___________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 29, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 0-10030
APPLE COMPUTER, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-2404110
[State or other jurisdiction [I.R.S. Employer Identification
of incorporation or No.]
organization]
1 Infinite Loop
Cupertino California 95014
[Address of principal executive [Zip Code]
offices]
Registrant's telephone number, including area code: (408) 996-1010
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
123,716,810 shares of Common Stock Issued and Outstanding as of May 13,1996
___________________________________________________________________________
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
APPLE COMPUTER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
March 29, March 31, March 29, March 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 2,185 $ 2,652 $ 5,333 $ 5,484
Costs and expenses:
Cost of sales 2,606 1,957 5,279 3,975
Research and development 150 143 303 275
Selling, general and administrative 404 386 845 801
Restructuring costs 207 -- 207 (17)
3,367 2,486 6,634 5,034
Operating income (loss) (1,182) 166 (1,301) 450
Interest and other income
(expense), net 7 (50) 17 (35)
Income (loss) before provision
(benefit) for income taxes (1,175) 116 (1,284) 415
Provision (benefit) for income
taxes (435) 43 (475) 154
Net income (loss) $ (740) $ 73 $ (809) $ 261
Earnings (loss) per common and
common equivalent share $ (5.99) $ .59 $(6.55) $ 2.14
Cash dividends paid per common
share $ -- $ .12 $ .12 $ .24
Common and common equivalent
shares used in the calculations
of earnings per share (in
thousands) 123,659 122,644 123,326 122,122
</TABLE>
See accompanying notes.
2
<PAGE>
APPLE COMPUTER, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(In millions)
<TABLE>
<CAPTION>
March 29, September 29,
1996 1995
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 500 $ 756
Short-term investments 92 196
Accounts receivable, net of allowance for
doubtful accounts of $87 ($87 at September
29, 1995) 1,366 1,931
Inventories:
Purchased parts 535 841
Work in process 196 291
Finished goods 735 643
1,466 1,775
Deferred tax assets 479 251
Other current assets 374 315
Total current assets 4,277 5,224
Property, plant, and equipment:
Land and buildings 518 504
Machinery and equipment 647 638
Office furniture and equipment 142 145
Leasehold improvements 197 205
1,504 1,492
Accumulated depreciation and amortization (812) (781)
Net property, plant, and equipment 692 711
Other assets 265 296
$ 5,234 $ 6,231
</TABLE>
See accompanying notes.
3
<PAGE>
APPLE COMPUTER, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in millions)
<TABLE>
<CAPTION>
March 29, September 29,
1996 1995
(Unaudited)
<S> <C> <C>
Current liabilities:
Short-term borrowings $ 352 $ 461
Accounts payable 817 1,165
Accrued compensation and employee benefits 127 131
Accrued marketing and distribution 309 206
Accrued restructuring costs 181 --
Other current liabilities 487 362
Total current liabilities 2,273 2,325
Long-term debt 303 303
Deferred tax liabilities 602 702
Shareholders' equity:
Common stock, no par value; 320,000,000
shares authorized; 123,684,863 shares issued
and outstanding at March 29, 1996
(122,921,601 shares at September 29, 1995) 420 398
Retained earnings 1,641 2,464
Accumulated translation adjustment and other (5) 39
Total shareholders' equity 2,056 2,901
$ 5,234 $6,231
</TABLE>
See accompanying notes.
4
<PAGE>
APPLE COMPUTER, INC.
APPLE COMPUTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
March 29, March 31,
1996 1995
<S> <C> <C>
Cash and cash equivalents, beginning of the period $ 756 $ 1,203
Operations:
Net income (loss) (809) 261
Adjustments to reconcile net income (loss) to cash
generated by (used for) operations:
Depreciation and amortization 88 67
Changes in assets and liabilities:
Accounts receivable 565 (52)
Inventories 309 104
Deferred tax assets (228) --
Other current assets (59) (9)
Accounts payable (348) (28)
Accrued restructuring costs 181 (32)
Other current liabilities 224 30
Deferred tax liabilities (100) 118
Cash generated by (used for) operations (177) 459
Investments:
Purchase of short-term investments (244) (928)
Proceeds from sale of short-term investments 348 372
Purchase of property, plant, and equipment, net of
retirements (40) (51)
Other (42) (23)
Cash generated by (used for) investment activities 22 (630)
Financing:
Increase (decrease) in short-term borrowings (109) 335
Increase (decrease) in long-term borrowings -- (1)
Increases in common stock, net of related 22 38
tax benefits
Cash dividends (14) (29)
Cash generated by (used for) financing activities (101) 343
Total cash generated (used) (256) 172
Cash and cash equivalents, end of the period $ 500 $ 1,375
</TABLE>
See accompanying notes.
5
<PAGE>
APPLE COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Interim information is unaudited; however, in the opinion of the
Company's management, all adjustments necessary for a fair statement of
interim results have been included. All adjustments are of a normal
recurring nature unless specified in a separate note included in these
Notes to Consolidated Financial Statements. The results for interim
periods are not necessarily indicative of results to be expected for
the entire year. These financial statements and notes should be read
in conjunction with the Company's annual consolidated financial
statements and the notes thereto for the fiscal year ended September
29, 1995, included in its Annual Report on Form 10-K for the year ended
September 29, 1995 (the "1995 Form 10-K").
2. In the second quarter of 1996, the Company announced and began to
implement a restructuring plan aimed at reducing costs and restoring
profitability to the Company's operations. The restructuring plan was
necessitated by decreased demand for Company products and the Company's
adoption of a new strategic direction. The Company's restructuring
actions consist primarily of terminating approximately 2,800 full-time
employees (not including employees who will be hired by the purchaser
of one of the Company's domestic manufacturing facilities), canceling
or vacating certain facility leases as a result of these employee
terminations, writing down operating assets to be sold as a result of
downsizing operations and outsourcing various operational functions,
and canceling contracts as a result of terminating e-world(TM), Apple's
on-line service. These actions have resulted in a charge of $207 million,
including cash expenditures of $24 million and non-cash asset write-
downs of $2 million, during the second quarter. The Company expects
that the remaining $181 million accrued balance at March 29, 1996 will
result in cash expenditures of $123 million over the next 12 months and
$12 million thereafter. The Company expects that most of the
contemplated restructuring actions will be completed within the next
twelve months and will be financed through current working capital, the
sale of certain long-term assets and investments, possible future short
and long term borrowings, and possible combined debt and equity
financing.
The following table depicts the restructuring activity during the second
quarter of 1996: (In millions)
<TABLE>
<CAPTION>
Category Total Restructuring Balance at
Charge Spending March 29,1996
<S> <C> <C> <C>
Payments to employees involuntarily
terminated (C) $ 115 $ 22 $ 93
Payments on canceled or vacated
facility leases (C) 26 1 25
Write-down of operating assets to be
sold (N) 48 2 46
Payments on canceled contracts (C) 18 1 17
</TABLE> $ 207 $ 26 $ 181
C: Cash; N: Noncash
3. Interest and other income (expense), net, consists of the following:
(In millions)
<TABLE> Three Months Ended Six Months Ended
<CAPTION> March 29, March 31, March 29, March 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income $11 $26 $28 $44
Interest expense (13) (10) (30) (17)
Foreign currency gain (loss) 10 (52) 28 (44)
Net premiums and discounts paid on
foreign exchange instruments (3) (16) (10) (17)
Other income (expense), net 2 2 1 (1)
</TABLE> $7 $(50) $17 $(35)
6
<PAGE>
4. The Company's cash equivalents consist primarily of U.S. Government
securities, Euro-dollar deposits, and commercial paper with maturities
of three months or less at the date of purchase. Short-term
investments consist principally of Euro-dollar deposits and commercial
paper with maturities between three and twelve months. The Company's
marketable equity securities consist of securities issued by U.S.
corporations and are included in "Other assets" on the accompanying
balance sheet. The Company's cash equivalents, short-term investments,
and marketable equity securities are classified and accounted for as
available-for-sale, and the cash equivalents and short-term
investments are generally held until maturity. The Company's cash and
cash equivalent balance includes $90 million pledged as collateral to
support short-term borrowings.
The adjustments recorded to shareholders' equity for unrealized holding
gains (losses) on available-for-sale cash equivalents and short-term
investments were not material, either individually or in the aggregate,
at March 29, 1996. The net adjustment recorded to shareholders' equity
for unrealized holding gains (losses) related to marketable equity
securities was an unrealized gain of approximately $9 million at March
29, 1996. The realized gains (losses) recorded to earnings on sales of
available-for-sale securities, either individually or in the aggregate,
were not material for the three and six months ended March 29, 1996.
5. U.S. income taxes have not been provided on a cumulative total of $407
million of undistributed earnings of certain of the Company's foreign
subsidiaries. It is intended that these earnings will be indefinitely
invested in operations outside of the United States. It is not
practicable to determine the income tax liability that might be
incurred if these earnings were to be distributed. Except for such
indefinitely invested earnings, the Company provides for federal and
state income taxes currently on undistributed earnings of foreign
subsidiaries.
The Internal Revenue Service ("IRS") has proposed federal income tax
deficiencies for the years 1984 through 1991, and the Company has made
certain prepayments thereon. The Company contested the proposed
deficiencies for the years 1984 through 1988, and most of the issues in
dispute for these years have been resolved. On June 29, 1995, the IRS
issued a notice of deficiency proposing increases to the amount of the
Company's federal income taxes for the years 1989 through 1991. The
Company has filed a petition with the United States Tax Court to
contest these alleged tax deficiencies. Management believes that
adequate provision has been made for any adjustments that may result
from these tax examinations.
Deferred tax assets resulting from the net loss incurred in the first
six months of 1996 loss are realizable based on the ability to offset
existing deferred tax liabilities.
6. Earnings per share is computed using the weighted average number of
common and dilutive common equivalent shares attributable to stock
options outstanding during the period. Loss per share is computed
using the weighted average number of common shares outstanding during
the period.
7. Certain prior year amounts on the Consolidated Statements of Cash Flows
have been reclassified to conform to the current period presentation.
8. No dividend has been declared for the second quarter of 1996, and the
Board of Directors anticipates that for the foreseeable future the
Company will retain any earnings for use in the operation of its
business.
9. The information set forth in Item 1 of Part II hereof is hereby
incorporated by reference.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following information should be read in conjunction with the
consolidated financial statements and notes thereto. All information is
based on Apple's fiscal calendar.
(Tabular information: Dollars in millions, except per share amounts)
Except for historical information contained herein, the statements set
forth in this Item 2 are forward-looking and involve risks and
uncertainties. For information regarding potential factors that could
affect the Company's financial results refer to pages 13 - 19 of this
Management Discussion and Analysis of Financial Condition and Results of
Operations under the heading "Factors That May Affect Future Results and
Financial Condition."
Results of Operations
<TABLE> Second Quarter Six Months
<CAPTION>
1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $2,185 $2,652 (17.6%) $5,333 $5,484 (2.8%)
Gross margin $(421) $695 (160.6%) $54 $1,509 (96.4%)
Percentage of net sales (19.3%) 26.2% 1.0% 27.5%
Operating expenses $761 $529 43.9% $1,355 $1,059 28.0%
Percentage of net sales 34.8% 19.9% 25.4% 9.3%
Restructuring costs $207 -- -- $207 $(17) NM
Percentage of net sales 9.5% -- 3.9% (0.3%)
Interest and other
income (expense), net $7 $(50) NM $17 $(35) NM
Net income (loss) $(740) $73 (1113.7%) $(809) $261 410.0%
Earnings per share $5.99 $0.59 (1115.3%) $(6.55) $2.14 406.1%
</TABLE>
NM: Not meaningful
Overview
The Company has recently experienced a significant decline in both units
shipped and share of the personal computer market. For the quarter ended
March 29, 1996, the number of the Company's Macintosh computers shipped
worldwide declined by 14% when compared with the corresponding quarter of
1995. Moreover, according to an industry source, the Company's share of
the worldwide and U.S. personal computer markets declined to 5.8% and 7.3%,
respectively, for the quarter ended March 29, 1996. This decline in
demand, coupled with intense price competition throughout the industry, has
resulted in the Company's decision to develop and recently announce key
elements of a new strategic direction intended to improve the Company's
competitiveness and restore its profitability. The Company intends to
develop and market products and services more selectively targeted to
education, home and business segments. In moving in this new strategic
direction, the Company expects to reduce the number of new product
introductions and the number of products in certain categories within its
current product portfolio.
8
<PAGE>
and printers. Total Macintosh computer unit sales decreased 14% in the
second quarter when compared with the corresponding quarter of 1995,
primarily as a result of a decline in worldwide demand for most product
families, primarily entry level products, due principally to customer
concerns regarding the Company's strategic direction, financial condition
and future prospects. The average aggregate revenue per Macintosh computer
unit decreased 1% in the second quarter when compared with the
corresponding quarter of 1995, primarily due to pricing actions across all
product lines in order to stimulate demand, substantially offset by
increased revenues from a shift in the mix towards the Company's newer
products and products with multi-media configurations, which have higher
average selling prices.
Net sales for the first six months of 1996 decreased when compared with the
first six months of 1995, resulting from a decrease in peripheral product
net sales such as displays and printers, partially offset by an increase in
Macintosh computer net sales. Total Macintosh computer unit sales did not
change in the first six months of 1996, when compared with the
corresponding periods of 1995. Unit sales increased in the first quarter
of 1996 when compared with the corresponding quarter of 1995 due to unit
sales increases within the PowerMacintosh(TM) and Performa (registered
trademark) families of desktop personal computers, and were offset by unit
sales decreases in the second quarter of 1996 when compared with the
corresponding quarter of 1995 as discussed in the preceding paragraph. The
average aggregate revenue per Macintosh computer unit increased 4% in the
first six months of 1996, when compared with the corresponding period of
1995, primarily due to increased revenues from a shift in the mix towards
the Company's newer products and products with multi-media configurations,
which have higher average selling prices, partially offset by pricing
actions across all product lines in order to stimulate demand.
International net sales decreased 11% and increased 4% in the second
quarter and first six months of 1996, respectively, when compared with the
corresponding periods of 1995. The decrease in the second quarter is
primarily attributable to a decrease in net sales in Europe due to a
decrease in total Macintosh computer unit sales, partially offset by higher
average aggregate revenue per Macintosh computer unit, and to a decrease in
net sales in Japan due to a decrease in the average aggregate revenue per
Macintosh computer unit. The increase in the first six months primarily
reflects strong net sales growth in Japan and certain countries within
Europe during the first quarter of 1996. International net sales
represented 59% and 54% of total net sales for the second quarter and first
six months of 1996, respectively, compared with 54% and 51% for the
corresponding periods of 1995. Domestic net sales decreased by
approximately 26% and 9% in the second quarter and first six months of
1996, respectively, when compared with the corresponding periods of 1995.
The Company's resellers typically purchase products on an as-needed basis.
Resellers frequently change delivery schedules and order rates depending on
changing market conditions. Unfilled orders ("backlog") can be, and often
are, canceled at will. The Company attempts to fill orders on the
requested delivery schedules. The Company's backlog increased slightly to
approximately $369 million at May 3, 1996, from approximately $365 million
at February 2, 1996. This increase in backlog relects the effect of delays
in shipments to address quality problems with respect to certain entry
level, Performa and Powerbook products, substantially offset by satisfying
product backlog in other categories. The Company estimates that product
backlog would have declined to approximately $220 million at May 3, 1996 if
the above-noted delays had not occurred.
In the Company's experience, the actual amount of product backlog at any
particular time is not necessarily a meaningful indication of its future
business prospects. In particular, backlog often increases in anticipation
of or immediately following introduction of new products because of over-
ordering by dealers anticipating shortages. Backlog often is reduced
sharply once dealers and customers believe they can obtain sufficient
supply. Because of the foregoing, as well as other factors affecting the
Company's backlog, backlog should not be considered a reliable indicator of
the Company's ability to achieve any particular level of revenue or
financial performance.
The Company believes that net sales will remain below prior years levels
through the first quarter of 1997.
9
<PAGE>
Gross Margin
Gross margin represents the difference between the Company's net sales and
its cost of goods sold. The amount of revenue generated by the sale of
products is influenced in significant part by the price set by the Company
for its products relative to competitive products. The cost of goods sold
is based primarily on the cost of components and, to a lesser extent,
direct labor costs. Because the Company uses some components that are not
common to the rest of the personal computer industry (including certain
ASICs), its component costs may be higher than those incurred by other
manufacturers. The type and cost of components included in particular
configurations of the Company's products (such as memory and disk drives)
are often directly related to the need to market products in configurations
competitive with other manufacturers. Competition in the personal computer
industry is intense, and, in the short term, frequent changes in pricing
and product configuration are often necessary in order to remain
competitive. Accordingly, gross margin as a percentage of net sales can be
significantly influenced in the short term by actions undertaken by the
Company in response to industrywide competitive pressures.
Gross margin decreased to (19.3%) and 1.0% during the second quarter and
first six months of 1996, respectively, when compared with the
corresponding periods of 1995, primarily as a result of a $616 million
charge in the second quarter of 1996 principally for the write-down of
certain inventory, as well as the cost to cancel excess component orders,
necessitated by significantly lower than expected demand for many of the
Company's products, primarily its entry level products. Also, the Company
separately incurred a $60 million charge that reflects 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. In addition, gross margins were adversely affected by aggressive
pricing actions in Japan, primarily in the first quarter of 1996, in
response to extreme competitive actions by other companies attempting to
gain market share, and pricing actions in the U.S. and Europe across all
product lines in order to stimulate demand.
The decrease in gross margin levels in the second quarter and first six
months of 1996 compared with the corresponding periods of 1995 was slightly
offset by hedging gains less the effects of a stronger U.S. dollar relative
to certain foreign currencies. The Company's operating strategy and
pricing take into account changes in exchange rates over time; however, the
Company's results of operations can be significantly affected in the short
term by fluctuations in foreign currency exchange rates.
Although the Company is taking actions to improve gross margins as it
implements its new strategic plan, it is anticipated that gross margins
will continue to remain under pressure and will remain below prior years'
levels through at least the third quarter of 1996 due to a variety of
factors, including continued industrywide pricing pressures, increased
competition, compressed product life cycles, and the need to sell through
current inventory at prices reflecting the recent write-downs.
<TABLE>
<CAPTION>
Research and Development
Second Quarter Six Months
1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Research and development $150 $143 4.9% $303 $275 10.2%
Percentage of net sales 6.9% 5.4% 5.7% 5.0%
</TABLE>
Research and development expenditures increased in the second quarter and
first six months of 1996 when compared with the corresponding periods of
1995, primarily due to higher project and headcount related spending as the
Company continues to invest in the development of new products and
technologies. The increase as a percentage of net sales in the second
quarter when compared with the corresponding quarter of 1995 was primarily
a result of the decrease in the level of net sales.
As part of the Company's restructuring plan and new strategic direction,
the Company expects to reduce the number of employees engaged in research
and development activities and to streamline its product offerings. As a
result, the Company expects that research and development expenditures will
decrease relative to historical levels. Nevertheless, the Company believes
that continued investments in research and development are critical to its
future growth and competitive position in the marketplace and are directly
related to continued, timely development of new and enhanced products. The
Company believes a greater portion of its research and development efforts
will be conducted through collaborations with third parties. In addition,
where appropriate the Company plans to acquire and license technologies
from third parties.
10
<PAGE>
<TABLE>
<CAPTION>
Selling, General and Second Quarter Six Months
Administrative 1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Selling, general and
administrative $404 $386 4.7% $845 $801 5.5%
Percentage of net sales 18.5% 14.6% 15.8% 14.6%
</TABLE>
Selling, general and administrative expenses increased in the second
quarter and first six months of 1996 when compared with the corresponding
periods of 1995 primarily due to increased spending related to marketing
and advertising programs. The increase as a percentage of net sales in the
second quarter when compared with the corresponding quarter of 1995 was
primarily a result of the decrease in the level of net sales.
As a result of its restructuring plan, the Company expects that selling,
general and administrative expenditures will decrease relative to
historical levels, although marketing and advertising expenses are expected
to remain high relative to historical levels during the remainder of 1996
as the Company attempts to stimulate greater demand for its products.
<TABLE>
<CAPTION>
Restructuring costs Second Quarter Six Months
1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Restructuring costs 207 -- -- $207 (17) NM
Percentage of net sales 9.5% -- 3.9% (.03%)
</TABLE>
For information regarding the Company's restructuring actions initiated in
the second quarter of 1996, refer to Note 2 of the Notes to Consolidated
Financial Statements (Unaudited) in Part I, Item I, and to Factors That May
Affect Future Results and Financial Condition as well as Liquidity and
Capital Resources in Part I, Item II of this Quarterly Report on Form 10-Q,
which information is hereby incorporated by reference.
In the first quarter of 1995, the Company lowered its estimates of the
total remaining costs associated with its restructuring plan initiated in
the third quarter of 1993 and recorded an adjustment that increased income
by $17 million.
11
<PAGE>
<TABLE>
<CAPTION>
Interest and Other Second Quarter Six Months
Income (Expense), Net 1995 1994 Change 1995 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Interest and other
income (expense), net $7 $(50) NM $17 $(35) NM
</TABLE>
Interest and other income (expense), net, increased to income from expense
in the second quarter and first six months of 1996 when compared to the
corresponding periods in 1995, primarily due to favorable variances related
to realized and unrealized foreign exchange hedging gains (losses) as a
result of less volatility in the foreign exchange markets in the second
quarter of 1996 as compared to the second quarter of 1995, offset by
unfavorable variances in interest income and expense related primarily to
higher borrowing costs, due to the downgradings of the Company's credit
ratings by external credit rating agencies, and due to the decrease in cash
and short-term investment balances during the second quarter and first six
months of 1996 as compared with the corresponding periods in 1995. The
Company's cost of funds has increased as a result of the recent
downgradings of its short-term debt to NP and C by Moody's Investor
Services and Standard and Poor's Rating Agency, respectively, and of its
long-term debt to Ba2 and B+ by Moody's Investor Services and Standard and
Poor's Rating Agency, respectively.
<TABLE>
<CAPTION>
Provision (Benefit)
for Income Taxes Second Quarter Six Months
1996 1995 Change 1996 1995 Change
<S> <C> <C> <C> <C> <C> <C>
Provision (benefit)for ($435) $43 1111.6% ($475) 154 408.4%
income taxes
Effective tax rate 37% 37% 37% 37%
</TABLE>
For information regarding the Company's Income Tax Provision (Benefit),
refer to Note 5 of the Notes to Consolidated Financial Statements
(Unaudited) in Part I, Item I of this Quarterly Report on Form 10-Q, which
information is hereby incorporated by reference.
12
<PAGE>
Factors That May Affect Future Results and Financial Condition
The Company's future operating results and financial condition are
dependent on the Company's ability to successfully develop, manufacture,
and market technologically innovative products in order to meet dynamic
customer demand patterns. Inherent in this process are a number of factors
that the Company must successfully manage in order to achieve favorable
future operating results and financial condition. Potential risks and
uncertainties that could affect the Company's future operating results and
financial condition include, without limitation: continued competitive
pressures in the marketplace; the effect any reaction to such competitive
pressures has on inventory levels and inventory valuations; the effects of
significant adverse publicity; the impact of uncertainties concerning the
Company's strategic direction and financial condition on revenue and
liquidity; the effect of continued degradation in the Company's liquidity;
and the effect of restructuring actions.
The Company expects to incur operating losses throughout at least the
remainder of 1996.
Restructuring of Operations
In the second quarter of 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
improve liquidity and the risk that cost-cutting initiatives will impair
the Company's ability to innovate and remain competitive in the computer
industry.
As part of its restructuring effort, the Company intends 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 reduce its research and
development expenditures by, among other things, relying to a greater
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 new 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 action that 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.
For more information regarding the Company's restructuring actions
initiated in the second quarter of 1996, refer to Note 2 of the Notes to
Consolidated Financial Statements (Unaudited) in Part I, Item I, and to
Liquidity and Capital Resources in Part I, Item II of this Quarterly Report
on Form 10-Q, which information is hereby incorporated by reference.
Product Introductions and Transitions
Due to the highly volatile nature of the personal computer industry, which
is characterized by dynamic customer demand patterns and rapid
technological advances, the Company frequently introduces new products and
product enhancements. 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. 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 key growth
segments.
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<PAGE>
The rate of product shipments immediately following introduction of a new
product is not necessarily an indication of the future rate of shipments
for that product, which depends on many factors, some of which are not
under the control of the Company. These factors may include initial large
purchases by a small segment of the user population that tends to purchase
new technology prior to its acceptance by the majority of users ("early
adopters"); purchases in satisfaction of pent-up demand by users who
anticipated new technology and, as a result, deferred purchases of other
products; and over-ordering by dealers who anticipate shortages due to the
aforementioned factors. The preceding may also be offset by other factors,
such as the deferral of purchases by many users until new technology is
accepted as "proven" and for which commonly used software products are
available; and the reduction of orders by dealers once they believe they
can obtain sufficient supply of products previously in backlog.
Backlog is often volatile after new product introductions due to the
aforementioned demand factors, often increasingly coincident with
introduction, and then decreasing once dealers and customers believe they
can obtain sufficient supply of products.
The measurement of demand for newly introduced products is further
complicated by the availability of different product configurations, which
may include various types of built-in peripherals and software.
Configurations may also require certain localization (such as language) for
various markets and, as a result, demand in different geographic areas may
be a function of the availability of third-party software in those
localized versions. For example, the availability of European-language
versions of software products manufactured by U.S. producers may lag behind
the availability of U.S. versions by a quarter or more. This may result in
lower initial demand for the Company's new products outside the United
States, even though localized versions of the Company's products may be
available.
The greater integration of functions and complexity of operations of the
Company's products also increase the risk that latent defects or other
faults could be discovered by customers or end-users after volumes of
products have been produced or shipped. If such defects were significant,
the Company could incur material recall and replacement costs under product
warranties.
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 consumers and a large number of competitors. In the first
six months of 1996, the Company's results of operations and financial
condition were, and in the near future are expected to 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.
The Company's future operating results and financial condition may be
affected by overall demand for personal computers and general customer
preferences for one platform over another or one set of product features
over another.
On November 7, 1994, the Company reached an agreement with International
Business Machines Corporation ("IBM") and Motorola, Inc. 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, Inc. announced the availability of the
"PowerPC Platform" specifications, which define a "unified" personal
computer architecture and combine the Power Macintosh platform and the PC
environment. Accordingly, 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.
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The Company is currently the primary maker of hardware that uses the
Macintosh operating system ("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(registered trademark) and Microsoft Windows(TM)
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's future operating results and financial condition
may be affected by its ability to increase the installed base for the
Macintosh platform. As part of its efforts to increase the installed base
for the Macintosh platform, the Company announced the licensing of the
Mac OS to other personal computer vendors in January 1995, and several
vendors currently sell products that utilize the Macintosh operating system.
The Company believes that licensing the operating system 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 is forced to compete
with other companies producing Mac OS-based computer systems. 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 them.
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 include both the RISC-based PowerPC 601 microprocessor and
the 486 DX2/66 microprocessor, which enable users to run concurrently
applications that require the Mac OS, MS-DOS, Windows 3.1 or Windows 95
operating systems. The Company has announced that it intends to ship by
June 1996 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.
The Company plans to supply customers who purchase Cross-Platform Products
with operating system software under licensing agreements with Microsoft.
The Company's prior licensing agreement with Microsoft expired on December
31, 1995. The Company recently entered into new licensing agreements with
Microsoft that will permit the Company to distribute MS-DOS and permit the
Company to acquire the rights to distribute certain Windows operating
systems, including Windows 95. In order to distribute Windows operating
systems, the Company will need to enter into one or more agreements with
certain Microsoft distributors.
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 earned, and the costs of
developing such software products. To the extent the Company's recent
financial losses have caused software developers to question the Company's
position in the personal computer market, they could 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.
Microsoft Corporation is an important developer of application software for
the Company's products. Accordingly, 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 systems.
The Company's ability to produce and market competitive products is also
dependent on the ability of IBM and Motorola, Inc., 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 compared with those supplied to the Company's
competitors by Intel Corporation, the developer and producer of the
microprocessors used by most personal computers using the MS-DOS and
Windows operating systems. IBM produces personal computers based on Intel
microprocessors as well as workstations based on the PowerPC
microprocessor, and is also the developer of OS/2, a competing operating
system to the Company's Mac OS. Accordingly, IBM's interest in supplying
the Company with microprocessors for the Company's products may be
influenced by IBM's perception of its interests as a competing manufacturer
of personal computers and as a competing operating system vendor.
15
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Recently, several competitors of the Company, including Compaq, IBM and
Microsoft, have either targeted or announced their intention to target
certain of the Company's key market segments, including education and
publishing. Some of these companies have greater financial, marketing,
manufacturing and technological resources than the Company.
The Company's future operating results and financial condition may also be
affected by the Company's ability to successfully expand and capitalize on
its investments in other markets, such as the markets for Internet services
and personal digital assistant (PDA) products.
Global Market Risks
A large portion of the Company's revenue is derived from its international
operations. As a result, the Company's operations and financial results
could be significantly affected by international factors, such as changes
in foreign currency exchange rates or weak economic conditions in the
foreign markets in which the Company distributes its products. When the
U.S. dollar strengthens against other currencies, the U.S. dollar value of
non-U.S. dollar-based sales decreases. When the U.S. dollar weakens, the
U.S. dollar value of non-U.S. dollar-based sales increases.
Correspondingly, the U.S. dollar value of non-U.S. dollar-based costs
increases when the U.S. dollar weakens and decreases when the U.S. dollar
strengthens. Overall, the Company is a net receiver of currencies other
than the U.S. dollar and, as such, benefits from a weaker dollar and is
adversely affected by a stronger dollar relative to major currencies
worldwide. Accordingly, changes in exchange rates, and in particular a
strengthening of the U.S. dollar, may negatively affect the Company's
consolidated sales and gross margins (as expressed in U.S. dollars).
To mitigate the short-term impact of fluctuating currency exchange rates on
the Company's non-U.S. dollar-based sales, product procurement, and
operating expenses, the Company regularly hedges its non-U.S. dollar-based
exposures. Specifically, the Company enters into foreign exchange forward
and option contracts to hedge firmly committed transactions. Currently,
hedges of firmly committed transactions do not extend beyond one year. The
Company also purchases foreign exchange option contracts to hedge certain
other probable, but not firmly committed transactions. Hedges of probable,
but not firmly committed transactions currently do not extend beyond one
year. To reduce the costs associated with these ongoing foreign exchange
hedging programs, the Company also regularly sells foreign exchange option
contracts and enters into certain other foreign exchange transactions. All
foreign
exchange forward and option contracts not accounted for as hedges,
including all transactions intended to reduce the costs associated with the
Company's foreign exchange hedging programs, are carried at fair value and
are adjusted on each balance sheet date for
changes in exchange rates.
While the Company is exposed with respect to fluctuations in the interest
rates of many of the world's leading industrialized countries, the
Company's interest income and expense is most sensitive to fluctuations in
the general level of U.S. interest rates. In this regard, changes in U.S.
interest rates affect the interest earned on the Company's cash, cash
equivalents, and short-term investments as well as interest paid on its
short-term borrowings and long-term debt. To mitigate the impact of
fluctuations in U.S. interest rates, the Company has entered into interest
rate swap and option transactions. Certain of these swaps are intended to
better match the Company's floating-rate interest income on its cash, cash
equivalents, and short-term investments with the fixed-rate interest
expense on its long-term debt. The Company also enters into interest rate
swap and option transactions in order to diversify a portion of the
Company's exposure away from fluctuations in short-term U.S. interest
rates. These instruments may extend the Company's cash investment horizon
up to a maximum effective duration of three years.
To ensure the adequacy and effectiveness of the Company's foreign exchange
and interest rate hedge positions, as well as to monitor the risks and
opportunities of the nonhedge portfolios, the Company continually monitors
its foreign exchange forward and option positions, and its interest rate
swap and option positions on a stand-alone basis and in conjunction with
its underlying foreign currency- and interest rate-related exposures,
respectively, from both an accounting and an economic perspective.
However, given the effective horizons of the Company's risk management
activities, there can be no assurance that the aforementioned programs will
offset more than a portion of the adverse financial impact resulting from
unfavorable movements in either foreign exchange or interest rates. In
addition, the timing of the accounting for recognition of gains and losses
related to mark-to-market instruments for any given period may not coincide
with the timing of gains and losses related to the underlying economic
exposures, and as such, may adversely affect the Company's operating
results and financial position. The Company generally does not engage in
leveraged hedging.
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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.
Inventory and Supply
In line with the Company's efforts to redesign its business model, the
Company intends to streamline its product offerings in its key usage areas
in education, business and the home. This simplification of product lines
has resulted in inventory reserves. Cancellation fees related to custom
component inventory purchased for anticipated product introductions that
have been canceled have also been paid or incurred. The Company has also
separately provided for the estimated cost to correct certain quality
problems on certain entry level, Performa and Powerbook products. Although
the Company believes its inventory and related reserves are adequate, no
assurance can be given that the Company will not incur additional inventory
charges.
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 price changes, there is a risk
that the Company will forecast incorrectly and produce excess or
insufficient inventories of particular 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 its
inventory levels and respond to short-term shifts in customer demand
patterns.
Certain of the Company's products are manufactured in whole or in part by
third-party manufacturers, either pursuant to design specifications of the
Company or otherwise. As a result of the Company's restructuring plan,
which includes the sale of the Company's Fountain, Colorado manufacturing
facility to SCI Systems, Inc. ("SCI") and a related manufacturing
outsourcing agreement with SCI, the proportion of its 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. It is
uncertain what effect such lessened control will have on the quality of the
products manufactured 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.
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.
The Company's ability to satisfy demand for its products may be limited by
the availability of key components. The Company believes that the
availability from suppliers to the personal computer industry of
microprocessors and ASICs presents the most significant potential for
constraining the Company's ability to produce products. Specific
microprocessors manufactured by Motorola, Inc. and IBM are currently
available only from single sources, while some advanced microprocessors are
currently in the early stages of ramp-up for production and thus have
limited availability. The Company and other producers in the personal
computer industry also compete for other semiconductor products with other
industries that have experienced increased demand for such products, due to
either increased consumer demand or increased use of semiconductors in
their products (such as the cellular phone and automotive industries).
Finally, 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.
17
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Marketing and Distribution
A number of uncertainties may affect the marketing and distribution of the
Company's products. Currently, the Company's primary means of distribution
is through third-party computer resellers. The Company also distributes
product through consumer channels such as mass-merchandise stores, consumer
electronics outlets, and computer superstores. The Company's business and
financial results could be adversely affected if the financial condition of
these resellers weakens or if resellers within consumer channels decide not
to continue to distribute the Company's products.
Uncertainty over the demand for the Company's products may cause resellers
to reduce the ordering and marketing of the Company's products. Under the
Company's arrangements with its resellers, resellers have the option to
reduce or eliminate unfilled orders previously placed, in most instances
without financial penalty. Resellers also have the option to return
products to the Company without penalty within certain limits, beyond which
they may be assessed fees. In the second quarter of 1996, the Company
experienced a reduction in ordering from historical levels by resellers due
to uncertainty concerning the Company's condition.
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.
Because of the foregoing factors, as well as other factors affecting the
Company's operating results and financial condition, past financial
performance should not be considered to be a reliable indicator of future
performance, and investors should not use historical trends to anticipate
results or trends in future periods. In addition, the Company's
participation in a highly dynamic industry often results in significant
volatility of the Company's common stock price.
Liquidity and Capital Resources
The Company's financial position with respect to cash, cash equivalents,
and short-term investments, net of short-term borrowings, decreased to $240
million at March 29, 1996, from $491 million at September 29, 1995. The
Company's financial position with respect to cash, cash equivalents, and
short-term investments decreased to $592 million at March 29, 1996, from
$952 million at September 29, 1995. The Company's cash and cash equivalent
balance at March 29, 1996 and September 29, 1995 includes $90 million
pledged as collateral to support short-term borrowings.
Cash used for operations during the first six months of 1996 totaled $177
million, primarily due to the net loss. Also contributing to cash used for
operations were lower accounts payable levels, due to a substantial
reduction in inventory purchases. Cash used for operations was partially
offset by a decrease in accounts receivable.
Net cash used for the purchase of property, plant, and equipment totaled
$40 million in the first six months of 1996, and consisted primarily of
increases in manufacturing machinery and equipment and buildings. The
Company expects that capital expenditures in 1996 will decline relative to
1995 expenditure levels.
18
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Short-term borrowings at March 29, 1996, were approximately $109 million
lower than at September 29, 1995. The issuance of commercial paper has
been discontinued and short-term borrowings have largely ceased. On March
29, 1996, Apple Japan, Inc., a subsidiary of the Company, entered into loan
agreements in the aggregate amount of $146 million with certain banks,
which extended or replaced approximately $146 million of existing
borrowings. Also on this date, Apple Japan, Inc. repaid approximately $54
million of existing borrowings. The current loans have maturity dates
ranging from June 28, 1996 to September 30, 1996. Two of these loans are
guaranteed by the Company. On April 2, 1996, Apple Computer B.V., a
subsidiary of the Company, entered into an agreement to extend its existing
$200 million secured credit facility. The amount currently outstanding is
approximately $190 million. The facility matures on June 28, 1996 and is
guaranteed by the Company. In connection with this facility, the Company
has agreed to maintain a minimum cash balance.
The Company's balance of long-term debt remained relatively constant during
the first six months of 1996. Substantially the entire amount of long-term
borrowings represents $300 million aggregate principal amount of 6.5%
unsecured notes issued under an omnibus shelf registration statement filed
with the Securities and Exchange Commission in 1994. This shelf
registration was for the registration of debt and other securities for an
aggregate offering amount of $500 million. The notes were sold at 99.925%
of par, for an effective yield to maturity of 6.51%. The notes pay
interest semi-annually and mature on February 15, 2004.
The Internal Revenue Service has proposed federal income tax deficiencies
for the years 1984 through 1991, and the Company has made certain
prepayments thereon. The Company contested the proposed deficiencies for
the years 1984 through 1988, and most of the issues in dispute for these
years have been resolved. On June 29, 1995, the IRS issued a notice of
deficiency proposing increases to the amount of the Company's federal
income taxes for the years 1989 through 1991. The Company has filed a
petition with the United States Tax Court to contest these alleged tax
deficiencies. Management believes that adequate provision has been made
for any adjustments that may result from these tax examinations.
It will be necessary for the Company to borrow in the near term to finance
its working capital needs, because the Company does not expect that it will
generate cash from operations in this time frame. In addition, in
connection with the restructuring actions, referred to on page 6 in Note 2
of the Notes to the Consolidated Financial Statements, the Company had $24
million of cash expenditures in the second quarter of 1996 and expects to
incur $123 million of cash expenditures over the next 12 months. These
cash expenditures are expected to be financed through current working
capital, the sale of certain assets and other investments, possible future
short and long-term borrowings, and possible combined debt and equity
financing.
As noted on page 12 under the subheading "Interest and other income
(expense), net", the Company's cost of funds has increased as a result of
the recent downgradings of its short-term debt to NP and C by Moody's
Investor Services and Standard and Poor's Rating Agency, respectively, and
of its long-term debt to Ba2 and B+ by Moody's Investor Services and
Standard and Poor's Rating Agency, respectively. In addition, the Company
may be required to pledge additional collateral with respect to certain of
its borrowings and to agree to more stringent covenants than in the past.
The Company is seeking alternative sources of liquidity and is discussing
various alternatives with several financial institutions. Although the
Company believes it will be able to arrange short- and long-term financing
that will cover its needs, it currently does not have commitments from
lenders to provide such funding. The Company believes that its balances of
cash, cash equivalents, and short-term investments, together with possible
short- and long-term borrowings and possible combined debt and equity
financing that the Company believes it will be able to obtain, will be
sufficient to meet its operating cash requirements, including the impact of
planned restructuring actions, on a short- and long-term basis. No
assurance can be given that the necessary financing will be obtained, or
that any additional financing that may be required if the restructuring
plan takes longer to implement than anticipated or is not successful can be
obtained. If the Company is unable to obtain adequate financing, its
liquidity, results of operations and financial condition will be materially
adversely affected.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Management is not aware of any pending legal proceedings to which the
Company is a party that are likely to have a material adverse effect on the
Company's financial condition and results of operations as reported in the
accompanying financial statements.
Reference is made to Item 1 of Part II of the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended December 29, 1995 for a discussion
of certain purported shareholder class action suits filed in January 1996.
In February 1996, the complaint in the action styled Abraham and Evelyn
Kostick Trust v. Peter Crisp, et al. was amended to add additional parties
and to add purported class and derivative claims based on theories such as
breach of fiduciary duty, misrepresentation and insider trading. In March
1996, a purported shareholder class action styled Derek Pritchard v.
Michael Spindler, et al., was filed in the California Superior Court for
Santa Clara County, alleging that the defendants breached their fiduciary
duty by allegedly rejecting an offer from a computer company (not named in
the complaint) to acquire the Company at a price in excess of $50 per
share.
The Company has been named as a defendant in numerous lawsuits (fewer than
100) in each of which the complaint alleges that the plaintiff incurred so-
called "repetitive stress injuries" to the upper extremities as a result of
using keyboards and/or mouse input devices sold by the Company. All of
these cases are in various stages of pre-trial activity.
The Company believes that all of the actions cited above are without merit.
Item 4. Submission of Matters to a Vote of Security Holders
a)The annual meeting of shareholders was held on January 23, 1996
b)The following directors were elected at the meeting to serve two-
year terms as Class II directors:
Peter O. Crisp
Bernard Goldstein
Delano E. Lewis
A. C. Markkula, Jr.
The following directors are continuing to serve their two-year terms
as Class I directors which will expire at the next annual meeting:
Gilbert F. Amelio
B. Jurgen Hintz
Katherine M. Hudson
c)The other matters voted upon at the meeting and results of those
votes were as follows:
For Against Abstained Broker Non-Vote
(1) Approval of an amendment to
the Employee Stock Purchase
Plan to increase the number
of shares of Common Stock
reserved for issuance
thereunder by 1,500,000
shares. 96,611,437 5,912,418 675,715 1,298,826 --
(2) Approval of an amendment
to the 1990 Stock Option
Plan to increase the number
of shares of Common Stock
reserved for issuance
thereunder by 4,200,000
shares. 80,523,883 21,968,201 707,486 1,298,826 --
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(3) Ratification of Ernst &
Young LLP as the Company's
independent auditors for
fiscal year 1996. 101,624,080 2,465,556 408,760 -- --
The foregoing matters are described in detail in the Registrant's definitive
proxy statement dated December 19, 1995, for the Annual Meeting of
Shareholders held on January 23, 1996.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit
Number Description
10.A.26 Employment Agreement dated February 28, 1996, between
Registrant and Gilbert F. Amelio.
10.A.27 Employment Agreement dated February 26, 1996, between
Registrant and George M. Scalise.
10.A.28 Employment Agreement dated March 4, 1996, between
Registrant and Fred D. Anderson, Jr.
10.A.29 Retention Agreement dated March 4, 1996, between
Registrant and Fred D. Anderson, Jr.
10.A.30 Employment Agreement dated April 2, 1996, between
Registrant and John Floisand.
10.A.31 Employment Agreement dated April 3, 1996, between
Apple Japan, Inc. and John Floisand.
10.B.13 Restructuring Agreement dated December 14, 1995,
among Registrant, Taligent, Inc. and International
Business Machines Corporation.
10.B.14 Stock Purchase Agreement dated April 4, 1996 between
Registrant and SCI Systems, Inc.
11 Computation of per share earnings
27 Financial Data Schedule
b) Reports on Form 8-K
A Current Report on Form 8-K dated April 10, 1996 was filed by Apple
with the Securities and Exchange Commission to report under Item 5
thereof the press release issued to the public on March 27, 1996 and
the extension or replacement of short-term borrowings of Apple Japan,
Inc. and Apple Computer B.V., subsidiaries of the registrant.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
APPLE COMPUTER, INC.
(Registrant)
DATE: May 13, 1996 BY /s/ Fred D. Anderson
Fred D. Anderson
Executive Vice President and
Chief Financial Officer
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Exhibit 10.A.26
Apple Computer, Inc.
1 Infinite Loop
Cupertino, CA 95014
Dr. Gilbert F. Amelio
13416 Middle Fork Lane
Los Altos Hills, CA 94022
Employment Agreement
Dear Dr. Amelio:
The following sets forth our agreement regarding the terms and
provisions of your employment as an officer and employee of Apple Computer,
Inc. (the "Company") during the Term. Capitalized words which are not
otherwise defined herein shall have the meanings assigned to such words in
Section 8 of this Agreement.
1. Term of Employment Under the Agreement. The term of your
employment under this Agreement (the "Term") shall commence on February 2,
1996 (the "Effective Date") and shall continue until the fifth anniversary
of the Effective Date. For purposes of this Agreement, "Contract Year"
means each 12-month period during the term beginning on the Effective Date
or anniversary thereof, and "Fiscal Year" means the Company's fiscal year.
Subject to the provisions of Section 5 below, either party may terminate
the Term at any time.
2. Employment During the Term. During the Term, you shall be
employed as the Chairman and Chief Executive Officer of the Company and
shall report directly to the Board of Directors of the Company (the
"Board"), and your duties and responsibilities to the Company shall be
consistent in all respects with such positions. During the Term, the
Company will take all steps reasonably necessary to assure that you
continue to be elected or appointed to the Board. You shall devote
substantially all of your business time, attention, skills and efforts
exclusively to the business and affairs of the Company, other than de
minimis amounts of time devoted by you to the management of your personal
finances or to engaging in charitable or community services. During the
Term, you shall be permitted to continue serving as a member of the boards
of directors of the corporations on which you are serving as a director on
the Effective Date (and on such other boards of directors as may be
approved in writing from time to time by the Board) as long as such service
does not adversely affect the performance of your duties to the Company as
contemplated hereunder. Your principal place of employment shall be the
executive offices of the Company as established from time to time, although
you understand and agree that you will be required to travel from time to
time for business purposes.
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3. Compensation During the Term.
(a) Base Salary. As compensation to you for all services
rendered to the Company and its subsidiaries, the Company will pay you a
base salary (the "Salary") at the rate of $990,000 per annum. Your Salary
will be paid to you in accordance with the Company's regular payroll
practices applicable to its executive officers. Your rate of Salary will
be reviewed annually by the Board and may be increased by the Board on the
basis of such review.
(b) Bonus.
(i) Annual Bonus. You shall be eligible to earn an annual bonus
(the "Annual Bonus") for each whole or partial Fiscal Year during the Term
consisting of the sum of (i) the Component A Bonus (as defined below) for
that Fiscal Year and (ii) the Component B Bonus (as defined below) for such
Fiscal Year. The Annual Bonus for each given Fiscal Year will be paid
within 90 days following the end of the Fiscal Year to which such Annual
Bonus relates. The "Component A Bonus" shall be based upon the Company
achieving one or more performance goals established in good faith by the
Compensation Committee of the Board (the "Committee") and approved by the
Board for such Fiscal Year. The performance goal or goals applicable to
the Component A Bonus for the Fiscal Year of the Company that includes the
Effective Date will be established within 60 days following the Effective
Date. The performance goals for the Component A Bonus for subsequent Fiscal
Years will be established, to the extent practicable, prior to the start of
the applicable Fiscal Year, but in no event later than 90 days following
the commencement of the Fiscal Year. The target amount of your Component A
Bonus for each 12-month Fiscal Year will equal 100% of your annual rate of
Salary based upon the rate in effect on the first day of that Fiscal Year.
The target amount for any Fiscal Year of fewer than 12 months will be
prorated by multiplying the target amount determined in accordance with the
previous sentence by a fraction (in no event greater than one), the
numerator of which is the number of days in such Fiscal Year in the Term
and the denominator of which is 365 ( the "Proration Fraction"). The
actual amount of the Component A Bonus paid to you for a given Fiscal Year
(which, for purposes of this Agreement, will be deemed earned as of the
last day of the applicable Fiscal Year) may range from 50% to 300% of the
target amount, based upon a performance schedule established by the
Committee for the applicable Fiscal Year and the relationship between the
Company's actual performance for the Fiscal Year and the target performance
established for that year by the Committee (it being understood that
payments in excess of 200% of target will be made only for extraordinarily
good corporate performance and payments of no Component A Bonus will be
made for only poor corporate performance); provided, however, that the
minimum Component A Bonus for the first Fiscal Year ending during the Term
shall be 50% of the target amount for that Fiscal Year. There shall be no
minimum guaranteed Component A Bonus for any Fiscal Year other than the
first Fiscal Year ending during the Term. The "Component B Bonus" shall be
$1,000,000 for each Fiscal Year of the Company ending during the Term (and,
for purposes of this Agreement, will be deemed earned as of the last day of
the applicable Fiscal Year ending during the Term). In no event may the
sum of the Component B Bonuses paid for all Fiscal Years during the Term
exceed $5 million. In the event that the Company changes its Fiscal Year
during the Term, an equitable adjustment shall be made to the bonus
arrangement which, in the reasonable good faith judgment of the Committee,
preserves, to the extent practicable, the bonus opportunity (including the
timing of payment of the Component B Bonuses) set forth above.
(ii) Signing Bonus. In addition to any amounts payable under
Section 3(b)(i) above, the Company will pay you as soon as practicable
following the Effective Date a one-time signing bonus of $200,000.
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(c) Loan. On or as soon as practicable after the Effective
Date, the Company shall cause one of its subsidiaries (the "Lender") to
lend you the amount of $5,000,000 (the "Loan"). The Loan shall initially
be made to you on a fully recourse basis but shall, subject to Section
5(h), become nonrecourse (and thereafter remain nonrecourse) as to the
portion of the principal amount of the Loan that is secured by collateral
with a value on the date such collateral is pledged by you equal to 125% of
the outstanding principal amount of the Loan. To the extent that the
collateral pledged by you does not have a value equal to 125% of the
outstanding principal amount of the Loan, the portion of the Loan that
shall be recourse shall be determined in accordance with the formula [P -
(C/1.25)], where "P" is the outstanding principal amount of the Loan and
"C" is the fair market value of all collateral securing the Loan determined
as of the date such collateral is pledged. The collateral that may be
pledged by you to secure the Loan shall consist of Performance Shares
earned by you and such other collateral as the Lender may reasonably
accept. The Company agrees to release its security interest in Performance
Shares prior to the full repayment of the Loan to the extent necessary to
permit you to sell such shares in order to pay the tax liability incurred
by you in connection with your earning of the Performance Shares, to pay
any currently due interest on the Loan or to pay any outstanding principal
amount of the Loan. The Loan shall bear interest at the minimum rate
necessary to avoid the imputation of interest under the Code. Interest
shall compound and be payable annually on each anniversary of the Effective
Date and on the date of your termination or resignation of employment.
Twenty per cent of the initial principal amount of the Loan shall be due
and payable on each of the first through fifth anniversaries of the
Effective Date. The entire principal amount of the Loan and any accrued
but unpaid interest on the Loan shall be immediately due and payable 90
days following the Date of Termination (as hereinafter defined). You may
prepay some or all of the principal amount of the Loan and any portion of
the accrued but unpaid interest on the Loan at any time without premium or
penalty. Repayments of principal and interest on the Loan shall be applied
ratably at the time of payment to the recourse and nonrecourse portions of
the Loan. Following your termination or resignation of employment for any
reason, the Company and the Lender shall have the unconditional right to
reduce any payments owed to you hereunder by the amount of any due and
unpaid principal and interest on the Loan and you hereby agree and consent
to such right on the part of the Company and the Lender. As a condition to
making the Loan to you, you shall execute a promissory note in favor of the
Lender and any other applicable Loan documentation consistent with the
terms of this Section 3(c) which is reasonably requested by the Lender.
(d) Benefits. During the Term, you shall be eligible to
participate in all welfare and fringe benefit plans and arrangements that
the Company provides to its executive employees in accordance with the
terms of such plans and arrangements, which shall be no less favorable to
you, in the aggregate, than the terms and provisions available to other
executive employees of the Company. Subject to your insurability at
standard commercial rates, in lieu of your participating in the Company's
regular life insurance programs, the Company agrees to maintain a whole
life insurance policy for you during the Term with a death benefit equal to
5 times your annual rate of Salary. The whole life policy shall be on
terms which are substantially similar to those applicable to the whole life
policy in effect with your prior employer (including the provisions thereof
applicable to the allocation of premiums on the policy between you and the
Company).
(e) Expenses. The Company will reimburse you in accordance with
its regular policies and practices for business expenses reasonably
incurred by you in connection with the performance of your duties under
this Agreement, subject to your presentation of appropriate documentation
of such expenses.
(f) Airplane Lease. The Company agrees to lease your current
airplane for business purposes on terms which are commercially reasonable
to you and the Company. The terms of such airplane lease will be negotiated
in good faith by you and the Company after the Effective Date and will be
memorialized in appropriate documentation.
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4. Long-Term Incentive Compensation. In order to align your
interests more closely with those of the Company's stockholders, the
Company will offer the following long-term incentive compensation
arrangements to you, subject to the terms and conditions set forth below.
(a) Stock Option. Subject to Section 4(c) below, as soon as
practicable after the Effective Date, the Company will grant to you
pursuant to the Apple Computer, Inc. 1990 Stock Option Plan (the "Option
Plan") a stock option (the "Option") covering 1,000,000 shares of common
stock of the Company (the "Common Stock"). The per share exercise price of
the Option shall be the fair market value of a share of Common Stock on the
day before the date the Option is granted to you by the Committee, as
determined in accordance with the provisions of the Option Plan. The
Option shall become vested and exercisable with respect to 20% of the
shares of Common Stock subject thereto on the Initial Vesting Date and on
each of the second through fifth anniversaries of the Effective Date,
provided that you have remained in the continuous full-time employ of the
Company through each such vesting date and stockholder approval of the
grant of the Option is obtained in accordance with Section 4(c) below. The
Option will be subject to the terms and provisions of the Option Plan and
such other terms consistent with the Option Plan as the Committee may
specify and set forth in the applicable Option Agreement.
(b) Performance Shares. (i) Subject to Section 4(c) below, for
each Fiscal Year during the Term, you shall be afforded the opportunity to
earn the Target Amount (as defined below) of shares of Common Stock (the
"Performance Shares"), subject to the Company's attaining the performance
goal or goals established in good faith by the Committee and approved by
the Board for that Fiscal Year (hereinafter, the "Performance Share
Arrangement"). The "Target Amount" for each 12-month Fiscal Year during
the Term shall be 200,000 shares of Common Stock. The "Target Amount" for
each Fiscal Year of the Term of fewer than 12 months shall be 200,000
shares of Common Stock multiplied by the Proration Fraction. In no event
may you have the opportunity to earn more than 1,000,000 Performance Shares
during the Term. The performance goal or goals for first Fiscal Year will
be established within 60 days following the Effective Date. The
performance goals for subsequent Fiscal Years will be established, to the
extent practicable, prior to the start of the applicable Fiscal Year, but
in no event later than 90 days following the start of the Fiscal Year. The
performance goal or goals established by the Committee for a given Fiscal
Year need not be the same goal or goals established by the Committee under
Section 3(b) above. You may earn fewer than the full number of Performance
Shares in a given year for performance that is below target for that year
based upon an award schedule established by the Committee at the time it
sets the performance targets for the year. In the event that the Company
changes its Fiscal Year during the Term, an equitable adjustment shall be
made to the Performance Share Arrangement which, in the reasonable good
faith judgment of the Committee, preserves, to the extent practicable, the
long-term incentive opportunity set forth above.
(ii) The Performance Shares earned by you for the first Fiscal
Year will be deemed earned on the Initial Vesting Date (subject to
applicable performance targets being achieved) and will be awarded to you
as soon as practicable following the Initial Vesting Date, provided that
you have remained in the continuous full-time employ of the Company through
that date. The Performance Shares for the second Fiscal Year will be
awarded to you on the Initial Vesting Date (provided you are then employed
by the Company), but will be forfeited in whole or in part as of the last
day of that Fiscal Year if the performance goal or goals applicable to that
year are not achieved. The Performance Shares for each subsequent Fiscal
Year will be awarded to you as of the first day of the Fiscal Year
(provided you are then employed by the Company), but will be forfeited in
whole or in part as of the last day of that Fiscal Year if the performance
goal or goals applicable to that year are not achieved. Performance Shares
will not be transferrable by you until they have been earned by you in
accordance with the provisions of this Section 4(b). Performance Shares
awarded for Fiscal Years during the Term other than the first Fiscal Year
will be issued in your name, but the share certificates representing such
shares will be held by the Company or its agent until they have been earned
in accordance with the provisions of this Section 4(b) and will bear an
appropriate legend or legends reflecting the transfer restrictions and
forfeiture provisions applicable thereto.
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(iii) In the event of a Change in Control of the Company, the
Company shall make equitable adjustments to the Performance Share
Arrangement in an manner intended to preserve the economic value of the
arrangement; provided, however, that, in the event of a merger of the
Company with or into another corporation, such adjustment shall consist of
a conversion of Performance Shares to be earned under the Performance Share
Arrangement into shares of the surviving corporation in accordance with the
exchange ratio approved by the Company's stockholders and an equitable
adjustment to the performance goals applicable to the Performance Share
Arrangement.
(c) Stockholder Approval. The grant of the Option is expressly
conditioned upon the stockholders of the Company approving in a separate
vote of the stockholders at the first annual or special meeting of
stockholders of the Company to occur after the Effective Date (i) the grant
of the Option and (ii) an amendment to the Option Plan to permit it to
comply with the requirements of Section 162(m) of the Code applicable to
qualified performance-based compensation. If such stockholder approval is
not obtained in the manner contemplated by the previous sentence, the
Option grant shall be void ab initio and of no further force and effect.
Similarly, the Performance Share Arrangement is expressly conditioned upon
the stockholders of the Company approving in a separate vote of the
stockholders at the first annual or special meeting of stockholders of the
Company to occur after the Effective Date the Performance Share Arrangement
and such additional terms as shall be necessary for the arrangement to meet
the requirements of Section 162(m) of the Code applicable to qualified
performance-based compensation. If such stockholder approval is not
obtained in the manner contemplated by the previous sentence, any
outstanding Performance Shares shall be immediately forfeited and the
Performance Share Arrangement shall be void ab initio and of no further
force and effect. If the stockholder approval contemplated by this Section
4(c) is not obtained, you and the Company agree to negotiate an alternative
long-term compensation arrangement to be submitted to stockholders and to
submit such alternative long-term compensation arrangement to stockholders
as soon as reasonably practicable, and to repeat this process to the extent
necessary until an alternative long-term compensation arrangement
negotiated by you and the Company is subsequently approved by the
stockholders. You and the Company agree to make a good faith and diligent
effort to obtain the stockholder approval contemplated by this Section 4(c)
as soon as reasonably possible. Anything in this Agreement to the contrary
notwithstanding, the Company shall have no obligation to call a special
meeting of stockholders for the purpose of obtaining any approval
contemplated by this Section 4(c).
(d) Registration; Reservation of Shares. To the extent
practicable, the Company will undertake to register the Option, the shares
of Common Stock underlying the Option and the Performance Shares on Form S-
8 under the Securities Act. The previous sentence, however, shall not in
any way be construed as (i) prohibiting the Company from engaging in any
transaction (including a transaction that will result in a Change in
Control), (ii) requiring the Company to file any reports under the Exchange
Act or to maintain its registration under the Exchange Act if such
registration is not otherwise required or (iii) requiring the registration
of the Option, the shares of Common Stock underlying the Option or the
Performance Shares on Form S-8 (or any other form) if Form S-8 is not
available to the Company. As soon as practicable following the Effective
Date, the Company shall reserve for issuance 1,000,000 shares of Common
Stock for issuance under the Performance Share Arrangement. As soon as
practicable following the Effective Date, the Company shall reserve for
issuance 1,000,000 shares of Common Stock for issuance under the Option
Plan in connection with the grant of the Option.
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5. Effect of Termination of Employment.
(a) Right to Resign Following a Year One Change in Control. In
the event of a Year One Change in Control, you shall have the right to
resign for any reason or for no stated reason during the Election Window.
In the event of such a resignation, the Company shall pay you the full
amount of the accrued but unpaid Salary you have earned through the Date of
Termination, plus a cash payment (calculated on the basis of your rate of
Salary then in effect) for all unused vacation time which you may have
accrued as of the Date of Termination. In addition, the Company shall pay
you on the Severance Payment Date an "all in" cash lump sum payment of $10
million. You will relinquish, as of the Date of Termination, the Option,
all rights under the Performance Share Arrangement and any outstanding
Performance Shares and the right to any additional payments or benefits
from the Company under this Agreement. The provisions of the Section 5(a)
shall not apply if, at the time of your resignation, the Company is
entitled to terminate your employment for Cause.
(b) Involuntary Termination Prior to the Initial Vesting Date.
In the event of your Involuntary Termination prior to the Initial Vesting
Date, the Company shall pay you the full amount of the accrued but unpaid
Salary you have earned through the Date of Termination, plus a cash payment
(calculated on the basis of your rate of Salary then in effect) for all
unused vacation time which you may have accrued as of the Date of
Termination. In addition, the Company shall pay you on the Severance
Payment Date an "all in" cash lump sum payment of $10 million. You will
relinquish as of the Date of Termination the Option, all rights under the
Performance Share Arrangement and any outstanding Performance Shares and
the right to any additional payments or benefits from the Company under
this Agreement.
(c) Involuntary Termination On or After the Initial Vesting
Date. (i) In the event of your Involuntary Termination on or after the
Initial Vesting Date, the Company shall pay you the full amount of the
accrued but unpaid Salary you have earned through the date of such
Involuntary Termination, plus a cash payment (calculated on the basis of
your rate of Salary then in effect) for all unused vacation time which you
may have accrued as of the date of Involuntary Termination. In addition,
the Company shall pay you on the Severance Payment Date a cash lump sum
amount equal to the sum of (i) the Salary payable to you for the remaining
portion of the Term and (ii) your annual rate of Salary (at the rate then
in effect) times the number of whole and partial Contract Years remaining
in the Term. In the event of an Involuntary Termination on or after the
Initial Vesting Date, you will retain all Performance Shares that have been
earned by you on or prior to the date of such Involuntary Termination and
you will continue to have the opportunity to earn the Performance Shares
for the Fiscal Year in which the Involuntary Termination occurs if the
applicable performance goals for that Fiscal Year are achieved; provided,
however, that, if your employment is Involuntarily Terminated (i) on or
after the Initial Vesting Date and (ii) on or after a Change in Control
(other than a Year One Change in Control), then the number of Performance
Shares you shall earn for the Fiscal Year in which the Date of Termination
occurs shall not be less than the Target Amount for that Fiscal Year (in no
event greater than 200,000) multiplied by a fraction (in no event greater
than one), the numerator of which is the number of days in such Fiscal Year
up to and including the Date of Termination and the denominator of which is
365 (the "Change in Control Fraction"). All other rights under the
Performance Share Arrangement and all other outstanding Performance Shares
will be forfeited as of the Date of Termination. You will retain the
portion of the Option that has vested on or prior to the Date of
Termination. In addition, if your employment is Involuntarily Terminated
(i) on or after the Initial Vesting Date and (ii) on or after a Change in
Control (other than a Year One Change in Control), you shall also vest in
an additional portion of the Option on the Date of Termination determined
by multiplying the number of shares of Common Stock in which the Option was
scheduled to vest on the anniversary of the Effective Date occurring on or
immediately following the Date of Termination by the Change in Control
Fraction. The vested portion of the Option will remain exercisable for 90
days following the Date of Termination. Any remaining unvested portion of
the Option will be forfeited as of the Date of Termination.
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(ii) In the event of your Involuntary Termination on or after the
Initial Vesting Date, you and your eligible dependents shall continue to be
eligible to participate during the Benefit Continuation Period (as
hereinafter defined) in the medical, dental, health and life insurance
plans applicable to you immediately prior to your Involuntary Termination
on the same terms and conditions in effect for you and your dependents
immediately prior to such Involuntary Termination. For purposes of the
previous sentence, "Benefit Continuation Period" means the period beginning
on the date of Date of Termination and ending on the first anniversary of
the Date of Termination; provided, however, that your coverage under such
plans and arrangements shall end on the date that you and your dependents
are eligible and elect coverage under the plans of a subsequent employer
which provide substantially equivalent or greater benefits to you and your
dependents. Following the end of the Benefit Continuation Period, you
shall be eligible to elect any applicable "continuation coverage" under
Section 4980B(f) of the Code as if the last day of the Benefit Continuation
Period was the date of your "qualifying event" for such continuation
coverage.
(iii) Except as otherwise provided in this Section 5(c), as
of the Date of Termination, you will relinquish the right to any additional
payments or benefits from the Company under this Agreement.
(d) Termination for Cause; Resignation Without Good Reason. In
the event you resign without Good Reason or you are terminated by the
Company for Cause at any time during the Term, the Company shall pay you
the full amount of the accrued but unpaid Salary you have earned through
the Date of Termination, plus a cash payment (calculated on the basis of
your rate of Salary then in effect) for all unused vacation time which you
may have accrued as of the Date of Termination. You will immediately
forfeit as of the Date of Termination the then unvested portion of the
Option, all future rights under the Performance Share Arrangement and any
outstanding Performance Shares that have not been earned as of the Date of
Termination. You will retain the portion of the Option that has vested on
or prior to the Date of Termination which will remain exercisable for 90
days following the Date of Termination. In addition, you shall immediately
relinquish the right to any additional payments or benefits from the
Company under this Agreement.
(e) Death or Disability. If your employment with the Company
ends as a result of your death or Disability during the Term, the Company
shall pay you (or, in the event of your death, your Beneficiary) the full
amount of the accrued but unpaid base salary you have earned through the
Date of Termination, plus a cash payment (calculated on the basis of your
rate of Salary then in effect) for all unused vacation time which you may
have accrued as of the Date of Termination. In the event of your death or
Disability, you (or in the event of your death, your Beneficiary) will
retain all Performance Shares that have been earned on or prior to the date
of your death or Disability and you (or in the event of your death, your
Beneficiary) will continue to have the opportunity to earn the Performance
Shares for the Fiscal Year in which the Involuntary Termination occurs if
the applicable performance goals for that Fiscal Year are achieved. All
other rights under the Performance Share Arrangement or and all other
outstanding Performance Shares will be forfeited as of the Date of
Termination. You will retain the portion of the Option that has vested on
or prior to the Date of Termination which will remain exercisable in
accordance with the provisions of the Option Plan. In addition, in the
event of your death, the Option will continue to vest in accordance with
the provisions of the Option Plan during the six-month period beginning on
the date of your death. Any remaining portion of the Option which has not
vested by the end of the period described in the previous sentence will be
forfeited. Except as otherwise provided in this Section 5(e), as of the
Date of Termination, you will relinquish the right to any additional
payments or benefits from the Company under this Agreement.
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(f) Date and Notice of Termination. Any termination of your
employment by the Company or by you during the Term shall be communicated
by a notice of termination to the other party hereto (the "Notice of
Termination"). The Notice of Termination shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of your employment under the provision so indicated. The
date of your termination of employment with the Company and its
subsidiaries (the "Date of Termination") shall be determined as follows:
(i) if your employment is terminated for Disability, thirty (30) days after
a Notice of Termination is delivered to you by the Company (provided that
you shall not have returned to the full-time performance of your duties
during such thirty (30) day period), (ii) if your employment is terminated
by the Company in an Involuntary Termination, the date the Notice of
Termination is delivered to you by the Company, (iii) if your employment is
terminated by the Company for Cause, subject to the applicable cure
provisions, the date such notice is delivered to you by the Company and
(iv) if you resign during the Election Window, the date the Notice of
Termination is delivered to the Company by you. If the basis for your
Involuntary Termination is your resignation for Good Reason, the Date of
Termination shall be, subject to the applicable cure provisions, ten (10)
days after the date your Notice of Termination is delivered to the Company
by you. The Date of Termination for a resignation of employment other than
for Good Reason other than during the Election Window shall be the date the
Notice of Termination is delivered to you by the Company. The Date of
Termination in the event of your death shall be the date of your death. If
your employment ends as a result of the expiration of the Term, the Date of
Termination shall be the last day of the Term.
(g) No Mitigation. You shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by you
as the result of employment by another employer.
(h) Right of Setoff. Anything in this Agreement to the contrary
notwithstanding, upon your termination or resignation of employment with
the Company for any reason, the full amount of the outstanding principal
and interest on the Loan shall become due and payable 90 days following the
applicable Date of Termination, and the Company and the Lender shall have
the right to apply any and all amounts payable to you under this Section 5
(or otherwise payable to you under this Agreement) to the payment of the
full amount of the then outstanding principal and interest on the Loan.
You hereby consent to such action by the Company and hereby irrevocably
designate the Company as your agent for purposes of the Loan repayment and
authorize and direct the Company to repay the Loan in the manner
contemplated by this Section 5(h). Any remaining amount of outstanding
principal and interest that is not paid in the manner contemplated by this
Section 5(h) shall be due and payable by you within 90 days following the
applicable Date of Termination.
6. Additional Payment.
(a) Gross-Up Payment. Notwithstanding anything herein to the
contrary, if it is determined that any Payment would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties
with respect to such excise tax (such excise tax, together with any
interest or penalties thereon, is herein referred to as an "Excise Tax"),
then you shall be entitled to an additional payment (a "Gross-Up Payment")
in an amount that will place you in the same after-tax economic position
that you would have enjoyed if the Excise Tax had not applied to the
Payment. The amount of the Gross-Up Payment shall be determined by the
Accounting Firm in accordance with the formula {(E x (1 - M)/(1 - T)) - E}
(or such other formula as the Accounting Firm deems appropriate which is
intended to achieve the same result), where
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E equals the Payments which are determined to be "excess
parachute payments" within the meaning of Section 280G(b)(1)
of the Code;
M equals the sum of the highest marginal rates1 for Taxes
applicable to you at the time of the Payment; and
T equals M plus the rate of Excise Tax applicable to the
Payment.
(b) Determination of Gross-Up Payment. Subject to the
provisions of Section 5(c), all determinations required under this Section
6, including whether a Gross-Up Payment is required, the amount of the
Payments constituting excess parachute payments, and the amount of the
Gross-Up Payment, shall be made by the Accounting Firm, which shall provide
detailed supporting calculations both to you and the Company within fifteen
days of the Change in Control Date, your Date of Termination after the
Change in Control Date or any other date reasonably requested by you or the
Company on which a determination under this Section 6 is necessary or
advisable. The Company shall pay to you the initial Gross-Up Payment
within 5 days of the receipt by you and the Company of the Accounting
Firm's determination. If the Accounting Firm determines that no Excise Tax
is payable by you, the Company shall cause the Accounting Firm to provide
you with an opinion that the Accounting Firm has substantial authority
under the Code and Regulations not to report an Excise Tax on your federal
income tax return. Any determination by the Accounting Firm shall be
binding upon you and the Company. If the initial Gross-Up Payment is
insufficient to cover the amount of the Excise Tax that is ultimately
determined to be owing by you with respect to any Payment (hereinafter an
"Underpayment"), the Company, after exhausting its remedies under Section
6(c) below, shall promptly pay to you an additional Gross-Up Payment in
respect of the Underpayment.
(c) Procedures. You shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of a Gross-Up Payment. Such notice shall be
given as soon as practicable after you know of such claim and shall apprise
the Company of the nature of the claim and the date on which the claim is
requested to be paid. You agree not to pay the claim until the expiration
of the thirty-day period following the date on which you notify the
Company, or such shorter period ending on the date the Taxes with respect
to such claim are due (the "Notice Period"). If the Company notifies you in
writing prior to the expiration of the Notice Period that it desires to
contest the claim, you shall: (i) give the Company any information
reasonably requested by the Company relating to the claim; (ii) take such
action in connection with the claim as the Company may reasonably request,
including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company and
reasonably acceptable to you; (iii) cooperate with the Company in good
faith in contesting the claim; and (iv) permit the Company to participate
in any proceedings relating to the claim. You shall permit the Company to
control all proceedings related to the claim and, at its option, permit the
Company to pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such
claim. If requested by the Company, you agree either to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner
and to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts as the Company shall determine; provided, however, that, if the
Company directs you to pay such claim and pursue a refund, the Company
shall advance the amount of such payment to you on an after-tax and
interest-free basis (the "Advance"). The Company's control of the contest
related to the claim shall be limited to the issues related to the Gross-Up
Payment and you shall be entitled to settle or contest, as the case may be,
any other issues raised by the Internal Revenue Service or other
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<PAGE>
taxing authority. If the Company does not notify you in writing prior to
the end of the Notice Period of its desire to contest the claim, the
Company shall pay to you an additional Gross-Up Payment in respect of the
excess parachute payments that are the subject of the claim, and you agree
to pay the amount of the Excise Tax that is the subject of the claim to the
applicable taxing authority in accordance with applicable law.
(d) Repayments. If, after receipt by you of an Advance, you
become entitled to a refund with respect to the claim to which such Advance
relates, you shall pay the Company the amount of the refund (together with
any interest paid or credited thereon after Taxes applicable thereto). If,
after receipt by you of an Advance, a determination is made that you shall
not be entitled to any refund with respect to the claim and the Company
does not promptly notify you of its intent to contest the denial of refund,
then the amount of the Advance shall not be required to be repaid by you
and the amount thereof shall offset the amount of the additional Gross-Up
Payment then owing to you.
(e) Further Assurances. The Company shall indemnify you and
hold you harmless, on an after-tax basis, from any costs, expenses,
penalties, fines, interest or other liabilities ("Losses") incurred by you
with respect to the exercise by the Company of any of its rights under this
Section 6, including, without limitation, any Losses related to the
Company's decision to contest a claim or any imputed income to you
resulting from any Advance or action taken on your behalf by the Company
hereunder. The Company shall pay all legal fees and expenses incurred
under this Section 6, and shall promptly reimburse you for the reasonable
expenses incurred by you in connection with any actions taken by the
Company or required to be taken by you hereunder. The Company shall also
pay all of the fees and expenses of the Accounting Firm, including, without
limitation, the fees and expenses related to the opinion referred to in
Section 6(b).
7. Successors; Binding Agreement; Attorneys Fees.
(a) Assumption by Successor. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business or assets of the
Company expressly to assume and to agree in writing, with a copy to you, to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place; provided, however, that no such assumption shall relieve the Company
of its obligations hereunder. As used in this Agreement, the "Company"
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law or otherwise.
(b) Enforceability; Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of you (and your personal
representatives and heirs) and the Company and any organization which
succeeds to substantially all of the business or assets of the Company,
whether by means of merger, consolidation, acquisition of all or
substantially all of the assets of the Company or otherwise, including,
without limitation, as a result of a Change in Control or by operation of
law. This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees or other
Beneficiary. If you should die while any amount would still be payable to
you hereunder if you had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to your Beneficiary.
(c) Attorney's Fees. The Company will pay or reimburse you for
the reasonable attorneys fees and expenses incurred by you in the
negotiation of this Agreement in an amount not to exceed $5,000.
8. Definitions. For purposes of this Agreement, the following
capitalized words shall have the meanings set forth below:
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"Accounting Firm" shall mean Ernst & Young or, if such firm is
unable or unwilling to perform such calculations, such other national
accounting firm as shall be designated by agreement between you and the
Company.
"Beneficiary" shall mean the person or persons designated by you
in writing to receive any benefits payable to you hereunder in the event of
your death or, if no such persons are so designated, your estate. No
Beneficiary designation shall be effective unless it is in writing and
received by the Company prior to the date of your death.
"Cause" shall mean a termination of your employment during the
Term which is a result of (i) your felony conviction or your plea of "no
contest" to a felony, (ii) your willful disclosure of material trade
secrets or other material confidential information related to the business
of the Company and its subsidiaries, or (iii) your willful and continued
failure substantially to perform your duties with the Company (other than
any such failure resulting from your incapacity due to physical or mental
illness or any such actual or anticipated failure resulting from a
resignation by you for Good Reason) after a written demand for substantial
performance is delivered to you by the Board, which demand specifically
identifies the manner in which the Board believes that you have not
substantially performed your duties, and which performance is not
substantially corrected by you within 10 days of delivery of such demand to
you. For purposes of the previous sentence, no act or failure to act on
your part shall be deemed "willful" unless done, or omitted to be done, by
you not in good faith and without reasonable belief that your action or
omission was in the best interest of the Company. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution
duly adopted by the Board at a meeting of the Board called and held for
such purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in
the good faith opinion of the Board you were guilty of conduct set forth
above in clause (i), (ii) or (iii) of the first sentence of this section
and specifying the particulars thereof in reasonable detail.
"Change in Control" shall mean a change in control of the
Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange
Act, whether or not the Company is then subject to such reporting
requirement; provided, however, that, anything in this Agreement to the
contrary notwithstanding, a Change in Control shall be deemed to have
occurred if:
(i) any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity or person, or any
syndicate or group deemed to be a person under Section 14(d)(2) of the
Exchange Act, is or becomes the "beneficial owner" (as defined in Rule
13d-3 of the General Rules and Regulations under the Exchange Act),
directly or indirectly, of securities of the Company representing 30%
or more of the combined voting power of the Company's then outstanding
securities entitled to vote in the election of directors of the
Company;
(ii) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement)
individuals who at the beginning of such period constituted the Board
and any new directors, whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least a majority of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority thereof;
(iii) there occurs a reorganization, merger, consolidation or
other corporate transaction involving the Company (a "Transaction"),
in each case, with respect to which the stockholders of the Company
immediately prior to such Transaction do not, immediately after the
Transaction, own more than 50 percent of the combined voting power of
the Company or other corporation resulting from such Transaction;
33
<PAGE>
(iv) all or substantially all of the assets of the Company are
sold, liquidated or distributed.
"Change in Control Date" shall mean the date on which the Change
in Control occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor provisions thereto.
"Disability" shall mean (i) your incapacity due to physical or
mental illness which causes you to be absent from the full-time performance
of your duties with the Company for six (6) consecutive months, and (ii)
your failure to return to full-time performance of your duties for the
Company within thirty (30) days after written Notice of Termination due to
Disability is given to you. Any question as to the existence of your
Disability upon which you and the Company cannot agree shall be determined
by a qualified independent physician selected by you (or, if you are unable
to make such selection, such selection shall be made by any adult member of
your immediate family), and approved by the Company. The determination of
such physician made in writing to the Company and to you shall be final and
conclusive for all purposes of this Agreement.
"Election Window" shall mean the thirty-day period beginning 180
days following the Change in Control Date applicable to the Year One Change
in Control.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and any successor provisions thereto.
"Good Reason" shall mean a resignation of your employment during
the Term as a result of any of the following: (i) a meaningful and
detrimental alteration in your position, titles, responsibilities or
reporting responsibilities from that contemplated under this Agreement;
provided, however, that a change in your position, titles, responsibilities
or reporting responsibilities as a result of or in connection with a Year
One Change in Control shall not constitute an event of Good Reason for
purposes of this Agreement; (ii) the failure of the Company to obtain an
agreement reasonably satisfactory to you from any successor to assume and
agree to perform this Agreement, as contemplated in Section 7(a) hereof; or
(iii) the reduction by the Company in your annual rate of Salary or the
failure of the Company to pay you in the time and manner contemplated by
Section 3(b) above any Component A Bonus or Component B Bonus earned by
you; or (iv) the failure of the Company to grant you the Option or to pay
you any Performance Shares earned by you, in each case, in the manner
contemplated by Section 4 above; provided, however, that the failure of the
stockholders of the Company to approve the Option grant or the Performance
Share Arrangement shall in no event constitute Good Reason hereunder; and
provided further, that an event described in this sentence shall not
constitute Good Reason unless it is communicated by you to the Company in
writing within thirty days of the date you know or have reason to know of
such event and is not corrected by the Company in a manner which is
reasonably satisfactory to you (including full retroactive correction with
respect to any monetary matter) within 10 days of the date of your delivery
of such written notice to the Company.
"Initial Vesting Date" shall mean the following:
1. In the event a Year One Change in Control occurs, the
earlier to occur of (i) the expiration of the Election
Window and (ii) 18 months after the Effective Date, but in
no event prior to the later to occur of the first
anniversary of the Effective Date and the date of the
stockholder approval contemplated by Section 4(c) hereof;
and
2. In the event a Year One Change in Control does not occur,
the later of (i) first anniversary of the Effective Date and
(ii) the date of the stockholder approval contemplated by
Section 4(c) hereof.
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<PAGE>
"Involuntary Termination" shall mean (i) your termination of
employment by the Company and its subsidiaries other than for Cause or
Disability or (ii) your resignation of employment with the Company and its
subsidiaries for Good Reason.
"Payment" means (i) any amount due or paid to you under this
Agreement, (ii) any amount that is due or paid to you under any plan,
program or arrangement of the Company and its subsidiaries (including,
without limitation, under the equity plans of the Company), and (iii) any
amount or benefit that is due or payable to you under this Agreement or
under any plan, program or arrangement of the Company and its subsidiaries
not otherwise covered under clause (i) or (ii) hereof which must reasonably
be taken into account under Section 280G of the Code and the Regulations in
determining the amount of the "parachute payments" received by you,
including, without limitation, any amounts which must be taken into account
under the Code and Regulations as a result of (A) the acceleration of the
vesting of any option, restricted stock or other equity award granted
hereunder or under any equity plan of the Company, (B) the acceleration of
the time at which any payment or benefit is receivable by you or (C) any
contingent severance or other amounts that are payable to you.
"Regulations" shall mean the proposed, temporary and final
regulations under Section 280G of the Code or any successor provision
thereto.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and any successor provisions thereto.
"Severance Payment Date" shall mean five business days following
the later to occur of (i) the Date of Termination applicable under Section
5(a), 5(b) or 5(c), as the case may be, and (ii) the date that all
outstanding principal and interest on the Loan has been repaid in full.
"Taxes" shall mean the federal, state and local income taxes to
which you are subject at the time of determination, calculated on the basis
of the highest marginal rates then in effect, plus any additional payroll
or withholding taxes to which you are then subject.
"Year One Change in Control" shall mean a Change in Control
occurring on or prior to the first anniversary of the Effective Date.
9. Notice. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid,
addressed to the Board of Directors, Apple Computer, Inc., 1 Infinite Loop,
M/S: 381, Cupertino, CA 95401, with a copy to the General Counsel of the
Company, or to you at the address set forth on the first page of this
Agreement or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change
of address shall be effective only upon receipt.
10. Miscellaneous.
(a) Amendments, Waivers, Etc. No provision of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements
or representations, oral or otherwise, express or implied, with respect to
the subject matter hereof have been made by either party which are not
expressly set forth in this Agreement and this Agreement shall supersede
all prior agreements, negotiations, correspondence, undertakings and
communications of the parties, oral or written, with respect to the subject
matter hereof.
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<PAGE>
(b) Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
(c) Representation. You hereby represent and warrant to the
Company that the execution and delivery by you of this Agreement to the
Company will not breach the terms of any contract, agreement or
understanding to which you are a party. You further acknowledge and agree
that a breach of this representation by you shall render this Agreement
void ab initio and of no further force and effect.
(d) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
(e) Withholding. Amounts paid to you hereunder shall be subject
to all applicable federal, state and local wage withholding.
(f) Source of Payments. All payments provided under this
Agreement (other than payments made pursuant to a plan which provides
otherwise or as otherwise expressly provided hereunder), shall be paid in
cash from the general funds of the Company, and no special or separate fund
shall be established, and no other segregation of assets made, to assure
payment. You will have no right, title or interest whatsoever in or to any
investments which the Company may make to aid it in meeting its obligations
hereunder. To the extent that any person acquires a right to receive
payments from the Company hereunder, such right shall be no greater than
the right of an unsecured creditor of the Company.
(g) Headings. The headings contained in this Agreement are
intended solely for convenience of reference and shall not affect the
rights of the parties to this Agreement.
(h) Arbitration and Expenses. Any controversy or claims arising
out of or relating to this Agreement or the breach of this Agreement that
cannot be resolved by you and the Company, including any dispute as to the
calculation of your benefits or any payments hereunder, shall be submitted
to arbitration in San Francisco under the supervision of the American
Arbitration Association ("AAA") by one arbitrator to be mutually selected
by the Company and you, with the AAA to appoint an arbitrator experienced
in the resolution of executive employment disputes in the event that the
parties are unable to agree on the selection of an arbitrator. The
proceedings at arbitration shall be confidential, and all documents and
other information relating to the arbitration shall not be disclosed to any
third party except as required by law. The award of the arbitrator shall
be final and conclusive upon the parties, and the parties shall not contest
or seek relief from the award in any court. Judgment upon the arbitration
award may be rendered in any court having jurisdiction thereof, or
application may be made to such court for a judicial acceptance of the
award and an order of enforcement, as the case may be. The Company shall
pay or reimburse you for any and all costs and expenses reasonably incurred
by you (including arbitration costs and legal fees and expenses) in
clarifying or enforcing your rights under this Agreement if you prevail on
the merits of the claim in respect of which such legal fees and expenses
are incurred, and you shall pay or reimburse the Company for any and all
costs and expenses reasonably incurred by the Company (including
arbitration costs and legal fees and expenses) in clarifying or enforcing
its rights under this Agreement if the Company prevails on the merits of
the claim in respect of which such legal fees and expenses are incurred.
(i) Governing Law. The validity, interpretation, construction,
and performance of this Agreement shall be governed by the laws of the
State of California applicable to contracts entered into and performed in
such State.
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<PAGE>
* * * *
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
APPLE COMPUTER, INC.
By: /s/ A.C. Markkula, Jr.
Agreed to as of this 28th day of February, 1996.
_/s/ G.F. Amelio___
Gilbert F. Amelio
37
<PAGE>
Exhibit 10.A.27
February 26, 1996
Mr. George M. Scalise
26055 Newbridge Road
Los Altos Hills, California 94022
Employment Agreement
Dear George:
The following sets forth our agreement regarding the terms and
provisions of your employment as an officer and employee of Apple Computer,
Inc. (the "Company"). Capitalized words which are not otherwise defined
herein shall have the meanings assigned to such words in Section 5 of this
Agreement.
1. Commencement of Employment. Your employment under this Agreement
shall commence on March 1, 1996 (the "Effective Date").
2. Position. You shall be employed as Executive Vice President and
Chief Administrative Officer, reporting to me, in my position as Chief
Executive Officer and Chairman of the Board, and your duties and
responsibilities to the Company shall be consistent in all respects with
such position. You shall devote substantially all of your business time,
attention, skills and efforts exclusively to the business and affairs of
the Company, other than de minimis amounts of time devoted by you to the
management of your personal finances or to engaging in charitable or
community services. Your principal place of employment shall be the
executive offices of the Company in Cupertino, California, although you
understand and agree that you will be required to travel from time to time
for business purposes.
3. Compensation.
(a) Base Salary. As compensation to you for all services
rendered to the Company and its subsidiaries, the Company will pay you a
base salary at the rate of not less than Four Hundred Twenty Thousand
Dollars ($420,000) per annum as of the Effective Date. Your base salary
will be paid to you in accordance with the Company's regular payroll
practices applicable to its executive employees.
(b) Bonus. You shall be eligible to participate in the annual
Senior Executive Bonus Plan (domestic) sponsored by the Company or any
successor plan thereto. Such bonus program shall
38
<PAGE>
afford you the opportunity to earn an annual bonus for each fiscal year of
the Company during your employment. During the Company's Fiscal Year 1996
only, your target bonus shall be Three Hundred Fifteen Thousand Dollars
($315,000), prorated based on that portion of FY96 during which you are
employed by the Company, commencing on the Effective Date. The amount of
your annual bonus thereafter shall be an amount equal to seventy-five
percent (75%) of your base salary which shall be reviewed annually by the
Company. Each annual bonus shall be paid to you in accordance with the
payment provisions of the bonus plan then in effect.
(c) Hiring Bonus. Subject to other provisions of this
Agreement, the Company shall pay you a Hiring Bonus in the amount of Six
Hundred Thirty Thousand Dollars ($630,000). Fifty percent (50%) of this
Hiring Bonus, in the amount of Three Hundred Fifteen Thousand Dollars
($315,000), shall be paid to you within thirty (30) days of the Effective
Date of this Agreement. The balance of your Hiring Bonus, in the amount of
Three Hundred Fifteen Thousand Dollars ($315,000), shall be paid to you
within five (5) days after the first anniversary of the Effective Date.
(d) Long-Term Incentive Compensation. In consideration of this
Agreement, we will recommend to the Company's Board of Directors an initial
stock option grant of two hundred forty thousand (240,000) shares of Apple
Computer, Inc. common stock. You shall be eligible to participate in each
Long-Term Incentive Plan or Arrangement established by the Company for its
executive employees in accordance with the terms and provisions of such
Long-Term Incentive Plan or Arrangement. The Company shall revise and
restate as appropriate its Long-Term Incentive Plans and Arrangements in
order to attract and retain the best qualified executives and officers.
You will receive a reasonable amount of incentives under the Company's
revised and restated Long-Term Incentive Plans and Arrangements.
(e) Benefits. You shall be eligible to participate in all
employee benefit plans and arrangements that the Company provides to its
executive employees in accordance with the terms of such plans and
arrangements, which shall be no less favorable to you, in the aggregate,
than the terms and provisions available to other executive employees of the
Company.
4. Termination.
(a) Termination for Cause. If your employment is terminated by
the Company for Cause, the Company shall pay you the full amount of the
accrued but unpaid base salary you have earned through the date of your
termination, plus a cash payment (calculated on the basis of your base
salary then in effect) for all unused accrued vacation. In addition, you
shall be entitled to benefits under the employee plans and arrangements
described in Section 3(e) above in accordance with terms and provisions of
such plans and arrangements.
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<PAGE>
(b) Termination Other than for Cause. During the five (5) year
period following the Effective Date only, if your employment is terminated
by the Company for reasons other than for Cause, the Company shall pay you
the full amount of the accrued but unpaid base salary you have earned
through the date of your termination, plus a cash payment (calculated on
the basis of your base salary then in effect) for all unused accrued
vacation. In addition, the Company shall pay you a lump sum amount
depending on the date of your employment termination as follows:
Termination Date Amount
During 1-year period 100% of annual base salary
following Effective Date ($420,000)
100% of target bonus
($315,000)
50% of hiring bonus
($315,000)
Following first anniversay 100% of annual base salary
of Effective Date 100% of target annual bonus
There shall be no other payments or benefits on termination.
5. Definitions. For purposes of this Agreement, the following
capitalized words shall have the meanings set forth below:
"Cause" shall mean a termination of your employment which is a
result of (i) your felony conviction, (ii) your willful disclosure of
material trade secrets or other material confidential information related
to the business of the Company and its subsidiaries or (iii) your willful
and continued failure substantially to perform your duties with the Company
(other than any such failure resulting from your incapacity due to physical
or mental illness). For purposes of the previous sentence, no act or
failure to act on your part shall be deemed "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief
that your action or omission was in the best interest of the Company.
"Long-Term Incentive Plan and/or Arrangement" shall mean the
Apple Computer, Inc. 1990 Stock Option Plan, as amended, and any successor
plan thereto.
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
mail, registered, return receipt requested, postage prepaid, addressed to
the Apple Computer, Inc., 1 Infinite Loop, MS 75-8A, Cupertino, California
95014, Attn.: Gilbert F. Amelio, with a copy to the General Counsel of the
Company, or to you at the address set forth on the first page of this
Agreement or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change
of address shall be effective only upon receipt.
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7. Miscellaneous.
(a) Amendments, Waivers, Etc. No provision of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements
or representations, oral or otherwise, express or implied, with respect to
the subject matter hereof have been made by either party which are not
expressly set forth in this Agreement and this Agreement shall supersede
all prior agreements, negotiations, correspondence, undertakings and
communications of the parties, oral or written, with respect to the subject
matter hereof; provided, however, except as expressly set forth herein,
this Agreement shall not supersede the terms of any stock options
previously granted to you under the Long-Term Incentive Plans and
Arrangements.
(b) Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
(d) Withholding. Amounts paid to you hereunder shall be subject
to all applicable federal, state and local withholding taxes.
(e) Source of Payments. All payments provided under this
Agreement, other than payments made pursuant to a plan which provides
otherwise, shall be paid in cash from the general funds of the Company, and
no special or separate fund shall be established, and no other segregation
of assets made, to assure payment. You will have no right, title or
interest whatsoever in or to any investments which the Company may make to
aid it in meeting its obligations hereunder. To the extent that any person
acquires a right to receive payments from the Company hereunder, such right
shall be no greater than the right of an unsecured creditor of the Company.
(f) Headings. The headings contained in this Agreement are
intended solely for convenience of reference and shall not affect the
rights of the parties to this Agreement.
(g) Governing Law. The validity, interpretation, construction,
and performance of this Agreement shall be governed by the laws of the
State of California applicable to contracts entered into and performed in
such State.
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<PAGE>
* * * *
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
APPLE COMPUTER, INC.
By_/s/ G. F. Amelio__
Gilbert F. Amelio
Agreed to as of this 26th day of February, 1996.
__/s/ George M. Scalise____
George M. Scalise
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Exhibit 10.A.28
March 4, 1996
Mr. Fred D. Anderson, Jr.
114 Old Chester Road
Essex Fells, New Jersey 07021
Employment Agreement
Dear Mr. Anderson:
The following sets forth our agreement regarding the terms and
provisions of your employment as an officer and employee of Apple Computer,
Inc. (the" Company"). Capitalized words which are not otherwise defined
herein shall have the meanings assigned to such words in Section 7 of this
Agreement.
1. Commencement of Employment. Your employment under this
Agreement shall commence on April 1, 1996 (the "Effective Date").
2. Position. You shall be employed as Executive Vice
President/Chief Financial Officer of the Company and shall report directly
to the Chief Executive Officer of the Company, and your duties and
responsibilities to the Company shall be consistent in all respects with
such position. You shall devote substantially all of your business time,
attention, skills and efforts exclusively to the business and affairs of
the Company, other than de minimis amounts of time devoted by you to the
management of your personal finances or to engaging in charitable or
community services. Your principal place of employment shall be the
executive offices of the Company in Cupertino, California, although you
understand and agree that you will be required to travel from time to time
for business purposes.
3. Compensation.
(a) Base Salary. As compensation to you for all services
rendered to the Company and its subsidiaries, the Company will pay you a
base salary at the rate of not less than five hundred thousand dollars
($500,000) per annum as of the Effective Date. Your base salary will be
paid to you in accordance with the Company's regular payroll practices
applicable to its executive employees.
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(b) Bonus. You shall be eligible to participate in the annual Senior
Executive Bonus Plan (domestic) sponsored by the Company or any successor
plan thereto. Such bonus program shall afford you the opportunity to earn
an annual bonus for each fiscal year of the Company during your employment.
During the Company's Fiscal Year 1996 only, you shall be guaranteed a bonus
payout of at least $400,000. During the Company's Fiscal Year 1997 only,
your target annual bonus will be set at 80% of your base salary. The
amount of your target annual bonus thereafter shall be reviewed annually by
the Company. Subject to the provision above regarding a guaranteed bonus
payout during the Company's Fiscal Year 1996 only, each annual bonus shall
be paid to you in accordance with the terms and conditions of the bonus
plan then in effect.
(c) Hiring Bonus. Subject to other provisions of this
Agreement, the Company shall pay you a Hiring Bonus in the amount of eight
hundred thousand dollars ($800,000). 50% of this Hiring Bonus ($400,000)
shall be paid to you within 5 days after the Effective Date of this
Agreement. The balance of your Hiring Bonus ($400,000) shall be paid to
you within 5 days after the first anniversary of the Effective Date.
(d) Long-Term Incentive Compensation In consideration of this
Agreement, we will recommend to the Apple Computer, Inc. Board of Directors
an initial stock option grant of 400,000 shares of Apple Computer, Inc.
common stock. Each grant vests over a three year period at 33% increments
beginning one year from the grant date and shall at all times be subject to
the terms and conditions of the Long-Term Incentive Plan or Arrangement.
You shall be eligible to participate in each Long-Term Incentive Plan or
Arrangement established by the Company for its executive employees in
accordance with the terms and provisions of such Long-Term Incentive Plan
or Arrangement. The Company shall revise and restate as appropriate its
Long-Term Incentive Plans and Arrangements in order to attract and retain
the best qualified executives and officers. You will receive a reasonable
amount of incentives under the Company's revised and restated Long-Term
Incentive Plans and Arrangements.
(e) Benefits. You shall be eligible to participate in all
employee benefit plans and arrangements that the Company provides to its
executive employees in accordance with the terms of such plans and
arrangements, which shall be no less favorable to you, in the aggregate,
than the terms and provisions available to other executive employees of the
Company.
4. Termination.
(a) Termination for Cause. If your employment is terminated by
the Company for Cause, the Company shall pay you the full amount of the
accrued but unpaid base salary you have earned through the date of your
termination, plus a cash payment (calculated on the basis of your base
salary then in effect) for all unused accrued vacation. In addition, you
shall be entitled to benefits under the employee plans and arrangements
described in Section 3(e) above in accordance with terms and provisions of
such plans and arrangements.
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(b) Termination Other than for Cause. During the five (5) year
period following the Effective Date only, if your employment is terminated
by the Company for reasons other than for Cause, the Company shall pay you
the full amount of the accrued but unpaid base salary you have earned
through the date of your termination, plus a cash payment (calculated on
the basis of your base salary then in effect) for all unused accrued
vacation. In addition, the Company shall pay you a lump sum amount
depending on the date of your employment termination as follows:
Termination Date Amount
During 1-year period 100% of annual base salary
following Effective Date ($500,000)
100% of target bonus
($400,000)
50% of hiring bonus
($400,000)
Following first anniversary 100% of annual base salary
of Effective Date 100% of target annual bonus
There shall be no other payments or benefits on termination.
5. Relocation. The Company will provide you with full
executive relocation benefits in accordance with the Company's Relocation
Policy for executives. Any additional relocation items or arrangements
will be determined in writing as authorized by the Company's Senior Vice
President of Human Resources.
6. Automobile Expense. For the first 3 years of your
employment, the Company will provide you with an annual automobile expense
not to exceed ten thousand dollars ($10,000).
7. Definitions. For purposes of this Agreement, the following
capitalized words shall have the meanings set forth below:
"Cause" shall mean a termination of your employment which is a
result of (i) your felony conviction, (ii) your willful disclosure of
material trade secrets or other material confidential information related
to the business of the Company and its subsidiaries or (iii) your willful
and continued failure substantially to perform your duties with the Company
(other than any such failure resulting from your incapacity due to physical
or mental illness or any such actual or anticipated failure resulting from
a resignation by you) after a written demand for substantial performance is
delivered to you by the Company's Chief Executive Officer, which demand
specifically identifies the manner in which the Company believes that you
have not substantially performed your duties, and which performance is not
substantially corrected by you within 10 days of receipt of such demand.
For purposes of the previous sentence, no act or failure to act on your
part shall be deemed "willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your action or
omission was in the best interest of the Company.
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"Long-Term Incentive Plan and/or Arrangement" shall mean the
Apple Computer, Inc. 1990 Stock Option Plan, as amended, and any successor
plans thereto.
8. Notice. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid,
addressed to the Apple Computer, Inc., 1 Infinite Loop, MS 75-8A,
Cupertino, California 95014, Attn.: Gilbert F. Amelio, Chairman and Chief
Executive Officer, with a copy to the General Counsel of the Company, or
to you at the address set forth on the first page of this Agreement or to
such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
9. Miscellaneous.
(a) Amendments, Waivers, Retention Agreement, Etc. No
provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing. No waiver
by either party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Agreement
and this Agreement shall supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or
written, with respect to the subject matter hereof; provided, however, that
the Retention Agreement between you and the Company shall supersede this
Agreement in its entirety, with the exception of paragraph 3(c) above, upon
the Change in Control Date as specified in the Retention Agreement.
(b) Beneficiaries. If you should die while any amount for
accrued salary, vacation, guaranteed bonus during Fiscal Year 1996 only or
hiring bonus under paragraph 3(c) of this Agreement would still be payable
to you if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this
Agreement to your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees or
other beneficiary.
(c) Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
(d) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
(e) Withholding. Amounts paid to you hereunder shall be subject
to all applicable federal, state and local withholding taxes.
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(f) Source of Payments. All payments provided under this
Agreement, other than payments made pursuant to a plan which provides
otherwise, shall be paid in cash from the general funds of the Company, and
no special or separate fund shall be established, and no other segregation
of assets made, to assure payment. You will have no right, title or
interest whatsoever in or to any investments which the Company may make to
aid it in meeting its obligations hereunder. To the extent that any person
acquires a right to receive payments from the Company hereunder, such right
shall be no greater than the right of an unsecured creditor of the Company.
(g) Headings. The headings contained in this Agreement are
intended solely for convenience of reference and shall not affect the
rights of the parties to this Agreement.
(h) Governing Law. The validity, interpretation, construction,
and performance of this Agreement shall be governed by the laws of the
State of California applicable to contracts entered into and performed in
such State.
* * * *
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
APPLE COMPUTER, INC.
By_/s/ G.F. Amelio___
Gilbert F. Amelio
Agreed to as of this 4th day of March, 1996.
_/s/ F.D. Anderson______
Fred D. Anderson, Jr.
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Exhibit 10.A.29
March 4, 1996
Fred D. Anderson, Jr.
114 Old Chester Road
Essex Fells, NJ 07021
Retention Agreement
Dear Fred:
Apple Computer, Inc., a California corporation (the "Company"),
considers it essential to the best interests of its stockholders to take
reasonable steps to retain key management personnel. Further, the Board of
Directors of the Company (the "Board") recognizes that the uncertainty and
questions which might arise among management in the context of a change in
control of the Company could result in the departure or distraction of
management personnel to the detriment of the Company and its stockholders.
The Board has determined, therefore, that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the management of the Company and its
subsidiaries, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising
from any possible change in control of the Company.
In order to induce you to remain in the employ of the Company,
the Company has determined to enter into this letter agreement (this
"Agreement") which addresses the terms and conditions of your employment in
the event of a change in control of the Company. Capitalized words which
are not otherwise defined herein shall have the meanings assigned to such
words in Section 8 of this Agreement.
1. Term of Employment Under the Agreement. The term of your
employment under this Agreement shall commence on the Change in Control
Date and shall continue until the second anniversary of the Change in
Control Date (the "Term").
2. Employment During the Term. During the Term, the following
terms and conditions shall apply to your employment with the Company:
(a) Titles; Reporting and Duties. Your position, titles, nature
and status of responsibilities and reporting obligations shall be no less
favorable to you than those that you enjoyed immediately prior to the
Change in Control Date.
(b) Salary and Bonus. Your base salary and annual bonus
opportunity may not be reduced, and your base salary shall be periodically
reviewed and increased in the manner commensurate with increases awarded to
other similarly situated executives of the Company.
(c) Incentive Compensation. You shall be eligible to
participate in each long-term incentive plan or arrangement established by
the Company for its executive employees, in accordance with the terms and
provisions of such plan or arrangement and at a level consistent with the
Company's practices applicable to you prior to the Change in Control Date.
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(d) Benefits. You shall be eligible to participate in all
pension, welfare and fringe benefit plans and arrangements that the Company
provides to its executive employees in accordance with the terms of such
plans and arrangements, which shall be no less favorable to you, in the
aggregate, than the terms and provisions available to other executive
employees of the Company.
(e) Location. You will continue to be employed at the business
location at which you were employed prior to the Change in Control Date and
the amount of time that you are required to travel for business purposes
will not be increased in any significant respect from the amount of
business travel required of you prior to the Change in Control Date.
3. Involuntary Termination During the Term.
(a) Severance Payment. In the event of your Involuntary
Termination during the Term, the Company shall pay you within 5 days of the
date of such Involuntary Termination the full amount of any earned but
unpaid base salary through the Date of Termination at the rate in effect at
the time of the Notice of Termination, plus a cash payment (calculated on
the basis of your Reference Salary) for all unused vacation time which you
may have accrued as of the Date of Termination. The Company shall also pay
you within 5 days of the Date of Termination a pro rata portion of the
annual bonus for the year in which your Involuntary Termination occurs,
calculated on the basis of your target bonus for that year and on the
assumption that all performance targets have been or will be achieved. In
addition, the Company shall pay you in a cash lump sum, within 8 days
following the date of your execution of the release described in the last
sentence of this Section 3(a) (or on the Date of Termination, if later), an
amount (the "Severance Payment") equal to the sum of (i) two times your
Reference Salary and (ii) one times your Reference Bonus. The Severance
Payment shall be in lieu of any other severance payments which you are
entitled to receive under any other severance pay plan or arrangement
sponsored by the Company and its subsidiaries. Your right to the Severance
Payment shall be conditioned upon your execution of a release in favor of
the Company in substantially the form of the release required for the
receipt of severance payments under the Severance Plan (as in effect on the
date of this Agreement) which is not revoked by you within the seven-day
revocation period specified therein.
(b) Benefit Payment. In the event of your Involuntary
Termination during the Term, you and your eligible dependents shall
continue to be eligible to participate during the Benefit Continuation
Period (as hereinafter defined) in the medical, dental, health, life and
other fringe benefit plans and arrangements applicable to you immediately
prior to your Involuntary Termination on the same terms and conditions in
effect for you and your dependents immediately prior to such Involuntary
Termination. For purposes of the previous sentence, "Benefit Continuation
Period" means the period beginning on the Date of Termination and ending on
the earlier to occur of (i) the second anniversary of the Date of
Termination and (ii) the date that you and your dependents are eligible and
elect coverage under the plans of a subsequent employer which provide
substantially equivalent or greater benefits to you and your dependents.
(c) Date and Notice of Termination. Any termination of your
employment by the Company or by you during the Term shall be communicated
by a notice of termination to the other party hereto (the "Notice of
Termination"). The Notice of Termination shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of your employment under the provision so indicated. The
date of your termination of employment with the Company and its
subsidiaries (the "Date of Termination") shall be determined as follows:
(i) if your employment is terminated for Disability, thirty (30) days after
a Notice of Termination is given (provided that you shall not have returned
to the full-time performance of your duties during such thirty (30) day
period), (ii) if your employment is terminated by the Company in an
Involuntary Termination, five (5) days after the date the Notice of
Termination is received by you and (iii) if your employment is terminated
by the Company for Cause, the later of the date specified in the Notice of
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Termination or ten (10) days following the date such notice is received by
you. If the basis for your Involuntary Termination is your resignation
for Good Reason, the Date of Termination shall be ten (10) days after
the date your Notice of Termination is received by the Company. The
Date of Termination for a resignation of employment other than for Good
Reason shall be the date set forth in the applicable notice, which shall
be no earlier than ten (10) days after the date such notice is received by
the Company.
(d) No Mitigation or Offset. You shall not be required to
mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
or benefit provided for in this Agreement be reduced by any compensation
earned by you as the result of employment by another employer or by pension
benefits paid by the Company or another employer after the Date of
Termination or otherwise except as specifically provided in clause (ii) of
the last sentence of Section 3(b).
4. Additional Payment.
(a) Gross-Up Payment. Notwithstanding anything herein to the
contrary, if it is determined that any Payment would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties
with respect to such excise tax (such excise tax, together with any
interest or penalties thereon, is herein referred to as an "Excise Tax"),
then you shall be entitled to an additional payment (a "Gross-Up Payment")
in an amount that will place you in the same after-tax economic position
that you would have enjoyed if the Excise Tax had not applied to the
Payment. The amount of the Gross-Up Payment shall be determined by the
Accounting Firm in accordance with the formula
{(E x (1 - M)/(1 - T)) - E} (or such other formula as the Accounting Firm
deems appropriate which is intended to achieve the same result), where
E equals the Payments which are determined to be "excess
parachute payments" within the meaning of Section 280G(b)(1)
of the Code;
M equals the sum of the highest marginal ratesTo be
expressed in up to three decimal places. For example, a
combined federal, state and local marginal rate of 56% would
be expressed as .560. for Taxes applicable to you at the
time of the Payment; and
T equals M plus the rate of Excise Tax applicable to the
Payment.
No Gross-Up Payments shall be payable hereunder if the Accounting Firm
determines that the Payments are not subject to an Excise Tax.
(b) Determination of Gross-Up Payment. Subject to the
provisions of Section 4(c), all determinations required under this Section
4, including whether a Gross-Up Payment is required, the amount of the
Payments constituting excess parachute payments, and the amount of the
Gross-Up Payment, shall be made by the Accounting Firm, which shall provide
detailed supporting calculations both to you and the Company within fifteen
days of the Change in Control Date, your Date of Termination or any other
date reasonably requested by you or the Company on which a determination
under this Section 4 is necessary or advisable. The Company shall pay to
you the initial Gross-Up Payment within 5 days of the receipt by you and
the Company of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by you, the Company shall cause
the Accounting Firm to provide you with an opinion that the Accounting Firm
has substantial authority under the Code and Regulations not to report an
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Excise Tax on your federal income tax return. Any determination by the
Accounting Firm shall be binding upon you and the Company. If the
initial Gross-Up Payment is insufficient to cover the amount of the
Excise Tax that is ultimately determined to be owing by you with respect
to any Payment (hereinafter an "Underpayment"), the Company, after
exhausting its remedies under Section 4(c) below, shall promptly pay to
you an additional Gross-Up Payment in respect of the Underpayment.
(c) Procedures. You shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of a Gross-Up Payment. Such notice shall be
given as soon as practicable after you know of such claim and shall apprise
the Company of the nature of the claim and the date on which the claim is
requested to be paid. You agree not to pay the claim until the expiration
of the thirty-day period following the date on which you notify the
Company, or such shorter period ending on the date the Taxes with respect
to such claim are due (the "Notice Period"). If the Company notifies you in
writing prior to the expiration of the Notice Period that it desires to
contest the claim, you shall: (i) give the Company any information
reasonably requested by the Company relating to the claim; (ii) take such
action in connection with the claim as the Company may reasonably request,
including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company and
reasonably acceptable to you; (iii) cooperate with the Company in good
faith in contesting the claim; and (iv) permit the Company to participate
in any proceedings relating to the claim. You shall permit the Company to
control all proceedings related to the claim and, at its option, permit the
Company to pursue or forgo any and all administrative appeals, proceedings,
hearings, and conferences with the taxing authority in respect of such
claim. If requested by the Company, you agree either to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner
and to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts as the Company shall determine; provided, however, that, if the
Company directs you to pay such claim and pursue a refund, the Company
shall advance the amount of such payment to you on an after-tax and
interest-free basis (the "Advance"). The Company's control of the contest
related to the claim shall be limited to the issues related to the Gross-Up
Payment and you shall be entitled to settle or contest, as the case may be,
any other issues raised by the Internal Revenue Service or other taxing
authority. If the Company does not notify you in writing prior to the end
of the Notice Period of its desire to contest the claim, the Company shall
pay to you an additional Gross-Up Payment in respect of the excess
parachute payments that are the subject of the claim, and you agree to pay
the amount of the Excise Tax that is the subject of the claim to the
applicable taxing authority in accordance with applicable law.
(d) Repayments. If, after receipt by you of an Advance, you
become entitled to a refund with respect to the claim to which such Advance
relates, you shall pay the Company the amount of the refund (together with
any interest paid or credited thereon after Taxes applicable thereto). If,
after receipt by you of an Advance, a determination is made that you shall
not be entitled to any refund with respect to the claim and the Company
does not promptly notify you of its intent to contest the denial of refund,
then the amount of the Advance shall not be required to be repaid by you
and the amount thereof shall offset the amount of the additional Gross-Up
Payment then owing to you.
(e) Further Assurances. The Company shall indemnify you and
hold you harmless, on an after-tax basis, from any costs, expenses,
penalties, fines, interest or other liabilities ("Losses") incurred by you
with respect to the exercise by the Company of any of its rights under this
Section 4, including, without limitation, any Losses related to the
Company's decision to contest a claim or any imputed income to you
resulting from any Advance or action taken on your behalf by the Company
hereunder. The Company shall pay all legal fees and expenses incurred
under this Section 4, and shall promptly reimburse you for the reasonable
expenses incurred by you in connection with any actions taken by the
Company or required to be taken by you hereunder. The Company shall also
pay all of the fees and expenses of the Accounting Firm, including, without
limitation, the fees and expenses related to the opinion referred to in
Section 4(b).
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(f) Combined Payments. Anything in this Section 4 to the
contrary notwithstanding, the Company shall have no obligation to pay you a
required Gross-Up Payment under this Section 4 if the aggregate amount of
all Combined Payments has at the time such payment is due exceeded the
Limit. If the amount of a Gross-Up Payment to you under this Section 4
would result in the Combined Payments exceeding the Limit, the Company
shall pay you only the portion, if any, of the Gross-Up Payment which can
be paid to you without causing the aggregate amount of all Combined
Payments to exceed the Limit. In the event that you are entitled to a Gross-
Up Payment under this Section 4 and other employees or former employees of
the Company are also entitled to gross-up payments under the corresponding
provisions of the applicable Combined Arrangements and the aggregate amount
of all such payments would cause the Limit on Combined Payments to be
exceeded, the Company shall allocate the amount of the reduction necessary
to comply with the Limit among all such payments in the proportion that the
amount of each such gross-up payment bears to the aggregate amount of all
such payments. Nothing in this Section 4(f) shall require you to repay to
the Company any amount that was previously paid to you under this Section
4.
5. Other Provisions.
(a) Vesting and Exercise. All Equity Awards granted to you
under the Equity Plans (including Short-Term Awards) shall vest and become
exercisable in the event of your Involuntary Termination on or following
the Change in Control Date. If you are employed by the Company on the date
of the Equity Plan Change in Control, your Equity Awards will vest and
become exercisable as of such date.
(b) Effect of 30-Day Alternative. In accordance with the terms
of the Equity Plans, upon an Equity Plan Change in Control, Equity Awards
which are options or stock appreciation rights are "cashed out," unless the
Administrator in its discretion determines not to do so. In the event that
the Administrator elects not to cash out such Equity Awards, the
Administrator has the discretion in the context of a merger or sale of all
or substantially all of the assets of the Company either (i) to cause such
Equity Awards to be assumed or an equivalent option or stock appreciation
right granted by the successor corporation to the Company or a parent or
subsidiary of such successor corporation, or (ii) to provide that your
Equity Awards will remain outstanding for a thirty-day period beginning on
the date that you are so notified of such action by the Administrator and
that such Equity Awards will expire to the extent not exercised at the end
of such thirty-day period (the "30-Day Alternative"). If the Administrator
determines to utilize the 30-Day Alternative, the Company shall pay you
with respect to each such Equity Award the excess, if any (the "Additional
Amount"), of the Change in Control Price you would have received had the
Equity Award been cashed out on the date of the Equity Plan Change in
Control over the value of the consideration actually received by you in
settlement of such awards (determined as of the date such consideration is
received by you). Further, in the event of your Involuntary Termination on
or after the Change in Control Date but on or prior to the date of the
Equity Plan Change in Control, the Company shall pay you the Additional
Amount as if your employment had continued through the date of the Equity
Plan Change in Control. In either case, the payment of the Additional
Amount shall be made within 5 days following the determination by the
Administrator of the Change in Control Price.
(c) Short-Term Awards. In the event that (i) the transaction
resulting in an Equity Plan Change in Control occurs at such a time or is
structured in such a manner so as to make it reasonably likely that you
would be subject to actual or potential liability for short-swing profits
under Section 16 of the Exchange Act ("Short-Swing Profit Liability") if
you were to exercise, tender, sell or otherwise dispose (including through
a merger) of your Short-Term Awards as part of, or prior to, such
transaction and (ii) your inability to exercise, tender, sell or otherwise
dispose of your Short-Term Awards on or prior to the date of such Equity
Plan Change in Control eliminates or reduces the value of some or all of
your Short-Term Awards, then, on the date of the Equity Plan Change in
Control, the Company shall pay you in a cash lump sum the amount of
. The provisions of clause (ii) of the previous sentence shall be deemed
to apply where (a) you are precluded from exercising,
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tendering or otherwise disposing of your Short-Term Awards on or prior to
the Transaction Date in order to avoid Short-Swing Profit Liability, (b) a
Short-Term Award cannot be repurchased, exchanged or cashed-out by the
Company (or other person) on or prior to the Transaction Date without a
risk of Short-Swing Profit Liability to you, or (c) you are required to
delay the exercise, sale, tender, or other disposition of your Short-Term
Awards in order to avoid Short-Swing Profit Liability and such delay
results in your receiving consideration for your Short-Term Awards (valued
at the date such consideration is received) which is of lesser value than
the consideration you would have received (valued as of the date of the
Equity Plan Change in Control) for such awards had such delay not occurred.
The foregoing provisions shall apply to your Equity Awards notwithstanding
your Involuntary Termination of employment with the Company on or after the
Change in Control Date but prior to the Equity Plan Change in Control. The
provisions of this Section 5(c) shall not apply if (A) prior to the Equity
Plan Change in Control, the Company provides you at its expense with an
opinion from a nationally recognized firm of attorneys stating that the
exercise, tender, sale or other disposition of your Short-Term Awards as
part of, or prior to, the transaction resulting in the Equity Plan Change
in Control will not subject you to Short-Swing Profit Liability and (B)
following your receipt of such opinion there is sufficient time for you to
exercise, tender, sell or otherwise dispose of your Short-Term Awards on or
prior to the Equity Plan Change in Control without impairing the value
thereof.
(d) General. Anything in this Agreement to the contrary
notwithstanding, in no event shall the vesting and exercisability
provisions applicable to you under the terms of your Equity Awards be less
favorable to you then the terms and provisions of such awards in effect on
the date hereof.
6. Legal Fees and Expenses. The Company shall pay or reimburse
you on an after-tax basis for all costs and expenses (including, without
limitation, court costs and reasonable legal fees and expenses which
reflect common practice with respect to the matters involved) incurred by
you as a result of any claim, action or proceeding (i) arising out of your
termination of employment during the Term, (ii) contesting, disputing or
enforcing any right, benefits or obligations under this Agreement or (iii)
arising out of or challenging the validity, advisability or enforceability
of this Agreement or any provision thereof; provided, however, that the
amount of the payments and reimbursements under this Section 6 shall not
exceed $2 million.
7. Successors; Binding Agreement.
(a) Assumption by Successor. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business or assets of the
Company expressly to assume and to agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place; provided, however, that
no such assumption shall relieve the Company of its obligations hereunder.
As used in this Agreement, the "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation
of law or otherwise.
(b) Enforceability; Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of you (and your personal
representatives and heirs) and the Company and any organization which
succeeds to substantially all of the business or assets of the Company,
whether by means of merger, consolidation, acquisition of all or
substantially all of the assets of the Company or otherwise, including,
without limitation, as a result of a Change in Control or by operation of
law. This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die
while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there is no such designee, to
your estate.
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8. Definitions. For purposes of this Agreement, the following
capitalized words shall have the meanings set forth below:
"Accounting Firm" shall mean Ernst & Young or, if such firm is
unable or unwilling to perform such calculations, such other national
accounting firm as shall be designated by agreement between you and the
Company. To the extent reasonably practicable, one such accounting firm
shall be designated to perform the calculations in respect of the Combined
Arrangements.
"Administrator" shall mean the "Administrator" as defined in the
applicable Equity Plan or, if no such term is defined in the Equity Plan,
the Board.
"Cause" shall mean a termination of your employment during the
Term which is a result of (i) your felony conviction, (ii) your willful
disclosure of material trade secrets or other material confidential
information related to the business of the Company and its subsidiaries or
(iii) your willful and continued failure substantially to perform your
duties with the Company (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or
anticipated failure resulting from a resignation by you for Good Reason)
after a written demand for substantial performance is delivered to you by
the Board, which demand specifically identifies the manner in which the
Board believes that you have not substantially performed your duties, and
which performance is not substantially corrected by you within 10 days of
receipt of such demand. For purposes of the previous sentence, no act or
failure to act on your part shall be deemed "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief
that your action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less
than three-fourths (3/4ths) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after reasonable
notice to you and an opportunity for you, together with your counsel, to be
heard before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct set forth above in clause (i), (ii) or
(iii) of the first sentence of this section and specifying the particulars
thereof in detail.
"Change in Control" shall mean a change in control of the
Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange
Act, whether or not the Company is then subject to such reporting
requirement; provided, however, that, anything in this Agreement to the
contrary notwithstanding, a Change in Control shall be deemed to have
occurred if:
(i) any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity or person, or any
syndicate or group deemed to be a person under Section 14(d)(2) of the
Exchange Act, is or becomes the "beneficial owner" (as defined in Rule
13d-3 of the General Rules and Regulations under the Exchange Act),
directly or indirectly, of securities of the Company representing 30%
or more of the combined voting power of the Company's then outstanding
securities entitled to vote in the election of directors of the
Company;
(ii) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement)
individuals who at the beginning of such period constituted the Board
and any new directors, whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least three-fourths (3/4ths) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved (the "Incumbent
Directors"), cease for any reason to constitute a majority thereof;
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(iii) There occurs a reorganization, merger, consolidation or
other corporate transaction involving the Company (a "Transaction"),
in each case, with respect to which the stockholders of the Company
immediately prior to such Transaction do not, immediately after the
Transaction, own more than 50 percent of the combined voting power of
the Company or other corporation resulting from such Transaction;
(iv) all or substantially all of the assets of the Company are
sold, liquidated or distributed; or
(v) there is a "change in control" of the Company within the
meaning of Section 280G of the Code and the Regulations.
"Change in Control Date" shall mean the earliest of (i) the date
on which the Change in Control occurs, (ii) the date on which the Company
executes an agreement, the consummation of which would result in the
occurrence of a Change in Control, (iii) the date the Board approves a
transaction or series of transactions, the consummation of which would
result in a Change in Control and (iv) the date the Company fails to
satisfy its obligations to have this agreement assumed by any successor to
the Company in accordance with Section 7(a) of this Agreement. If the
Change in Control Date occurs as a result of an agreement described in
clause (ii) of the previous sentence or as a result of the approval of the
Board described in clause (iii) of the previous sentence and the Change in
Control to which such agreement or approval relates (the "Contemplated
Change in Control") subsequently does not occur, then the Term shall expire
on the sixtieth day (the "Reset Date") following the date the Board
certifies by resolution duly adopted by three-fourths (3/4ths) of the
Incumbent Directors then in office that the Contemplated Change in Control
is not reasonably likely to occur; provided, however, that this sentence
shall not apply if (A) an Involuntary Termination of your employment with
the Company has occurred on and after the Change in Control Date and on or
prior to the Reset Date or (B) the Contemplated Change in Control
subsequently occurs within three months of the Reset Date. Following the
Reset Date, the provisions of this Agreement shall remain in effect and a
new Term shall commence upon the occurrence of a subsequent Change in
Control Date. Notwithstanding the first sentence of this section, if your
employment with the Company terminates prior to the Change in Control Date
and it is reasonably demonstrated that your termination of employment (i)
was at the request of the third party who has taken steps reasonably
calculated to effect the Change in Control or (ii) otherwise arose in
connection with or in anticipation of the Change in Control, then Change in
Control Date shall mean the date immediately prior to the date of your
termination of employment.
"Change in Control Price" shall mean the "Change in Control
Price" as defined in the applicable Equity Plan and determined by the
Administrator as of the date of the Equity Plan Change in Control, whether
or not the Administrator is required under the terms of the applicable
Equity Plan to determine such price as of such date.
"Combined Arrangements" shall mean this Agreement, the Retention
Agreements entered into as of the date first set forth above between the
Company and certain of its executive officers, any Retention Agreement
entered into after the date hereof which is specifically designated by the
terms thereof as one of the Combined Arrangements and the Supplement to the
Severance Plan.
"Combined Payments" shall mean the aggregate cash amount of (i)
severance payments made to you under Section 3(a) of this Agreement or to
any other employee or former employee under the corresponding provisions of
the applicable Combined Arrangement, (ii) severance payments made under
Sections 2(e) and 2(f) of the Supplement or the corresponding provisions of
the applicable Combined Arrangement, (iii) Gross-Up Payments made to you
under Section 6 of this Agreement or to any other employee or former
employee under the
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corresponding provisions of the applicable Combined Arrangement, (iv) fees
and expenses which are paid or reimbursed to you under Section 6 of this
Agreement or to any other employee or former employee under the
corresponding provisions of the applicable Combined Arrangement, (v)
payments made to you under Section 5 of this Agreement or to any other
employee or former employee under the corresponding provisions of the
applicable Combined Arrangement and (vi) costs incurred by the Company in
respect of any employee or former employee under Section 2(d) of the
Supplement or the corresponding provisions of the applicable Combined
Arrangement.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor provisions thereto.
"Common Stock" shall mean the common stock of the Company.
"Disability" shall mean (i) your incapacity due to physical or
mental illness which causes you to be absent from the full-time performance
of your duties with the Company for six (6) consecutive months, and (ii)
your failure to return to full-time performance of your duties for the
Company within thirty (30) days after written Notice of Termination due to
Disability is given to you. Any question as to the existence of your
Disability upon which you and the Company cannot agree shall be determined
by a qualified independent physician selected by you (or, if you are unable
to make such selection, such selection shall be made by any adult member of
your immediate family), and approved by the Company. The determination of
such physician made in writing to the Company and to you shall be final and
conclusive for all purposes of this Agreement.
"ELTSOP" shall mean the Apple Computer, Inc. 1987 Executive Long
Term Stock Option Plan, as amended, and any successor plan thereto.
"Equity Awards" shall mean options, restricted stock, bonus stock
or other grants or awards which consist of, or relate to, equity securities
of the Company and which have been granted to you under the Equity Plans.
For purposes of this Agreement, Equity Awards shall also include any
securities acquired upon the exercise of an option, warrant or similar
right that constitutes an Equity Award.
"Equity Plan Change in Control" shall mean a change in control of
the Company as defined in the applicable Equity Plan.
"Equity Plans" shall mean the Stock Option Plan, the ELTSOP, and
any other equity-based incentive plan or arrangement adopted by the
Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and any successor provisions thereto.
"Good Reason" shall mean a resignation of your employment during
the Term as a result of any of the following:
(i) A meaningful and detrimental alteration in your position,
your titles, or the nature or status of your responsibilities
(including your reporting responsibilities) from those in effect
immediately prior to the Change in Control Date;
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(ii) A reduction by the Company in your annual base salary as in
effect immediately prior to the Change in Control Date or as the same
may be increased from time to time thereafter; a failure by the
Company to increase your salary at a rate commensurate with that of
other key executives of the Company; or a reduction in your target
annual bonus (expressed as a percentage of base salary) below the
target in effect for you prior to the Change in Control Date;
(iii) The relocation of the office of the Company where you
are employed immediately prior to the Change in Control Date (the "CIC
Location") to a location which is more than fifty (50) miles away from
the CIC Location or the Company's requiring you to be based more than
fifty (50) miles away from the CIC Location (except for required
travel on the Company's business to an extent substantially consistent
with your customary business travel obligations in the ordinary course
of business prior to the Change in Control Date);
(iv) The failure by the Company to continue in effect any
compensation plan in which you participated prior to the Change in
Control Date or made available to you after the Change in Control
Date, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan in connection with the Change in Control, or the failure by the
Company to continue your participation therein on at least as
favorable a basis, both in terms of the amount of benefits provided
and the level of your participation relative to other participants, as
existed on the Change in Control Date;
(v) The failure by the Company to continue to provide you with
benefits at least as favorable in the aggregate to those enjoyed by
you under the Company's pension, savings, life insurance, medical,
health and accident, disability, and fringe benefit plans and programs
in which you were participating immediately prior to the Change in
Control Date; or the failure by the Company to provide you with the
number of paid vacation days to which you are entitled on the basis of
years of service with the Company in accordance with the Company's
normal vacation policy in effect immediately prior to the Change in
Control;
(vi) The failure of the Company to obtain an agreement reasonably
satisfactory to you from any successor to assume and agree to perform
this Agreement, as contemplated in Section 7(a) hereof or, if the
business of the Company for which your services are principally
performed is sold at any time after a Change in Control, the failure
of the Company to obtain such an agreement from the purchaser of such
business;
(vii) Any termination of your employment which is not
effected pursuant to the terms of this Agreement; or
(viii) A material breach by the Company of the provisions of
this Agreement;
provided, however, that an event described above in clause (i), (ii), (iv),
(v) or (viii) shall not constitute Good Reason unless it is communicated by
you to the Company in writing and is not corrected by the Company in a
manner which is reasonably satisfactory to you (including full retroactive
correction with respect to any monetary matter) within 10 days of the
Company's receipt of such written notice from you.
"Involuntary Termination" shall mean (i) your termination of
employment by the Company and its subsidiaries during the Term other than
for Cause or Disability or (ii) your resignation of employment with the
Company and its subsidiaries during the Term for Good Reason.
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"Limit" shall mean the dollar amount determined in accordance
with the formula [A x B x C], where
A equals 0.02;
B equals the number of issued and outstanding shares of Common
Stock of the Company immediately prior to the Change in
Control Date; and
C equals the greater of (i) (A) if the Common Stock is listed
on any established stock exchange or national market system
(including, without limitation, the National Market System
of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the highest closing
sale price (or closing bid price, if no sales are reported)
of a share of Common Stock, or (B) if the Common Stock is
regularly quoted on the NASDAQ System (but not on a national
market system) or quoted by a recognized securities dealer
but selling prices are not reported, the highest mean
between the high and low asked prices for the Common Stock,
in each case, on any day during the ninety-day period ending
on the Change in Control Date, and (ii) the highest price
paid or offered, as determined by the Accounting Firm, in
any bona fide transaction or bona fide offer related to the
Change in Control.
"Payment" means (i) any amount due or paid to you under this
Agreement, (ii) any amount that is due or paid to you under any plan,
program or arrangement of the Company and its subsidiaries (including,
without limitation, the Equity Plans), and (iii) any amount or benefit that
is due or payable to you under this Agreement or under any plan, program or
arrangement of the Company and its subsidiaries not otherwise covered under
clause (i) or (ii) hereof which must reasonably be taken into account under
Section 280G of the Code and the Regulations in determining the amount of
the "parachute payments" received by you, including, without limitation,
any amounts which must be taken into account under the Code and Regulations
as a result of (A) the acceleration of the vesting of any option,
restricted stock or other equity award granted under the Equity Plans or
otherwise, (B) the acceleration of the time at which any payment or benefit
is receivable by you or (C) any contingent severance or other amounts that
are payable to you.
"Reference Bonus" shall mean the greater of (i) the target annual
bonus applicable to you for the year in which your Involuntary Termination
occurs and (ii) the highest target annual bonus applicable to you in any of
the three years ending prior to the Change in Control Date.
"Reference Salary" shall mean the greater of (i) the annual rate
of your base salary from the Company and its subsidiaries in effect
immediately prior to the date of your Involuntary Termination and (ii) the
annual rate of your base salary from the Company in effect at any point
during the three-year period ending on the Change in Control Date.
"Regulations" shall mean the proposed, temporary and final
regulations under Section 280G of the Code or any successor provision
thereto.
"Severance Plan" means the Apple Computer, Inc. Executive
Severance Plan, as amended.
"Short-Term Awards" shall mean Equity Awards which have been
granted to you within the six-month period ending on the date of a Equity
Plan Change in Control. For purposes of this Agreement, Short-Term Awards
shall also include any securities acquired upon the exercise of an Equity
Award that constitutes a Short-Term Award.
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"Stock Option Plan" shall mean the Apple Computer, Inc. 1990
Stock Option Plan, as amended, and any successor plan thereto.
"Supplement" means the amendment to the Severance Plan adopted as
of the date of this Agreement and any future amendment thereto.
"Taxes" shall mean the federal, state and local income taxes to
which you are subject at the time of determination, calculated on the basis
of the highest marginal rates then in effect, plus any additional payroll
or withholding taxes to which you are then subject.
"Transaction Date" shall mean the date described in clause (i) of
the definition of Change in Control Date.
9. Notice. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid,
addressed to the Board of Directors, Apple Computer, Inc., 1 Infinite Loop,
M/S: 75 8A, Cupertino, CA 95014, with a copy to the General Counsel of the
Company, or to you at the address set forth on the first page of this
Agreement or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change
of address shall be effective only upon receipt.
10. Miscellaneous.
(a) Amendments, Waivers, Etc. No provision of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements
or representations, oral or otherwise, express or implied, with respect to
the subject matter hereof have been made by either party which are not
expressly set forth in this Agreement and this Agreement shall supersede
all prior agreements, negotiations, correspondence, undertakings and
communications of the parties, oral or written, with respect to the subject
matter hereof; provided, however, that, except as expressly set forth
herein, this Agreement shall not supersede the terms of Equity Awards
previously granted to you.
(b) Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
(d) No Contract of Employment. Nothing in this Agreement shall
be construed as giving you any right to be retained in the employ of the
Company or shall affect the terms and conditions of your employment with
the Company prior to the commencement of the Term hereof.
(e) Withholding. Amounts paid to you hereunder shall be subject
to all applicable federal, state and local withholding taxes.
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(f) Source of Payments. All payments provided under this
Agreement, other than payments made pursuant to a plan which provides
otherwise, shall be paid in cash from the general funds of the Company, and
no special or separate fund shall be established, and no other segregation
of assets made, to assure payment. You will have no right, title or
interest whatsoever in or to any investments which the Company may make to
aid it in meeting its obligations hereunder. To the extent that any person
acquires a right to receive payments from the Company hereunder, such right
shall be no greater than the right of an unsecured creditor of the Company.
(g) Headings. The headings contained in this Agreement are
intended solely for convenience of reference and shall not affect the
rights of the parties to this Agreement.
(h) Governing Law. The validity, interpretation, construction,
and performance of this Agreement shall be governed by the laws of the
State of California applicable to contracts entered into and performed in
such State.
* * * *
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
APPLE COMPUTER, INC.
By_/s/ G.F. Amelio__
Name:
Title:
Agreed to as of this 4th day of March, 1996.
_/s/ F.D. Anserson___
Fred D. Anderson, Jr.
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Exhibit 10.A.30
April 2, 1996
John Floisand
21223 Deepwell Court
Saratoga, CA 95070
Re: Apple Computer, Inc. Employment
Dear John:
The following sets forth our agreement ("Letter Agreement")
regarding the terms and provisions of your employment as an officer and
employee of Apple Computer, Inc. ("Apple"). This Letter Agreement shall
supersede any and all other agreements, oral and written, which may
presently exist between you and Apple with the following exception; the
June 9, 1995 Retention Agreement ("Retention Agreement") between you and
Apple. Upon a Change in Control Date, as defined in the Retention
Agreement, the Retention Agreement shall superceded this Letter Agreement
and shall govern exclusively.
1. Term of Employment Under the Agreement. The initial term of
your employment under this Agreement (the "Term") shall be effective as of
November 1, 1995 (the "Effective Date") and shall continue until the third
anniversary of the Effective Date. Thereafter, the parties agree to
renegotiate the terms and provisions of your employment with Apple.
2. Employment. You will be an Appointed Senior Vice-President
of Apple (grade 98), specifically assigned to Apple Pacific (and excluding
Apple Japan), and your duties and responsibilities to Apple shall be
consistent in all respects with such positions. You shall prorate your
business time, attention, skills and efforts to the business and affairs of
Apple and Apple Japan, as provided for in your employment Letter Agreement
with Apple Japan, other than de minimis amounts of time devoted by you to
the management of your personal finances or to engaging in charitable or
community services.
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3. Compensation.
(a) Base Salary. As compensation to you for all services
rendered to Apple, Apple will pay you a base salary at the rate of not less
than one hundred seventy-five thousand dollars ($175,000) per annum as of
the Effective Date. This will be paid in United States dollars and in
monthly increments of $14,583.33. The amount of your base salary shall be
reviewed annually by Apple and shall be increased to reflect market
compensation of similarly situated executive officers as determined by
Apple. Any increase in your base salary shall be effective as of each
anniversary of the Effective Date and shall be treated as your rate of base
salary for all purposes under this Letter Agreement. Your base salary will
be paid to you in accordance with Apple's regular payroll practices
applicable to its executive employees.
(b) Hire-On Bonus. Apple has paid you a hire-on bonus of one
hundred thousand dollars ($100,000). This amount was paid in United States
dollars and in lump sum.
(c) Bonus. You shall be eligible to participate in Apple's
Senior Executive Bonus Plan or any successor plan thereto. Such bonus
program shall afford you the opportunity to earn an annual bonus for each
fiscal year of Apple. During the first year of the Term, your annual
target bonus is two hundred, eighty-one thousand, two hundred fifty dollars
($281,250). The actual amount paid to you, if any, will be based on a
combination the overall corporate results, including Apple Pacific, as
outlined in Apple's Senior Executive Bonus Plan .
The amount of your annual bonus shall be reviewed annually by
Apple and shall be increased to reflect market bonus compensation of
similarly situated executive officers as determined by Apple. Any increase
in your annual bonus shall be effective as of each anniversary of the
Effective Date. Each annual bonus shall be paid to you in accordance with
the payment provisions of Apple's Senior Executive Bonus Plan.
(d) Long-Term Incentive Compensation. You shall be eligible to
participate in each Long-Term Incentive Plan or Arrangement established by
Apple for its executive employees in accordance with the terms and
provisions of such Long-Term Incentive Plan or Arrangement. In
consideration of this Letter Agreement, we
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will recommend to the Apple Computer, Inc. Board of Directors an initial
stock option grant of 30,000 shares of Apple Computer, Inc. common stock.
Each grant vests over a three year period at 33% increments beginning one
year from the grant date and shall at all times be subject to the terms and
conditions of the Long-Term Incentive Plan or Arrangement.
(e) Benefits. You shall be eligible to participate in all
employee benefit plans and arrangements that Apple provides to its
executive employees in accordance with the terms of such plans and
arrangements, which shall be no less favorable to you, in the aggregate,
than the terms and provisions available to other executive employees of
Apple.
4. Termination.
Subject to the conditions of this paragraph, Apple shall
designate you for participation in the Apple Computer, Inc. Executive
Severance Plan upon the termination of your employment during the term or
thereafter provided that (1) you have not obtained or been offered another
position with Apple or its affiliates, or (2) the termination of your
employment was not the result of your voluntary resignation, or (3) the
decision to terminate your employment was not for "Business Reasons".
"Business Reasons" shall mean that you are terminated for any of the
following reasons: (i) engaging in unfair or unlawful competition with
Apple; or (ii) inducing any customer of Apple to breach any contract with
Apple; or (iii) making any unauthorized disclosure of or otherwise misusing
any of the secrets or confidential information of Apple; or (iv) committing
any act of embezzlement, fraud or material theft with respect to any Apple
property; or (v) violating any Apple policy or guideline or the terms of
this Letter Agreement; or (vi) causing material loss, damage or injury to
or otherwise endangered the property, reputation or employees of Apple; or
(vii) engaging in malfeasance, negligence or misconduct, or failing to
perform reasonable duties and responsibilities consistent with your duties
and responsibilities to Apple; or (viii) failure to act in accordance with
specific, reasonable and lawful instructions from Apple's Chief Executive
Officer, or his designess.
5. Relocation. Apple will provide you will full international
relocation benefits to Japan in accordance with Apple's Relocation Policy.
Apple will continue to pay for and maintain your apartment in Japan,
including its furnishings and utilities, and reasonable costs of
maintenance and cleaning. In the event you choose to move
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your personal household goods to Japan, Apple will pay the reasonable costs
of moving your household goods and provide you with a relocation allowance
of $31,250. Apple also will reimburse you for the reasonable costs of
supplementing your current furnishings when you move to your new residence
in Japan. Upon Termination of your employment, Apple will provide you with
full relocation to the destination of your choice in accordance with
Apple's Relocation Policy..
6. Housing. Apple shall provide you with housing in accordance
with Apple's Expatriate Policy. In the event you elect not to stay in the
apartment currently provided to you, you will be responsible to pay for
your Japanese housing to the extent it represents the hypothetical housing
costs if you were in the United States in a similar home in accordance with
Apple's Expatriate Policy.
Your wife and daughter currently do not intend to relocate to
Japan so that your daughter may complete her education in California. So
long as your wife and daughter continue to live in your California home,
Apple will pay for the reasonable costs of an appliance guarantee contract
and pool and gardening services, not to exceed $250 per month. In the event
you choose to sell your California home, Apple will arrange for the
purchase your home. The purchase price will be determined based on three
(3) independent appraisals which will be obtained at Apple's expense. If
you travel to California on business after the sale of your California
home, you will be entitled to reasonable per diem expenses. If you choose
not to sell your California home, Apple will facilitate the rental of your
California home and pay mortgage payments, fees, taxes and maintenance from
the Effective Date. In the event your California home is not rented within
6 months, Apple will arrange for the purchase your home as outlined above.
7. Home Leave and Education. Apple will pay for six (6) round
trip business class airline tickets between Japan and California for your
wife and your daughter.
In the event your wife and daughter relocate to Japan during the
Term, Apple will pay for the reasonable costs of tuition, books and fees
for your daughter's education in Japan.
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8. Accountant Fees. Apple will pay the reasonable costs of
accounting services as provided in Apple's Expatriate Policy to handle
appropriate and covered financial matters.
9. Notice. For the purpose of this Letter Agreement, notices
and all other communications provided for in this Letter Agreement shall be
in writing and shall be deemed to have been duly given when delivered or
mailed by registered mail, return receipt requested, postage prepaid,
addressed to Apple Computer, Inc., 1 Infinite Loop, Mail Stop, MS 75-8A,
Cupertino, California 95014, Attn.: General Counsel, or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
10. Miscellaneous.
(a) Amendments, Waivers, Etc. No provision of this Letter
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Letter Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Letter
Agreement and this Letter Agreement shall supersede all prior agreements,
negotiations, correspondence, undertakings and communications of the
parties, oral or written, with respect to the subject matter hereof;
provided, however, that, except as expressly set forth herein, this Letter
Agreement shall not supersede the Retention Agreement or the terms of any
stock options previously granted to you under the Long-Term Incentive Plans
and Arrangements. "Long-Term Incentive Plan and/or Arrangement" shall mean
the Apple Computer, Inc. 1990 Stock Option Plan and the Apple Computer,
Inc. 1987 Executive Long Term Stock Option Plan, all as amended, and any
successor plans thereto.
(b) Validity. The invalidity or unenforceability of any
provision of this Letter Agreement shall not affect the validity or
enforceability of any other provision of this Letter Agreement, which shall
remain in full force and effect.
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(c) Counterparts. This Letter Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
(d) Equalization. Apple will provide you with tax equalization
benefits in accordance with Apple's Expatriate Policy.
(e) Source of Payments. All payments provided under this Letter
Agreement, other than payments made pursuant to a plan which provides
otherwise, shall be paid in cash from the general funds of Apple, and no
special or separate fund shall be established, and no other segregation of
assets made, to assure payment. You will have no right, title or interest
whatsoever in or to any investments which Apple may make to aid it in
meeting its obligations hereunder. To the extent that any person acquires
a right to receive payments from Apple hereunder, such right shall be no
greater than the right of an unsecured creditor of Apple.
(f) Headings. The headings contained in this Letter Agreement
are intended solely for convenience of reference and shall not affect the
rights of the parties to this Letter Agreement.
(g) Governing Law. The validity, interpretation, construction,
and performance of this Letter Agreement shall be governed by the laws of
the State of California without regard to its choice of law principles. The
parties agree that, except as expressly provided for to the contrary, venue
for any dispute shall be Santa Clara County, California.
(h) Remedies in Event of Future Dispute. In the event of any
future dispute, controversy or claim between the parties arising from or
relating to this Letter Agreement, its breach, any matter addressed by this
Letter Agreement, the parties will first attempt to resolve the dispute
through confidential mediation to be conducted in San Francisco by a member
of the firm of Gregoria, Haldeman & Piazza, Mediated Negotiations, 625
Market Street, Suite 400, San Francisco, California 94105. If the parties'
dispute is not resolved through mediation, it will be resolved through
binding confidential arbitration to be conducted by the American
Arbitration Association in San Francisco, pursuant to its Model Employment
Arbitration Rules, and judgment upon the award rendered by the
Arbitrator(s) may be entered by any court having
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jurisdiction of the matter. The prevailing party in such arbitration shall
be entitled to recover from the losing party, not only the amount of any
judgment awarded in its favor, but also any and all costs and expenses
incurred in arbitrating the dispute or in preparing for such arbitration.
* * * *
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to Apple the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
APPLE COMPUTER, INC.
By _/s/ Kevin Sullivan
Kevin Sullivan
Senior Vice-President,
Human Resources
Agreed to as of this ___ day of April, 1996.
_______________________________
John Floisand
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Exhibit 10.A.31
April 3, 1996
John Floisand
21223 Deepwell Court
Saratoga, CA 95070
Re: Apple Japan Employment
Dear John:
The following sets forth our agreement ("Letter Agreement")
regarding the terms and provisions of your employment as an officer and
employee of Apple Japan ("Apple Japan" or "Company"). This Letter
Agreement shall supersede any and all other agreements, oral and written,
which may presently exists between you and the Company with the following
exception; the June 9, 1995 Retention Agreement ("Retention Agreement")
between you and Apple. Upon a Change in Control Date, as defined in the
Retention Agreement, the Retention Agreement shall superceded this Letter
Agreement and shall govern exclusively.
1. Term of Employment Under the Agreement. The initial term of
your employment under this Agreement (the "Term") shall be effective as of
November 1, 1995 (the "Effective Date") and shall continue until the third
anniversary of the Effective Date. Thereafter, the parties agree to
renegotiate the terms and provisions of your employment with the Company.
A milestone under during the first year of the Term is that you hire the
President of Apple Japan. Once hired, another milestone is that you will
work with and mentor the new President of Apple Japan for one (1) year
following his hire in order to facilitate his new status.
2. Employment. You will be Chairman of the Apple Japan Board of
Directors and Chief Executive Officer of Apple Japan (grade 98) and your
duties and responsibilities to the Company shall be consistent in all
respects with such positions. The Company will take all steps reasonably
necessary to assure that you are elected or
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appointed to the Board. You shall prorate your business time, attention,
skills and efforts to the business and affairs of the Company and Apple
Computer, Inc., as provided for in your employment Letter Agreement with
Apple Computer, Inc., other than de minimis amounts of time devoted by you
to the management of your personal finances or to engaging in charitable or
community services.
3. Compensation.
(a) Base Salary. As compensation to you for all services
rendered to the Company, the Company will pay you a base salary at the rate
of not less than two hundred thousand dollars ($200,000) per annum as of
the Effective Date. This will be paid in United States dollars and in
monthly increments of $16,666.67. The amount of your base salary shall be
reviewed annually by the Company and shall be increased to reflect market
compensation of similarly situated executive officers as determined by the
Company. Any increase in your base salary shall be effective as of each
anniversary of the Effective Date and shall be treated as your rate of base
salary for all purposes under this Letter Agreement. Your base salary will
be paid to you in accordance with the Company's regular payroll practices
applicable to its executive employees.
(b) Benefits. You shall be eligible to participate in all
employee benefit plans and arrangements that the Company provides to its
executive employees in accordance with the terms of such plans and
arrangements, which shall be no less favorable to you, in the aggregate,
than the terms and provisions available to other executive employees of the
Company.
(c) Bonus. You shall be eligible to receive an annual bonus as
determined by the Board based on the overall corporate results of the
Company.
4. Termination.
Subject to the conditions of this paragraph, Apple shall
designate you for participation in the Apple Computer, Inc. Executive
Severance Plan upon the termination of your employment during the term or
thereafter provided that (1) you have not obtained or been offered another
position with the Company or its affiliates, or (2) the termination of your
employment was not the result of your voluntary resignation, or (3) the
decision to terminate your employment was not for "Business
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Reasons". "Business Reasons" shall mean that you are terminated for any of
the following reasons: (i) engaging in unfair or unlawful competition with
the Company; or (ii) inducing any customer of the Company to breach any
contract with the Company; or (iii) making any unauthorized disclosure of
or otherwise misusing any of the secrets or confidential information of the
Company; or (iv) committing any act of embezzlement, fraud or material
theft with respect to any Company property; or (v) violating any Company
policy or guideline or the terms of this Letter Agreement; or (vi) causing
material loss, damage or injury to or otherwise endangered the property,
reputation or employees of the Company; or (vii) engaging in malfeasance,
negligence or misconduct, or failing to perform reasonable duties and
responsibilities consistent with your duties and responsibilities to the
Company.
5. Automobiles. The Company shall provide you with an annual
automobile allowance of forty thousand dollars ($40,000) or, at the
Company's election, lease a vehicle for you of similar cost under the
Company's name. All maintenance, fuel, insurance and other miscellaneous
costs for this vehicle will be paid by the Company. In the event your wife
joins you in Japan, the Company will provide you with an annual automobile
allowance of twenty thousand dollars ($20,000) for a second vehicle for her
use. All maintenance, fuel, insurance and other miscellaneous costs for
this vehicle will be your responsibility.
In addition, the Company will reimburse you for the reasonable
costs of a taxi or hired car when you are required to attend business
functions and it is impractical for you to drive yourself.
6. Cost of Living. The Company will provide you with a cost of
living adjustment in accordance with the Company's Policy.
7. Membership Fees. The Company will pay the reasonable costs
of business memberships which you will need in order to perform your duties
for Apple Japan including membership in the Tokyo American Club. You will
be responsible for expenses related to your use of the Tokyo American Club
facilities.
8. Accountant Fees. The Company will pay the reasonable costs
of accounting services as provided in Apple's Expatriate Policy to handle
appropriate and covered financial matters.
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9. Notice. For the purpose of this Letter Agreement, notices
and all other communications provided for in this Letter Agreement shall be
in writing and shall be deemed to have been duly given when delivered or
mailed by registered mail, return receipt requested, postage prepaid,
addressed to Apple Japan, 1-14-1 Sendagaya, Shibuya-ku, Tokyo, 151 Japan,
with a copy sent in the same manner to Apple Computer, Inc., 1 Infinite
Loop, MS 75-8A, Cupertino, California 95014, Attn.: General Counsel, or to
such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
10. Miscellaneous.
(a) Amendments, Waivers, Etc. No provision of this Letter
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Letter Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Letter
Agreement and this Letter Agreement shall supersede all prior agreements,
negotiations, correspondence, undertakings and communications of the
parties, oral or written, with respect to the subject matter hereof with
the exception that this Letter Agreement shall not supersede the Retention
Agreement.
(b) Validity. The invalidity or unenforceability of any
provision of this Letter Agreement shall not affect the validity or
enforceability of any other provision of this Letter Agreement, which shall
remain in full force and effect.
(c) Counterparts. This Letter Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
(d) Equalization. Apple will provide you with tax equalization
benefits in accordance with Apple's Expatriate Policy.
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(e) Source of Payments. All payments provided under this Letter
Agreement, other than payments made pursuant to a plan which provides
otherwise, shall be paid in cash from the general funds of the Company, and
no special or separate fund shall be established, and no other segregation
of assets made, to assure payment. You will have no right, title or
interest whatsoever in or to any investments which the Company may make to
aid it in meeting its obligations hereunder. To the extent that any person
acquires a right to receive payments from the Company hereunder, such right
shall be no greater than the right of an unsecured creditor of the Company.
(f) Headings. The headings contained in this Letter Agreement
are intended solely for convenience of reference and shall not affect the
rights of the parties to this Letter Agreement.
(g) Governing Law. The validity, interpretation, construction,
and performance of this Letter Agreement shall be governed by the laws of
the State of California without regard to its choice of law principles. The
parties agree that, except as expressly provided for to the contrary, venue
for any dispute shall be Santa Clara County, California.
(h) Remedies in Event of Future Dispute. In the event of any
future dispute, controversy or claim between the parties arising from or
relating to this Letter Agreement, its breach, any matter addressed by this
Letter Agreement, the parties will first attempt to resolve the dispute
through confidential mediation to be conducted in San Francisco by a member
of the firm of Gregoria, Haldeman & Piazza, Mediated Negotiations, 625
Market Street, Suite 400, San Francisco, California 94105. If the
parties' dispute is not resolved through mediation, it will be resolved
through binding confidential arbitration to be conducted by the American
Arbitration Association in San Francisco, pursuant to its Model Employment
Arbitration Rules, and judgment upon the award rendered by the
Arbitrator(s) may be entered by any court having jurisdiction of the
matter. The prevailing party in such arbitration shall be entitled to
recover from the losing party, not only the amount of any judgment awarded
in its favor, but also any and all costs and expenses incurred in
arbitrating the dispute or in preparing for such arbitration.
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* * * *
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
APPLE JAPAN, INC.
By _/s/ M. Tashiro___
Masazumi Tashiro
Director
Agreed to as of this ___ day of April, 1996.
_______________________________
John Floisand
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Exhibit 10.B.13
RESTRUCTURING AGREEMENT
RESTRUCTURING AGREEMENT (this "Agreement") dated as of December 14,
1995 among TALIGENT, INC., a Delaware corporation (the "Company"), APPLE
COMPUTER, INC., a California corporation ("Apple"), and INTERNATIONAL
BUSINESS MACHINES CORPORATION, a New York corporation ("IBM").
RECITALS
HP has indicated its intention to exercise its rights to the Early
Exit Option under the Stockholder Agreement between HP, Apple and IBM, and
tender all the HP Shares to the Company.
Accordingly, Apple, IBM and the Company have determined it is in the
best interest of the Company and its stockholders to make fundamental
changes in the Company (the "Restructuring").
The parties intend that Apple, like HP, will transfer all its shares
in the Company to the Company, and at that time the Company will become a
wholly-owned subsidiary of IBM.
The parties will cause the mission and management of the Company to be
simplified and expect the number of employees to be reduced from
approximately 400 to approximately 150.
The parties expect that Company employees, customers and the public
will begin to be informed of the planned changes on approximately December
4, 1995.
AGREEMENT
The parties hereby agree as follows:
ARTICLE 1. Definitions and Construction
1.1 Certain Definitions.
As used in this Agreement, the following terms shall have the meanings
specified below:
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control
with the Person specified.
"Apple Confidentiality Agreement" shall mean the Confidentiality
Agreement between Apple and the Company dated February 16, 1994 .
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"Apple" shall mean Apple Computer, Inc., a California corporation.
"Apple Company Note" shall mean the note evidencing the approximately
$8 million obligation of the Company to Apple due 1996.
"Apple License In" shall mean the Technology License and Transfer
Agreement between Apple and the Company dated as of March 1, 1992, as
amended.
"Apple License Out" shall mean the Agreement for License of the
Company's Products to Apple dated as of March 1, 1992, as amended.
"Apple Patent License" shall mean the Patent Cross-License Agreement
between Apple and the Company dated as of March 1, 1992.
"Apple Support Agreement" shall mean the Support and Services
Agreement between Apple and the Company dated as of March 1, 1992.
"Apple Trademark License" shall mean the Trademark License Agreement
between Apple and the Company dated as of December 14, 1994.
"Apple Patent Venture Shares" shall mean shares representing one-half
of the equity of the Patent Venture.
"Apple Shares" shall mean the 1,000,000 shares of Class A Common
Stock, par value $.01 per share, of the Company, held by Apple.
"Approval" shall mean any consent, approval, license, permit or
authorization.
"Board" shall mean the board of directors of the Company.
"Business Day" shall mean any day other than a day which is a Saturday
or Sunday or other day on which commercial banks in New York, New York, or
San Francisco, California, are authorized or required to remain closed. In
no case shall any day in the period from December 23 of a particular year
to January 2 of the following year be considered a "Business Day".
"Closing" shall mean transactions described in Section 2.1 and Section
2.2.
"Closing Agreements" shall mean the New Apple License Out, the New
Research Agreement, and the Patent Venture Agreement.
"Closing Date" shall mean the date on which each Closing shall occur.
"Contract" shall mean contract, indenture, mortgage, lease, deed,
commitment, agreement, arrangement or legally binding understanding.
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As used in this Agreement, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).
"Dollars" or "$" shall mean lawful money of the United States of
America.
"Existing Patent Licenses" shall mean Patent Cross Licensing
Agreements between the Company and each of Apple, HP, and IBM; and any
patent grant or immunity requirement in the New Apple License Out or
similar agreements between the Company and each of HP and IBM.
"Existing Patents" shall mean all of the Company's issued patents,
patent applications and written invention disclosures received by the
Company's patent counsel as of January 29, 1996.
"Governmental Approval" shall mean any Approval of, or declaration or
filing with, any Governmental Authority.
"Governmental Authority" shall mean any court, administrative agency
or commission or other governmental agency or instrumentality, domestic or
foreign, or any arbitrator, of competent jurisdiction.
"HP" shall mean Hewlett-Packard Company, a California corporation.
"HP Shares" shall mean the shares of Class E Common Stock, par value
$.01 per share, of the Company, held by HP.
"Holder" shall mean any registered holder of Common Stock.
"HSR Act" shall mean Section 7A of the Clayton Act.
"IBM" shall mean International Business Machines Corporation, a New
York corporation.
"IBM Company Note" shall mean the note evidencing the approximately $8
million obligation of the Company to IBM due 1996.
"IBM Patent License" shall mean the Patent Cross-License Agreement
between IBM and the Company dated as of March 1, 1992.
"IBM Patent Venture Shares" shall mean shares representing one-half of
the equity of the Patent Venture.
"Injunction" shall mean any preliminary, temporary, interim or final
injunction, temporary restraining order or other legal prohibition.
"Judgment" shall mean any judgment, order, decree or arbitral award.
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"Law" shall mean any statute, law, ordinance, rule or regulation.
"Lien" shall mean, with respect to any asset, (i) any mortgage, deed
of trust, lien, pledge, charge, security interest, easement, covenant,
right of way, restriction , equity or encumbrance of any nature whatsoever
in or on such asset, (ii) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement
relating to such asset and (iii) in the case of securities, any purchase
option, call or similar right of a third party with respect to such
securities.
"Litigation" shall mean any written claim, action, lawsuit,
arbitration or proceeding.
Any reference to any fact, event, change or effect being "material"
with respect to any party shall mean an event, change or effect that is or,
insofar as can reasonably be foreseen, will be material to the business,
properties, assets, liabilities, financial condition or results of
operations of such party and its Subsidiaries taken as a whole.
"New Apple License Out" shall mean the amended and restated Agreement
for License of the Company's Products to Apple in the form attached as
Exhibit 1.
"New Research Agreement" shall mean a new Research and Experimentation
Agreement among the Company, Apple and IBM containing substantially the
terms of the Research Agreement.
"Operative Agreements" shall mean the Apple Confidentiality Agreement,
the Apple License In, the Apple License Out, the Apple Patent License, the
Research Agreement and the Stockholder Agreement.
"Party" shall mean any party hereto.
"Patent Venture" shall mean a Delaware corporation to be created on or
before January 26, 1996, of which half the capital stock shall be issued to
Apple at the First Closing.
"Patent Venture Agreement" shall mean the Patent Venture Agreement and
related corporate or other organizational documents to be entered into by
Apple and IBM as described in Section 5.3.
"Person" shall mean any individual, firm, corporation, partnership,
trust, joint venture, Governmental Authority or other entity, and shall
include any successor (by merger or otherwise) of such entity.
"Research Agreement" shall mean the Research and Experimentation
Agreement among the Company, HP, Apple and IBM dated as of February 16,
1994.
"Shares" shall mean shares of Common Stock.
"Stockholder Agreement" shall mean the Stockholder Agreement among the
Company, HP, Apple and IBM dated as of February 16, 1994.
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"Subsidiary" of any Person shall mean a corporation, company or other
entity (i) more than 50% of whose outstanding shares or securities
(representing the right to vote for the election of directors or other
managing authority) are, or (ii) which does not have outstanding shares or
securities (as may be the case in a partnership, joint venture or
unincorporated association), but more than 50% of whose ownership interest
representing the right to make decisions for such other entity is, now or
hereafter, owned or controlled, directly or indirectly, by such Person, but
such corporation, company or other entity shall be deemed to be a
Subsidiary only so long as such ownership or control exists.
"Tax" or "Taxes" shall mean all Federal, state, local and foreign
taxes, assessments and other governmental charges, including (i) taxes
based upon or measured by gross receipts, income, profits, sales, use or
occupation, (ii) value added, ad valorem, transfer, franchise, withholding,
payroll, employment, excise or property taxes, (iii) all interest,
penalties and additions imposed with respect to such amounts and (iv) any
obligations under any agreements or arrangements with any other Person with
respect to such amounts.
"Transactions" shall mean the transactions contemplated by the Closing
Agreements which are to be effected at the First Closing and the Second
Closing.
1.2 Terms Generally.
The definitions in Section 1.1 shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine
and neuter forms. The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation". All references
herein to Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Exhibits and Schedules to, this
Agreement unless the context shall otherwise require. The headings of the
Articles and Sections are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation
of this Agreement. Unless the context shall otherwise require, any
reference to any agreement or other instrument or statute or regulation are
to it as amended and supplemented from time to time (and, in the case of a
statute or regulation, to any successor provision). Any reference in this
Agreement to a "day" or a number of "days" (without the explicit
qualification of "Business") shall be interpreted as a reference to a
calendar day or number of calendar days. If any action or notice is to be
taken or given on or by a particular calendar day, and such calendar day is
not a Business Day, then such action or notice shall be deferred until, or
may be taken or given, on the next Business Day.
ARTICLE 2. Purchase and Sale
2.1 First Closing
(a) The First Closing will take place on January 30, 1996 at
10:00 a.m. local time at the offices of Apple's corporate law
department, 20400 Stevens Creek Blvd., Cupertino, California, or such
other date and place specified by agreement of Apple and IBM.
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(b) At the First Closing, upon the terms and subject to the
conditions set forth herein,
(i) the Company will transfer to Apple the Apple Patent
Venture Shares, by delivery of a certificate or certificates
representing the Apple Patent Venture Shares, registered in Apple's
name, in exchange for the return by Apple and cancellation of the
Apple Company Note; and
(ii) the Company will transfer to IBM the IBM Patent Venture
Shares, by delivery of a certificate or certificates representing the
IBM Patent Venture Shares, registered in IBM's name, in exchange for
the return by IBM and cancellation of the IBM Company Note.
2.2 Second Closing
(a) The Second Closing will take place on April 15, 1996 at
10:00 a.m. local time at the offices of Apple's corporate law
department, 20400 Stevens Creek Blvd., Cupertino, California, or such
other date and place specified by agreement of Apple and IBM.
(b) At the Second Closing, upon the terms and subject to the
conditions set forth herein:
(i) Apple shall transfer to the Company the Apple Shares in
exchange for which Apple, IBM and the Company shall enter into
agreements pursuant to which
(A) the parties will execute the New Research Agreement
under which Apple's obligations under the previous Research Agreement
are reduced from $10 million to $5 million, payable $2.5 million on
January 3, 1996 and $2.5 million on October 2, 1996; and
(B) Apple is released from any obligations under the
Stockholder Agreement and the Apple Support Agreement and Apple
releases IBM and the Company from any obligations under the
Stockholder Agreement and the Apple Support Agreement.
(ii) Apple and the Company shall enter into a New Apple
License Out agreement in substantially the form attached hereto, which
license agreement shall supersede the Apple License Out.
(iii) IBM intends to tightly integrate some of the
Company's frameworks as class libraries into IBM's Open Class library.
An initial version of this integration, called the "Starter Set" is
planned for approximately January, 1996, and a second version is
planned for approximately year end 1996 (the "Open Class Starter
Set"). IBM shall license to Apple the Open Class Starter Set pursuant
to a license agreement in substantially the form of the New Apple
License Out, except that the "Last Development Date" would be December
31, 1996.
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(iv) If IBM and Apple do not extend their existing patent
cross-license of October 1, 1991 or otherwise enter into a license
agreement to provide coverage at least equal to the following, then
Apple and the Company shall amend the Apple Patent License to:
(A) extend the applicability of "Licensed Patents"
under Section 1.5 of the Apple Patent License and under Section 1.5 of
the IBM Patent License from an effective date of October 1, 1996 to
December 31, 1997;
(B) for such extended period, the scope of the grants
thereunder shall be conformed to the scope of the technology grants
under the New Apple License Out;
(C) confirm IBM will permit the Company to license
patents under the Apple Patent License to encompass all inventions
created by the Company or otherwise licensable by IBM necessary to
make, use, license and sell the "Taligent Licensed Work" under the New
Apple License Out and in exchange Apple will license Company with the
right to sublicense IBM under the IBM Patent License to encompass all
inventions created by Apple or otherwise licenseable by Apple
necessary for Company and IBM to make, use, license and sell "Taligent
Licensed Work" as defined in the New Apple License Out; and
(D) confirm that the provisions of Section 5.2 of the
Apple Patent License and Section 5.2 of the IBM Patent License will
not apply to the acquisition by IBM of more than fifty percent (50%)
of the capital stock of the Company.
(v) Apple and the Company shall amend the Apple Trademark
License to:
(A) change the scope of "Licensed Goods" to all
Licensee's software programs which are licensed to Licensee pursuant
to the New Apple License Agreement (removing the requirement of
"Qualified"); and
(B) extend the term of the Apple Trademark License to
be perpetual.
(vi) Apple and IBM shall enter into the Patent Venture
Agreement.
ARTICLE 3. Conditions to Closings
3.1 Conditions to Each Party's Obligations at Each Closing
The obligations of Apple, IBM and the Company to be performed at the
First Closing and the Second Closing are each subject to the satisfaction
or waiver, as of each respective Closing Date, of the following conditions:
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(a) Governmental Approvals. All Governmental Approvals
necessary for the consummation of the Transactions shall have been
obtained or made and all waiting periods imposed by any Governmental
Authority or Law shall have expired.
(b) No Injunctions or Litigation. No Injunction restraining or
preventing the consummation of the Transactions shall be in effect,
and no Litigation shall be pending or threatened by or before any
Governmental Authority that would restrain or prevent the consummation
of the Transactions.
(c) Other Closing Agreements. The parties to each other Closing
Agreement shall have entered into all such other Closing Agreements,
each of which shall be in full force and effect (except each such
other Closing Agreement may be similarly conditioned on the entering
into of all other Closing Agreements).
(d) Approvals. All Approvals necessary for the consummation of
the Transactions shall have been obtained.
3.2 Additional Condition to First Closing.
The obligations of Apple, IBM and the Company at the First Closing are
subject to the satisfaction or waiver, as of the First Closing Date, of the
additional condition that the Company shall not be or have been on or prior
to the First Closing Date a Subsidiary of IBM (other than prior to the
initial investment by Apple).
3.3 Additional Condition to Second Closing.
The obligations of Apple, IBM and the Company at the Second Closing
are subject to the satisfaction or waiver, as of the Second Closing Date,
of the additional condition that the First Closing shall have occurred.
ARTICLE 4. Representations and Warranties
4.1. Representations and Warranties of the Company.
The Company represents and warrants to Apple and IBM that, as of the
date of this Agreement and on and as of the Closing Date:
(a) Organization and Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
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(b) Authority. The Company has all requisite corporate power
and authority to enter into this Agreement and the other Closing
Agreements and to consummate the Transactions. The execution and
delivery by the Company of this Agreement and the other Closing
Agreements and the consummation by the Company of the Transactions
have been duly authorized by all necessary corporate action on the
part of the Company. This Agreement and the other Closing Agreements
have been, or will at the Closing have been, duly executed and
delivered by the Company and constitute, or will at the Closing
constitute, legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective
terms. The execution and delivery by the Company of this Agreement
and the other Closing Agreements do not and did not, and the
consummation of the Transactions and compliance with the terms of the
Closing Agreements will not, conflict with, result in any violation of
or default (with or without notice or lapse of time or both) under,
give rise to a right of termination, cancellation or acceleration of
any material obligation or to the loss of any material benefit under
or result in or require the creation, imposition or extension of any
Lien upon any of the properties or assets of the Company under (i) any
Contract, (ii) any provision of the Amended and Restated Certificate
of Incorporation or By-laws of the Company or (iii) any Judgment or
Law, except with respect to clauses (i) or (iii), for such conflicts,
violations, defaults, rights or losses that, individually or in the
aggregate, would not have a material adverse effect on the Company or
on the Company's ability to perform its obligations under this
Agreement and the other Closing Agreements in accordance with their
respective terms. No Governmental Approval or Approval of any other
Person is required to be obtained or made by the Company in connection
with the execution and delivery of this Agreement or the other Closing
Agreements or the consummation of the Transactions (other than
Governmental Approvals (I) relating to the Transactions that must be
obtained by the Company by reason of facts peculiar to another party
which such other party has not disclosed or (II) the absence of which
would not have a material adverse effect on any party or on any
party's ability to perform its obligations under this Agreement and
the other Closing Agreements to which it is a party in accordance with
their respective terms).
(c) Financial Statements. Attached to this Agreement as Exhibit
2 is an unaudited balance sheet of the Company dated October 31, 1995,
an audited income statement and statement of changes in cash flows of
the Company for its fiscal year ended December 31, 1994, an unaudited
balance sheet of the Company dated October 31, 1995 (the "Balance
Sheet Date") and an unaudited income statement of the Company for the
period ended October 31, 1995 (all such financial statements being
collectively referred to herein as the "Financial Statements"). The
Financial Statements (i) are in accordance with the books and records
of the Company, (ii) are true, correct and complete and present fairly
the financial condition of the Company at the date or dates therein
indicated and the results of operations for the period or periods
therein specified, and (iii) have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis, except, as to the unaudited financial statements, for the
omission of notes thereto and normal year-end audit adjustments.
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(d) ERISA Plans. Except for its "401(k) Plan," the Company does
not have any Employee Pension Benefit Plan as defined in Section 3 of
the Employee Retirement Income Security Act of 1974, as amended.
(e) Patent Agreements. The Existing Patent Licenses are all of
the contracts, agreements, and instruments to which the Company is a
party relating to patents, patent applications or inventions (except
for employee confidentiality and invention agreements).
4.2. Representations and Warranties of Apple.
Apple represents and warrants to IBM that as of the date of this
Agreement and as of the Closing Date:
(a) Organization and Standing. Apple is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authority. Apple has all requisite corporate power and
corporate authority to enter into this Agreement and the other Closing
Agreements and to consummate the Transactions. The execution and
delivery by Apple of this Agreement and the other Closing Agreements
and the consummation by Apple of the Transactions have been duly
authorized by all necessary corporate action on the part of Apple.
This Agreement and the other Closing Agreements have been, or will at
the Closing have been, duly executed and delivered by Apple and
constitute, or will at the Closing constitute, its legal, valid and
binding obligations, enforceable against it in accordance with their
respective terms. No Governmental Approval or Approval of any other
Person is required to be obtained or made by Apple or any of its
Affiliates in connection with the execution and delivery of this
Agreement or the other Closing Agreements or the consummation of the
Transactions (other than under Governmental Approvals (I) relating to
the Transactions that must be obtained by Apple by reason of facts
peculiar to another party which such other party has not disclosed or
(II) the absence of which would not have a material adverse effect on
any party or on any party's ability to perform its obligations under
this Agreement and the other Closing Agreements to which it is a party
in accordance with their respective terms).
(c) Encumbrances. Apple is the record holder and sole
beneficial owner of the Apple Shares being transferred pursuant to
this Agreement and such Apple Shares are free and clear of any Lien.
4.3 Representations and Warranties of IBM.
IBM represents and warrants to Apple that as of the date of this
Agreement and as of the Closing Date:
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(a) Organization and Standing. IBM is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authority. IBM has all requisite corporate power and
corporate authority to enter into this Agreement and the other Closing
Agreements and to consummate the Transactions. The execution and
delivery by IBM of this Agreement and the other Closing Agreements and
the consummation by Apple of the Transactions have been duly
authorized by all necessary corporate action on the part of IBM .
This Agreement and the other Closing Agreements have been, or will at
the Closing have been, duly executed and delivered by IBM and
constitute, or will at the Closing constitute, its legal, valid and
binding obligations, enforceable against it in accordance with their
respective terms. No Governmental Approval or Approval of any other
Person is required to be obtained or made by Apple or any of its
Affiliates in connection with the execution and delivery of this
Agreement or the other Closing Agreements or the consummation of the
Transactions (other than under Governmental Approvals (I) relating to
the Transactions that must be obtained by Apple by reason of facts
peculiar to another party which such other party has not disclosed or
(II) the absence of which would not have a material adverse effect on
any party or on any party's ability to perform its obligations under
this Agreement and the other Closing Agreements to which it is a party
in accordance with their respective terms).
ARTICLE 5. Covenants Pending the Closing
5.1 Operations of the Company.
From the date of this Agreement to the Second Closing Date, the
Company covenants that (except (i) as expressly contemplated by this
Agreement, or (ii) to the extent that the other parties shall otherwise
consent in writing) that the Company shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted.
5.2 Restructuring Cooperation
(a) The parties will cause the Company to (i) provide the
employees who are terminated in connection with the Restructuring with
60 days written notice of termination and separation benefits,
including JVAR payouts and MPAP 10 payments approved by the parties
(ii) and take the other related actions make the other payments
approved by the Board of Directors of the Company on November 30, 1995
(hereinafter "Restructuring Costs"). As between Apple and IBM, IBM
shall be responsible for all Restructuring Costs, and IBM shall
indemnify Apple with respect to any claim by any third party against
Apple with respect to any obligation of the Company existing on or
arising after November 30, 1995 (other than obligations undertaken by
Apple pursuant to the Closing Agreements).
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(b) As part of the Restructuring, the Company management and IBM
will be determining which Company employees will be required to remain
with the Company to help the Company accomplish its new mission
(hereinafter "Core Team"). The Company will identify the "Core Team"
to Apple. IBM and Apple may wish to hire other Company employees, not
designated as the "Core Team". While Apple and IBM will not require
the others permission or review for any hiring decisions, neither
Apple nor IBM will interfere with the attempt by the Company to retain
the Company employees designated as the Core Team.
5.3 Establishment of Patent Licensing Company
(a) In order to maximize the value of the Company's patent
portfolio and to attempt to recover the cost of their advances to the
Company, the parties will establish a separate legal entity to manage
and license the patent portfolio now held by the Company (the "Patent
Venture").
(b) The Patent Venture will be established prior to the First
Closing and will initially be owned 100% by the Company. The Company
will inventory all of the Existing Patents by January 26, 1996. The
Company will use its best efforts to cause all Existing Patents to be
memorialized to written invention disclosures by January 29, 1996.
The Company will assign ownership of the Existing Patents to the
Patent Venture on or before January 29, 1996, subject to Existing
Patent Licenses.
(c) The details of the management of the Patent Venture and the
rights and obligations of each party with respect ot such Patent
Venture will be as defined in the Patent Venture Agreement.
(d) Immediately following the First Closing, until the execution
of the Patent Venture Agreement, the following provisions shall govern
the Patent Venture:
(i) Apple and IBM will establish a management committee of
equal representation which will manage the Patent Venture, determine
licensing policy, and hire employees. All significant decisions will
be subject to unanimous consent by Apple and IBM. Apple and IBM will
make an equal initial capital contribution (amount to be determined),
will split equally the costs of formation, and will contribute equally
on a quarterly basis operating funds for the Patent Venture. The
Patent Venture will provide to each of Apple and IBM full access to
all information concerning its assets and financial condition. The
Company will provide the Patent Venture full access and cooperation in
ensuring the perfection of the broadest possible rights in the
portfolio.
(ii) Unless otherwise agreed, the Patent Venture will
terminate, and the assets distributed to and liabilities assumed by
Apple and IBM (or their designees) as follows:
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(A) On or before September 2, 1996, the Patent Venture
will provide to each of Apple and IBM a schedule of the Existing
Patents. Such schedule will enumerate each such Existing Patent
separately, provided that rights to "counterparts" shall be considered
to be part of the related domestic Existing Patent. In the event that
two or more U.S. Patents or patent applications have been combined
into a single patent application outside the U.S., such U.S. Patents
and/or patent applications shall be considered as a single Existing
Patent for the purposes of this schedule.
(B) On September 16, 1996, Apple and IBM will divide up
the portfolio by means of alternate picks: one party will have the
opportunity to select a single Existing Patent to be assigned to it;
followed by the other party selecting another single Existing Patent;
and continuing in turn until each Existing Patent in the portfolio has
been selected by one or the other party. The determination of who
will select the first Existing Patent will be made by a toss of coin.
(C) Upon completion of the selection process, Apple
and IBM shall cooperate to initiate a bid process to obtain the
highest possible third party bid for the entire patent portfolio of
the Venture. This process shall be completed and the highest bid
obtained on or before January 16, 1997.
(D) Within ten (10) days of the completion of the bid
process and no later than January 26, 1997, each of Apple and IBM
shall simultaneously declare to the other in writing whether the
highest bid is acceptable to it or not acceptable to it with the
following results:
(1) If both Apple and IBM agree, then the highest
bid will be accepted and the entire portfolio transferred by the
Patent Venture to the highest bidder subject to all existing licenses.
Licenses granted to third parties during the term of the Patent
Venture ("Venture Licenses") will be assigned to and future proceeds
therefrom will benefit the highest bidder.
(2) If both Apple and IBM disagree, then the
Patent Venture will assign to each of Apple and IBM (or their
respective designees) the Patents so selected, subject to any
liabilities in the form of licenses set forth in Section 5.3(b) and
the Venture Licenses. Each Venture License will be assigned to one or
the other of Apple and IBM as appropriate, or to both, but in any case
the future proceeds from each such Venture License will be equally
split between the Apple and IBM.
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(3) If one of Apple or IBM agrees and one
disagrees, then the portfolio shall be transferred as set forth in (2)
above, provided however that the disagreeing party shall have the
option within ten (10) days from the receipt of the other parties'
declaration to inform the other party that it will pay to the other
party one-half of the highest bid and in this event the Patent Venture
will transfer the entire patent portfolio to the disagreeing party or
its designee as set forth in (1) above.
(E) The other assets of the Patent Venture which are
not Existing Patent or Venture Licenses will be liquidated and the
proceeds distributed equally net of the payment of remaining debts or
obligations. Notwithstanding the provisions of Section (D) above,
upon request of either Apple or IBM, Apple and IBM agree to continue
the Patent Venture as a legal entity to manage the separate portfolios
for a reasonable period of time (not to exceed 6 months) necessary for
an orderly assignment of Existing Patent assets to third party
designees of the parties.
5.4 Obligations Suspended under Research Agreement, etc.
Unless and until this Agreement is terminated pursuant to Section 6.1
without the Second Closing having occurred:
(a) Apple and IBM agree to suspend each obligation under the
Research Agreement or Apple License Out which would not be an
obligation under the New Research Agreement or New License Out,
including without limitation any funding amounts required to be paid
by Apple under the Research Agreement but not required to be paid
under the New Research Agreement.
(b) Apple and IBM agree that neither party will invoke any
default or similar mechanism under the Stockholder Agreement or the
Company's Restated Certificate of Incorporation or By-laws.
5.5 Further Actions
IBM shall not cause or permit the Company to become a Subsidiary of IBM
prior to the First Closing Date. Apple shall not cause or permit any Lien
to be created with respect to the Apple Shares prior to the Second Closing
Date (other than any created as a result of the execution of this Agreement).
In addition, each party shall take all actions commercially reasonable or
appropriate to ensure that the conditions to Closing set forth herein to
be satisfied by such party are satisfied on or prior to each Closing Date
and to obtain (and cooperate with the other parties in obtaining) any
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Governmental Approvals required to be obtained or made by it in connection
with any of the Transactions. The Company shall afford to the other
parties and their representatives access to properties, books and records,
subject to appropriate confidentiality restrictions, sufficient to permit
such other party to perform adequately its due diligence and business
reviews relating to the Company.
ARTICLE 6. Miscellaneous
6.1 Termination.
If the Second Closing shall not have occurred on or prior to June 30,
1996, this Agreement and all obligations of the parties hereunder, except
obligations under Section 5.3(d) and Section 6.12, shall terminate;
provided that no such termination shall relieve any party of any liability
it may have for any breach of this Agreement occurring prior to that date.
Following any such termination, if the Patent Venture shall have previously
been formed, it will terminate in accordance with the provisions of Section
5.3(d)(ii).
6.2 Notices.
Except as expressly provided herein, notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed or sent by telex, graphic scanning or
other telegraphic communications equipment of the sending party, as
follows:
(a) if to the Company:
Taligent, Inc.
10201 N. De Anza Blvd.
Cupertino, CA 95014-2233
Attention: General Counsel
Telephone: (408) 255-2525
Telecopier: (408) 777-5280
(b) if to Apple:
Apple Computer, Inc.
1 Infinite Loop
Cupertino, CA 95014
Attention: General Counsel
Telephone: (408) 996-1010
Telecopier: (408) 974-8530
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(c) if to IBM:
International Business Machines Corporate
Counsel - Software Solutions
Box 100, Route 100
Somers, NY 10589
Telephone: (914) 766-1675
Telecopier: (914) 766-1869
or to such other address or attention of such other person as any party
shall advise the other parties in writing. All notices and other
communications given to a party hereto in accordance with the provisions of
this Agreement shall be deemed to have been given on the date of receipt.
6.3 Applicable Law; Waiver of Jury Trials; Consent to Jurisdiction.
The validity, construction and performance of this Agreement shall be
governed by and construed in accordance with the laws of the State of New
York, applicable to contracts executed in and performed entirely within
such State, without reference to any choice of law principles of such
State. With respect to any Litigation arising out of this Agreement or any
Transaction, the parties expressly waive any right they may have to a jury
trial and agree that any such Litigation shall be tried by a judge without
a jury. Each party agrees to non-exclusive personal jurisdiction and venue
in the United States District Court for the Northern District of California
(and any California State court within that District) and the United States
District Court for the Southern District of New York (and any New York
State court within that District) for that purpose, and appoints the person
set forth in Section 6.2 as its agent for service of process in such
jurisdiction.
6.4 Severability.
If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, that provision will be enforced to the maximum
extent permissible so as to effect the intent of the parties, and the
validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby. If necessary to effect the
intent of the parties, the parties will negotiate in good faith to amend
this Agreement to replace the unenforceable language with enforceable
language which as closely as possible reflects such intent.
6.5 Amendments.
This Agreement may be modified or waived only by a written amendment
signed by persons authorized to so bind each party.
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6.6 Waiver.
The waiver by any party of any instance of any other party's
noncompliance with any obligation or responsibility herein shall not be
deemed a waiver of other instances or of any party's remedies for such
noncompliance.
6.7 Counterparts; Effectiveness.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become
effective when one or more counterparts shall have been signed by each
party and delivered to each other party. This Agreement shall become
effective upon execution by Apple and IBM; provided that in that event,
Apple and IBM agree to cause Taligent to execute this Agreement as soon as
practicable after January 3, 1996.
6.8. Entire Agreement.
The provisions of this Agreement and the other Closing Agreements set
forth the entire agreement and understanding among the parties as to the
subject matter hereof and supersede all prior agreements, oral or written,
and all other communications between the parties relating to the subject
matter hereof.
6.9. Assignment.
(a) No party shall assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the other
parties, except that no such consent shall be required for (i) an
assignment to a wholly-owned direct or indirect Subsidiary of a party,
or a parent corporation of which such party is a wholly-owned direct
or indirect Subsidiary, provided that no such assignment shall relieve
such party of any obligations hereunder; or (ii) an assignment by
operation of law in connection with a merger or consolidation of such
party.
(b) Any attempted assignment of this Agreement in violation of
this Section shall be void and of no effect.
(c) This Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties hereto and their respective
successors and permitted assigns.
6.10. No Third-Party Beneficiaries.
This Agreement is for the sole benefit of the parties and their
permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any Person, other than the parties and such assigns,
any legal or equitable rights hereunder.
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6.11. Remedies.
(a) In no event will any party be liable to another party for
incidental or special damages regardless of the form of action, lost
profits, lost savings or any other consequential damages, even if such
party has been advised of the possibility of such damages, resulting
from the breach of its obligations under any Closing Agreement or from
the use of any confidential or other information or any items or
products supplied pursuant to the Closing Agreements.
(b) Because the breach by any party of the provisions of this
Agreement would cause irreparable harm and significant injury that
would be difficult to ascertain and would not be compensable by
damages alone, the parties agree that each party will have the right
to enforce such provisions by Injunction, specific performance or
other equitable relief without prejudice to any other rights and
remedies the enforcing party may have. The reference to specific
Sections in this Section is not a waiver of any party's rights to seek
equitable relief for breaches of other Sections.
6.12. Expenses.
(a) Whether or not any of the Transactions are consummated, all
costs and expenses incurred in connection with the Closing Agreements
and the Transactions shall be paid by the party incurring such cost or
expense, except as the parties shall otherwise agree.
(b) The provisions of this Section shall remain operative and in
full force and effect regardless of the expiration of this Agreement
or the consummation of the Transactions.
6.13 Construction.
This Agreement has been negotiated by the parties and their respective
counsel and will be fairly interpreted in accordance with its terms and
without any strict construction in favor of or against any party.
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IN WITNESS WHEREOF, the Company, Apple and IBM have duly executed this
Agreement as of the day and year first above written.
TALIGENT, INC.
By: /s/ Deborah S. Coutant
Name: Deborah S. Coutant
Title: General Manager and CEO
APPLE COMPUTER, INC.
By:/s/David C. Nagel
Name: David C. Nagel
Title: Senior V.P., Worldwide R&D
INTERNATIONAL BUSINESS MACHINES
CORPORATION
By: /s/ R.L. Jones
Name: R.L. Jones
Title: Software Group Controller
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Exhibit List
Exhibit 1: Form of New Apple License Agreement
Exhibit 2: Financial Statements of the Company
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Exhibit 10.B.14
stock purchase agreement
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is dated as of April
4, 1996 (the "Effective Date"), and is made by and between APPLE COMPUTER,
INC., a California corporation (hereinafter "Apple"), and SCI SYSTEMS,
INC., a Delaware corporation ("SCI").
Recitals
A. Apple is engaged in the business of designing, manufacturing,
marketing, distributing and selling personal computers and other related
electronic products.
B. Apple desires to sell, and SCI desires to purchase, upon the
terms and subject to the conditions set fort by the appropriate person
outstanding shares of capital stock of a wholly-owned subsidiary of Apple
("NEWCO"), a corporation which will be formed on or before the Closing Date
to hold certain assets used by Apple in the operation of its manufacturing
facility in Fountain, Colorado (the "Fountain Facility").
C. Apple and SCI mutually desire that, after the Closing, NEWCO
shall operate the Fountain Facility, and shall, inter alia, manufacture and
assemble certain Apple Products at the Fountain Facility, pursuant to the
terms and conditions set forth in the Manufacturing Agreement and the other
Related Agreements to be executed and entered into by the parties at or
prior to the Closing.
NOW, THEREFORE, for and in consideration of the premises and of the
mutual covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. SALE AND TRANSFER OF SHARES; CLOSING
1.1 Shares. Subject to the terms and conditions of this Agreement, at the
Closing, Apple will sell, transfer and deliver all of the outstanding
shares of the capital stock of NEWCO (the "Shares") to SCI, and SCI will
purchase the Shares from Apple for the Purchase Price set forth in Section
1.2.
1.2 Purchase Price. The purchase price (the "Purchase Price") for the
Shares will be equal to the total capitalization of NEWCO as of the
Closing. Such amount shall be the sum of: (i) an amount equal to the net
book value of the Real Property and the Personal Property (other than the
Spare Parts) as of the Closing Date, calculated in accordance with
generally accepted accounting principles (GAAP) (as shown on NEWCO's books
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and records); (ii) an amount equal to Apple's original purchase cost of
the Spare Parts (for purposes of this Agreement, the parties estimate
that the portion of the total Purchase Price allocated to such Spare
Parts shall be Five Hundred Thousand Dollars ($500,000), but the final
amount with respect thereto shall be determined by the parties prior to
the expiration of the Due Diligence Period); and (iii) One Hundred Sixty
Million Dollars ($160,000,000). At the Closing, the parties shall execute
an amendment to this Agreement setting forth the final amount of the total
Purchase Price. The entire Purchase Price shall be paid, in cash or other
immediately available funds, at the Closing.
1.3 Closing. Consummation of the Transaction (the "Closing") shall take
place at the offices of the Person mutually agreed upon by SCI and Apple to
act as the escrow agent for the Closing (the "Escrow Agent"), at 10:00
o'clock A.M. (local Colorado time) on May 31, 1996, or on such other date
as the parties hereto agree. The date on which the Closing shall occur is
referred to herein as the "Closing Date". All deliveries provided for
herein from one party to the other shall be made to the Escrow Agent,
unless both parties expressly agree otherwise, in writing.
1.4 Closing Obligations.
A. At the Closing, but prior to delivering the Shares to SCI
pursuant to Section 1.4.B, Apple will deliver to NEWCO:
(i) A duly executed Bill of Sale and Assignment and Assumption
Agreement in substantially the form of Exhibit G and Exhibit H,
respectively, attached hereto;
(ii) A warranty deed in form sufficient to transfer title to the
Real Property from Apple to NEWCO (the "Deed");
(iii) All such other assignments and other instruments as are
reasonably necessary to vest in NEWCO good, valid and marketable title to
the Assets; and
(iv) All other previously undelivered documents required to be
delivered by Apple to NEWCO at or prior to the Closing in connection with
the Transaction, all as provided herein.
B. At the Closing, but subsequent to transferring the Assets to
NEWCO pursuant to Section 1.4.A, Apple will deliver to SCI:
(i) Certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), with signatures guaranteed by a
commercial bank or by a member firm of the New York Stock Exchange, for
transfer to SCI;
(ii) All other previously undelivered documents required to be
delivered by Apple to SCI at or prior to the Closing in connection with the
Transaction, all as provided herein; and
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(iii) A certificate executed by Apple, representing and
warranting to SCI that each of Apple's representations and warranties in
this Agreement was accurate in all respects as of the Effective Date and is
accurate in all respects as of the Closing Date as if made on the Closing
Date (giving full effect to any supplements to or amendments of this
Agreement or any of the exhibits attached hereto, in accordance with the
provisions of Section 9.4, below).
C. At the Closing, but subsequent to Apple transferring the Assets
to NEWCO pursuant to Section 1.4.A, SCI will deliver to Apple:
(i) The Purchase Price, in cash or immediately available funds;
(ii) All other previously undelivered documents required to be
delivered by SCI to Apple at or prior to the Closing in connection with the
Transaction, all as provided herein; and
(iii) A certificate executed by SCI, representing and
warranting to Apple that each of SCI's representations and warranties in
this Agreement was accurate in all respects as of the Effective Date and is
accurate in all respects as of the Closing Date as if made on the Closing
Date (giving full effect to any supplements to or amendments of this
Agreement or any of the exhibits attached hereto, in accordance with the
provisions of Section 9.4, below).
1.5 Costs and Fees of Escrow. SCI shall pay the premium for or cost of
any endorsement desired by SCI to any Title Insurance (as defined in
Section 5.9) which may be issued in connection with the Transaction, the
cost of any new or updated survey of the Real Property which SCI may elect
to obtain or request NEWCO to obtain, all recording costs and all
documentary stamp taxes in connection with the transfer of the Assets to
NEWCO, an amount equal to sixty-three percent (63%) of all state and local
sales and transfer taxes, if any, with respect to the Personal Property
arising from the Transaction, including without limitation any such taxes
arising from the transfer of the Assets to NEWCO, and one-half of the
Escrow Agent's fee, and all other customary and usual buyer's closing costs
and escrow charges applicable to the Transaction. Apple shall pay the
premium for a standard owner's policy of title insurance for the Real
Property, one-half of the Escrow Agent's fee, an amount equal to thirty-
seven percent (37%) of all state and local sales and transfer taxes, if
any, with respect to the Personal Property arising from the Transaction,
including without limitation any such taxes arising from the transfer of
the Assets to NEWCO, and all other customary and usual seller's closing
costs and escrow charges applicable to the Transaction. Real estate and
personal property taxes and assessments shall be prorated using the most
recent levy and assessments allocable to the Real Property as of the date
the Deed is recorded.
2. TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES
2.1 Assets to be Transferred to NEWCO.; Subject to and in accordance with
the terms and conditions hereof, at the Closing, Apple will assign,
transfer, convey and deliver to NEWCO, all of Apple's right, title and
interest in the following:
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A. The real property commonly known as 702 Bandley Drive, Fountain,
Colorado, as more particularly described in Exhibit A attached hereto,
together with all improvements on the real property (collectively the "Real
Property" or the "Site"), and all appurtenant rights thereto, including
without limitation easements, rights of way, licenses and other interests
therein; and
B. All personal property (including manufacturing and operating
equipment, and certain spare parts relating thereto [the "Spare Parts"])
owned by Apple and used by Apple in its operation of the Fountain Facility,
to the extent set forth on Exhibit B attached hereto, including machinery,
equipment, computers, tools, vehicles, furniture, all relevant data, files,
books and records at the Fountain Facility regarding the Assets, and office
supplies and office equipment (collectively, the "Personal Property").
During the Due Diligence Period, SCI and Apple shall identify with
specificity those Spare Parts currently located at the Fountain Facility
which shall be transferred to NEWCO pursuant to this Agreement, and Exhibit
B shall be amended, at or prior to the Closing, to accurately reflect such
items; and
C. Certain inventories of materials and components currently at the
Site and owned by Apple, and used in connection with Apple's ownership and
operation of the Assets, which inventory shall be identified by the parties
prior to the expiration of the Due Diligence Period, and shall be set forth
in Exhibit C attached hereto (the "Initial Inventory").
D. The Real Property, the Personal Property (including the Spare
Parts) and the Initial Inventory are sometimes referred to collectively
herein as the "Assets".
E. As part of the Transaction, Apple shall assign to NEWCO, and
NEWCO shall assume, all authorizations, consents, approvals, licenses,
orders, permits, exemptions of or filings or registrations with any court
or governmental or administrative authority which relate solely to Apple's
ownership and operation of the Assets, to the extent such Assigned Permits
are assignable or transferable, and to the extent not encompassed within or
addressed by any of the Related Agreements, all as more particularly set
forth in Exhibit D attached hereto (collectively, the "Assigned Permits").
F. As part of the Transaction, Apple shall assign to NEWCO, and
NEWCO shall assume, certain agreements and contracts relating to the
operation of the Site, including leases to which Apple is a party and
relating solely to the Assets, which are set forth in Exhibit E attached
hereto, and which SCI shall agree, by written notice to Apple prior to the
Due Diligence Completion Date, to have NEWCO assume (collectively, the
"Assigned Contracts"). To the extent any consents or approvals by, of or
from the other parties to said Assigned Contracts are necessary with
respect to such assignment and assumption, Apple shall use commercially
reasonable efforts to secure such consents or approvals. If such consents
or approvals are not secured by the Closing Date, SCI may elect to have
NEWCO assume any contract for which the required third party consent has
not been obtained, or may elect not to have NEWCO assume any such contract,
and in any case SCI shall advise Apple, in writing, of its election with
respect to any such contract not later than the Closing.
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2.2 Assignment and Assumption of Liabilities. As of the Closing Date,
Apple shall assign to NEWCO, and NEWCO shall assume and agree to pay, the
following liabilities and obligations, known and unknown, liquidated and
unliquidated, contingent or fixed, rights and causes of action with respect
to the Assets, the Assigned Permits and the Assigned Contracts
(collectively, the "Assumed Liabilities"): (i) all of Apple's obligations
arising on and after the Closing under the Assigned Contracts, and (ii) all
of Apple's obligations arising on and after the Closing under the Assigned
Permits; provided, however, that NEWCO shall have no liability or
obligation to perform under any Assigned Contracts and Assigned Permits
unless and until Apple's rights thereunder have been effectively assigned
to NEWCO.
2.3 Sale of Assets "AS IS". Except as expressly set forth in this
Agreement, Apple shall transfer the Assets to NEWCO in their "AS IS, WHERE
IS" condition as of the Effective Date, and solely in reliance on SCI's
inspection and examination of the Assets prior to the Closing Date.
Neither Apple, nor any of Apple's agents, representatives or employees,
have made any representations or warranties, direct or implied, verbal or
written, with respect to the Assets, or their merchantability, or the
fitness thereof for any particular purpose, except as expressly set forth
in this Agreement and the instruments of conveyance delivered at the
Closing, and Apple shall not be obligated to SCI or to NEWCO in connection
with any defect, whether patent or latent, with respect to the same, except
as provided in this Agreement and such instruments.
2.4 Risk of Loss. Risk of physical loss to the Assets shall be borne by
Apple prior to the Closing, and by NEWCO on and after the Closing. If,
prior to the Closing, the Assets or any material portion thereof are
damaged by flood, fire, earthquake or other casualty, or any governmental
or quasi-governmental entity commences any legal action or eminent domain
proceeding to take any portion of the Assets, then Apple shall give prompt
notice thereof to SCI and SCI shall have the right to terminate this
Agreement by written notice to Apple within five (5) days after SCI's
receipt or deemed receipt of such notice, in which event this Agreement
shall immediately terminate and the parties shall thereafter have no
further rights or obligations hereunder; provided, however, that if SCI
elects to go forward with the Transaction, all casualty insurance proceeds
relating solely to said casualty or loss with respect to any such damage to
any of the Assets, and/or all the proceeds of any such taking shall be
assigned to NEWCO at the Closing, to the extent that such proceeds would
otherwise be payable to Apple.
2.5 Excluded Assets.; The Assets which are the subject of this Agreement
shall not include the assets and/or property of Apple described in this
Section 2.5, none of which shall be transferred to NEWCO (collectively, the
"Excluded Assets"):
A. Inventories of raw materials, work-in-progress, and finished
goods or products (other than the Initial Inventory), located at the Site
and used in connection with Apple's business at the Site, all of which
shall be governed by the terms and conditions of the Manufacturing
Agreement.
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B. Apple's right, title and interest under such contracts, leases,
licenses and agreements which relate to Apple's operations at the Site, to
the extent not expressly assigned, transferred or sold to NEWCO pursuant to
the terms of this Agreement.
C. Information used by Apple to operate and conduct its business at
the Site with respect to the design, production and distribution of Apple
Products, including, without limitation, technical information, know-how,
processes, and procedures; and intellectual property rights of Apple and
all Apple Affiliates, of every nature and description, developed by Apple
or such Apple Affiliates prior to or after the Closing Date, including,
without limitation, all intellectual property rights developed or used at
the Site in connection with the design, development or manufacture of the
Apple Products manufactured at the Site, or used in connection with the
activities described in and contemplated by the Manufacturing Agreement.
To the extent that any such information and intellectual property is part
of the Transaction, it shall be subject to the terms and conditions of the
Intellectual Property Agreement.
D. Cash, cash equivalents, certificates of deposit, bank accounts,
prepaid items, accounts or notes receivable, and unbilled accounts or notes
arising from work completed at the Site on or prior to the Closing Date.
E. Claims or rights against third parties relating to liabilities or
obligations which are not assumed by NEWCO hereunder.
2.6 Excluded Liabilities.
A. Except as specifically assumed by NEWCO pursuant to Section 1 and
Section 2, NEWCO shall not assume, perform, pay or discharge any
liabilities, obligations, payables or debts of Apple, whether known or
unknown, accrued, absolute, contingent or otherwise, and Apple shall be
solely responsible for the payment or discharge thereof.
B. Without limiting the generality of the foregoing paragraph, SCI
and NEWCO shall not assume any liabilities or obligations of Apple:
(i) for any Taxes except as otherwise expressly provided in this
Agreement;
(ii) for product liabilities, liabilities to customers,
contractors and purchasers for defects in products, worker's compensation,
and automobile and similar liabilities for personal injuries, in each case
to the extent such liability arises from an injury, event or occurrence
prior to the Closing;
(iii) for any employee-related liability or obligation of
Apple, other than as expressly set forth in the Employee Agreement;
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(iv) for obligations or transactions of any kind between Apple
and its shareholders, subsidiaries or affiliates; or
(v) for any accounts payable of Apple arising in connection with
Apple's business at the Fountain Facility occurring prior to the Closing,
except as expressly provided in the Manufacturing Agreement or any of the
other Related Agreements.
2.7 Prorations; Tax Elections.
A. Prorations at Closing. At the Closing, there shall be prorated
between Apple, on the one hand, and NEWCO, on the other hand, as of the
Closing Date, the following accrued or prepaid items relating to Apple's
conduct of its business at the Site: (i) ad valorem and similar taxes with
respect to the Assets; (ii) rents, royalties and other payments due under
the Assigned Contracts; (iii) charges for utilities serving the Real
Property; (iv) deposits with respect to the Assets; (v) interest charges
relating to the Assumed Liabilities; (vi) license fees relating to any of
the Assets; (vii) fees under any of the Assigned Permits; and (viii)
governmental assessments and charges for services to or with respect to any
of the Assets. The Purchase Price to be paid hereunder shall be
appropriately decreased by the pro rata amount of any such items which are
accrued but unpaid as of the Closing Date, and shall be appropriately
increased by the pro rata amount of any such items which have been prepaid
by Apple as of the Closing Date.
B. 338(h)(10) Election. Apple and SCI will make an election under
Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the
"Code") (and any corresponding elections under applicable state, local or
foreign tax law) (collectively, the "338(h)(10) Election") with respect to
the purchase and sale of the Shares under this Agreement. In connection
with any such election, Apple and SCI will jointly execute IRS Form 8023-A
(Corporate Qualified Stock Purchases) at the Closing. The parties will
timely file the Form 8023-A with the appropriate Internal Revenue Service
("IRS") Center, via certified mail, return receipt requested to establish
proof of filing of the form with the IRS. Apple and SCI also agree to file
any other forms or to take such other steps as may be necessary to properly
effect such election. Apple will pay any tax attributable to any gain or
loss incurred by Apple with regard to the making of the 338(h)(10) Election
and will indemnify SCI and NEWCO against any liabilities arising out of any
failure by Apple to pay such taxes. In connection with such 338(h)(10)
election, the Purchase Price shall be allocated by mutual agreement of
Apple and SCI, as set forth in Exhibit F attached hereto. Apple and SCI
will file all tax returns (including amended returns and any claims for
refund) and information reports in a manner consistent with such
allocation.
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2.8 No Breach By Reason of Sale.; It is the intention of the parties that
this Agreement shall not constitute an assignment or attempted assignment
of any lease, license, commitment or other contract or agreement to which
either SCI or Apple is a party, if any such assignment or attempted
assignment would constitute a breach or violation thereof; it being
understood, however, that the preceding does not relieve Apple from any
liability to NEWCO or to SCI which Apple would otherwise have hereunder by
reason of a breach of Apple's representations, warranties, covenants or
conditions resulting from the failure of Apple to transfer such lease,
license, commitment, or other contract or agreement to NEWCO.
2.9 Waiver of Bulk Sales Law Compliance.; Compliance with the bulk sales
laws of the State of Colorado, if any, and those of any other jurisdiction
which may be applicable to the Transaction, is hereby waived by SCI, and
Apple hereby agrees to defend, indemnify and hold NEWCO and SCI harmless
from and against any claims by any Person arising out of or due to the
failure to comply with such bulk sales laws, including without limitation
any claims by any Person against all or any part of the Assets.
2.10 Hart-Scott-Rodino Filing.; Promptly following execution of this
Agreement by the parties, SCI and Apple shall prepare such documentation as
may be necessary to make any required filing under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). The
parties shall cooperate with respect to the filing, including without
limitation providing relevant data to the other as needed to complete said
filing. SCI shall pay all required fees with respect to such filing.
3. REPRESENTATIONS AND WARRANTIES OF APPLE.
Apple hereby represents and warrants to SCI and to NEWCO, as of the
Effective Date and as of the Closing Date, as follows:
3.1 Corporate Organization.; Apple is a corporation duly organized,
validly existing and in good standing under the laws of California, has
full corporate power and authority to carry on its business as it is now
being conducted at the Site and to own the Assets, and is duly qualified to
do business in the State of Colorado as a foreign corporation.
3.2 Authorization.; The execution and delivery of this Agreement, the
Bill of Sale, the Assignment and Assumption Agreement, the transfer of the
Shares, and all deeds, endorsements, assignments and other instruments to
be executed and delivered by Apple hereunder, and the consummation of the
Transaction, have been duly authorized by all necessary corporate action on
the part of Apple. This Agreement has been duly executed and delivered by
Apple and, when duly and validly executed by SCI, will constitute the valid
and binding obligation of Apple, enforceable against Apple in accordance
with its terms, except as enforceability may be limited by bankruptcy and
other similar laws and general principles of equity. The Deed, the Bill of
Sale, the Assignment and Assumption Agreement, and the deeds, endorsements,
assignments and other instruments to be executed and delivered to NEWCO by
Apple at the Closing will be valid and binding obligations of Apple,
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enforceable against Apple in accordance with their terms, except as
enforceability may be limited by bankruptcy and similar laws and general
principles of equity, and will effectively convey to and vest in NEWCO good
and marketable title to the Assets, subject only to the conditions set
forth therein and to the Permitted Liens (as defined in Section 3.5). The
transfer of the certificates representing the Shares, and all endorsements
and stock powers executed in connection therewith, and all other documents,
instruments and certificates to be executed and delivered to SCI by Apple
at the Closing will be valid and binding obligations of Apple, enforceable
against Apple in accordance with their terms, except as enforceability may
be limited by bankruptcy and similar laws and general principles of equity,
and will effectively convey to and vest in SCI good and marketable title to
the Shares.
3.3 No Violation. The execution and delivery of this Agreement by Apple
and the performance of this Agreement by Apple will not (i) conflict with
or violate the Articles of Incorporation or Bylaws of Apple, (ii) subject
to the obtaining of all required consents from governmental entities having
jurisdiction or other third parties, as provided in this Agreement,
conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Apple or by which any of its property is bound or
affected, or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default)
under, or impair Apple's rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any lien or
encumbrance on any of the Assets or the Shares pursuant to, any material
note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Apple is a
party or by which Apple is bound or affected, except, with respect to
clauses (ii) and (iii), for any such conflicts, violations, defaults or
other occurrences that would not have a Material Adverse Effect on Apple.
3.4 Consents. Except for governmental consents required under the HSR
Act, which will be requested as provided in Section 2.10 of this Agreement,
and as may be required under the Assigned Contracts and the Assigned
Permits, no consent of any Person (other than those previously obtained) is
necessary to the consummation of the Transaction, including, without
limitation, consents from parties to loans, contracts, leases or other
agreements and consents from governmental agencies, whether federal, state,
or local or foreign.
3.5 Title to Assets; Encumbrances.
A. Apple has good and marketable title to the Personal Property and
the Initial Inventory, and good, marketable fee simple title to the Real
Property, subject only to the Permitted Liens. The Assets are free and
clear of all liens (including liens for Taxes as defined below), claims,
charges, security interests or other encumbrances of any nature whatsoever
including, without limitation, leases, chattel mortgages, conditional sales
contracts, collateral security arrangements and other title or interest
retention arrangements (collectively, "Liens"), except for the following,
all of which shall be deemed "Permitted Liens": (i) minor imperfections of
title, exceptions, variances, reservations or limitations (if any), (ii)
Liens for current taxes, assessments and like impositions not yet
delinquent, (iii) zoning code and building code provisions applicable to
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the Real Property, (iv) rights reserved to any governmental authority to
regulate any of the Assets, and (v) inchoate materialmen's, mechanic's and
workmen's liens or other like liens arising in the ordinary course of business;
none of which materially detract from the value or impair the use of
the property subject thereto as currently used, or materially impair
the current operations of the Site.
B. With respect to the Real Property, Apple warrants and represents
as follows:
(i) No options have been granted to others to purchase, lease or
otherwise acquire any interest in the Real Property, or any part thereof.
Apple has the exclusive right of possession of each tract comprising the
Real Property, subject only to matters of record (including easements,
rights of way and other similar matters of record).
(ii) Neither Apple nor any other Person has caused any work or
improvements to be performed upon or made to the Real Property for which
there remains outstanding any payment obligation that would or might serve
as the basis for any claim, lien, charge or encumbrance in favor of the
Person which performed the work, other than Permitted Liens.
(iii) All requisite certificates of occupancy and other
permits or approvals required with respect to the improvements on any of
the Real Property and the occupancy and use thereof have been obtained and
are currently in effect.
(iv) Except as disclosed to SCI, Apple has received no
notification that it is in violation of any applicable building, zoning,
anti-pollution, health or other law, ordinance or regulation in respect of
the Assets or in respect of Apple's operations at the Site, and no facts
have come to the attention of Apple to cause it to believe any such
violation exists.
(v) Neither the whole nor any portion of the Real Property is
subject to any governmental decree or order to be sold or is being
condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor to Apple's best knowledge has
any such condemnation, expropriation or taking been proposed.
3.6 Condition of Assets. The Personal Property has no material defects
and is in good operating condition and repair, normal wear and tear
excepted, and is adequate for the uses to which it is being put; and that
portion of the Personal Property identified in Exhibit B as equipment used
in the manufacture and assembly of Apple Products has been regularly
maintained in the ordinary course of business.
3.7 Assigned Permits. To the best of Apple's knowledge, the Assigned
Permits constitute all permits needed to operate the Assets at the Fountain
Facility.
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3.8 Taxes.
A. "Taxes" shall mean all taxes, charges, fees, levies, imposts or
other assessments, including, without limitation, income, gross receipts,
excise, use, transfer, property, sales, license, payroll, withholding and
franchise taxes, imposed by the United States, or any state, local or
foreign government or subdivision or agency thereof, whether computed on a
unitary, combined or any other basis, and also including any interest and
penalties or additions to tax.
B. As of the date hereof, there are no Liens with respect to Taxes
(other than Permitted Liens for Taxes not yet delinquent) in connection
with the Assets. Apple has reserved for or paid, withheld, collected, and
paid over to the proper governmental authorities all Taxes which are
required to be paid, withheld, collected, or paid to and including the
Closing Date with respect to the Assets and its operations at the Site
(other than Taxes which are being contested by Apple in good faith), and
Apple shall pay all Taxes due and payable to and including the Closing
Date, to the extent that such amounts are not prorated at the Closing and
the payment obligation therefor would thereafter rest with NEWCO.
C. For all periods to and including the Closing (whether such
periods are reflected in a return or report ending on or before the
Closing, or after the Closing), NEWCO has timely filed or will have filed,
all Federal, foreign, state, county, local and/or other taxing authority
tax returns, reports, or other required filings with respect to any Taxes,
and has paid or will pay such Taxes with respect to such returns, reports
or required filings for all such periods as such Taxes become due.
D. Apple agrees that it shall indemnify and hold SCI and NEWCO
harmless of and from any loss, liability or expense actually incurred by
SCI or NEWCO as a result of all tax liability for which NEWCO may be liable
as a member of an affiliated, consolidated, unitary or combined group (as
defined in Section 1502 of the Code, or any comparable state or local
statute, rule or regulation) which includes Apple or any Apple Affiliates.
3.9 Contracts. The list of contracts and agreements set forth in Exhibit
E attached hereto is a true, complete and correct list of all agreements,
contracts and commitments necessary to operate the Assets, and to Apple's
best knowledge there are no material defaults by any party thereunder nor
have any amendments, oral or written, to any such Assigned Contracts been
made or entered into by Apple except as set forth in said Exhibit E.
3.10 Assumed Liabilities. Apple has disclosed to SCI all known liabilities
of Apple under and pursuant to the Assigned Contracts and the Assigned
Permits, and with respect to the Assets.
3.11 Litigation. There are no actions, suits, inquiries, proceedings or
investigations by or before any court or governmental or other regulatory
or administrative agency or commission (collectively, "Proceedings")
pending or, to Apple's best knowledge, threatened against or involving
Apple (other than solely as plaintiff initiated by Apple in the ordinary
course of collecting receivables) relating to the Assets. There is no
Proceeding known to Apple to be pending or threatened which questions or
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challenges the validity of this Agreement or any action taken or to be
taken by Apple pursuant to this Agreement or in connection with the
Transaction; nor to Apple's best knowledge is there any valid basis for any
such Proceeding with respect to Apple. Apple is not in default under or in
violation of, nor to Apple's best knowledge is there any valid basis for
any claim of default under or violation of, any of the Assigned Contracts,
which default or violation would have a Material Adverse Effect on NEWCO's
ownership and operation of the Assets, or on SCI's ownership of NEWCO.
3.12 Compliance with Law. Except for insubstantial violations which would
have no Material Adverse Effect, Apple's operations at the Site have been
conducted in accordance with all applicable laws, regulations and other
requirements of all national governmental authorities, and of all states,
municipalities and other political subdivisions and agencies having
jurisdiction over Apple's operations at the Site, including, without
limitation, all such laws, regulations and requirements relating to
antitrust, consumer protection, currency exchange, equal opportunity,
health, occupational safety, pension, and securities. Apple has not
received any notification of any asserted present or past failure by Apple
to comply with such laws, rules or regulations.
3.13 Environmental Protection. To Apple's best knowledge, during Apple's
ownership and operation of the Fountain Facility, Apple has had all
permits, licenses and other authorizations which are required in connection
with its operations at the Fountain Facility under and pursuant to
applicable Federal, state and local laws, rules, regulations, codes,
orders, decrees, judgments or injunctions relating to pollution or
protection of the environment, including without limitation laws relating
to torts and laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or any other industrial,
hazardous or toxic substances, materials or wastes (collectively,
"Hazardous Materials") into the environment (including, without limitation,
ambient air, surface water, ground water, or land), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, handling of, or exposure to, Hazardous Materials
(collectively, "Environmental Laws") at the Fountain Facility. Except as
may have been disclosed to SCI in any documentation delivered by Apple to
SCI prior to the Effective Date, Apple is, and has been during its
operations at the Fountain Facility, in compliance with all terms and
conditions of such required permits, licenses and authorizations, and, to
the best of Apple's knowledge, nothing has occurred while Apple has owned
the Fountain Facility which would cause Apple to fail to be in compliance
with said Environmental Laws with respect to its operations at the Fountain
Facility. Except as may have been disclosed to SCI in any documentation
delivered by Apple to SCI prior to the Effective Date, Apple is not aware
of, nor has Apple received notice of, any past, present or future events,
conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent continued compliance with said
Environmental Laws, or which may give rise to any common law or legal
liability, or may otherwise form the basis of any claim, action, demand,
suit, proceeding or hearing, based on or related to Apple's manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
handling, exposure to, emission, discharge, release or threatened release
into the environment, of any Hazardous Materials at the
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Fountain Facility. There is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice or demand letter, notice of violation,
investigation, or proceeding pending or, to Apple's best knowledge,
threatened, against Apple relating in any way to said Environmental Laws
with respect to Apple's use and operation of the Fountain Facility.
3.14 Occupational Safety and Health. Except as set forth in Exhibit I
attached hereto, to Apple's best knowledge, Apple is, in all material
respects, in compliance with all standards, duties, requirements,
responsibilities, rules, regulations and orders (hereinafter "safety and
health obligations") currently promulgated under, or issued pursuant to or
in enforcement of the Occupational Safety and Health Act of 1970, or any
laws, plans, or safety and health obligations currently established by any
state or political subdivision thereof or by common law, applicable to
Apple's operations at the Site, with respect to occupational safety and
health. Except as set forth in said Exhibit I, Apple is not aware of, nor
has Apple received notice of, any past, present or future events,
conditions, circumstances, activities, practices, incidents, actions or
plans relating to its operations at the Site which prevent compliance or
continued compliance with the aforesaid laws, plans or safety and health
obligations as they exist on the date hereof or any orders, decrees,
judgments, or injunctions, which have been issued, entered, promulgated or
approved thereunder, or which may give rise to any common law or legal
liability, or otherwise form the basis of any claim, action, demand, suit,
proceeding or hearing, based on Apple's violation of any of the aforesaid
laws, plans, or safety and health obligations to employees or others and on
its duty to maintain a workplace free of safety and health hazards. Except
as set forth in said Exhibit I, there is no civil, criminal or
administrative action, suit, demand, claim, hearing, citation, employee or
other complaint, notice of violation, investigation, or proceeding pending
or to Apple's best knowledge threatened against Apple relating in any way
to the aforesaid laws, plans, or safety and health obligations established
by the Federal government or any state or political subdivision thereof, or
by common law, or any orders, decrees, judgments or injunctions issued,
entered, promulgated or approved thereunder with respect to Apple's
operations at the Site.
3.15 Financial and Cost Data. All financial and cost data relating to
Apple's ownership and operation of the Assets disclosed to SCI by Apple is
accurate and complete in all material respects.
3.16 Representations and Warranties With Respect to NEWCO.
A. Organization of NEWCO. NEWCO will be formed by Apple, on or
before the Closing Date, solely for the purpose of engaging in the
Transaction. From the date of its incorporation and at all times through
and until the Closing, NEWCO will be a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation, have full corporate power and authority to carry on its
business, and (if not incorporated in Colorado) be duly qualified in the
State of Colorado as a foreign corporation.
B. Capitalization. From the date of the incorporation of NEWCO and
at all times through and including the Closing:
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(i) Apple will be the record and beneficial owner and holder of
the Shares, free and clear of any encumbrances or restrictions of any
nature, including, without limitation, any liens, judgments, security
interests, equities, claims and demands.
(ii) Apple will not be a party to any option, warrant, purchase
right, or other contract or commitment that could require Apple to sell,
transfer, or otherwise dispose of the Shares (other than this Agreement).
(iii) Apple will not be a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of the
Shares.
(iv) No legend or other reference to any purported encumbrance
will appear upon any certificate representing the Shares.
(v) All of the Shares will be duly authorized, validly issued,
fully paid and nonassessable.
(vi) NEWCO will not be a party to or be bound by any outstanding
or authorized options, warrants, calls, rights, commitments or any other
agreements of any character requiring NEWCO to issue, transfer, sell,
purchase, redeem or acquire any shares of capital stock or any other equity
or debt securities or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire, any
shares of capital stock or any other equity or debt securities of NEWCO.
C. Authorization. At the Closing, NEWCO will have full corporate
power and authority to execute and deliver any and all agreements
contemplated under this Agreement, including, without limitation, the Bill
of Sale and the Assignment and Assumption Agreement.
D. No Violation. As of the Closing, NEWCO's execution and delivery
of the Closing documents to which it is a party, and its performance of and
under any of the Assigned Contracts or the Assigned Permits, will not (i)
conflict with or violate the Articles of Incorporation or Bylaws of NEWCO,
(ii) subject to the obtaining of all required consents from governmental
entities having jurisdiction, as provided in this Agreement, conflict with
or violate any law, rule, regulation, order, judgment or decree applicable
to NEWCO, or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default)
under, or impair NEWCO's rights or alter the rights or obligations of any
third party under, or give to others any right of termination or amendment,
acceleration or cancellation of, or result in the creation of any lien or
encumbrance (other than Permitted Liens) on any of the Assets pursuant to,
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligations to which
Apple or NEWCO is a party or by which Apple or NEWCO is bound or affected,
except, with respect to clauses (ii) and (iii), for any such conflicts,
violations, defaults or other occurrences that would not have a Material
Adverse Effect on Apple or NEWCO, or affect the transfer of the Assets and
the sale of the Shares as provided herein.
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E. Assets and Liabilities. From the date of the incorporation of
NEWCO and at all times to and until the Closing,
(i) Except for obligations or liabilities incurred in connection
with its incorporation or organization and the Transaction, NEWCO will not
have incurred, directly or indirectly through any affiliate, any
obligations or liabilities or engaged in any business or activities of any
type or kind whatsoever or entered into any arrangements with any person or
entity;
(ii) NEWCO will not own, or have any contract to acquire, any
equity securities or other securities of any entity or any direct or
indirect equity or ownership interest in any business (other than the
Assets);
(iii) NEWCO will have no assets or liabilities other than the
Assets and the Assumed Liabilities.
3.17 Operation of Fountain Facility Prior to Closing. As of the Closing
Date, the Fountain Facility (including the Assets) shall have been operated
by Apple in accordance with the provisions of Section 7.
4. REPRESENTATIONS AND WARRANTIES OF SCI.
SCI hereby represents and warrants to Apple, as of the Effective Date and
as of the Closing Date, as follows:
4.1 Corporate Organization. SCI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
has full corporate power and authority to carry on its business as it is
now being conducted.
4.2 Authorization.; SCI has full corporate power and authority to enter
into this Agreement and to carry out the Transaction. The execution and
delivery of this Agreement and the consummation of the Transaction has been
duly authorized by all necessary corporate action on the part of SCI. This
Agreement, and all other documents, instruments and certifications to be
executed and delivered by SCI hereunder, have been duly executed and
delivered by SCI and, when duly and validly executed by Apple (to the
extent necessary), will constitute the valid and binding obligation of SCI,
enforceable against SCI in accordance with their terms, except as
enforceability may be limited by bankruptcy and other similar laws and
general principles of equity.
4.3 No Violation. The execution and delivery of this Agreement by SCI and
the performance of this Agreement by SCI will not (i) conflict with or
violate the Articles of Incorporation or Bylaws of SCI, (ii) subject to the
obtaining of all required consents from governmental entities having
jurisdiction, as provided in this Agreement, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to SCI or by
which any of its property is bound or affected, or (iii)
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result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair
SCI's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any lien or encumbrance on
any of the Assets pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which SCI is a party or by which SCI is bound
or affected, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, defaults or other occurrences that would not have a
Material Adverse Effect on SCI.
4.4 Consents. Except for governmental consents required under the HSR
Act, which will be requested as provided in Section 2.10 of this Agreement,
and as may be required under the Assigned Contracts and the Assigned
Permits, no consent of any Person (other than those previously obtained) is
necessary to the consummation of the Transaction, including, without
limitation, consents from parties to loans, contracts, leases or other
agreements and consents from governmental agencies, whether federal, state,
or local or foreign.
4.5 Adequate Financing. SCI has adequate financial resources to pay the
Purchase Price, in full, at the Closing, as required by Section 1.2 of this
Agreement, and all other costs to be paid by SCI as provided in Section
1.5, without placing a lien or encumbrance on the Assets such that the
foreclosure of said lien or encumbrance could have a Material Adverse
Effect on the performance under the Manufacturing Agreement or any of the
Related Agreements by SCI or NEWCO, as the case may be.
5. CONDITIONS TO THE OBLIGATIONS OF SCI.
The obligations of SCI under this Agreement are subject to the satisfaction
on or before the Closing Date of the following conditions, any of which may
be waived by SCI in writing:
5.1 Inspection of Assets; Completion of Due Diligence.
A. SCI shall have the right, at all times between the Effective Date
of this Agreement and 12:00 o'clock midnight on May 24, 1996 (the "Due
Diligence Completion Date"), which period is referred to herein as the "Due
Diligence Period", within which to make or obtain any investigations,
tests, examinations, reports, approvals or arrangements which SCI may
desire with regard to the Assets (herein, the "Due Diligence"), including
without limitation: the physical condition of the Assets, the presence of
Hazardous Materials on or about the Real Property, all documents and other
matters described in any title report which SCI may obtain with respect to
the Real Property, the zoning and other governmental or quasi-governmental
approvals or consents relating to the Assets, and the like. SCI agrees to
indemnify, defend and hold Apple and the Assets harmless of and from any
claim, liability or expense (including reasonable attorneys' fees and
costs) arising out of or in connection with any damage or destruction of
any property and/or injury or death to any person in connection with SCI's
performance or conduct of the Due Diligence, including without limitation
SCI's entry, or the entry of its employees, agents, contractors,
consultants and experts, upon the Site for the purpose of performing or
conducting the Due Diligence, and SCI further agrees to keep the
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Assets free and clear of all liens, claims and encumbrances of any kind
arising from or in regard to the Due Diligence. During the Due Diligence
Period, upon reasonable prior notice to Apple's designated representative
at the Site, Apple shall permit SCI and its representatives access to the
Site for the purpose of performing or conducting the Due Diligence,
provided that: (i) at all times SCI and its representatives shall, if Apple
so requests or requires, be escorted by an Apple representative, and (ii)
except as provided in Section 5.1.B, below, SCI shall not extract or sample
any portion of the Real Property or the ground water thereunder for the
purpose of testing or evaluation, nor drill any hole, dig any well, or
perform any borings on or about the Real Property (collectively,
"Sampling").
B. During the Due Diligence Period, SCI, at its sole expense, shall
have the right, in order to complete its Due Diligence, and in order to
determine whether Hazardous Materials are present on the Real Property, to
extract and sample portions of the Real Property and the ground water
thereunder, and to otherwise perform investigations, historical analyses,
and make inquiries relative to the presence or potential presence of
Hazardous Materials on the Real Property, and shall have the right to drill
holes, dig wells, and perform borings, provided that such entry onto the
Real Property shall comply with the terms and provisions of Section 5.1.A,
above, and further provided that:
(i) Apple shall have the right to approve, in its reasonable
discretion, all engineers, consultants, companies, laboratories, drillers
and other persons proposed by SCI to perform any of the Due Diligence,
prior to their entry onto the Site, and SCI shall not allow any such
persons onto the Site prior to advising Apple and giving Apple an
opportunity to approve all such persons, with such approval being deemed
given if Apple does not advise SCI, within three (3) business days after
being advised of SCI's selection of any third party, of Apple's disapproval
of the designated third party;
(ii) SCI shall obtain Apple's prior written consent (which
consent shall not be unreasonably withheld or delayed) to the sampling
plan, testing methods and other material elements of the sampling or
testing proposed by SCI;
(iii) SCI shall, at its sole expense, seal and cap any holes,
wells, or other borings made by it, and shall restore the Site to its
condition existing prior to any such sampling or testing by SCI;
(iv) SCI shall conduct all sampling or testing, and all closure
work with respect to such sampling or testing, in accordance with all
Federal, state and local rules, regulations, laws and statutes applicable
thereto;
(v) SCI shall bear all costs of any sampling or testing, and any
closure work in connection therewith; and
(vi) SCI shall hold and maintain all reports, results and other
information concerning any testing or sampling, and the Assets, in the
strictest confidence, and shall promptly deliver true, complete and correct
copies thereof to Apple, upon SCI's receipt of the same.
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C. Prior to the expiration of the Due Diligence Period, Apple shall
have completed and delivered to SCI an environmental questionnaire in a
form reasonably acceptable to the parties.
D. Prior to the expiration of the Due Diligence Period, SCI shall
have received all documents and information reasonably requested by it as
part of the Due Diligence, and shall have approved the condition of the
Assets, and otherwise be satisfied with the results of its Due Diligence.
5.2 Representations and Warranties True. The representations and
warranties of Apple contained in Section 3, as such section may be amended
by the parties prior to the expiration of the Due Diligence Period, and in
all certificates and other documents delivered and to be delivered by Apple
to SCI and NEWCO pursuant to the terms of this Agreement or in connection
with the Transaction shall be true, complete and accurate in all material
respects as of the date when made and at and as of the Closing Date as
though such representations and warranties were made at and as of such
date.
5.3 Performance. Apple shall have performed and complied in all material
respects with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by Apple on or prior to the
Closing.
5.4 Certificate of Apple. Apple shall have delivered to SCI a
certificate, dated as of the Closing Date, certifying in such detail as SCI
may reasonably request, as to the fulfillment and satisfaction of the
conditions set forth in Sections 5.2 and 5.3, above.
5.5 Resolutions.
A. Apple shall have delivered to SCI duly adopted resolutions of the
Board of Directors of Apple, certified by the Secretary or an Assistant
Secretary of Apple as of the Closing Date, authorizing and approving the
execution and delivery of this Agreement by Apple, and all other action
necessary to enable Apple to perform under this Agreement.
B. Apple shall have delivered to SCI duly adopted resolutions of the
Board of Directors of NEWCO, certified by the Secretary or an Assistant
Secretary of NEWCO as of the Closing Date, authorizing and approving
NEWCO's performance under this Agreement.
5.6 Opinion of Counsel. SCI shall have received an opinion from counsel
for Apple, in form and substance reasonably acceptable to SCI, with respect
to the matters set forth in Sections 3.1, 3.2 and 3.3 of this Agreement, as
well as with respect to the matters set forth in Sections 3.16.A, 3.16.B,
3.16.C, and 3.16.D.
5.7 No Injunction. On the Closing Date there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction or other governmental authority
having jurisdiction, directing that the Transaction not be consummated or
imposing any conditions on the consummation of the Transaction which SCI,
in its sole discretion, deems unacceptable.
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5.8 SCI Board Approval; Consents Obtained. The Board of Directors of SCI
shall have approved the execution and delivery of this Agreement, and SCI
shall have obtained all other consents and approvals required to be
obtained by it in order to consummate the transactions contemplated by this
Agreement, and any applicable waiting period under the HSR Act shall have
expired or been terminated.
5.9 Title Insurance. NEWCO shall be able to obtain, at standard rates,
from a title insurance company satisfactory to SCI, a policy of title
insurance, or an unconditional undertaking to issue the same, dated as of
the Closing Date, in face amounts and in form reasonably satisfactory to
SCI, insuring that fee simple title to the Real Property is vested in
NEWCO, subject only to exceptions to title reasonably acceptable to SCI
(the "Title Insurance"). In connection therewith, Apple agrees that it
shall, promptly following execution of this Agreement, deliver to SCI true
and correct copies of all surveys of the Real Property in Apple's
possession; and if Apple does not have such a survey for either parcel
constituting the Real Property, then Apple shall obtain such a survey for
SCI as promptly as possible upon SCI's request.
5.10 Execution of Related Agreements. The Related Agreements shall have
been fully negotiated and executed by the parties, and no bar shall exist
to the effectiveness of such agreements, including any default by either
party thereunder.
6. CONDITIONS TO OBLIGATIONS OF APPLE.
The obligations of Apple under this Agreement are subject to the
satisfaction on or before the Closing Date of the following conditions, any
of which may be waived by Apple:
6.1 Representations and Warranties True. The representations and
warranties of SCI contained in Section 4 and in all certificates and other
documents delivered and to be delivered by SCI to Apple pursuant to the
terms of this Agreement or in connection with the Transaction shall be
true, complete and accurate in all material respects as of the date when
made and at and as of the Closing Date as though such representations and
warranties were made at and as of such date.
6.2 Performance. SCI shall have performed and complied in all material
respects with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by it on or prior to the
Closing.
6.3 Certificate of SCI. SCI shall have delivered to Apple a certificate,
dated as of the Closing Date, certifying in such detail as Apple may
reasonably request, as to the fulfillment and satisfaction of the
conditions set forth in Sections 6.1 and 6.2, above.
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6.4 Resolutions. SCI shall have delivered to Apple duly adopted
resolutions of the Board of Directors of SCI, certified by the Secretary or
an Assistant Secretary of SCI as of the Closing Date, authorizing and
approving the execution and delivery of this Agreement by SCI, and all
other action necessary to enable SCI to perform under this Agreement.
6.5 Opinion of Counsel. Apple shall have received an opinion from counsel
for SCI, in form and substance reasonably acceptable to Apple, with respect
to the matters set forth in Sections 4.1, 4.2 and 4.3 of this Agreement.
6.6 No Injunction. On the Closing Date there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction or other governmental authority
having jurisdiction, directing that the Transaction not be consummated or
imposing any conditions on the consummation of the Transaction which Apple,
in its sole discretion, deems unacceptable.
6.7 Apple and NEWCO Board Approval; Consents Obtained. The Boards of
Directors of Apple and of NEWCO shall have approved the execution and
delivery of this Agreement, and Apple and/or NEWCO, as the case may be,
shall have obtained all other consents required to be obtained by either of
them in order to consummate the Transaction, and any applicable waiting
period under the HSR Act shall have expired or been terminated.
6.8 Execution of Related Agreements. The Related Agreements shall have
been fully negotiated and executed by both Apple and SCI, and no bar shall
exist to the effectiveness of such agreements, including any default by
either party thereunder.
7. CONDUCT OF APPLE'S BUSINESS AT THE SITE PENDING
THE CLOSING.
Between the signing of this Agreement and the Closing Date, except as
otherwise consented to by SCI in writing in advance, Apple agrees as
follows.
7.1 Business in Ordinary Course. Apple's business at the Site shall be
conducted only in the ordinary course, consistent with Apple's past
practice, which shall not include the making of any commitment which
extends beyond ninety (90) days from the date hereof, the acquisition of
capital assets in excess of Fifty Thousand Dollars ($50,000) in the
aggregate, or the removal of any Assets other than in the ordinary course
of business. Subject to the dollar limitations set forth above in this
Section 7.1, and provided that Apple shall not be obligated or required to
expend more than Five Thousand Dollars ($5,000) in repairing or replacing
any of the Assets, Apple will use commercially reasonable efforts to
maintain and keep the Assets in substantially as good condition and working
order as at the Effective Date hereof, except for depreciation through
ordinary wear and tear.
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7.2 Sale or Pledge of Assets. Subject to Apple's rights under Section
7.1, above, Apple shall not sell or lease any of the Assets or incur and
allow to continue to exist at the Closing Date any Liens on any of the
Assets, except for Permitted Liens, and those Liens which arise by
operation of law, or are incurred in the ordinary course in accordance with
Section 7.1, or would not cause the representations contained in Section 3,
above, to be untrue were such Liens to exist on the Closing Date.
7.3 Changes in Agreements. Apple shall not amend or modify in any
material respect, or consent to the early termination of, any of the
Assigned Contracts.
7.4 Preservation of Business Organization. Consistent with the other
provisions of this Agreement, Apple shall use commercially reasonable
efforts to preserve the Assets and the business of Apple at the Site
intact, and to keep available to SCI and/or to NEWCO, as the case may be,
the services of Apple's present employees consistent with past practice,
and to preserve the goodwill of Apple's suppliers and others with respect
to the Assigned Contracts.
7.5 Insurance. Apple shall keep all insurance currently in place with
respect to the Assets in full force and effect. All premiums due from
Apple with respect to such insurance have been paid, and Apple has not
received any notice of cancellation with respect thereto.
7.6 Compliance with Laws. Apple shall comply with all laws applicable to
its ownership and operation of the Assets, except for insubstantial
violations which would have no Material Adverse Effect.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
8.1 Survival of Representations and Warranties. Each of the
representations, warranties, covenants and agreements of the parties
contained in this Agreement shall survive the Closing Date for a period of
two (2) years from the Closing Date; provided, however, that the warranties
and representations set forth in Section 3.13 shall survive for a period
ten (10) years from the Closing Date; and, provided further, that the
warranties and representations set forth in Section 3.8, the obligations of
the parties with respect to the payment of any state and local sales and
transfer taxes with respect to the Personal Property (as set forth in
Section 1.5), and the obligations under Section 2.7.B shall survive for a
period of five (5) years from the Closing Date, or such later date on which
the statute of limitations for any Taxes covered thereby has expired. None
of the warranties and representations of Apple set forth in this Agreement
shall be deemed to merge into the Deed at the Closing.
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8.2 Indemnification.
A. By Apple. Apple shall indemnify, defend, and hold harmless
NEWCO, SCI and their respective subsidiaries, affiliates, directors,
officers, employees, representatives and agents (collectively, the
"Indemnified SCI Persons"), and reimburse the Indemnified SCI Persons for,
from, and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses, including,
without limitation, interest, penalties and reasonable attorneys' fees,
disbursements and expenses, imposed on or incurred by the Indemnified SCI
Persons, directly or indirectly, by reason of
(i) any breach by Apple of any of its representations and warranties
contained in this Agreement,
(ii) any failure by Apple to perform any covenant, undertaking or
obligation on its part hereunder,
(iii) all Liens referred to in Section 3.5 (including, without
limitation, Permitted Liens for Taxes not yet delinquent and Permitted
Liens for Taxes which are being contested by Apple in good faith),
(iv) the failure of Apple hereto to comply with the provisions of any
applicable bulk sales, fraudulent conveyance or other law for the
protection of creditors,
(v) any liability related to the Excluded Assets, and/or
(vi) any other liability of Apple other than the Assumed Liabilities.
B. By SCI. SCI shall indemnify, defend and hold harmless Apple and
its subsidiaries, affiliates, directors, officers, employees,
representatives and agents (collectively, the "Indemnified Apple Persons"),
and reimburse the Indemnified Apple Persons for, from, and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest,
penalties and reasonable attorneys' fees, disbursements and expenses,
imposed on or incurred by the Indemnified Apple Persons, directly or
indirectly, by reason of
(i) any breach by SCI of any of its representations and warranties
contained in this Agreement,
(ii) any failure by SCI to perform any covenant, undertaking or obligation
on its part hereunder, and/or
(iii) the failure of SCI hereto to comply with the provisions of any
applicable bulk sales, fraudulent conveyance or other law for the
protection of creditors.
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C. If any action or claim shall be brought or asserted against an
indemnified party under this Section 8.2 or any successor thereto (the
"Indemnified Party") in respect of which indemnity may be sought from an
indemnifying party under this Section 8.2 (the "Indemnifying Party"), the
Indemnified Party shall immediately notify the Indemnifying Party who shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all expenses;
except that any delay or failure to so notify the Indemnifying Party shall
only relieve the Indemnifying Party of its obligations hereunder to the
extent, if at all, that the Indemnifying Party is prejudiced by reason of
such delay or failure. The Indemnified Party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be borne by the
Indemnified Party unless (i) the employment thereof shall have been
specifically directed and required by the Indemnifying Party or (ii) the
Indemnifying Party shall have elected not to assume the defense of such
claim and employ counsel. Without the consent of the Indemnified Party,
the Indemnifying Party shall have no right to settle or compromise on any
non-monetary matter.
8.3 Limitation of Liability. The obligation of either party (the
"Indemnifying Party") hereunder to indemnify the other party (the
"Indemnified Party") against any damages or claims with respect to the
matters set forth in this Agreement shall be subject to all of the
following limitations:
A. No indemnification shall be required to be made by the
Indemnifying Party under this Section 8 or otherwise under this Agreement
for any damages or claims in an amount less than One Thousand Dollars
($1,000) for each such claim, unless and until the aggregate of all such
claims exceeds Twenty-Five Thousand Dollars ($25,000).
B. The Indemnifying Party shall be obligated to indemnify the
Indemnified Party only for those damages and claims as to which the
Indemnified Party has given the Indemnifying Party written notice thereof
on or prior to that date which is five (5) years after the Closing Date
(whether or not such damages or claims have then actually been sustained or
incurred); provided, however, that with respect to any claims for
indemnification under Section 3.13, the period shall be ten (10) years
after the Closing Date; and, provided, further, that with respect to any
claims for indemnification under Section 1.5, Section 2.7.B and Section
3.8, the period shall be five (5) years or such later date on which the
statute of limitations for any Taxes covered thereby has expired. Any
written notice delivered by the Indemnified Party to the Indemnifying Party
pursuant to this Section 8.3.B shall set forth the basis of the claim for
damages (including, without limitation, reference to the specific warranty
or representation alleged to have been breached) and, if then determinable
by the Indemnified Party, a reasonable estimate of the amount thereof (or,
if the Indemnified Party's good faith opinion, no such reasonable estimate
can then be made, the maximum potential damages that in the Indemnified
Party's good faith opinion might be sustained in connection with such
claim).
C. All damages shall be computed net of any actual income tax
benefit resulting therefrom to the Indemnified Party or any insurance
coverage with respect thereto which reduces or may reduce the damages that
would otherwise be sustained.
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D. In no event shall the Indemnifying Party's aggregate obligation
to indemnify the Indemnified Party for damages exceed an amount equal to
twenty percent (20%) of that portion of the Purchase Price allocated to the
Real Property and the Personal Property (that is, net of the portion of the
Purchase Price allocated to the Initial Inventory); provided, however, that
such limitation shall not apply to any claims for indemnification with
regard to any party's obligations with respect to Taxes, as in Section 1.5,
Section 2.7.B and Section 3.8 of this Agreement.
E. Anything in this Agreement to the contrary notwithstanding, no
director, officer or employee of any party shall have any personal
liability to any other party as a result of such party's breach of any
warranty or representation hereunder.
9. CERTAIN OTHER COVENANTS AND AGREEMENTS.
9.1 Further Assurances.
A. Upon the request of any of NEWCO, SCI or Apple, any other party
will execute and deliver to the requesting party, or such party's nominee,
all such instruments and documents of further assurance or otherwise, and
will do any and all such acts and things, as may reasonably be required to
carry out the obligations of such party hereunder and to more effectively
consummate the Transaction, including obtaining all consents and approvals
from foreign governmental authorities and from third parties under leases
and other contracts, agreements or obligations with respect to the Assets.
B. After the Closing, NEWCO, SCI and Apple shall from time to time,
at the request of any other party, and without further cost or expense to
the requesting party, execute and deliver such other instruments of
conveyance and transfer and take such other actions as the requesting party
may reasonably require, in order to more effectively consummate the
Transaction, including without limitation any reasonably necessary or
appropriate to vest in NEWCO good and marketable title to the Assets to be
transferred hereunder, and to effect the assumption by NEWCO of the
Assigned Contracts, and any reasonably necessary or appropriate to transfer
or assign to NEWCO any of the Assigned Permits, or to vest in SCI title to
the Shares.
9.2 Access and Inspection.
A. Prior to Closing. At all times after the execution of this
Agreement and up to and including the Closing Date, Apple shall give SCI,
and its authorized representatives, reasonable access, during normal
business hours, to the Assets, and Apple's employees, books, contracts,
commitments and records as they relate to the Assets, for the purpose of
enabling SCI to make such investigation of the Assets as SCI may desire,
including, without limitation, having surveys and tests made of the Real
Property, all as more particularly set forth in Section 5.1 above.
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B. After the Closing. For a period of five (5) years following the
Closing, and upon reasonable request from Apple, SCI shall provide, and/or
shall cause NEWCO to provide, to the officers, agents, and employees of
Apple, reasonable access during normal business hours to the books and
records of Apple transferred to NEWCO hereunder (if any); provided,
however, that with respect to any such books and records applicable to the
matters covered by Section 3.13, SCI agrees that it shall retain or shall
cause NEWCO to retain all such books and records for a period of ten (10)
years following the Closing Date. SCI agrees not to destroy nor to permit
NEWCO to destroy any such books or records without prior written notice to
Apple and a reasonable opportunity for Apple, at Apple's expense, to take
custody thereof. Any access and inspection rights of Apple pursuant to
this Section 9.2.B shall in no way be in derogation of or supersede or be
deemed to be in conflict with any rights Apple may have under the
Manufacturing Agreement or any of the other Related Agreements with respect
to access and inspection.
9.3 Notification of Certain Matters. Each party shall provide the other
with prompt notice of (i) any communication alleging that the consent of a
Person is or may be required in connection with the Transaction, (ii) any
communication from any governmental regulatory agency or authority in
connection with the Transaction, and (iii) any Proceeding commenced or
threatened which would have been required to be disclosed by either party
in connection with such party's warranties and representations as set forth
in this Agreement.
9.4 Amendment of Agreement; Modification of Exhibits.
A. To the extent that any of the exhibits attached hereto are not
completely filled in at the time this Agreement is executed by the parties,
such exhibits shall be completed as promptly as possible thereafter, and in
no event any later than the Closing.
B. If either party discovers, at any time prior to the Closing Date,
any information which would make the warranties and representations of such
party, as set forth in this Agreement, untrue or incomplete to a material
extent, or make the exhibits as attached hereto incorrect or misleading in
any material manner, or which is needed to accurately reflect the rights
and obligations of either party under this Agreement, then such party shall
promptly inform the other party, and the relevant portion of this Agreement
and/or the relevant exhibit(s) shall be amended or modified as appropriate
to incorporate such new or additional information.
9.5 Confidentiality. All information disclosed by one party to the other
in connection with the Transaction, including all information generated by
SCI during the performance of its Due Diligence, shall be held by the
receiving party in strict confidence, and neither party shall reveal to any
third party any confidential information of the other party received by it
in connection with the Transaction, including without limitation all Apple
Confidential Information, as that term is defined in the Confidentiality
Agreement. In addition, if the Transaction is not consummated, then each
party shall return to the other all documents and other written information
furnished by either party to the other in connection with the Transaction.
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9.6 Rights of NEWCO. From and after the Closing, every right granted to
SCI under this Agreement may be exercised by NEWCO, and every obligation of
SCI under this Agreement may be performed or discharged by NEWCO (provided,
however, that SCI shall in no event be relieved of any obligation or
liability it may have under this Agreement except by the full performance
thereof by NEWCO, and SCI, by its execution of this Agreement,
unconditionally and irrevocably guarantees such performance by NEWCO), and
every covenant, obligation and liability undertaken by Apple under this
Agreement and every representation and warranty made by Apple under this
Agreement to or for the benefit of SCI shall be deemed to also have been
made to and for the benefit of NEWCO.
10. BROKERS; FINDERS.
Each of Apple and SCI represents and warrants to the other that it dealt
with no broker, finder or similar person, firm, corporation or other entity
entitled to a fee or commission in connection with the Transaction. Apple
and SCI agree, each with the other, that each will indemnify and hold
harmless the other, in accordance with the provisions of Section 8.2,
against any claim (including reasonable attorneys' fees) by any Person
claiming through the indemnifying party to be entitled to a fee or
commission in connection with the Transaction.
11. TERMINATION OF AGREEMENT.
11.1 Termination of Agreement. This Agreement may be terminated, and the
Transaction may be terminated and/or abandoned, at any time but not later
than the Closing Date, as follows:
A. By mutual written agreement of SCI and Apple; or
B. By SCI if any of the conditions provided for in Section 5 of this
Agreement shall not have been met or waived in writing by SCI prior to the
required date therefor; or
C. By Apple if any of the conditions provided for in Section 6 of
this Agreement shall not have been met or waived in writing by Apple prior
to the required date therefor; or
D. By either party if a court of competent jurisdiction or any
governmental, regulatory or administrative agency or commission shall have
issued any order, decree or ruling, or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Transaction, which order, decree or ruling is final and not
appealable; or
E. By either party if a Material Adverse Event occurs with respect
to such party or the other party.
F. The right of termination set forth in Section 11.1.B or Section
11.1.C shall not be available to a party having breached this Agreement if
such breach shall have resulted in the non-occurrence of the Closing.
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11.2 Procedure Upon Termination. In the event of termination and
abandonment by SCI or by Apple, or by both, pursuant to Section 11.1
hereof, written notice thereof shall forthwith be given to the other party
and the Transaction shall be terminated and/or abandoned, without further
action by SCI or Apple.
12. DEFINITIONS
12.1 "Apple" shall mean Apple Computer, Inc., a California corporation,
whose address is 1 Infinite Loop, Cupertino, California; and, if the
context so requires, all Apple Affiliates.
12.2 "Apple Affiliates" shall mean all entities controlled by Apple,
including all wholly-owned subsidiaries and all entities in which Apple
owns, directly or indirectly, a controlling interest.
12.3 "Apple Product(s)" shall mean a product(s) sold by Apple under the
Apple Macintosh brand, the Apple Newton brand, or any successor or addition
thereto, or any replacement thereof.
12.4 "Closing" shall have the meaning set forth in Section 1.3.
12.5 "Confidentiality Agreement" shall mean that certain "Apple Computer,
Inc. Confidentiality Agreement (Mutual)" executed by Apple and SCI on or
about February 15, 1996, with respect to the Transaction.
12.6 "Manufacturing Agreement" shall mean that certain written agreement to
be entered into by and between the parties prior to the Closing Date, to be
effective as of the Closing Date, with respect to the respective rights and
obligations of the parties regarding the manufacture of certain products
for Apple at the Fountain Facility, substantially on the terms and
conditions set forth in the term sheet denominated, "Fountain Manufacturing
Agreement -- Terms and Conditions (Revision 5 - 4/3/96)", as such terms and
conditions may be mutually amended or modified by the parties.
12.7 "Material Adverse Effect" or "Material Adverse Event" shall mean, as
the context may require, any change, event or effect that is materially
adverse to the business, assets (including intangible assets), financial
condition or results of operations of the entity to whom the phrase applies
with respect to its business as it affects or impacts the Transaction,
including without limitation the operation of the Fountain Facility as
contemplated by this Agreement, either by Apple or NEWCO prior to the
Closing or by SCI or NEWCO following the Closing.
12.8 "Person" shall mean any natural person, trust, corporation, limited
liability company, partnership, joint venture or other entity having the
ability to conduct business under the laws applicable to the Transaction.
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12.9 "Related Agreements" shall mean all agreements entered into by the
parties with respect to the Transaction, excepting this Agreement,
including without limitation the Manufacturing Agreement, and all ancillary
agreements which may be identified in either this Agreement or in the
Manufacturing Agreement, including all license agreements with respect to
any intellectual property owned or licensed by Apple and used in the
operation of the Assets. All such Related Agreements shall be listed in
Exhibit J attached hereto.
12.10 "SCI" shall mean SCI Systems, Inc., a Delaware corporation, whose
address is: c/o SCI Systems (Alabama), Inc., 2101 West Clinton Avenue,
P.O. Box 1000, Huntsville, Alabama.
12.11 "Transaction" shall mean the entire series of transactions
between the parties, as described in this Agreement, and the Manufacturing
Agreement, together with all Related Agreements.
13. MISCELLANEOUS.
13.1 Notices. All notices, approvals or other communications provided for
herein to be sent or given to either party hereunder shall be deemed
validly and properly given or made if in writing and delivered by hand or
by certified mail, return receipt requested, or by overnight commercial
delivery service, or sent via telefacsimile (receipt confirmed) and
addressed to the parties at the following addresses:
If to Apple:
Apple Computer, Inc.
1 Infinite Loop
Cupertino, California 95014
Attention: Kwok Lau, MS 36-PL
Vice President, Operations
Telephone: (408) 974-0295
Fax: (408) 974-3222
With a copy to:
Apple Computer, Inc.
1 Infinite Loop
Cupertino, California 95014
Attention: General Counsel/esm
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If to SCI:
SCI Systems, Inc.
c/o SCI Systems (Alabama), Inc.
2101 West Clinton Avenue
P.O. Box 1000
Huntsville, Alabama 35807
Attention: A.E. Sapp, Jr., President & COO
Telephone: (205) 882-4640
Fax: (205) 882-4466
With a copy to:
SCI Systems, Inc.
c/o SCI Systems (Alabama), Inc.
2101 West Clinton Avenue
P.O. Box 1000
Huntsville, Alabama 35807
Attention: Michael M. Sullivan,
Secretary and Corporate Counsel
Either of the parties hereto may give notice to the other at any time by
the methods specified above of a change in the address at which, or the
persons to whom, notices addressed to it are to be delivered in the future,
and such notice shall be deemed to amend this Section 13.1 until superseded
by a later notice of the same type. Any notice given by personal delivery
or by telefacsimile shall be deemed given on actual receipt, and any notice
given by certified mail or overnight commercial courier shall be
conclusively deemed to have been given when accepted or rejected as shown
on the receipt therefor.
13.2 Dispute Resolution. In the event of any controversy or dispute
between Apple and SCI arising out of or in connection with this Agreement,
the parties shall attempt, promptly and in good faith, to resolve any such
dispute. If the parties are unable to resolve any such dispute within a
reasonable time (not to exceed ninety (90) days), then either party may
submit such controversy or dispute to mediation under the then applicable
rules of the American Arbitration Association (the "AAA") or any successor
organization. If the dispute cannot be resolved through mediation, then
such dispute shall be resolved by arbitration conducted in the Northern
District of California, in accordance with the then applicable commercial
arbitration rules of the AAA; provided, however, that the provisions of
California Code of Civil Procedure 1283.05 (as enacted on the Effective
Date) shall be applicable to such arbitration. Any judgment rendered by
the arbitrators pursuant to this Section 13.2 shall be final, and judgment
may be entered upon it in accordance with applicable law, in any court
having jurisdiction.
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13.3 Time of the Essence. Time is of the essence with respect to each and
every term or provision of this Agreement where time is an element of
performance.
13.4 Force Majeure. Subject to the express provisions of Section 11
(regarding termination of this Agreement), neither party will be deemed in
default of this Agreement, to the extent that performance of its
obligations or attempts to cure any breach are delayed or prevented by
reason of any event beyond the reasonable control of such party, including
any act of God, fire, earthquake, natural disaster, accident, act of
government, or any other act or circumstance that is beyond the reasonable
control of either party, provided that such party gives the other party
written notice thereof promptly and, in any event, within five (5) business
days of discovery thereof and uses its best efforts to continue to so
perform or cure. In the event of such a force majeure event, the time for
performance or cure will be extended for a period equal to the duration of
the force majeure event, but in no event more than thirty (30) days.
13.5 Waiver of Compliance. Any failure of Apple, on the one hand, or SCI,
on the other, to comply with any obligation, covenant, agreement or
condition herein may be expressly waived in writing by an authorized
officer of SCI or Apple, respectively, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure.
13.6 Expenses. Whether or not the Transaction is consummated, Apple agrees
that all fees and expenses incurred by it in connection with this Agreement
shall be borne by it, and SCI agrees that all fees and expenses incurred by
it in connection with this Agreement shall be borne by it, including,
without limitation as to Apple or SCI, all fees of counsel, attorneys and
accountants.
13.7 Headings; Number and Gender; Construction. The headings of the
Sections of this Agreement are inserted for convenience only and shall not
constitute a part hereof or affect in any way the meaning or interpretation
of this Agreement. Where the context so requires, the use of the singular
form herein shall include the plural, the use of the plural shall include
the singular, and the use of any gender shall include any and all genders.
This Agreement shall be construed, interpreted and enforced in accordance
with its plain terms, regardless of the party which drafted any of such
terms and conditions, and any rule of construction, interpretation or
application to the contrary shall not apply hereto.
13.8 Definition of Knowledge. The words "known", "to the knowledge of",
"to the best knowledge of", "aware" or words of similar import used in this
Agreement with reference to either party or to any individual shall be
conclusively presumed to mean that the person or entity has made reasonable
and diligent efforts, under the circumstances, to become knowledgeable; in
the case of any Person other than a natural person, the "knowledge" of such
Person shall be deemed to be the knowledge of its executive officers,
and/or those individuals within each entity with functional responsibility
for the matter addressed.
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13.9 Assignment. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns, provided, however, that none of such parties shall assign this
Agreement or its rights hereunder without the written consent of the other,
which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, both parties expressly agree that their
respective rights and obligations under this Agreement may be assigned, at
any time prior to the Closing, to a wholly-owned subsidiary of such party;
provided, however, that the party so assigning shall give prompt written
notice of such assignment to the other party, and provided further that no
such assignment shall relieve the assigning party of any obligations
hereunder.
13.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.11 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, regardless of the
laws that might otherwise govern under applicable principles of conflicts
of law thereof. Each of the parties hereto irrevocably consents to the
exclusive jurisdiction of any state or federal court within the State of
California, in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, agrees that process may be
served upon them in any manner authorized by the laws of the State of
California for such persons, and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction
and such process. Notwithstanding the foregoing, the parties agree that
Colorado law shall govern with respect to any dispute between the parties
arising out of the transfer of the Real Property and any warranties under
the Deed.
13.12 Amendment and Modification. Any amendment, modification or
supplement to this Agreement shall be in writing signed by the party or
parties to be charged.
13.13 Other Remedies; Specific Performance. Except as otherwise
expressly provided in this Agreement, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of
any other remedy conferred hereby, or by law or equity upon such party, and
the exercise by a party of any one remedy will not preclude the exercise of
any other remedy. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to
an injunction to prevent any breach of this Agreement and to enforce
specifically the terms and provisions hereof in any court having
jurisdiction, in addition to any other remedy to which they are entitled at
law or in equity.
13.14 Entire Agreement; Incorporation of Exhibits; Severability. This
Agreement and the exhibits attached hereto (all of which are incorporated
herein by this reference) and the other documents delivered pursuant hereto
constitute the entire agreement of the parties in respect of the subject
matter hereof and supersede all prior agreements, communications,
representations, or warranties, whether oral or written, among the parties
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in respect to such subject matter. If any term or provision of this
Agreement is found by a court of competent jurisdiction to be void or
unenforceable, then such term or provision shall be deemed stricken
from this Agreement, and the remaining terms and conditions hereof shall
remain in full force and effect to the maximum extent possible, or such
void or unenforceable term shall be replaced with a valid and enforceable
provision that will achieve, to the extent possible, the purpose of such
void or unenforceable provision.
13.15 Publicity. All press releases and other public announcements
respecting the subject matter hereof shall be made only with the mutual
agreement of the parties hereto; provided, however, that the parties
understand that SCI and Apple are publicly held companies with shares
traded on the New York and NASDAQ Exchanges and that the parties may make
such announcements as may be necessary to comply with the rules and
regulations of the said Exchanges and any and all applicable Federal and
state securities laws. After having given notice to the other party
hereto, SCI or Apple may make any such release or announcement which in the
opinion of their respective counsel is necessary or appropriate to comply
with applicable law. Each party hereto agrees that it will not
unreasonably withhold or delay any such approval.
13.16 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation other than
the parties hereto and their successors or assigns, any rights or remedies
under or by reason of this Agreement.
IN WITNESS WHEREOF, Apple and SCI have caused this Agreement to be
executed by their duly authorized officers as of the date first above
written.
APPLE COMPUTER, INC., a California
corporation
By /s/ G. Fred Forsyth
Its Senior V.P. Worldwide Operations
SCI SYSTEMS, INC., a Delaware corporation
By /s/ O.B. King
Its Cheif Executive Officer
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Exhibit A
Legal Description of Real Property
Parcel One
Lot 1, Block 1, COTTONWOOD PARK, COUNTY OF EL PASO, STATE OF COLORADO,
EXCEPT THAT PARCEL OF LAND CONVEYED TO THE STATE DEPARTMENT OF HIGHWAYS BY
DEED RECORDED NOVEMBER 18, 1987, IN BOOK 5446 AT PAGE 626.
Parcel Two
A PORTION OF THE SOUTHWEST QUARTER OF SECTION 31 TOWNSHIP 15 SOUTH RANGE 65
WEST OF THE 6TH P.M., IN THE CITY OF FOUNTAIN, EL PASO COUNTY, COLORADO,
MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHWEST CORNER
OF "COTTONWOOD PARK" AS RECORDED IN PLAT BOOK Z3 AT PAGE 22 OF THE RECORDS
OF SAID EL PASO COUNTY, SAID NORTHWEST CORNER BEING ALSO THE NORTHWEST
CORNER OF SECTION 6 TOWNSHIP 16 SOUTH RANGE 65 WEST OF THE 6TH P.M. AND A
POINT ON THE SOUTH LINE OF AFORESAID SECTION 31; THENCE NORTH 90 DEGREES 00
MINUTES 00 SECONDS WEST ALONG SAID SOUTH LINE OF SECTION 31 A DISTANCE OF
179.30 FEET TO A POINT ON THE EASTERLY RIGHT-OF-WAY LINE OF INTERSTATE
HIGHWAY 25; THENCE NORTHWESTERLY ALONG SAID EASTERLY LINE AND ON A CURVE TO
THE RIGHT, WITH A RADIUS OF 5580.00 FEET, A CENTRAL ANGLE OF 02 DEGREES 05
MINUTES 40 SECONDS, THE LONG CHORD OF WHICH BEARS NORTH 14 DEGREES 52
MINUTES 01 SECONDS WEST 203.96 FEET, AN ARC DISTANCE OF 203.97 FEET; THENCE
NORTHERLY ALONG THE EASTERLY LINE OF THE ROAD RIGHT-OF-WAY DEEDED TO THE
CITY OF FOUNTAIN BY A DEED RECORDED IN BOOK 5546 AT PAGE 202 OF EL PASO
COUNTY RECORDS, AND ON A CURVE TO THE RIGHT, WITH A RADIUS OF 703.82 FEET,
A CENTRAL ANGLE OF 10 DEGREES 34 MINUTES 18 SECONDS, A LONG CHORD BEARING
NORTH 02 DEGREES 42 MINUTES 44 SECONDS WEST 129.68 FEET, AN ARC DISTANCE OF
129.86 FEET TO A POINT OF REVERSE CURVE; THENCE CONTINUING ALONG EASTERLY
LINE OF SAID RIGHT-OF-WAY AND ON A CURVE TO THE LEFT, WITH A RADIUS OF
1290.46 FEET, A CENTRAL ANGLE OF 12 DEGREES 00 MINUTES 39 SECONDS, A LONG
CHORD BEARING NORTH 03 DEGREES 25 MINUTES 55 SECONDS WEST 270.02 FEET, AN
ARC DISTANCE OF 270.52 FEET TO A POINT ON THE WESTERLY LINE OF AFORESAID
SOUTHWEST QUARTER OF SECTION 31; THENCE NORTH 00 DEGREES 42 MINUTES 38
SECONDS WEST 724.79 FEET TO THE NORTHWEST CORNER OF THE SOUTHWEST QUARTER
OF THE SOUTHWEST QUARTER OF SAID SECTION 31; THENCE SOUTH 89 DEGREES 55
MINUTES 05 SECONDS EAST ALONG THE NORTHERLY LINE OF SAID SOUTHWEST QUARTER
OF THE SOUTHWEST QUARTER ADISTANCE OF 983.84 FEET TO THE NORTHWEST CORNER
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OF THAT TRACT CONVEYED TO EL PASO COUNTY BY DEED RECORDED IN BOOK 5591 AT
PAGE 1175 OF SAID EL PASO COUNTY RECORDS; THENCE SOUTHERLY AND EASTERLY
ALONG THE WESTERLY LINE OF SAID TRACT THE FOLLOWING 6 COURSES:
(1) SOUTH 32 DEGREES 02 MINUTES 03 SECONDS EAST 43.52 FEET;
(2) SOUTH 62 DEGREES 59 MINUTES 37 SECONDS EAST 853.07 FEET;
(3) SOUTH 13 DEGREES 34 MINUTES 30 SECONDS EAST 309.39 FEET;
(4) SOUTH 14 DEGREES 07 MINUTES 12 SECONDS WEST 271.44 FEET;
(5) SOUTH 21 DEGREES 36 MINUTES 21 SECONDS WEST 225.45 FEET;
(6) SOUTH 00 DEGREES 00 MINUTES 21 SECONDS EAST 119.84 FEET TO A POINT ON
THE SOUTH LINE OF SAID SECTION 31, SAID POINT BEING ALSO ON THE NORTH LINE
OF AFORESAID "COTTONWOOD PARK" AND THE NORTH LINE OF AFORESAID SECTION 6;
THENCE NORTH 90 DEGREES 00 MINUTES 00 SECONDS WEST ALONG SAID LINE 1429.21
FEET TO THE POINT OF BEGINNING, EXCEPT THAT TRACT CONVEYED TO THE UNITED
STATES GOVERNMENT BY A DEED RECORDED OCTOBER 29, 1976 IN BOOK 2870 AT PAGE
551 OF SAID EL PASO COUNTY RECORDS. TOGETHER WITH A BENEFICIAL EASEMENT
FOR UTILITY AND DRAINAGE PURPOSES AS SET FORTH IN INSTRUMENT RECORDED
JANUARY 3, 1989 IN BOOK 5592 AT PAGE 613.
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Exhibit B
List of Personal Property (Including Spare Parts)
[To be inserted]
127
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Exhibit C
List of Initial Inventory
[To be inserted]
128
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Exhibit D
List of Assigned Permits
[To be inserted]
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Exhibit E
List of Assigned Contracts
Vendor: Visiting Nurses Association, 1520 North Union Blvd., Colorado
Springs, Colorado
Re: Occupational Health Nursing Services
Vendor: PRAXAIR, INC., 39 Old Ridgebury Road, Danbury, Connecticut 06810-
5113
Re: nitrogen gas (in cylinders) supplier
Vendor: RUST Environment & Infrastructure, Inc., 6143 South Willow Drive,
Suite 200, Englewood, Colorado 80111-5123
Re: EH&S consulting services
Vendor: Marriott Corporation, 645 Carved Terrace, Colorado Springs,
Colorado 80919
Re: Food services (cafeteria), vending machines
Vendor: Servicemaster All Cleaning, Inc., 2123 E. St. Vrain, Colorado
Springs, Colorado 80909
Re: Janitorial supplies and janitorial services
Vendor: APS, 2121 Academy Circle, Suite 204, Colorado Springs, Colorado
80909
Re: Security services at site
Vendor: Perfection, Inc., 7646 Stampede Drive, Colorado Springs, Colorado
80920
Re: Landscape maintenance
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Exhibit F
Allocation of Purchase Price
Real Property $ 14,000,000 [estimated]
Personal Property $ 21,000,000 [estimated]
Spare Parts $ 500,000 [estimated]
Initial Inventory $ 160,000,000
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Exhibit G
Form of Bill of Sale
[To be inserted]
132
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Exhibit H
Form of Assignment and Assumption Agreement
[To be inserted]
133
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Exhibit I
Schedule of Environmental/OSHA Matters
[To be inserted]
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Exhibit J
List of Related Agreements
Manufacturing Agreement
Employee Agreement
Intellectual Property Agreement
Information Services Agreement
Transition Services Agreement
Letter of Credit Agreement
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Exhibit 10.B.15
KALEIDA RESTRUCTURING AGREEMENT
BETWEEN APPLE AND IBM
This is a Restructuring Agreement (hereinafter "Agreement") made effective
November 16th, 1995, between Apple Computer, Inc. (hereinafter "Apple"), a
California corporation having its principal place of business in Cupertino,
California, and International Business Machines Corporation ("IBM") a New
York corporation having its principal place of business in Armonk, New
York.
1. GENERAL PLAN
1.1 Apple and IBM are the two principal shareholders in, and have in the
past been the sole providers of funds to, Kaleida Labs, Inc. ("Kaleida"), a
Delaware corporation having its principal place of business in Mountain
View, California. The parties have decided to make fundamental changes in
Kaleida (hereinafter called the "Restructuring"). Both parties intend to
continue to use Kaleida's ScriptX technology, but to do so in a more
efficient and cost effective manner. The parties have agreed that they
will cause Kaleida to cease to exist as a separate operating entity,
although Kaleida will continue as a legal entity. At some later date, the
parties may decide to formally dissolve Kaleida, Kaleida employees,
customers and the public will begin to be informed of the planned changes
on approximately 11/16/95. Effective approximately 1/16/96, Kaleida will
have no employees and will cease its operations.
1.2 Apple plans to hire a "Core Team" of approximately 10 to 15 Kaleida
employees to continue maintenance and enhancements to ScriptX, which will
be subject to a separate ScriptX Development and License Agreement ("SDLA")
between Apple and IBM. The parties' obligations and rights relating to
this continuing maintenance and enhancements to ScriptX will be as defined
in that SDLA.
2. TRANSITION
2.1 It is anticipated that the phasing out of Kaleida's operations will
extend from the current date until some uncertain period of time after
Kaleida ceases its operations (hereinafter called the "Transition Period").
The parties will cause their representatives to oversee the termination of
Kaleida employees, deal with customer claims and support issues, and in
general manage all other aspects of the Restructuring. The parties will
jointly manage the Restructuring during the Transition Period with a
Transition Team comprised of people with financial, technical, legal, human
resources and other necessary skills from each of the parties. Mr. David
Nagel of Apple and Mr. Steven Mills of IBM, or their designees, will
resolve any disagreements that the Transition Team cannot resolve. This
Transition Team will develop and implement action plans to resolve all
issues, will quickly respond to new issues, and will track all issues until
resolved,
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2.2 All costs of the Restructuring through the Transition Period are
subject to approval by both parties, including such costs as separation
payments to employees, customer and other third party claims, settlement of
Toshiba's share for liquidation/ dissolution value, administrative
expenses, other Kaleida debts, legal and other fees, etc. Payment of such
costs shall be initially made from Kaleida funds. If such funds are
insufficient, the parties intend to provide such additional funds as are
approved by the parties, split equally between Apple and IBM. The parties
do not intend to make the 4th quarter 1995 payment to Kaleida according to
the existing Funding Agreement. The parties will develop a process to
compensate each other for a pro rata share of any agreed to restructuring
costs that are expended directly by one party.
2.3 In addition, the parties may agree to retain the services of certain
former Kaleida employees on a part time basis after 1/16/96 to assist in
performing administrative and other work during the Transition Period. The
parties will share equally the costs of retaining the services of such
persons.
3. TOSHIBA
The parties will mutually determine a fair resolution of the value of
Toshiba's share of Kaleida. An offer will be made to Toshiba in return for
Toshiba's relinquishing its shares in Kaleida and releasing any claims
against Kaleida, Apple and IBM.
4. INTELLECTUAL PROPERTY RIGHTS
4.1 The parties agree that the best way to preserve the intellectual
property ("IP") assets of Kaleida is to keep Kaleida as a non-operating
corporation, which will own the IP assets only and have no employees.
Following Toshiba's relinquishment of its shares, Kaleida will be owned 50%
by each party. The parties will cause Kaleida to be jointly managed by
representatives of the parties and the parties shall advance to Kaleida in
equal amounts, all administrative and operating costs required in excess of
Kaleida's resources. Necessary corporate documents will be modified to
simplify the administration, requiring a single board member from each
company and other changes. If and when the parties later formally dissolve
Kaleida, they intend to agree at that time on ownership of IP assets and
any additional licenses that may be needed.
4.2 Under the Multimedia License Agreement entered into among Kaleida,
Apple, and IBM on May 5, 1992 ("MLA") each party has equivalent broad
rights to Kaleida's IP assets on a worldwide, perpetual basis, including
copyrighted ScriptX technology, COS, Malibu, ITV and any other Kaleida
technologies. In complete satisfaction of the royalty obligations of each
party, the parties will cause Kaleida to accept the cancellation of its pre-
paid royalty obligations to each party and the licenses under the MLA will
become pre-paid and royalty free. Promptly after completion of the process
described in Section 4.3, the parties will cause Kaleida to deliver to each
party a copy of all existing Company Materials and Development
Environments, which will include the most current electronic and hardcopy
versions of the code (source and object), all documentation, all training
materials, etc., (hereinafter called "Transfer Event"). Each parties use
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of the Company Materials will be subject to the license grant in Section
6.1 of the MLA, except that SubSections 6.1.1.2, 6.1.1.3, and 6.1.1.6 of
that Section are deleted. Further, the parties agree that all Type I Code
becomes Type II Code as of the date of this Agreement and that the
Development Environments will be licensed according to the terms of Section
6.1, not Section 6.2. The parties also agree that the procedures in Section
4.2 of the MLA need not be followed. The parties will resolve later any
rights to Kaleida trademarks they may require.
4.3 Notwithstanding the foregoing, the licenses from the Parents to
Kaleida and from Kaleida to the Parents in the MLA will not include any
Parent Materials that have not been incorporated into Company Materials or
used as part of a Development Environment to create or maintain Company
Materials (hereinafter called "Unused Parent Materials"). Prior to the
Transfer Event, the parties will use best efforts to cause all Materials at
Kaleida to be inventoried and to determine which of the Materials are
Unused Parent Materials. Any copies of Unused Parent Materials found on
Kaleida's premises will, at the contributing Parent's election, either be
returned to the contributing Parent or destroyed. Once the Transfer Event
has occurred, however, each party will have the complete rights as defined
in Section 4.2 to use the Company Materials in accordance with the license
in the MLA, even if such Company Materials inadvertently contain any Unused
Parent Materials. The parties will enter into and will cause Kaleida to
enter into an amendment to the MLA to effectuate the provisions of this
Agreement.
4.4 This Agreement does not modify the Malibu Agreement between Apple and
IBM, dated June 27. 1995.
5. KALEIDA PERSONNEL
The parties will cause Kaleida to provide its employees with 60 days
written notice of termination and separation benefits approved by the
parties. IBM and Apple may hire certain employees, in addition to the
"Core Team" required for the SDLA. While the other party's permission or
review will not be required for any hiring decisions, the requirements for
the Core Team will first be identified. Neither party will interfere with
the attempt by Apple to hire the necessary Kaleida employees into the Core
Team.
6. OTHER KALEIDA ASSETS
The parties will cause Kaleida to inventory all its non-IP assets. The
parties will agree on whether assets will be liquidated or distributed
following the settlement with Toshiba. If assets are liquidated, the
proceeds are to be distributed equally. The parties will agree on an equal
distribution of all other non-liquidated assets, with appropriate
requirements of the Core Team considered first,
7. OTHER
The parties will cause any necessary Kaleida corporate documents to be
created or amended in order to effectuate any of the actions described
above, including Board resolutions, amendments
138
<PAGE>
to By-Laws, assignments, licenses, etc. This Agreement shall bind and
inure to the benefit of the parties and their respective successors and
assigns. This Agreement shall be governed by New York law. This Agreement
shall is solely for the benefit of the parties hereto and is not intended
nor shall it be construed as creating any rights in any third party
(including without limitation Kaleida or its other shareholder or
creditors). This Agreement may be amended or terminated only by written
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their Authorized Representatives.
INTERNATIONAL BUSINESS APPLE COMPUTER, INC.
MACHINES CORPORATION
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
By: /s/ Steven A. Mills By: /s/ David C. Nagel
Name Steven A. Mills Name David C. Nagel
Title: General Manager, SWS Title: Senior V.P., Apple Computer, Inc.
Date November 16, 1995 Date November 17, 1995
139
<PAGE>
EXHIBIT 11
APPLE COMPUTER, INC.
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 29, March 31, March 29, March 31,
1996 1995 1996 1995
<C> <C> <C> <C> <C>
Primary Earnings Per Share
Earnings (Loss)
Net income (loss) applicable
to common stock ($740,159) $ 72,917 ($808,845) $ 261,103
Shares
Weighted average number of
common sharesoutstanding 123,659 120,860 123,326 120,333
Adjustment for dilutive
effect of outstanding stock
options - 1,784 - 1,789
Weighted average number of
common and common equivalent
shares used for primary earnings
per share 123,659 122,644 123,326 122,122
Primary earnings (loss) per
common share ($5.99) $ .59 ($ 6.55) $ 2.14
Fully Diluted Earnings Per Share
Earnings (Loss)
Net income (loss) applicable
to common stock ($740,159) $ 72,917 ($808,845) $ 261,103
Shares
Weighted average number of
common sharesoutstanding 123,659 120,860 123,326 120,333
Adjustment for dilutive
effect of outstanding stock
options - 1,788 - 1,819
Weighted average number of
common and common equivalent
shares used for fully diluted
earnings per share 123,659 122,648 123,326 122,152
Fully diluted earnings (loss)
per common share ($5.99) $ .59 ($ 6.55) $ 2.14
</TABLE>
140
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
APPLE COMPUTER, INC.
FINANCIAL DATA SCHEDULE
(In millions, except per share amounts)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF INCOME
OF APPLE COMPUTER, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-29-1996
<PERIOD-END> MAR-29-1996
<CASH> 500
<SECURITIES> 92
<RECEIVABLES> 1,453
<ALLOWANCES> 87
<INVENTORY> 1,466
<CURRENT-ASSETS> 4,277
<PP&E> 1,504
<DEPRECIATION> 812
<TOTAL-ASSETS> 5,234
<CURRENT-LIABILITIES> 2,273
<BONDS> 303
<COMMON> 420
0
0
<OTHER-SE> 1,636
<TOTAL-LIABILITY-AND-EQUITY> 5,234
<SALES> 5,333
<TOTAL-REVENUES> 5,333
<CGS> 5,279
<TOTAL-COSTS> 5,279
<OTHER-EXPENSES> 1,355
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> (1,284)
<INCOME-TAX> (475)
<INCOME-CONTINUING> (809)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (809)
<EPS-PRIMARY> (6.55)
<EPS-DILUTED> (6.55)
<PAGE>
</TABLE>
