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APPLE INC
FORM 10-K
(Annual Report)
Filed 12/22/99 for the Period Ending 09/25/99
Address ONE INFINITE LOOP
CUPERTINO, CA 95014
Telephone (408) 996-1010
CIK 0000320193
Symbol AAPL
SIC Code 3571 - Electronic Computers
Industry Computer Hardware
Sector Technology
Fiscal Year 09/30
http://www.edgar-online.com
© Copyright 2011, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    APPLE INC FORM 10-K (Annual Report) Filed 12/22/99 for the Period Ending 09/25/99 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year ONE INFINITE ... 2011, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

  • Page 2
    ...(g) of the Act: Common Stock, no par value Common Share Purchase Rights (Titles of classes) 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...

  • Page 3
    ...as of December 10, 1999, based upon the closing price on the Nasdaq National Market reported for such date. Shares of Common Stock held by each executive officer and director and by each person who beneficially owns more than 5% of the outstanding Common Stock have been excluded in that such persons...

  • Page 4
    ... AND FINANCIAL CONDITION" UNDER PART II, ITEM 7 OF THIS FORM 10K. ITEM 1. BUSINESS GENERAL Apple Computer, Inc.-Registered Trademark- ("Apple" or the "Company") was incorporated under the laws of the state of California on January 3, 1977. The Company's principal executive offices are located at...

  • Page 5
    ...Internet access, and a powerful PowerPC G3 processor, iMac is suitable for a wide range of education and consumer applications. A completely redesigned iMac was introduced in October 1999 and is available in three models: iMac, iMac DV-Registered Trademark(Digital Video), and iMac DV Special Edition...

  • Page 6
    ... (formerly Claris-Registered Trademark- Corporation), a wholly owned subsidiary of the Company, develops, publishes, and distributes database management application software for Mac OS and Windows-based systems. Further, the Company has developed and currently markets AppleWorks-Registered Trademark...

  • Page 7
    ..., and directly to education institutions for resale (collectively referred to as "resellers"). The Company also sells many of its products in most of its major markets directly to end users through its on-line store. Throughout fiscal 1998, the Company revised its distribution channel model and...

  • Page 8
    ... or financial performance. WARRANTY The Company offers a limited parts and labor warranty on its hardware products. The warranty period is typically one year from the date of purchase by the end user. The Company also offers a 90-day warranty for Apple software and for Apple service parts used to...

  • Page 9
    ...-time employees and contractors. FOREIGN AND DOMESTIC OPERATIONS AND GEOGRAPHIC DATA Information regarding financial data by geographic segment and the risks associated with international operations is set forth in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements...

  • Page 10
    ... the foreseeable future. The Company continues to make investments in capital equipment as needed to meet anticipated demand for its products. Information regarding critical business operations that are located near major earthquake faults is set forth in Part II, Item 7 of this Form 10-K under the...

  • Page 11
    ... quoted on the Nasdaq National Market under the symbol AAPL, on the Tokyo Stock Exchange under the symbol APPLE, and on the Frankfurt Stock Exchange under the symbol APCD. As of December 10, 1999, there were 25,279 shareholders of record. The Company did not pay cash dividends in either fiscal 1999...

  • Page 12
    ... STATEMENTS AND NOTES THERETO INCLUDED IN ITEM 8 OF THIS FORM 10-K. ALL INFORMATION IS BASED ON THE COMPANY'S FISCAL CALENDAR. RESULTS OF OPERATIONS The following table sets forth annual results of operations for fiscal years 1999, 1998, and 1997 (in millions, except unit shipment and per share...

  • Page 13
    ... due to lower than planned deliveries of PowerPC G4 processors from Motorola. The primary focus of the Company during fiscal 2000 remains achieving meaningful year-over-year growth in both unit sales and net sales. The Company's future operating results and financial condition are dependent upon the...

  • Page 14
    ... unit sales...PowerBook unit sales...iMac unit sales(a)...iBook unit sales...Total Macintosh unit sales... 2 % (19)% 68 % -25 % 29 % 2 % (28)% -(4)% (a) Unit sales figures for iMac in 1998 and 1997 include sales of the Company's previous consumer and education oriented Macintosh products. Net...

  • Page 15
    ... and Asia except for Japan. Each geographic operating segment provides similar hardware and software products and similar services. Further information regarding the Company's operating segments may be found in Part II, Item 8 on this Form 10-K in the Notes to Consolidated Financial Statements at...

  • Page 16
    ... certain standardized parts. The Company also made changes to its distribution model during 1998 and 1997 that contributed to the increase in gross margins in 1998. The Company significantly reduced the number of locations where it stages finished goods, generally holding inventory on a regional...

  • Page 17
    ... in the short term by fluctuations in exchange rates. RESEARCH AND DEVELOPMENT The Company recognizes focused investments in research and development are critical to its future growth and competitive position in the marketplace and are directly related to timely development of new and enhanced...

  • Page 18
    ... Company acquired all of the outstanding shares of NeXT Software, Inc. (NeXT). NeXT had developed, marketed, and supported software enabling customers to implement business applications on the Internet/World Wide Web, intranets and enterprise-wide client/server networks. Of the total purchase price...

  • Page 19
    ... first quarter of fiscal 1999, the Company ceased accounting for its remaining investment in ARM using the equity method and categorized its remaining shares as available-for-sale requiring the shares be carried at fair value, with unrealized gains and losses net of taxes reported as a component of...

  • Page 20
    ... at the end of fiscal 1998. During fiscal 1999, the Company's primary source of cash was $798 million in cash flows from operating activities. Cash generated by operations was primarily from net income, declines in accounts receivables and inventory resulting from improved asset management, and an...

  • Page 21
    ... at favorable rates could materially adversely affect the Company's results of operations, financial condition, and liquidity. OTHER LONG-TERM INVESTMENTS As discussed above, the Company has categorized its shares in ARM as available-for-sale requiring the shares be carried at fair value, with...

  • Page 22
    ... through the date rollover and into January 2000. APPLE BRANDED PRODUCTS The Company designs and manufactures personal computers, related peripherals, operating system software and application software, including Macintosh personal computers and the Mac OS, which are marketed under the "Apple" brand...

  • Page 23
    ...IT Systems by the end of the third quarter of fiscal 1999. However, the Company has and will continue to review information developed as the result of its Y2K Plan, which could result in additional items being added to its Y2K inventory. Phase II--Remediation Cost Estimation: This Phase involves the...

  • Page 24
    ... and financial position. RISK FACTORS ASSOCIATED WITH Y2K ISSUES The Company has substantially completed its initial assessment of reasonably likely worst case scenarios of Non-IT Business Systems and/or IT Systems failures and related consequences. Based on current information, the Company believes...

  • Page 25
    ...or one set of product features over another. The Company is currently the only maker of hardware using the Mac OS. The Mac OS has a minority market share in the personal computer market, which is dominated by makers of computers utilizing Microsoft Windows operating systems. The Company believes the...

  • Page 26
    ...those customized to meet the Company's requirements. Such product supply constraints and corresponding increased costs could decrease the Company's net sales and adversely affect the Company's operating results and financial condition. The Company's ability to produce and market competitive products...

  • Page 27
    ...be found in Part II, Item 8 of this Form 10-K at Notes 1 and 2 of Notes to Consolidated Financial Statements, which information is hereby incorporated by reference. SUPPORT FROM THIRD-PARTY SOFTWARE DEVELOPERS Decisions by customers to purchase the Company's personal computers, as opposed to Windows...

  • Page 28
    ... of operations or financial condition. The conversion to the Euro may have competitive implications on the Company's pricing and marketing strategies, the impact of which are not known at this time. Additionally, the Company is at risk to the extent its principal European suppliers and customers are...

  • Page 29
    .... The Company's exposure to market risk for changes in interest rates relates primarily to the Company's investments and long-term debt obligations and related derivative financial instruments. The Company places its investments with high credit quality issuers and, by policy, limits the amount...

  • Page 30
    ...Debt: Fixed rate... $ 300 ====== 5.98% $ 954 ====== 6.07% Purchased floors are options limiting the Company's exposure to falling interest rates on its cash equivalents and short-term investments by locking in a minimum interest rate. The Company receives a payment when interest rates fall below...

  • Page 31
    ...exchange forward contracts are carried at fair value in other current liabilities. The premium costs of purchased foreign exchange option contracts are recorded in other current assets and marked to market through earnings. Probable but not firmly committed transactions comprise sales of the Company...

  • Page 32
    ... instruments do not qualify as accounting hedges. Premiums associated with sold foreign exchange option contracts are marked to market through earnings. The following table provides information about the Company's foreign currency derivative financial instruments outstanding as of September 25, 1999...

  • Page 33
    ... other currencies...Total currency spot/forward contracts...Estimated fair value...$ 590 86 177 62 -----$ 915 ====== $ (9) ====== 105.70 1.62 1.05 $ 98 10 138 49 -----$ 295 ====== $ (8) ====== 139.45 1.68 1.72 Foreign currency purchased call options: Japanese Yen...British Pound Sterling...

  • Page 34
    ... STATEMENTS Financial Statements: Report of KPMG LLP, Independent Auditors...Consolidated Balance Sheets as of September 25, 1999, and September 25, 1998...Consolidated Statements of Operations for the three fiscal years ended September 25, 1999...Consolidated Statements of Shareholders' Equity...

  • Page 35
    ... accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP Mountain View, California...

  • Page 36
    ... SHARE AMOUNTS) SEPTEMBER 25,1999 ASSETS: Current assets: Cash and cash equivalents...Short-term investments...Accounts receivable, less allowances of $68 and $81, respectively...Inventories...Deferred tax assets...Other current assets...Total current assets...Property, plant, and equipment, net...

  • Page 37
    ... SHARE AMOUNTS) THREE FISCAL YEARS ENDED SEPTEMBER 25, 1999 Net sales...Cost of sales...Gross margin...Operating expenses: Research and development...Selling, general, and administrative...Special charges: In-process research and development...Restructuring costs...Termination of license agreement...

  • Page 38
    ... comprehensive income (loss)...Common stock issued under stock option and purchase plans...Common stock issued in connection with the Company's redemption of long-term debt...Common stock repurchased...Tax benefit related to disqualifying dispositions of stock options...Balances as of September 25...

  • Page 39
    See accompanying notes to consolidated financial statements 35

  • Page 40
    ...sale of property, plant, and equipment...Gains from sales of investment...In-process research and development...Changes in operating assets and liabilities, net of effects of the acquisition of NeXT: Accounts receivable...Inventories...Other current assets...Other assets...Accounts payable...Accrued...

  • Page 41
    ... time of purchase and reevaluates such designation as of each balance sheet date. The Company's debt and marketable equity securities have been classified and accounted for as available-for-sale. These securities are carried at fair value, with the unrealized gains and losses, net of taxes, reported...

  • Page 42
    ... transactions and if the hedged transactions meet certain requirements. The Company monitors its interest rate and foreign exchange positions on a regular basis based on applicable and commonly used pricing models. The correlation between the changes in the fair value of hedging instruments and the...

  • Page 43
    ... 4. STOCK-BASED COMPENSATION The Company measures compensation expense for its employee stock-based compensation plans using the intrinsic value method and has provided in Note 7 pro forma disclosures of the effect on net income (loss) and earnings (loss) per share as if the fair value-based method...

  • Page 44
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) REVENUE RECOGNITION The Company recognizes revenue at the time products are shipped. Provisions are made currently for estimated product returns, price protection, rebates, and other...

  • Page 45
    ...purchase 1.2 million and 6.7 million shares of common stock were outstanding at the end of 1999 and 1998, respectively, that were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the Company's common shares...

  • Page 46
    ...133 on the Company's results of operations is dependent upon the fair values of the Company's derivatives and related financial instruments at the date of adoption. In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which...

  • Page 47
    ... America and Asia. Although none of the Company's customers accounted for more than 10% of net sales in any of the last three fiscal years, at times considerable trade receivables, which are not covered by collateral, are outstanding with the Company's distribution and retail channel partners. 43

  • Page 48
    ... rates at each respective date. The Company's exposure to credit loss and market risk will vary over time as a function of interest rates and currency exchange rates. The estimates of fair value are based on applicable and commonly used pricing models using prevailing financial market information...

  • Page 49
    ... maturity dates for purchased foreign exchange option contracts and sold option contracts ranged from one to four months. The counterparties to the agreements relating to the Company's investments and foreign exchange and interest rate instruments consist of a number of major international financial...

  • Page 50
    ... As of September 26, 1997, the Company owned 42.3% of the outstanding stock of ARM Holdings plc (ARM), a privately held company in the United Kingdom involved in the design of high performance microprocessors and related technology. The Company had accounted for this investment using the equity 46

  • Page 51
    ... first quarter of fiscal 1999, the Company ceased accounting for its remaining investment in ARM using the equity method and categorized its remaining shares as available-for-sale requiring the shares be carried at fair value, with unrealized gains and losses net of taxes reported as a component of...

  • Page 52
    ......Net property, plant, and equipment... ACCRUED EXPENSES (in millions) 1999 -------$ 84 170 105 378 ---$737 ==== 1998 -------$ 99 205 132 365 ---$801 ==== Accrued compensation and employee benefits...Accrued marketing and distribution...Accrued warranty and related costs...Other current...

  • Page 53
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4--SPECIAL CHARGES RESTRUCTURING OF OPERATIONS 1996 AND 1997 RESTRUCTURING ACTIONS In the second quarter of 1996, the Company announced and began to implement a restructuring plan designed to reduce costs and return the Company to profitability...

  • Page 54
    ... On February 4, 1997, the Company acquired all of the outstanding shares of NeXT Software, Inc. (NeXT). NeXT, headquartered in Redwood City, California, had developed, marketed and supported software enabling customers to implement business applications on the Internet/World Wide Web, intranets and...

  • Page 55
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4--SPECIAL CHARGES (CONTINUED) pertaining to NeXT subsequent to the date of acquisition have been included in the Company's operating results. The total purchase price was allocated to purchased in-process research and development ($375 million...

  • Page 56
    ... CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 5--INCOME TAXES (CONTINUED) As of September 25, 1999 and 1998, the significant components of the Company's deferred tax assets and liabilities were (in millions): 1999 -------Deferred tax assets: Accounts receivable and inventory reserves...Accrued...

  • Page 57
    ... into shares of Apple common stock at a conversion price of $16.50 per share, and the shares can be converted at Microsoft's option at such price after August 5, 2000. Each share of preferred stock is entitled to receive, if and when declared by the Company's Board of Directors, a dividend of...

  • Page 58
    ... payroll deductions at a price equal to 85% of the lower of the fair market values as of the beginning and end of the six-month offering period. Stock purchases under the Purchase Plan are limited to 10% of an employee's compensation, up to a maximum of $25,000 in any calendar year. During 1999 and...

  • Page 59
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6--SHAREHOLDERS' EQUITY (CONTINUED) SHAREHOLDER RIGHTS PLAN In May 1989, the Company adopted a shareholder rights plan and distributed a dividend of one right to purchase one share of common stock (a Right) for each outstanding share of common...

  • Page 60
    ... 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 Opinion No. 25, when the exercise price of the Company's employee stock options...

  • Page 61
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7--STOCK-BASED COMPENSATION (CONTINUED) Company's employee stock options and employee stock purchase plan shares have characteristics significantly different from those of traded options, and because changes in the subjective input ...

  • Page 62
    ...demurrers filed by the Company. The Third Amended Complaint was filed in October 1997, and eliminated the class action claims and restated claims against certain directors and former directors. In November 1997, the Company's Board of Directors appointed a special investigation committee and engaged...

  • Page 63
    ...90 days after purchase of Apple products. In late 1997, the Federal Trade Commission (FTC) commenced an investigation into customer complaints that Apple's change in technical support practices was either unfair or contrary to earlier representations to certain customers. Four purported class action...

  • Page 64
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8--COMMITMENTS AND CONTINGENCIES (CONTINUED) the Company's current release of its Mac OS operating system, Mac OS 9, infringes Microware's trademark for its real time operating system, OS-9. Microware asserts claims for trademark ...

  • Page 65
    ... FINANCIAL STATEMENTS (CONTINUED) NOTE 9--SEGMENT INFORMATION AND GEOGRAPHIC DATA (CONTINUED) Summary information by segment follows (in millions): 1999 -------Americas: Net Sales...Operating Income...Depreciation and Amortization...Segment Assets (a)...Europe: Net Sales...Operating Income...

  • Page 66
    ...restrictions, political instability, labor problems, trade restrictions, and changes in tariff and freight charges. No single customer accounted for more than 10% of net sales in 1999, 1998, or 1997. Net sales and long-lived assets related to operations in the United States, Japan, and other foreign...

  • Page 67
    ... iMac in 1998 and 1997 include sales of the Company's previous consumer and education oriented Macintosh products. NOTE 10--SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) FOURTH QUARTER THIRD QUARTER SECOND QUARTER FIRST QUARTER TABULAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1999 Net...

  • Page 68
    ...26, 1997... BEGINNING BALANCE --------$81 $99 $91 DEDUCTIONS(1 15 $29 $27 ENDING BALANCE -------$68 $81 $99 (1) Represents amounts written off against the allowance, net of recoveries. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 64

  • Page 69
    PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS Listed below are the Company's directors whose terms expire at the next annual meeting of shareholders. NAME ---William V. Campbell...Gareth C.C. Chang...Millard S. Drexler...Lawrence J. Ellison...Steven P. Jobs...Edgar ...

  • Page 70
    ... sets forth certain information regarding executive officers of the Company. Information pertaining to Mr. Jobs, who is both a director and an executive officer of the Company, may be found in the section entitled "DIRECTORS". FRED D. ANDERSON, Executive Vice President and Chief Financial Officer...

  • Page 71
    ... own more than ten percent of a registered class of the Company's equity securities, to file reports of securities ownership and changes in such ownership with the Securities and Exchange Commission (the "SEC"). Officers, directors and greater than ten percent shareholders also are required by rules...

  • Page 72
    ... stock acquired through the Company's Employee Stock Purchase Plan and $2,423 in matching contributions made by the Company in accordance with the terms of the 401 (k) plan. OPTION GRANTS IN LAST FISCAL YEAR The following table provides information about option grants to the Named Executive Officers...

  • Page 73
    ... value of securities underlying in-the-money options at the end of fiscal year 1999 (based on $64.9375 per share, the closing price of Common Stock on the Nasdaq National Market on September 24, 1999), minus the exercise price. DIRECTOR COMPENSATION In 1997, the Company ended its practice of paying...

  • Page 74
    ...of any such committee, the board of directors) of another entity, one of whose executive officers served as a director of the Company. COMPANY STOCK PERFORMANCE The following graph shows a five-year comparison of cumulative total shareholder return, calculated on a dividend reinvested basis, for the...

  • Page 75
    ...(the "TABLE DATE") with respect to the beneficial ownership of the Company's Common Stock by (i) each person the Company believes beneficially holds more than 5% of the outstanding shares of Common Stock; (ii) each director; (iii) each Named Executive Officer listed in the Summary Compensation Table...

  • Page 76
    ... Company as Senior Vice President, Worldwide Operations. Under the terms of his employment, he is entitled to an annual base salary of no less than $400,000. In addition, Mr. Cook received a one-time hiring bonus in the amount of $500,000 and a stock option grant with a sell-back provision. The sell...

  • Page 77
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In connection with the Company's use of aircraft to transport its executive officers, the Company paid approximately $102,865 during fiscal year 1999 to Wing & A Prayer, a company wholly-owned by Lawrence J. Ellison. 73

  • Page 78
    ... in the Company's Employee Stock Purchase Plan. During fiscal year 1999, all of the executive officers of the Company received new option grants under the 1998 Plan. The Options granted under the 1998 Plan were at an exercise price equal to the fair market value of the Common Stock on the date of...

  • Page 79
    SECTION 162(m) The Company intends that options granted under the Company's stock option plans be deductible by the Company under Section 162(m) of the Internal Revenue Code of 1986, as amended. MEMBERS OF THE COMPENSATION COMMITTEE Edgar S. Woolard, Jr. (Chairman) Gareth C.C. Chang 75

  • Page 80
    ... the Company's plan to repurchase shares of its common stock. A current report on form 8-K dated December 23, 1998 was filed by the Registrant with the Securities and Exchange Commission to report under Item 8 thereof the amendment to the Company's fiscal year end. The Company's fiscal calendar was...

  • Page 81
    ... Convertible Preferred Stock of Apple Computer Inc. Registration Rights Agreement, dated as of August 11, 1997, between Apple Computer, Inc. and Microsoft Corporation. 1981 Stock Option Plan, as amended. 1987 Executive Long Term Stock Option Plan. Apple Computer, Inc. Savings and Investment Plan, as...

  • Page 82
    ... Registrant and John B. Douglas III. Senior Officers Restricted Performance Share Plan, as amended through March 25, 1997. NeXT Computer, Inc. 1990 Stock Option Plan, as amended. Non-Employee Director Stock Plan. Retention Agreement dated May 1, 1997 between Apple Computer, Inc. and Fred D. Anderson...

  • Page 83
    ... dated May 1, 1997 between Registrant and Avie Tevanian. 1997 Employee Stock Option Plan, as amended through October 6, 1999. 1997 Director Stock Option Plan. 1998 Executive Officer Stock Plan, as amended through October 6, 1999. Master OEM Agreement dated as of January 26, 1988 between the Company...

  • Page 84
    ... the exhibit 4.1, 4.2, 4.3, and 4.8, respectively, in the Company's Registration Statement on Form S-3/A (file no. 333-10961) filed October 30, 1996. Incorporated by reference to the exhibit of that number in the Company's Annual Report on Form 10-K for the fiscal year ended September 27, 1996 (the...

  • Page 85
    ... to the exhibit of that number in the Company's Quarterly Report on Form 10-Q for the quarter ended June 26, 1999. Filed as an exhibit to this Annual Report on Form 10-K for the fiscal year ended September 25, 1999. 97K 98/1Q 98/2Q 99/2Q 99/3Q 99K (d) Financial Statement Schedule See Item 14...

  • Page 86
    ... Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: NAME ---/s/ STEVEN P. JOBS STEVEN P. JOBS TITLE ----interim Chief Executive Officer and Director (Principal Executive Officer) Executive...

  • Page 87
    ...LAWRENCE J. ELLISON /s/ EDGAR S. WOOLARD, JR. ------------------------------------------EDGAR S. WOOLARD, JR. /s/ JEROME B. YORK ------------------------------------------JEROME B. YORK TITLE ----Director DATE ---December 21, 1999 Director December 21, 1999 Director December 21, 1999 83

  • Page 88
    ... at a meeting of the shareholders, or the shares not consenting in the case of action by written consent, are equal to more than 16-2/3% of the outstanding shares entitled to vote. No amendment may change the stated maximum number of authorized directors to a number greater than two times the stated...

  • Page 89
    ... the total number of shares at the time outstanding having the right to vote for such directors may call a special meeting of shareholders to be held to elect the entire Board of Directors. The term of office of any director shall terminate upon such election of a successor. Any director may resign...

  • Page 90
    ... to vote at the meeting or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of this corporation after any record date fixed as aforesaid. The Board of Directors may close the books of...

  • Page 91
    ...certificates for shares of stock of this corporation; and, subject to the direction of the Board of Directors, to have general charge of the property of this corporation and to supervise and control all officers, agents and employees of this corporation. Article VA PRESIDENT SECTION 5A.1: POWERS AND...

  • Page 92
    .... The powers and duties of the Secretary are: (a) To keep a book of minutes at the principal executive office of this corporation, or such other place as the Board of Directors may order, of all meetings of its directors and shareholders with the time and place of holding, whether regular or special...

  • Page 93
    ...such limits in appointment power as the Board may determine. The Board shall be advised of any such appointment at a meeting of the Board, and the appointment shall be noted in the minutes of the meeting. The minutes shall clearly state that such persons are non-corporate officers appointed pursuant...

  • Page 94
    ...express terms is not so amendable or repealable, (f) a distribution to the shareholders of this corporation, except at a rate or in a periodic amount or within a price range determined by the Board of Directors, (g) the appointment of other committees of the Board of Directors or the members thereof...

  • Page 95
    ... at any time by the President or by the Board of Directors, or by two or more members thereof, or by one or more holders of shares entitled to cast not less than ten percent (10%) of the votes on the record date established pursuant to Section 10.8. Upon request in writing sent by registered mail to...

  • Page 96
    ... one vote for each share. In order that the corporation may determine the shareholders entitled to consent to corporate action in writing without a meeting or request a special meeting of the shareholders pursuant to Section 10.3, the Board of Directors may fix a record date, which record date shall...

  • Page 97
    ... by the contract of employment and if the proxy states that it was given in consideration of such contract of employment, the name of the employee and the period of employmet contracted for, (5) a person designated by or under a close corporation shareholder agreement or a voting trust agreement. In...

  • Page 98
    ...OF MEETINGS. Meetings (whether regular, special or adjourned) of the Board of Directors of this corporation shall be held at the principal office of this corporation for the transaction of business, as specified in accordance with Section 1.1 hereof, or at any other place within or without the State...

  • Page 99
    ...the required quorum for such meeting. SECTION 11.6: CONFERENCE TELEPHONE. Members of the Board of Directors may participate in a meeting through use of conference telephone or similar communications equipment, so long as all directors participating in such meeting can hear one another. Participation...

  • Page 100
    ... at management's discretion, to any one month during such fiscal year. SECTION 12.8: OFFICER LOANS AND GUARANTIES. If the corporation has outstanding shares held of record by 100 or more persons on the date of approval by the Board of Directors, the corporation may make loans of money or property to...

  • Page 101
    ... than 16-2/3% of the outstanding shares entitled to vote. SECTION 14.2: BY THE BOARD OF DIRECTORS. Subject to the right of shareholders to adopt, amend or repeal By-Laws, By-Laws, other than a By-Law or amendment thereof specifying or changing a fixed number of directors or the maximum or minimum...

  • Page 102
    ... entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the Articles of...

  • Page 103
    ... by the Board from time to time in its sole discretion as eligible to participate in the Plan. (f) "EMPLOYEE" shall mean: (1) 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...

  • Page 104
    ... 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...

  • Page 105
    ... 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...

  • Page 106
    ...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...

  • Page 107
    ... 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...

  • Page 108
    ... 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...

  • Page 109
    ... 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...

  • Page 110
    ... 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 applicable provisions of...

  • Page 111
    .... "CHANGE IN CONTROL PRICE" shall have the meaning set forth in Section 12 of the Plan. "COMMON STOCK" means the common stock, no par value, of the Company. "COMPANY" means Apple Computer, Inc., a California corporation, or its successor. "COMMITTEE" means a Committee, if any, appointed by the Board...

  • Page 112
    ... 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...

  • Page 113
    ...authority, in its discretion: (i) to determine the Fair Market Value of the Common Stock in accordance with 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...

  • Page 114
    ... 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. Neither the Plan nor any Option or SAR agreement...

  • Page 115
    ... issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator and may consist of (i) cash, (ii) check, (iii) promissory note, (iv) other Shares which have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares...

  • Page 116
    ... 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...

  • Page 117
    ...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...

  • Page 118
    ... 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...

  • Page 119
    ... 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 sixty...

  • Page 120
    ...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...

  • Page 121
    ... the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options, SARs or Stock Purchase Rights are, or will be, granted under the Plan. (d) "BOARD" means the Board of Directors of the Company...

  • Page 122
    ... market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system, on the date...

  • Page 123
    ... an outstanding Option, SAR or Stock Purchase Right. (v) "PARENT" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code. (w) "PLAN" means this 1998 Executive Officer Stock Plan. (x) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant...

  • Page 124
    ... forms of agreement for use under the Plan; (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option, SAR or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the date of grant, the time...

  • Page 125
    ... to have the Company withhold from the Shares to be issued upon exercise of an Option, SAR or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the...

  • Page 126
    ... Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. (b) Neither the Plan nor any Option, SAR or Stock Purchase Right shall confer upon an Optionee any right with respect to continuing the Optionee's relationship as an Employee with...

  • Page 127
    ... the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant...

  • Page 128
    ...) check; (iii) promissory note; (iv) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of...

  • Page 129
    ...and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of...

  • Page 130
    ..., of the terms, conditions and restrictions related to the offer, including the number of Shares that the Optionee shall be entitled to purchase, the price to be paid, and the time within which the Optionee must accept such offer. The offer shall be accepted by execution of an Agreement in the...

  • Page 131
    ... 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 or Stock Purchase Right, if any, that number of Shares having a Fair Market Value equal to the amount required to be withheld...

  • Page 132
    ... UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET SALE. (a) CHANGES IN CAPITALIZATION. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option, SAR or Stock Purchase Right, and the number of shares of...

  • Page 133
    ... Right, for each Share of Optioned Stock subject to the Option, SAR or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets. (d) CHANGE...

  • Page 134
    ..., which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options, SARs or Stock Purchase Rights granted under the Plan prior to the date of such...

  • Page 135
    ... INCORPORATION Ireland Ireland Ireland Japan Netherlands United Kingdom United States NAME ---Apple Computer, Inc. Limited...Apple Computer Limited...Apple Computer International...Apple Japan, LLC...Apple Computer B.V...Apple Computer (UK) Ltd...A C Real Properties, Inc... * Pursuant to Item 601...

  • Page 136
    ... statements of operations, shareholders' equity, and cash flows for each of the years in the three-year period ended September 25, 1999, and the related schedule, which report appears in the September 25, 1999 annual report on Form 10-K of Apple Computer, Inc. /s/ KPMG LLP Mountain View, California...

  • Page 137
    ...5 MULTIPLIER: 1,000,000 PERIOD TYPE FISCAL YEAR END PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER...