Apple (AAPL)

PROPOSAL NO. 2
Approval of Amendments to the Apple Inc. 2003 Employee Stock Plan

At the annual meeting, shareholders will be asked to approve amendments to the 2003 Employee Stock Plan (the “2003 Plan”), which was adopted, subject to shareholder approval, by the Board of Directors in April 2007. The plan, as amended, reflects the following amendments, which are subject to shareholder approval of this proposal: 

·       Increase in Aggregate Share Limit. The amended version of the 2003 Plan authorizes a 28,000,000 share increase in the number of shares of common stock available for award grants under the 2003 Plan.

·       Extension of Term of Plan. The amended version of the 2003 Plan extends the term of the plan by two years to May 10, 2017.

·       Modification and Extension of Performance-Based Award Features. One element of the 2003 Plan is the flexibility to grant certain performance-based awards designed to satisfy the requirements for deductibility of compensation under Section 162(m) of the U.S. Internal Revenue Code. These awards are referred to as “Performance-Based Awards” and are in addition to other awards, such as stock options and stock appreciation rights, expressly authorized under the 2003 Plan that may also qualify as performance-based compensation for Section 162(m) purposes. If shareholders approve

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this 2003 Plan proposal, the Company will have the flexibility to grant Performance-Based Awards under the plan that are payable in cash, and the Company’s authority to grant Performance-Based Awards under the plan will be extended through the first annual meeting of the Company’s shareholders that occurs in 2012 (this expiration time is earlier than the general expiration date of the 2003 Plan and is required under applicable tax rules).