Microsoft 2007 Annual Report Download - page 54

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Employee Stock Purchase Plan. We have an employee stock purchase plan for all eligible employees.
Compensation expense for the employee stock purchase plan is recognized in accordance with SFAS
No. 123(R). Shares of our common stock may be purchased by employees at three-month intervals at 90% of the
fair market value on the last day of each three-month period. Employees may purchase shares having a value not
exceeding 15% of their gross compensation during an offering period. Employees purchased the following shares:
(Shares In millions) 2007 2006 2005
Shares purchased 17 17 16
Average price per share $25.36 $23.02 $23.33
At June 30, 2007, 125 million shares were reserved for future issuance.
Savings Plan. We have a savings plan in the United States that qualifies under Section 401(k) of the Internal
Revenue Code, and a number of savings plans in international locations. Participating U.S. employees may
contribute up to 50% of their pretax salary, but not more than statutory limits. We contribute fifty cents for each
dollar a participant contributes in this plan, with a maximum contribution of 3% of a participant’s earnings.
Matching contributions for all plans were $218 million, $178 million, and $154 million in fiscal years 2007, 2006,
and 2005, respectively. Matching contributions are invested proportionate to each participant’s voluntary
contributions in the investment options provided under the plan. Investment options in the U.S. plan include
Microsoft common stock, but neither participant nor our matching contributions are required to be invested in
Microsoft common stock.
Stock Plans. We have stock plans for directors and for officers, employees, consultants, and advisors. At
June 30, 2007, an aggregate of 819 million shares were authorized for future grant under our stock plans, which
cover stock options, stock awards, and shared performance stock awards. Awards that expire or are canceled
without delivery of shares generally become available for issuance under the plans. The options transferred to
JPMorgan Chase Bank (“JPMorgan”) (see below) in fiscal year 2004 have been removed from our plans; the
options transferred to JPMorgan that expired without being exercised are not available for grant under any of our
plans. We issue new shares to satisfy stock option exercises.
On November 9, 2004, our shareholders approved amendments to the stock plans that allowed our Board of
Directors to adjust eligible options, unvested stock awards, and shared performance stock awards to maintain
their pre-dividend value after the $3.00 special dividend. Additional awards were granted for options, stock
awards, and shared performance stock awards by the ratio of post- and pre-special dividend stock price as of the
ex-dividend date. Strike prices for options were decreased by the same ratio. Stock-based compensation was not
affected by this adjustment. As a result of this approval and payment of the $3.00 special dividend on
December 2, 2004, an adjustment to the prices and number of shares of existing awards was made resulting in a
total of 96 million options and 7 million stock awards being issued to adjust the outstanding awards. In addition,
the target shared performance stock awards were increased by 4 million shares.
Stock Awards and Shared Performance Stock Awards. Stock awards are grants that entitle the holder to
shares of common stock as the award vests. Our stock awards generally vest over a five-year period.
Shared Performance Stock Awards (“SPSAs”) are a form of stock award in which the number of shares
ultimately received depends on our business performance against specified performance targets. The
performance period for SPSAs issued in fiscal years 2004, 2005, and 2006 was July 1, 2003 through June 30,
2006 (January 1, 2004 through June 30, 2006 for certain executive officers). Following the end of the
performance period, the Compensation Committee of the Board of Directors determined that the number of
shares of stock awards to be issued was 37.0 million, based on the actual performance against metrics
established for the performance period. One-third of the awards vested in fiscal year 2007. An additional one-third
of the awards will vest over each of the following two years. Because the SPSAs covered a three-year period,
SPSAs issued in fiscal year 2005 and 2006 were given only to newly hired and promoted employees eligible to
receive SPSAs.
The Company granted SPSAs for fiscal year 2007 with a performance period of July 1, 2006 through June 30,
2007. At the end of the performance period, the number of shares of stock subject to the award is determined by
multiplying the target award by a percentage ranging from 0% to 150%. The percentage is determined based on
performance against metrics for the performance period, as determined by the Compensation Committee of the
Board of Directors in its sole discretion. An additional 15% of the total stock and stock awards will be available as