PACIFIC ETHANOL, INC.

2016 STOCK INCENTIVE PLAN

 

ARTICLE ONE
GENERAL PROVISIONS

 

I. Purpose of the Plan.

 

This 2016 Stock Incentive Plan is intended to promote the interests of Pacific
Ethanol, Inc. by providing eligible persons in the Corporation’s service with
the opportunity to acquire a proprietary or economic interest, or otherwise
increase their proprietary or economic interest, in the Corporation as an
incentive for them to remain in such service and render superior performance
during such service. Capitalized terms not otherwise defined herein shall have
the meanings assigned to such terms in the attached Appendix.

 

II. Structure of the Plan.

 

A. The Plan is divided into two equity-based incentive programs:

 

  ● the Discretionary Grant Program, under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
common stock or stock appreciation rights tied to the value of such common
stock; and         ● the Stock Issuance Program, under which eligible persons
may be issued shares of common stock pursuant to restricted stock or restricted
stock unit awards or other stock-based awards, made by and at the discretion of
the Plan Administrator, that vest upon the completion of a designated service
period and/or the attainment of pre-established performance milestones, or under
which shares of common stock may be issued through direct purchase or as a bonus
for services rendered to the Corporation (or any Parent or Subsidiary).

 

B. The provisions of Articles One and Four shall apply to all equity programs
under the Plan and shall govern the interests of all persons under the Plan.

 

III. Administration of the Plan.

 

A. The Compensation Committee shall have sole and exclusive authority to
administer the Discretionary Grant and Stock Issuance Programs, provided,
however, that the Board may retain, reassume or exercise from time to time the
power to administer those programs with respect to all persons. However, any
discretionary Awards to members of the Compensation Committee must be authorized
and approved by a disinterested majority of the Board.

 

B. The Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Discretionary Grant and Stock
Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of those programs and any outstanding Awards
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Grant and Stock Issuance Programs under its jurisdiction or any
Award thereunder.

 

C. Service on the Compensation Committee shall constitute service as a Board
member, and members of each such committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service on such
committee. No member of the Compensation Committee shall be liable for any act
or omission made in good faith with respect to the Plan or any Award under the
Plan.

 

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IV. Eligibility.

 

A. The persons eligible to participate in the Discretionary Grant and Stock
Issuance Programs are as follows:

 

(i) Employees;

 

(ii) non-employee members of the Board or the board of directors of any Parent
or Subsidiary; and

 

(iii) Consultants.

 

B. The Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority to determine (i) with respect
to Awards made under the Discretionary Grant Program, which eligible persons are
to receive such Awards, the time or times when those Awards are to be made, the
number of shares to be covered by each such Award, the status of any awarded
option as either an Incentive Option or a Non-Statutory Option, the exercise
price per share in effect for each Award (subject to the limitations set forth
in Article Two), the time or times when each Award is to vest and become
exercisable and the maximum term for which the Award is to remain outstanding,
and (ii) with respect to Awards under the Stock Issuance Program, which eligible
persons are to receive such Awards, the time or times when the Awards are to be
made, the number of shares subject to each such Award, the vesting schedule (if
any) applicable to the shares subject to such Award, and the cash consideration
(if any) payable for such shares.

 

C. The Plan Administrator shall have the absolute discretion to grant options or
stock appreciation rights in accordance with the Discretionary Grant Program and
to effect stock issuances or other stock-based awards in accordance with the
Stock Issuance Program.

 

V. Stock Subject to the Plan.

 

A. The stock issuable under the Plan shall be shares of authorized but unissued
or reacquired common stock, including shares repurchased by the Corporation on
the open market. Subject to any additional shares authorized by the vote of the
Board and approved by the stockholders, the number of shares of common stock
reserved for issuance over the term of the Plan shall not exceed 1,150,000
shares. Any or all of the shares of common stock reserved for issuance under the
Plan shall be authorized for issuance pursuant to Incentive Options or other
Awards.

 

B. No one person participating in the Plan may be granted Awards of common stock
having a Fair Market Value on the applicable grant date(s) of more than One
Million Dollars ($1,000,000) in the aggregate per calendar year.

 

C. Shares of common stock subject to outstanding Awards under the Plan shall in
no event become eligible for reissuance under the Plan, whether as a result of
expiration or termination of an Award, cancellation or repurchase of unvested
shares, tender of shares in connection with a net/cashless exercise program,
withholding of shares to cover withholding taxes, or otherwise.

 

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D. If any change is made to the common stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding common stock as a class without the
Corporation’s receipt of consideration, appropriate adjustments shall be made by
the Plan Administrator to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the maximum number and/or class of securities for
which any one person may be granted Awards under the Plan per calendar year,
(iii) the number and/or class of securities and the exercise or base price per
share (or any other cash consideration payable per share) in effect under each
outstanding Award under the Discretionary Grant Program, and (iv) the number
and/or class of securities subject to each outstanding Award under the Stock
Issuance Program and the cash consideration (if any) payable per share
thereunder. To the extent such adjustments are to be made to outstanding Awards,
those adjustments shall be effected in a manner that shall preclude the
enlargement or dilution of rights and benefits under those Awards. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.

 

VI. Clawback Policy.

 

The Plan Administrator shall, notwithstanding anything to the contrary contained
in any Award document or in any employment or other agreement, have full power
and authority to modify or terminate any vested or unvested Award or require
repayment to the Corporation of the net proceeds received by a participant
arising from any Award, to apply the Corporation’s Policy for Recoupment of
Incentive Compensation dated March 25, 2011, as such policy may be amended by
the Corporation from time to time, or any successor “clawback” or similar policy
adopted by the Corporation, including any such policy or policy changes mandated
by or implemented pursuant to the Dodd-Frank Wall Street Reform and Consumer
Protection Act or the applicable listing requirements or rules and regulations
of The NASDAQ Capital Market, if applicable, and any other stock exchange or
other market on which common stock is then quoted or listed for trading.

 

ARTICLE TWO
DISCRETIONARY GRANT PROGRAM

 

I. Option Terms.

 

Each option shall be evidenced by one or more documents in the form approved by
the Plan Administrator; provided, however, that each such document shall comply
with the terms specified below. Each document evidencing an Incentive Option
shall, in addition, be subject to the provisions of the Plan applicable to such
options.

 

A. Exercise Price.

 

1. The exercise price per share shall be fixed by the Plan Administrator but
shall not be less than 85% of the Fair Market Value per share of common stock on
the option grant date.

 

2. The exercise price shall become immediately due upon exercise of the option
and shall be payable in one or more of the following forms that the Plan
Administrator may deem appropriate in each individual instance:

 

(i) cash or check made payable to the Corporation;

 

(ii) shares of common stock valued at Fair Market Value on the Exercise Date and
held for the period (if any) necessary to avoid any additional charges to the
Corporation’s earnings for financial reporting purposes; or

 

(iii) to the extent the option is exercised for vested shares, through a special
sale and remittance procedure pursuant to which the Optionee shall concurrently
provide irrevocable instructions to (a) a brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all applicable
federal, state and local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (b) the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm to
complete the sale.

 

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Except to the extent such sale and remittance procedure is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.

 

B. Exercise and Term of Options. Each option shall be exercisable at such time
or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten years measured
from the option grant date.

 

C. Effect of Termination of Service.

 

1. The following provisions shall govern the exercise of any options held by the
Optionee at the time of cessation of Service or death:

 

(i) Any option outstanding at the time of the Optionee’s cessation of Service
for any reason shall remain exercisable for such period of time thereafter as
shall be determined by the Plan Administrator and set forth in the documents
evidencing the option or as otherwise specifically authorized by the Plan
Administrator in its sole discretion pursuant to an express written agreement
with Optionee, but no such option shall be exercisable after the expiration of
the option term.

 

(ii) Any option held by the Optionee at the time of death and exercisable in
whole or in part at that time may be subsequently exercised by the personal
representative of the Optionee’s estate or by the person or persons to whom the
option is transferred pursuant to the Optionee’s will or the laws of inheritance
or by the Optionee’s designated beneficiary or beneficiaries of that option.

 

(iii) During the applicable post-Service exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares for which
that option is at the time exercisable. No additional shares shall vest under
the option following the Optionee’s cessation of Service, except to the extent
(if any) specifically authorized by the Plan Administrator in its sole
discretion pursuant to an express written agreement with Optionee. Upon the
expiration of the applicable exercise period or (if earlier) upon the expiration
of the option term, the option shall terminate and cease to be outstanding for
any shares for which the option has not been exercised.

 

2. The Plan Administrator shall have complete discretion, exercisable either at
the time an option is granted or at any time while the option remains
outstanding, to:

 

(i) extend the period of time for which the option is to remain exercisable
following the Optionee’s cessation of Service from the limited exercise period
otherwise in effect for that option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the expiration of
the option term, and/or

 

(ii) permit the option to be exercised, during the applicable post-Service
exercise period, not only with respect to the number of vested shares of common
stock for which such option is exercisable at the time of the Optionee’s
cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested had the Optionee continued
in Service.

 

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D. Stockholder Rights. The holder of an option shall have no stockholder rights
with respect to the shares subject to the option until such person shall have
exercised the option, paid the exercise price and become a holder of record of
the purchased shares.

 

E. Repurchase Rights. The Plan Administrator shall have the discretion to grant
options that are exercisable for unvested shares of common stock. Should the
Optionee cease Service while holding such unvested shares, the Corporation shall
have the right to repurchase, at the exercise price paid per share, any or all
of those unvested shares. The terms upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.

 

F. Transferability of Options. The transferability of options granted under the
Plan shall be governed by the following provisions:

 

(i) Incentive Options. During the lifetime of the Optionee, Incentive Options
shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or the laws of inheritance following the
Optionee’s death.

 

(ii) Non-Statutory Options. Non-Statutory Options shall be subject to the same
limitation on transfer as Incentive Options, except that the Plan Administrator
may structure one or more Non-Statutory Options so that the option may be
assigned in whole or in part during the Optionee’s lifetime to one or more
Family Members of the Optionee or to a trust established exclusively for the
Optionee and/or one or more such Family Members, to the extent such assignment
is in connection with the Optionee’s estate plan or pursuant to a domestic
relations order. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.

 

(iii) Beneficiary Designations. Notwithstanding the foregoing, the Optionee may
designate one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two (whether Incentive Options or
Non-Statutory Options), and those options shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee’s death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such transferred option,
including (without limitation) the limited time period during which the option
may be exercised following the Optionee’s death.

 

II. Incentive Options.

 

The terms specified below, together with any additions, deletions or changes
thereto imposed from time to time pursuant to the provisions of the Code
governing Incentive Options, shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Four shall be applicable to Incentive Options. Options
that are specifically designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.

 

A. Eligibility. Incentive Options may only be granted to Employees.

 

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B. Exercise Price. The exercise price per share shall not be less than 100% of
the Fair Market Value per share of common stock on the option grant date.

 

C. Dollar Limitation. The aggregate Fair Market Value of the shares of common
stock (determined as of the respective date or dates of grant) for which one or
more options granted to any Employee under the Plan (or any other option plan of
the Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two or more such options which become exercisable for the first time in
the same calendar year, then for purposes of the foregoing limitation on the
exercisability of those options as Incentive Options, such options shall be
deemed to become first exercisable in that calendar year on the basis of the
chronological order in which they were granted, except to the extent otherwise
provided under applicable law or regulation.

 

D. 10% Stockholder. If any Employee to whom an Incentive Option is granted is a
10% Stockholder, then the exercise price per share shall not be less than 110%
of the Fair Market Value per share of common stock on the option grant date, and
the option term shall not exceed five years measured from the option grant date.

 

III. Stock Appreciation Rights.

 

A. Authority. The Plan Administrator shall have full power and authority,
exercisable in its sole discretion, to grant stock appreciation rights in
accordance with this Section III to selected Optionees or other individuals
eligible to receive option grants under the Discretionary Grant Program.

 

B. Types. Three types of stock appreciation rights shall be authorized for
issuance under this Section III: (i) tandem stock appreciation rights (“Tandem
Rights”), (ii) standalone stock appreciation rights (“Standalone Rights”) and
(iii) limited stock appreciation rights (“Limited Rights”).

 

C. Tandem Rights. The following terms and conditions shall govern the grant and
exercise of Tandem Rights.

 

1. One or more Optionees may be granted a Tandem Right, exercisable upon such
terms and conditions as the Plan Administrator may establish, to elect between
the exercise of the underlying stock option for shares of common stock or the
surrender of that option in exchange for a distribution from the Corporation in
an amount equal to the excess of (i) the Fair Market Value (on the option
surrender date) of the number of shares in which the Optionee is at the time
vested under the surrendered option (or surrendered portion thereof) over (ii)
the aggregate exercise price payable for such vested shares.

 

2. No such option surrender shall be effective unless it is approved by the Plan
Administrator, either at the time of the actual option surrender or at any
earlier time. If the surrender is so approved, then the distribution to which
the Optionee shall accordingly become entitled under this Section III may be
made in shares of common stock valued at Fair Market Value on the option
surrender date, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.

 

3. If the surrender of an option is not approved by the Plan Administrator, then
the Optionee shall retain whatever rights the Optionee 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 (i) five business days
after the receipt of the rejection notice or (ii) 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 years after the date of the option grant.

 

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D. Standalone Rights. The following terms and conditions shall govern the grant
and exercise of Standalone Rights under this Article Two:

 

1. One or more individuals eligible to participate in the Discretionary Grant
Program may be granted a Standalone Right not tied to any underlying option
under this Discretionary Grant Program. The Standalone Right shall relate to a
specified number of shares of common stock and shall be exercisable upon such
terms and conditions as the Plan Administrator may establish. In no event,
however, may the Standalone Right have a maximum term in excess of ten years
measured from the grant date. Upon exercise of the Standalone Right, the holder
shall be entitled to receive a distribution from the Corporation in an amount
equal to the excess of (i) the aggregate Fair Market Value (on the exercise
date) of the shares of common stock underlying the exercised right over (ii) the
aggregate base price in effect for those shares.

 

2. The number of shares of common stock underlying each Standalone Right and the
base price in effect for those shares shall be determined by the Plan
Administrator in its sole discretion at the time the Standalone Right is
granted. In no event, however, may the base price per share be less than the
Fair Market Value per underlying share of common stock on the grant date.

 

3. Standalone Rights shall be subject to the same transferability restrictions
applicable to Non-Statutory Options and may not be transferred during the
holder’s lifetime, except to one or more Family Members of the holder or to a
trust established exclusively for the holder and/or such Family Members, to the
extent such assignment is in connection with the holder’s estate plan or
pursuant to a domestic relations order covering the Standalone Right as marital
property. In addition, one or more beneficiaries may be designated for an
outstanding Standalone Right in accordance with substantially the same terms and
provisions as set forth in Section I.F of this Article Two.

 

4. The distribution with respect to an exercised Standalone Right may be made in
shares of common stock valued at Fair Market Value on the exercise date, in
cash, or partly in shares and partly in cash, as the Plan Administrator shall in
its sole discretion deem appropriate.

 

5. The holder of a Standalone Right shall have no stockholder rights with
respect to the shares subject to the Standalone Right unless and until such
person shall have exercised the Standalone Right and become a holder of record
of shares of common stock issued upon the exercise of such Standalone Right.

 

E. Limited Rights. The following terms and conditions shall govern the grant and
exercise of Limited Rights under this Article Two:

 

1. One or more Section 16 Insiders may, in the Plan Administrator’s sole
discretion, be granted Limited Rights with respect to their outstanding options
under this Article Two.

 

2. Upon the occurrence of a Hostile Take-Over, the Section 16 Insider shall have
the unconditional right (exercisable for a 30-day period following such Hostile
Take-Over) to surrender each option with such a Limited Right to the
Corporation. The Section 16 Insider shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the number of shares in which the Optionee is at the time
vested under the surrendered option (or surrendered portion thereof) over (ii)
the aggregate exercise price payable for those vested shares. Such cash
distribution shall be made within five days following the option surrender date.

 

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3. The Plan Administrator shall pre-approve, at the time such Limited Right is
granted, the subsequent exercise of that right in accordance with the terms of
the grant and the provisions of this Section III. No additional approval of the
Plan Administrator or the Board shall be required at the time of the actual
option surrender and cash distribution. Any unsurrendered portion of the option
shall continue to remain outstanding and become exercisable in accordance with
the terms of the instrument evidencing such grant.

 

F. Post-Service Exercise. The provisions governing the exercise of Tandem,
Standalone and Limited Stock Appreciation Rights following the cessation of the
recipient’s Service or the recipient’s death shall be substantially the same as
those set forth in Section I.C of this Article Two for the options granted under
the Discretionary Grant Program.

 

IV. Change in Control/ Hostile Take-Over.

 

A. No Award outstanding under the Discretionary Grant Program at the time of a
Change in Control shall vest and become exercisable on an accelerated basis if
and to the extent that: (i) such Award is, in connection with the Change in
Control, assumed by the successor corporation (or parent thereof) or otherwise
continued in full force and effect pursuant to the terms of the Change in
Control transaction, (ii) such Award is replaced with a cash retention program
of the successor corporation that preserves the spread existing at the time of
the Change in Control on the shares of common stock as to which the Award is not
otherwise at that time vested and exercisable and provides for subsequent payout
of that spread in accordance with the same exercise/vesting schedule applicable
to those shares, or (iii) the acceleration of such Award is subject to other
limitations imposed by the Plan Administrator. However, if none of the foregoing
conditions are satisfied, each Award outstanding under the Discretionary Grant
Program at the time of the Change in Control but not otherwise vested and
exercisable as to all the shares at the time subject to that Award shall
automatically accelerate so that each such Award shall, immediately prior to the
effective date of the Change in Control, vest and become exercisable as to all
the shares of common stock at the time subject to that Award and may be
exercised as to any or all of those shares as fully vested shares of common
stock.

 

B. All outstanding repurchase rights under the Discretionary Grant Program shall
also terminate automatically, and the shares of common stock subject to those
terminated rights shall immediately vest in full, in the event of any Change in
Control, except to the extent: (i) those repurchase rights are assigned to the
successor corporation (or parent thereof) or otherwise continue in full force
and effect pursuant to the terms of the Change in Control transaction or (ii)
such accelerated vesting is precluded by other limitations imposed by the Plan
Administrator.

 

C. Immediately following the consummation of the Change in Control, all
outstanding Awards under the Discretionary Grant Program shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof) or otherwise expressly continued in full force
and effect pursuant to the terms of the Change in Control transaction.

 

D. Each option that is assumed in connection with a Change in Control or
otherwise continued in effect shall be appropriately adjusted, immediately after
such Change in Control, to apply to the number and class of securities that
would have been issuable to the Optionee in consummation of such Change in
Control had the option been exercised immediately prior to such Change in
Control. In the event outstanding Standalone Rights are to be assumed in
connection with a Change in Control transaction or otherwise continued in
effect, the shares of common stock underlying each such Standalone Right shall
be adjusted immediately after such Change in Control to apply to the number and
class of securities into which those shares of common stock would have been
converted in consummation of such Change in Control had those shares actually
been outstanding at that time. Appropriate adjustments to reflect such Change in
Control shall also be made to (i) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same, (ii) the base price per share in effect under
each outstanding Standalone Right, provided the aggregate base price shall
remain the same, (iii) the maximum number and/or class of securities available
for issuance over the remaining term of the Plan, and (iv) the maximum number
and/or class of securities for which any one person may be granted Awards under
the Plan per calendar year. To the extent the actual holders of the
Corporation’s outstanding common stock receive cash consideration for their
common stock in consummation of the Change in Control, the successor corporation
may, in connection with the assumption or continuation of the outstanding Awards
under the Discretionary Grant Program, substitute, for the securities underlying
those assumed Awards, one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of common stock
in such Change in Control transaction.

 

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E. The Plan Administrator shall have full power and authority to structure one
or more outstanding Awards under the Discretionary Grant Program so that those
Awards shall immediately vest and become exercisable as to all of the shares at
the time subject to those Awards in the event the Optionee’s Service is
subsequently terminated by reason of an Involuntary Termination within a
designated period (not to exceed 18 months) following the effective date of any
Change in Control or a Hostile Take-Over in which those Awards do not otherwise
vest on an accelerated basis. Any Awards so accelerated shall remain exercisable
as to fully vested shares until the expiration or sooner termination of their
term. In addition, the Plan Administrator may structure one or more of the
Corporation’s repurchase rights under the Discretionary Grant Program so that
those rights shall immediately terminate with respect to any shares held by the
Optionee at the time of his or her Involuntary Termination, and the shares
subject to those terminated repurchase rights shall accordingly vest in full at
that time.

 

F. The portion of any Incentive Option accelerated in connection with a Change
in Control shall remain exercisable as an Incentive Option only to the extent
the applicable One Hundred Thousand Dollar ($100,000) limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the
federal tax laws.

 

G. Awards outstanding under the Discretionary Grant Program shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

 

ARTICLE THREE
STOCK ISSUANCE PROGRAM

 

I. Stock Issuance Terms.

 

A. Issuances. Shares of common stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement that complies with the terms specified below. Shares of common stock
may also be issued under the Stock Issuance Program pursuant to restricted stock
awards or restricted stock units, awarded by and at the discretion of the Plan
Administrator, that entitle the recipients to receive the shares underlying
those awards or units upon the attainment of designated performance goals and/or
the satisfaction of specified Service requirements or upon the expiration of a
designated time period following the vesting of those awards or units.

 

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B. Issue Price.

 

1. The price per share at which shares of common stock may be issued under the
Stock Issuance Program shall be fixed by the Plan Administrator, but shall not
be less than 100% of the Fair Market Value per share of common stock on the
issuance date.

 

2. Shares of common stock may be issued under the Stock Issuance Program for any
of the following items of consideration that the Plan Administrator may deem
appropriate in each individual instance:

 

(i) cash or check made payable to the Corporation;

 

(ii) past services rendered to the Corporation (or any Parent or Subsidiary); or

 

(iii) any other valid form of consideration permissible under the Delaware
Corporations Code at the time such shares are issued.

 

C. Vesting Provisions.

 

1. Shares of common stock issued under the Stock Issuance Program may, in the
discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over the Participant’s period
of Service and/or upon attainment of specified performance objectives. The
elements of the vesting schedule applicable to any unvested shares of common
stock issued under the Stock Issuance Program shall be determined by the Plan
Administrator and incorporated into the Stock Issuance Agreement. Shares of
common stock may also be issued under the Stock Issuance Program pursuant to
restricted stock awards or restricted stock units that entitle the recipients to
receive the shares underlying those awards and/or units upon the attainment of
designated performance goals or the satisfaction of specified Service
requirements or upon the expiration of a designated time period following the
vesting of those awards or units, including (without limitation) a deferred
distribution date following the termination of the Participant’s Service.

 

2. The Plan Administrator shall also have the discretionary authority,
consistent with Code Section 162(m), to structure one or more Awards under the
Stock Issuance Program so that the shares of common stock subject to those
Awards shall vest (or vest and become issuable) upon the achievement of certain
pre-established corporate performance goals based on one or more of the
following criteria: (i) return on total stockholders’ equity; (ii) net income
per share of common stock; (iii) net income or operating income; (iv) earnings
before interest, taxes, depreciation, amortization and stock-compensation costs,
or operating income before depreciation and amortization; (v) sales or revenue
targets; (vi) return on assets, capital or investment; (vii) cash flow; (viii)
market share; (ix) cost reduction goals; (x) budget comparisons; (xi)
implementation or completion of projects or processes strategic or critical to
the Corporation’s business operations; (xii) measures of customer satisfaction;
(xiii) any combination of, or a specified increase in, any of the foregoing; and
(xiv) the formation of joint ventures, research and development collaborations,
marketing or customer service collaborations, or the completion of other
corporate transactions intended to enhance the Corporation’s revenue or
profitability or expand its customer base; provided, however, that for purposes
of items (ii), (iii) and (vii) above, the Plan Administrator may, at the time
the Awards are made, specify certain adjustments to such items as reported in
accordance with generally accepted accounting principles in the U.S. (“GAAP”),
which will exclude from the calculation of those performance goals one or more
of the following: certain charges related to acquisitions, stock-based
compensation, employer payroll tax expense on certain stock option exercises,
settlement costs, restructuring costs, gains or losses on strategic investments,
non-operating gains or losses, certain other non-cash charges, valuation
allowance on deferred tax assets, and the related income tax effects, purchases
of property and equipment, and any extraordinary non-recurring items as
described in Accounting Principles Board Opinion No. 30 or its successor,
provided that such adjustments are in conformity with those reported by the
Corporation on a non-GAAP basis. In addition, such performance goals may be
based upon the attainment of specified levels of the Corporation’s performance
under one or more of the measures described above relative to the performance of
other entities and may also be based on the performance of any of the
Corporation’s business groups or divisions thereof or any Parent or Subsidiary.
Performance goals may include a minimum threshold level of performance below
which no award will be earned, levels of performance at which specified portions
of an award will be earned, and a maximum level of performance at which an award
will be fully earned. The Plan Administrator may provide that, if the actual
level of attainment for any performance objective is between two specified
levels, the amount of the award attributable to that performance objective shall
be interpolated on a straight-line basis.

 

 10 

 

 

3. Any new, substituted or additional securities or other property (including
money paid other than as a regular cash dividend) that the Participant may have
the right to receive with respect to the Participant’s unvested shares of common
stock by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding common stock as a class without the Corporation’s receipt of
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participant’s unvested shares of common stock and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.

 

4. The Participant shall have full stockholder rights with respect to any shares
of common stock issued to the Participant under the Stock Issuance Program,
whether or not the Participant’s interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares. The Participant shall
not have any stockholder rights with respect to the shares of common stock
subject to a restricted stock unit award until that award vests and the shares
of common stock are actually issued thereunder. However, dividend-equivalent
units may be paid or credited, either in cash or in actual or phantom shares of
common stock, on outstanding restricted stock unit or restricted stock awards,
subject to such terms and conditions as the Plan Administrator may deem
appropriate.

 

5. Should the Participant cease to remain in Service while holding one or more
unvested shares of common stock issued under the Stock Issuance Program or
should the performance objectives not be attained with respect to one or more
such unvested shares of common stock, then except as set forth in Section I.C.6
of this Article Three, those shares shall be immediately surrendered to the
Corporation for cancellation, and the Participant shall have no further
stockholder rights with respect to those shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid in cash,
cash equivalent or otherwise, the Corporation shall repay to the Participant the
same amount and form of consideration as the Participant paid for the
surrendered shares.

 

6. The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of common stock that would otherwise
occur upon the cessation of the Participant’s Service or the non-attainment of
the performance objectives applicable to those shares. Any such waiver shall
result in the immediate vesting of the Participant’s interest in the shares of
common stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant’s cessation of Service or the
attainment or non-attainment of the applicable performance objectives. However,
no vesting requirements tied to the attainment of performance objectives may be
waived with respect to shares that were intended at the time of issuance to
qualify as performance-based compensation under Code Section 162(m), except in
the event of the Participant’s Involuntary Termination or as otherwise provided
in Section II.E of this Article Three.

 

 11 

 

 

7. Outstanding restricted stock awards or restricted stock units under the Stock
Issuance Program shall automatically terminate, and no shares of common stock
shall actually be issued in satisfaction of those awards or units, if the
performance goals or Service requirements established for such awards or units
are not attained or satisfied. The Plan Administrator, however, shall have the
discretionary authority to issue vested shares of common stock under one or more
outstanding restricted stock awards or restricted stock units as to which the
designated performance goals or Service requirements have not been attained or
satisfied. However, no vesting requirements tied to the attainment of
performance goals may be waived with respect to awards or units which were at
the time of grant intended to qualify as performance-based compensation under
Code Section 162(m), except in the event of the Participant’s Involuntary
Termination or as otherwise provided in Section II.E of this Article Three.

 

II. Change in Control/ Hostile Take-Over.

 

A. All of the Corporation’s outstanding repurchase rights under the Stock
Issuance Program shall terminate automatically, and all the shares of common
stock subject to those terminated rights shall immediately vest in full, in the
event of any Change in Control, except to the extent (i) those repurchase rights
are to be assigned to the successor corporation (or parent thereof) or otherwise
continued in full force and effect pursuant to the express terms of the Change
in Control transaction or (ii) such accelerated vesting is precluded by other
limitations imposed in the Stock Issuance Agreement.

 

B. Each outstanding Award under the Stock Issuance Program that is assumed in
connection with a Change in Control or otherwise continued in effect shall be
adjusted immediately after the consummation of that Change in Control to apply
to the number and class of securities into which the shares of common stock
subject to the Award immediately prior to the Change in Control would have been
converted in consummation of such Change in Control had those shares actually
been outstanding at that time, and appropriate adjustments shall also be made to
the cash consideration (if any) payable per share thereunder, provided the
aggregate amount of such consideration shall remain the same. If any such Award
is not so assumed or otherwise continued in effect or replaced with a cash
retention program which preserves the Fair Market Value of the shares underlying
the Award at the time of the Change in Control and provides for the subsequent
payout of that value in accordance with the vesting schedule in effect for the
Award at the time of such Change in Control, such Award shall vest, and the
shares of common stock subject to that Award shall be issued as fully-vested
shares, immediately prior to the consummation of the Change in Control.

 

C. The Plan Administrator shall have full power and authority to structure one
or more outstanding Awards under the Stock Issuance Program so that the shares
of common stock subject to those Awards shall immediately vest (or vest and
become issuable) as to all of the shares at the time subject to those Awards in
the event the Participant’s Service is subsequently terminated by reason of an
Involuntary Termination within a designated period (not to exceed 18 months)
following the effective date of any Change in Control or a Hostile Take-Over in
which those Awards do not otherwise vest on an accelerated basis. In addition,
the Plan Administrator may structure one or more of the Corporation’s repurchase
rights under the Stock Issuance Program so that those rights shall immediately
terminate with respect to any shares held by the Participant at the time of his
or her Involuntary Termination, and the shares subject to those terminated
repurchase rights shall accordingly vest in full at that time.

 

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D. The Plan Administrator’s authority under Paragraph C of this Section II shall
also extend to any Award intended to qualify as performance-based compensation
under Code Section 162(m), even though the automatic vesting of those Awards
pursuant to Paragraph C of this Section II may result in their loss of
performance-based status under Code Section 162(m).

 

E. Awards outstanding under the Stock Issuance Program shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.

 

ARTICLE FOUR
MISCELLANEOUS

 

I. Tax Withholding.

 

A. The Corporation’s obligation to deliver shares of common stock upon the
issuance, exercise or vesting of Awards under the Plan shall be subject to the
satisfaction of all applicable federal, state and local income and employment
tax withholding requirements.

 

B. Subject to applicable laws, rules and regulations and policies of the
Corporation, the Plan Administrator may, in its discretion, provide any or all
Optionees or Participants to whom Awards are made under the Plan with the right
to utilize any or all of the following methods to satisfy all or part of the
Withholding Taxes to which those holders may become subject in connection with
the issuance, exercise or vesting of those Awards.

 

(i) Stock Withholding: The election to have the Corporation withhold, from the
shares of common stock otherwise issuable upon the issuance, exercise or vesting
of those Awards a portion of those shares with an aggregate Fair Market Value
equal to the percentage of the Withholding Taxes (not to exceed 100%) designated
by the Optionee or Participant and make a cash payment equal to such Fair Market
Value directly to the appropriate taxing authorities on such individual’s
behalf.

 

(ii) Stock Delivery: The election to deliver to the Corporation, at the time the
Award is issued, exercised or vests, one or more shares of common stock
previously acquired by such the Optionee or Participant (other than in
connection with the issuance, exercise or vesting triggering the Withholding
Taxes) with an aggregate Fair Market Value equal to the percentage of the
Withholding Taxes (not to exceed 100%) designated by such holder. The shares of
common stock so delivered shall not be added to the shares of common stock
authorized for issuance under the Plan.

 

(iii) Sale and Remittance: The election to deliver to the Corporation, to the
extent the Award is issued or exercised for vested shares, through a special
sale and remittance procedure pursuant to which the Optionee or Participant
shall concurrently provide irrevocable instructions to a brokerage firm to
effect the immediate sale of the purchased or issued shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the Withholding Taxes required to be withheld by the
Corporation by reason of such issuance, exercise or vesting.

 

II. Share Escrow/Legends.

 

Unvested shares issued under the Plan may, in the Plan Administrator’s
discretion, be held in escrow by the Corporation until the Participant’s
interest in such shares vests or may be issued directly to the Participant with
restrictive legends on the certificates evidencing those unvested shares.

 

 13 

 

 

III. Effective Date and Term of the Plan.

 

A. The Plan was adopted by the Board on March 25, 2016, subject to stockholder
approval within twelve months after that date. Should stockholder approval not
be obtained within such period, the Plan will be terminated.

 

B. The Plan shall become effective on the Plan Effective Date. Awards may be
granted under the Discretionary Grant Program and the Stock Issuance Program at
any time on or after the Plan Effective Date.

 

C. The Plan shall terminate upon the earliest to occur of (i) March 25, 2017, if
stockholder approval of the Plan has not been obtained on or prior to that date,
(ii) March 25, 2026, (iii) the date on which all shares available for issuance
under the Plan shall have been issued as fully-vested shares, (iv) the
termination of all outstanding Awards in connection with a Change in Control, or
(v) such other date as the Board in its sole discretion terminates the Plan. If
the Plan terminates on March 25, 2026 or on such other date as the Board
terminates the Plan, then all Awards outstanding at that time shall continue to
have force and effect in accordance with the provisions of the documents
evidencing such Awards.

 

IV. Amendment, Suspension or Termination of the Plan.

 

The Board may suspend or terminate the Plan at any time, without notice, and in
its sole discretion. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall materially impair the rights and obligations
with respect to Awards at the time outstanding under the Plan unless the
Optionee or the Participant consents to such amendment or modification. In
addition, stockholder approval will be required for any amendment to the Plan
that (i) materially increases the number of shares of common stock available for
issuance under the Plan, (ii) materially expands the class of individuals
eligible to receive option grants or other awards under the Plan, (iii)
materially increases the benefits accruing to the Optionees and Participants
under the Plan or materially reduces the price at which shares of common stock
may be issued or purchased under the Plan, (iv) materially extends the term of
the Plan, (v) expands the types of awards available for issuance under the Plan
or (vi) is required under applicable laws, rules or regulations to be approved
by stockholders.

 

V. Use of Proceeds.

 

Any cash proceeds received by the Corporation from the sale of shares of common
stock under the Plan shall be used for general corporate purposes.

 

VI. Regulatory Approvals.

 

A. The implementation of the Plan, the grant of any Award and the issuance of
shares of common stock in connection with the issuance, exercise or vesting of
any Award made under the Plan shall be subject to the Corporation’s procurement
of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the Awards made under the Plan and the shares of
common stock issuable pursuant to those Awards.

 

B. No shares of common stock or other assets shall be issued or delivered under
the Plan unless and until there shall have been compliance with all applicable
requirements of federal and state securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the shares of common
stock issuable under the Plan, and all applicable listing requirements of The
NASDAQ Capital Market, if applicable, and any other stock exchange or other
market on which common stock is then quoted or listed for trading.

 

 14 

 

 

VII. No Employment/Service Rights.

 

Nothing in the Plan shall confer upon the Optionee or the Participant any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person’s Service at any time for any reason, with or without cause.

 

VIII. Non-Exclusivity of the Plan.

 

Nothing contained in the Plan is intended to amend, modify, or rescind any
previously approved compensation plans, programs or options entered into by the
Corporation. This Plan shall be construed to be in addition to and independent
of any and all other arrangements. Neither the adoption of the Plan by the Board
nor the submission of the Plan to the stockholders of the Corporation for
approval shall be construed as creating any limitations on the power or
authority of the Board to adopt, with or without stockholder approval, such
additional or other compensation arrangements as the Board may from time to time
deem desirable.

 

IX. Governing Law.

 

All questions and obligations under the Plan and agreements issued pursuant to
the Plan shall be construed and enforced in accordance with the laws of the
State of Delaware.

 

X. Information to Optionees and Participants.

 

Optionees and Participants under the Plan who do not otherwise have access to
financial statements of the Corporation will receive the Corporation’s financial
statements at least annually.

 

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APPENDIX

 

The following definitions shall be in effect under the Plan:

 

A. “Award” means any of the following stock or stock-based awards authorized for
issuance or grant under the Plan: stock option, stock appreciation right, direct
stock issuance, restricted stock or restricted stock unit award or other
stock-based award.

 

B. “Board” means the Corporation’s board of directors.

 

C. “Change in Control” shall be deemed to have occurred if, in a single
transaction or series of related transactions:

 

(i) any person (as such term is used in Section 13(d) and 14(d) of the 1934 Act,
or persons acting as a group, other than a trustee or fiduciary holding
securities under an employment benefit program, is or becomes a “beneficial
owner” (as defined in Rule 13-3 under the 1934 Act), directly or indirectly of
securities of the Corporation representing 51% or more of the combined voting
power of the Corporation, or

 

(ii) there is a merger, consolidation, or other business combination transaction
of the Corporation with or into another corporation, entity or person, other
than a transaction in which the holders of at least a majority of the shares of
voting capital stock of the Corporation outstanding immediately prior to such
transaction continue to hold (either by such shares remaining outstanding or by
their being converted into shares of voting capital stock of the surviving
entity) a majority of the total voting power represented by the shares of voting
capital stock of the Corporation (or surviving entity) outstanding immediately
after such transaction, or

 

(iii) all or substantially all of the Corporation’s assets are sold.

 

D. “Code” means the Internal Revenue Code of 1986, as amended.

 

E. “common stock” means the Corporation’s common stock, $0.001 par value per
share.

 

F. “Compensation Committee” means a committee of the Board comprised solely of
two or more Eligible Directors who are appointed by the Board to administer the
Discretionary Grant and Stock Issuance Programs, who are “outside directors”
within the meaning of Section 162(m) of the Code and who are “non-employee
directors” within the meaning of Rule 16b-3(b)(3)(i).

 

G. “Consultant” means a consultant or other independent advisor who is under
written contract with the Corporation (or any Parent or Subsidiary) to provide
consulting or advisory services to the Corporation (or any Parent or Subsidiary)
and whose securities issued pursuant to the Plan could be registered on Form
S-8.

 

H. “Corporation” means Pacific Ethanol, Inc., a Delaware corporation, and any
corporate successor to all or substantially all of the assets or voting stock of
Pacific Ethanol, Inc. that shall by appropriate action adopt the Plan.

 

I. “Discretionary Grant Program” means the discretionary grant program in effect
under Article Two of the Plan pursuant to which stock options and stock
appreciation rights may be granted to one or more eligible individuals.

 

 16 

 

 

J. “Eligible Director” means a Board member who is not, at the time of such
determination, an employee of the Corporation (or any Parent or Subsidiary).

 

K. “Employee” means an individual who is in the employ of the Corporation (or
any Parent or Subsidiary), subject to the control and direction of the employer
entity as to both the work to be performed and the manner and method of
performance.

 

L. “Exercise Date” means the date on which the Corporation shall have received
written notice of the option exercise.

 

M. “Fair Market Value” per share of common stock on any relevant date shall be
determined in accordance with the following provisions:

 

(i) If the common stock is at the time traded on The NASDAQ Capital Market, then
the Fair Market Value shall be the closing selling price per share of common
stock at the close of regular hours trading (i.e., before after- hours trading
begins) on The NASDAQ Capital Market on the date in question, as such price is
reported by the National Association of Securities Dealers. If there is no
closing selling price for the common stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.

 

(ii) If the common stock is not traded on The NASDAQ Capital Market but is at
the time listed or quoted on any other market or exchange, then the Fair Market
Value shall be the closing selling price per share of common stock at the close
of regular hours trading (i.e., before after-hours trading begins) on the date
in question on the market or exchange determined by the Plan Administrator to be
the primary market for the common stock, as such price is officially quoted in
the composite tape of transactions on such exchange. If there is no closing
selling price for the common stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for which
such quotation exists.

 

(iii) In the absence of an established market for the common stock, the Fair
Market Value shall be determined in good faith by the Plan Administrator.

 

In addition, with respect to any Incentive Option, the Fair Market Value shall
be determined in a manner consistent with any regulations issued by the
Secretary of the Treasury for the purpose of determining fair market value of
securities subject to an Incentive Option plan under the Code.

 

N. “Family Member” means, with respect to a particular Optionee or Participant,
any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, including adoptive
relationships.

 

O. “Hostile Take-Over” means either of the following events effecting a change
in control or ownership of the Corporation:

 

(i) the acquisition, directly or indirectly, by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation) of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than 50% of the total combined voting power of the
Corporation’s outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation’s stockholders that the Board does not recommend
such stockholders to accept, or

 

 17 

 

 

(ii) a change in the composition of the Board over a period of 36 consecutive
months or less such that a majority of the Board members ceases, by reason of
one or more contested elections for Board membership, to be composed of
individuals who either (A) have been Board members continuously since the
beginning of such period or (B) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board approved
such election or nomination.

 

P. ”Incentive Option” means an option that satisfies the requirements of Code
Section 422.

 

Q. “Involuntary Termination” means the termination of the Service of any
individual that occurs by reason of:

 

(i) if such individual is providing services to the Corporation pursuant to a
written contract that defines “cause” or “misconduct” or similar reasons such
individual could be dismissed or discharged by the Corporation, then such
individual’s involuntary dismissal or discharge by the Corporation other than
for any of such reasons and other than for Misconduct shall be an Involuntary
Termination;

 

(ii) if such individual is not providing services to the Corporation pursuant to
a written contract that defines “cause” or “misconduct” or similar reasons such
individual could be dismissed or discharged by the Corporation, then such
individual’s involuntary dismissal or discharge by the Corporation for reasons
other than Misconduct shall be an Involuntary Termination;

 

(iii) if such individual is providing services to the Corporation pursuant to a
written contract that defines “good reason” or similar reasons such individual
could voluntarily resign, then such individual’s voluntary resignation for any
of such reasons shall be an Involuntary Termination; or

 

(iv) if such individual is providing services to the Corporation pursuant to a
written contract that does not define “good reason” or similar reasons such
individual could voluntarily resign, then such individual’s voluntary
resignation following (A) a change in his or her position with the Corporation
that materially reduces his or her duties and responsibilities or the level of
management to which he or she reports, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and target bonus under any
corporate-performance based bonus or incentive programs) by more than 15% or (C)
a relocation of such individual’s place of employment by more than 50 miles,
provided and only if such change, reduction or relocation is effected by the
Corporation without the individual’s consent, shall be an Involuntary
Termination.

 

R. “Misconduct” means the commission of: any act of fraud, embezzlement or
dishonesty by the Optionee or Participant; any unauthorized use or disclosure by
such person of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary); any illegal or improper conduct or intentional
misconduct, gross negligence or recklessness by such person that has adversely
affected or, in the determination of the Plan Administrator, is likely to
adversely affect, the business, reputation, goodwill or affairs of the
Corporation (or any Parent or Subsidiary) in a material manner; any conduct that
provides a basis for the Corporation to terminate for “cause,” “misconduct” or
similar reasons the written contract pursuant to which the Optionee or
Participant is providing Services to the Corporation; resignation by the
Optionee or Participant on fewer than 30 days’ prior written notice and in
violation of an agreement to remain in Service of the Corporation, in
anticipation of a termination for “cause,” “misconduct” or similar reasons under
the agreement, or in lieu of a formal discharge for “cause,” “misconduct” or
similar reasons. The foregoing definition shall not in any way preclude or
restrict the right of the Corporation (or any Parent or Subsidiary) to discharge
or dismiss any Optionee, Participant or other person in the Service of the
Corporation (or any Parent or Subsidiary) for any other acts or omissions, but
such other acts or omissions shall not be deemed, for purposes of the Plan, to
constitute grounds for termination for Misconduct.

 

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S. “1934 Act” means the Securities Exchange Act of 1934, as amended.

 

T. “Non-Statutory Option” means an option not intended to satisfy the
requirements of Code Section 422.

 

U. “Optionee” means any person to whom an option is granted under the
Discretionary Grant Program.

 

V. “Parent” means any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation, provided each corporation in
the unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.

 

W. “Participant” means any person who is issued shares of common stock or
restricted stock units or other stock-based awards under the Stock Issuance
Program.

 

X. “Permanent Disability” or “Permanently Disabled” means the inability of the
Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve months or more.

 

Y. “Plan” means the Corporation’s 2016 Stock Incentive Plan, as set forth in
this document.

 

Z. “Plan Administrator” means the particular entity, whether the Compensation
Committee or the Board, which is authorized to administer the Discretionary
Grant and Stock Issuance Programs with respect to one or more classes of
eligible persons, to the extent such entity is carrying out its administrative
functions under those programs with respect to the persons then subject to its
jurisdiction.

 

AA. “Plan Effective Date” means the date that stockholder approval of the Plan
is obtained in accordance with Section III.A. of Article Four.

 

BB. “Section 16 Insider” means an officer or director of the Corporation subject
to the short-swing profit liability provisions of Section 16 of the 1934 Act.

 

CC. “Service” means the performance of services for the Corporation (or any
Parent or Subsidiary) by a person in the capacity of an Employee, an Eligible
Director or a Consultant, except to the extent otherwise specifically provided
in the documents evidencing the Award made to such person. For purposes of the
Plan, an Optionee or Participant shall be deemed to cease Service immediately
upon the occurrence of the either of the following events: (i) the Optionee or
Participant no longer performs services in any of the foregoing capacities for
the Corporation or any Parent or Subsidiary or (ii) the entity for which the
Optionee or Participant is performing such services ceases to remain a Parent or
Subsidiary of the Corporation, even though the Optionee or Participant may
subsequently continue to perform services for that entity.

 

DD. “Stock Issuance Agreement” means the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of common
stock under the Stock Issuance Program.

 

 19 

 

 

EE. “Stock Issuance Program” means the stock issuance program in effect under
Article Three of the Plan.

 

FF. “Subsidiary” means any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.

 

GG. “Take-Over Price” means the greater of (i) the Fair Market Value per share
of common stock on the date the option is surrendered to the Corporation in
connection with a Hostile Take-Over or, if applicable, (ii) the highest reported
price per share of common stock paid by the tender offeror in effecting such
Hostile Take-Over through the acquisition of such common stock. However, if the
surrendered option is an Incentive Option, the Take-Over Price shall not exceed
the clause (i) price per share.

 

HH. “10% Stockholder” means the owner of stock (as determined under Code Section
424(d)) possessing more than 10% of the total combined voting power of all
classes of stock of the Corporation (or any Parent or Subsidiary).

 

II. “Withholding Taxes” means the federal, state and local income and employment
taxes to which the Optionee or Participant may become subject in connection with
the issuance, exercise or vesting of the Award made to him or her under the
Plan.

 

 20