Apple 2006 Annual Report Download - page 6

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later date. One of the 46 grants was approved and dated at another meeting, but the recipient, who was becoming employed by the Company as
part of a corporate acquisition, did not start until a later date. Two other grants were approved before the employees’ start dates. Another grant
was mistakenly cancelled and subsequently reinstated, requiring an accounting adjustment. Thus, for these 46 grants the Company has
concluded that the originally assigned grant dates are not the proper measurement dates. As a result, the Company has recognized $2 million of
stock-based compensation expense.
Other UWC Grants—During the relevant period, 1,082 grants were approved by UWCs for a variety of purposes, including executive
recruitment, retention, promotion and new hires outside the Monday/Tuesday process. These grants were not made pursuant to pre-established
guidelines adopted by the Board or Compensation Committee. Therefore, the Company has concluded that these grants were not finalized for
accounting purposes until ratification by the Board or Compensation Committee. Accordingly, for 660 grants, the Company has concluded that
the originally assigned grant dates are not the proper measurement dates. As a result, the Company has recognized $48 million of stock-based
compensation expense. If other dates in the period from the preparation of the UWC to the preparation of the Secretary’s Certificate had been
used as measurement dates for grants whose actual ratification dates are unknown, the total stock-based compensation would have ranged from
approximately $35 million to $56 million.
CEO Grants—During the relevant period, the Company made two grants to CEO Steve Jobs. The first grant, dated January 12, 2000, was for
10 million option shares. The second grant, dated October 19, 2001, was for 7.5 million option shares. Both grants were cancelled in
March 2003 prior to being exercised, when Mr. Jobs received 5 million shares of restricted stock.
With respect to the grant dated January 12, 2000, the Board on December 2, 1999, authorized a special “CEO Compensation Committee” to
grant Mr. Jobs up to 15 million shares. The evidence indicates that the CEO Compensation Committee finalized the terms of the grant on
January 12, 2000, although the Committee’s action was memorialized in a UWC transmitted on January 18, 2000. Because the measurement
date is the originally assigned grant date, the Company has not recognized any stock-based compensation expense from this grant. If the
Company had determined that the measurement date was the date when the UWC was executed or received, then additional stock-based
compensation would have been recognized.
The grant dated October 19, 2001 was originally approved at a Board meeting on August 29, 2001, with an exercise price of $17.83. The terms
of the grant, however, were not finalized until December 18, 2001. The grant was dated October 19, 2001, with an exercise price of $18.30.
The approval for the grant was improperly recorded as occurring at a special Board meeting on October 19, 2001. Such a special Board
meeting did not occur. There was no evidence, however, that any current member of management was aware of this irregularity. The Company
has recognized $20 million in stock-based compensation expense for this grant, reflecting the difference between the exercise price of $18.30
and the share price on December 18, 2001 of $21.01.
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