Apple 2003 Annual Report Download - page 70

The tax effect related to the cumulative effect of adopting SFAS No. 133 was $(5) as of September 29, 2001. The tax effect related to the
changes in fair value of derivatives was $11 million, $(2) million and $(19) million for fiscal 2003, 2002, and 2001, respectively. The tax effect
related to derivative gains (losses) reclassified from other comprehensive income was $(7) million, $8 million and $23 million for fiscal 2003,
2002, and 2001, respectively.
Note 8—Employee Benefit Plans
2003 Employee Stock Option Plan
At the Annual Meeting of Shareholders held on April 24, 2003, the shareholders approved an amendment to the 1998 Executive Officer Stock
Plan to change the name of the plan to the 2003 Employee Stock Option Plan (the 2003 Plan), to provide for broad-based grants to all
employees in addition to executive officers and other key employees and to prohibit future "repricings" of employee stock options, including 6-
months-plus-1-day option exchange programs, without shareholder approval. Based on the terms of individual option grants, options granted
under the 2003 Plan generally expire 7 to 10 years after the grant date and generally become exercisable over a period of 4 years, based on
continued employment, with either annual or quarterly vesting. The 2003 Plan permits the granting of incentive stock options, nonstatutory
stock options, restricted stock, stock appreciation rights, and stock purchase rights.
1997 Employee Stock Option Plan
In August 1997, the Company's Board of Directors approved the 1997 Employee Stock Option Plan (the 1997 Plan), a non-shareholder
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. Based on the terms of individual option grants, options granted under the
1997
88
Plan generally expire 7 to 10 years after the grant date and generally become exercisable over a period of 4 years, based on continued
employment, with either annual or quarterly vesting. As a result of shareholder approval of amendments to the 1998 Executive Officer Stock
Plan in April 2003, the Company terminated the 1997 Employee Stock Option Plan and cancelled all remaining unissued shares, following the
completion of an employee stock option exchange program in October 2003.
Employee Stock Option Exchange Program
On March 20, 2003, the Company announced a voluntary employee stock option exchange program (the Exchange Program) whereby eligible
employees, other than executive officers and members of the Board of Directors, had an opportunity to exchange outstanding options with
exercise prices at or above $25.00 per share for a predetermined smaller number of new stock options issued with exercise prices equal to the
fair market value of one share of the Company's common stock on the day the new awards are issued, which would be at least six months plus
one day after the exchange options are cancelled. On April 17, 2003, in accordance with the Exchange Program, the Company accepted and
cancelled options to purchase 16,569,193 shares of its common stock. On October 22, 2003, new stock options totaling 6,697,368 shares were
issued to employees at an exercise price of $22.76 per share, which is equivalent to the closing price of the Company's stock on that date. No
financial or accounting impact to the Company's financial position, results of operations or cash flow was associated with this transaction.
1997 Director Stock Option Plan
In August 1997, the Company's Board of Directors adopted a shareholder approved Director Stock Option Plan (DSOP) for non-employee
directors of the Company. Initial grants of 30,000 options under the DSOP vest in three equal installments on each of the first through third
anniversaries of the date of grant, and subsequent annual grants of 10,000 options are fully vested at grant.
Rule 10b5
-1 Trading Plans
Certain of the Company's executive officers, including Mr. Timothy D. Cook and Mr. Fred D. Anderson, have entered into trading plans
pursuant to Rule 10b5-1(c)(1) of the Securities Exchange Act of 1934, as amended. A trading plan is a written document that pre-establishes
the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of Apple stock including
the exercise and sale of employee stock options and shares acquired pursuant to the Company's Employee Stock Purchase Plan.
Employee Stock Purchase Plan
Cumulative effect of adopting SFAS No. 133
—
—
12
Change in unrealized gain on derivative instruments
$
(5
)
$
(15
)
$
4