Document:

a61558_exhibit4-6.htm

Exhibit 4.6

 

Execution Copy

 

SECURITIES ACCOUNT CONTROL AGREEMENT

 

(Toyota Auto Receivables 2014-B Owner Trust Reserve Account)

 

This Securities Account Control Agreement (the “Agreement”) is dated as of June 18, 2014 and entered into between Toyota Auto Finance Receivables LLC (the “Pledgor”), a Delaware limited liability company, Deutsche Bank Trust Company Americas, in its capacity as Indenture Trustee on behalf of the holders of the Notes referred to below (in such capacity, the “Indenture Trustee,” also referred to herein as the “Secured Party”) under the Indenture (the “Indenture”), dated as of June 18, 2014, between Toyota Auto Receivables 2014-B Owner Trust, a statutory trust formed pursuant to the laws of the State of Delaware (the “Issuer”), and Deutsche Bank Trust Company Americas, in its capacity as securities intermediary (in such capacity, the “Securities Intermediary”).  Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Sale and Servicing Agreement dated as of June 18, 2014, between the Issuer, Toyota Auto Finance Receivables LLC, as seller, and Toyota Motor Credit Corporation (“TMCC”), as servicer (the “Sale and Servicing Agreement”).

 

PRELIMINARY STATEMENTS

 

A.           Trust Agreement.  The Issuer was formed as a Delaware statutory trust pursuant to the Trust Agreement, dated as of March 18, 2014, as the same has been amended and restated by the Amended and Restated Trust Agreement, dated as of June 18, 2014 (the “Trust Agreement”), by and between Toyota Auto Finance Receivables LLC and Wells Fargo Delaware Trust Company, National Association, as owner trustee (in such capacity and not individually, the “Owner Trustee”).

 

B.           Administration Agreement.  Concurrently herewith, the Issuer, the Indenture Trustee and TMCC have entered into the Administration Agreement pursuant to which TMCC will perform certain administrative tasks on behalf of the Indenture Trustee and the Issuer (when acting in such capacity, TMCC is referred to herein as the “Administrator”).

 

C.           Indenture.  Concurrently herewith, the Issuer and Indenture Trustee have entered into the Indenture pursuant to which the Issuer will issue asset-backed notes (the “Notes”) in the principal amounts and for purposes specified therein.

 

D.           Intention.  The Pledgor intends to establish the Reserve Account, as described in Section 5.07 of the Sale and Servicing Agreement, and intends to pledge to and to grant “control” thereof (as such term is defined in the Uniform Commercial Code as in effect on the date hereof in New York (the “UCC”)) to the Indenture Trustee (as Secured Party) pursuant to the terms of this Agreement.  It is the intention of the parties hereto that the Securities Intermediary be bound to the terms of this Agreement and be obligated to perform the duties of the Securities Intermediary described herein.

 

NOW, THEREFORE, in consideration of the premises herein contained and in order to induce the Issuer and Indenture Trustee to execute and deliver the Indenture, to induce the Issuer to purchase the Receivables in contemplation of issuing the Notes, to induce the Indenture Trustee to authenticate the Notes and for other good consideration, the receipt and adequacy of

 

  

  

  

 

which are hereby acknowledged, Pledgor, Securities Intermediary and Secured Party hereby agree as follows:

 

Section 1.     Definitions.

 

(a)           Specific Definitions.  The following terms used in this Agreement shall have the following meanings:

 

“Broker-Dealer” means a person registered as a broker or dealer under the Securities Exchange Act of 1934, as amended.

 

“Collateral” means (i) the Reserve Account, (ii) any amounts held from time to time in the Reserve Account, (iii) all Investments, including all Financial Assets, security entitlements, securities (whether certificated or uncertificated), instruments, accounts, general intangibles and deposits representing or evidencing any Investments, (iv) all interest, dividends, cash, instruments, securities and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Collateral, and (v) to the extent not covered by clauses (i) through (iv) above, all proceeds of any or all of the foregoing Collateral.

 

“Entitlement Order” has the meaning ascribed to the term “entitlement order” in Article 8 of the UCC.

 

“Financial Asset” has the meaning ascribed to the term “financial asset” in Article 8 of the UCC.

 

“Investments” means any Financial Assets credited to the Reserve Account, and any other property acquired by Securities Intermediary as securities intermediary hereunder in exchange for, with proceeds from or distributions on, or otherwise in respect of any Investments.

 

“Overnight Investments” means Investments of the kind described in clause (i) of the definition of “Eligible Investments” in the Sale and Servicing Agreement.

 

“Suspension Period” means any period (i) beginning promptly after receipt by Securities Intermediary of written notice from Secured Party, substantially in the form of the Prohibition Notice attached to this Agreement as Attachment 1, suspending Pledgor’s right to direct the investment of funds held for the credit of the Reserve Account, and (ii) ending promptly after receipt by Securities Intermediary of written notice from Secured Party, substantially in the form of the Rescission of Prohibition Notice attached to this Agreement as Attachment 2, rescinding the preceding Prohibition Notice.

 

(b)           General Provisions.  Unless otherwise defined herein or in the Sale and Servicing Agreement, terms used in Articles 8 and 9 of the UCC are used herein as therein defined.  Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

 

  

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Section 2.     Establishment and Operation of Reserve Account.

 

(a)           Establishment of Reserve Account.  Pledgor and Secured Party hereby authorize and direct Securities Intermediary to establish and maintain in its corporate trust department, a segregated trust account that is an Eligible Deposit Account and that is a “securities account” as that term is defined in Section 8-501(a) of the UCC in the name of Secured Party and under the sole dominion and control of Secured Party, designated as “Toyota Auto Receivables 2014-B Owner Trust Reserve Account.” Securities Intermediary hereby undertakes to treat Secured Party as the person entitled to exercise the rights that comprise any Financial Asset credited to the Reserve Account.  Secured Party and Pledgor agree that this account shall be the Reserve Account.

 

(b)           Acknowledgement of Receipt of Investments.  Securities Intermediary acknowledges the transfer by, or on behalf of, Pledgor, and the acquisition by Securities Intermediary, of cash in the amount of $3,750,000.25 for the credit of the Reserve Account.

 

(c)           Operations of the Reserve Account.  The Reserve Account shall be operated, and all Investments shall be acquired and registered or held (as applicable), in accordance with the terms of this Agreement.  No funds shall be withdrawn from or deposited into the Reserve Account, except as provided in the Indenture and the Sale and Servicing Agreement.  To the extent that the Indenture and the Sale and Servicing Agreement require payments into the Reserve Account, the provisions set forth herein shall govern.

 

(d)           Account Statements.  Securities Intermediary shall send Secured Party and Pledgor written account statements with respect to the Reserve Account not less frequently than monthly.  Reports or confirmation of the execution of orders and statements of account shall be conclusive if not objected to in writing within 30 days after delivery.

 

Section 3.     Mechanics of Deposits of Funds or Investments to the Reserve Account.

 

(a)           Transfers to the Reserve Account.  Any transfers of funds to the Reserve Account shall be made by wire transfer (or, if applicable, intra-bank transfer) of immediately available funds addressed as follows:

 

Deutsche Bank Trust Company Americas

ABA No.: 021001033

SWIFT: BKTRUS33

Acct Name:  CTAS Funds Control

Account #: 01419647

Ref: Toyota 2014-B Port TAOT14B.2 Reserve AC

Transfers of Financial Assets to the Reserve Account shall be permitted by book-entry from securities accounts maintained with Securities Intermediary.

 

(b)           Notice of Transfers.  In the event of any transfer of funds or Financial Assets to the Reserve Account pursuant to any provision of Section 4, Secured Party, or Pledgor, as the case may be, shall promptly, after initiating or sending out written instructions with respect to

 

  

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such transfer, give notice to the other such party by facsimile of the date and amount of such transfer.

 

Section 4.     Eligible Investments and Transfers of Amounts in the Reserve Account.

 

(a)           Strict Compliance.  Funds or credit balances held by Securities Intermediary in the Reserve Account shall not be (i) invested or reinvested, (ii) sold or redeemed, or (iii) transferred from the Reserve Account, in either case except as provided in this Section 4.

 

(b)           Pledgor’s Right to Direct Investment.  Except during any Suspension Period, Securities Intermediary shall, (i) in accordance with Pledgor’s written Entitlement Orders given to Securities Intermediary from time to time, sell or redeem Investments, and apply amounts transferred to or held for the credit of the Reserve Account to make investments for credit to the Reserve Account, in Securities Intermediary’s name and as custodian under this Agreement, in Eligible Investments, or release such amounts to, or to the order of, Pledgor and (ii) on each Payment Date prior to the occurrence of an Event of Default that results in the acceleration of the Notes that has not been rescinded under the Indenture, release all income from the investment of funds in the Reserve Account from the security interest granted to the Indenture Trustee in this Agreement and pay such amounts to, or to the order of, the Pledgor.  During any Suspension Period and at any time after the occurrence of an Event of Default that results in the acceleration of the Notes which has not been rescinded under the Indenture, Pledgor’s right to direct such investments under this Section 4(b) shall be suspended, and Securities Intermediary shall not accept Entitlement Orders with respect to the Reserve Account from any person other than Secured Party; and any credit balances shall be invested and reinvested only as provided in Section 4(c).

 

(c)           Secured Party’s Right to Direct Investment.  During any Suspension Period and at any time after the occurrence of an Event of Default that results in the acceleration of the Notes which has not been rescinded under the Indenture, Securities Intermediary shall, in accordance with Secured Party’s written Entitlement Orders (which may be prepared and delivered by the Administrator acting in its capacity as such) given to Securities Intermediary from time to time, sell or redeem Investments, and apply amounts transferred to or held for the credit of the Reserve Account to make investments for credit to the Reserve Account, in Securities Intermediary’s name and as custodian under this Agreement, in Eligible Investments, or release such amounts to or to the order of the Secured Party.

 

(d)           Overnight Investments.  To the extent that, as of 12:00 noon, New York time on any Business Day, there are credit balances expected to remain after settlement of all pending transactions in the Reserve Account, unless otherwise instructed by Secured Party (or by Administrator acting in its capacity as such, or by Pledgor at all times other than during a Suspension Period or at any time after the occurrence of an Event of Default that results in the acceleration of the Notes which has not been rescinded under the Indenture), Securities Intermediary shall apply the expected credit balances to acquire Overnight Investments.  Any Overnight Investments shall be held for the credit of the Reserve Account from which the proceeds for acquisition was derived.

 

  

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(e)           Actions of Securities Intermediary on Purchase of Investments.  Promptly upon the purchase, acquisition or transfer for credit of the Reserve Account of any Investment, Securities Intermediary shall take all steps that it customarily takes in the ordinary course of its business to ensure that such Investment is credited on its books to the Reserve Account.  Without limiting the generality of the foregoing, Securities Intermediary shall promptly (i) send to Pledgor and Secured Party a written confirmation of the acquisition of such Investment, and (ii) indicate by book entry in its records that such Investment has been credited to, and is held for the credit of, the Reserve Account.  Securities Intermediary agrees with Pledgor and Secured Party that any credit balances or property credited to, or held for the credit of, the Reserve Account shall be treated as “Financial Assets” as that term is defined in Section 8-102(a)(9)(iii) of the UCC.

 

(f)           Grant of Control.  Anything contained herein to the contrary notwithstanding, Securities Intermediary shall, if and as directed in writing by Secured Party, without the consent of Pledgor, whether during a Suspension Period or otherwise, (i) comply with Entitlement Orders originated by Secured Party with respect to the Reserve Account, and any Security Entitlements therein, (ii) transfer, sell or redeem any of the Collateral, (iii) transfer any or all of the Collateral to any account or accounts designated by Secured Party, including an account established in Secured Party’s name (whether at Secured Party or Securities Intermediary or otherwise), (iv) register title to any Collateral in any name specified by Secured Party consistent with the policies or practices of the applicable depository, including the name of Secured Party or any of its nominees or agents, without reference to any interest of Pledgor, or (v) otherwise deal with the Collateral as directed by Secured Party.  Nothing contained in this paragraph shall constitute a waiver by Pledgor of any rights or remedies it may have against Secured Party under this Agreement or any other agreement.

 

(g)           Deposit of Proceeds.  Subject to Section 4(b), any interest, cash dividends or other cash distributions received in respect of any Investments and the net proceeds of any sale or payment of any Investments shall be promptly credited to, and held for the credit of the Reserve Account, and any distribution of property other than cash in respect of any Investment shall be credited to, and held for the credit of, the Reserve Account.

 

(h)           Valuation of Collateral.  Securities Intermediary shall provide view only access to its systems to Secured Party for the purpose of communicating data as to the Reserve Account as of that date.

 

Section 5.     Grant of Security Interest in Reserve Account; Covenant Against Creation of other Interests.

 

(a)           Security Interest.  Pledgor hereby grants to the Indenture Trustee, for the benefit of the Holders of the Notes, all of the Pledgor’s right, title and interest in and to the Collateral, whether now or hereafter existing or in which the Pledgor now has or hereafter acquires an interest and wherever the same may be located.  Securities Intermediary hereby acknowledges the security interest granted by the Pledgor in favor of the Indenture Trustee, for the benefit of the Holders of the Notes, in the Collateral and acknowledges that, on each Payment Date (i) prior to the occurrence of an Event of Default that results in an acceleration of the Notes that has not been rescinded under the Indenture and (ii) for so long as a Suspension Period is not continuing

 

  

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on such Payment Date, all income from the investment of funds in the Reserve Account will be (i) released from the security interest granted to the Indenture Trustee in this Agreement and (ii) paid to, or to the order of, the Pledgor.

 

(b)           Acknowledgement of Securities Intermediary’s Role.  Securities Intermediary hereby further acknowledges that, during any Suspension Period, it holds the Reserve Account, and all Security Entitlements therein, as custodian for, for the benefit of, and subject to the control of, Secured Party.  During any Suspension Period, Securities Intermediary shall, by book entry or otherwise, indicate that the Reserve Account, and all Security Entitlements registered to or held therein, are subject to the control of Secured Party as provided in Sections 4(c), 4(e) and 4(f).  Securities Intermediary hereby further acknowledges that, subject to Section 4(f), at all times other than during a Suspension Period, it shall hold the Reserve Account, and all Security Entitlements therein, as custodian for, for the benefit of, and subject to the direction of, Pledgor at all times other than during a Suspension Period, Securities Intermediary shall, by book entry or otherwise, indicate that the Reserve Account, and all Security Entitlements registered to or held therein, are subject to the direction of Pledgor as provided in Section 4(b).

 

(c)           Securities Intermediary Has No Notice of Adverse Claims.  Securities Intermediary represents and warrants that (i) it has no notice of any Adverse Claim against any of the Collateral other than the claim of Secured Party under this Agreement, the Sale and Servicing Agreement and the Indenture; and (ii) it is not party to any agreement other than this Agreement that governs its rights or duties, or limits or conflicts with the rights of Secured Party, including the exclusive right of Secured Party to control as provided in Section 4(f), with respect to the Reserve Account.

 

(d)           Securities Intermediary Shall Not Acknowledge Other Claims.  Securities Intermediary agrees that, except as expressly provided in this Agreement (including Sections 4(b)) or with the written consent of Secured Party, it shall not agree to or acknowledge (i) any right by any Person other than Secured Party to originate Entitlement Orders or control with respect to the Reserve Account; or (ii) any limitation on the right of Secured Party to originate Entitlement Orders with respect to or direct the transfer of any Investments or cash credited to the Reserve Account.

 

Section 6.     Securities Intermediary Maintenance of the Reserve Account.

 

(a)           Transactions Shall Comply With Rules.  The parties acknowledge that all transactions in Financial Assets under this Agreement shall be in accordance with the rules and customs of the exchange, market or clearing organization, if any, in which the transactions are executed or settled and in conformity with applicable law and regulations of governmental authorities and future amendments or supplements thereto.

 

(b)           Risk of Investments and Transactions.  It is not the intention of the parties that Securities Intermediary should bear any investment risk associated with Eligible Investments or Overnight Investments acquired for the credit of the Reserve Account in accordance with Section 4.  Any losses or gains realized on such Investments shall be charged or credited to the Reserve Account, as appropriate.  On committing to a transaction for the credit of the Reserve Account pursuant to an instruction permitted in accordance with Section 4, Securities

 

  

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Intermediary may, (i) pending settlement, block (A) the Investments to be sold or (B) credit balances sufficient to settle any acquisition, or the Investment the liquidation of which will yield funds sufficient to settle any acquisition and, (ii) at the time of settlement, deliver such Investments or funds in accordance with the rules, custom or practice of the particular market.

 

(c)           Use of Intermediaries and Nominees.  Securities Intermediary is authorized, subject to Secured Party’s written instructions, to register any Financial Assets acquired by Securities Intermediary pursuant to this Agreement in the name of Securities Intermediary or in the name of its nominee, or to cause such securities to be registered in the name of a Federal reserve bank or a recognized securities intermediary or clearing corporation, or any nominee thereof.  Securities Intermediary may at any time and from time to time appoint, and may at any time remove, any bank, trust company, clearing corporation, or Broker-Dealer as its agent to carry out such of the provisions of this Agreement.  The appointment or use of any intermediary, or the appointment of any such agent, shall not relieve Securities Intermediary of any responsibility or liability under this Agreement.

 

(d)           Corporate Actions.  Except as otherwise set forth herein, Pledgor and Secured Party agree that Securities Intermediary shall have no responsibility for ascertaining or acting upon any calls, conversions, exchange offers, tenders, interest rate changes or similar matters relating to any Financial Assets credited to or held for the credit of the Reserve Account (except based on written instructions originated by Pledgor or Secured Party), or for informing Pledgor or Secured Party with respect thereto, whether or not Securities Intermediary has, or is deemed to have, knowledge of any of the aforesaid.  Securities Intermediary is authorized to withdraw securities sold or otherwise disposed of, and to credit the Reserve Account with the proceeds thereof or make such other disposition thereof as may be directed in accordance with this Agreement.  Securities Intermediary is further authorized to collect all income and other payments which may become due on Financial Assets credited to the Reserve Account, to surrender for payment maturing obligations and those called for redemption and to exchange certificates in temporary form for like certificates in definitive form, or, if the par value of any shares is changed, to effect the exchange for new certificates.  It is understood and agreed by Pledgor and Secured Party that, although Securities Intermediary will use reasonable efforts to effect the transactions set forth in the preceding sentence, Securities Intermediary shall incur no liability for its failure to effect the same unless its failure is the result of negligence or willful misconduct.

 

(e)           Disclosure of Account Relationships.  Pledgor and Secured Party acknowledge that Securities Intermediary may be required to disclose to securities issuers the name, address and securities positions with respect to Financial Assets credited to the Reserve Account, and hereby consent to such disclosures.

 

(f)           Forwarding of Documents.  Securities Intermediary shall forward to Pledgor and, if requested, Secured Party, or notify Pledgor and, if requested, Secured Party by telephone of, all written communications received by Securities Intermediary as owner of any Financial Assets credited to the Reserve Account and which are intended to be transmitted to the beneficial owner thereof.

 

  

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(g)           Direction in Disputes.  Subject to Section 4(f), Pledgor, Securities Intermediary and Secured Party hereby agree that in the event any dispute arises with respect to the payment, ownership or right to possession of the Reserve Account or any other Collateral credited to or held therein Securities Intermediary shall take or refrain from taking such actions with respect to the Reserve Account as may be directed by (a) Secured Party during the Suspension Period and (b) Pledgor other than during the Suspension Period.

 

(h)           No Setoff, etc.  Securities Intermediary shall not exercise on its own behalf any claim, right of set-off, banker’s lien, clearing lien, counterclaim or similar right against any of the Collateral; provided that Securities Intermediary may deduct, from any credit balances, any usual and ordinary transaction and administration fees payable in connection with the administration and operation of the Reserve Account.  Except for claims for deductions permitted in the preceding sentence, Securities Intermediary agrees that any security interest it may have in the Reserve Account or any security entitlement carried therein shall be subordinate and junior to the interest of Secured Party.

 

(i)           Only Agreement.  This Agreement shall govern the actions, rights and obligations of Securities Intermediary, and shall determine the governing law, with respect to the Reserve Account and the Collateral notwithstanding any term or condition in any agreement other than this Agreement as it may be amended, supplemented or otherwise modified in writing.

 

(j)           Care of Financial Assets.  Securities Intermediary shall maintain possession or control of all Financial Assets credited to the Reserve Account by segregating such Financial Assets from its proprietary assets and keeping them free of any lien, charge or claim of any third party granted or created by Securities Intermediary.  Securities Intermediary shall take such other steps to ensure that Financial Assets credited to the Reserve Account are identified as being held for customers of Securities Intermediary as may be required under applicable law or in accordance with custom and practice in the industry.

 

(k)           Further Actions.  Pledgor and Securities Intermediary shall take such further actions as Secured Party shall reasonably request as being necessary or desirable to maintain or achieve perfection or priority of Secured Party’s security interest with respect to the Collateral and to permit Secured Party to exercise its rights with respect to the Collateral.

 

Section 7.     Limitations on Duties, and Exculpation and Indemnification, of Securities Intermediary.

 

(a)           Limitation on Duty of Care; Exculpation.  Securities Intermediary’s duties hereunder are only those specifically provided herein, and Securities Intermediary shall incur no liability whatsoever for any actions or omissions hereunder except for any such liability arising out of or in connection with Securities Intermediary’s negligence or willful misconduct.  Securities Intermediary has no obligation to ensure the sufficiency of this Agreement or the arrangements described hereunder to satisfy any objectives of Secured Party or Pledgor.  Securities Intermediary shall have no duty to supervise or to provide investment counseling or advice to Pledgor or Secured Party with respect to the purchase, sale, retention or other disposition of any Financial Assets held hereunder.  Except as specifically otherwise provided in this Agreement, Securities Intermediary shall not be responsible for enforcing compliance by the

 

  

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other parties to this Agreement with their respective duties and obligations to each other under this or any other Agreement.

 

(b)           Consultation with Counsel.  Securities Intermediary may consult with, and obtain, at the expense of Pledgor, advice from, legal counsel as to the construction of any of the provisions of this Agreement, and shall incur no liability in acting in good faith in accordance with the reasonable advice and opinion of such counsel.

 

(c)           Reasonable Reliance.  Securities Intermediary shall be fully protected and shall suffer no liability in acting in accordance with any written instructions reasonably believed by it to have been given (i) by Secured Party (or from the Administrator purporting to be acting in its capacity as such) with respect to any aspect of the operation of the Reserve Account (including any such instructions relating to any investment or transfer of any amounts held therein) or (ii) by Pledgor, to the extent provided in Section 4(b), with respect to the Reserve Account.

 

(d)           Expenditure of Funds.  No provision of this Agreement shall require the Securities Intermediary to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

 

(e)           Resignation.  The Securities Intermediary may at any time resign by giving 30 days written notice of resignation to the Secured Party and the Pledgor; provided however that no such resignation of the  Securities Intermediary shall be effective until a successor Securities Intermediary has been appointed and is serving pursuant to the terms hereof.  Upon receiving notice of such resignation, the Pledgor shall promptly appoint a successor, and upon acceptance by the successor of such appointment, release the resigning Successor Intermediary from its obligations hereunder by written instrument, a copy of which instrument shall be delivered to the other parties hereto, the Securities Intermediary and the successor Securities Intermediary.  If no successor shall have been so appointed and have accepted appointment within 45 days after the giving of such notice of resignation, the resigning Securities Intermediary may petition any court of competent jurisdiction on for the appointment of such successor.

 

(f)           Indemnity.  The Pledgor shall indemnify the Securities Intermediary and its officers, directors, employees an agents against any and all loss, liability or expense (including reasonable attorneys’ fees and expenses) incurred by it in connection with the administration of this trust and the performance of its duties hereunder not resulting from its own willful misconduct, negligence or bad faith.  The Securities Intermediary shall notify the Pledgor promptly of any claim for which it may seek indemnity.  Failure by the Securities Intermediary to so notify the Pledgor shall not relieve the Pledgor of its obligations hereunder.  The Pledgor need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Securities Intermediary through the Securities Intermediary’s own willful misconduct, negligence or bad faith.  The provisions of this Section 7(f) shall survive the termination of this Agreement or the earlier resignation or removal of the Securities Intermediary

 

  

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Section 8.     Representations and Warranties By Securities Intermediary.  Securities Intermediary hereby represents and warrants to Pledgor and Secured Party as follows:

 

(a)           Corporate Power.  Securities Intermediary has all necessary corporate power and authority to enter into and perform this Agreement.

 

(b)           Execution Authorized.  The execution, delivery and performance of this Agreement by Securities Intermediary have been duly authorized by all necessary corporate action on the part of Securities Intermediary.

 

(c)           Securities Intermediary.  Securities Intermediary is a “securities intermediary” (as that term is defined in Section 8-102(a)(14) of the UCC) and is acting in such capacity with respect to the Reserve Account.  Securities Intermediary is not a “clearing corporation” (as that term is defined in Section 8-102(a)(5) of the UCC).

 

Section 9.     Termination.  All rights to the Reserve Account and all other Collateral registered to or held therein shall revert to Pledgor, upon Securities Intermediary’s receipt of written notice, signed by an authorized officer of Secured Party, that the Indenture has terminated.

 

Section 10.   Resignation and Removal of Securities Intermediary.

 

(a)           Removal.  Securities Intermediary may be removed at any time by written notice given by Secured Party to Securities Intermediary and Pledgor, but such removal shall not become effective until a successor Securities Intermediary shall have been appointed by Secured Party and shall have accepted such appointment in writing.

 

(b)           Resignation.  Securities Intermediary may resign at any time by giving not less than thirty days’ written notice to Secured Party and Pledgor, but such .removal shall not become effective until a successor Securities Intermediary shall have, been appointed by Secured Party and shall have accepted such appointment in writing.  If an instrument of acceptance by a successor Securities Intermediary shall not have been delivered to the resigning Securities Intermediary within sixty days after the giving of any such notice of resignation, the resigning Securities Intermediary may, at the expense of Pledgor, petition any court of competent jurisdiction for the appointment of a successor Securities Intermediary.

 

(c)           Successor Securities Intermediary.  Any successor Securities Intermediary shall be a bank or trust company, having capital and surplus of at least $50 million, located in the State of New York.

 

(d)           Process of Succession.  Upon the appointment of a successor Securities Intermediary and its acceptance of such appointment, the resigning or removed Securities Intermediary shall transfer all items of Collateral held by it to such successor (which items of Collateral shall be transferred to new Reserve Account established and maintained by such successor).  Following such appointment all references herein to Securities Intermediary shall be deemed a reference to such successor; provided that the provisions of Section 7 hereof shall continue to inure to the benefit of the resigning or removed Securities Intermediary with respect

 

  

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to any actions taken or omitted to be taken by it under this Agreement while it was Securities Intermediary hereunder.

 

Section 11.   Secured Party as Indenture Trustee.  Secured Party shall at all times be the same Person that is the Indenture Trustee under the Indenture.  Resignation or removal of the Indenture Trustee under the Indenture shall also constitute substitution of a successor Secured Party under this Agreement.  Upon the acceptance of any appointment as successor Indenture Trustee under the Indenture, that successor Indenture Trustee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Secured Party under this Agreement, and the retiring or removed Secured Party under this Agreement shall promptly (i) transfer to such successor Secured Party all items of Collateral held by Secured Party, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Secured Party under this Agreement, and (ii) execute and deliver to such successor Secured Party such documents and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Secured Party of the security interests created hereunder, whereupon such retiring or removed Secured Party shall be discharged from its duties and obligations under this Agreement.

 

Section 12.   Choice of Law.  Both this Agreement and the Reserve Account shall be governed by the laws of the State of New York (regardless of its conflict of law provisions (other than Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York)).  Regardless of any provision in any other agreement, for purposes of the UCC, New York shall be deemed to be the Securities Intermediary’s jurisdiction and the Reserve Account and Securities Entitlements related thereto shall be governed by the laws of the State of New York.

 

Section 13.   Amendments.  This Agreement may be amended from time to time by a written amendment duly executed and delivered by the Pledgor, the Indenture Trustee and the Securities Intermediary, and without the consent of any of the Noteholders or the Certificateholders, to cure any ambiguity, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, that either (i) an Officer’s Certificate shall have been delivered by the Servicer to the Indenture Trustee certifying that such officer reasonably believes that such proposed amendment will not materially and adversely affect the interest of any Noteholder or (ii) the Rating Agency Condition has been satisfied in respect of such proposed amendment.

 

This Agreement may also be amended from time to time by the Pledgor, the Indenture Trustee and the Securities Intermediary and, if the interests of the Noteholders are materially and adversely affected, with the consent of the Holders of the Notes evidencing at least a majority of the outstanding principal amount of the Controlling Class of Notes, acting together as a single Class, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or Certificateholders under this Agreement.

 

  

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No amendment otherwise permitted under this Section 13 may (x) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on the Receivables or distributions required to be made for the benefit of any Noteholders or Certificateholders without the consent of all Noteholders and Certificateholders adversely affected thereby, or (y) reduce the percentage of the Notes or Certificates which are required to consent to any such amendment without the consent of the Noteholders and Certficateholders adversely affected thereby; provided, that any amendment referred to in clause (x) or (y) above shall be deemed to not adversely affect any Noteholder if the Rating Agency Condition has been satisfied in respect of such proposed amendment.  No amendment referred to in clause (x) in the immediately preceding sentence shall be permitted unless an Officer’s Certificate shall have been delivered by the Servicer to the Indenture Trustee certifying that such officer reasonably believes that such proposed amendment will not materially and adversely affect the interest of any Noteholder or Certificateholder whose consent was not obtained.

 

Promptly after the execution of any such amendment or consent, the Indenture Trustee shall furnish written notification of the substance of such amendment or consent to the Certificateholder and the Administrator and the Administrator shall provide such notification to each of the Rating Agencies.

 

It shall not be necessary for the consent of the Certificateholders, the Noteholders or the Indenture Trustee pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof.  The manner of obtaining such consents and of evidencing the authorization of the execution thereof by the Certificateholders shall be subject to such reasonable requirements as the Indenture Trustee may prescribe.

 

Section 14.   Tax Reporting.  All items of income, gain, expense and loss recognized in the Securities Accounts shall be reported to the Internal Revenue Service and all state and local taxing authorities under the name and taxpayer identification number of the Pledgor.

 

Section 15.   Compensation.  Pledgor shall pay to the Securities Intermediary from time to time reasonable compensation for its services hereunder.  Pledgor shall reimburse the Securities Intermediary upon request for all reasonable disbursements, expenses and advances incurred or made by it.  Such expenses shall include the reasonable compensation, disbursements and expenses of the Securities Intermediary’s agents and counsel.

 

Section 16.    Successors.  The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors.

 

Section 17.    Notices.  Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below.

 

  

12

  

 

	
Pledgor:

	
Toyota Auto Finance Receivables LLC

19851 Western Avenue NF 10

Torrance, California 90501

Attention:  Treasury Operations Department

Fax: (310) 381-7739

With a copy by electronic mail to: TFS_TREASURY_Operations@toyota.com

 

	  	
With a copy to:

Toyota Auto Finance Receivables LLC

19851 Western Avenue EF 12

Torrance, California 90501

Attention:  Legal Department

Fax: (310) 381-7739

 

	
Secured Party:

	
Deutsche Bank Trust Company Americas

60 Wall Street, 16th Floor

Mail Stop NYC60-1625

New York, NY 10005

Attention: Asset Backed Securities Unit – Toyota Auto Receivables 2014-B Owner Trust

Fax: (212) 553-2459

 

	  	
With a copy to:

Mark DiGiacomo, CCTS

Vice President

Deutsche Bank National Trust Company

Alternative Structured Finance Services

100 Plaza One, 6th Floor

Jersey City, NJ 07311-3901

MS: JCY03-0699

 

	
Securities Intermediary:

	
Deutsche Bank Trust Company Americas

60 Wall Street, 16th Floor

Mail Stop NYC60-1625

New York, NY 10005

Attention: Asset Backed Securities Unit – Toyota Auto Receivables 2014-B Owner Trust

Fax: (212) 553-2459

 

	  	
With a copy to:

Mark DiGiacomo, CCTS

Vice President

Deutsche Bank National Trust Company

Alternative Structured Finance Services

100 Plaza One, 6th Floor

Jersey City, NJ 07311-3901

MS: JCY03-0699

  

13

  

 

Any party may change its address for notices in the manner set forth above.

 

Section 18.   Counterparts.  This Agreement may be executed in any manner of counterparts, all of which shall constitute in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement, by signing and delivering one or more counterparts.

 

Section 19.   No Petition.  Each of the parties hereto, by entering into this Agreement, hereby covenants and agrees that it shall not at any time acquiesce, petition or otherwise invoke or cause the Issuer or the Pledgor to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Issuer or the Pledgor under any federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or the Pledgor, as the case may be, or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Issuer or the Pledgor, in connection with any obligations relating to the Notes, the Certificates, this Agreement or any of the Basic Documents prior to the date that is one year and one day after the date on which the Indenture is terminated.  This Section 19 shall survive the termination of this Agreement and the termination of the Securities Intermediary under this Agreement.

 

[Remainder of page intentionally left blank]

 

 

 

 

 

 

 

 

  

14

  

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.

 

	  	
TOYOTA AUTO FINANCE RECEIVABLES LLC

 

 

	  	
By:

	/s/ Wei Shi                                                          
	  	  	
Name:  Wei Shi

	  	  	
Title:     President

 

 

	  	

 
“Deutsche Bank National Trust Company for”

 

DEUTSCHE BANK TRUST COMPANY AMERICAS, 

as Securities Intermediary

 

 

	  	
By:

	
/s/ Mark DiGiacomo                                            

	  	  	
Name:  Mark DiGiacomo

	  	  	
Title:    Vice President

 

	  	
By:

	/s/ Jennifer Freda                                                
	  	  	
Name:  Jennifer Freda

	  	  	
Title:    Associate

 

 

	  	

 
“Deutsche Bank National Trust Company for”

 

DEUTSCHE BANK TRUST COMPANY AMERICAS, 

not in its individual capacity but solely as Indenture Trustee

 

 

	 	
By:

	
/s/ Mark DiGiacomo                                            

	  	  	
Name:  Mark DiGiacomo

	  	  	
Title:    Vice President

 

	  	
By:

	/s/ Jennifer Freda                                                
	  	  	
Name:  Jennifer Freda

	  	  	
Title:    Associate

 

 

 

	  

 

 

  

  

  

Attachment 1

FORM OF PROHIBITION NOTICE

Date:

 

Deutsche Bank Trust Company Americas

60 Wall Street, 16th Floor

Mail Stop NYC60-1625

New York, NY 10005

Attn:  Asset Backed Securities Unit – Toyota Auto Receivables 2014-B Owner Trust

Fax:  (212) 553-2459

 

Toyota Auto Finance Receivables LLC

19851 Western Avenue NF 10

Torrance, California 90501

Attention:  Treasury Operations Department

 

Toyota Auto Finance Receivables LLC

19851 Western Avenue EF 12

Torrance, California 90501

Attention:  Legal Department

 

	
  

	
Re:

	
Prohibition Notice:  Toyota Auto Receivables 2014-B Owner Trust - Reserve Account

 

Ladies and Gentlemen:

 

Pursuant to the Securities Account Control Agreement (the “Agreement”) dated as of June 18, 2014 and entered into between Toyota Auto Finance Receivables LLC, Deutsche Bank Trust Company Americas, in its capacity as Indenture Trustee, and Deutsche Bank Trust Company Americas, in its capacity as Securities Intermediary, we hereby give you this Prohibition Notice and notify you of the commencement of a Suspension Period.  Until further notice from the undersigned substantially in the form of Attachment 2 to the Agreement, the Securities Intermediary shall not accept or follow instructions from Pledgor pursuant to Section 4(b) of the Agreement.

 

Capitalized terms used and not otherwise defined in this notice are used with their respective meanings in the Agreement.

 

	  	
Yours truly,

 

	  	
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Indenture Trustee and Secured Party

 

	  	
By: __________________________________  

 

	  	
Its:  __________________________________

  

  

  

Attachment 2

FORM OF RESCISSION OF PROHIBITION NOTICE

Date:

 

Deutsche Bank Trust Company Americas

60 Wall Street, 16th Floor

Mail Stop NYC60-1625

New York, NY 10005

Attn:  Asset Backed Securities Unit – Toyota Auto Receivables 2014-B Owner Trust

Fax:  (212) 553-2459

 

Toyota Auto Finance Receivables LLC

19851 Western Avenue NF 10

Torrance, California 90501

Attention:  Treasury Operations Department

 

Toyota Auto Finance Receivables LLC

19851 Western Avenue EF 12

Torrance, California 90501

Attention:  Legal Department

 

	
  

	
Re:

	
Rescission of Prohibition Notice:  Toyota Auto Receivables 2014-B Owner Trust - Reserve Account

 

Ladies and Gentlemen:

 

Pursuant to the Securities Account Control Agreement (the “Agreement”) dated as of June 18, 2014, and entered into between Toyota Auto Finance Receivables LLC, Deutsche Bank Trust Company Americas, in its capacity as Indenture Trustee, and Deutsche Bank Trust Company Americas, in its capacity as Securities Intermediary, we hereby notify you of the rescission by Secured Party of the Prohibition Notice dated               , 20__ and the end of the related Suspension Period.  You are hereby instructed that you shall accept and follow written instructions from Pledgor pursuant to Section 4(b) of the Agreement.

 

Capitalized terms used and not otherwise defined in this notice are used with their respective meanings in the Agreement.

 

	  	
Yours truly,

 

	  	
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Indenture Trustee and Secured Party

 

	  	

By: __________________________________  

 

	  	

Its:  __________________________________Exhibit 4.1

 

PACIFIC ETHANOL, INC.

2006 STOCK INCENTIVE PLAN

(As Amended Through June 18, 2014)

ARTICLE
ONE

GENERAL PROVISIONS

	I.		Purpose of the Plan.

This 2006 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.

    	1

    	 

    

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.

	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 1,715,000 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 be available for subsequent issuance under the Plan to the extent those Awards expire
or terminate for any reason prior to the issuance of the shares of common stock subject to those Awards. Unvested shares issued
under the Plan and subsequently cancelled or repurchased by the Corporation at the original exercise or issue price paid per share
pursuant to the Corporation’s repurchase rights under the Plan shall be added back to the number of shares of common stock
reserved for issuance under the Plan and shall accordingly be available for subsequent reissuance under the Plan. In addition,
should the exercise price of an option under the Plan be paid with shares of common stock, the authorized reserve of common stock
under the Plan shall be reduced only by the net number of shares issued under the exercised stock option. Should shares of common
stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection
with the issuance, exercise or vesting of an Award under the Plan, the number of shares of common stock available for issuance
under the Plan shall be reduced only by the net number of shares issued with respect to that Award.

    	2

    	 

    

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.

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.

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.

    	3

    	 

    

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.

    	4

    	 

    

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.

    	5

    	 

    

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.

    	6

    	 

    

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.

    	7

    	 

    

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.

G.           Net Counting. Upon the
exercise of any Tandem, Standalone or Limited Right under this Section III, the share reserve under Section V
of Article One shall only be reduced by the net number of shares actually issued by the Corporation upon such
exercise, and not by the gross number of shares as to which such Tandem, Standalone or Limited Right is exercised.

	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.

    	8

    	 

    

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.

E.           The Plan Administrator shall have
the discretionary authority to structure one or more outstanding Awards under the Discretionary Grant Program so that those Awards
shall, immediately prior to the effective date of a Change in Control or a Hostile Take-Over, vest and become exercisable as to
all the shares at the time subject to those Awards and may be exercised as to any or all of those shares as fully vested shares
of common stock, whether or not those Awards are to be assumed or otherwise continued in full force and effect pursuant to the
express terms of such transaction. In addition, the Plan Administrator shall have the discretionary authority to structure one
or more of the Corporation’s repurchase rights under the Discretionary Grant Program so that those rights shall immediately
terminate at the time of such Change in Control or consummation of such Hostile Take-Over and shall not be assignable to successor
corporation (or parent thereof), and the shares subject to those terminated rights shall accordingly vest in full at the time of
such Change in Control or consummation of such Hostile Take-Over.

F.           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.

G.           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.

H.           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.

    	9

    	 

    

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.

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.

    	10

    	 

    

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.

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.

    	11

    	 

    

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.

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.

    	12

    	 

    

C.           The Plan Administrator shall have
the discretionary authority to structure one or more unvested Awards under the Stock Issuance Program so that the shares of common
stock subject to those Awards shall automatically vest (or vest and become issuable) in whole or in part immediately upon the occurrence
of a Change in Control or upon the subsequent termination of the Participant’s Service by reason of an Involuntary Termination
within a designated period (not to exceed 18 months) following the effective date of that Change in Control transaction.

D.           The Plan Administrator shall also
have the discretionary authority to structure one or more unvested Awards under the Stock Issuance Program so that the shares of
common stock subject to those Awards shall automatically vest (or vest and become issuable) in whole or in part immediately upon
the occurrence of a Hostile Take-Over or upon the subsequent termination of the Participant’s Service by reason of an Involuntary
Termination within a designated period (not to exceed 18 months) following the effective date of that Hostile Take-Over.

E.           The Plan Administrator’s
authority under Paragraphs C and D 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 or D of
this Section II may result in their loss of performance-based status under Code Section 162(m).

F.           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. The shares of common stock so withheld shall not reduce
the number of shares of common stock authorized for issuance under the Plan.

(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.

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(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.

	III.		Effective Date and Term of the Plan.

A.           The Plan was initially adopted
by the Board on July 19, 2006 and ratified and approved by the Corporation’s stockholders on September 7, 2006. The Plan
was amended by the Board on March 5, 2010 and ratified and approved by the Corporation’s stockholders on June 3, 2010 to
increase the number of shares authorized for issuance under the Plan from 19,048 shares to 57,143 shares. The Plan was further
amended by the Board effective October 20, 2010 to (i) increase the limit on annual awards to any plan participant from 250,000
shares to 1,000,000 shares, and (ii) eliminate the authority of the Plan Administrator to reduce the exercise or base price of
one or more outstanding stock options or stock appreciation rights. The Plan was amended by the Board on March 25, 2011 and ratified
and approved by the Corporation’s stockholders on May 19, 2011 to increase the number of shares authorized for issuance under
the Plan from 57,143 shares to 80,952 shares. The Plan was amended by the Board effective April 2, 2012 and ratified and approved
by the Corporation’s stockholders on December 13, 2012 to increase the number of shares authorized for issuance under the
Plan from 80,952 shares to 414,286 shares. The Plan was amended by the Board effective March 21, 2013 and ratified and approved
by the Corporation’s stockholders on June 18, 2013 to increase the number of shares authorized for issuance under the Plan
from 414,286 shares to 914,286 shares. The Plan was also amended by the Board effective April 12, 2013 to (i) change the limit
on annual awards to any plan participant from 1,000,000 shares to a limit of One Million Dollars ($1,000,000), and (ii) eliminate
the authority of the Plan Administrator to replace outstanding options or stock appreciation rights or pay cash or issue shares
of common stock in consideration of cancelled options or stock appreciation rights. The Plan was amended by the Board on March
6, 2014, subject to stockholder approval, to increase the number of shares authorized for issuance under the Plan from 914,286
shares to 1,715,000 shares.

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) July 19, 2016, (ii) the date on which all shares available for issuance under the Plan shall have been
issued as fully-vested shares, (iii) the termination of all outstanding Awards in connection with a Change in Control or (iv) such
other date as the Board in its sole discretion terminates the Plan. If the Plan terminates on July 19, 2016 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.

    	14

    	 

    

	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 stock exchange or other market on which common stock is then quoted or listed for trading.

	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.

    	15

    	 

    

	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.

    	17

    	 

    

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

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(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 2006 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.

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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.

 

 

 

 

 

 

 

 

 

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