Apple 1998 Annual Report Download - page 58

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--SHAREHOLDERS' EQUITY (CONTINUED)
As of September 25, 1998, approximately 15.7 million options were reserved for future grant under the Company's stock option plans.
In December 1997, the Board of Directors approved an option exchange program which allowed employees to exchange all (but not less than
all) of their existing options (vested and unvested) with an exercise price greater than $13.6875, on a one-for-one basis for new options with an
exercise price of $13.6875, the fair market value of the Company's common stock on December 19, 1997, and a new four year vesting schedule
beginning in December 1997. A total of 4.7 million options with a weighted-average exercise price of $19.90 per share were exchanged for
new options as a result of this program.
In July 1997, the Board of Directors approved an option exchange program which allowed employees to exchange all (but not less than all) of
their existing options (vested and unvested) to purchase Apple common stock (other than options granted and assumed from NeXT) for options
having an exercise price of $13.25 and a new three year vesting period beginning in July of 1997. Approximately 7.9 million options were
repriced under this program.
On May 14, 1996, the Board of Directors adopted a resolution allowing employees up to and including the level of Vice President to exchange
1.25 options at their existing option price for 1.0 new options having an exercise price of $26.375 per share, the fair market value of the
Company's common stock at May 29, 1996. Options received under this program are subject to one year of additional vesting such that the new
vesting date for each vesting portion will be the later of May 29, 1997 or the original vesting date plus one year. Approximately 2.9 million
options were exchanged and repriced under this program.
NOTE 7--STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board (APB) No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its employee stock options and employee stock purchase plan shares because, as discussed below, the
alternative fair value accounting provided for under SFAS No. 123 requires use of option valuation models that were not developed for use in
valuing employee stock options and employee stock purchase plan shares. Under APB No. 25, when the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized.
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