Richard Belluzzo Note


                              

$15,000,000.00                 Redmond, Washington             December 12, 2000


     Subject to the terms and conditions herein, MICROSOFT CORPORATION
("Company") agrees to lend RICHARD BELLUZZO ("Maker") the principal amount to
Fifteen Million Dollars (U.S.) ($15,000,000.00) (the "Principal") and, for value
received, Maker promises to pay Company, or its assigns or order ("Payee"), the
principal sum of Fifteen Million Dollars (U.S.)($15,000,000.00), with interest
as provided herein. Unless otherwise provided herein, both Principal and
Interest, defined below, shall be payable in lawful money of the United States
of America, which shall be legal tender for public and private debts.

1.   Interest. Interest shall accrue from the date of payment on the unpaid
Principal outstanding, and shall be compounded annually until this Note is paid
in full, at the lowest applicable federal interest rate available in the month
of December 2000 (i.e., 5.87%)(the "Interest"). Interest will be calculated
based on a 365 day year and applied to the actual number of days elapsed. The
sum of Principal and Interest accrued as of any date shall constitute the "Total
Obligations" as of such date.

2.   Maturity Date. Absent a Default Event, and subject to the terms limiting
the Company's recourse hereunder, the Total Obligation, if not sooner paid,
shall be due and payable in a single installment on the fifth (5/th/)
anniversary of the date hereof, or the date on which Maker's employment with the
Company terminates, whichever is earlier ("Maturity Date"). Maker and any
endorsers of this Note hereby waive demand, grace, notice, presentment for
payment, and protest, and agree and consent that the Company may renew this
Note, and extend the time of payment, without notice, and without releasing any
party hereto.

3.   Prepayment. Maker may prepay the Total Obligation, in whole or in part ,at
any time before the Maturity Date, in cash, without being required to pay any
penalty or premium for such priviledge.

4.   Payment Method.

     4.1  On or after the Maturity Date, the payment of amounts owed under this
Note may be made, at Maker's discretion, in cash and/or by forefeiting vested
Company stock options subject to the 99/00 Grants having an aggregate Vested
Value (defined below in Subsection 6.1) equal to the amount being repaid. For
purposes of this Note, the term of September 1, 1999 for 1,000,000 shares; (ii)
grant of March 6, 2000 for 1,000,000 shares; (iii) grant of May 30, 2000 for
500,000 shares; and (iv) grant of May 30, 2000 for 1,000,000 shares.

     4.2  If Maker fails to repay the Adjusted Total Obligation (defined in
Subsection 6.2) within one hundred twenty (120) days after the Maturity Date,
Company may thereafter obtain repayment utilizing, at its discretion, any of the
applicable repayment methods or combinations thereof as set forth in Section 5.
In the event that the Company elects to cancel options subject to the 99/00
Grants in order to satisfy any part of the Adjusted Total Obligation, Company
shall use the Vested Value of such options as defined in Subsection 6.1 to
determine the aggregate pre-tax value of said options.

     4.3  If the Company forgives any portion of the Total Obligation, pursuant
to the terms limiting recourse hereunder, then such amount shall be treated as a
forgiveness of debt owed by Maker, and shall be reported by the Company as
income to Maker.



5.   Recourse. The Company's recourse against Maker for repayment of the
Principal and Interest shall be only as follows:

     5.1 If Maker is still in the employ of Company on the fifth anniversary of
this Note, or if Maker's employment is terminated by the Company without Cause
or Maker resigns for Good Reason at any time, the Company may obtain repayment
of the Adjusted Total Obligation by one or a combination of the following
methods: (i) by canceling the minimum necessary number of options subject to the
99/00 Grants to cover the amount being repaid, and (ii) through limited personal
recourse against Maker to the extent Maker has exercised any part of the 99/00
Grants; namely, the excess aggregate fair market value (i.e. the closing price
on the date of exercise) of the Company common stock obtained as a result of
such exercise over the aggregate exercise price thereof. For purposes of this
Note, the term "Cause" shall mean Maker's commission of a felony, or gross
negligence or willfull misconduct resulting in material damage to the Company;
and "Good Reason" shall mean that: (i) Maker's responsibilities to Company were
significantly diminished; (ii) Makers job location is moved by Company out of
King Country, Washington; (iii) the Company is split into two or more
independent companies for any reason, whether or not pursuant to a final,
non-appealable judgment or settlement in the Company's pending action with the
Department of Justice or otherwise; or (iv) there is a change in control of the
Company, which for the purposes of this Note means the acquisition, directly or
indirectly, by any person or related group of persons of beneficial ownership of
securities possessing more than fifty (50%) percent of the total combined voting
power of the Company's outstanding securities, or a merger or consolidation in
which securities possessing at least fifty (50%) percent of the total combined
voting power of the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities immediately prior
to such transaction or sale, or the sale transfer or other disposition of
seventy-five(75%) percent or more of the Company's assets in liquidation or
dissolution of the Company.

     5.2 If Maker is not in the employ of the Company and has been terminated by
the Company for Cause, or resigned without Good Reason, the Company may obtain
repayment of the Adjusted Total Obligation by one or a combination of the
following methods, at its discretion: (i) by canceling the minimum necessary
number of options subject to the 99/00 Grants to cover the amount being repaid,
and (ii) through full personal recourse against Maker.

     5.3 If Maker's employment is terminated by the Company due to death or
Disability prior to the fifth anniversary of this Note, the Company may obtain
repayment of the Total Obligation by one or a combination of the following
methods, at its discretion: (i) by canceling the minimum necessary number of
options subject to the 99/00 Grants to cover the amount being repaid, and (ii)
through full personal recourse against Maker or Maker's estate, as the case may
be; provided, however, that if the after-tax value of the 99/00 Grants, minus
the Total Obligation, is less than Five Million Dollars ($5,000,000), the
Company will forgive such portion of the Adjusted Total Obligation as is
necessary to leave Maker or Maker's estate, respectively, with a net amount of
Five Million Dollars ($5,000,000) after repayment to the Company. For purposes
of this Note, "Disability" has the meaning set fourth in the Company's 1991
Stock Option Plan

6.   Valuation Payment Mechanism. The Vested Value of the 99/00 Grants shall
be determined in accordance with the following "Valuation Payment Mechanism":

     6.1 Vested Value Determination: As soon as practicable after the Maturity
Date, the Company shall determine the Vested Value of the 99/00 Grants. The
"Vested Value" of the 99/00 Grants shall equal the sum of the Vested Values of
each respective option grant comprising the 99/00 Grants. The "Vested Value" of
any stock option grant shall be equal to: (i) the excess of) (y) the average
closing price of Company stock on the twenty (20) trading days immediately
preceding the Maturity Date

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over (z) the exercise price of the respect grant, multiplied by (ii) the number
of shares of the respective grant that are then vested; provided that the Vested
Value of any options that have been exercised shall be equal to the excess of
the closing price (as of the date of exercise) of Company common stock obtained
as a result of such exercise over the exercise price thereof.

         6.2 Adjusted Total Obligation Determination: Effective on the Maturity
Date, the Total Obligation shall be adjusted and repaid in accordance with the
following terms (as so adjusted, the "Adjusted Total Obligation"):

         (a) If Maker's employment is terminated on or before the second
         anniversary of the Note, Maker shall immediately repay the Total
         Obligation in full.

         (b) If Maker's Employment terminates after the second and on or before
         the third anniversaries of the Note, repayment shall be as follows: If
         the Vested Value of the 99/00 Grants exceeds the Total Obligation,
         Maker shall immediately repay the Total Obligation in full. If the
         Vested Value of the 99/00 Grants is less than the Total Obligation, the
         company shall forgive that portion of the Total Obligation that exceeds
         the Vested Value of the 99/00 Grants, provided, however, that the
         amount of forgiveness shall not exceed Four Million Dollars
         ($4,000,000) plus interest to the date of repayment, and Maker shall
         immediately repay the balance of the Total Obligation not forgiven.

         (c) If Maker's Employment terminates after the third and on or before
         the fourth anniversaries of the Note, repayment shall be as follows: If
         the Vested Value of the 99/00 Grants exceeds the Total obligation,
         Maker shall immediately repay the Total Obligation in full. If the
         Vested Value of the 99/00 Grants is less than the Total Obligation, the
         Company shall forgive that portion of the Total Obligation that exceeds
         the Vested Value of the 99/00 Grants, provided, however, that the
         amount of forgiveness shall not exceed Nine Million Dollars
         ($9,000,000) plus interest to the date of repayment, and Maker shall
         immediately repay the balance of the Total Obligation not forgiven.

         (d) If Maker's employment terminates after the fourth and on or before
         the fifth anniversaries of the Note, repayment shall be as follows: If
         the Vested Value of the 99/00 Grants exceeds the Total Obligation,
         Maker shall immediately repay the Total Obligation in full. If the
         Vested Value of the 99/00 Grants is less than the Total Obligation, the
         Company shall forgive that portion of the Total Obligation that exceeds
         the Vested Value of the 99/00 Grants, provided, however, that the
         amount of forgiveness shall not exceed Twelve Million Dollars
         ($12,000,000) plus interest to the date of repayment, and Maker shall
         immediately repay the balance of the Total Obligation not forgiven.

         (e) If Maker remains employed by Company on the fifth anniversary of
         the date of the Note, repayment shall be as follows: If the Vested
         Value of the 99/00 Grants exceeds the Total Obligation, Maker shall
         immediately repay the Total Obligation in full. If the Vested Value of
         the 99/00 Grants is less than the Total Obligation, the Company shall
         forgive that portion of the Total Obligation that exceeds the Vested
         Value of the 99/00 Grants, and Maker shall immediately repay the
         balance of the Total Obligation not forgiven.

7.       Default. Upon the commencement of any proceedings under any bankruptcy
or insolvency laws by or against Maker ("Default Event"), the Company, or other
holder or owner of this Note, may at its option accelerate the Maturity Date of
this Note, including all Principal and Interest thereon, without presentment,
demand, or notice to Maker or to any person obligated hereon: Upon the
occurrence of a Default Event and acceleration of the Maturity Date, the amount
of the Adjusted Total Obligation shall

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become due and payable immediately. Interest shall accrue at the same rate of
Interest specified above until this Note is paid in full, regardless of any
Default Event.

8.    Attorneys' Fees. If this Note is placed in the hands of an attorney for
collection or collected through bankruptcy or other judicial proceedings, or if
suit is brought hereon, Maker agrees to pay, in addition to all other amounts
owing hereunder, all expenses and costs of collection, including reasonable
attorneys' fees incurred by the Company.

9.    Governing Law/Severability. All terms, obligations, and provisions of this
Note are to be determined and governed by the laws of the State of Washington,
excluding its choice of law provisions. Should any term or provision of this
Note be declared invalid, such determination shall not affect the remaining
provisions hereof, which shall remain in full force and effect. Notwithstanding
any provision contained herein to the contrary, the holder shall not be entitled
to receive, collect, or apply as interest on the obligation evidenced hereby,
any amount in excess of the maximum rate of interest permitted by applicable
law.

      Maker is on notice that ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.

                                     "Maker"


                                      /s/ Richard Belluzzo
                                      --------------------
                                      Richard Belluzzo

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