MICROSOFT CORP
STOCK OPTION PLAN FOR CONSULTANTS AND ADVISORS
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<TYPE>EX-10.5
<SEQUENCE>4
<FILENAME>dex105.txt
<DESCRIPTION>STOCK OPTION PLAN FOR CONSULTANTS AND ADVISORS
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                                                                    Exhibit 10.5

                              MICROSOFT CORPORATION

                                STOCK OPTION PLAN
                          FOR CONSULTANTS AND ADVISORS


     1.   Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and maintain a long-term relationship with the best available
consultants and advisors, to provide additional incentive to such individuals,
and to promote the success of the Company's business. Options granted hereunder
shall be Nonqualified Stock Options, and shall be evidenced by written Stock
Option Agreements.

     2.   Definitions. As used herein, the following definitions shall apply:

          (a)  "Board" shall mean the Committee, if such Committee has been
appointed, or the Board of Directors of the Company, if such Committee has not
been appointed.

          (b)  "Code" shall mean the Internal Revenue Code of 1986, as amended.

          (c)  "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.

          (d)  "Common Stock" shall mean the common stock of Microsoft
Corporation.

          (e)  "Company" shall mean Microsoft Corporation, a Washington
corporation.

          (f)  "Continuous Status as a Consultant or Advisor" shall mean the
absence of any interruption, expiration, or termination of an Optionee's
consulting or advisory relationship, with the Company. Continuous Status as a
Consultant or Advisor shall not be considered interrupted in the case of any
temporary interruption in such person's availability to provide services to the
Company which has been authorized in writing by a Vice President of the Company
prior to its commencement; provided, however, that the Company may require
suspension of vesting in such cases. Continuous Status as a Consultant or
Advisor shall not be considered terminated if such person accepts employment
with the Company, and thereafter a person's Continuous Status as an Employee,
and the effects of an interruption or termination thereof (including by reason
of death or disability), shall be determined with reference to the Company's
1991 Stock Option Plan.

          (g)  "Nonqualified Stock Option" shall mean an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.

          (h)  "Option" shall mean a stock option granted pursuant to the Plan.

          (i)  "Optioned Stock" shall mean the Common Stock subject to an
Option.

          (j)  "Optionee" shall mean any consultant or advisor who receives an
Option.

          (k)  "Plan" shall mean this Stock Option Plan for Consultants and
Advisors.

          (l)  "Share" shall mean one share of Common Stock, as adjusted in
accordance with Section 11 of the Plan.

                                       1.

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     3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 2,400,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.

        If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.

     4. Administration of the Plan.

        (a) Procedure. The Plan shall be administered by the Board of Directors
of the Company.

            (1) The Board of Directors may appoint a Committee, consisting of
not less than two members of the Board of Directors, to administer the Plan on
behalf of the Board of Directors, subject to such terms and conditions as the
Board of Directors may prescribe. Once appointed, such Committee shall continue
to serve until otherwise directed by the Board of Directors.

            (2) The Board of Directors may, from time to time, increase the size
of the Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.

        (b) Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Nonqualified
Stock Options; (ii) to determine, in accordance with Section 8(b) of the Plan,
the fair market value of the Common Stock; (iii) to determine, in accordance
with Section 8(a) of the Plan, the exercise price per share of Options to be
granted, (iv) to determine the individuals to whom, and the time or times at
which, options shall be granted and the number of Shares to be represented by
each Option; (v) to interpret the Plan; (vi) to prescribe, amend, and rescind
rules and regulations relating to the Plan; (vii) to determine the terms and
provisions of each Option granted (which need not be identical) and, with the
consent of the holder thereof, modify or amend each Option; (viii) to reduce the
exercise price per share of outstanding and unexercised Options; (ix) to
accelerate or defer (with the consent of the Optionee) the exercise date of any
Option; (x) to authorize any person to execute, on behalf of the Company, any
instrument required to effectuate the grant of an Option previously granted by
the Board; and (xi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.

        (c) Effect of Board's Decision. All decisions, determinations, and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.

     5. Eligibility.

        (a) Options may be granted to consultants and advisors who provide
consulting services to the Company. In no event shall any employees (full-time
or part-time) of the Company be eligible for the grant of an Option under the
Plan. Notwithstanding the foregoing, the fact that an Optionee subsequently
becomes an employee of the Company shall not affect

                                       2.

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such Optionee's Option, so long as the Optionee's Continuous Status as a
Consultant or Advisor was uninterrupted prior to his or her commencement of
employment with the Company.

            (b) Nothing in the Plan or any Option granted hereunder shall confer
upon any Optionee any right to continue or require the continuance of the
Optionee's consulting or advisory relationship with the Company, nor shall it
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.

     6.     Term of Plan. The Plan shall become effective upon its adoption by
the Board and shall continue in effect for ten (10) years, unless sooner
terminated under Section 14 of the Plan.

     7.     Term of option. The term of each Option shall be no more than ten
(10) years from the date of grant.

     8.     Exercise Price and Consideration.

            (a) The per Share exercise price under each Option shall be such
price as is determined by the Board, which price may be less than, equal to, or
greater than the fair market value per Share on the date of grant.

            (b) The fair market value per Share shall be the closing price per
share of the Common Stock on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") National Market System on the date of grant. If
the Common Stock ceases to be listed on the NASDAQ National Market System, the
Board shall designate an alternative method of determining the fair market
value of the Common Stock.

            (c) The consideration to be paid for the Shares to be issued upon
exercise; of an Option, including the method of payment, shall be determined by
the Board at the time of grant and may consist of cash and/or check. Payment may
also be made by delivering a properly executed exercise notice, together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale proceeds necessary to pay the exercise price.

            (d) Prior to issuance of the Shares upon exercise of an Option, the
Optionee shall pay any federal, state, and local withholding obligations of the
Company, if applicable.

     9.     Exercise of Option.

            (a) Procedure for Exercise; Rights as a Stockholder. Any Option
 granted hereunder shall be exercisable at such times and under such conditions
 as determined by the Board at the time of grant, and as shall be permissible
 under the terms of the Plan. An Option may not be exercised for a fraction of
 a Share.

                An Option shall be deemed to be exercised when written notice of
such excercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with

                                       3.

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respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.

                The exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.

            (b) Termination of Consulting Relationship with Optionee. In the
event of termination of an Optionee's Continuous Status as a Consultant or
Advisor, such Optionee may exercise stock options to the extent exercisable on
the date of termination. Such exercise must occur within three (3) months (or
such shorter time as may be specified in the grant), after the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement). To the extent that the
Optionee was not entitled to exercise the Option at the date of such
termination, or does not exercise such Option within the time specified herein,
the Option shall terminate.

            (c) Termination of Consulting Relationship Due to Disability of
Optionee. Notwithstanding the provisions of Section 9(b) above, in the event of
termination of an Optionee's Continuous Status as a Consultant or Advisor as a
result of total and permanent disability (i.e., the inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of twelve (12) months), such
Optionee may exercise stock options to the extent exercisable on the date of
termination. Such exercise must occur within eighteen (18) months (or such
shorter time as may be specified in the grant), after the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement). To the extent that the
Optionee was not entitled to exercise such Option within the time specified
herein, the Option shall terminate.

            (d) Death of Optionee. Notwithstanding the provisions of Section 9
(b) above, In the event of the death of an Optionee:

                (i) who is at the time of death a consultant or advisor to the
Company, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement), by the
Optionee's Personal Representative or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued as of the date of death; or

                (ii) whose Option has not yet expired, but whose Continuous
Status as a Consultant or Advisor terminated prior to the date of death, the
Option may be exercised, at any time within six (6) months following the date of
death (but in no event later than the date of expiration of the term of such
Option as set forth in the Option Agreement), by the Optionee's Personal
Representative or by a person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination.

            (e) Notwithstanding subsections (b), (c), and (d) above, the Board
shall have the authority to extend the expiration date of any outstanding option
in circumstances in which it

                                       4.

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deems such action to be appropriate (provided that no such extension shall
extend the term of an option beyond the date on which the option would have
expired if no termination of the Optionee's Continuous Status as a Consultant
or Advisor had occurred).

     10. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

     11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from stock split, reverse stock split, stock dividend,
combination, or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding, and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reasons thereof shall be made with respect
to, the number or price of shares of Common Stock subject to an Option.

         In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise an Option as to all or any part of the Optioned Stock, including Shares
as to which the Option would not otherwise be exercisable. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, the Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless such
successor corporation does not agree to assume the Option or to substitute an
equivalent option, in which case the Board shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the Option
as to all of the Optioned Stock, including Shares as to which the Option would
not otherwise be exercisable. If the Board makes an Option fully exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify the Optionee that the Option shall be fully exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
will terminate upon the expiration of such period.

     12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each consultant or advisor
to whom an Option is so granted within a reasonable time after the date of such
grant.

                                       5.

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     13. Substitutions and Assumptions. The Board shall have the right to
substitute or assume Options in connection with mergers, reorganizations,
separations, or other transactions to which Section 424(a) of the Code applies,
provided such substitutions and assumptions are permitted by Section 424 of the
Code and the regulations promulgated thereunder. The number of Shares reserved
pursuant to Section 3 may be increased by the corresponding number of Options
assumed and, in the case of a substitution, by the net increase in the number of
Shares subject to Options before and after the substitution.

     14. Amendment and Termination of the Plan.

         (a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable.

         (b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

     15. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such shares pursuant to thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject of the
approval of counsel for the Company with respect to such compliance.

     16. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

[The number of shares in Section 3 has been adjusted for stock splits in 1992,
1994, 1996, 1998, and 1999.]

                                       6.

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