Retention Agreement - Apple Computer Inc. and Fred D. Anderson Jr.
March 4, 1996
Fred D. Anderson, Jr.
114 Old Chester Road
Essex Fells, NJ 07021
Retention Agreement
Dear Fred:
Apple Computer, Inc., a California corporation (the "Company"),
considers it essential to the best interests of its stockholders to take
reasonable steps to retain key management personnel. Further, the Board of
Directors of the Company (the "Board") recognizes that the uncertainty and
questions which might arise among management in the context of a change in
control of the Company could result in the departure or distraction of
management personnel to the detriment of the Company and its stockholders.
The Board has determined, therefore, that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the management of the Company and its
subsidiaries, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising
from any possible change in control of the Company.
In order to induce you to remain in the employ of the Company,
the Company has determined to enter into this letter agreement (this
"Agreement") which addresses the terms and conditions of your employment in
the event of a change in control of the Company. Capitalized words which
are not otherwise defined herein shall have the meanings assigned to such
words in Section 8 of this Agreement.
1. Term of Employment Under the Agreement. The term of your
employment under this Agreement shall commence on the Change in Control
Date and shall continue until the second anniversary of the Change in
Control Date (the "Term").
2. Employment During the Term. During the Term, the following
terms and conditions shall apply to your employment with the Company:
(a) Titles; Reporting and Duties. Your position, titles, nature
and status of responsibilities and reporting obligations shall be no less
favorable to you than those that you enjoyed immediately prior to the
Change in Control Date.
(b) Salary and Bonus. Your base salary and annual bonus
opportunity may not be reduced, and your base salary shall be periodically
reviewed and increased in the manner commensurate with increases awarded to
other similarly situated executives of the Company.
(c) Incentive Compensation. You shall be eligible to
participate in each long-term incentive plan or arrangement established by
the Company for its executive employees, in accordance with the terms and
provisions of such plan or arrangement and at a level consistent with the
Company's practices applicable to you prior to the Change in Control Date.
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(d) Benefits. You shall be eligible to participate in all
pension, welfare and fringe benefit plans and arrangements that the Company
provides to its executive employees in accordance with the terms of such
plans and arrangements, which shall be no less favorable to you, in the
aggregate, than the terms and provisions available to other executive
employees of the Company.
(e) Location. You will continue to be employed at the business
location at which you were employed prior to the Change in Control Date and
the amount of time that you are required to travel for business purposes
will not be increased in any significant respect from the amount of
business travel required of you prior to the Change in Control Date.
3. Involuntary Termination During the Term.
(a) Severance Payment. In the event of your Involuntary
Termination during the Term, the Company shall pay you within 5 days of the
date of such Involuntary Termination the full amount of any earned but
unpaid base salary through the Date of Termination at the rate in effect at
the time of the Notice of Termination, plus a cash payment (calculated on
the basis of your Reference Salary) for all unused vacation time which you
may have accrued as of the Date of Termination. The Company shall also pay
you within 5 days of the Date of Termination a pro rata portion of the
annual bonus for the year in which your Involuntary Termination occurs,
calculated on the basis of your target bonus for that year and on the
assumption that all performance targets have been or will be achieved. In
addition, the Company shall pay you in a cash lump sum, within 8 days
following the date of your execution of the release described in the last
sentence of this Section 3(a) (or on the Date of Termination, if later), an
amount (the "Severance Payment") equal to the sum of (i) two times your
Reference Salary and (ii) one times your Reference Bonus. The Severance
Payment shall be in lieu of any other severance payments which you are
entitled to receive under any other severance pay plan or arrangement
sponsored by the Company and its subsidiaries. Your right to the Severance
Payment shall be conditioned upon your execution of a release in favor of
the Company in substantially the form of the release required for the
receipt of severance payments under the Severance Plan (as in effect on the
date of this Agreement) which is not revoked by you within the seven-day
revocation period specified therein.
(b) Benefit Payment. In the event of your Involuntary
Termination during the Term, you and your eligible dependents shall
continue to be eligible to participate during the Benefit Continuation
Period (as hereinafter defined) in the medical, dental, health, life and
other fringe benefit plans and arrangements applicable to you immediately
prior to your Involuntary Termination on the same terms and conditions in
effect for you and your dependents immediately prior to such Involuntary
Termination. For purposes of the previous sentence, "Benefit Continuation
Period" means the period beginning on the Date of Termination and ending on
the earlier to occur of (i) the second anniversary of the Date of
Termination and (ii) the date that you and your dependents are eligible and
elect coverage under the plans of a subsequent employer which provide
substantially equivalent or greater benefits to you and your dependents.
(c) Date and Notice of Termination. Any termination of your
employment by the Company or by you during the Term shall be communicated
by a notice of termination to the other party hereto (the "Notice of
Termination"). The Notice of Termination shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of your employment under the provision so indicated. The
date of your termination of employment with the Company and its
subsidiaries (the "Date of Termination") shall be determined as follows:
(i) if your employment is terminated for Disability, thirty (30) days after
a Notice of Termination is given (provided that you shall not have returned
to the full-time performance of your duties during such thirty (30) day
period), (ii) if your employment is terminated by the Company in an
Involuntary Termination, five (5) days after the date the Notice of
Termination is received by you and (iii) if your employment is terminated
by the Company for Cause, the later of the date specified in the Notice of
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Termination or ten (10) days following the date such notice is received by
you. If the basis for your Involuntary Termination is your resignation
for Good Reason, the Date of Termination shall be ten (10) days after
the date your Notice of Termination is received by the Company. The
Date of Termination for a resignation of employment other than for Good
Reason shall be the date set forth in the applicable notice, which shall
be no earlier than ten (10) days after the date such notice is received by
the Company.
(d) No Mitigation or Offset. You shall not be required to
mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
or benefit provided for in this Agreement be reduced by any compensation
earned by you as the result of employment by another employer or by pension
benefits paid by the Company or another employer after the Date of
Termination or otherwise except as specifically provided in clause (ii) of
the last sentence of Section 3(b).
4. Additional Payment.
(a) Gross-Up Payment. Notwithstanding anything herein to the
contrary, if it is determined that any Payment would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties
with respect to such excise tax (such excise tax, together with any
interest or penalties thereon, is herein referred to as an "Excise Tax"),
then you shall be entitled to an additional payment (a "Gross-Up Payment")
in an amount that will place you in the same after-tax economic position
that you would have enjoyed if the Excise Tax had not applied to the
Payment. The amount of the Gross-Up Payment shall be determined by the
Accounting Firm in accordance with the formula
{(E x (1 - M)/(1 - T)) - E} (or such other formula as the Accounting Firm
deems appropriate which is intended to achieve the same result), where
E equals the Payments which are determined to be "excess
parachute payments" within the meaning of Section 280G(b)(1)
of the Code;
M equals the sum of the highest marginal ratesTo be
expressed in up to three decimal places. For example, a
combined federal, state and local marginal rate of 56% would
be expressed as .560. for Taxes applicable to you at the
time of the Payment; and
T equals M plus the rate of Excise Tax applicable to the
Payment.
No Gross-Up Payments shall be payable hereunder if the Accounting Firm
determines that the Payments are not subject to an Excise Tax.
(b) Determination of Gross-Up Payment. Subject to the
provisions of Section 4(c), all determinations required under this Section
4, including whether a Gross-Up Payment is required, the amount of the
Payments constituting excess parachute payments, and the amount of the
Gross-Up Payment, shall be made by the Accounting Firm, which shall provide
detailed supporting calculations both to you and the Company within fifteen
days of the Change in Control Date, your Date of Termination or any other
date reasonably requested by you or the Company on which a determination
under this Section 4 is necessary or advisable. The Company shall pay to
you the initial Gross-Up Payment within 5 days of the receipt by you and
the Company of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by you, the Company shall cause
the Accounting Firm to provide you with an opinion that the Accounting Firm
has substantial authority under the Code and Regulations not to report an
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Excise Tax on your federal income tax return. Any determination by the
Accounting Firm shall be binding upon you and the Company. If the
initial Gross-Up Payment is insufficient to cover the amount of the
Excise Tax that is ultimately determined to be owing by you with respect
to any Payment (hereinafter an "Underpayment"), the Company, after
exhausting its remedies under Section 4(c) below, shall promptly pay to
you an additional Gross-Up Payment in respect of the Underpayment.
(c) Procedures. You shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of a Gross-Up Payment. Such notice shall be
given as soon as practicable after you know of such claim and shall apprise
the Company of the nature of the claim and the date on which the claim is
requested to be paid. You agree not to pay the claim until the expiration
of the thirty-day period following the date on which you notify the
Company, or such shorter period ending on the date the Taxes with respect
to such claim are due (the "Notice Period"). If the Company notifies you in
writing prior to the expiration of the Notice Period that it desires to
contest the claim, you shall: (i) give the Company any information
reasonably requested by the Company relating to the claim; (ii) take such
action in connection with the claim as the Company may reasonably request,
including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company and
reasonably acceptable to you; (iii) cooperate with the Company in good
faith in contesting the claim; and (iv) permit the Company to participate
in any proceedings relating to the claim. You shall permit the Company to
control all proceedings related to the claim and, at its option, permit the
Company to pursue or forgo any and all administrative appeals, proceedings,
hearings, and conferences with the taxing authority in respect of such
claim. If requested by the Company, you agree either to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner
and to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts as the Company shall determine; provided, however, that, if the
Company directs you to pay such claim and pursue a refund, the Company
shall advance the amount of such payment to you on an after-tax and
interest-free basis (the "Advance"). The Company's control of the contest
related to the claim shall be limited to the issues related to the Gross-Up
Payment and you shall be entitled to settle or contest, as the case may be,
any other issues raised by the Internal Revenue Service or other taxing
authority. If the Company does not notify you in writing prior to the end
of the Notice Period of its desire to contest the claim, the Company shall
pay to you an additional Gross-Up Payment in respect of the excess
parachute payments that are the subject of the claim, and you agree to pay
the amount of the Excise Tax that is the subject of the claim to the
applicable taxing authority in accordance with applicable law.
(d) Repayments. If, after receipt by you of an Advance, you
become entitled to a refund with respect to the claim to which such Advance
relates, you shall pay the Company the amount of the refund (together with
any interest paid or credited thereon after Taxes applicable thereto). If,
after receipt by you of an Advance, a determination is made that you shall
not be entitled to any refund with respect to the claim and the Company
does not promptly notify you of its intent to contest the denial of refund,
then the amount of the Advance shall not be required to be repaid by you
and the amount thereof shall offset the amount of the additional Gross-Up
Payment then owing to you.
(e) Further Assurances. The Company shall indemnify you and
hold you harmless, on an after-tax basis, from any costs, expenses,
penalties, fines, interest or other liabilities ("Losses") incurred by you
with respect to the exercise by the Company of any of its rights under this
Section 4, including, without limitation, any Losses related to the
Company's decision to contest a claim or any imputed income to you
resulting from any Advance or action taken on your behalf by the Company
hereunder. The Company shall pay all legal fees and expenses incurred
under this Section 4, and shall promptly reimburse you for the reasonable
expenses incurred by you in connection with any actions taken by the
Company or required to be taken by you hereunder. The Company shall also
pay all of the fees and expenses of the Accounting Firm, including, without
limitation, the fees and expenses related to the opinion referred to in
Section 4(b).
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(f) Combined Payments. Anything in this Section 4 to the
contrary notwithstanding, the Company shall have no obligation to pay you a
required Gross-Up Payment under this Section 4 if the aggregate amount of
all Combined Payments has at the time such payment is due exceeded the
Limit. If the amount of a Gross-Up Payment to you under this Section 4
would result in the Combined Payments exceeding the Limit, the Company
shall pay you only the portion, if any, of the Gross-Up Payment which can
be paid to you without causing the aggregate amount of all Combined
Payments to exceed the Limit. In the event that you are entitled to a Gross-
Up Payment under this Section 4 and other employees or former employees of
the Company are also entitled to gross-up payments under the corresponding
provisions of the applicable Combined Arrangements and the aggregate amount
of all such payments would cause the Limit on Combined Payments to be
exceeded, the Company shall allocate the amount of the reduction necessary
to comply with the Limit among all such payments in the proportion that the
amount of each such gross-up payment bears to the aggregate amount of all
such payments. Nothing in this Section 4(f) shall require you to repay to
the Company any amount that was previously paid to you under this Section
4.
5. Other Provisions.
(a) Vesting and Exercise. All Equity Awards granted to you
under the Equity Plans (including Short-Term Awards) shall vest and become
exercisable in the event of your Involuntary Termination on or following
the Change in Control Date. If you are employed by the Company on the date
of the Equity Plan Change in Control, your Equity Awards will vest and
become exercisable as of such date.
(b) Effect of 30-Day Alternative. In accordance with the terms
of the Equity Plans, upon an Equity Plan Change in Control, Equity Awards
which are options or stock appreciation rights are "cashed out," unless the
Administrator in its discretion determines not to do so. In the event that
the Administrator elects not to cash out such Equity Awards, the
Administrator has the discretion in the context of a merger or sale of all
or substantially all of the assets of the Company either (i) to cause such
Equity Awards to be assumed or an equivalent option or stock appreciation
right granted by the successor corporation to the Company or a parent or
subsidiary of such successor corporation, or (ii) to provide that your
Equity Awards will remain outstanding for a thirty-day period beginning on
the date that you are so notified of such action by the Administrator and
that such Equity Awards will expire to the extent not exercised at the end
of such thirty-day period (the "30-Day Alternative"). If the Administrator
determines to utilize the 30-Day Alternative, the Company shall pay you
with respect to each such Equity Award the excess, if any (the "Additional
Amount"), of the Change in Control Price you would have received had the
Equity Award been cashed out on the date of the Equity Plan Change in
Control over the value of the consideration actually received by you in
settlement of such awards (determined as of the date such consideration is
received by you). Further, in the event of your Involuntary Termination on
or after the Change in Control Date but on or prior to the date of the
Equity Plan Change in Control, the Company shall pay you the Additional
Amount as if your employment had continued through the date of the Equity
Plan Change in Control. In either case, the payment of the Additional
Amount shall be made within 5 days following the determination by the
Administrator of the Change in Control Price.
(c) Short-Term Awards. In the event that (i) the transaction
resulting in an Equity Plan Change in Control occurs at such a time or is
structured in such a manner so as to make it reasonably likely that you
would be subject to actual or potential liability for short-swing profits
under Section 16 of the Exchange Act ("Short-Swing Profit Liability") if
you were to exercise, tender, sell or otherwise dispose (including through
a merger) of your Short-Term Awards as part of, or prior to, such
transaction and (ii) your inability to exercise, tender, sell or otherwise
dispose of your Short-Term Awards on or prior to the date of such Equity
Plan Change in Control eliminates or reduces the value of some or all of
your Short-Term Awards, then, on the date of the Equity Plan Change in
Control, the Company shall pay you in a cash lump sum the amount of
. The provisions of clause (ii) of the previous sentence shall be deemed
to apply where (a) you are precluded from exercising,
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tendering or otherwise disposing of your Short-Term Awards on or prior to
the Transaction Date in order to avoid Short-Swing Profit Liability, (b) a
Short-Term Award cannot be repurchased, exchanged or cashed-out by the
Company (or other person) on or prior to the Transaction Date without a
risk of Short-Swing Profit Liability to you, or (c) you are required to
delay the exercise, sale, tender, or other disposition of your Short-Term
Awards in order to avoid Short-Swing Profit Liability and such delay
results in your receiving consideration for your Short-Term Awards (valued
at the date such consideration is received) which is of lesser value than
the consideration you would have received (valued as of the date of the
Equity Plan Change in Control) for such awards had such delay not occurred.
The foregoing provisions shall apply to your Equity Awards notwithstanding
your Involuntary Termination of employment with the Company on or after the
Change in Control Date but prior to the Equity Plan Change in Control. The
provisions of this Section 5(c) shall not apply if (A) prior to the Equity
Plan Change in Control, the Company provides you at its expense with an
opinion from a nationally recognized firm of attorneys stating that the
exercise, tender, sale or other disposition of your Short-Term Awards as
part of, or prior to, the transaction resulting in the Equity Plan Change
in Control will not subject you to Short-Swing Profit Liability and (B)
following your receipt of such opinion there is sufficient time for you to
exercise, tender, sell or otherwise dispose of your Short-Term Awards on or
prior to the Equity Plan Change in Control without impairing the value
thereof.
(d) General. Anything in this Agreement to the contrary
notwithstanding, in no event shall the vesting and exercisability
provisions applicable to you under the terms of your Equity Awards be less
favorable to you then the terms and provisions of such awards in effect on
the date hereof.
6. Legal Fees and Expenses. The Company shall pay or reimburse
you on an after-tax basis for all costs and expenses (including, without
limitation, court costs and reasonable legal fees and expenses which
reflect common practice with respect to the matters involved) incurred by
you as a result of any claim, action or proceeding (i) arising out of your
termination of employment during the Term, (ii) contesting, disputing or
enforcing any right, benefits or obligations under this Agreement or (iii)
arising out of or challenging the validity, advisability or enforceability
of this Agreement or any provision thereof; provided, however, that the
amount of the payments and reimbursements under this Section 6 shall not
exceed $2 million.
7. Successors; Binding Agreement.
(a) Assumption by Successor. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business or assets of the
Company expressly to assume and to agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place; provided, however, that
no such assumption shall relieve the Company of its obligations hereunder.
As used in this Agreement, the "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation
of law or otherwise.
(b) Enforceability; Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of you (and your personal
representatives and heirs) and the Company and any organization which
succeeds to substantially all of the business or assets of the Company,
whether by means of merger, consolidation, acquisition of all or
substantially all of the assets of the Company or otherwise, including,
without limitation, as a result of a Change in Control or by operation of
law. This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die
while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there is no such designee, to
your estate.
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8. Definitions. For purposes of this Agreement, the following
capitalized words shall have the meanings set forth below:
"Accounting Firm" shall mean Ernst & Young or, if such firm is
unable or unwilling to perform such calculations, such other national
accounting firm as shall be designated by agreement between you and the
Company. To the extent reasonably practicable, one such accounting firm
shall be designated to perform the calculations in respect of the Combined
Arrangements.
"Administrator" shall mean the "Administrator" as defined in the
applicable Equity Plan or, if no such term is defined in the Equity Plan,
the Board.
"Cause" shall mean a termination of your employment during the
Term which is a result of (i) your felony conviction, (ii) your willful
disclosure of material trade secrets or other material confidential
information related to the business of the Company and its subsidiaries or
(iii) your willful and continued failure substantially to perform your
duties with the Company (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or
anticipated failure resulting from a resignation by you for Good Reason)
after a written demand for substantial performance is delivered to you by
the Board, which demand specifically identifies the manner in which the
Board believes that you have not substantially performed your duties, and
which performance is not substantially corrected by you within 10 days of
receipt of such demand. For purposes of the previous sentence, no act or
failure to act on your part shall be deemed "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief
that your action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less
than three-fourths (3/4ths) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after reasonable
notice to you and an opportunity for you, together with your counsel, to be
heard before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct set forth above in clause (i), (ii) or
(iii) of the first sentence of this section and specifying the particulars
thereof in detail.
"Change in Control" shall mean a change in control of the
Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange
Act, whether or not the Company is then subject to such reporting
requirement; provided, however, that, anything in this Agreement to the
contrary notwithstanding, a Change in Control shall be deemed to have
occurred if:
(i) any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity or person, or any
syndicate or group deemed to be a person under Section 14(d)(2) of the
Exchange Act, is or becomes the "beneficial owner" (as defined in Rule
13d-3 of the General Rules and Regulations under the Exchange Act),
directly or indirectly, of securities of the Company representing 30%
or more of the combined voting power of the Company's then outstanding
securities entitled to vote in the election of directors of the
Company;
(ii) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement)
individuals who at the beginning of such period constituted the Board
and any new directors, whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least three-fourths (3/4ths) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved (the "Incumbent
Directors"), cease for any reason to constitute a majority thereof;
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(iii) There occurs a reorganization, merger, consolidation or
other corporate transaction involving the Company (a "Transaction"),
in each case, with respect to which the stockholders of the Company
immediately prior to such Transaction do not, immediately after the
Transaction, own more than 50 percent of the combined voting power of
the Company or other corporation resulting from such Transaction;
(iv) all or substantially all of the assets of the Company are
sold, liquidated or distributed; or
(v) there is a "change in control" of the Company within the
meaning of Section 280G of the Code and the Regulations.
"Change in Control Date" shall mean the earliest of (i) the date
on which the Change in Control occurs, (ii) the date on which the Company
executes an agreement, the consummation of which would result in the
occurrence of a Change in Control, (iii) the date the Board approves a
transaction or series of transactions, the consummation of which would
result in a Change in Control and (iv) the date the Company fails to
satisfy its obligations to have this agreement assumed by any successor to
the Company in accordance with Section 7(a) of this Agreement. If the
Change in Control Date occurs as a result of an agreement described in
clause (ii) of the previous sentence or as a result of the approval of the
Board described in clause (iii) of the previous sentence and the Change in
Control to which such agreement or approval relates (the "Contemplated
Change in Control") subsequently does not occur, then the Term shall expire
on the sixtieth day (the "Reset Date") following the date the Board
certifies by resolution duly adopted by three-fourths (3/4ths) of the
Incumbent Directors then in office that the Contemplated Change in Control
is not reasonably likely to occur; provided, however, that this sentence
shall not apply if (A) an Involuntary Termination of your employment with
the Company has occurred on and after the Change in Control Date and on or
prior to the Reset Date or (B) the Contemplated Change in Control
subsequently occurs within three months of the Reset Date. Following the
Reset Date, the provisions of this Agreement shall remain in effect and a
new Term shall commence upon the occurrence of a subsequent Change in
Control Date. Notwithstanding the first sentence of this section, if your
employment with the Company terminates prior to the Change in Control Date
and it is reasonably demonstrated that your termination of employment (i)
was at the request of the third party who has taken steps reasonably
calculated to effect the Change in Control or (ii) otherwise arose in
connection with or in anticipation of the Change in Control, then Change in
Control Date shall mean the date immediately prior to the date of your
termination of employment.
"Change in Control Price" shall mean the "Change in Control
Price" as defined in the applicable Equity Plan and determined by the
Administrator as of the date of the Equity Plan Change in Control, whether
or not the Administrator is required under the terms of the applicable
Equity Plan to determine such price as of such date.
"Combined Arrangements" shall mean this Agreement, the Retention
Agreements entered into as of the date first set forth above between the
Company and certain of its executive officers, any Retention Agreement
entered into after the date hereof which is specifically designated by the
terms thereof as one of the Combined Arrangements and the Supplement to the
Severance Plan.
"Combined Payments" shall mean the aggregate cash amount of (i)
severance payments made to you under Section 3(a) of this Agreement or to
any other employee or former employee under the corresponding provisions of
the applicable Combined Arrangement, (ii) severance payments made under
Sections 2(e) and 2(f) of the Supplement or the corresponding provisions of
the applicable Combined Arrangement, (iii) Gross-Up Payments made to you
under Section 6 of this Agreement or to any other employee or former
employee under the
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corresponding provisions of the applicable Combined Arrangement, (iv) fees
and expenses which are paid or reimbursed to you under Section 6 of this
Agreement or to any other employee or former employee under the
corresponding provisions of the applicable Combined Arrangement, (v)
payments made to you under Section 5 of this Agreement or to any other
employee or former employee under the corresponding provisions of the
applicable Combined Arrangement and (vi) costs incurred by the Company in
respect of any employee or former employee under Section 2(d) of the
Supplement or the corresponding provisions of the applicable Combined
Arrangement.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor provisions thereto.
"Common Stock" shall mean the common stock of the Company.
"Disability" shall mean (i) your incapacity due to physical or
mental illness which causes you to be absent from the full-time performance
of your duties with the Company for six (6) consecutive months, and (ii)
your failure to return to full-time performance of your duties for the
Company within thirty (30) days after written Notice of Termination due to
Disability is given to you. Any question as to the existence of your
Disability upon which you and the Company cannot agree shall be determined
by a qualified independent physician selected by you (or, if you are unable
to make such selection, such selection shall be made by any adult member of
your immediate family), and approved by the Company. The determination of
such physician made in writing to the Company and to you shall be final and
conclusive for all purposes of this Agreement.
"ELTSOP" shall mean the Apple Computer, Inc. 1987 Executive Long
Term Stock Option Plan, as amended, and any successor plan thereto.
"Equity Awards" shall mean options, restricted stock, bonus stock
or other grants or awards which consist of, or relate to, equity securities
of the Company and which have been granted to you under the Equity Plans.
For purposes of this Agreement, Equity Awards shall also include any
securities acquired upon the exercise of an option, warrant or similar
right that constitutes an Equity Award.
"Equity Plan Change in Control" shall mean a change in control of
the Company as defined in the applicable Equity Plan.
"Equity Plans" shall mean the Stock Option Plan, the ELTSOP, and
any other equity-based incentive plan or arrangement adopted by the
Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and any successor provisions thereto.
"Good Reason" shall mean a resignation of your employment during
the Term as a result of any of the following:
(i) A meaningful and detrimental alteration in your position,
your titles, or the nature or status of your responsibilities
(including your reporting responsibilities) from those in effect
immediately prior to the Change in Control Date;
<PAGE>
(ii) A reduction by the Company in your annual base salary as in
effect immediately prior to the Change in Control Date or as the same
may be increased from time to time thereafter; a failure by the
Company to increase your salary at a rate commensurate with that of
other key executives of the Company; or a reduction in your target
annual bonus (expressed as a percentage of base salary) below the
target in effect for you prior to the Change in Control Date;
(iii) The relocation of the office of the Company where you
are employed immediately prior to the Change in Control Date (the "CIC
Location") to a location which is more than fifty (50) miles away from
the CIC Location or the Company's requiring you to be based more than
fifty (50) miles away from the CIC Location (except for required
travel on the Company's business to an extent substantially consistent
with your customary business travel obligations in the ordinary course
of business prior to the Change in Control Date);
(iv) The failure by the Company to continue in effect any
compensation plan in which you participated prior to the Change in
Control Date or made available to you after the Change in Control
Date, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan in connection with the Change in Control, or the failure by the
Company to continue your participation therein on at least as
favorable a basis, both in terms of the amount of benefits provided
and the level of your participation relative to other participants, as
existed on the Change in Control Date;
(v) The failure by the Company to continue to provide you with
benefits at least as favorable in the aggregate to those enjoyed by
you under the Company's pension, savings, life insurance, medical,
health and accident, disability, and fringe benefit plans and programs
in which you were participating immediately prior to the Change in
Control Date; or the failure by the Company to provide you with the
number of paid vacation days to which you are entitled on the basis of
years of service with the Company in accordance with the Company's
normal vacation policy in effect immediately prior to the Change in
Control;
(vi) The failure of the Company to obtain an agreement reasonably
satisfactory to you from any successor to assume and agree to perform
this Agreement, as contemplated in Section 7(a) hereof or, if the
business of the Company for which your services are principally
performed is sold at any time after a Change in Control, the failure
of the Company to obtain such an agreement from the purchaser of such
business;
(vii) Any termination of your employment which is not
effected pursuant to the terms of this Agreement; or
(viii) A material breach by the Company of the provisions of
this Agreement;
provided, however, that an event described above in clause (i), (ii), (iv),
(v) or (viii) shall not constitute Good Reason unless it is communicated by
you to the Company in writing and is not corrected by the Company in a
manner which is reasonably satisfactory to you (including full retroactive
correction with respect to any monetary matter) within 10 days of the
Company's receipt of such written notice from you.
"Involuntary Termination" shall mean (i) your termination of
employment by the Company and its subsidiaries during the Term other than
for Cause or Disability or (ii) your resignation of employment with the
Company and its subsidiaries during the Term for Good Reason.
<PAGE>
"Limit" shall mean the dollar amount determined in accordance
with the formula [A x B x C], where
A equals 0.02;
B equals the number of issued and outstanding shares of Common
Stock of the Company immediately prior to the Change in
Control Date; and
C equals the greater of (i) (A) if the Common Stock is listed
on any established stock exchange or national market system
(including, without limitation, the National Market System
of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the highest closing
sale price (or closing bid price, if no sales are reported)
of a share of Common Stock, or (B) if the Common Stock is
regularly quoted on the NASDAQ System (but not on a national
market system) or quoted by a recognized securities dealer
but selling prices are not reported, the highest mean
between the high and low asked prices for the Common Stock,
in each case, on any day during the ninety-day period ending
on the Change in Control Date, and (ii) the highest price
paid or offered, as determined by the Accounting Firm, in
any bona fide transaction or bona fide offer related to the
Change in Control.
"Payment" means (i) any amount due or paid to you under this
Agreement, (ii) any amount that is due or paid to you under any plan,
program or arrangement of the Company and its subsidiaries (including,
without limitation, the Equity Plans), and (iii) any amount or benefit that
is due or payable to you under this Agreement or under any plan, program or
arrangement of the Company and its subsidiaries not otherwise covered under
clause (i) or (ii) hereof which must reasonably be taken into account under
Section 280G of the Code and the Regulations in determining the amount of
the "parachute payments" received by you, including, without limitation,
any amounts which must be taken into account under the Code and Regulations
as a result of (A) the acceleration of the vesting of any option,
restricted stock or other equity award granted under the Equity Plans or
otherwise, (B) the acceleration of the time at which any payment or benefit
is receivable by you or (C) any contingent severance or other amounts that
are payable to you.
"Reference Bonus" shall mean the greater of (i) the target annual
bonus applicable to you for the year in which your Involuntary Termination
occurs and (ii) the highest target annual bonus applicable to you in any of
the three years ending prior to the Change in Control Date.
"Reference Salary" shall mean the greater of (i) the annual rate
of your base salary from the Company and its subsidiaries in effect
immediately prior to the date of your Involuntary Termination and (ii) the
annual rate of your base salary from the Company in effect at any point
during the three-year period ending on the Change in Control Date.
"Regulations" shall mean the proposed, temporary and final
regulations under Section 280G of the Code or any successor provision
thereto.
"Severance Plan" means the Apple Computer, Inc. Executive
Severance Plan, as amended.
"Short-Term Awards" shall mean Equity Awards which have been
granted to you within the six-month period ending on the date of a Equity
Plan Change in Control. For purposes of this Agreement, Short-Term Awards
shall also include any securities acquired upon the exercise of an Equity
Award that constitutes a Short-Term Award.
<PAGE>
"Stock Option Plan" shall mean the Apple Computer, Inc. 1990
Stock Option Plan, as amended, and any successor plan thereto.
"Supplement" means the amendment to the Severance Plan adopted as
of the date of this Agreement and any future amendment thereto.
"Taxes" shall mean the federal, state and local income taxes to
which you are subject at the time of determination, calculated on the basis
of the highest marginal rates then in effect, plus any additional payroll
or withholding taxes to which you are then subject.
"Transaction Date" shall mean the date described in clause (i) of
the definition of Change in Control Date.
9. Notice. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid,
addressed to the Board of Directors, Apple Computer, Inc., 1 Infinite Loop,
M/S: 75 8A, Cupertino, CA 95014, with a copy to the General Counsel of the
Company, or to you at the address set forth on the first page of this
Agreement or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change
of address shall be effective only upon receipt.
10. Miscellaneous.
(a) Amendments, Waivers, Etc. No provision of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements
or representations, oral or otherwise, express or implied, with respect to
the subject matter hereof have been made by either party which are not
expressly set forth in this Agreement and this Agreement shall supersede
all prior agreements, negotiations, correspondence, undertakings and
communications of the parties, oral or written, with respect to the subject
matter hereof; provided, however, that, except as expressly set forth
herein, this Agreement shall not supersede the terms of Equity Awards
previously granted to you.
(b) Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
(d) No Contract of Employment. Nothing in this Agreement shall
be construed as giving you any right to be retained in the employ of the
Company or shall affect the terms and conditions of your employment with
the Company prior to the commencement of the Term hereof.
(e) Withholding. Amounts paid to you hereunder shall be subject
to all applicable federal, state and local withholding taxes.
<PAGE>
(f) Source of Payments. All payments provided under this
Agreement, other than payments made pursuant to a plan which provides
otherwise, shall be paid in cash from the general funds of the Company, and
no special or separate fund shall be established, and no other segregation
of assets made, to assure payment. You will have no right, title or
interest whatsoever in or to any investments which the Company may make to
aid it in meeting its obligations hereunder. To the extent that any person
acquires a right to receive payments from the Company hereunder, such right
shall be no greater than the right of an unsecured creditor of the Company.
(g) Headings. The headings contained in this Agreement are
intended solely for convenience of reference and shall not affect the
rights of the parties to this Agreement.
(h) Governing Law. The validity, interpretation, construction,
and performance of this Agreement shall be governed by the laws of the
State of California applicable to contracts entered into and performed in
such State.
* * * *
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
APPLE COMPUTER, INC.
By_/s/ G.F. Amelio__
Name:
Title:
Agreed to as of this 4th day of March, 1996.
_/s/ F.D. Anserson___
Fred D. Anderson, Jr.