Apple (AAPL)

APPLE CONFIDENTIAL

As we discussed, I want to confirm the terms of your transition from your current position at Apple to a new role.

Apple has agreed to extend your employment through at least March 24, 2010 pursuant to the conditions of this Transition Agreement and attached Settlement Agreement and Release (the “Term”). This will allow you to continue to receive a salary and benefits as well as to vest in certain Restricted Stock Units as described below. We have agreed that you will immediately resign from your position as Senior Vice President, iPod, and as a member of the Apple Executive Team. In your new role as Special Advisor to Apple’s Chief Executive Officer, you shall provide such advice and other services concerning the business of Apple as may be reasonably requested by the Chief Executive Officer from time to time on a part time, but not a full time basis. During the Term, you will not be employed by or perform consulting services for any other entity absent Apple’s prior written consent.

Your new salary shall be $300,000 USD per year, subject to standard deductions and payable during Apple’s normal payroll cycle. You shall continue to receive all other benefits of employment generally available to other members of the Company’s management, and shall be entitled to participate in Apple’s VP/Director Bonus Program. All salary, benefits and bonus eligibility shall cease upon the termination of your employment with Apple. You will be entitled to the full FY’08 SVP Annual Bonus Program and all of your accrued vacation time to date shall be paid in full at your pre-transition salary. Any subsequent vacation accrual shall be paid at your new salary. In the event that your wife is no longer employed at Apple, then you will not be subject to any blackout restrictions regarding your sale of Apple securities when and if such restrictions lapse for her.

In consideration for Apple’s offer of continued employment, and upon the new grant of the RSUs set forth herein, you agree to cancel all of your outstanding unvested restricted stock units (“RSUs”) (as reflected below). You will have no further rights with respect to any of the cancelled RSUs, but your stock options shall remain outstanding and the terms and conditions of such options, including the vesting provisions, shall remain in full force and effect. The chart below lists your unvested RSUs that will be cancelled per your understanding and agreement:

Subject to the approval of and at a date to be determined by the Board of Directors, Apple will recommend that you be granted an award of RSUs in the amount of 77,500 shares. The grant date and vesting commencement date will be determined by the Board, and shall be subject to the terms and conditions of Apple’s 2003 Employee Stock Plan. The RSUs subject to the award will vest all at once on March 24, 2010, contingent upon your continued employment on that date, provided, however, that should Apple terminate your employment before March 24, 2010 without “Cause”, your RSUs will accelerate and immediately vest and you shall be entitled to continuation of your salary payments (or pay in lieu at Apple’s discretion) and benefits or COBRA reimbursement through March 24, 2010 subject to your execution of a new release commensurate with the terms of the attached release.

For purposes of this Agreement, “Cause” shall be defined as (i) an intentional material act of fraud or dishonesty in connection with your duties, or in the course of your employment with the Company; (ii) the conviction of a felony or crime involving moral turpitude; (iii) Your breach of this Transition Agreement or attached Settlement Agreement and Release; (iv) a willful act by you which constitutes gross misconduct and which is injurious to the Company; or (v) a willful breach of a material Apple policy or your Intellectual Property Agreement. Prior to any termination for “Cause” Apple will provide you with written notice of the basis for a “Cause” termination. In addition, prior to any termination for “Cause” under (iii) above, Apple will provide you with a ten (10) day opportunity to cure. No act or failure to act by you shall be considered “willful” unless committed without good faith and without a reasonable belief that the act or omission was in the Company’s best interest.

You will have an opportunity to review in advance all press releases and SEC filings referencing your change in roles with Apple pursuant to the Transition Agreement. Unless otherwise required by law, these announcements will not infer or suggest that you have been demoted and/or terminated.

In order to receive the consideration outlined in this Transition Agreement, you will need to sign the attached Settlement Agreement and Release, and another similar agreement after your date of separation. The second agreement will release claims for the period between the date you sign the first agreement and the end of your employment. If you fail to sign the attached release of claims within seven days, your employment at Apple will come to an immediate end.

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From today until your final date, I know that you will continue to adhere to Apple policies, and confidentiality agreements (including your Intellectual Property Agreement). Your employment shall remain at-will which means that either you or Apple may terminate your employment with or without notice or cause at any time subject to your rights under this Agreement.

Please be aware, the content of this memo and any related discussions or documents are confidential and are bound by the Intellectual Property Agreement that you signed as a condition of your employment with Apple. You are free to discuss this with your spouse and or legal/financial advisor.

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