Exhibit 10.17

MICROSOFT CORPORATION

EXECUTIVE OFFICER INCENTIVE PLAN

ARTICLE 1

Purpose

The Microsoft Corporation Executive Officer Incentive Plan is intended to
provide incentive compensation to executive officers of the Company and those
other senior officers that the Committee has determined should participate in
the Plan. Awards under the Plan may be intended to qualify as performance-based
compensation under Sections 162(m) and 409A of the Internal Revenue Code.

ARTICLE 2

Definitions

The terms used in this Plan include the feminine as well as the masculine gender
and the plural as well as the singular, as the context in which they are used
requires. The following terms, unless the context requires otherwise, are
defined as follows:

 

2.1

“Award” means the incentive compensation awarded by the Committee under
Section 4.1. Awards may be in the form of cash awards and/or equity-based awards
issued under the Stock Plan.

 

2.2

“Business Criteria” means the following: sales or licensing volume, revenues,
customer satisfaction, expenses, organizational health/productivity, earnings
(which includes similar measurements such as net profits, operating income and
net income, and which may be calculated before or after taxes, interest,
depreciation, amortization or taxes), margins, cash flow, shareholder return,
return on equity, return on assets or return on investments, working capital,
product shipments or releases, technology advances and innovations, brand or
product recognition or acceptance (including market share) and/or stock price.

 

2.3

“Code” means the Internal Revenue Code of 1986, as amended.

 

2.4

“Committee” means the Compensation Committee of the Company’s Board of
Directors.

 

2.5

“Company” means Microsoft Corporation.

 

2.6

“Deferred Compensation Plan” means the Microsoft Corporation Deferred
Compensation Plan, or a similar or successor plan or other arrangement for the
deferral of compensation specified by the Committee.

 

2.7

“Participant” means an employee described in Article 3 of the Plan.

 

2.8

“Performance Goals” means the written objective performance goals for Awards
under the Plan. To the extent required by Section 162(m), the Performance Goals
shall be stated in terms of one or more Business Criteria. Performance Goals may
be measured: individually, alternatively or in any combination, including
through an index; with respect to the Company, a Company subsidiary, division,
business unit, product line, product or any combination of the foregoing; on an
absolute basis, or relative to a target, to a designated comparison group, to
results in other periods or to other external measures. The Committee may
specify any reasonable definition of the measures it uses. Such definitions may
provide for reasonable adjustments to the measures and may include or exclude
items, including but not limited to: extraordinary or unusual and nonrecurring
gains or losses, litigation or claim judgments or settlements, material changes
in tax laws, acquisitions or divestitures, the cumulative effect of accounting
changes, asset write-downs, restructuring charges, or the results of
discontinued operations or products.

 

2.9

“Performance Period” means the period for which an Award is made for purposes of
this Plan as determined by the Committee. For the avoidance of doubt, the
applicable grant documentation for an Award may set forth performance
requirements in addition to the Performance Goals, and such additional
performance requirements may be based on a shorter or longer period than the
Performance Period.

 

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2.10

“Plan” means the Microsoft Corporation Executive Officer Incentive Plan, as it
may be amended from time to time.

 

2.11

“Section 162(m)” means Code Section 162(m) and applicable IRS guidance issued
thereunder.

 

2.12

“Stock Plan” means the Company’s 2001 Stock Plan, or a similar or successor plan
or other arrangement of the issuance of equity-based awards specified by the
Committee.

ARTICLE 3

Eligibility and Participation

Executive officers of the Company are eligible to receive Awards under the Plan.
In addition, other senior officers of the Company may be designated by the
Committee to receive awards under the Plan. Any person who receives an Award
under Section 4.1 shall be a Participant in the Plan and shall continue to be a
Participant until any amounts due under any Awards he may receive have been
paid.

ARTICLE 4

Incentive Awards

 

4.1

Grants of Awards.

 

(a)

Establishment of Written Terms—Not later than 90 days after the beginning of a
Performance Period for which the Committee has determined to grant Awards under
the Plan (or within the first 25% of the Performance Period for any Performance
Period that is less than 12 months) or any other date required or permitted
under Section 162(m), the Committee shall determine in writing (a) the
Participants receiving Awards for the Performance Period, (b) the Performance
Goals for each Participant for the Performance Period, and (c) the amount
payable to a Participant upon attainment of the applicable Performance Goals for
the Performance Period.

 

(b)

Incentive Pools—Unless otherwise determined by the Committee, the amount payable
to a Participant upon attainment of the applicable Performance Goals for a
Performance Period will be stated as a percentage of an incentive pool. As
described in Section 4.3 below, the amount of a Participant’s Award may be
reduced below the amount determined by multiplying the incentive pool percentage
by the incentive pool for the Performance Period. The total of the incentive
pool percentages assigned to all Participants for a Performance Period shall not
exceed 100%, and the amount of the incentive pool shall be determined under an
objective formula or basis.

 

(c)

Maximum Amount—The maximum number of shares of Company common stock with respect
to which equity-based Awards may be granted to any Participant based on one or
more Performance Periods ending in a fiscal year of the Company shall not exceed
(i) 20,000,000 shares for stock options or stock appreciation rights, and
(ii) 5,000,000 shares for stock awards (increased, in both cases
proportionately, in the event of any stock split, stock dividend or similar
event with respect to the shares). The maximum Awards settled in cash based on
one or more Performance Periods ending in a fiscal year of the Company shall
(i) not exceed the stock award share limit above multiplied by the closing price
per share of Company common stock on the last trading day coinciding with or
preceding the date the cash Award is paid, and (ii) reduce the share limits for
the Performance Period(s) for equity awards by the number of whole shares that
could be purchased with the cash Award on the date of payment of the cash Award.

 

(d)

New Executive Officers—The Committee may grant an Award to an individual who
becomes an executive officer during a Company fiscal year based on performance
during the balance of the fiscal year or such other Performance Period as it
determines. If the Performance Period for such an Award is less than 12 months,
within the first 25% of the Performance Period or any other date required or
permitted under Section 162(m), the Committee shall determine in writing
(a) Performance Goals for the Performance Period, and (b) the amount payable to
the Participant upon attainment of the applicable Performance Goals for the
Performance Period. The amount payable to such a Participant upon attainment of
the applicable Performance Goals for a Performance Period may be stated as a
percentage of an incentive pool.

 

(e)

EOIP Awards—Unless otherwise determined by the Committee, each Company fiscal
year for which the Committee intends to grant an Award is a Performance Period
for which the Committee will specify (1) the Participants, (2) if applicable, an
incentive pool that is a percentage of the Company’s operating income for the

 

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fiscal year, as reported in the Company’s financial statements (“Operating
Income”), and (3) if applicable, each Participant’s incentive pool percentage
for the Performance Period. In addition, if an employee becomes an executive
officer of the Company after the first quarter of the Company’s fiscal year,
then the remainder of that fiscal year, including the quarter in which the
employee becomes an executive officer, may be a Performance Period for which the
Committee will specify: (1) such Participant (or Participants), (2) an incentive
pool that is a percentage of the Company’s Operating Income for the Performance
Period, and (3) each Participant’s incentive pool percentage for the Performance
Period.

No payments will be made under an Award described in Section 4.1(e) unless the
Company’s Operating Income for the Performance Period is greater than zero; this
positive Operating Income requirement is the Performance Goal for the applicable
Performance Period.

 

4.2

Performance Goal Satisfaction and Certification.    Within a reasonable time
after the close of a Performance Period, the Committee shall determine whether
the Performance Goals established for that Performance Period have been met. If
the Performance Goals have been met, the Committee shall so certify in writing
to the extent required by Section 162(m).

 

4.3

Award Amount.    If the Committee has made the written certification under
Section 4.2 for a Performance Period, each Participant to whom the certification
applies shall be eligible to receive a payment under their Award for that
Performance Period, subject to any additional requirements set forth in the
written terms governing the Award and the applicable grant documentation. For
any Performance Period, however, the Committee (and, with respect to Awards for
the chief executive officer, two or more independent members of the Company’s
Board of Directors who are outside directors within the meaning of
Section 162(m)) shall have the absolute discretion to reduce the amount of, or
eliminate entirely, the payment under an Award to one or more of the
Participants. Payment of all or part of an Award amount in the form of an equity
compensation grant shall be made under, and subject to the terms and conditions
of, the Stock Plan and the applicable grant documentation.

 

4.4

Payment of the Award.

 

(a)

Unless otherwise determined by the Committee in the applicable grant
documentation, payment of an Award for a Performance Period ending with a
Company’s fiscal year shall be made by the end of the fiscal quarter following
the end of the fiscal year, and no later than March 15 of the calendar year
following the close of the Performance Period (or if later, by the 15th day of
the third month following the end of the Company’s fiscal year containing the
last day of the Performance Period).

 

(b)

As permitted by the Committee, a Participant may, in accordance with section
409A of the Code, voluntarily defer receipt of an Award in the form of cash
under the terms of the Deferred Compensation Plan.

 

(c)

The Company shall have the right to deduct from any Award payable in cash any
applicable Federal, state and local income and employment taxes and any other
amounts that the Company is required to deduct. Deductions from an Award in the
form of an equity compensation award shall be governed by the Company’s 2001
Stock Plan and the applicable grant documentation.

 

4.5

Eligibility for Payments.    Unless otherwise determined by the Committee, a
Participant shall be eligible to receive payment under an Award for a
Performance Period only if the Participant is employed by the Company or a
Company subsidiary on the last day of the Performance Period, and only if the
Participant satisfies any other conditions to receipt of the Award specified by
the Committee.

 

4.6

Discretionary Awards.    The Committee may grant Awards under the Plan that are
not intended to qualify as performance-based compensation under Section 162(m)
and as such will not need to meet the requirements of this Article 4.

ARTICLE 5

Administration

 

5.1

General Administration.    The Plan is to be administered by the Committee.
Subject to the terms and conditions of the Plan, the Committee is authorized and
empowered in its sole discretion to select Participants and to make Awards in
such amounts and upon such terms and conditions as it shall determine.

 

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5.2

Administrative Rules.    The Committee shall have full power and authority to
adopt, amend and rescind administrative guidelines, rules and regulations
pertaining to this Plan and to interpret the Plan and rule on any questions
respecting any of its provisions, terms and conditions.

 

5.3

Decisions Binding.    All decisions of the Committee concerning this Plan shall
be binding on the Company and its subsidiaries and their respective boards of
directors, and on all Participants and other persons claiming rights under the
Plan.

 

5.4

Section 162(m) and Shareholder Approval.    Other than Awards issued under
Section 4.6, Awards under this Plan are intended to satisfy the applicable
requirements for the performance-based compensation exception under
Section 162(m). It is intended that the Plan be administered, interpreted and
construed so that such Awards (“162(m) Awards”) meet such requirements. Payments
under 162(m) Awards shall be contingent upon shareholder approval of the
material terms of the Plan in accordance with Section 162(m). Unless and until
such shareholder approval is obtained, no amounts shall be paid under 162(m)
Awards.

 

5.5

Recovery Policy.    Amounts paid under the Plan shall be subject to recovery by
the Company under its executive compensation recovery policy as in effect from
time to time.

ARTICLE 6

Amendments and Termination

The Plan may be amended or terminated by the Committee at any time. All
amendments to this Plan, including an amendment to terminate the Plan, shall be
in writing. An amendment shall not be effective without the approval of the
shareholders of the Company if such approval is necessary to continue to qualify
Awards (other than those issued under Section 4.6) as performance-based
compensation under Section 162(m), or otherwise under Internal Revenue Service
or SEC regulations, the rules of NASDAQ or any other applicable law or
regulations, as reasonably interpreted by the Committee in its sole discretion.

ARTICLE 7

Miscellaneous

 

7.1

Duration of the Plan.    The Plan shall remain in effect until all Performance
Periods related to Awards made under the Plan have expired and any payments
under such Awards have been made.

 

7.2

Awards Not Assignable.    No Award, or any right thereto, shall be assignable or
transferable by a Participant except by will or by the laws of descent and
distribution. Any attempted assignment or alienation shall be void and of no
force or effect.

 

7.3

Participant Rights.    The right of any Participant to receive any Award
payments under the provisions of the Plan shall be an unsecured claim against
the general assets of the Company. The Plan shall not create, nor be construed
in any manner as having created, any right by a Participant to any Award for a
Performance Period because of a Participant’s participation in the Plan for any
prior Performance Period.

 

7.4

Employment at Will.    Neither this Plan nor any action or communication under
this Plan: (1) gives any employee any right with respect to employment or
continuation of current employment with the Company or its subsidiaries or to
employment that is not terminable at will, or (2) sets any employee’s employment
with the Company or its subsidiaries for any minimum or fixed period. Employment
by the Company or a Company subsidiary may be terminated by either the employee
or the employer at any time, for any reason or no reason, with or without cause,
and with or without notice or any kind of pre- or post-termination warning,
discipline or procedure. This Section 7.4 applies to employment in the United
States.

 

7.5

Successors.    Any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the Company’s
business or assets, shall assume the Company’s liabilities under this Plan and
perform any duties and responsibilities in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place.

 

7.6

References.    All statutory and regulatory references in this Plan include
successor provisions.

 

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7.7

Severability.    If any provision of the Plan is held invalid or illegal for any
reason, any illegality or invalidity shall not affect the remaining parts of the
Plan, but the Plan shall be construed and enforced as if the illegal or invalid
provision had never been inserted.

 

7.8

Applicable Law and Venue.    The Plan shall be governed by the laws of the State
of Washington. If the Company or any Participant (or beneficiary) initiates
litigation related to this Plan, the venue for such action will be in King
County, Washington.

 

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