Apple 1999 Annual Report Download - page 76

"Cause" to include a felony conviction, willful disclosure of confidential information or willful and continued failure to perform his
employment duties.
In February 1998, Mr. Cook joined the 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-back provision provides that during the five-day period starting on the second
anniversary of his commencement of employment, he may elect to sell all of his remaining vested and unvested options and shares (obtained
through the exercise of such options) back to the Company for the sum of $3 million less any profits Mr. Cook has realized to date through the
exercise and sale of such options (the "Sell-back Option"). During fiscal 1999, Mr. Cook realized net profits from the exercise and sale of his
options in excess of $3 million. The Sell-back Option has no future effect. If Mr. Cook's employment is terminated by the Company without
"Cause" during the first two years of his employment, he will be entitled to receive an amount equal to $800,000 minus the total base salary he
has received since the start of his employment.
CHANGE IN CONTROL ARRANGEMENTS--STOCK OPTIONS
In the event of a "change in control" of the Company, all outstanding options under the Company's stock option plans, except the Director
Stock Option Plan, will, unless otherwise determined by the plan administrator, become exercisable in full, and will be cashed out at an amount
equal to the difference between the applicable "change in control price" and the exercise price. The Director Stock Option Plan provides that
upon a "change in control" of the Company, all unvested options held by non-employee directors will automatically become fully vested and
exercisable and will be cashed out at an amount equal to the difference between the applicable "change in control price" and the exercise price
of the options. A "change in control" under these plans is generally defined as (i) the acquisition by any person of 50% or more of the
combined voting power of the Company's outstanding securities or (ii) the occurrence of a transaction requiring shareholder approval and
involving the sale of all or substantially all of the assets of the Company or the merger of the Company with or into another corporation.
In addition, options granted to Timothy D. Cook, Nancy R. Heinen, Mitchell Mandich and Sina Tamaddon provide that in the event there is a
"change in control", as defined in the Company's stock option plans, and if in connection with or following such "change in control", their
employment is terminated without "Cause" or if they should resign for "Good Reason", those options outstanding that are not yet vested and
exercisable as of the date of such "change in control", shall become fully vested and exercisable. Generally, "Cause" is defined to include a
felony conviction, willful disclosure of confidential information or willful and continued failure to perform his or her employment duties.
"Good Reason" includes resignation of employment as a result of a substantial diminution in position or duties, or an adverse change in title or
reduction in annual base salary.
CHANGE IN CONTROL ARRANGEMENTS--RETENTION AGREEMENTS
The Company was a party to retention agreements (the "RETENTION AGREEMENTS") with three executive officers (Messrs. Anderson,
Rubinstein and Tevanian) providing for certain cash payments in the event of a termination of employment following a change in control of the
Company. In March, 1999, Messrs. Anderson, Rubinstein and Tevanian agreed to waive any rights they may have under the Retention
Agreements. In exchange, all options previously granted to Messrs. Anderson, Rubinstein and Tevanian were amended to include a "change in
control" provision similar to the provision contained in option grants to Messrs. Cook, Mandich, Tamaddon and Ms. Heinen.
72