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.

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“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.

 

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“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.

 

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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.

 

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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

 

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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.

 

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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

 

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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:

 

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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

 

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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

 

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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.

 

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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

 

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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.

 

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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:

  

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

With a copy to:   

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

If to Trustee:   

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.

 

[remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the
day and year first above written.

 

Attest:

     

BNY WESTERN TRUST COMPANY

(“Trustee”)

By:  

/s/    C. KENT CARLSON        

--------------------------------------------------------------------------------

      By:  

/s/    PERRY TOBE        

--------------------------------------------------------------------------------

    C. Kent Carlson          

Perry Tobe

Assistant Vice President

Attest:

     

MICROSOFT CORPORATION

(“Grantor”)

By:  

/s/    JOHN A. SEETHOFF        

--------------------------------------------------------------------------------

      By:  

/s/    STEVEN A. BALLMER        

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John A. Seethoff

Assistant Secretary

         

Steven A. Ballmer

Chief Executive Officer

Attest:

     

ADDITIONAL PARTY

(“Beneficiaries’ Representative”)

By:  

/s/    JOHN A. SEETHOFF        

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      By:  

/s/    WILLIAM G. REED, JR.        

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    John A. Seethoff           William G. Reed, Jr.

 

 

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