Microsoft Completes Employee Stock Option Transfer Program

REDMOND, Wash., December 11, 2003 — Microsoft today completed its Stock Option Transfer Program, which was designed to give eligible employees the choice of realizing some value on a portion of their “underwater” stock options by selling them to JPMorgan.

According to the company, 18,503 of the 36,539 Microsoft eligible employees elected to participate a 51 percent participation rate. A total of 344.6 million options were transferred as a result of the program representing 55 percent of the 621.4 million eligible options.

“Throughout this process we worked very hard to strike a balance between employee and shareholder interests,” said Ken DiPietro, corporate vice president of human resources. “Now that it is complete, we believe this program has accomplished our objective of helping employees who chose to participate in the program realize some value on their underwater options, while protecting the interests of our shareholders.”

The total potential payment to employees as a result of the program is US$382 million, including $218 million which will be paid by the end of December 2003. The remainder will be paid to employees in installments in December 2005 and December 2006.

Under the terms of the program, the expiration dates for many of the employee options transferred to JPMorgan have been shortened, which could have a positive impact on shareholder dilution.

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