\n 20.8 DISTRIBUTION OF ACCOUNTS OF LESS THAN $5,000………………………………………………………….. 57
\n 20.9 PROVISION OF ANNUITIES……………………………………………………………………………… 57<\/p>\nARTICLE XXI VOLUNTARY AFTER-TAX CONTRIBUTIONS……………………………………………………………….. 58<\/p>\n
21.1 ELECTION TO MAKE VOLUNTARY AFTER-TAX CONTRIBUTIONS…………………………………………………….. 58
\n 21.2 VESTING OF VOLUNTARY AFTER-TAX CONTRIBUTIONS………………………………………………………….. 58
\n 21.3 ESTABLISHMENT OF VOLUNTARY AFTER-TAX CONTRIBUTIONS ACCOUNTS…………………………………………….. 58
\n 21.4 LIMITATIONS ON VOLUNTARY AFTER-TAX CONTRIBUTIONS………………………………………………………. 58
\n 21.5 DEFINITION OF COMPENSATION………………………………………………………………………….. 59
\n 21.6 PLAN TERMS APPLICABLE TO VOLUNTARY AFTER-TAX CONTRIBUTIONS……………………………………………… 59
\n<\/c><\/s><\/table>\n
iv<\/p>\n
MICROSOFT CORPORATION<\/p>\n
SAVINGS PLUS 401(k) PLAN<\/p>\n
MICROSOFT CORPORATION has adopted the Microsoft Corporation Savings Plus
\n401(k) Plan effective January 1, 1987, for the exclusive benefit of its
\nemployees. The Microsoft Corporation Savings Plus 401(k) Plan is restated by
\nthis document to incorporate prior amendments since the last restatement,
\neffective March 25, 1999.<\/p>\n
[Note: As explained in the preceding sentence, the last restatement of the
\nPlan was as of March 25, 1999. This document is an updated restatement, and
\nincorporates the amendments to the Plan that were adopted by Microsoft
\nCorporation between March 25, 1999 and July 1, 2000.]<\/p>\n
1<\/p>\n
ARTICLE I<\/p>\n
DEFINITIONS
\n ———–<\/p>\n
The following words shall have the following meanings unless the context
\nclearly indicates otherwise.<\/p>\n
1.1 BENEFICIARY means a person designated by a participant, or by this
\n ———–
\nPlan if there is no effective designation, to receive benefits payable under
\nthis Plan in the event of the participant’s death.<\/p>\n
1.2 CODE means the Internal Revenue Code of 1986, as amended.
\n —-
\n 1.3 COMPENSATION is defined and limited as set forth in Appendix I,
\n ————
\nattached hereto and incorporated herein.<\/p>\n
1.4 EMPLOYEE means any common law employee of the employer who receives
\n ——–
\nremuneration for personal services rendered to the employer, and any “leased
\nemployee” as defined in Code (S) 414(n)(2). For purposes of this Section 1.4, a
\n“`leased employee’ as defined in Code (S) 414(n)(2)” means any person who is not
\nan employee of the employer (as defined in Plan Section 1.6, “recipient”) and
\nwho provides services to such recipient if (i) such services are provided
\npursuant to an agreement between the recipient and any other person (“leasing
\norganization”), (ii) such person has performed such services for the recipient
\n(or for the recipient and related persons) on a substantially full-time basis
\nfor a period of at least 1 year, and (iii) such services are performed under
\nprimary direction or control by the recipient. The definition in the preceding
\nsentence shall be interpreted by applying the definition of “leased employee”
\nunder Code (S) 414(n)(2) and any Treasury Regulations thereunder.<\/p>\n
1.5 ELIGIBLE EMPLOYEE means a regular employee of the employer who
\n —————–
\nsatisfies the eligibility requirements of section 2.1. For purposes of this
\nPlan, a “regular employee” of the <\/p>\n
2<\/p>\n
employer is an employee who is in an approved headcount “regular” employment
\nposition with the employer and on the employer’s U.S. payroll. An approved
\nheadcount “regular” employment position is one that is (1) authorized in writing
\nduring the annual or out-of-cycle budgeting process as a “regular” employment
\nposition and approved by an officer of Microsoft (or by a Regional Director for
\npositions in subsidiaries of Microsoft) and (2) reflected on the official human
\nresources database of Microsoft or one of its subsidiaries as a “regular”
\nemployment position (e.g., “hourly regular” or “salaried regular”). For example,
\na worker who is reflected on the human resources database as “contingent” or an
\n“agency temp” is not in an approved headcount “regular” employment position even
\nthough the contingent or agency temp position was authorized as part of
\nMicrosoft’s budgeting process. An employee is on an employer’s U.S. payroll if
\nthe employee is paid from a payroll department of the employer where such
\npayroll department is located within the United States of America, and the
\nemployer withholds U.S. employment taxes (e.g., income tax, FICA) from the
\nemployee’s pay. Under no circumstances are the payroll departments of the
\nemployer’s foreign branches and subsidiaries treated as U.S. payroll departments
\nof the employer for purposes of this Plan.<\/p>\n
Notwithstanding the foregoing, the following persons are not eligible employees
\nand are not eligible to participate in this Plan even if they meet the
\ndefinition of regular employee of the employer:<\/p>\n
a. interns and visiting researchers;<\/p>\n
b. cooperatives;<\/p>\n
c. apprentices;<\/p>\n
d. nonresident aliens with no U.S. source income;<\/p>\n
3<\/p>\n
e. employees covered by a collective bargaining agreement resulting
\n from negotiations in which retirement benefits were the subject
\n of good faith bargaining and participation in this Plan was not
\n provided for;<\/p>\n
f. leased employees. For purposes of this Section 1.5(f), a leased
\n employee includes any person who provides services to the
\n employer (as defined in Plan Section 1.6, which in the rest of
\n this Section 1.5 may also be referred to as “recipient” or
\n “recipient employer”) pursuant to an agreement between such
\n recipient and any other person (“leasing organization”),
\n regardless of (i) the length of time the person has performed
\n such services for the recipient (or for the recipient and related
\n persons), (ii) whether or not the person is an employee of the
\n recipient, (iii) whether or not the person has performed such
\n services for the recipient (or for the recipient and related
\n persons) on a part-time or full-time basis, and (iv) whether or
\n not the person performed services under the primary direction or
\n control by the recipient. This definition of leased employee
\n includes, without limitation, “leased employees” as defined in
\n Code (S) 414(n)(2) and any Treasury Regulations thereunder.<\/p>\n
g. temporary workers engaged through or employed by temporary or
\n leasing agencies, irrespective of the length of time that the
\n workers perform or are expected to perform services at or for the
\n recipient employer, and even if the workers are, or may be
\n reclassified by the courts, the Internal Revenue Service (“IRS”)
\n or the U.S. Department of Labor (“DOL”) as, employees of the
\n recipient employer;<\/p>\n
4<\/p>\n
h. temporary employees of the employer. For purposes of this Plan, a
\n temporary employee of the employer is an employee of the employer
\n who is hired by the employer to work on a specific project or
\n series of projects which in the aggregate is not expected to
\n exceed six (6) months; and<\/p>\n
i. workers who hold themselves out to the recipient employer as
\n being independent contractors, or as being employed by another
\n company while providing services to the recipient employer, even
\n if the workers are, or may be reclassified by the courts, the IRS
\n or the DOL as, employees of the recipient employer.<\/p>\n
1.6 EMPLOYER means MICROSOFT CORPORATION and any subsidiary or affiliate
\n ——– ———————
\nof Microsoft Corporation which, with MICROSOFT CORPORATION’s approval, elects to
\nadopt the Plan for its employees. Employers maintaining the Plan are listed in
\nAppendix II, attached hereto and incorporated herein. No participating employers
\n(other than Microsoft Corporation and its delegates) shall have discretionary
\nauthority over the Plan, including, without limitation, the authority to amend
\nthe Plan and appoint fiduciaries. The Plan Administrator (and his or her
\ndelegates) has discretionary authority under the Plan as provided elsewhere in
\nthis Plan. For purposes of applying to this Plan Code (S)(S) 401, 410, 411, 414,
\n415 and 416, which sections relate to tax-qualified plans generally, to minimum
\nparticipation standards, to minimum vesting standards, to compensation, to
\nlimitations on benefits and contributions, and to top-heavy requirements under
\nqualified retirement plans, all employees of businesses under common control, as
\ndefined in Code (S)(S) 414(b) and (c), employees of affiliated service groups
\nunder Code (S) 414(m), and employees of any group of employers who must be
\naggregated and treated as one employer pursuant to Code (S) 414(o), shall be
\nconsidered to be employed by the employer.<\/p>\n
5<\/p>\n
1.7 ERISA means the Employee Retirement Income Security Act of 1974, as
\n —–
\namended.<\/p>\n
1.8 PARTICIPANT means an employee who meets the eligibility requirements
\n ———–
\nof Article II and who has entered the Plan. An employee shall be considered a
\nparticipant as long as one or more accounts are maintained under this Plan on
\nhis or her behalf.<\/p>\n
1.9 PLAN means the MICROSOFT CORPORATION SAVINGS PLUS 401(k) PLAN.
\n —-<\/p>\n
1.10 PLAN ADMINISTRATOR means the 401(k) Administrative Committee, which
\n ——————
\nshall consist of the following three positions at Microsoft Corporation:<\/p>\n
Vice President, Human Resources
\n Deputy Chief Financial Officer
\n Tax and Audit Vice President<\/p>\n
Any references in this Plan to the Plan Administrator as “he”, “she”, “him” or
\n“her” or references to “his” or “her” with respect to the Plan Administrator
\nshall be deemed to refer to the 401(k) Administrative Committee or a member of
\nthe 401(k) Administrative Committee, as appropriate under the circumstances.<\/p>\n
1.11 PLAN YEAR means the twelve month period beginning January 1 and
\n ———
\nending December 31.<\/p>\n
1.12 TRUST FUND means the assets of the trust established and maintained
\n ———-
\naccording to the provisions of this Plan.<\/p>\n
1.13 TRUSTEE means any individual, life insurance company, bank or trust
\n ——-
\ncompany or a combination of the foregoing, which the employer has designated to
\nmanage and invest the assets of the Plan.<\/p>\n
6<\/p>\n
ARTICLE II<\/p>\n
ELIGIBILITY TO PARTICIPATE IN PLAN
\n ———————————-<\/p>\n
2.1 ELIGIBILITY AND ENTRY DATE. Each eligible employee who is 18 years of
\n ————————–
\nage or older shall be eligible to participate in this Plan except as provided in
\nthis Article II. The eligible employee shall be eligible to elect to defer a
\npercentage of his or her compensation on the first entry date occurring after
\nthe date the eligibility requirements (e.g., meeting the definition of an
\neligible employee in Section 1.5 and being at least 18 years of age) are met.
\nThe participant’s salary deferrals shall commence with the payroll period
\nbeginning on the first day of the month that falls after the participant has
\nproperly completed and submitted an enrollment application and such application
\nhas been processed by the Plan Administrator and the employer’s payroll
\ndepartment. It may take several days after an employee becomes an eligible
\nemployee before the employee will be able to enroll in the Plan. The Plan
\nAdministrator shall establish the enrollment procedures (e.g., require on-line
\nenrollment) from time to time in its sole discretion.<\/p>\n
2.2 REEMPLOYMENT. If a former plan participant is reemployed as an
\n ————
\neligible employee, that person shall immediately renew participation in the plan
\nas of his or her date of rehire.<\/p>\n
2.3 ELECTION AGAINST PARTICIPATION. Any eligible employee may elect not
\n ——————————
\nto participate in the Plan at any time for any reason in writing signed by the
\neligible employee, a copy of which is delivered to the employer.<\/p>\n
2.4 ENTRY DATES. Plan entry dates shall be the first day of each month.
\n ———– <\/p>\n
7<\/p>\n
ARTICLE III<\/p>\n
EMPLOYEE CONTRIBUTIONS
\n ———————-<\/p>\n
3.1 ELECTION TO DEFER. Each participant may elect, in the manner provided
\n —————–
\nby the Plan Administrator, to contribute from 1% to 15% of each of his or her
\ncompensation payments to a salary deferral account under the Plan, except that
\nthe aggregate of such contributions shall not for the plan year exceed the
\nannual limitation on elective deferrals under Code (S) 402(g) in any taxable
\nyear, which limitation is increased as permitted by Internal Revenue Service
\npublication to reflect cost-of-living adjustments ($9,500 for 1997). The
\nemployer may, from time to time, change the percentage of salary that may be
\ndeferred. Except as authorized by the Plan Administrator, all such contributions
\nshall be by payroll reduction. Contributions shall be transferred to the trust
\nfund on the earliest date by which they can reasonably be segregated from the
\nemployer’s general assets, but in no event later than the 15th business day of
\nthe month following the month in which the employer receives or withholds the
\nemployee contributions. For purposes of determining the amount which may be
\ndeferred, only compensation earned while the participant is an eligible employee
\nand making salary deferral contributions to the plan shall be considered. A
\nparticipant may not defer more than 15% of any paycheck or other compensation
\npayment. The 15% maximum limit on deferrals is applied per pay period not to the
\nparticipant’s annual compensation nor his or her total compensation earned while
\nmaking salary deferral contributions to the Plan.<\/p>\n
3.2 DEFERRAL ELECTION DATES. Upon reemployment, an employee may elect to
\n ———————–
\ncontribute as of the day he or she is eligible to enter the Plan. All other
\nemployees or participants, including employees entering the plan initially, may
\nelect to contribute effective as of the first day of the month that falls after
\nthe employee or participant has properly completed <\/p>\n
8<\/p>\n
and submitted an enrollment application and such application has been processed
\nby the Plan Administrator and the employer’s payroll department. It may take
\nseveral days after an employee becomes an eligible employee before the employee
\nwill be able to enroll in the Plan. The Plan Administrator shall establish the
\nenrollment procedures (e.g., require on-line enrollment) from time to time in
\nits sole discretion. Participants may change their contribution percentage
\neffective as of the first day of any month subsequent to the date they request
\nthe change, provided, however, that the first month in which the change may
\napply shall not be earlier than the first month in which the change to the
\nparticipant’s payroll withholding can reasonably be made. An election to
\ncontribute may be made on any date prior to the effective date of the election,
\nin the manner provided by the Plan Administrator.<\/p>\n
3.3 TERMINATING AN ELECTION TO DEFER. A participant may terminate an
\n ——————————–
\nelection to contribute as of the first day of any month, provided notice of
\ntermination has been given by the fifteenth day of the previous month in the
\nmanner provided by the Plan Administrator. If an employee terminates an
\nelection to contribute, he or she must wait until the next entry date before
\nbeing eligible again to elect to contribute to the Plan.<\/p>\n
3.4 DISTRIBUTION OF EXCESS DEFERRALS. Notwithstanding any other provision
\n ——————————–
\nof the Plan, excess deferrals (amounts in excess of the annual limitation on
\nelective deferrals under Code (S) 402(g), as increased by a cost of living
\nfactor) and income allocable thereto may be distributed no later than April 15
\nto participants who claim for the preceding calendar year such excess deferrals
\nunder two or more plans or to participants who have such excess deferrals under
\nthis Plan. A participant may allocate excess deferrals to this Plan by
\nsubmitting to the Plan Administrator no later than March 1 a statement
\nspecifying the excess deferral amount for the preceding calendar year and
\nstating that, if such amount is not <\/p>\n
9<\/p>\n
distributed, such excess deferral, when added to amounts deferred under other
\nplans, exceeds the applicable annual limit. The excess deferrals distributed to
\na participant with respect to a calendar year shall be adjusted for income and,
\nif there is a loss allocable to the excess deferral, shall in no event be less
\nthan the lesser of the participant’s account under the Plan or the participant’s
\nelective deferrals for the calendar year.<\/p>\n
10<\/p>\n
ARTICLE IV<\/p>\n
EMPLOYER MATCHING CONTRIBUTIONS AND FORFEITURES
\n ———————————————–<\/p>\n
4.1 EMPLOYER MATCHING CONTRIBUTIONS. The employer shall contribute funds
\n ——————————-
\nto the Plan, from its current or retained profits, and use forfeitures to match
\na portion of each of a participant’s salary deferral contributions. The employer
\ncontribution shall match 50% of each of a participant’s salary deferral
\ncontributions up to six percent of the participant’s compensation for the pay
\nperiod for which the participant’s salary deferral is made, for a maximum
\nemployer matching contribution of three percent of the compensation paid to the
\nparticipant for such pay period. The matching contribution shall be allocated to
\nthe participant’s employer contribution account. The employer may from time to
\ntime change the amount of the employer matching contribution, provided any
\ndecrease in the matching contribution formula must be effective only for
\nmatching elective deferrals after the date of change. Total employer
\ncontributions for any plan year shall not exceed the maximum amount which is
\ndeductible by the employer for federal income tax purposes. The employer
\ncontribution shall be transferred to the trust fund at such times as the
\nemployer determines, but such contributions shall in no event be transferred to
\nthe trust fund later than the time prescribed by law for the employer to obtain
\na federal income tax deduction for the plan year for which the contribution is
\nmade. Employer contributions shall be credited to participants’ employer
\ncontribution accounts as of the date of receipt by the plan. For purposes of
\ndetermining the amount of matching contributions a participant will receive,
\nonly compensation earned while the participant is an eligible employee and
\nmaking salary deferral contributions to the Plan shall be considered. The 3%
\nlimit on employer matching contributions is applied to each paycheck given or
\nother compensation payment made to the participant. The 3% limit on matching
\ncontributions is applied per pay <\/p>\n
11<\/p>\n
period, and not to the participant’s annual compensation nor his or her total
\ncompensation earned while making salary deferral contributions to the Plan.
\nNotwithstanding the foregoing, any participant whose salary deferrals cease
\nbecause the Code Section 402(g) limit is reached, and not because the
\nParticipant terminated his or her election to defer, shall have his or her
\ncompensation earned after the Code Section 402(g) limit was reached considered
\nwhen determining the maximum amount of matching contributions to be allocated to
\nhis or her account. Matching contributions will continue to be made to such
\nparticipant’s account until the match equals the lesser of 50% of his or her
\ndeferrals or 3% of the participant’s compensation earned while the participant’s
\nsalary deferral election was in effect (including compensation earned after
\ndeferrals reached the applicable 402(g) limit). The amount of the matching
\ncontributions made for pay periods occurring after the participant’s salary
\ndeferral amount reached the 402(g) limit shall be calculated by multiplying the
\nlesser of (i) 3% or (ii) one half of the participant’s salary deferral election
\nwhich was in effect when the 402(g) limit was reached, by his or her
\ncompensation for each pay period occurring after the limit was reached.<\/p>\n
4.2 ALLOCATION OF FORFEITURES. As of the end of each plan year,
\n ————————-
\nforfeitures which have become available for allocation during such year because
\nof the completion of benefit distributions to terminated participants or
\nterminated participants’ completion of a one-year period of severance pursuant
\nto Section 5.6 shall be used first to restore previously forfeited amounts to
\nthe employer contribution accounts of former employees who are reemployed before
\nsustaining five consecutive one-year periods of severance. Any remaining
\nforfeiture amounts shall be used to reduce the employer matching contribution
\nfor the subsequent plan year. While this Plan is a multiple employer plan (as
\ndescribed in Code (S)413(c)), forfeitures with respect to employees who
\nterminate employment with one employer (as defined in Treasury Regulation<\/p>\n
12<\/p>\n
(S)1.413-2(a)(2)) shall be used first to restore previously forfeited amounts to
\nthe employer contribution accounts of former employees of such employer who are
\nreemployed before sustaining five consecutive one-year periods of severance.
\nAny remaining amounts from such forfeitures shall be used to reduce the employer
\nmatching contribution for the employees of such employer for the subsequent plan
\nyear and, if any forfeitures remain after the employer matching contributions
\nfor that employer are made for such plan year, such remaining forfeitures shall
\nbe used to reduce the employer matching contributions of other employers in the
\nPlan.<\/p>\n
13<\/p>\n
ARTICLE V<\/p>\n
VESTING – YEARS OF SERVICE
\n ————————–<\/p>\n
5.1 EMPLOYEE CONTRIBUTIONS. Each participant shall be 100% vested in all
\n ———————-
\namounts in his or her salary deferral account.<\/p>\n
5.2 EMPLOYER CONTRIBUTIONS. A participant whose employment is terminated
\n ———————-
\non or after reaching age 65, whose employment is terminated because of a total
\nand permanent disability, or who dies while employed, shall be 100% vested in
\nall amounts in his or her employer contribution account. All other participants
\nwho terminate shall be entitled to the vested percentage of their employer
\ncontribution account determined in accordance with the following schedule:<\/p>\n
Years of Service Vested Percentage Forfeited Percentage
\n —————- —————– ——————–
\n Less than 2 0% 100%
\n 2 or more years 100% 0%<\/p>\n
In computing years of service, all of an employee’s years of service shall be
\ntaken into account, except that if an employee has five or more consecutive one-
\nyear periods of severance, years of service after such period of severance shall
\nnot be taken into account for purposes of determining the nonforfeitable
\npercentage of the employee’s accrued benefit derived from employer contributions
\nwhich accrued before the period of severance. Preparticipation service with
\ncertain companies as set forth in Appendix II, attached hereto and incorporated
\nherein, shall be counted toward vesting.<\/p>\n
Effective July 8, 1997, an employee who (i) first becomes employed by
\nMicrosoft Corporation (“Microsoft”) or one of its affiliates (within the meaning
\nof Code Sections 414(b), (c), (m) or (o)) on or after July 8, 1997, and (ii) was
\npreviously employed by a company (or a trade or business thereof, hereinafter
\n“Former Employer”) which was acquired by or merged with <\/p>\n
14<\/p>\n
Microsoft (or an affiliate of Microsoft), shall receive credit for his or her
\nperiod of service with such Former Employer towards satisfying the vesting
\nservice requirements of this Plan, provided, however, that the credit shall only
\nbe given to those employees whose employment with Microsoft or one of its
\naffiliates is connected with Microsoft’s (or its affiliate’s) acquisition of or
\nmerger with such Former Employer. This vesting service credit shall be granted
\neffective as of the effective date of the closure of the acquisition of the
\nFormer Employer by, or the merger of the Former Employer with, Microsoft (or its
\naffiliate). For informational purposes, the list of Former Employers for which
\nvesting service credit is granted after July 8, 1997 shall be added to Appendix
\nII from time to time, but pursuant to this Section 5.2, the grant of such
\nservice credit shall be effective regardless of whether or when the name of the
\nFormer Employer is added to Appendix II. In the event a plan of the Former
\nEmployer is merged into this Plan, any service credit shall be as specified in
\nAppendix V hereto. Notwithstanding the foregoing, no vesting service credit
\nshall be granted under this paragraph for service with any Former Employer to
\nthe extent that this Plan is amended, prior to the closure of the acquisition of
\nor merger with such Former Employer, to expressly deny service credit with
\nrespect to service with such Former Employer. Notwithstanding the foregoing,
\neach participant with a positive employer contribution account balance in the
\nPlan on or after March 2, 2000 shall be 100% vested in all amounts that are in
\nhis or her employer contribution account on or after March 2, 2000.<\/p>\n
5.3 YEARS OF SERVICE. An employee’s years of service at any date shall
\n —————-
\nequal the number of years, including fractional portions of years, which have
\nelapsed between the date the employee first performed an hour of service, or
\nfirst performed an hour of service upon reemployment, and the date a period of
\nseverance begins. If a period of severance is less than twelve months, the
\nperiod of severance shall be included in determining years of service.<\/p>\n
15<\/p>\n
5.4 HOUR OF SERVICE. An hour of service means each hour for which an
\n —————
\nemployee is paid or entitled to payment for the performance of duties for the
\nemployer.<\/p>\n
5.5 PERIOD OF SEVERANCE. A period of severance is a period which begins
\n ——————-
\non the earlier of (i) the date the employee quits, is discharged, retires, dies;
\nor (ii) the first anniversary of the date the employee is absent from service
\nfor any other reason, such as disability leave, vacation, or leave of absence;
\nand which ends when the employee performs an hour of service upon reemployment.
\nHowever, if an employee is absent from employment for maternity or paternity
\nreasons, the period of severance shall begin on the second anniversary of the
\nfirst date of such absence. The period between the first and second
\nanniversaries of the first date of absence from work is neither a year or
\nfractional year of service, nor a period of severance. An absence for maternity
\nor paternity reasons includes an absence because of the following: pregnancy of
\nthe individual, birth of a child of the individual, placement of a child with
\nthe individual in connection with the adoption of such child by such individual
\nor caring for such child for a period beginning immediately following such birth
\nor placement.<\/p>\n
5.6 FORFEITURES. If, prior to incurring a one-year period of severance,
\n ———–
\na participant who is zero percent vested in his or her employer contribution
\naccount receives a distribution of his or her entire vested interest in the Plan
\n(e.g., salary deferrals, rollovers) on or due to his or her termination of
\nparticipation in the Plan, the participant’s entire employer contribution
\naccount shall be forfeited as of the date of such distribution. If a terminated
\nparticipant who is zero percent vested in his or her employer contribution
\naccount does not receive a distribution of his or her entire vested interest in
\nthe Plan prior to incurring a one-year period of severance, his or her entire
\nemployer contribution account shall be forfeited as of a date chosen by the Plan
\nAdministrator which is on or after the date the participant completes a one-<\/p>\n
16<\/p>\n
year period of severance. Forfeited amounts shall be transferred to a separate
\nforfeiture suspense account and made available for allocation as set forth in
\nArticle IV. If a terminated participant whose employer contribution account has
\nbeen forfeited due to either the receipt of a distribution or the occurrence of
\na one-year period of severance is reemployed before sustaining five consecutive
\none-year periods of severance, any amount forfeited shall be restored to his or
\nher employer contribution account, unadjusted by any gains or losses. If a
\nreemployed participant’s forfeiture was due to receipt of a distribution, the
\nparticipant shall have neither the right nor obligation to repay the distributed
\namount to the Plan. Restorations of accounts shall be funded first from
\nforfeitures held in the suspense account, and if such forfeiture amounts in the
\nsuspense account are not sufficient to restore the accounts, then from
\nadditional Company contributions. While this Plan is a multiple employer plan,
\nthe employer with the primary responsibility to make any Company contributions
\nthat are required to restore a rehired employee’s account shall be the employer
\nfrom which the employee terminated prior to being rehired. Upon the complete
\ntermination of the Plan, any terminated participant who, prior to the Plan’s
\ndate of termination, had not (i) incurred five consecutive one-year periods of
\nseverance, nor (ii) received a distribution of his or her entire vested interest
\nin the Plan, shall have any amount which was forfeited due to the prior
\noccurrence of a one-year period of severance restored, unadjusted by any gains
\nor losses, and such restored amount shall be nonforfeitable.<\/p>\n
17<\/p>\n
ARTICLE VI<\/p>\n
PARTICIPANTS’ ACCOUNTS AND INVESTMENTS
\n ————————————–<\/p>\n
6.1 INDIVIDUAL ACCOUNTS. The trustee shall maintain records to show
\n ——————-
\nthe interest in the Plan of each participant and former participant. Such
\nrecords shall be in the form of individual accounts. When appropriate, a
\nparticipant shall have two accounts, a salary deferral account and an employer
\ncontribution account. The maintenance of individual accounts is only for
\naccounting purposes, and a segregation of the assets of the trust fund to each
\naccount shall not be required. Notwithstanding the foregoing, to the extent
\nprovided in a written loan policy, a loan made to a participant will be treated
\nas a participant direction of investment. The participant alone shares in any
\nprincipal and interest paid on the loan, and he or she alone bears any expense
\nor loss incurred in connection with the loan. The Trustee will reflect the
\nparticipant’s loan on his or her account. Distributions and withdrawals made
\nfrom an account shall be charged to the account as of the date paid. Each
\nparticipant and former participant shall be advised from time to time, but at
\nleast once a year, as to the status of his or her account or accounts.<\/p>\n
6.2 INVESTMENT FUNDS. The trust fund shall consist of the following
\n —————-
\ninvestment funds: common stock funds, bond funds, income funds, money market
\nfunds, the Microsoft Corporation stock fund, and any other funds or investment
\nvehicles selected by the employer, including without limitation participant
\ndirected brokerage accounts. The employer may change the investment funds from
\ntime to time. Each participant and former participant shall direct the trustee
\nas to what portion of his or her accounts shall be deposited in each fund (or,
\nin the case of a Participant loan pursuant to Article XIX, what portion of his
\nor her account shall be loaned). If a participant or former participant wishes
\nto utilize more than one investment fund, he or she shall designate the
\npercentage of his or her account balances to be invested in each fund, and the<\/p>\n
18<\/p>\n
percentages designated shall be in 1% increments. The trust fund may hold
\nqualified employer securities and qualified employer real estate in any amount.
\nThe Plan is intended to constitute a plan described in ERISA (S) 404(c), and the
\nfiduciaries of the Plan may be relieved in accordance with ERISA (S) 404(c) of
\nliability for any losses which are the direct and necessary result of investment
\ninstructions given by a participant or former participant.<\/p>\n
6.3 CHANGING ACCOUNT INVESTMENTS. Up to six times in any plan year, a
\n —————————-
\nparticipant may change his or her direction as to the funds into which his or
\nher account will be invested. The Plan Administrator may change the number of
\ntimes that changes may be made, and the procedures for making changes in
\ninvestment elections, at any time and from time to time.<\/p>\n
6.4 PROCEDURES. The Plan Administrator shall adopt such rules and
\n ———-
\nprocedures as it deems advisable with respect to the direction of Plan
\ninvestments by participants, including without limitation the procedure for
\nallocating and charging fees, expenses or other charges connected with certain
\ninvestment funds to the accounts of those participants who choose to invest in
\nsuch funds. Any such rules and procedures shall be applied in a
\nnondiscriminatory manner.<\/p>\n
6.5 VALUATION OF ACCOUNTS. As often as directed by the employer, the
\n ———————
\ntrustee shall value the trust fund assets at fair market value and the Plan
\nAdministrator shall adjust the net credit balances in the accounts of
\nparticipants and former participants, upward or downward, to reflect the
\nallocation to the participant’s or former participant’s account of investment
\nearnings, gains and losses, expenses paid out of the trust fund, and
\ncontributions made and allocated to and distributions and withdrawals from the
\nparticipant’s or former participant’s account. In addition, as of the end of
\nthe fiscal quarter of each plan year and at such <\/p>\n
19<\/p>\n
other times as the Plan Administrator shall reasonably determine, the Plan
\nAdministrator shall adjust the net credit balances in the accounts of
\nparticipants and former participants in the trust fund, upward or downward, pro
\nrata, so that the aggregate of such net credit balances will equal the net worth
\nof each investment fund of the trust fund, using fair market values as
\ndetermined by the trustee and after such net worth for the appropriate
\ninvestment fund has been reduced by any expenses (to the extent not paid
\ndirectly by the employer), withdrawals, distributions and transfers chargeable
\nto that investment fund which have been incurred but not yet paid. All
\ndeterminations made by the trustee with respect to fair market values and net
\nworth shall be made in accordance with generally accepted principles of trust
\naccounting, and such determinations when so made by the trustee shall be
\nconclusive and binding upon all persons having an interest under the Plan.<\/p>\n
20<\/p>\n
ARTICLE VII<\/p>\n
PAYMENT OF ACCOUNT BALANCES UPON TERMINATION, DEATH, DISABILITY,
\n —————————————————————-<\/p>\n
QUALIFIED DOMESTIC RELATIONS ORDERS,
\n ————————————<\/p>\n
SALE OF TRADE OR BUSINESS
\n ————————-<\/p>\n
7.1 TERMINATION OF EMPLOYMENT. Upon termination of employment for any
\n ————————-
\nreason other than death or disability, the participant shall elect to receive
\nhis or her balances upon termination or upon reaching age 65, or on any date
\nbetween termination and age 65 at the participant’s election, except that if the
\nvalue of the participant’s accounts does not exceed $5,000 (and did not exceed
\n$5,000 at the time of any prior distribution), payment shall be made as soon as
\npracticable after termination. Account balances shall be valued as of the most
\nrecent valuation date prior to date of payment and shall be paid in a single
\ncash payment, except that the participant or former participant may elect to
\nreceive any or all of the shares allocated to him or her in the Microsoft
\nCorporation stock fund. Account balances shall be distributed no later than 60
\ndays after the latest of (i) the plan year in which the participant terminates
\nor (ii) the plan year in which the participant reaches age 65. Notwithstanding
\nthe foregoing, a person’s entire interest must be distributed, or must begin to
\nbe distributed, no later than the first day of April following the calendar year
\nin which the participant reaches age 70-1\/2. Furthermore, benefit payments will
\nnot be made to a participant who has a vested account balance greater than
\n$5,000, prior to the participant attaining age 70 1\/2 unless and until the
\nparticipant files a proper claim for benefits with the Plan Administrator.<\/p>\n
7.2 PAYMENT AT 59-1\/2. A participant may elect to receive a distribution
\n —————–
\nof all or a portion of his or her vested account balance or balances under this
\nPlan upon or after reaching age 59-1\/2. Payment shall be made in a single cash
\npayment, except that the participant may <\/p>\n
21<\/p>\n
elect to receive any or all of the shares allocated to him or her in the
\nMicrosoft Corporation stock fund.<\/p>\n
7.3 PAYMENT OF ACCOUNT BALANCES UPON DEATH. If a participant dies while
\n ————————————–
\nemployed, his or her employer contribution account shall be 100% vested. Each
\nparticipant shall designate a beneficiary or beneficiaries to receive all
\namounts credited to his or her accounts in the event of the participant’s death.
\nThe accounts shall be valued as of the most recent valuation date prior to
\npayment and shall be paid to the designated beneficiary or beneficiaries as soon
\nas feasible after the death. Payment shall be made in a single cash payment,
\nexcept that the beneficiary or beneficiaries may elect to receive any or all of
\nthe shares allocated to him or her in the Microsoft Corporation stock fund.
\nNotwithstanding the foregoing, if the deceased participant’s vested account
\nbalance exceeds $5,000 and the designated beneficiary is the participant’s
\nspouse, the spouse may elect to delay distribution of the lump sum amount until
\nany date on or before the date the Participant would have been age 65. If the
\ndeceased participant’s vested account balance exceeds $5,000 and the beneficiary
\nis a designated beneficiary who is not the participant’s spouse, the beneficiary
\nmay elect to delay distribution of the lump sum amount until any date on or
\nbefore the end of the calendar year in which the fifth anniversary of the
\nparticipant’s date of death occurs. Beneficiaries who are not designated
\nbeneficiaries may not delay distribution of the death benefit. If a participant
\nis married, the participant may not designate a beneficiary other than his or
\nher spouse without the spouse’s written consent which has been witnessed by a
\nplan representative or a notary public. If a participant fails to designate a
\nbeneficiary, or the participant has no surviving beneficiary, the amounts
\npayable to a married participant shall be distributed to his or her spouse and
\nthe benefits of a single participant shall be distributed to his or her estate.<\/p>\n
22<\/p>\n
7.4 PAYMENT OF ACCOUNT BALANCES UPON DISABILITY. If a participant’s
\n ——————————————-
\nemployment is terminated prior to retirement because of a total and permanent
\ndisability, the employer contribution account shall be 100% vested and payment
\nof the participant’s account balances shall be made as soon as practicable. A
\nparticipant shall be deemed to be totally and permanently disabled if the
\nparticipant meets the definition of having a total disability under the
\nemployer-provided long-term disability plan. The participant’s accounts shall be
\nvalued as of the most recent valuation date prior to payment and shall be paid
\nin a single cash payment within sixty (60) days after the disability has been
\nestablished under this section, except that the participant may elect to receive
\nany or all of the shares allocated to him or her in the Microsoft Corporation
\nstock fund. Notwithstanding the foregoing, if the value of the disabled
\nparticipant’s accounts exceeds $5,000 (or exceeded $5,000 at the time of a prior
\ndistribution), the participant may elect to delay receipt of the balance of his
\nor her accounts until reaching age 65. Notwithstanding the foregoing, benefit
\npayments will not be made to a participant who has a vested account balance
\ngreater then $5,000, prior to the participant attaining age 70 1\/2 unless and
\nuntil the participant files a proper claim for benefits.<\/p>\n
7.5 EARLY RETIREMENT. Upon reaching age 55, a participant may elect early
\n —————-
\nretirement and terminate employment. Each such participant shall receive the
\nvalue of his or her salary deferral account and the vested portion of his or her
\nemployer contribution account, which shall be paid in the time and manner
\ndescribed in Section 7.1.<\/p>\n
7.6 DISTRIBUTIONS UNDER QUALIFIED DOMESTIC RELATIONS ORDERS. Distribution
\n ——————————————————-
\nto an alternate payee under a qualified domestic relations order as defined in
\nCode (S) 414(p) may be made at any time, including prior to the participant’s
\nattainment of earliest retirement age if the court order specifies distribution
\nat an earlier time or permits an agreement<\/p>\n
23<\/p>\n
between the Plan and the alternate payee to authorize an earlier distribution
\nand the alternate payee consents to the distribution.<\/p>\n
7.6.1 Qualified Status of Order. The Plan Administrator shall
\n ————————-
\nestablish reasonable procedures to determine the qualified status of a domestic
\nrelations order. Upon receiving a domestic relations order, the Plan
\nAdministrator shall promptly notify the participant and any alternate payee
\nnamed in the order in writing of the receipt of the order and the Plan’s
\nprocedures for determining the qualified status of the order. Within a
\nreasonable period of time after receiving the domestic relations order, the Plan
\nAdministrator shall determine the qualified status of the order and shall notify
\nthe participant and each alternate payee in writing of its determination. The
\nPlan Administrator shall provide notice under this paragraph by mailing to the
\nindividual’s address specified in the domestic relations order, or in a manner
\nconsistent with Department of Labor regulations.<\/p>\n
7.6.2 Amounts Payable During Determination Process. If any portion of
\n ——————————————–
\nthe participant’s nonforfeitable accrued benefit is payable during the period
\nthe Plan Administrator is making its determination of the qualified status of
\nthe domestic relations order, the Trustee shall make a separate accounting of
\nthe amounts payable. If the Plan Administrator determines the order is a
\nqualified domestic relations order within 18 months of the date amounts first
\nare payable following receipt of the order, the amounts shall be payable in
\naccordance with the order. If the Plan Administrator does not make its
\ndetermination of the qualified status of the order within the 18 month
\ndetermination period, the amounts shall be payable in the manner in which they
\nwould be distributed if the order did not exist. The order shall be applied
\nprospectively if the Plan Administrator determines after the 18 month period
\nthat the order is a qualified domestic relations order.<\/p>\n
24<\/p>\n
7.6.3 Investment of Amounts Payable. To the extent it is not
\n —————————–
\ninconsistent with the provisions of the qualified domestic relations order, any
\npartitioned funds payable to the alternate payee(s) may be invested in a
\nsegregated subaccount and may be invested in fixed income investments or, at the
\ndirection of the alternate payee(s), in any investment funds available to
\nparticipants. If an order specifies that the alternate payee is entitled to any
\nportion of the account of a participant who has an outstanding Plan loan, the
\nloan will continue to be held in the participant’s account and will not be
\ntransferred to an account for the alternate payee. A segregated subaccount
\nshall remain a part of the Trust, but it alone shall share in any income it
\nearns, and it alone shall bear any expense or loss it incurs. The Trustee shall
\nmake any payments or distributions to the alternate payee(s) by separate benefit
\nchecks or other separate distribution.<\/p>\n
7.7 SALE OF TRADE OR BUSINESS. Distributions may also be made in the event
\n ————————–
\nof termination of the Plan, or any part thereof, as described in Code (S)
\n401(k)(a)(A)(i) and the regulations thereunder, or a disposition of the assets
\nof a trade or business or the stock of a subsidiary with respect to employees
\nwho continue employment with the acquiring corporation or subsidiary as
\ndescribed in Code (S) 401(k)(10)(A)(ii) and (iii) and the regulations
\nthereunder. In no event may amounts attributable to 401(k) elective deferrals be
\ndistributed earlier than upon one of the following events:<\/p>\n
(a) Retirement, death, disability or separation from service (see
\nCode (S) 401(k)(10)(A)(i));<\/p>\n
(b) Termination of this Plan without establishment of a successor
\nplan (see Code (S) 401(k)(10)(A)(i));<\/p>\n
(c) The employee’s attainment of age 59-1\/2;<\/p>\n
25<\/p>\n
(d) The sale or other disposition by a corporation to an unrelated
\ncorporation, which does not maintain this Plan, of substantially all of the
\nassets used in a trade or business, but only with respect to employees who
\ncontinue employment with the acquiring corporation (see Code (S)
\n401(k)(10)(A)(ii));<\/p>\n
(e) The sale or other disposition by a corporation of its interest in
\na subsidiary to any unrelated entity which does not maintain this Plan, but only
\nwith respect to employees who continue employment with the subsidiary (see Code
\n(S) 401(k)(10)(A)(iii)).<\/p>\n
7.8 NOTICE OF RIGHT TO DEFER PAYMENT. A participant whose total account
\n ———————————
\nbalances exceed (or have exceeded at the time of a prior distribution) $5,000
\nshall be given an explanation of the optional forms of benefit available, and of
\nhis or her right to defer receipt of distribution. If a participant fails to
\nconsent to an immediate distribution, it shall be deemed an election to defer
\nthe commencement of payment of any benefit. However, any election to defer the
\nreceipt of benefits shall not apply with respect to distributions which are
\nrequired under Code (S) 401(a)(9). Notice of the rights specified under this
\nSection 7.8 shall be provided no less than 30 days and no more than 90 days
\nbefore the “Annuity Starting Date.” The “Annuity Starting Date” is the first day
\non which all events have occurred which entitle the participant to receive a
\ndistribution (e.g., termination of employment, consent to distribution).
\nDistribution may commence less than 30 days after the notice required under
\nSection 1.411(a)-11(c) of the Income Tax Regulations is given if:<\/p>\n
(A) the plan administrator clearly informs the participant that the
\nparticipant has a right to a period of at least 30 days after receiving the
\nnotice to consider the decision of whether or not to elect a distribution (and,
\nif applicable, a particular distribution option), and<\/p>\n
26<\/p>\n
(B) the participant, after receiving the notice, affirmatively elects
\na distribution.<\/p>\n
Written consent of the participant to the distribution must not be made before
\nthe participant receives the notice and must not be made more than 90 days
\nbefore the Annuity Starting Date. No consent shall be valid if a significant
\ndetriment is imposed under the plan on any participant who does not consent to
\nthe distribution. Consent to an immediate distribution is not required after
\nthe participant has reached age 65 or has died.<\/p>\n
7.9 DIRECT ROLLOVER DISTRIBUTIONS. Notwithstanding any provision of the
\n —————————–
\nPlan to the contrary and subject to the following limitations, a distributee may
\nelect, at the time and in the manner prescribed by the Plan Administrator, to
\nhave any portion of an eligible rollover distribution paid directly to an
\neligible retirement plan. Direct rollovers may not be divided among several
\nplans. A participant may elect to receive a distribution partly as a direct
\nrollover and partly in a direct payment to the participant only if the direct
\nrollover amount equals or exceeds $500.<\/p>\n
The following definitions shall apply to this section 7.9:<\/p>\n
(a) Eligible Rollover Distribution. An eligible rollover distribution
\n ——————————
\nis any distribution of all or any portion of the balance to the credit of the
\ndistributee, except that an eligible rollover distribution does not include:<\/p>\n
(i) any distribution that is one of a series of substantially
\nequal periodic payments (not less frequently than annually) made for the life
\n(or life expectancy) of the distributee or the joint lives (or joint life
\nexpectancies) of the distributee and the distributee’s designated beneficiary,
\nor for a specified period of ten years or more;<\/p>\n
27<\/p>\n
(ii) any mandatory minimum distribution at age 70 1\/2 under Code
\n(S) 401(a)(9); and<\/p>\n
(iii) the portion of any distribution that is not includible in
\ngross income (determined without regard to the exclusion for net unrealized
\nappreciation with respect to employer securities).<\/p>\n
(b) Eligible Retirement Plan. An eligible retirement plan is an
\n ————————
\nindividual retirement account described in Code (S) 408(a), an individual
\nretirement annuity described in Code (S) 408(b) (other than an endowment
\ncontract), an annuity plan described in Code (S) 403(a), or a qualified trust
\ndescribed in Code (S) 401(a) of a defined contribution plan, that accepts the
\ndistributee’s eligible rollover distribution. However, in the case of an
\neligible rollover distribution to the surviving spouse, an eligible retirement
\nplan is an individual retirement account or individual retirement annuity.<\/p>\n
(c) Distributee. A distributee includes an employee or former
\n ———–
\nemployee. In addition, the employee’s or former employee’s surviving spouse and
\nthe employee’s or former employee’s spouse or former spouse who is the alternate
\npayee under a qualified domestic relations order, as defined in Code (S) 414(p),
\nare distributees with regard to the interest of the spouse or former spouse.<\/p>\n
28<\/p>\n
ARTICLE VIII<\/p>\n
HARDSHIP WITHDRAWALS
\n ——————–<\/p>\n
If a participant has a financial hardship, the participant may withdraw so
\nmuch of the following amount as is necessary to meet the hardship:<\/p>\n
(a) his or her salary deferral contributions plus net investment gains and
\n earnings on such deferrals as of December 31, 1988, plus<\/p>\n
(b) his or her salary deferral contributions made after December 31, 1988,
\n minus<\/p>\n
(c) any prior withdrawals, distributions, assignments via qualified
\n domestic relations orders, expenses and net investment losses made or
\n incurred with respect to the amounts described in (a) or (b) above.<\/p>\n
The salary deferral contributions will be valued as of the valuation date
\n on or immediately before the withdrawal. Hardship withdrawals may not be
\n made from net investment gains and earnings which have accrued after
\n December 31, 1988 on salary deferral contributions. Notwithstanding the
\n foregoing, a participant who has an outstanding loan from the Plan (or must
\n take such a loan prior to the hardship distribution pursuant to this
\n Article VIII) may not take a hardship distribution in an amount which
\n exceeds 40% of his or her vested account balance.<\/p>\n
A hardship withdrawal shall be available for any of the following
\nreasons:<\/p>\n
(a) Medical expenses incurred by the participant, the participant’s
\n spouse, or any dependents of the participant or expenses necessary for
\n those persons to obtain medical care;<\/p>\n
(b) Purchase (excluding mortgage payments) of a principal residence for
\n the participant;<\/p>\n
29<\/p>\n
(c) Payment of tuition, related educational fees, and room and board
\n expenses, for the next 12 months of post-secondary education for the
\n participant, his or her spouse, children or dependents;<\/p>\n
(d) Preventing the eviction of the participant from his or her principal
\n residence or foreclosure on the mortgage of the participant’s
\n principal residence; or<\/p>\n
(e) Need due to critical financial emergencies, defined as circumstances
\n of sufficient severity that a participant is confronted by present or
\n impending financial ruin. The need shall be based on the
\n participant’s net worth statement, which shall form an objective
\n criterion for determining hardship.<\/p>\n
A participant who receives a hardship distribution<\/p>\n
(a) shall not receive a distribution in excess of the participant’s
\n immediate and heavy financial need;<\/p>\n
(b) shall, prior to the distribution, have exercised all vested stock
\n options and received all other distributions and loans available under
\n all plans maintained by the employer;<\/p>\n
(c) shall not make elective contributions or have nonelective participant
\n contributions made to this Plan or any other retirement plan, stock
\n purchase plan, stock option or similar plan of the employer, until the
\n first January 1 or July 1 following the one-year anniversary of the
\n date the hardship distribution is made; and<\/p>\n
(d) shall not make contributions to any plan of the employer, including
\n this Plan, for his or her tax year immediately following the tax year
\n in which the hardship distribution was received, in excess of (i) the
\n annual limit applicable under Code (S) 402(g) ($9,500 for 1997), as
\n increased by a cost of living factor, minus <\/p>\n
30<\/p>\n
(ii) the amount of participant contributions in the tax year of the
\n hardship distribution.<\/p>\n
Hardship withdrawals may not be taken from a Participant’s employer contribution
\naccount, rollover account, or acquisition rollover account. Amounts transferred
\nfrom the plans of other employers pursuant to a plan merger (e.g., see Appendix
\nV to this Plan) or plan-to-plan transfer of plan assets may in some cases by
\nheld in the acquisition rollover account, and therefore be unavailable for
\nhardship withdrawals.<\/p>\n
31<\/p>\n
ARTICLE IX<\/p>\n
LIMITATIONS ON EMPLOYEE AND EMPLOYER CONTRIBUTIONS
\n ————————————————–<\/p>\n
9.1 LIMITATIONS ON TOTAL CONTRIBUTIONS TO ACCOUNTS. Notwithstanding
\n ———————————————-
\nanything in this Plan to the contrary, the total of employee and employer
\ncontributions and forfeitures allocated to a participant’s accounts under this
\nand any other employer sponsored defined contribution plan for any year shall
\nnot exceed the applicable limits described in Code (S) 415 (e.g., the lesser of
\n(i) 25% of the participant’s compensation (as defined in Section 9.9), or (ii)
\n$30,000). Effective March 31, 1988, the year used to determine the limits on
\nannual additions shall be the calendar year. If such additions exceed the
\nlimitation, the Plan shall distribute to the participant the participant’s
\nelective deferrals to this Plan (within the meaning of Code (S) 402(g)(3)) and
\nany gains attributable thereto to the extent that the distribution would reduce
\nthe excess amounts in the participant’s account (see Treasury Regulations (S)
\n1.415-6(b)(6)(iv)). Any remaining excess annual additions to the participant’s
\naccount for the year shall be used to reduce future employer contributions
\npursuant to Treasury Regulation (S) 1.415-6(b)(6)(ii).<\/p>\n
9.2 AVERAGE ACTUAL DEFERRAL PERCENTAGE TESTS. With respect to participant
\n —————————————-
\ncontributions in a plan year, the actual deferral percentage shall satisfy one
\nof the tests described in (a) or (b) below. (Definitions of words used in the
\ntests are given in Section 9.9.)<\/p>\n
(a) The average actual deferral percentage for eligible participants
\nwho are highly compensated employees for the plan year shall not exceed the
\naverage actual deferral percentage for eligible participants who are non-highly
\ncompensated employees for the plan year multiplied by 1.25;<\/p>\n
32<\/p>\n
(b) the average actual deferral percentage for eligible participants
\nwho are highly compensated employees for the plan year shall not exceed the
\naverage actual deferral percentage for eligible participants who are non-highly
\ncompensated employees for the plan year multiplied by 2, provided that the
\naverage actual deferral percentage for eligible participants who are highly
\ncompensated employees does not exceed the average actual deferral percentage for
\neligible participants who are non-highly compensated employees by more than two
\n(2) percentage points or such lesser amount as the Secretary of the Treasury
\nshall prescribe to prevent the multiple use of this alternative limitation with
\nrespect to any highly compensated employee.<\/p>\n
9.3 ELECTIVE DEFERRALS OR QUALIFIED EMPLOYER DEFERRAL CONTRIBUTIONS UNDER
\n ———————————————————————
\nTWO OR MORE PLANS OR ARRANGEMENTS. The actual deferral percentage for any
\n———————————
\neligible participant who is a highly compensated employee for the plan year and
\nwho is eligible to have elective deferrals or qualified employer deferral
\ncontributions allocated to his account under two or more plans or arrangements
\ndescribed in Code (S) 401(k) that are maintained by the employer or an
\naffiliated employer shall be determined as if all such elective deferrals and
\nqualified employer deferral contributions were made under a single arrangement.<\/p>\n
9.4 ELECTIVE DEFERRALS, QUALIFIED EMPLOYER DEFERRAL CONTRIBUTIONS, AND
\n ——————————————————————
\nCOMPENSATION OF FAMILY MEMBERS. For purposes of determining the actual deferral
\n——————————
\npercentage of a participant who is a highly compensated employee subject to the
\nfamily aggregation rules of Code (S) 414(q)(6), the elective deferrals,
\nqualified employer deferral contributions and compensation of such participant
\nshall include the elective deferrals, qualified employer deferral contributions
\nand compensation of family <\/p>\n
33<\/p>\n
members, and such family members shall be disregarded in determining the actual
\ndeferral percentage for participants who are non-highly compensated employees.<\/p>\n
The determination and treatment of the elective deferrals, qualified
\nnonelective contributions and actual deferral percentage of any participant
\nshall satisfy such other requirements as may be prescribed by the Secretary of
\nthe Treasury.<\/p>\n
9.5 ACTIONS AVAILABLE WHEN TESTS UNSATISFIED. In the event that the Plan
\n —————————————-
\nAdministrator shall at any time have reasonable cause to conclude that neither
\nof the tests will be satisfied for a plan year, then the Plan Administrator
\nshall take such actions as the Plan Administrator deems necessary in accordance
\nwith Appendix III, attached hereto and incorporated herein.<\/p>\n
9.6 DISTRIBUTION OF EXCESS CONTRIBUTIONS. Excess contributions and income
\n ————————————
\nallocable thereto shall be distributed no later than the last day of each plan
\nyear to participants on whose behalf such excess contributions were made for the
\npreceding plan year. “Excess contributions” shall mean the difference between
\nthe participant contributions made by highly compensated employees and the
\nmaximum amount of allowable participant contributions for those employees. The
\nincome allocable to excess contributions shall be determined by multiplying
\nincome allocable to the participant’s elective deferrals and qualified employer
\ndeferral contributions for the plan year by a fraction, the numerator of which
\nis the excess contribution on behalf of the participant for the preceding plan
\nyear and the denominator of which is the sum of the participant’s account
\nbalances attributable to elective deferrals and qualified employer deferral
\ncontributions on the last day of the preceding plan year. The excess
\ncontributions which would otherwise be distributed to the participant shall be
\nadjusted for income; shall be reduced, in accordance with regulations, by the
\namount of excess deferrals<\/p>\n
34<\/p>\n
distributed to the participant; shall, if there is a loss allocable to the
\nexcess contributions, in no event be less than the lesser of the participant’s
\naccount under the Plan or the participant’s elective deferrals and qualified
\nemployer deferral contributions for the plan year. Amounts distributed under
\nthis section shall be treated as distributions from the participant’s elective
\ndeferral account and shall be treated as distributed from the participant’s
\nqualified employer deferral contribution account only to the extent such excess
\ncontributions exceed the balance in the participant’s elective deferral account.<\/p>\n
9.7 AVERAGE CONTRIBUTIONS PERCENTAGE TESTS. With respect to participant
\n ————————————–
\ncontributions and employer matching contributions, the average contribution
\npercentage shall satisfy one of the tests described in, (a) or (b) below
\n(definitions of words used in the tests are given in Section 9.9).<\/p>\n
(a) The average contribution percentage for eligible participants who
\nare highly compensated employees for the plan year shall not exceed the average
\ncontribution percentage for eligible participants who are non-highly compensated
\nemployees for the plan year multiplied by 1.25;<\/p>\n
(b) the average contribution percentage for eligible participants who
\nare highly compensated employees for the plan year shall not exceed the average
\ncontribution percentage for eligible participants who are non-highly compensated
\nemployees for the plan year multiplied by 2, provided that the average
\ncontribution percentage for eligible participants who are highly compensated
\nemployees does not exceed the average contribution percentage for eligible
\nparticipants who are non-highly compensated employees by more than two (2)
\npercentage points or such lesser amount as the Secretary of the Treasury shall
\nprescribe to <\/p>\n
35<\/p>\n
prevent the multiple use of this alternative limitation with respect to any
\nhighly compensated employee.<\/p>\n
9.8 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS. Excess aggregate
\n ———————————————-
\ncontributions and income allocable thereto shall be distributed no later than
\nthe last day of each plan year to participants to whose accounts employee
\ncontributions or matching contributions were allocated for the preceding plan
\nyear. “Excess aggregate contributions” shall mean the amount described in Code
\n(S) 401(m)(6)(B). The income allocable to excess aggregate contributions shall
\nbe determined by multiplying the income allocable to the participant’s employee
\ncontributions and matching employer contributions for the plan year by a
\nfraction, the numerator of which is the excess aggregate contributions on behalf
\nof the participant of the preceding plan year and the denominator of which is
\nthe sum of the participant’s account balances attributable to employee
\ncontributions and matching employer contributions on the last day of the
\npreceding plan year. The excess aggregate contributions to be distributed to a
\nparticipant shall be adjusted for income, and, if there is a loss allocable to
\nthe excess aggregate contribution, shall in no event be less than the lesser of
\nthe participant’s account under the Plan or the participant’s employee
\ncontributions and matching contributions for the plan year. Excess aggregate
\ncontributions shall be distributed from the participant’s matching contribution
\naccount in proportion to the participant’s employee contributions and matching
\ncontributions for the plan year.<\/p>\n
9.9 DEFINITIONS APPLICABLE TO DISCRIMINATION TESTS. For purposes of this
\n ———————————————-
\nArticle, the following definitions shall be used:<\/p>\n
36<\/p>\n
Actual deferral percentage shall mean the ratio (expressed as a percentage)
\n ————————–
\nof effective deferrals and qualified employer deferral contributions on behalf
\nof the eligible participant for the plan year to the eligible participant’s
\ncompensation for the plan year.<\/p>\n
Average actual deferral percentage shall mean the average (expressed as a
\n ———————————-
\npercentage) of the actual deferral percentages of the eligible participants in a
\ngroup.<\/p>\n
Compensation shall mean wages within the meaning of Code (S) 3401(a) and
\n ————
\nall other payments of compensation to an employee by his employer (in the course
\nof the employer’s trade or business) for which the employer is required to
\nfurnish the employee a written statement under Code (S)(S) 6041(d), 6051(a)(3),
\nand 6052. Compensation excludes amounts paid or reimbursed by the employer for
\nmoving expenses incurred by an employee, but only to the extent that at the time
\nof the payment it is reasonable to believe that these amounts are deductible by
\nthe employee under Code (S) 217. Compensation shall be determined without regard
\nto any rules under Code (S) 3401(a) that limit the remuneration included in
\nwages based on the nature or location of the employment or the services
\nperformed (such as the exception for agricultural labor in Code (S) 3401(a)(2)).
\nFor purposes of performing the average actual deferral percentage test and the
\naverage contributions percentage test, the annual compensation of each employee
\ntaken into account shall not exceed the limitation under Code (S) 401(a)(17),
\nwhich is the OBRA ’93 annual compensation limit. The OBRA ’93 annual
\ncompensation limit is $150,000 ($160,000 in 1997), as adjusted by the
\nCommissioner for increases in the cost of living in accordance with Code (S)
\n401(a)(17)(B). In addition, in performing the average actual deferral percentage
\ntest and the average contributions percentage test for any year, Microsoft
\nCorporation may elect to include in the definition of compensation for all
\nemployees the elective contributions that are made by the<\/p>\n
37<\/p>\n
employer on behalf of its employees that are not includible in gross income
\nunder Code (S) 125 (cafeteria plan) or Code (S) 402(e)(3) (cash or deferred
\narrangement).<\/p>\n
Elective deferrals shall mean contributions made to the Plan during the
\n ——————
\nplan year by the employer, at the election of the participant, in lieu of cash
\ncompensation and shall include contributions made pursuant to a salary reduction
\nagreement.<\/p>\n
Eligible participant shall mean any employee of the employer who is
\n ——————–
\notherwise authorized under the terms of the Plan to have elective deferrals or
\nqualified employer deferral contributions allocated to his or her account for
\nthe plan year.<\/p>\n
Family Member shall mean an individual described in Code (S) 414(q)(6)(B).
\n ————- <\/p>\n
Highly Compensated Employee shall mean an individual described in Code (S)
\n —————————
\n414(q).<\/p>\n
Inactive Participant shall mean any employee or former employee who has
\n ——————–
\nceased to be an eligible employee and on whose behalf an account is maintained
\nunder the Plan.<\/p>\n
Matching contribution shall mean any contribution to the Plan made by the
\n ———————
\nemployer for the plan year and allocated to a participant’s account by reason of
\nthe participant’s employee contributions or elective deferrals.<\/p>\n
Non-highly compensated employee shall mean an employee of the employer who
\n ——————————-
\nis neither a highly compensated employee nor a family member.<\/p>\n
Participant shall mean any employee of the employer who has met the
\n ———–
\neligibility and participation requirements of the Plan.<\/p>\n
Qualified employer deferral contributions shall mean qualified nonelective
\n —————————————–
\ncontributions taken into account under the terms of the Plan in determining the
\nactual deferral percentage.<\/p>\n
Qualified nonelective contributions shall mean contributions (other than
\n ———————————–
\nmatching contributions) made by the employer and allocated to participants’
\naccounts that the participant <\/p>\n
38<\/p>\n
may not elect to receive in cash until distributed from the Plan; that are 100
\npercent vested and nonforfeitable when made; and that are not distributable
\nunder the terms of the Plan to participants or their beneficiaries except in
\nevents upon which elective deferrals may be distributed as described in Section
\n7.7(a) through (e) of this Plan.<\/p>\n
39<\/p>\n
ARTICLE X<\/p>\n
ROLLOVER CONTRIBUTIONS
\n ———————-<\/p>\n
10.1 PERMITTED ROLLOVERS. Subject to terms and conditions established by
\n ——————-
\nthe Plan Administrator, an employee, whether or not a participant, may transfer
\nrollover or direct rollover amounts to the trust from other eligible retirement
\nplans as permitted under, and pursuant to the provisions of, Code (S)(S) 402(c)
\nand 401(a)(31), respectively. The Plan Administrator shall require written
\ncertification that the contribution qualifies under Code (S)(S) 402(c) or
\n401(a)(31), respectively.<\/p>\n
10.2 VESTING AND ACCOUNTING. Rollover contributions and earnings shall be
\n ———————-
\n100% vested and shall be accounted for separately in a rollover account. All
\nrollover contributions shall be invested and reinvested along with the assets of
\nthe Plan and treated in all respects as other assets of the Plan.<\/p>\n
10.3 DISTRIBUTION UPON TERMINATION. The rollover account shall be
\n —————————–
\ndistributed at the same time and in the same manner as the employee’s other
\naccounts. If an employee terminates with no other amounts payable from this
\nPlan, the rollover account shall be valued as of the valuation date coinciding
\nwith or preceding the date of termination and shall be paid in a single sum
\nwithin 60 days after the end of the plan year.<\/p>\n
40<\/p>\n
ARTICLE XI<\/p>\n
ADMINISTRATION
\n ————–<\/p>\n
11.1 NAMED FIDUCIARY. The employer and the Plan Administrator are named
\n —————
\nfiduciaries for purposes of ERISA. The Plan Administrator is the named fiduciary
\nwith the authority to control and manage the operation and administration of the
\nPlan, and is the “administrator” of the Plan within the meaning of ERISA Section
\n3(16)(A).<\/p>\n
11.2 PLAN ADMINISTRATOR. The Plan Administrator may from time to time
\n ——————
\nemploy agents to aid in the administration of the Plan. The Plan Administrator
\nshall have the sole power and discretion to interpret and construe the
\nprovisions of this Plan and to determine all questions, including both
\ninterpretive and factual questions arising in connection with the
\nadministration, interpretation and application of the Plan, and shall supply any
\nomission or reconcile any inconsistency in the Plan. The Plan Administrator’s
\nauthority includes, without limitation, the sole authority to interpret and
\nconstrue the Plan and determine a participant’s eligibility to participate in
\nthe Plan and to receive benefits, and amount of benefits, if any. Any such
\naction shall be final and conclusive upon all persons. The Plan Administrator
\nshall decide any disputes which may arise under this Plan relative to the rights
\nof employees, past and present, and their beneficiaries. Further, the Plan
\nAdministrator shall adopt such rules as it deems necessary, and give
\ninstructions and directions to the trustee as necessary and, in general, shall
\ndirect the administration of the Plan. The Plan Administrator’s authority
\nincludes, but is not limited to, the following:<\/p>\n
a. to compute, certify, and direct the trustee with respect to the
\n amount and the kind of benefits to which any participant shall be
\n entitled hereunder;<\/p>\n
41<\/p>\n
b. to authorize and direct the trustee with respect to all
\n nondiscretionary or otherwise directed disbursements from the
\n trust;<\/p>\n
c. to compute and certify to the employer and to the trustee from
\n time to time the sums of money necessary or desirable to be
\n contributed to the Plan;<\/p>\n
d. to consult with the employer and the trustee regarding the short
\n and long-term liquidity needs of the Plan in order that the
\n trustee can exercise any investment discretion in a manner
\n designed to accomplish specific objectives; and<\/p>\n
e. to prepare and implement a procedure to notify eligible employees
\n that they may elect to have a portion of their compensation
\n deferred or paid to them in cash.<\/p>\n
11.3 FACILITY OF PAYMENTS. Whenever, in the Plan Administrator’s opinion,
\n ——————–
\na person who is entitled to receive any payment of a benefit or installment
\nthereof is under a legal disability or is incapacitated in any way so as to be
\nunable to manage his or her financial affairs, the Plan Administrator may direct
\nthe trustee to make payments to such person or to the participant’s legal
\nrepresentative or to a relative or friend of the participant for his or her
\nbenefit. Any payment of a benefit or installment thereof made in accordance with
\nthe provisions of this section shall be a complete discharge of any liability
\nfor the making of such payment under this Plan.<\/p>\n
11.4 APPOINTMENT OF INVESTMENT MANAGER. The employer shall have the
\n ———————————
\nauthority described in ERISA (S) 402(c)(3) to appoint one or more investment
\nmanagers and contract with each for management of any part of the trust fund for
\na reasonable fee. Selection and retention of an investment manager shall be in
\nthe trustee’s discretion. Each investment <\/p>\n
42<\/p>\n
manager shall have the power to manage, acquire, and dispose of the part of the
\ntrust fund designated by the employer. The investment manager shall have no
\nresponsibility for plan operation or administration.<\/p>\n
11.5 INVESTMENT MANAGER AND TRUSTEE. If an investment manager is
\n ——————————
\nappointed:<\/p>\n
(a) The trustee shall segregate the trust fund or any part thereof
\ninto one or more investment accounts. The trustee shall appoint an investment
\nmanager for each account and designate the part of the trust fund to be managed
\nby each investment manager.<\/p>\n
(b) The trustee may terminate at any time the authority of an
\ninvestment manager to manage an account. In such event or upon resignation of an
\ninvestment manager, the trustee may appoint a successor investment manager for
\nthe account.<\/p>\n
(c) Each investment manager to whom any fiduciary responsibility
\nwith respect to the Plan or the trust funds allocated is delegated, shall
\ndischarge such responsibility in accordance with the standards set forth in
\nERISA 404(a) and shall acknowledge such responsibility in writing.<\/p>\n
11.6 DELEGATION OF AUTHORITY AND DUTIES BY PLAN ADMINISTRATOR. The 401(k)
\n ——————————————————–
\nAdministrative Committee may allocate to a specific 401(k) Administrative
\nCommittee member or members the authority and duty to carry out some or all of
\nthe Plan Administrator’s fiduciary responsibilities under the Plan. In addition,
\nthe 401(k) Administrative Committee (or a 401(k) Administrative Committee member
\nwho has been allocated authority and duties pursuant to the preceding sentence)
\nmay designate one or more persons, positions, committees or entities either
\nwithin or outside of Microsoft Corporation to carry out some or all of the Plan
\nAdministrator’s fiduciary responsibilities under the Plan. Any<\/p>\n
43<\/p>\n
such designee and any 401(k) Administrative Committee member who has been
\nallocated authority shall have the same authority and discretion as would the
\n401(k) Administrative Committee in performing the delegated or allocated
\nresponsibilities. The 401(k) Administrative Committee’s allocation or delegation
\ndescribed in this Section 11.6 may include, without limitation, its fiduciary
\nauthority and duties under Articles XI and XII, including authority, power and
\ndiscretion that is assigned solely to the Plan Administrator. The Plan
\nAdministrator’s allocation or delegation may be made either orally or in
\nwriting, and shall be effective only after the person receiving the allocation
\nor delegation agrees to accept the authority and duties allocated or delegated.<\/p>\n
44<\/p>\n
ARTICLE XII<\/p>\n
CLAIMS PROCEDURE
\n —————-<\/p>\n
12.1 DENIAL OF CLAIMS. Any denial of a claim for benefits under the trust
\n —————-
\nby a participant or beneficiary shall be stated in writing and delivered or
\nmailed to the participant or beneficiary. Such notice shall set forth the
\nspecific reasons for the denial in a manner that may be understood without legal
\nor actuarial counsel. Any denial of a claim may be appealed to the Plan
\nAdministrator by sending to the Plan Administrator a written request for review
\nwithin 90 days after receiving notice of denial. The Plan Administrator shall
\ngive the applicant an opportunity to review pertinent documents in preparing the
\napplicant’s request for review. The request shall set forth all grounds on which
\nit is based, supporting facts and other matters which the applicant deems
\npertinent. The Plan Administrator may require the applicant to submit such
\nadditional facts, documents or other material as it deems necessary or advisable
\nin making its review and shall act upon such request within 60 days after the
\nreceipt thereof, unless special circumstances require further time. If the Plan
\nAdministrator confirms the denial in whole or in part, the Plan Administrator
\nshall notify the applicant, setting forth in a manner calculated to be
\nunderstood by the applicant, specific reasons for denial and specific references
\nto Plan provisions on which the decision was based.<\/p>\n
12.2 ARBITRATION. Any controversy or claim arising out of or relating to
\n ———–
\nthis Plan, which is asserted by any person as an employee, former employee,
\nparticipant, or beneficiary, shall be settled by arbitration in accordance with
\nthe Commercial Rules of the American Arbitration Association. Judgment upon the
\naward rendered by the arbitrator shall be entered in a court having jurisdiction
\nthereof. All such arbitration cases shall be heard by an attorney licensed in
\nthe jurisdiction where the arbitration hearing is to occur.<\/p>\n
45<\/p>\n
ARTICLE XIII<\/p>\n
NONALIENATION PROVISION
\n ———————–<\/p>\n
No participant shall have the right or power to alienate, anticipate,
\ncommute, pledge, encumber, or assign any of the funds allocated to the
\nparticipant under the terms of this Plan, and such funds shall not be subject to
\nseizure by any creditor of the participant under any writ or proceedings at law
\nor in equity; provided, that the terms of this Article shall not prohibit the
\ncreation, assignment or recognition of a right to any benefit payable with
\nrespect to a participant if such creation, assignment or recognition of a right
\nis made under a qualified domestic relations order defined under Code (S)
\n414(p).<\/p>\n
46<\/p>\n
ARTICLE XIV
\n TERMINATION
\n ———–<\/p>\n
14.1 PLAN TERMINATION. The employer shall have the right to terminate the
\n —————-
\nPlan at any time as to its employees by action of its board of directors or by
\naction of any committee or officer to whom such board of directors has delegated
\nthe right to terminate the Plan. In addition, Microsoft Corporation reserves the
\nright to terminate the Plan in its entirety at any time by action of the Board
\nof Directors of Microsoft Corporation or by action of any committee or officer
\nto whom the Board of Directors has delegated such authority to terminate the
\nPlan, and the Plan shall terminate in its entirety unless Microsoft Corporation
\npermits employers wishing to continue the Plan as to their respective employees
\nto arrange a spin-off of Plan assets attributable to accounts of their
\nemployees.<\/p>\n
14.2 NO REVERSION TO EMPLOYER — ACCRUED RIGHTS NONFORFEITABLE. No
\n ———————————————————
\ntermination shall have the effect of vesting in the employer any part of the
\nprincipal or income of the plan funds. In the case of a termination, partial
\ntermination, or complete discontinuance of contributions, the rights of all
\naffected employees accrued to the date of such termination or partial
\ntermination, to the extent funded as of such date, shall be nonforfeitable. See
\nSection 5.6 of this Plan for the treatment of certain forfeitures upon complete
\ntermination of the Plan.<\/p>\n
14.3 DISTRIBUTION UPON TERMINATION OR DISCONTINUANCE OF CONTRIBUTIONS.
\n —————————————————————-
\nUpon termination of the Plan or a complete discontinuance of contributions to
\nthe Plan the interests of all participants shall fully vest and distribution
\nshall be made to each participant in the form and manner determined by the Plan
\nAdministrator and as permitted by the Code and ERISA. See Section 7.7 of this
\nPlan.<\/p>\n
47<\/p>\n
ARTICLE XV
\n MERGER OR CONSOLIDATION
\n ———————–<\/p>\n
In the case of any merger or consolidation with, or transfer of, assets or
\nliabilities to any other retirement Plan, the termination benefits of
\nparticipants, former participants and beneficiaries immediately subsequent to
\nthe merger, consolidation or transfer shall be equal to or greater than the
\ntermination benefits immediately prior to such merger, consolidation, or
\ntransfer. In the case of any plan which has merged into this Plan or any assets
\nand liabilities which have been transferred to this Plan from another plan, see
\nAppendix V (as added pursuant to this amendment) of this Plan for (i) special
\nprovisions which apply to any accounts which were transferred to this Plan or
\nestablished in connection with such transfer or merger and (ii) special
\nprovisions which apply to participants who formerly participated in the
\ntransferor or nonsurviving plan.<\/p>\n
48<\/p>\n
ARTICLE XVI
\n AMENDMENTS
\n ———-<\/p>\n
Microsoft Corporation reserves the right, from time to time, to make any
\namendment or amendments to this Plan by resolution of its Board of Directors, or
\nby action of any committee, person(s) or job position(s) to whom the Board of
\nDirectors has delegated authority to amend the Plan, which amendment or
\namendments shall not cause any part of the plan funds to be used for, or
\ndirected to, any purposes other than the exclusive benefit of participants,
\nformer participants or their beneficiaries, nor shall any such amendment reduce
\nthe amount of accrued benefit of any participant or beneficiary within the
\nmeaning of Code (S) 411(d)(6) except to the extent permitted by Code (S)
\n411(d)(6) or the Treasury Regulations thereunder.<\/p>\n
49<\/p>\n
ARTICLE XVII
\n RIGHTS RESERVED
\n —————<\/p>\n
The establishment of the Plan as evidenced hereby or as hereafter modified,
\nthe creation of any funds or accounts or the payment of any benefit hereunder
\nshall not be construed as giving any participant, or any other person, any legal
\nor equitable right against the employer, the trustee, or the Plan Administrator,
\nunless the same shall be specifically provided for in this document or conferred
\nby affirmative action of the employer in accordance with the terms and
\nprovisions of this Plan or as giving any employee or participant the right to be
\nretained in the service of the employer. All employees shall remain subject to
\ndischarge by the employer to the same extent as if this Plan had never been
\nexecuted.<\/p>\n
50<\/p>\n
ARTICLE XVIII
\n TOP-HEAVY PROVISIONS
\n ——————–<\/p>\n
If the Plan is top-heavy in any plan year, the provisions of Appendix IV,
\nattached hereto and incorporated herein, shall supersede any conflicting
\nprovisions in the Plan.<\/p>\n
51<\/p>\n
ARTICLE XIX
\n LOANS
\n —–<\/p>\n
A participant may borrow from his or her account in accordance with a non-
\ndiscriminatory written loan policy, which is incorporated herein by reference.<\/p>\n
52<\/p>\n
ARTICLE XX<\/p>\n
ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND BENEFICIARIES
\n ——————————————————-<\/p>\n
20.1 APPLICABILITY. The provisions of this Article XX shall apply only to
\n ————-
\nthe participants who (1) had accounts transferred to this Plan from a plan which
\nprovided the option of receiving distributions in the form of an annuity (as
\nshown in Appendix V), and (2) have chosen to receive their distribution upon
\ndeath, disability, or termination of employment in the form of a life annuity.
\nThis Article XX applies only to those accounts described in Appendix V that were
\ntransferred from the prior plan in a plan merger, plan-to-plan asset transfer or
\nother transfer for which the annuity distribution option is required by law to
\nbe preserved with respect to the transferred accounts. Thus, for example, this
\nArticle XX does not apply to regular rollovers.<\/p>\n
20.2 DEFINITIONS.
\n ————<\/p>\n
(a) ANNUITY STARTING DATE means the first day of the first period for
\n ———————
\nwhich an amount is paid as an annuity.<\/p>\n
(b) ELECTION PERIOD means the period beginning on the first day of the
\n —————
\nplan year in which a participant attains 35 and ending on the date of the
\nparticipant’s death. If a participant separates from service before the first
\nday of the plan year in which he reaches age 35, the election period with
\nrespect to his or her account balance as of the date of separation shall begin
\non the date of separation. A participant who will not attain age 35 as of the
\nend of a plan year may make a valid waiver election to waive the qualified
\npreretirement survivor annuity for the period beginning on the date of the
\nelection and ending on first day of the plan year in which the participant will
\nattain age 35. Qualified preretirement survivor annuity coverage will be<\/p>\n
53<\/p>\n
automatically reinstated as of the first day of the plan year in which a
\nparticipant attains age 35. Any new waiver on or after that date shall be
\nsubject to the full requirements of this Article XX.<\/p>\n
(c) QUALIFIED JOINT AND SURVIVOR ANNUITY means an immediate annuity
\n ————————————
\npurchasable with the participant’s vested account balance which provides a life
\nannuity for the participant and a survivor annuity payable for the remaining
\nlife of the participant’s surviving spouse equal to at least 50% and not more
\nthan 100% of the amount of the annuity payable during the life of the
\nparticipant.<\/p>\n
(d) PRERETIREMENT SURVIVOR ANNUITY means an annuity which is purchasable
\n ——————————
\nwith 100% of the participant’s vested account balance (as determined on the date
\nof the participant’s death) and which is payable for the life of the
\nparticipant’s surviving spouse.<\/p>\n
(e) SPOUSE means the current spouse or surviving spouse of a participant
\n ——
\nexcept that a former spouse will be treated as a spouse or surviving spouse (and
\na current spouse will not be treated as the spouse or surviving spouse) to the
\nextent provided under a qualified domestic relations order.<\/p>\n
20.3 DISTRIBUTION IN THE FORM OF A JOINT AND SURVIVOR ANNUITY.
\n ——————————————————– <\/p>\n
A participant who is married shall receive his or her vested account balance in
\nthe form of a joint and survivor annuity unless the participant completes a
\nvalid waiver election within the 90-day period ending on the annuity starting
\ndate. The participant’s waiver election will not be required to meet the spousal
\nconsent requirements if: (1) the participant does not have a spouse; (2) the
\nPlan is unable to locate the participant’s spouse; (3) the participant is
\nlegally separated or has been abandoned (within the meaning of state law) and
\nthe participant has a court order to that effect; or (4) other circumstances
\nexist under which the Secretary of the Treasury will excuse the <\/p>\n
54<\/p>\n
consent requirement. If the participant’s spouse is legally incompetent to give
\nconsent, the spouse’s legal guardian (even if the legal guardian is the
\nparticipant) may give consent.<\/p>\n
20.4 DISTRIBUTION IN THE FORM OF A PRERETIREMENT SURVIVOR ANNUITY. If a
\n ————————————————————
\nmarried participant dies prior to his or her annuity starting date, the
\nparticipant’s surviving spouse shall receive a portion of the participant’s
\nvested account balance in the form of a preretirement survivor annuity, unless
\nthe participant had a valid waiver election in effect, or unless the participant
\nand his or her spouse were not married through a one year period ending on the
\ndate of the participant’s death.<\/p>\n
20.5 WAIVER ELECTION – QUALIFIED JOINT AND SURVIVOR ANNUITY.
\n ——————————————————<\/p>\n
During the 90-day period prior to the participant’s annuity starting date, a
\nparticipant may waive the requirement to receive his or her benefit under the
\nPlan in the form of a joint and survivor annuity. In order to waive the
\nelection, the participant must have received a written explanation of the terms
\nand conditions of the qualified joint and survivor annuity as described in
\nSection 20.7.<\/p>\n
A married participant’s waiver election shall not be valid unless the
\nparticipant’s spouse: (1) has consented in writing to the election waiver and a
\nnotary public or the plan administrator (or his or her representative) witnesses
\nthe spouse’s consent; (2) the spouse consents to the alternate form of payment
\ndesignated by the participant or to any change in the designated form of
\npayment; and (3) unless the spouse is the participant’s sole beneficiary, the
\nspouse consents to the participant’s beneficiary designation or to any change in
\nthe participant’s beneficiary designation.<\/p>\n
55<\/p>\n
20.6 WAIVER ELECTION – PRERETIREMENT SURVIVOR ANNUITY. A participant’s
\n ————————————————
\nwaiver election of the preretirement survivor annuity is not valid unless: (1)
\nthe participant makes the waiver election during the election period as defined
\nin this section; and (2) the participant’s spouse (to whom the preretirement
\nsurvivor annuity is payable) satisfies the consent requirements described in
\nSection 20.5, except that the spouse need not consent to the form of benefit
\npayable to the designated beneficiary. The spouse’s consent to the waiver of the
\npreretirement survivor annuity is irrevocable, unless the participant revokes
\nthe waiver election. A waiver election described in this paragraph is not valid
\nunless made after the participant has received the written explanation described
\nin Section 20.7.<\/p>\n
20.7 NOTICE REQUIREMENTS. In the case of a qualified joint and survivor
\n ——————-
\nannuity, no less than 30 days and no more than 90 days before a participant’s
\nannuity starting date the plan administrator shall provide to the participant a
\nwritten explanation of: (1) the terms and conditions of a qualified joint and
\nsurvivor annuity; (2) the participant’s right to make, and the effect of, an
\nelection to waive the qualified joint and survivor annuity form of benefit; (3)
\nthe rights of the participant’s spouse; and (4) the right to make, and the
\neffect of, a revocation of a previous election to waive the qualified joint and
\nsurvivor annuity. The Plan may provide the written explanation described above
\nafter the annuity starting date, provided that the distribution begins at least
\n30 days after the date on which such explanation is provided. Notwithstanding
\nthe foregoing, the Plan may permit a participant to elect to waive the
\nrequirement that the written explanation be provided at least 30 days before the
\nannuity starting date. Such a waiver is allowed only if the distribution
\ncommences more than 7 days after the written explanation is provided.<\/p>\n
56<\/p>\n
In the case of a qualified preretirement annuity, the plan administrator
\nshall provide to the participant a written explanation of the qualified
\npreretirement survivor annuity, in terms and manner comparable to the
\nrequirements applicable to the explanation of a qualified joint and survivor
\nannuity as described in the preceding paragraph. The explanation shall be
\nprovided by the latest of the following periods: (1) the period beginning with
\nthe first day of the plan year in which the participant attains age 32 and
\nending with the close of the plan year preceding the plan year in which the
\nparticipant attains age 35; (2) a reasonable period ending after an individual
\nbecomes a participant; or (3) a reasonable period ending after this Article XX
\nfirst applies to the participant. Notwithstanding the foregoing, in the case of
\na participant who separates from service before attaining age 35, notice must be
\nprovided within a reasonable time ending after his separation from service.<\/p>\n
A reasonable period of time shall be the end of a two-year period beginning
\none year before the date the applicable event occurs, and ending one year after
\nthat date. In the case of a participant who separates from service before the
\nplan year in which he reaches age 35, notice shall be provided within the two-
\nyear period beginning one year before the separation and ending one year after
\nthe separation. If such a participant thereafter returns to employment with the
\nemployer, the applicable period for the participant shall be redetermined.<\/p>\n
20.8 DISTRIBUTION OF ACCOUNTS OF LESS THAN $5,000. Notwithstanding any
\n ——————————————–
\nprovision of this Article XX to the contrary, if a participant’s vested account
\nbalance does not exceed $5,000 on the date of distribution (and has never
\nexceeded $5,000 at the time of a prior distribution), the participant’s benefit
\nshall be distributed in the form of a lump sum.<\/p>\n
20.9 PROVISION OF ANNUITIES. All annuities provided under this Plan
\n ———————-
\nshall be purchased from an insurance company selected by Microsoft Corporation.<\/p>\n
57<\/p>\n
ARTICLE XXI
\n VOLUNTARY AFTER-TAX CONTRIBUTIONS
\n ———————————<\/p>\n
21.1 ELECTION TO MAKE VOLUNTARY AFTER-TAX CONTRIBUTIONS. In the same
\n ————————————————–
\nmanner as described in Article III for employee salary deferrals, a participant
\nmay elect to contribute on an after-tax basis from 1% to 7% of each of his or
\nher compensation payments to an employee after-tax contribution account under
\nthe Plan, provided, however, that the contributions shall be subject to the
\nlimitations of Code (S)415 (as described in Section 9.1 of the Plan) and Code
\n(S)401(m) (as described in Section 9.7 and Appendix III.9.5.C. of the Plan).<\/p>\n
21.2 VESTING OF VOLUNTARY AFTER-TAX CONTRIBUTIONS. A participant’s
\n ——————————————–
\nvoluntary after-tax contributions made to the Plan in accordance with Section
\n21.1 shall be fully vested at all times.<\/p>\n
21.3 ESTABLISHMENT OF VOLUNTARY AFTER-TAX CONTRIBUTIONS ACCOUNTS. For
\n ———————————————————–
\nparticipants who elect to make a contribution under this Article XXI, the
\nemployer shall establish a separate account for the participant. These accounts
\nshall be labeled employee after-tax contribution accounts.<\/p>\n
21.4 LIMITATIONS ON VOLUNTARY AFTER-TAX CONTRIBUTIONS. A participant’s
\n ————————————————
\nvoluntary after-tax contributions shall be subject to the limitations on total
\naccount contributions under Section 9.1 of the Plan. If a participant who has
\nmade voluntary after-tax contributions during the plan year exceeds the
\nlimitation under Section 9.1, the after-tax contributions shall be distributed
\nto the participant before any distribution from the participant’s salary
\ndeferral account is made.<\/p>\n
A participant’s voluntary after-tax contributions shall also be subject to
\nthe average contributions percentage test as described in Section 9.7 and
\nAppendix III.9.5.C. of the Plan. For <\/p>\n
58<\/p>\n
purposes of such test and calculating a participant’s contribution percentage,
\nan employee’s voluntary after-tax contributions shall be added to the employer
\nmatching contributions, the sum of which shall then be divided by the
\nparticipant’s compensation. If a participant who has made voluntary after-tax
\ncontributions during the plan year exceeds the limitations under Section 9.7 and
\nAppendix III.9.5.C. of the Plan, the after-tax contributions shall be
\ndistributed to the participant before any distribution from the participant’s
\nemployer contribution account is made.<\/p>\n
21.5 DEFINITION OF COMPENSATION. Any employee voluntary after-tax
\n ————————–
\ncontributions made by a participant during the plan year shall be included in
\nthe definition of compensation in Appendix I of the Plan.<\/p>\n
21.6 PLAN TERMS APPLICABLE TO VOLUNTARY AFTER-TAX CONTRIBUTIONS. The
\n ———————————————————-
\nprovisions of Article III applicable to the method of making an election to
\ncontribute a portion of compensation, the provisions of Article VI regarding
\nparticipant’s accounts and investments, the provisions of Article VII regarding
\nthe payment of account balances upon termination, age 59 1\/2 , death,
\ndisability, qualified domestic relations orders, or the sale of the trade or
\nbusiness, the provisions of Article VIII regarding hardship distributions, and
\nthe provisions of Article XIX (which incorporates by reference the loan policy
\nof the Plan) and the loan policy shall all apply to participant voluntary after-
\ntax contributions. For purposes of these sections, except to the extent
\nprovided otherwise under this Article, voluntary after-tax contributions shall
\nbe treated in the same manner as participant salary deferral contributions. In
\naddition, the general provisions of the Plan found in Article XI Administration,
\nArticle XII Claims Procedure, Article XIII Nonalienation Provision, Article XIV
\nTermination, Article XV Merger or Consolidation, Article XVI Amendments, Article
\nXVII Rights Reserved, <\/p>\n
59<\/p>\n
Article XVIII Top-Heavy Provisions and similar articles or appendices shall
\napply to the voluntary after-tax contributions to the Plan.<\/p>\n
60<\/p>\n
APPENDIX I<\/p>\n
DEFINITION OF COMPENSATION<\/p>\n
Section 1.3
\n I.1.3.A. Compensation:
\n ———— <\/p>\n
Compensation means an employee’s wages, salaries, fees for professional
\nservices, and other amounts received (without regard to whether or not an amount
\nis paid in cash) for personal services actually rendered in the course of
\nemployment with the employer maintaining the plan to the extent that the amounts
\nare includible in gross income (including, but not limited to, bonuses,
\ncommissions, and overtime pay). Compensation includes the employee’s elective
\nsalary reduction contributions not includible in gross income under Code (S) 125
\n(cafeteria plans) or (S) 402(e)(3) (401(k) plans); and compensation includes
\nforeign earned income (as defined in Code (S) 911(b)), whether or not excludable
\nfrom gross income under Code (S) 911. Compensation shall not include:<\/p>\n
(a) (even if includible in gross income) reimbursements or other
\nexpense allowances, fringe benefits (cash and noncash), moving expenses,
\ndeferred compensation, welfare benefits, and bonuses and expense allowances
\nwhich are not based upon the participant’s performance as an employee (examples
\nof non-performance based compensation include signing, relocation, press, and
\npatent bonuses, tax and foreign currency equalization payments, and anniversary
\nstock awards);<\/p>\n
(b) employer contributions to a simplified employee pension
\ndescribed in Code (S) 408(k), distributions from a plan of deferred compensation
\n(regardless of whether such amounts are includible in the gross income of the
\nemployee when distributed);<\/p>\n
I-1<\/p>\n
(c) amounts realized from the exercise of a nonqualified stock
\noption, or when restricted stock (or property) held by an employee either
\nbecomes freely transferable or is no longer subject to a substantial risk of
\nforfeiture;<\/p>\n
(d) amounts realized by the employee from the sale, exchange or
\nother disposition of stock acquired under a qualified stock option; and<\/p>\n
(e) other amounts which receive special tax benefits, such as
\npremiums for group-term life insurance.<\/p>\n
I.1.3.B. Compensation for Employees of Controlled Group
\n ———————————————-<\/p>\n
In the case of an employee of an employer which is a member of a controlled
\ngroup of corporations (as defined in Code (S) 414(b) as modified by Code (S)
\n415(h)), the term “compensation” for such employee includes compensation from
\nall employers that are members of the group, regardless of whether the
\nemployee’s particular employer has a qualified plan. This rule is also
\napplicable to an employee of two or more trades or businesses (whether or not
\nincorporated) that are under common control (as defined in Code (S) 414(c) as
\nmodified by Code (S) 415(h)), to an employee of two or more members of an
\naffiliated service group as defined in Code (S) 414(m), and to an employee of
\ntwo or more members of any group of employers who must be aggregated and treated
\nas one employer pursuant to Code (S) 414(o).<\/p>\n
I.1.3.C. Limitations on Compensation
\n —————————<\/p>\n
(a) In addition to the applicable limitations set forth in the
\nPlan, and notwithstanding any other provisions of the Plan to the contrary the
\nannual compensation of each employee taken into account under the Plan shall not
\nexceed the OBRA ’93 annual compensation limit. The OBRA ’93 annual compensation
\nlimit is $150,000, as adjusted by the Commissioner for increases in the cost of
\nliving in accordance with Code (S) 401(a)(17)(B) (e.g., $160,000 in<\/p>\n
I-2<\/p>\n
1997). The cost-of-living adjustment in effect for a calendar year applies to
\nany period, not exceeding 12 months, over which compensation is determined (the
\n“determination period”) beginning in such calendar year. If a determination
\nperiod consists of fewer than 12 months, the OBRA ’93 annual compensation limit
\nwill be multiplied by a fraction, the numerator of which is the number of months
\nin the determination period, and the denominator of which is 12.<\/p>\n
Any reference in this Plan to the limitation under Code (S) 401(a)(17)
\nshall mean the OBRA ’93 annual compensation limit set forth in this provision.<\/p>\n
For purposes of determining the maximum dollar amount referred to in this
\nprovision, the compensation of any participant who is either a 5% owner (as
\ndefined in Code (S) 416(i)) or one of the ten most highly paid highly
\ncompensated employees during the Plan year shall be aggregated with: (i) the
\ncompensation of any lineal descendant who has not attained the age of 19, and
\n(ii) the compensation of a participant who is his or her spouse.<\/p>\n
I-3<\/p>\n
APPENDIX II
\n Sections 1.6, 2.1 and 5.2<\/p>\n
EMPLOYERS MAINTAINING THE PLAN<\/p>\n
Employer Effective Date
\n——————————————- ————————–
\nMicrosoft Corporation January 1, 1987
\nTechnology Resources Management Corporation November 23, 1992
\nVermeer Technologies, Inc. April 1, 1996 – March 13, 1998
\nMicrosoft Licensing, Inc. August 1, 1997
\nWebTV Networks, Inc. January 1, 1998
\nHotmail Corporation April 1, 1998
\nMicrosoft – Health, LLC September 21, 1998
\nMSNBC Interactive News L.L.C. January 1, 1999
\nExpedia, Inc. November 1 – December 31, 1999
\nVisio Corporation March 1, 2000<\/p>\n
EMPLOYEES’ PREPARTICIPATION SERVICE WITH THESE COMPANIES
\n IS COUNTED FOR ELIGIBILITY AND VESTING<\/p>\n
Company Effective Date Credit is Granted
\n——————————————- ——————————–
\nMicrosoft Corporation January 1, 1987
\nTechnology Resources Management Corporation November 23, 1992
\nFox Software, Inc. July 1, 1992
\nSOFTIMAGE, Inc. June 27, 1994
\nBauer Group, Inc. July 1, 1989
\nForethought, Inc. August 1, 1987
\nAltamira Software Corporation September 16, 1994
\nNextBase, Ltd. October 31, 1994
\nAutomap, Inc. October 31, 1994
\nOne Tree Software, Inc. November 10, 1994
\nNatural Language Inc. February 22, 1995
\nNetwork Managers Ltd. August 28, 1995<\/p>\n
II-1<\/p>\n
\n\nCompany Effective Date Credit is Granted
\n—————————————————- ——————————–
\n
\nBlue Ribbon SoundWorks October 13, 1995<\/p>\nNetwise October 28, 1995<\/p>\n
Bruce Artwick Organization December 1, 1995<\/p>\n
Vermeer Technologies, Inc. January 12, 1996
\n(Note: service credit is as described in Appendix
\n V) <\/p>\n
Colusa Software, Inc. February 9, 1996<\/p>\n
Aspect Software Engineering, Inc. March 22, 1996<\/p>\n
Aha! software corp. March 27, 1996<\/p>\n
EXOS, Inc. April 12, 1996<\/p>\n
EShop Inc. June 20, 1996
\n(Note: service credit is as described in Appendix
\n V) <\/p>\n
ResNova Software, Inc. November 14, 1996<\/p>\n
Panorama Software Systems Ltd. January 2, 1997
\n<\/c><\/s><\/caption>\n<\/table>\n
EMPLOYEES’ PREPARTICIPATION SERVICE WITH THESE COMPANIES
\n IS COUNTED FOR VESTING<\/p>\n
\n\n Company Effective Date Credit is Granted
\n—————————————————- ———————————
\n
\nNetCarta Corporation January 31, 1997<\/p>\nInterse` Corporation February 25, 1997<\/p>\n
Dimension X May 13, 1997 <\/p>\n
Cooper & Peters, Inc. June 11, 1997 <\/p>\n
LinkAge Software (1997) Inc. June 27, 1997
\n(and its predecessor, LinkAge Software Inc.) <\/p>\n
VXtreme, Inc. July 31, 1997 <\/p>\n
WebTV Networks, Inc. August 1, 1997
\n(Note: service credit is as described in Appendix
\n V) <\/p>\n
Hotmail Corporation December 30, 1997<\/p>\n
Firefly Network, Inc. April 15, 1998<\/p>\n
The Mesa Group, Inc. April 24, 1998<\/p>\n
Valence Research August 7, 1998
\n<\/c><\/s><\/caption>\n<\/table>\n
II-2<\/p>\n
\n\n Company Effective Date Credit is Granted
\n —————————————————- ——————————–
\n
\n LinkExchange Inc. November 4, 1998<\/p>\n Virtual World Entertainment Group, Inc. January 11, 1999<\/p>\n
FASA Interactive Technology, Inc. January 11, 1999<\/p>\n
Compare Net, Inc. March 4, 1999<\/p>\n
Access Software Incorporated April 29, 1999<\/p>\n
Jump Networks, Inc. April 30, 1999<\/p>\n
Intrinsa Corporation June 29, 1999<\/p>\n
Entropic Research Laboratory, Inc. November 4, 1999<\/p>\n
Visio Corporation January 7, 2000
\n<\/c><\/s><\/caption>\n<\/table>\n
In order to receive preparticipation service credit for service with any of
\nthe foregoing companies except Microsoft Corporation (“Microsoft”), Technology
\nResources Management Corporation (“TRMC”), Vermeer Technologies, Inc. (“VTI”)
\nand eShop Inc. (each of the foregoing is hereinafter referred to as a “Former
\nEmployer”), the employee must be employed by Microsoft, TRMC, VTI or a company
\nwhich is affiliated (within the meaning of Code Sections 414(b), (c), (m) or
\n(o)) with Microsoft, TRMC or VTI, in connection with Microsoft’s (or its
\naffiliate’s) acquisition of or merger with such Former Employer (or a trade or
\nbusiness thereof). Any employee who has previously worked for one of the Former
\nEmployers and whose employment with Microsoft, TRMC, VTI or one of its
\naffiliates is not connected with Microsoft’s (or its affiliate’s) acquisition of
\nor merger with such Former Employer (or a trade or business thereof) will not
\nreceive credit for his or her prior service with the Former Employer.<\/p>\n
Preparticipation service credit is counted for eligibility and vesting
\npurposes for an employee’s service with the following companies despite the fact
\nthat neither Microsoft nor an affiliate of Microsoft acquired or merged with
\nsuch company (or a trade or business thereof). Notwithstanding the foregoing,
\nservice with the following companies will only be counted for<\/p>\n
II-3<\/p>\n
those employees who are employed with Microsoft (or an affiliate of Microsoft)
\non the effective date set forth below on which service credit is granted for
\nservice with such company.<\/p>\n
EMPLOYEES’ PREPARTICIPATION SERVICE WITH THESE COMPANIES
\n IS COUNTED FOR ELIGIBILITY AND VESTING
\n (NOTE: These Companies were not Acquired)<\/p>\n
Company Effective Date Credit is Granted
\n————————————– ————————————
\n Charles View Software, Inc. June 1, 1996<\/p>\n
Prior service with MSNBC Interactive News L.L.C. and, for employees of MSNBC
\nInteractive News L.L.C., service with National Broadcast Company, shall also be
\ncounted towards vesting. See Appendix V.G. regarding calculation of such
\nvesting service credit.<\/p>\n
II-4<\/p>\n
APPENDIX III<\/p>\n
CODE (S) 401(k) LIMITATIONS OF COMPENSATION DEFERRALS AND CODE (S) 401(m)<\/p>\n
LIMITATIONS ON COMPENSATION DEFERRALS<\/p>\n
III.9.5.A. Definition of Highly Compensated Employee.
\n —————————————– <\/p>\n
“Highly compensated employee” shall mean:<\/p>\n
(a) Any employee who performs services for the employer during the
\n“determination year” and who, during the “determination year” (1) was a 5% owner
\nof the employer; (2) received compensation from the employer in excess of
\n$75,000 (as adjusted for increases in cost of living as reported in IRS
\npublications); (3) received compensation from the employer in excess of $50,000
\n(as adjusted for increases in cost of living as reported in IRS publications)
\nand was a member of the “top-paid group” for such year; or (4) was an officer of
\nthe employer and received compensation during such year that is greater than 50%
\nof the dollar limitation in effect under Code (S) 415(c)(1(A);<\/p>\n
(b) Any employee who separated from service (or was deemed to have
\nseparated) prior to the determination year, and met the description in (a) above
\nfor either the separation year or any determination year ending on or after the
\nemployee’s 55th birthday.<\/p>\n
(c) If no officer of the employer has compensation in excess of 50%
\nof the dollar limitation in effect under Code (S) 415(b)(1)(A) during a
\ndetermination year, the highest paid officer for such year shall be treated as a
\nhighly compensated employee.<\/p>\n
(d) If an employee is, during a determination year, a “family
\nmember” of either a 5% owner who is an employee or of a highly compensated
\nemployee in the group consisting of the 10 most highly compensated employees
\nranked on the basis of compensation paid by the employer during such year, then
\nthe family member and 5% owner or top-ten highly <\/p>\n
III-1<\/p>\n
compensated employee shall be treated as a single employee, and their
\ncompensation and contributions or benefits under this Plan shall be aggregated.
\nExcept as otherwise provided under Code (S) 401(a)(17), “family member” includes
\nthe spouse, lineal ascendants and descendants of the employee or former
\nemployee, and the spouses of such lineal ascendants and descendants.<\/p>\n
(e) The “determination year” shall be the plan year for which
\ncompliance is being tested, and the “look-back year” shall be the calendar year
\nending at the end of the determination year (see the calendar year calculation
\nelection pursuant to Temporary Treasury Regulation 1.414(q)-IT, Q&A-14(b)).
\nBecause the look-back year is the same as the determination year, the look-back
\nyear shall be referred to herein as the determination year.<\/p>\n
(f) The “top-paid group” for a determination year shall consist of
\nthe top 20% of employees ranked on the basis of compensation received during the
\nyear excluding employees described in Code (S) 414(q)(8) and Treasury
\nregulations thereunder. The number of employees treated as officers shall be
\nlimited to 50 (or, if less, the greater of 3 employees or 10% of the employees).
\nFor purposes of this definition of “highly compensated employee”, “compensation”
\nmeans compensation within the meaning of Code (S) 415(c)(3), but including
\nelective or salary reduction contributions to a cafeteria plan, cash or deferred
\narrangement, or tax-sheltered annuity.<\/p>\n
(g) Notwithstanding the foregoing, for any year that the requirements
\nset forth in Code Section 414(q)(12) and any regulations thereunder are
\nsatisfied, (a)(2) above shall be applied by substituting “$50,000” for
\n“$75,000”, and (a)(3) above shall not apply.<\/p>\n
III-2<\/p>\n
III.9.5.B. Code (S) 401(k) Limitations on Compensation Deferrals.
\n —————————————————– <\/p>\n
(a) The Plan Administrator will estimate as soon as practicable
\nbefore the close of the plan year and at such other times as the Plan
\nAdministrator in its discretion determines, the extent, if any, to which any
\nparticipant or class of participants will have to reduce contributions under
\nthis Plan.<\/p>\n
(b) For each plan year, an actual deferral percentage will be
\ndetermined for each participant equal to the ratio of the total amount of the
\nparticipant’s salary deferrals under section 3.1 for the plan year divided by
\nthe participant’s compensation in the plan year. In the case of family members
\ntreated as a single highly compensated employee under the definition of “highly
\ncompensated employee”, in accordance with the family aggregation rules of Code
\n(S) 414(q)(6), the actual deferral percentage shall be the greater of the (1)
\nthe actual deferral percentage determined by combining the compensation
\ndeferrals and compensation of all eligible family members who are highly
\ncompensated employees without regard to family aggregation, and (2) the actual
\ndeferral percentage determined by combining the salary deferrals and
\ncompensation of all eligible family members. Except to the extent taken into
\naccount in the preceding sentence, the deferrals and compensation of such family
\nmembers shall be disregarded for purposes of this section. Except as otherwise
\nprovided in this paragraph (b), with respect to participants who have made no
\nsalary deferrals under this plan, such actual deferral percentage will be zero.<\/p>\n
(c) The average of the actual deferral percentages for highly
\ncompensated employees (“high average”) when compared with the average of the
\nactual deferral percentages for non-highly compensated employees (“low average”)
\nmust meet one of the following requirements:<\/p>\n
III-3<\/p>\n
(1) The high average is no greater than 1.25 times the low
\naverage; or<\/p>\n
(2) The high average is no greater than two times the low
\naverage and the high average is no greater than the low average plus two
\npercentage points.<\/p>\n
(d) If, pursuant to the estimates by the Plan Administrator under (a)
\nand (b) above, a participant or class of participants is not eligible for salary
\ndeferral treatment for any or all of the amounts deferred, then the Plan
\nAdministrator may elect, at its discretion, to pursue any of the following
\ncourses of action or any combination thereof:<\/p>\n
(1) Excess salary deferrals, and any earnings attributable
\nthereto through the date of distribution, may be returned to the employer
\nemploying the participant, solely for the purpose of enabling the employer to
\nwithhold any federal, state, or local taxes due on such amounts. The employer
\nwill pay all remaining amounts to the participant within the 2-1\/2 month period
\nfollowing the close of the plan year to which the excess salary deferrals relate
\nto the extent feasible. but in all events no later than 12 months after the
\nclose of such plan year.<\/p>\n
(2) The Plan Administrator may authorize a suspension or
\nreduction of salary deferrals.<\/p>\n
(3) The company, in its discretion, may make a contribution to
\nthe Plan, which will be allocated as a fixed dollar amount among the accounts of
\nnon-highly compensated employees who have met the requirements of section 2.1<\/p>\n
(e) The amount of the excess salary deferrals will be determined by
\nthe Plan Administrator by reducing the actual deferral percentage of the highly
\ncompensated employee(s) with the highest actual deferral percentage to the
\nextent required to enable the plan to meet the limits in (c) above or to cause
\nthe actual deferral percentage of such employee(s) to equal the actual deferral
\npercentage of the highly compensated employee(s) with the next-highest actual<\/p>\n
III-4<\/p>\n
deferral percentage. The process in the preceding sentence shall be repeated
\nuntil the Plan satisfies the limits in (c) above. In the case of family members
\nsubject to the family aggregation rules of Code (S) 414(q)(6), excess salary
\ndeferrals will be allocated among family members in proportion to the salary
\ndeferrals of each family member that have been combined under section
\nIII.9.5.B.(b) above. Where the actual deferral percentage is determined under
\nsection III.9.5.B.(b)(1) above, however, excess salary deferrals will be
\nallocated first among the eligible highly compensated employee family members in
\nproportion to the salary deferrals of each such highly compensated employee
\nfamily member until the actual deferral percentage of the eligible highly
\ncompensated employee family members has been reduced to the actual deferral
\npercentage of the eligible non-highly compensated employee family members. If
\nreduction of the actual deferral percentage below that of the eligible non-
\nhighly compensated employee family members is required under section
\nIII.9.5.B.(b)(1) to enable the plan to meet the limits in section III.9.5.B.(c)
\nabove, such further reduction shall take into account the salary deferrals of
\nall eligible family members and shall be allocated among all such family members
\nin proportion to their salary deferrals. The earnings attributable to excess
\nsalary deferrals will be determined in accordance with Treasury Regulations.<\/p>\n
(f) In the discretion of the Plan Administrator, the tests described
\nin this section may be applied by aggregating the Plan with any other defined
\ncontribution plans permitted under the Code.<\/p>\n
III.9.5.C. Code (S) 401(m) Limitations on Employer Matching Contributions.
\n ————————————————————–<\/p>\n
(a) For each plan year, a contribution percentage will be determined
\nfor each participant equal to the ratio of the total amount of the participant’s
\nemployer matching contributions under section 4.1 for the plan year divided by
\nthe participant’s compensation for the<\/p>\n
III-5<\/p>\n
plan year. Any employer matching contributions or employer contributions treated
\nas salary deferrals under section III.9.5.B.(b) shall not be used to satisfy the
\nrequirements of this Section III.9.5.B.(a), except as otherwise permitted by the
\nCode or Treasury Regulations. In the case of family members treated as a single
\nhighly compensated employee under the definition of “highly compensated
\nemployee” in accordance with the family aggregation rules of Code (S) 414(q)(6),
\nthe contribution percentage shall be the greater of (1) the contribution
\npercentage determined by combining the employer matching contributions and
\ncompensation of all eligible family members who are highly compensated employees
\nwithout regard to family aggregation, and (2) the actual contribution percentage
\ndetermined by combining the employer matching contributions and compensation of
\nall eligible family members. Except to the extent taken into account in the
\npreceding sentence, the employer matching contributions, compensation and all
\namounts treated as employer matching contributions of such family members shall
\nbe disregarded for purposes of this section III.9.5.C. Except as otherwise
\nprovided in this Section III.9.5.C.(b), with respect to participants and for
\nwhom there were no employer matching contributions under this plan, such
\ncontribution percentage will be zero.<\/p>\n
(b) The average of the contribution percentages for highly
\ncompensated employees (“high average”) when compared with the average of the
\ncontribution percentages for non-highly compensated employees (“low average”)
\ndoes not exceed the greater of:<\/p>\n
(1) 1.25 times the low average; or<\/p>\n
(2) The lesser of two times the low average, or the low average
\nplus two percentage points.<\/p>\n
(c) If the contribution percentage for any plan year for highly
\ncompensated employees exceeds the limits established in (b), the excess
\ncontributions for such plan year (and<\/p>\n
III-6<\/p>\n
the earnings attributable to such excess contributions through the date of
\ndistribution) shall be distributed to the highly compensated employees so that
\nthe contribution percentage of the highly compensated employee(s) with the
\nhighest contribution percentage is reduced to the extent required to enable the
\nplan to meet the limits in (b) above or to cause the contribution percentage of
\nsuch employee(s) to equal the contribution percentage of the highly compensated
\nemployee(s) with the next-highest contribution percentage. The process in the
\npreceding sentence shall be repeated until the plan satisfies the limits in (b)
\nabove. In the case of family members subject to the family aggregation rules of
\nCode (S) 414(q)(6), excess contributions will be allocated among family members
\nin proportion to the employer matching contributions of each family member that
\nhave been combined under section III.9.5.C.(a) above. Where the contribution
\npercentage is determined under section III.9.5.C.(a)(1) above, however, excess
\nemployer matching contributions will be allocated first among the eligible
\nhighly compensated employee family members in proportion to the employer
\nmatching contributions of each such highly compensated employee family member
\nuntil the contribution percentage of the eligible highly compensated employee
\nfamily members has been reduced to the contribution percentage of the eligible
\nnon-highly compensated employee family members. If reduction of the contribution
\npercentage below that of the eligible non-highly compensated employee family
\nmembers is required under section III.9.5.C.(a)(1) to enable the plan to meet
\nthe limits in section A.3(b) above, such further reduction shall take into
\naccount the employer matching contributions of all eligible family members in
\nproportion to their employer matching contributions. The earnings attributable
\nto excess contributions will be determined in accordance with Treasury
\nRegulations.<\/p>\n
III-7<\/p>\n
(d) The tests of sections III.9.5.B.(c) and III.9.5.C.(b) shall be
\nmet in accordance with the prohibition against the multiple use of the
\nalternative limitation under Code (S) 401(m)(9).<\/p>\n
III-8<\/p>\n
APPENDIX IV<\/p>\n
IV.18.A. TOP-HEAVY DEFINITIONS. The definitions relating to top-heavy
\n ———————
\nplan provisions are as follows:<\/p>\n
(a) Key Employee shall mean any employee or former employee (and the
\n ————
\nbeneficiaries of such employee) who, in the plan year containing the
\ndetermination date, or any of the four preceding plan years is:<\/p>\n
(i) An officer of the employer having an annual compensation
\nfrom the employer greater than 50 percent of the amount in effect under Code (S)
\n415(b)(1)(A) for any such plan year. Not more than fifty employees (or, if
\nfewer, the greater of three employees or ten percent of the employees),
\nincluding those employees included under subparagraph (ii), (iii) and (iv)
\nbelow, shall be considered as officers for purposes of this subparagraph.<\/p>\n
(ii) One of the ten employees having an annual compensation
\nfrom the employer of more than the amount in effect under Code (S) 415(c)(1)(A)
\nin the plan year and owning (or considered as owning within the meaning of Code
\n(S) 318) the largest interests in the employer.<\/p>\n
(iii) A five-percent owner of the employer.<\/p>\n
(iv) A one-percent owner of the employer having an annual
\ncompensation (within the meaning of Code (S) 414(q)(7)) from the employer of
\nmore than $150,000 for a plan year.<\/p>\n
Whether an employee is a five-percent owner or a one-percent owner shall be
\ndetermined in accordance with Code (S) 416(i). If any individual has not
\nperformed services for the employer at any time during the five-year period
\nending on the determination date, any accrued benefit for such individual shall
\nnot be taken into account.<\/p>\n
IV-1<\/p>\n
(b) Top-Heavy Plan shall mean that this Plan is considered top-heavy
\n ————–
\nfor any plan year if any of the following conditions exists:<\/p>\n
(i) If the top-heavy ratio for this Plan exceeds 60% and this
\nPlan is not part of any required aggregation group or permissive aggregation
\ngroup of plans.<\/p>\n
(ii) If this Plan is a part of a required aggregation group of
\nplans but not part of a permissive aggregation group and the top-heavy ratio for
\nthe group of plans exceeds 60%.<\/p>\n
(iii) If this Plan is a part of a required aggregation group and
\npart of a permissive aggregation group of plans and the top-heavy ratio for the
\npermissive aggregation group exceeds 60%.<\/p>\n
(c) Top-Heavy Ratios shall mean the ratios calculated as follows:
\n —————-<\/p>\n
(i) If the employer maintains one or more defined contribution
\nplans (including any simplified employee pension plan) and the employer has not
\nmaintained any defined benefit plan which during the 5-year period ending on the
\ndetermination date(s) has or has had accrued benefits, the top-heavy ratio for
\nthis Plan alone or for the required or permissive aggregation group as
\nappropriate is a fraction, the numerator of which is the sum of the account
\nbalances of all key employees as of the determination date(s) (including any
\npart of any account balance distributed in the 5-year period ending on the
\ndetermination date(s)), and the denominator of which is the sum of all account
\nbalances (including any part of any account balance distributed in the 5-year
\nperiod ending on the determination date(s)), both computed in accordance with
\nCode (S) 416 and the regulations thereunder. Both the numerator and denominator
\nof the top-heavy ratio are adjusted to reflect any contribution not actually
\nmade as <\/p>\n
IV-2<\/p>\n
of the determination date, but which is required to be taken into account on
\nthat date under Code (S) 416 and the regulations thereunder.<\/p>\n
(ii) If the employer maintains one or more defined contribution
\nplans (including any simplified employee pension plan) and the employer
\nmaintains or has maintained one or more defined benefit plans which during the
\n5-year period ending on the determination date(s) has or has had any accrued
\nbenefits, the top-heavy ratio for any required or permissive aggregation group
\nas appropriate is a fraction, the numerator of which is the sum of account
\nbalances under the aggregated defined contribution plan or plans for all key
\nemployees, determined in accordance with (i) above, and the present value of
\naccrued benefits under the aggregated defined benefit plan or plans for all key
\nemployees as of the determination date(s), and the denominator of which is the
\nsum of the account balances under the aggregated defined contribution plan or
\nplans for all participants, determined in accordance with (i) above, and the
\npresent value of accrued benefits under the defined benefit plan or plans for
\nall participants as of the determination date(s), all determined in accordance
\nwith Code (S) 416 and the regulations thereunder. The accrued benefits under a
\ndefined benefit plan in both the numerator and denominator of the top-heavy
\nratio are adjusted for any distribution of an accrued benefit made in the five-
\nyear period ending on the determination date.<\/p>\n
(iii) For purposes of (i) and (ii) above the value of account
\nbalances and the present value of accrued benefits will be determined as of the
\nmost recent valuation date that falls within or ends with the 12-month period
\nending on the determination date, except as provided in Code (S) 416 and the
\nregulations thereunder for the first and second plan years of a defined benefit
\nplan. The account balances and accrued benefits of a participant (1) who is not
\na key employee but who was a key employee in a prior year, or (2) who has not
\nbeen credited with <\/p>\n
IV-3<\/p>\n
at least one hour of service with any employer maintaining the Plan at any time
\nduring the 5-year period ending on the determination date will be disregarded.
\nThe calculation of the top-heavy ratio, and the extent to which distributions,
\nrollovers, and transfers are taken into account will be made in accordance with
\nCode (S) 416 and the regulations thereunder. Deductible employee contributions
\nwill not be taken into account for purposes of computing the top-heavy ratio.
\nWhen aggregating plans the value of account balances and accrued benefits will
\nbe calculated with reference to the determination dates that fall within the
\nsame calendar year.<\/p>\n
(d) Permissive Aggregation Group shall mean the required aggregation
\n —————————-
\ngroup of plans plus any other plan or plans of the employer which, when
\nconsidered as a group with the required aggregation group, would continue to
\nsatisfy the requirements of Code (S)(S) 401(a) (4) and 410.<\/p>\n
(e) Required Aggregation Group shall mean each qualified plan of the
\n ————————–
\nemployer in which at least one key employee participates or participated at any
\ntime during the determination period (regardless of whether the plan has
\nterminated), and any other qualified plan of the employer which enables such a
\nplan to ,meet the requirements of Code (S) 401(a)(4) or (S) 410.<\/p>\n
(f) Determination Date shall mean for any plan year subsequent to the
\n ——————
\nfirst plan year, the last day of the preceding plan year; for the first plan
\nyear of the Plan, the last day of that year.<\/p>\n
(g) Valuation Date shall mean the date as of which account balances
\n ———
\nor accrued benefits are valued for purposes of calculating the top-heavy ratio.<\/p>\n
(h) Present value shall be based only on the interest and mortality
\n ——-
\nrates specified in the adoption agreement.<\/p>\n
IV-4<\/p>\n
IV.18.B. MINIMUM ALLOCATION.
\n —————— <\/p>\n
The employer contributions and forfeitures allocated on behalf of any
\nparticipant employed on the last day of the plan year, who is not a key
\nemployee, shall not be less than the lesser of three percent of such
\nparticipant’s compensation or in the case where the employer has no defined
\nbenefit plan which designates this plan to satisfy Code (S) 401, the largest
\npercentage of employer contributions and forfeitures, as a percentage of the
\nfirst $160,000 (or the adjusted limitation under Code (S) 401(a)(17)) of the key
\nemployee’s compensation, allocated on behalf of any key employee for that year.
\nIf the highest rate allocated to a key employee for a year in which the Plan is
\ntop heavy is less than 3%, amounts contributed as a result of a salary deferral
\nagreement shall be included in determining contributions made on behalf of key
\nemployees. The minimum allocation is determined without regard to any Social
\nSecurity contribution. This minimum allocation shall be made even though, under
\nother plan provisions, the participant would not otherwise be entitled to
\nreceive an allocation, or would have received a lesser allocation for the year
\nbecause of (1) the participant’s failure to complete 1,000 hours of service (or
\nany equivalent provided in the Plan), or (2) the participant’s failure to make
\nmandatory employee contributions to the Plan, or (3) compensation less than a
\nstated amount. An allocation under this section shall not be made if the
\nparticipant is covered under any other plan or plans of the employer and the
\nminimum allocation or benefit requirement applicable to top-heavy plans will be
\nmet in the other plan or plans. The definition of compensation in section 1.3 of
\nthe Plan shall be the definition for determining minimum allocations under this
\nsection. This definition shall be used for all top-heavy purposes, including
\ndetermining whether an employee is a key employee.<\/p>\n
IV-5<\/p>\n
APPENDIX V<\/p>\n
SPECIAL PROVISIONS FOR ACCOUNTS OR PARTICIPANTS TRANSFERRED<\/p>\n
FROM OTHER PLANS IN CONNECTION WITH PLAN<\/p>\n
MERGERS OR TRUST-TO-TRUST TRANSFERS<\/p>\n
A. Former Accounts and Participants of the Vermeer Technologies 401(k) Plan<\/p>\n
1. History of Corporate Merger. On January 12, 1996, Vermeer
\n —————————
\nTechnologies, Inc. merged with a wholly-owned subsidiary of Microsoft
\nCorporation, and the merged entity remained a wholly-owned subsidiary of
\nMicrosoft. On February 21, 1996 the name of the subsidiary (i.e., the merged
\nentity) was changed from Vermeer Technologies, Inc. to Microsoft Web Authoring
\nProduct Unit, Inc. (“MWAPUI”). On March 26, 1996 the name of the subsidiary was
\nchanged back to Vermeer Technologies, Inc. (“VTI”). At the time of the merger,
\nVTI was the plan sponsor of the Vermeer Technologies 401(k) Plan (“V-Plan”).
\nAfter the merger, VTI employees continued to actively participate in the V-Plan.<\/p>\n
2. Plan Merger. Effective April 1, 1996, the V-Plan is merged into the
\n ———–
\nMicrosoft Corporation Savings Plus 401(k) Plan (“Plan”), and this plan document
\nfor the plan, as amended previously and by this Amendment, is the surviving plan
\ndocument.<\/p>\n
Only employee 401(k) salary deferrals and rollovers have been contributed
\nto the V-Plan; no employer matching or discretionary profit sharing
\ncontributions have ever been made to the V-Plan. The only accounts which
\nparticipants have in the V-Plan are 401(k) salary deferral and rollover accounts
\n(“V-Accounts”), both of which are and always have been nonforfeitable. The V-
\nAccounts are transferred to the Plan without alteration and shall be kept
\nseparate from other accounts held in the Plan by former V-Plan participants. The
\nV-Accounts shall only contain amounts transferred from the V-Plan, and shall
\nalways be kept separate from the salary deferral, <\/p>\n
V-1<\/p>\n
matching and rollover accounts that former V-Plan participants have after April
\n1, 1996. However, each former V-Plan participant’s V-Plan salary deferral and
\nrollover account (if any) may be consolidated into one V-Account at the Plan
\nAdministrator’s discretion if the accounts have identical rights, features,
\nconditions, and limits.<\/p>\n
3. Eligibility. The age 18 minimum age requirement set forth in Plan
\n ———–
\nSection 2.1 shall not apply to any person who was ever employed by MWAPUI or VTI
\non or before April 1, 1996. Every employee of VTI who on April 1, 1996 is an
\neligible employee (as defined in Section 1.5 of the Plan) shall immediately
\nbegin active participation in the Plan without having to satisfy the age 18
\nminimum age requirement set forth in Plan Section 2.1. Any participant in the V-
\nPlan on April 1, 1996 who is not an eligible employee as defined in Plan Section
\n1.5 shall be an inactive participant in the Plan and shall actively participate
\nin the Plan only if and when they become an eligible employee. Any person who is
\nemployed by VTI on April 1, 1996 but is neither a participant in the V-Plan nor
\nan eligible employee as defined in Plan Section 1.5 shall become a participant
\nin the Plan if and when they become an eligible employee. Any person employed by
\nVTI after April 1, 1996 who was not employed by VTI or MWAPUI at any time on or
\nbefore April 1, 1996 shall be required to satisfy all of the eligibility
\nconditions of Plan Sections 1.5 and 2.1, including the age 18 minimum age
\nrequirement.<\/p>\n
4. Vesting and Vesting Service Credit. Participants are 100% vested in
\n ———————————-
\ntheir V-Accounts which are transferred to the Plan effective April 1, 1996. For
\npurposes of determining their vested percentage in their employer matching
\ncontribution account in this Plan, participants shall be credited with the whole
\nyears of vesting service credited to them under the V-Plan as of December 31,
\n1995. Beginning with the 1996 plan year (commencing January 1, 1996), the
\nparticipant shall begin to earn vesting service credit under the elapsed time
\nmethod as <\/p>\n
V-2<\/p>\n
set forth in Article V of the Plan. In addition, if a participant worked at
\nleast 1,000 hours between January 1, 1996 and March 31, 1996, the participant
\nshall be credited with one year of service for 1996 even if they do not work
\nevery day in 1996. Notwithstanding anything in this Subsection 4 to the
\ncontrary, a participant who is described in the previous sentence shall not
\nbegin to earn credit under the elapsed time method of Article V until the 1997
\nplan year (commencing January 1, 1997).<\/p>\n
5. Special Provisions Applicable to the V-Accounts. The following special
\n ———————————————–
\nprovisions apply only to the V-Accounts. With respect to the V-Accounts, the
\nfollowing special provisions shall supersede any other provisions of this Plan
\nwhich are inconsistent with the following provisions.<\/p>\n
6. Form of Benefit Payments. The participant may elect to have his or her
\n ————————
\nV-Accounts distributed in a single lump sum payment or in installments, and in
\ncash or in kind. If the participant elects an in-kind distribution, the
\nparticipant’s interest in the investments of his or her V-Accounts shall be
\ndistributed in-kind. For example, if a participant’s V-Account were invested 50%
\nin the Microsoft Stock Fund and 50% in the Magellan Fund and the participant
\nrequested an in-kind distribution, the participant would receive half of her
\naccount in the form of Microsoft stock and the other half of her account in
\nunits of interest in the Magellan mutual fund (less any applicable tax
\nwithholding). Participants may elect to have their V-Accounts distributed in
\ninstallments over a period not to exceed the participant’s life expectancy or
\nthe joint life expectancies of the participant and the participant’s designated
\nbeneficiary. The participant may elect to have the installments paid monthly,
\nquarterly, semi-annually or annually. If at the time of distribution to a
\nparticipant or beneficiary the participant’s total vested account balance in the
\nPlan (including V-Accounts and other accounts) does not exceed $5,000 (and never
\nexceeded <\/p>\n
V-3<\/p>\n
$5,000 at the time of a prior distribution), then the V-Account balance will be
\ndistributed in an immediate lump sum and installment payments will not be a
\npayment option.<\/p>\n
7. Timing of Benefit Payments. Upon a participant’s termination of
\n ————————–
\nemployment for reasons other than death, the participant’s V-Account shall be
\ndistributed as soon as possible after the account is valued. The distribution
\nshall be in cash or in kind, as elected by the participant. If a participant’s
\ntotal vested account balance in the Plan (including V-Accounts and other
\naccounts) exceeds $5,000 at the time of distribution (or ever exceeded $5,000 at
\nthe time of a prior distribution), then the participant may elect to delay
\nreceipt or commencement of his or her V-Account until any date on or before the
\ndate the participant reaches age 70 1\/2. Any delayed distribution must comply
\nwith the requirements of Code Section 401(a)(9) and the regulations thereunder
\n(including without limitation the incidental death benefit requirements). If the
\nparticipant with total vested plan account balance in excess of $5,000 does not
\nselect a distribution date, the participant’s V-Account shall be distributed as
\nsoon as practicable after the participant reaches age 65 or terminates
\nemployment, whichever occurs last.<\/p>\n
The timing of the distribution of the V-Account upon a participant’s death
\nshall depend upon whether the participant died before or after the commencement
\nof his or her benefit payments, and whether the participant was survived by a
\nbeneficiary who was designated by the participant. If a participant dies prior
\nto the commencement of the distribution of his or her V-Account and is survived
\nby a designated beneficiary who is not his or her spouse, the distribution must
\nbe made by December 31 of the calendar year in which the fifth anniversary of
\nthe participant’s death occurs unless the beneficiary elects to have installment
\npayments commence by the end of the first calendar year after the participant’s
\ndeath. If the designated beneficiary is the participant’s spouse, then the same
\ndistribution rules described in the previous sentence apply,<\/p>\n
V-4<\/p>\n
except that the spouse may elect to delay distribution or commencement of
\ninstallment payments until the end of the calendar year in which the participant
\nwould have attained age 70 1\/2. Notwithstanding the foregoing, if the
\nparticipant dies before benefit payments from the Plan have commenced to the
\nparticipant and his or her vested account balance in the Plan does not exceed
\n$5,000 (and have never exceeded $5,000 at the time of a prior distribution),
\ndistribution to the beneficiary shall be made in an immediate lump sum payment
\nin cash or in kind, as elected by the beneficiary. If the participant dies
\nbefore benefit payments have commenced, the participant’s total vested account
\nbalance in the Plan (including V-Accounts and other accounts) exceeds $5,000 (or
\nexceeded $5,000 at the time of a prior distribution), and the death beneficiary
\nis not a designated beneficiary, distribution of the participant’s V-Account
\nbalance will be made in a lump sum or installment payments (e.g., installment
\npayments over four years) as elected by the beneficiary provided, however, that
\nthe total V-Account balance must be distributed no later than December 31 of the
\ncalendar year in which the fifth anniversary of the participant’s death occurs.<\/p>\n
If the participant died while he was receiving installment payments of his
\nV-Account, the remaining portion of the V-Account shall be distributed at least
\nas rapidly as under the length and frequency of installment payments which the
\nparticipant had selected.<\/p>\n
Distributions to beneficiaries may be made in cash or in kind, at the
\nelection of the beneficiary.<\/p>\n
Notwithstanding the foregoing, upon the death or termination of employment
\nof a participant with a vested total account balance in the Plan in excess of
\n$5,000, neither the participant nor his or her surviving spouse death
\nbeneficiary may delay distribution beyond the date the participant attains (or
\nwould have attained) age 65. Any references to age 70 1\/2 in this<\/p>\n
V-5<\/p>\n
Subsection 7 shall be replaced with a reference to age 65. This paragraph shall
\nnot be effective unless and until the Plan receives a favorable determination
\nletter from the Internal Revenue Service stating that this Amendment will not
\nadversely affect the tax-qualified status of the Plan.<\/p>\n
8. Plan Loans. Any loans to a participant which are outstanding on April
\n ———-
\n1, 1996 shall be transferred in kind along with the rest of the participant’s
\nV-Accounts. A participant with such a loan outstanding shall have all of the
\nrights and be subject to all of the conditions of his or her loan as set forth
\nin his or her V-Plan loan documents.<\/p>\n
B. Former Accounts and Participants of the eShop Inc. 401(k) Savings Plan<\/p>\n
1. History of Corporate Merger. On June 20, 1996, eShop Inc. was merged
\n —————————
\ninto Microsoft Corporation, with Microsoft Corporation being the surviving
\ncorporation. After the corporate merger, certain former employees of eShop Inc.
\nbecame employees of Microsoft Corporation. As a result of the corporate merger,
\nMicrosoft Corporation became the plan sponsor and administrator of the eShop
\nInc. 401(k) Savings Plan (“E-Plan”), a tax-qualified profit sharing plan which
\nhas a 401(k) feature. Although the E-Plan provides for discretionary employer
\ncontributions (e.g., profit sharing and matching contributions), only employee
\nsalary deferral contributions and rollover contributions have been made to the
\nE-Plan. The E-Plan was frozen as of June 20, 1996, and former eShop Inc.
\nemployees stopped making salary deferral contributions to the E-Plan effective
\nJune 20, 1996. The former eShop Inc. employees will begin making salary deferral
\ncontributions to the Microsoft Corporation Savings Plus Plan (“Plan”) effective
\nAugust 1, 1996.<\/p>\n
2. Plan Merger. Effective November 1, 1996, the E-Plan is merged into the
\n ———–
\nPlan, and this plan document for the Plan, as amended previously and by this
\nAmendment, is the surviving plan document. Although the E-Plan provides for
\ndiscretionary employer <\/p>\n
V-6<\/p>\n
contributions (e.g., profit sharing and matching contributions), only employee
\nsalary deferral contributions and rollover contributions have been made to the
\nE-Plan; no employer matching or discretionary profit sharing contributions have
\never been made to the E-Plan. The only accounts (“E-Accounts”) which
\nparticipants have in the E-Plan are a 401(k) salary deferral account (“Deferral
\nE-Account”) and a rollover contribution account (“Rollover E-Account”)
\ncontaining amounts which the participant had rolled into the E-Plan from another
\nplan or IRA. The E-Accounts are and always have been nonforfeitable. The E-
\nAccounts are transferred to the Plan without alteration. The Rollover E-Account
\nshall only contain amounts transferred from the E-Plan and shall always be kept
\nseparate from the salary deferral, matching and rollover accounts that former E-
\nPlan participants have in this Plan after August 1, 1996. The Deferral E-Account
\nshall be merged with the former E-Plan participant’s new salary deferral account
\nin the Plan which will hold deferrals which are made from salary earned on or
\nafter August 1, 1996.<\/p>\n
3. Eligibility. The age 18 minimum age requirement set forth in Plan
\n ———–
\nSection 2.1 shall not apply to any person who was ever employed by eShop Inc.
\n(previously known as Ink Development Corporation). Every former employee of
\neShop Inc. or Ink Development Corporation who on or after August 1, 1996 is an
\neligible employee (as defined in Section 1.5 of the Plan) shall immediately
\nbegin active participation in the Plan without having to satisfy the age 18
\nminimum age requirement set forth in Plan Section 2.1. Any participant in the E-
\nPlan on November 1, 1996 who is not an eligible employee as defined in Plan
\nSection 1.5 shall be an inactive participant in the Plan and shall actively
\nparticipate in the Plan only if and when they become an eligible employee. Any
\nperson who is employed on November 1, 1996 but is neither a participant in the
\nE-Plan nor an eligible employee as defined in Plan Section 1.5 shall become a
\nparticipant in the Plan if and when they become an eligible employee.<\/p>\n
V-7<\/p>\n
4. Vesting and Vesting Service Credit. Participants are 100% vested in
\n ———————————-
\ntheir E-Accounts which are transferred to the Plan effective November 1, 1996.
\nFor purposes of determining their vested percentage in their employer matching
\ncontribution account in this Plan, participants shall be credited with the whole
\nyears of vesting service credited to them under the E-Plan as of December 31,
\n1995. Beginning with the 1996 plan year (commencing January 1, 1996), the
\nparticipant shall begin to earn vesting service credit under the elapsed time
\nmethod as set forth in Article V of the Plan. In addition, if a participant
\nworked at least 1,000 hours between January 1, 1996 and October 31, 1996, the
\nparticipant shall be credited with one year of service for 1996 even if they do
\nnot work every day in 1996. Notwithstanding anything in this Subsection 4 to the
\ncontrary, a participant who is described in the previous sentence shall not
\nbegin to earn credit under the elapsed time method of Article V until the 1997
\nplan year (commencing January 1, 1997).<\/p>\n
5. Special Provision Applicable to the Rollover E-Account. A participant
\n ——————————————————
\nmay elect to withdraw from the Rollover E-Account once during each plan year,
\nany amount up to 100% of the value of the Rollover E-Account. The participant
\nshall notify the plan administrator of his election to make a withdrawal under
\nthis Section. The distribution will be made as soon as reasonably practicable
\nafter such notice is given.<\/p>\n
6. Plan Loans. Any loans from the E-Plan to an E-Plan participant which
\n ———-
\nare outstanding on November 1, 1996 shall be transferred to the Plan in kind as
\nan asset allocated to the participant’s E-Accounts. A participant with such a
\nloan outstanding shall have all of the rights and be subject to all of the
\nconditions of his or her loan as set forth in his or her E-Plan loan documents.<\/p>\n
V-8<\/p>\n
C. Former Accounts and Participants of Dimension X 401(k) Plan<\/p>\n
1. History of Corporate Merger. On May 14, 1997, Dimension X was merged
\n —————————
\nwith DX Acquisition Inc., a wholly-owned subsidiary of Microsoft Corporation,
\nwith Dimension X being the surviving corporation and becoming a wholly-owned
\nsubsidiary of Microsoft Corporation. Over several months after the corporate
\nmerger, the employees of Dimension X became employees of Microsoft Corporation.
\nAt the time of the merger with DX Acquisition Inc., Dimension X was the sponsor
\nof the Dimension X 401(k) Plan (“D-Plan”). The plan remained in existence after
\nDimension X was merged into the DX Acquisition Inc.<\/p>\n
2. Plan Merger. Effective January 1, 1998, the D-Plan is merged into the
\n ———–
\nPlan, and the plan document for the Plan, as amended previously and by this
\namendment, is the surviving plan document.<\/p>\n
The D-Plan contains employee salary deferral contributions, and employer
\ndiscretionary matching contributions. No employee after-tax contributions were
\nmade, nor were any employer discretionary contributions made. As of January 1,
\n1998, there were no roll-over accounts maintained in the D-Plan. The salary
\ndeferral contributions have always been nonforfeitable. The employer matching
\ncontributions are 100% vested pursuant to the amendment to the Dimension X
\n401(k) Plan effective April 1, 1997. The employer matching D-accounts and the
\nsalary deferral D-accounts are transferred to the Plan without alteration. At
\nthe discretion of the Plan Administrator, these D-accounts may be consolidated
\nwith other accounts made to the Plan by former D-Plan participants after the
\ndate of the plan merger.<\/p>\n
3. Eligibility. Any participant in the Dimension X 401(k) Plan on May 14,
\n ———–
\n1997 who on January 1, 1998 is an eligible employee (as defined in Section 1.5
\nof the Plan) and who has not previously entered the Plan shall begin active
\nparticipation in the Plan on January 1, <\/p>\n
V-9<\/p>\n
1998, the date of the merger of the plans. Such participant shall not be
\nrequired to satisfy the age 18 minimum age requirement set forth in Plan Section
\n1.5 nor be required to be employed through an entry date. A participant for
\nthese purposes shall include a person who maintained an account balance in the
\nDimension X 401(k) Plan or who was eligible to make deferrals under the
\nDimension X 401(k) Plan.<\/p>\n
4. Vesting and Vesting Service Credit. Participants are 100% vested in
\n ———————————-
\ntheir D-accounts which are transferred to the Plan effective January 1, 1998.
\nFor purposes of determining their vested percentage in their employer matching
\ncontribution account in this Plan (i.e., matching contributions made by
\nMicrosoft Corporation after January 1, 1998), participants shall be credited
\nwith the whole years of service credited to them under the D-Plan as of their
\nlast computation date prior to January 1, 1998. For the period of time from the
\nlast computation date prior to January 1, 1998 until the next computation date
\nfollowing January 1, 1998, the participant shall be credited with the greater
\nof: (1) the period of service that would be credited to the employee under the
\nelapsed time method as set forth in Article V of the Plan for his service during
\nthe 12 month period following the participant’s last computation date which is
\nprior to January 1, 1998; or (2) a year of service if the participant worked at
\nleast 1,000 hours between his\/her last computation date before January 1, 1998
\nand January 1, 1998. For these purposes, a computation date shall be the
\nanniversary date of a participant’s first date of employment with Dimension X.
\nBeginning on the last day of the period described in (1) or (2) of the third
\nsentence of this subsection 4, whichever is applicable, a participant shall earn
\nvesting credit under the elapsed time method set forth in Article V of the Plan.<\/p>\n
5. Special Provisions Applicable. There are no special provisions
\n —————————–
\napplicable to D-accounts.<\/p>\n
V-10<\/p>\n
6. Plan Loans. Any loans from the D-Plan to a D-Plan participant which
\n ———-
\nare outstanding on January 1, 1998 shall be transferred to the Plan in kind as
\nan asset allocated to the participant’s D-Plan account. A participant with such
\na loan outstanding shall have all of the rights and be subject to all of the
\nconditions of his or her loan as set forth in his or her D-Plan loan documents.<\/p>\n
D. Former Accounts and Participants of VXtreme, Inc. 401(k) Retirement Plan<\/p>\n
1. History of Corporate Merger. On July 30, 1997, VXtreme, Inc.
\n —————————
\n(“VXtreme”) was merged with Microsoft Investments Washington Parent, Inc., a
\nwholly owned subsidiary of Microsoft Corporation with VXtreme being the
\nsurviving corporation and becoming a wholly-owned subsidiary of Microsoft
\nCorporation. At the time of the merger, VXtreme sponsored a profit sharing plan
\nwith a 401(k) component, the VXtreme, Inc. 401(k) Retirement Plan (“VX-Plan”).
\nAlthough the VX-Plan continued in existence after the corporate merger, most of
\nthe employees of VXtreme after the merger became employees of Microsoft
\nCorporation.<\/p>\n
2. Plan Merger. Effective January 1, 1998, the VX-Plan is merged into the
\n ———–
\nPlan, and the plan document for the Plan, as amended previously and by this
\namendment, is the surviving plan document.<\/p>\n
The VX-Plan contains only salary deferral contributions, and roll-over
\ncontributions (“VX-Accounts”). The VX-Plan does not provide for employer
\ncontributions nor employee after-tax contributions, nor has it ever provided for
\nsuch contributions in the past. The salary deferral contributions and the roll-
\nover contributions to the VX-Plan have always been nonforfeitable. The salary
\ndeferral VX-Accounts and the roll-over VX-Accounts are transferred to the Plan
\nwithout alteration. The salary deferral VX-Accounts and the roll-over VX-
\nAccounts shall be consolidated with each other (hereinafter collectively
\nreferred to as VX-Accounts), <\/p>\n
V-11<\/p>\n
however, they will be kept separate from any contributions made to the Plan by
\nor on behalf of former VX-Plan participants after January 1, 1998.<\/p>\n
3. Eligibility. Any employee of VXtreme on January 1, 1998 who is an
\n ———–
\neligible employee (as defined in Section 1.5 of the Plan) shall begin active
\nparticipation in the Plan on January 1, 1998, the date of the merger of the
\nplans. Any participant of the VX-Plan on January 1, 1998 who is not an eligible
\nemployee as defined in Plan Section 1.5 (e.g., an intern) shall be an inactive
\nparticipant in the Plan and shall actively participate in the Plan only if and
\nwhen they become an eligible employee as defined in Plan section 1.5. Such
\nformer participant in the VX-Plan shall not be required to be employed through
\nan entry date before he\/she can become a participant under the Plan. Any person
\nemployed by VXtreme after January 1, 1998 who was not employed by VXtreme at any
\ntime on or before January 1, 1998 shall be required to satisfy all of the
\neligibility conditions of Plan Sections 1.5 and 2.1, and must be employed
\nthrough an entry date before he\/she will become a participant under the Plan.<\/p>\n
4. Vesting and Vesting Service Credit. Participants are 100% vested in
\n ———————————-
\ntheir VX-Accounts which are transferred to the Plan effective January 1, 1998.
\nFor purposes of determining their vested percentage in their employer matching
\ncontribution account in this Plan (i.e., matching contributions made by
\nMicrosoft Corporation after January 1, 1998), participants shall be credited
\nwith vesting service under the elapsed time method as set forth in Article V of
\nthe Plan for their service at VXtreme.<\/p>\n
5. Special Provisions Applicable. The following special provisions apply
\n —————————–
\nonly to the VX-Accounts. With respect to the VX-Accounts, the following special
\nprovisions shall supersede any other provisions of this Plan which are
\ninconsistent with the following provisions. However, to the extent the Plan is
\namended subsequent to this amendment in a way which gives<\/p>\n
V-12<\/p>\n
participants greater benefits or additional options not provided in this
\nsection, participants with a VX-Account shall be eligible for those additional
\nbenefits or options without violating this section.<\/p>\n
6. Form of Benefit Payments. Unless the participant makes an election
\n ————————
\notherwise, the participant (or beneficiary) shall receive the distribution of
\nhis or her VX-Account in the form of a lump-sum. The participant may however,
\nelect to receive distributions from his or her VX-Account in the form of an
\nannuity. There are five different annuity options that a participant may
\nchoose. These are: (1) a straight life annuity; (2) a single life annuity with
\na certain period of 5, 10, or 15 years; (3) a single life annuity with an
\ninstallment refund; (4) a joint and survivor annuity with an installment refund
\nand survivor percentages of 50, 66 and 2\/3, or 100; or (5) a fixed period
\nannuity for any period of whole months which is not less than 60 and does not
\nexceed the joint life expectancies of the participant and the named beneficiary.
\nIf a participant chooses a life annuity form of distribution, the provisions of
\nArticle XX of the Plan shall apply. If at the time of distribution to a
\nparticipant or beneficiary the participant’s total vested account balance in the
\nPlan (including VX-Account and other accounts) does not exceed $5,000 (and never
\nexceeded $5,000 at the time of a prior distribution), the VX-Account balance
\nwill be distributed in an immediate lump-sum cash payment.<\/p>\n
7. Plan Loans. Any loans from the VX-Plan to a VX-Plan participant which
\n ———-
\nare outstanding on January 1, 1998 shall be transferred to the Plan in kind as
\nan asset allocated to the participant’s VX-Plan account. A participant with such
\na loan outstanding shall have all of the rights and be subject to all of the
\nconditions of his or her loan as set forth in his or her VX-Plan loan documents.
\nIf a participant in the VX-Plan requests a loan after January 1, 1998 of a
\nportion <\/p>\n
V-13<\/p>\n
of his or her VX-Account, spousal consent will not be required unless the
\nparticipant has selected a life annuity form of distribution with respect to his
\nor her VX-Account balance.<\/p>\n
E. Former Accounts and Participants of WebTV 401(k) Plan<\/p>\n
1. History of Corporate Merger. On August 1, 1997, Microsoft Corporation
\n —————————
\npurchased a controlling interest in WebTV Networks, Inc. (“WebTV”). Through a
\nrecapitalization, WebTV became a controlled subsidiary of Microsoft Corporation.
\nWebTV remained in existence after the recapitalization and WebTV employees
\ncontinued to be employed by WebTV. At the time of the recapitalization, WebTV
\nsponsored the WebTV 401(k) Plan (the “W-Plan”). The W-Plan continued in
\nexistence after the recapitalization of WebTV and employees of WebTV continued
\nto participate in the W-Plan.<\/p>\n
2. Plan Merger. Effective March 1, 1998, the W-Plan is merged into the
\n ———–
\nPlan, and the plan document for the Plan, as amended previously and by this
\namendment, is the surviving plan document.<\/p>\n
The W-Plan contains only employee salary deferral contributions, and roll-
\nover contributions (“W-Accounts”). No employee after-tax, employer matching, or
\nemployer discretionary contributions were ever made to the W-Plan. The salary
\ndeferral contributions and the roll-over contributions to the W-Plan have always
\nbeen nonforfeitable. The salary deferral W-Accounts and the roll-over W-Accounts
\nare transferred to the Plan without alteration. The salary deferral W-Accounts
\nand the roll-over W-Accounts shall be consolidated with each other, however,
\nthey will be kept separate from any contributions made to the Plan by or on
\nbehalf of former W-Plan participants after March 1, 1998.<\/p>\n
3. Eligibility. Any employee of WebTV on March 1, 1998 who is an eligible
\n ———–
\nemployee (as defined in Section 1.5 of the Plan) and who has not previously
\nentered the Plan<\/p>\n
V-14<\/p>\n
shall begin active participation in the Plan on March 1, 1998, the date of the
\nmerger of the plans. Any participant of the W-Plan on March 1, 1998 who is not
\nan eligible employee as defined in Plan Section 1.5 (e.g., an intern) shall be
\nan inactive participant in the Plan and shall actively participate in the Plan
\nonly if and when they become an eligible employee as defined in Plan section
\n1.5. Such former participant in the W-Plan shall not be required to be employed
\nthrough an entry date before he\/she can become a participant in the Plan. Any
\nperson employed by WebTV after March 1, 1998 who was not employed by WebTV at
\nany time on or before March 1, 1998 shall be required to satisfy all of the
\neligibility conditions of Plan Sections 1.5 and 2.1, and must be employed
\nthrough an entry date before he\/she will become a participant under the Plan.<\/p>\n
4. Vesting and Vesting Service Credit. Participants are 100% vested in
\n ———————————-
\ntheir W-Accounts which are transferred to the Plan effective March 1, 1998. For
\npurposes of determining their vested percentage in their employer matching
\ncontribution account in this Plan (i.e., matching contributions made after March
\n1, 1998), participants shall be credited with the whole years of service
\ncredited to them under the W-Plan as of March 31, 1997. For the 12-month period
\nof time commencing on April 1, 1997, the participant shall be credited with the
\ngreater of: (1) the period of service that would be credited to the employee
\nunder the elapsed time method as set forth in Article V of the Plan for his
\nservice during the 12 month period ending March 31, 1998; or (2) a year of
\nservice if the participant worked at least 1,000 hours between April 1, 1997 and
\nMarch 1, 1998 even if they did not work every day during this period. Beginning
\nMarch 31, 1998, participants shall earn vesting credit under the elapsed time
\nmethod set forth in Article V of the Plan.<\/p>\n
V-15<\/p>\n
5. Special Provisions Applicable. The following special provisions apply
\n —————————–
\nonly to the W-Accounts. With respect to the W-Accounts, the following special
\nprovisions shall supersede any other provisions of this Plan which are
\ninconsistent with the following provisions. However, to the extent the Plan is
\namended subsequent to this amendment in a way which gives participants greater
\nbenefits or additional options not provided in this section, participants with a
\nW-Account shall be eligible for those additional benefits or options without
\nviolating this section.<\/p>\n
6. Form of Benefit Payments. The participant may elect to have his or her
\n ————————
\nW-Account distributed in a single lump sum payment or in installments, in cash
\nor in kind or in a combination of both. Participants may elect to have their W-
\nAccounts distributed in substantially equal installments over a period which is
\nno longer than the participant’s life expectancy or the joint life expectancy of
\nthe participant and the participant’s designated beneficiary. If at the time of
\ndistribution to a participant or beneficiary the participant’s total vested
\naccount balance in the Plan (including the W-Account and other accounts) does
\nnot exceed $5,000 (and never exceeded $5,000 at the time of a prior
\ndistribution), then the W-Account balance will be distributed in an immediate
\nlump sum payment, in cash or in kind or a combination of both, as elected by the
\nparticipant or beneficiary.<\/p>\n
7. Plan Loans. Any loans from the W-Plan to a W-Plan participant which
\n ———-
\nare outstanding on March 1, 1998 shall be transferred to the Plan in kind as an
\nasset allocated to the participant’s W-Plan account. A participant with such a
\nloan outstanding shall have all of the rights and be subject to all of the
\nconditions of his or her loan as set forth in his or her W-Plan loan documents.<\/p>\n
V-16<\/p>\n
F. Former Accounts and Participants of Hotmail Corporation 401(k) Plan<\/p>\n
1. History of Corporate Merger. On December 30, 1997 Hotmail Corporation
\n —————————
\nwas merged with Micro HM Inc., a wholly-owned subsidiary of Microsoft
\nCorporation, with Hotmail Corporation being the surviving corporation and
\nbecoming a wholly-owned subsidiary of Microsoft Corporation. At the time of the
\nmerger with Micro HM Inc., Hotmail Corporation was the sponsor of the Hotmail
\nCorporation 401(k) Plan (“H-Plan”). The plan remained in existence after Hotmail
\nCorporation was merged into Micro HM Inc.<\/p>\n
2. Plan Merger. Effective April 1, 1998, the H-Plan is merged into the
\n ———–
\nPlan, and the plan document for the Plan, as amended previously and by this
\namendment, is the surviving plan document.<\/p>\n
The H-Plan contains employee salary deferral contributions and rollover
\ncontributions only (“H-Accounts”). No employee after-tax contributions were
\nmade, nor were any employer matching or discretionary contributions made. The
\nsalary deferral accounts and the rollover accounts have always been
\nnonforfeitable. The salary deferral accounts and the rollover accounts are
\ntransferred to the Plan without alteration. At the discretion of the Plan
\nAdministrator, these H-Accounts (the salary deferral accounts and the rollover
\naccounts) may be consolidated with each other, however, they will be kept
\nseparate from any contributions made to the Plan by or on behalf of former H-
\nPlan participants after April 1, 1998.<\/p>\n
3. Eligibility. Any employee of Hotmail Corporation who on April 1, 1998
\n ———–
\nis a participant in the Hotmail Corporation 401(k) Plan and is an eligible
\nemployee (as defined in Section 1.5 of the Plan) shall begin active
\nparticipation in the Plan on April 1, 1998, the date of the merger of the plans.
\nSuch participant shall not be required to be employed through an entry date as
\nset forth in Plan Section 2.4. A participant for these purposes shall include a
\nperson who<\/p>\n
V-17<\/p>\n
maintained an account balance in the Hotmail Corporation 401(k) Plan or who was
\neligible to make deferrals under the Hotmail Corporation 401(k) Plan. Any
\nparticipant of the H-Plan on April 1, 1998 who is not an eligible employee as
\ndefined in Plan Section 1.5 (e.g., an intern) shall be an inactive participant
\nin the Plan and shall actively participate in the Plan only if and when they
\nbecome an eligible employee as defined in Plan Section 1.5. Such former
\nparticipant in the H-Plan shall not be required to be employed through an entry
\ndate before he\/she can become a participant in the Plan. Any person employed by
\nHotmail Corporation after April 1, 1998 who was not employed by Hotmail
\nCorporation at any time on or before April 1, 1998 shall be required to satisfy
\nall of the eligibility conditions of Plan Sections 1.5 and 2.1, and must be
\nemployed through an entry date before he\/she will become a participant under the
\nPlan.<\/p>\n
4. Vesting and Vesting Service Credit. Participants are 100% vested in
\n ———————————-
\ntheir H-Accounts which are transferred to the Plan effective April 1, 1998. For
\npurposes of determining their vested percentage in their employer matching
\ncontribution account in this Plan (i.e., matching contributions made by
\nMicrosoft Corporation after April 1, 1998), participants shall be credited with
\nvesting service under the elapsed time method as set forth in Article V of the
\nPlan for their service at Hotmail Corporation. The H-Plan did not calculate
\nvesting service because all contributions were 100% vested when made.<\/p>\n
5. Special Provisions Applicable. The following special provisions apply
\n —————————–
\nonly to the H-Accounts. With respect to the H-Accounts, the following special
\nprovisions shall supersede any other provisions of this plan which are
\ninconsistent with the following provisions. However, to the extent the Plan is
\namended subsequent to this amendment in a way which gives participants greater
\nbenefits or additional options not provided in this section, participants with<\/p>\n
V-18<\/p>\n
an H-Account shall be eligible for those additional benefits or options without
\nviolating this section.<\/p>\n
6. Form of Benefit Payments. Unless the participant makes an election
\n ————————
\notherwise, the participant (or beneficiary) shall receive the distribution of
\nhis or her H-Account in the form of a lump-sum, either in cash or in kind or in
\na combination of both. The participant may, however, elect to receive
\ndistributions from his or her H-Accounts in the form of installments payable in
\ncash or in kind, or part in cash and part in kind over a period not in excess of
\nthat required to comply with Code (S)401(a)(9). If at the time of distribution
\nto the participant or beneficiary the participant’s total vested account balance
\nin the Plan (including H-Accounts and all other accounts) does not exceed $5,000
\n(and never exceeded $5,000 at the time of a prior distribution), then the H-
\nAccount balance will be distributed in an immediate lump sum payment, in cash or
\nin kind or a combination of both, as elected by the participant or beneficiary.<\/p>\n
7. Plan Loans. Any loans from the H-Plan to an H-Plan participant which
\n ———-
\nare outstanding on April 1, 1998 shall be transferred to the Plan in kind as an
\nasset allocated to the participant’s H-Plan account. A participant with such a
\nloan outstanding shall have all of the rights and be subject to all of the
\nconditions of his or her loan as set forth in his or her H-Plan loan documents.<\/p>\n
G. Former Accounts and Participants of MSNBC Interactive News 401(k) Plan<\/p>\n
1. History of Establishment of MSNBC Interactive News L.L.C. MSNBC
\n ——————————————————–
\nInteractive News L.L.C. was established in 1996 as a joint venture between
\nMicrosoft Corporation (and certain of its affiliates) and National Broadcast
\nCompany (and certain of its affiliates). MSNBC Interactive News L.L.C. sponsors
\nthe MSNBC Interactive News 401(k) Plan <\/p>\n
V-19<\/p>\n
(“MSNBC Plan”), and such plan provides service credit for vesting purposes to
\nformer employees of National Broadcast Company.<\/p>\n
2. Plan Merger. Effective January 1, 1999, the MSNBC Plan is merged into
\n ———–
\nthe Plan, and the plan document for the Plan, as amended previously and by this
\namendment, is the surviving plan document.<\/p>\n
The MSNBC Plan contains employee salary deferral contributions, employer
\nmatching contributions, employee after-tax contributions, and rollover
\ncontributions (“MSNBC-Accounts”). The MSNBC-Accounts are hereby made 100%
\nvested, and are transferred without alteration and shall be kept separate from
\nthe other Plan accounts. However, the Plan Administrator may, in his
\ndiscretion, combine certain portions of the MSNBC-Accounts with the other Plan
\naccounts (e.g., MSNBC salary deferrals with Plan salary deferrals, MSNBC after-
\ntax contributions with Plan after-tax contributions) to the extent such
\ncombinations comply with the terms of the Plan and applicable laws. Except to
\nthe extent permitted by tax regulations (including Treasury Regulation
\n(S)1.411(d)-4), amounts transferred from the MSNBC Plan that are attributable to
\nelective contributions (as defined in Treasury Regulation (S)1.401(k)-1(g)(3)),
\nincluding amounts treated as elective contributions, shall be subject to the
\ndistribution limitations provided for in Treasury Regulation (S)1.401(k)-1(d).<\/p>\n
3. Eligibility. Any employee of the MSNBC Interactive News L.L.C. who on
\n ———–
\nDecember 31, 1998 is a participant in the MSNBC Plan and who on January 1 or 2,
\n1999 is an eligible employee (as defined in Section 1.5 of the Plan) shall begin
\nactive participation in the Plan on January 1, 1999. A participant for these
\npurposes shall include a person who maintained an account balance in the MSNBC
\nPlan or who was eligible to make deferrals under the MSNBC Plan. Any participant
\nof the MSNBC Plan who on January 1 or 2, 1999 is not an eligible<\/p>\n
V-20<\/p>\n
employee as defined in Plan Section 1.5 (e.g., a temporary employee, an intern)
\nshall be an inactive participant in the Plan and shall actively participate in
\nthe Plan only if and when they become an eligible employee as defined in Plan
\nSection 1.5. Such former participant in the MSNBC Plan shall not be required to
\nbe employed through an entry date before he\/she can become a participant in the
\nPlan. Any person employed by the MSNBC Interactive News L.L.C. after January 2,
\n1999, who was not employed by MSNBC Interactive News L.L.C. at any time on or
\nbefore January 2, 1999 shall be required to satisfy all of the eligibility
\nconditions of Plan Sections 1.5 and 2.1, and must be employed through an entry
\ndate before he\/she will become eligible to participate in the Plan.<\/p>\n
4. Vesting and Vesting Service Credit. Participants in the MSNBC Plan on
\n ———————————-
\nDecember 31, 1998 are 100% vested in their MSNBC-Accounts that are transferred
\nto the Plan effective January 1, 1999, and are 100% vested in their employer
\nmatching contribution accounts in the Plan going forward. For purposes of
\ndetermining the vested percentage in the employer matching contribution account
\nin this Plan (i.e., matching contributions made by MSNBC after January 1, 1999)
\nfor employees who are not participants in the MSNBC Plan on December 31, 1998
\n(e.g., those hired by MSNBC Interactive News L.L.C. after December 31, 1998),
\nsuch employees shall be credited with vesting service under the elapsed time
\nmethod as set forth in Article V of the Plan for their service at MSNBC
\nInteractive News L.L.C. and, for employees of MSNBC Interactive News L.L.C.,
\nservice with National Broadcast Company. Service with National Broadcast
\nCompany shall not be counted for those employed by Microsoft Corporation or
\nother affiliates thereof unless the employee worked for MSNBC Interactive News
\nL.L.C. between working for National Broadcast Company and Microsoft Corporation
\nor its affiliates.<\/p>\n
5. Special Provisions Applicable. There are no special provisions
\n —————————–
\napplicable to the MSNBC-Accounts.<\/p>\n
V-21<\/p>\n
H. Former Accounts and Participants of Virtual World Entertainment Group, Inc.
\nEmployees 401(k) Plan<\/p>\n
1. History of Corporate Merger. On January 11, 1999, Virtual World
\n —————————
\nEntertainment Group, Inc. (“VWEG”) was merged with a wholly-owned subsidiary of
\nMicrosoft Corporation, and VWEG was the surviving corporation. FASA Interactive
\nTechnology, Inc. (“FASA”) remained a wholly-owned subsidiary of VWEG. Since the
\ncorporate merger, neither VWEG nor FASA have had any employees. At the time of
\nthe merger, VWEG was the sponsor of the Virtual World Entertainment Group, Inc.
\nEmployees 401(k) Plan (“VWEG Plan”), and FASA was a participating employer in
\nthe VWEG Plan. The VWEG Plan remained in existence after the corporate merger.<\/p>\n
2. Plan Merger and Asset Transfer. Effective July 1, 1999, the VWEG-Plan
\n ——————————
\nis merged into the Plan, and the plan document for the Plan, as amended
\npreviously and by this amendment, is the surviving plan document. Upon the Plan
\nAdministrator’s receipt of satisfactory evidence that (i) Virtual World
\nEntertainment, LLC (“VWE”) has established a defined contribution plan that is
\ntax-qualified under Code Section 401(a), (ii) VWE wants its plan to receive a
\nplan-to-plan transfer, and (iii) VWE’s plan has been drafted to receive a plan-
\nto-plan transfer in compliance with Code Sections 414(l) and 411(d)(6) and the
\ntreasury regulations thereunder, any assets and liabilities with respect to the
\nVWEG-Accounts of persons currently employed by VWE shall be transferred to VWE’s
\nplan.<\/p>\n
The VWEG-Plan contains employee salary deferral contributions, employer
\nmatching contributions and rollover contributions only (“VWEG-Accounts”).
\nEmployee after-tax contributions were not permitted. The salary deferral
\naccounts and the rollover accounts have always been nonforfeitable. The employer
\nmatching account has been subject to a vesting<\/p>\n
V-22<\/p>\n
schedule. Effective July 1, 1999, all assets in the Plan as of such date are
\nhereby made 100% vested. The salary deferral and employer match accounts are
\ntransferred to the Plan without alteration. At the discretion of the Plan
\nAdministrator, these VWEG-Accounts (the salary deferral and match accounts) may
\nbe consolidated with the respective Microsoft salary deferral and match
\naccounts. The rollover accounts shall be kept in a separate acquisition rollover
\naccount.<\/p>\n
3. Eligibility. Any participant of the VWEG-Plan on July 1, 1999 who is not
\n ———–
\nan eligible employee as defined in Plan Section 1.5 (e.g., an intern) shall be
\nan inactive participant in the Plan and shall actively participate in the Plan
\nonly if and when they become an eligible employee as defined in Plan Section
\n1.5. Such former participant in the VWEG-Plan shall not be required to be
\nemployed through an entry date before he\/she can become a participant in the
\nPlan.<\/p>\n
4. Vesting. Participants are 100% vested in their VWEG-Accounts which are
\n ——-
\ntransferred to the Plan effective July 1, 1999. In addition, Participants with
\nsuch VWEG-Accounts shall be 100% vested in future employer matching
\ncontributions made to this Plan (the Microsoft Plan).<\/p>\n
5. Special Provisions Applicable. The following special provision applies
\n —————————–
\nonly to the rollover accounts in the VWEG Plan that are transferred to this Plan
\nas part of the VWEG-Accounts. A Participant may request an inservice withdrawal
\n(i.e., withdrawal while still employed) from such rollover accounts once per
\nPlan Year. This special withdrawal provision shall not apply to rollovers made
\nto the Plan after July 1, 1999.<\/p>\n
6. Plan Loans. Any loans from the VWEG-Plan to a VWEG-Plan participant which
\n ———-
\nare outstanding on July 1, 1999 shall be transferred to the Plan in kind as an
\nasset allocated to the <\/p>\n
V-23<\/p>\n
participant’s VWEG-Plan account. A participant with such a loan outstanding
\nshall have all of the rights and be subject to all of the conditions of his or
\nher loan as set forth in his or her VWEG-Plan loan documents.<\/p>\n
I. Former Accounts and Participants of Compare Net 401(k) Plan<\/p>\n
1. History of Corporate Merger. On March 4, 1999, Compare Net, Inc. was
\n —————————
\nmerged with MS-Jupiter, Inc., a wholly-owned subsidiary of Microsoft
\nCorporation, with Compare Net, Inc. being the surviving corporation and becoming
\na wholly-owned subsidiary of Microsoft Corporation. At the time of the merger
\nwith MS-Jupiter, Inc., Compare Net, Inc. was the sponsor of the Compare Net
\n401(k) Plan (“CN-Plan”). The plan remained in existence after Compare Net, Inc.
\nwas merged with MS-Jupiter, Inc.<\/p>\n
2. Plan Merger. Effective September 1, 1999, the CN-Plan is merged
\n ———–
\ninto the Plan, and the plan document for the Plan, as amended previously and by
\nthis amendment, is the surviving plan document. The Plan consists only of
\nemployee pre-tax deferrals, and rollovers made from prior plans or IRAs (“CN-
\nAccounts”). The CN-Accounts are transferred to the Plan without alteration and
\nshall be kept separate from other accounts held in the Plan by former CN-Plan
\nparticipants. No discretionary employer contributions were made. Because any
\nprior rollovers are subject to immediate withdrawal, they will be kept in a
\nseparate acquisition rollover account from the employee pre-tax deferrals.<\/p>\n
3. Eligibility. All former employees of Compare Net, Inc. were
\n ———–
\nterminated from Compare Net, Inc. prior to July 1, 1999. Those employed by
\nMicrosoft Corporation as an eligible employee (as defined in Section 1.5 of the
\nPlan) prior to July 1, 1999 entered the Plan on July 1, 1999. Any former
\nparticipant in the CN-Plan who is not an eligible employee (as defined in
\nSection 1.5 of the Plan) shall enter the Plan immediately upon becoming an
\neligible employee, <\/p>\n
V-24<\/p>\n
and shall not be required to be employed through an entry date before he\/she
\nwill become a participant under the Plan.<\/p>\n
4. Vesting and Vesting Service Credit. Participants are 100% vested in
\n ———————————-
\ntheir CN-Accounts which are transferred from the CN-Plan effective September 1,
\n1999. For purposes of determining their vested percentage in their employer
\nmatching contribution account in this Plan (i.e., matching contributions made by
\nMicrosoft Corporation after July 1, 1999), participants shall be credited with
\nvesting service under the elapsed time method as set forth in Article V of the
\nPlan for their service at Compare Net, Inc.<\/p>\n
5. Special Provisions Applicable. The following special provisions apply
\n —————————–
\nonly to the CN-Accounts. With respect to the CN-Accounts, the following special
\nprovisions shall supersede any other provisions of this Plan which are
\ninconsistent with the following provisions. For example, in-kind distributions
\nof Microsoft stock are permitted on lump sum distributions to the extent a CN-
\nAccount is invested in Microsoft stock at the time of the distribution, because
\nsuch distributions are permitted with respect to other Plan accounts and would
\nnot be inconsistent with the following special provisions. In addition, to the
\nextent the Plan is amended subsequent to this amendment in a way which gives
\nparticipants greater benefits or additional options not provided in this
\nsection, participants with a CN-Account shall be eligible for those additional
\nbenefits or options without violating this section.<\/p>\n
6. Form of Benefit Payments. Unless the participant makes an election
\n ————————
\notherwise, the participant (or beneficiary) shall receive the distribution of
\nhis or her CN-Account in the form of a cash lump sum. Participants with vested
\naccount balances in excess of $5,000 may elect to receive their distribution in
\nthe form of monthly cash installments over a period certain which <\/p>\n
V-25<\/p>\n
may not exceed the life expectancy of the participant or the joint life
\nexpectancy of the participant and his or her designated beneficiary.<\/p>\n
7. Inservice Withdrawals of Prior Rollovers. Participants who rolled
\n —————————————-
\namounts into the CN-Plan from another plan or IRA may withdraw such amounts and
\nthe earnings thereon at any time.<\/p>\n
8. Plan Loans. Any loans from the CN-Plan to a CN-Plan participant
\n ———-
\nwhich are outstanding on September 1, 1999 shall be transferred to the Plan in
\nkind as an asset allocated to the participant’s CN-Account. A participant with
\nsuch a loan outstanding shall have all of the rights and be subject to all of
\nthe conditions of his or her loan as set forth in his or her CN-Plan loan
\ndocuments.<\/p>\n
J. Former Accounts and Participants of Visio Corporation<\/p>\n
1. History of Corporate Merger. On January 7, 2000, Visio Corporation
\n —————————
\nbecame a wholly-owned subsidiary of Microsoft Corporation as a result of a
\nmerger between Visio Corporation and a subsidiary of Microsoft Corporation. At
\nthe time of the merger with the subsidiary of Microsoft Corporation, Visio
\nCorporation was the sponsor of the Visio 401(k) Plan (“VC-Plan”). The VC-Plan
\nwas frozen as of February 1, 2000, and Visio employees stopped making salary
\ndeferral contributions to the VC-Plan effective February 1, 2000. The Visio
\nemployees will be eligible to enter the Microsoft Savings Plus 401(k) Plan
\n(“Plan”) effective March 1, 2000.<\/p>\n
2. Plan Merger. Effective July 1, 2000, the VC-Plan is merged into the
\n ———–
\nPlan and this plan document for the Plan, as amended previously and by this
\nAmendment, is the surviving plan document.<\/p>\n
V-26<\/p>\n
The VC-Plan contains employee salary deferral contributions, employer
\nmatching contributions, and rollover contributions (“VC-Accounts”). Employee
\nafter-tax contributions were not permitted and discretionary employer
\ncontributions were never made. The salary deferral accounts and the rollover
\naccounts have always been nonforfeitable. The employer matching account has
\nbeen subject to a vesting schedule. Effective February 1, 2000, all accounts in
\nthe VC-Plan as of such date were made 100% vested. The salary deferral and
\nemployer match accounts are transferred to the Plan without alteration. The
\nrollover accounts containing rollovers that were made to the VC-Plan shall be
\nkept in a separate acquisition rollover account (“Rollover VC-Account”).<\/p>\n
3. Eligibility. Any participant of the VC-Plan on July 1, 2000, who is
\n ———–
\nnot an eligible employee as defined in Plan Section 1.5 (e.g., an intern) shall
\nbe an inactive participant in the Plan and shall actively participate in the
\nPlan only if and when they become an eligible employee as defined in Plan
\nSection 1.5. Such former participant in the VC-Plan shall renew active
\nparticipation in the Plan immediately upon becoming an eligible employee as
\ndefined in Plan Section 1.5 and attaining age 18. Any person employed by Visio
\nCorporation after July 1, 2000 who was not a participant in the VC-Plan on or
\nbefore July 1, 2000 shall be required to satisfy all of the eligibility
\nconditions of Plan Section 1.5 and 2.1, and must be employed through an entry
\ndate before he\/she will become a participant under the Plan.<\/p>\n
4. Vesting and Vesting Service Credit. Participants are 100% vested in
\n ———————————-
\ntheir VC-Accounts which are transferred to the Plan. For purposes of determining
\ntheir vested percentage in their employer matching contribution account in this
\nPlan (e.g., matching contributions made by Microsoft Corporation after March 1,
\n2000), participants shall be credited with vesting service under the elapsed
\ntime method as set forth in Article V of the Plan for their service at Visio<\/p>\n
V-27<\/p>\n
Corporation. Notwithstanding the preceding sentence, employees who are employed
\nby Visio Corporation on any date between March 1, 2000 and July 1, 2000
\n(inclusive) and who enter the Plan as participants between March 1, 2000 and
\nJuly 1, 2000 (inclusive) shall be 100% vested in their employer matching
\ncontribution accounts in the Plan.<\/p>\n
5. Special Provisions Applicable. The following special provisions apply
\n —————————–
\nonly to the VC-Accounts. With respect to the VC-Accounts, the following special
\nprovisions shall supersede any other provisions of this plan which are
\ninconsistent with the following provisions. However, to the extent the Plan is
\namended subsequent to this amendment in a way which gives participants greater
\nbenefits or additional options not provided in this section, participants with a
\nVC-Account shall be eligible for those additional benefits or options without
\nviolating this section.<\/p>\n
6. Rollover VC-Account. A participant may elect to withdraw from the
\n ——————-
\nRollover VC-Account at any time, any amount up to 100% of the value of the
\nRollover VC-Account. The participant shall notify the plan administrator of his
\nelection to make a withdrawal under this Section. The distribution will be made
\nas soon as reasonably practicable after such notice is given.<\/p>\n
7. Form of Benefit Payments. The participant may elect to have his or
\n ————————
\nher VC-Accounts distributed in a single lump sum payment, in cash or in kind.<\/p>\n
8. Plan Loans. All loans from the VC-Plan to a VC-Plan participant
\n ———-
\nwhich are outstanding on July 1, 2000 shall be transferred to the Plan in kind
\nas an asset allocated to the participant’s VC-Plan account. A participant with
\nsuch a loan outstanding shall have all of the rights and be subject to all of
\nthe conditions of his or her loan as set forth in his or her VC-Plan loan
\ndocuments.<\/p>\n
V-28<\/p>\n
K. Former Accounts and Participants of Entropic Research Laboratory, Inc.<\/p>\n
Savings and Investment Plan<\/p>\n
1. History of Corporate Merger. On November 4, 1999, Entropic Research
\n —————————
\nLaboratory, Inc. (“Entropic”) became a wholly-owned subsidiary of Microsoft
\nCorporation as a result of a merger between Entropic and a subsidiary of
\nMicrosoft Corporation. At the time of the merger with the subsidiary of
\nMicrosoft Corporation, Entropic was the sponsor of the Entropic Research
\nLaboratory, Inc. Savings & Investment Plan (“ERL-Plan”). Participants in the
\nERL-Plan who became Microsoft employees on or before March 1, 2000 will be
\neligible to enter the Microsoft Savings Plus 401(k) Plan (“Plan”) effective
\nMarch 1, 2000.<\/p>\n
2. Plan Merger. Effective March 1, 2000, the ERL-Plan is merged into the
\n ———–
\nPlan and this plan document for the Plan, as amended previously and by this
\nAmendment, is the surviving plan document.<\/p>\n
The ERL-Plan contains employee salary deferral contributions and rollover
\ncontributions (“ERL-Accounts”). Employee after-tax contributions were not
\npermitted and discretionary employer contributions were never made. The salary
\ndeferral accounts and the rollover accounts have always been nonforfeitable.
\nThe salary deferral accounts are transferred to the Plan without alteration. The
\nrollover accounts containing rollovers that were made to the ERL-Plan shall be
\nkept in a separate acquisition rollover account (“Rollover ERL-Account”).<\/p>\n
3. Eligibility. Any participant of the ERL-Plan on March 1, 2000, who
\n ———–
\nis not an eligible employee as defined in Plan Section 1.5 (e.g., an intern)
\nshall be an inactive participant in the Plan and shall actively participate in
\nthe Plan only if and when they become an eligible employee as defined in Plan
\nSection 1.5. Such former participant in the ERL-Plan shall renew active<\/p>\n
V-29<\/p>\n
participation in the Plan immediately upon becoming an eligible employee as
\ndefined in Plan Section 1.5 and attaining age 18.<\/p>\n
4. Vesting and Vesting Service Credit. Participants are 100% vested in
\n ———————————-
\ntheir ERL-Accounts which are transferred to the Plan. For purposes of
\ndetermining their vested percentage in their employer matching contribution
\naccount in this Plan (e.g., matching contributions made by Microsoft
\nCorporation), participants shall be credited with vesting service under the
\nelapsed time method as set forth in Article V of the Plan for their service at
\nEntropic.<\/p>\n
5. Special Provisions Applicable. The following special provisions apply
\n —————————–
\nonly to the ERL-Accounts. With respect to the ERL-Accounts, the following
\nspecial provisions shall supersede any other provisions of this Plan which are
\ninconsistent with the following provisions. However, to the extent the Plan is
\namended subsequent to this amendment in a way which gives participants greater
\nbenefits or additional options not provided in this section, participants with a
\nERL-Account shall be eligible for those additional benefits or options without
\nviolating this section.<\/p>\n
6. Rollover ERL-Account. A participant may elect to withdraw from the
\n ——————–
\nRollover ERL-Account as of a valuation date following such election, any amount
\nup to 100% of the value of the Rollover ERL-Account as of such valuation date.
\nThe participant shall notify the plan administrator of his election to make a
\nwithdrawal under this Section. The distribution will be made as soon as
\nreasonably practicable after such notice is given.<\/p>\n
7. Form of Benefit Payments. The participant may elect to have his or
\n ————————
\nher ERL-Accounts distributed in a single lump sum payment, in cash or in kind or
\nin a combination of both. Participants may also elect to have their ERL-Accounts
\ndistributed in installments payable in cash or in kind, or in a combination of
\nboth over a period not to exceed the participant’s life <\/p>\n
V-30<\/p>\n
expectancy or the joint life expectancy of the participant and spouse. If at the
\ntime of distribution to a participant or beneficiary the participant’s total
\nvested account balance in the Plan (including ERL-Accounts and other accounts)
\ndoes not exceed $5,000 (and never exceeded $5,000 at the time of a prior
\ndistribution), then the ERL-Account balance will be distributed in an immediate
\nlump sum payment, in cash or in kind or in a combination of both, as elected by
\nthe participant or beneficiary, and installment payments will not be a payment
\noption.<\/p>\n
8. Timing of Death Benefit Payments. Upon a participant’s death, the
\n ——————————–
\ndistribution of the participant’s ERL-Account shall be made or commence at the
\ntimes specified in Section 7.3 of the Plan. The distribution shall be in cash
\nor in kind, or in a combination of both, or in installments payable in cash or
\nin kind, or in a combination of both over a period not to exceed the
\nparticipant’s life expectancy or the joint life expectancy of the participant
\nand spouse, as elected by the participant or beneficiary. Notwithstanding the
\nforegoing, if the participant’s total vested account balance in the Plan
\n(including ERL-Accounts and other accounts) does not exceed $5,000, distribution
\nto the beneficiary shall be made in an immediate lump sum payment in cash or in
\nkind, or in a combination of both, as elected by the beneficiary.<\/p>\n
If a participant dies prior to the commencement of the distribution of his
\nor her ERL-Account and is survived by a designated beneficiary who is not his or
\nher spouse, the distribution must be made by December 31 of the calendar year in
\nwhich the fifth anniversary of the participant’s death occurs unless the
\nbeneficiary elects to have installment payments commence by the end of the first
\ncalendar year after the participant’s death. If the designated beneficiary is
\nthe participant’s spouse, the spouse may elect to delay distribution or
\ncommencement of installment payments until the end of the calendar year in which
\nthe participant would have attained age 65. If the participant dies prior to
\ncommencement of the distribution of his or her <\/p>\n
V-31<\/p>\n
ERL-Account and is not survived by a designated beneficiary, distribution shall
\nbe made in an immediate lump sum payment in cash or in kind, or in a combination
\nof both, as elected by the beneficiary.<\/p>\n
If the participant died while he was receiving installment payments of his
\nERL-Account, the remaining portion of the ERL-Account shall be distributed at
\nleast as rapidly as under the length and frequency of installment payments which
\nthe participant had selected.<\/p>\n
9. Plan Loans. All loans from the ERL-Plan to a ERL-Plan participant
\n ———-
\nwhich are outstanding on March 1, 2000 shall be transferred to the Plan in kind
\nas an asset allocated to the participant’s ERL-Plan account. A participant with
\nsuch a loan outstanding shall have all of the rights and be subject to all of
\nthe conditions of his or her loan as set forth in his or her ERL-Plan loan
\ndocuments.<\/p>\n
V-32<\/p>\n
APPENDIX VI<\/p>\n
Section 2.5<\/p>\n
EARLY ENTRY FOR CERTAIN EMPLOYEES OF ACQUIRED COMPANIES<\/p>\n
Any eligible employee who immediately following one of the relevant acquisition
\ndates listed below was employed by Microsoft Corporation (or any company which
\nis affiliated with Microsoft, within the meaning of Code Sections 414(b), (c),
\n(m), or (o)), and on the date immediately preceding the relevant acquisition
\ndate was employed by the relevant company listed below, shall enter the Plan on
\nthe later of (i) the relevant entry dates listed below, or (ii) the first
\npayroll period immediately after becoming an eligible employee and attaining age
\n18.<\/p>\n
\n\n————————————————————————————————
\n Company Acquisition Date Plan Entry Date
\n ——- —————- —————
\n————————————————————————————————
\n
\nNetCarta Corporation January 31, 1997 March 1, 1997
\n————————————————————————————————
\nInterse’ Corporation February 25, 1997 April 1, 1997
\n————————————————————————————————
\nVisio Corporation January 7, 2000 March 1, 2000
\n————————————————————————————————
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