SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
APPLE COMPUTER, INC.
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(Name of Registrant as Specified In Its Charter)
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Registrant)
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and 0-11.
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[LOGO]
APPLE COMPUTER, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 19, 2001
To Holders of Common Stock of
Apple Computer, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of Apple
Computer, Inc., a California corporation (the "Company"), will be held on
Thursday, April 19, 2001 at 10:00 a.m., local time, at the Company's principal
executive offices located at 1 Infinite Loop, Cupertino, California 95014, for
the following purposes, as more fully described in the accompanying Proxy
Statement:
1. To elect the Company's Board of Directors.
2. To approve an amendment to the 1998 Executive Officer Stock Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 5,000,000 shares.
3. To ratify the appointment of KPMG LLP as independent auditors of the
Company for fiscal year 2001.
4. To consider a shareholder proposal.
5. To transact such other business as may properly come before the meeting
and any postponement(s) or adjournment(s) thereof.
All shareholders are cordially invited to attend the meeting in person.
However, to ensure that each shareholder's vote is counted at the meeting,
shareholders are requested to mark, sign, date and return the enclosed proxy
card as promptly as possible in the envelope provided. Shareholders attending
the meeting may vote in person even if they have previously returned proxy
cards.
Only shareholders of record as of the close of business on February 21, 2001
are entitled to receive notice of, to attend and to vote at the meeting.
Sincerely,
[SIG]
NANCY R. HEINEN
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
Cupertino, California
March 12, 2001
[LOGO]
APPLE COMPUTER, INC.
1 INFINITE LOOP
CUPERTINO, CALIFORNIA 95014
PROXY STATEMENT
INTRODUCTION
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"BOARD") of Apple Computer, Inc., a California corporation (the "COMPANY"), for
use at the Company's annual meeting of shareholders (the "ANNUAL MEETING") to be
held on Thursday, April 19, 2001 at 10:00 a.m., local time, and at any
postponement(s) or adjournment(s) thereof. The purposes of the Annual Meeting
are set forth in this Proxy Statement and in the accompanying Notice of Annual
Meeting of Shareholders. The Annual Meeting will be held at the Company's
principal executive offices at the address shown above.
The Company's complete mailing address is 1 Infinite Loop, Cupertino,
California 95014, and its telephone number is (408) 996-1010. Georgeson
Shareholder Communications Inc., which is assisting with the mechanics of the
return of the proxies, may be contacted at (800) 223-2064.
These proxy solicitation materials were mailed on or about March 12, 2001 to
all shareholders entitled to vote at the Annual Meeting.
PROCEDURAL MATTERS
Shareholders of record as of the close of business on February 21, 2001 (the
"RECORD DATE") are entitled to receive notice of, to attend, and to vote at the
Annual Meeting. There were 346,068,877 shares of Common Stock issued and
outstanding on the Record Date. Each share has one vote on all matters. The
closing sale price of Common Stock as reported on the Nasdaq National Market on
the Record Date was $18.875 per share.
A shareholder may revoke any proxy given pursuant to this solicitation by
attending the Annual Meeting and voting in person, or by delivering to the
Company's Corporate Secretary at the Company's principal executive offices
referred to above, prior to the Annual Meeting, a written notice of revocation
or a duly executed proxy bearing a date later than that of the previously
submitted proxy.
The Company will bear the cost of this solicitation. The Company has
retained the services of Georgeson Shareholder Communications Inc. to assist in
obtaining proxies from brokers and nominees of shareholders for the Annual
Meeting. The estimated cost of such services is $14,000 plus out-of-pocket
expenses. In addition, the Company will reimburse brokerage firms and other
persons representing beneficial owners of shares for their reasonable expenses
in forwarding solicitation material to such beneficial owners. Certain of the
Company's directors, officers and regular employees, without additional
compensation, may solicit proxies personally or by telephone, facsimile or
telegram.
Attendance at the Annual Meeting is limited to shareholders. Admission to
the meeting will be on a first-come, first-served basis. Registration will begin
at 9:00 a.m. and each shareholder may be asked to present valid picture
identification such as a driver's license or passport. Cameras, recording
devices and other electronic devices will not be permitted at the meeting.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
In the election of directors, the seven candidates receiving the highest
number of affirmative votes will be elected as directors. Proposals 2 and 3 each
require for approval (i) the affirmative vote of a majority of the shares
"represented and voting" and (ii) the affirmative vote of a majority of the
required quorum. Proposal 4 requires the unanimous vote of the shares
outstanding on the Record Date. The required quorum for the transaction of
business at the Annual Meeting is a majority of the shares of Common Stock
issued and outstanding on the Record Date. Shares that are voted "FOR",
"AGAINST" or "ABSTAIN" in a matter are treated as being present at the meeting
for purposes of establishing the quorum, but only shares voted "FOR" or
"AGAINST" are treated as shares "represented and voting" at the Annual Meeting
with respect to such matter. Accordingly, abstentions and broker non-votes will
be counted for purposes of determining the presence or absence of the quorum for
the transaction of business, but will not be counted for purposes of determining
the number "represented and voting" with respect to a proposal.
INTERNET VOTING
Shareholders whose shares are registered in the name of a bank or brokerage
firm may be eligible to vote electronically through the Internet or by
telephone. A large number of banks and brokerage firms are participating in the
ADP Investor Communication Services online program. This program provides
eligible shareholders the opportunity to vote via the Internet or by telephone.
Voting forms will provide instructions for shareholders whose bank or brokerage
firm is participating in ADP's program.
Registered shareholders may vote electronically through the Internet by
following the instructions included with their proxy card. Shareholders not
wishing to vote electronically through the Internet or whose form does not
reference Internet or telephone voting information should complete and return
the enclosed paper proxy card. Signing and returning the proxy card or
submitting the proxy via the Internet or by telephone does not affect the right
to vote in person at the Annual Meeting.
DIRECTORS
Listed below are the seven directors nominated for re-election at the Annual
Meeting. All of the directors elected at the Annual Meeting will serve a
one-year term expiring at the next annual meeting of shareholders.
DIRECTOR
NAME POSITION WITH THE COMPANY AGE SINCE
---- ------------------------- -------- --------
William V. Campbell............... Director 60 1997
Gareth C.C. Chang................. Director 58 1996
Millard S. Drexler................ Director 56 1999
Lawrence J. Ellison............... Director 56 1997
Steven P. Jobs.................... Director and Chief Executive 46 1997
Officer
Arthur D. Levinson................ Director 51 2000
Jerome B. York.................... Director 62 1997
WILLIAM V. CAMPBELL has been Chairman of the Board of Directors of
Intuit, Inc. ("INTUIT") since August 1998. From September 1999 to January 2000,
Mr. Campbell acted as Chief Executive Officer of Intuit. From April 1994 to
August 1998, Mr. Campbell was President and Chief Executive Officer and a
director of Intuit. From January 1991 to December 1993, Mr. Campbell was
President and Chief Executive Officer of GO Corporation. Mr. Campbell also
serves on the board of directors of SanDisk Corporation.
GARETH C.C. CHANG is the Chief Executive Officer and Chairman of the Board
of PingPong Technology. He is also the Executive Chairman of Click2Asia.com.
Formerly, Mr. Chang served as Chairman and Chief Executive Officer of STAR TV
and Executive Director of News Corporation. Prior to joining STAR TV,
2
Mr. Chang was President of Hughes Electronics International and President of
Direct TV International from 1993 to 1998. Previously, he was Corporate Vice
President of McDonnell Douglas Corporation. He is currently a member of the
Advisory Council of Nike Inc. and serves on the board of SRS Labs Inc.
MILLARD S. DREXLER has been Chief Executive Officer of Gap Inc. since 1995,
and President since 1987. Mr. Drexler has been a member of the Board of
Directors of Gap Inc. since November 1983. He also served as the President of
the Gap Division from 1983 to 1987.
LAWRENCE J. ELLISON has been Chief Executive Officer and a director of
Oracle Corporation ("ORACLE") since he co-founded Oracle in May 1977, and was
President of Oracle until June 1996. Mr. Ellison has been Chairman of the Board
of Oracle since June 1995.
STEVEN P. JOBS is one of the Company's co-founders and currently serves as
its Chief Executive Officer. Mr. Jobs is also the Chairman and Chief Executive
Officer of Pixar Animation Studios. In addition, Mr. Jobs co-founded NeXT
Software, Inc. ("NEXT") and served as the Chairman and Chief Executive Officer
of NeXT from 1985 until 1997 when NeXT was acquired by the Company. Mr. Jobs is
currently a director of Gap Inc.
ARTHUR D. LEVINSON, PH.D. has been President, Chief Executive Officer and a
director of Genentech Inc. ("GENENTECH") since July 1995. Dr. Levinson has been
Chairman of the Board of Directors of Genentech since September 1999. He joined
Genentech in 1980 and served in a number of executive positions, including
Senior Vice President of R&D from 1993 to 1995.
JEROME B. YORK is Chairman and Chief Executive Officer of
MicroWarehouse, Inc. Previously, he was Vice Chairman of Tracinda Corporation
from September 1995 to October 1999. In May 1993, he joined International
Business Machines Corporation ("IBM") as Senior Vice President and Chief
Financial Officer, and he served as a director of IBM from January 1995 to
August 1995. Prior to joining IBM, Mr. York served in a number of executive
positions at Chrysler Corporation, including Executive Vice President-Finance
and Chief Financial Officer from May 1990 to May 1993. He also served as a
director of Chrysler Corporation from 1992 to 1993. Mr. York is also a director
of MGM Mirage, Inc., Metro-Goldwyn-Mayer, Inc. and National TechTeam, Inc.
BOARD MEETINGS AND COMMITTEES
The Board met and/or took action by written consent a total of eleven times
during fiscal year 2000. The Board has a standing Audit and Finance Committee
("AUDIT COMMITTEE").
The Audit Committee is primarily responsible for reviewing the services
performed by the Company's independent auditors and internal audit department,
evaluating the Company's accounting policies and its system of internal controls
and reviewing significant financial transactions. The Audit Committee met six
times during fiscal year 2000.
Consistent with the new Nasdaq audit committee structure and membership
requirements, the Audit Committee is comprised of three members: Messrs. York,
Campbell and Levinson. Because of Mr. York's affiliation with MicroWarehouse,
(see "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS"), he is deemed to be a
"non-independent" director. As permitted under the Nasdaq requirements, the
Board carefully considered Mr. York's affiliation with MicroWarehouse as well as
his accounting and financial expertise and determined that it is in the best
interest of the Company and its shareholders that he continue to serve as a
member of the Audit Committee. Both Mr. Campbell and Dr. Levinson are
independent directors.
The Audit Committee operates under a written charter adopted by the Board
which is included in this proxy statement as Appendix A.
During fiscal year 2000, with the exception of Mr. Ellison, no director
attended fewer than 75% of the aggregate of all meetings of the Board and the
committees, if any, upon which such director served and which were held during
the period of time that such person served on the Board or such committee.
3
DIRECTOR COMPENSATION
In 1997, the Company ended its practice of paying cash retainers and fees to
directors, and approved the Apple Computer, Inc. 1997 Director Stock Option Plan
(the "DIRECTOR PLAN"). The Director Plan was approved by the shareholders in
April 1998 and 800,000 shares have been reserved for issuance under the Director
Plan. Pursuant to the Director Plan, the Company's non-employee directors are
granted an option to acquire 30,000 shares of Common Stock upon their initial
election to the Board ("INITIAL OPTIONS"). On the fourth anniversary of a
non-employee director's initial election to the Board and on each subsequent
anniversary, the director will be entitled to receive an option to acquire
10,000 shares of Common Stock ("ANNUAL OPTIONS"). Initial Options vest and
become exercisable in equal annual installments on each of the first through
third anniversaries of the date of grant. Annual Options are fully vested and
immediately exercisable on their date of grant. As of the end of the fiscal
year, there were options for 360,000 shares outstanding under the Director Plan.
EXECUTIVE OFFICERS
The following sets forth certain information regarding executive officers of
the Company. Information pertaining to Mr. Jobs, who is both a director and an
executive officer of the Company, may be found in the section entitled
"DIRECTORS".
FRED D. ANDERSON, Executive Vice President and Chief Financial Officer (age
56), joined the Company in April 1996. Prior to joining the Company,
Mr. Anderson was Corporate Vice President and Chief Financial Officer of
Automatic Data Processing, Inc., a position he held from August 1992 to
March 1996. Mr. Anderson also serves as a member of the Board of Directors of
3Com Corporation.
TIMOTHY D. COOK, Senior Vice President, Worldwide Operations and interim
Senior Vice President, Worldwide Sales, Service & Support (age 40), joined the
Company in February 1998. Prior to joining the Company, Mr. Cook held the
position of Vice President, Corporate Materials for Compaq Computer Corporation
("COMPAQ"). Previous to his work at Compaq, Mr. Cook was the Chief Operating
Officer of the Reseller Division at Intelligent Electronics. Mr. Cook also spent
12 years with IBM, most recently as Director of North American Fulfillment.
NANCY R. HEINEN, Senior Vice President, General Counsel and Secretary (age
44), joined the Company in September 1997. Prior to joining the Company,
Ms. Heinen held the position of Vice President, General Counsel and Secretary of
the Board of Directors at NeXT from February 1994 until the acquisition of NeXT
by the Company in February 1997.
RONALD B. JOHNSON, Senior Vice President, New Business Development (age 42),
joined the Company in January 2000. Prior to joining the Company, Mr. Johnson
spent 10 years with Target Stores, most recently as Senior Merchandising
Executive.
JONATHAN RUBINSTEIN, Senior Vice President, Hardware Engineering (age 44),
joined the Company in February 1997. Before joining the Company, Mr. Rubinstein
was Executive Vice President and Chief Operating Officer of FirePower Systems
Incorporated, from May 1993 to August 1996. Mr. Rubinstein also serves as a
member of the Board of Directors of Immersion Corporation.
SINA TAMADDON, Senior Vice President, Applications (age 43), joined the
Company in September 1997. Mr. Tamaddon has also served with the Company in the
position of Senior Vice President, Worldwide Service and Support, and Vice
President and General Manager, Newton Group. Before joining the Company,
Mr. Tamaddon held the position of Vice President, Europe with NeXT from
September 1996 through March 1997. From August 1994 to August 1996,
Mr. Tamaddon held the position of Vice President, Professional Services with
NeXT.
AVADIS TEVANIAN, JR., PH.D., Senior Vice President, Software Engineering
(age 39), joined the Company in February 1997 upon the Company's acquisition of
NeXT. With NeXT, Dr. Tevanian held several
4
positions, including Vice President, Engineering, from April 1995 to
February 1997. Prior to April 1995, Dr. Tevanian worked as an engineer with NeXT
and held several management positions.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of January 31, 2001
(the "TABLE DATE") with respect to the beneficial ownership of the Company's
Common Stock by (i) each person the Company believes beneficially holds more
than 5% of the outstanding shares of Common Stock; (ii) each director;
(iii) each Named Executive Officer listed in the Summary Compensation Table
under the heading "EXECUTIVE COMPENSATION" and (iv) all directors and executive
officers as a group. On the Table Date, 346,025,643 shares of Common Stock were
issued and outstanding. Unless otherwise indicated, all persons named as
beneficial owners of Common Stock have sole voting power and sole investment
power with respect to the shares indicated as beneficially owned.
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
SHARES OF COMMON STOCK PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) COMMON STOCK OUTSTANDING
------------------------ ---------------------- ------------------------
AIM Management Group............. 20,168,808(2) 5.83%
Steven P. Jobs................... 15,060,002(3) 4.35%
Fred D. Anderson................. 636,004(4) *
William V. Campbell.............. 60,502(5) *
Gareth C.C. Chang................ 64,000(5) *
Millard S. Drexler............... 40,000(6) *
Lawrence J. Ellison.............. 60,000(5) *
Ronald B. Johnson................ 318,750(7) *
Arthur D. Levinson............... 101,600(8) *
Mitchell Mandich................. 245,456(9) *
Jonathan Rubinstein.............. 505,184(10) *
Jerome B. York................... 80,000(5) *
All executive officers and
directors as a group
(15 persons)................... 18,666,841 5.39%
--------------------------
(1) Represents shares of Common Stock held and/or options held by such
individuals that were exercisable at the Table Date or within 60 days
thereafter. The share numbers have been adjusted to reflect the Company's
two-for-one stock split in June 2000.
(2) Based on a Form 13G dated February 9, 2001 for the period ending
December 31, 2000, filed by AIM Management Group, Inc., 11 Greenway Plaza,
Suite 100, Houston, TX 77046. The Form 13G filing for AIM Management Group,
an institutional investment advisor, also includes AIM Advisors, Inc., AIM
Capital Management, Inc. and AIM Private Asset Management, Inc.
Collectively, they are the beneficial owners of 20,168,808 shares or 5.83%
of the Common Stock.
(3) Includes 15,060,000 shares of Common Stock which Mr. Jobs has the right to
acquire by exercise of stock options.
(4) Includes 633,332 shares of Common Stock which Mr. Anderson has the right to
acquire by exercise of stock options.
(5) Includes 60,000 shares of Common Stock which Messrs. Campbell, Chang,
Ellison and York each have the right to acquire by exercise of stock
options.
(6) Includes 20,000 shares of Common Stock which Mr. Drexler has the right to
acquire by exercise of stock options.
(7) Includes 318,750 shares of Common Stock which Mr. Johnson has the right to
acquire by exercise of stock options.
(8) Includes 1,400 shares which Dr. Levinson holds indirectly.
5
(9) Includes 245,246 shares of Common Stock which Mr. Mandich has the right to
acquire by exercise of stock options.
(10) Includes 500,000 shares of Common Stock which Mr. Rubinstein has the right
to acquire by exercise of stock options.
* Represents less than 1% of the issued and outstanding shares of Common Stock
on the Table Date.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
securities ownership and changes in such ownership with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than ten
percent shareholders also are required by rules promulgated by the SEC to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Company, the absence of a Form 3, 4 or 5 or written representations that no
Forms 5 were required, the Company believes that, during fiscal year 2000, its
officers, directors and greater than ten percent beneficial owners complied with
all applicable Section 16(a) filing requirements.
6
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Until April 2000, the members of the Compensation Committee were
Messrs. Edgar S. Woolard and Gareth C.C. Chang. Mr. Woolard retired from the
Board of Directors in April 2000 and the Company ceased to have an active
Compensation Committee. As a result, the Company's executive compensation
program is presently administered by the Board. The Board reviews and approves
the base salaries, bonuses, stock options and other compensation of the
executive officers and management-level employees of the Company and administers
the Company's stock option plans. Mr. Jobs, who is both a member of the Board
and the Company's Chief Executive Officer, does not participate in deliberations
of the Board concerning executive compensation.
The Company's executive compensation program focuses on Company performance,
individual performance and increases in stockholder value over time as
determinants of executive pay levels. These principles are intended to motivate
executive officers to improve the financial position of the Company, to hold
executives accountable for the performance of the organizations for which they
are responsible, to attract key executives into the service of the Company, and
to create value for the Company's shareholders. The compensation for executive
officers is based on two elements: Cash compensation and equity-based
compensation.
CASH COMPENSATION
The Company reviews executive compensation surveys in both the computer
industry and general industry to ensure that the total cash compensation
provided to executive officers and senior management remains at competitive
levels so that the Company can continue to attract and retain management
personnel with the talents and skills required to meet the challenges of a
highly competitive industry. The compensation of executive officers is reviewed
annually.
BONUSES
For fiscal year 2000, the Board established a FY00 Vice Presidents and
Directors Incentive Bonus Plan (the "BONUS PLAN"), under which cash bonuses for
employees at the level of director and above were determined based on specified
revenue, unit shipments and profit targets for the Company. Because the Company
achieved the metrics specified in the Bonus Plan, payments were made thereunder.
Executive officers and members of the Board were not eligible to participate in
the Bonus Plan and received no other bonuses for fiscal year 2000.
EQUITY-BASED COMPENSATION
In fiscal year 2000, the Board emphasized equity-based compensation,
principally in the form of options, as the cornerstone of the Company's
executive compensation program. Equity awards are typically set by the Board
based on industry surveys, each officer's individual performance and
achievements, market factors and the recommendations of management. In fiscal
year 2000, executive officers were eligible to receive grants of stock options
under the 1998 Executive Officer Stock Plan ("1998 PLAN"). In addition,
executive officers were eligible to participate in the Company's Employee Stock
Purchase Plan.
During fiscal year 2000, options were granted under the 1998 Plan to
Messrs. Jobs, Johnson, and Tamaddon and Ms. Heinen. The options granted under
the 1998 Plan were at an exercise price equal to the fair market value of the
Common Stock on the date of grant and generally vest in increments over a
four-year period after grant, subject to the participant's continued employment
with the Company. However, the options granted to Mr. Jobs will vest in full in
July 2001. All options granted under the 1998 Plan expire ten years from the
date of grant, unless a shorter term is provided in the option agreement or the
participant's employment with the Company terminates before the end of such
ten-year period.
7
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In December 1999, in recognition of Mr. Jobs' outstanding performance over
the previous two and a half years, the Board awarded Mr. Jobs a special
executive bonus in the form of a Gulfstream V airplane. The Board anticipates
delivering the plane to Mr. Jobs during fiscal 2001. In January 2000, Mr. Jobs
accepted the position of Chief Executive Officer, which he had previously held
on an interim basis. The Board at that time granted Mr. Jobs 20 million options
under the 1998 Plan. Mr. Jobs will continue to receive a salary of $1 per year
for the services he performs as the Company's Chief Executive Officer.
SECTION 162(m)
The Company intends that options granted under the Company's stock option
plans be deductible by the Company under Section 162(m) of the Internal Revenue
Code of 1986, as amended.
MEMBERS OF THE BOARD OF DIRECTORS (EXCLUDING MR. JOBS)
William V. Campbell Gareth C.C. Chang Millard S. Drexler
Lawrence J. Ellison Arthur D. Levinson Jerome B. York
INFORMATION REGARDING EXECUTIVE COMPENSATION
The following table summarizes compensation information for the last three
fiscal years for (i) Mr. Jobs, Chief Executive Officer and (ii) the four most
highly compensated executive officers other than the Chief Executive Officer who
were serving as executive officers of the Company at the end of the fiscal year
(collectively, the "NAMED EXECUTIVE OFFICERS").
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
--------------------- -------------
SECURITIES
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS* COMPENSATION
------------------------------------------------------- -------- -------- ---------- ------------- -------------
($) ($) (#) ($)
Steven P. Jobs......................................... 2000 1 90,000,000(1) 20,000,000 --
Chief Executive Officer 1999 1 -- -- --
1998 1 -- -- --
Fred D. Anderson....................................... 2000 660,414 -- -- 6,750(2)
Executive Vice President and Chief Financial Officer 1999 605,260 -- 950,000 29,700(3)
1998 604,283 -- 500,000(4) 60,123(5)
Ronald B. Johnson...................................... 2000 328,719 500,000(6) 1,200,000 111,444(7)
Senior Vice President, New Business Development 1999 -- -- -- --
1998 -- -- -- --
Mitchell Mandich....................................... 2000 453,444 -- -- 7,650(2)
Senior Vice President, Worldwide Sales(8) 1999 402,941 -- 775,752 7,200(2)
1998 402,253 -- 916,668(4) 8,118(2)
Jonathan Rubinstein.................................... 2000 451,949 -- -- 6,577(2)
Senior Vice President, Hardware Engineering 1999 402,200 -- 458,334 5,888(9)
1998 402,095 -- 600,000(4) 4,804(2)
------------------------------
* Adjusted to reflect the Company's two-for-one stock split in June 2000.
(1) In December 1999, Mr. Jobs was given a special executive bonus for serving
as the Company's interim Chief Executive Officer for the previous 2 1/2
years without compensation, in the form of an aircraft with a total cost to
the Company of approximately $90,000,000. In January 2000, Mr. Jobs accepted
the position of Chief Executive Officer of the Company.
(2) Consists of matching contributions made by the Company in accordance with
the terms of the 401(k) plan.
8
(3) Consists of $22,500 in relocation assistance and $7,200 in matching
contributions made by the Company in accordance with the terms of the 401(k)
plan.
(4) Includes the replacement of 500,000, 448,500 and 600,000 options that were
previously granted to Messrs. Anderson, Mandich and Rubinstein,
respectively, and canceled in fiscal 1998 pursuant to the December 1997
stock option exchange program.
(5) Includes $55,000 in relocation assistance and $5,123 in matching
contributions made by the Company in accordance with the terms of the 401(k)
plan.
(6) In connection with his employment, Mr. Johnson received a one-time hiring
bonus in the amount of $500,000.
(7) Consists of $111,444 in relocation assistance.
(8) Mr. Mandich resigned from his position of Senior Vice President, Worldwide
Sales on October 9, 2000.
(9) Includes $3,465 from the disqualifying disposition of shares of Company
stock acquired through the Company's Employee Stock Purchase Plan and $2,423
in matching contributions made by the Company in accordance with the terms
of the 401(k) plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information about option grants to the Named
Executive Officers during fiscal year 2000. All options have been adjusted to
reflect the Company's two-for-one stock split in June 2000.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE AT
SECURITIES ASSUMED ANNUAL RATES OF
UNDERLYING PERCENT OF TOTAL STOCK PRICE APPRECIATION FOR
OPTIONS OPTIONS GRANTED EXERCISE OR OPTION TERM(3)
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME (#) FISCAL YEAR (1) ($/SH)(2) DATE 5% ($) 10% ($)
---- ---------- ---------------- ----------- ---------- ------------ --------------
Steven P. Jobs........... 20,000,000 43.80% $43.5938 1/12/10 $548,317,503 $1,389,544,207
Fred D. Anderson......... -- -- -- -- -- --
Ronald B. Johnson........ 1,200,000 2.63% $47.4375 12/14/09 $ 35,799,827 $ 90,723,790
Mitchell Mandich(4)...... -- -- -- -- -- --
Jonathan Rubinstein...... -- -- -- -- -- --
------------------------
(1) Based on an aggregate of 45,662,484 options granted to all employees during
fiscal year 2000. Options granted in fiscal year 2000, including those
granted to Mr. Johnson, typically vest in four equal annual installments
commencing on the first anniversary of the date of grant. Of the options
granted to Mr. Jobs, 10 million options were immediately vested and
exercisable on the date of grant; 5 million vested in July 2000; and the
remaining 5 million will vest in July 2001.
(2) All options were granted at an exercise price equal to the fair market value
based on the closing market value of Common Stock on the Nasdaq National
Market on the date of grant.
(3) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on SEC rules, and do not represent the Company's estimate or
projection of the price of the Company's stock in the future. Actual gains,
if any, on stock option exercises depend upon the actual future price of
Common Stock and the continued employment of the option holders throughout
the vesting period. Accordingly, the potential realizable values set forth
in this table may not be achieved.
(4) Mr. Mandich resigned from his position of Senior Vice President, Worldwide
Sales on October 9, 2000.
9
OPTIONS EXERCISED AND YEAR-END OPTION HOLDINGS
The following table provides information about stock option exercises by the
Named Executive Officers during fiscal year 2000 and stock options held by each
of them at fiscal year-end.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE YEAR-END (#) FISCAL YEAR-END ($)(2)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Steven P. Jobs............. -- -- 15,060,000(3) 5,000,000 $ 855,000 $ 0
Fred D. Anderson........... 458,332 $16,821,525 333,332 1,200,000 $6,374,975 $12,742,188
Ronald B. Johnson.......... -- -- -- 1,200,000 -- $ 0
Mitchell Mandich(4)........ 395,960 $20,987,967 63,432 1,200,000 $1,287,484 $14,622,596
Jonathan Rubinstein........ 233,334 $9,575,949 200,000 1,200,000 $3,803,125 $13,265,625
------------------------
(1) Market value of underlying securities (based on the fair market value of
Common Stock on the Nasdaq National Market) at the time of exercise, minus
the exercise price.
(2) Market value of securities underlying in-the-money options at the end of
fiscal year 2000 (based on $25.75 per share, the closing price of Common
Stock on the Nasdaq National Market on September 29, 2000), minus the
exercise price.
(3) Includes 60,000 options granted to Mr. Jobs in his capacity as a director
pursuant to the 1997 Director Stock Option Plan.
(4) Mr. Mandich resigned from his position of Senior Vice President, Worldwide
Sales on October 9, 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until April 2000, the members of the Compensation Committee were
Messrs. Edgar S. Woolard and Gareth C.C. Chang. Mr. Woolard retired from the
Board of Directors in April 2000 and the Company ceased to have an active
Compensation Committee. Since that time, the entire Board of Directors has acted
with respect to matters previously considered by the Compensation Committee.
Neither Messrs. Woolard or Chang were employees of the Company. No person who
was an employee of the Company in fiscal year 2000 served on the Compensation
Committee in fiscal year 2000. During fiscal year 2000, Mr. Jobs served as a
director of Gap Inc. (though not on the compensation committee of that board of
directors) and Mr. Drexler served as a director of the Company. Other than as
described in the preceding sentence, no executive officer of the Company
(i) served as a member of the compensation committee (or other board committee
performing similar functions or, in the absence of any such committee, the board
of directors) of another entity, one of whose executive officers served on the
Company's Compensation Committee (or after April 2000, the Board), (ii) served
as a director of another entity, one of whose executive officers served on the
Company's Compensation Committee, (or after April 2000, the Board) or
(iii) served as a member of the compensation committee (or other board committee
performing similar functions or, in the absence of any such committee, the board
of directors) of another entity, one of whose executive officers served as a
director of the Company.
10
COMPANY STOCK PERFORMANCE
The following graph shows a five-year comparison of cumulative total
shareholder return, calculated on a dividend reinvested basis, for the Company,
the S&P 500 Composite Index (the "S&P 500") and the S&P Computers (Hardware)
Index (the "INDUSTRY INDEX"). The graph assumes $100 was invested in each of the
Common Stock, the S&P 500 and the Industry Index on September 30, 1995. Data
points on the graph are annual. Note that historic stock price performance is
not necessarily indicative of future stock price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CUMULATIVE TOTAL RETURN
Based upon an initial investment of $100 on September 30, 1995
with dividends reinvested
APPLE S&P COMPUTERS
Computer Inc. S&P 500 (Hardware)
Sep-95 $100 $100 $100
Sep-96 $60 $120 $120
Sep-97 $57 $169 $225
Sep-98 $104 $189 $273
Sep-99 $175 $234 $441
Sep-00 $139 $267 $525
ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
The Company entered into an employment agreement with Mr. Anderson effective
April 1, 1996, pursuant to which he serves as Executive Vice President and Chief
Financial Officer of the Company. Pursuant to his agreement, Mr. Anderson is
entitled to an annual base salary of no less than $500,000. If Mr. Anderson's
employment is terminated by the Company without "Cause" at any time during the
five-year period following April 1, 1996, he will be entitled to receive a lump
sum severance payment equal to the sum of his annual base salary and target
bonus, if any. Mr. Anderson's agreement generally defines "Cause" to include a
felony conviction, willful disclosure of confidential information or willful and
continued failure to perform his employment duties.
CHANGE IN CONTROL ARRANGEMENTS--STOCK OPTIONS
In the event of a "change in control" of the Company, all outstanding
options under the Company's stock option plans, except the Director Plan, will,
unless otherwise determined by the plan administrator,
11
become exercisable in full, and will be cashed out at an amount equal to the
difference between the applicable "change in control price" and the exercise
price. The Director Plan provides that upon a "change in control" of the
Company, all unvested options held by non-employee directors will automatically
become fully vested and exercisable and will be cashed out at an amount equal to
the difference between the applicable "change in control price" and the exercise
price of the options. A "change in control" under these plans is generally
defined as (i) the acquisition by any person of 50% or more of the combined
voting power of the Company's outstanding securities or (ii) the occurrence of a
transaction requiring shareholder approval and involving the sale of all or
substantially all of the assets of the Company or the merger of the Company with
or into another corporation.
In addition, options granted to Fred D. Anderson, Timothy D. Cook, Nancy R.
Heinen, Mitchell Mandich, Sina Tamaddon, Jonathan Rubinstein and Avadis Tevanian
provide that in the event there is a "change in control", as defined in the
Company's stock option plans, and if in connection with or following such
"change in control", their employment is terminated without "Cause" or if they
should resign for "Good Reason", those options outstanding that are not yet
vested and exercisable as of the date of such "change in control" shall become
fully vested and exercisable. Generally, "Cause" is defined to include a felony
conviction, willful disclosure of confidential information or willful and
continued failure to perform his or her employment duties. "Good Reason"
includes resignation of employment as a result of a substantial diminution in
position or duties, or an adverse change in title or reduction in annual base
salary.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's use of aircraft to transport its executive
officers, the Company paid approximately $179,278 during fiscal year 2000 to
Wing & A Prayer, a company wholly-owned by Lawrence J. Ellison.
In connection with a relocation assistance package, the Company loaned
Mr. Johnson (Senior Vice President, New Business Development) $1,500,000 for the
purchase of his principal residence. The loan is secured by a deed of trust and
is due and payable in May 2004. Under the terms of the loan, Mr. Johnson agreed
that should he exercise any of his stock options prior to the due date of the
loan, that he would pay the Company an amount equal to the lesser of (1) an
amount equal to 50% of the total net gain realized from the exercise of the
options; or (2) $375,000 multiplied by the number of years between the exercise
date and the date of the loan. The largest amount of the indebtedness
outstanding on this loan during fiscal year 2000 was $1,500,000.
Mr. Jerome York, a member of the Board of the Directors of the Company, is a
member of an investment group that purchased MicroWarehouse, Inc.
("MICROWAREHOUSE") in January 2000. He also serves as its Chairman, President
and Chief Executive Officer. MicroWarehouse is a multi-billion dollar specialty
catalog and online retailer and direct marketer of computer products, including
products made by the Company, through its MacWarehouse catalogue. During fiscal
year 2000, MicroWarehouse accounted for 3.26% of the Company's net sales.
12
REPORT OF THE AUDIT & FINANCE COMMITTEE
The following is the report of the Audit & Finance Committee (the "Audit
Committee") with respect to the Company's audited financial statements for the
fiscal year ended September 30, 2000. The information contained in this report
shall not be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission, nor shall such information be incorporated
by reference into any future filing under the Securities Act of 1933, as
amended, or the 1934 Securities Exchange Act, as amended, except to the extent
that the Company specifically incorporates by reference in such filing.
AUDITED FINANCIAL STATEMENTS
The Audit Committee has reviewed and discussed the audited financial
statements for the fiscal year ended September 30, 2000 with the Company's
management and KPMG LLP, the Company's independent auditors. The Audit Committee
has also discussed with KPMG LLP the matters required to be discussed by
Statement on Auditing Standards No. 61, "Communication with Audit Committees".
The Audit Committee has also received and reviewed the written disclosures
and the letter from KPMG LLP required by Independence Standard No. 1
"Independence Discussion with Audit Committees" and has discussed with the
auditors the auditors' independence.
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the financial statements referred to
above be included in the Company's annual report on Form 10-K for the fiscal
year ended September 30, 2000.
MEMBERS OF THE AUDIT & FINANCE COMMITTEE
William V. Campbell Arthur D. Levinson Jerome B. York (Chairman)
13
OVERVIEW OF PROPOSALS
This Proxy Statement contains four proposals requiring shareholder action.
Proposal No. 1 requests the election of seven directors to the Company's Board.
Proposal No. 2 requests that the shareholders approve an amendment to the
Company's 1998 Executive Officer Stock Plan to increase the number of shares
reserved for issuance thereunder by 5,000,000 shares. Proposal No. 3 requests
ratification of the Company's independent auditors. Proposal No. 4 is a
shareholder proposal. Each of the proposals is discussed in more detail in the
pages that follow.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board has nominated the current directors to be re-elected to serve for
a one-year term and until their successors are duly elected and qualified.
Holders of proxies solicited by this Proxy Statement will vote the proxies
received by them as directed on the proxy card or, if no direction is made, for
the election of the Board's seven nominees below. If any nominee is unable or
declines to serve as a director at the time of the Annual Meeting, the proxy
holders will vote for a nominee designated by the present Board to fill the
vacancy. It is not presently expected that any nominee will be unable or will
decline to serve as a director.
The Board's nominees for re-election at this Annual Meeting are
Messrs. Campbell, Chang, Drexler, Ellison, Jobs, Levinson and York.
VOTE REQUIRED
The seven nominees for director receiving the highest number of affirmative
votes of the shares entitled to be voted for them shall be elected as directors.
Votes withheld from any director are counted for purposes of determining the
presence or absence of the quorum, but have no other legal effect under
California law.
RECOMMENDATION
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR RE-ELECTION OF
MESSRS. CAMPBELL, CHANG, DREXLER, ELLISON, JOBS, LEVINSON AND YORK.
14
PROPOSAL NO. 2
APPROVAL OF AN AMENDMENT TO THE 1998 EXECUTIVE OFFICER STOCK PLAN
The Shareholders are being asked to approve an amendment to the Company's
1998 Executive Officer Stock Plan (the "1998 PLAN") to increase the number of
shares reserved for issuance thereunder by 5,000,000, bringing the total number
of shares of Common Stock reserved for issuance under the 1998 Plan to
43,000,000.
The 1998 Plan is an integral part of the Company's compensation program.
Under the 1998 Plan, the chairman of the Board of Directors and executive
officers of the Company at the level of Senior Vice President and above and
other key employees may be granted stock options, stock appreciation rights and
stock purchase rights. The proposed amendment would provide the additional
shares necessary to attract and retain the best available personnel for
positions of substantial responsibility with the Company.
Since the 1998 Plan was approved by the shareholders, a total of 38,073,338
stock options have been granted, including options that terminated before being
exercised. As of January 31, 2001, there were 34,371,402 options to purchase
shares outstanding and 748,742 shares of Common Stock had been issued upon the
exercise of options.
VOTE REQUIRED
The affirmative vote of (i) a majority of the shares "represented and
voting" and (ii) a majority of the quorum will be required to approve this
Proposal.
RECOMMENDATION
THE BOARD HAS UNANIMOUSLY APPROVED THE AMENDMENT TO THE 1998 PLAN AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE AMENDMENT.
DESCRIPTION OF THE 1998 PLAN
ELIGIBILITY; LIMITATIONS. Options, stock appreciation rights and stock
purchase rights may be granted under the 1998 Plan. Options granted under the
1998 Plan may be either "incentive stock options," as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory
stock options. Nonstatutory stock options, stock appreciation rights and stock
purchase rights may be granted under the 1998 Plan to the Chairman of the
Company and to executive officers of the Company and any parent or subsidiary of
the Company and other key employees. Incentive stock options may only be granted
to executive officers of the Company. The Administrator, in its discretion,
selects the person(s) to whom options, stock appreciation rights and stock
purchase rights may be granted, the time or times at which such options, stock
appreciation rights and stock purchase rights shall be granted, and the number
of shares subject to each such grant. For this reason, it is not possible to
determine the benefits or amounts that will be received by any particular
individual or individuals in the future. The 1998 Plan provides that no
person(s) may be granted, in any fiscal year of the Company, options, stock
appreciation rights or stock purchase rights to purchase more than 17,000,000
shares of Common Stock.
SHARES AVAILABLE FOR ISSUANCE. Upon approval of the proposed amendment by
shareholders, a total of 43,000,000 shares of Common Stock will be available for
issuance under the 1998 Plan. If an option, stock appreciation right or stock
purchase right lapses, expires or is otherwise terminated without the issuance
of shares, or if shares are tendered to pay the exercise price of an option,
stock appreciation right or stock purchase right, the shares underlying the
lapsed, expired or terminated option, stock appreciation right or stock purchase
right or the tendered shares, shall revert to the 1998 Plan. The number of
shares available for issuance will be adjusted if there is a change in the
Company's capitalization, a merger, or a similar transaction.
15
ADMINISTRATION. The Plan may generally be administered by the Board or a
Committee appointed by the Board (as applicable, the "Administrator").
TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the following
additional terms and conditions:
(a) EXERCISE PRICE. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an incentive
stock option may not be less than 100% of the fair market value of the Common
Stock on the date such option is granted; provided, however, the exercise price
of an incentive stock option granted to a 10% shareholder may not be less than
110% of the fair market value of the Common Stock on the date such option is
granted. The fair market value of the Common Stock is generally determined with
reference to the closing sale price for the Common Stock (or the closing bid if
no sales were reported) on the date the option is granted. The exercise price of
a non-statutory option which is intended to comply with Section 162(m) of the
Code may not be less than 100% of the fair market value.
(b) EXERCISE OF OPTION; FORM OF CONSIDERATION. The Administrator determines
when options become exercisable, and may in its discretion, accelerate the
vesting of any outstanding option. Stock options granted under the 1998 Plan
generally vest and become exercisable over a four or five year period. The 1998
Plan permits payment to be made by cash, check, promissory note, other shares of
Common Stock of the Company (with some restrictions), cashless exercises, a
reduction in the amount of any Company liability to the optionee, any other form
of consideration permitted by applicable law, or any combination thereof.
(c) TERM OF OPTION. All options granted under the 1998 Plan expire ten years
from the date of grant, unless a shorter term is provided in the option
agreement. The term of an incentive stock option may be no more than ten
(10) years from the date of grant; provided that in the case of an incentive
stock option granted to a 10% shareholder, the term of the option may be no more
than five (5) years from the date of grant. No option may be exercised after the
expiration of its term.
(d) TERMINATION OF EMPLOYMENT. If the optionee's employment or status as
Chairman terminates for any reason other than death or unless the Administrator
otherwise approves, then options may be exercised no later than 90 days after
such termination and may be exercised only to the extent the option was
exercisable on the termination date. Special provisions apply in the case of
death of the optionee.
(e) DEATH. If an optionee ceases to be an employee or Chairman as a result
of his or her death, then all options held by such optionee under the 1998 Plan
may be exercised at any time within six months after death, or such other period
up to twelve months as may be provided in the option agreement, but only to the
extent the options would have been exercisable within six months after the date
of death.
(f) NONTRANSFERABILITY OF OPTIONS, STOCK APPRECIATION RIGHTS OR STOCK
PURCHASE RIGHTS. Unless determined otherwise by the Administrator, options,
stock appreciation rights and stock purchase rights granted under the 1998 Plan
are not transferable other than by will or the laws of descent and distribution
or pursuant to a qualified domestic relations order, and may be exercised during
the optionee's lifetime only by the optionee, or in the event of death, by the
optionee's estate or by a person who acquires the right to exercise the option,
stock appreciation right or stock purchase right.
(g) BUYOUT. The Administrator at any time may buyout for cash or shares, an
option or stock appreciation right.
(h) OTHER PROVISIONS. The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the 1998 Plan as may be
determined by the Administrator.
STOCK APPRECIATION RIGHTS. The Administrator is authorized to grant stock
appreciation rights in connection with all or any part of an option granted
under the 1998 Plan, either concurrently with
16
the grant of the option or at any time thereafter, and to grant stock
appreciation rights independently of options. A stock appreciation right granted
in connection with an option is exercisable only when and to the extent that the
underlying option is exercisable, and expires no later than the date on which
the underlying option expires. Independent stock appreciation rights are
exercisable in whole or in part at such times as the Administrator specifies in
the grant or agreement.
The Company's obligations arising upon the exercise of a stock appreciation
right may be paid in cash or Common Stock, or any combination of the same, as
the Administrator may determine. Shares issued upon the exercise of a stock
appreciation right are valued at their fair market value as of the date of
exercise. When a stock appreciation right is exercised, the aggregate number of
shares of Common Stock available for issuance under the 1998 Plan will be
reduced by the number of underlying shares of Common Stock as to which the stock
appreciation right is exercised.
STOCK PURCHASE RIGHTS. The Administrator is authorized to grant stock
purchase rights under the 1998 Plan, either concurrently with a grant of options
or stock appreciation rights and/or cash awards made outside of the 1998 Plan or
at any time thereafter, and to grant stock purchase rights independently of
other awards. In the case of stock purchase rights, unless the Administrator
determines otherwise, the agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability). The
purchase price for Shares repurchased pursuant to the agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Administrator.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the 1998 Plan, the number and class of shares of stock subject to any
option, stock appreciation right or stock purchase right outstanding under the
1998 Plan, and the exercise price of any such outstanding option, stock
appreciation right or stock purchase right.
In the event of a liquidation or dissolution, any unexercised options, stock
appreciation rights or stock purchase rights will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Administrator. The Administrator may, in its discretion, provide that each
optionee shall have the right to exercise all of the optionee's options, stock
appreciation rights and stock purchase rights as to all or any part of the
optioned stock, stock appreciation right or stock purchase right, including
those shares not otherwise exercisable.
CHANGE IN CONTROL. In the event of a "change in control" of the Company (as
defined below), all options, stock appreciation rights and stock purchase rights
outstanding under the 1998 Plan as of the date on which such change in control
occurs will, unless otherwise determined by the Administrator, become fully
exercisable and the value of all outstanding options, stock appreciation rights
and stock purchase rights will be cashed out. The cash-out price will be the
difference between the exercise price and the defined "change in control price."
A "change in control" is defined as (i) the acquisition by any person of 50%
or more of the combined voting power of the Company's outstanding securities, or
(ii) the occurrence of a transaction requiring shareholder approval and
involving the sale of all or substantially all the assets of the Company or the
merger of the Company with or into another corporation. The "change in control
price" is determined by the Administrator and may be either (x) the highest
closing price of Common Stock as reported in the public market during the
60-calendar-day period immediately preceding the date of determination of the
change in control price or (y) the highest price paid or offered (as determined
by the Administrator) in any bona fide transaction or offer related to the
change in control of the Company during the 60-calendar-day period preceding the
date of determination of the change in control price.
17
In the event of a sale of all or substantially all the assets of the Company
or the merger of the Company with or into another corporation, in a transaction
in which options, stock appreciation rights or stock purchase rights outstanding
under the 1998 Plan are not accelerated and cashed out as provided above, each
outstanding option, stock appreciation right or stock purchase right will be
assumed or an equivalent option, stock appreciation right or stock purchase
right will be substituted by the successor corporation in the transaction or by
a parent or subsidiary of such successor corporation, unless the Administrator
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the optionee shall have the right to exercise
the option, stock appreciation right or stock purchase right as to all of the
shares subject thereto, including shares that would not otherwise be
exercisable. If the Administrator makes an option, stock appreciation right or
stock purchase right fully exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, then the Company shall notify the
optionee that the option, stock appreciation right or stock purchase right will
be fully exercisable for a period of 30 days from the date of such notice, and
the option, stock appreciation right or stock purchase right will terminate upon
the expiration of such period.
AMENDMENT AND TERMINATION OF THE 1998 PLAN. The Board may amend, alter,
suspend or terminate the 1998 Plan, or any part thereof, at any time and for any
reason. However, the Company shall obtain shareholder approval for any amendment
to the 1998 Plan to the extent necessary to comply with Section 162(m) and
Section 422 of the Code, or any similar rule or statute. No such action by the
Board or shareholders may alter or impair any option, stock appreciation right
or stock purchase right previously granted under the 1998 Plan without the
written consent of the optionee.
STOCK PRICE. On February 21, 2001, the closing price of the Common Stock as
quoted on the Nasdaq National Market was $18.875.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon an optionee's sale of the shares (assuming that
the sale occurs at least two years after grant of the option and at least one
year after exercise of the option), any gain will be taxed to the optionee as
long-term capital gain. If the optionee disposes of the shares prior to the
expiration of the above holding periods, then the optionee will recognize
ordinary income in an amount generally measured as the difference between the
exercise price and the lower of the fair market value of the shares at the
exercise date or the sale price of the shares. Any gain or loss recognized on
such premature sale of the shares in excess of the amount treated as ordinary
income will be characterized as capital gain or loss.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Upon
a disposition of such shares by the optionee, any difference between the sale
price and the optionee's exercise price, to the extent not recognized as taxable
income as provided above, is treated as long-term or short-term capital gain or
loss, depending on the holding period.
STOCK PURCHASE RIGHTS. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. If at the time
of purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code, the purchaser will not recognize
ordinary income at the time of purchase. Instead, the purchaser will recognize
ordinary income on the dates when a stock ceases to be subject to a substantial
risk of forfeiture. At such times, the purchaser will recognize ordinary income
measured as the difference between the purchase price and the fair market value
of the stock on the date the stock is no longer subject to a substantial risk of
forfeiture.
18
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding period
by timely filing an election pursuant to Section 83(b) of the Code. In such
event, the ordinary income recognized, if any, is measured as the difference
between the purchase price and the fair market value of the stock on the date of
purchase, and the capital gain holding period commences on such date. The
ordinary income recognized by a purchaser who is an employee will be subject to
tax withholding by the Company.
STOCK APPRECIATION RIGHTS. No income will be recognized by a recipient in
connection with the grant of a stock appreciation right. When the stock
appreciation right is exercised, the recipient will generally be required to
include as taxable ordinary income in the year of exercise an amount equal to
the sum of the amount of cash received and the fair market value of any Common
Stock received upon the exercise. In the case of a recipient who is also an
employee, any taxable income recognized upon exercise of a stock appreciation
right will constitute wages for which withholding will be required. The Company
will generally be entitled to a tax deduction in the same amount. Any gain or
loss on the resale of Common Stock acquired upon exercise of a stock
appreciation right will be treated as a taxable gain or loss.
SECTION 162(m) OF THE CODE. Section 162(m) of the Code generally disallows a
public company's tax deduction for compensation to executive officers in excess
of $1,000,000 in any tax year. Compensation that qualifies as "performance-based
compensation" is excluded from the $1,000,000 deductibility cap, and therefore
remains fully deductible by the company that pays it. To qualify as
"performance-based" within the meaning of Section 162(m) of the Code, options
and stock appreciation rights must be granted with an exercise price of not less
than 100% of the fair market value of the Common Stock on the date of the grant,
among other things. To the extent these requirements are met, compensation
attributable to options and stock appreciation rights granted to executive
officers under the 1998 Plan will qualify as performance-based compensation for
purposes of Section 162(m) of the Code, and the Company will generally be
entitled to a tax deduction in the amount recognized by such officers upon
exercise of the options. No tax authority or court has ruled on the
applicability of Section 162(m) to the 1998 Plan and any final determination of
the deductibility of amounts realized upon exercise of an option granted under
the 1998 Plan could ultimately be made by the Internal Revenue Service or a
court having final jurisdiction with respect to the matter. The Company retains
the right to grant options under the 1998 Plan in accordance with the terms of
the 1998 Plan regardless of any final determination as to the applicability of
Section 162(m) of the Code to these grants.
Compensation attributable to stock purchase rights granted under the 1998
Plan will not generally qualify as "performance-based" within the meaning of
Section 162(m) of the Code. As a result, income recognized by executive officers
in connection with stock purchase rights will be subject to the limitations on
deductibility under such section.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES, HOLDERS OF STOCK APPRECIATION RIGHTS, HOLDERS OF STOCK PURCHASE
RIGHTS AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS, STOCK
APPRECIATION RIGHTS AND STOCK PURCHASE RIGHTS UNDER THE 1998 PLAN. IT DOES NOT
PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF THE
EMPLOYEE'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY,
STATE OR FOREIGN COUNTRY IN WHICH THE EMPLOYEE MAY RESIDE.
19
PARTICIPATION IN THE
1998 EXECUTIVE OFFICER STOCK PLAN
The following table sets forth certain information as of January 31, 2001
with respect to options granted under the 1998 Plan since inception to (i) each
Named Executive Officer listed in the Summary Compensation Table; (ii) all
executive officers as a group and (iii) all employees, excluding executive
officers, as a group. Members of the Board are not eligible to receive grants
under the 1998 Plan. As of the date of this proxy there has been no
determination by the Board of Directors with respect to future awards under the
1998 Plan. The options listed below have been adjusted to reflect the Company's
two-for-one stock split in June 2000.
NUMBER OF SECURITIES AVERAGE WEIGHTED EXERCISE
UNDERLYING OPTIONS GRANTED OR BASE PRICE
NAME (#) ($/SH)
---- -------------------------- -------------------------
Steven P. Jobs.................................. 20,000,000* $43.5938
Fred D. Anderson................................ 1,950,000 $17.0561
Ronald B. Johnson............................... 1,500,000 $41.6500
Mitchell Mandich................................ 775,752 $17.3125
Jonathan Rubinstein............................. 1,916,668 $17.0516
All executive officers as a group............... 31,812,000 $35.3810
All other employees as a group.................. 6,261,338 $17.8682
------------------------
* 20,000,000 options were granted to Mr. Jobs in connection with his
acceptance of the position of Chief Executive Officer of the Company in
January 2000.
20
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed KPMG LLP ("KPMG"), independent
auditors, to audit Apple's consolidated financial statements for fiscal year
2001. KPMG served as the Company's independent auditors for fiscal year 2000. At
the Annual Meeting, the shareholders are being asked to ratify the appointment
of KPMG as the Company's independent auditors for fiscal year 2001. In the event
of a negative vote on such ratification, the Board of Directors will reconsider
its selection. Representatives of KPMG are expected to be present at the Annual
Meeting and will have the opportunity to respond to appropriate questions and to
make a statement if they so desire.
FEES PAID TO THE INDEPENDENT AUDITORS
AUDIT FEES
KPMG billed the Company aggregate fees of $2,265,000 for professional
services rendered for the audit of the Company's annual financial statements for
fiscal year 2000 and for reviews of the financial statements included in the
Company's quarterly reports on Form 10-Q for the first three quarters of fiscal
2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION
KPMG billed the Company aggregate fees of $21,493,000 for professional
services rendered for various information system implementation projects in
fiscal 2000.
ALL OTHER FEES
KPMG billed the Company aggregate fees of $7,054,000 for other professional
services rendered in fiscal 2000, including professional services in connection
with tax preparation, tax consultation, statutory filings and other consulting
services.
The Audit and Finance Committee of the Board of Directors has considered
whether the provision by KPMG of the non-audit services listed above is
compatible with maintaining KPMG's independence.
VOTE REQUIRED
The affirmative vote of (i) a majority of the shares "represented and
voting" and (ii) a majority of the quorum will be required to approve this
Proposal.
RECOMMENDATION
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
21
PROPOSAL NO. 4
SHAREHOLDER PROPOSAL
Richard A. Ash, 1612 Latimer Street, Philadelphia, PA 19103, owner of 4,000
shares of Apple's common stock (as of the date of the submission) has submitted
the following proposal:
Resolved that Apple Computer, Inc. (Apple), adopt the following policy:
That the annual meeting of Apple shall be held in auditoriums in the
downtown areas of cities that are major transportation centers such as
Manhattan, Philadelphia, Chicago, Los Angeles and San Francisco, and that the
location of the meeting be rotated among these major transportation centers so
that during each three year period an Eastern location, a Central location, and
a Western location, are each chosen for the location of the meeting.
REASONS IN SUPPORT
Apple has a history of having its annual meeting at the company headquarters
in Cupertino, California or at the auditorium of a nearby college. Neither
location is accessible by public transportation from downtown San Francisco or
its Airport and attendance requires a drive of about one hour or more duration
by automobile.
The annual shareholders meeting is of great importance to shareholders, the
owners of the company. Attendance gives them the opportunity to ask questions of
top management and vote on the matters on the meeting agenda such as election of
directors after hearing debate on the issues.
Apple has more than 25,000 shareholders that reside throughout the United
States and abroad. Apple annual meetings should be held in locations that are
readily accessible, with minimum burden and inconvenience to shareholders
wishing to attend. Steve Jobs, is chief executive of Pixar Corporation, which
customarily holds its annual meetings in downtown San Francisco. Apple's
technical presentations and its presentations to security analysts are held in
conveniently accessible transportation centers. The proponent of this resolution
has on a number of occasions asked Apple's management to conduct meetings in
centrally accessible locations without success. It is necessary that
shareholders vote for this resolution.
VOTE REQUIRED
The unanimous vote of the shareholders will be required to approve this
Proposal.
BOARD OF DIRECTORS' STATEMENT OPPOSING SHAREHOLDER PROPOSAL
The Board of Directors recommends that you vote AGAINST the shareholder
proposal. If adopted, the proposal would require the Company to move the
location of its annual meeting to different locations around the United States.
The Board of Directors believes this would be costly, difficult to implement and
could potentially affect the conduct of the annual meeting.
Currently, the Company holds its annual meeting at its headquarters in
Cupertino, California. By holding the meeting at its headquarters, shareholders
have an opportunity to visit the Company's facilities and to interact directly
with members of the management team in a question and answer session following
the meeting. Management is able to attend and participate in the annual meeting
and the question and answer session largely because the meeting is held at the
Company's headquarters. Use of Company-owned facilities also minimizes the cost,
preparation time and employee resources that would otherwise be incurred if the
annual meeting were held elsewhere.
The Board currently has the power to schedule the annual meeting anywhere in
the United States and has traditionally concluded that the best interests of the
Company and its shareholders are served by having the annual meeting at the
Company's headquarters. Therefore, the Board does not believe that
22
adoption of the Proposal is in the best interests of the Company and its
shareholders and recommends a vote AGAINST the proposal.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE ABOVE SHAREHOLDER
PROPOSAL.
OTHER MATTERS
The Company knows of no other matters to be submitted to the shareholders at
the Annual Meeting. If any other matters properly come before the shareholders
at the Annual Meeting, it is the intention of the persons named on the enclosed
proxy card to vote the shares they represent as the Board may recommend.
SHAREHOLDER PROPOSALS
Shareholders who intend to present proposals at the next annual meeting of
shareholders must send such proposals to the Company for receipt no later than
January 26, 2002. Shareholder proposals to be considered for inclusion in the
proxy statement and form of proxy relating to such meeting must be received no
later than November 13, 2001.
THE BOARD OF DIRECTORS
Dated: March 12, 2001
23
APPENDIX A
APPLE COMPUTER, INC.
AUDIT AND FINANCE COMMITTEE CHARTER
There shall be a Committee of the Board of Directors (the "Board") to be
known as the Audit and Finance Committee ("Committee") with purpose,
composition, duties and responsibilities, as follows:
PURPOSE OF THE COMMITTEE. The primary purpose of the Committee is to assist
the Board in fulfilling its oversight responsibility by reviewing the financial
information that will be provided to the shareholders and others, the systems of
internal controls that management and the Board have established and the
auditing, accounting and financial reporting process generally.
COMPOSITION OF THE COMMITTEE. The members of the Committee shall be
appointed by the Board. The Committee will be composed of not less than three
members and shall be composed solely of "independent" directors who are
financially literate and at least one member must have accounting or related
financial management expertise. One member may be "non-independent", provided
that the Board determines it to be in the best interests of the Corporation and
its shareholders, and the Board discloses the reasons for the determination in
the Corporation's annual proxy statement. No member shall be an officer or
employee of the Corporation or its subsidiaries. The Chairman of the Committee
shall be designated by the Board.
COMMITTEE MEETINGS. The Committee shall meet at least four times annually,
or more frequently as circumstances dictate. The Committee should meet at least
annually with management, the Director of Internal Audit, and the independent
auditors in separate executive sessions to discuss any matters that the
Committee or each of these groups believe should be discussed privately. The
Committee should meet with the independent auditors and management quarterly to
review the Corporation's financial information. The Chairman of the Board, any
member of the Committee or the Secretary of the Corporation may call meetings of
the Committee.
DUTIES AND RESPONSIBILITIES. In meeting its responsibilities, the Committee
is expected to:
1. Provide an open avenue of communication between the internal auditors, the
independent auditor, and the Board.
2. Review and update the committee's charter annually.
3. Recommend to the Board the independent auditor to be nominated, approve the
compensation of the independent auditor, and review and approve the
discharge of the independent auditor.
4. Review and concur in the appointment, replacement, reassignment, or
dismissal of the director of internal auditing.
5. Confirm and assure the independence of the internal auditor and the
independent auditor, including a review of management consulting services
and related fees provided by the independent auditor.
6. Inquire of management, the director of internal auditing, and the
independent auditor about significant risks or exposures and assess the
steps management has taken to minimize such risk to the company.
7. Consider, in consultation with the independent auditor and the director of
internal auditing, the audit scope and plan of the internal auditors and the
independent auditor.
8. Consider with management and the independent auditor the rationale for
employing audit firms other than the principal independent auditor.
9. Review with the director of internal auditing and the independent auditor
the coordination of audit effort to assure completeness of coverage,
reduction of redundant efforts, and the effective use of audit resources.
10. Consider and review with the independent auditor and the director of
internal auditing:
- The adequacy of the company's internal controls including computerized
information system controls and security.
24
- Any related significant findings and recommendations of the independent
auditor and internal auditing together with management's responses
thereto.
11. Review with management and the independent auditor at the completion of the
annual examination:
- The company's annual financial statements and related footnotes.
- The independent auditor's audit of the financial statements and his or her
report thereon.
- Any significant changes required in the independent auditor's audit plan.
- Any serious difficulties or disputes with management encountered during
the course of the audit.
- Other matters related to the conduct of the audit which are to be
communicated to the committee under generally accepted auditing standards.
12. Consider and review with management and the director of internal auditing:
- Significant findings during the year and management's responses thereto.
- Any difficulties encountered in the course of their audits, including any
restrictions on the scope of their work or access to required information.
- Any changes required in the planned scope of their audit plan.
- The internal auditing department budget and staffing.
13. Review filings with the SEC and other published documents containing the
company's financial statements and consider whether the information
contained in these documents is consistent with the information contained in
the financial statements.
14. Review with management and/or the independent auditor the interim financial
report before it is filed with the SEC or other regulators.
15. Review legal and regulatory matters that may have a material impact on the
financial statements, related company compliance policies, and programs and
reports received from regulators.
16. Meet with the director of internal auditing, the independent auditor, and
management in separate executive sessions to discuss any matters that the
committee or these groups believe should be discussed privately with the
audit committee.
17. Report committee actions to the Board with such recommendations as the
committee may deem appropriate.
18. Prepare a letter for inclusion in the annual report that describes the
committee's composition and responsibilities, and how they were discharged.
19. Review periodically the capital structure of the Corporation and to the
extent it deems necessary, recommend to the Board of Directors transactions
or alterations of the capital structure of the Corporation.
20. Review for approval or disapproval special transactions or expenditures as
specifically delegated by the Board or such other special transactions or
expenditures not specifically delegated by the Board if determined by the
Committee that approval by the full Board is not necessary or convenient
such as transactions that require relatively rapid decisions (such as the
sale of securities or the terms of authorized debt).
21. Review and recommend to the Board of Directors changes in the Corporation's
treasury resolutions and expenditure authorizations.
22. Periodically meet with the Investment Review Committee on matters pertaining
to the Corporation's investment practices for foreign exchange, investments,
and derivatives.
23. The audit committee shall have the power to conduct or authorize
investigations into any matters within the committee's scope of
responsibilities. The committee shall be empowered to retain independent
counsel, accountants, or others to assist it in the conduct of any
investigation.
24. The committee will perform such other functions as assigned by law, the
company's charter or bylaws, or the Board.
25
[APPLE COMPUTER LOGO]
[LOGO]
PRINTED ON RECYCLED PAPER
APPENDIX B
APPLE COMPUTER, INC.
1998 EXECUTIVE OFFICER STOCK PLAN
PROPOSED AMENDMENT
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are:
to attract and retain the best available personnel for positions of
substantial responsibility;
to provide additional incentive to the Chairman and/or Executive Officers
and other key employees; and
to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options (as defined
under Section 422 of the Code) or Nonstatutory Stock Options, as determined by
the Administrator at the time of grant. Stock appreciation rights ("SARs") may
be granted under the Plan in connection with Options or independently of
Options. Stock Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "AGREEMENT" means an agreement between the Company and an Optionee
evidencing the terms and conditions of an individual Option, SAR or Stock
Purchase Right grant. The Agreement is subject to the terms and conditions
of the Plan.
(c) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws
of any foreign country or jurisdiction where Options, SARs or Stock Purchase
Rights are, or will be, granted under the Plan.
(d) "BOARD" means the Board of Directors of the Company.
(e) "CHAIRMAN" means the Chairman of the Board.
(f) "CODE" means the Internal Revenue Code of 1986, as amended.
(g) "COMMITTEE" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
(h) "COMMON STOCK" means the common stock of the Company.
(i) "COMPANY" means Apple Computer, Inc., a California corporation.
(j) "CONTINUOUS STATUS AS CHAIRMAN" unless determined otherwise by the
Administrator, means the absence of any interruption or termination as
Chairman of the Board with the Company. Continuous Status as Chairman shall
not be considered interrupted in the case of medical leave, military leave,
family leave, or any other leave of absence approved by the Administrator,
provided, in each case, that such leave does not result in termination as
Chairman with the Company. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute status as
"Chairman" by the Company.
(k) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of the employment relationship with the Company
or any Subsidiary. Continuous Status as an Employee shall not be
considered interrupted in the case of (i) medical leave, military leave,
family leave, or any other leave of absence approved by the Administrator,
provided, in each case, that such leave does not result in termination of
the employment relationship with the Company or any Subsidiary, as the
case may be, under the terms of the respective Company policy for such
leave; however, vesting may be tolled while an employee is on an approved
leave of absence under the terms of the respective Company policy for such
leave; or (ii) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries, or its successor; For purposes
of Incentive Stock Options, no such leave may exceed ninety days, unless
reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved
by the Company is not so guaranteed, on the 91st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as
an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Neither service as a Chairman nor as a Director
nor payment of a director's fee by the Company shall be sufficient to
constitute 'employment' by the Company.
(l) "Director" means a member of the Board.
(m) "Employee" means any person employed by the Company or any Parent or
Subsidiary of the Company subject to (k) above.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(o) "Executive Officer" means any person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.
(p) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or
system, on the date of determination or, if the date of determination is
not a trading day, the immediately preceding trading day, as reported in
THE WALL STREET JOURNAL or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the date of determination
or, if there are no quoted prices on the date of determination, on the
last day on which there are quoted prices prior to the date of
determination, as reported in THE WALL STREET JOURNAL or such other
source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the
Administrator.
(q) "Incentive Stock Option"means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder and is expressly designated by the
Administrator at the time of grant as an incentive stock option.
(r) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Optioned Stock" means the Common Stock subject to an Option, SAR or
Stock Purchase Right.
(u) "Optionee" means the holder of an outstanding Option, SAR or Stock
Purchase Right.
(v) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this 1998 Executive Officer Stock Plan.
(x) "Restricted Stock" means shares of Common Stock acquired pursuant to
a grant of Stock Purchase Rights under Section 12 of the Plan.
(y) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect
to the Plan.
(z) "SAR" means a stock appreciation right granted pursuant to Section
10 below.
(aa) "Section 16(b)" means Section 16(b) of the Exchange Act.
(bb) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 15 of the Plan.
(cc) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 12 of the Plan, as evidenced by an Agreement.
(dd) "Subsidiary" means a 'subsidiary corporation', whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 15 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan or for which SARs or Stock Purchase Rights may be granted and
exercised is 43,000,000 Shares. The Shares may be authorized, but unissued, or
reacquired Common Stock.
In the discretion of the Administrator, any or all of the Shares authorized
under the Plan may be subject to SARs issued pursuant to the Plan.
If an Option, SAR or Stock Purchase Right issued under the Plan should
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased Shares which were subject thereto shall become available
for other Options, SARs or Stock Purchase Rights under this Plan (unless the
Plan has terminated); however, should the Company reacquire Shares which were
issued pursuant to the exercise of an Option or SAR, such Shares shall not
become available for future grant under the Plan. If Shares of Restricted Stock
are repurchased by the Company at their original purchase price, such shares
shall become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3
promulgated under the Exchange Act or any successor rule thereto, as in
effect at the time that discretion is being exercised with respect to the
Plan, and by the legal requirements of the Applicable Laws relating to
the administration of stock plans such as the Plan, if any, the Plan may
(but need not) be administered by different administrative bodies with
respect to (A) Directors who are not Employees, (B) Directors who are
Employees, (C) Officers who are not Directors and (D) Employees who are
neither Directors nor Officers.
(ii) SECTION 162(m). To the extent that the Administrator determines
it to be desirable to qualify Options or SARs granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of
the Code, the Plan shall be administered by a Committee of two or more
"outside directors" within the meaning of Section 162(m) of the Code.
(iii) RULE 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption
under Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the person(s) to whom Options, SARs and Stock Purchase
Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be covered
by each Option, SAR or Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option, SAR or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the date of grant, the time or times when Options, SARs
or Stock Purchase Rights may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option, SAR
or Stock Purchase Right or the shares of Common Stock relating thereto,
based in each case on such factors as the Administrator, in its sole
discretion, shall determine;
(vi) to reduce the exercise price of any Option, SAR or Stock
Purchase Right to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option, SAR or Stock Purchase
Right shall have declined since the date the Option, SAR or Stock
Purchase Right was granted;
(vii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(ix) to modify or amend each Option, SAR or Stock Purchase Right
(subject to Section 17(c) of the Plan), including the discretionary
authority to extend the post-termination exercisability period of Options
longer than is otherwise provided for in the Plan;
(x) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon
exercise of an Option, SAR or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld.
The Fair Market Value of the Shares to be withheld shall be determined on
the date that the amount of tax to be withheld is to be determined. All
elections by an Optionee to have Shares withheld for this purpose shall
be made in such form and under such conditions as the Administrator may
deem necessary or advisable;
(xi) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option, SAR or Stock
Purchase Right previously granted by the Administrator; and
(xii) to make all other determinations deemed necessary or advisable
for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions,
determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options, SARs or Stock Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options, SARs and Stock Purchase Rights
may be granted to the Chairman, Executive Officers and other key employees or to
such other individuals as determined by the Administrator whom the Company has
offered a position of Chairman or Executive Officer. Incentive Stock Options may
be granted only to Executive Officers and other key employees.
6. LIMITATIONS.
(a) Each Option shall be designated in the Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of this Section 6(a), Incentive Stock Options shall be taken into
account in the order in which they were granted. The Fair Market Value of
the Shares shall be determined as of the time the Option with respect to
such Shares is granted.
(b) Neither the Plan nor any Option, SAR or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as an Employee with or Chairman of the Company, nor shall they
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options and SARs:
(i) No participant shall be granted, in any fiscal year of the
Company, Options or SARs to purchase more than 17,000,000 Shares;
(ii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described
in Section 15;
(iii) If an Option or SAR is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a
transaction described in Section 15), the canceled Option will be counted
against the limits set forth in subsections (i) above. For this purpose,
if the exercise price of an Option or SAR is reduced, the transaction
will be treated as a cancellation of the Option or SAR and the grant of a
new Option or SAR.
7. TERM OF PLAN. Subject to Section 21 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 16 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Agreement. Moreover, in the case of an Incentive Stock Option granted to an
Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option;
(A) granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of
grant; or
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date
of grant;
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as 'performance-based
compensation' within the meaning of Section 162(m) of the Code, the per
Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant;
(iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant as determined by the Administrator or pursuant to a
merger or other corporate transaction.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is
granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions which must be satisfied
before the Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at the
time of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised;
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the issuance
of Shares to the extent permitted by Applicable Laws.
10. STOCK APPRECIATION RIGHTS.
(a) GRANTED IN CONNECTION WITH OPTIONS. At the sole discretion of the
Administrator, SARs may be granted in connection with all or any part of an
Option, either concurrently with the grant of the Option or at any time
thereafter during the term of the Option. The following provisions apply to
SARs that are granted in connection with Options:
(i) The SAR shall entitle the Optionee to exercise the SAR by
surrendering to the Company unexercised a portion of the related Option.
The Optionee shall receive in exchange from the Company an amount equal
to the excess of (x) the Fair Market Value on the date of exercise of the
SAR of the Common Stock covered by the surrendered portion of the related
Option over (y) the exercise price of the Common Stock covered by the
surrendered portion of the related Option. Notwithstanding the foregoing,
the Administrator may place limits on the amount that may be paid upon
exercise of a SAR; provided, however, that such limit shall not restrict
the exercisability of the related Option;
(ii) When a SAR is exercised, the related Option, to the extent
surrendered, shall no longer be exercisable;
(iii) A SAR shall be exercisable only when and to the extent that the
related Option is exercisable and shall expire no later than the date on
which the related Option expires; and
(iv) A SAR may only be exercised at a time when the Fair Market Value
of the Common Stock covered by the related Option exceeds the exercise
price of the Common Stock covered by the related Option.
(b) INDEPENDENT SARS. At the sole discretion of the Administrator,
SARs may be granted without related Options. The following provisions apply
to SARs that are not granted in connection with Options:
(i) The SAR shall entitle the Optionee, by exercising the SAR, to
receive from the Company an amount equal to the excess of (x) the Fair
Market Value of the Common Stock covered by exercised portion of the SAR,
as of the date of such exercise, over (y) the Fair Market Value of the
Common Stock covered by the exercised portion of the SAR, as of the date
on which the SAR was granted; provided, however, that the Administrator
may place limits on the amount that may be paid upon exercise of a SAR;
and
(ii) SARs shall be exercisable, in whole or in part, at such times as
the Administrator shall specify in the Optionee's Agreement.
(c) FORM OF PAYMENT. The Company's obligation arising upon the
exercise of a SAR may be paid in Common Stock or in cash, or in any
combination of Common Stock and cash, as the Administrator, in its sole
discretion, may determine. Shares issued upon the exercise of a SAR shall be
valued at their Fair Market Value as of the date of exercise.
(d) RULE 16b-3. SARs granted hereunder shall contain such additional
restrictions as may be required to be contained in the Plan or Agreement in
order for the SAR to qualify for the maximum exemption provided by Rule
16b-3.
11. EXERCISE OF OPTION OR SAR.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option or SAR
granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the
Administrator and set forth in the Agreement. An Option may not be exercised
for a fraction of a Share.
An Option or SAR shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the terms
of the Option or SAR) from the person entitled to exercise the Option or
SAR, and (ii) full payment for the Shares with respect to which the Option
is exercised. Full payment may consist of any consideration and method of
payment authorized by the Administrator and permitted by the Agreement and
the Plan. Shares issued upon exercise of an Option shall be issued in the
name of the Optionee or, if requested by the Optionee, in the name of the
Optionee and his or her spouse. Until the Shares are issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue
(or cause to be issued) such Shares promptly after the Option is exercised.
No adjustment will be made for a dividend or other right for which the
record date is prior to the date the Shares are issued, except as provided
in Section 15 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
Exercise of a SAR in any manner shall, to the extent the SAR is exercised,
result in a decrease in the number of Shares which thereafter shall be
available for purposes of the Plan, and the SAR shall cease to be
exercisable to the extent it has been exercised.
(b) TERMINATION OF CONTINUOUS STATUS AS CHAIRMAN. Upon termination of
an Optionee's Continuous Status as Chairman (other than termination by
reason of the Optionee's death), the Optionee may, but only within
ninety (90) days after the date of such termination, exercise his or her
Option or SAR to the extent that it was exercisable at the date of such
termination. Notwithstanding the foregoing, however, an Option or SAR may
not be exercised after the date the Option or SAR would otherwise expire by
its terms due to the passage of time from the date of grant.
(c) TERMINATION OF CONTINUOUS EMPLOYMENT. Upon termination of an
Optionee's Continuous Status as Employee (other than termination by reason
of the Optionee's death), the Optionee may, but only within ninety (90) days
after the date of such termination, exercise his or her Option or SAR to the
extent that it was exercisable at the date of such termination.
Notwithstanding the foregoing, however, an Option or SAR may not be
exercised after the date the Option or SAR would otherwise expire by its
terms due to the passage of time from the date of grant.
(d) DEATH OF OPTIONEE. If an Optionee dies (i) while an Employee or
Chairman, the Option or SAR may be exercised at any time within six (6)
months (or such other period of time not exceeding twelve (12) months as
determined by the Administrator) following the date of death by the
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that would have accrued had the Optionee continued living and
terminated his or her employment six (6) months (or such other period of
time not exceeding twelve (12) months as determined by the Administrator)
after the date of death; or (ii) within ninety (90) days after the
termination of Continuous Status as an Employee or Chairman, the Option or
SAR may be exercised, at any time within six (6) months (or such other
period of time not exceeding twelve (12) months as determined by the
Administrator) following the date of death by the Optionee's estate or by a
person who acquired the right to exercise the Option or SAR by bequest or
inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination. If the Option or SAR is not so exercised
within the time specified herein, the Option or SAR shall terminate, and the
Shares covered by such Option or SAR shall revert to the Plan.
Notwithstanding the foregoing, however, an Option or SAR may not be
exercised after the date the Option or SAR would otherwise expire by its
terms due to the passage of time from the date of grant.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to buy
out for a payment in cash or Shares an Option or SAR previously granted
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
12. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the Optionee in writing or electronically, of the terms, conditions
and restrictions related to the offer, including the number of Shares that
the Optionee shall be entitled to purchase, the price to be paid, and the
time within which the Optionee must accept such offer. The offer shall be
accepted by execution of an Agreement in the form determined by the
Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines otherwise,
the Agreement shall grant the Company a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's service with the
Company for any reason (including death or Disability). The purchase price
for Shares repurchased pursuant to the Agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of
the purchaser to the Company. The repurchase option shall lapse at a rate
determined by the Administrator.
(c) OTHER PROVISIONS. The Agreement shall contain such other terms,
provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator in its sole discretion.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Stock Purchase Right is exercised, except as
provided in Section 15 of the Plan.
13. TRANSFERABILITY OF OPTIONS, SARS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an Option, SAR or Stock Purchase
Right may not be sold, pledged, assigned, hypothecated, transferred, or disposed
of in any manner other than by will or by the laws of descent or distribution or
pursuant to a qualified domestic relations order as defined by the Code or Title
1 of the Employee Retirement Income Security Act, and may be exercised, during
the lifetime of the Optionee, only by the Optionee. If the Administrator makes
an Option, SAR or Stock Purchase Right transferable, such Option, SAR or Stock
Purchase Right shall contain such additional terms and conditions as the
Administrator deems appropriate.
14. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. When an
Optionee incurs tax liability in connection with the exercise of an Option,
SAR or Stock Purchase Right, which tax liability is subject to tax
withholding under applicable tax laws, and the Optionee is obligated to pay
the Company an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by electing to have the
Company withhold from the Shares to be issued upon exercise of the Option, or
the Shares to be issued upon exercise of the SAR or Stock Purchase Right, if
any, that number of Shares having a Fair Market Value equal to the amount
required to be withheld. The Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to
be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose shall
be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(i) the election must be made on or prior to the applicable Tax Date;
and
(ii) all elections shall be subject to the consent or disapproval of the
Administrator.
In the event the election to have Shares withheld is made by an Optionee and
the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option, SAR or Stock Purchase Right
is exercised but such Optionee shall be unconditionally obligated to tender back
to the Company the proper number of Shares on the Tax Date.
15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, SAR or Stock Purchase Right, and the number of
shares of Common Stock which have been authorized for issuance under the
Plan but as to which no Options, SARs or Stock Purchase Rights have yet been
granted or which have been returned to the Plan upon cancellation or
expiration of an Option, SAR or Stock Purchase Right, as well as the price
per share of Common Stock covered by each such outstanding Option, SAR or
Stock Purchase Right, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of
Common Stock subject to an Option, SAR or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, all outstanding Options, SARs and
Stock Purchase Rights will terminate immediately prior to the consummation
of such proposed action, unless otherwise provided by the Administrator. The
Administrator may, in the exercise of its sole discretion in such instances,
declare that any Option, SAR or Stock Purchase Right shall terminate as of a
date fixed by the Administrator and give each Optionee the right to exercise
his or her Option, SAR or Stock Purchase Right as to all or any part of the
Optioned Stock, including Shares as to which the Option, SAR or Stock
Purchase Right would not otherwise be exercisable.
(c) MERGER OR ASSET SALE. Unless otherwise determined by the
Administrator, in the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company,
each outstanding Option, SAR and Stock Purchase Right shall be assumed or an
equivalent option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the Option, SAR or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option, SAR or Stock Purchase Right as to all of the Optioned
Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option, SAR or Stock Purchase Right becomes fully vested
and exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee in
writing or electronically that the Option, SAR or Stock Purchase Right shall
be fully vested and exercisable for a period of thirty (30) days from the
date of such notice, and the Option, SAR or Stock Purchase Right shall
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option, SAR or Stock Purchase Right shall be considered
assumed if, following the merger or sale of assets, the option or right
confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option, SAR or Stock Purchase Right immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the
outstanding Shares); provided, however, that if such consideration
received in the merger or sale of assets is not solely common stock of the
succesor corporation or its Parent, the Administrator may, with the
consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, SAR or Stock Purchase Right, for
each Share of Optioned Stock subject to the Option, SAR or Stock Purchase
Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received
by holders of Common Stock in the merger or sale of assets.
(d) CHANGE IN CONTROL. In the event of a "Change in Control" of the
Company, as defined in paragraph (e) below, unless otherwise determined by
the Administrator prior to the occurrence of such Change in Control, the
following acceleration and valuation provisions shall apply:
(i) Any Options, SARs and Stock Purchase Rights outstanding as of the
date such Change in Control is determined to have occurred that are not
yet exercisable and vested on such date shall become fully exercisable
and vested; and
(ii) The value of all outstanding Options, SARs and Stock Purchase
Rights shall, unless otherwise determined by the Administrator at or
after grant, be cashed-out. The amount at which such Options, SARs and
Stock Purchase Rights shall be cashed out shall be equal to the excess of
(x) the Change in Control Price (as defined below) over (y) the exercise
price of the Common Stock covered by the Option, SAR or Stock Purchase
Right. The cash-out proceeds shall be paid to the Optionee or, in the
event of death of an Optionee prior to payment, to the estate of the
Optionee or to a person who acquired the right to exercise the Option,
SAR or Stock Purchase Right by bequest or inheritance.
(e) DEFINITION OF "CHANGE IN CONTROL". For purposes of this
Section 15, a "Change in Control" means the happening of any of the
following:
(i) When any "person", as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, a Subsidiary or a
Company employee benefit plan, including any trustee of such plan acting
as trustee) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the combined
voting power of the Company's then outstanding securities; or
(ii) The occurrence of a transaction requiring shareholder approval,
and involving the sale of all or substantially all of the assets of the
Company or the merger of the Company with or into another corporation.
(f) CHANGE IN CONTROL PRICE. For purposes of this Section 15, "Change
in Control Price" shall be, as determined by the Administrator, (i) the
highest Fair Market Value at any time within the 60-day period immediately
preceding the date of determination of the Change in Control Price by the
Administrator (the "60-Day Period"), or (ii) the highest price paid or
offered, as determined by the Administrator, in any bona fide transaction or
bona fide offer related to the Change in Control of the Company, at any time
within the 60-Day Period.
16. DATE OF GRANT. The date of grant of an Option, SAR or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option, SAR or Stock Purchase Right, or such other
later date as is determined by the Administrator. Notice of the determination
shall be provided to each Optionee within a reasonable time after the date of
such grant.
17. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to
comply with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee
and the Company. Termination of the Plan shall not affect the
Administrator's ability to exercise the powers granted to it hereunder with
respect to Options, SARs or Stock Purchase Rights granted under the Plan
prior to the date of such termination.
18. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the
exercise of an Option, SAR or Stock Purchase Right unless the exercise of
such Option, SAR or Stock Purchase Right and the issuance and delivery of
such Shares shall comply with Applicable Laws and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an
Option, SAR or Stock Purchase Right, the Company may require the person
exercising such Option, SAR or Stock Purchase Right to represent and warrant
at the time of any such exercise that the Shares are being purchased only
for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation
is required.
19. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
20. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
21. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
22. NON-U.S. EMPLOYEES. Notwithstanding anything in the Plan to the
contrary, with respect to any employee who is resident outside of the United
States, the Committee may, in its sole discretion, amend the terms of the
Plan in order to conform such terms with the requirements of local law or to
meet the objectives of the Plan. The Committee may, where appropriate,
establish one or more sub-plans for this purpose.
[LOGO]
APPLE COMPUTER, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 19, 2001
The undersigned shareholder of Apple Computer, Inc., a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement with respect to the annual Meeting of
Shareholders of Apple Computer, Inc. to be held at 1 Infinite Loop,
Cupertino, California 95014 on Thursday, April 19, 2001 at 10:00 a.m., and
hereby appoints Fred D. Anderson and Nancy R. Heinen, and each of them,
proxies and attorneys-in-fact, each with power of substitution and
revocation, and each with all powers that the undersigned would possess if
personally present, to vote the Apple Computer, Inc. Common Stock of the
undersigned at such meeting and any postponements or adjournments of such
meeting, as set forth below, and in their discretion upon any other business
that may properly come before the meeting (and any such postponements or
adjournments).
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, FOR THE
ELECTION OF THE NOMINEES, FOR PROPOSALS 2 AND 3 AGAINST PROPOSAL 14 AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING AND ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE
^ FOLD AND DETACH HERE ^
DIRECTIONS:
FROM SAN JOSE:
Take 280 northbound
Take the Cupertino exit
Make a left onto De Anza Blvd.
(at signal)
Make a left onto Mariani Avenue
Enter Infinite Loop Parking Lot
at the end of Mariani Avenue
Proceed to Building 4
[MAP]
FROM SAN FRANCISCO:
Take 280 southbound
Take De Anza Blvd. exit
Make a right onto De Anza Blvd.
(at signal)
Make a left onto Mariani Avenue
Enter Infinite Loop Parking Lot
at the end of Mariani Avenue
Proceed to Building 4
Attendance at the Annual Meeting is limited to shareholders. Admission to
the meeting will be on a first-come, first-served basis. In the interest of
saving time and money, Apple has opted to provide you with the enclosed Form
10-K for 2000 in lieu of producing a glossy annual report.
APPLE COMPUTER, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY / /
For All
For Withheld Except
1. To elect the Company's Board of Directors. / / / / / /
NOMINEES: (01) Gareth C.C. Chang, (02) William V. Campbell, (03) Millard S.
Drexler, (04) Lawrence J. Ellison, (05) Steven P. Jobs, (06) Arthur D.
Levinson and (07) Jerome B. York
---------------------------------------------
(Except nominee(s) noted above)
For Against Abstain
2. To approve an amendment to the 1998 / / / / / /
Executive Officer Stock Plan to increase
the number of shares of Common Stock
reserved for issuance thereunder by
5,000,000 shares.
For Against Abstain
3. To ratify the appointment of KPMG / / / / / /
LLP as independent auditors of the
Company for fiscal year 2000.
For Against Abstain
4. To consider a shareholder proposal. / / / / / /
5. To transact such other business as
may properly come before the meeting
and any postponements or adjournment(s)
thereof.
This proxy card should be signed by the shareholder(s) exactly as his or her
name(s) appear(s) hereon, dated and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate if
shares are held by joint tenants or as community property, both persons
should sign.
Signature ______________________________ Date___________ 2001
Signature ______________________________ Date___________ 2001
^ FOLD AND DETACH HERE ^
Control Number
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE OR VOTE THROUGH THE INTERNET.
VOTE BY INTERNET
Dear Shareholder:
We are pleased to announce that you can now vote your shares over the
Internet. We encourage you to take advantage of this new feature which
eliminates the need to return the proxy card. Your Internet vote is quick,
convenient and your vote is immediately submitted. Just follow these easy
steps:
1. Read the accompanying Proxy Statement
2. Go to the website www.computershare.com/us/proxy
3. Enter the 6-digit Control Number located above
4. Follow the simple instructions on the screen
Your Internet vote authorizes the named proxies to vote your shares to the
same extent as if you marked, signed, dated and returned the proxy card.
Please note that all votes cast by Internet must be submitted prior to 10:00
a.m. Central Time, April 17, 2001.
If you vote by Internet, please do not return your proxy by mail.
THANK YOU FOR YOUR VOTE.