EXHIBIT 10.22
CONFIDENTIAL TREATMENT REQUESTED
MASTER SERVICES AGREEMENT
AND INTELLECTUAL PROPERTY ASSIGNMENT
     This Master Services Agreement and Intellectual Property Assignment (the
“Agreement”) is made and entered into as of the 1st day of April, 2005 (the
“Effective Date”) by and between TRANSMETA CORPORATION (“COMPANY”), a California
corporation, and MICROSOFT CORPORATION (“MICROSOFT”), a Washington corporation,
with its principal business offices located at One Microsoft Way, Redmond, WA
98052.
     In consideration of the covenants and conditions hereinafter set forth,
MICROSOFT and COMPANY agree as follows:

1.   Services.       (a) COMPANY shall perform as a “work for hire” the services
for MICROSOFT that are described on the Schedules as may be attached hereto from
time to time by mutual written agreement of the parties and such services shall
include any materials, inventions, ideas, designs, concepts, techniques,
discoveries, or improvements created by COMPANY by use of or exposure to
Microsoft Confidential Information (the “WORK”) in accordance with the terms and
conditions of this Agreement, and on the price, delivery dates and
specifications described in the applicable Schedule for the WORK. The Schedules
shall be in the form attached hereto and shall be signed by both parties,
numbered with an individual Contract Number, and attached to this Agreement.
COMPANY is not obligated to perform any WORK hereunder and MICROSOFT has not
contracted for any WORK unless and until a Schedule is executed by both parties
and attached hereto.       (b) Subcontracting. COMPANY shall not subcontract any
part or all of the WORK to any third party (hereafter, “Subcontractor”) without
MICROSOFT’s prior express written consent. If MICROSOFT consents to the use of a
Subcontractor, COMPANY shall: (a) guarantee Subcontractor’s fulfillment of the
applicable COMPANY obligations hereunder; (b) make all payments to Subcontractor
for WORK performed; and (c) indemnify MICROSOFT for all damages and costs of any
kind incurred by MICROSOFT or any third party that are caused by Subcontractor
and arise out of Subcontractor’s performance of the WORK. MICROSOFT may in its
sole discretion require that a Subcontractor execute a separate written
agreement that includes the same or similar provisions as are contained in this
Agreement.   2.   Delivery Schedule. COMPANY shall complete and deliver the WORK
to MICROSOFT according to the delivery schedule and in conformance with the
specifications described in the applicable Schedule for such WORK. MICROSOFT
shall evaluate the WORK and shall submit a written or verbal notice of
acceptance or rejection to COMPANY within * * * after MICROSOFT’s receipt of the
WORK, or such other time as reasonable under the circumstances. Conformity to
specifications and COMPANY’s warranties herein shall solely determine
MICROSOFT’s right to accept or reject the WORK, and to the extent that the
applicable specifications are not specific or definitive, then acceptance or
rejection also may be based upon the fitness of the WORK for MICROSOFT’s
intended purpose. If rejected, COMPANY shall promptly correct the WORK. If
COMPANY fails to correct the WORK within * * * after notice of rejection or
other reasonable period agreed to by the parties, MICROSOFT may terminate the
applicable Schedule to this Agreement, or the applicable portion thereof, and
receive a full refund of amounts paid under such Schedule for the rejected WORK.
If the WORK is rejected as provided above, MICROSOFT may, at its option and upon
written notice to COMPANY, terminate the applicable Schedule or the applicable
portion thereof, for a full refund of amounts paid under such Schedule for such
rejected WORK.

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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3.   Payment       (a) Payment Amount. MICROSOFT shall pay COMPANY for the WORK
as described on the applicable Schedule for such WORK (“Service Fees”). Except
as indicated by COMPANY, the Service Fees are inclusive of all taxes that
COMPANY may be assessed in the performance of its obligations pursuant to this
Agreement and COMPANY shall pay same and shall not pass same on to MICROSOFT.
Under no circumstances may COMPANY include on its invoices charges arising out
of or related to researching, reporting on or correcting tax, accounting or
reconciling errors or shortfalls of which it has been notified.      
(b) Payment Terms. Upon receipt of a correct and undisputed invoice from
COMPANY, MICROSOFT shall pay such invoice * * * Notwithstanding the foregoing,
all payments due hereunder are conditioned upon MICROSOFT’s written acceptance
of the WORK. COMPANY shall bear sole responsibility for all expenses incurred in
connection with the performance of the WORK, unless otherwise agreed to in
advance and in writing by MICROSOFT.       (c) Microsoft Invoice. COMPANY shall
invoice MICROSOFT for all amounts due under this Agreement via the MICROSOFT
Invoice online tool, in accordance with the then-current requirements set forth
at http://invoice.MICROSOFT.com. Without limitation, COMPANY’s invoices shall
set forth all amounts due from MICROSOFT to COMPANY, and shall contain
sufficient detail to allow MICROSOFT to determine the accuracy of the amount(s)
billed. All invoices shall be expressed and payable in U.S. dollars.      
(d) Payment Method. Payments by MICROSOFT shall be made according to MICROSOFT’s
then-current payment policies, which may include payment via ACH electronic
payment to COMPANY’s financial institution pursuant to instructions supplied to
MICROSOFT by COMPANY in MICROSOFT’s ACH Electronic Payment form.      
(e) Disputed Amounts. MICROSOFT may dispute any payable amount by notice to
COMPANY orally or in writing within * * * of MICROSOFT’s receipt of the invoice,
which claim of dispute may concern not only the accuracy of the charge itself,
but also any claim of deficient services or performance, or any other claim of
breach of this Agreement that relates to the specific charges in the invoice.
Any partial payment of an invoice shall be deemed notice by MICROSOFT of the
disputed amount. All disputed amounts that MICROSOFT subsequently agrees in
writing to pay, or that are required to be paid pursuant to a proper court order
or award from any mutually submitted arbitration, shall be paid on the payment
terms set forth in subsection (2.b) above. Payment of an invoice without
asserting a dispute is not a waiver of any claim or right. Failure by MICROSOFT
to dispute any invoiced amount within the periods set forth above shall not be
deemed a waiver of any claims that were unknown to MICROSOFT at the time.   4.  
Non-Disclosure. COMPANY agrees that at all times during the term of this
Agreement, and for five (5) years thereafter, COMPANY will hold in strictest
confidence, and will not use or disclose to any third party, any confidential
information of MICROSOFT. The term “MICROSOFT Confidential Information” shall
mean all non-public information that MICROSOFT designates as being confidential,
or which, under the circumstances of disclosure ought to be treated as
confidential. “MICROSOFT Confidential Information” includes, without limitation,
the terms and conditions of this Agreement, information relating to released or
unreleased MICROSOFT software or hardware products, marketing or promotion of
any MICROSOFT product, business policies or practices of MICROSOFT, customers or
suppliers of MICROSOFT, or information received from others that MICROSOFT is
obligated to treat as confidential. If COMPANY has any questions as to what
comprises such confidential information, COMPANY agrees to consult with
MICROSOFT. “MICROSOFT Confidential Information” shall not include information
that was known to

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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    COMPANY prior to MICROSOFT’s disclosure to COMPANY, or information that
becomes publicly available through no fault of COMPANY.   5.   Ownership of
WORK; Assignment of Rights to MICROSOFT.       (a) The WORK has been specially
ordered and commissioned by MICROSOFT and may be incorporated in existing
MICROSOFT works as a compilation or collective work. COMPANY agrees that all
copyrights in the WORK shall be owned by MICROSOFT and the WORK shall be a “work
made for hire” for copyright purposes.       (b) COMPANY hereby assigns to
MICROSOFT, its successors and assigns, all rights, title and interest in and to
the WORK including, without limitation, the following:

     (i) any copyrights that COMPANY may possess or acquire in the WORK and all
copyrights and equivalent rights in the WORK throughout the world, including all
renewals and extensions of such rights that may be secured under the laws now or
hereafter in force and effect in the United States of America or in any other
country or countries;
     (ii) all rights in and to any inventions, ideas, designs, concepts,
techniques, discoveries, or improvements, whether or not patentable, embodied in
the WORK or developed in the course of COMPANY’s creation of the WORK,
including, but not limited to, all trade secrets, utility and design patent
rights and equivalent rights in and to such inventions and designs throughout
the world, regardless of whether or not legal protection for the WORK is sought;
     (iii) any documents, magnetically or optically encoded media, or other
materials created by COMPANY under this Agreement; and
     (iv) the right to sue for infringements which may occur before the date of
this Agreement, and to collect and retain damages from any such infringements.

    (c) At MICROSOFT’s expense, COMPANY shall execute and deliver such
instruments and take such other action as may be requested by MICROSOFT to
perfect or protect MICROSOFT’s rights in the WORK and to carry out the
assignments contemplated in subparagraph (b) of this Section. In this regard,
COMPANY agrees to cooperate with MICROSOFT in the filing and prosecution of any
copyright or patent applications that MICROSOFT may elect to file on the WORK or
inventions and designs relating to the WORK. MICROSOFT acknowledges that COMPANY
has taken no action to assist in the registration of the copyrights or the WORK
and will do so only as and when requested by MICROSOFT.       (d) To the maximum
extent permitted by law, COMPANY waives all moral rights in the WORK.      
(e) COMPANY has developed the WORK based on its Background Technology (defined
as any knowledge, patents or copyrights developed prior the date of signing this
Agreement). The Transmeta Code Morphing Software shall be considered COMPANY
Background Technology. The parties agree that the Background Technology is not
“work for hire” as that term is defined under U.S. copyright law, and that as a
result COMPANY shall retain all rights, including copyrights, patents, trade
secrets and any other proprietary rights to the Background Material. COMPANY
hereby grants to MICROSOFT a worldwide, irrevocable, non-exclusive, fully paid
up, license to use and distribute and otherwise exploit any Background
Technology which is included in the WORK. By means of example and not by
limitation, if the WORK could not, in a commercially reasonable way, be utilized
by MICROSOFT without specific rights to the Background Technology, COMPANY would
provide MICROSOFT with the rights described above. Continuing with another
example, if

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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    the COMPANY provides to MICROSOFT the WORK and includes with the WORK the
Background Technology, the act of providing these components together would not
result in a license from COMPANY to MICROSOFT in the Background Technology.

6.   COMPANY Warranties. COMPANY warrants that:       (a) COMPANY has full and
exclusive right and power to enter into and perform according to the terms of
this Agreement;       (b) The WORK as delivered to MICROSOFT does not infringe
any copyright, patent, trade secret, trademark, or other proprietary right held
by any third party;       (c) The WORK will meet the specifications listed in
the applicable Schedule, will be complete and accurate, and will comply with all
applicable laws and regulations;       (d) The WORK will be created by employees
of COMPANY within the scope of their employment and under written obligation to
assign all right, title and interest in the WORK, including, without limitation,
the rights enumerated and assigned to MICROSOFT in Section 5 above to COMPANY,
or with MICROSOFT’s prior written consent, by independent contractors under
written obligations to assign all right, title and interest in the WORK to
COMPANY including, without limitation, the rights enumerated and assigned to
MICROSOFT in Section 5 above;       (e) The WORK will either be originally
created by COMPANY, or COMPANY will obtain all necessary rights to the WORK to
transfer ownership to MICROSOFT as required by Section 5 above. Further, COMPANY
will not incorporate into the WORK any third party product, software, or other
materials for which the intellectual property rights are not owned solely by
COMPANY without the express written permission of MICROSOFT;       (f) The
services provided by COMPANY shall be performed in a professional manner and
shall be of a high grade, nature, and quality;       (g) COMPANY’s employees
shall, while on MICROSOFT property or conducting any MICROSOFT related business,
comply with all MICROSOFT policies and applicable local, state and federal laws,
including specifically all laws prohibiting harassment of any kind in the
workplace. COMPANY assumes all responsibility for providing to its employees any
training that may be required to insure compliance with such laws. Further,
COMPANY warrants that when COMPANY’s employees require cardkey access to
MICROSOFT facilities and/or an account on MICROSOFT’s email system, that COMPANY
and its employees assigned to MICROSOFT will execute all applicable agreement(s)
required by MICROSOFT and will comply with all vendor policies then in effect,
and COMPANY agrees to immediately remove upon MICROSOFT’s request any of its
employees who fail to comply with such policies, laws, and regulations. If
COMPANY’s services are provided on MICROSOFT property, COMPANY warrants that
none of the individuals placed at MICROSOFT have been convicted of a felony as
an adult within the seven (7) years prior to their assignment at MICROSOFT; and
      (h) COMPANY warrants that any software portion of the WORK is not, and
when delivered to MICROSOFT shall not be, in whole or in part, governed by an
Excluded License. An “Excluded License” is any license that requires, as a
condition of use, modification and/or distribution of software subject to the
Excluded License, that such software and/or other software combined and/or
distributed with such software be (i) disclosed or distributed in source code
form; (ii) licensed for the purpose of making derivative works; or
(iii) redistributable at no charge.

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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7. Indemnity.
THE PARTIES EXPRESSLY AGREE THAT THE FOLLOWING SECTION 7 “INDEMNITY” WAS READ
AND REVIEWED BY EACH AND SUBJECT TO NEGOTIATION:

    (a) COMPANY shall indemnify, defend, and hold harmless MICROSOFT and its
successors, officers, directors, employees, agents, contractors, and assigns
(collectively, “Indemnified Party”) from all causes of action, claims, demands,
costs, expenses, losses, suits, proceedings, damages, and liabilities of any
kind (including without limitation reasonable attorneys’ fees incurred) that are
threatened, asserted or filed against any Indemnified Party (collectively,
“Claims”) to the extent such Claims arise out of or relate to the WORK or this
Agreement or any Schedule hereunder (except to the comparative extent that such
Claims result from the negligent or willful acts of any Indemnified Party), and
include without limitation the following: (i) bodily injury or death to any
person (including without limitation bodily injury or death to COMPANY, or
COMPANY’s employee or agent); (ii) damage, loss or disappearance of any
property; (iii) any allegation that, if true, would constitute a breach of
COMPANY’s representations and warranties set forth herein or that arise by
operation of law; and/or (iv) any act or omission of COMPANY or COMPANY’s
employees or agents.       (b) Additional Remedy. If any WORK or portion thereof
is held to constitute an infringement of a third party proprietary right and use
of it as contemplated by this Agreement and any Schedule hereunder is enjoined
or threatened to be enjoined, COMPANY shall notify MICROSOFT and immediately, at
COMPANY’s expense: (i) procure for MICROSOFT the right to continue the use,
sale, and/or marketing of the WORK (or portion thereof), or (ii) replace or
modify the WORK (or portion thereof) so that it is non-infringing and meets the
requirements of the Schedule A and this Agreement to MICROSOFT’s satisfaction.
If (i) or (ii) are not available or are otherwise not fulfilled, then in
addition to any damages or expenses reimbursed under this Section 7 or otherwise
available to MICROSOFT, COMPANY shall refund to MICROSOFT all amounts paid by
MICROSOFT under this Agreement.       (c) Claims. If MICROSOFT seeks
indemnification for a Claim, MICROSOFT shall provide COMPANY with:
(a) reasonably prompt written notice of the Claim and permit COMPANY, through
mutually acceptable legal counsel, to answer and defend the Claim, and (b) at
COMPANY’s expense, information and reasonable assistance to help defend the
Claim. COMPANY may, upon prior written notice to MICROSOFT, undertake to conduct
all proceedings or negotiations for a Claim and to assume its defense, and
COMPANY shall also undertake all other required steps to settle or defend the
Claim, including without limitation the employment of legal counsel satisfactory
to MICROSOFT and payment of all expenses. MICROSOFT shall have the right to
employ separate legal counsel and participate in the defense of any Claim.
COMPANY shall reimburse MICROSOFT upon demand for all payments made or loss
suffered by it based on the judgment of any court of competent jurisdiction or
pursuant to a bona fide compromise or settlement of the Claim. COMPANY may not
settle any Claim on MICROSOFT’s behalf, or publicize the settlement of any
Claim, without first obtaining MICROSOFT’s express written permission.      
(d) Bodily Injury or Death Claims. Except to the extent prohibited by law and
solely with respect to bodily injury or death claims by or on behalf of
individuals who fall within the scope of the foregoing indemnity, COMPANY
expressly waives immunity under industrial insurance laws, including but not
limited to Title 51 of the Revised Code of the State of Washington, if
applicable.       (e) Indemnification for Other Damages. COMPANY shall fully
compensate, reimburse at estimated retail price, and indemnify MICROSOFT for
loss or damage caused by COMPANY (or by any COMPANY employee or agent) through
unlawfully, improperly, or without prior authorization

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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    from MICROSOFT removing, retaining, possessing, misappropriating, or failing
to return, any Confidential Information, and/or MICROSOFT property.   8.  
Termination.       (a) This Agreement shall commence as of the Effective Date
and shall terminate upon * * * prior written notice by either party, provided
COMPANY must complete all WORK described in any Schedule executed and attached
hereto unless otherwise agreed by MICROSOFT.       (b) MICROSOFT shall have the
right to cancel any Schedule with or without cause. In the event MICROSOFT
cancels the Schedule, MICROSOFT will provide COMPANY written notice of such
cancellation. Upon receipt of such notice, COMPANY will discontinue all work
thereunder. Except in cases of cancellation for cause as specified elsewhere in
this Agreement, MICROSOFT will pay for all work performed by COMPANY up until
the date of receipt of the cancellation notice. Further for such termination of
a Schedule without cause the parties agree as follows:

  (i)   The parties shall use commercially reasonable efforts to identify other
project(s) (“Replacement Project”) within MICROSOFT which are at least equal in
monetary value to the Schedule terminated by MICROSOFT under Section 8(b) above.
Should such a project be identified, the parties will create a Schedule for the
performance of such WORK by COMPANY.     (ii)   To the extent that the parties
are not able to identify any Replacement Project(s), COMPANY shall invoice
MICROSOFT and MICROSOFT agrees to pay the lesser of either * * * or the amount
remaining to be invoiced on the original Schedule.

    (c) Following completion of or cancellation of each Schedule, or in the
event of termination of a Schedule or this Agreement, COMPANY agrees to deliver
to MICROSOFT all drawings, blueprints, notes, memoranda, specifications,
designs, devices, documents and any other material containing or disclosing any
confidential or proprietary information of MICROSOFT. COMPANY will not retain
any such materials, or copies thereof, without MICROSOFT’s written approval.    
  (d) In the event of cancellation of a Schedule or termination of this
Agreement and upon request by MICROSOFT, COMPANY agrees to turn over to
MICROSOFT all work in progress applicable to such Schedule within * * *.      
(e) In the event of termination or expiration of this Agreement for any reason,
Sections 4, 5, 6, 7, 8(c), (d) and (e), 9, and 11 shall survive termination.

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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9.   Notices.       All notices, authorizations, and requests sent to either
party in connection with this Agreement shall be deemed given on the day they
are either (a) deposited in the U.S. mail, postage prepaid, certified or
registered, return receipt requested or (b) sent by air express courier with
charges prepaid, and addressed as follows (or to such other address as the party
to receive the notice or request so designates by written notice to the other
party):       Notices to COMPANY:

     
     Attention:
  General Counsel
 
  Transmeta Corporation
 
  3990 Freedom Circle
 
  Santa Clara, CA 95054
 
  USA
 
   
     Notices to MICROSOFT:
  MICROSOFT CORPORATION
 
  One Microsoft Way
 
  Redmond, WA 98052-6399
 
   
     Attention:
   
 
 
 
 
   
     Copy to:
  Law & Corporate Affairs
     Fax:
  (425) 936-7329

    or to such other address as the party to receive the notice or request so
designates by written notice to the other.   10.   Insurance.       (a) COMPANY
warrants that it shall maintain sufficient insurance coverage to enable it to
meet its obligations created by this Agreement and by law. Without limiting the
foregoing, COMPANY warrants that such insurance shall include the following* *
*.       (b) In addition, if:

     (1) the WORK consists of, includes, or results in any intellectual property
(including without limitation, material capable of being protected by copyright,
trade secret, or trademark law); or
     (2) COMPANY’s performance of the WORK constitutes such professional
consulting services as:
(i) system development, design, or maintenance;
(ii) technical support; or
(iii) financial services (e.g., collections, and transaction authorization); or
(iv) engages in any services considered “Professional Services”

    then COMPANY shall maintain * * *. Such insurance shall include coverage for
* * *. * * *.   (c)   Upon request, COMPANY shall deliver to MICROSOFT proof of
such coverage. In the event that COMPANY’s proof evidences coverage which
MICROSOFT reasonably determines to be less than that required to meet COMPANY’s
obligations created by this Agreement, then COMPANY agrees that it shall
promptly acquire such coverage and notify MICROSOFT in writing thereof.

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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11.   Miscellaneous.       (a) Independent Contractor Status; Taxes.      
(i) Independent Contractor Status This Agreement is not intended to create any
relationship other than that of COMPANY acting as an independent contractor
performing WORK for MICROSOFT. Neither party is a partner of the other for any
purpose whatsoever. Nothing herein shall be construed as: (1) creating an
employer-employee relationship, (2) creating an exclusive relationship between
the parties, (3) preventing either party from entering into the same or similar
relationship with others, or (4) creating a minimum commitment for business from
MICROSOFT to COMPANY. Under no circumstance shall COMPANY or COMPANY’s employees
be construed as employees of MICROSOFT, or entitled to participate in the profit
sharing, pension or other plans established for the benefit of MICROSOFT
employees. COMPANY shall provide MICROSOFT with satisfactory proof of
independent contractor status upon request.       (ii) Employment-Related Taxes,
Insurance and Benefits. COMPANY shall be responsible for all of COMPANY’s
federal and state taxes, withholding, social security, insurance and other
benefits on behalf of COMPANY and COMPANY’s employees. Notwithstanding the
foregoing, COMPANY warrants that if the Internal Revenue Service or any state or
local agency determines that COMPANY is a common law employee of MICROSOFT and
therefore subject to withholding and payroll taxes (e.g. federal income tax,
FICA, FUTA, etc.), COMPANY shall fully indemnify, defend and hold MICROSOFT
harmless from all such withholding and payroll taxes, and associated interest
and penalties, if any, assessed against MICROSOFT in connection with such
determination.       (iii) Other Taxes. The amounts to be paid by MICROSOFT to
COMPANY hereunder do not include any foreign, U.S. federal, state, local,
municipal or other governmental taxes, duties, levies, fees, excises or tariffs
of any kind that may arise as a result of or in connection with this Agreement
(“Taxes”). MICROSOFT is not and shall not be liable for any Taxes, which are and
shall be COMPANY’s financial responsibility. COMPANY shall fully indemnify,
defend and hold MICROSOFT harmless from all Taxes, and all claims, causes of
action, costs (including without limitation reasonable attorneys’ fees) and any
other liabilities of any nature whatsoever related to Taxes. If any Taxes are
withheld on any amounts otherwise to be paid by MICROSOFT to COMPANY, MICROSOFT
will deduct such Taxes from the amount otherwise owed to COMPANY and pay them to
the appropriate taxing authority. At COMPANY’s written request and expense,
MICROSOFT will use reasonable efforts to assist COMPANY in obtaining tax
certificates or other appropriate documentation evidencing such payment, but the
responsibility for such documentation shall remain with COMPANY.      
(b) Remove/Replace Employees or Subcontractors. MICROSOFT may request the
immediate removal of COMPANY or any COMPANY employee or Subcontractor who
behaves in a manner that is unlawful or inconsistent with any MICROSOFT policy,
or that is otherwise deemed unacceptable to MICROSOFT. If as a result of
complying with a valid court order or for any business reason MICROSOFT asks
COMPANY to promptly remove and/or replace any COMPANY employee or Subcontractor
assigned to perform any WORK, COMPANY will do so promptly. .      
(c) Assignment. The WORK is personal and unique, and MICROSOFT relies upon the
qualifications, reputation and expertise of COMPANY to perform all of COMPANY’s
obligations under this Agreement, as well as upon COMPANY’s affirmative
representation that COMPANY has the resources and expertise to perform all WORK.
Accordingly, COMPANY acknowledges and agrees that COMPANY will not sell, assign,
transfer, pledge or encumber any of COMPANY’s rights or delegate any of its
duties or obligations under this Agreement (by actual assignment or by operation
of law, including without limitation through a merger, acquisition,
consolidation, exchange of shares, or sale or other disposition of assets,
including disposition on dissolution), without the prior written consent of
MICROSOFT. Notwithstanding the foregoing however, COMPANY may

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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    subcontract portions of the WORK which do not relate to the development of
software without the prior written consent of MICROSOFT provided that COMPANY’s
remains responsible for performance of the WORK as described in this Agreement.
MICROSOFT may assign this Agreement to any of its affiliates, existing now or in
the future, without COMPANY’s prior consent. This Agreement shall inure to and
bind all successors, assigns, receivers and trustees of the respective parties

    (d) Governing Law; Jurisdiction. This Agreement shall be construed and
controlled by the laws of the State of Washington, USA. COMPANY consents to the
exclusive jurisdiction and venue in the federal courts sitting in King County,
Washington unless no federal subject matter jurisdiction exists, in which case
COMPANY consents to the exclusive jurisdiction and venue in the Superior Court
of King County, Washington. COMPANY waives all defenses of lack of personal
jurisdiction and forum non conveniens. Process may be served on either party in
the manner authorized by applicable law or court rule. In any action to enforce
any right or remedy under this Agreement, or to interpret any provision of this
Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys’ fees, costs and other expenses.

    (e) Construction; No Waiver. If a court of competent jurisdiction finds any
provision of this Agreement or portion thereof, to be unenforceable, then this
Agreement shall immediately be deemed amended or modified to exclude such clause
or provision and the remainder of this Agreement shall continue in full force
and effect. No failure by either party to exercise a right under this Agreement
or under law shall operate as a waiver thereof. No waiver of any breach of this
Agreement shall constitute a waiver of any other breach. No waiver shall be
effective unless in writing and signed by the waiving party.

    (f) English Language. This Agreement is executed in the English language,
which shall be the sole and controlling language used in interpreting or
construing its meaning. Any translation of this Agreement into a language other
than English shall be for reference only and shall not affect the interpretation
hereof.

    (g) Entire Agreement; Amendments. This Agreement contains the entire
agreement between the parties concerning its subject matter, and supersedes all
oral understandings, representations, prior discussions and preliminary
agreements of any nature. Any representations, warranties, promise or conditions
not expressly contained in this Agreement shall not be binding upon the parties.
This Agreement does not constitute an offer by Microsoft and it shall not be
effective until signed by both parties. This Agreement may be executed in
counterparts, each of which when so executed shall be deemed to be an original,
and all of which taken together shall constitute one and the same Agreement.
Except as may be specifically allowed hereunder, this Agreement may not be
modified or amended except by a written amendment to this Agreement dated after
the Effective Date and signed by authorized representatives of both parties,
except that Microsoft reserves the right to unilaterally amend its facility,
security, access and website policies, procedures and guidelines as it deems
necessary from time to time.

    (h) Diversity. COMPANY expressly acknowledges and agrees that MICROSOFT is
an equal opportunity employer and promotes a diverse work environment, and that
any remarks, gestures, or behaviors by COMPANY in connection with this Agreement
that are discriminatory toward or offensive to individuals on the basis of
gender, race, color, national origin, age, religion, or disability will be cause
for MICROSOFT to immediately terminate this Agreement or the subject Schedule.

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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     IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective Date written above.

      MICROSOFT CORPORATION   TRANSMETA CORPORATION
(“Company”)

     
/s/ Thomas L. Phillips
  /s/ Arthur L. Swift
 
   
By (Sign)
  By (Sign)
Thomas L. Phillips
  Arthur L. Swift
 
   
Name (Print)
  Name (Print)
GM
  President & CEO
 
   
Title
  Title
4/01/05
  4/1/05
 
   
Date
  Date
 
  77-0402448
 
   
 
  COMPANY’s Federal Employer ID

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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SCHEDULE A-1
This Schedule is made pursuant to that certain Master Services Agreement and
Intellectual Property Assignment (the “Agreement”), dated April 1, 2005 by and
between TRANSMETA CORPORATION (“COMPANY”) and Microsoft Corporation (“MS”).
A. Description of Work and Specifications (the “WORK”):
MS and COMPANY are entering into a development services agreement whereby
COMPANY will provide software development, hardware production, and other
services associated with the development of the * * * project (“* * *”). The
overall purpose of this work is to develop the Microsoft * * * software,
specifications, and reference model, all of which will be implemented by the
COMPANY in COMPANY provided computer systems.
All WORK created by COMPANY for MS under this Schedule A, including the
development of software for the * * * project, is and shall remain the sole and
confidential property of MS, and COMPANY may not disclose to nor use any of the
WORK for itself or for any third party.
B. Payment:
MS shall pay COMPANY an Up-front, non-refundable Retainer (“Retainer”) payment
amount in the amount of US $* * *. This payment is made by Microsoft in order to
accelerate the * * * project, an acceleration which is made possible by COMPANY
allocating more personnel and resources to the * * * project. In consideration
for this acceleration, COMPANY is requiring a non-refundable, fully paid up
retainer at the start of the quarter in question. In return for that retainer,
COMPANY will ensure that all required COMPANY resources are available for the
quarter.
MS and COMPANY both acknowledge that the Retainer amount will be used to offset
the future development costs for the * * * project by the COMPANY. Such an
offset will occur by applying using the Retainer as a credit for initial
invoices until the Retainer credit has been extinguished.
C. Delivery Schedule:
This Retainer is effective upon the joint execution of this agreement.
 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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This Schedule A-1 shall be attached to and incorporated into the Master Services
Agreement, and is subject to all of the terms and conditions of the Agreement.

     
MICROSOFT CORPORATION
  TRANSMETA CORPORATION
One Microsoft Way
  3990 Freedom Circle
Redmond, WA 98052
  Santa Clara, CA 95054
 
   
/s/ Thomas L. Phillips
  /s/ Arthur L. Swift
 
   
By (Sign)
  By (Sign)
Thomas L. Phillips
  Arthur L. Swift
 
   
Name (Print)
  Name (Print)
4/01/05
  4/1/05
 
   
Date
  Date

MS Contact: Tom Phillips
 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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EXHIBIT A
Microsoft Travel Policy For Vendors
In general, Microsoft does not pay for travel expenses. However, if Microsoft
has agreed to pay business travel expenses in the Schedule A or Agreement, the
following rules shall apply to the reimbursement of travel-related expenses.
Objectives

  •   Ensure all vendors have a clear and consistent understanding of policies
and procedures for business travel.     •   Provide vendor business travelers
with a reasonable level of service and comfort at the lowest possible cost.    
•   Maximize Microsoft’s ability to negotiate discounted rates with travel
program suppliers and reduce travel expenses.

Scope

  •   This travel policy applies to vendor travel conducted in connection with
delivering Work for Microsoft and for which vendor will seek reimbursement from
Microsoft.     •   These are minimum policy standards. Specific Microsoft
business units may impose greater control, at their discretion.

Vendors are expected to minimize travel-related expenses whenever possible.
Vendors should use the least expensive options, providing this does not result
in ineffective use of the working time or unnecessary inconvenience. Vendors
should ensure that Microsoft funds are used most effectively.
Vendor Responsibility

  •   The vendor is responsible for complying with the Microsoft travel policy.
    •   The vendor is responsible for obtaining Microsoft’s prior written
approval for incurring travel expenses for which reimbursement will be sought
from Microsoft.     •   Microsoft will reimburse vendors for all reasonable and
necessary expenses while traveling on authorized Microsoft business.

Microsoft shall have no obligation to reimburse vendors for expenses that are
not in compliance with this policy.
When a vendor utilizes MS Travel program for travel fulfillment and does not
book the lowest airfare, hotel or car rental rate offered, the travel system
will record the policy exception, and generate periodic exception reports which
will be reviewed by MS vendor managers.
Who to Contact on Travel Policy Issues
Any questions, concerns or suggestions regarding this policy may be directed to
prohelp@microsoft.com.
 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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Saturday Night Stay
Weekend hotel stays and expenses are reimbursable if the airfare savings due to
the Saturday night stay result in a lower overall cost for the trip is at least
$250 USD equivalent currency and the additional expenses fall within policy and
do not exceed the airfare savings.
Spouse/Companion Travel
Microsoft will not reimburse travel and entertainment expenses incurred by a
spouse or other individual accompanying a vendor on business.
Travel Arrangements

  •   Vendors should make reservations 7-21 days in advance of the date of
travel to take advantage of advance purchase discounts.

  •   Vendors utilizing MS Travel Program to fulfill travel requirements are
required to use program vendors whenever possible. MS Travel Management has
negotiated rates for air, hotel and car accommodations.

Vendors utilizing MS Travel Program for fulfillment must review and implement
all procedures as outlined in separate document “MS Travel Program – Vendors
Procedures” a copy of which is available by emailing a request to
tvlgpcal@microsoft.com.
Additional Travel Insurance Purchased by Vendors
The company will NOT reimburse expenses for additional travel insurance coverage
beyond what may be automatically included as part of making travel reservations
and which are at no additional expense to the traveler.
Air Travel
Airline Class of Service

Vendors will use the ‘lowest logical airfare’ available, in the majority of
cases this will entail Economy/Coach class travel.
Business Class Eligibility
Vendors will not be reimbursed for Business class travel unless explicitly
authorized in writing by Microsoft.
Upgrades for Domestic/International Air Travel
Upgrades at the expense of Microsoft are NOT permitted. Individual travel
arrangements should be managed independently if an airline upgrade is being
utilized.
Airline Frequent Flyer Programs
 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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Vendors may retain frequent flyer program benefits. However, participation in
these programs must NOT influence flight selection, which would result in
incremental cost to Microsoft beyond the lowest logical airfare, as defined in
this policy.
Airline Club Memberships
Microsoft will not reimburse vendors for club memberships.
Cancellations
If cancelled by Vendor, Vendor shall not seek any reimbursement for cancelled
travel. When a trip is cancelled by Microsoft after the ticket / invoice has
been issued, the traveler shall inquire about using the same ticket for future
travel for Microsoft or obtaining a refund to be applied to any request for
reimbursement. Travelers can reuse airline tickets if traveling within one year
and airfare eligibility requirements are met. Contact the designated travel
agency for assistance with this transaction if a traveler is not able to reuse
the ticket then it should be returned to the issuing travel agency.
Lost or Excess Baggage
Microsoft will not reimburse vendors for personal items lost while traveling on
business. The ultimate responsibility for retrieving and compensating lost
baggage lies with the airlines. Microsoft will reimburse vendors for excess
baggage charges only in the following circumstances:

  •   When vendor is traveling with heavy or bulky materials or equipment
necessary for performing Work for Microsoft;     •   Vendor’s excess baggage
consists of Microsoft records or property; or     •   Vendor is traveling on
Microsoft business for more than 14 days

Lodging
Reservations
Hotel reservations should NOT be made directly with the hotel. Vendors using MS
Travel Program — Hotel reservations must be made through one of the following
methods:
• Travelport (US based travelers only)
• Designated travel agency
• Event Registration when applicable
Hotel Selection Guidelines for Vendors using MS Travel Program
Vendors are required to use Microsoft Program properties in cities where there
are Microsoft negotiated rates. Refer to Microsoft’s preferred hotel database
http://msmarket/ (click on Travel then Hotel Program) or send an email to
prohelp@microsoft.com. If a Microsoft negotiated hotel rate is not available,
travelers should use an American Express rate or the least expensive property in
a similar hotel category.
Hotel Upgrades
Travelers may accept room upgrades to suites or executive floor rooms if the
upgrade is at no additional cost to Microsoft.
Hotel Cancellation Procedures
Vendors are responsible for canceling hotel rooms and must contact the
designated travel agency that made the reservation. Travelers should request and
record the cancellation number in case of billing
 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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disputes. Travelers should note that cancellation deadlines are based on the
local time of the property.
Hotel Frequent Guest Programs
Awards from such programs may be retained by travelers for personal use.
However, participation in these programs must not influence hotel selection,
which would result in incremental cost beyond the company’s specially negotiated
rate. Membership fees associated with joining these programs are not
reimbursable.
Car Rental
Car Rental Selection Guidelines for vendors using MS Travel Program
Vendors must use Program Car Rental vendors when renting while on Microsoft
business. See http://msmarket/(click on Travel) or send an email to
prohelp@microsoft.com. Vendors may upgrade their car rental if the upgrade is at
no cost to Microsoft.
Class of Service
Compact/Midsize car is standard; full-size when three or more vendors traveling
together.
Rental Car Refuel Provision
The traveler must refuel prior to returning the vehicle to avoid any related
fees.
Other Transportation
Rail Travel
Rail travel will be in Coach Class. Rail travel should be used when:

  •   It is less expensive than air travel and adds no more than one and a half
hours to the total travel time     •   It is more timely than driving

Expense Reimbursement
All travel-related business expenses must be accurately documented and approved
by the Microsoft Vendor Account Manager.
Reimbursable Expenses

  •   Airfare and surface transportation     •   Car rental     •  
Gratuities/tips (within reason)     •   Hotel/ lodging     •   Meals     •  
Parking and tolls

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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  •   Saturday night stay-over (Weekend hotel stays and expenses are
reimbursable if the airfare savings due to the Saturday night stay result in a
lower overall cost for the trip is at least $250 USD or equivalent currency and
the additional expenses fall within policy and do not exceed the airfare
savings.)

Non-Reimbursable Expenses
Non-reimbursable items, services, occurrences, and events include, but are not
limited to:

  •   Airline upgrade certificates     •   American Express Membership Rewards  
  •   Barber, hair stylist, manicurist, and other grooming costs     •  
Briefcases and luggage     •   Business entertainment     •   Charge card late
fees and interest charges     •   Clothing     •   Family / partner accompanying
traveler     •   Foreign travel document requirements     •   Free flight,
hotel, or car rental coupons     •   Hotel upgrades     •   Laundry and dry
cleaning     •   Massage and other spa charges     •   Personal aircraft or
non-approved aircraft charter expenses     •   Personal credit card fees     •  
Supplemental rental automobile insurance — CDW (Collision Damage Waiver), LDW
(Loss Damage Waiver), PAI (Personal Accident Insurance), PEC (Personal Effects
Coverage), LIS (Liability Insurance Coverage)     •   Telephone calls (not
Microsoft business related)     •   Trip or flight insurance     •   Use of
frequent flyer award tickets for business travel

Meals and Entertainment
Personal Meal Expenses
Personal meals are defined as meal expenses incurred by the traveler when on an
out-of-town business trip. Travelers will be reimbursed for personal meal
expenses according to actual and reasonable cost, using the guideline not to
exceed a daily amount of $75 USD or equivalent currency. Alternatively, per
diems may apply if required by Microsoft clients.
Entertainment
Vendors shall not charge entertainment expense back to Microsoft when
entertaining Microsoft employees or at any event in which Microsoft employees
were present.
 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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EXHIBIT B
Pre-Placement Policy
Microsoft requires that all vendors perform pre-placement background checks on
all personnel (including Company employees, agents, Subcontractors and
Subcontractor’s employees) performing work on behalf of Microsoft and requiring
access to Microsoft owned or leased facilities, or that require network access
(referred to as “Individual” or “Individuals”). This policy is a result of
proactive planning and is similar to other pre-placement policies throughout the
industry. Additionally, this policy is intended to help reduce corporate losses
from theft and reduce potential corporate liability by contributing toward a
safer and more secure work environment for everyone.
If any of the criteria apply, a background check is required prior to placement.
The primary purposes of the background check are to verify the truthfulness of
each Individual’s answers to questions about the Individual’s juvenile (to the
extent this applies) and adult criminal histories and to prevent the placement
of Individuals who have been convicted in the last ten (10) years of felonies
reasonably related to the work the Individual will do for Microsoft. Company is
responsible for making for the determination of whether a felony disclosed in a
background check is reasonably related to the work the Individual will do for
Microsoft. If Company is unsure of whether the felony is reasonably related to
the work the Individual will do at Microsoft, Company agrees to contact
Microsoft.
Company shall comply with all applicable laws when performing background checks
on each Individual, including without limitation compliance with the Fair Credit
Reporting Act and other laws on background checks.
Placement procedures:

1.   Prior to placement of an Individual at Microsoft, Company will obtain a
signed release form from the Individual Company is placing. In addition to
allowing Company to conduct the pre-placement background check and release the
data to Microsoft when requested (Microsoft agrees the data will remain
confidential), the release form must include the following questions with a box
for the Individual to check:       “In the last ten years, have you been
convicted of or pled guilty to any felony?” YES ( ) NO ( )       “In the last
ten years have you been released from prison on a felony conviction?” YES ( ) NO
( )       NOTE: A previous felony conviction or imprisonment on a felony
conviction will not necessarily eliminate you from consideration for employment
/ placement on assignment.

2.   In addition, the release form must include the following statement, which
the Individual must confirm is true prior to being placed by Company at
Microsoft:       “I have answered truthfully in response to the questions on
this form regarding my criminal conviction history, and I understand that I will
not be placed on assignment at Microsoft, or that if placed I will be removed
from assignment, in the event I have made any false statement regarding my
criminal conviction history or any other matter.”

3.   Prior to placement by Company of an Individual on assignment at a Microsoft
owned or leased facility, a pre-placement background and social security
verification check will be completed. A social security verification check
includes confirmation that the social security number is assigned to the
specific individual.

4.   Pre-placement background checks are also required when Individuals separate
from their current employer and are subsequently placed by another supplier at
Microsoft or if more than six months

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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    have transpired between assignments at Microsoft. Microsoft reserves the
right to request an updated pre-placement background check from the Company on
Individuals on assignment at Microsoft.

5.   If a background check produces information which will make an Individual an
unacceptable placement, or if Microsoft learns that the Individual has falsified
his/her statement, Microsoft expects the Company to take complete responsibility
for removal of the Individual from Microsoft property. In addition, Microsoft
expects Company to absorb all related costs.

6.   If Company becomes aware of criminal felony activity by an Individual while
assigned to Microsoft, Company must inform its Microsoft business contact
immediately but in no event later than 24 hours after becoming aware of the
information.

7.   Compliance with the policy requirements will occur at least quarterly in
the form of random inquiries to Company by Microsoft Corporate. When requested,
Company will need to be prepared to respond to all inquiries from Microsoft
regarding background checks within one business day.

8.   When Company conducts felony screenings, Company will monitor any possible
disparate impact on a legally protected class. Data in this area are subject to
review periodically by Microsoft Legal and Security Departments to determine
whether program modifications are necessary.       At a minimum, Company should
use an established and reputable commercial background check company.

10.   Notwithstanding the indemnification provisions of Section 8 of the
Agreement, Company agrees to indemnify Microsoft from any liability Microsoft
may sustain as a result of Company’s failure to adhere to Microsoft’s background
check requirement or Company’s failure to comply with all applicable laws in
conducting a background check on Individuals.

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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EXHIBIT C
VENDOR CODE OF CONDUCT
Microsoft Vendor Code of Conduct
The Microsoft Standards of Business Conduct (www.microsoft.com) are a general
guide to the Company’s standards of business practices and regulatory
compliance. Its requirements apply to Microsoft Corporation, to all
subsidiaries, or affiliates in which Microsoft Corporation directly or
indirectly owns more than 50 percent of the voting control (“Controlled
Affiliates”), and to all directors, officers, and employees of each. All
references to “Microsoft” include Microsoft Corporation and all Controlled
Affiliates unless otherwise specified.
It is Microsoft’s intention to select and retain vendors (“Vendors”) who share
and embrace the letter and spirit of our commitment to integrity. We understand
that Vendors are independent entities; however, the business practices and
actions of a vendor may impact and/or reflect upon Microsoft. Because of this,
Microsoft requires all Vendors and their employees, agents, and subcontractors
(Vendors’ employees, agents, and subcontractors shall hereinafter be referred to
collectively as “Representatives”) to adhere to standards of business conduct
and compliance while they are conducting business with and/or on behalf of
Microsoft, that are similar to what Microsoft expects from its own employees.
The information outlined below is important and should be read carefully. All
Microsoft Vendors will be required to educate and, when appropriate, train their
Representatives to ensure they understand and comply with the Microsoft Vendor
Code of Conduct.
The policies summarized below are not all-inclusive, and there may be other
conduct not specifically listed that will be considered unacceptable for a
Vendor and/or its Representatives. Microsoft requires that Vendors and their
Representatives conduct themselves in a professional manner at all times while
on Microsoft property or while conducting business with and/or on behalf of
Microsoft. Vendors with questions regarding the Microsoft Vendor Code of Conduct
should e-mail msvpinfo@microsoft.com or contact Microsoft via other means as
detailed under the “Reporting of Questionable Behavior and/or Possible
Violations” section of this code, regarding their concerns.
LEGAL AND REGULATORY COMPLIANCE PRACTICES
All Microsoft Vendors shall conduct their business activities in full compliance
with the applicable laws and regulations of their respective countries and all
United States laws applicable to Microsoft, while conducting business with
and/or on behalf of Microsoft in a foreign jurisdiction and shall require that
their Representatives do the same. There are no circumstances that would allow
for the disregard of any applicable law or regulatory requirement in the conduct
of a Vendor’s business activities and none will be tolerated by Microsoft.
Vendors shall promptly notify the Microsoft Law and Corporate Affairs Department
of any conflict between U.S. and applicable law by sending an e-mail to
buscond@microsoft.com or via other means of contact detailed under the
“Reporting of Questionable Behavior and/or Possible Violations” section of this
code. In addition to any specific obligations under Vendor’s agreement with
Microsoft, all Microsoft Vendors shall, without limitation:

  •   Comply with the anti-corruption laws of the countries in which they do
business and the United States Foreign Corrupt Practices Act (“FCPA”). Microsoft
Vendors may not make any direct or indirect payments or promises of payment to
foreign government officials for the purpose of inducing the individual to use
or misuse his/her position to obtain or retain business.

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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  •   Not participate in international boycotts that are not sanctioned by the
U.S. government or applicable laws.     •   Comply with all applicable trade
control and applicable laws as well as all export, re-export and import
requirements.     •   Conduct their business in full compliance with antitrust
and fair competition laws that govern the jurisdictions in which they conduct
business.     •   Comply with all applicable environmental laws and regulations
regarding the use and preservation of land, air, and water.     •   Be honest,
direct, and truthful in discussions with regulatory agency representatives and
government officials.

BUSINESS PRACTICES
Microsoft Vendors and their Representatives shall conduct their business
interactions and activities with integrity and in accordance with their
obligations under specific agreements with Microsoft. While many Microsoft
Vendors may have their own compliance requirements, business practice standards,
and/or codes of business conduct, it is essential that all Microsoft Vendors and
Representatives understand and uphold the requirements for acceptable business
conduct at Microsoft when doing business with and/or on behalf of Microsoft. In
addition to any specific obligations under Vendor’s agreement with Microsoft,
all Microsoft Vendors shall, without limitation:

  •   Honestly and accurately record and report all business information and
comply with all applicable laws regarding their completion and accuracy.     •  
Create, retain, and dispose of business records in full compliance with all
applicable legal and regulatory requirements.     •   Protect and responsibly
use both the physical and intellectual assets of Microsoft including property,
supplies, consumables, and equipment when authorized by Microsoft to use such
assets.     •   Use Microsoft provided information technology and systems
(including e-mail) only for authorized Microsoft business-related purposes.
Microsoft strictly prohibits Vendors and Representatives from using Microsoft
technology and systems to create, access, store, print, solicit, or send any
material that is intimidating, harassing, threatening, abusive, sexually
explicit or otherwise offensive or inappropriate and/or send any false,
derogatory, or malicious communications using Microsoft provided information
assets and systems.     •   Comply with all Microsoft requirements for
maintenance of passwords, confidentiality, security, and privacy procedures as a
condition of receiving access to Microsoft’s internal corporate network, all
systems and buildings. All data stored or transmitted on Microsoft owned or
leased equipment is not to be considered private and is the property of
Microsoft. Microsoft may monitor all use of the corporate networks and all
systems (including e-mail) and/or access all data stored or transmitted using
the Microsoft network.     •   Comply with the intellectual property ownership
rights of Microsoft and others including but not limited to copyrights,
trademarks, and trade secrets. Use software, hardware and content only in
accordance with their associated license or terms of use.     •   Not distribute
or cause to be distributed, any form of literature, materials or other
information on Microsoft owned or leased property (such as brochures,
publications, advertisements, surveys, announcements, or flyers) unrelated to
Microsoft business in Microsoft work areas (such as offices, cubicles, copy
rooms, and/or conference rooms) at any time. Distribution of such materials
using the Microsoft network or e-mail system is also strictly prohibited.

 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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  •   Speak to the press on Microsoft’s behalf only if Vendor and/or
Representative(s) is expressly authorized in writing to do so by Microsoft.    
•   Use good judgment, discretion, and moderation when offering gifts or
entertainment to Microsoft employees. In doing so, the Vendor and/or its
Representatives will refrain from giving Microsoft employees an individual gift
or a combination of gifts with a value greater than $200.00 and never offer a
bribe, kickback, bartering arrangement for goods or services, and/or any other
incentive to a Microsoft employee in order to obtain or retain Microsoft
business.     •   Avoid the appearance of or actual improprieties and/or
conflicts of interests. Vendors and/or their Representatives shall not deal
directly with any Microsoft employee whose spouse, domestic partner, or other
family member or relative holds a significant financial interest in the Vendor.
Dealing directly in the course of negotiating the Vendor agreement or performing
the Vendor’s obligations with a spouse, domestic partner, or other family member
or relative who is employed by Microsoft is also prohibited.     •   Avoid
insider trading by buying or selling Microsoft’s or another company’s stock when
in possession of information about Microsoft or another company that is not
available to the investing public and that could influence an investor’s
decision to buy or sell stock.

EMPLOYMENT PRACTICES
Microsoft expects its Vendors to share its commitment to diversity, equal
employment opportunity, and a safe and harassment free workplace. Microsoft
Vendors shall conduct their employment practices in full compliance with all
applicable laws, and regulations in all of their global operations. In addition
to any specific obligations under Vendor’s agreement with Microsoft, all
Microsoft Vendors shall, without limitation:

  •   Cooperate with Microsoft’s commitment to a workforce free of harassment
and unlawful discrimination.     •   Provide a safe and healthy work environment
and fully comply with all applicable safety and health regulations and
practices.     •   Prohibit the use, possession, distribution, and/or sale of
alcohol and/or illegal drugs while on Microsoft owned or leased property.     •
  Use only voluntary labor. The use of forced labor whether in the form of
indentured labor, bonded labor, or prison labor by a Microsoft Vendor and/or its
subcontractors is prohibited.     •   Comply with all minimum age laws and
requirements and not employ child labor.     •   Comply with all applicable laws
governing compensation and working hours. In those countries where there is no
applicable standard, overtime shall be paid, at a minimum, at the rate equal to
the employee’s regular wages.     •   In those instances where housing is
provided by Vendors, assure Representatives’ housing meets all applicable laws
and regulations.

COMPLIANCE WITH THE MICROSOFT VENDOR CODE OF CONDUCT
It is the responsibility of the Vendor to ensure that its Representatives
understand and comply with the Microsoft Vendor Code of Conduct and to inform
its Microsoft contact (or a member of Microsoft management) if and when any
situation develops that requires the Vendor to operate in violation of the code
set forth in this document.
 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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ENFORCEMENT OF AND COMPLIANCE VERIFICATION WITH THE MICROSOFT VENDOR CODE OF
CONDUCT
Microsoft intends to enforce the terms of the Vendor Code of Conduct in
accordance with the terms of Vendor’s agreement with Microsoft and will not
tolerate any departure from its standards. Microsoft Vendors are expected to
self-monitor their compliance with this Vendor Code of Conduct. As part of
Microsoft’s compliance verification process, Microsoft may utilize internal
and/or external (third-party) monitors to conduct, unannounced, on-site audits
of Vendors and their facilities. Audits may include but not be limited to
inspections of physical facilities, record and document review, and interviews
with Representatives.
In addition to any other rights Microsoft may have under its agreement with
Vendor, Microsoft may request the immediate removal of any Representative who
behaves in a manner that is unlawful or inconsistent with this Code, any
Microsoft policy, or that is otherwise deemed unacceptable to Microsoft.
COMPLIANCE ACKNOWLEDGEMENT
All Vendors may be required, as a condition for maintaining an active vendor
relationship with Microsoft, to acknowledge their obligation to comply with the
Microsoft Vendor Code of Conduct.
REPORTING OF QUESTIONABLE BEHAVIOR AND/OR POSSIBLE VIOLATIONS
If you wish to report a questionable behavior or possible violation of the
Vendor Code of Conduct, Microsoft has a variety of resources available to assist
you. You are encouraged to work with your Microsoft contact in resolving a
business practice or compliance concern. However, Microsoft recognizes that
there may be a time when this is not possible or appropriate. In such instances,
contact any of the following:

  1.   The Microsoft Business Conduct Line at 1-877-320-MSFT (6738).     2.   If
you are calling from outside the United States, you may make a collect call to
the Business Conduct Line by accessing an international operator and asking to
place a collect call to 1-704-540-0139.     3.   If you are a Vendor with access
to Microsoft’s intranet, you may send an e-mail to the Director of Compliance by
e-mailing the Business Conduct and Compliance alias, buscond@microsoft.com.    
4.   Send a letter to the Director of Compliance at Microsoft Corporation, Law
and Corporate Affairs, One Microsoft Way, Redmond, WA 98052 or send a
confidential fax to 1-425-705-2985.

Microsoft will not tolerate any retribution or retaliation taken against any
individual who has, in good faith, sought out advice or has reported
questionable behavior and/or a possible violation.
 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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EXHIBIT D
Vendor Subcontractor Requirements
To the extent that Company is providing products and/or performing services for
Microsoft in the United States pursuant to this Agreement and is authorized to
obtain and does obtain some or all of the products and/or services from any
third party in fulfilling its obligations under this Agreement (the “Third Party
Products and/or Services”), Company agrees to acquire Third Party Products
and/or Services from the following:

1.   Minority Owned and Operated Businesses. Company’s obligation shall include
at least five percent (5%) of the total amount paid by Company to suppliers of
Third Party Products and/or Services attributable to Third Party Products and/or
Services obtained from Minority Owned and Operated Businesses. For purposes of
this section, “Minority-Owned and Operated Businesses” shall mean businesses
(a) which are at least fifty-one percent (51%) owned by a Minority Person or
Persons or, in the case of any publicly owned business, at least fifty-one
percent (51%) of the stock of which is owned by a Minority Person or Persons and
(b) whose management and daily business operations are controlled by one or more
of the same Minority Person or Persons having such ownership interest. For
purposes of this section, “Minority Person or Persons” shall mean one or more
individuals who is/are US citizens, residing in the United States, and who
is/are (a) African-American/Black, (b) Hispanic, (c) Asian-American/Pacific
Islander (including native Hawaiians), (d) Asian Indian, and/or (e) Native
American/American Indian (enrolled in a federally recognized tribe); and

2.   Women Owned and Operated Businesses. Company’s obligation shall include at
least five percent (5%) of the total amount paid by Company to suppliers of
Third Party Products and/or Services attributable to Third Party Products and/or
Services obtained from Women Owned and Operated Businesses. For purposes of this
section, “Women-Owned and Operated Businesses” shall mean businesses (a) which
are at least fifty-one percent (51%) owned by one or more women residing in the
United States, or, in the case of any publicly owned business, at least
fifty-one percent (51%) of the stock of which is owned by one or more women
residing in the United States and (b) whose management and daily business
operations are controlled by one or more of the same women having such ownership
interest.

In the event Company is unable to comply with the percentage purchase
requirements of Sections 1. and 2 above after using best efforts, Company shall
have the right to include in the calculation of the amount paid by Company to
suppliers of Third Party Products and/or Services attributable to Third Party
Products and/or Services, those amounts paid by Company to (i) Minority Owned
and Operated Businesses and (ii) Women Owned and Operated Businesses.
By the 10th business day following November 30 and May 31, Company shall
complete all information required on Microsoft Subcontractor Reporting Form and
submit the completed form via email to MSVPinfo@microsoft.com or in writing to
the address specified in the PAG. The Microsoft Subcontractor Reporting Form,
when signed by an officer of Company, shall indicate Company’s compliance with
the requirements of this section. The information provided by Company on the
Microsoft Subcontractor Reporting Form shall include, but may not be limited to,
the name(s) of all third parties from which Company obtains Third Party Products
and/or Services and the total dollar amount of such purchases for the preceding
six months. Company agrees that the total dollar amount of such purchases shall
not be co-reported or double-reported to government agencies or other third
parties. Company shall include in the email delivering the Microsoft
Subcontractor Reporting Form the name of a specific Company employee contact
responsible for administration of Company’s obligations under this section (the
“Company Contact”).
 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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If Company has used best efforts to fulfill its obligations under this section
(including the efforts identified above) but has failed to do so for reasons
beyond Company’s reasonable control, then the Company Contact shall, at
Microsoft’s request:

1.   Meet with the Microsoft Vendor Account Manager (“VAM”) and Supplier
Diversity Program Manager to discuss Company’s efforts to comply with this
section. If the VAM and Supplier Diversity Program Manager determine that
Company has made best, but unsuccessful, efforts to be in compliance with this
section, then, at Microsoft’s sole reasonable discretion, (a) Microsoft shall
not enforce Company’s obligations under this section for a period not to exceed
the timeframe required by Company to comply with the provisions of subsection 2,
below, (b) Microsoft shall confirm the same in writing, and (c) Microsoft shall
not consider Company to be in breach of its obligations under this section, and

2.   Develop, in conjunction with the VAM and Supplier Diversity Program
Manager, a mutually agreeable plan (including, but not limited to, a compliance
timeline, quarterly compliance milestones, and quarterly reporting requirements)
by which Company shall come into compliance with its obligations under this
section.

If, after meeting with the Company Contact as provided above, Microsoft
determines in its sole reasonable discretion that it is not feasible or
reasonable to require Company’s full compliance with this section, Microsoft
shall either (a) modify the percentage requirements in order to facilitate
Company’s compliance or (b) eliminate Company’s obligation to comply with this
section in its entirety.
The provisions of the above Vendor Subcontractor Obligations shall not apply if
Company’s annual receipts are less than Eighteen Million U.S. Dollars
(18,000,000 USD) and the Company qualifies as a small business as defined under
the Small Business Administration’s Table of Size Standards dated October 1,
2002. Company must indicate they are exempt from reporting on its Vendor
Subcontracting Reporting Form by checking the field stating that they are exempt
from reporting. The parties to this Agreement shall review compliance with this
the above Vendor Subcontractor Obligations at each subsequent renewal.
 

* * *   Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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VENDOR SUBCONTRACTING REPORTING

                     
Company Name
      Vendor Number    
 
                 
Street Address
           
 
                 
Street Address
           
 
                 
City
  State   Zip    
 
                 
Reporting Period
           
 
               

                                            Current             MSVP     Percent
    Actual YTD   Subcontract Awards   Requirement     Goal     US Dollers    
Percent  
Total billed to Microsoft
                  $            
Total amount billed to Microsoft that was subcontracted
                  $            
1 Minority owned and operated businesses
    5 %     0 %   $           %
2. Women owned and operated businesses
    5 %     0 %   $           %
3. Total of 1 and 2
    10 %     0 %   $           %

Company’s annual receipts are less than Eighteen Million U.S. Dollars
(18,000,000 USD) and that Company qualifies as a small business as defined under
the Small Business Administration’s Table of Size Standards dated October 1,
2002 as such, reporting is not required during this reporting period.
I,
                                                                                ,
attest that the foregoing is true and correct.
Signed:
                                                                                Title:                                                            
Phone:                                         E-mail:
                                        
 

* * * Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidential
request. Omissions are designated as * * *. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.

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Microsoft Confidential