PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant
x
Filed by a Party other than the Registrant
¨
Check the appropriate box:
| ¨
|
Preliminary Proxy
Statement
|
| x
|
Definitive Proxy
Statement
|
| ¨
|
Definitive
Additional Materials
|
| ¨
|
Soliciting
Material Pursuant to §240.14a-11(c) or §240.14a-12
|
MICROSOFT CORPORATION
(Name of Registrant as Specified in Its Charter)
MICROSOFT CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|
¨
|
Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
|
|
(1)
|
Title of each class
of securities to which transaction applies:
|
|
(2)
|
Aggregate number of
securities to which transaction applies:
|
|
(3)
|
Per unit price or
other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
|
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(4)
|
Proposed maximum
aggregate value of transaction:
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¨
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Check box if any
part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|
(1)
|
Amount Previously
Paid:
|
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(2)
|
Form, Schedule or
Registration Statement No.:
|
[MICROSOFT LOGO]
September 28, 1999
Dear
Shareholder:
You are cordially
invited to attend the annual meeting of shareholders of Microsoft
Corporation, which will be held at the Meydenbauer Center, 11100 NE
6th Street, Bellevue, Washington on November 10, 1999, at 8:00 a.m.
I look forward to greeting as many of our shareholders as possible.
Please note that parking is limited, so please plan ahead if you are
driving to the meeting.
Details of the
business to be conducted at the annual meeting are given in the
attached Notice of Annual Meeting and Proxy Statement.
You will notice in
reading the Proxy Statement that Jill Barad, a director of the
Company since 1996, is not standing for re-election. We want to
express our appreciation to Jill for her valuable contributions to
the Company during her service on the Board.
Whether or not you
attend the annual meeting it is important that your shares be
represented and voted at the meeting. Therefore, I urge you to sign,
date, and promptly return the enclosed proxy in the enclosed
postage-paid envelope. If you decide to attend the annual meeting
and vote in person, you will of course have that opportunity.
On behalf of the
Board of Directors, I would like to express our appreciation for
your continued interest in the affairs of the Company.
|
Executive Vice President and Chief
Operating Officer
|
MICROSOFT CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 10, 1999
To
the Shareholders:
The annual meeting
of the shareholders of Microsoft Corporation will be held at the
Meydenbauer Center, 11100 NE 6th Street, Bellevue, Washington, on
November 10, 1999, at 8:00 a.m. for the following purposes:
|
2. To approve
the adoption of the 1999 Stock Option Plan for Non-Employee
Directors.
|
|
3. To
transact such other business as may properly come before the
meeting.
|
Only shareholders of
record at the close of business on September 10, 1999 are entitled
to notice of, and to vote at, this meeting.
|
BY ORDER OF THE BOARD OF DIRECTORS
|
|
William H. Neukom, Secretary
|
Redmond, Washington
September 28, 1999
IMPORTANT
|
Whether or not you
expect to attend in person, we urge you to sign, date, and return
the enclosed Proxy at your earliest convenience. This will ensure
the presence of a quorum at the meeting. Promptly signing,
dating, and returning the Proxy will save the Company the expense
and extra work of additional solicitation. An addressed
envelope for which no postage is required if mailed in the United
States is enclosed for that purpose. Sending in your Proxy will
not prevent you from voting your stock at the meeting if you
desire to do so, as your Proxy is revocable at your option.
|
MICROSOFT CORPORATION
One Microsoft Way
Redmond, Washington 98052
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS
To Be Held November 10, 1999
This
Proxy Statement, which was first mailed to shareholders on September
28, 1999, is furnished in connection with the solicitation of
proxies by the Board of Directors of Microsoft Corporation (the
“Company”), to be voted at the annual meeting of the
shareholders of the Company, which will be held at 8:00 a.m. on
November 10, 1999, at the Meydenbauer Center, 11100 NE 6th Street,
Bellevue, Washington, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. Shareholders who execute
proxies retain the right to revoke them at any time prior to the
exercise of the powers conferred thereby, by delivering a signed
statement to the Secretary of the Company at or prior to the annual
meeting or by executing another proxy dated as of a later date. The
cost of solicitation of proxies is to be borne by the Company.
Shareholders of record at the close of business on September 10,
1999 will be entitled to vote at the meeting on the basis of one
vote for each share held. On September 10, 1999, there were
5,141,508,124 shares of common stock outstanding, held of record by
93,850 shareholders.
1. ELECTION OF DIRECTORS
AND MANAGEMENT INFORMATION
The
Company’s Board of Directors currently consists of seven
members. Jill E. Barad, a director of the Company since 1996, is
leaving the Board effective as of the date of the annual meeting.
The Company has begun a search for another director.
Six
directors are to be elected at the annual meeting, to hold office
until the next annual meeting of shareholders and until their
successors are elected and qualified. It is intended that the
accompanying proxy will be voted in favor of the following persons
to serve as directors unless the shareholder indicates to the
contrary on the proxy. Management expects that each of the nominees
will be available for election, but if any of them is not a
candidate at the time the election occurs, it is intended that such
proxy will be voted for the election of another nominee to be
designated by the Board of Directors to fill any such vacancy.
Nominees
William H. Gates, 43, was a founder of the Company and has been its
Chief Executive Officer and Chairman of the Board since the Company
’s predecessor partnership was incorporated in 1981. From 1975
to 1981, Mr. Gates was a partner with Paul Allen, Microsoft’s
other founder, in the predecessor partnership. Mr. Gates is also a
member of the Board of Directors of ICOS Corporation.
Paul
G. Allen, 46, has been a director of the Company since 1990, and
also served on the Board from 1981 to 1984. Mr. Allen was a founder
of the Company and worked at Microsoft from 1975 to 1984. Mr. Allen
owns and invests in a suite of companies exploring the potential of
digital communications. Mr. Allen’s business strategy includes
encouraging communication and synergy among his companies for mutual
benefit. His primary companies include Asymetrix Learning Systems,
Inc., Vulcan Ventures Inc., and Vulcan Northwest Inc., all of
Bellevue, Washington, Interval Research Corp. of Palo Alto,
California, and Charter Communications of St. Louis. Allen is owner
of KXL AM and FM Radio of Portland, Oregon, the Portland Trail
Blazers basketball team and the Seattle Seahawks NFL franchise, a
partner in the entertainment studio Dream Works SKG, a board member
of USA Networks, and holds investments in more than 100 new media
companies. Allen gives back to the community through the six Allen
Charitable Foundations, which support arts, medical, forest
protection and other charitable needs in the Pacific Northwest. He
is the founder of Experience Music Project in Seattle and Clear Blue
Sky Productions in Bellevue.
Richard A. Hackborn, 62, has been a director of the Company since
1994. Mr. Hackborn retired in 1993 from Hewlett-Packard Company,
which designs, manufactures, and services electronic products and
systems for measurement, computation, and communications, and
currently serves on that company’s Board of Directors, and is
the Chairman-elect. From 1990 to 1993, he was Hewlett-Packard’s
Executive Vice President, Computer Products Organization, and from
1984 through 1990, he was its Vice President and General Manager,
Peripherals Group.
David
F. Marquardt, 50, has served as a director of the Company since
1981. Mr. Marquardt is a founding general partner of August Capital,
formed in 1995, and has been a general partner of various Technology
Venture Investors entities, which are private venture capital
limited partnerships, since August 1980. He is a director of
Netopia, Inc., Tumbleweed Communication Corporation, and ScanSoft,
Inc., and various privately held companies.
Wm.
G. Reed, Jr., 60, has been a director of the Company since 1987. Mr.
Reed served as Chairman of the Board of Simpson Timber Company, a
forest products company, from 1971 to 1986, and as Chairman of
Simpson Investment Company, from 1986 to 1996. In addition to
Simpson Investment Company, he is a director of PACCAR, Inc., SAFECO
Corporation, the Seattle Times Company, and Washington Mutual
Savings Bank.
Jon
A. Shirley, 61, served as President and Chief Operating Officer of
Microsoft from 1983 to 1990. He has been a director of the Company
since 1983. Mr. Shirley also serves as Chairman of the Board of
Directors of Mentor Graphics Corporation.
Information Regarding the Board and its Committees
The
Company’s Board of Directors has an Audit Committee, a
Compensation Committee, and a Finance Committee. There is no
standing nominating committee. Messrs. Reed, Marquardt and Shirley
serve on the Audit Committee, which meets with financial management,
the internal auditors, and the independent auditors to review
internal accounting controls and accounting, auditing, and financial
reporting matters. Messrs. Hackborn and Reed and Ms. Barad serve on
the Compensation Committee, which reviews the compensation of the
Chief Executive Officer and other officers of the Company, reviews
executive bonus plan allocations, and grants stock options to
officers and employees of the Company under its stock option plan.
Messrs. Hackborn, Marquardt, and Shirley serve on the Finance
Committee, which reviews and provides guidance to the Board of
Directors and management with respect to major financial policies of
the Company.
The
Audit Committee, Compensation Committee, and Finance Committee each
met four times during fiscal 1999. The entire Board of Directors met
five times during the last fiscal year. Ms. Barad did not attend two
meetings of the Compensation Committee and two meetings of the Board
of Directors, and Mr. Marquardt did not attend two meetings of Audit
Committee and two meetings of the Finance Committee, though both
attended a majority of the aggregate number of Board meetings and
committee meetings. All other directors attended 75% or more of the
aggregate number of Board meetings and committee meetings.
Messrs. Gates and Allen receive no cash compensation for serving on
the Board except for reimbursement of reasonable expenses incurred
in attending meetings. Pursuant to agreements with the Company, the
other directors are each paid $8,000 per year plus $1,000 for each
Board meeting and $500 for each committee meeting they attend.
During fiscal 1999, Messrs. Allen, Hackborn, Marquardt, Reed, and
Shirley and Ms. Barad each received an annual option to purchase
5,000 shares (10,000 shares after giving effect to the March 1999
stock split) of the Company’s common stock. The exercise price
of each option was the market price of Microsoft common stock on the
date of grant.
Information Regarding Beneficial Ownership of Principal
Shareholders, Directors, and Management
The following table
sets forth information regarding the beneficial ownership of the
Company’s common shares by the nominees for directors, the
Company’s Chief Executive Officer and the four other highest
paid executive officers (“Named Executive Officers”), and
the directors and executive officers as a group.
Names
|
|
Amount and Nature of
Beneficial Ownership
of Common Shares as
of 9/10/99(1)
|
|
Percent of Class
|
| William H. Gates
|
|
787,055,600
|
(2)(3)
|
|
15.3
|
%
|
| Paul G. Allen
|
|
260,723,896
|
(4)
|
|
5.1
|
%
|
| Jill E. Barad
|
|
129,000
|
(5)
|
|
*
|
|
| Richard A. Hackborn
|
|
50,000
|
(6)
|
|
*
|
|
| David F. Marquardt
|
|
2,169,228
|
(7)
|
|
*
|
|
| Wm. G. Reed, Jr.
|
|
601,872
|
(8)
|
|
*
|
|
| Jon A. Shirley
|
|
10,180,362
|
(9)
|
|
*
|
|
| Steven A. Ballmer
|
|
239,626,854
|
(2)
|
|
4.7
|
%
|
| Robert J. Herbold
|
|
934,783
|
(10)
|
|
*
|
|
| Paul A. Maritz
|
|
747,064
|
(11)
|
|
*
|
|
| Michel Lacombe
|
|
3,120,008
|
(12)
|
|
*
|
|
| Executive Officers and Directors as a group (24
persons)
|
|
1,327,455,492
|
(13)
|
|
25.7
|
%
|
| (1)
|
Beneficial
ownership represents sole voting and investment power. To the
Company’s knowledge, the only shareholders who beneficially
owned more than 5% of the outstanding common shares as of
September 10, 1999, were Messrs. Gates and Allen.
|
| (2)
|
The business
address for Messrs. Gates and Ballmer is: Microsoft Corporation,
One Microsoft Way, Redmond, Washington 98052.
|
| (3)
|
Does not include
214,460 shares owned by Mr. Gates’ wife, as to which he
disclaims beneficial ownership.
|
| (4)
|
Includes 1,280,000
shares that may be purchased within 60 days of September 10, 1999,
pursuant to outstanding stock options (“Vested Options”
). Mr. Allen’s business address is: Vulcan Northwest, Inc.,
110—110th Avenue N.E., Suite 550, Bellevue, Washington 98004.
|
| (5)
|
Includes 120,000
Vested Options.
|
| (6)
|
Includes 20,000
Vested Options.
|
| (7)
|
Includes 920,000
Vested Options.
|
| (8)
|
Includes 560,000
Vested Options.
|
| (9)
|
Includes 1,323,670
shares held by the Shirley Family Limited Partnership, a limited
partnership of which Mr. Shirley is the president of the sole
general partner, and 101,550 shares held by Mr. Shirley as trustee
under trusts for two grandsons, and 920,000 Vested Options.
|
| (10)
|
Includes 925,000
Vested Options.
|
| (11)
|
Includes 718,000
Vested Options.
|
| (12)
|
Includes 1,320,000
Vested Options.
|
| (13)
|
Includes 17,419,640
Vested Options.
|
Information Regarding Executive Officer Compensation
Cash Compensation
The following table
discloses compensation received for the three fiscal years ended
June 30, 1999, by the Company’s Chief Executive Officer and the
four other Named Executive Officers.
SUMMARY COMPENSATION TABLE
Name and Principal
Position
|
|
Year
|
|
Annual Compensation
|
|
Long-Term
Compensation
Awards
|
|
Salary
|
|
Bonus(1)
|
|
Securities
Underlying
Options(#)
|
|
All Other
Compensation(2)
|
|
William H. Gates
|
|
1999
|
|
|
$400,213
|
|
|
$223,160
|
|
|
0
|
|
|
0
|
|
|
Chairman of the Board;
|
|
1998
|
|
|
368,874
|
|
|
173,423
|
|
|
0
|
|
|
0
|
|
|
Chief Executive Officer; Director
|
|
1997
|
|
|
349,992
|
|
|
241,360
|
|
|
0
|
|
|
0
|
|
|
| Steven A. Ballmer
|
|
1999
|
|
|
388,392
|
|
|
272,181
|
|
|
0
|
|
|
$4,800
|
|
|
President
|
|
1998
|
|
|
337,429
|
|
|
205,598
|
|
|
0
|
|
|
4,800
|
|
|
|
|
1997
|
|
|
316,242
|
|
|
265,472
|
|
|
0
|
|
|
5,125
|
|
|
| Robert J. Herbold
|
|
1999
|
|
|
562,465
|
|
|
363,693
|
|
|
0
|
|
|
50,997
|
|
|
Executive Vice President;
|
|
1998
|
|
|
535,773
|
|
|
572,317
|
|
|
0
|
|
|
76,833
|
|
|
Chief Operating Officer
|
|
1997
|
|
|
536,127
|
|
|
673,096
|
|
|
0
|
|
|
50,094
|
|
|
| Paul A. Maritz
|
|
1999
|
|
|
331,213
|
|
|
246,647
|
|
|
0
|
|
|
4,940
|
|
|
Group Vice President,
|
|
1998
|
|
|
311,223
|
|
|
205,215
|
|
|
0
|
|
|
5,314
|
|
|
Developer
|
|
1997
|
|
|
282,084
|
|
|
243,105
|
|
|
0
|
|
|
5,025
|
|
|
|
Michel Lacombe
|
|
1999
|
|
|
356,983
|
|
|
222,796
|
|
|
0
|
|
|
0
|
|
|
Senior Vice President; President, Europe,
|
|
1998
|
|
|
335,570
|
|
|
257,503
|
|
|
0
|
|
|
0
|
|
|
Middle East, and Africa Region
|
|
1997
|
|
|
333,951
|
|
|
278,050
|
|
|
0
|
|
|
0
|
|
| (1)
|
The amounts
disclosed in the Bonus column were all awarded under the Company
’s Executive Bonus Plan, except the amounts disclosed for Mr.
Herbold include payments of $250,000 in 1997 and 1998 pursuant to
a signing bonus.
|
| (2)
|
The amounts
disclosed in this column only include Company contributions under
the Company’s 401(k) plan, except that for Mr. Herbold, it
also includes $45,344 in 1997, $72,033 in 1998, and $46,197 in
1999, for life insurance premiums.
|
Compensation Pursuant to Stock Options
No stock
options were granted to any Named Executive Officers during fiscal
1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table
provides information on option exercises in fiscal 1999 by the Named
Executive Officers and the value of such officers’ unexercised
options at June 30, 1999.
Name
|
|
Shares
Acquired
on Exercise
(#)
|
|
Value Realized
($)
|
|
Number of Securities
Underlying Unexercised
Options at Fiscal
Year-End(#)
|
|
Value of Unexercised
In-the-Money Options
at Fiscal Year-End($)
|
Exercisable
|
|
Unexercisable
|
|
Exercisable
|
|
Unexercisable
|
| William H. Gates
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
| Steven A. Ballmer
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
| Robert J. Herbold
|
|
130,000
|
|
|
$ 6,188,438
|
|
|
1,000,000
|
|
|
1,350,000
|
|
|
$ 83,406,250
|
|
|
$112,598,438
|
|
| Paul A. Maritz
|
|
2,214,000
|
|
|
144,701,622
|
|
|
1,544,000
|
|
|
948,000
|
|
|
132,945,800
|
|
|
80,495,475
|
|
| Michel Lacombe
|
|
0
|
|
|
0
|
|
|
1,320,000
|
|
|
1,020,000
|
|
|
113,717,250
|
|
|
78,065,628
|
|
Robert J. Herbold Employment Agreement
Mr. Herbold joined
Microsoft in November 1994, and pursuant to his employment agreement
receives enhanced health, disability, and insurance benefits during
and after his employment. Microsoft maintains $650,000 and $1.35
million life insurance policies to replace policies he had from his
previous employer.
If Mr. Herbold
’s employment is terminated for any reason other than
Misconduct or voluntary resignation, Microsoft and Mr. Herbold will
negotiate in good faith a reasonable severance package with a
minimum of 18 months’ base salary. For severance purposes,
Misconduct is limited to the commission of a felony or any other
intentional misconduct that has a material adverse effect upon the
business or reputation of Microsoft.
REPORT OF THE MICROSOFT CORPORATION BOARD
OF DIRECTORS COMPENSATION COMMITTEE
Microsoft’s employee compensation policy is to offer a package
including a competitive salary, an incentive bonus based upon
individual performance goals, competitive benefits, and an efficient
workplace environment. The Company also encourages broad-based
employee ownership of Microsoft stock through a stock option program
in which most employees are eligible to participate.
The
Company’s compensation policy for officers is similar to that
for other employees, and is designed to promote continued
performance and attainment of corporate and personal goals.
The
Compensation Committee of the Board of Directors (comprised entirely
of non-employee directors) reviews and approves individual officer
salaries, bonus financial performance goals, bonus plan allocations,
and stock option grants. The Committee also reviews guidelines for
compensation, bonus, and stock option grants for non-officer
employees.
Officers of the Company are paid salaries in line with their
responsibilities. These salaries are structured so the midpoint
salary range is at the 65th percentile of salaries paid by
competitors in the computer and other relevant industries.
Competitors selected for salary comparison purposes differ from the
companies included in the Nasdaq Computer and Data Processing
Stocks, which is used in the Performance Graph that follows this
report. Officers also participate in the Executive Bonus Plan. Each
officer is eligible to receive a discretionary bonus of up to 15% of
base salary based upon individually established performance goals.
Officers are also eligible for financial performance bonuses of up
to 90% of base salary, with amounts based on a graduated formula
which takes into account predetermined corporate revenue and profit
goals and, in the case of officers with profit and loss
responsibility, group revenue and profit goals. The maximum total
bonus under the Executive Bonus Plan is 105% of base salary. The
Compensation Committee establishes aggressive revenue and profit
goals as an incentive for superior individual, group, and corporate
performance. Likewise, stock option grants to officers (and other
employees) promote success by aligning employee financial interests
with long-term shareholder value. Stock option grants are based on
various subjective factors primarily relating to the
responsibilities of the individual officers, and also to their
expected future contributions and prior option grants.
As
noted above, the Company’s compensation policy is primarily
based upon the practice of pay-for-performance. Section 162(m) of
the Internal Revenue Code imposes a limitation on the deductibility
of nonperformance-based compensation in excess of $1 million paid to
Named Executive Officers. The Committee currently believes that the
Company should be able to continue to manage its executive
compensation program for Named Executive Officers so as to preserve
the related federal income tax deductions, although individual
exceptions may occur.
The
Compensation Committee annually reviews and approves the
compensation of William H. Gates, the Chief Executive Officer. Mr.
Gates also participates in the Executive Bonus Plan, with his bonus
tied to corporate revenue and profit goals, but does not participate
in the individual performance portion of the Executive Bonus Plan.
His maximum possible bonus is 90% of his base salary. The Committee
believes Mr. Gates is paid a reasonable salary, and his bonus is
based on the same corporate financial goals as the other officers of
the Company. In addition, Mr. Gates is a significant shareholder in
the Company, and to the extent his performance as CEO translates
into an increase in the value of the Company’s stock, all
shareholders, including him, share the benefits.
COMPENSATION COMMITTEE
Jill E. Barad
Richard A. Hackborn
Wm. G. Reed, Jr.
PERFORMANCE GRAPH
Note: Microsoft
management consistently cautions that the stock price performance
shown in the graph below should not be considered indicative of
potential future stock price performance.
Comparison of Five Year Cumulative Total Return among Microsoft
Corporation,
Nasdaq Computer & Data Processing Services (C&DPS) Index,
and S&P 500 Index
[PERFORMANCE GRAPH APPEARS HERE AND IS SUMMARIZED BELOW]
| |
|
Fiscal Year Ended June
30
|
|
|
|
1994
|
|
1995
|
|
1996
|
|
1997
|
|
1998
|
|
1999
|
|
|
(Dollars)
|
| Microsoft
|
|
100
|
|
|
175
|
|
|
233
|
|
|
490
|
|
|
840
|
|
|
1,398
|
|
| Nasdaq
|
|
100
|
|
|
163
|
|
|
217
|
|
|
274
|
|
|
414
|
|
|
631
|
|
| S&P 500
|
|
100
|
|
|
123
|
|
|
151
|
|
|
199
|
|
|
255
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309
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Certain Relationships and Related Transactions
Mr. Gates is the
sole shareholder of Corbis Corporation, a company that provides
digitized images and production services. The Company paid Corbis
Corporation approximately $276,000 in fiscal 1999 as licensing fees
for digital images.
In July 1999, the
Company agreed to lease approximately 390,000 square feet of space
in two buildings located in Issaquah, Washington. The lessor of the
properties is Sammamish Park L.L.C., a limited liability company
owned by Paul Allen. These leases run for approximately 3
1
/
2
years, and the total
amount of rent payable over the term of the leases is approximately
$95 million, which the Company believes is consistent with the fair
market value for such leases.
Section 16(a) Beneficial Ownership Reporting
Compliance
Craig
Mundie, Senior Vice President, Consumer Strategy, failed to report a
gift of shares on his Form 5 filed in August 1998, but subsequently
reported the gift in a filing on Form 4 filed in March 1999.
2. PROPOSAL FOR APPROVAL OF
THE 1999 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
At
the meeting, the shareholders will be requested to approve the 1999
Stock Option Plan for Non-Employee Directors (the “Directors
’ Plan”). The Company’s 1991 Stock Option Plan for
Non-Employee Directors expires on December 31, 1999, and the Board
recommends approval of the new Directors’ Plan to allow the
Company to continue to attract and retain the best available Board
members and provide an incentive for persons serving as directors to
use their best efforts on the Company’s behalf. Directors who
are not also employees of the Company are not eligible to
participate in any of the Company’s other existing stock plans.
For these reasons, the Board of Directors has unanimously adopted
resolutions approving, and recommending to the shareholders for
their approval, the Directors’ Plan. A copy of the Directors
’ Plan may be obtained upon written request to the Company’
s Investor Relations Department at the address listed on page 10.
Description of the Plan
Each
director who is not, and has not been during the immediately
preceding 12-month period, an employee of the Company or any
subsidiary of the Company is eligible to participate in the Directors
’ Plan. The Board has reserved the discretion to determine that
one or more directors will not be eligible for a specified year or
for an indefinite period.
An
aggregate of 2,000,000 shares of common stock have been reserved for
issuance under the Directors’ Plan. Each eligible non-employee
director will be eligible to receive an option to purchase up to
10,000 shares of common stock on an annual basis. Each of the five
continuing non-employee directors of the Company will be eligible to
receive these discretionary options in the coming fiscal year. The
Directors’ Plan will permit the Company to grant options for up
to 50,000 shares of common stock to new non-employee directors at
the time of their initial election to the Board. The Company cannot
now determine the number of options to be granted in the future
under the Directors’ Plan to all current directors who are not
executive officers as a group or to each nominee for election as a
director who is a non-employee of the Company. In the fiscal year
ended June 30, 1999, options to purchase 60,000 shares of Common
Stock were granted to non-employee directors. The closing price of
Microsoft common stock on September 10, 1999 was $95.
The
exercise price and vesting schedule for all options granted under
the Directors’ Plan will be set by the Board in its discretion.
Options granted under the Directors’ Plan will become fully
exercisable if the director ceases to serve on the Board for any
reason within one year following any Change in Control of the
Company (as defined in the Directors’ Plan). Options may be
exercised only while the option holder is a director of the Company,
within 180 days after the date the option holder terminates as a
director, or within 180 days after the death of the option holder.
During the option holder’s lifetime, an option is exercisable
only by the option holder. Options are not transferable except upon
the death of the option holder, or as the Board of Directors may
otherwise permit.
At
the date of exercise, the option holder may pay the full option
price in cash or in shares of common stock previously acquired by
the option holder valued at fair market value. The use of previously
acquired shares to pay the option price enables the option holder to
avoid the need to fund the entire purchase with cash. Upon exercise
of an option, the number of shares subject to the option and the
number of shares available under the Directors’ Plan for future
option grants are reduced by the number of shares with respect to
which the option is exercised.
The
Directors’ Plan will be in effect until options have been
granted and exercised with respect to all shares available for the
Directors’ Plan. However, no option can be granted under the
Directors’ Plan more than ten years after the Directors’
Plan has been approved by the Company’s shareholders. The Board
of Directors may terminate the Directors’ Plan at any time,
except with respect to options already outstanding.
The Board of
Directors has authority to grant options to non-employee directors
and is responsible for the general administration and interpretation
of the Directors’ Plan. No director may participate in any
decision relating exclusively to an option granted to the director.
Tax Consequences
The federal income
tax consequences of a directors participation in the Directors’
Plan are complex and subject to change. The following discussion,
which has been prepared by the law firm of Preston Gates & Ellis
LLP, counsel to the Company, is only a summary of the general rules
applicable to the Directors’ Plan.
Options granted
under the Directors’ Plan are nonqualified stock options.
Nonqualified stock options granted under the Directors’ Plan do
not qualify as incentive stock options and will not qualify for any
special tax benefits to the option holder. An option holder
generally will not recognize any taxable income at the time he or
she is granted a nonqualified option. However, upon its exercise,
the option holder will recognize ordinary income for federal tax
purposes measured by the excess of the then fair market value of the
shares over the exercise price. The income realized by the option
holder will be subject to income and other employee withholding
taxes.
The option holder
’s basis for determination of gain or loss upon the subsequent
disposition of shares acquired upon the exercise of a nonqualified
stock option will be the amount paid for such shares plus any
ordinary income recognized as a result of the exercise of such
option. Upon disposition of any shares acquired pursuant to the
exercise of a nonqualified stock option, the difference between the
sale price and the option holder’s basis in the shares will be
treated as a capital gain or loss and generally will be
characterized as long-term capital gain or loss if the shares have
been held for more than one year at their disposition.
In general, there
will be no federal income tax deduction allowed to the Company upon
the grant or termination of a nonqualified stock option or a sale or
disposition of the shares acquired upon the exercise of a
nonqualified stock option. However, upon the exercise of a
nonqualified stock option, the Company will be entitled to a
deduction for federal income tax purposes equal to the amount of
ordinary income that an option holder is required to recognize as a
result of the exercise, provided that the deduction is not otherwise
disallowed under the Code.
Vote Required and Board Recommendation
Approval of the
Directors’ Plan requires more votes in favor of adoption of the
plan than those against adoption. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE ADOPTION OF THE DIRECTORS’ PLAN.
PROPOSALS OF SHAREHOLDERS
Proposals of
shareholders intended to be presented at the 2000 Annual Meeting of
Shareholders must be received by the Company no later than May 26,
2000 to be included in the Company’s Proxy Statement and form
of proxy related to that meeting. Shareholders who intend to present
a proposal at the 2000 Annual Meeting of Shareholders without
inclusion of such proposal in the Company’s proxy materials are
required to provide notice of such proposal to the Company no later
than August 13, 2000. The Company reserves the right to reject, rule
out of order, or take other appropriate action with respect to any
proposal that does not comply with these and other applicable
requirements.
SOLICITATION OF PROXIES
The proxy
accompanying this Proxy Statement is solicited by the Board of
Directors of the Company. Proxies may be solicited by officers,
directors, and regular supervisory and executive employees of the
Company, none of whom will receive any additional compensation for
their services. Also, W.F. Doring & Co. may solicit proxies at
an approximate cost of $12,500 plus reasonable expenses. Such
solicitations may be made personally, or by mail, facsimile,
telephone, telegraph, messenger, or via the Internet. The Company
will pay persons holding shares of common stock in their names or in
the names of nominees, but not owning such shares beneficially, such
as brokerage houses, banks, and other fiduciaries, for the expense
of forwarding solicitation materials to their principals. All of the
costs of solicitation of proxies will be paid by the Company.
VOTING TABULATION
Vote Required:
Under the Washington Business Corporation
Act, the election of the Company’s Directors requires a
plurality of the votes represented in person or by proxy at the
meeting. Approval of the Directors’ Plan requires more votes in
favor of adoption than those against the proposal. Votes cast by
proxy or in person at the meeting will be tabulated by ChaseMellon
Shareholder Services, LLC. A majority of the shares eligible to vote
must be present in person or represented by proxy to provide a
quorum.
Effect of an
Abstention and Broker Non-Votes: A
shareholder who abstains from voting on any or all proposals will be
included in the number of shareholders present at the meeting for
the purpose of determining the presence of a quorum. Abstentions
will not be counted either in favor of or against the election of
the nominees or other proposals. Under the rules of the National
Association of Securities Dealers, brokers holding stock for the
accounts of their clients who have not been given specific voting
instructions as to a matter by their clients may vote their clients
’ proxies in their own discretion.
AUDITORS
Representatives of
Deloitte & Touche LLP, independent public auditors for the
Company for fiscal 1999 and the current fiscal year, will be present
at the meeting, will have an opportunity to make a statement, and
will be available to respond to appropriate questions.
OTHER MATTERS
The Board of
Directors does not intend to bring any other business before the
meeting, and so far as is known to the Board, no matters are to be
brought before the meeting except as specified in the notice of the
meeting. However, as to any other business that may properly come
before the meeting, it is intended that proxies, in the form
enclosed, will be voted in respect thereof in accordance with the
judgment of the persons voting such proxies.
DATED: Redmond, Washington, September 28,
1999.
|
A COPY OF THE
COMPANY’S FORM 10-K REPORT FOR FISCAL YEAR 1999, CONTAINING
INFORMATION ON OPERATIONS, FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, IS AVAILABLE UPON REQUEST. PLEASE WRITE TO:
|
INVESTOR RELATIONS DEPARTMENT
MICROSOFT CORPORATION
ONE MICROSOFT WAY
REDMOND, WASHINGTON 98052
MICROSOFT CORPORATION
P R
O X Y
FOR
ANNUAL MEETING OF THE SHAREHOLDERS OF MICROSOFT CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints
WILLIAM H. GATES and ROBERT J. HERBOLD, and each of them, with full
power of substitution, as proxies to vote the shares which the
undersigned is entitled to vote at the Annual Meeting of the Company
to be held at the Meydenbauer Center, 11100 NE 6th Street, Bellevue,
Washington on November 10, 1999 at 8:00 a.m. and at any adjournments
thereof.
(Continued and to be signed on the reverse side)
| |
This proxy when properly signed will
be voted in the manner directed herein by the undersigned
shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
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Please mark
your votes
as indicated
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x
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FOR election of all
nominees
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WITHHOLD vote from
all nominees
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1.
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Election of directors: William H. Gates, Paul G. Allen,
Richard A. Hackborn, David F. Marquardt, Wm G. Reed, Jr., and Jon
A. Shirley
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o
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o
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2.
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Proposal to approve the 1999 Stock Option Plan for Non-Employee
Directors.
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FOR
o
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AGAINST
o
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ABSTAIN
o
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Except for nominee(s) listed below from whom vote is withheld:
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3.
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In their discretion, the proxies are
authorized to vote upon such other business as may properly come
before the meeting.
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IMPORTANT - PLEASE SIGN AND RETURN PROMPTLY.
When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee, or
guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by an
authorized person.
|
| Signature
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Signature if held
jointly
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Dated:
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|
, 1999 |
MICROSOFT CORPORATION
P R
O X Y
FOR
ANNUAL MEETING OF THE SHAREHOLDERS OF MICROSOFT CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints
WILLIAM H. GATES and ROBERT J. HERBOLD, and each of them, with full
power of substitution, as proxies to vote the shares which the
undersigned is entitled to vote at the Annual Meeting of the Company
to be held at the Meydenbauer Center, 11100 NE 6th Street, Bellevue,
Washington on November 10, 1999 at 8:00 a.m. and at any adjournments
thereof.
(Continued and to be signed on the reverse side)
| |
This proxy when properly signed will
be voted in the manner directed herein by the undersigned
shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
|
|
Please mark
your votes
as indicated
|
x
|
|
| |
|
|
|
FOR election of all
nominees
|
|
WITHHOLD vote from
all nominees
|
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1.
|
Election of directors: William H. Gates, Paul G. Allen,
Richard A. Hackborn, David F. Marquardt, Wm G. Reed, Jr., and Jon
A. Shirley
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o
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|
o
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2.
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Proposal to approve the 1999 Stock Option Plan for Non-Employee
Directors.
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FOR
o
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AGAINST
o
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ABSTAIN
o
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Except for nominee(s) listed below from whom vote is withheld:
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3.
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In their discretion, the proxies are
authorized to vote upon such other business as may properly come
before the meeting.
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IMPORTANT - PLEASE SIGN AND RETURN PROMPTLY.
When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee, or
guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by an
authorized person.
|
| Signature
|
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Signature if held
jointly
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Dated:
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, 1999 |
FOLD AND DETACH HERE
YOUR VOTE IS
IMPORTANT!
YOU CAN VOTE IN ONE OF TWO WAYS:
1.
Vote by Internet at the Internet address:
http://www.eproxy.com/msft
OR
2.
Mark, sign and date this proxy card and return promptly in the
enclosed envelope.
| [LOGO OF MSFT]
|
[LOGO
OF MICROSOFT]
|
| Microsoft
Investor Relations | www.microsoft/com/msft/
|
www.microsoft.com
|
VOTE YOUR PROXY OVER
THE INTERNET!
> It's fast, convenient, and your vote is
immediately confirmed and tabulated. Most important, by choosing to
vote over the Internet, you help Microsoft reduce postage and proxy
tabulation costs.
YOUR VOTE IS IMPORTANT!
Using the Internet, you can vote anytime, 24 hours a day. Or if you
prefer, you can return the enclosed paper ballot in the envelope
provided. Please do not return the enclosed paper ballot if you are
voting over the Internet.
HOW TO VOTE OVER THE
INTERNET
| 1.
|
Read the
accompanying Proxy Statement.
|
| 2.
|
Have your
11-digit control number located on your voting ballot available.
|
| 3.
|
Point
your browser to http://www.eproxy.com/msft/
|
| 4.
|
Follow the
instructions.
|
| |
—
|
you can
simply cast your vote,
|
OR
|
—
|
you can
cast your vote and register to receive all future shareholder
communications electronically, instead of in print. This means
that the annual report, proxy, and other correspondence will be
delivered to you electronically via e-mail.
|
| [LOGO OF MSFT]
|
[LOGO OF MICROSOFT]
|
| Microsoft
Investor Relations | www.microsoft/com/msft/
|
www.microsoft.com
|
VOTE YOUR PROXY OVER
THE INTERNET OR BY TELEPHONE!
>
It's fast, convenient, and your vote is immediately confirmed
and tabulated. Most important, by using the Internet or telephone,
you help Microsoft reduce postage and proxy tabulation costs.
YOUR VOTE IS IMPORTANT!
Using the Internet or telephone, you can vote anytime, 24 hours a
day. Or if you prefer, you can return the enclosed paper ballot in
the envelope provided. Please do not return the enclosed paper
ballot if you are voting over the Internet or by telephone.
VOTING OPTIONS
1
|
VOTE OVER THE INTERNET:
|
OR
|
2
|
VOTE BY TELEPHONE:
|
| |
— |
Read the accompanying Proxy Statement.
|
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|
— |
Read the
accompanying Proxy Statement.
|
| |
— |
Have your 12-digit control number located on your
voting ballot available.
|
|
|
— |
Have your
12-digit control number located on your voting ballot available.
|
| |
— |
Point your browser to http://www.proxyvote.com/
|
|
|
— |
Using a
touch-tone phone, call the toll-free number shown on your voting
ballot.
|
| |
— |
Follow the instructions.
|
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|
— |
Following
the recorded instructions.
|
| |
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>
|
you can
simply cast your vote,
|
|
|
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|
| |
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|
or
|
|
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|
|
| |
|
>
|
you can
cast your vote and register to receive all future shareholder
communications electronically, instead of in print. This means
that the annual report, proxy, and other correspondence will be
delivered to you electronically via e-mail.
|
|
|
|
|
