Apple (AAPL)

Compensation of Directors

The form and amount of director compensation are determined by the Board after its review of recommendations made by the Compensation Committee. The current practice of the Board is to base a substantial portion of a director’s annual retainer on equity. Under the Company’s 1997 Director Stock Option Plan (the “Director Plan”), members of the Board who are not also Company employees (“Non-Employee Directors”) are granted an option to acquire 30,000 shares of the Company’s common stock upon their initial election or appointment to the Board (an “Initial Option”). Initial Options vest and become exercisable in equal installments on each of the first three anniversaries of the grant date. Starting on the fourth anniversary of a Non-Employee Director’s initial election or appointment to the Board and on each subsequent anniversary thereafter during the director’s tenure on the Board, the Non-Employee Director is granted an option to acquire 10,000 shares of the Company’s common stock (an “Annual Option”). Annual Options are fully vested and immediately exercisable on the date of grant.

At the Annual Meeting, shareholders are being asked to approve certain amendments to the Director Plan that would, among other things, provide for annual grants to Non-Employee Directors to be made in the form of restricted stock units (“RSUs”) instead of options and to be made in connection with the Company’s annual meeting of shareholders rather than on the anniversary of the date the Non-Employee Director joined the Board. Please see the proposed amendments to the Director Plan described in Proposal No. 3.

10

Non-Employee Directors also receive a $50,000 annual retainer paid in quarterly installments, and the Chair of the Audit Committee receives an additional annual retainer of $25,000. Other than the Chair of the Audit Committee, directors do not receive any additional compensation for serving as a Chair or member of any other committee.

In addition, under the Company’s Board of Directors Equipment Program, each Non-Employee Director is eligible to receive, upon request and free of charge, one of each new product introduced by the Company and is eligible to purchase additional equipment at a discount.

Compensation of Directors

The form and amount of director compensation are determined by the Board after its review of recommendations made by the Nominating Committee. The current practice of the Board is to base a substantial portion of a director’s annual retainer on equity. Under the Company’s 1997 Director Stock Option Plan (the “Director Plan”), members of the Board who are not also Company employees (“Non-Employee Directors”) are granted an option to acquire 30,000 shares of the Company’s common stock upon their initial election or appointment to the Board (an “Initial Option”). Initial Options vest and become exercisable in equal installments on each of the first three anniversaries of the grant date. Starting on the fourth anniversary of a Non-Employee Director’s initial election or appointment to the Board and on each subsequent anniversary thereafter during the director’s tenure on the Board, the Non-Employee Director is granted an option to acquire 10,000 shares of the Company’s common stock (an “Annual Option”). Annual Options are fully vested and immediately exercisable on the date of grant.

Non-Employee Directors also receive a $50,000 annual retainer paid in quarterly installments, and the Chair of the Audit Committee receives an additional annual retainer of $25,000. In addition, under the Company’s Board of Directors Equipment Program, each Non-Employee Director is eligible to receive, upon request and free of charge, one of each new product introduced by the Company and is eligible to purchase additional equipment at a discount. In 2008, each Non-Employee Director was offered a commemorative gift for Board

10

service and a payment to cover the tax liability to the director arising from the gift and the payment itself. Other than the Chair of the Audit Committee, directors do not receive any additional compensation for serving as a Chair or member of any other committee.

Since his initial appointment to the Board on August 29, 2006, Dr. Schmidt has declined the annual retainer fee and declined to participate in the Director Plan, under which he would have received an Initial Option to acquire 30,000 shares of the Company’s common stock. In September 2006, Dr. Schmidt purchased 10,000 shares of the Company’s common stock on the open market.

Compensation of Directors

The form and amount of director compensation are determined by the Board after a review of recommendations made by the Nominating Committee. The current practice of the Board is to base a substantial portion of a director’s annual retainer on equity. Under the Company’s 1997 Director Stock Option Plan (the “Director Plan”), members of the Board who are not also employees (“Non-Employee Directors”) are granted an option to acquire 30,000 shares of the Company’s common stock upon their initial election to the Board (an “Initial Option”). Initial Options vest and become exercisable in equal installments on each of the first three anniversaries of the grant date. On the fourth anniversary of a Non-Employee Director’s initial election to the Board and on each subsequent anniversary thereafter, the director is granted an option to acquire 10,000 shares of the Company’s common stock (an “Annual Option”). Annual Options are fully vested and immediately exercisable on the date of grant.

Upon his initial appointment to the Board on August 29, 2006, Dr. Schmidt declined the annual retainer fee and the automatic stock option grant to purchase 30,000 shares to which new directors are entitled under the Director Plan. Instead, Dr. Schmidt purchased 10,000 shares of the Company’s common stock on the open market.

Non-Employee Directors also receive a $50,000 annual retainer paid in quarterly installments. Beginning in the 2008 fiscal year, the chairperson of the Audit Committee is also entitled to an annual retainer of $25,000, in addition to the annual retainer paid to all Non-Employee Directors. In addition, each Non-Employee Director is eligible to receive free of charge one of each new product introduced by the Company and is eligible to purchase additional equipment at a discount. Directors do not receive any additional consideration for serving as a member or chairperson of any other committee.

Compensation of Directors

The form and amount of director compensation are determined by the Board after a review of recommendations made by the Nominating Committee. The current practice of the Board is to base a substantial portion of a director's annual retainer on equity. Under the Company's 1997 Director Stock Option Plan (the "Director Plan"), the Company's Non-Employee Directors are granted an option to acquire 30,000 shares of the Company's common stock upon their initial election to the Board (an "Initial Option"). Initial Options vest and become exercisable in equal installments on each of the first three anniversaries of the grant date. On the fourth anniversary of a Non-Employee Director's initial election to the Board and on each subsequent anniversary thereafter, the director is granted an option to acquire 10,000 shares of the Company's common stock (an "Annual Option"). Annual Options are fully vested and immediately exercisable on the date of grant.

Upon his initial appointment to the Board on August 29, 2006, Dr. Schmidt declined the annual retainer fee and the automatic stock option grant to purchase 30,000 shares to which new directors are entitled under the Director Plan. Instead, Dr. Schmidt purchased 10,000 shares of the Company's common stock on the open market.

Non-Employee directors also receive a $50,000 annual retainer paid in quarterly installments. Beginning in the 2008 fiscal year, the chairperson of the Audit and Finance Committee will also be entitled to an annual retainer of $25,000, in addition to the annual retainer paid to all non-employee directors. Directors do not receive any additional consideration for serving as a member or chairperson of any other committee. In addition, directors receive up to two free computer systems per year and are eligible to purchase additional equipment at a discount.

Compensation of Directors

The form and amount of director compensation are determined by the Board after a review of recommendations made by the Nominating Committee. The current practice of the Board
is to base a substantial portion of a director's annual retainer on equity. Under the Company's 1997 Director Stock Option Plan (the "Director Plan"), the Company's Non-Employee Directors
are granted an option to acquire 30,000 shares of the Company's common stock upon their initial election to the Board (an "Initial Option"). Initial Options vest and become exercisable in equal
installments on each of the first three anniversaries of the grant date. On the fourth anniversary of a Non-Employee Director's initial election to the Board and on each subsequent
anniversary thereafter, the director is granted an option to acquire 10,000 shares of the Company's common stock (an "Annual Option"). Annual Options are fully vested and immediately exercisable on
the date of grant.

Upon
his initial appointment to the Board on August 29, 2006, Dr. Schmidt declined the annual retainer fee and the automatic stock option grant to purchase 30,000 shares to which new
directors are entitled under the Director Plan. Instead, Dr. Schmidt purchased 10,000 shares of the Company's common stock on the open market.

Non-Employee
directors also receive a $50,000 annual retainer paid in quarterly installments. Beginning in the 2008 fiscal year, the chairperson of the Audit and Finance Committee will
also be entitled to an annual retainer of $25,000, in addition to the annual retainer paid to all
non-employee directors. Directors do not receive any additional consideration for serving as a member or chairperson of any other committee. In addition, directors receive up to two free
computer systems per year and are eligible to purchase additional equipment at a discount.