Document:

POOLING AND SERVICING AGREEMENT

 Exhibit 4.3 
  

 
  

POOLING AND SERVICING AGREEMENT 

BETWEEN 
 CAPITAL AUTO
RECEIVABLES LLC 
 AND 

ALLY FINANCIAL INC. 

DATED AS OF MARCH 16, 2016 
  

 
  

 TABLE OF CONTENTS 
  

							
	 	    	 	  	Page	 
		
	 ARTICLE I DEFINITIONS
	  	 	1	  
			
	 SECTION 1.01
	    	 Definitions
	  	 	1	  
	 SECTION 1.02
	    	 Owner of a Receivable
	  	 	2	  
		
	 ARTICLE II PURCHASE AND SALE OF RECEIVABLES
	  	 	2	  
			
	 SECTION 2.01
	    	 Purchase and Sale of Receivables
	  	 	2	  
	 SECTION 2.02
	    	 Receivables Purchase Price
	  	 	3	  
	 SECTION 2.03
	    	 The Closings
	  	 	3	  
	 SECTION 2.04
	    	 Custody of Receivable Files
	  	 	3	  
		
	 ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES
	  	 	4	  
			
	 SECTION 3.01
	    	 Duties of the Servicer
	  	 	4	  
	 SECTION 3.02
	    	 Collection of Receivable Payments
	  	 	5	  
	 SECTION 3.03
	    	 Realization Upon Liquidating Receivables
	  	 	6	  
	 SECTION 3.04
	    	 Maintenance of Insurance Policies
	  	 	6	  
	 SECTION 3.05
	    	 Maintenance of Security Interests in Vehicles
	  	 	7	  
	 SECTION 3.06
	    	 Covenants, Representations and Warranties of the Servicer
	  	 	7	  
	 SECTION 3.07
	    	 Purchase of Receivables Upon Breach of Covenant
	  	 	8	  
	 SECTION 3.08
	    	 Basic Servicing Fee; Payment of Certain Expenses by Servicer
	  	 	9	  
	 SECTION 3.09
	    	 Servicer’s Accounting
	  	 	9	  
	 SECTION 3.10
	    	 Application of Collections
	  	 	9	  
		
	 ARTICLE IV REPRESENTATIONS AND WARRANTIES
	  	 	10	  
			
	 SECTION 4.01
	    	 Representations and Warranties as to the Receivables
	  	 	10	  
	 SECTION 4.02
	    	 Representations and Warranties as to the Pool of Receivables
	  	 	12	  
	 SECTION 4.03
	    	 Additional Representations and Warranties of the Seller
	  	 	13	  
	 SECTION 4.04
	    	 Representations and Warranties of CARI
	  	 	14	  
		
	 ARTICLE V ADDITIONAL AGREEMENTS
	  	 	15	  
			
	 SECTION 5.01
	    	 Conflicts With Further Transfer and Servicing Agreements
	  	 	15	  
	 SECTION 5.02
	    	 Protection of Title
	  	 	15	  
	 SECTION 5.03
	    	 Other Liens or Interests
	  	 	15	  
	 SECTION 5.04
	    	 Repurchase Events
	  	 	16	  
	 SECTION 5.05
	    	 Indemnification
	  	 	17	  
	 SECTION 5.06
	    	 Further Assignments
	  	 	17	  
	 SECTION 5.07
	    	 Pre-Closing Collections
	  	 	18	  
	 SECTION 5.08
	    	 Asset Representations Review
	  	 	18	  
		
	 ARTICLE VI CONDITIONS
	  	 	18	  
			
	 SECTION 6.01
	    	 Conditions to Obligation of CARI
	  	 	18	  
	 SECTION 6.02
	    	 Conditions to Obligation of the Seller
	  	 	19	  
		
	 ARTICLE VII MISCELLANEOUS PROVISIONS
	  	 	19	  
			
	 SECTION 7.01
	    	 Amendment
	  	 	19	  
	 SECTION 7.02
	    	 Survival
	  	 	20	  

  
 i 

							
	 SECTION 7.03
	    	 Notices
	  	 	20	  
	 SECTION 7.04
	    	 Governing Law
	  	 	20	  
	 SECTION 7.05
	    	 Waivers
	  	 	20	  
	 SECTION 7.06
	    	 Costs and Expenses
	  	 	20	  
	 SECTION 7.07
	    	 Confidential Information
	  	 	20	  
	 SECTION 7.08
	    	 Headings
	  	 	20	  
	 SECTION 7.09
	    	 Counterparts
	  	 	20	  
	 SECTION 7.10
	    	 No Petition Covenant
	  	 	20	  
	 SECTION 7.11
	    	 Limitations on Rights of Others
	  	 	21	  
	 SECTION 7.12
	    	 Merger and Consolidation of the Seller, the Servicer or CARI
	  	 	21	  
	 SECTION 7.13
	    	 Assignment
	  	 	21	  

  

			
		
	EXHIBIT A	  	Form of First Step Receivables Assignment
		
	SCHEDULE A	  	Schedule of Receivables
		
	APPENDIX A	  	Definitions, Rules of Construction and Notices
		
	APPENDIX B	  	Additional Representations and Warranties

  
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 THIS POOLING AND SERVICING AGREEMENT, dated as of March 16, 2016, between CAPITAL AUTO
RECEIVABLES LLC, a Delaware limited liability company (“CARI”), and ALLY FINANCIAL INC., a Delaware corporation (“Ally Financial,” also herein referred to as the “Seller” in its capacity as seller
of the Receivables and as the “Servicer” in its capacity as servicer of the Receivables). 
 WHEREAS, CARI desires to
purchase on the date hereof a portfolio of automobile and light truck retail instalment sale contracts, direct purchase money loans and related rights owned by the Seller; 

WHEREAS, the Seller is willing to sell on the date hereof such contracts and related rights to CARI; 

WHEREAS, CARI may wish to sell or otherwise transfer on the date hereof such contracts and related rights, or interests therein, to a trust,
corporation, partnership or other entity (any such entity being the “Issuing Entity”); 
 WHEREAS, the Issuing Entity may
issue debentures, notes, participations, certificates of beneficial interest, partnership interests or other interests or securities (collectively, any such issued interests or securities being “Securities”) to fund its acquisition
of such contracts and related rights; 
 WHEREAS, the Issuing Entity may wish to provide in the agreements pursuant to which it acquires its
interest in such contracts and related rights and issues the Securities (the Second Step Receivables Assignment, the Trust Agreement, the Notes, the Certificates, the Trust Sale and Servicing Agreement and the Indenture being collectively the
“Further Transfer and Servicing Agreements”) that the Servicer shall service such contracts; 
 WHEREAS, the Servicer is
willing to service such contracts in accordance with the terms hereof for the benefit of CARI and, by its execution of the Further Transfer and Servicing Agreements, will be willing to service such contracts in accordance with the terms of such
Further Transfer and Servicing Agreements for the benefit of the Issuing Entity and each other party identified or described herein or in the Further Transfer and Servicing Agreements as having an interest as owner, trustee, secured party, or holder
of Securities (the Issuing Entity and all such parties under the Further Transfer and Servicing Agreements being “Interested Parties”) with respect to such contracts, and the proceeds thereof, as the interests of such parties may
appear from time to time. 
 NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto
agree as follows: 
 ARTICLE I 

DEFINITIONS 
 SECTION 1.01
Definitions. Certain capitalized terms used in this Agreement are defined in and shall have the respective meanings assigned to them in Part I of Appendix A to this Agreement. All references herein to “the Agreement”
or “this Agreement” are to this Pooling and Servicing Agreement as it may be amended, supplemented or modified from time to 

 
time, and all references herein to Articles and Sections are to Articles or Sections of this Agreement unless otherwise specified. The rules of construction set forth in Part II of such
Appendix A shall be applicable to this Agreement. 
 SECTION 1.02 Owner of a Receivable. For purposes of this
Agreement, the “Owner” of a Receivable shall mean CARI until the sale, transfer, assignment or other conveyance of such Receivable by CARI pursuant to the terms of the Further Transfer and Servicing Agreements, and thereafter shall
mean the Issuing Entity; provided, however, that the Seller, the Servicer or CARI, as applicable, shall be the “Owner” of any Receivable from and after the time that such Person shall acquire such Receivable, whether
pursuant to Section 3.07 or 5.04 of this Agreement, any provision of the Further Transfer and Servicing Agreements or otherwise. 

ARTICLE II 
 PURCHASE AND
SALE OF RECEIVABLES 
 SECTION 2.01 Purchase and Sale of Receivables. 

(a) Purchase. On the Closing Date, subject to satisfaction of the conditions specified in Article VI and the First Step Receivables
Assignment (and, in any event, immediately prior to consummation of the related transactions contemplated by the Further Transfer and Servicing Agreements, if any), the Seller shall sell, transfer, assign and otherwise convey to CARI, without
recourse: 
 (i) all right, title and interest of the Seller in, to and under the Receivables listed on the Schedule of Receivables and all
monies received thereon on and after the Cutoff Date, exclusive of any amounts allocable to the premium for physical damage collateral protection insurance required by the Seller or the Servicer covering any related Financed Vehicle; 

(ii) the interest of the Seller in the security interests in the Financed Vehicles granted by Obligors pursuant to the Receivables and, to
the extent permitted by law, any accessions thereto; 
 (iii) the interest of the Seller in any proceeds from claims on any physical
damage, credit life, credit disability or other insurance policies covering the related Financed Vehicles or Obligors; 
 (iv) the interest
of the Seller in any proceeds from recourse against Dealers on the Receivables; 
 (v) all right, title and interest of the Seller in, to
and under the First Step Receivables Assignment; and 
 (vi) all present and future claims, demands, causes and choses in action in respect
of any or all of the foregoing described in clauses (i) through (v) above and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all the foregoing, including all proceeds of the
conversion of any or all of the foregoing, 

  
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voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, investment property, payment intangibles, general intangibles, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or
part of or are included in the proceeds of any of the foregoing. 
 The property described in clauses (i) through
(vi) above is referred to herein collectively as the “Purchased Property.” 
 (b) It is the intention of the
Seller and CARI that the sale, transfer, assignment and other conveyances of the Receivables contemplated by this Agreement and the First Step Receivables Assignment shall constitute a sale of the Receivables from the Seller to CARI and the
beneficial interest in and title to the Receivables shall not be part of the Seller’s estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law. 

(c) The sale, transfer, assignment and other conveyances of Receivables contemplated by this Agreement and the First Step Receivables
Assignment do not constitute and are not intended to result in the creation of or an assumption by CARI of any obligation of the Seller, the Servicer or any other Person to the Obligors, Dealers, insurers or any other Person in connection with the
Receivables, any Dealer Agreements, any insurance policies or any other agreement or instrument relating to any of them. 
 SECTION 2.02
Receivables Purchase Price. In consideration for the Purchased Property, CARI shall, on the Closing Date, pay to the Seller an amount equal to the Initial Aggregate Receivables Principal Balance in respect of the Receivables and the Seller
shall execute and deliver to CARI an assignment in the form attached hereto as Exhibit A (the “First Step Receivables Assignment”). The Initial Aggregate Receivables Principal Balance is equal to $1,022,999,998.97. A portion
of the Initial Aggregate Receivables Principal Balance shall be paid to the Seller in immediately available funds and the balance of such purchase price shall be paid through one or both of (a) an increase in the amount owing from CARI to
Seller under the Intercompany Advance Agreement (as a result of an advance made thereunder from Seller to CARI) and (b) an increase in Seller’s capital account in CARI (as a result of a deemed capital contribution from the Seller to CARI).
The amount advanced under the Intercompany Advance Agreement and the amount of the deemed capital contribution shall be duly recorded by the Seller and CARI. 

SECTION 2.03 The Closing. The sale and purchase of the Receivables shall take place at the offices of Kirkland & Ellis LLP,
300 North LaSalle Street, Chicago, Illinois 60654, on the Closing Date at a time mutually agreeable to the Seller and CARI, and will occur simultaneously with the closing of transactions contemplated by the Further Transfer and Servicing Agreements.

 SECTION 2.04 Custody of Receivable Files. In connection with the sale, transfer and assignment of the Receivables to CARI pursuant
to this Agreement and the First Step Receivables Assignment, CARI, simultaneously with the execution and delivery of this Agreement, shall enter into the Custodian Agreement with the Custodian, pursuant to which 

  
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CARI shall revocably appoint the Custodian, and the Custodian shall accept such appointment, to act as the agent of CARI as Custodian of the following documents or instruments which shall be
constructively delivered to CARI with respect to each Receivable: 
 (a) the fully executed original of the instalment sale contract or
direct purchase money loan, as applicable, for such Receivable; 
 (b) documents evidencing or related to any Insurance Policy; 

(c) the original credit application of each Obligor, fully executed by each such Obligor on the Seller’s customary form, or on a form
approved by the Seller, for such application; 
 (d) where permitted by law, the original certificate of title (when received) and otherwise
such documents, if any, that the Seller keeps on file in accordance with its customary procedures indicating that the Financed Vehicle is owned by the Obligor and subject to the interest of the Seller as first lienholder or secured party; and 

(e) any and all other documents that the Seller keeps on file in accordance with its customary procedures relating to the individual
Receivable, Obligor or Financed Vehicle. 
 ARTICLE III 

ADMINISTRATION AND SERVICING OF RECEIVABLES 

SECTION 3.01 Duties of the Servicer. 

(a) The Servicer is hereby appointed and authorized to act as agent for the Owner of the Receivables and in such capacity shall manage,
service, administer and process collections on the Receivables with reasonable care, using that degree of skill and attention that the Servicer exercises with respect to comparable motor vehicle related receivables that it services for itself or
others. The Servicer hereby accepts such appointment and authorization and agrees to perform the duties of Servicer with respect to the Receivables set forth herein and in the Further Transfer and Servicing Agreements. 

(b) The Servicer’s duties shall include collection and posting of all payments, responding to inquiries of Obligors, investigating
delinquencies, sending billing statements to Obligors, policing the collateral, including remarketing repossessed and returned Financed Vehicles, accounting for collections and furnishing monthly and annual statements to the Owner of any Receivables
with respect to distributions, generating federal income tax information and performing the other duties specified herein. Subject to the provisions of Section 3.02 (including the provisions regarding “Permitted Modifications”
set forth therein) and the limitations set forth in Section 3.07(a)(iii)), the Servicer shall follow its customary standards, policies and procedures and shall have full power and authority, acting alone, to do any and all things in
connection with such managing, servicing, administration and collection as set forth herein. 
 (c) Without limiting the generality of the
foregoing, the Servicer is hereby authorized and empowered by the Owner of the Receivables, pursuant to this Section 3.01, to 

  
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execute and deliver, on behalf of all Interested Parties, or any of them, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Receivables and the Financed Vehicles (including proceeds). The Servicer is hereby authorized to (i) commence, in its own name or in the name of the Owner of such Receivable a legal proceeding,
whether through judicial process or (with respect to repossession of a Financed Vehicle) non-judicial process, (ii) participate in a voluntary or involuntary liquidation proceeding to enforce a Liquidating Receivable or Receivable as
contemplated by Section 3.03, (iii) enforce all obligations of the Seller, the Servicer, CARI or the Issuing Entity under this Agreement and under the Further Transfer and Servicing Agreements or (iv) commence or participate in
a legal proceeding (including a bankruptcy case) relating to or involving a Receivable or a Liquidating Receivable. If the Servicer commences or participates in such a legal proceeding in its own name, the Servicer is hereby authorized and empowered
by the Owner of the Receivables pursuant to this Section 3.01 to obtain possession of the related Financed Vehicle and immediately and without further action on the part of the Owner or the Servicer, the Owner of such Receivable shall
thereupon automatically assign in trust such Receivable and the security interest in the related Financed Vehicle to the Servicer for the benefit of the Interested Parties immediately prior to such legal or liquidation proceeding for purposes of
commencing or participating in any such proceeding as a party or claimant. Upon such automatic assignment, the Servicer will be, and will have all the rights and duties of, a secured party under the UCC and other applicable law with respect to such
Receivable and the related Financed Vehicle. At the Servicer’s request from time to time, the Owner of a Receivable assigned under this Section 3.01 shall provide the Servicer with evidence of the assignment in trust for the benefit
of the Interested Parties as may be reasonably necessary for the Servicer to take any of the actions set forth in the following sentence. 

(d) The Servicer is hereby authorized and empowered by the Owner of a Receivable to execute and deliver in the Servicer’s name any
notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any such proceeding. Any Owner of Receivables shall furnish the Servicer with any powers of attorney and other documents and take any
other steps which the Servicer may deem necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement and the Further Transfer and Servicing Agreements. Except to the extent required by the
preceding two sentences, the authority and rights granted to the Servicer in this Section 3.01 shall be nonexclusive and shall not be construed to be in derogation of the retention by the Owner of a Receivable of equivalent authority and
rights. 
 SECTION 3.02 Collection of Receivable Payments. The Servicer shall make reasonable efforts to collect all payments called
for under the terms and provisions of the Receivables as and when the same shall become due and shall follow such collection practices, policies and procedures as it follows with respect to comparable motor vehicle related receivables that it
services for itself or others in connection therewith (the “Established Collection Procedures”). Subject to the limitations provided in Section 3.07(a)(iii) (which limitations shall remain in effect at all times), the
Servicer is hereby authorized to make any Permitted Modifications (as defined below) without the prior consent of the Owner of such Receivable. The Servicer is not authorized to, and shall not, make or grant any extensions, rebates, deferrals,
alterations, amendments or adjustments on a Receivable (collectively, “Receivable Modifications”) unless such Receivable Modification is a Permitted Modification. 

  
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“Permitted Modification” means any Receivable Modification made pursuant to the Established Collection Procedures with respect to which at least one of the following conditions
has been or will be satisfied: (i) the Receivable Modifications, individually and collectively, considering all Receivable Modifications proposed to be made to such Receivable, are ministerial in nature (such as, by way of example, the change
of payment dates due from an Obligor to a different day in the month, waiver of any prepayment charge or late payment charge, or waiver of other fees that may be collected in the ordinary course of servicing the Receivable); (ii) the Servicer,
in response to a request made by an Obligor and pursuant to the Established Collection Procedures, provides for extensions or deferrals of payments with respect to such Receivable to the extent that the following conditions all apply: (a) such
extensions or deferrals will not exceed 90 days in the aggregate during any 12-month period; (b) such extensions or deferrals will not exceed 180 days in the aggregate during the life of such Receivable; and (c) the Servicer believes that
such extensions or deferrals are appropriate or necessary to preserve the value of such Receivable and to prevent the Receivable from going into default (or where such Receivable is already in default, to prevent the Receivable from becoming further
impaired); (iii) the Servicer provides for extensions or deferrals of payment with respect to a Receivable which is in default and which the Servicer believes are appropriate or necessary to preserve the value of such Receivable and to prevent
such Receivable from becoming further impaired; or (iv) the Servicer has delivered an opinion to the Issuing Entity to the effect that such Receivable Modifications will not cause the Issuing Entity to fail to qualify as a grantor trust for
United States federal income tax purposes. 
 SECTION 3.03 Realization Upon Liquidating Receivables. The Servicer shall use
reasonable efforts, consistent with its customary practices, policies and procedures, to repossess or otherwise comparably convert the ownership or gain control of any Financed Vehicle that it has reasonably determined should be repossessed or
otherwise converted following a default under the Receivable secured by the Financed Vehicle. The Servicer is authorized to follow such customary practices, policies and procedures as it follows with respect to comparable motor vehicle related
receivables that it services for itself or others, which customary practices, policies and procedures may include reasonable efforts to realize upon any recourse to Dealers, selling the related Financed Vehicle at public or private sale and the
taking of other actions by the Servicer in order to realize upon such a Receivable. The Servicer is hereby authorized to exercise its discretion consistent with its customary practices, policies and procedures and the terms of the Basic Documents,
in servicing Liquidating Receivables so as to maximize the net collection of those Liquidating Receivables, including the discretion to choose to sell or not to sell any of the Liquidating Receivables itself on behalf of the Depositor or any other
Owner. The Servicer shall not be liable for any such exercise of its discretion made in good faith and in accordance with such servicing procedures. The foregoing is subject to the provision that, in any case in which the Financed Vehicle shall have
suffered damage, the Servicer shall not expend funds in connection with any repair or towards the repossession of such Financed Vehicle unless it shall determine in its discretion that such repair or repossession shall increase the proceeds of
liquidation of the related Receivable by an amount greater than the amount of such expenses. The Servicer shall be entitled to receive Liquidation Expenses with respect to each Liquidating Receivable at such time as the Receivable becomes a
Liquidating Receivable (or as may otherwise be provided in the Further Transfer and Servicing Agreements). 
 SECTION 3.04 Maintenance of
Insurance Policies. The Servicer shall, in accordance with its customary practices, policies and procedures, require that each Obligor shall 

  
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have obtained physical damage insurance covering the Financed Vehicle as of the execution of the related Receivable. The Servicer shall, in accordance with its customary practices, policies and
procedures, track such physical damage insurance with respect to each Receivable. 
 SECTION 3.05 Maintenance of Security Interests in
Vehicles. The Servicer shall, in accordance with its customary practices, policies and procedures and at its own expense, take such steps as are necessary to maintain perfection of the security interest created by each Receivable in the
related Financed Vehicle. The Owner of each Receivable hereby authorizes the Servicer to re-perfect such security interest on behalf of such Owner, as necessary because of the relocation of a Financed Vehicle, or for any other reason. 

SECTION 3.06 Covenants, Representations and Warranties of the Servicer. As of the Closing Date, the Servicer hereby makes the
following representations, warranties and covenants on which CARI relies in accepting the Receivables hereunder and pursuant to the First Step Receivables Assignment, and on which the Issuing Entity shall rely in accepting such Receivables and
executing and delivering the Securities under the Further Transfer and Servicing Agreements. 
 (a) The Servicer covenants that from and
after the closing hereunder: 
 (i) Liens in Force. Except as contemplated in this Agreement or the Further Transfer and Servicing
Agreements, the Servicer shall not release in whole or in part any Financed Vehicle from the security interest securing the related Receivable; 

(ii) No Impairment. The Servicer shall do nothing to impair the rights or security interest of CARI or any Interested Party in and to
the Purchased Property; and 
 (iii) No Modifications. The Servicer shall not amend or otherwise modify any Receivable such that the
Amount Financed, the Annual Percentage Rate, or the number of originally scheduled due dates is altered or such that the last scheduled due date occurs after the Final Scheduled Distribution Date. 

(b) Upon the execution of this Agreement and the Further Transfer and Servicing Agreements, the Servicer represents and warrants to the
Issuing Entity and CARI that as of the Closing Date: 
 (i) Organization and Good Standing. The Servicer has been duly formed and is
validly existing and in good standing under the laws of its State of incorporation, with power and authority to own its properties and to conduct its business as such properties are presently owned and such business is presently conducted; 

(ii) Due Qualification. The Servicer is duly qualified to do business as a foreign entity in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Receivables) requires or shall require such qualification; 

(iii) Power and Authority. The Servicer has the power and authority to execute and deliver this Agreement and the Further Transfer and
Servicing Agreements and to 

  
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carry out the terms of such agreements; the Servicer has the power, authority and legal right to service the Receivables as provided herein and in the Further Transfer and Servicing Agreements
and the Servicer’s execution, delivery and performance of this Agreement and the Further Transfer and Servicing Agreements have been duly authorized by the Servicer by all necessary corporate action; 

(iv) Binding Obligation. The Further Transfer and Servicing Agreements and this Agreement, when duly executed and delivered, shall
constitute the legal, valid and binding obligations of the Servicer enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the
enforcement of creditors’ rights in general and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law; 

(v) No Violation. The consummation by the Servicer of the transactions contemplated by this Agreement and the Further Transfer and
Servicing Agreements, and the fulfillment by the Servicer of the terms hereof and thereof, shall not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws (or similar organizational documents) of the Servicer, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Servicer is a party or by which it is bound, or result in the
creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement and the Further Transfer and Servicing Agreements, or
violate any law or, to the best of the Servicer’s knowledge, any order, rule or regulation applicable to the Servicer of any court or of any federal or State regulatory body, administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or any of its properties; and 
 (vi) No Proceedings. To the Servicer’s knowledge, there are no
proceedings or investigations pending, or threatened, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Servicer or its properties (A) asserting the
invalidity of this Agreement and the Further Transfer and Servicing Agreements or any Securities issued thereunder, (B) seeking to prevent the issuance of such Securities or the consummation of any of the transactions contemplated by the
Further Transfer and Servicing Agreements, or (C) seeking any determination or ruling that might materially and adversely affect this Agreement, the performance by the Servicer of its obligations under, or the validity or enforceability of, the
Further Transfer and Servicing Agreements. 
 SECTION 3.07 Purchase of Receivables Upon Breach of Covenant. Upon discovery by
any of the Seller, the Servicer, CARI or any party under the Further Transfer and Servicing Agreements of a breach of any of the covenants set forth in Sections 3.05 and 3.06(a), the party discovering such breach shall give prompt
written notice thereof to the others. As of the last day of the second Monthly Period following its discovering or receiving notice of such breach (or, at the Servicer’s election, the last day of the first Monthly Period following such
discovery or notice), the Servicer shall, unless it shall have cured such breach in all material respects, purchase from the Owner thereof any Receivable materially and adversely affected by 

  
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such breach as determined by such Owner and, on the related Distribution Date, the Servicer shall pay the Administrative Purchase Payment. It is understood and agreed that the obligation of the
Servicer to purchase any Receivable with respect to which such a breach has occurred and is continuing shall, if such obligation is fulfilled, constitute the sole remedy against the Servicer for such breach available to CARI or any Interested Party.

 SECTION 3.08 Basic Servicing Fee; Payment of Certain Expenses by Servicer. The Servicer is entitled to receive the Basic Servicing
Fee out of collections in respect of the Receivables and other available funds, as and to the extent set forth herein and in the Further Transfer and Servicing Agreements. The Servicer shall also be entitled to Investment Earnings as, and to the
extent, set forth in the Further Transfer and Servicing Agreements. Subject to any limitations on the Servicer’s liability under the Further Transfer and Servicing Agreements, the Servicer shall be required to pay all expenses incurred by it in
connection with its activities under this Agreement and under the Further Transfer and Servicing Agreements (including fees and disbursements of the Issuing Entity, any trustees and independent accountants, taxes imposed on the Servicer, expenses
incurred in connection with distributions and reports to holders of Securities and all other fees and expenses not expressly stated under this Agreement or the Further Transfer and Servicing Agreements to be for the account of the holders of
Securities). 
 SECTION 3.09 Servicer’s Accounting. On each Determination Date under a Further Transfer and Servicing
Agreement, the Servicer shall deliver to each of the trustees and other applicable parties under the Further Transfer and Servicing Agreements and to CARI and the Rating Agencies a Servicer’s Accounting with respect to the immediately preceding
Monthly Period executed by any Authorized Officer of the Servicer containing all information necessary to each such party for making any distributions required by the Further Transfer and Servicing Agreements, and all information necessary to each
such party for sending any statements required under the Further Transfer and Servicing Agreements. Receivables to be purchased by the Servicer under Sections 3.07 or 5.04 or to be repurchased by CARI, the Servicer or the Seller
under the Further Transfer and Servicing Agreements as of the last day of any Monthly Period shall be identified by Receivable number (as set forth in the Schedule of Receivables). With respect to any Receivables for which CARI is the Owner, the
Servicer shall deliver to CARI such accountings relating to such Receivables and the actions of the Servicer with respect thereto as CARI may reasonably request. 

SECTION 3.10 Application of Collections. For the purposes of this Agreement and the Further Transfer and Servicing Agreements,
no later than each Distribution Date all collections for the related Monthly Period shall be applied by the Servicer as follows: 
 (a) With
respect to all Simple Interest Receivables (other than Administrative Receivables and Warranty Receivables), payments by or on behalf of the Obligors that are not Supplemental Servicing Fees shall be applied to principal and interest on all such
Simple Interest Receivables. 
 (b) With respect to a Simple Interest Receivable that is also an Administrative Receivable or Warranty
Receivable, payments by or on behalf of the Obligor shall be applied in the same manner as set forth in Section 3.10(a). A Warranty Payment or an Administrative Purchase Payment, as applicable, shall be applied to principal and interest
on such Receivable. 

  
 9 

 ARTICLE IV 

REPRESENTATIONS AND WARRANTIES 

SECTION 4.01 Representations and Warranties as to the Receivables. The Seller makes the following representations and warranties
as to each Receivable, on which CARI relies in accepting the Receivables. Such representations and warranties speak as of the Closing Date and shall survive the sale, transfer and assignment of the Receivables to CARI and the subsequent assignment
and transfer pursuant to the Further Transfer and Servicing Agreements: 
 (a) Characteristics of Receivables. 

(i) General. Each Receivable: 

(1) is secured by a Financed Vehicle, was originated in the United States by the Seller or one of its subsidiaries or a Dealer for the retail
sale of a Financed Vehicle in the ordinary course of business, was fully and properly executed by the parties thereto, if not originated by the Seller, was purchased by the Seller from one of its subsidiaries or from such Dealer under an existing
Dealer Agreement, and was validly assigned by such subsidiary or such Dealer to the Seller in accordance with its terms, 
 (2) has created
or shall create a valid, binding and enforceable first priority security interest in favor of the Seller in the Financed Vehicle, which security interest is assignable by the Seller to CARI, 

(3) contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for realization
against the collateral of the benefits of the security, 
 (4) is a Simple Interest Receivable, 

(5) provides for level monthly payments which may vary from one another by no more than $5, which shall amortize the Amount Financed by
maturity and shall yield interest at the Annual Percentage Rate, 
 (6) has an original term of not less than twelve (12) monthly
payments and not greater than eighty-four (84) monthly payments and a remaining term of not less than three (3) monthly payments, and 

(7) with respect to which at least one monthly payment has been made. 

(ii) Receivables. In addition to the characteristics set forth in Section 4.01(a)(i) above, each Receivable (1) has a
first scheduled payment due date on or after September 28, 2009, (2) was originated on or after September 3, 2009, (3) as of the Cutoff Date, was not considered past due (that is, no payments due on that Receivable in excess of
$25 were more than thirty (30) days delinquent), and was not a Liquidating Receivable, and (4) has an Annual Percentage Rate not greater than 26.00%. 

  
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 (b) Schedule of Receivables. The information set forth in the Schedule of Receivables is
true and correct in all material respects relating to such Receivable. 
 (c) Compliance With Law. All requirements of applicable
federal, State and local laws, and regulations thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act,
the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Consumer Financial Protection Bureau’s Regulations “B” and “Z”, the Servicemembers Civil Relief Act of 2003, the Texas Consumer Credit Code, and state
adaptations of the National Consumer Act and of the Uniform Consumer Credit Code and other consumer credit laws and equal credit opportunity and disclosure laws, in respect of each such Receivable and other Purchased Property, have been complied
with in all material respects, and each such Receivable and the sale of the Financed Vehicle evidenced thereby complied at the time it was originated or made and now complies in all material respects with all legal requirements of the jurisdiction
in which it was originated or made. 
 (d) Binding Obligation. Each such Receivable represents the genuine, legal, valid and binding
payment obligation in writing of the Obligor thereon, enforceable in all material respects by the holder thereof in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors’ rights in general and by equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. 

(e) Security Interest in Financed Vehicle. Immediately prior to the sale, transfer and assignment thereof pursuant hereto and the First
Step Receivables Assignment, each Receivable was secured by a validly perfected first priority security interest in the Financed Vehicle in favor of the Seller as secured party or all necessary and appropriate action had been commenced that would
result in the valid perfection of a first priority security interest in the Financed Vehicle in favor of the Seller as secured party. 
 (f)
Receivables In Force. Each such Receivable has not been satisfied, subordinated or rescinded, and the Financed Vehicle securing each such Receivable has not been released from the lien of the related Receivable in whole or in part. 

(g) No Waiver. Since the Cutoff Date, no provision of any such Receivable has been waived, altered or modified in any respect, except
to the extent set forth in the related Receivable File; provided that no such modification has increased the number of originally scheduled due dates or the Amount Financed of the related Receivable. 

(h) No Defenses. No right of rescission, setoff, counterclaim or defense has been asserted or threatened as indicated in the Receivable
File with respect to any such Receivable. 
 (i) Insurance. The Obligor under each such Receivable is required to maintain a physical
damage insurance policy of the type that the Seller requires in accordance with its customary underwriting standards for the purchase of motor vehicle related receivables. 

  
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 (j) Good Title. Each such Receivable has not been sold, transferred, assigned or pledged
by the Seller to any Person other than CARI; immediately prior to the conveyance of each such Receivable pursuant to this Agreement and the First Step Receivables Assignment, the Seller had good and marketable title thereto, free of any Lien; and,
upon execution and delivery of this Agreement by the Seller, CARI shall have all of the right, title and interest of the Seller in and to each such Receivable, the unpaid indebtedness evidenced thereby and the collateral security therefor, free of
any Lien. 
 (k) One Original. There is only one original executed copy of each such Receivable. 

(l) No Documents or Instruments. No such Receivable, or constituent part thereof, constitutes a “negotiable
instrument” or “negotiable document of title” (as such terms are used in the UCC). 
 SECTION 4.02
Representations and Warranties as to the Pool of Receivables. The Seller makes the following representations and warranties as to the pool of Receivables, on which CARI relies in accepting the Receivables. Such representations and warranties
speak as of the Closing Date, and shall survive the sale, transfer and assignment of the Receivables to CARI, and the subsequent assignment and transfer pursuant to the Further Transfer and Servicing Agreements: 

(a) Creation, Perfection and Priority of Security Interests. The representations and warranties regarding creation, perfection and
priority of security interests in the Purchased Property, which are attached to this Agreement as Appendix B, are true and correct to the extent that they are applicable. 

(b) No Adverse Selection. No selection procedures believed to be adverse to CARI or to the holders of the Securities issued under the
Further Transfer and Servicing Agreements were utilized in selecting the Receivables from those receivables of the Seller that meet the selection criteria set forth in this Agreement. 

(c) No Liens. To the best of the Seller’s knowledge: (1) there are no liens or claims that have been filed for work, labor or
materials affecting any Financed Vehicle securing any Receivable that are or may be liens prior to, or equal or coordinate with, the security interest in the Financed Vehicle granted by such Receivable; (2) no contribution failure has occurred
with respect to any Benefit Plan which is sufficient to give rise to a lien under Section 303 (k) of ERISA with respect to any Receivable; and (3) no tax lien has been filed and no claim related thereto is being asserted with respect
to any Receivable. 
 (d) Lawful Assignment. Each such Receivable was not originated in, or is not subject to the laws of, any
jurisdiction the laws of which would make unlawful the sale, transfer and assignment of each such Receivable under this Agreement, the Trust Sale and Servicing Agreement or the Indenture, as applicable. 

(e) All Filings Made. All filings (including UCC filings) necessary in any jurisdiction to give CARI a first priority perfected
ownership interest in each such Receivable shall have been made. 

  
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 SECTION 4.03 Additional Representations and Warranties of the Seller. The Seller hereby
represents and warrants to CARI and the Servicer as of the Closing Date that: 
 (a) Organization and Good Standing. The Seller has
been duly formed and is validly existing as an entity in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are presently owned and such business is
presently conducted; 
 (b) Due Qualification. The Seller is duly qualified to do business as a foreign entity in good standing, and
has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business requires or shall require such qualification; 

(c) Power and Authority. The Seller has the power and authority to execute and deliver this Agreement and the First Step Receivables
Assignment and to carry out its terms; the Seller has full power and authority to sell and assign the property to be sold and assigned to CARI, and has duly authorized such sale and assignment to CARI by all necessary corporate action; and the
execution, delivery and performance of this Agreement and the First Step Receivables Assignment have been duly authorized by the Seller by all necessary corporate action; 

(d) Valid Sale; Binding Obligation. This Agreement and the First Step Receivables Assignment, when duly executed and delivered, shall
constitute a valid sale, transfer and assignment of the Receivables, in each case, enforceable against creditors of and purchasers from the Seller; and this Agreement together with the First Step Receivables Assignment, when duly executed and
delivered, shall constitute a legal, valid and binding obligation of the Seller enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, receivership, conservatorship, insolvency, reorganization or other
similar laws affecting the enforcement of creditors’ rights in general and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law; 

(e) No Violation. The consummation of the transactions contemplated by this Agreement and the First Step Receivables Assignment and the
fulfillment of the terms of this Agreement and the First Step Receivables Assignment shall not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or bylaws (or similar organizational documents) of the Seller, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Seller is a party or by which it is bound, or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement and the First Step Receivables Assignment or violate any law or, to the
best of the Seller’s knowledge, any order, rule or regulation applicable to the Seller of any court or of any federal or State regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Seller or
any of its properties; and 
 (f) No Proceedings. To the Seller’s knowledge, there are no proceedings or investigations pending,
or threatened, before any court, regulatory body, administrative agency 

  
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or other tribunal or governmental instrumentality having jurisdiction over the Seller or its properties (A) asserting the invalidity of this Agreement and the First Step Receivables
Assignment, (B) seeking to prevent the consummation of any of the transactions contemplated by this Agreement and the First Step Receivables Assignment, or (C) seeking any determination or ruling that might materially and adversely affect
the performance by the Seller of its obligations under, or the validity or enforceability of, this Agreement and the First Step Receivables Assignment. 

SECTION 4.04 Representations and Warranties of CARI. CARI hereby represents and warrants to the Seller and the Servicer as of the
Closing Date: 
 (a) Organization and Good Standing. CARI has been duly formed and is validly existing as an entity in good standing
under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are presently owned and such business is presently conducted; 

(b) Due Qualification. CARI is duly qualified to do business as a foreign entity in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualification; 

(c) Power and Authority. CARI has the power and authority to execute and deliver this Agreement and the First Step Receivables
Assignment and to carry out its terms; CARI had at all relevant times, and now has, power, authority and legal right to acquire and own the Receivables and the execution, delivery and performance of this Agreement and the First Step Receivables
Assignment have been duly authorized by CARI by all necessary limited liability company action; 
 (d) No Violation. The consummation
of the transactions contemplated by this Agreement and the First Step Receivables Assignment and the fulfillment of the terms of this Agreement and the First Step Receivables Assignment shall not conflict with, result in any breach of any of the
terms and provisions of or constitute (with or without notice or lapse of time) a default under, the certificate of formation or limited liability company agreement of CARI, or any indenture, agreement, mortgage, deed of trust or other instrument to
which CARI is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument, other than any Further Transfer and Servicing
Agreement or violate any law or, to the best of CARI’s knowledge, any order, rule or regulation applicable to CARI of any court or of any federal or State regulatory body, administrative agency or other governmental instrumentality having
jurisdiction over CARI or any of its properties; and 
 (e) No Proceedings. To CARI’s knowledge, there are no proceedings or
investigations pending or threatened, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over CARI or its properties (i) asserting the invalidity of this Agreement and
the First Step Receivables Assignment, or (ii) seeking any determination or ruling that might materially and adversely affect the performance by CARI of its obligations under, or the validity or enforceability of, this Agreement and the First
Step Receivables Assignment. 

  
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 ARTICLE V 

ADDITIONAL AGREEMENTS 

SECTION 5.01 Conflicts With Further Transfer and Servicing Agreements. To the extent that any provision of Sections 5.02 through
5.04 of this Agreement conflicts with any provision of the Further Transfer and Servicing Agreements, the Further Transfer and Servicing Agreements shall govern. 

SECTION 5.02 Protection of Title. 

(a) Filings. The Seller shall authorize or prepare, as applicable, and file such financing statements or amendments to financing
statements and cause to be authorized and prepared, as applicable, and filed such continuation and other statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of CARI under
this Agreement and the First Step Receivables Assignment in the Receivables and the other Purchased Property and in the proceeds thereof. The Seller shall deliver (or cause to be delivered) to CARI file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing, and the Seller hereby authorizes CARI and its assigns to file all such financing statements without its signature. 

(b) Name Change. The Seller shall not change its State of incorporation or its name, identity or entity structure in any manner that
would, could or might make any financing statement or continuation statement filed by the Seller, CARI or CARI’s assigns in accordance with Section 5.02(a) seriously misleading within the meaning of the UCC, unless it shall give
CARI written notice thereof within ten (10) days of such change. 
 (c) Executive Office; Maintenance of Offices. The Seller
shall give CARI written notice within ten (10) days of any relocation of its principal executive office if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement. The Seller shall at all times maintain each office from which it originates Receivables and its principal executive office within the United States of America. 

(d) New Debtor. In the event that the Seller shall change the jurisdiction in which it is formed or otherwise enter into any
transaction which would result in a “new debtor” (as defined in the UCC) succeeding to the obligations of the Seller hereunder, the Seller shall comply fully with the obligations of Section 5.02(a). 

SECTION 5.03 Other Liens or Interests. Except for the conveyances hereunder and under the First Step Receivables Assignment and as
contemplated by the Further Transfer and Servicing Agreements, the Seller shall not sell, pledge, assign or transfer the Receivables or other Purchased Property to any other Person, or grant, create, incur, assume or suffer to exist any Lien on any
interest therein, and the Seller shall defend the right, title and interest of CARI in, to and under such Receivables or other Purchased Property against all claims of third parties claiming through or under the Seller. 

  
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 SECTION 5.04 Repurchase or Substitution of Receivables. 

(a) Repurchase or Substitution Events. By its execution of the Further Transfer and Servicing Agreements to which it is a party, the
Seller shall acknowledge the assignment by CARI of such of its right, title and interest in, to and under this Agreement and the First Step Receivables Assignment to the Issuing Entity as shall be provided in the Further Transfer and Servicing
Agreements. The Seller hereby covenants and agrees with CARI for the benefit of CARI and the Interested Parties that in the event of a breach of any of the Seller’s representations and warranties contained in Sections 4.01 or 4.02
hereof with respect to any Warranty Receivable (a “Repurchase or Substitution Event”), the Seller shall (a) if such breach is discovered on or prior to the second anniversary of the Closing Date and if the aggregate Principal
Balance of the Substitute Receivables substituted since the Closing Date is less than or equal to 10% of the Initial Aggregate Receivables Principal Balance, the Seller shall substitute a Substitute Receivable in exchange for such Warranty
Receivable by delivering a First Step Receivables Assignment with respect to such Substitute Receivable on the related Substitution Date, or (b) if such breach is discovered after the second anniversary of the Closing Date or if the Seller has
previously sold Substitute Receivables to CARI in an amount greater than 10% of the Initial Aggregate Receivables Principal Balance, the Seller shall repurchase such Warranty Receivable from the Issuing Entity (if the Issuing Entity is then the
Owner of such Warranty Receivable) on the date and for the amount specified in the Further Transfer and Servicing Agreements, in each case, without further notice from CARI hereunder. Upon the occurrence of a Repurchase or Substitution Event with
respect to a Warranty Receivable for which CARI is the Owner, the Seller agrees to repurchase or substitute such Warranty Receivable from CARI for an amount and upon the same terms as the Seller would be obligated to repurchase or substitute such
Warranty Receivable from the Issuing Entity if the Issuing Entity was then the Owner thereof, and upon payment of the Warranty Payment, the Seller shall have such rights with respect to such Warranty Receivable as if the Seller had purchased or
substituted such Warranty Receivable from the Issuing Entity as the Owner thereof. It is understood and agreed that the obligation of the Seller to repurchase or substitute any Warranty Receivable as to which a breach has occurred and is continuing
shall, if such obligation is fulfilled, constitute the sole remedy against the Seller for such breach available to CARI or any Interested Party. 

(b) Identification of Substitute Receivables. The Seller shall select the Substitute Receivable within the portfolio of receivables
owned by the Seller by identifying all of the receivables that meet the criteria set forth in each of the following criteria and then removing receivables that do not satisfy the criteria specified in each successive clause in the order of priority
set forth below until only one receivable is available: 
 (i) First, the Substitute Receivable must satisfy each of the criteria set forth
in the definition of “Substitute Receivable”; 
 (ii) Second, the Substitute Receivable must be the receivable owned by the
Seller that has a Principal Balance closest to the Principal Balance of the related Warranty Receivable; 

  
 16 

 (iii) Third, the Substitute Receivable must be the receivable owned by the Seller that has an
Annual Percentage Rate closest to the Annual Percentage Rate of the related Warranty Receivable; 
 (iv) Fourth, the Substitute Receivable
must be the receivable owned by the Seller that has a remaining term closest to the remaining term of the Warranty Receivable; 
 (v)
Fifth, the Substitute Receivable must be the receivable owned by the Seller that has an accompanying FICO score closest to the FICO score of the Obligor related to the Warranty Receivable; and 

(vi) Sixth, the Substitute Receivable must be the receivable owned by the Seller that is secured by the related Financed Vehicle that is
closest to the Financed Vehicle that secures the related Warranty Receivable, with the characteristics determined in the following order of priority: 

(1) the make of the related Financed Vehicle; 

(2) the model year of the related Financed Vehicle; 

(3) whether the related Financed Vehicle was used or new at the time that the Substitute Receivable was acquired by the Seller; and 

(4) the mileage of the the related Financed Vehicle to the nearest 10th of a mile. 

(c) Repurchase Dispute Resolution. The Seller hereby agrees to cooperate with the Interested Parties in any ADR Proceeding commenced
pursuant to the provisions set forth in the Further Transfer and Servicing Agreements. CARI hereby agrees to provide the Seller with the opportunity to exercise any rights of CARI pursuant to the Further Transfer and Servicing Agreements with
respect to an ADR Proceeding to the extent a dispute relates to the representations and warranties of the Seller contained in Section 4.01 or Section 4.02. 

SECTION 5.05 Indemnification. The Seller shall indemnify CARI for any liability as a result of the failure of a Receivable to be
originated in compliance with all requirements of law. This indemnity obligation shall be in addition to any obligation that the Seller may otherwise have. 

SECTION 5.06 Further Assignments. The Seller acknowledges that CARI may, pursuant to the Further Transfer and Servicing Agreements,
sell the Receivables to the Issuing Entity and assign its rights hereunder and under the First Step Receivables Assignment to the Issuing Entity, subject to the terms and conditions of the Further Transfer and Servicing Agreements, and that the
Issuing Entity may in turn further pledge, assign or transfer its rights in the Receivables and this Agreement and the First Step Receivables Assignment. The Seller further acknowledges that CARI may assign its rights under the Custodian Agreement
to the Issuing Entity. 

  
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 SECTION 5.07 Pre-Closing Collections. Within two (2) Business Days after the Closing
Date, the Seller shall transfer to the account or accounts designated by CARI (or by the Issuing Entity under the Further Transfer and Servicing Agreements) all collections on the Receivables held by the Seller on the Closing Date, and conveyed to
CARI pursuant to Section 2.01; provided that so long as the Monthly Remittance Conditions are satisfied, such collections need not be transferred until the first Distribution Date. 

SECTION 5.08 Asset Representations Review. 

(a) The Seller shall (i) at all times while any Public Notes remain Outstanding, ensure that an Asset Representations Reviewer is
appointed, (ii) cooperate with the Asset Representations Reviewer in creating procedures for a review of the representations and warranties set forth in Section 4.01, (iii) provide the Asset Representations Reviewer with the
Asset Representations Review Notice and (iv) provide the Asset Representations Reviewer with reasonable access to the Seller’s offices and information databases upon the initiation of an Asset Representations Review as set forth in
Section 5.17(e) of the Indenture. 
 (b) Upon receipt of a final report from the Asset Representations Reviewer, the Seller shall
review the findings of the Asset Representations Reviewer and determine whether a breach of a representation or warranty set forth in Section 4.01 has occurred with respect to any Receivable tested by the Asset Representations Reviewer
and whether a repurchase or substitution of such Receivable is required pursuant to Section 5.04(a). Upon the written request of a Noteholder or Note Owner, the Seller shall forward the final report from the Asset Representations
Reviewer to such Noteholder or Note Owner. 
 ARTICLE VI 

CONDITIONS 
 SECTION 6.01
Conditions to Obligation of CARI. The obligation of CARI to purchase the Receivables hereunder and pursuant to the First Step Receivables Assignment is subject to the satisfaction of the following conditions: 

(a) Representations and Warranties True. The representations and warranties of each of the Seller and the Servicer hereunder shall be
true and correct at the time of the Closing Date, and each of the Seller and the Servicer shall have performed all obligations to be performed by it hereunder on or prior to the Closing Date. 

(b) No Repurchase or Substitution Event. No Repurchase or Substitution Event shall have occurred on or prior to the Closing Date. 

(c) Computer Files Marked. The Seller shall have or shall have caused to have, at its own expense, on or prior to the Closing Date,
indicated in its computer files created in connection with the Receivables that the Receivables have been sold to CARI pursuant to this Agreement and the First Step Receivables Assignment and deliver to CARI the Schedule of Receivables, certified by
an officer of the Seller to be true, correct and complete. 

  
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 (d) Documents to be Delivered By the Seller. 

(i) The Assignment. On the Closing Date, the Seller shall execute and deliver the First Step Receivables Assignment. 

(ii) Evidence of UCC Filing. On or prior to the Closing Date, the Seller shall record and file, at its own expense, a UCC-1 financing
statement in each jurisdiction in which required by applicable law, authorized by and naming the Seller as seller or debtor, naming CARI as purchaser or secured party, naming the Receivables and the other Purchased Property as collateral, meeting
the requirements of the laws of each such jurisdiction and in such manner as is necessary to perfect the sale, transfer, assignment and conveyance of such Receivables to CARI. The Seller shall deliver a file-stamped copy, or other evidence
satisfactory to CARI of such filing, to CARI on or prior to the Closing Date. 
 (iii) Other Documents. On the Closing Date, the
Seller shall provide such other documents as CARI may reasonably request. 
 (e) Other Transactions. The transactions contemplated by
the Further Transfer and Servicing Agreements shall be consummated to the extent that such transactions are intended to be substantially contemporaneous with the transactions hereunder. 

(f) Asset Representations Reviewer. The Asset Representations Reviewer shall have been appointed and shall have entered into the Asset
Representations Review Agreement. 
 SECTION 6.02 Conditions to Obligation of the Seller. The obligation of the Seller to sell the
Receivables to CARI hereunder or pursuant to the First Step Receivables Assignment is subject to the satisfaction of the following conditions: 

(a) Representations and Warranties True. The representations and warranties of CARI hereunder shall be true and correct as of the
Closing Date with respect to the Receivables with the same effect as if then made, and CARI shall have performed all obligations to be performed by it hereunder or pursuant to the First Step Receivables Assignment on or prior to the closing
hereunder. 
 (b) Receivables Purchase Price. On the Closing Date, CARI shall pay to the Seller that portion of the Initial Aggregate
Receivables Principal Balance as provided in Section 2.02. 
 ARTICLE VII 

MISCELLANEOUS PROVISIONS 

SECTION 7.01 Amendment. This Agreement may be amended from time to time (subject to any expressly applicable amendment provision of the
Further Transfer and Servicing Agreements) by a written amendment duly executed and delivered by the Seller, the Servicer and CARI. 

  
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 SECTION 7.02 Survival. The representations and warranties of the Seller and the Servicer
set forth in Articles IV and V of this Agreement and of Servicer set forth in Section 3.06 of this Agreement shall remain in full force and effect and shall survive the Closing Date and the closing under the Further
Transfer and Servicing Agreements. 
 SECTION 7.03 Notices. All demands, notices and communications upon or to the Seller, the
Servicer or CARI under this Agreement shall be delivered as specified in Part III of Appendix A to this Agreement. 
 SECTION
7.04 Governing Law. THIS AGREEMENT AND THE FIRST STEP RECEIVABLES ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF OR OF ANY OTHER JURISDICTION OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 SECTION 7.05 Waivers. No failure or delay on the part of CARI in exercising any power, right or remedy under this Agreement or
the First Step Receivables Assignment shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other or further exercise thereof or the exercise of any other power, right or remedy.

 SECTION 7.06 Costs and Expenses. The Seller agrees to pay all reasonable out-of-pocket costs and expenses of CARI, including fees
and expenses of counsel, in connection with the perfection as against third parties of CARI’s right, title and interest in, to and under the Receivables and the enforcement of any obligation of the Seller hereunder. 

SECTION 7.07 Confidential Information. CARI agrees that it shall neither use nor disclose to any person the names and addresses of the
Obligors, except in connection with the enforcement of CARI’s rights hereunder, under the Receivables, under the Further Transfer and Servicing Agreements or as required by law. 

SECTION 7.08 Headings. The headings of the various Articles and Sections herein are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof. 
 SECTION 7.09 Counterparts. This Agreement may be executed in two or more
counterparts and by different parties on separate counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. 

SECTION 7.10 No Petition Covenant. Notwithstanding any prior termination of this Agreement, the Seller shall not, prior to the date
which is one year and one day after the final distribution with respect to the Notes to the Note Distribution Account or, with respect to the Certificates, to the Certificateholder or the Certificate Distribution Account, acquiesce, petition or
otherwise invoke or cause CARI or the Issuing Entity to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against CARI or the 

  
 20 

 
Issuing Entity under any federal or State bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of CARI
or the Issuing Entity or any substantial part of the property of either of them, or ordering the winding up or liquidation of the affairs of CARI or the Issuing Entity under any federal or State bankruptcy or insolvency proceeding. 

SECTION 7.11 Limitations on Rights of Others. The provisions of this Agreement and the First Step Receivables Assignment are solely for
the benefit of the Seller, the Servicer and CARI and, to the extent expressly provided herein, the Interested Parties, and nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in, under, or in respect of this Agreement or any covenants, conditions or provisions contained herein. 
 SECTION
7.12 Merger and Consolidation of the Seller, the Servicer or CARI. Any corporation, limited liability company or other entity (i) into which any of the Seller, the Servicer or CARI may be merged or consolidated, (ii) resulting from
any merger or consolidation to which any of the Seller, the Servicer or CARI shall be a party, (iii) succeeding to the business of any of the Seller, the Servicer or CARI or (iv) 25% or more of the voting stock (or, if not a corporation,
other voting interests) of which is owned, directly or indirectly, by General Motors or Ally Financial, which corporation, limited liability company or other entity in any of the foregoing cases executes an agreement of assumption to perform every
obligation of the Seller, the Servicer or CARI (as applicable) under this Agreement and the other Basic Documents, shall be the successor to the Seller, the Servicer or CARI (as applicable) under this Agreement without the execution or filing of any
document or any further act on the part of any of the parties to this Agreement. 
 SECTION 7.13 Assignment. Notwithstanding anything
to the contrary contained in this Agreement, this Agreement may be assigned by the Seller, the Servicer or CARI without the consent of any other Person to a corporation, limited liability company or other entity that is a successor (by merger,
consolidation or purchase of assets) to the Seller, the Servicer or CARI (as applicable), or 25% or more of the voting interests of which is owned, directly or indirectly, by General Motors or by Ally Financial, provided that the assignee of CARI
executes an agreement of assumption, as provided in Section 3.03(a) or 6.02 of the Trust Sale and Servicing Agreement. 

*    *    *    *    * 

  
 21 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written. 
  

			
	ALLY FINANCIAL INC.
		
	By:	 	 /s/ R. C. Farris

		 	Name: R. C. Farris
		 	Title: Assistant Treasurer
	
	CAPITAL AUTO RECEIVABLES LLC
		
	By:	 	 /s/ M. T. St. Charles

		 	Name: M. T. St. Charles
		 	Title: Vice President

  
 Pooling and Servicing Agreement (CARAT
2016-1) 

 EXHIBIT A 

FORM OF 
 FIRST STEP RECEIVABLES
ASSIGNMENT 
 PURSUANT TO THE POOLING AND SERVICING AGREEMENT 

For value received, in accordance with the Pooling and Servicing Agreement, dated as of March 16, 2016 (the “Pooling and
Servicing Agreement”), between Ally Financial Inc., a Delaware corporation (the “Seller” and the “Servicer”), and Capital Auto Receivables LLC, a Delaware limited liability company
(“CARI”), the Seller does hereby sell, assign, transfer and otherwise convey unto CARI, without recourse, as of March 16, 2016, (i) all right, title and interest of the Seller in, to and under the Receivables listed on the
Schedule of Receivables attached as Schedule A hereto and all monies received thereon on and after the Cutoff Date, exclusive of any amounts allocable to the premium for physical damage collateral protection insurance required by the Seller or the
Servicer covering any related Financed Vehicle; (ii) the interest of the Seller in the security interests in the Financed Vehicles granted by Obligors pursuant to the Receivables and, to the extent permitted by law, any accessions thereto;
(iii) the interest of the Seller in any proceeds from claims on any physical damage, credit life, credit disability or other insurance policies covering the related Financed Vehicles or Obligors; (iv) the interest of the Seller in any
proceeds from recourse against Dealers on the Receivables; (v) all right, title and interest of the Seller in, to and under the First Step Receivables Assignment; and (vi) all present and future claims, demands, causes and choses in action
in respect of any or all the foregoing described in clauses (i), (ii), (iii), (iv) and (v) above and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all the foregoing, including all
proceeds of the conversion of any or all of the foregoing, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, investment property, payment intangibles, general intangibles, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or
part of or are included in the proceeds of any of the foregoing. 
 It is the intention of the Seller and CARI that the sale, transfer,
assignment and other conveyances of the Receivables contemplated by the Pooling and Servicing Agreement and this First Step Receivables Assignment shall constitute a sale of the Receivables from the Seller to CARI and the beneficial interest in and
title to the Receivables shall not be part of the Seller’s estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law. 

The foregoing sale, transfer, assignment and other conveyances of the Receivables contemplated by the Pooling and Servicing Agreement and this
First Step Receivables Assignment do not constitute and are not intended to result in the creation of or an assumption by CARI of any obligation of the undersigned to the Obligors, Dealers, insurers or any other Person in connection with the
Receivables, any Dealer Agreements, any insurance policies or any other agreement or instrument relating to any of them. 
 This First Step
Receivables Assignment is made pursuant to and upon the representations, warranties and agreements on the part of the undersigned contained in the Pooling and Servicing Agreement and is to be governed by the Pooling and Servicing Agreement. 

  
 Ex. A-1 

 Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to
them in the Pooling and Servicing Agreement. 

*    *    *    *    * 

  
 Ex. A-2 

 IN WITNESS WHEREOF, the undersigned has caused this First Step Receivables Assignment to be duly
executed as of the day and year first above written. 
  

			
	ALLY FINANCIAL INC.
		
	By:	 	  

	Name:	 	
	Title:	 	

  
 Ex. A-3 

 SCHEDULE A 

SCHEDULE OF RECEIVABLES 

The Schedule of Receivables is on file at the offices of: 
  

	1.	The Indenture Trustee 

  

	2.	The Owner Trustee 

  

	3.	The Servicer 

  

	4.	The Seller 

  

	5.	Capital Auto Receivables LLC 

  
 Sch. A 

 APPENDIX A 

Part I 
 For ease of reference,
capitalized terms defined herein have been consolidated with and are contained in Part I of Appendix A to the Trust Sale and Servicing Agreement of even date herewith among Ally Financial Inc., CARI and Capital Auto Receivables Asset Trust 2016-1,
as amended and supplemented from time to time. 
 Part II 

For ease of reference, the rules of construction have been consolidated with and are contained in Part II of Appendix A to the Trust Sale and
Servicing Agreement of even date herewith among Ally Financial Inc., CARI and Capital Auto Receivables Asset Trust 2016-1, as amended and supplemented from time to time. 

Part III 
 For ease of reference,
the notice addresses and procedures have been consolidated with and are contained in Appendix B to the Trust Sale and Servicing Agreement of even date herewith among Ally Financial Inc., CARI and Capital Auto Receivables Asset Trust 2016-1, as
amended and supplemented from time to time. 

  
 App. A 

 APPENDIX B 

Additional Representations and Warranties 
  

	1.	While it is the intention of the Seller and CARI that the transfer and assignment contemplated by this Agreement and the First Step Receivables Assignment shall constitute sales of the Purchased Property from the Seller
to CARI, this Agreement, the Trust Sale and Servicing Agreement and the Indenture create a valid and continuing security interest (as defined in the applicable UCC) in the Purchased Property in favor of CARI, the Trust and the Indenture Trustee, as
applicable, which security interest is prior to all other Liens, and is enforceable as such as against creditors of and purchasers from the Seller, CARI and the Issuing Entity, respectively. 

 

	2.	All steps necessary to perfect the Seller’s security interest against each Obligor in the property securing the Purchased Property have been taken. 

 

	3.	Prior to the sale of the Purchased Property to CARI under this Agreement, the Receivables constitute “tangible chattel paper” within the meaning of the applicable UCC. 

 

	4.	The Seller owns and has good and marketable title to the Purchased Property free and clear of any Lien, claim or encumbrance of any Person. 

 

	5.	The Seller has caused or will have caused, within ten (10) days, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to
perfect the security interest in the Purchased Property granted to CARI hereunder, the Issuing Entity under the Trust Sale and Servicing Agreement and the Indenture Trustee under the Indenture. 

 

	6.	Other than the security interest granted to CARI pursuant to the Basic Documents, the Issuing Entity under the Trust Sale and Servicing Agreement and the Indenture Trustee under the Indenture none of the Seller, CARI or
the Issuing Entity has pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Purchased Property. None of the Seller, CARI or the Issuing Entity has authorized the filing of, nor is the Seller aware of, any
financing statements against the Seller, CARI or the Issuing Entity that include a description of collateral covering the Purchased Property other than the financing statements relating to the security interests granted to CARI, the Issuing Entity
and the Indenture Trustee under the Basic Documents or any financing statement that has been terminated. The Seller is not aware of any judgment or tax lien filings against the Seller, CARI or the Issuing Entity. 

 

	7.	The Custodian has in its possession or with third party vendors all original copies of the Receivables Files and other documents that constitute or evidence the Receivables and the Purchased Property. The Receivables
Files and other documents that constitute or evidence the Purchased Property do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than CARI. All financing statements filed or
to be filed against the Seller in favor of CARI in connection herewith describing the Receivables contain a statement to the following effect: “A purchase of or security interest in any collateral described in this financing statement will
violate the rights of CARI.” 

  
 App. Bex10-81.htm

Exhibit 10.7.1

 

AMENDED AND RESTATED

 

EMPLOYMENT, CONFIDENTIALITY AND NONCOMPETE AGREEMENT

 

Build-A-Bear Workshop, Inc., a Delaware corporation (“Company”), and Gina Collins (“Employee”) entered into an Employment, Confidentiality and Noncompete Agreement effective as of January 20, 2014 (“Prior Agreement”). This Amended and Restated Employment, Confidentiality and Noncompete Agreement (“Agreement”) is entered into effective as of March 7, 2016 (“Effective Date”) by and between the Company and Employee and completely amends and supersedes the Prior Agreement.

 

WHEREAS, Company desires to continue to employ and Employee desires to be employed as the Chief Marketing Officer and Brand Bear of Company from and after the Effective Date.

 

WHEREAS, Company has pioneered the retail concept of “make your own” stuffed plush toys, including animals and dolls, and is engaged in, among other things, the business of production, marketing, promotion and distribution of plush stuffed toys, clothing, accessories and similar items, including without limitation, the ownership, management, franchising, leasing and development of retail stores in which the basic operation is the selling of such items, and the promotion of the related concepts and characters through merchandising and mass media. Company is headquartered and its principal place of business is located in, and this Agreement is being signed in, St. Louis, Missouri.

 

WHEREAS, Company conducts business in selected locations throughout the United States and internationally directly and through franchise arrangements.

 

WHEREAS, Company has expended a great deal of time, money and effort to develop and maintain its proprietary Confidential Information (as defined herein) which is material to Company and which, if misused or disclosed, could be very harmful to Company’s business.

 

WHEREAS, the success of Company depends to a substantial extent upon the protection of its Confidential Information and goodwill by all of its employees.

 

WHEREAS, Company compensates its employees to, among other things, develop and preserve goodwill with its customers, landlords, suppliers and partners on Company’s behalf and business information for Company’s ownership and use.

 

WHEREAS, if Employee were to leave Company, Company, in all fairness, would need certain protections in order to prevent competitors of Company from gaining an unfair competitive advantage over Company or diverting goodwill from Company, or to prevent Employee from misusing or misappropriating the Confidential Information.

 

NOW, THEREFORE, in consideration of the compensation and other benefits of Employee’s employment by Company and the recitals, mutual covenants and agreements hereinafter set forth, Employee and Company agree as follows:

 

 

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1.     Employment Services.

 

(a)     As of the Effective Date, Employee shall continue to be employed by Company, and Employee accepts such continued employment, upon the terms and conditions hereinafter set forth. Employee shall serve as Chief Marketing Officer and Brand Bear throughout the Employment Period, and agrees to do so on a full-time basis. Employee shall carry out such duties as are assigned to her by Company’s Chief Executive Officer. 

 

(b)     Employee agrees that throughout Employee’s employment with Company, Employee will (i) faithfully render such services as may be delegated reasonably to Employee by Company, (ii) devote substantially all of Employee’s entire business time, good faith, best efforts, ability, skill and attention to Company’s business, and (iii) follow and act in accordance with all of the rules, policies and procedures of Company which are applicable to its senior executives, including but not limited to working hours, sales and promotion policies, and specific Company rules. 

 

(c)     “Company” means Build-A-Bear Workshop, Inc. or one of its Subsidiaries. The term “Subsidiary” means any corporation, joint venture or other business organization in which Build-A-Bear Workshop, Inc. now or hereafter, directly or indirectly, owns or controls more than fifty percent (50%) interest. 

 

2.     Term of Employment. The term of this Agreement shall commence on the Effective Date first set forth above, and shall end on the third anniversary of the Effective Date, unless sooner terminated as provided in Section 4 hereof (the “Renewal Term”). Following the Renewal Term, this Agreement shall renew for successive one-year periods (each a “Renewal Period”; collectively, the Renewal Term and each Renewal Period, the “Employment Period”), unless either party notifies the other party of its decision not to renew the Agreement at least sixty (60) days prior to the third anniversary of the Effective Date or the expiration of any Renewal Period, or unless the Agreement is sooner terminated as provided in Section 4 hereof. For the avoidance of doubt, if either party provides notice of non-renewal of the Agreement at least sixty (60) days prior to the end of the Renewal Term or the end of any Renewal Period, then the Agreement shall expire.

 

3.      Compensation.

 

(a)     Base Salary. Throughout the Employment Period, Company shall pay Employee as compensation for her services an annual base salary of not less than Three Hundred Twenty Four Thousand Five Hundred Dollars ($324,500), payable in accordance with Company’s usual practices. Employee’s annual base salary rate shall be reviewed by the Compensation Committee of the Board of Directors (the “Compensation Committee”) at least annually and may be subject to adjustment following each fiscal year so that Employee’s salary will be commensurate with similarly situated executives with firms similarly situated to Company. However, Employee’s annual base salary rate shall not be subject to decrease at any time during the Employment Period.

 

 

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(b)     Bonus. Should Company meet or exceed the sales, profits and other objectives established by the Compensation Committee for any fiscal year, Employee shall be eligible to receive a bonus for such fiscal year in the amount as determined by the Compensation Committee; provided however, the target bonus opportunity established for Employee in any given fiscal year will be set by the Compensation Committee at not less than fifty percent (50%) of Employee’s earned annual base pay for such fiscal year. Any bonus payable to Employee will be payable in cash, stock or stock options, or combination thereof, all as determined by the Board of Directors or any duly authorized committee thereof, and unless (to the extent consistent with Section 409A of the Code) a different payout schedule is applicable for all executive employees of Company, any such bonus payment will be payable in a single, lump sum payment in the calendar year that contains the April 30th immediately following such fiscal year, but no later than April 30th of such year. In the event of termination of this Agreement because of Employee’s death or disability (as defined by Section 4.1(b)), termination by Company without Cause pursuant to Section 4.1(c), or pursuant to Employee’s right to terminate this Agreement for Good Reason under Section 4.1(d), (1) any bonus for the fiscal year preceding the fiscal year in which such termination occurs shall be paid at the time and in the form such bonus would have been paid had Employee’s employment continued until the payment date, and (2) the bonus for the fiscal year in which such termination occurs shall be pro-rated based on the number of full calendar weeks during the applicable fiscal year during which Employee was employed hereunder, based on the bonus amount that Employee would have earned based on actual performance for the fiscal year had Employee’s employment not terminated, and shall be paid at the time and in the form such bonus would have been paid had Employee’s employment continued; provided, however, in the event of termination of this Agreement because of Employee’s termination by Company without Cause pursuant to Section 4.1(c) or pursuant to Employee’s right to terminate this Agreement for Good Reason under Section 4.1(d) and such termination is on the date of a Change in Control or during a period of twenty-four (24) months after a Change in Control, Employee’s target bonus for the fiscal year in which such termination occurs shall be prorated based on the number of full calendar weeks during the applicable fiscal year during which Employee was employed hereunder and shall be paid within thirty (30) days of such termination (subject to any delay in payout required under Section 4.2(b)). Notwithstanding anything herein to the contrary, no bonus shall be payable hereunder in the event that Employee’s employment terminates for any other reason prior to the date on which any bonus is actually paid. 

 

Such bonus, if any, shall be payable after Company’s accountants have determined the sales and profits and have issued their audit report with respect thereto for the applicable fiscal year, which determination shall be binding on the parties. Any such bonus shall be paid in the calendar year that contains the April 30 immediately following such fiscal year, but no later than April 30th of such year. 

 

(c)     Equity Awards. Employee may have been granted in the past, and/or may in the future be granted, a certain number of restricted shares and/or stock options to purchase shares of Company’s common stock (the “Common Stock”) and/or other awards, pursuant to the terms set forth more particularly in the stock option and/or restricted stock and/or other award agreements (“Stock Agreement”) used in connection with the Build-A-Bear Workshop, Inc. 2004 Stock Incentive Plan (or any successor plan) (the “Plan”). The Plan and applicable Stock Agreement(s) shall govern any grants of restricted shares and/or stock options to purchase shares of Company’s Common Stock and/or such other awards.

 

(d)     Discounts. Employee and her immediate family will be entitled to a minimum 20% discount for all merchandise purchased at Company’s stores.

 

 

3

 

  

(e)     Vacation. Employee shall be entitled to paid vacation and paid sick leave on the same basis as may from time to time apply to other Company executive employees generally. Vacations will be scheduled with the approval of Company’s Chief Executive Officer. One-third of one year’s vacation (or any part of it) may be carried over to the next year; provided that such carry over is used in the first calendar quarter of the next year. Unless otherwise approved by Company’s Chief Executive Officer, all unused vacation shall be forfeited. No more than two weeks of vacation can be taken at one time. Employee shall also be entitled to one (1) additional day per calendar year of paid vacation to be taken in the month of her birthday.

 

(f)     Other. Employee shall be eligible for such other perquisites as may from time to time be awarded to Employee by Company payable at such times and in such amounts as Company, in its sole discretion, may determine. All compensation under this Agreement shall be subject to customary withholding taxes and other employment taxes as required with respect thereto. Throughout the Employment Period, Employee shall also qualify for all rights and benefits for which Employee may be eligible under any benefit plans including group life, medical, health, dental and/or disability insurance or other benefits (“Welfare Benefits”) which are provided for employees generally at her then current location of employment. 

 

4.     Termination Provisions.

 

4.1     Termination of Employment. Prior to the expiration of the Employment Period, this Agreement and Employee’s employment may be terminated as follows:

 

(a)     Upon Employee’s death;

 

(b)     By Company upon thirty (30) days’ prior written notice to Employee in the event Employee, by reason of permanent physical or mental disability (which shall be determined by a physician selected by Company or its insurers and acceptable to Employee or Employee’s legal representative (such agreement as to acceptability not to be withheld unreasonably)), following such time as Employee has been unable to perform the essential functions of her position, with or without reasonable accommodation, for the longer of: (i) six (6) consecutive months or (ii) the maximum health leave provided under Company’s Health Leave of Absence policy for Employee’s length of service with Company; provided, however, Employee shall not be terminated due to permanent physical or mental disability unless or until said disability also entitles Employee to benefits under such disability insurance policy as is provided to Employee by Company, provided however that continued entitlement to disability benefits coverage shall be not required where Employee fails to qualify for benefits coverage continuation due to an act or omission by Employee.

 

(c)     By Company with or without Cause. For the purposes of this Agreement, “Cause” shall mean: (i) Employee’s engagement in any conduct which, in Company’s reasonable determination, constitutes gross misconduct, or is illegal, unethical or improper provided such conduct brings detrimental notoriety or material harm to Company; (ii) gross negligence or willful misconduct; (iii) any act which results in a conviction for a felony involving moral turpitude, fraud or misrepresentation; (iv) a material breach of a material provision of this Agreement by Employee, or (v) failure of Employee to follow a written directive of the Chief Executive Officer or the Board of Directors within thirty (30) days after receiving such notice, provided that such directive is reasonable in scope and is otherwise within the Chief Executive Officer’s or the Board’s reasonable business judgment, and is reasonably within Employee’s control; provided Employee does not cure said conduct or breach as set forth in (i)-(v)(to the extent curable) within thirty (30) days after the Chief Executive Officer or the Board of Directors provides Employee with reasonably-detailed written notice of said conduct or breach accompanied by a clear written statement of Company’s intent to terminate the Employee’s employment for Cause in the absence of a cure. Cause shall not exist unless and until the Employee (and her counsel if she wishes) has been afforded an opportunity prior to the actual date of termination to discuss the matter with the Board of Directors at a duly-called Board meeting at which the matter is timely placed on the agenda and the Board subsequently votes to terminate the relationship for Cause.

 

 

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(d)     By the Employee with or without Good Reason. For purposes of this Agreement, “Good Reason” shall mean (i) a material breach of a material provision of this Agreement by Company, (ii) Company’s issuance of a notice of non-renewal of this Agreement under Section 2, (iii) a material diminution in Employee’s total annual compensation, including base salary, annual bonus opportunity and long-term incentives, (iv) a material diminution in Employee’s authority, duties or responsibilities, or (v) a change in the geographic location at which Employee must perform services hereunder of more than twenty-five (25) miles; provided, that, Employee provides the Board of Directors with written notice of Good Reason within thirty (30) days of the date on which Employee becomes aware of the condition alleged to give rise to Good Reason, Company does not cure such condition within thirty (30) days after such notice (to the extent curable), and Employee terminates her employment within ninety (90) days following the onset of one or more conditions giving rise to Good Reason. 

 

4.2     Impact of Termination.

 

(a)     Survival of Covenants. Upon termination of this Agreement, all rights and obligations of the parties hereunder shall cease, except termination of employment pursuant to Section 4 or otherwise shall not terminate or otherwise affect the rights and obligations of the parties pursuant to Sections 5 through 13 hereof.

 

(b)     Severance. In the event during the Employment Period (i) Company terminates Employee’s employment without Cause pursuant to Section 4.1(c) or (ii) the Employee terminates her employment for Good Reason pursuant to Section 4.1(d), subject to the execution and non-revocation of a release and waiver of all claims described below, Company shall continue her base salary in accordance with its regular payroll practices for a period of (A) twelve (12) months, commencing on the date that is thirty (30) days after the termination in the case of a termination of employment either prior to a Change in Control or following a period of twenty-four (24) months after a Change in Control or (B) eighteen (18) months, commencing on the date that is thirty (30) days after the termination in the case of a termination of employment during the twenty-four (24) month period immediately following a Change in Control. Notwithstanding anything herein to the contrary, receipt of any payment in connection with a termination of employment shall be conditioned on Employee signing a release and waiver of all claims against Company and its affiliates within thirty (30) days after her termination of employment, in such form and manner as Company shall reasonably prescribe, which release shall become effective and irrevocable within thirty (30) days after Employee’s termination of employment. Employee shall accept these payments in full discharge of all obligations of any kind which Company has to her except obligations, if any (i) for post-employment benefits expressly provided under this Agreement and/or at law, (ii) to repurchase any capital stock of Company owned by Employee (as may or may not be set forth in the applicable stock agreement); or (iii) for indemnification under separate agreement by virtue of Employee’s status as a director/officer of Company. Employee shall also be eligible to receive a bonus with respect to the year of termination to the extent provided in Section 3(b).

 

 

5

 

  

For purposes of these severance pay provisions and any other term of this Agreement which provides for a payment upon termination of employment, Employee shall be considered as having terminated employment only if such termination constitutes a “separation from service” within the meaning of Section 409A of the Code, and any proposed or final regulations and guidance promulgated thereunder. Notwithstanding anything herein to the contrary, in the event that Employee is determined to be a specified employee within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), for purposes of any payment on termination of employment hereunder, payment(s) shall be made or begin, as applicable, on the first payroll date which is more than six months following the date of separation from service, to the extent required to avoid any adverse tax consequences under Section 409A of the Code. Any payments that would have been made during such 6-month period shall be made in a lump sum on the first payroll date which is more than six months following the date Employee separates from service with Company. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement. This Agreement shall be interpreted and administered in a manner consistent with Section 409A of the Code.

 

For purposes of this Agreement, “Change in Control” shall mean: (i) the purchase or other acquisition (other than from Company) by any person, entity or group of persons, within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (“Act”) (excluding, for this purpose, Company or its subsidiaries or any employee benefit plan of Company or its subsidiaries), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 20% or more of either the then-outstanding shares of common stock of Company or the combined voting power of Company’s then-outstanding voting securities entitled to vote generally in the election of directors; (ii) individuals who, as of the date hereof, constitute Company’s Board of Directors (and, as of the date hereof, the “Incumbent Board”) cease for any reason to constitute at least a majority of Company’s Board of Directors, provided that any person who becomes a director subsequent to the date hereof whose election, or nomination for election by Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act) shall be, for purposes of this Section, considered as though such person were a member of the Incumbent Board; (iii) a reorganization, merger or consolidation involving Company, in each case with respect to which persons who were the stockholders of Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of, respectively, the common stock and the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated corporation’s then-outstanding voting securities; or (iv) a liquidation or dissolution of Company, or the sale of all or substantially all of the assets of Company.

 

 

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(c)     Termination due to Employee Non-Renewal of Term or Termination by Employee without Good Reason. If the Agreement expires either at the end of the Renewal Term or at the end of any Renewal Period, due to the issuance of notice of non-renewal by Employee under Section 2, then no severance under Section 4.2(b) shall be paid to the Employee and her employment shall terminate upon the anniversary date. If Employee terminates her employment without Good Reason, then no severance under Section 4.2(b) shall be paid to Employee and her employment shall terminate on the effective date of such termination. For the avoidance of doubt, if Company ends the employment relationship either at the end of the Renewal Term or at the end of any Renewal Period without Cause under Section 4.1(c), Company shall remit to Employee the severance specified in Section 4.2(b) provided Company has received the release and waiver referred to in Section 4.2(b).

 

(d)     Welfare Benefits. Upon termination or expiration of this Agreement for any reason, Employee shall be provided with such Welfare Benefits continuation notices, rights and obligations as may be required under federal or state law (including COBRA). In the event that Employee becomes entitled to any severance under paragraph 4.2(b) above, the Company shall pay Employee, within thirty (30) days of her termination of employment, a single lump sum equal to eighteen multiplied by the monthly Company-paid portion of health, dental and vision plan coverage premiums for those benefits in which Employee and her dependents are enrolled on the date of termination of employment.

 

5.     Confidential Information.

 

(a)     Employee agrees to keep secret and confidential, and not to use or disclose to any third parties, except as directly required for Employee to perform Employee’s employment responsibilities for Company, any of Company’s proprietary Confidential Information.

 

(b)     Employee acknowledges and confirms that certain data and other information (whether in human or machine readable form) that comes into her possession or knowledge (whether before or after the date of this Agreement) and which was obtained from Company, or obtained by Employee for or on behalf of Company, and which is identified herein (the “Confidential Information”) is the secret, confidential property of Company. This Confidential Information includes, but is not limited to:

 

(1)     lists or other identification of customers or prospective customers of Company;

 

(2)     lists or other identification of sources or prospective sources of Company’s products or components thereof, its landlords and prospective landlords and its current and prospective alliance, marketing and media partners (and key individuals employed or engaged by such parties);

 

(3)     all compilations of information, correspondence, designs, drawings, files, formulae, lists, machines, maps, methods, models, studies, surveys, scripts, screenplays, artwork, sketches, notes or other writings, plans, leases, records and reports;

 

(4)     financial, sales and marketing data relating to Company or to the industry or other areas pertaining to Company’s activities and contemplated activities (including, without limitation, leasing, manufacturing, transportation, distribution and sales costs and non-public pricing information);

 

 

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(5)     equipment, materials, designs, procedures, processes, and techniques used in, or related to, the development, manufacture, assembly, fabrication or other production and quality control of Company’s products, stores and services;

 

(6)     Company’s relations with its past, current and prospective customers, suppliers, landlords, alliance, marketing and media partners and the nature and type of products or services rendered to, received from or developed with such parties or prospective parties;

 

(7)     Company’s relations with its employees (including, without limitation, salaries, job classifications and skill levels); and

 

(8)     any other information designated by Company to be confidential, secret and/or proprietary (including without limitation, information provided by customers, suppliers and alliance partners of Company).

 

Notwithstanding the foregoing, the term Confidential Information shall not consist of any data or other information which has been made publicly available or otherwise placed in the public domain other than by Employee in violation of this Agreement.

 

(c)     During the Employment Period, Employee will not copy, reproduce or otherwise duplicate, record, abstract, summarize or otherwise use, any papers, records, reports, studies, computer printouts, equipment, tools or other property owned by Company except as expressly permitted by Company in writing or required for the proper performance of her duties on behalf of Company.

 

6.     Post-Termination Restrictions. Employee recognizes that (i) Company has spent substantial money, time and effort over the years in developing and solidifying its relationships with its customers, suppliers, landlords and alliance, marketing and media partners and in developing its Confidential Information; (ii) long-term customer, landlord, supplier and partner relationships often can be difficult to develop and require a significant investment of time, effort and expense; (iii) Company has paid its employees to, among other things, develop and preserve business information, customer, landlord, vendor and partner goodwill, customer, landlord, vendor and partner loyalty and customer, landlord, vendor and partner contacts for and on behalf of Company; and (iv) Company is hereby agreeing to employ and pay Employee based upon Employee’s assurances and promises not to divert goodwill of customers, landlords, suppliers or partners of Company, either individually or on a combined basis, or to put herself in a position following Employee’s employment with Company in which the confidentiality of Company’s Confidential Information might somehow be compromised. Accordingly, Employee agrees that during the Employment Period and for the period of time set forth below following termination of employment, provided termination is in accordance with the terms of Section 4.1(b), (c), or (d), or due to expiration of the Agreement due to non-renewal by either party, Employee will not, directly or indirectly (whether as owner, partner, consultant, employee or otherwise):

 

 

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(a)     for one (1) year, engage in, assist or have an interest in, or enter the employment of or act as an agent, advisor or consultant for, any person or entity which is engaged in, or will be engaged in, the development, manufacture, supplying or sale of a product, process, service or development which is competitive with a product, process, service or development on which Employee worked or with respect to which Employee has or had access to Confidential Information while at Company (“Restricted Activity”), and which is located within the United States or within any country where Company has established a retail presence either directly or through a franchise arrangement; provided, however, that following termination of her employment, Employee shall be entitled to be an employee of an entity that engages in Restricted Activity so long as: (i) the sale of stuffed plush toys is not a material business of the entity; (ii) Employee has no direct or personal involvement in the sale of stuffed plush toys; and (iii) neither Employee, her relatives, nor any other entities with which she is affiliated own more than 1% of the entity. As used in this paragraph 6, “material business” shall mean that either (A) greater than 10% of annual revenues received by such entity were derived from the sale of stuffed plush toys and related products, or (B) or the entity otherwise annually derives or is projected to derive annual revenues in excess of $5 million from a retail concept that is similar in any material regard to Company; or

 

(b)     for one (1) year, induce or attempt to induce any employee, consultant, partner or advisor of Company to accept employment or an affiliation with any other entity.

 

7.     Acknowledgment Regarding Restrictions. Employee recognizes and agrees that the restraints contained in Section 6 (both separately and in total), including the geographic scope thereof in light of Company’s marketing efforts, are reasonable and enforceable in view of Company’s legitimate interests in protecting its Confidential Information and customer goodwill and the limited scope of the restrictions in Section 6. 

 

8.      Inventions.

 

(a)     Any and all ideas, inventions, discoveries, patents, patent applications, continuation-in-part patent applications, divisional patent applications, technology, copyrights, derivative works, trademarks, service marks, improvements, trade secrets and the like (collectively, “Inventions”), which are developed, conceived, created, discovered, learned, produced and/or otherwise generated by Employee, whether individually or otherwise, during the time that Employee is employed by Company, whether or not during working hours, that relate to (i) current and anticipated businesses and/or activities of Company, (ii) the current and anticipated research or development of Company, or (iii) any work performed by Employee for Company, shall be the sole and exclusive property of Company, and Company shall own any and all right, title and interest to such Inventions. Employee assigns, and agrees to assign to Company whenever so requested by Company, any and all right, title and interest in and to any such Invention, at Company’s expense, and Employee agrees to execute any and all applications, assignments or other instruments which Company deems desirable or necessary to protect such interests, at Company’s expense.

 

 

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(b)     Employee acknowledges that as part of her work for Company she may be asked to create, or contribute to the creation of, computer programs, documentation and other copyrightable works. Employee hereby agrees that any and all computer programs, documentation and other copyrightable materials that she has prepared or worked on for Company, or is asked to prepare or work on by Company, shall be treated as and shall be a “work made for hire,” for the exclusive ownership and benefit of Company according to the copyright laws of the United States, including, but not limited to, Sections 101 and 201 of Title 17 of the U.S. Code (“U.S.C.”) as well as according to similar foreign laws. Company shall have the exclusive right to register the copyrights in all such works in its name as the owner and author of such works and shall have the exclusive rights conveyed under 17 U.S.C. §§ 106 and 106A including, but not limited to, the right to make all uses of the works in which attribution or integrity rights may be implicated. Without in any way limiting the foregoing, to the extent the works are not treated as works made for hire under any applicable law, Employee hereby irrevocably assigns, transfers, and conveys to Company and its successors and assigns any and all worldwide right, title, and interest that Employee may now or in the future have in or to the works, including, but not limited to, all ownership, U.S. and foreign copyrights, all treaty, convention, statutory, and common law rights under the law of any U.S. or foreign jurisdiction, the right to sue for past, present, and future infringement, and moral, attribution, and integrity rights. Employee hereby expressly and forever irrevocably waives any and all rights that she may have arising under 17 U.S.C. §§ 106A, rights that may arise under any federal, state, or foreign law that conveys rights that are similar in nature to those conveyed under 17 U.S.C. §§ 106A, and any other type of moral right or droit moral.

 

9.        Company Property. Employee acknowledges that any and all notes, records, sketches, computer diskettes, training materials and other documents relating to Company obtained by or provided to Employee, or otherwise made, produced or compiled during the Employment Period, regardless of the type of medium in which they are preserved, are the sole and exclusive property of Company and shall be surrendered to Company upon Employee’s termination of employment and on demand at any time by Company.

 

10.     Nondisparagement. Employee agrees that she will not in any way disparage Company or its affiliated entities, officers, or directors; and the officers and directors shall not in any way disparage Employee. Further, Employee agrees that she will neither make nor solicit any comments, statements, or the like to the media or to third parties that may be considered to be derogatory or detrimental to the good name or business reputation of Company or any of its affiliated entities, officers or directors; and the officers and directors will neither make nor solicit any comments, statements, or the like to the media or to third parties that may be considered to be derogatory or detrimental to the good name or business reputation of Employee.

 

11.     Non-Waiver of Rights. Either party’s failure to enforce at any time any of the provisions of this Agreement or to require at any time performance by the other party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement, or any part hereof, or the right of the non-breaching party thereafter to enforce each and every provision in accordance with the terms of this Agreement.

 

12.     Company’s Right to Injunctive Relief. In the event of a breach or threatened breach of any of Employee’s duties and obligations under the terms and provisions of Sections 5, 6, or 8 hereof, Company shall be entitled, in addition to any other legal or equitable remedies it may have in connection therewith (including any right to damages that it may suffer), to seek temporary, preliminary and permanent injunctive relief restraining such breach or threatened breach, without the necessity of posting any bond. Employee hereby expressly acknowledges that the harm which might result to Company’s business as a result of any noncompliance by Employee with any of the provisions of Sections 5, 6 or 8 would be largely irreparable. 

 

 

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13.     Judicial Enforcement. If any provision of this Agreement is adjudicated to be invalid or unenforceable under applicable law in any jurisdiction, the validity or enforceability of the remaining provisions thereof shall be unaffected as to such jurisdiction and such adjudication shall not affect the validity or enforceability of such provisions in any other jurisdiction. To the extent that any provision of this Agreement is adjudicated to be invalid or unenforceable because it is overbroad, that provision shall not be void but rather shall be limited only to the extent required by applicable law and enforced as so limited. The parties expressly acknowledge and agree that this Section is reasonable in view of the parties’ respective interests.

 

14.     Employee Representations. Employee represents that the execution and delivery of the Agreement and Employee’s employment with Company do not violate any previous employment agreement or other contractual obligation of Employee. Employee further represents and agrees that she will not, during her employment with Company, improperly use or disclose any proprietary information or trade secrets of former employers and will not bring on to the premises of Company any unpublished documents or any property belonging to her former employers unless consented to in writing by such employers.

 

15.     Amendments. No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by the parties hereto. This Agreement supersedes all prior agreements and understandings between Employee and Company to the extent that any such agreements or understandings conflict with the terms of this Agreement.

 

16.     Assignments. This Agreement shall be freely assignable by Company to and shall inure to the benefit of, and be binding upon, Company, its affiliates, successors and assigns and/or any other entity which shall succeed to the business presently being conducted by Company. Being a contract for personal services, neither this Agreement nor any rights hereunder shall be assigned by Employee.

 

17.     Choice of Forum and Governing Law. In light of Company’s substantial contacts with the State of Missouri, the parties’ interests in ensuring that disputes regarding the interpretation, validity and enforceability of this Agreement are resolved on a uniform basis, and Company’s execution of, and the making of, this Agreement in Missouri, the parties agree that: (i) any litigation involving any noncompliance with or breach of the Agreement, or regarding the interpretation, validity and/or enforceability of the Agreement, shall be filed and conducted in the state or federal courts in St. Louis City or County, Missouri; and (ii) the Agreement shall be interpreted in accordance with and governed by the laws of the State of Missouri, without regard for any conflict of law principles.

 

18.     Notices. Except as otherwise provided for herein, any notices to be given by either party to the other shall be affected by personal delivery in writing or by mail, registered or certified, postage prepaid, with return receipt requested. Mailed notices shall be addressed as follows:

 

 

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(a)     If to Company:

 

Sharon Price John 

Chief Executive Officer and Chief President Bear

1954 Innerbelt Business Center

St. Louis, MO 63114

 

With copy to:

 

Eric Fencl

Chief Administrative Officer & General Counsel

1954 Innerbelt Business Center

St. Louis, MO 63114

 

 

(b)     If to Employee:

 

Gina Collins

                    
                    

19.     Arbitration.     Any controversy or claim arising out of, or relating to this Agreement, the breach thereof, or Employee’s employment by Company, shall, at Company’s sole option, be settled by binding arbitration in the County of St. Louis in accordance with the employment rules then in force of the American Arbitration Association, and judgment upon the award rendered may be entered and enforced in any court having jurisdiction thereof. The controversies or claims subject to arbitration at Company’s option under this Agreement include, without limitation, those arising under Title VII of the Civil Rights Act of 1964, 42 U.S.C. Section 1981, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Worker Adjustment and Retraining Notification Act, the Missouri Human Rights Act, local laws governing employment, and the statutory and/or common law of contract and tort. In the event Employee commences any action in court which Company has the right to submit to binding arbitration, Company shall have sixty (60) days from the date of service of a summons and complaint upon Company to direct in writing that all or any part of the dispute be arbitrated. Any remedy available in any court action shall also be available in arbitration. 

 

20.     Excise Taxes. Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment, benefit, vesting or distribution to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a “Payment”) would but for this Section 20 be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any comparable successor provisions (the “Excise Tax”), then the Payments shall be either (i) provided to Employee in full, or (ii) provided to Employee as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax, whichever of the foregoing amounts, when taking into account applicable income and employment taxes, the Excise Tax, and any other applicable taxes, results in the receipt by Employee on an after-tax basis, of the greatest amount of Payments, notwithstanding that all or some portion of such Payments may be subject to the Excise Tax. Any determination required under this Section 20 shall be made in writing in good faith by the Company's independent certified public accountants, appointed prior to any change in ownership (as defined under Code Section 280G(b)(2), and/or tax counsel selected by such accountants (the “Accounting Firm”) in accordance with the principles of Section 280G of the Code. In the event of a reduction of Payments hereunder, the Payments shall be reduced as follows: (i) first from cash payments which are included in full as parachute payments, (ii) second from equity awards which are included in full as parachute payments, (iii) third from cash payments which are partially included as parachute payments, and (iv) fourth from equity awards that are partially included as parachute payments. In applying these principles, any reduction or elimination of the Payments shall be made in a manner consistent with the requirements of Code Section 409A and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero. For purposes of making the calculations required by this Section 20, the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code, and other applicable legal authority. The Company and Employee shall furnish to the Accounting Firm such information and documents as the Accounting Firm may reasonably request in order to make a determination under this Section 20. All fees and expenses of the Accounting Firm shall be borne solely by the Company.

  

 

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If, notwithstanding any reduction described in this Section 20, the Internal Revenue Service (the “IRS”) determines that Employee is liable for the Excise Tax as a result of the receipt of the Payments as described above, then Employee shall be obligated to pay back to the Company, within thirty (30) days after a final IRS determination or in the event that Employee challenges the final IRS determination, a final judicial determination, a portion of the Payments equal to the “Repayment Amount.” The Repayment Amount with respect to the Payments shall be the smallest such amount, if any, as shall be required to be paid to the Company so that Employee's net after-tax proceeds with respect to the Payments (after taking into account the payment of the Excise Tax and all other applicable taxes imposed on such payment) shall be maximized. The Repayment Amount with respect to the Payments shall be zero if a Repayment Amount of more than zero would not result in Employee’s net after-tax proceeds with respect to the Payments being maximized. If the Excise Tax is not eliminated pursuant to this paragraph, Employee shall pay the Excise Tax.

Notwithstanding any other provision of this Section 20, if (i) there is a reduction in the Payments as described in this Section 20, (ii) the IRS later determines that Employee is liable for the Excise Tax, the payment of which would result in the maximization of Employee’s net after-tax proceeds (calculated as if Employee’s Payments had not previously been reduced), and (iii) Employee pays the Excise Tax, then the Company shall pay to Employee those Payments which were reduced pursuant to this subsection as soon as administratively possible after Employee pays the Excise Tax so that Employee’s net after-tax proceeds with respect to the Payments are maximized.

 

For the avoidance of doubt, Employee acknowledges she is solely responsible for the payment of any Excise Tax and that the Company will not reimburse or otherwise indemnify her for such amount. Any reimbursements or repayments provided under this subsection shall be made strictly in accordance with Section 409A of the Code, including Treasury Regulation 1.409A-3(i)(1)(v).

 

 

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Notwithstanding anything in this Agreement to the contrary, if any payments or benefits due to Employee hereunder would cause the application of an accelerated or additional tax under Section 409A of the Code (“Section 409A”), such payments or benefits shall be restructured in a manner which does not cause such an accelerated or additional tax. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following Employee’s separation from service shall instead be paid on the first (1st) business day after the date that is six (6) months following Employee’s date of termination (or death, if earlier). In the event that Employee receives reduced payments and benefits as a result of the application of this paragraph, reduction shall be made from payments and benefits which are determined not to be nonqualified deferred compensation for purposes of Section 409A of the Code first, and then shall be made (to the extent necessary) out of payments and benefits which are subject to Section 409A of the Code and which are due at the latest future date, to the extent such reduction would not trigger adverse tax consequences under Section 409A of the Code. 

 

 

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21.     Headings. Section headings are provided in this Agreement for convenience only and shall not be deemed to substantively alter the content of such sections.

 

PLEASE NOTE: BY SIGNING THIS AGREEMENT, EMPLOYEE IS HEREBY CERTIFYING THAT EMPLOYEE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C) HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS EMPLOYEE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL SUCH QUESTIONS; AND (D) UNDERSTANDS EMPLOYEE’S RIGHTS AND OBLIGATIONS UNDER THE AGREEMENT.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of March 7, 2016.

 

THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY COMPANY.

 

 

 

	
 
	
 
	
/s/ Gina Collins
	
 

	
 
	
 
	
Gina Collins
	
 

	
 
	
 
	
 
	
 

	 	 	 	 
	 	 	 	 
	 	 	BUILD-A-BEAR WORKSHOP, INC.	 
	 	 	 	 
	 	 	 	 

 

	 	By: 	Sharon Price John	 
	 	 	 	 
	 	Name: 	Sharon Price John	 
	 	 	 	 
	 	Title: 	Chief Executive Officer	 

 

 

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