Apple (AAPL)

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 flows was associated with this transaction.

103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8—Shareholders’ Equity (Continued)

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 flows was associated with this transaction.

103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8—Shareholders’ Equity (Continued)

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.

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.

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 $25.00 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 are issued, which was to be at least six months plus one day after the exchange options are cancelled. On April 17, 2003, in accordance with the Exchange Program, the Company cancelled options to purchase 16,569,193 shares of its common stock. On October 22, 2003, new stock options totaling 6,697,368 shares were issued to employees at an exercise price of $22.76 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.

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 $25.00 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 are issued, which was to be at least six months plus one day
after the exchange options are cancelled. On April 17, 2003, in accordance with the Exchange Program, the Company cancelled options to purchase 16,569,193 shares of its common stock. On
October 22, 2003, new stock options totaling 6,697,368 shares were issued to employees at an exercise price of $22.76 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.

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 $25.00 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 are issued, which would be at least six months plus one day after the exchange options are cancelled. On April 17, 2003, in accordance with the Exchange Program, the Company accepted and cancelled options to purchase 16,569,193 shares of its common stock. On October 22, 2003, new stock options totaling 6,697,368 shares were issued to employees at an exercise price of $22.76 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.

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 $25.00 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 are issued, which would be at least six months plus one day
after the exchange options are cancelled. On April 17, 2003, in accordance with the Exchange Program, the Company accepted and cancelled options to purchase 16,569,193 shares of its common
stock. On October 22, 2003, new stock options totaling 6,697,368 shares were issued to employees at an exercise price of $22.76 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.