___________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 29, 1995 or
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 0-10030
APPLE COMPUTER, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-2404110
[State or other jurisdiction [I.R.S. Employer Identification No.]
of incorporation or organization]
1 Infinite Loop 95014
Cupertino California [Zip Code]
[Address of principal executive offices]
Registrant's telephone number, including area code: (408) 996-1010
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
123,656,178 shares of Common Stock Issued and Outstanding as of
February 2, 1996
___________________________________________________________________________
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
APPLE COMPUTER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in millions, except per share amounts)
THREE MONTHS ENDED
December 29, December 30,
1995 1994
Net sales $ 3,148 $ 2,832
Costs and expenses:
Cost of sales 2,673 2,018
Research and development 153 132
Selling, general and administrative 441 415
Restructuring costs -- (17)
3,267 2,548
Operating income (loss) (119) 284
Interest and other income
(expense), net 10 15
Income (loss) before income taxes (109) 299
Income tax provision (benefit) (40) 111
Net income (loss) $ (69) $ 188
Earnings (loss) per common and
common equivalent share $(0.56) $ 1.55
Cash dividends paid per common share $ .12 $ .12
Common and common equivalent shares
used in the calculations of
earnings (loss) per share (in
thousands) 122,994 121,600
See accompanying notes.
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APPLE COMPUTER, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(In millions)
December 29, September 29,
1995 1995
(Unaudited)
Current assets:
Cash and cash equivalents $ 824 $ 756
Short-term investments 276 196
Accounts receivable, net of allowance for
doubtful accounts of $92 ($87 at September
29, 1995) 1,944 1,931
Inventories:
Purchased parts 707 841
Work in process 250 291
Finished goods 990 643
1,947 1,775
Deferred tax assets 302 251
Other current assets 258 315
Total current assets 5,551 5,224
Property, plant, and equipment:
Land and buildings 516 504
Machinery and equipment 646 638
Office furniture and equipment 143 145
Leasehold improvements 199 205
1,504 1,492
Accumulated depreciation and amortization (792) (781)
Net property, plant, and equipment 712 711
Other assets 290 296
$ 6,553 $ 6,231
See accompanying notes.
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APPLE COMPUTER, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in millions)
December 29, September 29,
1995 1995
(Unaudited)
Current liabilities:
Short-term borrowings $ 498 $ 461
Accounts payable 1,431 1,165
Accrued compensation and employee benefits 125 131
Accrued marketing and distribution 284 206
Other current liabilities 367 362
Total current liabilities 2,705 2,325
Long-term debt 304 303
Deferred tax liabilities 750 702
Shareholders' equity:
Common stock, no par value; 320,000,000
authorized; 123,118,433 shares issued
and outstanding at December 29, 1995
(122,921,601 shares at September 29, 1995) 404 398
Retained earnings 2,380 2,464
Accumulated translation adjustment and other 10 39
Total shareholders' equity 2,794 2,901
$ 6,553 $ 6,231
See accompanying notes.
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APPLE COMPUTER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
THREE MONTHS ENDED
December 29, December 30,
1995 1994
Cash and cash equivalents, beginning of the
period $ 756 $ 1,203
Operations:
Net income (loss) (69) 188
Adjustments to reconcile net income (loss)
to cash generated by operations:
Depreciation and amortization 42 38
Net book value of property, plant, and
equipment retirements 1 5
Changes in assets and liabilities:
Accounts receivable (13) (18)
Inventories (172) 4
Deferred tax assets (51) 24
Other current assets 57 77
Accounts payable 266 74
Income taxes payable (67) (31)
Accrued marketing and distribution 78 97
Other current liabilities 67 (66)
Deferred tax liabilities 48 61
Cash generated by operations 187 453
Investments:
Purchase of short-term investments (244) (410)
Proceeds from sale of short-term investments 164 25
Purchase of property, plant, and equipment (31) (22)
Other (36) (12)
Cash used for investment activities (147) (419)
Financing:
Increase (decrease) in short-term borrowings 37 (83)
Increase (decrease) in long-term borrowings 1 (1)
Increases in common stock, net of related
tax benefits 5 9
Cash dividends (15) (14)
Cash generated by (used for)
financing activities 28 (89)
Total cash generated (used) 68 (55)
Cash and cash equivalents, end of the period $ 824 $ 1,148
See accompanying notes.
5
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APPLE COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Interim information is unaudited; however, in the opinion of the
Company's management, all adjustments necessary for a fair statement of
interim results have been included. All adjustments are of a normal
recurring nature unless specified in a separate note included in these
Notes to Consolidated Financial Statements. The results for interim
periods are not necessarily indicative of results to be expected for
the entire year. These financial statements and notes should be read
in conjunction with the Company's annual consolidated financial
statements and the notes thereto for the fiscal year ended September
29, 1995, included in its Annual Report on Form 10-K for the year ended
September 29, 1995 (the "1995 Form 10-K").
2. Interest and other income (expense), net, consists of the
following: (In millions)
Three Months Ended
December 29, December 30,
1995 1994
Interest income $ 17 $ 19
Interest expense (17) (7)
Gain on foreign exchange instruments 18 9
Net premiums and discounts paid on
forward and option foreign exchange
instruments (7) (3)
Other income (expense), net (1) (3)
$ 10 $ 15
3. The Company's cash equivalents consist primarily of U.S. Government
securities, Euro-dollar deposits, and commercial paper with maturities
of three months or less at the date of purchase. Short-term
investments consist principally of Euro-dollar deposits and commercial
paper with maturities between three and twelve months. The Company's
marketable equity securities consist of securities issued by U.S.
corporations and are included in "Other assets" on the accompanying
balance sheet. The Company's cash equivalents, short-term investments,
and marketable equity securities are classified and accounted for as
available-for-sale and are generally held until maturity.
The adjustments recorded to shareholders' equity for unrealized holding
gains (losses) on available-for-sale cash equivalents and short-term
investments were not material, either individually or in the aggregate,
at December 29, 1995. The net adjustment recorded to shareholders'
equity for unrealized holding gains (losses) related to marketable
equity securities was an unrealized gain of approximately $18 million
at December 29, 1995. The realized gains (losses) recorded to earnings
on sales of available-for-sale securities, either individually or in
the aggregate, were not material for the three months ended December
29, 1995.
4. U.S. income taxes have not been provided on a cumulative total of $400
million of undistributed earnings of certain of the Company's foreign
subsidiaries. It is intended that these earnings will be indefinitely
invested in operations outside of the United States. It is not
practicable to determine the income tax liability that might be
incurred if these earnings were to be distributed. Except for such
indefinitely invested earnings, the Company provides for federal and
state income taxes currently on undistributed earnings of foreign
subsidiaries.
The Internal Revenue Service ("IRS") has proposed federal income tax
deficiencies for the years 1984 through 1991, and the Company has made
certain prepayments thereon. The Company contested the proposed
deficiencies for the years 1984 through 1988, and most of the issues in
dispute for these years have been resolved. On June 29, 1995, the IRS
issued a notice of deficiency proposing increases to the amount of the
Company's federal income taxes for the years 1989 through 1991. The
Company has filed a petition with the United States Tax Court to
contest these alleged tax deficiencies. Management believes that
adequate provision has been made for any adjustments that may result
from these tax examinations.
5. Earnings per share is computed using the weighted average number of
common and dilutive common equivalent shares attributable to stock
options outstanding during the period. Loss per share is computed
using the weighted average number of common shares outstanding during
the period.
6
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6. Certain prior year amounts on the Consolidated Statements of Cash Flows
have been reclassified to conform to the current period presentation.
7. No dividend has been declared for the first quarter of 1996, and the
Board of Directors does not anticipate that dividends will be declared
in the near future given the financial condition of the Company.
8. The information set forth in Item 1 of Part II hereof is hereby
incorporated by reference.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following information should be read in conjunction with the
consolidated financial statements and notes thereto. All information is
based on Apple's fiscal calendar.
(Tabular information: Dollars in millions, except per share amounts)
Except for historical information contained herein, the statements set
forth in this Item 2 are forward-looking and involve risks and
uncertainties. For information regarding potential factors that could
affect the Company's financial results refer to pages 11 - 15 of this
Management Discussion and Analysis of Financial Condition and Results of
Operations under the heading "Factors That May Affect Future Results and
Financial Condition."
Results of Operations
First First
Quarter Quarter
1996 1995 Change
Net sales $ 3,148 $ 2,832 11.2%
Gross margin $ 475 $ 814 -41.6%
Percentage of net sales 15.1% 28.7%
Operating expenses (excluding
restructuring costs) $ 594 $ 547 8.6%
Percentage of net sales 18.9% 19.3%
Restructuring costs $ -- $ (17) --
Percentage of net sales -- -0.6%
Net income (loss) $ (69) $ 188 -136.7%
Earnings (loss) per share $ (0.56) $ 1.55 -136.1%
Net Sales
Net sales for the first quarter of 1996 increased over the comparable
period of 1995, primarily resulting from a combination of unit growth and
slightly higher average aggregate revenue per Macintosh (registered trademark)
computer unit. Total Macintosh computer unit sales increased 12% in the
first quarter of 1996, over the comparable period of 1995. This unit
sales growth principally resulted from strong sales of the Company's
PowerPC (registered trademark) products, which accounted for over 78% of
total unit shipments at the end of the first quarter of 1996, compared
with 26% in the comparable period of 1995. Specifically, unit sale increases
were within the Power Macintosh (trademark) and the Performa (registered
trademark) families of desktop personal computers. This unit growth was
partially offset by declining unit sales of certain of the Company's older
product offerings. The increase in average aggregate revenue per Macintosh
computer unit of approximately 7% in the first quarter of 1996 over the
comparable period of 1995 was driven by a shift in mix towards the
Company's newer products and products with multi-media configurations.
Specifically, the Company recorded increased revenue from the sale of
products within the Power Macintosh family of personal computers.
International net sales grew 19% in the first quarter of 1996, over the
comparable period of 1995, primarily reflecting strong net sales growth in
Japan and certain countries within Europe. International net sales
represented 51% of total net sales for the first quarter of 1996, compared
with 47% for the corresponding period of 1995. Domestic net sales grew
approximately 4% in the first quarter of 1996, over the comparable period
of 1995.
In general, the Company's resellers typically purchase products on an as-
needed basis. Resellers frequently change delivery schedules and order
rates depending on changing market conditions. Unfilled orders ("backlog")
can be, and often are, canceled at will. The Company attempts to fill
orders on the requested delivery schedules. The Company's backlog
decreased to approximately $365 million at February 2, 1996, from
approximately $618 million at December 1, 1995, primarily due to the
Company satisfying product backlog that existed at December 1, 1995.
In the Company's experience, the actual amount of product backlog at any
particular time is not necessarily a meaningful indication of its future
business prospects. In particular, backlog often increases in anticipation
of or immediately following introduction of new products because of over-
ordering by dealers anticipating shortages. Backlog often is reduced
sharply once dealers and customers believe they can obtain sufficient
supply. Because of the foregoing, as well as other factors affecting the
Company's backlog, backlog should not be considered a reliable indicator of
the Company's ability to achieve any particular level of revenue or
financial performance.
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Gross Margin
Gross margin represents the difference between the Company's net sales and
its cost of goods sold. The amount of revenue generated by the sale of
products is influenced principally by the price set by the Company for its
products relative to competitive products. The cost of goods sold is based
primarily on the cost of components and to a lesser extent, direct labor
costs. The type and cost of components included in particular
configurations of the Company's products (such as memory and disk drives)
are often directly related to the need to market products in configurations
competitive with other manufacturers. Competition in the personal computer
industry is intense, and in the short term, frequent changes in pricing and
product configuration are often necessary in order to remain competitive.
Accordingly, gross margin as a percentage of net sales can be significantly
influenced in the short term by actions undertaken by the Company in
response to industrywide competitive pressures.
Gross margin decreased both in amount and as a percentage of net sales
during the first quarter of 1996, over the comparable period of 1995. The
decrease in gross margin as a percentage of net sales was primarily a
result of: aggressive pricing actions in Japan in response to extreme
competitive actions by other companies attempting to gain market share;
pricing actions in both the U.S. and Europe on certain configurations of
entry level and PowerBook (registered trademark) products in order to
stimulate demand; lower of cost or market adjustments charged to cost of
sales due to pricing certain products in specific markets (particularly
Japan) at below manufactured cost in response to competitive actions;
and implementing changes in production plans in response to lower
than expected demand, which necessitated the financial write-off of
components, canceling component orders and incurring cancellation charges.
Pressures on gross margin are continuing in the second quarter of 1996 as
the Company has taken further initiatives to lower prices and reduce
inventories. These actions could result in further inventory charges,
expenses related to changes in production plans and cancellation charges.
The decrease in gross margin levels in the first quarter of 1996 compared
with the corresponding period of 1995 was somewhat offset by a weaker U.S.
dollar relative to certain foreign currencies. The Company's operating
strategy and pricing take into account changes in exchange rates over time;
however, the Company's results of operations can be significantly affected
in the short term by fluctuations in foreign currency exchange rates.
It is anticipated that gross margins will continue to remain under pressure
and will remain below prior years' levels due to a variety of factors,
including continued industrywide pricing pressures around the world,
increased competition, compressed product life cycles, and the need to
reduce current inventory levels. Gross margins declined in the first
quarter of 1996 compared with the fourth quarter of 1995 and are likely to
decline further in the second quarter of 1996.
Research and Development First First
Quarter Quarter
1996 1995 Change
Research and development $ 153 $ 132 15.9%
Percentage of net sales 4.9% 4.7%
Research and development expenditures increased in amount in the first
quarter of 1996 when compared with the corresponding period of 1995. This
increase is primarily due to higher project and headcount related spending
as the Company continues to invest in the development of new products and
technologies.
As a percentage of net sales, research and development expenditures
remained relatively consistent in the first quarter of 1996 when compared
with the corresponding period of 1995.
The Company believes that continued investments in research and development
are critical to its future growth and competitive position in the
marketplace and are directly related to continued, timely development of
new and enhanced products. Going forward, the Company intends to simplify
its product portfolio to focus its offerings primarily on innovative,
differentiated and best-of-class products in its key market segments in
education, business and the home.
9
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First First
Quarter Quarter
Selling, General and 1996 1995 Change
Administrative
Selling, general and $ 441 $ 415 6.3%
administrative
Percentage of net sales 14.0% 14.7%
Selling, general and administrative expenses increased in amount in the
first quarter of 1996 when compared with the corresponding period of 1995.
This increase was primarily a result of increased spending related to
marketing and advertising programs. Selling, general and administrative
expenses decreased as a percentage of net sales in the first quarter of
1996 when compared with the corresponding period of 1995, primarily as a
result of an increase in the level of net sales and the Company's ongoing
efforts to manage operating expense growth as a percentage of net sales.
The Company will continue to face the challenge of managing selling,
general and administrative expenses, particularly in light of the Company's
expectation of continued pressure on gross margins and continued
competitive pressures worldwide.
Restructuring Costs First First
Quarter Quarter
1996 1995 Change
Restructuring costs -- $ (17) --
Percentage of net sales -- (0.6%) --
For information regarding the Company's current restructuring actions,
refer to Management's Discussion and Analysis of Financial Condition and
Results of Operations under the heading "Factors That May Affect Future
Results and Financial Condition" under the subheading "Restructuring of
Operations."
Interest and Other Income First First
(Expense), Net Quarter Quarter
1996 1995 Change
Interest and other income
(expense), net $ 10 $ 15 -33.3%
Interest and other income (expense), net decreased to $10 million in income
in the first quarter of 1996 compared with $15 million in income during the
same period in 1995. This $5 million decrease in interest and other income
(expense), net is comprised of $14 million unfavorable variance related to:
increased interest expense as a result of higher debt balances and
borrowing rates; increased foreign exchange hedging costs due to higher
foreign currency receivable balances; and decreased interest income as cash
balances were lower. The unfavorable change in interest and other income
was offset in part by a $9 million increase in income related primarily to
realized and unrealized foreign exchange hedging gains in the first quarter
of 1996 compared with the same period in 1995. The Company expects that
its cost of funds will increase as a result of the recent downgrading of
its short- and long-term debt to P-3 and Baa3, respectively, by Moody's
Investor Services, and to B and BB-, respectively, by Standard and Poor's
Rating Agency.
Income Tax Provision First First
(Benefit) Quarter Quarter
1996 1995 Change
Income tax provision (benefit) $ (40) $ 111 -136.0%
Effective tax rate 37% 37%
The information contained in Note 4 of the Notes to Consolidated Financial
Statements (Unaudited) in Part I, Item 1 of this Quarterly Report on Form
10-Q is incorporated by reference into this discussion.
10
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Factors That May Affect Future Results and Financial Condition
The Company's future operating results and financial condition are
dependent on the Company's ability to successfully develop, manufacture,
and market technologically innovative products in order to meet dynamic
customer demand patterns. Inherent in this process are a number of factors
that the Company must successfully manage in order to achieve favorable
future operating results and financial condition. Potential risks and
uncertainties that could affect the Company's future operating results and
financial condition include, without limitation, continued competitive
pressures in the marketplace; the effect any reaction to such competitive
pressures has on inventory levels and inventory valuations; the effects of
significant adverse publicity; the impact of uncertainties concerning the
Company's strategic direction and financial condition on revenue and
liquidity; the effect of continued degradation in the Company's liquidity;
and the need for and effect of any business restructuring actions.
The Company expects to report an operating loss for the second quarter of
1996 that will significantly exceed the operating loss of $69 million,
after taxes, reported in the first quarter of 1996. The anticipated
operating loss, which is largely attributable to declining sales due to
marketplace uncertainty about the Company's strategic direction and
prospects, does not include the financial impact of charges related to
restructuring actions.
Restructuring of Operations
As announced on January 17, 1996, the Company is currently implementing a
reorganization plan which is aimed at beginning to bring the Company's
business model in line with major strategic goals and at the same time to
move toward improving the cost and competitiveness of its operations.
Initial actions planned to begin in the second quarter of 1996 will focus
on streamlining the Company's business operations. These initial actions
are expected to result in pre-tax charges of at least $125 million, and are
primarily comprised of headcount reductions in the selling, general and
administrative areas of at least 1,300 full-time employees, as well as
evaluating the Company's various business investments. The Company expects
to incur future restructuring charges as the several phases of the business
reorganization are developed and implemented. These plans may include,
among other actions, outsourcing of certain administrative and
manufacturing functions. In addition, the Company intends to refine its
product plans by reducing the number of products within certain categories
in an effort to improve overall contribution. The Company's future
operating results and financial condition could be adversely affected by
its ability to effectively manage the transition to the new business model
and cost structure.
Implementation of the Company's restructuring actions may adversely affect
the Company's ability to retain and motivate employees. In addition, while
the restructuring actions are expected to lower the fixed cost of
operations, it could also reduce the direct control that the Company
currently has over various functions which may be outsourced. As such, the
Company cannot determine the ultimate effect on the quality or efficiency
of work performed in the event of outsourcing various functions.
Product Introductions and Transitions
Due to the highly volatile nature of the personal computer industry, which
is characterized by dynamic customer demand patterns and rapid
technological advances, the Company frequently introduces new products and
product enhancements. The success of new product introductions is
dependent on a number of factors, including market acceptance, the
Company's ability to manage the risks associated with product transitions,
the availability of application software for new products, the effective
management of inventory levels in line with anticipated product demand, the
manufacturing of products in appropriate quantities to meet anticipated
demand, and the risk that new products may have quality or other defects in
the early stages of introduction that were not anticipated in the design of
those products. Accordingly, the Company cannot determine the ultimate
effect that new products will have on its sales or results of operations.
The rate of product shipments immediately following introduction of a new
product is not necessarily an indication of the future rate of shipments
for that product, which depends on many factors, some of which are not
under the control of the Company. These factors may include initial large
purchases by a small segment of the user population that tends to purchase
new technology prior to its acceptance by the majority of users ("early
adopters"); purchases in satisfaction of pent-up demand by users who
anticipated new technology and as a result deferred purchases of other
products; and overordering by dealers who anticipate shortages due to the
aforementioned factors. The preceding may also be offset by other factors,
such as the deferral of purchases by many users until new technology is
accepted as "proven" and for which commonly used software products are
available; and the reduction of orders by dealers once they believe they
can obtain sufficient supply of product previously in backlog.
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Backlog is often volatile after new product introductions due to the
aforementioned demand factors, often increasing coincident with
introduction, and then decreasing once dealers and customers believe they
can obtain sufficient supply of product.
The measurement of demand for newly introduced products is further
complicated by the availability of different product configurations, which
may include various types of built-in peripherals and software.
Configurations may also require certain localization (such as language) for
various markets and, as a result, demand in different geographic areas may
be a function of the availability of third-party software in those
localized versions. For example, the availability of European-language
versions of software products manufactured by U.S. producers may lag behind
the availability of U.S. versions by a quarter or more. This may result in
lower initial demand for the Company's new products outside the United
States, even though localized versions of the Company's products may be
available.
As part of its restructuring plan, the Company may reduce the number of new
product introductions and intends to reduce the number of products in
certain categories within its product portfolio in order to focus its
offerings on the Company's key markets and reduce required investments.
This simplification within product lines may have an adverse effect on
sales and on the Company's results of operations and financial condition in
the future.
Competition
The personal computer industry is highly competitive and continues to be
characterized by consolidations in the hardware and software industries,
aggressive pricing practices, and downward pressure on gross margins. For
example, in Japan, other companies have initiated extreme competitive
actions in order to gain market share, and as a result, the Company has
implemented aggressive pricing and promotional activities. In the first
quarter of 1996, the Company's results of operations and financial
condition were, and in the near future are expected to be, adversely
affected by industrywide pricing pressures and downward pressures on gross
margins.
The Company's future operating results and financial condition may also be
affected by the Company's ability to offer customers competitive
technologies while effectively managing the impact on inventory levels and
the potential for customer confusion created by product proliferation. The
Company's future operating results and financial condition may also be
affected by overall demand for personal computers and general customer
preferences for one platform over another or one set of product features
over another.
On November 7, 1994, the Company reached an agreement with International
Business Machines Corporation ("IBM") and Motorola, Inc. on a new hardware
reference platform for the PowerPC microprocessor that is intended to
deliver a much wider range of operating system and application choices for
computer customers. As a result of this agreement, the Company is moving
forward with its efforts to make the Macintosh operating system available
on the common platform. In line with its efforts, on November 13, 1995,
the Company, IBM, and Motorola, Inc. announced the availability of the
"PowerPC Platform" specifications, which define a "unified" personal
computer architecture and combine the Power Macintosh platform and the PC
environment. Accordingly, the Company's future operating results and
financial condition may be affected by its ability to continue to implement
this agreement and to manage the risk associated with the transition to
this new hardware reference platform.
The Company is currently the primary maker of hardware that uses the
Macintosh operating system, and it has a minority market share in the
personal computer market, which is dominated by makers of computers that
run the MS-DOS (registered trademark) and Microsoft Windows (trademark)
operating systems. The Company's future operating results and financial
condition may be affected by its ability to increase market
share in its personal computer business. As part of its efforts to increase
overall market share, the Company announced the licensing of the Macintosh
operating system to other personal computer vendors in January 1995, and
several vendors currently sell product that utilize the Macintosh operating
system. The success of the Company's efforts to increase its overall
market share through licensing of the Macintosh operating system will
depend in part on the Company's ability to manage the risks associated
with competing with companies producing Macintosh OS-based computer
systems. Accordingly, the Company cannot determine the ultimate effect
that licensing of the Macintosh operating system will have on its product
pricing and unit sales or future operating results and financial condition.
The Company believes that licensing the operating system will result in a
broader installed base on which software vendors can develop and provide
technical innovations for the Macintosh platform. However, there can be
no assurance that the installed base will be broadened by the licensing
of the operating system or that licensing will result in an increase in
the number of application software titles or the rate at which vendors
will bring to market application software based on the Macintosh operating
system.
The Company's principal competitor in producing operating system software,
Microsoft Corporation, is a large, well-financed corporation which has a
dominant position in various segments of the personal computer software
industry. As a result of the introduction of Windows 95 in August 1995,
the Company has taken and will continue to take steps to address the
additional
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challenges to and competitive pressures on its efforts in developing and
marketing the Company's products. Accordingly, the Company's future
operating results and financial condition could be adversely affected
should the Company be unable to effectively manage the competitive pressure
and other challenges presented by the introduction of Windows 95.
Certain of the Company's personal computer products are capable of running
application software designed for the MS-DOS or Windows operating systems
("Cross-Platform Products"), through software emulation of Intel
Corporation microprocessor chips by use of software specifically designed
for the Company's products, either those based on the Motorola 68000 series
of microprocessors or those based on the PowerPC microprocessor. The
Company has also introduced products that include both the RISC-based
PowerPC 601 microprocessor and the 486 DX2/66 microprocessor, which enable
users to switch between the Macintosh and DOS or Windows computing
environments.
The Company plans to supply customers who purchase Cross-Platform Products
capable of running the MS-DOS or Windows 3.1 operating system with
operating system software under a licensing agreement with Microsoft. This
license agreement expired on December 31, 1995 (the "Old License
Agreement"). The Company has attempted to license Windows 95 software from
Microsoft but has been unable to do so because of the Company's
unwillingness to consent to Microsoft's demand under Microsoft's proposed
license agreement (the "New License Agreement") that the Company agree not
to sue Microsoft if Microsoft infringes any of the Company's patents.
Microsoft has also informed the Company that it will not renew the Old
License Agreement unless the Company accepts the New License Agreement.
Accordingly, the Company is currently unable to supply customers with any
of Microsoft's operating systems on Cross-Platform Products except for such
product that was in inventory as of December 31, 1995. Although customers
could obtain copies of such software from other sources, the Company is
unable to predict the effect of such a situation on the demand for Cross-
Platform Products. Although Cross-Platform Products represented only a
small portion of the Company's unit sales during 1995, the Company is
unable to predict the effect of such a situation on the Company's future
operating results.
Decisions by customers to purchase the Company's personal computers, as
opposed to MS-DOS or Windows-based systems, are often based on the
availability of third-party software for particular applications. The
Company believes that the availability of third-party application software
for the Company's hardware products depends in part on the third-party
developers' perception and analysis of the relative benefits of developing
such software for the Company's products versus software for the larger MS-
DOS and Windows market. This analysis is based on factors such as the
perceived strength of the Company and its products, the anticipated
potential revenue that may be earned, and the costs of developing such
software products. Microsoft Corporation is an important developer of
application software for the Company's products. Accordingly, Microsoft's
interest in producing application software for the Company's products may
be influenced by Microsoft's perception of its interests as an operating
system vendor.
The Company's ability to produce and market competitive products is also
dependent on the ability of IBM and Motorola, Inc., the suppliers of the
PowerPC RISC microprocessor for certain of the Company's products, to
continue to supply to the Company microprocessors that produce superior
price/performance results compared with those supplied to the Company's
competitors by Intel Corporation, the developer and producer of the
microprocessors used by most personal computers using the MS-DOS and
Windows operating systems. IBM produces personal computers based on the
Intel microprocessors as well as on the PowerPC microprocessor, and is also
the developer of OS/2, a competing operating system to the Company's
Macintosh operating system. Accordingly, IBM's interest in supplying the
Company with improved versions of microprocessors for the Company's
products may be influenced by IBM's perception of its interests as a
competing manufacturer of personal computers and as a competing operating
system vendor.
The Company's future operating results and financial condition may also be
affected by the Company's ability to successfully expand and capitalize on
its investments in other markets, such as the markets for Internet services
and personal digital assistant (PDA) products.
Global Market Risks
A large portion of the Company's revenue is derived from its international
operations. As a result, the Company's operations and financial results
could be significantly affected by international factors, such as changes
in foreign currency exchange rates or weak economic conditions in the
foreign markets in which the Company distributes its products. When the
U.S. dollar strengthens against other currencies, the U.S. dollar value of
non-U.S. dollar-based sales decreases. When the U.S. dollar weakens, the
U.S. dollar value of non-U.S. dollar-based sales increases.
Correspondingly, the U.S. dollar value of non-U.S. dollar-based costs
increases when the U.S. dollar weakens and decreases when the U.S. dollar
strengthens. Overall, the Company is a net receiver of currencies other
than the U.S. dollar and, as such, benefits from a weaker dollar and is
adversely affected by a stronger dollar relative to major currencies
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worldwide. Accordingly, changes in exchange rates, and in particular a
strengthening of the U.S. dollar, may negatively affect the Company's
consolidated sales and gross margins (as expressed in U.S. dollars).
To mitigate the short-term impact of fluctuating currency exchange rates on
the Company's non-U.S. dollar-based sales, product procurement, and
operating expenses, the Company regularly hedges its non-U.S. dollar-based
exposures. Specifically, the Company enters into foreign exchange forward
and option contracts to hedge firmly committed transactions. Currently,
hedges of firmly committed transactions do not extend beyond one year. The
Company also purchases foreign exchange option contracts to hedge certain
other probable, but not firmly committed transactions. Hedges of probable,
but not firmly committed transactions currently do not extend beyond one
year. To reduce the costs associated with these ongoing foreign exchange
hedging programs, the Company also regularly sells foreign exchange option
contracts and enters into certain other foreign exchange transactions. All
foreign exchange forward and option contracts not accounted for as hedges,
including all transactions intended to reduce the costs associated with the
Company's foreign exchange hedging programs, are carried at fair value and
are adjusted on each balance sheet date for changes in exchange rates.
While the Company is exposed with respect to fluctuations in the interest
rates of many of the world's leading industrialized countries, the
Company's interest income and expense is most sensitive to fluctuations in
the general level of U.S. interest rates. In this regard, changes in U.S.
interest rates affect the interest earned on the Company's cash, cash
equivalents, and short-term investments as well as interest paid on its
short-term borrowings and long-term debt. To mitigate the impact of
fluctuations in U.S. interest rates, the Company has entered into interest
rate swap and option transactions. Certain of these swaps are intended to
better match the Company's floating-rate interest income on its cash, cash
equivalents, and short-term investments with the fixed-rate interest
expense on its long-term debt. The Company also enters into interest rate
swap and option transactions in order to diversify a portion of the
Company's exposure away from fluctuations in short-term U.S. interest
rates. These instruments may extend the Company's cash investment horizon
up to a maximum effective duration of three years.
To ensure the adequacy and effectiveness of the Company's foreign exchange
and interest rate hedge positions, as well as to monitor the risks and
opportunities of the nonhedge portfolios, the Company continually monitors
its foreign exchange forward and option positions, and its interest rate
swap and option positions on a stand-alone basis and in conjunction with
its underlying foreign currency- and interest rate-related exposures,
respectively, from both an accounting and an economic perspective.
However, given the effective horizons of the Company's risk management
activities, there can be no assurance that the aforementioned programs will
offset more than a portion of the adverse financial impact resulting from
unfavorable movements in either foreign exchange or interest rates. In
addition, the timing of the accounting for recognition of gains and losses
related to mark-to-market instruments for any given period may not coincide
with the timing of gains and losses related to the underlying economic
exposures, and as such, may adversely affect the Company's operating
results and financial position. The Company generally does not engage in
leveraged hedging.
Inventory and Supply
In line with the Company's efforts to redesign its business model, the
Company intends to streamline its product offerings in its key market
segments in education, business and the home. However, this simplification
of product lines may result in inventory reserves or cancellation fees
related to custom component inventory purchased for anticipated product
introductions that may be canceled. Furthermore, the Company may incur
lower of cost or market adjustments in order to sell through current
product offerings which may be discontinued in the near term.
The Company's ability to satisfy demand for its products may be limited by
the availability of key components. The Company believes that the
availability from suppliers to the personal computer industry of
microprocessors and ASICs presents the most significant potential for
constraining the Company's ability to produce products. Specific
microprocessors manufactured by Motorola, Inc. and IBM are currently
available only from single sources, while some advanced microprocessors are
currently in the early stages of ramp-up for production and thus have
limited availability. The Company and other producers in the personal
computer industry also compete for other semiconductor products with other
industries that have experienced increased demand for such products, due to
either increased consumer demand or increased use of semiconductors in
their products (such as the cellular phone and automotive industries).
Finally, the Company uses some components that are not common to the rest
of the personal computer industry (including certain ASICs). Continued
availability of these components may be affected if producers were to
decide to concentrate on the production of common components instead of
custom components. Such product supply constraints and corresponding
increased costs could adversely affect the Company's future operating
results and financial condition, including loss of market share. In the
past, the Company's operating results and financial condition have been and
may in the future be adversely affected by the Company's ability to manage
inventory levels and lead times required to obtain components in order to
be more responsive to short-term shifts in
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customer demand patterns. In addition, if unit sales growth for current or
future product offerings is not realized, the Company's results of
operations and financial condition could be adversely affected.
Certain of the Company's products are manufactured in whole or in part by
third-party manufacturers, either pursuant to design specifications of the
Company or otherwise. As a result of the Company's restructuring plan,
the proportion of its products produced under such arrangements may
increase. While such arrangements may lower the fixed cost of operations,
it may also reduce the direct control the Company currently has over
production, and it is uncertain what the effect such lowered control will
have on the quality of the products manufactured or the flexibility of the
Company to respond to changing market conditions. Moreover, although
arrangements with such manufacturers may contain provisions for warranty
expense reimbursement, the Company remains at least initially responsible
to the ultimate consumer for warranty service. Accordingly, in the event
of product defects or warranty liability, the Company may remain at least
primarily liable. Any unanticipated product defect or warrant liability,
whether pursuant to arrangements with contract manufacturers or otherwise,
could adversely affect the Company's future operating results and financial
condition.
Marketing and Distribution
A number of uncertainties may affect the marketing and distribution of the
Company's products. Currently, the Company's primary means of distribution
is through third-party computer resellers. The Company also distributes
product through consumer channels such as mass-merchandise stores, consumer
electronics outlets, and computer superstores. The Company's business and
financial results could be adversely affected if the financial condition of
these resellers weakens or if resellers within consumer channels decide not
to continue to distribute the Company's products.
Uncertainty over the demand for the Company's products may cause resellers
to reduce the ordering and marketing of the Company's products. Under the
Company's arrangements with its resellers, resellers have the option to
reduce or eliminate unfilled orders previously placed, in most instances
without financial penalty. Resellers also have the option to return
products to the Company without penalty within certain limits, beyond which
they may be assessed fees. In the second quarter of 1996, the Company is
experiencing a reduction in ordering by resellers from historical levesl in
certain regions due to uncertainty concerning the Company's condition.
Other Factors
The majority of the Company's research and development activities, its
corporate headquarters, and other critical business operations are located
near major seismic faults. The Company's operating results and financial
condition could be materially adversely affected in the event of a major
earthquake.
Production and marketing of products in certain states and countries may
subject the Company to environmental and other regulations which include,
in some instances, the requirement that the Company provide consumers with
the ability to return to the Company product at the end of its useful life,
and leave responsibility for environmentally safe disposal or recycling
with the Company. It is unclear what the effect of such regulation will
have on the Company's future operating results and financial condition.
The Company is currently in the process of replacing its current
transaction systems (which include order management, distribution, and
finance) with a single integrated system as part of its ongoing effort to
increase operational efficiency. The Company's future operating results
and financial condition could be adversely affected if it is unable to
implement and effectively manage the transition to this new integrated
system.
Because of the foregoing factors, as well as other factors affecting the
Company's operating results and financial condition, past financial
performance should not be considered to be a reliable indicator of future
performance, and investors should not use historical trends to anticipate
results or trends in future periods. In addition, the Company's
participation in a highly dynamic industry often results in significant
volatility of the Company's common stock price.
Liquidity and Capital Resources
The Company's financial position with respect to cash, cash equivalents,
and short-term investments, net of short-term borrowings, increased to $602
million at December 29, 1995, from $491 million at September 29, 1995.
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Cash generated by operations during the first three months of 1996 totaled
$187 million. Cash was generated primarily as a result of higher accounts
payable levels, reflecting longer payment terms obtained from vendors as
well as growth in inventory levels. Cash generated by operations was
partially offset by cash used for the purchase of inventory. Despite the
higher sales level achieved during the first quarter of 1996 compared with
the same period of 1995, less cash was generated by operations in 1996
primarily because of the growth in inventory and the operating loss
incurred primarily due to competitive pricing actions.
Net cash used for the purchase of property, plant, and equipment totaled
$31 million in the first three months of 1996, and was primarily made up of
increases in manufacturing machinery and equipment and buildings. The
Company anticipates that capital expenditures in 1996 will decline relative
to 1995 expenditure levels.
Short-term borrowings at December 29, 1995, were approximately $37 million
higher than at September 29, 1995. These borrowings were primarily made to
fund expected working capital growth in certain markets worldwide.
Domestically, $88 million of U.S. commercial paper was issued and $10
million of short-term borrowings were incurred from U.S. banks during the
first quarter of 1996. Outside the United States, short-term borrowings
decreased by $61 million. Apple Japan, Inc. and Apple Computer BV
(Netherlands), subsidiaries of the Company, held short-term borrowings from
several banks, totaling approximately $197 million and $203 million,
respectively, at December 29, 1995. These loans mature in March 1996 and
April 1996, respectively. In the second quarter of 1996, the Company
largely discontinued its issuance of commercial paper.
The Company's balance of long-term debt remained relatively constant during
the first quarter of 1996. Substantially the entire amount of long-term
borrowings represents $300 million aggregate principal amount of 6.5%
unsecured notes issued under an omnibus shelf registration statement filed
with the Securities and Exchange Commission in 1994. This shelf
registration was for the registration of debt and other securities for an
aggregate offering amount of $500 million. The notes were sold at 99.925%
of par, for an effective yield to maturity of 6.51%. The notes pay
interest semi-annually and mature on February 15, 2004.
The Company expects that it will borrow in the near to intermediate term to
finance its working capital needs and capital expenditures, particularly
because it is unlikely that the Company will continue to generate cash from
operations in this time frame.
The Internal Revenue Service has proposed federal income tax deficiencies
for the years 1984 through 1991, and the Company has made certain
prepayments thereon. The Company contested the proposed deficiencies for
the years 1984 through 1988, and most of the issues in dispute for these
years have been resolved. On June 29, 1995, the IRS issued a notice of
deficiency proposing increases to the amount of the Company's federal
income taxes for the years 1989 through 1991. The Company has filed a
petition with the United States Tax Court to contest these alleged tax
deficiencies. Management believes that adequate provision has been made
for any adjustments that may result from these tax examinations.
As noted on page 10 under the subheading "Interest and other income(expense),
net, the Company expects that its cost of funds will increase in 1996. In
addition, the Company may be required to pledge collateral with respect to
certain of its borrowings and to agree to more stringent covenants than
in the past. The Company is seeking alternative sources of liquidity and
is discussing financing alternatives with several financial institutions.
Although the Company believes it will be able to arrange short- and
intermediate-term financing that will cover its needs, it currently
does not have commitments from lenders to provide such funding. The Company
believes that its balances of cash, cash equivalents, and short-term
investments, together with short- and long-term borrowings that the Company
believes it will be able to obtain, will be sufficient to meet its short-
and long-term operating cash requirements, including the impact of planned
restructuring actions, on a short- and long-term basis.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Management is not aware of any pending legal proceedings to which the
Company is a party that are likely to have a material adverse effect on the
Company's financial condition and results of operations as reported in the
accompanying financial statements. In January 1996, two purported class
action complaints naming the Company and its directors as defendants were
filed in Superior Court in the state of California, styled as Abraham and
Evelyn Kostick Trust v. Peter O. Crisp, et al., and Manson v. Peter O.
Crisp, et al. These complaints seek injunctive relief and unspecified
compensatory damages based on substantially identical allegations of acts
of mismanagement resulting in a depressed price for the Company. The
Company has reviewed the allegations of the complaints and believes they
are without merit, and intends to defend itself vigorously.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit
Number Description
10.A.5 1990 Stock Option Plan, revised December 1995.
10.A.6 Apple Computer, Inc. Employee Stock Purchase Plan,
as amended December 6, 1995.
10.A.7 1996 Senior/Executive Incentive Bonus Plan.
10.A.19 Executive Severance Plan as amended and restated
effective as of January 15, 1996.
10.A.23 Separation Agreement dated December 1, 1995,
between Registrant and Daniel Eilers.
10.A.24 Separation Agreement dated October 31, 1995,
between Registrant and Joseph A. Graziano.
10.A.25 Summary of Principal Terms of Employment between
Registrant and Gilbert F. Amelio.
11 Computation of per share earnings
27 Financial Data Schedule
b) Reports on Form 8-K
None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
APPLE COMPUTER, INC.
(Registrant)
DATE: February 12, 1996 BY /s/ Jeanne Seeley
Jeanne Seeley
Vice President, Finance and
Corporate Controller
(Chief Accounting Officer)
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APPLE COMPUTER, INC.
INDEX TO EXHIBITS
Exhibit Description Page Number
Index
10.A.5 1990 Stock Option Plan, revised 20
December 1995.
10.A.6 Apple Computer, Inc. Employee Stock 33
Purchase Plan, as amended December 6,
1995.
10.A.7 1996 Senior/Executive Incentive Bonus 41
Plan.
10.A.19 Executive Severance Plan as amended 52
and restated effective as of January
15, 1996.
10.A.23 Separation Agreement dated December 107
1, 1995, between Registrant and
Daniel Eilers.
10.A.24 Separation Agreement dated October 121
31, 1995, between Registrant and
Joseph A. Graziano.
10.A.25 Summary of Principal Terms of 130
Employment between Registrant and
Gilbert F. Amelio.
11 Computation of per share earnings 135
27 Financial Data Schedule 136
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EXHIBIT 10.A.5
APPLE COMPUTER, INC.
1990 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1990 Stock Option
Plan are to attract and retain high quality personnel for positions of
substantial responsibility, to provide additional incentive to Employees of
the Company, its Subsidiaries and its Affiliated Companies and to promote
the success of the Company's business. This Plan succeeds to and replaces
the Company's 1981 Stock Option Plan. Options granted under the Plan may
be incentive stock options (as defined under Section 422 of the Code) or
non-statutory stock options, as determined by the Administrator at the time
of grant of an option and subject to the applicable provisions of Section
422 of the Code, and the regulations promulgated thereunder. Stock
appreciation rights ("SARs") may be granted under the Plan in connection
with Options or independently of Options.
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 from time to time pursuant to Section 4 of
the Plan.
(b) "Affiliated Company" means a corporation which is not a
Subsidiary but with respect to which the Company owns, directly or
indirectly through one or more Subsidiaries, at least 20% of the total
voting power, unless the Administrator determines in its discretion that
such corporation is not an Affiliated Company.
(c) "Board" means the Board of Directors of the Company.
(d) "Common Stock" means the Common Stock, no par value, of the
Company.
(e) "Company" means Apple Computer, Inc., a California corporation,
or its successor.
(f) "Committee" means a Committee, if any, appointed by the Board in
accordance with paragraph (a) of Section 4 of the Plan.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
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(h) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship with the Company
or any Subsidiary or Affiliated Company. Continuous Status as an Employee
shall not be considered interrupted in the case of: (i) medical leave,
provided that such leave is for a period of not more than four months; (ii)
military leave; (iii) family leave, provided that such leave is for a
period of not more than four months; (iv) any other leave of absence
approved by the Administrator, provided that such leave is for a period of
not more than four months, unless reemployment upon the expiration of such
leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to formal policy adopted from time to time by the Company and
issued and promulgated to Employees in writing; or (v) in the case of
transfers between locations of the Company or between the Company, its
Subsidiaries,its successor or its Affiliated Companies.
(i) "Director" means a member of the Board.
(j) "Employee" means any person, including Officers and Directors,
employed by and on the payroll of the Company, any Subsidiary or any
Affiliated Company. The payment of Directors' fees by the Company shall
not be sufficient to constitute "employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" means 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
National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System), 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 system or exchange
(or the exchange with the greatest volume of trading in Common Stock)
for the last market trading day prior to the time of determination, as
reported in the Wall Street Journal or such other source as the
Administrator deems reliable.
(ii) If the Common Stock is regularly quoted on the NASDAQ System
(but not on the National Market System) or quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high and low asked prices for the
Common Stock for the last day on which there are quoted prices prior
to the time of determination.
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith
by the Administrator.
(m) "Officer" means an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.
(n) "Nonstatutory Stock Option" means an Option that is not an
Incentive Stock Option.
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(o) "Incentive Stock Option" means an Option that satisfies the
provisions of Section 422 of the Code and is expressly designated by the
Administrator at the time of grant as an incentive stock option.
(p) "Option" means an Option granted pursuant to the Plan.
(q) "Optioned Stock" means the Common Stock subject to an Option or
SAR.
(r) "Optionee" means an Employee who receives an Option or SAR.
(s) "Parent" corporation shall have the meaning defined in Section
424(e) of the Code.
(t) "Plan" means this 1990 Stock Option Plan.
(u) "SAR" means a stock appreciation right granted pursuant to
Section 9 below.
(v) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(w) "Subsidiary" corporation has the meaning defined in Section
424(f) of the Code.
In addition, the terms "Rule 16b-3" and "Applicable Laws", the term
"Insiders", the term "Tax Date" and the terms "Change in Control" and
"Change in Control Price", shall have the meanings set forth, respectively,
in Sections 4, 9, 10 and 12 below.
3. Stock Subject to the Plan. Subject to the provisions of Section
12 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan or for which SARs may be granted and
exercised is 51,200,000 Shares (including Shares issued under the 1981
Stock Option Plan, to which this Plan is a successor).
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.
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If an Option or SAR issued under this Plan or under the Company's 1981
Stock Option Plan should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless this Plan shall have been terminated, become
available for other Options or SARs under this Plan. 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.
4. Administration of the Plan.
(a) Composition of Administrator.
(1) 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 ("Rule 16b-3"), and by the legal requirements relating
to the administration of stock plans such as the Plan, if any, of
applicable securities laws, California corporate law and the Code
(collectively, "Applicable Laws"), 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.
(2) Administration with respect to Directors and
Officers. With respect to grants and awards to Employees who are also
Officers or Directors of the Company, the Plan may be administered by (A)
the Board, if the Board may administer the Plan in compliance with Rule 16b-
3 as it applies to a plan intended to qualify thereunder as a discretionary
grant or award plan, or (B) a Committee designated by the Board to
administer the Plan, which Committee shall be constituted (I) in such a
manner as to permit the Plan and grants and awards thereunder to comply
with Rule 16b-3 as it applies to a plan intended to qualify thereunder as a
discretionary grant or award plan and (II) in such a manner as to satisfy
the Applicable Laws.
(3) Administration with respect to Other Persons.
With respect to grants and awards to Employees who are neither Directors
nor Officers of the Company, the Plan may be administered by (A) the Board
or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws.
(4) General. Once a Committee has been appointed
pursuant to subsection (2) or (3) of this Section 4(a), such Committee
shall continue to serve in its designated capacity until otherwise directed
by the Board. From time to time the Board may increase the size of any
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill
vacancies (however caused) and remove all members of a Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee appointed under subsection
(2) to the extent permitted by Rule 16b-3 as it applies to a plan intended
to qualify thereunder as a discretionary grant or award plan.
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(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 of the
Common Stock in accordance with Section 2(l) of the Plan; (ii) to
determine, in accordance with Section 8(a) of the Plan, the exercise price
per Share of Options and SARs to be granted; (iii) to determine the
Employees to whom, and the time or times at which, Options and SARs shall
be granted and the number of Shares to be represented by each Option or SAR
(including without limitation whether or not a corporation shall be
excluded from the definition of Affiliated Company under Section 2(b));
(iv) to interpret the Plan; (v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or SAR granted
hereunder (including, but not limited to, any restriction or limitation, or
any vesting acceleration or waiver of forfeiture restrictions regarding any
Option or SAR and/or the Shares relating thereto, based in each case on
such factors as the Administrator shall determine, in its sole discretion);
(vi) to approve forms of agreement for use under the Plan; (vii) to
prescribe, amend and rescind rules and regulations relating to the Plan;
(viii) to modify or amend each Option or SAR (with the consent of the
Optionee) or accelerate the exercise date of any Option or SAR; (ix) to
reduce the exercise price of any Option or SAR to the then current Fair
Market Value if the Fair Market Value of the Common Stock covered by such
Option or SAR shall have declined since the date the Option or SAR was
granted; (x) to authorize any person to execute on behalf of the Company
any instrument required to effectuate the grant of an Option or SAR
previously granted by the Administrator; and (xi) to make all other
determinations deemed necessary or advisable for the administration of the
Plan.
(c) Effect of Decisions by the Administrator. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility. Options and SARs may be granted only to Employees.
An Employee who has been granted an Option or SAR may, if he or she is
otherwise eligible, be granted an additional Option or Options, SAR or
SARs. Each Option shall be evidenced by a written Option agreement, which
shall expressly identify the Options as Incentive Stock Options or as
Nonstatutory Stock Options, and which shall be in such form and contain
such provisions as the Administrator shall from time to time deem
appropriate. However, notwithstanding such designation, to the extent that
the aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options and options granted under other plans
of the Company or any Parent or Subsidiary that are designated as incentive
stock options are exercisable for the first time by an Optionee during any
calendar year exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of the preceding sentence, (i)
Options shall be taken into account in the order in which they were
granted, and (ii) the Fair Market Value of the Shares shall be determined
as of the time the Option or other incentive stock option with respect to
such Shares is granted. Without limiting the foregoing, the Administrator
may, at any time, or from time to time, authorize the Company, with the
consent of the respective recipients, to issue new Options or Options in
exchange for the surrender and cancellation of any or all outstanding
Options, other options, SARs or other stock appreciation rights.
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Neither the Plan nor any Option or SAR agreement shall confer upon any
Optionee any right with respect to continuation of employment by the
Company (or any Parent, Subsidiary or Affiliated Company), nor shall it
interfere in any way with the Optionee's right or the right of the Company
(or any Parent, Subsidiary or Affiliated Company) to terminate the
Optionee's employment at any time or for any reason.
6. Term of Plan. The Plan shall become effective upon its adoption
by the Board or its approval by vote of the holders of a majority of the
outstanding Shares of the Company entitled to vote on the adoption of the
Plan, whichever is earlier. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be ten (10) years
from the date of grant thereof or such shorter term as may be provided in
the Option agreement. However, 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 voting
power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant
thereof or such shorter time as may be provided in the Option agreement.
8. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the Shares
issuable pursuant to an Option shall be such price as is determined by the
Administrator, but shall in no event be less than 100% of the Fair Market
Value of Common Stock, determined as of the date of grant of the Option.
In the event that the Administrator shall reduce the exercise price, the
exercise price shall be no less than 100% of the Fair Market Value as of
the date of that reduction. In no event shall the per Share exercise price
be less than 110% of the Fair Market Value per Share as of the date of
grant in the case of an Incentive Stock Option granted to an Optionee who,
immediately before the grant of such Option, owns Shares representing more
than 10% of the voting power or value of all classes of stock of the
Company or any Parent or Subsidiary.
(b) Method of Payment. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may
consist of (i) cash, (ii) check, (iii) promissory note, (iv) other Shares
which (x) in the case of Shares acquired upon exercise of an Option, have
been owned by the Optionee for more than six (6) months on the date of
surrender, and (y) 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) delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds required to pay the exercise
price, (vi) if the Optionee is subject to Section 16 of the Exchange Act,
by delivering an irrevocable subscription agreement for the Shares which
irrevocably obligates the Optionee to take and pay for the Shares not more
than twelve (12) months after the date of delivery of the subscription
agreement, or (vii) any combination of the foregoing methods of payment
and/or any other consideration or method of payment as shall be permitted
under applicable corporate law.
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9. 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 an SAR; provided, however, that such limit shall not restrict
the exercisability of the related Option.
(ii) When an SAR is exercised, the related Option, to the
extent surrendered, shall no longer be exercisable.
(iii) An 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.
(iv) An 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 an SAR.
(ii) SARs shall be exercisable, in whole or in part, at such
times as the Administrator shall specify in the Optionee's SAR
agreement.
(c) Form of Payment. The Company's obligation arising upon the
exercise of an 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 an SAR shall
be valued at their Fair Market Value as of the date of exercise.
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(d) Rule 16b-3. SARs granted to persons who are subject to
Section 16 of the Exchange Act ("Insiders") shall contain such additional
restrictions as may be required to be contained in the plan or SAR
agreement in order for the SAR to qualify for the maximum exemption
provided by Rule 16b-3.
10. Method of Exercise.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
or SAR granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator and as shall be permissible
under the terms of the Plan.
An Option or SAR shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with
the terms of the Option or SAR by the person entitled to exercise the
Option or SAR and full payment for the Shares with respect to which the
Option is exercised has been received by the Company. Full payment may, as
authorized by the Administrator (and, in the case of an Incentive Stock
Option, determined at the time of grant) and permitted by the Option
agreement, consist of any consideration and method of payment allowable
under Section 8(b) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, 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. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 12 of the Plan. An
Option or SAR may not be exercised with respect to a fraction of a Share.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter shall be 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 an 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) Rule 16b-3. Options and SARs granted to Insiders must
comply with Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to be contained in the Plan or
the agreement to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
(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.
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(d) Death of Optionee. In the event of the death of an
Optionee:
(1) Who is at the time of death an Employee and who shall
have been in Continuous Status as an Employee since the date of grant
of the Option, 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
(2) Within ninety (90) days after the termination of
Continuous Status as an Employee, 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 had
accrued at the date of 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.
(e) Stock Withholding to Satisfy Withholding Tax Obligations.
When an Optionee incurs tax liability in connection with the exercise of an
Option or SAR, 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 (including, at the election of the
Optionee, any additional amount which the Optionee desires to have withheld
in order to satisfy in whole or in part the Optionee's full estimated tax
in connection with the exercise) 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, if any, that number of Shares having a
Fair Market Value equal to the amount required to be withheld (and any
additional amount desired to be withheld, as aforesaid). 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;
(ii) once made, the election shall be irrevocable as to the
particular Shares of the Option or SAR as to which the election is made
unless revocation of the election is permitted by Rule 16b-3 and the Code;
and
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(iii) 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 or SAR
is exercised but such Optionee shall be unconditionally obligated to tender
back to the Company the proper number of Shares on the Tax Date.
11. Non-Transferability of Options. Options and SARs 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 I of the Employee Retirement Income Security Act, or the rules
thereunder. The designation of a beneficiary by an Optionee or holder of
an SAR does not constitute a transfer. An Option or an SAR may be
exercised, during the lifetime of the Optionee or SAR holder, only by the
Optionee or SAR holder or by a transferee permitted by this Section 11.
12. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of Shares covered by each
outstanding Option and SAR, and the number of Shares which have been
authorized for issuance under the Plan but as to which no Options or SARs
have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option or SAR, as well as the price per
Share covered by each such outstanding Option or SAR, shall be
proportionately adjusted for any increase or decrease in the number of
issued Shares 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 aggregate number of issued Shares 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 Administrator, 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 subject to an Option or SAR.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, all outstanding Options and SARs
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 or SAR shall terminate as of a date fixed by the Administrator
and give each Optionee the right to exercise his or her Option or SAR as to
all or any part of the Optioned Stock or SAR, including Shares as to which
the Option or SAR would not otherwise be exercisable.
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<PAGE>
(c) Sale of Assets or Merger. Subject to the provisions of
paragraph (d) hereof, in the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding Option and SAR
shall be assumed or an equivalent option or stock appreciation right shall
be substituted by such successor corporation or 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
or SAR as to all of the Optioned Stock, including Shares as to which the
Option or SAR would not otherwise be exercisable. If the Administrator
makes an Option or SAR fully exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Company shall
notify the Optionee that the Option or SAR shall be fully exercisable for a
period of thirty (30) days from the date of such notice, and the Option or
SAR will terminate upon the expiration of such period. For purposes of
this paragraph, an Option granted under the Plan shall be deemed to be
assumed if, following the sale of assets or merger, the Option confers the
right to purchase, for each Share of Optioned Stock subject to the Option
immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale
of assets or merger by holders of Common Stock for each Share held on the
effective date of the transaction (and if such 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 sale of assets or merger was not solely
Common Stock of the successor corporation or its parent, the Administrator
may, with the consent of the successor corporation and the participant,
provide for the per share consideration to be received upon exercise of the
Option 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 sale of assets or merger.
(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:
(1) Any Options and SARs 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
(2) The value of all outstanding Options and SARs shall,
unless otherwise determined by the Administrator at or after grant, be
cashed-out. The amount at which such Options and SARs 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 or SAR. 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 or SAR by bequest or inheritance.
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(e) Definition of "Change in Control". For purposes of this
Section 12, 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 12,
"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.
13. Time of Granting Options and SARs. The date of grant of an
Option or SAR shall, for all purposes, be the date on which the
Administrator makes the determination granting such Option or SAR. Notice
of the determination shall be given to each Employee to whom an Option or
SAR is so granted within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan, as it may deem advisable; provided
that, to the extent necessary and desirable to comply with Rule 16b-3 or
with Section 422 of the Code (or any other Applicable Law), the Company
shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as is required.
(b) Effect of Amendment or Termination. Any such amendment,
alteration, suspension or termination of the Plan shall not impair the
rights of any Optionee or SAR holder under any grant theretofore made
without his or her consent. Such Options and SARs shall remain in full
force and effect as if this Plan had not been amended or terminated.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an Option or SAR unless the exercise of such Option or SAR
and the issuance and delivery of such Shares pursuant thereto shall comply
with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock
exchange or quotation system upon which the Shares may then be listed or
quoted, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
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As a condition to the exercise of an Option or SAR or the
issuance of Shares upon exercise of an Option or SAR, the Company may
require the person exercising such Option or SAR 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 by any of the aforementioned relevant provisions of law.
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 non-
issuance or sale of such Shares as to which such requisite authority shall
not have been obtained.
16. 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.
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EXHIBIT 10.A.6
APPLE COMPUTER, INC.
EMPLOYEE STOCK PURCHASE PLAN
(as amended through December 6, 1995)
The following constitute the provisions of the Employee Stock Purchase
Plan (herein called the "Plan") of Apple Computer, Inc. (herein called the
"Company").
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its subsidiaries with an opportunity to purchase Common Stock
of the Company through payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986. The provisions of the
Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Common Stock" shall mean the Common Stock, no par value,
of the Company.
(c) "Company" shall mean Apple Computer, Inc., a California
corporation.
(d) "Compensation" shall mean all regular straight time
earnings, payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses and commissions (except to the extent that the
exclusion of any such items is specifically directed by the Board or its
committee).
(e) "Designated Subsidiaries" shall mean the Subsidiaries which
have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(f) "Employee" means any person, including an officer, who is
customarily employed for at least twenty (20) hours per week and more than
five (5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(g) "Plan" shall mean this Employee Stock Purchase Plan.
(h) "Section 16 Person" shall mean any person participating in
the Plan who has been designated by the Board of Directors as having
authority to carry out policy-making functions such that the person is
subject to the reporting and short-swing profit regulations of Section 16
of the Securities Exchange Act of 1934.
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(i) "Subsidiary" shall mean a corporation, domestic or foreign,
of which not less than 50% of the voting shares are held by the Company or
a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(j) "1934 Act Section 16" shall mean Section 16 of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder.
3. Eligibility.
(a) Any Employee as defined in Section 2 who shall be employed
by the Company or one of its Designated Subsidiaries on the date his or her
participation in the Plan is effective shall be eligible to participate in
the Plan, subject to the limitations imposed by Section 423(b) of the
Internal Revenue Code of 1986, as amended; provided that no Section 16
Person who has terminated his or her participation in any offering period
shall be eligible to participate in the Plan during any offering period
commencing less than six months after such election to terminate.
(b) Any provisions of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan (i) if, immediately
after the grant, such Employee would own shares and/or hold outstanding
options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of shares of the Company or
of any Subsidiary of the Company, or (ii) which permits his or her rights
to purchase shares under all employee stock purchase plans of the Company
and its Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000) of the fair market value of the shares (determined at the
time such option is granted) for each calendar year in which such stock
option is outstanding at any time.
4. Offering Dates. The Plan shall be implemented by one offering
during each six-month period of the Plan, commencing on or about January 1,
1981 and continuing thereafter until terminated in accordance with Section
19 hereof. The Board of Directors of the Company shall have the power to
change the duration of offering periods with respect to future offerings
without shareholder approval if such change is announced at least fifteen
(15) days prior to the scheduled beginning of the first offering period to
be affected.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions on the
form provided by the Company and filing it with the Company's payroll
office prior to the applicable offering date. Once filed, the subscription
agreement shall remain effective for all subsequent offering periods until
the participant withdraws from the Plan as provided in Section 10 hereof or
files another subscription agreement.
(b) Payroll deductions for a participant shall commence on the
first payroll following the commencement offering date and shall continue
at the same rate until such time as the participant withdraws from the Plan
as provided in Section 10 hereof or another subscription agreement is filed
which changes the rate of payroll deductions.
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6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each
payday during subsequent offering periods at a rate not exceeding ten
percent (10%) of the Compensation which he or she received on such payday,
and the aggregate of such payroll deductions during any offering period
shall not exceed ten percent (10%) of his or her aggregate Compensation
during said offering period.
(b) All payroll deductions made by a participant shall be
credited to his or her account under the Plan. A participant may not make
any additional payments into such account.
(c) A participant may discontinue his or her participation in
the Plan as provided in Section 10, or may lower, but not increase, the
rate of his or her payroll deductions (within the limitations set forth in
subsection (a) above) during an offering period by completing and filing
with the Company a new authorization for payroll deductions. The change in
rate shall be effective within fifteen (15) days following the Company's
receipt of the new authorization; except in the case of a change in the
rate of participation of a Section 16 Person, in which case the change
shall be effective no earlier than the offering period commencing on or
after the end of such fifteen-day period.
(d) A participant may increase his or her rate of payroll
deductions (within the limitations set forth in subsection (a) above) to be
effective for the next offering period by completing and filing with the
Company a new authorization for payroll deductions at least fifteen (15)
days before the beginning of said offering period.
7. Grant of Option.
(a) At the beginning of each six-month offering period, each
eligible Employee participating in the Plan shall be granted an option to
purchase (at the per share option price) up to a number of shares of the
Company's Common Stock determined by dividing the Employee's accumulated
payroll deductions (not to exceed an amount equal to ten percent (10%) of
his or her Compensation during the applicable offering period) by the lower
of (i) eighty-five percent (85%) of the fair market value of a share of the
Company's Common Stock on the date of the commencement of said offering
period, or (ii) eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the date of the expiration of the
offering period, subject to the limitations set forth in Sections 3(b) and
12 hereof, and subject to the following limitation: The number of shares
of the Company's Common Stock subject to any option granted to an Employee
pursuant to this Plan shall not exceed two hundred percent (200%) of the
number of shares of the Company's Common Stock determined by dividing an
amount equal to ten percent (10%) of the Employee's semi-annual
Compensation as of the date of the commencement of the applicable offering
period by eighty-five percent (85%) of the fair market value of a share of
the Company's Common Stock on the date of the commencement of said offering
period. Fair market value of a share of the Company's Common Stock shall
be determined as provided in Section 7(b) herein.
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(b) The option price per share of such shares shall be the lower
of: (i) 85% of the fair market value of a share of the Common Stock of the
Company at the commencement of the six-month offering period; or (ii) 85%
of the fair market value of a share of the Common Stock of the Company at
the time the option is exercised at the termination of the six-month
offering period. The fair market value of the Company's Common Stock on a
given date shall be the mean of the reported bid and asked prices for that
date, or if the Common Stock is listed on an exchange or quoted on the
Nasdaq National Market, the closing sale price on such exchange or
quotation system for that date.
8. Exercise of Option. Unless a participant withdraws from the Plan
as provided in Section 10, his or her option for the purchase of shares
will be exercised automatically at the end of the offering period, and the
maximum number of full shares subject to option will be purchased for him
or her at the applicable option price with the accumulated payroll
deductions in his or her account. During his or her lifetime, a
participant's option to purchase shares hereunder is exercisable only by
him or her.
9. Delivery; Roll-Over of Fractional Share Interests.
(a) As promptly as practicable after the termination of each
offering, the Company shall arrange for the delivery to each participant,
as appropriate, of a certificate representing the number of full shares
purchased upon exercise of his or her option. No fractional shares shall
be issued. Any cash remaining to the credit of a participant's account
under the Plan after a purchase by him or her of shares at the termination
of each offering period which is insufficient to purchase a full share of
Common Stock of the Company subject to option shall remain in such
participant's account and shall be applied to the next succeeding offering
period unless the participant has withdrawn as to future offering periods,
in which case such cash shall be returned to said participant. Any cash
attributable to shares in excess of the number of shares subject to option
to the participant (as determined in accordance with Section 7(a) hereof)
shall be returned to the participant.
(b) A Section 16 Person purchasing shares pursuant to this Plan
in any offering period shall not directly nor indirectly sell such shares
or any beneficial interest in such shares for a period of six months
following the end of such offering period where such sale would constitute
a violation under 1934 Act Section 16.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account under the Plan at any
time prior to the end of the offering period by giving written notice to
the Company. All of the participant's payroll deductions credited to his
or her account will be paid to him or her promptly after receipt of his or
her notice of withdrawal and his or her option for the current period will
be automatically terminated, and no further payroll deductions for the
purchase of shares will be made during the offering period.
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(b) Upon termination of the participant's employment prior to
the end of the offering period for any reason, including retirement or
death, the payroll deductions credited to his or her account will be
returned to him or her or, in the case of his or her death, to the person
or persons entitled thereto under Section 14, and his or her option will be
automatically terminated.
(c) In the event an Employee fails to remain in the continuous
employ of the Company or one of its Designated Subsidiaries for at least
twenty (20) hours per week during the offering period in which the employee
is a participant, he or she will be deemed to have elected to withdraw from
the Plan and the payroll deductions credited to his or her account will be
returned to him or her and his or her option terminated.
(d) Except as provided in Section 3(a) with respect to Section
16 Persons, a participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering
or in any similar plan which may hereafter be adopted by the Company.
However, a new subscription agreement will have to be filed in such case.
11. No Interest. No interest shall accrue on the payroll deductions
of a participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be eleven
million five hundred thousand (11,500,000) shares, subject to adjustment
upon changes in capitalization of the Company as provided in Section 18.
The shares to be sold to participants under the Plan may, at the election
of the Company, be either treasury shares or shares authorized but
unissued. If at the termination of any offering period the total number of
shares which would otherwise be subject to options granted pursuant to
Section 7(a) hereof exceeds the number of shares then available under the
Plan (after deduction of all shares for which options have been exercised
or are then outstanding), the Company shall promptly notify the
participants, and shall, in its sole discretion (i) make a pro rata
allocation of the shares remaining available for option grant in as uniform
a manner as shall be practicable and as it shall determine to be equitable,
(ii) terminate the offering period without issuance of any shares or (iii)
obtain shareholder approval of an increase in the number of shares
authorized under the Plan such that all options could be exercised in full.
The Company may delay determining which of (i), (ii) or (iii) above it
shall decide to effect, and may accordingly delay issuances of any shares
under the Plan, for such time as is necessary to attempt to obtain
shareholder approval of any increase in shares authorized under the Plan.
The Company shall promptly notify participants of its determination to
effect (i), (ii) or (iii) above upon making such decision. A participant
may withdraw all but not less than all the payroll deductions credited to
his or her account under the Plan at any time prior to such notification
from the Company. In the event the Company determines to effect (i) or
(ii) above, it shall promptly upon such determination return to each
participant all payroll deductions not applied towards the purchase of
shares.
(b) The participant will have no interest or voting right in
shares covered by his or her option until such option has been exercised.
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(c) Shares to be delivered to a participant under the Plan will
be registered in the name of the participant or in the name of the
participant and the spouse of the participant.
13. Administration. The Plan shall be administered by a committee of
members of the Board of Directors, which committee shall be appointed by
the Board. The administration, interpretation or application of the Plan
by such committee shall be final, conclusive and binding upon all
participants. Members of the committee shall not be permitted to
participate in the Plan.
14. Designation of Beneficiary.
(a) A participant may indicate in his or her subscription
agreement, or may file a written designation of beneficiary with respect
to, a person who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's
death subsequent to the end of the offering period but prior to delivery to
him or her of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's
death prior to the end of the offering period.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under
the Plan who is living at the time of such participant's death, the Company
shall deliver such shares and/or cash to the executor or administrator of
the estate of the participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any one
or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as
the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an
option or to receive shares under the Plan may be assigned, transferred,
pledged or otherwise disposed of in any way (other than by will, the laws
of descent and distribution or as provided in Section 14 hereof) by the
participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such
act as an election to withdraw funds in accordance with Section 10.
16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
17. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to
participating Employees semi-annually within a reasonable period of time
following the stock purchase date, which statements will set forth the
amounts of payroll deductions, the per share purchase price, the number of
shares purchased, the amount of cash rolled over into the next offering
period and the remaining cash balance, if any.
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18. Adjustments Upon Changes in Capitalization. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each option under the Plan which has not yet been
exercised and the number of shares of Common Stock which have been
authorized for issuance under the Plan but have not yet been placed under
option (collectively, the "Reserves"), as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split
or the payment of a stock dividend (but only on the Common Stock) or any
other increase or decrease in the number of 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
issue by the Company of shares of stock of any class, or securities
convertible into or exercisable for 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.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option under
the Plan, in the event that the Company effects one or more
reorganizations, recapitalizations, rights offerings or other increases or
reductions of shares of its outstanding Common Stock, and in the event of
the Company being consolidated with or merged into any other corporation.
19. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights
of any participant under any option theretofore granted without his or her
consent.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to
comply with Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended, or with Section 423 of the Internal Revenue Code of 1986,
as amended (or any successor statute or rule or other applicable law, rule
or regulation), such shareholder approval to be obtained in such a manner
and to such a degree as is required by the applicable law, rule or
regulation.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect options already granted hereunder
and such options shall remain in full force and effect as if this Plan had
not been amended or terminated.
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20. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt
thereof. All notices or other communications to a participant by the
Company shall be deemed to have been duly given when sent by the Company by
regular mail to the address of the participant on the human resources
records of the Company or when posted on Applelink or any substitute
general electronic messaging and bulletin board system utilized by the
Company.
21. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange or automated quotation system
upon which the shares may then be listed or quoted, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the
time of any such exercise that (i) 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 by any of the aforementioned applicable provisions of law, and
(ii) in the case of a Section 16 Person, (a) the acquisition of such shares
will not cause a violation of the 1934 Act Section 16 and (b) he or she
will not directly or indirectly sell such shares or any beneficial interest
in such shares for a period of six months following the end of such
offering period where such sale would constitute a violation of the 1934
Act Section 16.
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EXHIBIT 10.A.7
FY96
SENIOR/EXECUTIVE INCENTIVE BONUS PLAN
PURPOSE
The purpose of the Senior/Executive Incentive Bonus Plan "The Plan" is
to focus the efforts of Senior Management towards predetermined,
specific goals and objectives which are of critical importance to the
success of the organization.
The program specifically:
- encourages participants to achieve outstanding results toward company
and individual objectives,
- strengthens the ability of the organization to attract and retain high
caliber,key management personnel, and
- provides a leveraged compensation program that is based on performance
towards objectives, with superior performance resulting in aggressive
compensation levels.
ELIGIBILITY
The following employees are eligible to participate in the
Senior/Executive Bonus Plan:
- Chief Executive Officer - Vice Presidents
- Geography Presidents - Senior Directors
- Senior Vice Presidents - Directors
Full year participants in the Senior/Executive Incentive Bonus Plan
may not participate in other bonus plans without the approval of the
Division President and the HR Director. However, nominal gift
certificates and awards are acceptable, provided they are less than
$500.
INCENTIVE BONUS GUIDELINES
Bonus targets for eligible participants in the Senior/Executive
Incentive Bonus Plan will be set individually and expressed as a
percent of base salary as of the beginning of the fiscal year
according to salary grade. If an individual's salary grade changes
between the beginning and the end of the year, the bonus target may be
adjusted on a prorated basis (see Administrative Procedures).
PERFORMANCE MEASUREMENTS
There are two main components used to determine the bonus payout
amounts after the end of the applicable biannual payment period (see
Bonus Payouts): the Financial Performance Measurements and the
Individual Performance Measurements . Details of these measurements
are described below.
- Financial Performance Measurements
The Financial Performance Measurements consist of Market Share,
Operating Margin, Inventory Turns, Day Sales Outstanding, Corporate
Return on Capital Employed (ROCE), and Time to Market. All Plan
participants will be measured on either Corporate or Division
Business Measurements as described in the Weighting of Performance
Measurements section.
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- Individual Performance Measurements
The Individual Performance Measurement is based on the participant's
performance against two to four objectives that are aligned with
Corporate/Division strategic objectives.
Weighting of Performance Measurements
The annual bonus target for Vice Presidents and above is weighted 100%
on Financial Performance Measurements. The annual bonus target for
Directors is weighted 70% on Financial Performance Measurements and
30% on Individual Performance Measurements. These weightings are
shown in the table below. The financial results used in determining
financial performance are based on the participant's position and area
of responsibility and will be either a Corporate or Division
measurement. Functional Staff (e.g., Finance, Human Resources,
Information Systems and Legal) within a Division will be measured on
the overall Division's Business Measurements. Other line or staff
participants within a division may be measured on the Division's
Business Measurements which are specific to their area of
responsibility (e.g., Entry Mac Products, Power Books, Imaging, etc.).
Details of the weighting of Financial and Individual Performance
Measurements are as follows:
FINANCIAL PERFORMANCE MEASUREMENTS (1) TOTL TOTL
% %
Mkt Corp Oper Inv DaySales Time Fin Ind
Shr ROCE Mar Turns O/S To Perf Perf
Mkt Meas Meas
Apple Leadership Team (ALT)
- CEO-CFO-SVPHR-General Counsel 50% 50% 100%
- WWOps - Head 50% 50% 100%
- Research & Development - Head 50% 50% 100%
- GEO Pres. (Americas,Eur,Pac) 50% 50% 100%
Vice Presidents (Corp. & Div.)
- Corporate Staff - All VP's 50% 50% 100%
- WWOps - All VP's (2) 40% 30% 30% 100%
- R & D - All VP's 40% 20% 40% 100%
- Entertainment & NM - All VP's 50% 50% 100%
- GEO VP's (Americas,Eur,Pac) 50% 20% 15% 15% 100%
Directors & SIA's (Corp. & Div.)
- Corp Staff - All Dirs & SIA's 35% 35% 70% 30%
- WWOps - All Dirs & SIA's (2) 30% 20% 20% 70% 30%
- R & D - All Dirs & SIA's 30% 15% 25% 70% 30%
- Ent & NM - All Dirs & SIA's 35% 35% 70% 30%
- GEO Dirs&SIA's(Amer,Eur,Pac) 30% 20% 10% 10% 70% 30%
(1)Financial Performance Measurements may be based on Worldwide,
Geography, Regional or Functional levels depending upon the area
of responsibility. For example, Market Share Measurements will be
at a Worldwide, Geography, Regional or Country level. Operating
Margin may be at a Functional Level such as Mac Desktops or
Servers and Technology, etc.
(2)WWOPS will be measured on Corporate or Geography Measurements.
Geo. Measurements apply to those with specific geographic
responsibility (e.g. Cork will use Europe Measurements,
Singapore will use Pacific Measurements, and Fountain and
Sacramento will use Americas Measurements).
Any exceptions to using these financial performance measurements must
be approved by the Senior Vice President of Human Resources.
DETAILS OF AWARD DETERMINATION:
Target payouts (less deductions and withholdings) will be based on the
expectation of meeting financial and, if applicable, individual
performance goals. If the thresholds are met, period-end payouts will
be calculated in each segment as described below.
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FINANCIAL PERFORMANCE MEASUREMENTS
- Corporate Performance Measurements
Corporate Performance Measurements will be Market Share, Return
on Capital Employed (ROCE) and Inventory Turns. If the threshold
is met, the bonus target will be multiplied by a percentage from
50% through 175% depending on Corporate Performance. If the
threshold is not met, there will be no payout for that performance
segment.
- Division/Geography Performance Measurements
Division/Geography Performance Measurements will be
Market Share, Operating Margin, Inventory Turns, Day Sales
Outstanding, and Time to Market. If the threshold is met, the
bonus target will be multiplied by a minimum percentage which
varies by Performance Measurement (see Payout Table in each
segment) through a maximum percentage of 175% depending on
Division/Geography Performance. If the threshold is not met, there
will be no payout for that performance segment. Plan numbers and
actual performance will be monitored by the Worldwide Planning
Group and the Worldwide Market Tracking Group.
If for any reason there is a significant change in a
Division's/Geography's plan during the plan payment period, upon
joint recommendation of Human Resources and Worldwide Planning or
Worldwide Market Tracking and with the approval of the Chief
Executive Officer, plan targets may be changed or another
alternative may be implemented.
If for any reason, including reorganization, a Division/Geography
Business Measurement is no longer applicable for the entire payment
period, the Division Business Measurement will be replaced by the
higher Division, Geography or Corporate Business Measurement.
PAYOUT TABLES:
The bonus payouts at various achievements to plan for the Financial
Measures are shown in the following tables. Actual payouts in between
the values shown in the tables will be calculated on the actual
incremental % achievement to plan. With the exception of Market Share
and Time to Market, Accelerators and Decelerators are used when
achievement to plan is above or below 100%. For Market Share and Time
to Market, Accelerators and Decelerators are used when achievement to
plan is above or below 110%.
Market Share Segment
This Segment will measure Market Share Percentage Achievement of
Reported Market Share Gain versus Target Market Share Gain as shown in
the Market Share Payout Table below:
FIRST HALF FY96 Market Share Payout Table
% Achievement
Reported Market Share % %
Gain vs. Target Bonus Per
Market Share Gain Payout Point
MAXIMUM 150% 175.0% 1.30%
140% 162.0% 1.30%
130% 149.0% 1.30%
120% 136.0% 1.30%
110% 123.0% 1.30%
PLAN 100% 110.0% Accelerators
Decelerators
90% 103.3% 0.67%
80% 96.7% 0.67%
70% 90.0% 0.67%
60% 83.3% 0.67%
50% 76.7% 0.67%
40% 70.0% 0.67%
30% 63.3% 0.67%
20% 56.7% 0.67%
THRESHOLD 10% 50.0% 0.67%
Below 10% 0.0%
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First Half FY96
Supplemental Market Share Payout Table
(This table to be used only for Target Market Share Gain Goals of Less
Than 0.20 of a point.)
Bonus
Market Share Points Payout
MAXIMUM 0.50 0.40 0.30 0.20 0.10 0.00 -0.10 Or Less 175.00%
0.40 0.30 0.20 0.10 0.00 -0.10 -0.20 158.75%
0.30 0.20 0.10 0.00 -0.10 -0.20 -0.30 142.50%
0.20 0.10 0.00 -0.10 -0.20 -0.30 -0.40 126.25%
PLAN 0.10 0.00 -0.10 -0.20 -0.30 -0.40 -0.50 110.00% Accelerators
Decelerators
0.00 -0.10 -0.20 -0.30 -0.40 -0.50 -0.60 93.75%
THRESHOLD -0.02 -0.12 -0.22 -0.33 -0.44 -0.55 -0.66 80.00%
Below -0.02 -0.12 -0.22 -0.33 -0.44 -0.55 -0.66 0.00%
For example, a country has a Target Market Share Goal of -0.10 and
achieves a Reported Market Share Gain above target of 0.05. The Bonus
Payout percentage would be 134.375%.
Apple Market Share Targets
Apple market share targets will be based on Apple's semi-annual market
share goals as approved by Apple's Board of Directors preceding the
measurement period. The Apple Leadership Team will be responsible for
allocating overall targets to individual countries/regions.
Reported Apple Market Share Gain (Loss)
Market share gain or (loss) will be based on Apple Market Share data
for the total first half fiscal year 1995 (Q1 and Q2 FY95) as compared
to Apple Market Share data for the total first half fiscal year 1996
(Q1 and Q2 FY96) as reported by Apple's Market Tracking Group. The
Apple Market Share Gain or (Loss) will be the difference between the
Apple Market Share over the two periods (first half FY95 versus first
half FY96). Apple Market Share is defined as Apple's actual CPU's
(including servers) sold during the Bonus Metric Measurement period
divided by the reported market CPU's (including servers) sold during
the same period (as tracked by the Corporate Market Tracking group).
For examples of Market Share calculations refer to the Reported Market
Share section in the Market Share Examples table below.
Market share gain or (loss) calculations for countries or regions that
are not measured quarterly by Apple's Market Tracking Group (all
countries/regions excluding U.S., Japan, and Western European
countries) will be sized by Apple's Market Tracking Group based on the
most recent market data available. If there is no new data available,
the original market size will be used to calculate the reported Market
Share.
Apple Total Geography Market Share
Apple Total Geography Market Share is a roll-up of all the countries
and/or regions market share numbers within the total geography being
measured.
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Time To Market Segment
This segment will measure achievement of product delivery commitments
in the Research & Development Organization. Time to Market is defined
as the Golden Master Target (software) or the Introduction Date
(hardware) as defined and approved through the Apple New Product
Production (ANPP) Product Proposal Review (PPR). If the achievement is
8 or more weeks ahead of schedule, the maximum bonus of 175% is
payable. If the achievement is 8 or more weeks behind schedule, no
bonus is payable. The bonus payable will be determined based on the
following table.
Time To Market Payout Table (Division Only)
ACHIEVEMENT
# WEEKS TO % %
TARGET PAYOUT PER WEEK
MAXIMUM > = 8 175.0% 8.125%
7 166.9% 8.125%
6 158.8% 8.125%
# Weeks 5 150.6% 8.125%
Ahead Of - - - - -> 4 142.5% 8.125%
Target Date 3 134.4% 8.125%
2 126.3% 8.125%
1 118.1% 8.125%
PLAN 0 110% Accelerators
Decelerators
- 1 96.1% 13.929%
# Weeks - 2 82.1% 13.929%
Slipped From - - - -> - 3 68.2% 13.929%
Target Date - 4 54.3% 13.929%
- 5 40.4% 13.929%
- 6 26.4% 13.929%
THRESHOLD - 7 12.5% 13.929%
< = - 8 0.0%
NOTE: Actual payouts in between the values shown will be calculated on
the actual incremental % achievement to plan based on a seven day
week. For example, if achievement is 1 day ahead of schedule, the
payout would be 111.16%.
Corporate ROCE and Operating Margin Segments
- Corporate ROCE Segment
This segment measures Return on Capital Employee achieved to Plan.
ROCE is defined as Operating Profit less Cash Taxes Paid, divided
by Average Capital Employed (Total Assets excluding Cash, less Current
Liabilities (excluding Short Term Notes Payable) plus Capitalized
Operating Leases).
- Operating Margin Segment
This segment measures Operating Margin achieved to Plan. Operating
Margin is defined as Gross Margin Less Operating Expenses.
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Once minimum thresholds are met, bonus payouts for both Corporate ROCE
and Operating Margin can range from 50% to 175% based on the following
payout table:
Corporate ROCE and Operating Margin Payout Table
% To % Bonus % Per Each
Plan Payout Point
MAXIMUM 125% 175% 3.00%
120% 160% 3.00%
115% 145% 3.00%
110% 130% 3.00%
105% 115% 3.00%
PLAN 100% 100% Accelerators
Decelerators
95% 75% 5.00%
THRESHOLD 90% 50% 5.00%
< 90% 0%
Inventory Turns Segment
This segment measures Inventory Turns achieved to Plan. Inventory
Turns is defined as the number of times inventory is converted into
cost of goods sold (excluding all service business). Plan
participants employed in a worldwide operations role with worldwide
responsibilities are measured on worldwide inventory turns. Most
participants employed in a Geography are measured on Geography
inventory turns. Regional operations groups and manufacturing site
participants are measured on regional inventory turns. Please refer
to the Glossary of Terms section of this document for more details of
how the Inventory Turns metric is defined. Once the minimum threshold
is met, bonus payouts for Inventory Turns can range from 50% to 175%
based on the following payout table:
Inventory Turns Payout Table
% To % Bonus % Per Each
Plan Payout Point
MAXIMUM 123% 175% 3.26%
115% 150% 3.26%
105% 116% 3.26%
PLAN 100% 100% Accelerators
Decelerators
95% 75% 5.00%
THRESHOLD 90% 50% 5.00%
< 90% 0%
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Day Sales Outstanding Segment
This segment measures Day Sales Outstanding (DSO) achieved to Plan.
Day Sales Outstanding is defined as the measure for average length of
time Apple must wait after making a sale before receiving payment.
Once the minimum threshold is met, bonus payouts for DSO can range
from 50% to 175% based on the following payout table:
Day Sales Outstanding Payout Table
% To % Bonus % Per Each
Plan Payout Point
MAXIMUM 115% 175% 5.0%
110% 150% 5.0%
105% 125% 5.0%
PLAN 100% 100% Accelerators
Decelerators
95% 75% 5.0%
THRESHOLD 90% 50% 5.0%
< 90% 0%
INDIVIDUAL PERFORMANCE MEASUREMENT (Directors only):
The Individual Performance measurement is based on the participant's
performance against two to four key strategic, predetermined
objectives. The Individual Performance Measurement objectives are
determined jointly by the participant and the supervising manager.
Each goal is weighted as to its importance. The overall weighting
must equal 100%. Individual performance is determined by the
supervising manager and is subject to approval by the Compensation
Committee of the Board of Directors before any actual payout is
issued. Individual performance is measured as follows:
% of Individual
Achievement Target Award Paid
CONSISTENTLY EXCEEDED Individual Performance Goals 121% - 150%
CONSISTENTLY MET ALL Individual Performance Goals 100% - 120%
MET MOST Individual Performance Goals 80% - 99%
DID NOT MEET Individual Performance Goals No Award Paid
The overall assessment of the individual performance segment is
calculated by multiplying the targeted dollar amount by the %
achievement for each category as shown in the example below:
Target Bonus = $40,000
Individual Performance segment = $12,000 (30% of Target Bonus)
Weighting is calculated as shown below for each of the performance areas
Overall individual performance weighting of 103% = a payout of $12,360
Individual Individual Individual
Weighting Achievement X Target = Payout
Quality Management 40% Met Most 85%
Customer Satisfaction 30% Exceeded 130%
Employee Alighment 30% Met all 100%
Overall 100% 103% X $12,000 = $12,360
The percentage award achieved under the Individual Performance
Measurement is then applied to the portion of the Target Bonus, i.e.
30%, to determine the actual Individual Performance portion of the
award.
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The target will be multiplied by a percentage up to a maximum of 150%
depending on the supervising manager's overall assessment of the
individual's performance against objectives. Ratings of all
participants will then be reviewed at higher levels of management
within the organization to ensure equity. This information will then
be reviewed by the Compensation Committee of the Board of Directors
and, depending on overall financial performance, individual percentage
payouts may then be adjusted.
If the Individual Performance portion of the bonus is determined to be
zero, no Financial portion of the bonus will be payable. Exceptions
to zero payment for Individual Performance below 80%, and/or paying
the Financial portion of the bonus when the Individual Performance is
below 80%, must be approved by the Division Head or Sr. Vice
President, and the Division Human Resources Manager. (Note: Also see
the Corrective Action/Disciplinary Situations section.)
BONUS PAYOUT
Senior/Executive Incentive Bonus Plan payouts (less deductions and
withholdings) will be paid biannually. The first payment will be
based on "1st Half" (Q1 and Q2) Financial Performance results and will
be paid as soon as practicable, usually during May/June after the
close of Q2. The second payment will be based on "2nd Half" (Q3 and
Q4) Financial Performance results as well as Individual Performance
results for the entire fiscal year (Q1 through Q4) and will be paid as
soon as practicable, usually during November/December following the
end of the plan year. Both awards are paid out of the
Senior/Executive Bonus Pool Fund.
There will be no Senior/Executive Incentive Bonus Plan payout on
Financial or Individual performance if there is no Corporate operating
profit or if there is a Corporate operating loss. In either case, the
CEO has the option to recommend to the Compensation Committee of the
Board of Directors appropriate individual awards.
ADMINISTRATIVE PROCEDURES
The purpose of administrative procedures is to provide for consistency
of administration of the incentive plans. The following guidelines
apply only when previously stated plan requirements have been met.
Foreign Exchange
Non U.S. operations are measured on a local currency basis. Foreign
currency Plan rates will be used to determine both the Planned and
actual performance of the entity for bonus calculation purposes.
New Hires, Promotions and Transfers
An employee who is hired, promoted or transferred into a position in
which he or she is newly eligible to become a participant may receive
a prorated award based on the months in the position (see Payout
Proration Criteria section).
Employees promoted or transferred from one eligible position into
another eligible position will require a determination of whether a
new target award and new objectives should be set. If the new target
is different, awards will be prorated based on the number of months of
service in each position during the plan year. (see Payout Proration
Criteria section).
Employees transferred into a position not eligible for participation
in the Senior/Executive Bonus Plan will receive a prorated payment at
the end of the plan year based on the number of months worked in the
eligible position. If the employee transfers during the first
biannual period, the employee will receive payment of the prorated
Financial portion of the bonus with the normal payout in May/June.
The prorated Individual portion (if applicable) will be paid at the
end of the plan year provided the participant is employed by Apple on
the last day of the year end payment period. (see next section)
Payout Proration Criteria
- New Hires and Promotions
If eligibility for participation occurs on the 1st through the 14th
of the month, any bonus payout will be based on the full month. If
eligibility for participation occurs on or after the 15th of the
month, no bonus is payable for that month.
For example, if an eligible employee is hired on March 11th, any
payout will be based on participation beginning March 1st. If the
employee is hired on March 15th, any payout will be based on
participation beginning April 1st.
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- Transfers
If a plan participant transfers from one organization to another,
the respective organizational measurement will be prorated by the
number of months the plan participant was in each organization. If
the participant transfers before the 15th of the month, credit for
that month will be assigned to the new organization. If the
participant transfers on or after the 15th of the month, credit for
that month will be assigned to the previous organization.
- Transfers between the SIA Bonus Plan and the Senior/Executive Bonus Plan
If a plan participant transfers between the SIA Bonus Plan and
Senior/Executive Bonus Plan because of a promotion, demotion or
other reason, the respective Plan measurement will be prorated by
the number of months the plan participant was in each Plan. If the
participant transfers before the 15th of the month, credit for that
month will be assigned to the new Plan. If the participant
transfers on or after the 15th of the month, credit for that month
will be assigned to the previous Plan in which the employee was a
participant.
- Ineligibility
Participants who become ineligible for participation in the Plan
before the 15th of the month, will receive no credit for that month
toward their bonus proration. Participants who become ineligible
on or after the 15th of the month will receive a full-month credit
towards their bonus proration.
Terminations
Plan participants who terminate their employment and are not employed
by Apple on the last day of the first biannual payment period are not
eligible to receive any award. If a plan participant terminates after
the close of the first biannual payment period but prior to the actual
distribution of the bonus payout such participant will be eligible to
receive the Financial portion of the bonus award with the normal
payout in May/June. They will not be eligible for the individual
portion of the bonus award, nor will they be eligible for an award for
the second biannual period. Plan participants who terminate their
employment and are not employed by Apple on the last day of the plan
year are not eligible to receive an award for the second biannual period,
nor will they be eligible for the individual portion of the award. If a
plan participant terminates after the end of the Plan Year but prior to
the actual distribution of the bonus payout such participant will be
eligible to receive a bonus plan award according to the terms of the Plan.
Rehires
Plan participants who terminate their employment during the Plan year,
and who are rehired and are employed by Apple on the last day of the
biannual payment period, are eligible to receive an award. Such an
award will be prorated to reflect only the period of time the
participant was employed by Apple and according to the above Payout
Proration Criteria measured from the most recent rehire date.
Disability or Death
Awards will normally be prorated at the end of the plan year based on
the amount of time the employee was an active participant (see Payout
Proration Criteria section). In the case of a participant's death,
any such award will be paid to the beneficiary as determined pursuant
to the participant's designation of beneficiary under the employee's
Apple life insurance plan.
Corrective Actions/Disciplinary Situations
If, during the applicable biannual bonus period or any time before the
biannual bonus has actually been paid to the employee, management has
determined that corrective action, discipline or demotion of an
employee is appropriate, management may, in its discretion and in
consultation with Human Resources, reduce or eliminate entirely the
amount of bonus the employee would otherwise be eligible to receive.
If, at the time a biannual bonus would otherwise be payable, such
corrective action, discipline or demotion is being considered but has
not yet been implemented, the entire bonus, or any portion of it, may
be withheld until a decision on such action has been finalized and
implemented.
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Other Provisions
Participation in this Plan is not an agreement (express or implied)
between the Plan participant and Apple that the participant will be
employed by Apple for any specific period of time, nor is there any
agreement for continuing or long-term employment. The Plan
participant and Apple each have the right to terminate the employment
relationship at any time and for any reason. This at-will employment
relationship can only be modified by an agreement signed by the
participant and Apple's Senior Vice President of Human Resources.
Any determination of performance, payment or other matters under this
Plan by management and/or the Board of Directors is binding on all
interested persons.
Apple Computer Inc.'s obligation to pay out a Senior/Executive
Incentive Bonus Plan award shall be unfunded and all payment of
benefits shall be made from the general assets of Apple Computer, Inc.
Title to and beneficial ownership of any assets of the 1996 Accrued
Senior/Executive Incentive Bonus Plan accounts or any other assets
which Apple Computer, Inc. may designate to pay bonuses under the Plan
shall remain in and with Apple Computer, Inc.until payment to
participants.
This summary highlights the principle features of the bonus plan, but
it does not describe every situation that can occur. Apple Computer,
Inc. retains the right to interpret, revise, modify or delete the plan
at its sole discretion at any time
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Glossary of Terms Attachment A.
- - Day Sales Outstanding: Measure For Average Length Of Time Apple
Must Wait After Making A Sale Before
Receiving Payment
- - Inventory Turns: The number of times inventory is converted
into cost of goods sold (excluding all
service business). Most participants
employed in a Geography are measured on
Geography inventory turns. Operations
groups and manufacturing site participants
in Geographies are measured on regional
inventory turns. Plan participants employed
in a worldwide operations role are measured
on worldwide inventory turns. Everyone else
in a Geography is measured on Geography
inventory turns.
Geography inventory turns
1H Turns = Standard Cost of Goods Sold for
1H divided by average gross finished goods
inventory for current & 2 prior fiscal quarter
ends. Where the standard Cost of Goods Sold is
the cost of goods sold at standard cost
excluding other cost of goods sold
(warranty, scrap, reserves etc.), and gross
finished goods inventory is finished goods
inventory at standard cost before reserves
in-transits from OEM vendors.
Regional inventory turns
1H Turns = Standard Cost of Goods Sold for
1H divided by average gross inventory for current
& 2 prior fiscal quarter ends. Where standard
Cost of Goods Sold is the cost of goods sold
at standard cost excluding other cost of
goods sold (warranty, scrap, reserves etc.),
and gross inventory is raw materials, work-
in-process, finished goods including in-
transits from OEM vendors at standard cost
before reserves.
Worldwide inventory turns
Current & prior 3 fiscal quarter's Total
Cost of Goods Sold divided by average net
inventory for current & 4 prior fiscal quarter
ends. Where total Cost of Goods Sold is the
total cost of goods sold including other cost of
goods sold (warranty, scrap, reserves etc.),
net inventory is total inventory at standard
cost after reserves.
- - Market Share Gain (Loss) The difference between Apple Market
Share for a specified period in one fiscal
year and Apple Market Share for the
corresponding period of another fiscal year.
- - Operating Margin: Gross Margin Less Operating Expenses
- - Return On Capital Employed: (ROCE) Operating Profit Less Cash Taxes
Paid Divided By Average Capital Employed
(Total Assets Excluding Cash, Less Current
Liabilities (Excluding Short Term Notes)
Plus Capitalized Operating Leases)
- - Time To Market: The Golden Master Target (software) or the
Introduction Date (hardware) as defined and
approved through the Apple New Product
Production (ANPP) Product Proposal Review
(PPR).
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EXHIBIT 10.A.19
APPLE COMPUTER, INC.
EXECUTIVE SEVERANCE PLAN
(Established Effective as of June 1, 1991)
(As Amended and Restated Effective as of January 15, 1996)
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CONTENTS
SECTION 1. ESTABLISHMENT AND PURPOSE
1.1 Establishment
1.2 Purpose
1.3 Supersession
SECTION 2. DEFINITIONS
2.1 "Apple"
2.2 "Apple Disability Plan"
2.3 "Cash Out Payment"
2.4 "Company"
2.5 "Domestic Partner"
2.6 "Early Termination Date"
2.7 "Election and Release"
2.8 "Eligible Employee"
2.9 "Employee"
2.10 "Employer Group"
2.11 "ERISA"
2.12 "Extended Benefit Coverage"
2.13 "Family Leave of Absence"
2.14 "Month of Pay"
2.15 "Notification Date"
2.16 "Participant"
2.17 "Personal Leave of Absence"
2.18 "Plan"
2.19 "Plan Year"
2.20 "Prorated Bonus"
2.21 "Regular Employee"
2.22 "Regular Salary"
2.23 "Severance Benefits"
2.24 "Severance Payment"
2.25 "Termination Date"
2.26 "Termination Notice Period"
2.27 "Years of Service"
SECTION 3. PARTICIPATION
3.1 Limited to Designated Eligible Employees
3.2 Commencement of Participation
3.3 Persons Who Shall Not Be Designated as Participants
(a) Employment Termination
(b) Resignation
(c) Written Employment Contract
(d) Redeployment or Layoff Plan
(e) Host Country
(f) Expatriate Employee
(g) Personal Leave of Absence
3.4 Termination of Participation
3.5 Ineligible for Personal Leave
3.6 Family Leave Limitations
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SECTION 4. TERMINATION NOTICE PERIOD
4.1 Term of Termination Notice Period
4.2 Suspension of Termination Notice Period
(a) Disability
(b) Temporary Assignment
(c) Restart
4.3 Extension of Termination Notice Period Under
Limited Circumstances
4.4 Continuation of Employment and Employee Benefits
During Termination Notice Period
4.5 Additional Benefits During Termination Notice
Period
4.6 Termination of Employee Benefits at End of
Termination Notice Period
SECTION 5. ELECTION TO RECEIVE SEVERANCE BENEFITS
5.1 Availability of Severance Benefits
5.2 Must Sign Election and Release
5.3 Effect of Failure To Elect Severance Benefits
SECTION 6. CASH OUT PAYMENT
6.1 Availability of Cash Out Payment
6.2 Effect of Election To Receive a Cash Out Payment
6.3 Ineligible for Rehire
6.4 Ineligible for Temporary or Contract Work
SECTION 7. AMOUNT AND PAYMENT OF BENEFITS UNDER THE PLAN
7.1 Severance Payment
7.2 Prorated Bonus
7.3 Extended Benefit Coverage
7.4 Cash Out Payment
7.5 Offset for Amounts Owed
7.6 Time of Payment of Benefits Under the Plan
(a) Payment Before Termination
(b) Form and Time of Payment
7.7 Death
SECTION 8. SOURCE OF PAYMENTS AND EXPENSES
8.1 Source of Benefits
8.2 Expenses
SECTION 9. ADMINISTRATION AND PLAN FIDUCIARIES
9.1 Plan Sponsor and Administrator
9.2 Administrative Responsibilities
9.3 Allocation and Delegation of Responsibilities
9.4 No Individual Liability
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SECTION 10. CLAIMS AND APPEALS
10.1 Claims for Benefits
(a) Time Limits for Submission of Initial Claim
(b) Time Limits for Decision on Initial Claim
(c) Deemed Denial
10.2 Review of Denied Claims
(a) Request for Review
(b) Decision on Review
(c) Rules and Interpretations
10.3 Exhaustion of Remedies
SECTION 11. GENERAL PROVISIONS
11.1 Legal Construction of the Plan
11.2 Relation of the Plan to Other Employee
Benefit Plans
11.3 No Rights Created or Accrued
11.4 Relation of the Plan to Descriptive Matter
11.5 Non-alienation of Benefits
SECTION 12. AMENDMENT AND TERMINATION
12.1 Amendment
12.2 Termination
12.3 Effect of Amendment or Termination
SECTION 13. EXECUTION
SUPPLEMENT TO THE APPLE COMPUTER, INC. EXECUTIVE SEVERANCE PLAN (EFFECTIVE
AS OF JUNE 9, 1995)
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APPLE COMPUTER, INC.
EXECUTIVE SEVERANCE PLAN (ESP)
(Established Effective as of June 1, 1991)
(As Amended and Restated Effective as of January 15, 1996)
1 . ESTABLISHMENT AND PURPOSE.
1.1 Establishment.
The Apple Computer, Inc. Executive Severance Plan was established effective
as of June 1, 1991. The Plan was amended and restated effective as of
January 15, 1996 to read as set forth herein; provided, however, that the
amendments reflected in this restatement shall not apply to any Eligible
Employee who was advised in writing prior to January 15, 1996 that he or
she would be designated as a Participant, even if the Participant's
Notification Date occurred on or after January 15, 1996.
1.2 Purpose.
The purpose of the Plan is to establish the rules by which Apple will pay
benefits provided under the Plan upon the designation of an Eligible Employee
for termination. The Plan is intended to be, and shall be maintained and
operated as, an employee welfare benefit plan under ERISA.
1.3 Supersession.
This Plan supersedes any plan, program or practice previously in effect by
which Apple may have provided separation allowances, termination allowances
or other severance benefits to Employees, other than a written contract of
employment or a written separation agreement providing such benefits.
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The Plan specifically supersedes benefits provided under the Apple
Computer, Inc. Redeployment Plan and the Apple Computer, Inc. Layoff Plan.
An employee designated for termination under this Plan shall receive
benefits under this Plan in lieu of any and all benefits to which the
employee may claim to be entitled under Apple's Redeployment Plan or Layoff
Plan.
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SECTION 2 . DEFINITIONS.
SECTION 2.1 "Apple"
"Apple" means Apple Computer, Inc., a California corporation.
SECTION 2.2 "Apple Disability Plan"
"Apple Disability Plan" means any plan maintained by Apple for the purpose
of providing short-term or long-term disability benefits for its employees.
SECTION 2.3 "Cash Out Payment"
"Cash Out Payment" means the benefit described in Sections 6 and 7.4.
SECTION 2.4 "Company"
"Company" means Apple Computer, Inc., a California corporation and those of
its subsidiaries that it designates, in writing, to participate in the Plan.
SECTION 2.5 "Domestic Partner"
"Domestic Partner" means a Domestic Partner for Apple medical benefits as
defined in the Apple Benefits Book.
SECTION 2.6 "Early Termination Date"
"Early Termination Date" means the date prior to a Participant's Termination
Date on which the Participant voluntarily terminates his or her employment
with the Company. 2.7 "Election and Release".cF..7 "Election and Release";
means the written Executive Severance Plan Election and Release agreement
described in Section 5.2.
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SECTION 2.7 "Eligible Employee"
"Eligible Employee" means an Employee who is employed in any job with a
grade designation of 94 or above or the equivalent thereof and who is not
eligible to receive severance benefits under a written contract of employment
or written separation agreement with the Company or under any other plan,
program or practice by which Apple provides any separation allowance or
under any federal, state, local or foreign law or regulation.
SECTION 2.8 "Employee"
"Employee" means a Regular Employee of the Company who is not hired for a
fixed period of employment.
SECTION 2.9 "Employer Group"
"Employer Group" means Apple and all corporations owned 100%, directly or
indirectly, by Apple.
SECTION 2.10 "ERISA"
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
and includes regulations promulgated thereunder by the Secretary of Labor.
SECTION 2.11 "Extended Benefit Coverage"
"Extended Benefit Coverage" means the benefit described in Sections 5.1
and 7.3.
SECTION 2.12 "Family Leave of Absence"
"Family Leave of Absence" means a leave of absence granted to allow an
Employee to care for a newborn or newly adopted child, or to care for a
family member with a serious health condition, as defined in the "Personal
Time" section of the Apple Benefits Book.
SECTION 2.13 "Month of Pay"
"Month of Pay" means the Participant's Regular Salary, divided by the number
of working hours per year (2080) and multiplied by the Participant's Standard
Hours Worked Per Month. For purposes of this Section 2.14, a Participant's
"Standard Hours Worked Per Month" is defined to be either (i) 173.33, in the
case of an Eligible Employee regularly scheduled at his or her Notification
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Date to work 40 hours per week or classified by Apple as a full-time
Employee, or (ii) in the case of an Eligible Employee regularly scheduled
at his or her Notification Date to work less than 40 hours per week or
classified by Apple as a part-time Employee, the average number of hours
he or she was scheduled to work per month (not to exceed 173.33) at Apple
during the five years preceding the Participant's Notification Date, as
shown on the Participant's personnel action notice(s).
SECTION 2.14 "Notification Date"
"Notification Date" means the date upon which a Participant receives
notification of his or her participation in the Plan as described in
Section 3.2.
SECTION 2.15 "Participant"
"Participant" means an Eligible Employee who has been designated as a
Participant in the Plan pursuant to Section 3.
SECTION 2.16 "Personal Leave of Absence"
"Personal Leave of Absence" means an unpaid leave of absence granted for
pursuits that are beneficial to the Company, extended vacations or other
compelling personal reasons, as defined in Section 7 of the Apple Benefits
Book.
SECTION 2.17 "Plan"
"Plan" means this Apple Computer, Inc. Executive Severance Plan, as adopted
effective as of June 1, 1991, and as it may be amended (or terminated) from
time to time.
SECTION 2.18 "Plan Year"
"Plan Year" means a period of 12 consecutive months beginning on April 1 and
ending on March 31.
SECTION 2.19 "Prorated Bonus"
"Prorated Bonus" means the benefit, if any, described in Sections 5.1 and 7.2.
SECTION 2.20 "Regular Employee"
"Regular Employee" means an individual who is a common law employee of the
Company and who is not a flexible workforce employee, co-op intern, college
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intern, independent contractor, consultant or temporary agency worker employed
by an outside agency. An individual's status as a "Regular Employee" shall be
determined by Apple. Subject to Section 10.2 relating to Review of Denied
Claims, all such determinations shall be conclusive and binding on all persons.
SECTION 2.21 "Regular Salary" "Regular Salary" means the
Participant's monthly base salary determined as of his or her Notification
Date.
SECTION 2.22 "Severance Benefits"
"Severance Benefits" means, collectively, the Severance Payment, the Prorated
Bonus, if any, and the Extended Benefit Coverage.
SECTION 2.23 "Severance Payment"
"Severance Payment" means the benefit described in Sections 5.1 and 7.1.
SECTION 2.24 "Termination Date"
"Termination Date" means the date specified as the Termination Date in an
Eligible Employee's written notice of participation in the Plan, and is the
date used to determine a Participant's Severance Benefits.
SECTION 2.25 "Termination Notice Period"
"Termination Notice Period" means the period described in Section 4.1.
SECTION 2.26 "Years of Service"
"Years of Service" means the number of days elapsed from the Participant's
date of hire, measured from the earlier of a Participant's most recent hire
date or adjusted hire date, through the Participant's Termination Date,
divided by 365. For purposes of this Section 2.27, a Participant's "adjusted
hire date" means his or her most recent hire date adjusted for eligible past
service with the Company.
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SECTION 3 . PARTICIPATION.
SECTION 3.1 Limited to Designated Eligible Employees
Only an Eligible Employee who receives the written notification described
in Section 3.2 may participate in the Plan. No other person shall be a
Participant in the Plan.
SECTION 3.2 Commencement of Participation
An Eligible Employee may become a Participant only if he or she receives
written notification that he or she is a Participant. The notice shall be
approved by the Division President and the Human Resources Vice
President/Director of the Eligible Employee's division, or the
designees of such persons, and shall state the Eligible Employee's
Termination Date. The Eligible Employee's participation in the Plan and
Termination Notice Period will begin on his or her Notification Date or
such other plan participation date as may be provided in such written
notice.
SECTION 3.3 Persons Who Shall Not Be Designated as Participants
An Eligible Employee shall not be designated as a Participant in the Plan or
receive benefits under the Plan if:
(a) Employment Termination
A decision has been made to terminate his or her employment for any
reason not related to the Company's decision to terminate the Employee
because of business conditions;
(b) Resignation
He or she has resigned or has given notice of his or her resignation;
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(c) Written Employment Contract
He or she is employed under a written employment contract that provides
greater severance or similar benefits than are provided by the Plan;
(d) Redeployment or Layoff Plan
He or she is currently a participant in any Apple Computer Inc.
redeployment or layoff plan;
(e) Host Country
He or she is eligible to receive compensation or benefits under the
laws of any other country (including, but not limited to, his or her
host country) or under Company policy or guidelines established pursuant
thereto, and those laws, policies, or guidelines require payments or
benefits greater than or similar to those provided by the Plan;
(f) Expatriate Employee
If he or she is an expatriate Employee employed by the Company in the
United States and has retained the United States as his or her "home
country;" provided, however, that any such Employee who is repatriated
in accordance with his or her assignment contract may be designated as a
Participant under this Plan after such repatriation; or
(g) Personal Leave of Absence
He or she is on a Personal Leave of Absence.
Whether benefits as described in Subsections 3(c) or (e) are greater than
the benefits provided under the Plan shall be determined by Apple and such
determinations shall be conclusive and binding on all persons.
SECTION 3.4 Termination of Participation
A Participant's Plan Participation shall terminate as of the earliest of the
following dates:
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(a) The date the Participant's employment with the Company
is terminated for any reason (other than death) not related to the
Company's decision to terminate the Participant because of business
conditions;
(b) The date the Participant accepts an offer of employment
with any member of the Employer Group; or,
(c) The date no further benefits are payable to the
Participant under the Plan.
SECTION 3.5 Ineligible for Personal Leave
When an Eligible Employee becomes a Participant in the Plan, he or she will
not be eligible to take a Personal Leave of Absence.
SECTION 3.6 Family Leave Limitations
When an Eligible Employee becomes a Participant in the Plan, he or she may
still apply for a Family Leave of Absence. If an Eligible Employee is
granted such a leave to care for a seriously ill family member or in
connection with the birth of a child, his or her leave shall not extend
beyond his or her Termination Date.
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SECTION 4 . TERMINATION NOTICE PERIOD.
SECTION 4.1 Term of Termination Notice Period
For each Participant, the Termination Notice Period is the period beginning
on the Participant's Notification Date or such other plan participation date
as may be provided in the Participant's written notification of his or her
participation in the Plan as described in Section 3.2, and, subject to Sections
4.2 and 4.3, ending upon then earliest of the following dates:
(a) The Participant's Termination Date;
(b) The Participant's Early Termination Date;
(c) The date of the Participant's death;
(d) The date the Participant accepts an offer of employment
with any member of the Employer Group. If a Participant receives an
offer of employment from any member of the Employer Group, the
Participant must accept the offer before the end of the Termination
Notice Period or the offer will be deemed to be rejected;
(e) The date the Participant's employment is terminated for
any reason not related to the Company's decision to terminate the
Participant because of business conditions (including, without
limitation, the Participant's misuse of confidential or proprietary
information or violations of the standards described in Apple's Global
Ethics brochure or any other Apple policy or guideline; or
(f) Three months after the Participant's Notification Date
or such other plan participation date as may be provided in the
Participant's written notification of his or her participation in the
Plan as described in Section 3.2.
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SECTION 4.2 Suspension of Termination Notice Period
Notwithstanding the provisions of Section 4.1, a Participant's Termination
Notice Period shall be suspended if and during such time as one of the
following conditions exists:
(a) Disability. The Participant is eligible
to receive or is receiving disability benefits under an Apple
Disability Plan. (For this purpose, a Participant shall not be
considered eligible to receive benefits under an Apple Disability Plan
if he or she has failed to make timely application for such benefits
following the onset of disability.) If the Participant is released to
return to work with the Company within two years of the date his or
her disability leave begins, the suspension shall end on the effective
date of such release and the Participant's Termination Notice Period
will resume. If the Participant is not released to return to work
with the Company within two years of the date his or her disability
leave begins, then the Termination Notice Period shall immediately end
and the Participant will not be eligible to receive a Cash-Out Payment
or Severance Benefits pursuant to Section 5.
(b) Temporary Assignment. The Company, in its sole
discretion, determines that the Participant's services are required
in order to perform or complete an assignment. Upon actual completion
of such a temporary assignment, the Participant's Termination Notice
Period shall resume. The Participant's Termination Notice Period shall
be suspended no more than six months under this Subsection (b); any
exceptions must be approved in advance by the Senior Vice President of
Human Resources or his or her designee.
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(c) Restart. The Participant is receiving benefits under the
Apple Restart Plan. The Participant's Termination Notice period shall
be suspended for up to six weeks under this Subsection (c), provided
that the Participant became eligible for sabbatical benefits under the
Apple Restart Plan before or during the Termination Notice Period and
applied for and received approval of such sabbatical benefits before
his or her Termination Date.
SECTION 4.3 Extension of Termination Notice Period Under Limited
Circumstances.
Notwithstanding the provisions of Section 4.1, a Participant may request an
extension of his or her Termination Notice Period for up to a maximum of 14
additional calendar days. A request for such an extension must be made to
the Corporate Employee Relations Director and will be approved only if the
following conditions are satisfied:
(a) The Participant first signs the Election and Release
agreement described in Section 5.2 (and does not revoke such agreement
during the seven days following its signing);
(b) The Participant agrees in writing to the adjustment
described in Section 7.1;
(c) The extension sought is necessary and no longer than
necessary:
(i) To allow the Participant to become vested in a
stock option granted under the terms of the Apple Computer, Inc.
1981 or 1990 Stock Option Plans;
(ii) To allow the Participant to become vested in the
Apple Executive Long Term Stock Option Plan;
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(iii) To allow the Participant to become vested in and
eligible for a distribution from Apple's Profit Sharing Plan;
(iv) To enable the Participant to purchase stock under
the Apple Employee Stock Purchase Plan for the purchase period in
which the Participant's employment would otherwise terminate; or
(v) To enable the Participant to deal with
circumstances that Apple determines in its sole discretion to be
so extraordinary as to warrant an extension. No extension shall
be granted pursuant to this Section 4.3(c)(v) without the prior,
written approval of the Participant's Division President or Vice
President and the Senior Vice President of Human Resources. In
no event may an extension granted under this Section 4.3(c)(v),
when added to extensions under Section 4.3(c)(i), (ii), (iii) or
(iv), total more than 14 calendar days.
In no event shall any Participant who meets the eligibility requirements
for the Apple Restart Plan as a result of an extension pursuant to this
Section 4.3 be eligible to receive benefits under the Apple Restart Plan.
SECTION 4.4 Continuation of Employment and Employee Benefits
During Termination Notice Period.
A Participant will continue to be an Employee and to receive his or her
Regular Salary for the Termination Notice Period, but he or she will not be
required to perform any work for the Company. The Participant's coverage
under or participation in Apple's employee benefit plans or programs (if any)
shall also continue during the Termination Notice Period, but coverage as an
Employee shall terminate at the end of the Termination Notice Period in
accordance with Section 4.6. During the Termination Notice Period the
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Participant will have access, as appropriate, to Apple's Career Resource
Center, Company Store, Cupertino Fitness Center and Child Care Center,
as long as those facilities remain in operation.
SECTION 4.5 Additional Benefits During Termination Notice Period.
During the Termination Notice Period, a Participant may be eligible to receive
certain job placement assistance or counseling, in accordance with procedures
established by Apple. The availability of such assistance may vary depend
ing upon business conditions at the time of the termination, the Participant's
job location and such other factors as may be determined by Apple in its sole
discretion.
SECTION 4.6 Termination of Employee Benefits at End of
Termination Notice Period.
Except as otherwise required by law or as provided in Section 7.3 of the Plan,
a Participant's coverage under or participation in any of Apple's employee
benefit plans or programs that continues during the Termination Notice Period
pursuant to this Plan shall cease as of the close of the Participant's
Termination Notice Period.
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SECTION 5 . ELECTION TO RECEIVE SEVERANCE BENEFITS.
SECTION 5.1 Availability of Severance Benefits
A Participant may elect, subject to the requirements of Section 5.2, to
receive a Severance Payment, a Prorated Bonus, if any, and/or Extended
Benefit Coverage under the Plan; provided, however, that a Participant whose
employment is involuntarily terminated as described in Subsection 4.1(e) or
who accepts another job with any member of the Employer Group during the
Termination Notice Period shall not be eligible to elect such Severance
Benefits. The election to receive Severance Benefits must be made during
the Termination Notice Period or within twelve months after the last day of
the Participant's employment.
SECTION 5.2 Must Sign Election and Release.
No Participant shall be entitled to receive Severance Benefits under the
Plan unless he or she first has properly completed and executed the Executive
Severance Plan Election and Release agreement provided to the Participant under
the Plan, and does not revoke such agreement during the seven days following
its signing. The Election and Release agreement shall provide that execution
of such Election and Release agreement by the Participant will constitute a
waiver and release of every claim the Participant might otherwise have against
Apple, its subsidiaries, or any of their officers, directors or employees
arising out of his or her employment or the termination of his or her
employment with the Company.
SECTION 5.3 Effect of Failure To Elect Severance Benefits
If a Participant fails to elect Severance Benefits by signing and returning
the Election and Release agreement described in Section 5.2 to the Corporate
Employee Relations Director or the designee of such person during the period
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described in Section 5.1, or if a Participant who has signed the Election
and Release agreement revokes it within seven days, such Participant shall
cease to be a Participant under the Plan.
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SECTION 6 . CASH OUT PAYMENT.
SECTION 6.1 Availability of Cash Out Payment
A Cash Out Payment shall be paid to a Participant who elects to terminate his
or her employment with the Company before the Participant's Termination Date;
provided, however, that a Participant whose employment is involuntarily
terminated as described in Section 4.1(e) or who accepts another job with any
member of the Employer Group during the Termination Notice Period shall not
be eligible for a Cash Out Payment.
SECTION 6.2 Effect of Election To Receive a Cash Out Payment
If a Participant makes the election described in Section 6.1, his or her
Termination Notice Period shall end on the effective date of his or her
termination of employment. The benefits described in Section 4.4 shall cease
to be effective upon the termination of the Participant's Termination Notice
Period.
SECTION 6.3 Ineligible for Rehire
In general, a Participant who receives a Cash Out Payment shall not be
eligible for rehire by any member of the Employer Group before 60 days
after his or her Termination Date. Any exceptions must be approved by the
Division Senior Executive and the Division Human Resources Vice President
or Director. If the Participant is rehired by the Company within 60 days
after his or her Termination Date, Apple, in its sole discretion, may
require the Participant to repay to Apple the entire amount of his or her
Severance Payment and Prorated Bonus, if any. If the Participant is
rehired by theCompany prior to his or her Termination Date, Apple, in its sole
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discretion, may require the Participant also to repay to Apple the entire
amount of his or her Cash Out payment.
SECTION 6.4 Ineligible for Temporary or Contract Work.
A Participant shall not be eligible to work as a temporary employee or
independent contractor for any member of the Employer Group before 60 days
after his or her Termination Date. Notwithstanding the foregoing, no
Participant may work as a temporary employee or independent contractor in
the same position he or she held when his or her Layoff Notice Period
commenced.
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SECTION 7 . AMOUNT AND PAYMENT OF BENEFITS UNDER THE PLAN.
SECTION 7.1 Severance Payment
The amount of Severance Payment payable to a Participant who elects to
receive it pursuant to Section 5, shall be determined with reference to the
Participant's Termination Date and shall be equal to the number of Months
of Pay determined in accordance with the following table:
Years of Service* Months of Pay
3 or less 4
4 5
5 6
6 7
7 8
8 9
9 10
10 11
11 or more 12 (maximum)
Partial years of service in excess of three years shall be prorated by full
month to determine a Participant's total Severance Payment. A
Participant's Severance Payment shall be reduced by the compensation the
Participant received with respect to any period during which his or her
Termination Notice Period was extended pursuant to Section 4.3.
SECTION 1.1 Prorated Bonus
The amount of Prorated Bonus, if any, payable to a Participant who elects to
receive it pursuant to Section 5, shall be determined with reference to the
Participant's Termination Date and shall be equal to the Participant's
actual bonus under the Company's Senior/Executive Incentive Bonus Plan or,
if applicable, the Participant's actual bonus prorated for the amount of
time from the beginning of Apple's fiscal year (generally, October 1) to
the Participant's Termination Date. A Participant whose Termination Date falls
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between the 1st and 14th day of any month shall receive a one-half-month
credit towards their bonus proration. A Participant whose Notification
Date occurs during one fiscal year but whose Termination Date occurs in the
next fiscal year shall receive his or her actual bonus, if any, for the
first fiscal year and the prorated portion of his or her actual bonus, if
any, for the second fiscal year.
SECTION 1.2 Extended Benefit Coverage
A Participant who elects to receive Extended Benefit Coverage
pursuant to Section 5 shall be eligible to continue to receive the same
Company paid Medical and Dental coverages the Participant is receiving as
of his or her Termination Date or, if applicable, Early Termination Date,
extended as follows:
Participant's Grade Level Period of Extended Company-Paid
on Termination Date or Coverage From Termination Date
Early Termination Date or Early Termination Date
97-100 12 Months
94-96 9 Months
Notwithstanding the foregoing, a Participant's period of extended Benefit
Coverage shall end if and when the Participant becomes eligible for similar
coverage through another employer, including the employer of the
Participant's spouse or Domestic Partner. Each Participant shall be given
the opportunity to purchase continuing medical and dental coverage, as
required under section 602 of ERISA and section 4980B of the Code, prior to
the expiration of the Participant's current coverage or Extended Benefit
Coverage, if elected.
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SECTION 1.1 Cash Out Payment
The Cash Out Payment is an amount equal to the Regular Salary that the
Participant would have been paid had the Participant remained employed by
the Company until the Participant's Termination Date.
SECTION 1.2 Offset for Amounts Owed.
The Company reserves the right to deduct from any lump sum Severance
Benefit and/or Cash Out Payment payable to a Participant under the Plan any
and all amounts owed by the Participant to the Company, including but not
limited to overpayment of commissions or salary, unreimbursed cash, salary
and travel advances, taxes, amounts due to the Company Store for purchases
or Loan to Own Equipment, Custom Coverage, any other employee benefit plan
deductions, and any unpaid loans.
SECTION 1.3 Time of Payment of Benefits Under the Plan
(a) Payment Before Termination
No Participant shall be entitled to receive a Cash Out Payment under the
Plan before the last day of his or her employment with the Company. No
Participant shall be entitled to receive a Severance Payment, Prorated
Bonus or Extended Benefit Coverage under the Plan until his or her
employment with the Company has terminated and until the eighth day after
the Participant has signed the Election and Release Agreement pursuant to
Section 5.2, provided that the Participant has not subsequently revoked
such agreement.
(b) Form and Time of Payment.
A Participant's Severance Payment and Cash Out Payment, if any, shall be paid
as soon as reasonably practicable after the Participant's termination of
employment. A Participant's Prorated Bonus, if any, shall be paid at or
about the time that bonus payments are made to active employees who are
eligible to receive bonuses under the Company's Senior/Executive Incentive
Bonus Plan for the same year for which the Prorated Bonus is paid. The
Company shall withhold appropriate federal, state and local income and
employment taxes and shall make all applicable employee benefit plan and
other deductions from any payments under the Plan; provided, however, that
the Company shall not make Apple Computer, Inc. Savings and Investment Plan
deductions from any Plan payments.
SECTION 1.4 Death.
If a Participant dies before his or her participation has terminated pursuant
to Section 3.4, any Severance Payment, Prorated Bonus or Cash Out Payment to
which the Participant would have been entitled under the Plan had the
Participant voluntarily terminated employment with the Company on the date of
his or her death shall be paid to the Participant's surviving spouse, or if
there is no surviving spouse, to the Participant's designated beneficiary
under Apple's group term life insurance plan, or if there is no such
designated beneficiary, to the Participant's estate. Such Payments shall be
made at the time and in the form determined pursuant to Section 7.6(b) and
shall be made regardless of whether the Participant has signed an Election
and Release. Extended Benefit Coverage will continue to be provided to the
Participant's surviving eligible dependents in accordance with the terms of
the Participant's coverage and Section 7.3.
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SECTION 2 . SOURCE OF PAYMENTS AND EXPENSES.
SECTION 2.1 Source of Benefits
Any benefit payable under the Plan shall be unfunded and payable only from
Apple's general assets.
SECTION 2.2 Expenses.
The expenses of operating and administering the Plan shall be borne entirely
by Apple.
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SECTION 3 . ADMINISTRATION AND PLAN FIDUCIARIES.
SECTION 3.1 Plan Sponsor and Administrator
Apple is the "plan sponsor" and the "administrator" of the Plan, within the
meaning of ERISA.
SECTION 3.2 Administrative Responsibilities
Apple shall be the named fiduciary with the power and sole discretion to
determine who is eligible for benefits under the Plan, to interpret the Plan
and to prescribe such forms, make such rules, regulations and computations
and prescribe such guidelines as it may determine are necessary or appropriate
for the operation and administration of the Plan, to change the terms of such
rules, regulations or guidelines, and to rescind such rules, regulations or
guidelines. Such determinations of eligibility, rules, regulations,
interpretations, computations and guidelines shall be conclusive and binding
upon all persons. In administering the Plan, Apple shall at all times
discharge its duties with respect to the Plan in accordance with the standards
set forth in section 404(a)(1) of ERISA.
SECTION 3.3 Allocation and Delegation of Responsibilities
Apple may allocate any of its responsibilities for the operation and
administration of the Plan among its officers, employees and agents.
It may also delegate any of its responsibilities under the Plan by
designating, in writing, another person to carry out such responsibilities.
Any such written delegation shall become effective when executed by Apple's
Corporate Employee Relations Manager or his or her designee, and the
designated person shall then be responsible for carrying out the
responsibilities described in such writing.
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SECTION 3.4 No Individual Liability.
It is declared to be the express purpose and intent of Apple that no
individual liability shall attach to or be incurred by any member of the
Board of Directors of Apple, by any officer of Apple, or by any employee,
representative or agent of Apple, under, or by reason of the operation of,
the Plan.
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SECTION 4 . CLAIMS AND APPEALS.
SECTION 4.1 Claims for Benefits
A Participant shall be entitled to receive his or her benefits under the Plan
upon filing with the Company the applicable documents as prescribed by
Apple. Any Participant (or the surviving spouse or duly authorized
representative of a deceased Participant) who believes himself or herself
to be entitled to receive benefits that are different from the benefits
that he or she has received or who believes that he or she has a claim to
other relief arising out of the Company's decision to terminate the
Participant may make a claim for benefits or such other relief under this
Section 10.1. Such claim should be directed to the Participant's Division
President or to the Division Vice President or Director of Human Resources.
Apple's Corporate Employee Relations Director or his or her designee shall
exercise oversight responsibility with respect to the claims and appeal
processes.
(a) Time Limits for Submission of Initial Claim
No claim by a Participant (or by the surviving spouse or duly authorized
representative of a deceased Participant) shall be valid unless it is
made immediately and in no event later than 60 days following the receipt
of the disputed benefit, a denial of a benefit or, in the case of a claim
to other relief arising out of the Company's decision to terminate the
Participant, the date on which the Participant's employment terminated.
(b) Time Limits for Decision on Initial Claim
If any claim is denied, in whole or in part, notice of such denial shall
be given to the claimant in writing within 90 days, except that if special
circumstances require that the time for consideration of the claim be
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extended, notice of the extension shall be given in writing within 90
days, and notice of such denial shall thereafter be given within 180 days.
Each period of 90 or 180 days referred to in the preceding sentence shall
begin to run on the day the claim is received by the Participant's
Division President or the Division Vice President or Director of Human
Resources. A written notice of denial shall set forth, in a manner
calculated to be understood by the claimant, specific reasons for the
denial, specific references to the relevant Plan provisions on which
it is based, a description of any information or material necessary to
perfect the claim, an explanation of why such material is necessary
and an explanation of the Plan's review procedure. A notice that
additional time is necessary for consideration of a claim shall
indicate the special circumstances requiring the extension of time and
the date by which Apple expects to render its decision on the claim.
(c) Deemed Denial
If written notice of the denial of a claim for benefits or of the fact
that an extension of time is necessary for processing the claim is not
furnished within the time period specified in Section 10.1(b), the claim
shall be deemed to have been denied, and the claimant shall be permitted
to appeal such denial in accordance with the review procedure set forth
in Section 10.2.
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SECTION 4.2 Review of Denied Claims
(a) Request for Review.
A claimant whose application for benefits is denied in whole or in part, or
the claimant's duly authorized representative, may appeal from the denial by
submitting to Apple's Senior Vice President of Human Resources or his or her
designee a request for a review of the application within 90 days after
receiving written notice of the denial from Apple. Upon the request of a
Claimant or his or her representative, Apple shall give the claimant or the
representative an opportunity to review pertinent materials that pertain to
his or her plan benefits, other than legally privileged documents, in
preparing the request for a review. The request for a review shall be in
writing and sent to the address set forth in the Summary Plan Description
distributed to Participants or in later Plan information. The request for
a review shall set forth all of the grounds on which it is based, all facts
in support of the request and any other matters which the claimant deems
pertinent. The Senior Vice President of Human Resources or designee may
require the claimant to submit such additional facts, documents or other
material as he or she may deem necessary or appropriate in making his or
her review.
(b) Decision on Review.
The Senior Vice President of Human Resources or his or her designee shall
act on each request for a review within 60 days after receipt, unless special
circumstances require further time for processing and the claimant is
advised of the extension. In no event shall the decision on review be
rendered more than 120 days after the Senior Vice President of Human
Resources or designeereceives the request for a review. The Senior Vice
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President of Human Resources or designee shall give prompt, written notice of
his or her decision to the claimant and to Apple. In the event that the
Senior Vice President of Human Resources or his or her designee confirms the
denial of the application for benefits in whole or in part, the notice shall
set forth, in a manner calculated to be understood by the claimant, the
specific reasons for the decision and specific references to the relevant
Plan provisions on which the decision is based.
(c) Rules and Interpretations
The Corporate Employer Relations Director and Senior Vice President of
Human Resources shall adopt such rules, procedures and interpretations of
the Plan as they deem necessary or appropriate in carrying out their
responsibilities under this Section 10.
SECTION 4.3 Exhaustion of Remedies
Decisions of the Senior Vice President of Human Resources or his or her
designee shall be conclusive and binding on all persons. No legal action
for benefits under the Plan or arising out of the Company's decision to
terminate the Participant shall be brought unless and until the claimant
(i) has submitted a claim in accordance with Section 10.1, (ii) has been
notified by Apple that the claim is denied or the claim is deemed to be
denied under Section 10.1(c), (iii) has filed a written request for review
of the claim in accordance with Section 10.2, and (iv) has been notified in
writing that the Senior Vice President of Human Resources or his or her
designee has affirmed the denial of the claim; provided that legal action
may be brought after Apple has failed to take any action on the claim
within the time prescribed by Sections 10.1(b) and 10.2(c) above,
respectively.
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SECTION 5 . GENERAL PROVISIONS.
SECTION 5.1 Legal Construction of the Plan
The Plan shall be governed and construed in accordance with ERISA.
SECTION 5.2 Relation of the Plan to Other Employee Benefit Plans
Except as provided in Section 1.3, the benefits provided under the Plan shall
be provided in addition to, and not in place of, any other benefit to which a
Participant is or may be entitled under the terms of any other employee
benefit plan established or maintained by Apple. The terms of this Plan
shall not be construed to change, amend or modify the terms of any other
such employee benefit plan. No term of any other employee benefit plan
shall be construed to change, amend or modify any term of this Plan.
SECTION 5.3 No Rights Created or Accrued
Nothing in the Plan shall be construed as creating a contract of
employment or as giving to an employee or agent of the Company a right to
receive any benefit other than the benefits specifically provided under the
terms of the Plan or a right to continue in the employment of the Company.
Nothing in the Plan shall be construed to limit in any manner the right of
the Company to discharge, demote, reclassify, transfer, relocate, or in any
other manner treat or deal with any person in its employ, including,
without limitation, any person who might otherwise have become (or
remained) a Participant in the Plan absent such treatment or dealing, which
right is hereby reserved. Nothing in this Plan shall be construed to
change the at-will nature of the Participant's employment. No benefits
shall be deemed to
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accrue under the Plan at any time except the time at which they become
payable under the Plan, and no right to a benefit under the Plan (other
than the benefits under any employee benefit plans or programs in which the
Participant continues to participate pursuant to Section 4.4) shall be
deemed to vest prior to the termination of the Participant's employment.
SECTION 5.4 Relation of the Plan to Descriptive Matter
The Plan shall contain no terms or provisions except those set forth herein,
or as hereafter amended in accordance with the provisions of Section 12.
The provisions of the Plan shall control, and any description made in any
other document shall not control, if ever any such description is deemed
to be in conflict with any provision of the Plan.
SECTION 5.5 Non-alienation of Benefits
No benefits payable under the Plan shall be subject to anticipation,
alienation, sale, transfer, assignment, pledge or other encumbrance,
and any attempt to do so shall be void.
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SECTION 6 . AMENDMENT AND TERMINATION.
SECTION 6.1 Amendment.
Apple may amend the Plan at any time, by a written instrument executed
by Apple's Senior Vice President of Human Resources.
SECTION 6.2 Termination.
Apple may terminate the Plan, at any time and for any reason, by a written
instrument executed by Apple's Senior Vice President of Human Resources.
SECTION 6.3 Effect of Amendment or Termination.
If a Participant's employment has terminated and the Participant is entitled
to receive benefits under the Plan, no amendment to the Plan, and no
termination of the Plan, shall thereafter operate to diminish or eliminate
such Participant's entitlement to such benefits.
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SECTION 7 . EXECUTION.
To record the amendment and restatement of the Plan effective as of
January 15, 1996, Apple's Senior Vice President of Human Resources has
executed this document this 13th day of January, 1996.
APPLE COMPUTER, INC.
By_/s/_Kevin J. Sullivan_____
Kevin J. Sullivan
Senior Vice President
Human Resources
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SUPPLEMENT TO THE
APPLE COMPUTER, INC. EXECUTIVE SEVERANCE PLAN
(Effective June 9, 1995)
SECTION 1. ESTABLISHMENT AND PURPOSE.
This Supplement (the "Supplement") to the Apple Computer, Inc.
Executive Severance Plan (the "Plan") is hereby established effective as of
the date it is approved by the Board of Directors of Apple (the "Board").
The purpose of this Supplement is to set forth the terms and provisions of
the Plan that will apply in the event of a Change in Control of Apple.
Capitalized words not otherwise defined herein shall have the meanings
assigned to such words in the Plan.
SECTION 2. ADDITIONAL BENEFITS.
(a) Each Eligible Employee (i) whose employment with the Company is
involuntary terminated by the Company for any reason during the Supplement
Term, other than due to such Employee's misuse of confidential or
proprietary information or a violation of the standards described in
Apple's Global Ethics brochure or any other Apple policy or guideline or
(ii) who resigns during the Supplement Term for Good Reason shall
automatically become a Participant, whether or not such person is
designated as a Participant in accordance with Section 3.1 of the Plan
(hereinafter, a "Section 2(a) Participant"); provided, however, that no
Eligible Employee described in
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Section 3.3(c), (d), (e) or (f), or an Eligible Employee described in
Section 3.3(b) who resigns other than for Good Reason, shall become a
Section 2(a) Participant. In addition, during the Supplement Term, the
definition of "Eligible Employee" in the Plan is revised to exclude
reference to "any other plan, program or practice by which Apple provides
any separation allowance" which is established on or after the Change in
Control Date or which is implemented at any time with the intention,
express or implied, of eliminating Apple's obligations under the Plan or
this Supplement. Employees of the Company who are otherwise Eligible
Employees and who are parties to a Retention Agreement shall continue to be
eligible to be designated as Participants in the Plan if their employment
terminates prior to the Change in Control Date or after the expiration of
the term of their Retention Agreement.
(b) Section 4.1(e) of the Plan is revised to prohibit the Company
from ending the Termination Notice Period for any such Termination Notice
Period that begins within the Supplement Term for any reason other than the
Section 2(a) Participant's misuse of confidential or proprietary
information or a violation of the standards described in Apple's Global
Ethics brochure or any other Apple policy or guideline.
(c) Section 4.3 of the Plan is revised to substitute "30 additional
calendar days" for "14 additional calendar days" for any Termination Notice
Period that begins during the Supplemental Term.
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(d) Section 4.5 of the Plan is revised to require the Company to
provide job placement assistance or counseling to each Section 2(a)
Participant who requests such assistance; provided, however, that the
individual Participant cost to Apple of providing such benefits to a
Section 2(a) Participant need not exceed $7,500.
(e) Section 7.1 of the Plan is revised for each Section 2(a)
Participant as follows:
Years of Service* Months of Pay
3 or less 8
4 10
5 12
6 14
7 16
8 18
9 20
10 22
11 or more 24 (maximum)
_____________
* Years of Service will be determined as of the Participant's
Termination Date.
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(f) Section 7.2 of the Plan is revised for each Section 2(a)
Participant as follows: In lieu of the Prorated Bonus, each Section 2(a)
Participant shall receive a special severance bonus (the "Severance Bonus")
equal to the greater of (i) the target annual bonus amount payable to the
Section 2(a) Participant for the fiscal year in which the Notification Date
occurs, or (ii) the target annual bonus amount payable to the Section 2(a)
Participant for the last fiscal year ended prior to the Change in Control
Date, in either case, calculated on the assumption that all applicable
performance targets had been achieved. The Severance Bonus shall not be
subject to any proration and shall otherwise be payable at such time and
manner as the Prorated Bonus.
(g) Section 7.3 of the Plan is revised for each Section 2(a)
Participant as follows:
Participant's Grade Level Period of Extended Coverage from
on Termination Date or Termination Date or
Early Termination Date Early Termination Date
97-100 24 months
94-96 18 months
(h) The additional payments and benefits provided by this Section 2
of the Supplement are subject to the condition that the Section 2(a)
Participant execute a release in the form and manner contemplated by
Section 5.2 of the Plan.
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SECTION 3. GROSS-UP PAYMENT.
A new Section 7.8 is added to the Plan as follows:
7.8 Gross-Up Payment.
(a) Right to Payment. Notwithstanding anything in the Plan or the
Supplement to the contrary, if it is determined that any Payment to an
Eligible Employee (whether or not such employee qualifies for benefits
under the Plan or the Supplement and whether or not such employee is a
Section 2(a) Participant at the time of determination) would be subject to
the excise tax imposed by Section 4999 of the Code or any interest or
penalties with respect to such excise tax (such excise tax, together with
any interest or penalties thereon, is herein referred to as an "Excise
Tax"), then such Eligible Employee shall be entitled to an additional
payment (a "Gross-Up Payment") in an amount that will place such Eligible
Employee in the same after-tax economic position that such employee would
have enjoyed if the Excise Tax had not applied to the Payment. The amount
of the Gross-Up Payment shall be determined by the Accounting Firm in
accordance with the formula {(E x (1 - M)/(1 - T)) - E} (or such other
formula as the Accounting Firm deems appropriate which is intended to
achieve the same result), where
E equals the Payments which are determined to be "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code;
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M equals the sum of the highest marginal rates1 for Taxes
applicable to the Eligible Employee at the time of the Payment;
and
T equals M plus the rate of Excise Tax applicable to the Payment.
No Gross-Up Payments shall be payable to an Eligible Employee hereunder if
the Accounting Firm determines that the Payments to such Eligible Employee
are not subject to an Excise Tax.
(b) Determination of Gross-Up Payment. Subject to the provisions of
Section 7.8(c), all determinations required under this Section 7.8,
including whether a Gross-Up Payment is required, the amount of the
Payments constituting excess parachute payments, and the amount of the
Gross-Up Payment, shall be made by the Accounting Firm, which shall provide
detailed supporting calculations both to the Eligible Employee and the
Company within fifteen days of the Change in Control Date, the date of the
Eligible Employee's termination of employment with the Company and its
subsidiaries or any other date reasonably requested by the Eligible
Employee or the Company on which a determination under this Section 3 is
necessary or advisable. The Company shall pay each Eligible Employee the
initial Gross-Up Payment within 5 days of the receipt by the Company of the
Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable to an Eligible Employee (or class of Eligible
Employees), the Company shall cause
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the Accounting Firm to provide such Eligible Employee (or each member of
the class of Eligible Employees) with an opinion that the Accounting Firm
has substantial authority under the Code and Regulations not to report an
Excise Tax on the Eligible Employee's federal income tax return. Any
determination by the Accounting Firm shall be binding upon the Eligible
Employee and the Company. If the initial Gross-Up Payment is insufficient
to cover the amount of the Excise Tax that is ultimately determined to be
owing by the Eligible Employee with respect to any Payment (hereinafter an
"Underpayment"), the Company, after exhausting its remedies under Section
7.8(c) below, shall promptly pay to the Eligible Employee an additional
Gross-Up Payment in respect of the Underpayment.
(c) Procedures. As a condition to Apple's obligations hereunder to
an Eligible Employee, each Eligible Employee shall be required to notify
Apple in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by Apple of a Gross-Up Payment by
such Eligible Employee. Such notice shall be given as soon as practicable
after the Eligible Employee knows of such claim and shall apprise Apple of
the nature of the claim and the date on which the claim is requested to be
paid. An Eligible Employee shall agree not to pay the claim until the
expiration of the thirty-day period following the date on which the
Eligible Employee notifies Apple, or such shorter period ending on the date
the Taxes with respect to such claim are due (the "Notice Period"). If
Apple notifies the Eligible Employee in writing prior to the expiration of
the Notice Period that it desires to contest the claim, the Eligible
Employee shall: (i) give Apple any information reasonably requested by
Apple relating to the claim;
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(ii) take such action in connection with the claim as Apple may reasonably
request, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by Apple and
reasonably acceptable to the Eligible Employee; (iii) cooperate with Apple
in good faith in contesting the claim; and (iv) permit Apple to participate
in any proceedings relating to the claim. An Eligible Employee shall
permit Apple to control all proceedings related to the claim and, at its
option, permit Apple to pursue or forgo any and all administrative appeals,
proceedings, hearings, and conferences with the taxing authority in respect
of such claim. If requested by Apple, an Eligible Employee shall agree
either to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner and to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and
in one or more appellate courts as Apple shall determine; provided,
however, that, if Apple directs such Eligible Employee to pay such claim
and pursue a refund, Apple shall advance the amount of such payment to the
Eligible Employee on an after-tax and interest-free basis (the "Advance").
Apple's control of the contest related to the claim shall be limited to the
issues related to the Gross-Up Payment and the Eligible Employee shall be
entitled to settle or contest, as the case may be, any other issues raised
by the Internal Revenue Service or other taxing authority. If Apple does
not notify the Eligible Employee in writing prior to the end of the Notice
Period of its desire to contest the claim, Apple shall pay to the Eligible
Employee an additional Gross-Up Payment in respect of the excess parachute
payments that are the subject of the claim, and the Eligible Employee shall
be required to pay the amount of the Excise Tax that is the subject of the
claim to the applicable taxing authority in accordance with applicable law.
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(d) Repayments. If, after receipt by an Eligible Employee of an
Advance, the Eligible Employee becomes entitled to a refund with respect to
the claim to which such Advance relates, the Eligible Employee shall pay
Apple the amount of the refund (together with any interest paid or credited
thereon after Taxes applicable thereto). If, after receipt by Eligible
Employee of an Advance, a determination is made that the Eligible Employee
shall not be entitled to any refund with respect to the claim and Apple
does not promptly notify the Eligible Employee of its intent to contest the
denial of refund, then the amount of the Advance shall not be required to
be repaid by Eligible Employee and the amount thereof shall offset the
amount of the additional Gross-Up Payment then owing to the Eligible
Employee.
(e) Further Assurances. Apple shall indemnify each Eligible
Employee and hold each Eligible Employee harmless, on an after-tax basis,
from any costs, expenses, penalties, fines, interest or other liabilities
("Losses") incurred by the Eligible Employee with respect to the exercise
by Apple of any of its rights under this Section 7.8, including, without
limitation, any Losses related to Apple's decision to contest a claim or
any imputed income to the Eligible Employee resulting from any Advance or
action taken on the Eligible Employee's behalf by Apple hereunder. Apple
shall pay all legal fees and expenses incurred under this Section 7.8, and
shall promptly reimburse each Eligible Employee for the reasonable expenses
incurred by the Eligible Employee in connection with any actions taken by
Apple or required to be taken by the Eligible Employee hereunder. Apple
shall also pay all of the fees and expenses of the Accounting Firm,
including, without limitation, the fees and expenses related to the opinion
referred to in Section 7.8(b).
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(f) Combined Payments. Anything in this Section 7.8 to the contrary
notwithstanding, Apple shall have no obligation to pay an Eligible Employee
a required Gross-Up Payment under this Section 7.8 if the aggregate amount
of all Combined Payments has at the time such payment is due exceeded the
Limit. If the amount of a Gross-Up Payment to an Eligible Employee under
this Section 7.8 would result in the Combined Payments exceeding the Limit,
Apple shall pay the Eligible Employee the portion, if any, of the Gross-Up
Payment which can be paid to such employee without causing the aggregate
amount of all Combined Payments to exceed the Limit. In the event that an
Eligible Employee is entitled to a Gross-Up Payment under this Section 7.8
and other employees or former employees of the Company are also entitled to
gross-up payments under this Section 7.8 or under the corresponding
provisions of any other applicable Combined Arrangement and the aggregate
amount of all such payments would cause the Limit on Combined Payments to
be exceeded, Apple shall allocate the amount of the reduction necessary to
comply with the Limit among all such payments in the proportion that the
amount of each such gross-up payment bears to the aggregate amount of all
such payments. Nothing in this Section 7.8(f) shall require any Eligible
Employee to repay to Apple any amount that was previously paid to such
employee under this Section 7.8.
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SECTION 4. AMENDMENT AND ASSUMPTION.
(a) Section 12.1 of the Plan is revised as follows: The Plan and
this Supplement may not be amended or terminated by Apple on and after the
occurrence of the Change in Control Date in any way that would reduce or
eliminate the payments and benefits owing under the Plan and this
Supplement to any Section 2(a) Participant. In addition, no amendment or
termination which would be precluded under the previous sentence if made on
or after the Change in Control Date shall be effective if made or first
effective within the twelve month period ending on the Change in Control
Date.
(b) Apple will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business or assets of Apple expressly to assume and to agree to
perform this Agreement in the same manner and to the same extent that Apple
would be required to perform it if no such succession had taken place;
provided, however, that no such assumption shall relieve Apple of its
obligations hereunder.
SECTION 5. DEFINITIONS.
For purposes of the Plan and this Supplement, the following
capitalized words shall have the meanings set forth below:
"Accounting Firm" shall mean Ernst & Young or, if such firm is unable
or unwilling to perform such calculations, such other national accounting
firm as shall be designated by Apple in accordance with the terms of the
Retention Agreements.
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"Change in Control" shall mean a change in control of Apple of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether
or not Apple is then subject to such reporting requirement; provided,
however, that, anything in the Plan or this Supplement to the contrary
notwithstanding, a Change in Control shall be deemed to have occurred if:
(i) any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity or
person, or any syndicate or group deemed to be a person under Section
14(d)(2) of the Exchange Act, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 of the General Rules and Regulations under the
Exchange Act), directly or indirectly, of securities of Apple
representing 30% or more of the combined voting power of Apple's then
outstanding securities entitled to vote in the election of directors
of Apple;
(ii) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constituted the Board
and any new directors, whose election by the Board or nomination for
election by Apple's stockholders was approved by a vote of at least
three-fourths (3/4ths) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved (the "Incumbent
Directors"), cease for any reason to constitute a majority thereof;
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(iii) there occurs a reorganization, merger, consolidation or
other corporate transaction involving the Company (a "Transaction"),
in each case, with respect to which the stockholders of the Company
immediately prior to such Transaction do not, immediately after the
Transaction, own more than 50 percent of the combined voting power of
the Company or other corporation resulting from such Transaction;
(iv) all or substantially all of the assets of Apple are sold,
liquidated or distributed; or
(v) there is a "change in control" of Apple within the meaning
of Section 280G of the Code and the Regulations.
"Change in Control Date" shall mean the earliest of (i) the date on
which the Change in Control occurs, (ii) the date on which Apple executes
an agreement, the consummation of which would result in the occurrence of a
Change in Control, (iii) the date the Board approves a transaction or
series of transactions, the consummation of which would result in a Change
in Control and (iv) the date Apple fails to satisfy its obligations to have
the Plan and this Supplement assumed by any successor to Apple in
accordance with Section 4(b) of this Supplement. If the Change in Control
Date occurs as a result of an agreement described in clause (ii) of the
previous sentence or as a result of the approval of the Board described in
clause (iii) of the previous sentence and the Change in Control to which
such agreement or approval relates (the "Contemplated Change in Control")
subsequently does not
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occur, then the Supplement Term shall expire on the sixtieth day (the
"Reset Date") following the date the Board certifies by resolution duly
adopted by three-fourths (3/4ths) of the Incumbent Directors then in office
that the Contemplated Change in Control is not reasonably likely to occur;
provided, however, that this sentence shall not apply (A) to any Section
2(a) Participant whose termination of employment with Apple has occurred on
and after the Change in Control Date and on or prior to the Reset Date or
(B) if the Contemplated Change in Control subsequently occurs within three
months of the Reset Date. Following the Reset Date, the provisions of the
Plan and this Supplement shall remain in effect and a new Supplement Term
shall commence upon the occurrence of a subsequent Change in Control Date.
Notwithstanding the first sentence of this section, if an individual's
employment with the Company terminates prior to the Change in Control Date
and it is reasonably demonstrated that such termination of employment (i)
was at the request of the third party who has taken steps reasonably
calculated to effect the Change in Control or (ii) otherwise arose in
connection with or in anticipation of the Change in Control, then, solely
with respect to the affected Participant, the Change in Control Date shall
mean the date immediately prior to the date of such Participant's
termination of employment.
"Combined Arrangements" shall mean this Supplement to the Plan (as the
same may be amended from time to time) and the Retention Agreements.
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"Combined Payments" shall mean the aggregate cash amount of (i)
severance payments made to employees or former employees under Section 3(a)
of the Retention Agreements or the corresponding provisions of the
applicable Combined Arrangement, (ii) severance payments made to Section
2(a) Participants under Sections 2(e) and 2(f) of the Supplement or to any
other employee or former employee under the corresponding provisions of the
applicable Combined Arrangement, (iii) Gross-up Payments made to an
Eligible Employee under Section 3 of the Supplement or to any other
employee or former employee under the corresponding provisions of the
applicable Combined Arrangement, (iv) fees and expenses which are paid or
reimbursed to employees or former employees under Section 6 of the
Retention Agreements or to any other employee or former employee under the
corresponding provisions of the applicable Combined Arrangement, (v)
payments made to employees or former employees under Section 5 of the
Retention Agreements or to any other employee or former employee under the
corresponding provisions of the applicable Combined Arrangement and (vi)
costs incurred by Apple in respect of a Section 2(a) Participant under
Section 2(d) of the Supplement or to any other employee or former employee
under the corresponding provisions of the applicable Combined Arrangement.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor provisions thereto.
"Common Stock" shall mean the common stock of Apple.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and any successor provisions thereto.
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"Good Reason" shall mean:
(i) The relocation of the office of the Company where an
Eligible Employee is employed immediately prior to the Change in
Control Date (the "CIC Location") to a location which is more than
fifty (50) miles away from the CIC Location or the Company's requiring
an Eligible Employee to be based more than fifty (50) miles away from
the CIC Location (except for required travel on the Company's business
to an extent substantially consistent with the Eligible Employee's
customary business travel obligations in the ordinary course of
business prior to the Change in Control Date); or
(ii) The Company's assignment of an Eligible Employee to a job
with significantly reduced duties and responsibilities and which
involves either (A) a reduction in the Eligible Employee's base salary
or target bonus opportunity or (B) a drop of two grade designations or
more; provided, however, that clause (B) shall not apply if the
reduction in employee's grade designation causes such employee to
cease to qualify as an Eligible Employee for purposes of the Plan and
this Supplement;
provided, however, that an event described above shall not constitute Good
Reason unless it is communicated by the Eligible Employee to the Company in
writing and is not corrected by the Company in a manner which is reasonably
satisfactory to the Eligible Employee (including full retroactive
correction with respect to any monetary matter) within 10 days of the
Company's receipt of such written notice.
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"Limit" shall mean the dollar amount determined in accordance with the
formula [A x B x C], where
A equals 0.02;
B equals the number of issued and outstanding shares of Common
Stock of Apple immediately prior to the Change in Control Date;
and
C equals the greater of (i) (A) if the Common Stock is listed on
any established stock exchange or national market system
(including, without limitation, the National Market System of
the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the highest closing sale price (or
closing bid price, if no sales are reported) of a share of
Common Stock, or (B) if the Common Stock is regularly quoted on
the NASDAQ System (but not on a national market system) or
quoted by a recognized securities dealer but selling prices are
not reported, the highest mean between the high and low asked
prices for the Common Stock, in each case, on any day during the
ninety-day period ending on the Change in Control Date, and (ii)
the highest price paid or offered, as determined by the
Accounting Firm, in any bona fide transaction or bona fide offer
related to the Change in Control.
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"Notification Date" shall mean, during the Supplement Term, the date
an Eligible Employee is notified of his or her termination of employment or
the end of the date on which the cure period referred to in the definition
of Good Reason expires without the Company effecting the cure contemplated
by such definition.
"Payment" means (i) any amount due or paid to an Eligible Employee
under the Plan or this Supplement, (ii) any amount that is due or paid to
an Eligible Employee under any plan, program or arrangement of the Company,
and (iii) any amount or benefit that is due or payable to an Eligible
Employee under the Plan or this Supplement or under any plan, program or
arrangement of the Company not otherwise covered under clause (i) or (ii)
hereof which must reasonably be taken into account under Section 280G of
the Code and the Regulations in determining the amount of the "parachute
payments" received by the Eligible Employee, including, without limitation,
any amounts which must be taken into account under the Code and Regulations
as a result of (A) the acceleration of the vesting of any option,
restricted stock or other equity award granted under Apple's equity-based
incentive plans or otherwise, (B) the acceleration of the time at which any
payment or benefit is receivable by an Eligible Employee or (C) any
contingent severance or other amounts that are payable to an Eligible
Employee.
"Regulations" shall mean the proposed, temporary and final regulations
under Section 280G of the Code or any successor provision thereto.
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"Retention Agreements" means the Retention Agreements, dated as of the
date of this Supplement, to which Apple is a party and any Retention
Agreement entered into after the date hereof which is specifically
designated in the terms thereof as one of the Combined Arrangements.
"Supplement Term" shall mean the period commencing on the Change in
Control Date and ending on the second anniversary thereof.
"Transaction Date" shall mean the date described in clause (i) of the
definition of Change in Control Date.
_______________________________
* Years of Service will be determined as of the Participant's Termination
Date.
1 To be expressed in up to three decimal places. For example, a combined
federal, state and local marginal rate of 56% would be expressed as .560.
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EXHIBIT 10.A.23
Separation Agreement
In consideration of the mutual agreements set forth below, Daniel
Eilers ("Eilers") and Apple Computer, Inc. ("Apple") agree to the following
terms and conditions of this Separation Agreement (the "Agreement"):
1. Nature of Business. Apple is in the business of designing,
developing, producing, selling and marketing computer systems, related
products and services. The business practices of Apple and the market
conditions in which Apple operates change rapidly and these changes have
necessitated prompt changes in management, and/or managers'
responsibilities. These changes are needed from time to time in the high
level management positions such as those for which Eilers has been
employed.
2. Resignation from Office and Rescission of Retention Agreement.
Employee shall resign from his position as Senior Vice President, World
Wide Marketing & Customer Solutions of Apple, effective as of December 1,
1995. Eilers hereby resigns from all other positions he holds on behalf of
Apple, its subsidiaries and affiliates effective as of December 1, 1995
(except as an employee), which positions are set forth at Exhibit A hereto.
Eilers agrees to sign all appropriate and mutually agreeable documentation
prepared by Apple to facilitate these resignations.
Eilers and Apple agree that in exchange for the terms and conditions
of this Agreement, the June 9, 1995 Retention Agreement between Eilers and
Apple, a copy of which is attached hereto as Exhibit B, is hereby
rescinded and that neither party has any further rights or obligations
under the Retention Agreement.
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3. Employment Status/Termination. Subject to paragraph 11 below,
from the date of this Agreement through February 1, 1996 ("Termination
Date") or such earlier date as a result of an event under paragraph 11,
Eilers will continue to devote his best efforts to Apple and will remain an
employee of and fiduciary to Apple reporting to Edward B. Stead. On and
after December 1, 1995, Eilers will not be required to perform any duties
for or on behalf of Apple. Until Termination Date, Eilers shall continue
to receive his regular salary and receive full employee benefits. Apple
will designate Eilers as a participant in Apple's Executive Severance Plan
("Plan"), on or about December 1, 1995, and Eilers will become eligible to
receive the appropriate compensation and benefits under that Plan valued as
of February 1, 1996.
4. Compensation and Benefits Upon Termination. Subject to paragraph
11 below, at or before Termination Date, Apple will pay the following:
a. Severance Payments. Under this Agreement and the Plan,
Eilers is eligible to receive a lump sum severance payment based on 13
years and 6 months of employment and a proration of his FY '96
Senior/Executive Incentive Bonus Plan ("Bonus Plan"), less deductions, and
a payout of his accrued vacation. Subject to paragraph 11 below, Apple
will pay Eilers five hundred fifteen thousand, seven hundred fifty dollars
($515,750), less payroll tax deductions, and an additional amount equal to
Eilers' accrued vacation through Termination Date, less payroll tax
deductions, in full satisfaction of all Apple's obligations under the Plan,
Bonus Plan and otherwise. Eilers shall be paid on or before Termination
Date and such payment constitutes full compensation under the Plan , Bonus
Plan and otherwise. There shall be no other payments to Eilers except as
stated in this paragraph 4(a) and in paragraph 3 above and the amount of
such payments shall at all times remain subject to paragraph 11.
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b. Stock Options. Apple's Board of Directors (the "Board")
previously granted Eilers options to purchase shares of Apple Common Stock
under Apple's 1981 and 1990 Stock Option Plans (the "1981 and 1990 Plans")
and options to purchase shares of stock under Apple's 1987 Executive Long
Term Stock Option Plan ("ELTSOP"). Such options shall continue to vest and
be exercisable in accordance with the terms of the grant agreement issued
to Eilers with respect to such grants, and the terms of the 1981 and 1990
Stock Option Plans and the ELTSOP administered by the Board.
c. Receipt of Documentation. Eilers acknowledges that he has
previously received from Apple copies of pertinent portions of Apple's
Executive Severance Plan, Apple's Senior/ Executive Bonus Program, Apple's
1981 and 1990 Stock Option Plans, Apple's ELTSOP, Apple's Vacation and
Holiday Policies, and Apple's Benefit Plans relating to health care, life
insurance, accidental death and disability, short and long term disability
and Savings Plans. Eilers understands and agrees to be bound by the
written terms and conditions of these various plans, policies or programs,
and agrees that Apple has reserved the right and option, in its sole
discretion, to change, interpret, modify or terminate these and all other
plans, policies or programs at any time without Eilers's consent so long as
such action does not conflict with or reduce Eiler's rights under this
Agreement.
d. Outplacement. Apple will provide Eilers with the following
outplacement benefits:
(1) Until August 1, 1996, or such earlier date as the parties
may agree, Apple will maintain as active Eilers' phone number and phone
line at (408) 974-2303 so that Eilers may continue to receive calls with
voice mail box access. Eilers agrees that his voice mail greeting will
refer callers of a personal nature to another number and will instruct
callers with Apple business to either leave a message or to another Apple
phone number. Eilers agrees to forward to Edward B. Stead any calls for
and on behalf of Apple. Apple will maintain Eilers' name and number in
Apple's directory so that Apple operators will continue to be able to
transfer calls to Dan Eilers' phone number and phone line.
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(2) Until August 1, 1996, Apple will forward any personal mail
directed to Eilers but received by Apple to Eilers' home address.
(3) Apple will provide Eilers with a non-employee AppleLink
account, at Apple's expense, through August 1, 1996.
(4) Apple will provide Eilers with an outplacement office
through December 1, 1996, or such earlier date as the parties may agree to,
otherwise in accordance with the outplacement benefits under the Plan.
e. No Other Benefits. Eilers will not be entitled to receive
any other compensation, bonus or benefits provided by, through or on behalf
of Apple, its affiliates or subsidiaries, other than benefits that are
vested as of Termination Date and that are payable in accordance with the
terms of any applicable Benefit Plan, or otherwise provided for herein.
5. Confidentiality. The terms of this Agreement are confidential.
Neither Eilers nor Apple will at any time disclose to any third party the
fact or terms of this Agreement, except as authorized by this agreement or
as required by law. Eilers may also make such disclosure to his immediate
family members, his tax advisor and/or lawyer, all of whom shall be
instructed to keep the information disclosed to them confidential; any
disclosure by any such party shall be deemed a disclosure by Eilers. Apple
and Eilers shall not disparage each other in their communications in
response to all inquiries from the press, public media or any other third
parties regarding this Agreement or Eilers's employment termination.
6. Trade Secrets, Proprietary and Confidential Information. Eilers
agrees to comply with Apple's "Proprietary Rights and Information
Agreement" which is attached hereto as Exhibit C to this Agreement.
In addition, Eilers agrees to continue to abide by the principles and
guidelines in Apple's Global Ethics brochure, the terms of which are
incorporated herein to the extent it applies to employees through
Termination Date and to former employees thereafter.
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On or before Termination Date, Eilers agrees to promptly return to
Apple or its records retention designee all Apple proprietary and
confidential information, including but not limited to all business plans,
financial records, inventions, discoveries, improvements, computer
programs, designs, documentation, notes, plans, drawings and copies thereof
to Apple. Apple hereby gives to Eilers the equipment identified at Exhibit
D and all manuals and documents which came with such equipment.
Eilers and Apple agree that this section regarding Trade Secrets,
Proprietary and Confidential Information shall survive the termination of
this Agreement.
7. Fiduciary Duties/Non-Solicitation. Eilers further recognizes
that Apple's work force constitutes an important and vital aspect of its
business. Eilers agrees that during his employment with Apple he shall
not solicit, or assist others employed by Apple to become employed by any
firm, company or other business enterprise without the consent of and
direction from Apple. Through February 1, 1997, Eilers agrees that he
shall not solicit, or assist others employed by Apple to become employed by
any firm, company or other business enterprise. Eilers further represents
that he has no time prior to the date this Agreement is signed solicited or
encouraged any employee to leave Apple without the consent of and direction
from Apple. Nothing in this Agreement will prevent Eilers from providing
favorable recommendations or favorable references on behalf of persons who
previously worked with Eilers.
Eilers and Apple also agree, that upon a breach or violation or
threatened breach or violation of any confidentiality, trade secrets, or
non-solicitation agreement by Eilers contained herein, or if any provision
of Sections 5, 6, or 7 of this Agreement, Apple, in addition to all other
remedies which might be available to it, shall be entitled as a matter of
right to equitable relief in any court of competent jurisdiction, including
the right to obtain injunctive relief or specific performance. Eilers and
Apple agree that the remedies at law for any such breach or violation are
not fully adequate and that the injuries to Apple as a result of the
continuation of any breach or violation are incapable of full calculation
in monetary terms and therefore constitute irreparable harm. This
paragraph 7 shall survive the termination of this Agreement.
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8. Indemnification. All rights of indemnification previously
provided by Apple to Eilers by Apple's By-Laws and/or by the
Indemnification Agreement dated May 19, 1992 shall continue in full force
and effect in accordance with their terms, following the date of this
Agreement. A copy of Eilers's Indemnification Agreement is attached hereto
as Exhibit E to this Agreement.
9. Successors. Apple will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Apple to expressly
assume and agree to perform this Agreement in the manner and to the same
extent that Apple would be required to perform it if no such succession had
taken place. Failure of Apple to obtain such assumption and agreement
prior to the effectiveness of any such succession shall entitle Eilers to
the benefits listed in paragraphs 3 and 4 of this Agreement, subject to the
terms and conditions therein.
10. Governing Law. The validity, interpretation, effect, and
enforcement of this Agreement shall be governed by the laws of the State of
California without regard to its choice of law principles.
11. Entire Agreement. This Agreement, and Exhibits A, B, C, D & E to
this Agreement, set forth the entire Agreement and understanding between
Eilers and Apple, and supersede any other negotiations, agreements,
understandings, oral agreements, representations or past or future
practices, whether written or oral, by Apple, except as otherwise provided
herein. This Agreement may be amended only by written agreement, signed by
the parties to be bound by the amendment. Parol evidence will be
inadmissible to show agreement by and between the parties to any term or
condition contrary to or in addition to the terms and conditions contained
in this Agreement.
Each Apple plan or policy referred to herein directly or by
implication (except the 1981 and 1990 Stock Option Plans) is incorporated
herein only insofar as it does not contradict this Agreement. If any
inconsistencies exist between this Agreement and any such plan, policy or
program, this Agreement shall control. If any inconsistencies exist
between this Agreement and any such plan or policy, this Agreement and the
1981 and 1990 Stock Option Plans, those stock plans shall control.
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Nothing in any such plan, policy, or this Agreement shall change the
At Will nature of Eilers's employment under this Agreement by which either
party can terminate Eilers's employment without regard to cause. Eilers
understands and agrees that Apple is obligated to make the payments
outlined in paragraph 3 and 4 of this Agreement in the event Eilers's
employment terminates before Termination Date for any reason other than:
a. by Apple for "Business Reasons" as defined below;
b. by Eilers for any reason, except if Eilers's employment is
terminated for any material breach by Apple of this Agreement. In this
event, Eilers will be entitled to the payments outlined in paragraph 3 and
4 adjusted according to the actual, accelerated Termination Date and
offsetting any payments made to his prior to the actual, accelerated
Termination Date;
For purposes of this Agreement only, "Business Reasons" shall mean that
Eilers is terminated for any of the following reasons:
(i) engaging in unfair or unlawful competition with Apple; or
(ii) inducing any customer of Apple to breach any contract with
Apple; or
(iii)making any unauthorized disclosure of or otherwise
misusing any of the secrets or confidential information of Apple; or
(iv) committing any act of embezzlement, fraud or material theft
with respect to any Apple property; or
(v) violating any Apple policy or guideline or the terms of this
Agreement; or
(vi)causing material loss, damage or injury to or otherwise
endangered the property, reputation or employees of Apple; or
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(vii)engaging in malfeasance, negligence or misconduct, or
failing to perform reasonable duties and responsibilities consistent with your
duties and responsibilities to Apple; or
(viii)failure to act in accordance with specific, reasonable
and lawful instructions from Apple's Chief Executive Officer, or his
delegate.
12. Right to Advice of Counsel. Eilers understands that he has the
right to have this Agreement reviewed by his lawyer and acknowledges that
Apple has encouraged his to consult with his lawyer so that he is fully
aware of his rights and obligations under this Agreement. Eilers
acknowledges that he has done so.
13. Modification. This Agreement may not be amended, modified,
changed or discharged in any respect except as agreed in writing and signed
by Eilers and the Chief Executive Officer of Apple Computer, Inc.
14. Severability and Interpretation. In the event that any provision
or any portion of this Agreement is held invalid or unenforceable by a
court of competent jurisdiction, such provision or portion thereof shall be
considered separate and apart from the remainder of this Agreement and the
other provisions shall remain fully valid and enforceable, provided that,
if paragraph 2, 5, 6, 7, 19 or 21 are held to be invalid or unenforceable
in response to a motion, argument or other act by Eilers, then Apple, at
its sole discretion, may rescind the Agreement and recover all
consideration paid to Eilers under the Agreement.
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15. Notices. All notices required by this Agreement shall by given
in writing either by personal delivery or by first class mail, return
receipt requested. Notices shall be addressed as follows:
To Apple: Apple Computer, Inc.
1 Infinite Loop, Mail Stop 38-I
Cupertino, California 95014
Attention: General Counsel
To Eilers : 1224 Miraflores Way
Los Altos, CA 94024
or in each case to such other address as Eilers or Apple shall notify the
other. Notice given by mail shall be deemed given five (5) days following
the date of mailing.
16. Miscellaneous. The rights and obligations of Apple under this
Agreement shall inure to the benefit of and shall be binding upon the
present and future subsidiaries of Apple, any and all subsidiaries of a
subsidiary, all affiliated corporations, and successors and assigns of
Apple. No assignment of this Agreement by Apple will relieve Apple of its
obligations. Eilers shall not assign any of his rights and/or obligations
under this Agreement and any such attempted assignment will be void. This
Agreement shall be binding upon and inure to the benefit of Eilers, his
heirs, executors, administrators, or other legal representatives and their
legal assigns.
17. Damage Limitation. At Termination Date, Eilers shall not be
entitled to recover any compensation, benefits or damages except as
specifically described in this Agreement. This damage waiver provides that
no damages (including without limitation, special, consequential, general,
liquidated or punitive damages) shall be sought or due from Apple.
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18. Waiver. A waiver by either party of any of the terms or
conditions of this Agreement in any instance shall not be deemed or
construed to be a waiver of such term or condition for the future, or of
any subsequent breach thereof. All remedies, rights, undertakings,
obligations, and agreements contained in this Agreement shall be cumulative
and none of them shall be in limitation of any other remedy, right,
undertaking, obligation or agreement of either party.
19. Release. Eilers hereby completely releases and forever
discharges Michael Spindler, Apple, its officers, directors, agents,
employees, attorneys, insurers, subsidiaries and affiliates ("Apple
Parties") from, and covenants not to sue any Apple Party with respect to,
all claims, rights, demands, actions, obligations, debts, sums of money,
damages (including but not limited to general, special, punitive,
liquidated and compensatory damages) and causes of action of every kind,
nature and character, known and unknown, in law or equity, connected with
Eilers's employment relationship with the Apple Parties, or any other act
or omission of any Apple Party which may have occurred prior to the date
this Agreement is signed. Eilers further agrees that by his acceptance and
negotiation of the payment provided for in paragraph (4) of this Agreement,
he thereby completely releases and forever discharges the Apple Parties
from, and covenants not to sue any Apple Party with respect to, all claims,
rights, demands, actions, obligations, debts, sums of money, damages
(including but not limited to general, special, punitive, liquidated and
compensatory damages) and causes of action of every kind, nature and
character, known and unknown, in law or equity, connected with Eilers's
employment relationship with the Apple Parties, or the termination of such
relationship, or any other act or omission of any Apple Party which may
have occurred prior to Termination Date. This release and discharge
includes, but is not limited to, all "wrongful discharge" claims; all
claims relating to any contracts of employment express or implied; any
covenant of good faith and fair dealing express or implied; any tort of any
nature: any federal, state, or municipal statute or ordinance; any claims
under the California Fair Employment and Housing Act, Title VII of the
Civil Rights Act of 1964, 42 U.S.C. Section 1981, and any other laws and
regulations relating to employment discrimination and any and all claims
for attorney's fees and costs. Eilers specifically acknowledges that the
foregoing release includes a complete release and discharge of all Apple
Parties from any and all claims, damages of any kind, and claims for
attorneys fees and costs, under the Age Discrimination in Employment Act of
1967 ("ADEA") as amended by the Older Worker
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Benefit Protection Act ("OWBPA"). Eilers and Apple agree that part of the
consideration payable to Eilers under this Agreement is consideration that
Eilers would not otherwise be entitled to and is in consideration for
Eilers's release of claims under the ADEA as amended by the OWBPA.
Eilers acknowledges that he understands the protections provided by
the OWBPA and that the provisions of the OWBPA have been met by the terms
of this Agreement. Eilers states that he knowingly and voluntarily enters
into this Agreement. Eilers acknowledges that this Agreement is written in
a manner calculated to be understood by him. Eilers further acknowledges
that this Agreement refers without limitation to rights under the Age
Discrimination in Employment Act. Eilers understands that by this
Agreement, he does not waive rights or claims that may arise after
Termination Date. Eilers acknowledges that he is entering this Agreement
in exchange for consideration in addition to anything of value to which he
already is entitled due to his employment with Apple. Further, Eilers
acknowledges that this release of claims under the OWBPA is not requested
in connection with an exit incentive program or other employment
termination program offered to a group or class of employees within the
meaning of OWBPA. Notwithstanding this provision, Eilers acknowledges that
he has been allowed up to forty five (45) days from the date that he
received this Agreement to accept its terms. Eilers acknowledges he has
consulted with an attorney about the Agreement. Eilers acknowledges that
after he signs the Agreement, he will then be given seven (7) days
following the date on which he signs the Agreement to revoke it and that
this Agreement will only become effective after this seven (7) day period
has lapsed. Any such revocation must be in writing signed by Eilers and
immediately delivered to Apple's General Counsel.
Eilers has read and expressly waives Section 1542 of the California
Civil Code, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIS MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
WITH THE DEBTOR.
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This waiver is not a mere recital, but is a known waiver of rights and
benefits. This is a bargained-for provision of this Agreement and is
further consideration for the covenants and conditions contained herein.
The Apple Parties hereby release and forever discharge Eilers, his
agents and attorneys from, and covenant not to sue Eilers, his agents and
attorneys with respect to, all claims, rights, demands, actions,
obligations, debts, sums of money, damages, and causes of action ("claims")
arising from his employment relationship with Apple to the extent permitted
by law and public policy, except for any claims arising from any
intentional acts of misconduct, or any other act taken in bad faith or
without a reasonable belief that it was in the best interests of the Apple
Parties.
20. Cooperation. Eilers agrees that he will make himself available
at reasonable times and intervals to participate in the conduct of and
preparation for any pending or future litigation to which Apple is a party
and in which his experience or knowledge may be relevant. Eilers shall be
reimbursed for reasonable travel and out-of-pocket expenses incurred by
virtue of his cooperation as described in this paragraph. In no respect
shall this provision be deemed to pertain to or affect the nature or
substance of Eilers testimony at deposition or trial or in any other
truthful testimony at deposition or trial or in any other circumstances.
21. Remedies in Event of Future Dispute.
a. Except as provided in subparagraph (b) below, in the event
of any future dispute, controversy or claim between the parties arising
from or relating to this Agreement, its breach, any matter addressed by
this Agreement, and/or Eilers's employment with Apple through Termination
Date, the parties will first attempt to resolve the dispute through
confidential mediation to be conducted in San Francisco by a member of the
firm of Gregoria, Haldeman & Piazza, Mediated Negotiations, 625 Market
Street, Suite 400, San Francisco, California 94105. If the parties'
dispute is not resolved through mediation, it will be resolved through
binding confidential arbitration to be conducted by the American
Arbitration Association in San Francisco, pursuant to its California
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Employment Dispute Resolution Rules, and judgment upon the award rendered
by the Arbitrator(s) may be entered by any court having jurisdiction of the
matter. The prevailing party in such arbitration shall be entitled to
recover from the losing party, not only the amount of any judgment awarded
in its favor, but also any and all costs and expenses, incurred in
arbitrating the dispute or in preparing for such arbitration.
b. In the event that a dispute arises concerning compliance
with this Agreement, either party will be entitled to obtain from a court
with jurisdiction over the parties preliminary and permanent injunctive
relief to enjoin or restrict the other party from such breach or to enjoin
or restrict a third party from inducing any such breach, and other
appropriate relief, including money damages. In seeking any such relief,
however, the moving party will retain the right to have any remaining
portion of the controversy resolved by binding confidential arbitration in
accordance with subparagraph (a) above.
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By signing the below, the parties agree to the terms hereof, including
the Exhibits hereto, and agree that this document, and Exhibits A, B, C, D
& E hereto, sets forth their entire agreement, except as otherwise
expressly provided herein.
APPLE COMPUTER, INC.
Date 1/18/96 By _/s/ Edward B. Stead_____________
Edward B. Stead
Vice President and General Counsel
Apple Computer, Inc.
I have read, understand, and agree to the foregoing:
Date 12/11/95 By _/s/ Daniel Eilers ________________
Daniel Eilers
APPROVED AS TO FORM:
Date 12/12/95 By _/s/ Cynthia Carlson_____________
Cynthia Carlson, Esq.
Gray, Cary, Ware & Freidenrich
Attorneys for Daniel Eilers
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EXHIBIT 10.A.24
Separation Agreement
In consideration of the mutual agreements set forth below, Joseph A.
Graziano ("Graziano") and Apple Computer, Inc. ("Apple") agree to the
following terms and conditions of this Separation Agreement (the
"Agreement"):
1. Nature of Business. Apple is in the business of designing,
developing, producing, selling and marketing computer systems, related
products and services. The business practices of Apple and the market
conditions in which Apple operates change rapidly and these changes have
necessitated prompt changes in management, and/or managers'
responsibilities. These changes are needed from time to time in the high
level management positions such as those for which Graziano has been
employed.
2. Resignations and Rescission of Retention Agreement. Employee has
resigned from his position on Apple's Board of Directors effective as of
October 3, 1995 and from his position as Chief Financial Officer effective
as of October 31, 1995. Graziano also hereby resigns effective October 31,
1995 from all other positions he holds on behalf of Apple, its subsidiaries
and affiliates (except for his position as an employee), which positions
are set forth at Exhibit A hereto. Graziano agrees to sign at Apple's
request all appropriate mutually agreeable documentation prepared by Apple
to facilitate these resignations.
Graziano and Apple agree that in exchange for the terms and conditions
of this Agreement, the June 9, 1995 Retention Agreement between Graziano
and Apple, a copy of which is attached hereto as Exhibit B, is hereby
rescinded and that neither party has any further rights or obligations
under the Retention Agreement.
3. Employment Status/Termination. Subject to paragraph 2 above and
paragraph 11 below, from October 31, 1995 through January 2, 1996
("Termination Date") or such earlier date as a result of an event under
paragraph 11, Graziano will continue to devote his best efforts to Apple
and will remain an employee of Apple as provided in this paragraph,
reporting to Edward B. Stead. Until January 2, 1996, Graziano will remain
an appointed vice-president of Apple and continue to receive his regular
salary and full executive level medical insurance benefits. On or about
October 31, 1995, Apple will designate Graziano as a participant in Apple's
Executive Severance Plan ("Plan") and Graziano will become eligible to
receive benefits under the Plan valued as of December 31, 1995. To the
extent this Agreement varies from the terms and conditions of the Plan or
Apple's Senior/Executive Bonus Program ("Bonus Plan"), this Agreement shall
govern.
4. Compensation and Benefits Upon Termination. Subject to paragraph
11 below, on or about Termination Date, Apple will pay the following:
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a. Severance Payments. Graziano is eligible to receive a lump
sum severance payment under the Plan based on his 6 years' and 6 months'
employment and a proration of his FY '96 bonus, less deductions. Subject
to paragraph 11 below, on or about Termination Date, Apple will pay
Graziano three hundred forty thousand, six-hundred twenty-six dollars
($340,626.00), less deductions, in full satisfaction of all Apple's
obligations to pay severance benefits under the Plan, Bonus Plan, and any
and all other written or oral agreements between Graziano and Apple
including but not limited to, the employment agreement dated June 14, 1989,
a copy of which is attached hereto as Exhibit C. On or about Termination
Date and subject to paragraph 11 below, Apple will pay Graziano an
additional lump sum payment of fifty nine thousand, three hundred seventy
four dollars ($59,374), less deductions, in consideration of the covenants
and promises made in this Agreement expressly including the promises and
covenants contained in paragraph 7 of this Agreement. Except as provided
for below in Paragraph 4(b), there shall be no other payments to Graziano
except as stated in this paragraph 4(a) and in paragraph 3 above and the
amount of such payments shall at all times remain subject to paragraph 11.
b. Stock Options. Apple's Board of Directors (the "Board")
previously granted Graziano options to purchase shares of Apple Common
Stock under Apple's 1981 and 1990 Stock Option Plans (the "1981 and 1990
Plans") and options to purchase shares of stock under Apple's 1987
Executive Long Term Stock Option Plan ("ELTSOP"). Nothing in this
Agreement shall alter the terms and conditions of such options and such
options shall continue to vest and be exercisable in accordance with the
terms of the grant agreement issued to Graziano with respect to such
grants, and the terms of the 1981 and 1990 Stock Option Plans and the
ELTSOP administered by the Board. Notwithstanding this paragraph, the
administrator of the ELTSOP has determined that the three (3) month period
relating to the exercise of options after termination of employment as
provided for in Section 9(e) of the ELTSOP shall be extended to twelve (12)
months with respect to those outstanding stock options granted to Graziano
only under the ELTSOP which are vested and exercisable on or before January
2, 1996.
c Receipt of Documentation. Graziano acknowledges that he has
previously received from Apple copies of pertinent portions of Apple's
Executive Severance Plan, Apple's Senior/Executive Bonus Program, Apple's
1981 and 1990 Stock Option Plans, Apple's ELTSOP, Apple's Vacation and
Holiday Policies, and Apple's Benefit Plans relating to health care, life
insurance, accidental death and disability, short and long term disability
and Savings Plans. Graziano understands and agrees to be bound by the
written terms and conditions of these various plans, policies or programs,
unless expressly provided for otherwise under this Agreement or in the
Plan, and agrees that Apple has reserved the right and option, in its sole
discretion, to change, interpret, modify or terminate these and all other
plans, policies or programs at any time without Graziano's consent so long
as such action does not conflict with or reduce Graziano's rights under
this Agreement.
e. No Other Benefits. Graziano will not be entitled to receive
any other compensation, bonus or benefits provided by, through or on behalf
of Apple, its affiliates or subsidiaries, other than benefits that are
vested as of Termination Date and that are payable in accordance with the
terms of any applicable Benefit Plan, or otherwise provided for herein.
5. Confidentiality. The terms of this Agreement are confidential.
Neither Graziano nor Apple will at any time disclose to any third party the
fact or terms of this Agreement, except as
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authorized by this agreement or as required by law. Graziano may also make
such disclosure to his
spouse, tax advisor and/or lawyer, all of whom shall be instructed to keep
the information disclosed to them confidential; any disclosure by any such
party shall be deemed a disclosure by Graziano. Apple and Graziano shall
not disparage each other in their communications in response to all
inquiries from the press, public media or any other third parties regarding
this Agreement or Graziano's employment termination. If Apple makes a
press statement which disparages Graziano, then Graziano may invoke the
procedures outlined in paragraph 21 of this Agreement. If Graziano makes a
press statement which disparages Apple, then Apple may invoke the
procedures outlined in paragraph 21 of this Agreement.
6. Trade Secrets, Proprietary and Confidential Information.
Graziano agrees to comply with Apple's "Proprietary Rights and Information
Agreement" which is attached hereto as Exhibit D to this Agreement.
In addition, Graziano agrees to continue to abide by the principles
and guidelines in Apple's Global Ethics brochure, the terms of which are
incorporated herein to the extent it applies to employee through
Termination Date and to former employees thereafter.
On or before Termination Date, Graziano agrees to promptly return to
Apple or its records retention designee, all Apple proprietary and
confidential information, including but not limited to all inventions,
discoveries, improvements, computer programs, designs, documentation,
notes, plans, drawings and copies thereof to Apple. Graziano shall be
entitled to keep as his own personal property the equipment listed at
Exhibit E together with manuals and product data information associated
with such equipment.
Graziano and Apple agree that this section regarding Trade Secrets,
Proprietary and Confidential Information shall survive the termination of
this Agreement.
7. Non-Competition/Non-Solicitation. Graziano further recognizes
that Apple's work force constitutes an important and vital aspect of its
business. Graziano agrees, therefore, that both during his employment with
Apple, and thereafter until January 2, 1997, Graziano shall not solicit, or
assist others employed by Apple, or any of its subsidiaries or affiliates,
to become employed by any firm, company or other business enterprise.
Graziano further represents that he has no time prior to this areement
solicited or encouraged any employee to leave Apple. Nothing in this
Agreement will prevent Graziano from providing favorable recommendations or
favorable references on behalf of persons who previously worked with
Graziano.
Graziano will not, without the prior express written consent of Apple,
compete with Apple on or before June 30, 1996 by engaging in or assisting
others to develop or market products or services that are in competition
with Apple products or services. Graziano's agreement not to compete is
limited to the state of California. Nothing in this Agreement shall
prohibit Graziano from serving as a member of the Boards of Directors of
Stratacom, Intellicorp, Pixar and/or Sharedata.
Graziano and Apple also agree, that upon a breach or violation or
threatened breach or violation of any confidentiality, trade secrets, non-
competition or non-solicitation agreement by Graziano contained herein, or
if any provision of Sections 5, 6, or 7 of this Agreement, Apple, in
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addition to all other remedies which might be available to it including
rescission of the Agreement and repayment of the consideration paid to
Graziano for the covenants or promises breached, shall be entitled as a
matter of right to equitable relief in any court of competent jurisdiction,
including the right to obtain injunctive relief or specific performance.
Graziano and Apple agree that the remedies at law for any such breach or
violation are not fully adequate and that the injuries to Apple as a result
of the continuation of any breach or violation are incapable of full
calculation in monetary terms and therefore constitute irreparable harm.
This paragraph 7 shall survive the termination of this Agreement.
8. Indemnification. All rights of indemnification previously
provided by Apple to Graziano by Apple's By-Laws and/or by the
Indemnification Agreement dated June 14, 1989 shall continue in full force
and effect in accordance with their terms, following the date of this
Agreement. A copy of Graziano's Indemnification Agreement is attached
hereto as Exhibit F to this Agreement.
9. Successors. Apple will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Apple to expressly
assume and agree to perform this Agreement in the manner and to the same
extent that Apple would be required to perform it if no such succession had
taken place. Failure of Apple to obtain such assumption and agreement
prior to the effectiveness of any such succession shall entitle Graziano to
the benefits listed in paragraphs 3 and 4 of this Agreement, subject to the
terms and conditions therein.
10. Governing Law. The validity, interpretation, effect, and
enforcement of this Agreement shall be governed by the laws of the State of
California without regard to its choice of law principles.
11. Entire Agreement. This Agreement, and Exhibits A, B, C, D, E & F
to this Agreement, set forth the entire Agreement and understanding between
Graziano and Apple, and supersede any other negotiations, written
agreements, understandings, oral agreements, representations or past or
future practices, whether written or oral, by Apple, including but not
limited to, the employment agreement between Apple and Graziano dated June
14, 1989, except as otherwise provided for herein. This Agreement may be
amended only by written agreement, signed by the parties to be bound by the
amendment. Parol evidence will be inadmissible to show agreement by and
between the parties to any term or condition contrary to or in addition to
the terms and conditions contained in this Agreement.
Each Apple plan or policy referred to herein directly or by
implication (except the 1981 and 1990 Stock Option Plans and the ELTSOP) is
incorporated herein only insofar as it does not contradict this Agreement.
If any inconsistencies exist between this Agreement and any such plan or
policy, this Agreement shall control. If any inconsistencies exist between
this Agreement and the 1981 and 1990 Stock Option Plans or the ELTSOP,
those stock plans shall control.
Nothing in any such plan, policy, or this Agreement shall change the
At Will nature of Graziano's employment under this Agreement and as
provided under his employment agreement dated June 14, 1989 by which either
party can terminate Graziano's employment without regard to cause.
Notwithstanding any provision in this Agreement to the contrary, Graziano
understands and agrees that Apple is obligated to make the payments
outlined in paragraph 3 and 4 of this Agreement in the event Graziano's
employment terminates before Termination Date for any reason other than:
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a. by Apple for "Business Reasons" as defined below;
b. by Graziano for any reason, except if Graziano's employment
is terminated for any material breach by Apple of this Agreement. In this
event, Graziano will be entitled to the payments outlined in paragraph 3
and 4 adjusted according to the actual, accelerated Termination Date and
offsetting any payments made to him prior to the actual, accelerated
Termination Date;
For purposes of this Agreement only, "Business Reasons" shall mean that
Graziano is terminated for any of the following reasons:
(i) engaging in unfair or unlawful competition with Apple; or
(ii) inducing any customer of Apple to breach any contract with
Apple; or
(iii) making any unauthorized disclosure of or otherwise misusing
any of the secrets or confidential information of Apple; or
(iv) committing any act of embezzlement, fraud or material theft
with respect to any Apple property; or
(v) violating any Apple policy or guideline or the terms of this
Agreement; or
(vi) causing material loss, damage or injury to or otherwise
endangered the property, reputation or employees of Apple; or
(vii) engaging in malfeasance, negligence or misconduct, or failing
to perform reasonable duties and responsibilities consistent with your duties
and responsibilities to Apple; or
(viii)failure to act in accordance with specific, reasonable and
lawful instructions from Apple's Chief Executive Officer, or his delegate.
12. Right to Advice of Counsel. Graziano understands that he has the
right to have this Agreement reviewed by his lawyer and acknowledges that
Apple has encouraged him to consult with his lawyer so that he is fully
aware of his rights and obligations under this Agreement. Graziano
acknowledges that he has done so.
13. Modification. This Agreement may not be amended, modified,
changed or discharged in any respect except as agreed in writing and signed
by Graziano and the Chief Executive Officer of Apple Computer, Inc.
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14. Severability and Interpretation. In the event that any provision
or any portion of this Agreement is held invalid or unenforceable by a
court of competent jurisdiction, such provision or portion thereof shall be
considered separate and apart from the remainder of this Agreement and the
other provisions shall remain fully valid and enforceable, provided that,
if paragraph 2, 5, 6, 7, 19 or 21 is held to be invalid or unenforceable in
response to a motion, argument or other act by Graziano, then Apple, at its
sole discretion, may rescind the Agreement and recover all consideration
paid to Graziano under the Agreement.
15. Notices. All notices required by this Agreement shall by given
in writing either by personal delivery or by first class mail, return
receipt requested. Notices shall be addressed as follows:
To Apple: Apple Computer, Inc.
1 Infinite Loop, Mail Stop 38-I
Cupertino, California 95014
Attention: General Counsel
To Graziano : 14055 Chester Avenue
Saratoga, California 95070
or in each case to such other address as Graziano or Apple shall notify the
other. Notice given by mail shall be deemed given five (5) days following
the date of mailing.
16. Miscellaneous. The rights and obligations of Apple under this
Agreement shall inure to the benefit of and shall be binding upon the
present and future subsidiaries of Apple, any and all subsidiaries of a
subsidiary, all affiliated corporations, and successors and assigns of
Apple. No assignment of this Agreement by Apple will relieve Apple of its
obligations. Graziano shall not assign any of his rights and/or
obligations under this Agreement and any such attempted assignment will be
void. This Agreement shall be binding upon and inure to the benefit of
Graziano's heirs, executors, administrators, or other legal representatives
and their legal assigns.
17. Damage Limitation. At Termination Date, Graziano shall not be
entitled to recover any compensation, benefits or damages except as
specifically described in this Agreement. This damage waiver provides that
no damages (including without limitation, special, consequential, general,
liquidated or punitive damages) shall be sought or due from Apple.
18. Waiver. A waiver by either party of any of the terms or
conditions of this Agreement in any instance shall not be deemed or
construed to be a waiver of such term or condition for the future, or of
any subsequent breach thereof. All remedies, rights, undertakings,
obligations, and agreements contained in this Agreement shall be cumulative
and none of them shall be in limitation of any other remedy, right,
undertaking, obligation or agreement of either party.
19. Release. Graziano hereby completely releases and forever
discharges Michael Spindler, Apple, its officers, directors, agents,
employees, attorneys, insurers, subsidiaries and affiliates ("Apple
Parties") from, and covenants not to sue any Apple Party with respect to,
all claims, rights, demands, actions, obligations, debts, sums of money,
damages (including but not limited to general, special, punitive,
liquidated and compensatory damages) and causes of action of every kind,
nature
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and character, known and unknown, in law or equity, connected with
Graziano's employment relationship with the Apple Parties, or any other act
or omission of any Apple Party which may have occurred prior to the date
this Agreement is signed. Graziano further agrees that by his acceptance
and negotiation of the payment provided for in paragraph (4) of this
Agreement, he thereby completely releases and forever discharges the Apple
Parties from, and covenants not to sue any Apple Party with respect to, all
claims, rights, demands, actions, obligations, debts, sums of money,
damages (including but not limited to general, special, punitive,
liquidated and compensatory damages) and causes of action of every kind,
nature and character, known and unknown, in law or equity, connected with
Graziano's employment relationship with the Apple Parties, or the
termination of such relationship, or any other act or omission of any Apple
Party which may have occurred prior to Termination Date. This release and
discharge includes, but is not limited to, all "wrongful discharge" claims;
all claims relating to any contracts of employment, express or implied; any
covenant of good faith and fair dealing, express or implied; any tort of
any nature: any federal, state, or municipal statute or ordinance; any
claims under the California Fair Employment and Housing Act, Title VII of
the Civil Rights Act of 1964, 42 U.S.C. Section 1981, and any other laws
and regulations relating to employment discrimination and any and all
claims for attorney's fees and costs. Graziano specifically acknowledges
that the foregoing release includes a complete release and discharge of all
Apple Parties from any and all claims, damages of any kind, and claims for
attorneys fees and costs, under the Age Discrimination in Employment Act of
1967 ("ADEA") as amended by the Older Worker Benefit Protection Act
("OWBPA"). Graziano and Apple agree that part of the consideration payable
to Graziano under this Agreement is consideration that Graziano would not
otherwise be entitled to and is in consideration for Graziano's release of
claims under the ADEA as amended by the OWBPA.
Graziano acknowledges that he understands the protections provided by
the OWBPA and that the provisions of the OWBPA have been met by the terms
of this Agreement. Graziano states that he knowingly and voluntarily
enters into this Agreement. Graziano acknowledges that this Agreement is
written in a manner calculated to be understood by him. Graziano further
acknowledges that this Agreement refers without limitation to rights under
the Age Discrimination in Employment Act. Graziano understands that by
this Agreement, he does not waive rights or claims that may arise after the
date the Agreement is executed. Graziano acknowledges that he is entering
this Agreement in exchange for consideration in addition to anything of
value to which he already is entitled due to his employment with Apple.
Further, Graziano acknowledges that this release of claims under the OWBPA
is not requested in connection with an exit incentive program or other
employment termination program offered to a group or class of employees
within the meaning of OWBPA. Notwithstanding this provision, Graziano
acknowledges that he has been allowed up to forty five (45) days from the
date that he received this Agreement to accept its terms. Graziano
acknowledges he has consulted with an attorney about the Agreement.
Graziano acknowledges that after he signs the Agreement, he will then be
given seven (7) days following the date on which he signs the Agreement to
revoke it and that this Agreement will only become effective after this
seven (7) day period has lapsed. Any such revocation must be in writing
signed by Graziano and immediately delivered to Apple's General Counsel.
Graziano has read and expressly waives Section 1542 of the California
Civil Code, which provides as follows:
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A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
This waiver is not a mere recital, but is a known waiver of rights and
benefits. This is a bargained-for provision of this Agreement and is
further consideration for the covenants and conditions contained herein.
The Apple Parties hereby release and forever discharge Graziano, his
agents and attorneys from, and covenant not to sue Graziano, his agents and
attorneys with respect to, all claims, rights, demands, actions,
obligations, debts, sums of money, damages, and causes of action ("claims")
arising from his employment relationship with Apple to the extent permitted
by law and public policy, except for any claims arising from any
intentional acts of misconduct, or any other act taken in bad faith or
without a reasonable belief that it was in the best interests of the Apple
Parties.
20. Cooperation. Graziano agrees that he will make himself available
at reasonable times and intervals to participate in the conduct of and
preparation for any pending or future litigation to which Apple is a party
and in which his experience or knowledge may be relevant. Graziano shall
be reimbursed for his reasonable travel and out-of-pocket expenses incurred
by virtue of his cooperation as described in this paragraph. In no respect
shall this provision be deemed to pertain to or affect the nature or
substance of Graziano testimony at deposition or trial or in any other
truthful testimony at deposition or trial or in any other circumstances.
21. Remedies in Event of Future Dispute.
a. Except as provided in subparagraph (b) below, in the event
of any future dispute, controversy or claim between the parties arising
from or relating to this Agreement, its breach, any matter addressed by
this Agreement, and/or Graziano's employment with Apple through Termination
Date, the parties will first attempt to resolve the dispute through
confidential mediation to be conducted in San Francisco by a member of the
firm of Gregoria, Haldeman & Piazza, Mediated Negotiations, 625 Market
Street, Suite 400, San Francisco, California 94105. If the parties'
dispute is not resolved through mediation, it will be resolved through
binding confidential arbitration to be conducted by the American
Arbitration Association in San Francisco, pursuant to its California
Employment Dispute Resolution Rules, and judgment upon the award rendered
by the Arbitrator(s) may be entered by any court having jurisdiction of the
matter. The prevailing party in such arbitration shall be entitled to
recover from the losing party, not only the amount of any judgment awarded
in its favor, but also any and all costs and expenses, incurred in
arbitrating the dispute or in preparing for such arbitration.
b. In the event that a dispute arises concerning compliance
with this Agreement, either party will be entitled to obtain from a court
with jurisdiction over the parties preliminary and permanent injunctive
relief to enjoin or restrict the other party from such breach or to enjoin
or restrict a third party from inducing any such breach, and other
appropriate relief, including money damages. In seeking any such relief,
however, the moving party will retain the right to have any remaining
portion of the controversy resolved by binding confidential arbitration in
accordance with subparagraph (a) above.
128
<PAGE>
By signing the below, the parties agree to the terms hereof, including
the Exhibits hereto, and agree that this document, and Exhibits A, B, C, D,
E & F hereto, set forth their entire agreement, except as otherwise
expressly provided herein.
APPLE COMPUTER, INC.
By _/s/ Michael Spindler__________
Date 12/20/95 Michael Spindler
Chief Executive Officer
Apple Computer, Inc.
I have read, understand, and agree to the foregoing:
By _/s/ Joseph A. Graziano________
Date 12/19/95 Joseph A. Graziano
APPROVED AS TO FORM:
By _____________________________
Date Greg Gallo, Esq.
Gray, Cary, Ware & Freidenrich
Attorneys for Joseph Graziano
129
Exhibit 10.A.25
Summary of Principal Terms of Employment
The following sets forth the principal terms of the employment
agreement between Apple Computer, Inc. (the "Company") and Gilbert F.
Amelio (the "Executive"). The Company and the Executive will negotiate a
definitive written agreement in accordance with the terms set forth below:
TERM: 5 years, commencing as soon as practicable after the date
hereof (the "Effective Date").
TITLE: Chairman and Chief Executive Officer.
BASE
SALARY: $990,000 per annum.
SIGNING
BONUS: $200,000 payable reasonably promptly following the Effective
Date.
LOAN: Reasonably promptly following the Effective Date, subject to
delivery of a promissory note and other loan documentation,
the Company or one of its subsidiaries will lend Executive
$5,000,000 (the "Loan"). 20% of the original principal amount
of the Loan will be due and payable on each anniversary of the
Effective Date. The Loan will bear interest (compounded
semiannually and payable annually). Any unpaid principal and
interest on the Loan will be due and payable on the date of
the Executive's termination or resignation of employment.
ANNUAL
BONUS: Executive will be eligible to earn an annual bonus for each
whole or partial fiscal year of the Company during the term.
The annual bonus will consist of the sum of the "Component A
Bonus" and the "Component B Bonus."
The bonus target for the Component A Bonus for each 12-month
fiscal year will equal 1 times Executive's annual rate of base
salary. The bonus target for partial fiscal years in the term
will be prorated to take into account the number of days in
the fiscal year occurring during the term. The amount of the
Component A Bonus for each fiscal year may range from 50% to
300% of target based upon performance (it being understood
that amounts in excess of 200% will be based on extraordinary
performance)[; provided, however, that the minimum Component A
Bonus for the first fiscal year of the term shall be 50% of
the target for that year].
130
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The Component B Bonus for each fiscal year ending during the
term shall be $1 million (it being understood that the
aggregate amount of Component B Bonuses paid during the term
may not exceed $5 million).
The annual bonus for each fiscal year will be paid within 120
days following the end of the applicable year.
OPTION
GRANT: Subject to shareholder approval, the Company will grant the
Executive an option covering one million shares of common
stock. The per share exercise price will be the fair market
value of a share of stock on the day prior to the date the
option is granted by the Compensation Committee. The option
will vest as follows:
- 20% of the option will vest and become exercisable on the
Initial Vesting Date.
- 20% of the option will vest and become exercisable on each
of the second through fifth anniversaries of the Effective
Date.
Vesting of the option on the vesting dates described above
will occur only if the Executive is employed with the Company
on the applicable vesting date and shareholder approval of the
option grant is obtained. The option will be subject to the
standard terms of the Company's Stock Option Plan, and will be
forfeited if not approved by the Company's stockholders at the
first meeting thereof to occur after the Effective Date.
The "Initial Vesting Date" shall mean (A) if a change in
control of the Company does not occur on or prior to the first
anniversary of the Effective Date, the later of (i) the first
anniversary of the Effective Date and (ii) the date of
stockholder approval of the option grant and performance share
arrangement, and (B) if a change in control of the Company
occurs on or prior to the first anniversary of the Effective
Date, the earlier to occur of (i) the expiration of the
Election Window (as defined below) and (ii) 18 months after
the Effective Date, but in no event will vesting occur prior
to the later to occur of the first anniversary of the
Effective Date and the date of shareholder approval of the
equity arrangements.
PERFORMANCE
STOCK: Subject to shareholder approval, the Executive will be
afforded an opportunity to earn a specified target amount of
shares of stock for each fiscal year of the term based upon
the achievement of performance objectives established in good
faith for each year by the Compensation Committee and approved
by the Board of Directors. The target amount for each 12-
month fiscal year will be 200,000 shares. The target amount
for partial fiscal years will be prorated to take into account
the number of days in the fiscal year occurring during the
term. No more than 1,000,000 performance shares may be earned
during the term.
131
<PAGE>
The performance shares for the first fiscal year will be
awarded to the Executive if the performance goals established
for that year have been achieved and the Executive's
employment with the Company has continued past the Initial
Vesting Date. The performance shares for each subsequent
fiscal year will be awarded at the start of the year (or on
the Initial Vesting Date, if later), but will be forfeited at
the end of the year if the performance goals applicable to
that fiscal year are not achieved. [In the manner determined
by the Compensation Committee, the Executive will be eligible
to earn fewer performance shares for a fiscal year than the
target amount specified if performance does not meet the goal
established by the Compensation Committee for the applicable
fiscal year.]
Equitable adjustment will be made to the share targets in the
event of a Change in Control. All rights with respect to the
award of performance shares will be terminated and any
outstanding performance shares will be forfeited if the
performance share arrangement is not approved by the Company's
stockholders at the first meeting thereof to occur after the
Effective Date.
EFFECT OF
TERMINATION
OF
EMPLOYMENT: Following a Change in Control
a. Right to Resign in Election Window. If a Change in
Control of the Company occurs on or prior to the first
anniversary of the Effective Date, the Executive shall
have the right to resign within the 30-day window period
beginning six months following the date of the Change in
Control (the "Election Window"). In the event of such a
resignation, the Executive will receive an "all in" cash
lump sum payment of $10 million, less the aggregate amount
of all Component B Bonuses previously paid to the
Executive. The Executive will forfeit the option, all
rights to performance shares and any outstanding
performance shares and the right to any additional future
payments from the Company.
b. Termination by the Company. If following a Change in
Control, the Company terminates his employment other than
for Cause prior to the end of the Election Window, the
Executive will receive an "all in" cash lump sum payment
of $10 million, less the aggregate amount of all Component
B Bonuses previously paid to the Executive. The Executive
will forfeit the option, all rights to performance shares,
any outstanding performance shares and the right to any
additional future payments from the Company.
132
<PAGE>
No Change in Control During the First Year.
a. Prior to the Initial Vesting Date. If the Executive
resigns for Good Reason or is terminated without Cause
prior to the Initial Vesting Date, he will receive an "all
in" cash lump sum payment of $10 million, less the
aggregate amount of all Component B Bonuses previously
paid to the Executive. The Executive will forfeit the
option, all rights to performance shares, any outstanding
performance shares and the right to any additional future
payments from the Company.
b. After the Initial Vesting Date. If the Executive resigns
for Good Reason or is terminated without Cause on or after
the Initial Vesting Date, he will be entitled to the
following:
- a lump sum severance payment equal to the salary
and annual target bonus that would have been
payable to him for the remaining term of
employment, less the aggregate amount of all
Component B Bonuses previously paid to the
Executive.
- he will retain all performance shares that have
vested prior to the date of such termination of
employment and he will be eligible to vest in the
performance shares that would have vested at the
end of the fiscal year in which the termination of
employment occurs if the Company meets the
applicable performance objectives for that fiscal
year. All other rights to performance shares or
outstanding performance shares will be forfeited.
- he will retain the options that have vested prior
to the date of such termination of employment.
Vested options will remain exercisable for 90 days
following termination of employment. Any remaining
portion of the option will be forfeited.
The definitions of Good Reason and Cause will be
negotiated in good faith (it being understood that Good
Reason will not
include a change in title, duties or responsibilities
following a Change in Control that occurs on or prior to
the first anniversary of the Effective Date).
133
<PAGE>
Setoff.
In the event the Executive's employment ends for any
reason, the full amount of the outstanding principal and
interest of the Loan shall become due and payable, and the
Company will have the right to apply any and all amounts
payable to the Executive (including any severance or
termination payments described above) to the payment of
the full amount of the then outstanding principal and
interest on the Loan. Any remaining amount of outstanding
principal and interest that is not paid in the manner
contemplated by the previous sentence will be payable by
the Executive within 5 days of the date of termination or
resignation.
EXCISE TAX: Severance payments will be grossed up to take into account the
golden parachute excise tax.
STOCKHOLDER
APPROVAL: The Company will use reasonable efforts to obtain stockholder
approval of the option and the performance share arrangement.
As noted above, the option and performance share arrangement
will be void ab initio and of no further force and effect if
such stockholder approval is not obtained. [In the event such
stockholder approval is not obtained, the Company and the
Executive agree to negotiate in good faith an alternative long-
term performance arrangement to submit to the stockholders for
approval.]
AIRPLANE
LEASE: The Company agrees to lease for business reasons the
Executive's airplane on terms to be negotiated.
OTHER
TERMS: The definitive employment agreement will contain other
reasonable and customary provisions.
134
EXHIBIT 11
APPLE COMPUTER, INC.
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(In thousands, except per share amounts)
Three Months Ended
December 29, December 30,
1995 1994
Primary Earnings (Loss) Per Share
Earnings (Loss)
Net income (loss) applicable to common stock $( 68,686) $ 188,186
Shares
Weighted average number of common shares
outstanding 122,994 119,806
Adjustment for dilutive effect of outstanding
stock options -- 1,794
Weighted average number of commonshares used in
the calculation of loss per share 122,994 --
Weighted average number of common and common
equivalent shares used in the calcuation of
primary earnings per share -- 121,600
Loss per common share $( 0.56) --
Primary earnings per common share -- $ 1.55
Fully Diluted Earnings (Loss) Per Share
Earnings (Loss)
Net income (loss) applicable to common stock $( 68,686) $ 188,186
Shares
Weighted average number of common shares
outstanding 122,994 119,806
Adjustment for dilutive effect of outstanding
stock options -- 1,850
Weighted average number of common shares used in the
calculation of loss per share 122,994 --
Weighted average number of common and common
equivalentshares used in the calculation of fully
diluted earnings per share -- 121,656
Loss per common share $( 0.56) --
Fully diluted earnings per common share -- $ 1.55
135
<PAGE>
EXHIBIT 27
APPLE COMPUTER, INC.
FINANCIAL DATA SCHEDULE
(In millions, except per share amounts)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1996
<PERIOD-END> DEC-29-1995
<CASH> 824
<SECURITIES> 276
<RECEIVABLES> 2,036
<ALLOWANCES> 92
<INVENTORY> 1,947
<CURRENT-ASSETS> 5,551
<PP&E> 1,504
<DEPRECIATION> 792
<TOTAL-ASSETS> 6,553
<CURRENT-LIABILITIES> 2,705
<BONDS> 304
<COMMON> 404
0
0
<OTHER-SE> 2,390
<TOTAL-LIABILITY-AND-EQUITY> 6,553
<SALES> 3,148
<TOTAL-REVENUES> 3,148
<CGS> 2,673
<TOTAL-COSTS> 2,673
<OTHER-EXPENSES> 594
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17
<INCOME-PRETAX> (109)
<INCOME-TAX> (40)
<INCOME-CONTINUING> (69)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69)
<EPS-PRIMARY> (0.56)
<EPS-DILUTED> (0.56)
</TABLE>
