Resignation Agreement RESIGNATION AGREEMENT dated as of July 23, 2002, between Richard Belluzzo ("Belluzzo") residing at [redacted] Seattle, Washington and Microsoft Corporation ("Microsoft") ("Agreement"). 1. Resignation. Belluzzo hereby acknowledges his voluntary and irrevocable resignation from the offices of President and Chief Operating Officer effective May 1, 2002. In addition, Belluzzo voluntarily and irrevocably resigns his employment with Microsoft effective August 23, 2002 ("Resignation Date"). Except as expressly modified by paragraphs 2, 3 and 4 of this Agreement, Belluzzo's existing compensation and benefits shall remain in place until the Resignation Date. In the event that Belluzzo elects to resign his employment prior to the Resignation Date, any and all compensation and stock option vesting will cease on the last day of his employment with Microsoft except as set forth below in paragraph 2. In consideration of Belluzzo signing this Agreement and his executing a general release of claims in a form acceptable to Microsoft ("Release"), Microsoft has agreed to undertake the commitments described in Paragraphs 2 and 3 below, some or all to which Belluzzo would not otherwise be entitled. 2. Bonus and Other Consideration. In consideration of Belluzzo irrevocably resigning his employment and office as set forth in Section 1, signing this Agreement, delivering an effective and timely Release and honoring the commitments undertaken herein, and conditioned upon each of the foregoing events having occurred, Microsoft agrees to: (1) take the actions described in Paragraph 3 below; and (2) award Belluzzo a bonus under the Partner Bonus Plan for the fiscal year ending June 30, 2002 in the amount of $350,000, which amount exceeds the amount to which Belluzzo would be entitled as of right under the Partner Bonus Plan. This bonus shall be payable on August 15, 2002 in accordance with Microsoft's regular payroll procedures for payment of such bonuses (including tax withholding). Belluzzo acknowledges and agrees that he is not eligible for and waives any and all rights to a bonus under the Partner Bonus Plan for the fiscal year beginning July 1, 2002 and ending June 30, 2003. Nothing in this Agreement represents a waiver by Belluzzo of any rights he might otherwise have, including to be paid accrued vacation, receive health or other insurance, or exercise his stock options in accordance with Microsoft's stock option plans except as set forth in Paragraph 3. 3. Cancellation of Options. In connection with option grants made September 1, 1999 for 1,000,000 shares, March 6, 2000 for 1,000,000 shares, May 30, 2000 for 500,000 shares and May 30, 2000 for 1,000,000 shares (the "99/00 Options"), on December 12, 2000 Microsoft and Belluzzo entered into an arrangement whereby Belluzzo was advanced the sum of $15,000,000 which represented a minimum benefit to be received from the potential exercise of the 99/00 Options unless Microsoft terminated his employment with cause or Belluzzo terminated without good reason. The advance was acknowledged by a promissory note a copy of which is attached as Exhibit A (the "Note"). In lieu of the provisions in the Note, the parties have parties have agreed that the 99/00 Options shall be cancelled as of the Resignation Date and Belluzzo shall retain all funds previously advanced. Microsoft shall forgive the remaining unpaid balance of interest and principal owing under the Note. Microsoft will thereafter promptly cancel the Note and return it to Belluzzo. Belluzzo will execute such instruments as are reasonably requested by Microsoft to evidence surrender and cancellation of the 99/00 Options. The forgoing arrangements shall supercede any conflicting terms of the Note or any other oral or written agreement between the parties. Belluzzo understands that forgiveness of the Note and cancellation of the 99/00 Options will constitute ordinary income taxable to him, and which will be reported by Microsoft as income to him. Accordingly, Belluzzo agrees to pay to Microsoft not later than October 1, 2002, and Microsoft shall timely pay to the United States Treasury the amount of federal tax and employment withholding Microsoft is required to withhold with respect to the debt forgiven. The parties will execute such instruments and documentation as is reasonably necessary to evidence withholding and payment of the withheld sum. 1. 4. Miscellaneous. This Agreement and the Release contain the entire agreements and all the promises and covenants exchanged by the parties and merge any and all prior written and oral communications concerning the financial terms relating to Belluzzo's resignation. In executing this Agreement, each party warrants that he or it is relying solely upon his or its own judgment and knowledge, and that he or it is signing in the absence of any caercion or duress whatsoever. The parties agree that the provisions of this Agreement are severable. In the event that any provision is found to be unlawful or unenforceable, the remaining provisions shall remain in full force and effect. The parties further agree that all questions with respect to the construction of this Agreement and the rights and liabilities under it shall be governed by the laws of the State of Washington, and any dispute arising in connection with the execution and/or operation of this Agreement shall be determined in a Washington court of competent jurisdiction, to whose personal jurisdiction Belfuzzo consents to submit. In the event suit is commenced to enforce this Agreement, the substantially prevailing party shall be entitled to an award of his or its reasonable attorneys' fees and costs. This Agreement shall bind the heirs, successors, representatives, and assigns of each party. Microsoft Corporation /s/ Richard Belluzzo By /s/ Steven A. Ballmer -------------------- ---------------------------------- Richard Belluzzo Steven A. Ballmer, Chief Executive Officer
Richard Belluzzo Resignation Agreement
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