Document:

pmt-ex102_6.htm

Exhibit 10.2

GUARANTY

THIS GUARANTY, dated as of October 14, 2016, (this “Guaranty”), is made by PENNYMAC MORTGAGE INVESTMENT TRUST (the “Guarantor”) in favor of JPMorgan Chase Bank, N.A. (“Chase”).

Recitals

Pursuant to the Master Repurchase Agreement, dated as of October 14 2016 (as supplemented, amended or restated from time to time, the “Repurchase Agreement”), by and between Chase, as Buyer, and PennyMac Corp. and PennyMac Operating Partnership, L.P., as Sellers (“Sellers”), Chase has agreed to purchase certain Mortgage Loans from Sellers and Sellers have agreed to repurchase such Mortgage Loans upon the terms and subject to the conditions set forth therein.

It is a condition precedent to the obligation of Chase to purchase Mortgage Loans from Sellers under the Repurchase Agreement that Guarantor shall have executed and delivered this Guaranty to Chase.

Guaranty and Agreements

For good and valuable consideration, the receipt and sufficiency of which the parties hereby acknowledge, the parties hereby agree as follows:

1.Defined Terms. All capitalized terms defined in the Repurchase Agreement and used, but not defined differently, in this Guaranty have the same meanings here as there.

“Chase”, “Guarantor” and “Guaranty” are defined in the preamble.

“Change in Control” means either of the following events (a) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) of outstanding shares of voting stock (or equivalent equity interests) of Guarantor at any time if after giving effect to such acquisition such Person or Persons owns fifty percent (50%) or more of such outstanding voting stock (or equivalent equity interests).

“Expiration Date” is defined in Section 2(c).

“Foreign Buyer” is defined in Section 4(e)(ii)(4).

“Guarantor Event of Default” is defined in Section 11.

“Indirect” is defined in Section 4(d)(2).

“IRS” is defined in Section 4(e)(ii)(4).

 

 

 

“Material Adverse Effect” means (a) a material adverse change in the financial condition of Guarantor since the effective date of the most recent financial statements of Guarantor delivered to Buyer, (b) a material impairment of the ability of Guarantor to perform under this Guaranty and to avoid a breach or default hereunder or (c) a material adverse effect upon the legality, validity, binding effect or enforceability of this Guaranty against Guarantor.

“Obligations” means the obligations and liabilities of Sellers and Guarantor to Chase, arising under, or out of or in connection with the Repurchase Agreement, this Guaranty or any other Transaction Document, whether on account of covenants, Repurchase Prices, Margin Deficits, Price Differential, Required Amounts, Income, escrow payments, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to Chase that are required to be paid by Sellers pursuant to the terms of the Transaction Documents) or otherwise and whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred.

“Other Taxes” is defined in Section 4(e)(ii)(2).

“Plans” is defined in Section 3(n).

“REIT” means a real estate investment trust, as defined in Section 856 of the IRC.

“Repurchase Agreement” and “Sellers” are defined in the recitals.

“Taxes” is defined in Section 4(e)(ii)(1).

The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Guaranty refer to this Guaranty as a whole and not to any particular provision, and Section references are to Sections of this Guaranty unless otherwise specified.

The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

2.Guaranty. 

(a)Unconditional Payment Guaranty.  Guarantor hereby unconditionally and irrevocably guarantees to Chase and its successors, indorsees, transferees and assigns, the prompt and complete payment and performance by Sellers of the Obligations when due, whether at their stated maturity, by acceleration or otherwise

(b)Costs of Enforcement and Collection.  Guarantor further agrees to pay any and all expenses (including, without limitation, all reasonable fees and disbursements of counsel) which may be paid or incurred by Chase in enforcing any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, Guarantor under this Guaranty.  This Guaranty shall remain in full force and effect until the Obligations are paid in full, notwithstanding that from time to time prior thereto either or both Sellers may be free from any Obligations.

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(c)Liability Unaffected by Certain Payments; Guarantor Remains Liable.  No payment or payments made by Sellers, Guarantor, any other guarantor or any other Person, or received or collected by Chase from Sellers, Guarantor, any other guarantor or any other Person by virtue of any action or proceeding or any setoff or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations, shall be deemed to modify, reduce, release or otherwise affect the liability of Guarantor hereunder.  Guarantor shall remain liable for the Obligations until (i) the Obligations are satisfied and paid in full and (ii) the earlier to occur of (a) expiration of the Repurchase Agreement and the other Transaction Documents or (b) termination of the Repurchase Agreement and the other Transaction Documents (such date, the “Expiration Date”), notwithstanding any payment or payments referred to in the foregoing sentence other than payments made by Guarantor in respect of the Obligations or payments received or collected from Guarantor in respect of the Obligations.

(d)Notify Chase of Purpose of Payments Made.  Guarantor agrees that whenever, at any time, or from time to time, it shall make any payment to Chase on account of its liability hereunder, it will notify Chase in writing that such payment is made under this Guaranty for such purpose.

3.Representations, Warranties and Covenants of Guarantor. Guarantor hereby represents, warrants and covenants (which representations and warranties, except as otherwise specifically provided, will be deemed republished concurrently with each purchase Transaction under the Repurchase Agreement) that:

(a)Organization and Good Standing.  Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction under which it was organized, has full legal power and authority to own its property and to carry on its business as currently conducted, and is duly qualified to do business and is in good standing in each jurisdiction in which the transaction of its business makes such qualification necessary, except in jurisdictions, if any, where a failure to be in good standing has no Material Adverse Effect.  For the purposes hereof, “good standing” includes qualification for any and all licenses and payment of any and all taxes required in the jurisdiction of its organization and in each jurisdiction in which Guarantor transacts business.  

(b)Authority and Capacity.  Guarantor has all requisite power, authority and capacity to enter into this Guaranty and to perform the obligations required of Guarantor hereunder.  This Guaranty constitutes a valid and legally binding agreement of Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization, conservatorship and similar laws, and by equitable principles.  No consent, approval, authorization, license or order of or registration or filing with, or notice to, any Governmental Authority is required under state or federal law prior to the execution, delivery and performance of or compliance by Guarantor with this Guaranty.

(c)No Conflict.  Neither the execution and delivery of this Guaranty, nor the consummation of the transactions contemplated by this Guaranty, nor compliance with its terms and conditions, shall conflict with or result in the breach of, or constitute a default under, or result in the creation or imposition of (i) any lien, charge or encumbrance of any nature upon the 

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properties or assets of Guarantor, (ii) any mortgage, indenture, deed of trust, loan or credit agreement, other guaranty or other agreement or instrument to which Guarantor is now a party or by which it is bound (other than this Guaranty) or (iii) any of the terms, conditions or provisions of Guarantor’s charter or by-laws or any similar organizational documents of Guarantor.

(d)Performance.  Guarantor does not believe, nor does Guarantor have any reason or cause to believe, that Guarantor cannot perform each and every covenant contained in this Guaranty.

(e)Ordinary Course Transaction.  Performance of Guarantor’s obligations under this Guaranty is in the ordinary course of Guarantor’s business.

(f)Litigation; Compliance with Laws.  There is no Litigation pending or, to Guarantor’s knowledge threatened, that might have a Material Adverse Effect.  Guarantor has not violated any Requirement of Law applicable to Guarantor that could reasonably be expected to have a Material Adverse Effect.

(g)Statements Made.  The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of Guarantor to Chase in connection with the negotiation, preparation or delivery of this Guaranty or included herein or delivered pursuant hereto, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by or on behalf of Guarantor to Chase in connection with this Guaranty and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified.  There is no fact known to a Responsible Officer of Guarantor that, after due inquiry, could reasonably be expected to have a Material Adverse Effect that has not been disclosed herein, in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to Chase for use in connection with the transactions contemplated hereby.

(h)Solvency.  As of the date hereof and immediately after giving effect to each Transaction under the Repurchase Agreement, the fair value of the assets of Guarantor is greater than the fair value of Guarantor’s liabilities (including, without limitation, contingent liabilities if and to the extent required to be recorded as a liability on Guarantor’s financial statements in accordance with GAAP), and Guarantor is not insolvent (as defined in 11 U.S.C. § 101(32)), is able to pay its debts as they mature and does not have an unreasonably small capital to engage in the business in which it is engaged and proposes to engage.  Guarantor does not intend to incur, or believe that it has incurred, debts beyond its ability to pay as they mature.  Guarantor is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of Guarantor or any of its assets.

(i)Financial Condition.  Guarantor’s balance sheet and statement of income and cash flows heretofore furnished to Chase fairly present in all material respects the financial 

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condition of Guarantor as of their respective dates and the results of Guarantor’s operations for the periods ended on their respective dates.  As of such dates, Guarantor had no known material liabilities, direct or indirect, fixed or contingent, matured or unmatured, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against on, said balance sheets and related statements, and at the present time there are no material unrealized or anticipated losses from any loans, advances or other commitments of Guarantor except as heretofore disclosed to Chase in writing.  Said financial statements were prepared in accordance with GAAP applied on a consistent basis throughout the periods involved.  Since the date of the most recently-provided financial statements, no event or events have occurred that have had a Material Adverse Effect, nor is a Responsible Officer of Guarantor aware of any state of facts particular to Guarantor that (with or without notice or lapse of time or both) could reasonably be expected to have a Material Adverse Effect.

(j)Regulation U.  Guarantor is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any sales made under the Repurchase Agreement will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock.

(k)Investment Company Act.  Guarantor is not an “investment company” or controlled by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

(l)Agreements.  Guarantor is not a party to any agreement, instrument or indenture, or subject to any restriction, materially adversely affecting its business, operations, assets or financial condition, except as disclosed in the financial statements referred to in Section 3(g).  Guarantor is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement, instrument, or indenture which default would, or could reasonably be expected to, have a Material Adverse Effect.  As of the date of this Guaranty, no holder of any Debt of Guarantor has given notice of any alleged default thereunder, or, if given, the same has been cured or will be cured by Guarantor within the cure period provided therein, or has been waived in writing by such holder.  No liquidation or dissolution of Guarantor and no receivership, insolvency, bankruptcy, reorganization or other similar proceedings relative to Guarantor or any of Guarantor’s property is pending or, to the knowledge of any Responsible Officer of Guarantor, threatened. 

(m)Title to Properties.  Guarantor has good, valid, insurance (in the case of real property) and marketable title to all of its properties and assets (whether real or personal, tangible or intangible) reflected on the financial statements delivered pursuant to Section 4(g)4(g).

(n)ERISA.  All plans of a type described in Section 3(3) of ERISA (“Plans”) in respect of which Guarantor is an “employer,” as defined in Section 3(5) of ERISA, are in substantial compliance with ERISA, and none of such Plans is insolvent or in reorganization, has an accumulated or waived funding deficiency within the meaning of Section 412 of the Internal Revenue Code, and Guarantor has not incurred any material liability (including any material 

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contingent liability) to or on account of any such Plan pursuant to Sections 4062, 4063, 4064, 4201 or 4204 of ERISA; and no proceedings have been instituted to terminate any such Plan, and no condition exists which presents a material risk to Guarantor of incurring a liability to or on account of any such Plan pursuant to any of the foregoing Sections of ERISA.  No Plan or trust forming a part thereof has been terminated since December 1, 1974.

(o)Proper Names.  Guarantor does not operate in any jurisdiction under a trade name, division, division name or name other than those names previously disclosed in writing by Guarantor to Chase, and all such names are utilized by Guarantor only in the jurisdiction(s) identified in such writing.

(p)No Undisclosed Liabilities.  Other than as disclosed in the most current financial statements delivered to Buyer, Guarantor does not have any liabilities or Debt, direct or contingent.  This representation initially refers to the financial statements referred to in Section 3(i) and will be deemed republished concurrently with delivery to Buyer of updated financial statements pursuant to Sections 4(g)(i) and 4(g)(ii).

(q)Tax Returns and Payments.  All federal, state and local income, excise, property and other tax returns required to be filed with respect to Guarantor in any jurisdiction have been filed on or before the due date thereof (plus any applicable extensions); all such returns are true and correct; all taxes, assessments, fees and other governmental charges upon Guarantor, and upon Guarantor’s property, income or franchises, which are due and payable have been paid, including, without limitation, all FICA payments and withholding taxes, if appropriate, other than those which are being contested in good faith by appropriate proceedings, diligently pursued and as to which Guarantor has established adequate reserves determined in accordance with GAAP consistently applied.  The amounts reserved, as a liability for income and other taxes payable, in the financial statements described in Section 3(i) are sufficient for payment of all unpaid federal, state and local income, excise, property and other taxes, whether or not disputed, of Guarantor, accrued for or applicable to the period and on the dates of such financial statements and all years and periods prior thereto and for which Guarantor may be liable in Guarantor’s own right or as transferee of the assets of, or as successor to, any other Person.

(r)Subsidiaries.  Guarantor has not issued, and does not have outstanding, any warrants, options, rights or other obligations to issue or purchase any shares of its capital stock or other securities.  The outstanding shares of capital stock or other indicia of equity of Guarantor have been duly authorized and validly issued and are fully paid and non-assessable. 

(s)Place of Business and Formation.  As of the date of this Guaranty, the principal place of business of Guarantor is 6101 Condor Dr., Third Floor, Moorpark, California 93021.  As of the date hereof, and during the four (4) months immediately preceding that date, (i) the chief executive office of Guarantor and the office where Guarantor’s financial books and records relating to Guarantor’s property and all contracts relating thereto and all accounts arising therefrom are kept is and has been located at that address.

(t)Guarantor is a REIT. 

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4.Covenants of Guarantor.  Guarantor hereby covenants with Chase as follows:

(a)Maintenance of Existence; Conduct of Business.  Guarantor will preserve and maintain its corporate or other existence in good standing.  Whether Guarantor is a corporation, partnership, limited liability company or another type of entity, Guarantor will (i) maintain all of Guarantor’s rights, privileges, licenses and franchises necessary in the normal conduct of Guarantor’s business and conduct such business in an orderly and efficient manner, (ii) keep adequate books and records of Guarantor’s business activities and (iii) make no material change in the nature or character of Guarantor’s business.  

(b)Compliance with Applicable Laws.  Guarantor will comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, a breach of which could materially adversely affect Guarantor’s business, operations, assets or financial condition, except where contested in good faith and by appropriate proceedings, and with sufficient reserves established therefor.

(c)Inspection of Properties and Books.  Guarantor will permit authorized representatives of Chase to (a) discuss the business, operations, assets and financial condition of Guarantor with Guarantor’s officers, employees and accountants and to examine Guarantor’s books of account, records, reports and other papers and make copies or extracts thereof and (b) inspect all of Guarantor’s property and all related information and reports at Guarantor’s expense, all at such reasonable times as Chase may request.

(d)Notices.  During the period of this Guaranty, Guarantor will promptly notify Chase of the occurrence of any of the following and provide such additional documentation and cooperation as Chase may request with respect to any of the following:

(1)any change in Guarantor’s business address or telephone number;

(2)Any merger, consolidation or reorganization of Guarantor, or any changes in Guarantor’s ownership, or ownership of Guarantor’s business, by direct or indirect means.  “Indirect” means any change in ownership of a controlling interest of Guarantor’s direct or indirect corporate parent, if any;

(3)any change of Guarantor’s name;

(4)any significant adverse change in Guarantor’s financial position;

(5)entry of any court judgment or regulatory order in which Guarantor may be required to pay a claim or claims which could have a Material Adverse Effect;

(6)the filing of any petition, claim or lawsuit against Guarantor which could reasonably be expected to have a Material Adverse Effect;

(7)Guarantor admits to committing, or is found to have committed, a material violation of any law, regulation or order relating to its business operations;

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(8)the initiation of any investigations, audits, examinations or reviews of Guarantor by an Agency, any local, state or federal agency or any trade association or consumer advocacy group relating to the business operations of Guarantor with the exception of normally scheduled audits or examinations by Guarantor’s regulators;

(9)any disqualification or suspension of Guarantor by an Agency, including any notification or knowledge from any source of any disqualification or suspension, or any warning of any such disqualification or suspension or impending or threatened disqualification or suspension; 

(10)the filing, recording or assessment of any federal, state or local tax Lien against Guarantor;

(11)the occurrence of any Guarantor Event of Default or the occurrence of any default under this Guaranty and continuation thereof for five (5) days; or 

(12)any other action, event or condition of any nature that has or could reasonably be expected to have a Material Adverse Effect or that, with or without notice or lapse of time or both, will constitute a default under any other agreement, instrument or indenture to which Guarantor is a party or to which Guarantor’s properties or assets may be subject.

(e)Payment of Debt, Taxes, Etc.

(i)Pay Taxes.  Guarantor shall pay and perform all material obligations and material Debt of Guarantor in accordance with its terms, and pay and discharge or cause to be paid and discharged all taxes, assessments and governmental charges or levies imposed on Guarantor or on its income, receipts or properties, before the same shall become past due, as well as all lawful claims for labor, materials or supplies or otherwise which, if unpaid, might become a Lien or charge upon such properties or any part thereof; provided that Guarantor shall not be required to pay obligations, Debt, taxes, assessments or governmental charges or levies or claims for labor, materials or supplies for which Guarantor shall have obtained an adequate bond or adequate insurance or which are being contested in good faith and by proper proceedings that are being reasonably and diligently pursued, if such proceedings do not involve any likelihood of the sale, forfeiture or loss of any such property or any interest therein while such proceedings are pending; and provided further that book reserves adequate under GAAP shall have been established with respect thereto.

(ii)Payments Free and Clear; Other Taxes; Indemnity; Foreign Buyers; Provisions Survive Termination.

(1)All payments made by Guarantor under this Guaranty shall be made free and clear of, and without deduction or withholding for or on account of, any present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities (including penalties, interest and additions to tax) with respect thereto imposed by any Governmental Authority, excluding taxes imposed on (or measured by) its net income (however denominated) or capital, branch profits taxes, franchise taxes or any other tax imposed on the net income by the 

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United States, a state or a foreign jurisdiction under the laws of which Chase is organized or of its applicable lending office, or any political subdivision thereof (collectively, “Taxes”), all of which shall be paid by Guarantor for Guarantor’s own account not later than the date when due.  If Guarantor is required by Requirement of Law to deduct or withhold any Taxes from or in respect of any amount payable hereunder, it shall: (a) make such deduction or withholding; (b) pay the amount so deducted or withheld to the appropriate Governmental Authority not later than the date when due; (c) deliver to Chase, promptly, original tax receipts and other evidence satisfactory to Chase of the payment when due of the full amount of such Taxes and (d) pay to Chase such additional amounts as may be necessary so that such Chase receives, free and clear of all Taxes, a net amount equal to the amount it would have received under this Guaranty, as if no such deduction or withholding had been made.

(2)In addition, Guarantor agrees to pay to the relevant Governmental Authority in accordance with all applicable Requirements of Law any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (including, without limitation, mortgage recording taxes, transfer taxes and similar fees) imposed by the United States or any taxing authority thereof or therein that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Guaranty (“Other Taxes”).

(3)Guarantor agrees to indemnify Chase for the full amount of Taxes (including additional amounts with respect thereto) and Other Taxes, and the full amount of Taxes of any kind imposed by any jurisdiction on amounts payable under this Guaranty, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, provided that Chase shall have provided Guarantor with evidence, reasonably satisfactory to Guarantor, of payment of Taxes or Other Taxes, as the case may be.

(4)Any assignee of Chase that is not incorporated or otherwise created under the laws of the United States, any State thereof, or the District of Columbia (a “Foreign Buyer”) shall provide Guarantor with properly completed United States Internal Revenue Service (“IRS”) Form W-8BEN or W-8ECI or any successor form prescribed by the IRS, certifying that such Foreign Buyer is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Guaranty is effectively connected with the conduct of a trade or business in the United States on or prior to the date upon which each such Foreign Buyer becomes a purchaser of Mortgage Loans under the Repurchase Agreement.  Each Foreign Buyer will resubmit the appropriate form on the earliest of (x) the third anniversary of the prior submission or (y) on or before the expiration of thirty (30) days after there is a “change in circumstances” with respect to such Foreign Buyer as defined in Treas. Reg. Section 1.1441(e)(4)(ii)(D).  For any period with respect to which a Foreign Buyer has failed to provide Guarantor with the appropriate form or other relevant document pursuant to this subparagraph (unless such failure is due to a change in any Requirement of Law occurring subsequent to the date on which a form originally was required to be provided), such Foreign Buyer shall not be entitled to any “gross-up” of Taxes or indemnification under this Section 4(e) with respect to Taxes imposed by the United States; provided that should a Foreign Buyer which is otherwise exempt from a withholding tax, become subject to Taxes because of its failure to deliver a form 

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required hereunder, Guarantor shall take such steps as such Foreign Buyer shall reasonably request to assist such Foreign Buyer to recover such Taxes.

(5)Without prejudice to the survival or any other agreement of Guarantor hereunder, the agreements and obligations of Guarantor contained in this Section 4(e) shall survive the termination of this Guaranty.  Nothing contained in this Section 4(e) shall require Chase to make available any of its tax returns or other information that it deems to be confidential or proprietary.

(f)Insurance.  Guarantor shall maintain (a) errors and omissions insurance or mortgage impairment insurance and blanket bond coverage, with such companies; (b) liability insurance and fire and other hazard insurance on its properties, with responsible insurance companies approved by Chase, in such amounts and against such risks as is customarily carried by similar businesses operating in the same vicinity; and (c) within thirty (30) days after notice from Chase, obtain such additional insurance as Chase shall reasonably require, all at the sole expense of Guarantor.  Photocopies of such policies shall be furnished to Chase without charge upon obtaining such coverage or any renewal of or modification to such coverage.

(g)Financial Statements and Other Reports.

(i)As soon as available and in any event not later than forty-five (45) days after the end of each calendar month, statements of income and changes in stockholders’ equity and cash flow of Guarantor and its Subsidiaries on a consolidated basis for the immediately preceding month, and related balance sheet as at the end of the immediately preceding month, all in reasonable detail, prepared in accordance with GAAP applied on a consistent basis, and certified as to the fairness of presentation by a Responsible Officer of Guarantor, subject, however, to normal year-end audit adjustments;

(ii)As soon as available and in any event not later than ninety (90) days after the end of each fiscal year of Guarantor, statements of income, changes in stockholders’ equity and cash flows of Guarantor and its Subsidiaries on a consolidated basis for the preceding fiscal year, the related balance sheet as at the end of such year (setting forth in comparative form the corresponding figures for the preceding fiscal year), all in reasonable detail, prepared in accordance with GAAP applied on a consistent basis throughout the periods involved, and accompanied by an opinion in form and substance satisfactory to Chase and prepared by an accounting firm reasonably satisfactory to Chase, or other independent certified public accountants of recognized standing selected by Guarantor and acceptable to Chase, as to said financial statements and a certificate signed a Responsible Officer of Guarantor stating that said financial statements fairly present the financial condition and results of operations of Guarantor as at the end of, or for, such year;

(iii)From time to time, with reasonable promptness, such further information regarding the business, operations, properties or financial condition of Guarantor as Chase may reasonably request.

(h) REIT Status.  Guarantor is a REIT and for its current taxable year is 

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entitled to a dividends paid deduction under the requirements of Section 857 of the IRCwith respect to any dividends paid by it with respect to each taxable year for which it claims a deduction in its Form 1120-REIT filed with the IRS.

(i)Financial Covenants.

(i)Leverage Ratio.  Guarantor shall not permit the Leverage Ratio of it and its Subsidiaries on a consolidated basis, computed as of the end of each calendar month, to exceed 5.0 to 1.0.

(ii)Minimum Tangible Net Worth.  Guarantor shall not permit the Tangible Net Worth of Guarantor and its Subsidiaries on a consolidated basis, computed as of the end of each calendar month, to be less than Eight Hundred Sixty Million Dollars ($860,000,000).

(iii)Maintenance of Liquidity.  Guarantor shall not permit the unencumbered Liquidity of it and its Subsidiaries on a consolidated basis, computed as of the end of each calendar month, to be less than Forty Million Dollars ($40,000,000).

(iv)Net Income.  Guarantor shall test its net income at the end of each calendar quarter and shall not permit its net income before taxes for more than one of any two successive calendar quarters to be less than One Dollar ($1). 

(j)Use of Chase’s Name.  Guarantor shall confine its use of Chase’s logo and the “Chase” and “JPMorgan” names to those uses specifically authorized by Chase in writing.

(k) Transactions with Affiliates.  Guarantor will not and will not permit any of its Subsidiaries to enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any of Guarantor’s Affiliates unless such transaction is (a) otherwise permitted under this Guaranty or the Repurchase Agreement, (b) in the ordinary course of Guarantor’s or such Subsidiary’s business and (c) upon fair and reasonable terms no less favorable to Guarantor or such Subsidiary than it would obtain in a comparable arm’s-length transaction with a Person which is not an Affiliate.

(l)Further Assurances.  Guarantor agrees to do such further acts and things and to execute and deliver to Chase such additional assignments, acknowledgments, agreements, powers and instruments as are reasonably required by Chase to carry into effect the intent and purposes of this Guaranty or to better assure and confirm unto Chase its rights, powers and remedies hereunder.

5.Right of Setoff. Upon the occurrence and during the continuance of any Event of Default, Guarantor hereby irrevocably authorizes Chase or any of its Affiliates at any time and from time to time without notice to Guarantor, any such notice being expressly waived by Guarantor, to set off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Chase or any of its Affiliates to or for the credit or the account of Guarantor, or any part thereof in such amounts as Chase may elect, against and on 

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account of the obligations and liabilities of Guarantor to Chase hereunder and claims of every nature and description of Chase or any of its Affiliates against Guarantor, in any currency, whether arising hereunder, under the Repurchase Agreement or under any other Transaction Document, as Chase may elect, whether or not Chase has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured.  Chase shall notify Guarantor promptly of any such setoff and the application made by Chase; provided that the failure to give such notice shall not affect the validity of such setoff and application.  The rights of Chase and its Affiliates under this Section are in addition to other rights and remedies (including without limitation, other rights of setoff) which Chase and its Affiliates may have.

6.No Subrogation. Notwithstanding any payment or payments made by Guarantor hereunder or any setoff or application of funds of Guarantor by Chase or any of its Affiliates, Guarantor shall not be entitled to be subrogated to any of the rights of Chase against Sellers, or either of them, or any other guarantor or any collateral security or guarantee or right of offset held by Chase for the payment of the Obligations, nor shall Guarantor seek or be entitled to seek any contribution or reimbursement from Sellers or any other guarantor in respect of payments made by Guarantor hereunder, until all amounts owing to Chase by Sellers on account of the Obligations are paid and satisfied in full and the Repurchase Agreement is terminated.  If any amount shall be paid to Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid and satisfied in full, such amount shall be held by Guarantor in trust for Chase, segregated from other funds of Guarantor, and, forthwith upon receipt by Guarantor, shall be turned over to Chase in the exact form received by Guarantor (duly indorsed by Guarantor to Chase, if required), to be applied against the Obligations, whether matured or unmatured, in such order as Chase may determine.

7.Amendments, Etc. with Respect to the Obligations. Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against Guarantor and without notice to or further assent by Guarantor, any demand for payment of any of the Obligations made by Chase may be rescinded and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, terminated, waived, surrendered or released by Chase, and the Repurchase Agreement and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as Chase may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by Chase for the payment of the Obligations may be sold, exchanged, waived, surrendered or released.  Chase shall not have any obligation to protect, secure, perfect or insure any lien at any time held by it as security for the Obligations or for this Guaranty or any property subject thereto.  When making any demand hereunder against Guarantor, Chase may, but shall be under no obligation to, make a similar demand on either or both Sellers or any other guarantor, and any failure by Chase to make any such demand or to collect any payments from either or both Sellers or any such other guarantor or any release of either or both Sellers or such other guarantor shall not relieve Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of Chase against Guarantor.  For the 

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purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.

8.Waiver of Rights. Guarantor waives any and all notice of any kind including, without limitation, notice of the creation, renewal, extension or accrual of any of the Obligations, and notice of or proof of reliance by Chase upon this Guaranty or acceptance of this Guaranty; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guaranty; and all dealings between Sellers and Guarantor, on the one hand, and Chase, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Guaranty.  Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon either or both Sellers or Guarantor with respect to the Obligations.  Guarantor waives every right and defense to which it may be entitled by virtue of any suretyship or similar law, including, without limitation, failure of consideration, fraud by or affecting any Person, usury, forgery, breach of warranty, failure to satisfy any requirement of the statute of frauds, running of any statute of limitation, accord and satisfaction and any defense based on election of remedies of any type.  In addition, Guarantor waives any requirement that Chase exhaust any right, power or remedy or proceed against either or both Sellers.

9.Guaranty Absolute and Unconditional. Guarantor understands and agrees that this Guaranty shall be construed as a continuing, absolute and unconditional guarantee of the full and punctual payment and performance by Sellers of the Obligations and not of their collection or collectability only and is in no way conditioned upon any requirement that Chase first attempt to collect any of the obligations from either or both Sellers, without regard to (a) the validity, regularity or enforceability of the Repurchase Agreement or any other Transaction Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by Chase, (b) any defense, setoff, deduction, abatement, recoupment, reduction or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by either or both Sellers against Chase or (c) any other circumstance whatsoever (with or without notice to or knowledge of either or both Sellers or Guarantor) that constitutes, or might be construed to constitute, an equitable or legal discharge of either or both Sellers from the Obligations, or of Guarantor from this Guaranty, in bankruptcy or in any other instance.  When pursuing its rights and remedies hereunder against Guarantor, Chase may, but shall be under no obligation to, pursue such rights, powers, privileges and remedies as it may have against either or both Sellers or any other Person or against the Mortgage Assets or any other collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by Chase to pursue such other rights or remedies or to collect any payments from either or both Sellers or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of either or both Sellers or any such other Person or any such collateral security, guarantee or right of offset, shall not relieve Guarantor of any liability hereunder, and shall not impair or affect the rights, powers, privileges and remedies, whether express, implied or available as a matter of law or equity, of Chase against Guarantor.  This Guaranty shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon Guarantor and the successors and assigns thereof, and shall inure to the benefit of Chase, and its successors, indorsees, transferees and assigns, until all of the Obligations and the obligations of 

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Guarantor under this Guaranty shall have been satisfied by performance and payment in full and the Repurchase Agreement and the other Transaction Documents shall have been terminated, notwithstanding that from time to time during the term of the Repurchase Agreement either or both Sellers may be free from any Obligations.

10.Event of Default.  If an Event of Default under the Repurchase Agreement shall have occurred and be continuing, Guarantor agrees that, as between Guarantor and Chase, the Obligations may be declared to be due for purposes of this Guaranty notwithstanding any stay, injunction or other prohibition which may prevent, delay or vitiate any such declaration as against either or both Sellers and that, in the event of any such declaration (or attempted declaration), such Obligations shall forthwith become due by Guarantor for purposes of this Guaranty.

11.Guarantor Events of Default.  The following events each constitutes a “Guarantor Event of Default” which shall also be deemed to be an Event of Default under the Repurchase Agreement:

(a)Guarantor shall default in the payment of any amount required to be paid by it under this Guaranty; or

(b)any representation or warranty made by Guarantor in connection with this Guaranty or contained herein is inaccurate or incomplete in any material respect on or as of the date made or hereafter becomes untrue; or 

(c)Guarantor shall fail to comply with any of the requirements set forth in Section 4(i) (Financial Covenants); or

(d)Guarantor shall fail to observe or perform any other duty, responsibility or obligation contained in the Transaction Documents (other than the other Guarantor Events of Default identified elsewhere in this Section 11) and such failure to observe or perform shall continue unremedied for a period of five (5) days; or

(e)any Act of Insolvency by or in respect of Guarantor occurs; or

(f)Guarantor shall fail to (i) continue to be qualified as a REIT or (b) to continue to be entitled to a dividends paid deduction under the requirements of Section 857 of the IRC with respect to any dividends paid by it with respect to each taxable year for which it claims a deduction in its Form 1120-REIT filed with the IRS; or 

(g)one or more judgments or decrees are entered against Guarantor involving claims of Ten Million Dollars ($10,000,000) in the aggregate, not paid or not fully covered by insurance, and all such judgments or decrees are not vacated, discharged, or stayed or bonded pending appeal within thirty (30) days from entry thereof; or

(h)there is a default under any agreement, if any, that Guarantor or any of its Affiliates or Subsidiaries has with Chase or any of its Affiliates or Subsidiaries and that relates to 

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Debt to Chase or any of its Affiliates or Subsidiaries of One Million Dollars ($1,000,000) or more; or

(i)Guarantor fails to pay when due any other Debt of Ten Million Dollars ($10,000,000) or more beyond any period of grace provided, or there occurs any breach or default with respect to any material term of any other Debt if the effect of such failure, breach or default is to cause, or to permit the holder or holders thereof (or a trustee on behalf of such holder or holders) to cause, Debt of Guarantor of Ten Million Dollars ($10,000,000) or more to become or be declared due prior to its stated maturity (upon the giving or receiving of notice, lapse of time, both, or otherwise); or

(j)any one or more events have occurred that have had a Material Adverse Effect; or

(k)any Governmental Authority or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the assets of Guarantor, or shall have taken any action to displace the management of Guarantor or to curtail its authority in the conduct of the business of Guarantor, and such action shall not have been discontinued or stayed within thirty (30) days; or

(l)this Guaranty ceases to be in full force and effect, or Guarantor’s material obligations under this Guaranty shall cease to be in full force and effect, or Guarantor shall contest the enforceability thereof; or

(m)any Change in Control of Guarantor or Guarantor’s business shall have occurred without Chase’s prior consent or a material change in the management of Guarantor shall have occurred which has not been approved by Chase; or

(n)the initiation of any investigation of Guarantor by any state or federal agency, that is reasonably likely to have a material adverse effect on Guarantor’s ability to perform its obligations under this Guaranty; or

(o)any other event shall occur with respect to Guarantor that Chase determines, in its sole discretion, has had a Material Adverse Effect.

12.Reinstatement. This Guaranty shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by Chase upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of either or both Sellers or Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, either or both Sellers or Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.

13.Payments. Guarantor hereby guarantees that payments hereunder will be paid to Chase without deduction, abatement, recoupment, reduction, setoff or counterclaim in U.S. Dollars in accordance with the wiring instructions of Chase.

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14.Notices. All notices, requests and other communications provided for herein (including without limitation any modifications of, or waivers, requests or consents under, this Guaranty) shall be given or made in writing (including without limitation by email or telecopy) and delivered to the intended recipient at the “Address for Notices” specified on the signature page hereto; or, as to any party, at such other address as shall be designated by such party in a written notice to each other party. All such communications shall be deemed to have been received on the date delivered to or received at the premises of the addressee.

15.Severability. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

16.Integration. This Guaranty and the other Transaction Documents represent the agreement of Guarantor with respect to the subject matter hereof and thereof and there are no promises or representations by Chase relative to the subject matter hereof or thereof not reflected herein or therein.

17.Amendments in Writing; No Waiver; Cumulative Remedies. 

(a)None of the terms or provisions of this Guaranty may be waived, amended, supplemented or otherwise modified except by a written instrument executed by Guarantor and Chase; provided that any provision of this Guaranty may be waived in writing by Chase.

(b)Chase shall not be deemed by any act (except by a written instrument pursuant to Section 17(a)), delay, indulgence, omission or otherwise be deemed to have waived any right, power, privilege or remedy hereunder or to have acquiesced in any Default or Event of Default, Guarantor Event of Default, or in any breach of any of the terms and conditions hereof.  No failure to exercise, nor any delay in exercising, on the part of Chase, any right, power, remedy or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power, remedy or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  A waiver by Chase of any right, power, privilege or remedy hereunder on any one occasion shall not be construed as a bar to any right, power, privilege or remedy which Chase would otherwise have on any future occasion.

(c)The rights, powers, privileges and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights, powers, privileges or remedies provided by law.

18.Subordination of Sellers’ Obligations to Guarantor.  Guarantor agrees that if, for any reason whatsoever, either or both Sellers is now or hereafter becomes liable, obligated or indebted to Guarantor, all such liabilities, obligations and indebtedness, together with all interest thereon and fees and other charges in connection therewith, and all liens, security interests, charges and other security devices, shall at all times, be second, subordinate and inferior in right 

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of payment, in lien priority and in all other respects to the Obligations and to all liens, collateral assignments, security interests and other security devices or arrangements securing the Obligations.

19.Section Headings. The section headings used in this Guaranty are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation of this Guaranty.

20.Successors and Assigns. This Guaranty shall bind the successors and permitted assigns of Guarantor and benefit Chase and its successors and assigns.  This Guaranty may not be assigned or delegated by Guarantor without the express written consent of Chase in its sole discretion and any attempt to assign, delegate or transfer this Guaranty without such consent shall be null and void and of no effect whatsoever.

21.Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (EXCEPT FOR SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

22.Waiver of Jury Trial; Consent to Jurisdiction and Venue; Service of Process.  GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY.  GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT GUARANTOR MAY EFFECTIVELY DO SO, ANY OBJECTION WHICH GUARANTOR MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  NOTHING IN THIS SECTION 21 SHALL AFFECT THE RIGHT OF CHASE TO BRING ANY ACTION OR PROCEEDING AGAINST GUARANTOR OR ITS PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.  EACH PARTY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO IT AT ITS ADDRESS FOR NOTICES SPECIFIED ON THE SIGNATURE PAGE HERETO.

EACH OF GUARANTOR AND CHASE HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN GUARANTOR AND CHASE ARISING OUT OF OR IN ANY WAY RELATED TO THIS GUARANTY OR ANY OTHER TRANSACTION DOCUMENT.  THIS PROVISION IS A MATERIAL INDUCEMENT TO CHASE TO PROVIDE THE FACILITY EVIDENCED BY THE AGREEMENT.

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23.Joint and Several.  If any other Person in any manner or by any means or method also guarantees payment, performance or both payment and performance, of any or all of the Obligations, Guarantor shall be jointly and severally liable with such other Person for payment and performance of those Obligations.

24.Agents. Chase may employ agents and attorneys-in-fact in connection herewith and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith.

25.Counterparts. This Guaranty may be executed in any number of counterparts, all of which when taken together shall constitute one and the same instrument and any of the parties hereto may execute this Guaranty by signing any such counterpart.

(The remainder of this page is intentionally blank; counterpart signature pages follow.)

 

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IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly executed and delivered as of the day and year first above written.

 

		
	
PENNYMAC MORTGAGE 

INVESTMENT TRUST

 

By:/s/ Pamela Marsh

Pamela Marsh

Managing Director, Treasurer
	
JPMORGAN CHASE BANK, N.A.

 

 

By:/s/ Lee Chung

Lee Chung

Authorized Officer

	
Address for Notices:

 

PennyMac Mortgage Investment Trust

3043 Townsgate Road, Third Floor

Westlake Village, CA 91361

Phone: (805) 330-6059 

Fax: (818) 936-0145

email:  pamela.marsh@pnmac.com

 
	
Address for Notices:

JPMorgan Chase Bank, N.A.

712 Main Street, 3rd Floor North

Houston, Texas 77002

Attention:  Lee Chung

Phone:  (713) 216-1847

Fax:  (713) 216-5570

email:  lee.s.chung@jpmorgan.comEX-10.1

 Exhibit 10.1 
 MICROSOFT CORPORATION 
 2001 STOCK PLAN 

(as amended effective as of July 26, 2016) 
 1. Purpose of the Plan.    The purposes of this Stock Plan are to attract and retain the best available individuals for positions of substantial responsibility, to provide additional
incentive to such individuals, and to promote the success of the Company’s business by aligning the financial interests of Employees and Consultants providing personal services to the Company or to any Parent or Subsidiary of the Company with
long-term shareholder value. 
 Awards granted hereunder may be Incentive Stock Options, Nonqualified Stock Options, Stock Awards, or
SARs, at the discretion of the Board and as reflected in the terms of the Award Agreement. 
 2.
Definitions.    As used herein, the following definitions shall apply: 
 (a) “Award” shall
mean any award or benefits granted under the Plan, including Options, Stock Awards, and SARs. 
 (b) “Award Agreement”
shall mean a written or electronic agreement between the Company and the Awardee setting forth the terms of the Award. 
 (c)
“Awardee” shall mean the holder of an outstanding Award. 
 (d) “Board” shall mean (i) the Board of
Directors of the Company or (ii) both the Board and the Committee, if a Committee has been appointed in accordance with Section 4(a) of the Plan. 
 (e) “Code” shall mean the Internal Revenue Code of 1986, as amended. 
 (f)
“Committee” shall mean the Compensation Committee appointed by the Board of Directors in accordance with Section 4(a) of the Plan, if one is appointed; provided, however, if the Board of Directors appoints more than one Committee
pursuant to Section 4(a), then “Committee” shall refer to the appropriate Committee, as indicated by the context of the reference. 
 (g) “Common Shares” shall mean the common shares of Microsoft Corporation. 
 (h)
“Company” shall mean Microsoft Corporation, a Washington corporation and any successor thereto. 
 (i)
“Consultant” shall mean any person, except an Employee, engaged by the Company or any Parent or Subsidiary of the Company, to render personal services to such entity, including as an advisor. 

(j) “Continuous Status as a Participant” shall mean (1) for Employees, the absence of any interruption or termination of service
as an Employee, and (2) for Consultants, the absence of any interruption, expiration, or termination of such person’s consulting or advisory relationship with the Company or the occurrence of any termination event as set forth in such
person’s Award Agreement. Continuous Status as a Participant shall not be considered interrupted (i) for an Employee in the case of sick leave, maternity leave, infant care leave, medical emergency leave, military leave, or any other leave of
absence for which Continuous Status is not considered interrupted in accordance with the Company’s policies on such matters, and (ii) for a Consultant, 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. 
 (k)
“Conversion Options” shall mean the Options described in Section 6(c) of the Plan. 
 (l) “Employee”
shall mean any person, including an officer, who is a common law employee of, receives remuneration for personal services to, is reflected on the official human resources database as an employee of, and is on the payroll of the Company or any Parent
or Subsidiary of the Company. A person 

 
is on the payroll if he or she is paid from the payroll department of the Company, or any Parent or Subsidiary of the Company. Persons providing services to the Company, or to any Parent or
Subsidiary of the Company, pursuant to an agreement with a staff leasing organization, temporary workers engaged through or employed by temporary or leasing agencies, and workers who hold themselves out to the Company, Parent, or Subsidiary to which
they are providing services as being independent contractors, or as being employed by or engaged through another company while providing the services are not Employees for purposes of this Plan, whether or not such persons are, or may be
reclassified by the courts, the Internal Revenue Service, the U. S. Department of Labor, or other person or entity as, common law employees of the Company, Parent, or Subsidiary, either solely or jointly with another person or entity. 

(m) “Effective Date” shall mean January 1, 2001. 
 (n) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 
 (o)
“Incentive Stock Option” shall mean any Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. 
 (p) “Maximum Annual Participant Award” shall have the meaning set forth in Section 5(b). 
 (q) “Nonqualified Stock Option” shall mean an Option not intended to qualify as an Incentive Stock Option. 
 (r) “Option” shall mean a stock option granted pursuant to Section 6 of the Plan. 

(s) “Parent” shall mean a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the
Code. 
 (t) “Participant” shall mean an Employee or Consultant. 

(u) “Plan” shall mean this 2001 Stock Plan, including any amendments thereto. 

(v) “Share” shall mean one Common Share, as adjusted in accordance with Section 14 of the Plan. 

(w) “SAR” shall mean a stock appreciation right awarded pursuant to Section 8 of the Plan. 

(x) “Stock Award” shall mean a grant of Shares or of a right to receive Shares or their cash equivalent (or both) pursuant to
Section 7 of the Plan. 
 (y) “Subsidiary” shall mean (i) in the case of an Incentive Stock Option a “subsidiary
corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code, and (ii) in the case of a Nonqualified Stock Option, a Stock Award or an SAR, with the approval of the Board, Committee or other person authorized to
administer the Plan in accordance with Section 4 of the Plan, a limited liability company, partnership or other entity in which the Company controls 50 percent or more of the voting power or equity interests. 

3. Shares Subject to the Plan.    Subject to the provisions of Sections 14 and 16 of the Plan, the maximum aggregate
number of Shares (increased, proportionately, in the event of any stock split, stock dividend or similar event with respect to the Shares) which may be awarded and delivered under the Plan shall not exceed the sum of (a) any Shares available for
future awards, as of the Effective Date, under the Microsoft Corporation 1991 Stock Option Plan, as amended (“1991 Stock Plan”) and (b) any Shares that are represented by awards under the 1991 Stock Plan which, after the Effective Date,
are forfeited, expire, are cancelled without delivery of Shares, or otherwise result in the return of Shares to the Company, minus (c) 100,000,000 Shares (unadjusted for any stock split or stock dividend with respect to the Shares). The Shares may
be authorized, but unissued, or reacquired Common Shares. 

 Subject to the provisions of the following sentence, if an Award should expire or become unexercisable
for any reason without having been exercised in full, the undelivered Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future Awards under the Plan. Notwithstanding anything to the contrary
contained herein, any Awards of Options that are transferred to a third party pursuant to a program under which the holder of certain Options may transfer such Options to such third party in exchange for cash or other consideration, shall be removed
from the Plan and the Shares subject to such Awards shall not be available for regrant under the Plan regardless of whether the transferred Options are exercised or expire without exercise. 

4. Administration of the Plan. 
 (a) Procedure.    The Plan shall be administered by the Board of Directors of the Company. 
 (i) The Board of Directors may appoint one or more Committees each 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 Committees shall continue to serve until otherwise directed by the Board of Directors. 
 (ii) From time to time the Board of Directors may increase the size of the Committee(s) and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution
therefor, or fill vacancies however caused. 
 (iii) The Committee(s) appointed to administer the Plan on behalf of the Board of Directors
may delegate its authority to administer the Plan to the extent provided in the charter for the Committee(s) or a resolution of the Board. 
 (b) Powers of the Board.    Subject to the provisions of the Plan, the Board shall have the authority, in its discretion: (i) to grant Incentive Stock Options, Nonqualified Stock Options,
Stock Awards, and SARs; (ii) to determine, in accordance with Section 11(b) of the Plan, the fair market value of the Shares; (iii) to determine, in accordance with Section 11(a) of the Plan, the exercise price per share of Awards to be granted;
(iv) to determine the Participants to whom, and the time or times at which, Awards shall be granted and the number of Shares to be represented by each Award; (v) to interpret the Plan and the terms of Awards; (vi) to prescribe, amend, and rescind
rules and regulations relating to the Plan; including the form of Award Agreement, and manner of acceptance of an Award, (vii) to determine the terms and provisions of each Award to be granted (which need not be identical) and, with the consent of
the Awardee, modify or amend any Award; (viii) to authorize conversion or substitution under the Plan of any or all Conversion Options; (ix) to accelerate or defer (with the consent of the Awardee) the vesting or exercise date of any Award; (x) to
authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Award previously granted by the Board; and (xi) to make all other determinations deemed necessary or advisable for the administration of
the Plan; provided that, no consent of an Awardee is necessary under clauses (vii) or (ix) if the modification, amendment, acceleration, or deferral, in the reasonable judgment of the Board confers a benefit on the Awardee, or is made
pursuant to an adjustment in accordance with Section 14. 
 The Board may, but need not, determine that an award shall vest or be granted
subject to the satisfaction of one or more performance goals. Performance goals for awards will be determined by the Compensation Committee of the Board and will be designed to support the business strategy, and align executives’ interests with
customer and shareholder interests. For awards that are intended to qualify as performance-based compensation under Section 162(m), performance goals will be based on one or more of the following business criteria: sales or licensing volume,
revenues, customer satisfaction, expenses, organizational health/productivity, earnings (which includes similar measurements such as net profits, operating profits and net income, and which may be calculated before or after taxes, interest,
depreciation, amortization or taxes), margins, cash flow, shareholder return, return on equity, return on assets or return on investments, working capital, product shipments or releases, brand or product recognition or acceptance and/or stock price.
These criteria may be measured: individually, alternatively or in any combination; with respect to the Company, a subsidiary, division, business unit, product line, product or any combination of the foregoing; on an absolute basis, or relative to a
target, to a designated comparison group, to results in other periods or to other external measures; and including or excluding items that could affect the measurement, such as extraordinary or unusual and nonrecurring gains or

 
losses, litigation or claim judgments or settlements, material changes in tax laws, acquisitions or divestitures, the cumulative effect of accounting changes, asset write-downs, restructuring
charges, or the results of discontinued operations. 
 (c) Effect of Board’s Decision.    All decisions,
determinations, and interpretations of the Board shall be final and binding on all Participants and Awardees. 
 5. Eligibility.

 (a) Awards may be granted to Participants and to persons to whom offers of employment as an Employee have been extended; provided that
Incentive Stock Options may only be granted to Employees. For avoidance of doubt, directors are not eligible to participate in the Plan unless they are Employees or Consultants. 

(b) The maximum number of Shares with respect to which an Award or Awards may be granted to any Participant in any one taxable year of the Company
(the “Maximum Annual Participant Award”) shall not exceed 20,000,000 Common Shares for Options or SARs, or 5,000,000 shares for Stock Awards (increased, in both cases proportionately, in the event of any stock split, stock dividend or
similar event with respect to the Shares). If an Option is in tandem with an SAR, such that the exercise of the Option or SAR with respect to a Share cancels the tandem SAR or Option right, respectively, with respect to each Share, the tandem Option
and SAR rights with respect to each Share shall be counted as covering but one Share for purposes of the Maximum Annual Participant Award. 
 6. Options. 
 (a) Each Option shall be designated in the written or electronic option agreement
as either an Incentive Stock Option or a Nonqualified Stock Option. However, notwithstanding such designations, to the extent that the aggregate fair market value of the Shares with respect to which Options designated as Incentive Stock Options are
exercisable for the first time by any Employee during any calendar year (under all plans of the Company) exceeds $100,000, such Options shall be treated as Nonqualified Stock Options. 

(b) For purposes of Section 6(a), Options shall be taken into account in the order in which they were granted, and the fair market value of the
Shares shall be determined as of the time the Option with respect to such Shares is granted. 
 (c) Options converted or substituted under
the Plan for any or all outstanding stock options and stock appreciation rights held by employees, consultants, advisors or other option holders granted by entities subsequently acquired by the Company or a subsidiary or affiliate of the Company
(“Conversion Options”) shall be effective as of the close of the respective mergers into, or acquisitions of such entities by, the Company or a subsidiary or affiliate of the Company; provided that such Conversion Options may not be
exercised during any periods that may be specified by the Company immediately following the close of the merger or acquisition necessary to ensure compliance with applicable law. The Conversion Options may be Incentive Stock Options or Nonqualified
Stock Options, as determined by the Committee; provided, however, that stock appreciation rights in the acquired entity shall only be converted to or substituted with Nonqualified Stock Options. The Conversion Options shall be options to purchase
the number of Common Shares determined by multiplying the number of shares of the acquired entity’s common stock underlying each such stock option or stock appreciation right immediately prior to the closing of such merger or acquisition by the
number specified in the applicable merger or acquisition agreement for conversion of each share of such entity’s common stock to a Common Share (the “Merger Ratio”), rounded down to the closest whole share. Such Conversion Options
shall be exercisable at an exercise price per Common Share (increased to the nearest whole cent) equal to the exercise price per share of the acquired entity’s common stock under each such stock option or stock appreciation right immediately
prior to closing divided by the Merger Ratio. No fractional Common Shares will be issued upon exercise of Conversion Options. In lieu of such issuance, the Common Shares issued pursuant to each such exercise shall be rounded to the closest whole
Share. Conversion Options may be granted and exercised without the issuance of an Award Agreement. 
 7. Stock Awards. 

(a) Stock Awards may be granted either alone, in addition to, or in tandem with other Awards granted under the Plan. After the Committee determines
that it will offer a Stock Award, it will advise the Awardee in writing or electronically, by means of an Award Agreement, of the terms, conditions and restrictions, 

 
including vesting, if any, related to the offer, including the number of Shares that the Awardee shall be entitled to receive or purchase, the price to be paid, if any, and, if applicable, the
time within which the Awardee must accept the offer. The offer shall be accepted by execution of an Award Agreement in the manner determined by the Committee; provided that Shares may be issued to an Awardee under a fully vested Stock Award without
the issuance of an Award Agreement. 
 (b) Unless the Committee determines otherwise, the Award Agreement shall provide for the forfeiture
of the non-vested Common Shares underlying such Stock Award upon the Awardee ceasing to be a Participant. To the extent that the Awardee purchased the Shares granted under such Stock Award and any such Shares remain non-vested at the time the
Awardee ceases to be a Participant, the cessation of Participant status shall cause an immediate sale of such non-vested Shares to the Company at the original price per Common Share paid by the Awardee. 

8. SARs. 
 (a) The Committee
shall have the full power and authority, exercisable in its sole discretion, to grant SARs to selected Awardees. The Committee is authorized to grant both tandem stock appreciation rights (“Tandem SARs”) and stand-alone stock appreciation
rights (“Stand-Alone SARs”) as described below. 
 (b) Tandem SARs. 

(i) Awardees may be granted a Tandem SAR, exercisable upon such terms and conditions as the Committee shall establish, to elect between the
exercise of the underlying Section 6 Option for Common Shares or the surrender of the Option in exchange for a distribution from the Company in an amount equal to the excess of (A) the fair market value (on the Option surrender date) of the number
of Shares in which the Awardee is at the time vested under the surrendered Option (or surrendered portion thereof) over (B) the aggregate exercise price payable for such vested Shares. 

(ii) No such Option surrender shall be effective unless it is approved by the Committee, either at the time of the actual Option surrender or at
any earlier time. If the surrender is so approved, then the distributions to which the Awardee shall become entitled under this Section 8(b) may be made in Common Shares valued at fair market value on the Option surrender date, in cash, or partly in
Shares and partly in cash, as the Committee shall deem appropriate. 
 (iii) If the surrender of an Option is not approved by the
Committee, then the Awardee shall retain whatever rights he or she had under the surrendered Option (or surrendered portion thereof) on the Option surrender date and may exercise such rights at any time prior to the later of (A) five (5) business
days after the receipt of the rejection notice or (B) the last day on which the Option is otherwise exercisable in accordance with the terms of the instrument evidencing such Option, but in no event may such rights be exercised more than ten (10)
years after the date of the Option grant. 
 (c) Stand-Alone SARs. 

(i) An Awardee may be granted a Stand-Alone SAR not tied to any underlying Option under Section 6 of the Plan. The Stand-Alone SAR shall cover a
specified number of Common Shares and shall be exercisable upon such terms and conditions as the Committee shall establish. Upon exercise of the Stand-Alone SAR, the holder shall be entitled to receive a distribution from the Company in an amount
equal to the excess of (A) the aggregate fair market value (on the exercise date) of the Common Shares underlying the exercised right over (B) the aggregate base price in effect for those Shares. 

(ii) The number of Common Shares underlying each Stand-Alone SAR and the base price in effect for those Shares shall be determined by the Committee
at the time the Stand-Alone SAR is granted. In no event, however, may the base price per Share be less than the fair market value per underlying Common Share on the grant date. 

(iii) The distribution with respect to an exercised Stand-Alone SAR may be made in Common Shares valued at fair market value on the exercise date,
in cash, or partly in Shares and partly in cash, as the Committee shall deem appropriate. 
 (d) The Common Shares underlying any SARs
exercised under this Section 8 shall not be available for subsequent issuance under the Plan. 

 9. Term of Plan.    The Plan shall become effective as of the Effective
Date. It shall continue in effect until terminated under Section 17 of the Plan. 
 10. Term of Award; Limitations on Vesting and
Repricing. 
 (a) The term of each Award shall be no more than ten (10) years from the date of grant. However, in the case of an
Incentive Stock Option granted to a Participant who, at the time the Option is granted, owns Shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the term of the
Option shall be no more than five (5) years from the date of grant. 
 (b) Each Award shall vest over a period of not less than three (3)
years from the date of grant, provided that Awards covering up to 50,000,000 shares (increased, proportionately, in the event of any stock split, stock dividend or similar event) may be granted without regard to the 3-year vesting restriction;
provided further, that Conversion Options and awards that are granted or vest based on performance goals or that vest in less than three (3) years based on death, disability, or retirement shall not count toward the limit of this Section 10(b).

 (c) Without approval of the shareholders of the Company, no Option or SAR may be repriced, replaced, regranted through cancellation,
repurchased for cash or other consideration, or modified (except in connection with an adjustment pursuant to Section 14), in each case if the effect would be to reduce the exercise price for the Shares underlying the Option or SAR. 

11. Exercise Price and Consideration. 
 (a) The per Share exercise price under each Award shall be such price as is determined by the Board, subject to the following: 
 (i) In the case of an Incentive Stock Option 
 (A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the fair
market value per Share on the date of grant. 
 (B) granted to any other Employee, the per Share exercise price shall be no less than 100%
of the fair market value per Share on the date of grant. 
 (ii) Except for Conversion Options under Section 6(c), the per Share exercise
price under a Nonqualified Stock Option or SAR shall be no less than seventy-five percent (75%) of the fair market value per Share on the date of grant. Notwithstanding the foregoing (or any other provision of the Plan), Options and SARs that are
granted to Employees who are non-exempt for purposes of the FLSA, shall satisfy the requirements for exclusion from regular rate of pay for purposes of the FLSA and shall have an exercise price that is at least eighty-five percent (85%) of the fair
market value of the underlying Shares at the time of grant; furthermore, such Options or SARs shall not be exercisable within the six (6) month period immediately following the date of grant, except, if so provided in the Award Agreement, in the
event of the Awardee’s death, disability, or retirement, upon a change in corporate control of the Company, or under such other circumstances as are permitted under the FLSA or rules and regulations thereunder. 

(iii) The maximum aggregate number of Shares underlying all Nonqualified Stock Options and SARs with a per Share exercise price of less than fair
market value on any grant date that may be granted under this Plan is 50,000,000 Shares (increased, proportionately, in the event of any stock split, or stock dividend or similar event with respect to the Shares); provided that Conversion Options
shall not count against the limit of this Section 11(a)(iii). 
 (b) The fair market value per Share shall be the closing price per share
of the Common Share on the Nasdaq Stock Market (“Nasdaq”) on the date of grant. If the Shares cease to be listed on Nasdaq, the Board shall designate an alternative method of determining the fair market value of the Shares. 

(c) The consideration to be paid for the Shares to be issued upon exercise of an Award, 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. If the Awardee is an officer of the Company within the meaning of Section 16 of the Exchange Act, the officer may, in addition, be allowed to pay all or part
of the purchase price with Shares which, as of the exercise date, the officer has owned for six (6) months or more. If the Awardee is a participant in the 1998 Microsoft Corporation Stock Option Gain And Bonus Deferral Program, he may in addition be
allowed to pay all or part of the purchase price of any deferred Option with Shares. Shares used by officers to pay the exercise price shall be valued at their fair market value on the exercise date. 

(d) Prior to issuance of the Shares upon exercise of an Award, the Awardee shall pay any federal, state, and local income and employment tax
withholding obligations applicable to such Award. If an Awardee is an officer of the Company within the meaning of Section 16 of the Exchange Act, he may elect to pay such withholding tax obligations by having the Company withhold Shares having a
value equal to the amount required to be withheld, and any Award under the Plan may permit or require that such withholding tax obligations be paid by having the Company withhold Shares having a value equal to the amount required to be withheld. The
value of the Shares to be withheld shall equal the fair market value of the Shares on the day the Award is exercised. The right of an officer to dispose of Shares to the Company in satisfaction of withholding tax obligations shall be deemed to be
approved as part of the initial grant of an Award, unless thereafter rescinded, and shall otherwise be made in compliance with Rule 16b-3 and other applicable regulations, and any Award under the Plan may permit or require that such withholding tax
obligations be paid by having the Company withhold Shares having a value equal to the amount required to be withheld. 
 12. Exercise
of Award. 
 (a) Procedure for Exercise; Rights as a Shareholder.    Any Award 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 Award may not be exercised for a fraction of a Share. 
 An Award shall be deemed to be exercised
when written or electronic notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award 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 11(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 share certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares subject to the Award,
notwithstanding the exercise of the Award. The Company shall issue (or cause to be issued) such share certificate promptly upon exercise of the Award. In the event that the exercise of an Award is treated in part as the exercise of an Incentive
Stock Option and in part as the exercise of a Nonqualified Stock Option pursuant to Section 6(a), the Company shall issue a share certificate evidencing the Shares treated as acquired upon the exercise of an Incentive Stock Option and a separate
share certificate evidencing the Shares treated as acquired upon the exercise of a Nonqualified Stock Option, and shall identify each such certificate accordingly in its share transfer records. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the share certificate is issued, except as provided in Section 14 of the Plan. 

Exercise of an Award in any manner and delivery of the Shares subject to such Award 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 Award, by the number of Shares as to which the Award is exercised. 
 (b) Termination of Status as a Participant.    In the event of termination of an Awardee’s Continuous Status as a Participant, such Awardee may exercise his or her rights under any
outstanding Awards to the extent exercisable on the date of termination (but in no event later than the date of expiration of the term of such Award as set forth in the Award Agreement). To the extent that the Awardee was not entitled to exercise
his or her rights under such Awards at the date of such termination, or does not exercise such rights within the time specified in the individual Award Agreements, the Awards shall terminate, except as otherwise may be provided in the Award
Agreement. 

 (c) Disability of Awardee.    Notwithstanding the provisions of Section
12(b) above, in the event of termination of an Awardee’s Continuous Status as a Participant as a result of total and permanent disability (i.e., 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) (i) the Awardee is unable to engage in any substantial gainful activity, or (ii) the Awardee has received income replacement benefits for
at least three months under an accident and health plan covering Company employees): 
 (i) Any outstanding but unvested Stock Award shall
become immediately vested (unless otherwise provided in the Award Agreement); and 
 (ii) Any outstanding Option or SAR shall vest, but
only to the extent of the vesting that would have occurred had the Awardee remained in Continuous Status as a Participant for a period of twelve (12) months after the date on which the Participant ceased performing services as a result of the total
and permanent disability. An Option or SAR that is vested pursuant to this Section 12(c) must be exercised within eighteen (18) months (or such shorter time as is specified in the grant) from the date on which the Participant ceased performing
services as a result of the total and permanent disability (but in no event later than the date of expiration of the term of such Option or SAR as set forth in the Award Agreement). To the extent that the Awardee was not entitled to exercise such
Option or SAR within the time specified herein, the Award shall terminate. This Section 12(c) shall only apply to a Conversion Option to the extent provided in the Award Agreement for the Conversion Option. 

(d) Death of Awardee. Notwithstanding the provisions of Section 12(b) above, in the event of the death of an Awardee: 

(i) who is at the time of death a Participant with an outstanding Stock Award, all unvested shares under any outstanding Awards shall become
immediately vested (unless otherwise provided in the Award Agreement). Such shares may be claimed by the Awardee’s estate or by a person who acquired the right to the shares by bequest or inheritance within twelve (12) months following the date
of death. Any right to shares not claimed within twelve (12) months from the date of death shall be canceled. 
 (ii) who is at the time
of death a Participant with an outstanding Option or SAR, the Option or SAR will vest, but only to the extent of the vesting that would have occurred had the Awardee continued living and remained in Continuous Status as a Participant twelve (12)
months following the date of death. An Option or SAR that is vested pursuant to this Section 12(d)(i) may be exercised, at any time within twelve (12) months following the date of death, by the Awardee’s estate or by a person who acquired the
right to exercise the Award by bequest or inheritance; or 
 (iii) whose Option or SAR has not yet expired but whose Continuous Status as
a Participant terminated prior to the date of death, the Option or SAR may be exercised, at any time within twelve (12) months following the date of death, by the Awardee’s estate or by a person who acquired the right to exercise the Option or
SAR by bequest or inheritance, but only to the extent of the right to exercise that had vested at the date of termination. 
 This Section
12(d) shall only apply to a Conversion Option to the extent provided in the Award Agreement for the Conversion Option. 
 (e)
Notwithstanding subsections (b), (c), and (d) of this Section 12, the Board shall have the authority to extend the expiration date of any outstanding Option in circumstances in which it deems such action to be appropriate (provided that no such
extension shall extend the term of an Award beyond the date on which the Award would have expired if no termination of the Employee’s Continuous Status as a Participant had occurred). 

13. Non-Transferability of Awards.    An Award 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 Awardee, only by the Awardee; provided that the Board may permit further transferability, on a general or
specific basis, and may impose conditions and limitations on any permitted transferability. 
 14. Adjustments to Shares Subject to the
Plan.    If any change is made to the Shares by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Shares as a class without the
Company’s receipt of consideration, appropriate 

 
adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities and/or the price per Share covered by
outstanding Awards under the Plan, (iii) the Maximum Annual Participant Award, (iv) the maximum aggregate number of Shares underlying all Nonqualified Stock Options and SARs with a per Share exercise price of less than fair market value on any grant
date that may be granted under the Plan, and (v) the maximum aggregate number of Shares underlying all Awards with a vesting period of less than three years. The Board may also make adjustments described in (i)-(v) of the previous sentence in the
event of any distribution of assets to shareholders other than a normal cash dividend. In determining adjustments to be made under this Section 14, the Board may take into account such factors as it deems appropriate, including (i) the restrictions
of applicable law, (ii) the potential tax consequences of an adjustment and (iii) the possibility that some Awardees might receive an adjustment and a distribution or other unintended benefit, and in light of such factors or circumstances may make
adjustments that are not uniform or proportionate among outstanding Awards, modify vesting dates, defer the delivery of stock certificates or make other equitable adjustments. Any such adjustments to outstanding Awards will be effected in a manner
that precludes the enlargement of rights and benefits under such Awards. Adjustments, if any, and any determinations or interpretations, including any determination of whether a distribution is other than a normal cash dividend, made by the Board
shall be final, binding and conclusive. For purposes of this Section 14, conversion of any convertible securities of the Company shall not be deemed to have been effected without receipt of consideration. Except as expressly provided herein, no
issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award. 

In the event of the proposed dissolution or liquidation of the Company, the Award 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 Award shall terminate as of a date fixed by the Board and give each Awardee the right to exercise an
Award as to all or any part of the Shares subject to an Award, including Shares as to which the Award 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, each Award shall be assumed or an equivalent award 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 Award or to substitute an equivalent award, in which case the Board shall, in lieu of such assumption or substitution, provide for the Awardee to have the right to exercise the Award as to all of the Shares subject to Awards, including
Shares as to which the Award would not otherwise be exercisable. If the Board makes an Award fully exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Board shall notify the Awardee that the Award shall
be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Award will terminate upon the expiration of such period. 
 15. Time of Granting Awards.    The date of grant of an Award shall, for all purposes, be the date on which the Company completes the corporate action relating to the grant of such Award
and all conditions to the grant have been satisfied, provided that conditions to the grant, exercise or vesting of an Award shall not defer the date of grant. Notice of a grant shall be given to each Participant to whom an Award is so granted within
a reasonable time after the determination has been made. 
 16. Substitutions and Assumptions.    The Board
shall have the right to substitute or assume Awards 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 Awards assumed and, in the case of a substitution, by the net increase in the number of
Shares subject to Awards before and after the substitution. 
 17. 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 (including, but not limited to amendments which the Board deems appropriate to enhance the Company’s ability to claim deductions related to stock option exercises); provided that any increase in the number of Shares
subject to the Plan, other than in connection with an adjustment under Section 14 of the Plan, and any amendment described in Section 10(c) of the Plan, shall require approval of or ratification by the shareholders of the Company. 

 (b) Participants in Foreign Countries.    The Board shall have the
authority to adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Subsidiaries may operate to assure the viability of the benefits
from Awards granted to Participants performing services in such countries and to meet the objectives of the Plan. 
 (c) Effect of
Amendment or Termination.    Except as otherwise provided in Sections 4 and 14, any such amendment or termination of the Plan shall not affect Awards already granted and such Awards shall remain in full force and effect as if
this Plan had not been amended or terminated, unless mutually agreed otherwise between the Awardee and the Board, which agreement must be in writing and signed by the Awardee and the Company. 

18. Conditions Upon Issuance of Shares.    Shares shall not be issued pursuant to the exercise of an Award unless the
exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, 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 to the approval of counsel for the Company with respect to such compliance. 

19. 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. 
 20. No Employment/Service
Rights.    Nothing in the Plan shall confer upon any Participant the right to an Award or to continue in service as an Employee or Consultant for any period of specific duration, or interfere with or otherwise restrict in any
way the rights of the Company (or any Parent or Subsidiary employing or retaining such person), or of any Participant or Awardee, which rights are hereby expressly reserved by each, to terminate such person’s services at any time for any
reason, with or without cause. 
  

	*	 All share numbers in the Plan reflect the 2-for-1 stock split effected February 2003.

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