Preferred Stock Purchase Agreement - Apple Computer Inc. and Microsoft Corp.
PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF AUGUST 5, 1997
BETWEEN
APPLE COMPUTER, INC.
AND
MICROSOFT CORPORATION
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TABLE OF CONTENTS
PAGE
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SECTION 1 - Agreement to Purchase and Sell Preferred Stock . . . . . . . . . 1
1.1 Agreement to Purchase and Sell Preferred Stock. . . . . . . . . . . 1
1.2 Per Share Purchase and Conversion Prices. . . . . . . . . . . . . . 1
SECTION 2 - Closing Date; Delivery . . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3 - Representations and Warranties of the Company. . . . . . . . . . 2
3.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Absence of Certain Changes or Events. . . . . . . . . . . . . . . . 4
3.6 Governmental Consent, etc.. . . . . . . . . . . . . . . . . . . . . 4
3.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4 - Representations and Warranties of the Purchaser. . . . . . . . . 5
4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4 Disclosure of Information . . . . . . . . . . . . . . . . . . . . . 5
4.5 Investment Experience . . . . . . . . . . . . . . . . . . . . . . . 5
4.6 Accredited Investor Status. . . . . . . . . . . . . . . . . . . . . 6
4.7 Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5 - Conditions to Obligation of the Purchaser. . . . . . . . . . . . 6
5.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . 6
5.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.3 No Order Pending. . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.4 No Law Prohibiting or Restricting Sale of the Shares. . . . . . . . 6
5.5 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . 7
5.6 Patent Cross License Agreement and Technology Agreement . . . . . . 7
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SECTION 6 - Conditions to Obligation of the Company. . . . . . . . . . . . . 7
6.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . 7
6.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.3 No Order Pending. . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.4 No Law Prohibiting or Restricting the Sale of the Shares. . . . . . 7
6.5 The Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.6 Patent Cross License Agreement and Technology Agreement . . . . . . 8
SECTION 7 - Covenants of the Company . . . . . . . . . . . . . . . . . . . . 8
7.1 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 8 - Covenants of the Purchaser . . . . . . . . . . . . . . . . . . . 8
8.1 Right of First Refusal. . . . . . . . . . . . . . . . . . . . . . . 8
8.2 Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
8.3 Voting Trust, etc.. . . . . . . . . . . . . . . . . . . . . . . . .10
8.4 Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . .10
8.5 Acts in Concert with Others . . . . . . . . . . . . . . . . . . . .10
8.6 Restrictions on Transfer of Shares. . . . . . . . . . . . . . . . .10
8.7 Acquisition of Stock. . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 9 - Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . .11
9.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . .11
9.2 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . .12
9.4 Survival; Termination of Covenants. . . . . . . . . . . . . . . . .12
9.5 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . .13
9.6 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . .13
9.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
9.8 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
9.9 Fees, Costs and Expenses. . . . . . . . . . . . . . . . . . . . . .14
9.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
9.11 Initial Public Announcement . . . . . . . . . . . . . . . . . . . .15
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PREFERRED STOCK PURCHASE AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
this 5th day of August, 1997 between Apple Computer, Inc., a California
corporation (the "Company"), and Microsoft Corporation, a Washington corporation
(the "Purchaser").
RECITALS
WHEREAS, concurrently with this Agreement the Company and the Purchaser are
entering into a Patent Cross License Agreement in the form attached hereto as
Exhibit A;
WHEREAS, concurrently with this Agreement the Company and the Purchaser are
entering into a Technology Agreement in the form attached hereto as Exhibit B;
and
WHEREAS, in connection with the Patent Cross License Agreement and the
Technology Agreement, the Company desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Company, shares of the Company's Series A
Non-Voting Convertible Preferred Stock, no par value (the "Preferred Stock")
convertible into the Company's Common Stock, no par value (the "Common Stock"),
on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1
AGREEMENT TO PURCHASE AND SELL PREFERRED STOCK
1.1 AGREEMENT TO PURCHASE AND SELL PREFERRED STOCK. Upon the terms and
subject to the conditions of this Agreement, the Company hereby agrees to
sell to the Purchaser at the Closing (as defined below), and the Purchaser
agrees to purchase from the Company at the Closing, $150,000,000 aggregate
purchase price of Preferred Stock, no par value, of the Company having the
terms and conditions set forth in the Certificate of Determination of
Preferences of Series A Non-Voting Convertible Preferred Stock of Apple
Computer, Inc. (the "Certificate") substantially in the form attached hereto
as Exhibit C (the "Shares") at a price per share (the "Per Share Purchase
Price") set forth in Section 1.2 below.
1.2 PER SHARE PURCHASE AND CONVERSION PRICES. The Per Share Purchase
Price shall be $1,000. The initial "Conversion Price" (as defined in the
Certificate) shall be $16.50 per share.
SECTION 2
CLOSING DATE; DELIVERY
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2.1 CLOSING DATE. The Closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held at the offices of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto,
California, at 10:00 a.m. (Pacific time), August 11, 1997, or at such other time
and place as the Company and the Purchaser mutually agree (the date of the
Closing being hereinafter referred to as the "Closing Date").
2.2 DELIVERY. At the Closing, the Company will deliver to the Purchaser a
certificate or certificates representing the Shares against payment of the
aggregate purchase price of $150,000,000 by wire transfer of immediately
available funds to an account designated by the Company. The certificate or
certificates representing the Shares and the shares of Common Stock issuable
upon conversion of the Shares shall be subject to a legend restricting transfer
under the Securities Act of 1933, as amended (the "Securities Act"), and
referring to restrictions on transfer herein, such legend to be substantially as
follows:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of 1933, as
amended. Such shares may not be sold or transferred in the absence of such
registration or an opinion of counsel reasonably satisfactory to the Company as
to the availability of an exemption from registration.
The shares represented by this certificate are subject to restrictions on
transfer, including any sale, pledge or other hypothecation, set forth in an
agreement dated as of August 5, 1997 between the Company and Microsoft
Corporation, a copy of which agreement may be obtained at no cost by written
request made by the holder of record of this certificate to the secretary of the
Company at the Company's principal executive offices."
The Company agrees (i) to remove the legend set forth in the second
preceding paragraph upon receipt of an opinion of counsel in form and substance
reasonably satisfactory to the Company that the Shares or the shares of Common
Stock issuable upon conversion of the Shares are eligible for transfer without
registration under the Securities Act and (ii) to remove the legend set forth in
the immediately preceding paragraph at such time as the Shares (or the shares of
Common Stock issuable upon conversion of the Shares) may be transferred in
compliance with Section 8 or upon the termination of the covenants of Section 8
as provided for in Section 9.4.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
3.1 ORGANIZATION. The Company is a corporation duly organized and validly
existing under the laws of the State of California and is in good standing under
such laws. The Company has the requisite corporate power to own and operate its
properties and assets, and to carry on its
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business as presently conducted and as proposed to be conducted. The Company
is qualified to do business as a foreign corporation in each jurisdiction in
which the ownership of its property or the nature of its business requires
such qualification, except where the failure to be so qualified would not
have a materially adverse effect on the Company and its subsidiaries, taken
as a whole.
3.2 AUTHORIZATION. All corporate action on the part of the Company
necessary for the authorization, execution, delivery and performance of this
Agreement, the Registration Rights Agreement (attached as Exhibit D hereto), the
Patent Cross License Agreement and the Technology Agreement by the Company, the
authorization, sale, issuance and delivery of the Shares hereunder, and the
performance of the Company's obligations hereunder and under said Agreements has
been taken. This Agreement, the Registration Rights Agreement, the Patent Cross
License Agreement and the Technology Agreement constitute legal, valid and
binding obligations of the Company enforceable in accordance with their
respective terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and to limitations
of public policy as they may apply to Section 4 of the Registration Rights
Agreement. Upon their issuance and delivery pursuant to this Agreement, the
Shares will be validly issued, fully paid and nonassessable. The issuance and
sale of the Shares will not give rise to any preemptive rights or rights of
first refusal on behalf of any person in existence on the date hereof.
3.3 NO CONFLICT. The execution and delivery of this Agreement, the
Registration Rights Agreement, the Patent Cross License Agreement and the
Technology Agreement do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of any
obligation or to a loss of a material benefit under, any provision of the
Articles of Incorporation or By-laws of the Company or any mortgage, indenture,
lease or other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company, its properties or assets, the effect of which could have a
material adverse effect on the Company and its subsidiaries, taken as a whole,
or materially impair or restrict the Company's power to perform its obligations
as contemplated under said Agreements.
3.4 SEC DOCUMENTS. The Company has filed all required reports, schedules,
forms, statements and other documents with the Securities and Exchange
Commission (the "SEC") since December 31, 1995 (the "SEC Documents"). As of
their respective dates, the SEC Documents complied in all material respects with
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be and the rules and regulations
of the SEC promulgated thereunder applicable to such SEC Documents, and none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Except to the extent that information contained in any
SEC Document has been revised or superseded by a later filed SEC Document, none
of the SEC Documents contains any untrue statement of a material fact or omits
to state any
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material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with U.S. generally
accepted accounting principles ("GAAP") (except, in the case of unaudited
statements as permitted by Form 10Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicted in the notes thereto)
and fairly present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated
results of their operation and cashflows (or changes in financial position
prior to the approval of Financial Accounting Standards Boards Statement of
Financial Accounting Standards No. 95) for the periodthen ending in
accordance with GAAP (subject, in the case of the unaudited statements, to
normal year end audit adjustments). Except as set forth in the filed SEC
Documents, neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of the Company and its consolidated subsidiaries or in the
notes thereto and which could reasonably be expected to have a material
adverse effect on the Company and its subsidiaries taken as a whole.
3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the SEC
Documents since the date of the most recent audited financial statements
included in the SEC Documents, there has not been (i) any declaration, setting
aside or payment of any dividend or distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock, (ii) any split,
combination or reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (iii) any damage,
destruction or loss of property, whether or not covered by insurance, that has
or could reasonably be expected to have a material adverse effect on the Company
and its subsidiaries taken as a whole, or (iv) any change in accounting methods,
principles or practices by the Company materially affecting its assets,
liabilities, or business, except insofar as may have been required by a change
in GAAP.
3.6 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Shares, or the
consummation of any other transaction contemplated hereby, except such filings
as may be required to be made with the SEC and the National Association of
Securities Dealers, Inc.
3.7 LITIGATION. Except as is disclosed in the SEC Documents, there is no
suit, action or proceeding pending or affecting the Company or any of its
subsidiaries that, individually or in the aggregate, could (i) have a material
adverse effect on the Company and its subsidiaries taken as a whole, (ii) impair
the ability of the Company to perform its obligations under this Agreement, the
Registration Rights Agreement, the Patent Cross License and the Technology
Agreement, or (iii) prevent the consummation of any of the transactions
contemplated by said Agreements, nor is there any judgment, decree, injunction,
rule or order of any governmental entity or arbitrator
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outstanding against the Company or any of its subsidiaries having, or which,
could reasonably be expected to have, any such effect.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
4.1 ORGANIZATION. The Purchaser is a corporation duly organized and
validly existing and in good standing under the laws of the State of Washington,
with all requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as now being conducted.
4.2 AUTHORITY. All corporate action on the part for the Purchaser
necessary of the authorization, execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Patent Cross License Agreement
and the Technology Agreement by the Purchaser has been taken. This Agreement,
the Registration Rights Agreement, the Patent Cross License Agreement and the
Technology Agreement have been duly executed and delivered by the Purchaser and
constitute legal, valid and binding obligations of the Purchaser, enforceable in
accordance with their respective terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy as they may apply to Section 4 of the
Registration Rights Agreement. The execution and delivery of said Agreements do
not, and the consummation of the transactions contemplated hereby and thereby
will not, conflict with or result in any violation of any obligation under any
provision of the Articles of Incorporation or By-laws of the Purchaser or any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Purchaser.
4.3 INVESTMENT. The Purchaser is acquiring the Shares for investment for
its own account, not as a nominee or agent, and not with a view to, or for
resale in connection with, any distribution thereof. The Purchaser understands
that the Shares have not been registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Purchaser's representations and warranties contained
herein.
4.4 DISCLOSURE OF INFORMATION. The Purchaser has had full access to all
information it considers necessary or appropriate to make an informed investment
decision with respect to the Shares to be purchased by the Purchaser under this
Agreement. The Purchaser further has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Shares and to obtain additional information necessary to verify
any information furnished to the Purchaser or to which the Purchaser had access.
4.5 INVESTMENT EXPERIENCE. The Purchaser understands that the purchase of
the Shares involves substantial risk. The Purchaser has experience as an
investor in securities of companies and
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acknowledges that it is able to fend for itself, can bear the economic risk
of its investment in the Shares and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of this investment in the Shares and protecting its own interests in
connection with this investment.
4.6 ACCREDITED INVESTOR STATUS. The Purchaser is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities Act.
4.7 RESTRICTED SECURITIES. The Purchaser understands that the Shares to
be purchased by the Purchaser hereunder are characterized as "restricted
securities" under the Securities Act inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under the
Securities Act and applicable regulations thereunder such securities may be
resold without registration under the Securities Act only in certain limited
circumstances. The Purchaser is familiar with Rule 144 of the SEC, as presently
in effect, and understands the resale limitations imposed thereby and by the
Securities Act. The Purchaser understands that the Company is under no
obligation to register any of the Shares sold hereunder except as provided in
the Registration Rights Agreement.
SECTION 5
CONDITIONS TO OBLIGATION OF THE PURCHASER
The Purchaser's obligation to purchase the Shares at the Closing is, at the
option of the Purchaser, which may waive any such conditions, subject to the
fulfillment on or prior to the Closing Date of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company contained in Section 3 will be true and correct on
and as of the date hereof and on and as of the Closing Date with the same
effect as though such representations and warranties had been made as of the
Closing Date. The Purchaser shall have received a certificate signed by an
officer of the Company to such effect on the Closing Date.
5.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects. The Purchaser
shall have received a certificate signed by an officer of the Company to such
effect on the Closing Date.
5.3 NO ORDER PENDING. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.
5.4 NO LAW PROHIBITING OR RESTRICTING SALE OF THE SHARES. There shall not
be in effect any law, rule or regulation prohibiting or restricting the sale of
the Shares, or requiring any consent or approval of any Person which shall not
have been obtained to issue the Shares with full benefits
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afforded the Preferred Stock or the Common Stock into which the Preferred
Stock is convertible (except as otherwise provided in this Agreement).
5.5 REGISTRATION RIGHTS AGREEMENT. The Company shall have executed and
delivered the Registration Rights Agreement substantially in the form attached
hereto as Exhibit D.
5.6 PATENT CROSS LICENSE AGREEMENT AND TECHNOLOGY AGREEMENT. The Company
shall have executed and delivered the Patent Cross License Agreement and
Technology Agreement substantially in the forms attached hereto as Exhibit A and
Exhibit B, respectively.
SECTION 6
CONDITIONS TO OBLIGATION OF THE COMPANY
The Company's obligation to sell and issue the Shares at the Closing is, at
the option of the Company, which may waive any such conditions, subject to the
fulfillment on or prior to the Closing Date of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Purchaser contained in Section 4 will be true and correct on and as of the
date hereof and on and as of the Closing Date with the same effect as though
such representations and warranties had been made as of the Closing Date. The
Company shall have received a certificate signed on behalf of the Purchaser by
an officer of the Purchaser to such effect on the Closing Date.
6.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchaser on or prior to the Closing Date shall
have been performed or complied with in all material respects. The Company
shall have received a certificate signed on behalf of the Purchaser by an
officer of the Purchaser to such effect on the Closing Date.
6.3 NO ORDER PENDING. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.
6.4 NO LAW PROHIBITING OR RESTRICTING THE SALE OF THE SHARES. There shall
not be in effect any law, rule or regulation prohibiting or restricting the sale
of the Shares, or requiring any consent or approval of any person which shall
not have been obtained to issue the Shares with full benefits afforded the
Preferred Stock or the Common Stock into which the Preferred Stock is
convertible (except as otherwise provided in this Agreement).
6.5 THE PURCHASER. The Purchaser shall have executed and delivered the
Registration Rights Agreement substantially in the form attached hereto as
Exhibit D.
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6.6 PATENT CROSS LICENSE AGREEMENT AND TECHNOLOGY AGREEMENT. The
Purchaser shall have executed and delivered the Patent Cross License Agreement
and Technology Agreement substantially in the forms attached hereto as Exhibit A
and Exhibit B, respectively.
SECTION 7
COVENANTS OF THE COMPANY
7.1 REGISTRATION RIGHTS. The Company will comply with the provisions
regarding registration rights contained in the Registration Rights Agreement
attached hereto as Exhibit D.
SECTION 8
COVENANTS OF THE PURCHASER
8.1 RIGHT OF FIRST REFUSAL. Prior to making any sale or transfer of the
Shares (other than a sale or transfer registered under the Securities Act or
pursuant to Rule 144, or a sale or transfer of that number of Shares
representing less than three percent (3%) of the Company's outstanding Common
Stock to any person or group), the Purchaser shall give the Company the
opportunity to purchase such Shares in the following manner:
(i) The Purchaser shall give notice (the "Transfer Notice") to the
Company in writing of such intention specifying the approximate number of the
proposed purchasers or transferees, the amount of Shares proposed to be sold or
transferred, the proposed price per share therefor (the "Transfer Price") and
the other material terms upon which such disposition is proposed to be made.
(ii) The Company shall have the right, exercisable by written notice
given by the Company to the Purchaser within five (5) business days after
receipt of such Transfer Notice, to purchase all but not part of the Shares
specified in such Transfer Notice for cash per share equal to the Transfer
Price, provided, within five (5) business days after written notice of exercise
by the Company, the Company shall provide the Purchaser with evidence
satisfactory to the Purchaser (by written commitment letter subject only to
customary representations, diligence and documentation, letter of credit or
otherwise) of its ability to finance such repurchase.
(iii) If the Company exercises its right of first refusal
hereunder, the closing of the purchase of the Shares with respect to which such
right has been exercised shall take place within ten (10) business days after
the Company gives notice of such exercise. Upon exercise of its right of first
refusal, the Company and the Purchaser shall be legally obligated to consummate
the purchase contemplated thereby and shall use their best efforts to secure any
approvals required in connection therewith.
(iv) If the Company does not exercise its right of first refusal
hereunder within the time specified for such exercise, the Purchaser shall be
free, during the period of 90 calendar days
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following the expiration of such time for exercise, to sell the Shares
specified in such Transfer Notice on terms no less favorable to the Purchaser
than the terms specified in such Transfer Notice.
(v) Notwithstanding the foregoing, prior to making any sale or
exchange of Shares in response to a tender or exchange offer, the Purchaser
shall give the Company the opportunity to purchase such Shares in the following
manner:
(a) The Purchaser shall give notice (the "Tender Notice") to the
Company in writing of such intention no later than 10 calendar days prior to the
latest time by which Shares must be tendered in order to be accepted pursuant to
such offer or to qualify for any proration applicable to such offer (the "Tender
Date"), specifying the amount of Shares proposed to be tendered. For purposes
hereof, a tender offer to purchase Shares shall be deemed to be an offer at the
price specified therein, without regard to any provisions thereof with respect
to proration or conditions to the offeror's obligation to purchase (assuming
such conditions are not impossible of performance when the offer is made,
without giving effect to the Company's right of first refusal).
(b) If the Tender Notice is given, the Company shall have the
right, exercisable by giving notice to the Purchaser at least two business days
prior to the Tender Date, to purchase all but not part of the Shares specified
in the Tender Notice for cash. If the Company exercises such right by giving
such notice, the closing of the purchase of such Shares shall take place not
later than one business day prior to the Tender Date; provided, however, that if
the purchase price specified in the tender offer includes any property other
than cash, the value of any property included in the purchase price shall be
jointly determined by a nationally recognized investment banking firm selected
by each party or, in the event such firms are unable to agree, a third
nationally recognized investment banking firm to be selected by such two firms.
For this purpose:
(x) The parties shall use their best efforts to cause any
determination of the value of any securities included in the purchase price to
be made within three business days after the date of delivery of the Tender
Notice. If the firms selected by the Purchaser and the Company are unable to
agree upon the value of any such securities within such three-day period, the
firms shall promptly select a third firm whose determination shall be made
promptly and shall be conclusive.
(y) The parties shall use their best efforts to cause any
determination of the value of property other than securities to be made within
four business days after the date of delivery of the Tender Notice. If the
firms selected by the Purchaser and the Company are unable to agree upon a value
within six business days after the date of delivery of the Tender Notice, the
firms shall promptly select a third firm whose determination shall be made
promptly and shall be conclusive.
The purchase price to be paid by the Company pursuant to this
Section 8.1(v) shall be (A) if such tender offer is consummated, the purchase
price that the Purchaser would have received if it had tendered the Shares
purchased by the Company and all such Shares had been
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purchased in such tender offer, including any increases in the price paid by
the tender offeror after exercise by the Company of its right of first
refusal hereunder, or (B) if such tender offer is not consummated, the
highest price offered pursuant thereto, in each case with property, if any,
to be valued as aforesaid. Each party shall bear the cost of its own
investment banking firm and the parties shall share the cost of any third
firm selected hereunder.
(c) If the Company does not exercise such right by giving such
notice, then the Purchaser shall be free to accept the tender offer with respect
to which the Tender Notice was given.
8.2 VOTING. Unless the Company otherwise consents in writing, the
Purchaser shall take such action as may be required so that all Shares are voted
on all matters to be voted on by holders of Voting Stock (to the extent the
Shares are entitled to a vote) in the same proportion as the votes cast by the
other holders of Voting Stock with respect to such matters; provided, that the
Shares and any other voting securities of the Company owned by the Purchaser may
be voted as the Purchaser determines in its sole discretion on any Significant
Event (as defined in Section 9.1 below) presented to the holders of Voting Stock
for a vote. In the event that the Shares are entitled to vote on a matter
submitted to the shareholders of the Company, the Purchaser, as the holder of
Shares, shall be present, in person or by proxy, at all meetings of shareholders
of the Company so that the Shares may be counted for the purposes of determining
the presence of a quorum at such meetings.
8.3 VOTING TRUST, ETC. The Purchaser shall not deposit any Shares in a
voting trust or, except as otherwise provided herein, subject any Shares to any
arrangement or agreement with respect to the voting of such Shares.
8.4 SOLICITATION OF PROXIES. Without the Company's prior written consent,
the Purchaser shall not solicit proxies with respect to any Shares of the
Company owned by the Purchaser, nor shall it become a "participant" in any
"Election Contest" (as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) relating to the election of directors of the Company.
The Purchaser shall exercise its influence on the management, the Board of
Directors and policies of the Company in a manner consistent with its
shareholding and any business agreements between the Purchaser and the Company.
8.5 ACTS IN CONCERT WITH OTHERS. Except as contemplated herein with
regard to permissible sales of the Purchaser's Shares, the Purchaser shall not
join a partnership, limited partnership, syndicate or other group, or otherwise
act in concert with any Person, for the purpose of acquiring, holding or
disposing of Shares of the Company owned by the Purchaser.
8.6 RESTRICTIONS ON TRANSFER OF SHARES. For a period of three years from
the date of this Agreement, the Purchaser shall not, directly or indirectly,
sell, transfer, pledge or hypothecate any Shares (or shares of Common Stock
received upon the conversion of the Shares) owned by it except (i) to the
Company or any person or group approved in writing by the Company, or (ii) to a
corporation of which the Purchaser owns not less than 50% of the voting power
entitled to be cast in
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the election of directors (a "Controlled Corporation"), so long as such
Controlled Corporation agrees to hold such Shares subject to all the
provisions of this Agreement, including this Section 8.6, and agrees to
transfer such Shares to the Purchaser or another Controlled Corporation of
the Purchaser if it ceases to be a Controlled Corporation of the Purchaser.
Notwithstanding the foregoing or anything else to the contrary in this
Agreement, the Purchaser may enter into bona fide transactions through a
nationally recognized investment banking firm which constitute a hedge
against changes in the market price of the Common Stock, provided, however,
no public disclosure is made with respect to such hedge transactions, except
in an initial Schedule 13D, the text of which is reasonably satisfactory to
the Company, or if in the opinion of counsel to Purchaser such disclosure is
required as a matter of law.
8.7 ACQUISITION OF STOCK. The Purchaser shall advise management of the
Company as to the Purchaser's general plans to acquire shares of Common Stock,
or rights thereto, reasonably in advance of any such acquisitions. All of the
Purchaser's purchases of Common Stock shall be in compliance with applicable
laws and regulations and the provisions of this Agreement.
SECTION 9
MISCELLANEOUS
9.1 CERTAIN DEFINITIONS. As used in this Agreement:
(a) The term "Voting Stock" means the Common Stock and any other
securities issued by the Company having the ordinary power to vote in the
election of directors of the Company (other than securities having such power
only upon the happening of a contingency).
(b) The terms "Beneficial Owner," "beneficial Ownership" and "group"
shall have the meaning comprehended by Section 13(d)(3) of the Exchange Act and
the rules and regulations promulgated thereunder.
(c) The term "Person" shall mean any person, individual, corporation,
partnership, trust or other non-governmental entity or any governmental agency,
court, authority or other body (whether foreign, federal, state, local or
otherwise).
(d) The term "Change of Control" shall mean (i) an acquisition of
Voting Stock by a Person or group in a purchase or transaction or series of
related purchases or transactions if immediately thereafter such Person or group
has Beneficial Ownership of more than fifty percent (50%) of the combined voting
power of the Company's then outstanding Voting Stock; (ii) the execution of an
agreement providing for a tender offer, merger, consolidation or reorganization,
or series of such related transactions involving the Company, unless the
stockholders of the Company, immediately after such transaction or transactions
are the Beneficial Owners of at least fifty percent (50%) of the Voting Stock;
(iii) a change or changes in the membership of the Company's Board of
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Directors which represent a change of a majority or more of such membership
during any twelve month period (unless such change or changes in membership
are caused by the actions of the then existing Board of Directors and do not
occur within twelve months of the commencement, threat or proposal of an
Election Contest, tender offer or other transaction which would constitute a
Change of Control under (i) or (ii) of this Section 9.1(d)); or (iv) a sale
of all or substantially all of the Company's assets.
(e) The term "Insolvency Proceeding" shall mean (i) an assignment
for the benefit of creditors, (ii) the filing by or against Company of a
petition to have Company adjudged insolvent, bankrupt or seeking a
reorganization or liquidation under any law relating to bankruptcy, insolvency
or receivership, (iii) an appointment of a receiver or trustee for all or
substantially all of the assets of the Company, (iv) a public admission in
writing of the Company's inability to pay its debts as they come due, or (v) the
adoption of a plan of liquidation or dissolution by the Board of Directors of
the Company.
(f) The term "Significant Event" means (i) any proposed amendment to
the Articles of Incorporation or By-laws of the Company (other than a proposal
to increase the number of authorized shares of Common Stock or Preferred Stock;
provided such increase(s) is (are) not contrary to clause (v) of this Section
9.1 (f)), (ii) a disposition of the Company (by way of merger, disposition of
assets or otherwise), (iii) a recapitalization of the Company, (iv) a
liquidation of the Company, or (v) any vote pursuant to any provision of law or
the Company's Articles of Incorporation or By-laws requiring or permitting
shareholders to approve any business combination proposed by or with another
Person or its affiliates which have acquired a certain percentage of the
Company's shares or to grant voting rights to such Person or to waive or adopt
provisions requiring such a vote.
9.2 BEST EFFORTS. Each of the Company and the Purchaser shall use its
best efforts to take all actions required under any law, rule or regulation
adopted subsequent to the date hereto to ensure that the conditions to the
Closing set forth herein are satisfied on or before the Closing Date.
9.3 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of California as applied to contracts entered
into solely between residents of, and to be performed entirely within, such
state, and without reference to principles of conflicts of laws or choice of
laws.
9.4 SURVIVAL; TERMINATION OF COVENANTS. The representations and
warranties in Sections 3 and 4 of this Agreement shall not survive the Closing
except for the representations and warranties in Sections 4.3 and 4.7 hereof
which shall continue to survive. The covenants of the Company and the Purchaser
under Section 7 and Section 8 hereof shall terminate on the fifth anniversary of
this Agreement, provided the Purchaser's covenants in Section 8 shall terminate
in the event of a Change of Control or Insolvency Proceeding.
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9.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
9.6 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Certificate and the
Registration Rights Agreement constitute the full and entire understanding and
agreement between the parties with regard to the subject matter hereof and
thereof and supersede all prior agreements and understandings among the parties
relating to the subject matter hereof. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought. The enforceability and validity of
this Agreement, the Patent Cross License Agreement and the Technology Agreement
are each to be determined separately and any finding that any one or more of
such agreements is invalid or nonenforceable shall have no effect on the
validity or enforceability of this Agreement.
9.7 NOTICES. All notices, requests, demands or other communications which
are required or may be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed to have been duly given: (i) on the date of
delivery if delivered by hand, (ii) upon the third day after such notice is
(a) deposited in the United States mail, if mailed by registered or certified
mail, postage prepaid, return receipt requested, or (b) sent by a nationally
recognized overnight express courier, or (iii) by facsimile upon written
confirmation (other than the automatic confirmation that is received from the
recipient's facsimile machine) of receipt by the recipient of such notice:
(a) if to the Company, to it at:
One Infinite Loop
Cupertino, CA 95014
Attention: Chief Financial Officer
with a copy addressed as set forth above but to the attention of the
General Counsel; with a copy to:
Larry W. Sonsini
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94306
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(b) if to the Purchaser, to it at:
Microsoft Corporation
One Microsoft Way
Building 8
North Office 2211
Redmond, WA 98052
Attention: Chief Financial Officer
with a copy addressed as set forth above but to the attention of
Senior Vice President, Law and Corporate Affairs, with a copy to:
Richard B. Dodd
Preston Gates & Ellis LLP
5000 Columbia Center
701 Fifth Avenue
Seattle, WA 98104-7078
9.8 BROKERS.
(a) The Company has not engaged, consented to or authorized any
broker, finder or intermediary to act on its behalf, directly or indirectly, as
a broker, finder or intermediary in connection with the transactions
contemplated by this Agreement. The Company hereby agrees to indemnify and hold
harmless the Purchaser from and against all fees, commissions or other payments
owing to any party acting on behalf of the Company hereunder.
(b) The Purchaser has not engaged, consented to or authorized any
broker, finder or intermediary to act on its behalf, directly or indirectly, as
a broker, finder or intermediary in connection with the transactions
contemplated by this Agreement. The Purchaser hereby agrees to indemnify and
hold harmless the Company from and against all fees, commissions or other
payments owing to any party acting on behalf of the Purchaser hereunder.
9.9 FEES, COSTS AND EXPENSES. All fees, costs and expenses (including
attorneys' fees and expenses) incurred by either party hereto in connection with
the preparation, negotiation and execution of this Agreement, the Registration
Rights Agreement, the Patent Cross License Agreement and the Technology
Agreement and the consummation of the transactions contemplated hereby and
thereby, shall be the sole and exclusive responsibility of such party.
9.10 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and restriction
of this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
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9.11 INITIAL PUBLIC ANNOUNCEMENT. The Company and the Purchaser shall
agree on the form and content of the initial public announcement which shall be
made concerning this Agreement, the Patent Cross License Agreement and the
Technology Agreement and the transactions contemplated hereby and thereby, and
neither the Company nor the Purchaser shall make such public announcement
without the consent of the other, except as required by law.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date set forth above.
APPLE COMPUTER, INC.
By: /s/ John B. Douglas, III
---------------------------------------------
Name: John B. Douglas, III
------------------------------------------
Title: Senior Vice President
-----------------------------------------
MICROSOFT CORPORATION
By: /s/ Greg Maffei
---------------------------------------------
Title: Chief Financial Officer
-----------------------------------------
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