ITEM 15. Exhibits,
Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statements and Schedules
The financial statements are set
forth under Item 8 of this Annual Report on Form 10-K. Financial statement
schedules have been omitted since they are either not required, not applicable,
or the information is otherwise included.
(b) Reports on Form 8-K
We did not file any reports on Form
8-K during the quarter ended June 30, 2003. We furnished to the SEC reports on Form 8-K
on April 15, 2003
and May 12, 2003.
The April 15,
2003 Form 8-K was for the purpose of furnishing the press release
announcing our financial results for the fiscal quarter ended March 31, 2003.
The May 12, 2003
Form 8-K was for the purpose of furnishing our consolidated balance sheets as
of June 30, 2002
and March 31,
2003, and the related consolidated statements of income, cash
flows, and stockholders' equity for the three and nine months ended March 31, 2002
and 2003 formatted in XBRL (Extensible Business Reporting Language).
(c) Exhibit Listing
Exibit
Number |
|
Description |
|
|
|
3.1 |
|
Amended and Restated
Articles of Incorporation of Microsoft Corporation(1) |
3.2 |
|
Bylaws of Microsoft
Corporation(2) |
10.1 |
|
Microsoft Corporation 2001 Stock Plan, as amended and
restated |
10.2 |
|
Microsoft Corporation
1991 Stock Option Plan(3) |
10.3 |
|
Microsoft Corporation
1981 Stock Option Plan(4) |
10.4 |
|
Microsoft Corporation
1999 Stock Option Plan for Non-Employee Directors(5) |
10.5 |
|
Microsoft Corporation
Stock Option Plan for Consultants and Advisors(6) |
10.6 |
|
Microsoft Corporation 2003 Employee Stock Purchase Plan(7) |
10.7 |
|
Trust Agreement dated June 1, 1993 between Microsoft
Corporation and BNY Western Trust Company as trustee (formerly with
First Interstate Bank of Washington as trustee)(6) |
10.8 |
|
Trust Agreement dated as
of June 30, 2003 between Microsoft Corporation and BNY
Western Trust Company as trustee |
10.9 |
|
Form of Indemnification
Agreement(6) |
21. |
|
Subsidiaries of
Registrant |
23. |
|
Independent Auditors'
Consent |
31.1 |
|
Certifications of Chief
Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
31.2 |
|
Certifications of Chief
Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
32. |
|
Certifications of Chief
Executive Officer and Chief Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 |
(1)
Incorporated by reference to Quarterly Report on Form 10-Q for the Quarterly Period Ended December 31, 2002
(2)
Incorporated by reference to Quarterly Report on Form 10-Q for the Quarterly Period Ended March 31, 2003.
(3)
Incorporated by reference to Annual Report on Form 10-K for the Fiscal Year Ended June 30, 1997.
(4)
Incorporated by reference to Registration Statement 33-37623 on Form S-8.
(5)
Incorporated by reference to Registration Statement 333-91755 on Form S-8.
(6)
Incorporated by reference to Annual Report on Form 10-K for the Fiscal Year Ended June 30, 2002.
(7)
Incorporated by reference to Registration Statement 333-102240 on Form S-8.
SIGNATURES
Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned;
thereunto duly authorized, in the City of Redmond,
State of Washington,
on September 4,
2003.
MICROSOFT CORPORATION
|
|
|
By:
|
|
John G. Connors
Senior Vice President, Chief Financial Officer
|
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on behalf
of Registrant and in the capacities indicated on September 4, 2003.
Signature
|
|
Title
|
|
|
William H. Gates III
|
|
Chairman
of the Board of Directors and Chief Software Architect
|
|
|
Steven A. Ballmer
|
|
Chief
Executive Officer
|
|
|
/s/ JAMES
I. CASH, JR., Ph.D.
James I. Cash, Jr., Ph.D.
|
|
Director
|
|
|
Raymond V. Gilmartin
|
|
Director
|
|
|
/s/ ANN
MCLAUGHLIN KOROLOGOS
Ann McLaughlin Korologos
|
|
Director
|
|
|
David F. Marquardt
|
|
Director
|
|
|
Wm. G. Reed, Jr.
|
|
Director
|
|
|
Jon A. Shirley
|
|
Director
|
|
|
John G. Connors
|
|
Senior Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
|
Exhibit 10.1
MICROSOFT CORPORATION
2001 STOCK PLAN
(as amended and restated effective June 12, 2003)
1. Purpose of the Plan. The
purposes of this Stock Plan are to attract and retain the best available
individuals for positions of substantial responsibility, to provide additional
incentive to such individuals, and to promote the success of the Company's
business by aligning the financial interests of Employees and Consultants
providing personal services to the Company or to any Parent or Subsidiary of
the Company with long-term shareholder value.
Awards granted hereunder may be Incentive Stock
Options, Nonqualified Stock Options, Stock Awards, or SARs, at the discretion
of the Board and as reflected in the terms of the Award Agreement.
2. Definitions. As
used herein, the following definitions shall apply:
(a) "Award"
shall mean any award or benefits granted under the Plan, including Options,
Stock Awards, and SARs.
(b) "Award
Agreement" shall mean a written or electronic agreement between the Company
and the Awardee setting forth the terms of the Award.
(c) "Awardee"
shall mean the holder of an outstanding Award.
(d) "Board"
shall mean (i) the Board of Directors of the Company or (ii) both the Board and
the Committee, if a Committee has been appointed in accordance with Section
4(a) of the Plan.
(e) "Code"
shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee"
shall mean the Compensation Committee appointed by the Board of Directors in
accordance with Section 4(a) of the Plan, if one is appointed; provided,
however, if the Board of Directors appoints more than one Committee pursuant to
Section 4(a), then "Committee" shall refer to the appropriate Committee, as
indicated by the context of the reference.
(g) "Common
Shares" shall mean the common shares of Microsoft Corporation.
(h) "Company"
shall mean Microsoft Corporation, a Washington
corporation and any successor thereto.
(i) "Consultant"
shall mean any person, except an Employee, engaged by the Company or any Parent
or Subsidiary of the Company, to render personal services to such entity,
including as an advisor.
(j) "Continuous
Status as a Participant" shall mean (1) for Employees, the absence of any
interruption or termination of service as an Employee, and (2) for Consultants,
the absence of any interruption, expiration, or termination of such person's
consulting or advisory relationship with the Company or the occurrence of any
termination event as set forth in such person's Award Agreement. Continuous
Status as a Participant shall not be considered interrupted (i) for an Employee
in the case of sick leave, maternity leave, infant care leave, medical
emergency leave, military leave, or any other leave of absence authorized in
writing by a Vice President of the Company prior to its commencement, and (ii)
for a Consultant, in the case of any temporary interruption in such person's availability
to provide services to the Company which has been authorized in writing by a
Vice President of the Company prior to its commencement.
(k) "Conversion
Options" shall mean the Options described in Section 6(c) of the Plan.
(l) "Employee"
shall mean any person, including an officer, who is a common law employee of,
receives remuneration for personal services to, is reflected on the official
human resources database as an employee of, and is on the payroll of the
Company or any Parent or Subsidiary of the Company. A person is on the payroll
if he or she is paid from the payroll department of the Company, or any Parent
or Subsidiary of the Company. Persons providing services to the Company, or to
any Parent or Subsidiary of the Company, pursuant to an agreement with a staff
leasing organization, temporary workers engaged through or employed by
temporary or leasing agencies, and workers who hold themselves out to the
Company, Parent, or Subsidiary to which they are providing services as being independent
contractors, or as being employed by or engaged through another company while
providing the services are not Employees for purposes of this Plan, whether or
not such persons are, or may be reclassified by the courts, the Internal
Revenue Service, the U. S. Department of Labor, or other person or entity as,
common law employees of the Company, Parent, or Subsidiary, either solely or
jointly with another person or entity.
(m) "Effective
Date" shall mean January
1, 2001.
(n) "Exchange
Act" shall mean the Securities Exchange Act of 1934, as amended.
(o) "FLSA"
shall mean the Fair Labor Standards Act of 1938, as amended.
(p) "Incentive
Stock Option" shall mean any Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code.
(q) "Maximum
Annual Participant Award" shall have the meaning set forth in Section 5(b).
(r) "Nonqualified
Stock Option" shall mean an Option not intended to qualify as an Incentive
Stock Option.
(s) "Option"
shall mean a stock option granted pursuant to Section 6 of the Plan.
(t) "Parent"
shall mean a "parent corporation," whether now or hereafter existing, as
defined in Section 424(e) of the Code.
(u) "Participant"
shall mean an Employee or Consultant.
(v) "Plan"
shall mean this 2001 Stock Plan, including any amendments thereto.
(w) "Share"
shall mean one Common Share, as adjusted in accordance with Section 14 of the
Plan.
(x) "SAR"
shall mean a stock appreciation right awarded pursuant to Section 8 of the
Plan.
(y) "Stock
Award" shall mean a grant of Shares or of a right to receive Shares or
their cash equivalent (or both) pursuant to Section 7 of the Plan.
(z) "Subsidiary"
shall mean (i) in the case of an Incentive Stock Option a "subsidiary
corporation," whether now or hereafter existing, as defined in Section 424(f)
of the Code, and (ii) in the case of a Nonqualified Stock Option, a Stock Award
or an SAR, in addition to a subsidiary corporation as defined in (i), a limited
liability company, partnership or other entity in which the Company controls 50
percent or more of the voting power or equity interests.
3. Shares Subject to the
Plan. Subject to the provisions of Sections 14 and 16 of the
Plan, the maximum aggregate number of Shares (increased, proportionately, in
the event of any stock split or stock dividend with respect to the Shares)
which may be awarded and delivered under the Plan shall not exceed the sum of
(a) any Shares available for future awards, as of the Effective Date, under the
Microsoft Corporation 1991 Stock Option Plan, as amended ("1991 Stock Plan")
and (b) any Shares that are represented by awards under the 1991 Stock Plan
which, after the Effective Date, are forfeited, expire, are cancelled without
delivery of Shares, or otherwise result in the return of Shares to the Company.
The Shares may be authorized, but unissued, or reacquired Common Shares.
If an Award should expire or become unexercisable for
any reason without having been exercised in full, the undelivered Shares which
were subject thereto shall, unless the Plan shall have been terminated, become
available for future Awards under the Plan.
4. Administration of the
Plan.
(a) Procedure. The
Plan shall be administered by the Board of Directors of the Company.
(i) The
Board of Directors may appoint one or more Committees each consisting of not
less than two members of the Board of Directors to administer the Plan on
behalf of the Board of Directors, subject to such terms and conditions as the
Board of Directors may prescribe. Once appointed, such Committees shall
continue to serve until otherwise directed by the Board of Directors.
(ii) From
time to time the Board of Directors may increase the size of the Committee(s)
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, or fill vacancies however
caused.
(b) Powers
of the Board. Subject to the provisions of the Plan, the Board
shall have the authority, in its discretion: (i) to grant Incentive Stock
Options, Nonqualified Stock Options, Stock Awards, and SARs; (ii) to determine,
in accordance with Section 11(b) of the Plan, the fair market value of the
Shares; (iii) to determine, in accordance with Section 11(a) of the Plan, the
exercise price per share of Awards to be granted; (iv) to determine the
Participants to whom, and the time or times at which, Awards shall be granted
and the number of Shares to be represented by each Award; (v) to interpret the
Plan; (vi) to prescribe, amend, and rescind rules and regulations relating to
the Plan; including the form of Award Agreement, and manner of acceptance of an
Award, (vii) to determine the terms and provisions of each Award to be granted
(which need not be identical) and, with the consent of the Awardee, modify or
amend each Award; (viii) to authorize conversion or substitution under the Plan
of any or all Conversion Options; (ix) to accelerate or defer (with the consent
of the Awardee) the exercise date of any Option; (x) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the
grant of an Award previously granted by the Board; and (xi) to make all other
determinations deemed necessary or advisable for the administration of the
Plan.
(c) Effect
of Board's Decision. All decisions, determinations, and
interpretations of the Board shall be final and binding on all Participants and
Awardees.
5. Eligibility.
(a) Awards
may be granted to Participants and to persons to whom offers of employment as
an Employee have been extended; provided that Incentive Stock Options may only be granted to
Employees. For avoidance of doubt, directors are not eligible to participate in
the Plan unless they are Employees or Consultants.
(b) The
maximum number of Shares with respect to which an Award or Awards may be
granted to any Participant in any one taxable year of the Company (the "Maximum
Annual Participant Award") shall not exceed 20,000,000 Common Shares
(increased, proportionately, in the event of any stock split or stock dividend
with respect to the Shares). If an Option is in tandem with an SAR, such that
the exercise of the Option or SAR with respect to a Share cancels the tandem
SAR or Option right, respectively, with respect to each Share, the tandem
Option and SAR rights with respect to each Share shall be counted as covering
but one Share for purposes of the Maximum Annual Participant Award.
6. Options.
(a) Each
Option shall be designated in the written or electronic option agreement as
either an Incentive Stock Option or a Nonqualified Stock Option. However,
notwithstanding such designations, to the extent that the aggregate fair market
value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Employee during any calendar
year (under all plans of the Company) exceeds $100,000, such Options shall be
treated as Nonqualified Stock Options.
(b) For
purposes of Section 6(a), Options shall be taken into account in the order in
which they were granted, and the fair market value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Options
converted or substituted under the Plan for any or all outstanding stock
options and stock appreciation rights held by employees, consultants, advisors
or other option holders granted by entities subsequently acquired by the Company
("Conversion Options") shall be effective as of the close of the respective
mergers and acquisitions of such entities by the Company. The Conversion
Options may be Incentive Stock Options or Nonqualified Stock Options, as
determined by the Committee; provided, however, that stock appreciation rights
in the acquired entity shall only be converted to or substituted with
Nonqualified Stock Options. The Conversion Options shall be options to purchase
the number of Common Shares determined by multiplying the number of shares of
the acquired entity's common stock underlying each such stock option or stock
appreciation right immediately prior to the closing of such merger or
acquisition by the number specified in the applicable merger or acquisition
agreement for conversion of each share of such entity's common stock to a
Common Share (the "Merger Ratio"). Such Conversion Options shall be exercisable
at an exercise price per Common Share (increased to the nearest whole cent)
equal to the exercise price per share of the acquired entity's common stock
under each such stock option or stock appreciation right immediately prior to
closing divided by the Merger Ratio. No fractional Common Shares will be issued
upon exercise of Conversion Options. In lieu of such issuance, the Common Shares
issued pursuant to each such exercise shall be rounded to the closest whole
Share. All other terms and conditions
applicable to such stock options and stock appreciation rights prior to closing
of the acquisition, including vesting, shall remain unchanged under the
Conversion Options.
7. Stock Awards.
(a) Stock
Awards may be granted either alone, in addition to, or in tandem with other
Awards granted under the Plan. The maximum aggregate number of Shares
underlying all such Stock Awards shall not exceed 80,000,000 Common Shares
(increased, proportionately, in the event of any stock split or stock dividend
with respect to the Shares). Any Stock Award granted to an Employee who is
non-exempt for purposes of the FLSA shall include a vesting period of not less
than six (6) months. After the Committee determines that it will offer a Stock
Award, it will advise the Awardee in writing or electronically, by means of an
Award Agreement, of the terms, conditions and restrictions, including vesting,
if any, related to the offer, including the number of Shares that the Awardee
shall be entitled to receive or purchase, the price to be paid, if any, and, if
applicable, the time within which the Awardee must accept the offer. The offer
shall be accepted by execution of an Award Agreement in the manner determined
by the Committee.
(b) Unless
the Committee determines otherwise, the Award Agreement shall provide for the
forfeiture of the non-vested Common Shares underlying such Stock Award upon the
Awardee ceasing to be a Participant. To the extent that the Awardee purchased
the Shares granted under such Stock Award and any such Shares remain non-vested
at the time the Awardee ceases to be a Participant, the cessation of
Participant status shall cause an immediate sale of such non-vested Shares to
the Company at the original price per Common Share paid by the Awardee.
8. SARs.
(a) The
Committee shall have the full power and authority, exercisable in its sole
discretion, to grant SARs to selected Awardees. The Committee is authorized to
grant both tandem stock appreciation rights ("Tandem SARs") and stand-alone
stock appreciation rights ("Stand-Alone SARs") as described below.
(b) Tandem
SARs.
(i) Awardees
may be granted a Tandem SAR, exercisable upon such terms and conditions as the
Committee shall establish, to elect between the exercise of the underlying
Section 6 Option for Common Shares or the surrender of the Option in
exchange for a distribution from the Company in an amount equal to the excess
of (A) the fair market value (on the Option surrender date) of the number of
Shares in which the Awardee is at the time vested under the surrendered Option
(or surrendered portion thereof) over (B) the aggregate exercise price payable
for such vested Shares.
(ii) No
such Option surrender shall be effective unless it is approved by the
Committee, either at the time of the actual Option surrender or at any earlier
time. If the surrender is so approved, then the distributions to which the
Awardee shall become entitled under this Section 8(b) may be made in Common
Shares valued at fair market value on the Option surrender date, in cash, or
partly in Shares and partly in cash, as the Committee shall deem appropriate.
(iii) If
the surrender of an Option is not approved by the Committee, then the Awardee
shall retain whatever rights he or she had under the surrendered Option (or
surrendered portion thereof) on the Option surrender date and may exercise such
rights at any time prior to the later of (A) five (5) business days after the
receipt of the rejection notice or (B) the last day on which the Option is
otherwise exercisable in accordance with the terms of the instrument evidencing
such Option, but in no event may such rights be exercised more than ten (10)
years after the date of the Option grant.
(c) Stand-Alone
SARs.
(i) An
Awardee may be granted a Stand-Alone SAR not tied to any underlying Option
under Section 6 of the Plan. The Stand-Alone SAR shall cover a specified
number of Common Shares and shall be exercisable upon such terms and conditions
as the Committee shall establish. Upon exercise of the Stand-Alone SAR, the
holder shall be entitled to receive a distribution from the Company in an
amount equal to the excess of (A) the aggregate fair market value (on the
exercise date) of the Common Shares underlying the exercised right over (B) the
aggregate base price in effect for those Shares.
(ii) The
number of Common Shares underlying each Stand-Alone SAR and the base price in
effect for those Shares shall be determined by the Committee at the time the
Stand-Alone SAR is granted. In no event, however, may the base price per Share
be less than the fair market value per underlying Common Share on the grant date.
(iii) The
distribution with respect to an exercised Stand-Alone SAR may be made in Common
Shares valued at fair market value on the exercise date, in cash, or partly in
Shares and partly in cash, as the Committee shall deem appropriate.
(d) The
Common Shares underlying any SARs exercised under this Section 8 shall not be
available for subsequent issuance under the Plan.
9. Term of Plan. The
Plan shall become effective as of the Effective Date. It shall continue in
effect until terminated under Section 17 of the Plan.
10. Term of Award. The
term of each Award shall be no more than ten (10) years from the date of grant.
However, in the case of an Incentive Stock Option granted to a Participant
who, at the time the Option is granted, owns Shares representing more than ten
percent (10%) of the voting power of all classes of shares of the Company or
any Parent or Subsidiary, the term of the Option shall be no more than five (5)
years from the date of grant.
11. Exercise Price and
Consideration.
(a) The
per Share exercise price under each Award shall be such price as is determined
by the Board, subject to the following:
(i) In
the case of an Incentive Stock Option
(A) granted
to an Employee who, at the time of the grant of such Incentive Stock Option,
owns shares representing more than ten percent (10%) of the voting power of all
classes of shares of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the fair market value per Share on
the date of grant.
(B) granted
to any other Employee, the per Share exercise price shall be no less than 100%
of the fair market value per Share on the date of grant.
(ii) Except
for Conversion Options under Section 6(c), the per Share exercise price under a
Nonqualified Stock Option or SAR shall be no less than seventy-five percent
(75%) of the fair market value per Share on the date of grant. Notwithstanding
the foregoing (or any other provision of the Plan), Options and SARs that are
granted to Employees who are non-exempt for purposes of the FLSA, shall satisfy
the requirements for exclusion from regular rate of pay for purposes of the
FLSA and shall have an exercise price that is at least eighty-five percent
(85%) of the fair market value of the underlying Shares at the time of grant;
furthermore, such Options or SARs shall not be exercisable within the six (6)
month period immediately following the date of grant, except, if so provided in
the Award Agreement, in the event of the Awardee's death, disability, or
retirement, upon a change in corporate control of the Company, or under such
other circumstances as are permitted under the FLSA or rules and regulations
thereunder.
(iii) The
maximum aggregate number of Shares underlying all Nonqualified Stock Options
and SARs with a per Share exercise price of less than fair market value on any
grant date that may be granted under this Plan is 50,000,000 Shares (increased,
proportionately, in the event of any stock split or stock dividend with respect
to the Shares).
(iv) The
maximum aggregate number of Shares underlying all Stock Awards with a per Share
price of less than fair market value on any grant date that may be granted
under this Plan is 80,000,000 Shares (increased, proportionately, in the event
of any stock split or stock dividend with respect to the Shares).
(b) The
fair market value per Share shall be the closing price per share of the Common
Share on the Nasdaq Stock Market ("Nasdaq") on the date of grant. If the Shares
cease to be listed on Nasdaq, the Board shall designate an alternative method
of determining the fair market value of the Shares.
(c) The
consideration to be paid for the Shares to be issued upon exercise of an Award,
including the method of payment, shall be determined by the Board at the time
of grant and may consist of cash and/or check. Payment may also be made by
delivering a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
proceeds necessary to pay the exercise price. If the Awardee is an officer of
the Company within the meaning of Section 16 of the Exchange Act, he may, in
addition, be allowed to pay all or part of the purchase price with Shares
which, as of the exercise date, the officer has owned for six (6) months or
more. If the Awardee is a participant in the 1998 Microsoft Corporation Stock
Option Gain And Bonus Deferral Program, he may in addition be allowed to pay
all or part of the purchase price of any deferred Option with Shares. Shares
used by officers to pay the exercise price shall be valued at their fair market
value on the exercise date.
(d) Prior
to issuance of the Shares upon exercise of an Award, the Awardee shall pay any
federal, state, and local income and employment tax withholding obligations
applicable to such Award. If an Awardee is an officer of the Company within the
meaning of Section 16 of the Exchange Act, he may elect to pay such withholding
tax obligations by having the Company withhold Shares having a value equal to
the amount required to be withheld, and any Award under the Plan may permit or
require that such withholding tax obligations be paid by having the Company
withhold Shares having a value equal to the amount required to be withheld. The
value of the Shares to be withheld shall equal the fair market value of the
Shares on the day the Award is exercised. The right of an officer to dispose of
Shares to the Company in satisfaction of withholding tax obligations shall be
deemed to be approved as part of the initial grant of an Award, unless
thereafter rescinded, and shall otherwise be made in compliance with Rule 16b-3
and other applicable regulations.
12. Exercise of Award.
(a) Procedure
for Exercise; Rights as a Shareholder. Any Award granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board at the time of grant, and as shall be permissible under
the terms of the Plan.
An
Award may not be exercised for a fraction of a Share.
An
Award shall be deemed to be exercised when written or electronic notice of such
exercise has been given to the Company in accordance with the terms of the
Award by the person entitled to exercise the Award and full payment for the
Shares with respect to which the Award is exercised has been received by the
Company. Full payment may, as authorized by the
Board, consist of any
consideration and method of payment allowable under Section 11(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the share
certificate evidencing such Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Shares
subject to the Award, notwithstanding the exercise of the Award. The Company
shall issue (or cause to be issued) such share certificate promptly upon
exercise of the Award. In the event that the exercise of an Award is treated in
part as the exercise of an Incentive Stock Option and in part as the exercise
of a Nonqualified Stock Option pursuant to Section 6(a), the Company shall
issue a share certificate evidencing the Shares treated as acquired upon the exercise
of an Incentive Stock Option and a separate share certificate evidencing the
Shares treated as acquired upon the exercise of a Nonqualified Stock Option,
and shall identify each such certificate accordingly in its share transfer
records. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the share certificate is issued, except as
provided in Section 14 of the Plan.
Exercise
of an Award in any manner and delivery of the Shares subject to such Award
shall result in a decrease in the number of Shares which thereafter may be
available, both for purposes of the Plan and for sale under the Award, by the
number of Shares as to which the Award is exercised.
(b) Termination
of Status as a Participant. In the event of termination of an
Awardee's Continuous Status as a Participant, such Awardee may exercise his or
her rights under any outstanding Awards to the extent exercisable on the date
of termination (but in no event later than the date of expiration of the term
of such Award as set forth in the Award Agreement). To the extent that the
Awardee was not entitled to exercise his or her rights under such Awards at the
date of such termination, or does not exercise such rights within the time
specified in the individual Award Agreements, the Awards shall terminate.
(c) Disability
of Awardee. Notwithstanding the provisions of Section 12(b)
above, in the event of termination of an Awardee's Continuous Status as a
Participant as a result of total and permanent disability (i.e., the inability
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
twelve (12) months), the Awardee may exercise the Award, but only to the extent
of the right to exercise that would have accrued had the Awardee remained in
Continuous Status as a Participant for a period of twelve (12) months after the
date on which the Participant ceased performing services as a result of the
total and permanent disability. Such exercise must occur within eighteen (18)
months (or such shorter time as is specified in the grant) from the date on
which the Participant ceased performing services as a result of the total and
permanent disability (but in no event later than the date of expiration of the
term of such Award as set forth in the Award Agreement). To the extent that the
Awardee was not entitled to exercise such Award within the time specified
herein, the Award shall terminate.
(d) Death
of Awardee. Notwithstanding the provisions of Section 12(b)
above, in the event of the death of an Awardee:
(i) who
is at the time of death a Participant, the Award may be exercised, at any time
within twelve (12) months following the date of death, by the Awardee's estate
or by a person who acquired the right to exercise the Award by bequest or
inheritance, but only to the extent of the right to exercise that would have
accrued had the Awardee continued living and remained in Continuous Status as a
Participant twelve (12) months after the date of death; or
(ii) whose
Award has not yet expired but whose Continuous Status as a Participant
terminated prior to the date of death, the Award may be exercised, at any time
within twelve (12) months following the date of death, by the Awardee's estate
or by a person who acquired the right to exercise the Award by bequest or
inheritance, but only to the extent of the right to exercise that had accrued
at the date of termination.
(e) Notwithstanding
subsections (b), (c), and (d) above, the Board shall have the authority to
extend the expiration date of any outstanding option in circumstances in which
it deems such action to be appropriate (provided that no such extension shall
extend the term of an Award beyond the date on which the Award would have
expired if no termination of the Employee's Continuous Status as a Participant
had occurred).
13. Non-Transferability of
Awards. An Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or
by the laws of descent or distribution and may be exercised, during the
lifetime of the Awardee, only by the Awardee; provided that the Board may
permit further transferability, on a general or specific basis, and may impose
conditions and limitations on any permitted transferability.
14. Adjustments to Shares
Subject to the Plan.
The number of Shares covered by each outstanding
Award, the Maximum Annual Employee Award and the number of Shares which have
been authorized for issuance under the Plan but as to which no Awards have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Award, as well as the price per Share covered by each such
outstanding Award, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination, or reclassification of the Shares, or
any other increase or decrease in the number of issued Shares effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding, and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of any class, or securities convertible into shares of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares subject to an Award.
In the event of the proposed dissolution or liquidation
of the Company, the Award will terminate immediately prior to the consummation
of such proposed action, unless otherwise provided by the Board. The Board may,
in the exercise of its sole discretion in such instances, declare that any
Award shall terminate as of a date fixed by the Board and give each Awardee the
right to exercise an Award as to all or any part of the Shares subject to an
Award, including Shares as to which the Award would not otherwise be
exercisable. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each Award shall be assumed or an equivalent award shall be
substituted by such successor corporation or a parent or subsidiary of such successor
corporation, unless such successor corporation does not agree to assume the
Award or to substitute an equivalent award, in which case the Board shall, in
lieu of such assumption or substitution, provide for the Awardee to have the
right to exercise the Award as to all of the Shares subject to Awards,
including Shares as to which the Award would not otherwise be exercisable. If
the Board makes an Award fully exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
the Awardee that the Award shall be fully exercisable for a period of fifteen
(15) days from the date of such notice, and the Award will terminate upon the
expiration of such period.
15. Time of Granting Awards. The
date of grant of an Award shall, for all purposes, be the date on which the
Company completes the corporate action relating to the grant of such Award and
all conditions to the grant have been satisfied, provided that conditions to
the exercise of an Award shall not defer the date of grant. Notice of a grant
shall be given to each Participant to whom an Award is so granted within a
reasonable time after the determination has been made.
16. Substitutions and
Assumptions. The Board shall have the right to substitute or
assume Awards in connection with mergers, reorganizations, separations, or
other transactions to which Section 424(a) of the Code applies, provided such
substitutions and assumptions are permitted by Section 424 of the Code and the
regulations promulgated thereunder. The number of Shares reserved pursuant to
Section 3 may be increased by the corresponding number of Awards assumed and,
in the case of a substitution, by the net increase in the number of Shares
subject to Awards before and after the substitution.
17. Amendment and
Termination of the Plan.
(a) Amendment
and Termination. The Board may amend or terminate the Plan from
time to time in such respects as the Board may deem advisable (including, but
not limited to amendments which the Board deems appropriate to enhance the
Company's ability to claim deductions related to stock option exercises);
provided that any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 14 of the Plan,
shall require approval of or ratification by the shareholders of the Company.
(b) Participants
in Foreign Countries. The Board shall have the authority to
adopt such modifications, procedures, and subplans as may be necessary or
desirable to comply with provisions of the laws of foreign countries in which
the Company or its Subsidiaries may operate to assure the viability of the
benefits from Awards granted to Participants performing services in such
countries and to meet the objectives of the Plan.
(c) Effect
of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Awards already granted and such Awards shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Awardee and the Board,
which agreement must be in writing and signed by the Awardee and the Company.
18. Conditions Upon Issuance
of Shares. Shares shall not be issued pursuant to the exercise
of an Award unless the exercise of such Award and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
19. Reservation of Shares. The
Company, during the term of this Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
20. No Employment/Service
Rights. Nothing in the Plan shall confer upon any Participant
the right to an Award or to continue in service as an Employee or Consultant
for any period of specific duration, or interfere with or otherwise restrict in
any way the rights of the Company (or any Parent or Subsidiary employing or
retaining such person), or of any Participant or Awardee, which rights are
hereby expressly reserved by each, to terminate such person's services at any
time for any reason, with or without cause.
21. Shareholder Approval. The
Plan is subject to approval by the shareholders of the Company at the Annual
Meeting of Shareholders to be held on November 9, 2000.
*All
share numbers in the Plan reflect the 2-for-1 stock split effected February
2003.
Exhibit 10.8
2003 INDEMNIFICATION TRUST AGREEMENT
This 2003 INDEMNIFICATION TRUST AGREEMENT ("Trust"
or "Agreement") is established as of June 30, 2003, between MICROSOFT
CORPORATION, a Washington corporation ("Grantor"), and BNY WESTERN TRUST
COMPANY ("Trustee"), whose address is Two Union Square, Suite 1720, 601
Union Street, Seattle, Washington 98101-2321, and, as an additional party,
William G. Reed, Jr. (the "Beneficiaries' Representative").
RECITALS
A. The Grantor has established this Trust to be a
source of indemnification for the Grantor's directors who are eligible for such
indemnification as stated in this Trust as it is in effect from time to time.
B. The Grantor has determined, after due diligence,
that it has and will derive substantial economic benefits of this Trust,
including economic terms that are more favorable to the Grantor than obtaining
protection for its directors through the current director insurance market.
C. The Grantor's Articles of Incorporation (the "Articles")
provide for mandatory indemnification of the Grantor's directors to the maximum
extent provided by law, and as such, this Trust is not an exclusive source of
indemnification for such directors.
D. The Grantor has determined that the Trust is
necessary in order for the Grantor to attract and retain the most qualified
directors.
E. The capitalized terms have the meaning ascribed to
them in the body of this Trust.
AGREEMENT
NOW, THEREFORE, the Grantor transfers to the Trustee
funds as stated on Exhibit A of this Agreement and the Trustee
acknowledges receipt of the funds and accepts the trust created hereby and
agrees that it will hold all property which it may receive hereunder, as
custodian IN TRUST, for the purposes and upon the terms and conditions
hereinafter stated, and Grantor, Trustee and Beneficiaries' Representative
agree as follows:
ARTICLE 1
DEFINITIONS
"Act" means the Washington Business Corporation
Act RCW 23B or succession legislation.
"Cash" means (a) currency of the United States,
and (b) certificates of deposit or time deposits having, in each case, a tenor
of not more than six (6) months, issued by any U.S. commercial bank or any
branch or agency of a non-U.S. bank licensed to conduct business in the U.S.
having combined capital and surplus of not less than $250,000,000 (including the
Trustee and its affiliates.).
"Claim" or "Claims" includes, without
limitation, any threatened, pending, or completed action, suit, or proceeding,
whether civil, derivative, criminal, administrative, investigative, or
otherwise, initiated by a person other than the Beneficiary (including any
Claims by or in the right of Grantor), unless the Claim was initiated by the
Beneficiary in good faith to establish or enforce a right to indemnification
under the Articles, this Trust or applicable statute.
"Covered Act" means any act or omission
(including, without limitation, any alleged breach of duty, neglect, error,
misstatement, misleading statement, or otherwise, or appearing as or preparing
to be a witness) by a Beneficiary, and any Claim against such Beneficiary, by
reason of the fact that that Beneficiary is or was a director of Grantor, or of
any subsidiary or division, or is or was serving at the request of Grantor as a
director, officer, partner, trustee, employee, or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise.
"Corporate Securities" means USD denominated
senior debt obligations that are obligations (whether direct or by virtue of
guarantees) of corporations organized in the United States whose long-term,
unsecured, unsubordinated debt securities are rated at least "A" (or its
equivalent successor rating) in the case of Standard & Poor's Ratings Group
or "A2" (or its equivalent successor rating) in the case of Moody's Investors
Service, Inc.
"Eligible Securities" means Cash, Treasury
Securities, Government Securities and Municipal Securities, Corporate
Securities, Money Market Funds and Other Eligible Securities. All Eligible
Securities must be in a form suitable for delivery and retransfer, and must be
capable of being priced by recognized third-party dealers.
"Excluded Claim" means any payment for Losses
or Expenses in connection with any Claim the payment of which is Ultimately
Determined to be prohibited by the Act, public policy, or other applicable law
(including binding regulations and orders or, and undertakings or other
commitments with, any governmental entity or agency) as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits Grantor to provide broader indemnification rights
than said law permitted Grantor to provide prior to such amendment).
"Expenses" means any reasonable expenses
incurred by Beneficiary as a result of a Claim or Claims made against him or
her for Covered Acts including, without limitation, counsel fees and costs of
investigative, judicial, or administrative proceedings and any appeals.
"Fines" shall include any fine, penalty or,
with respect to an employee benefit plan, any excise tax, or penalty assessed
with respect thereto.
"Government Securities" means bonds, notes,
debentures, obligations or other evidence of indebtedness issued and/or
guaranteed by the Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation or the Government National Mortgage Association, including mortgage
participation certificates, mortgage pass-through certificates and other
mortgage-backed securities, but excluding collateralized mortgage obligations
and mortgage-related securities representing payments of interest only or
principal only and REMIC securities and CMBS (commercial mortgage backed
securities).
"Loss" means any amount which Beneficiary is
legally obligated to pay as a result of any Claim or Claims made against him or
her for Covered Acts including, without limitation, Fines, damages, judgments,
costs of defense of any Claims and sums paid in settlement of any Claim or
Claims, specifically including fees of plaintiff's counsel.
"Money Market Funds" means money market funds
rated "AAAm" or AAAm-G by Standard & Poors Rating Service, including funds
for which the Trustee or its affiliates provide investment advisory or other
management services.
"Municipal Securities" means senior and
unsubordinated debt obligations that are obligations (whether direct or by
virtue of guarantees) of U.S. state or municipal issuers whose long-term,
unsecured, unsubordinated, debt securities are rated at least "A" (or its
equivalent successor rating) in the case of Standard & Poor's Ratings Group
or "A2" (or its equivalent successor rating) in the case of Moody's Investors
Service, Inc., excluding "A" or "A2" rated debt securities of housing and
hospital issuers and municipal funds and partnerships where the rating is not based
upon the rating of a third-party credit enhancer of such securities.
"Other Eligible Securities" means securities
other than Cash, Corporate Securities, Treasury Securities, Government
Securities, Money Market Funds and Municipal Securities mutually agreed upon in
writing by Beneficiaries' Representative and Grantor.
"Treasury Securities" means securities issued
or guaranteed by the United States Government, including United States Treasury
obligations and any other obligations the timely payment of principal and
interest of which is guaranteed by the United States Government.
"Ultimate Determination" means a final order
from which there is no further right of appeal in any action in which a
Beneficiary seeks indemnification. Such an order shall constitute the Ultimate
Determination of the Beneficiary's right to indemnification from Grantor.
"Ultimately Determined" shall have a correlative meaning.
ARTICLE 2
PRIOR COVERED ACTS AND CLAIMS
2.1 Indemnification for Covered Acts. The Beneficiaries (as defined below) under this
Trust shall be indemnified for any Losses, Expenses or Fines that result from a
Claim based on a Covered Act asserted while this Trust is in effect without
regard to whether the Covered Act occurred on, before or after the
establishment of this Trust.
2.2 Nonexclusive Remedy. The rights of Beneficiaries to indemnification from
this Trust are limited to the assets of the Trust, but this does not limit the
Beneficiaries' rights, if any, to indemnification (without duplication) from
other Grantor arrangements or obligations, including but not limited to
applicable insurance coverage.
ARTICLE 3
THE BENEFICIARIES AND THE
BENEFICIARIES' REPRESENTATIVE
3.1 The Beneficiaries. All present and future members of Grantor's Board of
Directors shall be "Beneficiaries" of the Trust, provided, however,
that if there is a "Change in Control" of Grantor no directors elected or
appointed after or in connection with such Change in Control shall be entitled
to be Beneficiaries who were not Beneficiaries prior to such Change in Control.
For purposes of this Agreement, the term "Change of Control" shall mean
(a) a tender offer or exchange offer where the purpose of such offer is to take
over and control Grantor and such offer is accepted by owners of securities of
Grantor representing 50% or more of the combined voting power of Grantor's then
outstanding voting securities, (b) Grantor is merged or consolidated with
another corporation and as a result of such merger or consolidation less than
50% of the outstanding voting securities of the surviving or resulting
corporation shall then be owned in the aggregate by the former shareholders of
Grantor, (c) Grantor transfers substantially all of its assets to another
corporation which is not a wholly-owned subsidiary of Grantor, or (d) during
any period of twelve (12) consecutive months, individuals who at the beginning
of such twelve (12) month period were directors of Grantor cease for any reason
to constitute at least a majority of Grantor's Board of Directors. The
Beneficiaries' Representative shall promptly notify the Trustee of a Change in
Control. Any Beneficiary shall remain a Beneficiary despite his or her
resignation, removal, or other failure to continue to be a member of Grantor's Board
of Directors during the term of this Agreement. A person whose conduct gives
rise to a right of indemnification both as a member of the Board of Directors
and as an officer, shall be a Beneficiary hereunder as to all such conduct
without being required to separate his or her activities between the role of
director and the role of officer.
3.2 New Beneficiaries. If prior to a Change in Control an individual is
duly elected to the Grantor's Board of Directors, Grantor agrees to notify the
Trustee promptly of such election or appointment; provided, however,
Grantor's failure to so notify the Trustee shall not affect in any way an
individual director's rights as a beneficiary under this Trust. The Trustee
shall have the right to rely on the accuracy and completeness of any statement
provided to it by the Grantor's Secretary, Assistant Secretary or Chief
Executive Officer as to the Beneficiary status of any individual.
3.3 Beneficiaries' Representative. Except as expressly provided elsewhere in this Agreement,
all communications or demands made by and among the Trustee and the
Beneficiaries are to be made through the individual then designated as the
Beneficiaries' Representative. The Beneficiaries' Representative shall have the
exclusive right to convey Demands (as defined below) from time to time on the
Trustee to direct payment to one or more of the Beneficiaries.
3.4 Identity of Beneficiaries' Representative. The Beneficiaries' Representative shall be a
Beneficiary who is a present or past nonemployee director of Grantor,
designated in writing to the Trustee and Grantor from time to time by a
majority of the then living nonemployee directors who are Beneficiaries under
this Agreement. For this purpose a director who has not been employed by Grantor
during the current year and the preceding three (3) years shall be regarded as
a nonemployee director. The Trustee and Grantor shall be entitled to rely on
the original appointment of that individual as the Beneficiaries'
Representative unless notified in writing of a change in the Beneficiaries'
Representative by a writing signed by the former Beneficiary Representative. A
Beneficiary shall be deemed to have consented to such change in Beneficiaries
Representative if such Beneficiary is provided with notice of such change in
accordance with Section 8.6 of this Agreement and does not provide written
notice of objection to such change within ten (10) days. The Trustee shall be
entitled to rely on such subsequent appointment as of the date such writing is received
by the Trustee. The Trustee shall be entitled to rely on the accuracy and
completeness of a written list delivered to the Trustee by Grantor, and
certified by the Secretary of Grantor to be accurate and to have been prepared
in good faith, identifying the individuals who constitute the then living past
and present nonemployee directors who are Beneficiaries under this Agreement.
In the absence of an effective appointment of a Beneficiaries' Representative,
the Trustee or any Beneficiary may, after ten (10) days' written notice to all
Beneficiaries and the Grantor, petition a court of competent jurisdiction at
the expense of the Trust for appointment of a Beneficiaries' Representative who
need not be a Beneficiary (if none are willing or able to serve), but shall in
no event be an officer or director elected or appointed after a Change in
Control who was not a Beneficiary prior to such Change in Control. The
designation or appointment of a successor Beneficiaries' Representative shall
become effective only upon the execution of a counterpart of this Agreement
whereby such successor Beneficiaries' Representative shall assume and become
bound by all the duties and responsibilities of a Beneficiaries' Representative
under this Agreement.
3.5 Right of Beneficiaries to Receive Payments. The rights of the Beneficiaries to make a Demand and
receive distributions from the Trustee shall not be affected or diminished in
any way by the existence of any dispute between one or more Beneficiaries and
Grantor, and the Trustee in making distributions from the Trust Fund (as
defined below) shall be entitled to rely upon the simple Demand of a
Beneficiary, as conveyed by the Beneficiaries' Representative pursuant to
Section 4.7. Such distributions shall be made notwithstanding any notice or
demand by or on behalf of Grantor that the distributions should not be made,
whether based on Grantor's claim that any Beneficiary is not entitled to some
or all of the amount of such distributions or otherwise. The Trustee shall have
no responsibility or liability to Grantor for making any payment despite having
received any such notice or demand by or on behalf of Grantor. The Trustee
shall have no responsibility to inquire into the accuracy or truthfulness of
any such notice or demand, whether from the Grantor or the Beneficiaries'
Representative.
ARTICLE 4
THE TRUST FUND
4.1 Trust Fund; Grantor Trust. The Trustee shall hold all property received by it
as custodian in Trust hereunder as one fund which, together with the income and
gains therefrom and additions thereto, shall constitute the "Trust Fund."
The Trust is intended to be a grantor trust
within the meaning of Section 761 of the Internal Revenue Code of 1986, as
amended, and shall be construed accordingly. The Trust Fund shall not be paid
to the Grantor or any trustee in bankruptcy of the Grantor, shall be held
separate and apart from other funds of the Grantor, and shall be used
exclusively for the purposes set forth herein.
4.2 Minimum Balance. Grantor shall deliver to the Trustee the amount stated in Exhibit
A of this Trust Agreement (the "Minimum Balance"), to be held in
trust, for the stated uses and purposes in accordance with the terms of this
Agreement. Nothing contained herein shall preclude Grantor from making
additional transfers of funds from time to time to the Trustee, whether
required under the terms of this Agreement or not, to be held in trust as part
of the Trust Fund. If Grantor makes additional transfers of funds to the Trust
Fund, such additional transfers shall be deemed an increase of the Minimum
Balance and Exhibit A shall be automatically amended without further
action by the parties hereto. The Grantor and the Beneficiaries' Representative
shall periodically, but no less than every third anniversary of this Agreement,
review the adequacy of the Minimum Balance.
4.3 Maintenance of Minimum Balance. The Trustee agrees to provide monthly reports to
Grantor and the Beneficiaries' Representative showing the current fair market
value of the Trust Fund. If any such report shows that the current fair market
value of the Trust Fund is less than the Minimum Balance, then within ten (10)
days after such report, Grantor agrees to deliver cash funds to the Trustee
equal to the difference between the fair market value of the Trust Fund and the
Minimum Balance so that the Trust balance is at least equal to the Minimum
Balance. Notwithstanding the foregoing, Grantor shall have no obligation to
make payments to the Trustee in excess of $100,000,000 (including the initial
transfer of funds) under or with respect to this Agreement.
4.4 Additional Contributions. Subject to the aggregate limitation of $100,000,000
set forth in Section 4.3, Grantor agrees to make additional contributions ("Additional
Contributions") to the Trust Fund within ten (10) days after receipt of a
written request from the Beneficiaries' Representative certifying in good faith
that Claims have or are reasonably expected to be asserted against
Beneficiaries and that estimated Losses and Expenses for all pending,
threatened or anticipated Claims against all Beneficiaries are reasonably
expected to exceed the then Trust Fund balance. A copy of such written
certification shall be provided to the Trustee at the same time and in the same
manner as it is provided to Grantor. Such written certification shall be
accompanied by an opinion of independent counsel to the effect that, based on
the information made known to such counsel, (a) the Claims are not Excluded
Claims and (b) the amount requested is reasonable. Independent counsel shall be
selected by the Beneficiaries' Representative and shall have no present or past
professional relationship to the Beneficiaries who are the subject of the
Claims.
4.5 Excess Balance. If at any time the fair market value of the Trust Fund shall exceed
the Minimum Balance, plus any additional contributions which continue to be
required pursuant to Section 4.4, Grantor shall be entitled to withdraw an
amount equal to the excess over the said sum upon thirty (30) days' advance
written notice to the Beneficiaries' Representative.
4.6 Direction of Investment. Notwithstanding anything contained in this Agreement
to the contrary, Grantor retains the right to direct the investment of the
Trust Fund and Trustee shall have no duty to review or recommend investments; provided,
however, that the Grantor shall only direct the Trustee to invest the
Trust Fund in Eligible Securities in accordance with Grantor's current
cash-management policies. If the Grantor instructs the Trustee to invest in
securities other than in Cash, Government Securities, Municipal Securities,
Money Market Funds or Treasury Securities, such instruction shall be
accompanied by the written consent of the Beneficiaries' Representative as to
the investment(s) in such Other Eligible Securities. Unless otherwise
instructed by Grantor in writing, the Trustee shall initially invest the Trust
Fund in the investments set forth on Exhibit B. If for any reason one or
more investments on Exhibit B shall not be available, and Grantor shall
fail to direct the Trustee pursuant to written instructions as to how to invest
the Trust Fund (including the consent of Beneficiaries' Representative if the
proposed investment is in other than Eligible Securities), the Trustee shall
invest the Trust Fund in Money Market Funds. In the event the Trustee is
required to make a distribution pursuant to Section 4.7 at a time when the
Trust Fund has insufficient cash to cover such distribution, the Trustee shall
seek the advice of the Grantor with regard to which Trust investments to
liquidate in order to cover the required distribution; if the Grantor does not
respond to the Trustee's inquiry within forty-eight (48) hours the Trustee
shall use its discretion in choosing which investments to liquidate.
4.7 Distributions From Trust Fund.
4.7.1 Duties of Beneficiary. The Beneficiary
shall certify in each demand regarding a Claim for a Covered Act (a "Demand")
delivered to the Beneficiaries' Representative that (i) he or she is entitled
to payment of at least the amount demanded, (ii) that no part of the Demand is
precluded by RCW 23B.08.560 (a)-(c) or other provision in the Act or applicable
successor statute, (iii) that the Beneficiary will repay to the Trust any
amounts paid or applied to or for the use of such Beneficiary in the event of a
Ultimate Determination that such payments are precluded by RCW 23B.08.560
(a)-(c), or in the event the Beneficiary receives payment for the same Claim
from another source, (iv) that a request to the Grantor for indemnification has
remained unsatisfied for 20 days and that no part of the amount then being
demanded from the Trust Fund has been previously received from the Grantor, and
(v) that he or she has complied with any applicable requirements of Grantor's
Articles and policy with respect to indemnification, if any, with respect to
the Demand.
4.7.2 Duties of Beneficiaries' Representative.
The Beneficiaries' Representative shall convey a Beneficiary's Demand to the
Trustee. Along with the conveyance of such Demand to the Trustee, the
Beneficiaries' Representative shall submit, in a writing signed by the
Beneficiaries' Representative, a statement (i) that such Demand is being made
pursuant to the Articles, as such may be amended and restated from time to
time, provided that any such amendment shall be given effect under this
Agreement only to the extent that such amendment provides broader
indemnification rights than existed prior to such amendment, (ii) that the
Demand is for satisfaction of indemnification obligations, (iii) that the
Demand is being made by a Beneficiary, (iv) the amounts being demanded by such
Beneficiary, and (v) that he or she is not aware of any facts or conditions
that would make indemnification pursuant to this Agreement inappropriate, provided,
however, that the Beneficiaries' Representative has no duty
to independently investigate the validity of a Demand.
4.7.3 Duties of Trustee. The Trustee shall
deliver a copy of each Demand to Grantor as promptly as reasonably possible. As
soon as practicable after any such Demand is conveyed by the Beneficiaries'
Representative, subject to the provisions of Section 3.5, the Trustee shall
distribute funds to the Beneficiary specified in such Demand in the amount and
manner set forth therein. If the Trustee does not have sufficient funds to
satisfy all pending Demands of Beneficiaries in full, the Trustee shall make
all reasonable efforts to make pro rata payments, less any amounts due the
Trustee, to the Beneficiaries as specified by the Beneficiaries'
Representative. Upon the replenishment of the Trust Fund, if that occurs in
accordance with Section 4.3, the Trustee shall continue to make pro rata
distributions, less any amounts due the Trustee, until such Demand is satisfied
or to satisfy subsequent Demands.
4.8 Taxes.
The Grantor agrees to pay any and all taxes on the Trust Fund or the income
thereof or which the Beneficiaries or the Trustee would otherwise be required
to pay with respect to the interest of any person or person therein, and to
provide the Trustee with proof of payment. This does not include any taxes
payable upon an indemnification payment distribution from the Trust if the same
would be taxable to the recipient beneficiary under applicable law.
4.9 Duties and Responsibilities of Beneficiaries'
Representative. The Beneficiaries'
Representative (and any successor Beneficiaries' Representative) shall have the
following affirmative duties and responsibilities:
4.9.1 To demand deposits from the Grantor so as to
maintain the Minimum Balance of the Trust in accordance with Section 3.3 and
any Additional Contributions required by section 3.4;
4.9.2 To demand payment by the Trustee to a
Beneficiary who has made a Demand and who, in the good faith judgment of the
Beneficiaries' Representative, has satisfied the conditions for indemnification
as set forth in this Agreement and the Articles, provided, however,
that the Beneficiaries' Representative has no duty to independently investigate
the validity of a Demand; and
4.9.3 To generally cause the Grantor and Trustee to
discharge their respective responsibilities under this Agreement and the
responsibilities of the Grantor under the Articles, including the bringing of
legal actions and proceedings to enforce such agreement.
4.10 Investment Powers of the Trustee. Subject to the Grantor's rights pursuant to Section
4.6 to direct investment of the Trust Fund, the Trustee shall have those powers
provided under Washington
law with respect to any property at any time held by it and constituting part
of the Trust Fund.
4.11 Administrative Powers of Trustee. Subject to the Grantor's right pursuant to Section
4.6 to direct investment of the Trust Fund in Eligible Securities, the Trustee
shall have the power, to do any of the following:
4.11.1 To cause any investment to be registered and
held in the name of one or more of its nominees, or one or more nominees of any
system for the central handling of securities, without increase or decrease of
liability;
4.11.2 To collect and receive any and all money and
other property due to the Trust Fund and to give full discharge therefor;
4.11.3 To make investments and investment decisions in
its discretion when the Grantor does not respond to a Trustee inquiry for directions
within two (2) business days after the request; and
4.11.4 To hold uninvested, without liability for
interest thereon, such monies received by the Trustee as the Trustee considers
necessary to meet anticipated and imminent disbursements.
4.12 Adverse Determination. In the event the trust arrangement created
hereby is deemed to be invalid or ineffective by a court of competent
jurisdiction, whether in connection with the bankruptcy of one of the parties
hereto or otherwise (an "Adverse Determination"), then the parties agree
that the nature of their relationship shall be Grantor as debtor, Trustee as
securities intermediary and Beneficiaries' Representative as secured party for
the benefit of the Beneficiaries. To that end, and to secure the obligation of
Grantor to indemnify Beneficiaries, Grantor hereby grants the Beneficiaries'
Representative for the benefit of the Beneficiaries a continuing security
interest in, and pledges all right title and interest in and to, the following
(for purposes of this Section 4.12, the "Collateral"):
4.12.1 The Trust account and the Trust Fund, and any
certificates or instruments representing or evidencing the Trust Fund, and all
cash, investment property, interest, dividends, rights and other property at any
time and from time to time received, receivable or otherwise issued,
distributed or distributable in respect of or in exchange for any or all of the
Trust Fund;
4.12.2 All other investment property and other
property hereafter issued, delivered or deliverable to Trustee in substitution
for or in addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash, investment
property, interest, dividends, rights and other property at any time and from
time to time received, receivable or otherwise issued, distributed or
distributable after the date hereof in respect of or in exchange for any or all
thereof; and
4.12.3 All proceeds of all of the foregoing.
Grantor and, at the direction of Beneficiaries'
Representative, Trustee shall execute such other documents and instruments as
Beneficiaries' Representative may reasonably require from time to time to
perfect and protect its first priority security interest in the Collateral. In
the event of an Adverse Determination, Beneficiaries' Representative shall have
and shall be deemed to have had all the rights and remedies of a secured party
under Article 9 of the Uniform Commercial Code ("UCC") and may exercise
any of the rights and remedies available to it under
the UCC as in effect from time to time in the State of Washington or otherwise available to it,
including, without limitation, sale, assignment or other disposal of the
Collateral in exchange for cash or credit. Grantor agrees that a Demand is also
a notice of disposition under Section 9-611 of the UCC and that five Business
Days is reasonable notice if notice of a disposition is required under Section
9-611. Furthermore, Grantor agrees that any Beneficiary may be the purchaser of
the Collateral consisting of Cash, Corporate Securities, Government Securities
or Municipal Securities at a private sale without notice because the Collateral
is of a type sold on a recognized market or the subject of widely distributed
standard price quotations. Beneficiaries' Representative shall provide Trustee
with an Adverse Determination Notice as soon as practicable, although failure
to provide such notice shall not affect the rights or obligations of the
parties hereunder, except that Beneficiary shall not take any action with
respect to Trustee as securities intermediary until such notice is provided.
Except for the amounts due to Trustee pursuant to Section 7.3, Trustee waives
any right of set-off, banker's lien or other lien or claim it may have to the
Collateral.
Grantor covenants and agrees that it shall not pledge,
assign, hypothecate or transfer its interest in the Trust account or the Trust
Fund. Grantor further covenants and agrees that it shall not so direct Trustee,
and Trustee agrees that it will not acknowledge or agree to any such pledge,
assignment, hypothecation or transfer.
ARTICLE 5
RESIGNATION, REMOVAL, OR DEATH OF TRUSTEE
5.1 Resignation of Trustee. The Trustee may resign at any time by filing its
written resignation with Grantor and Beneficiaries' Representative. Such
resignation shall take effect sixty (60) days from the date of such filing or
upon appointment of a successor pursuant to Section 5.3, whichever shall first
occur.
5.2 Removal of Trustee. Grantor and the Beneficiaries' Representative may
remove the Trustee at any time by delivering to the Trustee a written notice of
its removal and the appointment of a successor pursuant to Section 5.3.
5.3 Appointment of Successor Trustee.
5.3.1 Removal of the Trustee and the appointment of a
successor Trustee shall take effect sixty (60) days following delivery to the
Trustee of (i) an instrument in writing removing the Trustee and appointing
such successor, executed by Grantor and accompanied by an instrument in writing
signed by the Beneficiaries' Representative certifying that a majority of the
then living Beneficiaries agree to such removal and appointment, and (ii) an
acceptance in writing, executed by such successor, both acknowledged in the
same form as this Agreement. The Trustee may agree to an earlier effective
date. In the event of the death or dissolution of the Trustee, the successor
trustee shall be appointed by the Grantor with the approval of the
Beneficiaries' Representative, which approval shall not be unreasonably
withheld, and a writing to such effect and an acceptance in writing, as
referred to above, shall be delivered to the Trustee. In order to qualify to
serve as Trustee, any successor trustee must, at a minimum: (i) be authorized
under state or federal law to exercise corporate trust powers, (ii) have a
combined capital
and surplus of at least $100 million, and (iii) be subject to supervision or
examination by federal or state authority.
5.3.2 All of the provisions set forth herein with respect
to the Trustee shall relate to each successor with the same force and effect as
if such successor had been originally named as Trustee under this Trust.
5.3.3 If a successor is not appointed within sixty
(60) days after the Trustee gives notice of its resignation pursuant to Section
4.1, or within sixty (60) days after the Trustee's death or dissolution, the
Trustee or the Beneficiaries' Representative may apply to any court of
competent jurisdiction at the expense of the Trust for appointment of a successor.
5.4 Transfer of Fund to Successor. Upon appointment of a successor trustee as set forth
above, the Trustee shall transfer and deliver the Trust Fund to such successor
with authority to retain only reasonable reserves pending settlement of its
final account as provided in Section 7.4.
ARTICLE 6
DURATION, TERMINATION, AND AMENDMENT OF TRUST
6.1 Term.
6.1.1 The term of this Trust shall be for a period of
ten (10) years until June
30, 2013, unless extended or terminated according to the terms of
this Trust. This Trust may be terminated by consent of a majority of the
Grantor's Board of Directors and a majority of the then living Beneficiaries; provided,
however, no such termination shall be effective (i) following a Change
of Control, or (ii) so as to reduce indemnification otherwise available to a
Beneficiary of this Trust for any Demand then existing and still pending or
with respect to any later asserted Demand arising out of a Covered Act
occurring before the effective date of such termination. Expiration or
termination of this Trust shall operate prospectively only, so that all
provisions of this Agreement shall remain in full force and effect as to any
Demand asserted prior to the effective date of expiration or termination
relating to a Covered Act that occurs prior to the effective date of expiration
or termination. The Grantor and the Beneficiaries' Representative shall notify
the Trustee of termination of the Trust by, with respect to the Grantor, an
instrument in writing executed by the Grantor together with a certified copy of
the resolution of the Grantor's Board of Directors authorizing such termination
and, with respect to the Beneficiaries' Representative, written evidence of the
consent of a majority of the then living Beneficiaries. Termination by consent
of the Grantor and majority of the then living Beneficiaries shall be effective
on the later to occur of (i) the Grantor's board resolution and (ii) receipt by
Beneficiaries' Representative of written consents from at least a majority of
the then living Beneficiaries.
6.1.2 The Grantor and the Beneficiaries'
Representative (jointly or separately) as applicable shall provide the Trustee
and the Beneficiaries and their successors in interest with written notice of
expiration thirty (30) days prior to the expiration date.
6.1.3 In the event of a proposed termination prior to
the expiration of the term of this Trust, Beneficiaries may assert a Demand if,
in such Beneficiaries' good faith judgment, there is a reasonable likelihood
that following such proposed termination, a Claim will be asserted arising out
of a Covered Act that occurred before the effective date of such termination.
If so made, such Demand(s) shall be treated as a then existing and still
pending Demand hereunder.
6.2 Distribution Upon Termination. When this Trust expires or is terminated in
accordance with Section 6.1, the Trustee shall distribute the Trust Fund to
Grantor less any full and adequate provision or reserves for any distributions
to be made pursuant to any outstanding demands under Section 4.7 and 6.1.2 and
any deductions authorized or required by Section 7.3.
6.3 Amendment of Trust Instrument.
6.3.1 Except in the event of a change of control, this
Trust may be amended by consent of a majority of the Grantor's Board of
Directors, a majority of the then living Beneficiaries and the Trustee, provided,
however, no such amendment shall be effective (i) following a Change of
Control, or (ii) so as to reduce indemnification otherwise available to a
Beneficiary of this Trust for any Claim then existing and still pending or with
respect to any later asserted Claim arising out of a Covered Act occurring
before the effective date of such amendment and provided further, that
approval of the Trustee shall only be required if the proposed amendment
affects in any way the Trustee's rights or duties under this Agreement. If the
Trust is amended without the consent of the Trustee as provided above, the
Grantor shall deliver notice of amendment to the Trustee or its successor in
interest thirty (30) days prior to the proposed effective date of the amendment
by an instrument in writing executed by the Grantor and the Beneficiaries'
Representative, together with a certified copy of the resolution of the Grantor's
Board of Directors authorizing such amendment. The Grantor shall send a copy of
such notice to each individual Beneficiary or his or her successors in
interest.
6.3.2 In the event of a proposed amendment of this
Trust, Beneficiaries may assert a Demand if, in such Beneficiaries' good faith
judgment, there is a reasonable likelihood that following such proposed
amendment, a Claim will be asserted arising out of a Covered Act that occurred
before the effective date of such amendment and which will be affected by such
amendment. If so made, such Demand(s) shall be treated as a then existing and
still pending Demand hereunder.
ARTICLE 7
RIGHTS AND OBLIGATIONS OF THE TRUSTEE
7.1 Duties of Trustee. The duties and liabilities of the Trustee shall at
all times be limited to those expressly stated in this Agreement. The Trustee
shall discharge its duties hereunder with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person acting
in a like capacity and familiar with such matters would use in the conduct of
an enterprise of a like character and with like aims. The Trustee shall not be
liable for any loss sustained by the Trust Fund by reason of the purchase,
retention, sale, or exchange or any investment made in good faith and in
accordance with the Grantor's written directions and the
provisions of this Agreement.
7.2 Indemnification of Trustee. The Trustee shall not be liable for any action taken
or omitted by it in good faith and believed by it to be authorized hereby or
within the rights or powers conferred upon it hereunder, or taken or omitted by
it in accordance with advice of counsel (which counsel may be of the Trustee's
own choosing and which may be house counsel of the Trustee), and shall not be
liable for any mistake of fact or error of judgment or for any acts or
omissions of any kind unless caused by willful misconduct or gross negligence.
Grantor agrees to indemnify the Trustee and hold it harmless against any and
all liabilities, losses, claims, expenses (including reasonable attorneys'
fees), and damages incurred by it hereunder, except for liabilities, losses,
claims, expenses, and damages incurred by the Trustee resulting from its own
willful misconduct or gross negligence.
7.3 Expenses and Compensation. The Trustee shall pay from the Trust Fund, to the
extent not paid by Grantor, the Trustee's reasonable expenses of administration
of the Trust, including reasonable compensation of counsel (including house
counsel) and any agents engaged by the Trustee to assist it in such
administration. The Grantor shall pay the Trustee reasonable compensation for
its services as Trustee hereunder and the Trustee shall have a lien on the
Trust Fund for such compensation and expenses until paid.
7.4 Accounts of Trustees. The Trustee shall keep full accounts of all of its
receipts and disbursements. Its financial statements, books, and records with
respect to the Trust Fund shall be open to inspection by the Grantor or the
Beneficiaries' Representative or their representatives at all reasonable times
during business hours of the Trustee and may be audited not more frequently
than once in each fiscal year by an independent certified public accountant
engaged by the Beneficiaries' Representative. Within ninety (90) days after the
close of each fiscal year, or any termination of the duties of the Trustee, the
Trustee shall prepare, sign, and submit in duplicate to Grantor an account of
its acts and transactions as Trustee hereunder.
ARTICLE 8
MISCELLANEOUS
8.1 Governing Law. The validity, interpretation, performance, and enforcement of this
Agreement and the Trust created hereby shall be governed by the laws of the
state of Washington.
The parties irrevocably submit to the jurisdiction and venue of any Washington State
or United States Federal Court sitting in Seattle,
Washington. Any proceeding with
respect to this Trust shall be in King County Superior Court unless otherwise
consented to by Grantor.
8.2 Successors.
This Agreement and the Trust created hereby shall be binding upon and shall
inure to the benefit of the spouses, heirs, personal and legal representatives,
estates, successors, and assigns of the parties hereto and of the
Beneficiaries.
8.3 Third Party Beneficiaries. The Beneficiaries are specifically acknowledged as
third party beneficiaries of this Agreement and shall have the right to bring
actions to enforce this Agreement where the Beneficiaries' Representative fails
to bring such an action or fails to prosecute an action in good faith.
8.4 Enforcement Expenses. Grantor shall be responsible for all costs and
expenses, including reasonable attorneys' fees and costs, incurred in any
action brought to enforce or interpret this Agreement, whether brought by the
Beneficiaries' Representative, a Beneficiary, the Trustee, or otherwise, unless
the court determines that such Claim for enforcement was not brought in good
faith or was frivolous.
8.5 Titles and Headings Not to Control. The titles to articles and headings of sections in
this Agreement are for convenience of reference only and in case of any
conflict the text of this Agreement, rather than any title or heading, shall
control.
8.6 Notices, Consents and Other Communications. All notices, consents, or other communications
required or contemplated by this Agreement shall be in writing and shall be
deemed to have been given when delivered either by (a) personal delivery, (b)
prepaid overnight courier, (c) postage prepaid return receipt requested
certified mail or (d) facsimile pursuant to and subject to the terms of section
8.8. The other nit is the lack of a space in the clean version in section 4.6
between" in" and" Money Market Funds:
If
to a Beneficiary: The last address given to the Trustee by each respective
Beneficiary
If
to Beneficiaries' Representative: The last address given to the Trustee by the
Beneficiaries' Representative
If to Microsoft:
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Microsoft
Corporation
One Microsoft Way
Redmond, WA 98052-6399
Attention:
Deputy General Counsel,
Finance
and Operations
Telephone
No.: (425) 882-8080
Facsimile
No.: (425) 869-1327
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With a copy to:
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Preston Gates & Ellis LLP
925 Fourth Avenue, Suite 2900
Seattle, WA 98104-1158
Attention:
Kent Carlson
Telephone
No.: (206) 623-7580
Facsimile
No.: (206) 623-7022
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If to Trustee:
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BNY
Western Trust Company
Two Union Square, Suite 1720
601 Union Street
Seattle, WA 98101-2321
Attention:
Corporate Trust Services
Telephone
No.: (206) 667-8904
Facsimile
No.: (206) 667-8905
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Notice by personal delivery shall be effective upon
the date delivery is made and notice by certified mail or overnight courier
shall be effective on the date it is recorded as delivered by the U.S. Postal
Service or the overnight courier, respectively.
8.7 Force Majeure. From the effective date of this Agreement, the Trustee, or any
successor in interest, shall not be considered in breach of or in default in
its obligations with respect to any obligations created hereunder in the event
of an unavoidable delay in the performance of such obligations due to
unforeseeable causes beyond its control and without its fault or negligence,
including, but not limited to, acts of God, or of the public enemy, acts of a
government, acts of the other party, fires, floods, epidemics, quarantine
restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence,
riot, inability to procure or general sabotage or rationing of labor,
equipment, facilities, sources of energy, material or supplies in the open
market, malicious mischief, condemnation, and unusually severe weather or
delays of suppliers or subcontractors due to such causes or any similar event
and/or occurrences beyond the control of the Trustee.
8.8 Facsimile Instruction. The Trustee agrees to accept and act upon facsimile
transmission of written instructions and/or directions pursuant to this
Agreement, provided, however, that: (a) the Grantor and/or
Beneficiaries' Representative as applicable, subsequent to such facsimile
transmission of written instructions, shall provide the originally executed
instructions and/or directions to the Trustee in a timely manner, (b) such
originally executed instructions and/or directions shall be signed by a person
as may be designated and authorized to sign for the Grantor and/or
Beneficiaries' Representative and, (c) the Grantor and/or Beneficiaries'
Representative shall provide to the Trustee an incumbency certificate listing
such designated persons which such incumbency certificate shall be amended
whenever a person is to be added or deleted from the listing.
IN WITNESS WHEREOF, the parties hereto have executed
this agreement as of the day and year first above written.
Attest:
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BNY
WESTERN TRUST COMPANY
("Trustee")
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By:
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By:
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Perry Tobe
Assistant Vice President
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Attest:
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MICROSOFT
CORPORATION
("Grantor")
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By:
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John A. Seethoff
Assistant Secretary
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By:
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Steven A. Ballmer
Chief Executive Officer
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Attest:
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ADDITIONAL
PARTY
("Beneficiaries'
Representative")
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By:
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By:
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EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
The following is a list of subsidiaries of the Company
as of June 30,
2003, omitting some subsidiaries which, considered in the
aggregate, would not constitute a significant subsidiary.
NAME
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WHERE INCORPORATED
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Microsoft
Asia, Ltd.
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Nevada, USA
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Microsoft
Business Solutions ApS
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Denmark
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Microsoft
Capital Group, L.P.
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Nevada, USA
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Microsoft
E-Holdings, Inc.
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Nevada, USA
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Microsoft
Finance Company Limited
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Ireland
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Microsoft
Ireland Capital Limited
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Ireland
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Microsoft
Ireland Operations Limited
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Ireland
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Microsoft
Licensing, Inc.
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Nevada, USA
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Microsoft
Manufacturing B.V.
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Netherlands
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Microsoft
T-Holdings, Inc.
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Nevada, USA
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MSLI,
GP
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Nevada, USA
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Round
Island, LLC
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Nevada, USA
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Round
Island One Limited
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Ireland
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Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We
consent to the incorporation by reference in Registration Statement Numbers
33-51583 and 333-06298 (Microsoft Corporation 1991 Stock Option Plan),
333-16665 (Microsoft Corporation 1997 Employee Stock Purchase Plan), 333-75243
(Microsoft Corporation Savings Plus 401(k) Plan), 333-91755 (Microsoft
Corporation 1999 Stock Option Plan for Non-Employee Directors), 333-52852
(Microsoft Corporation 2001 Stock Plan), 333-102240 (Microsoft Corp 2003 Employee
Stock Purchase Plan) of Microsoft Corporation on Forms S-8 and 333-43449 of
Microsoft Corporation on Form S-3 of our report dated July 17, 2003 (September 3,
2003, as to certain information in Note 20) (which report expresses an
unqualified opinion and includes an explanatory paragraph relating to the
adoption of Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities, and Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets)
appearing in this Annual Report on Form 10-K of Microsoft Corporation for the
year ended June
30, 2003.
/s/
Deloitte & Touche LLP
Deloitte
& Touche LLP
Seattle, Washington
September 3, 2003
Exhibit 31.1
CERTIFICATIONS
I,
Steven A. Ballmer, certify that:
1. I
have reviewed this annual report on Form 10-K of Microsoft Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
c)
Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal control over financial
reporting.
Date:
September 4, 2003
/s/ Steven A. Ballmer
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Steven
A. Ballmer
Chief
Executive Officer
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Exhibit 31.2
CERTIFICATIONS
I,
John G. Connors, certify that:
1. I
have reviewed this annual report on Form 10-K of Microsoft Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b)
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c)
Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal control over financial
reporting.
Date:
September 4, 2003
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/s/ John G. Connors
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John
G. Connors
Chief
Financial Officer
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Exhibit 32
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In
connection with the Annual Report of Microsoft Corporation, a Washington
corporation (the "Company"), on Form 10-K for the year ending June 30, 2003,
as filed with the Securities and Exchange Commission (the "Report"), Steven A.
Ballmer, Chief Executive Officer of the Company and John G. Connors, Chief
Financial Officer of the Company, respectively, do each hereby certify,
pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to
his knowledge:
(1) The Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and result of
operations of the Company.
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Steven A. Ballmer
Chief Executive Officer
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September 4, 2003
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John G. Connors
Chief Financial Officer
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September 4, 2003
[A
signed original of this written statement required by Section 906 has been
provided to Microsoft Corporation and will be retained by Microsoft Corporation
and furnished to the Securities and Exchange Commission or its staff upon
request.]
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