Apple 2005 Annual Report Download - page 87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 8—Employee Benefit Plans
2003 Employee Stock Plan
The 2003 Employee Stock Plan (the 2003 Plan) is a shareholder approved plan that provides for broad-based grants to employees, including
executive officers. 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 units, 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. Based on the terms of individual option grants,
options granted under the 1997 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. In October 2003, the Company terminated the 1997
Employee Stock Option Plan and cancelled all remaining unissued shares totaling 28,590,702. No new options can be granted from the 1997
Plan.
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 $12.50 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 were issued, which was to be at least six months
plus one day after the exchange options were cancelled. On April 17, 2003, in accordance with the Exchange Program, the Company cancelled
options to purchase 33,138,386 shares of its common stock. On October 22, 2003, new stock options totaling 13,394,736 shares were issued to
employees at an exercise price of $11.38 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, Mr. Peter Oppenheimer, Mr. Jonathan Rubinstein, Mr. Philip W.
Schiller, Dr. Bertrand Serlet, and Dr. Avadis Tevanian, Jr., 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 the Company’s stock including the exercise and sale of employee
stock options and shares acquired pursuant to the Company’s employee stock purchase plan and upon vesting of restricted stock units.
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