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06HR1201 8/06 • BN0171-0806
EMPLOYEE STOCK
PURCHASE PLAN
A C C O U N T A U T H O R I Z AT I O N F O R M
I authorize Costco to deduct $_______________________________________ from each paycheck for the Employee Stock Purchase Plan.
Employee Name (Print )
Employee Number
Employee’s Signature
Date
Return this completed form to the payroll Clerk or Benefits Representative at your location.
TO COSTCO PAYROLL/BENEFITS REPRESENTATIVE:
PLEASE FILE THIS FORM IN THE EMPLOYEES PERSONNEL FILE AT YOUR LOCATION.
DO NOT SEND IT TO THE BENEFIT DEPARTMENT.
EMPLOYEE STOCK PURCHASE PLAN
TERM AND CONDITIONS
To: Smith Barney
What is the Employee Stock Purchase Plan?
1. All provisions of the Constitution, rules and regulations and all
customs and usages of the Securities Exchange or marketplace
where transactions are executed, as from time to time in effect,
shall apply.
5. I have the option to revise my payroll deduction within the specified
limits or withdraw from the Plan by notifying my employer in
writing. If I terminate my payroll deductions and my participation in
the Plan, Smith Barney shall continue to maintain the account for a
reasonable period of time unless I elect to close it. I may at any time
direct that all or part of the shares in my account be sold, or that a
certificate for all or part of the full shares held in my account be
registered in my name and mailed to me subject to the certificate
withdrawal fee. Also, I may deposit in my account any additional
shares of Costco held by me for safekeeping.
2. Periodic payments for my account will be made through payroll
deductions by my employer for the purchases of Common Stock
of Costco.
6. Copies of annual reports, proxy statements and any other materials
issued to stockholders will be mailed to me provided the balance
in my account is one share or more.
3. Sales of stock initiated and transmitted by mail will be
executed at the opening of the market or as soon as practicable
thereafter, on the business day following receipt of the order.
Sell orders transmitted by phone or facsimile will be entered for
execution immediately.
7. Costco reserves the right to discontinue the Employee Stock
Purchase Plan at any time it deems advisable. Smith Barney
also may discontinue its services as operating broker for the
plan upon written notice to Costco.
I have received a copy of the Plan Terms and Conditions and I
hereby affirm that I have attained the age of majority in the state
in which I reside. I agree that the following terms and conditions
shall govern the handling of my account by Smith Barney under
this Account Authorization.
4. Fees and costs relating to purchases of stock made through
payroll deductions will be paid by my employer. Commissions
on purchases other than by payroll deduction and on sales will
be charged to me at the Plan rates prevailing at Smith Barney
at the time of the transaction.
Smith Barney
Member SIPC
388 Greenwich St. – 18th Floor
New York, New York 10013
1-800-367-4777
The Employee Stock Purchase Plan (ESPP®) makes it easy for you
to become a shareholder of the company and share in its potential
future growth and profitability. You now have the opportunity to
purchase the company’s common stock through regular and
convenient payroll deductions. By doing so, you will be taking a
significant step forward in setting up a structured and systematic
program that will benefit you and your family down the road.
Please keep in mind that your participation in the ESPP is entirely
voluntary and should be just one part of an overall, well-balanced
investment plan.
Who is eligible to participate?
Only employees of the company who have attained the age of
majority in their state of residence are eligible to participate.
How does the ESPP work?
Once you decide on the dollar amount you would like to invest each
pay period, the company will regularly deduct those funds from your
paycheck. That amount is combined with all the dollars deducted
from your fellow employees and forwarded to Smith Barney on a
periodic basis. The funds are then used to purchase company stock.
Smith Barney will open and maintain an individual securities account
for you when you enroll in the Plan. As soon as practicable after funds
are received by Smith Barney, company stock will be purchased for
your account using the total funds deducted from your pay the
previous period.
The company will pay Smith Barney’s fees for stock purchases made
for your account with payroll deductions pursuant to the Plan. Any
fees for purchases not made through payroll deductions or for sales
will be payable directly by you in connection with such transactions.
What are the advantages
of the Employee Stock Purchase Plan?
There are many. For starters, it’s convenient and it encourages
investment. After all, investing a specific amount of money every
pay period is one of the easiest ways to build your portfolio. Now
with the ESPP, you simply select the dollar amount you want
deducted and the rest is automatic.
The ESPP offers an affordable way to invest. You don’t have to
commit to buy a specific number of shares of stock each pay period.
Nor do you have to buy whole shares. Just select the dollar amount
you’re most comfortable with. Although no investment program is
risk-free, your company’s plan can help cushion you from market
fluctuations through a long-term investment technique known as
dollar cost averaging. If you place a fixed amount of money regularly
in the same investment, you will buy more shares of a stock when
the price goes down and fewer shares when it rises. Over the long
run, your average cost per share will be less than it would have
been if you had bought a fixed number of shares each time.
Purchasing company stock through the payroll deduction plan also
ensures that 100% of your money goes to work for you, because you
pay no commissions or fees. The company pays them for you.
Finally, you always have easy access to your account. You may sell all
or part of your company stock quickly and conveniently simply by
calling Smith Barney at 1-800-367-4777.
What will the stock cost through the Plan?
Stock prices fluctuate from day to day and even during the day,
depending on how much owners of a stock are willing to sell it for
and how much buyers are willing to pay. Your account will be
credited with stock at the average market price of all shares
bought for all employees in the Plan for that period. Purchases
may be made over a period of days so as not to adversely affect
the price of the stock.
How much stock can I purchase
through the Plan?
Smith Barney will credit your account with as many whole and
fractional shares of the company’s stock as the funds forwarded to
Smith Barney for your account will allow. If the amount of money
invested won’t buy a whole share, your account will be credited
with a fractional share. For example, if you invest $100 each
month, and stock is purchased at $49 per share, your account will
be credited with 2.0408 shares.
How do I change the amount
of my payroll deduction?
To increase or decrease the amount of your payroll deductions or
discontinue payroll deductions entirely, notify your payroll clerk in
writing. Any changes you request will take effect as soon as
possible after your written request is received by your payroll clerk.
If you notify the company to stop payroll deductions, if you leave the
company or if the Plan is discontinued by the company, your account
with Smith Barney will remain open unless you choose to close it.
You can continue to buy and sell securities through your Smith
Barney brokerage account. (Different transaction fees may apply.)
If you request that your account be closed, you can instruct Smith
Barney to sell your holdings and mail you a check for the net
proceeds, or to deliver a stock certificate for your whole shares
along with a check for the net proceeds from the sale of fractional
shares. Transaction fees or commissions on sales and other
applicable charges such as certificate fees are payable by you. To
avoid additional tax liability you should complete a Form W-9 and
submit it to Smith Barney. The form is available by calling Smith
Barney at 1-800-367-4777.
What record of my transactions will I receive?
Each time there is a purchase made on your behalf a confirmation
statement will be mailed to you by Smith Barney to your home
address. You will also receive a confirmation statement from
smith Barney anytime you sell shares in your account. When you
sell shares you may have to pay income tax on the proceeds so it
is important that retain all of your confirmation statements.
What additional corporate information
will I be entitled to as a shareholder?
As soon as you own one whole share of company stock, you generally
will receive all material that is distributed by the company for the
benefit of its shareholders. This includes such items as annual
reports, interim reports and proxy statements. When the company
distributes proxies, your whole shares are voted in accordance
with your written instructions duly delivered to Smith Barney.
What type of protection
is provided by Smith Barney?
Get information on your account
at the touch of a button.
Call 1-800-367-4777.
If you have a touch-tone telephone, you can obtain security positions
and their market value seven days a week, 22 hours a day, simply by
calling the toll-free number and entering your 9-digit account number.
To place buy or sell orders, or for any additional information, you
can reach a Smith Barney Client Service Representative Monday
through Friday, 8 a.m. to 7 p.m., Eastern time. To avoid additional
tax liability or a delay in selling your shares you should complete
a W-9 and return it to Smith Barney.
Get started now on the road
to a lifetime of benefits.
Just complete the ESPP Enrollment Form (found on the last page
of this booklet) today, and return it to your payroll clerk. Please be
sure you:
• Follow the instructions carefully.
• Fill out all sections.
Smith Barney is a member of Securities Investor Protector Corporation
(SIPC), so cash and securities held by Smith Barney for your account
are protected up to $500,000, of which $100,000 may be paid to
satisfy claims for cash balances. Smith Barney has obtained additional
coverage from The Aetna Casualty & Surety Company, bringing
total coverage for cash and securities held by Smith Barney for your
account to $2.5 million. (The $100,000 coverage limit for cash remains.)
• Sign your name in each of the places indicated.
EMPLOYEES’ ACCOUNTS
WITH SMITH BARNEY
Smith Barney will open and maintain accounts for participants in
the Plan. Costco will pay all fees on purchases of its Common Stock
made through payroll deductions. Smith Barney’s commissions and
charges in connection with sales or purchases made other than by
payroll deduction will be payable by the participant who places
the order.
Opening an Account
An eligible employee who elects to participate in the Costco Plan
must open an account with Smith Barney by:
1. Completing the attached Enrollment/Account Authorization form
authorizing Costco to establish your employee account; and
2. Forwarding completed form to your payroll clerk.
3. You can change your payroll deduction at any time by giving written
instructions to your payroll clerk.