1
EXHIBIT 10.1
MICROSOFT CORPORATION
1991 STOCK OPTION PLAN, AS AMENDED
1. Purpose of the Plan. The purposes of this Stock Option Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to such
individuals, and to promote the success of the Company's business by aligning
employee financial interests with long-term shareholder value.
Options granted hereunder may be either Incentive Stock
Options or Nonqualified Stock Options, at the discretion of the Board and as
reflected in the terms of the written option agreement.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" shall mean the Committee, if such Committee has
been appointed, or the Board of Directors of the Company, if such Committee has
not been appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Committee" shall mean the Committee appointed by the
Board of Directors in accordance with paragraph (a) of Section 4 of the Plan,
if one is appointed; provided, however, if the Board of Directors appoints more
than one Committee pursuant to Section 4, then "Committee" shall refer to the
appropriate Committee, as indicated by the context of the reference.
(d) "Common Stock" shall mean the common stock of Microsoft
Corporation.
(e) "Company" shall mean Microsoft Corporation, a Washington
corporation and any successor thereto.
(f) "Continuous Status as an Employee" shall mean the absence
of any interruption or termination of service as an Employee. Continuous
Status as an Employee shall not be considered interrupted 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.
2
(g) "Disinterested Person" shall have the same meaning as
defined in Rule 16b-3(c)(2) promulgated by the Securities and Exchange
Commission pursuant to its authority under the Exchange Act.
(h) "Employee" shall mean any person, including officers,
employed by the Company or any Parent or Subsidiary of the Company.
(i) "Incentive Stock Option" shall mean any Option intended
to qualify as an incentive stock option within the meaning of Section 422 of
the Code.
(j) "Maximum Annual Employee Grant" shall have the meaning
set forth in Section 5(e).
(k) "Nonqualified Stock Option" shall mean an Option not
intended to qualify as an Incentive Stock Option.
(l) "Option" shall mean a stock option granted pursuant to
the Plan.
(m) "Optioned Stock" shall mean the Common Stock subject to
an Option.
(n) "Optionee" shall mean an Employee who receives an Option.
(o) "Outside Director" shall have the same meaning as defined
or interpreted for purposes of Section 162(m) of the Code.
(p) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(q) "Plan" shall mean this 1991 Stock Option Plan, including
any amendments thereto.
(r) "Share" shall mean one share of Common Stock, as adjusted
in accordance with Section 11 of the Plan.
(s) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of shares which may be
optioned and sold under the Plan is 160,000,000 shares of Common Stock. The
Shares may be authorized, but unissued, or reacquired Common Stock.
2
3
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure. The Plan shall be administered by the
Board of Directors of the Company.
(1) 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.
(2) Any grants of Options to officers who are
subject to Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act") shall only be made by a Committee of two or more directors, each of whom
is a Disinterested Person and an Outside Director.
(3) Subject to the foregoing subparagraphs (1) and
(2), 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 or Nonqualified Stock Options; (ii) to determine, in
accordance with Section 8(b) of the Plan, the fair market value of the Common
Stock; (iii) to determine, in accordance with Section 8(a) of the Plan, the
exercise price per share of Options to be granted; (iv) to determine the
Employees to whom, and the time or times at which, Options shall be granted and
the number of Shares to be represented by each Option; (v) to interpret the
Plan; (vi) to prescribe, amend, and rescind rules and regulations relating to
the Plan; (vii) to determine the terms and provisions of each Option granted
(which need not be identical) and, with the consent of the holder thereof,
modify or amend each Option; (viii) to reduce the exercise price per share of
outstanding and unexercised Options; (ix) to accelerate or defer (with the
consent of the Optionee) 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 Option 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 Optionees and any other holders of any Options granted under the Plan.
3
4
5. Eligibility.
(a) Options may be granted only to Employees. Notwithstanding
the foregoing, William H. Gates III is not eligible to participate in the Plan.
For avoidance of doubt, directors are not eligible to participate in the Plan
unless they are full-time Employees.
(b) Each Option shall be designated in the written 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 Optionee
during any calendar year (under all plans of the Company) exceeds $100,000,
such Options shall be treated as Nonqualified Stock Options.
(c) For purposes of Section 5(b), 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.
(d) Nothing in the Plan or any Option granted hereunder shall
confer upon any Optionee any right with respect to continuation of employment
with the Company, nor shall it interfere in any way with the Optionee's right
or the Company's right to terminate the employment relationship at any time,
with or without cause.
(e) The maximum number of Shares with respect to which an
Option or Options may be granted to any Employee in any one taxable year of the
Company shall not exceed 1,000,000 shares (the "Maximum Annual Employee
Grant").
6. Term of Plan. The Plan shall become effective upon its
adoption by the Board. It shall continue in effect until August 16, 2001,
unless sooner terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be no more than
ten (10) years from the date of grant. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted,
owns stock representing more than ten percent (10%) of the voting power of all
classes of stock 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.
8. Exercise Price and Consideration.
4
5
(a) The per Share exercise price under each Option shall be
such price as is determined by the Board, subject to the following:
(1) In the case of an Incentive Stock Option
(i) granted to an Employee who, at the time
of the grant of such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock 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.
(ii) 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.
(2) In the case of a Nonqualified Stock Option the
per Share exercise price may be less than, equal to, or greater than the fair
market value per Share on the date of grant.
(b) The fair market value per Share shall be the closing
price per share of the Common Stock on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") National Market System on the date of
grant. If the Common Stock ceases to be listed on the NASDAQ National Market
System, the Board shall designate an alternative method of determining the fair
market value of the Common Stock.
(c) The consideration to be paid for the Shares to be issued
upon exercise of an Option, 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 Optionee 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 of Common Stock. 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
Option, the Optionee shall pay any federal, state, and local withholding
obligations of the Company, if applicable. If an Optionee 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 of
Common Stock 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 Option is exercised. The following provisions shall apply
to such elections: (i) if an Optionee has received multiple Options, a
separate election must be made for each Option;
5
6
(ii) the election may be a "standing election", i.e., upon making an election,
a fixed date need not be set for the exercise of the Option to which the
election relates; (iii) the election will be subject to the approval or
disapproval of the Board, which approval or disapproval may be given at any
time after the election to which it relates; (iv) the election may not be made
within six months following the date of grant of the Option to which it
relates; (v) the election must be made six months prior to the day the Option
is exercised, or both the election and exercise must be made in the ten-day
"window period" beginning on the third day following the release of the
Company's quarterly or annual summary statement of sales and earnings; and (vi)
an election may be revoked, or may be reinstituted after a revocation, only
upon six months' prior notice.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any
Option 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 Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option 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 8(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 stock
certificate evidencing such Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly upon exercise of the
Option. In the event that the exercise of an Option 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 5(b), the Company shall issue a
stock certificate evidencing the Shares treated as acquired upon the exercise
of an Incentive Stock Option and a separate stock certificate evidencing the
Shares treated as acquired upon the exercise of a Nonqualified Stock Option,
and shall identify each such certificate accordingly in its stock transfer
records. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.
Exercise of an Option in any manner 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 Option, by the number of Shares as to which the
Option is exercised.
6
7
(b) Termination of Status as Employee. In the event of
termination of an Optionee's Continuous Status as an Employee, such Optionee
may exercise stock options to the extent exercisable on the date of
termination. Such exercise must occur within three (3) months (or such shorter
time as may be specified in the grant), after the date of such termination (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement). To the extent that the Optionee was not
entitled to exercise the Option at the date of such termination, or does not
exercise such Option within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. Notwithstanding the provisions
of Section 9(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee 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 Optionee may exercise the Option, but only
to the extent of the right to exercise that would have accrued had the Optionee
remained in Continuous Status as an Employee for a period of twelve (12) months
after the date on which the Employee ceased working 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
Employee ceased working as a result of the total and permanent disability (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement). To the extent that the Optionee was not
entitled to exercise such Option within the time specified herein, the Option
shall terminate.
(d) Death of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of the death of an Optionee:
(i) who is at the time of death an Employee of the
Company, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Status as an Employee twelve (12) months after the date of death; or
(ii) whose Option has not yet expired but whose
Continuous Status as an Employee terminated prior to the date of death, the
Option may be exercised, at any time within six (6) months following the date
of death (but in no event later than the date of expiration of the term of such
Option as set forth in the Option Agreement), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
termination.
7
8
(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 option beyond the
date on which the option would have expired if no termination of the Employee's
Continuous Status as an Employee had occurred).
10. Non-Transferability of Options. The Option 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 Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger. Subject
to any required action by the stockholders of the Company, the number of shares
of Common Stock covered by each outstanding Option, the Maximum Annual Employee
Grant and the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination, or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock 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 stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Option 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
Option shall terminate as of a date fixed by the Board and give each Optionee
the right to exercise an Option as to all or any part of the Optioned Stock,
including Shares as to which the Option 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
Option shall be assumed or an equivalent option 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 Option or to
substitute an equivalent option, in which case the Board shall, in lieu of such
assumption or substitution, provide for the Optionee to have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable.
8
9
If the Board makes an Option fully exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
the Optionee that the Option shall be fully exercisable for a period of fifteen
(15) days from the date of such notice, and the Option will terminate upon the
expiration of such period.
12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date on which the Company completes the
corporate action relating to the grant of an option and all conditions to the
grant have been satisfied, provided that conditions to the exercise of an
option shall not defer the date of grant. Notice of a grant shall be given to
each Employee to whom an Option is so granted within a reasonable time after
the determination has been made.
13. Substitutions and Assumptions. The Board shall have the right
to substitute or assume Options 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 Options
assumed and, in the case of a substitution, by the net increase in the number
of Shares subject to Options before and after the substitution.
14. 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, the following revisions or amendments
shall require approval of or ratification by the stockholders of the Company:
(i) any increase in the number of Shares subject to
the Plan, other than in connection with an adjustment under Section 11 of the
Plan; or
(ii) if the Company has a class of equity securities
registered under Section 12 of the Exchange Act at the time of such revision or
amendment, any change which would require stockholder approval pursuant to Rule
16b-3 promulgated by the Securities and Exchange Commission pursuant to its
authority under the Exchange Act.
(b) Employees 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 Options granted to Employees employed in such
countries and to meet the objectives of the Plan.
9
10
(c) Effect of Amendment or Termination. Any such amendment
or termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
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.
16. 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.
17. Stockholder Approval. The Plan is subject to approval by the
shareholders of the Company at the Annual Meeting of Shareholders to be held on
October 29, 1993. If the Plan, as herein amended, is not so approved by the
shareholders, the Plan, as previously approved, shall continue in effect.
[The number of shares in Sections 3 and 5(e) have been increased to reflect the
2-for-1 stock split in May 1994.]
10