Microsoft and Sinofsky reach ‘retirement’ deal: $14M in stock, restrictions on activity

Microsoft Windows President Steven Sinofsky in Anaheim in September. (Microsoft photo)

Microsoft Windows President Steven Sinofsky in Anaheim in September. (Microsoft photo)

Six months after the departure of Microsoft Windows chief Steven Sinofsky, Microsoft has reached a “Retirement Agreement” with the former executive — awarding him stock worth more than $14 million in exchange for his agreement not to compete against the company, disclose secret information, disparage Microsoft or work for certain competitors.

The agreement was disclosed in an SEC filing by Microsoft this afternoon, on the eve of the 4th of July holiday. The filing doesn’t include the full text of the agreement. That means the filing leaves out key details — such as the identities of the competitors for which Sinofsky can’t work under terms of the agreement.

The non-compete and non-disparagement clauses of the agreement run through the end of this year, while another provision requiring Sinofsky to cooperate in any litigation lasts for another few years.

Sinofsky was never known for making negative or disparaging comments during his tenure with the company — despite being a prolific blogger, he is known for being especially careful with his public statements — so it’s not clear what drove Microsoft to include that provision, except to the extent that it’s a standard clause in such deals.

Here’s the full text of the filing.

Steven Sinofsky and Microsoft Corporation have entered into an agreement (the “Retirement Agreement”) relating to Mr. Sinofsky’s resignation as President of the Windows Division on November 12, 2012. The Retirement Agreement includes covenants by Mr. Sinofsky to: (i) not compete with Microsoft by accepting employment at certain competitors or encouraging certain customers of Microsoft to choose a competing offering to Microsoft products; (ii) not solicit Microsoft employees to terminate their employment or work for other entities; (iii) cooperate in litigation brought by or against Microsoft; (iv) not disparage Microsoft; and (v) continue complying with certain provisions of the Microsoft Corporation Employee Non-Disclosure Agreement between Microsoft and him related to intellectual property rights and confidentiality of Microsoft and third-party information. Mr. Sinofsky also agreed to a release of claims against Microsoft and its related parties.

In return for the performance of his obligations under the Retirement Agreement, Microsoft will pay the value of his outstanding unvested stock awards granted prior to fiscal year 2013 and 50% of the shares of stock awarded for his performance during fiscal year 2013, all based on the vesting schedule that would have applied in connection with a qualifying “retirement” on his separation date under his stock award agreements, (a total of 418,361 shares). The payments will be made over time through August 2016 according to the vesting schedules for the stock awards. The value of the shares will be determined by market price as of each vesting date. Microsoft agreed to indemnify Mr. Sinofsky against claims arising from acts or omissions relating to his employment at Microsoft pursuant to the Company’s Articles of Incorporation.

Sinofsky oversaw a turnaround of the Windows business starting with Windows 7, and led an overhaul of the operating system with Windows 8, before his sudden departure at the end of the year. He and Microsoft CEO Steve Ballmer clashed over a variety of issues prior to his departure.

Most recently, Sinofsky has been teaching classes at Harvard.

A Microsoft spokesman issued this statement to GeekWire.

“Given Steven’s 23 years of strong service at Microsoft, which included leading teams that produced six versions of Office and two versions of Windows, the company will continue to provide him with the economic value of the stock awards he earned during his employment, similar to the retirement benefits we provide employees who work at least 15 years and retire at 55 or older. This agreement provides a number of important considerations for Microsoft, including a commitment that Steven will continue assisting with intellectual property litigation until January 1, 2017.”

Previously on GeekWire: Ballmer, Sinofsky and the struggle for the soul of Microsoft

GeekWire reporter Taylor Soper contributed to this report.

  • Patrick Husting

    Classic…

  • Guest

    Well done. The world would be a better place if everyone were enjoined from disparaging (or “dissing,” as the kids say) their former employers. Such unpleasantness makes public discussion such a chore.

  • John007

    Hmmmmmm?…………….for $14 million in stock (plus the fact that stock will probably increase in value), I think I could do a real good job of keeping my mouth shut. Mmmmmmkay

  • Mark

    Outside of taking six months to conclude, which suggests it’s the product of intense legal wrangling and threats of recourse, this agreement seems pretty standard. The gag order is also typical, not that Sinofsky seems inclined to take cheap shots anyway. Good for him. Some don’t like his style, while others don’t like W8 or feel he didn’t produce the right product for the competitive need. Fair enough, I even include myself in the latter. But his overall record of accomplishment at MS is irrefutable. Indeed it’s much better than any other long term executive I can think of and far superior to Ballmer’s. Externally he was also visible and generally respected (at least) for his technical knowledge and understanding of where the industry was going, which is more than you can say for a majority of MS’s SLT. So he certainly didn’t deserve to have his reputation trashed on the way out, particularly in such a personal manner. The cash he gains here is really just a fraction of what he lost by being bounced out so suddenly. Now if only we could get rid of Ballmer for just $14M…

  • http://www.techmansworld.com/ Michael Hazell

    Talk about a payout.

  • Eric LeVine

    Steven helped to create BILLIONS of dollars of shareholder value. He deserves every penny.

    • Guest

      He was also the person running Windows when it lost its dominance to iOS and Android, and then spent three years architecting W8, the supposed comeback OS, which has failed to catch on