Exhibit 10.5

 

MICROSOFT CORPORATION

 

STOCK OPTION PLAN

FOR CONSULTANTS AND ADVISORS

(as amended and restated as of November 15, 2004)

 

1. Purposes of the Plan. The purposes of this Stock Option Plan are to attract
and maintain a long-term relationship with the best available consultants and
advisors, to provide additional incentive to such individuals, and to promote
the success of the Company’s business. Options granted hereunder shall be
Nonqualified Stock Options, and shall be evidenced by written Stock Option
Agreements.

 

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.

 

(d) “Common Stock” shall mean the common stock of Microsoft Corporation.

 

(e) “Company” shall mean Microsoft Corporation, a Washington corporation.

 

(f) “Continuous Status as a Consultant or Advisor” shall mean the absence of any
interruption, expiration, or termination of an Optionee’s consulting or advisory
relationship with the Company. Continuous Status as a Consultant or Advisor
shall not be considered interrupted 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; provided, however, that the Company may require suspension of
vesting in such cases. Continuous Status as a Consultant or Advisor shall not be
considered terminated if such person accepts employment with the Company, and
thereafter a person’s Continuous Status as an Employee, and the effects of an
interruption or termination thereof (including by reason of death or
disability), shall be determined with reference to the Company’s 1991 Stock
Option Plan.

 

(g) “Nonqualified Stock Option” shall mean an Option not intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.

 

(h) “Option” shall mean a stock option granted pursuant to the Plan.

 

(i) “Optioned Stock” shall mean the Common Stock subject to an Option.

 

(j) “Optionee” shall mean any consultant or advisor who receives an Option.

 

(k) “Plan” shall mean this Stock Option Plan for Consultants and Advisors.

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(l) “Share” shall mean one share of Common Stock, as adjusted in accordance with
Section 11 of the Plan.

 

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 4,802,233 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.

 

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 a Committee, 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 Committee shall continue to serve
until otherwise directed by the Board of Directors.

 

(2) The Board of Directors may, from time to time, increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.

 

(b) Powers of the Board. Subject to the provisions of the Plan, the Board shall
have the authority, in its discretion: (i) to grant 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 individuals 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 and the terms of Options; (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 any 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 vesting or 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; provided that, no consent of an
Optionee is necessary under clauses (vii) or (ix) if the modification,
amendment, acceleration, or deferral in the reasonable judgment of the Board
confers a benefit upon the Optionee, or is made pursuant to an adjustment in
accordance with Section 11.

 

(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.

 

2.

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5. Eligibility.

 

(a) Options may be granted to consultants and advisors who provide consulting
services to the Company. In no event shall any employees (full-time or
part-time) of the Company be eligible for the grant of an Option under the Plan.
Notwithstanding the foregoing, the fact that an Optionee subsequently becomes an
employee of the Company shall not affect such Optionee’s Option, so long as the
Optionee’s Continuous Status as a Consultant or Advisor was uninterrupted prior
to his or her commencement of employment with the Company.

 

(b) Nothing in the Plan or any Option granted hereunder shall confer upon any
Optionee any right to continue or require the continuance of the Optionee’s
consulting or advisory relationship with the Company, nor shall it interfere in
any way with the Optionee’s right or the Company’s right to terminate such
relationship at any time, with or without cause.

 

6. Term of Plan. The Plan shall become effective upon its adoption by the Board
and shall continue in effect for ten (10) years, 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.

 

8. Exercise Price and Consideration.

 

(a) The per Share exercise price under each Option shall be such price as is
determined by the Board, which 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.

 

(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.

 

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.

 

3.

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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. 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.

 

The 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.

 

(b) Termination of Consulting Relationship with Optionee. In the event of
termination of an Optionee’s Continuous Status as a Consultant or Advisor, 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) Termination of Consulting Relationship Due to Disability of Optionee.
Notwithstanding the provisions of Section 9(b) above, in the event of
termination of an Optionee’s Continuous Status as a Consultant or Advisor 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), such
Optionee may exercise stock options to the extent exercisable on the date of
termination. Such exercise must occur within eighteen (18) 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 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 a consultant or advisor to 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 Personal
Representative 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 as of the date of death; or

 

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(ii) whose Option has not yet expired, but whose Continuous Status as a
Consultant or Advisor 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 Personal Representative 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.

 

(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 Optionee’s Continuous Status
as a Consultant or Advisor 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. If any change is made
to the Shares by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Shares as a class without the Company’s receipt of consideration,
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, and (ii) the number and/or class of
securities and/or the price per share covered by outstanding Options under the
Plan. The Board may also make adjustments described in (i)-(ii) of the previous
sentence in the event of any distribution of assets to shareholders other than a
normal cash dividend. In determining adjustments to be made under this Section
11, the Board may take into account such factors as it deems appropriate,
including (i) the restrictions of applicable law, (ii) the potential tax
consequences of an adjustment, and (iii) the possibility that some Optionees
might receive an adjustment and a distribution or other unintended benefit, and
in light of such factors or circumstances may make adjustments that are not
uniform or proportionate among outstanding Options, modify vesting dates, defer
the delivery of stock certificates or make other equitable adjustments. Any such
adjustments to outstanding Options will be effected in a manner that precludes
the enlargement of rights and benefits under such Options. Adjustments, if any,
and any determinations or interpretations, including any determination of
whether a distribution is other than a normal cash dividend, made by the Board
shall be final, binding and conclusive. For purposes of this Section 11,
conversion of any convertible securities of the Company shall not be deemed to
have been effected “without receipt of consideration.” 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 reasons 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, the Option shall be
assumed or an equivalent option shall be substituted

 

5.

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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. 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 Board makes the determination granting such
Option. Notice of the determination shall be given to each consultant or advisor
to whom an Option is so granted within a reasonable time after the date of such
grant.

 

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.

 

(b) Effect of Amendment or Termination. Except as otherwise provided in Sections
4 and 11, 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 to thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, 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.

 

[The number of shares in Section 3 has been adjusted to reflect the 3-for-2
stock split in June 1992, the 2-for-1 stock splits in May 1994, November 1996,
February 1998, March 1999 and February 2003, and the adjustments related to the
special dividend payable December 2, 2004 to shareholders of record on November
17, 2004.]

 

6.