Apple 2002 Annual Report Download - page 75

approved plan for grants of stock options to employees who are not officers of the Company. Options may be granted under the 1997 Plan to
employees at not less than the fair market value on the date of grant. These options generally become exercisable over a period of 4 years,
based on continued employment, and generally expire 10 years after the grant date.
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 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 Plan provides that upon a
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"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 the Named Executive Officers generally 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.
Item 13. Certain Relationships and Related Transactions
In connection with a relocation assistance package, the Company loaned Mr. Johnson (Senior Vice President, Retail) $1,500,000 for the
purchase of his principal residence. The loan is secured by a deed of trust and is due and payable in May 2004. Under the terms of the loan,
Mr. Johnson agreed that should he exercise any of his stock options prior to the due date of the loan, that he would pay the Company an amount
equal to the lesser of (1) an amount equal to 50% of the total net gain realized from the exercise of the options; or (2) $375,000 multiplied by
the number of years between the exercise date and the date of the loan. The largest amount of the indebtedness outstanding on this loan during
fiscal year 2002 was $1,500,000.
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 2002, MicroWarehouse accounted for 3.3% of the Company's
net sales. The Company also purchases products from MicroWarehouse for its own internal use.
In March 2002, the Company entered into a Reimbursement Agreement with its Chief Executive Officer, Mr. Steven P. Jobs, for the
reimbursement of expenses incurred by Mr. Jobs in the operation of his private plane when used for Apple business. The Reimbursement
Agreement is effective for expenses incurred by Mr. Jobs for Apple business purposes since he took delivery of the plane in May 2001. During
2002, the Company recognized a total of $1,168,000 in expenses pursuant to this reimbursement agreement related to expenses incurred by
Mr. Jobs during 2001 and 2002.
Item 14. Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Company's management as of a date within 90 days of the filing
date of this Annual Report on Form 10-K, the Company's principal executive officer and principal financial officer have concluded that the
Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as
amended ( Exchange Act ) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange
Commission rules and forms.
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