Restructuring Agreement - Taligent Inc., Apple Computer Inc. and International Business Machines Corp.
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.
<PAGE>
(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.
<PAGE>
(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.
<PAGE>
(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
<PAGE>
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
<PAGE>
(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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
Exhibit List
Exhibit 1: Form of New Apple License Agreement
Exhibit 2: Financial Statements of the Company