Document:

Microsoft Corporation 1991 Stock Option Plan

 Exhibit 10.2 
  
 MICROSOFT CORPORATION 
  
 1991 STOCK OPTION PLAN 
 (as amended and
restated as of November 15, 2004) 
  
 1. Purpose of the
Plan. The purposes of this Stock Option Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to such individuals, and to promote the success of the
Company’s business by aligning employee financial interests with long-term shareholder value. 
  
 Options granted hereunder may be either Incentive Stock Options or Nonqualified Stock Options, at the discretion of the Board and as reflected in the
terms of the written option agreement. 
  
 2. Definitions.
As used herein, the following definitions shall apply: 
  
 (a)
“Board” shall mean the Committee, if such Committee has been appointed, or the Board of Directors of the Company, if such Committee has not been appointed. 
  
 (b) “Code” shall mean the Internal Revenue Code of 1986, as amended. 
  
 (c) “Committee” shall mean the Committee appointed by the
Board of Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is appointed; provided, however, if the Board of Directors appoints more than one Committee pursuant to Section 4, then “Committee” shall refer to the
appropriate Committee, as indicated by the context of the reference. 
  
 (d) “Common Shares” shall mean the common shares of Microsoft Corporation. 
  
 (e) “Company” shall mean Microsoft Corporation, a Washington corporation and any successor thereto. 
  
 (f) “Continuous Status as an Employee” shall mean the
absence of any interruption or termination of service as an Employee. Continuous Status as an Employee shall not be considered interrupted in the case of sick leave, maternity leave, infant care leave, medical emergency leave, military leave, or any
other leave of absence authorized in writing by a Vice President of the Company prior to its commencement. 
  
 (g) “Employee” shall mean any person, including officers, employed by the Company or any Parent or Subsidiary of the Company. 

 
 (h) “Incentive Stock Option” shall mean any Option
intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. 
  
 (i) “Maximum Annual Employee Grant” shall have the meaning set forth in Section 5(e). 

 (j) “Non-Employee Director” shall have the same meaning as defined or interpreted for
purposes of Rule 16b-3 (including amendments and successor provisions) as promulgated by the Securities and Exchange Commission pursuant to its authority under the Exchange Act (“Rule 16b-3”). 
  
 (k) “Nonqualified Stock Option” shall mean an Option not
intended to qualify as an Incentive Stock Option. 
  
 (l)
“Option” shall mean a stock option granted pursuant to the Plan. 
  
 (m) “Optioned Shares” shall mean the Common Shares subject to an Option. 
  
 (n) “Optionee” shall mean an Employee who receives an Option. 
  
 (o) “Outside Director” shall have the same meaning as defined or interpreted for purposes of Section 162(m)
of the Code. 
  
 (p) “Parent” shall mean a
“parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code. 
  
 (q) “Plan” shall mean this 1991 Stock Option Plan, including any amendments thereto. 
  
 (r) “Share” shall mean one Common Share, as adjusted in
accordance with Section 11 of the Plan. 
  
 (s)
“Subsidiary” shall mean (i) in the case of an Incentive Stock Option a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code, and (ii) in the case of a Nonqualified Stock
Option, in addition to a subsidiary corporation as defined in (i), a limited liability company, partnership or other entity in which the Company controls 50 percent or more of the voting power or equity interests. 
  
 3. Shares Subject to the Plan. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of shares which may be optioned and sold under the Plan is 4,202,262,379 Common Shares. The Shares may be authorized, but unissued, or reacquired Common Shares. 
  
 If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto shall become available for future grant or awards under the Microsoft Corporation 2001 Stock Plan (the “2001 Plan”). 
  
 4. Administration of the Plan. 
  
 (a) Procedure. The Plan shall be administered by the Board of
Directors of the Company. 
  

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 (1) The Board of Directors may appoint one or more Committees each consisting of not less than two
members of the Board of Directors to administer the Plan on behalf of the Board of Directors, subject to such terms and conditions as the Board of Directors may prescribe. Once appointed, such Committees shall continue to serve until otherwise
directed by the Board of Directors. 
  
 (2) Any grants of Options
to officers who are subject to Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”) shall be made by (i) a Committee of two or more directors, each of whom is a Non-Employee Director and an Outside Director or (ii) as
otherwise permitted by both Rule 16b-3, Section 162(m) of the Code and other applicable regulations. 
  
 (3) Subject to the foregoing subparagraphs (1) and (2), from time to time the Board of Directors may increase the size of the Committee(s) and appoint
additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, or fill vacancies however caused. 
  
 (b) Powers of the Board. Subject to the provisions of the Plan, the Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options or Nonqualified Stock Options; (ii) to determine, in accordance with Section 8(b) of the Plan, the fair market value of the Shares; (iii) to determine, in accordance with Section 8(a) of the Plan, the exercise price per share of Options to
be granted; (iv) to determine the Employees to whom, and the time or times at which, Options shall be granted and the number of Shares to be represented by each Option; (v) to interpret the Plan and the terms of Options; (vi) to prescribe, amend,
and rescind rules and regulations relating to the Plan; (vii) to determine the terms and provisions of each Option granted (which need not be identical) and, with the consent of the holder thereof, modify or amend any Option; (viii) to reduce the
exercise price per share of outstanding and unexercised Options; (ix) to accelerate or defer (with the consent of the Optionee) the vesting or exercise date of any Option; (x) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted by the Board; and (xi) to make all other determinations deemed necessary or advisable for the administration of the Plan; provided that, no consent of an Optionee is
necessary under clauses (vii) or (ix) if the modification, amendment, acceleration, or deferral in the reasonable judgment of the Board confers a benefit on the Optionee, or is made pursuant to an adjustment in accordance with Section 11.

  
 (c) Effect of Board’s Decision. All decisions,
determinations, and interpretations of the Board shall be final and binding on all Optionees and any other holders of any Options granted under the Plan. 
  
 5. Eligibility. 
  
 (a) Options may be granted only to Employees. For avoidance of doubt, directors are not eligible to participate in the Plan unless they are full-time
Employees. 
  
 (b) Each Option shall be designated in the written
option agreement as either an Incentive Stock Option or a Nonqualified Stock Option. However, notwithstanding such designations, to the extent that the aggregate fair market value of the Shares with respect to 
  

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 which Options designated as Incentive Stock Options are exercisable for the first time by any Optionee during any
calendar year (under all plans of the Company) exceeds $100,000, such Options shall be treated as Nonqualified Stock Options. 
  
 (c) For purposes of Section 5(b), Options shall be taken into account in the order in which they were granted, and the fair market value of the Shares
shall be determined as of the time the Option with respect to such Shares is granted. 
  
 (d) Nothing in the Plan or any Option granted hereunder shall confer upon any Optionee any right with respect to continuation of employment with the Company, nor shall it interfere in any way with the Optionee’s
right or the Company’s right to terminate the employment relationship at any time, with or without cause. 
  
 (e) The maximum number of Shares with respect to which an Option or Options may be granted to any Employee in any one taxable year of the Company shall
not exceed 16,000,000 shares (the “Maximum Annual Employee Grant”). 
  
 6. Term of Plan. The Plan shall become effective upon its adoption by the Board. No new Options may be granted under the Plan, provided that Shares subject to the Plan (other than Shares issued in the exercise
of Options granted under the Plan) shall be available for grants and awards under the 2001 Plan as provided in Section 3 and awards shall be subject to adjustment as provided in Section 11. 
  
 7. Term of Option. The term of each Option shall be no more than ten
(10) years from the date of grant. However, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns Shares representing more than ten percent (10%) of the voting power of all classes of shares of
the Company or any Parent or Subsidiary, the term of the Option shall be no more than five (5) years from the date of grant. 
  
 8. Exercise Price and Consideration. 
  
 (a) The per Share exercise price under each Option shall be such price as is determined by the Board, subject to the following: 
  
 (1) In the case of an Incentive Stock Option 
  
 (i) granted to an Employee who, at the time of the grant of such Incentive
Stock Option, owns shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the fair market value per Share on
the date of grant. 
  
 (ii) granted to any other Employee, the
per Share exercise price shall be no less than 100% of the fair market value per Share on the date of grant. 
  

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 (2) In the case of a Nonqualified Stock Option the per Share exercise price may be less than, equal to,
or greater than the fair market value per Share on the date of grant. 
  
 (b) The fair market value per Share shall be the closing price per share of the Common Share on the Nasdaq Stock Market (“Nasdaq”) on the date of grant. If the Shares cease to be listed on Nasdaq, the Board shall designate an
alternative method of determining the fair market value of the Shares. 
  
 (c) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Board at the time of grant and may consist of cash and/or check. Payment may also be made
by delivering a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale proceeds necessary to pay the exercise price. If the Optionee is an officer of the Company
within the meaning of Section 16 of the Exchange Act, he may in addition be allowed to pay all or part of the purchase price with Shares. If the Optionee is a participant in the 1998 Microsoft Corporation Stock Option Gain And Bonus Deferral
Program, he may in addition be allowed to pay all or part of the purchase price of any deferred Option with Shares. Shares used by officers to pay the exercise price shall be valued at their fair market value on the exercise date. 
  
 (d) Prior to issuance of the Shares upon exercise of an Option, the Optionee
shall pay any federal, state, and local withholding obligations of the Company, if applicable. If an Optionee is an officer of the Company within the meaning of Section 16 of the Exchange Act, he may elect to pay such withholding tax obligations by
having the Company withhold Shares having a value equal to the amount required to be withheld. The value of the Shares to be withheld shall equal the fair market value of the Shares on the day the Option is exercised. The right of an officer to
dispose of Shares to the Company in satisfaction of withholding tax obligations shall be deemed to be approved as part of the initial grant of an option, unless thereafter rescinded, and shall otherwise be made in compliance with Rule 16b-3 and
other applicable regulations. 
  
 9. Exercise of Option.

  
 (a) Procedure for Exercise; Rights as a Shareholder.
Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Board at the time of grant, and as shall be permissible under the terms of the Plan. 
  
 An Option may not be exercised for a fraction of a Share. 
  
 An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full
payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the share certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with 
  

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 respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be
issued) such share certificate promptly upon exercise of the Option. In the event that the exercise of an Option is treated in part as the exercise of an Incentive Stock Option and in part as the exercise of a Nonqualified Stock Option pursuant to
Section 5(b), the Company shall issue a share certificate evidencing the Shares treated as acquired upon the exercise of an Incentive Stock Option and a separate share certificate evidencing the Shares treated as acquired upon the exercise of a
Nonqualified Stock Option, and shall identify each such certificate accordingly in its share transfer records. No adjustment will be made for a dividend or other right for which the record date is prior to the date the share certificate is issued,
except as provided in Section 11 of the Plan. 
  
 Exercise of an
Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 
  
 (b) Termination of Status as Employee. In the event of termination of
an Optionee’s Continuous Status as an Employee, such Optionee may exercise stock options to the extent exercisable on the date of termination. Such exercise must occur within three (3) months (or such shorter time as may be specified in the
grant), after the date of such termination (but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement). To the extent that the Optionee was not entitled to exercise the Option at the date of
such termination, or does not exercise such Option within the time specified herein, the Option shall terminate. 
  
 (c) Disability of Optionee. Notwithstanding the provisions of Section 9(b) above, in the event of termination of an Optionee’s Continuous
Status as an Employee as a result of total and permanent disability (i.e., the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of twelve (12) months), the Optionee may exercise the Option, but only to the extent of the right to exercise that would have accrued had the Optionee remained in Continuous Status
as an Employee for a period of twelve (12) months after the date on which the Employee ceased working as a result of the total and permanent disability. Such exercise must occur within eighteen (18) months (or such shorter time as is specified in
the grant) from the date on which the Employee ceased working as a result of the total and permanent disability (but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement). To the extent that
the Optionee was not entitled to exercise such Option within the time specified herein, the Option shall terminate. 
  
 (d) Death of Optionee. Notwithstanding the provisions of Section 9(b) above, in the event of the death of an Optionee: 
  
 (i) who is at the time of death an Employee of the Company, the Option may
be exercised, at any time within six (6) months following the date of death (but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement), by the Optionee’s estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that would have accrued had the Optionee continued living and remained in Continuous Status as an Employee twelve (12) months after
the date of death; or 
  

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 (ii) whose Option has not yet expired but whose Continuous Status as an Employee terminated prior to the
date of death, the Option may be exercised, at any time within six (6) months following the date of death (but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement), by the Optionee’s
estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of termination. 
  
 (e) Notwithstanding subsections (b), (c), and (d) above, the Board shall have the authority to extend the expiration date of
any outstanding option in circumstances in which it deems such action to be appropriate (provided that no such extension shall extend the term of an option beyond the date on which the option would have expired if no termination of the
Employee’s Continuous Status as an Employee had occurred). 
  
 10. Non-Transferability of Options. The Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee; provided that the Board may permit further transferability, on a general or specific basis, and may impose conditions and limitations on any permitted transferability. 
  
 11. Adjustments Upon Changes in Capitalization or Merger. If any
change is made to the Shares by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Shares as a class without the Company’s receipt of consideration,
appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities and/or the price per share covered by outstanding Options under the Plan, and (iii) the
Maximum Annual Employee Grant. The Board may also make adjustments described in (i)-(iii) of the previous sentence in the event of any distribution of assets to shareholders other than a normal cash dividend. In determining adjustments to be made
under this Section 11, the Board may take into account such factors as it deems appropriate, including (i) the restrictions of applicable law, (ii) the potential tax consequences of an adjustment, and (iii) the possibility that some Optionees might
receive an adjustment and a distribution or other unintended benefit, and in light of such factors or circumstances may make adjustments that are not uniform or proportionate among outstanding Options, modify vesting dates, defer the delivery of
stock certificates or make other equitable adjustments. Any such adjustments to outstanding Options will be effected in a manner that precludes the enlargement of rights and benefits under such Options. Adjustments, if any, and any determinations or
interpretations, including any determination of whether a distribution is other than a normal cash dividend, made by the Board shall be final, binding and conclusive. For purposes of this Section 11, conversion of any convertible securities of the
Company shall not be deemed to have been effected “without receipt of consideration.” Except as expressly provided herein, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect,
and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option. 
  
 In the event of the proposed dissolution or liquidation of the Company, the Option will terminate immediately prior to the consummation of such proposed
action, unless 
  

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 otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that
any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise an Option as to all or any part of the Optioned Shares, including Shares as to which the Option would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each Option shall be assumed or an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless such successor corporation does not agree to assume the Option or to substitute an equivalent option, in which case the Board shall, in lieu of such assumption or substitution, provide for
the Optionee to have the right to exercise the Option as to all of the Optioned Shares, including Shares as to which the Option would not otherwise be exercisable. If the Board makes an Option fully exercisable in lieu of assumption or substitution
in the event of a merger or sale of assets, the Board shall notify the Optionee that the Option shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option will terminate upon the expiration of such
period. 
  
 12. Time of Granting Options. The date of grant
of an Option shall, for all purposes, be the date on which the Company completes the corporate action relating to the grant of an option and all conditions to the grant have been satisfied, provided that conditions to the exercise of an option shall
not defer the date of grant. Notice of a grant shall be given to each Employee to whom an Option is so granted within a reasonable time after the determination has been made. 
  
 13. Substitutions and Assumptions. The Board shall have the right to substitute or assume Options in connection with
mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code applies, provided such substitutions and assumptions are permitted by Section 424 of the Code and the regulations promulgated thereunder. The number of
Shares reserved pursuant to Section 3 may be increased by the corresponding number of Options assumed and, in the case of a substitution, by the net increase in the number of Shares subject to Options before and after the substitution. 

 
 14. Amendment and Termination of the Plan. 
  
 (a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable (including, but not limited to amendments which the Board deems appropriate to enhance the Company’s ability to claim deductions related to stock option exercises);
provided that any increase in the number of Shares subject to the Plan, other than in connection with an adjustment under Section 11 of the Plan, shall require approval of or ratification by the shareholders of the Company. 
  
 (b) Employees in Foreign Countries. The Board shall have the authority
to adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Subsidiaries may operate to assure the viability of the benefits from
Options granted to Employees employed in such countries and to meet the objectives of the Plan. 
  
 (c) Effect of Amendment or Termination. Except as otherwise provided in Sections 4 and 11, any such amendment or termination of the Plan shall not
affect Options 
  

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 already granted and such Options shall remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company. 
  

15. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. 
  
 16. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 
  
 17. Shareholder Approval. The Plan, as amended, is subject to approval by the shareholders of the Company at the 2004 Annual Meeting of
Shareholders. If the Plan, as herein amended, is not so approved by the shareholders, the Plan, as previously approved, shall continue in effect. 
  
  
 [The number of shares in Sections 3 and 5(e) have been increased to reflect the 2-for-1 stock
splits in May 1994, November 1996, February 1998, March 1999 and February 2003. The number of shares in Section 3 has also been increased to reflect the adjustments related to the special dividend payable December 2, 2004 to shareholders of record
on November 17, 2004.] 
  

 9Corporation 1999 Stock Plan for Non-Employee Directors

 Exhibit 10.3 
  
 MICROSOFT CORPORATION 
 1999 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS 
 (as amended and restated as of November 15, 2004) 
  
 1. Purpose 
  
 The purpose of the Microsoft Corporation 1999 Stock Plan for Non-Employee
Directors (the “Plan”) is to attract and retain the services of experienced and knowledgeable independent directors of Microsoft Corporation (the “Corporation”) for the benefit of the Corporation and its stockholders and to
provide additional incentive for such directors to continue to work for the best interests of the Corporation and its stockholders through continuing ownership of its common stock. 
  
 2. Shares Subject to the Plan 
  
 The total number of shares of common stock of the Corporation (“Shares”) for which Awards (as defined in Section
4) may be granted under the Plan shall not exceed 3,550,214 in the aggregate, subject to adjustment in accordance with Section 12 hereof. Within the foregoing limitation, Shares underlying Awards that have been granted pursuant to the Plan but which
Awards have lapsed or otherwise terminated without delivery of Shares shall become available for the grant of additional Awards. 
  
 3. Administration of Plan 
  
 The Board of Directors of the Corporation shall administer the Plan. The Board may delegate responsibility for administration of the Plan to a Board
committee (the “Committee”) composed solely of two or more directors, each of whom is a “Non-Employee Director” (as that term is defined in Rule 16b-3(b) promulgated by the Securities and Exchange Commission pursuant to its
authority under the Securities Exchange Act of 1934 (the “Exchange Act”)). The Board or the Committee, as the case may be, shall have the power to construe the Plan and the terms of the Shares, to determine all questions arising
thereunder, and to adopt and amend such rules and regulations for the administration of the Plan as it may deem desirable; provided that, no consent of an Awardee is necessary where the modification, amendment, acceleration, or deferral in the
reasonable judgment of the Board confers a benefit upon the Awardee, or is made pursuant to an adjustment in accordance with Section 12. References to the “Board” in this Plan shall be deemed to refer to either the Board or the Committee,
whichever is appropriate in the context in which the word is used. 
  
 4. Discretionary Award Grants 
  
 Pursuant to
this Plan, the Board may grant in its discretion an Award (as defined in this Section 4) to any person who (a) is elected a director of the Corporation, and (b) is not, and has not during the immediately preceding 12 month period been, an employee
of the Corporation or any subsidiary of the Corporation. An “Award” may be either (i) a grant of a stock option (an “Option”) or (ii) a grant of Shares or of a right to receive Shares or their cash equivalent (or both) (a
“Stock Award”). No Awards under this Section 4 may be granted to any individual director with respect to more than 10,000 shares for any calendar year or, in the case of a newly elected director, more than 25,000 shares for the year in
which the director is first elected. No director shall have any claim or right to be granted an Award under this Plan. Having received an Award under this Plan shall not give a director any right to receive any other Award under this Plan and the
Board may determine that any or all director(s) are not eligible to receive an Award under this Plan for an indefinite period or for a specified year or years. 

 5. Award Agreement 
  
 Each Award granted under the Plan shall be evidenced by an Award agreement (the “Agreement”) duly executed on
behalf of the Corporation and by the director to whom such Award is granted, which Agreements may but need not be identical and which shall (a) comply with and be subject to the terms and conditions of the Plan and (b) provide that the director
agrees to continue to serve as a director of the Corporation during the term for which he or she was elected. Each Award shall vest over a period of not less than three (3) years from the date of grant, except with respect to Awards that are granted
in lieu of cash compensation. Any Agreement may contain such other terms, provisions, and conditions not inconsistent with the Plan as may be determined by the Board. No Award shall be deemed granted within the meaning of the Plan and no purported
grant of any Award shall be effective, until such Agreement shall have been duly executed on behalf of the Corporation and the director to whom the Award is to be granted. 
  
 6. Stock Awards 
  
 (a) Stock Awards may be granted either alone, in addition to, or in tandem with other Awards granted under the Plan. After the Board determines that it
will offer a Stock Award, it will advise the director in writing or electronically, by means of an Agreement, of the terms, conditions and restrictions, including vesting, if any, related to the offer, including the number of Shares that the
director shall be entitled to receive or purchase, the price to be paid, if any, and, if applicable, the time within which the director must accept the offer. The offer shall be accepted by execution of an Agreement or as otherwise directed by the
Board. 
  
 (b) Unless the Board determines otherwise, the
Agreement shall provide for the forfeiture of the non-vested Shares underlying such Stock Award upon the director ceasing to be a director for any reason, including death. To the extent that the director purchased the Shares granted under such Stock
Award and any such Shares remain non-vested at the time the director ceases to be a director, the cessation of director status shall cause an immediate sale of such non-vested Shares to the Company at the original price per Share paid by the
director. 
  

	7.	Options  

  
 (a) The Board shall set the exercise price for an Option granted pursuant to Section 4 of the Plan in its discretion. 
  
 (b) Each Option shall expire no more than ten years from the date of the
granting thereof, but shall be subject to earlier termination as follows: 
  
 (i) In the event of the death of an Option holder, the Option granted to such person may be exercised to the extent exercisable on the date of death, within the earlier of (x) 180 days after the date of death of such
person and (y) the date on which the Option expires by its terms, by the estate of such person, or by any person or persons who acquired the right to exercise such Option by will or by the laws of descent and distribution. 
  

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 (ii) In the event that an Option holder ceases to be a director of the Corporation, other than by reason
of his or her death, an Option granted to such person may be exercised, to the extent exercisable on the date such person ceases to be a director, within the earlier of (x) 180 days after the date such person ceases to be a director and (y) the date
on which the Option expires by its terms. 
  
 8. Vesting and
Exercise of Awards 
  
 (a) The Board shall set the vesting
schedule for Awards granted pursuant to Section 4 of the Plan in its discretion. 
  
 (b) To the extent that the right to exercise an Option has vested and is in effect, the Option may be exercised from time to time, by giving written notice, signed by the person or persons exercising the Option, to
the Corporation, stating the number of whole Shares with respect to which the Option is being exercised, accompanied by payment in full for such Shares, which payment may be in whole or in part in shares of the common stock of the Corporation
already owned by the person or persons exercising the Option, valued at fair market value on the date of payment. For purposes hereof, the fair market value of the Shares covered by an Option shall be the closing price of the Shares on the
applicable date as reported in the National Market List of the National Association of Securities Dealers Inc. Automated Quotation System or on the principal national securities exchange on which the Shares are then listed for trading. 

 
 (c) Upon exercise of the Option, delivery of a certificate for fully paid
and non-assessable Shares shall be made at the principal office of the Corporation in the State of Washington to the person or persons exercising the Option as soon as practicable (but in no event more than 30 days) after the date of receipt of the
notice of exercise by the Corporation, or at such time, place, and manner as may be agreed upon by the Corporation and the person or persons exercising the Option. 
  
 (d) Upon a Stock Award becoming fully vested and nonforfeitable, delivery of a certificate for fully paid and non-assessable
Shares shall be made at the principal office of the Corporation in the State of Washington to the person to whom the Stock Award was granted as soon as practicable (but in no event more than 30 days) after the date on which the Stock Award becomes
fully vested and nonforfeitable, or at such time, place, and manner as may be agreed upon by the Corporation and the holder of the Stock Award. 
  
 (e) Prior to issuance of the Shares in connection with an Award, the director receiving the Award may request the Corporation to withhold and pay on the
director’s behalf any federal, state, and local income tax obligations applicable to such Award by having the Corporation withhold Shares having a value equal to the amount requested to be withheld, and any Award under the Plan may permit that
such withholding tax be paid by having the Corporation withhold Shares having a value equal to the amount requested to be withheld. The value of the Shares to be withheld shall equal the fair market value of the Shares on the day the Award is
exercised or granted, as applicable. The right of a director to dispose of Shares to the Corporation in satisfaction of withholding tax obligations shall be deemed to be approved as part of the initial grant of an Award, unless thereafter rescinded,
and shall otherwise be made in compliance with Rule 16b-3 and other applicable regulations. 
  

 3 

 9. Merger, Consolidation, Sale of Assets, etc., Resulting in a Change in Control 
  
 (a) In the event of a Change in Control (as hereinafter defined),
notwithstanding the vesting provisions contained in the Agreement granting an Option or Stock Award, as applicable, to a director pursuant to this Plan, such Option shall become fully exercisable or Stock Award shall become fully vested and
nonforfeitable if, within one year of such Change in Control, such director shall cease for any reason to be a member of the Board. For purposes hereof, a Change in Control of the Corporation shall be deemed to have occurred if (i) there shall be
consummated (x) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the common stock of the Corporation would be converted into cash, securities, or
other property, other than a merger of the Corporation in which the holders of the common stock of the Corporation immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after
the merger, or (y) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation; or (ii) the stockholders of the Corporation approve any plan or
proposal for the liquidation or dissolution of the Corporation; or (iii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than William H. Gates III, shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of 30% or more of the Corporation’s outstanding common stock; or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors shall
cease for any reason to constitute a majority thereof unless the election, or the nomination for election by the Corporation’s stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period. 
  
 (b)
Any exercise of an Option permitted pursuant to this Section 9 shall be made within 180 days of the related director’s termination as a director of the Corporation. 
  
 10. Awards Not Transferable 
  

An Award granted pursuant to the Plan may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or
by the laws of descent or distribution and may be exercised, during the lifetime of the holder of an Award, only by the holder; provided that the Board may permit further transferability, on a general or specific basis, and may impose conditions and
limitations on any permitted transferability. 
  
 11. No Rights
as Stockholder Until Holder 
  
 Neither the recipient of an
Award under the Plan nor his successors in interest shall have any rights as a stockholder of the Corporation with respect to any Shares subject to an Award granted to such person until such person becomes a holder of record of such Shares.

  
 12. Adjustments Upon Changes in Capitalization or
Merger 
  
 If any change is made to the Shares by reason of
any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Shares as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made
to (i) the maximum number and/or class of securities issuable under 
  

 4 

 the Plan, (ii) the number and/or class of securities and/or the price per Share covered by outstanding Awards under the
Plan, and (iii) the limits on size of awards permitted pursuant to Section 4 of the Plan. The Board may also make adjustments described in (i)-(iii) of the previous sentence in the event of any distribution of assets to shareholders other than a
normal cash dividend. In determining adjustments to be made under this Section 12, the Board may take into account such factors as it deems appropriate, including (i) the restrictions of applicable law, (ii) the potential tax consequences of an
adjustment, and (iii) the possibility that some Awardees might receive an adjustment and a distribution or other unintended benefit, and in light of such factors or circumstances may make adjustments that are not uniform or proportionate among
outstanding Awards, modify vesting dates, defer the delivery of stock certificates or make other equitable adjustments. Any such adjustments to outstanding Awards will be effected in a manner that precludes the enlargement of rights and benefits
under such Awards. Adjustments, if any, and any determinations or interpretations, including any determination of whether a distribution is other than a normal cash dividend, made by the Board shall be final, binding and conclusive. For purposes of
this Section 12, conversion of any convertible securities of the Corporation shall not be deemed to have been effected “without receipt of consideration.” Except as expressly provided herein, no issuance by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of common stock subject to an Award. 
  
 In the event of the proposed dissolution or liquidation of the Corporation,
an outstanding Award (i.e., an Option that has not been exercised or a Stock Award that has not become fully vested and nonforfeitable) will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the
Board. The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Option holder the right to exercise an Option as to all or any part of the stock
covered by such Option, including Shares as to which the Option would not otherwise be exercisable. In the event of a proposed sale of all or substantially all of the assets of the Corporation, or the merger of the Corporation with or into another
corporation, each Award shall be assumed or an equivalent Award shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless such successor corporation does not agree to assume each and every
Award or to substitute an equivalent Award, in which case the Board shall, in lieu of such assumption or substitution, provide for the immediate full vesting of any Stock Awards not yet fully vested, or provide for the Option holder to have the
right to exercise such Option as to all of the stock covered by such Option, including Shares as to which such Option would not otherwise be exercisable, or both. If the Board makes an Option fully exercisable in lieu of assumption or substitution
in the event of a merger or sale of assets, the Board shall notify the Option holder that the Option shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option will terminate upon the expiration of such
period. 
  
 13. Restrictions on Issue of Shares 

 
 Notwithstanding anything in this Plan to the contrary, the Corporation
may delay the issuance of Shares covered by any Award and the delivery of a certificate for such Shares until one of the following conditions shall be satisfied: 
  
 (a) the Shares to be issued in connection with the grant or exercise of an Award, as applicable, are at the time of the
issue of such Shares by the Corporation effectively registered under applicable federal securities laws now in force or hereafter amended; or 
  

 5 

 (b) counsel for the Corporation shall have given an opinion, which opinion shall not be unreasonably
conditioned or withheld, that such Shares are exempt from registration under applicable federal securities laws now in force or hereafter amended. 
  
 It is intended that all grants of Stock Awards and exercises of Options shall be effective. Accordingly, the Corporation shall use its best efforts to
bring about compliance with the above conditions within a reasonable time, except that the Corporation shall be under no obligation to cause a registration statement or a post-effective amendment to any registration statement to be prepared at its
expense solely for the purpose of covering the issuance of Shares in connection with the grant or exercise of any Award. 
  
 14. Purchase for Investment 
  
 Unless the Shares to be issued in connection with the grant or exercise of an Award granted under the Plan have been effectively registered under the
Securities Act of 1933 as now in force or hereafter amended, the Corporation shall be under no obligation to issue any Shares covered by any Award unless the person or persons to whom the Shares are to be issued, in whole or in part, shall give a
written representation and undertaking to the Corporation, which is satisfactory in form and scope to counsel to the Corporation and upon which, in the opinion of such counsel, the Corporation may reasonably rely, that he or she is acquiring the
shares issued or transferred to him or her for his or her own account as an investment and not with a view to, or for sale in connection with, the distribution of any such Shares, and that he or she will make no transfer of the same except in
compliance with any rules and regulations in force at the time of such transfer under the Securities Act of 1933, or any other applicable law, and that if Shares are issued or transferred without such registration a legend to this effect may be
placed upon the certificates representing the Shares. 
  
 15.
Expenses of the Plan 
  
 All costs and expenses of the
adoption and administration of the Plan shall be borne by the Corporation and none of such expenses shall be charged to any director. 
  
 16. Termination and Amendment of Plan 
  
 Unless sooner terminated as herein provided, the Plan shall terminate ten years from the Effective Date. The Board may at any time terminate the Plan or
make such modification or amendment thereof as it deems advisable; provided, however, that stockholder approval will be required for any amendment that will (a) increase the total number of shares as to which Awards may be granted under the Plan,
(b) modify the class of persons eligible to receive Awards, or (c) otherwise require stockholder approval under any applicable law or regulation. In addition, the Board shall not amend the provisions in the Plan regarding the amount, pricing, and
timing for grants pursuant to this Plan more than once every six months, other than to comport with changes in the Internal Revenue Code, or the rules thereunder. Except as otherwise provided in Sections 3 and 12, termination or any modification or
amendment of the Plan shall not, without the consent of an Award holder, affect his or her rights under an Award previously granted to him or her. 
  
 All share numbers in the Plan reflect the 2-for-1 stock split effected February 2003. The number of shares in Section 2 has also been increased to reflect the adjustments
related to the special dividend payable December 2, 2004 to shareholders of record on November 17, 2004. 
  

 6

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