PROGRAM AGREEMENT between MICROSOFT CORPORATION and JPMORGAN CHASE BANK, relating to the STOCK OPTION TRANSFER PROGRAM OF MICROSOFT CORPORATION dated as of October 9, 2003

Exhibit (d)(3)

PROGRAM AGREEMENT

between

MICROSOFT CORPORATION

and

JPMORGAN CHASE BANK,

relating to the

STOCK OPTION TRANSFER PROGRAM OF

MICROSOFT CORPORATION

dated as of

October 9, 2003

PROGRAM AGREEMENT

Program Agreement dated as of October 9, 2003 between Microsoft Corporation, a Washington corporation (the “Company”) and JPMorgan Chase Bank (the “Bank”):

WHEREAS, the Company proposes to establish a stock option transfer program for certain employee stock options issued by the Company (the “Option Transfer Program”), on the terms and subject to the conditions set forth in the draft Notice to Eligible Employees of Stock Option Transfer Program (the “Notice of Option Transfer Program”) and the draft related Election Form (the “Election Form”), copies of which in substantially similar form will be made available to employees of the Company in either electronic or paper form and are attached hereto as Exhibits A and B, respectively, which, together with any other documents, materials or filings generally distributed to the Company’s employees relating to the Option Transfer Program (other than the Transaction Agreements (as defined below)), all as amended or supplemented from time to time in accordance with the terms hereof, are referred to herein as the “Transaction Disclosure Materials”;

WHEREAS, concurrently with the execution of this Agreement, the Company, the Bank and JPMSI shall execute and deliver the Registration Agreement (as amended from time to time, the “Registration Agreement”) dated as of the date hereof, among the Company, the Bank and JPMSI (the Registration Agreement, together with this Agreement, the Confirmation (as defined below) and Master Agreement (as defined below), the “Transaction Agreements,” and the Transaction Agreements, together with the Transaction Disclosure Materials, the “Transaction Documents”); and

WHEREAS, the Company and the Bank wish to provide for certain matters relating to the Option Transfer Program:

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth herein, the Company and the Bank hereby agree as follows:

1. Certain Terms. The following terms, as used herein, shall have the following meanings:

“Aggregate Cash Payment” shall have the meaning set forth in Section 5.

“Archipelago” means the Archipelago Exchange.

“Available Trading Day” means a Trading Day on which (i) there is no Market Disruption, (ii) no Registration Unavailability Event shall have occurred and be continuing and (iii) there is no Bring-down Event.

“Average Closing Price” means the arithmetic average (rounded up to the nearest 1/10,000 of a dollar) of the Closing Prices of the Common Stock for every Available Trading Day during the Averaging Period.

“Average Closing Price Report” shall have the meaning set forth in Section 3(b).

“Averaging Period” means the period (x) beginning on and including the first Available Trading Day after the earlier of (i) the Final Report Date and (ii) a prior date after the Election Deadline on which a Final Tabulation Report was transmitted to the Bank prior to 5:00 p.m. (New York time) and otherwise in conformance with Section 2, and (y) ending on and including the earlier of (i) the Averaging Period End Date and (ii) the 15th consecutive Available Trading Day.

“Averaging Period Deficiency” means that the Averaging Period consists of five or fewer Available Trading Days.

“Averaging Period End Date” means December 15, 2003.

“Bank Unavailability Notice” means a written notice delivered to the Company by the Bank pursuant to Section 11(g) indicating that the Bank has received an Outside Counsel Notification.

“Bring-down Event” means a failure by the Company or outside counsel for the Company, on any Trading Day during the Averaging Period, to deliver to the Bank as promptly as practicable but in any event prior to 9:00 a.m. (New York time) on such Trading Day (if requested prior to 8:00 p.m. (New York time) on the immediately prior Trading Day), upon a request by the Bank pursuant to Section 6(d) of the Registration Agreement, a bring-down letter in the form of Annex E to the Registration Agreement; provided that the Bank may waive the requirement of such bring-down letter in its sole discretion.

“Business Day” means a day on which commercial banks and foreign exchange markets settle payments and are open for general business in U.S. Dollars in New York City.

“CBOE” means the Chicago Board Options Exchange.

“Clear Available Trading Day” means an Available Trading Day on which a Bank Unavailability Notice has not been delivered.

“Closing” shall have the meaning set forth in Section 9(a).

“Closing Date” shall have the meaning set forth in Section 9(a).

“Closing Price” means, with respect to the Common Stock on any Trading Day, the Official NASDAQ Closing Price (NOCP) on such Trading Day.

“Common Stock” means the common stock of the Company, par value $0.00000625 per share.

“Company” shall have the meaning set forth in the introduction.

“Commission” means the Securities and Exchange Commission.

“Confirmation” shall have the meaning set forth in Section 4(a).

“Consent” means any consent, approval, order, permit, license, exemption or authorization.

“Disrupted Day” means any Trading Day on which Nasdaq, Archipelago or the CBOE fails to open for trading during its regular trading session.

“Early Closure” means the closure on any Trading Day of Nasdaq, Archipelago or the CBOE, prior to its Scheduled Closing Time, unless such earlier closing time is announced by Nasdaq, Archipelago or the CBOE, as the case may be, at least one hour prior to the earlier of (i) the actual closing time for the regular trading session on Nasdaq, Archipelago or the CBOE, as the case may be, on such Trading Day and (ii) the submission deadline for orders to be entered into the Nasdaq system, Archipelago or the CBOE, as the case may be, for execution at the Scheduled Closing Time on such Trading Day.

“Election Deadline” means the date and time on which the Election Period terminates, as set forth in the Notice of Stock Option Transfer Program, or such later time to which the Company extends the Election Period pursuant to Section 8.

“Election Form” shall have the meaning set forth in the preamble.

“Election Period” means the period beginning at the date and time of the commencement of the Stock Option Transfer Program set forth in the Notice of Stock Option Transfer Program and ending at the Election Deadline.

“Election Period Extension Event” means (i) an event has occurred or a condition shall exist that has caused the Notice of Option Transfer Program or the Election Form to include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or (ii) a Stock Option Transfer Program Disruption Event has occurred.

“Election Period Extension Notice” means a written notice delivered by the Company to the Bank describing the Company’s reasonable determination that on the date of such delivery a Election Period Extension Event has occurred.

“Eligible Option” shall have the meaning assigned thereto in the Notice of Option Transfer Program.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Exchange Disruption” means any event (other than an Early Closure) that disrupts or impairs (as determined by the Bank reasonably and in good faith) the ability of market participants in general (i) to effect transactions in, or obtain market value for, the Common Stock on Nasdaq or Archipelago, or (ii) to effect transactions in, or obtain market values for, futures or options contracts relating to Common Stock on the CBOE.

“Ex-Dividend Date” has the meaning set forth Section 4(c).

“Filing” means any requisite registration, qualification, declaration or other statement with any Governmental Authority.

“Final Report Date” shall have the meaning set forth in Section 2(b).

“Final Tabulation Report” shall have the meaning set forth in Section 2(b).

“Governmental Authority” means any federal, state or foreign government or any court of competent jurisdiction, regulatory or administrative agency or commission or other governmental authority or instrumentality, state, federal or foreign or supranational.

“Indemnified Persons” shall have the meaning set forth in Section 19(b).

“Interim Price Report” shall have the meaning set forth in Section 3(a).

“JPMorgan Entity” shall have the meaning set forth in Section 6(a).

“JPMorgan Options” means the Participating Options, as amended and restated pursuant to Section 4 and evidenced by the Confirmation.

“JPMSI” means X.X. Xxxxxx Securities Inc.

“Law” means any statute, law, ordinance, rule, regulation, registration, permit, order, license, decree or judgment promulgated or issued by any Governmental Authority.

“Losses” shall have the meaning set forth in Section 19(b).

“Make-Up Amount” means an amount, which may be negative, equal to the product of the Shortfall Amount times the Price Differential, as determined by the Bank in good faith, in consultation with the Company.

“Make-Up Days” means a number of consecutive Clear Available Trading Days beginning on the first Clear Available Trading Day immediately following the last day of the Averaging Period, which number shall be equal to 15 minus the number of Clear Available Trading Days in the Averaging Period.

“Market Disruption” means the occurrence or existence of (i) a Trading Disruption or an Exchange Disruption, that, in either case, the Bank determines reasonably and in good faith is material, at any time during the one hour period that ends at the close of the regular trading session of Nasdaq, Archipelago or the CBOE, (ii) an Early Closure or (iii) a Disrupted Day.

“Master Agreement” means the 1992 ISDA Master Agreement (Multicurrency-Cross Border) dated as of January 22, 1997 between the Company and the Bank (as successor in interest to Xxxxxx Guaranty Trust Company of New York), as amended and supplemented from time to time.

“Multi-Year Grant Options” shall have the meaning assigned thereto in the Notice of Option Transfer Program.

“Nasdaq” means the Nasdaq National Market of The Nasdaq Stock Market, Inc.

“No-Action Request Letter” means the letter dated October 9, 2003 to the Commission by Xxxxx Xxxx & Xxxxxxxx and Xxxxxxx Xxxxx & Xxxxx LLP on behalf of the Bank and the Company, respectively, requesting exemptive and no-action relief from certain rules promulgated under the Exchange Act.

“Notice of Option Transfer Program” shall have the meaning set forth in the preamble.

“Option Shares” shall have the meaning set forth in Section 14(d).

“Option Transfer Program” shall have the meaning set forth in the preamble.

“Outside Counsel Notification” means a written notice delivered to the Bank by outside counsel to the Bank on any Trading Day in the Averaging Period advising the Bank that it should not use the Prospectus to effect sales of the Shares on such Trading Day.

“Participating Holder” means a holder of Participating Options prior to the assignment thereof described in Section 4.

“Participating Options” shall have the meaning set forth in Section 2(b).

“Payment Obligation” shall have the meaning set forth in Exhibit F hereto.

“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including any Governmental Authority.

“Price Differential” means an amount, which may be negative, equal to the Average Closing Price minus the arithmetic average (rounded up to the nearest 1/10,000 of a dollar) of the Closing Prices for all days on which the Shortfall Sales are executed.

“Pricing Grid” shall have the meaning set forth in Section 11(h).

“Price Report Format” shall have the meaning set forth in Section 3(a).

“Prospectus” shall have the meaning set forth in the Registration Agreement.

“Registration Agreement” shall have the meaning set forth in the preamble.

“Registration Statement” shall have the meaning set forth in the Registration Agreement.

“Registration Unavailability Event” means (i) any event shall occur or condition shall exist as a result of which the prospectus contained in the Registration Statement as then amended or supplemented would include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances existing when the Prospectus is delivered to a purchaser, not misleading, (ii) it is necessary to amend or supplement such prospectus to comply with law, or (iii) a stop order suspending the effectiveness of the Registration Statement shall have been issued or a proceeding for that purpose shall have been instituted or, to the knowledge of the Company or JPMorgan, threatened, by the Commission.

“Scheduled Closing Date” means the third Business Day immediately following the last day of the Averaging Period.

“Scheduled Closing Time” means, with respect to Nasdaq, Archipelago or the CBOE, the scheduled weekday closing time, without regard to after hours or any other trading outside of the regular trading session hours.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Series” means, in relation to the Eligible Options, Eligible Options with the same exercise price and expiration date (or the same grant value date and final valuation date in the case of stock appreciation rights); provided that Multi-year Grant Options shall be considered a separate Series from Eligible Options that have the same exercise price and expiration date but are not Multi-year Grant Options.

“Share” means a share of Common Stock.

“Shortfall Amount” means a number of Shares equal to (a) the number of Shares necessary for the JPMorgan Entities to sell for the purpose of establishing the Bank’s or its affiliates’ initial “delta” hedge position in respect of the JPMorgan Options, times (b) a number equal to the number of Make-Up Days, divided by (c) 15.

“Shortfall Determination Date” has the meaning set forth in Section 18(a)(ii).

“Shortfall Sales” shall have the meaning set forth in Section 18(a)(i).

“Special Fixed Date Series” means (i) the Series of Participating Options with an exercise price of $47.7188 and an expiration date of December 6, 2006, (ii) the Series of Participating Options with an exercise price of $45.8750 and an expiration date of December 8, 2006 and (iii) the Series of Participating Options with an exercise price of $48.3125 and an expiration date of December 13, 2006.

“Statement” shall have the meaning set forth in Section 14(c).

“Stock Option Transfer Program Disruption Event” shall have the meaning assigned thereto in the Notice of Option Transfer Program.

“Tabulation Format” shall have the meaning set forth in Section 2(a).

“Trading Day” means any day (except November 28, 2003) on which Nasdaq, Archipelago or the CBOE, as the case may be, is scheduled to be open for trading for its regular trading session.

“Trading Disruption” means any suspension of or limitation imposed on trading by Nasdaq, Archipelago or the CBOE, or otherwise and whether by reason of movements in price exceeding limits permitted by Nasdaq, Archipelago or the CBOE or otherwise (i) in the Common Stock on Nasdaq or Archipelago or (ii) in futures or options contracts relating to the Common Stock on the CBOE.

“Tranche” shall have the meaning set forth in the Confirmation.

“Transaction Agreements” shall have the meaning set forth in the preamble.

“Transaction Disclosure Materials” shall have the meaning set forth in the preamble.

“Transaction Documents” shall have the meaning set forth in the preamble.

“Transactions” means the transactions contemplated by the Transaction Documents, including without limitation the amendment and restatement of the Participating Options pursuant to Section 4 and the performance by the Company and the Bank of their respective obligations under the JPMorgan Options.

“Unavailability Notice” means a written notice describing the Company’s reasonable determination that a Registration Unavailability Event has occurred.

“Unhedged JPMorgan Options” means those JPMorgan Options with respect to which the Bank shall determine in good faith, in consultation with the Company, that the Bank and its affiliates were unable to establish an initial hedge position on the Clear Available Trading Days in the Averaging Period.

“Unwind Amount” means an amount, which may be negative, that the Bank determines to be its and its affiliates total out-of-pocket losses and costs (or gain, in which case expressed as a negative number) in connection with terminating or liquidating the position hedging its exposure to the ownership of the JPMorgan Options (which, for the avoidance of doubt, shall be the total out-of-pocket losses and costs (or gain, in which case expressed as a negative number) in connection with the Bank terminating or liquidating its “rho” or interest rate hedge and unwinding its initial “delta” or stock price hedge).

“Unwind Determination Date” has the meaning set forth in Section 18(b).

2. Tabulations. (a) Not later than 6:00 p.m. (New York time) on each day of the Election Period, the Company shall transmit to the Bank by electronic mail to the addresses listed on Annex A hereto, a tabulation in the form set forth as Exhibit C hereto (the “Tabulation Format”) setting forth as of 3:00 p.m. New York time on such day the number of options of each Series submitted to the Option Transfer Program and not withdrawn on or before such time.

(b) Not later than 5:00 p.m. (New York time) on the second calendar day following the last day of the Election Period (the “Final Report Date”), the Company shall transmit to the Bank by electronic mail to the addresses listed on Annex A hereto, a tabulation (the “Final Tabulation Report”) in the Tabulation Format setting forth as of such time the number of options of each Series irrevocably submitted to the Option Transfer Program at or prior to the Election Deadline (“Participating Options”). Upon receipt of the Final Tabulation Report, the Bank shall promptly acknowledge its receipt of the Final Tabulation Report by signing and delivering to the Company the cross-receipt set forth as Exhibit D hereto.

3. Calculation of Average Closing Price. (a) No later than 6:00 p.m. (New York time) on each Available Trading Day during the Averaging Period (other than the last Available Trading Day of such Averaging Period), the Bank shall calculate in good faith the Average Closing Price for the Averaging Period (as if the Averaging Period ended on such day) through and including such Available Trading Day and transmit such calculation to the Company by electronic mail to the addresses listed on Annex B in the format (the “Price Report Format”) set forth as Exhibit E–1 hereto (an “Interim Price Report”).

(b) No later than 6:00 p.m. (New York time) on the last Available Trading Day of the Averaging Period, the Bank shall calculate in good faith, in consultation with the Company, the Average Closing Price and transmit such calculation to the Company by electronic mail to the addresses listed on Annex B in the Price Report Format set forth as Exhibit E–2 (the “Average Closing Price Report”). The Bank shall, not later than the third Business Day following receipt of a written request by the Company, provide the Company with a written explanation of the basis for any calculation made hereunder. The Bank’s calculation of the Average Closing Price, as communicated in the Average Closing Price Report, shall be final and binding on the Bank and the Company for all purposes of the Option Transfer Program.

4. Assignment and Modification of Participating Options. (a) Upon the terms and subject to the conditions set forth in this Agreement, as of the Closing, each Participating Option set forth in the Final Tabulation Report shall be assigned by the Participating Holder thereof to the Bank and the terms of such Participating Option are, effective as of the Closing Date, hereby amended and restated to have the terms and conditions set forth in the form of Confirmation attached as Exhibit F hereto. The parties shall promptly execute a confirmation (the “Confirmation”) in the form of Exhibit F hereto; provided that the amendment and restatement set forth in the immediately preceding sentence shall be effective upon the Closing notwithstanding any delay in executing or failure to execute such Confirmation. Each Tranche set forth on Schedule A of the Confirmation shall correspond to a Series of Participating Options, which means that such Tranche shall have (w) a Trade Date (as defined in the Confirmation) of the last day of the Averaging Period, (x) a Number of Options (as defined in the Confirmation) equal to the aggregate number of Participating Options for such Series, (y) an Exercise Price (as defined in the Confirmation) equal to the exercise price (or the grant date value in the case of a stock appreciation right) for such Series, and (z) an Expiration Date (as defined in the Confirmation) determined as of follows: (i) if the expiration date (or the final valuation date in the case of a stock appreciation right) for such Series is longer than 36 months (or 24 months in the case of Multi-year Grant Options) from the last day of the Averaging Period, an Expiration Date of 36 months (or 24 months in the case of Multi-year Grant Options) from the last day of the Averaging Period, (ii) in the case of Participating Options from a Special Fixed Date Series, an Expiration Date that is the same as the expiration date for such Special Fixed Date Series (provided that if the Averaging Period ends after December 5, 2003, the Expiration Date for each such Tranche referred to in clause (ii) shall be the earlier of (x) 36 months from the last day of

the Averaging Period and (y) the original expiration date for such Special Fixed Date Series extended by a number of calendar days equal to the number of calendar days from, and including, December 5, 2003 to, but excluding, the calendar day on which the Averaging Period ends) and (iii) in all other cases, an Expiration Date that is the same as the expiration date (or the final valuation date in the case of a stock appreciation right) for such Series (provided that if the Averaging Period ends after December 5, 2003, the Expiration Date for each such Tranche referred to in clause (iii) shall be extended by a number of calendar days equal to the number of calendar days from, and including, December 5, 2003 to, but excluding, the calendar day on which the Averaging Period ends); provided that if the Expiration Date so determined pursuant to clause (i), (ii) or (iii) above is not a Business Day, (x) if such Expiration Date as so determined would be 36 months (or 24 months in the case of Multi-year Grant Options) from the last day of the Averaging Period, such Expiration Date shall instead be the immediately succeeding Business Day and (y) in all other cases, such Expiration Date shall instead be the immediately preceding Business Day. Notwithstanding the foregoing, if the number of Clear Available Trading Days in the Averaging Period is less than 15 but no Averaging Period Deficiency exists, then the parties agree to amend and restate the Confirmation as of the last Make-Up Day such that the Expiration Dates for the Unhedged JPMorgan Options shall be redetermined pursuant to clause (z) above as if the Averaging Period had ended on the last Make-Up Day.

(b) The Company acknowledges and agrees that, effective as of the Closing Date, the JPMorgan Options and, upon execution thereof, the Confirmation, shall be valid, binding and enforceable obligations of the Company to the Bank, without any further action or the execution of any further documents or agreements, and notwithstanding any defect or lack of effectiveness of any assignment of any Participating Options from the Participating Holders.

(c) If at any time during the period from and including the first day of the Averaging Period, to and including the last day of the Averaging Period, an ex-dividend date for a cash dividend occurs with respect to the Shares (an “Ex-Dividend Date”), the Company shall pay to the Bank, on the day on which such cash dividend is paid or to be paid by the Issuer, an amount in United States Dollars equal to the product of (i) the value of such dividend paid or to be paid with respect to one Share times (ii) the product of the number of Participating Options times (iii) a percentage (in no event greater than 100%) provided by the Bank reflecting its delta hedge position on such date; provided that in lieu of such payment, the parties may agree in good faith to an adjustment or other method of compensating the Bank in respect of such dividend.

5. Payment. Upon the terms and subject to the conditions set forth in this Agreement, on the Closing Date, the Bank shall pay to the Company an amount (the “Aggregate Cash Payment”) equal to the sum of the cash amounts to be paid for all Series of Participating Options in the Final Tabulation Report, as may have been amended pursuant to Section 7 hereof, obtained by, in the case of each Series, multiplying (i) the appropriate cash amount to be paid for each Participating Option of such Series by reference to the Pricing Grid by (ii) the number of Participating Options in such Series, by wire transfer or credit of immediately available funds to an account of the Company specified by notice to the Bank no later than three Business Days before the Closing Date.

6. Share Transactions by the Bank. (a) The parties hereto acknowledge that the Bank and/or one or more of its affiliates (each, a “JPMorgan Entity”) intends to enter into market transactions in order to hedge its exposure to the ownership of the JPMorgan Options and otherwise in connection with the Stock Option Transfer Program. These market transactions will include sales of Common Stock which may take place during the Participation and Averaging Periods and after the end of the Averaging Period. The number of Shares to be offered and sold pursuant to the Registration Statement will be greater than the number JPMorgan Entities wish to sell in order to hedge their exposure. Accordingly, the Bank expects JPMorgan Entities to repurchase Shares in secondary market transactions so that they will be in its desired hedge position after taking into account all such sales and purchases. The number of Shares repurchased may be a significant percentage of the number of Shares offered hereunder, and, depending on market factors and the terms of the JPMorgan Options, is likely to represent substantially more than half of the number of Shares offered and sold. JPMorgan Entities may also buy or sell additional Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative securities in connection with these hedging activities. JPMorgan Entities will make their own determination as to whether, when or in what manner any of these hedging or market activities in Shares will be conducted.

(b) The parties hereto further acknowledge that in addition to the hedging activities described in clause (a) above, JPMorgan Entities may be active in the market for Shares other than in connection with these hedging activities in relation to the Stock Option Transfer Program. JPMorgan Entities will make their own determination as to whether, when or in what manner any of these market activities will be conducted.

7. Accuracy of Final Tabulation Report. (a) The Company acknowledges and agrees that the number of JPMorgan Options for each Tranche, the exercise prices of the JPMorgan Options for each such Tranche, the expiration dates of the JPMorgan Options for each such Tranche and the amount of the Aggregate Cash Payment shall be calculated based on information provided in the Final Tabulation Report, as amended in accordance with the immediately succeeding paragraph, notwithstanding any inaccuracy contained therein, and the Bank shall have no obligation to verify the accuracy thereof.

(b) The Company may amend the Final Tabulation Report by delivering to the Bank on or prior to the end of the Averaging Period, an amended and restated Final Tabulation Report in the Tabulation Format with the amended number of JPMorgan Options for each Tranche, the exercise prices of the JPMorgan Options for each such Tranche, the expiration dates of the JPMorgan Options for each such Tranche and the amount of the Aggregate Cash Payment; provided that the Final Tabulation Report may be amended as follows: (x) no change may be made to any number or any other component set forth in the Final Tabulation Report other than the number of JPMorgan Options and (y) the sum of all changes to the number of JPMorgan Options that is amended hereby shall not exceed 100,000 for all Tranches (for the avoidance of doubt, a change in either direction (i.e., additions and subtractions of JPMorgan Options) shall be added and not netted for purposes of this calculation).

(c) If at any time after the Final Report Date, the Company becomes aware of any significant errors in the number of Participating Options reported to the Bank on the Final Tabulation Report or from time to time pursuant to this subsection, the Company shall promptly transmit to the Bank by electronic mail to the addresses listed on Annex A hereto the corrected number of Participating Options.

(d) If at any time after the Final Report Date, the Company becomes aware of any errors in the Final Tabulation Report that are not reflected therein pursuant to the amendments permitted under Section 7(b) above, the Company and the Bank will, with respect to the Participating Options in excess of the 100,000 options limit referred to in Section 7(b) above, enter into good faith negotiations with a view to entering, subject to any applicable laws, into mutually acceptable documentation which would be expected to reflect the accurate number of the Participating Options and make appropriate adjustments between the Bank and the Company in respect of either reduction or increase in the number of the Participating Options.

(e) Notwithstanding any provision hereof to the contrary, in no event shall the number of Participating Options in the Final Tabulation Report exceed the number of Participating Options for which the Common Stock underlying such options has been registered pursuant to the Registration Statement.

8. Extension of Election Period. (a) If at any time during the period beginning on the fifth day prior to the day on which the Election Deadline occurs and ending at the Election Deadline, an Election Period Extension Event occurs, the Company shall deliver to the Bank an Election Period Extension Notice. Upon delivery of such notice, the Company may extend the Election Period for a number of Business Days that would allow the number of remaining days in the Election Period to equal five Business Days from the remedying of such Election Period Extension Event until the Election Deadline; provided that the Election Period shall not be extended beyond November 28, 2003.

(b) The Company agrees that it shall, promptly upon delivery of an Election Period Extension Notice, use its reasonable best efforts to remedy the Election Period Extension Event, including by making all necessary Filings (including without limitation on Form 8-K under the Exchange Act) to cause the Election Period Extension Event to terminate. In addition, the Company agrees that it shall promptly inform Participating Holders that an Election Period Extension Event has occurred and the extension of the Election Period.

(c) If at any time prior to the Election Deadline, the Company requests that the Bank agree to an extension of the Election Deadline for any reason (other than the occurrence of an Election Period Extension Event), the Bank shall consider such request in good faith and shall not unreasonably withhold its consent to such extension; provided that the Election Period shall not be extended beyond November 28, 2003.

9. Closing; Conditions to Closing. (a) The closing (the “Closing”) of the Option Transfer Program shall take place at the offices of Xxxxx Xxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on the later of (i) the Scheduled Closing Date or (ii) as soon as possible, but in no event later than three Business Days after the satisfaction of the conditions set forth in this Section 9 below (other than conditions that by their nature are to be satisfied and are in fact satisfied at the Closing), or at such other time or place as the parties may agree (the “Closing Date”). At the Closing, (i) the Participating Options shall be assigned and modified as set forth in Section 4 hereof and (ii) the Bank shall pay to the Company the amounts set forth in Section 5 hereof.

(b) The obligations of the Bank to consummate the Transactions shall be subject to the satisfaction at or prior to the Closing Date of each of the following conditions, any of which may be waived in writing:

(i) no Stock Option Transfer Program Disruption Event shall have occurred and be continuing on the Closing Date;

(ii) the Company shall have entered into and performed in all material respects its obligations under any Transaction Agreement to which it is a party or is intended to be a party, which are required to be entered into or performed on or prior to the Closing Date;

(iii) no Transaction Agreement shall have been terminated;

(iv) the representations and warranties by the Company in this Agreement shall be accurate in all material respects at and as of the Closing Date as if made at and as of such date; and

(v) no action is taken, or any approval withheld, by any Governmental Authority of competent jurisdiction that would, directly or indirectly, prevent or make it illegal for JPMorgan to conduct the market transactions described in Section 6(a) herein.

(c) The obligations of the Company to consummate the Transactions shall be subject to the satisfaction at or prior to the Closing Date of each of the following conditions, any of which may be waived in writing:

(i) no Stock Option Transfer Program Disruption Event shall have occurred and be continuing on the Closing Date;

(ii) the Bank shall have entered into and performed in all material respects its obligations under any Transaction Agreement to which it is a party or is intended to be a party, which are required to be entered into or performed on or prior to the Closing Date;

(iii) no Transaction Agreement shall have been terminated; and

(iv) the representations and warranties by the Bank in this Agreement shall be accurate in all material respects at and as of the Closing Date as if made at and as of such date.

10. Termination Events. (a) This Agreement may be terminated:

(i) by mutual written agreement of the Bank and the Company;

(ii) by either party if an Averaging Period Deficiency occurs;

(iii) by either party at any time after March 24, 2004, if, as of such time, the Closing has not occurred;

(iv) by the Bank pursuant to Section 13;

(v) by the Company during the Election Period, if any event or events occur that have resulted or may result, in the Company’s reasonable judgment, in a material impairment of the contemplated compensatory objectives of the Option Transfer Program; or

(vi) by the Bank if the Election Period does not end on or prior to November 28, 2003.

(b) If this Agreement is terminated as permitted by this Section, this Agreement shall be void and the parties hereto shall cease to have any obligations to one another under this Agreement except as provided in this Section. The provisions of Sections 1, 10, 18, 19, 22, 23, 24 and 25 of this Agreement shall survive any termination hereof pursuant to Section 10(a).

11.

Certain Covenants of the Parties. Each of the Bank and the Company agree that

(a) The parties shall use their respective reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable under applicable Laws to consummate the Option Transfer Program as promptly as practicable, including (i) preparing and filing as promptly as practicable with any Governmental Authority or other Persons all documentation and to effect all necessary Filings, and (ii) obtaining and maintaining all Consents required to be obtained from any Governmental Authority or other third party, in each case, that are necessary, proper or advisable to consummate the Option Transfer Program.

(b) Each of the Bank and the Company shall, in connection with the efforts referenced in clause (a) to obtain all required Consents for the consummation of the Option Transfer Program, use its reasonable best efforts, subject to applicable Law, to (i) cooperate in all respects with the other party hereto in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a third party (including sharing copies of any such filings or submissions reasonably in advance of the filing or submission thereof); (ii) keep each of the other parties hereto informed of any communication received by any such party from, or, given by such party to any Governmental Authority, and of any communication received or given in connection with any proceeding by a third party, in each case regarding the Option Transfer Program; and (iii) permit each of the other parties hereto to review in advance any communication intended to be given by it to, and consult with the other parties in advance of any meeting or conference with, the Commission or any other Governmental Authority or, in connection with any proceeding by a third party, with any other Person, and to the extent requested by the Bank or the Company, and permitted by the Commission or such other applicable Governmental Authority or other Person, give the other party the opportunity to attend and participate in such meetings and conferences.

(c) In furtherance and not in limitation of the covenants of the parties contained in clauses (a) and (b), if any objections are asserted with respect to the Option Transfer Program, or if any suit is instituted (or threatened to be instituted) by the Commission or any other Governmental Authority challenging the Option Transfer Program, or that would otherwise prohibit or materially impair or materially delay the Option Transfer Program, each of the Bank and the Company shall use its reasonable best efforts to resolve any such objections or suits so as to permit consummation of the Option Transfer Program.

(d) In the event that any administrative or judicial action or proceeding is instituted (or threatened to be instituted) by any Person (other than the Commission or any other Governmental Authority) challenging the Option Transfer Program, each of the Bank and the Company shall cooperate in all respects with each other and use its respective, reasonable best efforts to defend contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the Option Transfer Program.

(e) Each of the Bank and the Company acknowledge and agree that after the Election Deadline, it shall use its reasonable best efforts not to do anything or omit to do anything on or prior to the later of (x) the Closing Date and (y) the last Make-up Day, that would cause (i) a Registration Unavailability Event, or (ii) a Stock Option Transfer Program Disruption Event.

(f) Promptly upon the occurrence of a Registration Unavailability Event, (x) the Company shall deliver an Unavailability Notice to the Bank and (y) the Company agrees that it shall inform Participating Holders promptly after the end of the Averaging Period, as to which Trading Days were not counted as Available Trading Days.

(g) If on any Trading Day in the Averaging Period, the Company has not delivered an Unavailability Notice to the Bank, and the Bank receives an Outside Counsel Notification, the Bank shall deliver a Bank Unavailability Notice to the Company in the manner set forth in Section 25.

(h) The parties agree that (x) as promptly as practicable after the execution of this Agreement, the Bank shall provide the pricing grid in respect of the Transactions to the Company and (y) the Bank and the Company shall in good faith and expeditiously negotiate any disagreements between them as to the pricing set forth therein. If the parties reach an agreement as to such pricing grid, the pricing grid as so agreed shall be attached as Exhibit G hereto and shall be deemed the “Pricing Grid”. If the parties do not reach such agreement prior to October 14, 2003, then this Agreement shall be deemed terminated and such termination shall be deemed to have been made pursuant to Section 10(a)(vi).

12. Certain Covenants of the Company. The Company agrees that it shall:

(a) reserve and keep available sufficient Shares to deliver upon exercise by the Bank of the JPMorgan Options, as amended and restated pursuant to Section 4; and

(b) (x) conduct the Option Transfer Program in all material respects in conformance with the terms thereof set forth in the Notice of Option Transfer Program and Election Form and (y) except as permitted in Section 13, not amend, modify, terminate or withdraw the Option Transfer Program, Notice of Option Transfer Program or Election Form or any provision thereof or waive any provision of the Notice of Option Transfer Program or Election Form without the prior written consent of the Bank, other than such amendments, modifications, terminations or withdrawals that would not reasonably be expected to affect the Bank or any of its affiliates in any manner or result in any liability to the Bank.

13. Transaction Disclosure Materials. The Company agrees that, a reasonable time prior to using any Transaction Disclosure Material, filing any such material with the Commission or with any other Governmental Authority, or amending or modifying any such material, that (i) changes any of the terms of the Transactions that affect the Bank or (ii) could reasonably be expected to adversely affect the Bank or any of its affiliates or result in any liability to the Bank, it shall furnish copies of such material, as modified or amended, to the Bank and shall give reasonable consideration to the Bank’s and the Bank’s counsel’s comments, if any, thereon. If the Company uses or permits the use of any such Transaction Disclosure Material or files any such material with the Commission or any other Governmental Authority or amend or modify such material (i) that has not been submitted to the Bank for the Bank’s comments or (ii) that has been so submitted and with respect to which the Bank has made comments which have been communicated in writing to the Company, but which comments have not resulted in a response satisfactory to the Bank to reflect the Bank’s comments, then the Bank shall be entitled to terminate this Agreement pursuant to Section 10.

14. Representations and Agreements of the Company. The Company represents and warrants to the Bank as of the date hereof and as of the Closing Date, and agrees with the Bank, that:

(a) the Company has taken all necessary corporate action to authorize each of the Transaction Documents and the consummation of the Transactions;

(b) each of the Transaction Agreements has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding agreement of the Company, except as may be limited by applicable bankruptcy, insolvency or similar laws relating to or affecting the rights and remedies of creditors or by equitable principles, and except as rights of indemnity or contribution may be limited by applicable law;

(c) (i) not later than the first day of the Election Period, the Company shall duly file with the Commission a Statement on Schedule TO (the “Statement”) pursuant to Rule 13e-4 promulgated by the Commission under the Exchange Act, a copy of which Statement (including the documents required to be filed as exhibits thereto) in the form in

which it is to be so filed has been furnished to the Bank; (ii) the Statement as so filed and as amended from time to time shall comply as to form in all material respects with the applicable provisions of the Exchange Act and the rules and regulations thereunder, except to the extent described in the No-Action Request Letter; and (iii) neither the Statement as filed or as amended from time to time nor any other Transaction Disclosure Material as filed or as amended or supplemented from time to time shall contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading, except that the Company makes no representation or warranty with respect to any statement contained in, or any omission from, any Transaction Disclosure Material based upon information furnished in writing by the Bank to the Company expressly for use therein;

(d) the consummation of the Option Transfer Program, the issuance by the Company of the shares of Common Stock to be issued upon exercise of the JPMorgan Options (the “Option Shares”) and the execution, delivery and performance by the Company of its obligations under the Transaction Agreements will not result in the violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except for such violations which would not reasonably be expected to materially and adversely affect or delay the Option Transfer Program and except to the extent described in the No-Action Request Letter;

(e) except as described in the Notice of Option Transfer Program, no Consent or other action of, or Filing with, any Governmental Authority is required in connection with the consummation of the Option Transfer Program, the issuance by the Company of the Option Shares, and the execution, delivery and performance by the Company of its obligations under the Transaction Agreements, except for the filing with the Commission of the Statement, the filing of the Registration Statement, the registration of the Option Shares under the Securities Act and such consents, approvals, authorizations, orders and registrations or qualifications which would not reasonably be expected to materially and adversely affect or delay the Option Transfer Program;

(f) the consummation of the Option Transfer Program, the issuance by the Company of the Option Shares, and the execution, delivery and performance by the Company of its obligations under the Transaction Agreements will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, except in the case of this clause (i) for such breaches, violations, defaults, liens, charges or encumbrances which would not reasonably be expected to materially and adversely affect or delay the Option Transfer Program and which would not result in any liability to the Bank or (ii) result in any violation of the provisions of the charter or by-laws of the Company;

(g) the Shares issuable upon the exercise of the JPMorgan Options have been duly authorized by the Company and validly reserved for issuance and, at the time of delivery to the Bank, such Shares will be issued and delivered in accordance with the provisions of this Agreement and will be validly issued, fully paid and non-assessable;

(h) the Company has no knowledge of any material fact or information concerning the Company or any of its subsidiaries, or the operations, assets, condition, financial or otherwise, or prospects of the Company or any of its subsidiaries, or any Eligible Options that is required to be made generally available to the public or to the holders of Participating Options and that has not been, or is not being, or will not be, made generally available to the public prior to the Election Deadline through the Transaction Disclosure Materials or otherwise; and

(i) the Option Transfer Program is effective to transfer and assign all right, title and interest in and to the Participating Options to the Bank and upon payment therefor pursuant to Section 5 hereof, the Bank will have acquired good and valid title to the JPMorgan Options free and clear of any lien or claim.

15. Representations and Agreements of the Bank. The Bank represents and warrants to the Company as of the date hereof and as of the Closing Date, and agrees with the Company, that:

(a) the Bank has taken all necessary corporate action to authorize each of the Transaction Agreements and the consummation of the transactions contemplated thereby;

(b) each of the Transaction Agreements has been duly authorized, executed and delivered by the Bank and is a valid and binding agreement of the Bank except as may be limited by applicable bankruptcy, insolvency or similar laws relating to or affecting the rights and remedies of creditors or by equitable principles;

(c) the execution and delivery of the Transaction Agreements and the consummation of the transactions contemplated thereby comply with all applicable requirements of Law, and no Consent or other action of, or Filing with any Governmental Authority is required in connection therewith, except for such Consents, other actions or Filings which would not reasonably be expected to materially and adversely affect or delay the Option Transfer Program; and

(d) the execution and delivery of the Transaction Agreements and the consummation of the transactions contemplated thereby do not conflict with, result in a breach of or constitute a default under, (i) the charter or by-laws of the Bank or (ii) any agreement, plan or instrument affecting the Bank or to which the Bank or any of its subsidiaries or affiliates is a party or by which any of them or any of their respective properties or assets is or may be bound, except in the case of this clause (ii) for such breaches, or defaults which would not reasonably be expected to materially and adversely affect or delay the Option Transfer Program.

16. Opinions. (a) The Company will deliver at Closing to the Bank an opinion, reasonably satisfactory to the Bank’s counsel, of Xxxxxxx Xxxxx & Xxxxx LLP, counsel to the Company, to the effect that:

(i) the Company has taken all necessary corporate action to authorize each of the Transaction Documents and the consummation of the Transactions;

(ii) each of the Transaction Agreements has been duly authorized, executed and delivered by the Company and are valid and binding agreements of the Company, except as may be limited by applicable bankruptcy, insolvency or similar laws relating to or affecting the rights and remedies of creditors or by equitable principles, and except as rights to indemnity or contribution may be limited by applicable law;

(iii) the consummation of the Option Transfer Program, the issuance by the Company of the Option Shares, and the execution, delivery and performance by the Company of its obligations under this Agreement, the Confirmation and the Master Agreement will not, to the knowledge of such counsel, result in the violation of any applicable law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority except for such violations that would not be expected to materially and adversely affect or delay the Option Transfer Program and except to the extent described in the No-Action Request Letter;

(iv) except as described in the Notice of Option Transfer Program, no consent, approval, authorization, order, registration or qualification of or with any court or arbitrator or governmental or regulatory authority is required for the consummation of the Option Transfer Program, the issuance by the Company of the Option Shares, or the execution, delivery and performance by the Company of its obligations under this Agreement, the Confirmation and the Master Agreement, except for the filing with the Commission of the Statement, the filing of the Registration Statement, the registration of the Option Shares under the Securities Act and such consents, approvals, authorizations, orders and registrations or qualifications that would not be expected to materially and adversely affect or delay the Option Transfer Program;

(v) the consummation of the Option Transfer Program, the issuance by the Company of the Option Shares, and the execution, delivery and performance by the Company of its obligations under this Agreement, the Confirmation and the Master Agreement will not (1) result in any violation of the provisions of the charter or by-laws of the Company, or (2) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument which is an exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 2003;

(vi) the Statement (other than the financial statements and related schedules contained or incorporated by reference therein, as to which such counsel need express no opinion) at the time it was filed with the Commission and as amended from time to time through the Closing complied as to form in all material respects to the requirements of the Exchange Act, except to the extent described in the No-Action Request Letter;

(vii) Each document incorporated by reference in the Statement or any further amendment or supplement thereto made by the Company prior to Closing (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), at the time they were filed with the Commission, complied as to form in all material respects to the requirements of the Exchange Act;

(viii) the Option Shares have been duly authorized by the Company and, when issued in conformity with the terms and conditions of the JPMorgan Options and this Agreement, will be validly issued, fully paid and non-assessable; and

(ix) the Option Transfer Program is effective to transfer and assign all right, title and interest in and to the Participating Options to the Bank and upon payment therefor pursuant to Section 5 hereof, the Bank will have acquired good and valid title to the JPMorgan Options free and clear of any lien or claim.

The opinion of counsel described above shall be rendered to the Bank at the request of the Company and shall so state therein.

17. Notice of Certain Events. The Company shall advise the Bank promptly of (i) the occurrence of any event that could cause the Company to (A) withdraw or terminate the Option Transfer Program or (B) permit the Company to exercise any right pursuant to Section 8, (ii) the issuance of any comment or order or the taking of any other action by the Commission or any Governmental Authority concerning the Option Transfer Program, and (iii) any other information relating to the Option Transfer Program that the Bank may from time to time reasonably request.

18. Hedging Reimbursement. (a) (i) If the number of Clear Available Trading Days in the Averaging Period is less than 15 but no Averaging Period Deficiency occurs, the parties agree and acknowledge that in order to establish its initial “delta” hedge of its exposure to ownership of the JPMorgan Options, the Bank will sell a number of Shares during each of the Make-Up Days equal to a number of shares calculated by dividing the total number of Shares necessary to establish its initial delta hedge by fifteen (such sales, the “Shortfall Sales”).

(ii) Upon completion of the Shortfall Sales, the Bank shall determine, in consultation with the Company, the Make-Up Amount in good faith and notify the Company of such amount in the manner set forth in Section 25 hereof (the date on which such determination is made, the “Shortfall Determination Date”), such notification to include a written explanation by the Bank of the basis for the calculations made hereunder.

(iii) On the third Business Day immediately following the Shortfall Determination Date, the Company shall deliver to the Bank a cash payment, by wire transfer of immediately available funds to an account designated by the Bank, in an amount equal to the Make-Up Amount (provided that if such Make-Up Amount is negative, the Bank shall deliver to the Company an amount in cash equal to the absolute value of such Make-Up Amount).

(b) (i) In the event that this Agreement is terminated pursuant to Sections 10(a)(ii) through 10(a)(vi), the Bank shall determine the Unwind Amount in good faith and notify the Company of such amount in the manner set forth in Section 25 hereof (such date, the “Unwind Determination Date”), such notification to include a written explanation by the Bank of the basis for the calculations made hereunder.

(ii) On the third Business Day immediately following the Unwind Determination Date, the Company shall deliver to the Bank a cash payment, by wire transfer of immediately available funds to an account designated by the Bank, in an amount equal to (x) in the case of termination pursuant to Sections 10(a)(iii) through 10(a)(vi), the Unwind Amount and (y) in the case of termination pursuant to Section 10(a)(ii), the Unwind Amount divided by two (provided that, in either case, if such Unwind Amount is negative, the Bank shall deliver to the Company an amount in cash equal to the absolute value of such Unwind Amount in case of termination pursuant to clause (x), or of such Unwind Amount divided by two, in case of termination pursuant to clause (y)).

19. Liability; Indemnification. (a) The Bank shall have no liability (in tort, contract or otherwise) to the Company for any losses, claims, damages, liabilities or expenses arising from the Bank’s own acts in performing the Bank’s obligations hereunder or otherwise in connection with the Option Transfer Program and the JPMorgan Options, except for any such losses, claims, damages, liabilities or expenses primarily attributable to the Bank’s bad faith or gross negligence or the Bank’s breach of its obligations under this Agreement or any other Transaction Agreement. The Bank shall act as an independent contractor, and nothing herein contained shall constitute the Bank an agent of the Company.

(b) The Company hereby agrees to hold the Bank harmless and to indemnify the Bank (including any of the Bank’s affiliated companies and any director, officer, agent or employee of the Bank or any such affiliated company) and any director, officer or other person controlling (within the meaning of Section 20(a) of the Exchange Act) the Bank (including any of the Bank’s affiliated companies) (collectively, “Indemnified Persons”) from and against any and all losses, claims, damages, liabilities or expenses (whether in contract, tort or otherwise, and including, without limitation, fees and disbursements of counsel) whatsoever (as incurred or suffered and including, but not limited to, any and all expenses reasonably incurred in investigating, preparing or defending any litigation or

proceeding, commenced or threatened, and whether or not the Bank or any other Indemnified Person shall be a party thereto (collectively, the “Losses”)) arising out of, relating to or in connection with (c) any untrue statement or alleged untrue statement of a material fact contained in any Transaction Disclosure Material, or any omission or alleged omission to state in any such material a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading, (d) any withdrawal or termination by the Company of the Option Transfer Program or failure by the Company to comply with the terms of the Transaction Disclosure Materials and this Agreement, including without limitation the terms thereof set forth in the Notice of Option Transfer Program, (e) any breach by the Company of any representation or warranty or failure to comply with any of the agreements contained herein and (f) activities performed or services furnished pursuant to this Agreement or the certain letter dated October 9, 2003 or otherwise arising out of, relating to or in connection with the Option Transfer Program; except in the case of clause (iv) above (A) for any Losses arising out of, relating to or in connection with any activities of a JPMorgan Entity described in Section 6 hereof and (B) for any such Loss that is determined by final and nonappealable judgment of a court of competent jurisdiction to have resulted primarily from the Bank’s bad faith or gross negligence or a breach by the Bank of its obligations under this Agreement or any other Transaction Agreement and except in the case of clause (i) above for any such Loss that arises out of, relates to or in connection with (x) any untrue statement or alleged untrue statement of a material fact contained in any Transaction Disclosure Material or (y) any omission to state in any such material a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading, if in any such case such statement or omission was made in reliance upon and in conformity with information furnished in writing by the Bank to the Company expressly for use therein. The foregoing indemnity shall be in addition to any liability that the Company might otherwise have to the Bank and such other Indemnified Persons.

(c) If a claim is made against any Indemnified Person, such Indemnified Person shall notify the Company promptly after any written assertion of such claim threatening to institute an action or proceeding with respect thereto and shall notify the Company promptly of any action commenced against such Person within a reasonable time after such Person shall have been served with a summons or other first legal process giving information as to the nature and basis of the claim. Failure so to notify the Company shall not, however, relieve the Company from any liability that it may have on account of this indemnity or otherwise except to the extent the Indemnified Person shall have been materially prejudiced in any material respect by such failure. The Company shall be entitled to participate at its own expense in the defense of any such litigation or proceeding but such defense shall be conducted by counsel to such Indemnified Person. The Company shall, upon the request of such Indemnified Person, assume the defense of any such litigation or proceeding including the payment for the fees and expenses of counsel, and in the case of any such request such defense shall be conducted by counsel reasonably satisfactory to the Bank. In any such litigation or proceeding the defense of which the Company shall have so assumed, any Indemnified Person shall have the right to participate in such litigation or proceeding and to retain its own counsel, but the fees and expenses of

such counsel shall be at the expense of such Indemnified Person unless (h) the Company and the Indemnified Person shall have mutually agreed to the retention of such counsel or (i) the named parties to any such proceeding (including any impleaded parties) include one or both of (x) the Company and (y) the Indemnified Person and representation of both parties by the same counsel in the opinion of counsel to such Indemnified Person would be inappropriate due to actual or potential differing interests between them. It is understood that the Company shall not, in connection with any litigation or proceeding or related litigation or proceedings in the same jurisdiction, be liable under this agreement for the fees and expenses of more than one separate firm for all such Indemnified Persons. Such firm shall be designated in writing by the Bank. The Company shall not be liable for any settlement of any litigation or proceeding effected without the written consent of the Company, but if settled with such consent or if there be a final judgment for the plaintiff, the Company agrees, subject to the provisions of this Section 19(c), to indemnify the Indemnified Person from and against any loss or liability by reason of such settlement or judgment.

(d) The indemnity agreements contained in this Section 19(d) and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect regardless of (i) any failure to commence, or the withdrawal, termination or consummation of, the Option Transfer Program or the termination of this agreement, (ii) any investigation made by or on behalf of any Indemnified Person and (iii) any withdrawal or termination by the Bank pursuant to Section 10 or otherwise.

20. Severability. If any provision hereof shall be determined to be invalid or unenforceable in any respect, such determination shall not affect such provision in any other respect or any other provision hereof, which shall remain in full force and effect.

21. Counterparts; Amendment. This Agreement may be executed in one or more separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Neither this Agreement nor any other Transaction Agreement, nor any provision hereof or thereof, may be amended or any such provisions waived except in writing signed by the party sough to be bound.

22. Binding Effect. This Agreement, including any right to indemnity or contribution hereunder, shall inure to the benefit of and be binding upon the Company, the Bank and the other Indemnified Persons, and their respective successors and assigns. Nothing in this Agreement or any other Transaction Agreement is intended, to, or shall give to any other person any third-party beneficiary or other right of any kind with respect to, by virtue of or under this Agreement or any other Transaction Agreement. Notwithstanding any other provision of any Transaction Document to the contrary requiring the Bank to purchase, sell, receive or deliver any shares of the Common Stock or other securities (including, for the avoidance of doubt, the Participating Options) to or from the Company or any employee, the Bank may designate any of its affiliates to purchase, sell, receive or deliver such shares or other securities or otherwise to perform the Bank’s obligations in respect of the Transactions and any such designee may assume such obligations, and the Bank shall be discharged of its obligations to the Company to the extent of any such performance and the Bank may otherwise, from time to time, without the Company’s consent, assign any or all of its rights and delegate any or all of its obligations hereunder to any of its affiliates.

23. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, and all rights and remedies shall be governed by said laws, without regard to conflict of laws principles. Each of the parties hereto agree (a) that this Agreement involves at least $100,000 and (b) that this Agreement has been entered into by the parties hereto in express reliance upon 6 Xxx.X. §0000. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the Transactions shall be brought in a federal court located in the State of Delaware or a Delaware state court. Each of the parties hereby consents to exclusive personal jurisdiction in any such action, suit or proceeding brought in any such state or federal court (and of the appropriate appellate courts therefrom) and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient form. Each party agrees that service of process on such party as provided in Section 25 shall be deemed effective service of process on such party. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS.

24. Entire Agreement. This Agreement, together with the other Transaction Agreements, constitute the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. The Bank is entering into this Agreement through its London branch. Notwithstanding the foregoing, the Bank represents to the Company that the obligations of the Bank are the same as if it had entered into this Agreement through its head or home office in New York.

25. Notices. Except as otherwise provided in this Agreement, all notices and other communications (other than communications pursuant to Sections 2 and 3) required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered personally or by facsimile transmission to the parties hereto as follows:

(a) If to the Company:

Microsoft Corporation

Xxx Xxxxxxxxx Xxx

Xxxxxxx, XX 00000

Fax: (000) 000-0000

Attn: Xxxx Xxxxxxxx, Deputy General Counsel, Finance and Operations

Attn: Xxxxx Xxxxxxxxxx, Treasurer

Attn: Xxxxxx Xxxx, Assistant Treasurer

Attn: Xxxx Xxx, Assistant Treasurer

or at such other address or addresses as may later have been furnished in writing by the Company to the Bank, with a copy to:

Xxxxxxx Xxxxx & Xxxxx LLP

000 Xxxxxx Xxxxxx, Xxxxx 0000

Xxxxxxx, XX 00000-0000

Fax: (000) 000-0000

Attn: Xxxxxxx X. Xxxx

(b) If to the Bank:

JPMorgan Chase Bank

000 Xxxx Xxxxxx, 00xx Xxxxx

Xxx Xxxx, Xxx Xxxx, 00000

Fax: 000-000-0000

Attn: EDG Corporate Marketing, Xxxxx Xxxx

or at such other address or addresses as may later have been furnished in writing by the Bank to the Company, with a copy to:

Xxxxx Xxxx & Xxxxxxxx

000 Xxxxxxxxx Xxxxxx

Xxx Xxxx, Xxx Xxxx 00000

Fax: (000) 000-0000

Attention: Xxxxx X. Xxxxxxx

Except as otherwise provided in this Agreement, all such notices and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day, in the place of receipt. Otherwise, any such notice, request or other communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

MICROSOFT CORPORATION

By:		/s/ XXXXX XXXXXXXXXX
		Name: Xxxxx Xxxxxxxxxx
		Title: Corporate Vice President & Treasurer

JPMORGAN CHASE BANK

By:		/s/ XXXXXXX X. XXXX
		Name: Xxxxxxx X. Xxxx
		Title: Vice President

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PROGRAM AGREEMENT between MICROSOFT CORPORATION and JPMORGAN CHASE BANK, relating to the STOCK OPTION TRANSFER PROGRAM OF MICROSOFT CORPORATION dated as of October 9, 2003

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