Apple 2001 Annual Report Download - page 60

Mr. Jerome York, a member of the Board of the Directors of the Company, is a member of an investment group that purchased
MicroWarehouse, Inc. (" MicroWarehouse ") in January 2000. He also serves as its Chairman, President and Chief Executive Officer.
MicroWarehouse is a multi-billion dollar specialty catalog and online retailer and direct marketer of computer products, including products
made by the Company, through its MacWarehouse catalogue. During fiscal year 2001, MicroWarehouse accounted for 2.89% of the
Company's net sales.
The following report of the Compensation Committee of the Board of Directors shall not be deemed "soliciting material" or to be "filed" with
the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities
Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by
reference into such filing.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
From April 2000 until August 2001, the entire Board of Directors acted with respect to matters previously considered by a Compensation
Committee. In August 2001, the Board re-established a Compensation Committee and named William V. Campbell, Arthur D. Levinson and
Jerome B. York as members. The Company's executive compensation program is administered by the Compensation Committee (the
"Committee"). The Committee reviews and approves the base salaries, bonuses, stock options and other compensation of the executive officers
and management-level employees of the Company and administers the Company's stock option plans.
The Company's executive compensation program focuses on Company performance, individual performance and increases in stockholder value
over time as determinants of executive pay levels. These principles are intended to motivate executive officers to improve the financial position
of the Company, to hold executives accountable for the performance of the organizations for which they are responsible, to attract key
executives into the service of the Company, and to create value for the Company's shareholders. The compensation for executive officers is
based on two elements: Cash compensation and equity-based compensation.
Cash Compensation
The Company reviews executive compensation surveys in both the computer industry and general industry to ensure that the total cash
compensation provided to executive officers and senior management remains at competitive levels so that the Company can continue to attract
and retain management personnel with the talents and skills required to meet the challenges of a highly competitive industry. The compensation
of executive officers is reviewed annually.
Bonuses
For fiscal year 2001, employees at the level of director and above were eligible for cash bonuses under the FY01 Vice Presidents and Directors
Incentive Bonus Plan (the " Bonus Plan "). Bonus payouts are dependent upon the Company achieving specific revenue, unit shipments and
profit targets in conjunction with certain specified performance goals for individual business divisions. Several divisions achieved the metrics
specified in the Bonus Plan and payments were made thereunder. Executive officers and members of the Board were not eligible to participate
in the Bonus Plan. However, Mr. Tim Cook, Senior Vice President, Worldwide Operations, Sales, Service & Support received a special one-
time bonus for accepting the position of Senior Vice President Sales, Service & Support in addition to his position as Senior Vice President,
Operations and Dr. Avadis Tevanian received a patent award. No other Executive Officer received a bonus during fiscal year 2001.
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Equity-Based Compensation
In fiscal year 2001, the cornerstone of the Company's executive compensation program was equity-
based compensation, principally in the form
of stock options. Stock options provide an opportunity to attract, motivate and retain high quality employees and executive officers while
promoting the success of the Company's business. Equity awards are typically based on industry surveys, market conditions, each officer's
individual performance and achievements, future responsibility and promotion, the number of unvested options held by each individual at the
time of grant and the number of above market options held by the individual. In fiscal year 2001, executive officers were eligible to receive
grants of stock options under the 1998 Executive Officer Stock Plan (" 1998 Plan "). In addition, executive officers were eligible to participate
in the Company's Employee Stock Purchase Plan.
During fiscal year 2001, all of the Company's executive officers, excluding Mr. Jobs received stock 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 grant and
generally vest in annual increments over a four-year period after grant, subject to the participant's continued employment with the Company.
However, the options granted to Mr. Johnson vest over four years in sixteen equal quarterly increments. All options granted under the 1998
Plan expire ten years from the date of grant unless a shorter term is provided in the option agreement or the participant's employment with the
Company terminates before the end of such ten-year period.
Compensation of the Chief Executive Officer
In December 1999, in recognition of Mr. Jobs' outstanding performance over the previous two and a half years, the Board awarded Mr. Jobs a
special executive bonus in the form of a Gulfstream V airplane. The Board delivered the plane to Mr. Jobs during fiscal 2001. Accordingly, the
amounts paid during fiscal year 2001 towards the purchase of the plane and the tax assistance associated with the transfer of the plane were