Document:

Exhibit 10.6

 

Execution Version

 

 

ASSET REPRESENTATIONS REVIEW AGREEMENT

 

among

 

FORD CREDIT AUTO OWNER TRUST 2015-C,
 as Issuer

 

FORD MOTOR CREDIT COMPANY LLC,
 as Servicer

 

and

 

CLAYTON FIXED INCOME SERVICES LLC,
 as Asset Representations Reviewer

 

Dated as of September 1, 2015

 

 

 

TABLE OF CONTENTS

 

	
ARTICLE I   USAGE AND DEFINITIONS
    	
1
    
	
Section 1.1.
    	
Usage and Definitions
    	
1
    
	
Section 1.2.
    	
Additional Definitions
    	
1
    
	
Section 1.3.
    	
Review Materials and   Test Definitions
    	
2
    
	
ARTICLE II   ENGAGEMENT OF ASSET REPRESENTATIONS REVIEWER
    	
2
    
	
Section 2.1.
    	
Engagement; Acceptance
    	
2
    
	
Section 2.2.
    	
Confirmation of Status
    	
2
    
	
ARTICLE III   ASSET REPRESENTATIONS REVIEW PROCESS
    	
2
    
	
Section 3.1.
    	
Review Notices
    	
2
    
	
Section 3.2.
    	
Identification of   Review Receivables
    	
3
    
	
Section 3.3.
    	
Review Materials
    	
3
    
	
Section 3.4.
    	
Performance of Reviews
    	
3
    
	
Section 3.5.
    	
Review Reports
    	
4
    
	
Section 3.6.
    	
Review Representatives
    	
4
    
	
Section 3.7.
    	
Dispute Resolution
    	
5
    
	
Section 3.8.
    	
Limitations on Review   Obligations
    	
5
    
	
ARTICLE IV   ASSET REPRESENTATIONS REVIEWER
    	
6
    
	
Section 4.1.
    	
Representations and   Warranties
    	
6
    
	
Section 4.2.
    	
Covenants
    	
7
    
	
Section 4.3.
    	
Fees and Expenses
    	
7
    
	
Section 4.4.
    	
Limitation on Liability
    	
8
    
	
Section 4.5.
    	
Indemnification by   Asset Representations Reviewer
    	
8
    
	
Section 4.6.
    	
Indemnification of   Asset Representations Reviewer
    	
8
    
	
Section 4.7.
    	
Inspections of Asset   Representations Reviewer
    	
9
    
	
Section 4.8.
    	
Delegation of   Obligations
    	
9
    
	
Section 4.9.
    	
Confidential Information
    	
9
    
	
Section 4.10.
    	
Personally Identifiable   Information
    	
11
    
	
ARTICLE V   RESIGNATION AND REMOVAL; SUCCESSOR ASSET REPRSENTATIONS REVIWER
    	
13
    
	
Section 5.1.
    	
Eligibility   Requirements for Asset Representations Reviewer
    	
13
    
	
Section 5.2.
    	
Resignation and Removal   of Asset Representations Reviewer
    	
13
    
	
Section 5.3.
    	
Successor Asset   Representations Reviewer
    	
14
    
	
Section 5.4.
    	
Merger, Consolidation   or Succession
    	
14
    
	
ARTICLE VI   OTHER AGREEMENTS
    	
14
    
	
Section 6.1.
    	
Independence of Asset   Representations Reviewer
    	
14
    
	
Section 6.2.
    	
No Petition
    	
14
    
	
Section 6.3.
    	
Limitation of Liability   of Owner Trustee
    	
15
    
	
Section 6.4.
    	
Termination of   Agreement
    	
15
    
	
ARTICLE VII   MISCELLANEOUS PROVISIONS
    	
15
    
	
Section 7.1.
    	
Amendments
    	
15
    
	
Section 7.2.
    	
Assignment; Benefit of   Agreement; Third Party Beneficiaries
    	
16
    
	
Section 7.3.
    	
Notices
    	
16
    
	
Section 7.4.
    	
GOVERNING LAW
    	
16
    
	
Section 7.5.
    	
Submission to   Jurisdiction
    	
16
    
	
Section 7.6.
    	
WAIVER OF JURY TRIAL
    	
16
    

 

i

 

	
Section 7.7.
    	
No Waiver; Remedies
    	
17
    
	
Section 7.8.
    	
Severability
    	
17
    
	
Section 7.9.
    	
Headings
    	
17
    
	
Section 7.10.
    	
Counterparts
    	
17
    

 

Schedule A — Review Materials

Schedule B — Representations and Warranties and Tests

 

 

ASSET REPRESENTATIONS REVIEW AGREEMENT, dated as of September 1, 2015 (this “Agreement”), among FORD CREDIT AUTO OWNER TRUST 2015-C, a Delaware statutory trust, as Issuer, FORD MOTOR CREDIT COMPANY LLC, a Delaware limited liability company, as Servicer, and CLAYTON FIXED INCOME SERVICES LLC, a Delaware limited liability company, as Asset Representations Reviewer.

 

BACKGROUND

 

In the normal course of its business, Ford Credit purchases retail installment sale contracts secured by new and used cars, light trucks and utility vehicles from motor vehicle dealers.

 

In connection with a securitization transaction sponsored by Ford Credit, Ford Credit sold a pool of Receivables consisting of retail installment sale contracts to the Depositor, who sold them to the Issuer.

 

The Issuer has granted a security interest in the pool of Receivables to the Indenture Trustee, for the benefit of the Secured Parties, as security for the Notes issued by the Issuer under the Indenture.

 

The Issuer has determined to engage the Asset Representations Reviewer to perform reviews of certain Receivables for compliance with the representations and warranties made by Ford Credit and the Depositor about the Receivables in the pool.

 

The parties agree as follows.

 

ARTICLE I
 USAGE AND DEFINITIONS

 

Section 1.1.                                 Usage and Definitions.  Capitalized terms used but not defined in this Agreement are defined in Appendix A to the Sale and Servicing Agreement, dated as of September 1, 2015, among Ford Credit Auto Owner Trust 2015-C, as Issuer, Ford Credit Auto Receivables Two LLC, as Depositor, and Ford Motor Credit Company LLC, as Servicer.  Appendix A also contains usage rules that apply to this Agreement.  Appendix A is incorporated by reference into this Agreement.

 

Section 1.2.                                 Additional Definitions.  The following terms have the meanings given below:

 

“Confidential Information” has the meaning stated in Section 4.9(b).

 

“Contract” has the meaning stated in Schedule A.

 

“Information Recipients” has the meaning stated in Section 4.9(a).

 

“Indemnified Parties” has the meaning stated in Section 4.6(a).

 

“Issuer PII” has the meaning stated in Section 4.10(a).

 

 

“Personally Identifiable Information” or “PII” has the meaning stated in Section 4.10(a).

 

“Review” means the performance by the Asset Representations Reviewer of the testing procedures for each Test and each Review Receivable according to Section 3.4.

 

“Review Fee” has the meaning stated in Section 4.3(b).

 

“Review Materials” means, for a Review and a Review Receivable, the documents and other materials listed in Schedule A, as applicable.

 

“Review Report” means, for a Review, the report of the Asset Representations Reviewer as described in Section 3.5.

 

“Test” has the meaning stated in Section 3.4(a).

 

“Test Complete” has the meaning stated in Section 3.4(c).

 

“Test Fail” has the meaning stated in Section 3.4(a).

 

“Test Pass” has the meaning stated in Section 3.4(a).

 

Section 1.3.                                 Review Materials and Test Definitions.  Capitalized terms or terms or phrases in quotation marks used in the Tests, if not defined in Appendix A to the Sale and Servicing Agreement or in this Agreement, including Schedule A to this Agreement, refer to sections, titles or terms in the Contract or other Review Materials.

 

ARTICLE II
 ENGAGEMENT OF ASSET REPRESENTATIONS REVIEWER

 

Section 2.1.                                 Engagement; Acceptance.  The Issuer engages Clayton Fixed Income Services LLC to act as the Asset Representations Reviewer for the Issuer.  Clayton Fixed Income Services LLC accepts the engagement and agrees to perform the obligations of the Asset Representations Reviewer on the terms in this Agreement.

 

Section 2.2.                                 Confirmation of Status.  The parties confirm that the Asset Representations Reviewer is not responsible for (a) reviewing the Receivables for compliance with the representations and warranties under the Transaction Documents, except as described in this Agreement, or (b) determining whether noncompliance with the representations or warranties constitutes a breach of the Transaction Documents.

 

ARTICLE III
 ASSET REPRESENTATIONS REVIEW PROCESS

 

Section 3.1.                                 Review Notices.  On receipt of a Review Notice from the Indenture Trustee according to Section 7.2 of the Indenture, the Asset Representations Reviewer will start a Review.  The Asset Representations Reviewer will not be obligated to start a Review until a Review Notice is received.

 

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Section 3.2.                                 Identification of Review Receivables.  Within ten Business Days after receipt of a Review Notice, the Servicer will deliver to the Asset Representations Reviewer and the Indenture Trustee a list of the Review Receivables.

 

Section 3.3.                                 Review Materials.

 

(a)                                 Access to Review Materials.  The Servicer will give the Asset Representations Reviewer access to the Review Materials for all of the Review Receivables within 60 days after receipt of the Review Notice in one or more of the following ways: (i) by providing access to the Servicer’s receivables systems, either remotely or at an office of the Servicer, (ii) by electronic posting to a password-protected website to which the Asset Representations Reviewer has access, (iii) by providing originals or photocopies at an office of the Servicer where the Receivable Files are located or (iv) in another manner agreed by the Servicer and the Asset Representations Reviewer.  The Servicer may redact or remove Personally Identifiable Information from the Review Materials without changing the meaning or usefulness of the Review Materials for the Review.

 

(b)                                 Missing or Insufficient Review Materials.  The Asset Representations Reviewer will review the Review Materials to determine if any Review Materials are missing or insufficient for the Asset Representations Reviewer to perform any Test.  If the Asset Representations Reviewer determines any missing or insufficient Review Materials, the Asset Representations Reviewer will notify the Servicer promptly, and in any event no less than 20 days before completing the Review.  The Servicer will have 15 days to give the Asset Representations Reviewer access to the missing Review Materials or other documents or information to correct the insufficiency.  If the missing Review Materials or other documents have not been provided by the Servicer within 15 days, the related Review Receivable will have a Test Fail for the Test or Tests that require use of the missing or insufficient Review Materials.  If the Contract for any Review Receivable is not provided or is illegible, the Asset Representations Reviewer will be unable to perform any Tests and the related Review Receivable will have an overall Test Fail for all Tests.  In either of these cases, the Test or Tests will be considered completed and the Review Report will report a Test Fail for the related Review Receivable or applicable representation or warranty and the reason for the Test Fail.

 

Section 3.4.                                 Performance of Reviews.

 

(a)                                 Test Procedures.  For a Review, the Asset Representations Reviewer will perform for each Review Receivable the procedures listed under “Tests” in Schedule B for each representation and warranty (each, a “Test”), using the Review Materials necessary to perform the procedures as stated in the Test.  For each Test and Review Receivable, the Asset Representations Reviewer will determine if the Test has been satisfied (a “Test Pass”) or if the Test has not been satisfied (a “Test Fail”).

 

(b)                                 Review Period.  The Asset Representations Reviewer will complete the Review of all of the Review Receivables within 60 days after receiving access to the Review Materials under Section 3.3(a).  However, if missing or additional Review Materials are provided to the Asset Representations Reviewer under Section 3.3(b), the Review period will be extended for an additional 30 days.

 

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(c)                                  Completion of Review for Certain Review Receivables.  Following the delivery of the list of the Review Receivables and before the delivery of the Review Report by the Asset Representations Reviewer, the Servicer may notify the Asset Representations Reviewer if a Review Receivable is paid in full by the Obligor or purchased from the Issuer by the Sponsor, the Depositor or the Servicer according to the Transaction Documents.  On receipt of notice, the Asset Representations Reviewer will immediately terminate all Tests of such Receivables and the Review of such Receivables will be considered complete (a “Test Complete”).  In this case, the Review Report will indicate a Test Complete for the Receivables and the related reason.

 

(d)                                 Previously Reviewed Receivable; Duplicative Tests.  If any Review Receivable was included in a prior Review, the Asset Representations Reviewer will not perform any Tests on it, but will include the results of the previous Tests in the Review Report for the current Review.  If the same Test is required for more than one representation or warranty listed on Schedule B, the Asset Representations Reviewer will only perform the Test once for each Review Receivable but will report the results of the Test for each applicable representation or warranty on the Review Report.

 

(e)                                  Termination of Review.  If a Review is in process and the Notes will be paid in full on the next Payment Date, the Servicer will notify the Asset Representations Reviewer and the Indenture Trustee no less than ten days before that Payment Date.  On receipt of notice, the Asset Representations Reviewer will terminate the Review immediately and will not be obligated to deliver a Review Report.

 

Section 3.5.                                 Review Reports.  Within five days after the end of the Review period under Section 3.4(b), the Asset Representations Reviewer will deliver to the Issuer, the Servicer and the Indenture Trustee a Review Report indicating for each Review Receivable whether there was a Test Pass or a Test Fail for each Test, or whether the Review Receivable was an overall Test Fail (for a missing or illegible Contract) or a Test Complete.  For each Test Fail, overall Test Fail or Test Complete, the Review Report will indicate the related reason.  The Review Report will contain a summary of the Review results to be included in the Issuer’s Form 10-D report for the Collection Period in which the Review Report is received.  The Asset Representations Reviewer will ensure that the Review Report does not contain any Issuer PII.  On reasonable request of the Servicer, the Asset Representations Reviewer will provide additional detail on the Test results.

 

Section 3.6.                                 Review Representatives.

 

(a)                                 Servicer Representative.  The Servicer will designate one or more representatives who will be available to assist the Asset Representations Reviewer in performing the Review, including responding to requests and answering questions from the Asset Representations Reviewer about access to Review Materials on the Servicer’s originations, receivables or other systems, obtaining missing or insufficient Review Materials and/or providing clarification of any Review Materials or Tests.

 

(b)                                 Asset Representations Reviewer Representative.  The Asset Representations Reviewer will designate one or more representatives who will be available to the Issuer and the Servicer during the performance of a Review.

 

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(c)                                  Questions About Review.  The Asset Representations Reviewer will make appropriate personnel available to respond in writing to written questions or requests for clarification of any Review Report from the Indenture Trustee or the Servicer until the earlier of (i) the payment in full of the Notes and (ii) one year after the delivery of the Review Report.  The Asset Representations Reviewer will not be obligated to respond to questions or requests for clarification from Noteholders or any other Person and will direct such Persons to submit written questions or requests to the Indenture Trustee.

 

Section 3.7.                                 Dispute Resolution.  If a Receivable that was Reviewed by the Asset Representations Reviewer is the subject of a dispute resolution proceeding under Section 2.6 of the Sale and Servicing Agreement, the Asset Representations Reviewer will participate in the dispute resolution proceeding on request of a party to the proceeding.  The reasonable expenses of the Asset Representations Reviewer for its participation in any dispute resolution proceeding will be considered expenses of the requesting party for the dispute resolution and will be paid by a party to the dispute resolution as determined by the mediator or arbitrator for the dispute resolution according to Section 2.6 of the Sale and Servicing Agreement.  If not paid by a party to the dispute resolution, the expenses will be reimbursed by the Issuer according to Section 4.3(d).

 

Section 3.8.                                 Limitations on Review Obligations.

 

(a)                                 Review Process Limitations.  The Asset Representations Reviewer is not obligated to:

 

(i)                                     determine whether a Delinquency Trigger has occurred or whether the required percentage of Noteholders has voted to direct a Review under the Indenture, and may rely on the information in any Review Notice delivered by the Indenture Trustee;

 

(ii)                                  determine which Receivables are subject to a Review, and may rely on the lists of Review Receivables provided by the Servicer;

 

(iii)                               obtain or confirm the validity of the Review Materials and no liability for any errors in the Review Materials and may rely on the accuracy and completeness of the Review Materials;

 

(iv)                              obtain missing or insufficient Review Materials from any party or any other source; or

 

(v)                                 take any action or cause any other party to take any action under any of the Transaction Documents or otherwise to enforce any remedies against any Person for breaches of representations or warranties about the Review Receivables.

 

(b)                                 Testing Procedure Limitations.  The Asset Representations Reviewer will only be required to perform the testing procedures listed under “Tests” in Schedule A, and will not be obligated to perform additional procedures on any Review Receivable or to provide any information other than a Review Report indicating for each Review Receivable whether there was a Test Pass or a Test Fail for each Test, or whether the Review Receivable was a Test Complete and the related reason.  However, the Asset Representations Reviewer may provide

 

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additional information about any Review Receivable that it determines in good faith to be material to the Review.

 

ARTICLE IV
 ASSET REPRESENTATIONS REVIEWER

 

Section 4.1.                                 Representations and Warranties .  The Asset Representations Reviewer represents and warrants to the Issuer as of the Closing Date:

 

(a)                                 Organization and Qualification.  The Asset Representations Reviewer is duly organized and validly existing as a limited liability company in good standing under the laws of State of Delaware.  The Asset Representations Reviewer is qualified as a foreign limited liability company in good standing and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of its properties or the conduct of its activities requires the qualification, license or approval, unless the failure to obtain the qualifications, licenses or approvals would not reasonably be expected to have a material adverse effect on the Asset Representations Reviewer’s ability to perform its obligations under this Agreement.

 

(b)                                 Power, Authority and Enforceability.  The Asset Representations Reviewer has the power and authority to execute, deliver and perform its obligations under this Agreement.  The Asset Representations Reviewer has authorized the execution, delivery and performance of this Agreement.  This Agreement is the legal, valid and binding obligation of the Asset Representations Reviewer enforceable against the Asset Representations Reviewer, except as may be limited by insolvency, bankruptcy, reorganization or other laws relating to the enforcement of creditors’ rights or by general equitable principles.

 

(c)                                  No Conflicts and No Violation.  The completion of the transactions contemplated by this Agreement and the performance of the Asset Representations Reviewer’s obligations under this Agreement will not (i) conflict with, or be a breach or default under, any indenture, mortgage, deed of trust, loan agreement, guarantee or similar document under which the Asset Representations Reviewer is a debtor or guarantor, (ii) result in the creation or imposition of a Lien on the properties or assets of the Asset Representations Reviewer under the terms of any indenture, mortgage, deed of trust, loan agreement, guarantee or similar document, (iii) violate the organizational documents of the Asset Representations Reviewer or (iv) violate a law or, to the Asset Representations Reviewer’s knowledge, an order, rule or regulation of a federal or State court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Asset Representations Reviewer or its properties that applies to the Asset Representations Reviewer, which, in each case, would reasonably be expected to have a material adverse effect on the Asset Representations Reviewer’s ability to perform its obligations under this Agreement.

 

(d)                                 No Proceedings.  To the Asset Representations Reviewer’s knowledge, there are no proceedings or investigations pending or threatened in writing before a federal or State court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Asset Representations Reviewer or its properties (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the completion of the transactions contemplated by this Agreement or (iii) seeking any determination or ruling that would reasonably be expected to

 

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have a material adverse effect on the Asset Representations Reviewer’s ability to perform its obligations under, or the validity or enforceability of, this Agreement.

 

(e)                                  Eligibility.  The Asset Representations Reviewer meets the eligibility requirements in Section 5.1.

 

Section 4.2.                                 Covenants.  The Asset Representations Reviewer covenants and agrees that:

 

(a)                                 Eligibility.  It will notify the Issuer and the Servicer promptly if it no longer meets the eligibility requirements in Section 5.1.

 

(b)                                 Review Systems; Personnel.  It will maintain business process management and/or other systems necessary to ensure that it can perform each Test and, on execution of this Agreement, will load each Test into these systems. The Asset Representations Reviewer will ensure that these systems allow for each Review Receivable and the related Review Materials to be individually tracked and stored as contemplated by this Agreement.  The Asset Representations Reviewer will maintain adequate staff that is properly trained to conduct Reviews as required by this Agreement.

 

(c)                                  Maintenance of Review Materials.  It will maintain copies of any Review Materials, Review Reports and other documents relating to a Review, including internal correspondence and work papers, for a period of two years after the termination of this Agreement.

 

Section 4.3.                                 Fees and Expenses.

 

(a)                                 Annual Fee.  The Issuer will, or will cause the Administrator to, pay the Asset Representations Reviewer, as compensation for agreeing to act as the Asset Representations Reviewer under this Agreement, an annual fee separately agreed to by the Issuer and the Asset Representations Reviewer.  The annual fee will be paid as agreed by the Issuer and the Asset Representations Reviewer until this Agreement is terminated.

 

(b)                                 Review Fee.  Following the completion of a Review and the delivery to the Indenture Trustee of the Review Report, or the termination of a Review according to Section 3.4(e), and the delivery to the Servicer of a detailed invoice, the Asset Representations Reviewer will be entitled to a fee of $275 for each Review Receivable for which the Review was started (the “Review Fee”).  However, no Review Fee will be charged for any Review Receivable which was included in a prior Review or for which no Tests were completed prior to the Asset Representations Reviewer being notified of a termination of the Review according to Section 3.4(e) or due to missing or insufficient Review Materials under Section 3.3(b).  If the detailed invoice is submitted on or before the first day of a month, the Review Fee will be paid by the Issuer according to the priority of payments in Section 8.2 of the Indenture starting on or before the Payment Date in that month.  However, if a Review is terminated according to Section 3.4(e), the Asset Representations Reviewer must submit its invoice for the Review Fee for the terminated Review no later than five Business Days before the final Payment Date to be reimbursed no later than the final Payment Date.

 

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(c)                                  Reimbursement of Travel Expenses.  If the Servicer provides access to the Review Materials at one of its properties, the Issuer will reimburse the Asset Representations Reviewer for its reasonable travel expenses incurred in connection with the Review upon receipt of a detailed invoice.

 

(d)                                 Dispute Resolution Expenses.  If the Asset Representations Reviewer participates in a dispute resolution proceeding under Section 3.7 and its reasonable expenses for participating in the proceeding are not paid by a party to the dispute resolution within 90 days after the end of the proceeding, the Issuer will reimburse the Asset Representations Reviewer for such expenses upon receipt of a detailed invoice.

 

Section 4.4.                                 Limitation on Liability.  The Asset Representations Reviewer will not be liable to any Person for any action taken, or not taken, in good faith under this Agreement or for errors in judgment.  However, the Asset Representations Reviewer will be liable for its willful misconduct, bad faith or negligence in performing its obligations under this Agreement.  In no event will the Asset Representations Reviewer be liable for special, indirect or consequential losses or damages (including lost profit), even if the Asset Representations Reviewer has been advised of the likelihood of the loss or damage and regardless of the form of action.

 

Section 4.5.                                 Indemnification by Asset Representations Reviewer .  The Asset Representations Reviewer will indemnify each of the Issuer, the Depositor, the Servicer, the Owner Trustee and the Indenture Trustee and their respective directors, officers, employees and agents for all fees, expenses, losses, damages and liabilities resulting from (a) the willful misconduct, bad faith or negligence of the Asset Representations Reviewer in performing its obligations under this Agreement or (b) the Asset Representations Reviewer’s breach of any of its representations or warranties in this Agreement.  The Asset Representations Reviewer’s obligations under this Section 4.5 will survive the termination of this Agreement, the termination of the Issuer and the resignation or removal of the Asset Representations Reviewer.

 

Section 4.6.                                 Indemnification of Asset Representations Reviewer.

 

(a)                                 Indemnification.  The Issuer will, or will cause the Administrator to, indemnify the Asset Representations Reviewer and its officers, directors, employees and agents (each, an “Indemnified Person”), for all fees, expenses, losses, damages and liabilities resulting from the performance of its obligations under this Agreement (including the fees and expenses of defending itself against any loss, damage or liability), but excluding any fee, expense, loss, damage or liability resulting from (i) the Asset Representations Reviewer’s willful misconduct, bad faith or negligence or (ii) the Asset Representations Reviewer’s breach of any of its representations or warranties in this Agreement.

 

(b)                                 Proceedings.  Promptly on receipt by an Indemnified Person of notice of a Proceeding against it, the Indemnified Person will, if a claim is to be made under Section 4.6(a), notify the Issuer and the Administrator of the Proceeding.  The Issuer or the Administrator may participate in and assume the defense and settlement of a Proceeding at its expense.  If the Issuer or the Administrator notifies the Indemnified Person of its intention to assume the defense of the Proceeding with counsel reasonably satisfactory to the Indemnified Person, and so long as the Issuer or the Administrator assumes the defense of the Proceeding in a manner reasonably

 

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satisfactory to the Indemnified Person, the Issuer and the Administrator will not be liable for fees and expenses of counsel to the Indemnified Person unless there is a conflict between the interests of the Issuer or the Administrator, as applicable, and an Indemnified Person.  If there is a conflict, the Issuer or the Administrator will pay for the reasonable fees and expenses of separate counsel to the Indemnified Person.  No settlement of a Proceeding may be made without the approval of the Issuer and the Administrator and the Indemnified Person, which approval will not be unreasonably withheld.

 

(c)                                  Survival of Obligations.  The Issuer’s and the Administrator’s obligations under this Section 4.6 will survive the resignation or removal of the Asset Representations Reviewer and the termination of this Agreement.

 

(d)                                 Repayment.  If the Issuer or the Administrator makes any payment under this Section 4.6 and the Indemnified Person later collects any of the amounts for which the payments were made to it from others, the Indemnified Person will promptly repay the amounts to the Issuer or the Administrator, as applicable.

 

Section 4.7.                                 Inspections of Asset Representations Reviewer.  The Asset Representations Reviewer agrees that, with reasonable prior notice not more than once during any year, it will permit authorized representatives of the Issuer, the Servicer or the Administrator, during the Asset Representations Reviewer’s normal business hours, to examine and review the books of account, records, reports and other documents and materials of the Asset Representations Reviewer relating to (a) the performance of the Asset Representations Reviewer’s obligations under this Agreement, (b) payments of fees and expenses of the Asset Representations Reviewer for its performance and (c) a claim made by the Asset Representations Reviewer under this Agreement.  In addition, the Asset Representations Reviewer will permit the Issuer’s, the Servicer’s or the Administrator’s representatives to make copies and extracts of any of those documents and to discuss them with the Asset Representations Reviewer’s officers and employees.  Each of the Issuer, the Servicer and the Administrator will, and will cause its authorized representatives to, hold in confidence the information except if disclosure may be required by law or if the Issuer, the Servicer or the Administrator reasonably determines that it is required to make the disclosure under this Agreement or the other Transaction Documents.  The Asset Representations Reviewer will maintain all relevant books, records, reports and other documents and materials for a period of at least two years after the termination of its obligations under this Agreement.

 

Section 4.8.                                 Delegation of Obligations.  The Asset Representations Reviewer may not delegate or subcontract its obligations under this Agreement to any Person without the consent of the Issuer and the Servicer.

 

Section 4.9.                                 Confidential Information.

 

(a)                                 Treatment.  The Asset Representations Reviewer agrees to hold and treat Confidential Information given to it under this Agreement in confidence and under the terms and conditions of this Section 4.9, and will implement and maintain safeguards to further assure the confidentiality of the Confidential Information.  The Confidential Information will not, without the prior consent of the Issuer and the Servicer, be disclosed or used by the Asset

 

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Representations Reviewer, or its officers, directors, employees, agents, representatives or affiliates, including legal counsel (collectively, the “Information Recipients”) other than for the purposes of performing Reviews of Review Receivables or performing its obligations under this Agreement.  The Asset Representations Reviewer agrees that it will not, and will cause its Affiliates to not (i) purchase or sell securities issued by Ford Credit or its Affiliates or special purpose entities on the basis of Confidential Information or (ii) use the Confidential Information for the preparation of research reports, newsletters or other publications or similar communications.

 

(b)                                 Definition.  “Confidential Information” means oral, written and electronic materials (irrespective of its source or form of communication) furnished before, on or after the date of this Agreement to the Asset Representations Reviewer for the purposes contemplated by this Agreement, including:

 

(i)                                     lists of Review Receivables and any related Review Materials;

 

(ii)                                  origination and servicing guidelines, policies and procedures, and form contracts; and

 

(iii)                               notes, analyses, compilations, studies or other documents or records prepared by the Servicer, which contain information supplied by or on behalf of the Servicer or its representatives.

 

However, Confidential Information will not include information that (A) is or becomes generally available to the public other than as a result of disclosure by the Information Recipients, (B) was available to, or becomes available to, the Information Recipients on a non-confidential basis from a Person or entity other than the Issuer or the Servicer before its disclosure to the Information Recipients who, to the knowledge of the Information Recipient is not bound by a confidentiality agreement with the Issuer or the Servicer and is not prohibited from transmitting the information to the Information Recipients, (C) is independently developed by the Information Recipients without the use of the Confidential Information, as shown by the Information Recipients’ files and records or other evidence in the Information Recipients’ possession or (D) the Issuer or the Servicer provides permission to the applicable Information Recipients to release.

 

(c)                                  Protection.  The Asset Representations Reviewer will take reasonable measures to protect the secrecy of and avoid disclosure and unauthorized use of Confidential Information, including those measures that it takes to protect its own confidential information and not less than a reasonable standard of care.  The Asset Representations Reviewer acknowledges that Personally Identifiable Information is also subject to the additional requirements in Section 4.10.

 

(d)                                 Disclosure.  If the Asset Representations Reviewer is required by applicable law, regulation, rule or order issued by an administrative, governmental, regulatory or judicial authority to disclose part of the Confidential Information, it may disclose the Confidential Information.  However, before a required disclosure, the Asset Representations Reviewer, if permitted by law, regulation, rule or order, will use its reasonable efforts to provide the Issuer and the Servicer with notice of the requirement and will cooperate, at the Servicer’s expense, in the Issuer’s and the Servicer’s pursuit of a proper protective order or other relief for the disclosure

 

10

 

of the Confidential Information.  If the Issuer or the Servicer is unable to obtain a protective order or other proper remedy by the date that the information is required to be disclosed, the Asset Representations Reviewer will disclose only that part of the Confidential Information that it is advised by its legal counsel it is legally required to disclose.

 

(e)                                  Responsibility for Information Recipients.  The Asset Representations Reviewer will be responsible for a breach of this Section 4.9 by its Information Recipients.

 

(f)                                   Violation.  The Asset Representations Reviewer agrees that a violation of this Agreement may cause irreparable injury to the Issuer and the Servicer and the Issuer and the Servicer may seek injunctive relief in addition to legal remedies.  If an action is initiated by the Issuer or the Servicer to enforce this Section 4.9, the prevailing party will be reimbursed for its fees and expenses, including reasonable attorney’s fees, incurred for the enforcement.

 

Section 4.10.                          Personally Identifiable Information.

 

(a)                                 Definitions.  “Personally Identifiable Information” or “PII” means information in any format about an identifiable individual, including, name, address, phone number, e-mail address, account number(s), identification number(s), any other actual or assigned attribute associated with or identifiable to an individual and any information that when used separately or in combination with other information could identify an individual.  “Issuer PII” means PII furnished by the Issuer, the Servicer or their Affiliates to the Asset Representations Reviewer and PII developed or otherwise collected or acquired by the Asset Representations Reviewer in performing its obligations under this Agreement.

 

(b)                                 Use of Issuer PII.  The Issuer does not grant the Asset Representations Reviewer any rights to Issuer PII except as provided in this Agreement.  The Asset Representations Reviewer will use Issuer PII only to perform its obligations under this Agreement or as specifically directed in writing by the Issuer and will only reproduce Issuer PII to the extent necessary for these purposes.  The Asset Representations Reviewer must comply with all laws applicable to PII, Issuer PII and the Asset Representations Reviewer’s business, including any legally required codes of conduct, including those relating to privacy, security and data protection.  The Asset Representations Reviewer will protect and secure Issuer PII.  The Asset Representations Reviewer will implement privacy or data protection policies and procedures that comply with applicable law and this Agreement.  The Asset Representations Reviewer will implement and maintain reasonable and appropriate practices, procedures and systems, including administrative, technical and physical safeguards to (i) protect the security, confidentiality and integrity of Issuer PII, (ii) ensure against anticipated threats or hazards to the security or integrity of Issuer PII, (iii) protect against unauthorized access to or use of Issuer PII and (iv) otherwise comply with its obligations under this Agreement.  These safeguards include a written data security plan, employee training, information access controls, restricted disclosures, systems protections (e.g., intrusion protection, data storage protection and data transmission protection) and physical security measures.

 

(c)                                  Additional Limitations.  In addition to the use and protection requirements described in Section 4.10(b), the Asset Representations Reviewer’s disclosure of Issuer PII is also subject to the following requirements:

 

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(i)                                     The Asset Representations Reviewer will not disclose Issuer PII to its personnel or allow its personnel access to Issuer PII except (A) for the Asset Representations Reviewer personnel who require Issuer PII to perform a Review, (B) with the prior consent of the Issuer or (C) as required by applicable law.  When permitted, the disclosure of or access to Issuer PII will be limited to the specific information necessary for the individual to complete the assigned task.  The Asset Representations Reviewer will inform personnel with access to Issuer PII of the confidentiality requirements in this Agreement and train its personnel with access to Issuer PII on the proper use and protection of Issuer PII.

 

(ii)                                  The Asset Representations Reviewer will not sell, disclose, provide or exchange Issuer PII with or to any third party without the prior consent of the Issuer.

 

(d)                                 Notice of Breach.  The Asset Representations Reviewer will notify the Issuer promptly in the event of an actual or reasonably suspected security breach, unauthorized access, misappropriation or other compromise of the security, confidentiality or integrity of Issuer PII and, where applicable, immediately take action to prevent any further breach.

 

(e)                                  Return or Disposal of Issuer PII.  Except where return or disposal is prohibited by applicable law, promptly on the earlier of the completion of the Review or the request of the Issuer, all Issuer PII in any medium in the Asset Representations Reviewer’s possession or under its control will be (i) destroyed in a manner that prevents its recovery or restoration or (ii) if so directed by the Issuer, returned to the Issuer without the Asset Representations Reviewer retaining any actual or recoverable copies, in both cases, without charge to the Issuer.  Where the Asset Representations Reviewer retains Issuer PII, the Asset Representations Reviewer will limit the Asset Representations Reviewer’s further use or disclosure of Issuer PII to that required by applicable law.

 

(f)                                   Compliance; Modification.  The Asset Representations Reviewer will cooperate with and provide information to the Issuer regarding the Asset Representations Reviewer’s compliance with this Section 4.10.  The Asset Representations Reviewer and the Issuer agree to modify this Section 4.10 as necessary for either party to comply with applicable law.

 

(g)                                  Audit of Asset Representations Reviewer.  The Asset Representations Reviewer will permit the Issuer and its authorized representatives to audit the Asset Representations Reviewer’s compliance with this Section 4.10 during the Asset Representations Reviewer’s normal business hours on reasonable advance notice to the Asset Representations Reviewer, and not more than once during any year unless circumstances necessitate additional audits.  The Issuer agrees to make reasonable efforts to schedule any audit described in this Section 4.10 with the inspections described in Section 4.7.  The Asset Representations Reviewer will also permit the Issuer during normal business hours on reasonable advance written notice to audit any service providers used by the Asset Representations Reviewer to fulfill the Asset Representations Reviewer’s obligations under this Agreement.

 

(h)                                 Affiliates and Third Parties.  If the Asset Representations Reviewer processes the PII of the Issuer’s Affiliates or a third party when performing a Review, and if such Affiliate or third party is identified to the Asset Representations Reviewer, such Affiliate or third party is an

 

12

 

intended third-party beneficiary of this Section 4.10, and this Agreement is intended to benefit the Affiliate or third party.  The Affiliate or third party may enforce the PII related terms of this Section 4.10 against the Asset Representations Reviewer as if each were a signatory to this Agreement.

 

ARTICLE V
 RESIGNATION AND REMOVAL;
 SUCCESSOR ASSET REPRSENTATIONS REVIWER

 

Section 5.1.                                 Eligibility Requirements for Asset Representations Reviewer.  The Asset Representations Reviewer must be a Person who (a) is not Affiliated with the Sponsor, the Depositor, the Servicer, the Indenture Trustee, the Owner Trustee or any of their Affiliates and (b) was not, and is not Affiliated with a Person that was, engaged by the Sponsor or any Underwriter to perform any due diligence on the Receivables prior to the Closing Date.

 

Section 5.2.                                 Resignation and Removal of Asset Representations Reviewer.

 

(a)                                 No Resignation.  The Asset Representations Reviewer will not resign as Asset Representations Reviewer unless it determines it is legally unable to perform its obligations under this Agreement and there is no reasonable action that it could take to make the performance of its obligations under this Agreement permitted under applicable law.  The Asset Representations Reviewer will deliver a notice of its resignation to the Issuer and the Servicer, together with an Opinion of Counsel supporting its determination.

 

(b)                                 Removal.  If any of the following events occur, the Issuer, by notice to the Asset Representations Reviewer, may remove the Asset Representations Reviewer and terminate its rights and obligations under this Agreement:

 

(i)                                     the Asset Representations Reviewer no longer meets the eligibility requirements in Section 5.1;

 

(ii)                                  the Asset Representations Reviewer breaches of any of its representations, warranties, covenants or obligations in this Agreement; or

 

(iii)                               an Insolvency Event of the Asset Representations Reviewer occurs.

 

(c)                                  Notice of Resignation or Removal.  The Issuer will notify the Servicer, the Owner Trustee and the Indenture Trustee of any resignation or removal of the Asset Representations Reviewer.

 

(d)                                 Continue to Perform After Resignation or Removal.  No resignation or removal of the Asset Representations Reviewer will be effective, and the Asset Representations Reviewer will continue to perform its obligations under this Agreement, until a successor Asset Representations Reviewer has accepted its engagement according to Section 5.3(b).

 

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Section 5.3.                                 Successor Asset Representations Reviewer .

 

(a)                                 Engagement of Successor Asset Representations Reviewer.  Following the resignation or removal of the Asset Representations Reviewer, the Issuer will engage a successor Asset Representations Reviewer who meets the eligibility requirements of Section 5.1.

 

(b)                                 Effectiveness of Resignation or Removal.  No resignation or removal of the Asset Representations Reviewer will be effective until the successor Asset Representations Reviewer has executed and delivered to the Issuer and the Servicer an agreement accepting its engagement and agreeing to perform the obligations of the Asset Representations Reviewer under this Agreement or entering into a new agreement with the Issuer on substantially the same terms as this Agreement.

 

(c)                                  Transition and Expenses.  If the Asset Representations Reviewer resigns or is removed, the Asset Representations Reviewer will cooperate with the Issuer and take all actions reasonably requested to assist the Issuer in making an orderly transition of the Asset Representations Reviewer’s rights and obligations under this Agreement to the successor Asset Representations Reviewer.  The Asset Representations Reviewer will pay the reasonable expenses of transitioning the Asset Representations Reviewer’s obligations under this Agreement and preparing the successor Asset Representations Reviewer to take on the obligations on receipt of an invoice with reasonable detail of the expenses from the Issuer or the successor Asset Representations Reviewer.

 

Section 5.4.                                 Merger, Consolidation or Succession.  Any Person (a) into which the Asset Representations Reviewer is merged or consolidated, (b) resulting from any merger or consolidation to which the Asset Representations Reviewer is a party or (c) succeeding to the business of the Asset Representations Reviewer, if that Person meets the eligibility requirements in Section 5.1, will be the successor to the Asset Representations Reviewer under this Agreement.  Such Person will execute and deliver to the Issuer and the Servicer an agreement to assume the Asset Representations Reviewer’s obligations under this Agreement (unless the assumption happens by operation of law).

 

ARTICLE VI
 OTHER AGREEMENTS

 

Section 6.1.                                 Independence of Asset Representations Reviewer.  The Asset Representations Reviewer will be an independent contractor and will not be subject to the supervision of the Issuer or the Owner Trustee for the manner in which it accomplishes the performance of its obligations under this Agreement.  Unless authorized by the Issuer or the Owner Trustee, respectively, the Asset Representations Reviewer will have no authority to act for or represent the Issuer or the Owner Trustee and will not be considered an agent of the Issuer or the Owner Trustee.  Nothing in this Agreement will make the Asset Representations Reviewer and either of the Issuer or the Owner Trustee members of any partnership, joint venture or other separate entity or impose any liability as such on any of them.

 

Section 6.2.                                 No Petition.  Each of the parties agrees that, before the date that is one year and one day (or, if longer, any applicable preference period) after payment in full of (a) all

 

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securities issued by the Depositor or by a trust for which the Depositor was a depositor or (b) the Notes, it will not start or pursue against, or join any other Person in starting or pursuing against (i) the Depositor or (ii) the Issuer, respectively, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other proceedings under any bankruptcy or similar law.  This Section 6.2 will survive the termination of this Agreement.

 

Section 6.3.                                 Limitation of Liability of Owner Trustee .  This Agreement has been signed on behalf of the Issuer by U.S. Bank Trust National Association not in its individual capacity but solely in its capacity as Owner Trustee of the Issuer.  In no event will U.S. Bank Trust National Association in its individual capacity or a beneficial owner of the Issuer be liable for the Issuer’s obligations under this Agreement.  For all purposes under this Agreement, the Owner Trustee will be subject to, and entitled to the benefits of, the Trust Agreement.

 

Section 6.4.                                 Termination of Agreement.  This Agreement will terminate, except for the obligations under Section 4.6, on the earlier of (a) the payment in full of all outstanding Notes and the satisfaction and discharge of the Indenture and (b) the date the Issuer is terminated under the Trust Agreement.

 

ARTICLE VII
 MISCELLANEOUS PROVISIONS

 

Section 7.1.                                 Amendments.

 

(a)                                 The parties may amend this Agreement:

 

(i)                                     to clarify an ambiguity, correct an error or correct or supplement any term of this Agreement that may be defective or inconsistent with the other terms of this Agreement or to provide for, or facilitate the acceptance of this Agreement by, a successor Asset Representations Reviewer, in each case without the consent of the Noteholders or any other Person;

 

(ii)                                  to add, change or eliminate terms of this Agreement, in each case without the consent of the Noteholders or any other Person, if the Administrator delivers an Officer’s Certificate to the Issuer, the Owner Trustee and the Indenture Trustee stating that the amendment will not have a material adverse effect on the Noteholders; or

 

(iii)                               to add, change or eliminate terms of this Agreement for which an Officer’s Certificate is not or cannot be delivered under Section 7.1(a)(ii), with the consent of the Noteholders of a majority of the Note Balance of each Class of Notes Outstanding (with each affected Class voting separately, except that all Noteholders of Class A Notes will vote together as a single class).

 

(b)                                 Notice of Amendments.  The Administrator will notify the Rating Agencies in advance of any amendment.  Promptly after the execution of an amendment, the Administrator will deliver a copy of the amendment to the Rating Agencies.

 

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Section 7.2.                                 Assignment; Benefit of Agreement; Third Party Beneficiaries.

 

(a)                                 Assignment.  Except as stated in Section 5.4, this Agreement may not be assigned by the Asset Representations Reviewer without the consent of the Issuer and the Servicer.

 

(b)                                 Benefit of Agreement; Third-Party Beneficiaries.  This Agreement is for the benefit of and will be binding on the parties and their permitted successors and assigns.  The Owner Trustee and the Indenture Trustee, for the benefit of the Noteholders, will be third-party beneficiaries of this Agreement and may enforce this Agreement against the Asset Representations Reviewer and the Servicer.  No other Person will have any right or obligation under this Agreement.

 

Section 7.3.                                 Notices.

 

(a)                                 Notices to Parties.  All notices, requests, demands, consents, waivers or other communications to or from the parties must be in writing and will be considered given:

 

(i)                                     for overnight mail, on delivery or, for registered first class mail, postage prepaid, three days after deposit in the mail;

 

(ii)                                  for a fax, when receipt is confirmed by telephone, reply email or reply fax from the recipient;

 

(iii)                               for an email, when receipt is confirmed by telephone or reply email from the recipient; and

 

(iv)                              for an electronic posting to a password-protected website to which the recipient has access, on delivery of an email (without the requirement of confirmation of receipt) stating that the electronic posting has occurred.

 

(b)                                 Notice Addresses.  Any notice, request, demand, consent, waiver or other communication will be addressed as stated in Schedule B to the Sale and Servicing Agreement or to another address as a party may give by notice to the other parties.

 

Section 7.4.                                 GOVERNING LAW.  THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF NEW YORK.

 

Section 7.5.                                 Submission to Jurisdiction.  Each party submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State Court sitting in New York, New York for legal proceedings relating to this Agreement.  Each party irrevocably waives, to the fullest extent permitted by law, any objection that it may now or in the future have to the venue of a proceeding brought in such a court and any claim that the proceeding has been brought in an inconvenient forum.

 

Section 7.6.                                 WAIVER OF JURY TRIAL.  EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN LEGAL PROCEEDING RELATING TO THIS AGREEMENT.

 

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Section 7.7.                                 No Waiver; Remedies.  No party’s failure or delay in exercising a power, right or remedy under this Agreement will operate as a waiver.  No single or partial exercise of a power, right or remedy will preclude any other or further exercise of the power, right or remedy or the exercise of any other power, right or remedy.  The powers, rights and remedies under this Agreement are in addition to any powers, rights and remedies under law.

 

Section 7.8.                                 Severability.  If a part of this Agreement is held invalid, illegal or unenforceable, then it will be deemed severable from the remaining Agreement and will not affect the validity, legality or enforceability of the remaining Agreement.

 

Section 7.9.                                 Headings.  The headings in this Agreement are included for convenience and will not affect the meaning or interpretation of this Agreement.

 

Section 7.10.                          Counterparts.  This Agreement may be executed in multiple counterparts. Each counterpart will be an original and all counterparts will together be one document.

 

[Remainder of Page Left Blank]

 

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EXECUTED BY:

 

	
 
    	
FORD   CREDIT AUTO OWNER TRUST 2015-C,
    
	
 
    	
 
    	
as   Issuer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
U.S.   BANK TRUST NATIONAL ASSOCIATION, not in its individual capacity, but solely   as Owner Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles Gallagher
    
	
 
    	
 
    	
Name:
    	
Charles   Gallagher
    
	
 
    	
 
    	
Title:
    	
Asst. Vice President
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
FORD   MOTOR CREDIT COMPANY LLC,
    
	
 
    	
 
    	
as   Servicer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Samuel P. Smith
    
	
 
    	
 
    	
Name:
    	
Samuel   P. Smith
    
	
 
    	
 
    	
Title:
    	
Assistant   Treasurer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
CLAYTON   FIXED INCOME SERVICES LLC,
    
	
 
    	
 
    	
as   Asset Representations Reviewer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Peter Kushel
    
	
 
    	
 
    	
Name:
    	
Peter   Kushel
    
	
 
    	
 
    	
Title:
    	
Chief Financial Officer
    

 

[Signature Page to Asset Representations Review Agreement]

 

 

Schedule A

 

Review Materials

 

1.                                      A copy of the Receivable File that includes the following documents, if applicable:

 

(a)                                 The retail installment sale contract or similar document that evidences the Receivable (the “Contract”)

 

(b)                                 The following documents related to the Contract (collectively, the “Amendments”):

 

(i)                                     Any correction notices to the Contract

 

(ii)                                  Any modification agreements completed by the parties to the Contract

 

(c)                                  The certificate of title, motor vehicle lien statement, application for title, application for registration for motor vehicle, certificate of origin or manufacturer statement of origin for a vehicle, or other evidence (including eAtlas reporting for electronic titling states) showing the security interest in the Financed Vehicle (collectively, the “Title Documents”)

 

(d)                                 Any ancillary documents for credit insurance, service contracts or other products and services (collectively, the “Ancillary Documents”)

 

(e)                                  Military orders

 

(f)                                   The credit application

 

(g)                                  State specific documents related to the Contract

 

2.                                      Copies of applicable Ford Credit procedures, as of the date of the Contract, including:

 

(a)                                 Ford Credit’s procedure listing approved contract forms as of the date of the Contract (the “List of Approved Contract Forms”)

 

(b)                                 Ford Credit’s procedure listing acceptable name variations of Ford Credit and Lincoln Automotive Financial Services (the “List of Acceptable Name Variations”)

 

(c)                                  Ford Credit’s procedure listing approved providers and form numbers for service contracts and other products (the “List of Approved Products”)

 

3.                                      A copy of the Agreement to Terms of Assignment (the “Dealer Assignment”)

 

4.                                      Applicable screen prints from Ford Credit’s receivables systems

 

SA-1

 

Schedule B

 

Representations and Warranties and Tests

 

	
Representation   and Warranty
   (Section references are to the 
   Receivables Purchase Agreement)
    	
 
    	
Tests
    
	
Section 3.3(a) -   Origination.  The   Receivable was originated by a Dealer in the United States under United   States law for the retail sale of a Financed Vehicle in the ordinary course   of the Dealer’s business.  The   Receivable was signed by the Dealer and the Obligor.  The Receivable was purchased by the Sponsor   from the Dealer and validly assigned by the Dealer to the Sponsor.
    	
 
    	
Test   3.3(a) — 1: Dealer Address

 

Observe the address of   the Dealer on the Contract and confirm it is in the United States.

 

Test   3.3(a) — 2: Contract Signed

 

Observe the Contract   and confirm signatures are present for the Dealer and the Obligor.

 

Test   3.3(a) — 3: Contract Form

 

Observe the Contract   and confirm it was completed electronically or, if completed on paper,   confirm the form number and revision date on the Contract are on the List of   Approved Contract Forms.

 

Test   3.3(a) — 4: Valid Assignment

 

Observe the Contract   and confirm it was completed electronically or, if completed on paper,   confirm the Dealer’s signature is present as assignor either on the Contract   or on a separate form.

 

Test 3.3(a) —   5:  Dealer Confirmation

 

Observe the Contract   and confirm it was completed electronically or, if completed on paper,   confirm the Dealer name on the Contract matches the Dealer name on the Dealer   Assignment.
    
	
 
    	
 
    	
 
    
	
Section 3.3(b) -   Simple Interest.  The   Receivable provides for level monthly payments in United States dollars that   fully amortize the Amount Financed by its stated maturity and yield interest   at the Annual Percentage Rate.  The   Receivable applies a simple interest method of allocating a fixed payment to   principal and interest.
    	
 
    	
Test   3.3(b) — 1: Level Monthly Payments

 

Observe the Contract,   taking into account any Amendments, and confirm it reflects a level monthly   payment except that the final payment may be different by up to the amount of   the prior level monthly payments.

 

Test 3.3(b) — 2:   U.S. Dollars

 

Observe the Contract   and confirm it is payable in U.S. dollars.

 

Test   3.3(b) — 3: Amortization

 

Observe the information   in the “Federal Truth-In-Lending Disclosures” box of the Contract, taking   into account any Amendments.  Calculate   the sum of the “Finance Charge” and the “Amount Financed.”  Using the “Number of Payments” and the   “Amount of Payments” from the payment schedule section of the “Federal Truth-In-Lending   Disclosures” box, multiply the “Number of Payments” by the “Amount of   Payments.” Confirm the product matches the sum calculated above.

 

Test   3.3(b) — 4: Simple Interest

 

Observe the Contract   and confirm it is a simple finance charge contract. 
    
	
 
    	
 
    	
 
    
	
Section 3.3(c) -   Prepayment.  The   Receivable allows for prepayment without penalty.
    	
 
    	
Test   3.3(c) — 1: Prepayment without Penalty

 

Observe the Contract   and confirm it provides a prepayment disclosure that does not require a   penalty.  
    

 

SB-1

 

	
Representation   and Warranty
   (Section references are to the 
   Receivables Purchase Agreement)
    	
 
    	
Tests
    
	
Section 3.3(d) -   No Government Obligors.    The Receivable is not an obligation of the United States or a State or   local government or of an agency, department, instrumentality or political   subdivision of the United States or a State or local government.
    	
 
    	
Test   3.3(d) — 1: No Government Obligor

 

Observe the Contract,   taking into account any Amendments, and confirm the Financed Vehicle was   purchased for personal use or, if not, confirm the Obligor is not a   government Obligor. For purposes of this Test, if the name of the Obligor   contains a word indicating it may be a government Obligor, use online sources   to confirm the Obligor is a commercial business and not a government   Obligor.  
    
	
 
    	
 
    	
 
    
	
Section 3.3(e) -   Insurance.  The   Receivable requires the Obligor to have physical damage Insurance covering   the Financed Vehicle.
    	
 
    	
Test   3.3(e) — 1: Insurance

 

Observe the Contract   and confirm there is an agreement from the Obligor to insure against loss of   or risk to the Financed Vehicle.  
    
	
 
    	
 
    	
 
    
	
Section 3.3(f) -   Compliance with Underwriting Procedures.  The Receivable was underwritten according   to the underwriting procedures in all material respects.
    	
 
    	
Test   3.3(f) — 1:  Contract Form

 

Observe the Contract   and confirm it was completed electronically or, if completed on paper,   confirm the form number and revision date on the Contract are on the List of   Approved Contract Forms.

 

Test   3.3(f) — 2: Financed Vehicle Description

 

Observe the Contract,   taking into account any Amendments, and confirm the description of the   Financed Vehicle, including the vehicle identification number, year, make and   model, new, used or demo and use, matches the vehicle information in Ford   Credit’s receivables systems.

 

Observe each Ancillary   Document, if any, and confirm any information describing the Financed Vehicle   matches the corresponding information in the Contract, taking into account   any Amendments.

 

Test 3.3(f) — 3:   Net Trade Information

 

Observe the Contract,   taking into account any Amendments, and confirm there was not a trade-in   vehicle or, if so, confirm the net trade-in amount on the Contract equals the   difference between the value of the trade-in vehicle and the amount the   Obligor owes for the trade-in.

 

Test 3.3(f) — 4:   Fees and Additional Products

 

Observe the fees   included in the “Itemization of Amount Financed” section of the Contract,   taking into account any Amendments, and confirm the fees do not exceed the   limits stated in the applicable Ford Credit procedure.

 

Observe the amount for   each additional product, if any, financed in the “Itemization of Amount   Financed” section of the Contract, taking into account any Amendments, and   confirm each amount does not exceed the advance cap amount stated in the   applicable Ford Credit procedure.

 

Test 3.3(f) — 5:   Contract Signed

 

Observe the Contract   and confirm signatures are present for the Dealer and Obligor.

 

Test 3.3(f) — 6:   Insurance Signatures

 

Observe the insurance   section of the Contract and confirm that no insurance products were purchased   or, if so, confirm signatures are present for the Obligor in the insurance   section of the Contract.
    

 

SB-2

 

	
Representation   and Warranty
   (Section references are to the 
   Receivables Purchase Agreement)
    	
 
    	
Tests
    
	
 
    	
 
    	
Test 3.3(f) — 7:   Dealer Confirmation

 

Observe the Contract   and confirm it was completed electronically or, if completed on paper,   confirm the Dealer name on the Contract matches the Dealer name on the Dealer   Assignment.

 

Test 3.3(f) — 8:   Non-Financial Requirements Documentation

 

Observe the   non-financial requirements in Ford Credit’s receivables systems and confirm   that no additional document requirements were identified or, if so, confirm   all required documents are in the Receivable File.

 

Test 3.3(f) — 9:   Notice to Co-Signer

 

Observe the Contract   and confirm it does not have a co-buyer or, if so, confirm a “Notice to   Cosigner” document is not required using the applicable Ford Credit procedure   or, if so, confirm a signed and dated “Notice to Cosigner” document is in the   Receivable File.

 

Test 3.3(f) — 10:   Correction Notice/Modification Agreement

 

Confirm Ford Credit’s   receivables systems did not indicate instructions to send a correction notice   and/or complete a modification agreement for the Receivable or, if so,   confirm a correction notice and/or modification agreement is/are present in   the Receivable File and is/are accurate and complete as required by the   applicable Ford Credit procedure.

 

Test 3.3(f) — 11:   Rate Cap Confirmation

 

Observe the APR on the   Contract, taking into account any Amendments, and confirm it does not exceed   the rate indicated in Ford Credit’s receivables systems by more than the rate   cap allowed in the applicable Ford Credit procedure.  
    
	
 
    	
 
    	
 
    
	
Section 3.3(g) -   Valid Assignment.    The Receivable was originated in, and is subject to the laws of, a jurisdiction   which permits the sale and assignment of the Receivable.  The terms of the Receivable do not limit   the right of the owner of the Receivable to sell the Receivable.
    	
 
    	
Test 3.3(g) — 1:   Contract Form

 

Observe the Contract   and confirm it was completed electronically or, if completed on paper,   confirm the form number and revision date on the Contract are on the List of   Approved Contract Forms.  
    
	
 
    	
 
    	
 
    
	
Section 3.3(h) -   Compliance with Law.    At the time it was originated, the Receivable complied in all material   respects with all requirements of law in effect at the time.
    	
 
    	
Test 3.3(h) — 1:   Contract Form

 

Observe the Contract   and confirm it was completed electronically or, if completed on paper,   confirm the form number and revision date are on the List of Approved   Contract Forms.

 

Test 3.3(h) — 2:   Annual Percentage Rate

 

Observe the APR   disclosed on the Contract, taking into account any Amendments.  Compute the APR, using the “Amount   Financed,” “Number of Payments,” date of the Contract, first payment due date,   and “Amount of Payments” from the Contract, taking into account any   Amendments.  Compare the computed APR   to the APR disclosed and confirm the difference between them is within the   legal tolerance of 0.125 percent.

 

Test 3.3(h) — 3:   Legibility of Contract

 

Observe the “Federal   Truth-In-Lending Disclosures” box of the Contract, 
    

 

SB-3

 

	
Representation   and Warranty
   (Section references are to the 
   Receivables Purchase Agreement)
    	
 
    	
Tests
    
	
 
    	
 
    	
taking into account any   Amendments, and confirm all printed sections are legible and aligned on the   correct line.

 

Test   3.3(h) — 4: Additional Product Provider and Form

 

Observe the provider   name, form number and revision date on each Ancillary Document, if any, and   confirm they are on the List of Approved Products.

 

Test 3.3(h) — 5:   Amount Financed

 

Observe the   “Itemization of Amount Financed” section of the Contract, taking into account   any Amendments, and confirm each line with a “$”, is completed.

 

Observe the “Amount   Financed” in the “Federal Truth-in-Lending Disclosures” box of the Contract,   taking into account any Amendments.    Compute the “Amount Financed” using the values in the “Itemization of   Amount Financed” section.  Compare the computed   amount to the “Amount Financed” disclosed and confirm they match.

 

Test 3.3(h) — 6:   Total of Payments

 

Observe the “Total of   Payments” in the “Federal Truth-in-Lending Disclosures” box of the Contract,   taking into account any Amendments.    Compute the sum of the “Amount Financed” and the “Finance Charge” in   the “Federal Truth-in- Lending Disclosures” box of the Contract, taking into   account any Amendments.  Compare the   computed amount to the “Total of Payments” disclosed on the Contract, taking   into account any Amendments, and confirm they match.

 

Test 3.3(h) — 7:   Payment Schedule

 

Observe the first   scheduled due date in the payment schedule section of the “Federal   Truth-In-Lending Disclosure” box of the Contract, taking into account any   Amendments, and confirm it does not create a discrepancy under the applicable   Ford Credit procedure.

 

Observe the “Total of   Payments” in the “Federal Truth-in-Lending Disclosures” box of the Contract,   taking into account any Amendments.    Compute the “Total of Payments” using the “Number of Payments” and the   “Amount of Payments” in the payment schedule section of the “Federal   Truth-In-Lending Disclosures” box.    Compare the computed amount to the amount in the “Total of Payments” section   and confirm they match.

 

Test 3.3(h) — 8:   Total Sale Price

 

Observe the “Total Sale   Price” section in the “Federal Truth-In-Lending Disclosures” box of the   Contract taking into account any Amendments.    Compute the “Total Sale Price” using the “Total of Payments” and the   amount of any down payment.  Compare   the computed amount to the amount in the “Total Sale Price” section and   confirm they match

 

Test 3.3(h) — 9:   Equal Credit Opportunity Act - Origination

 

Observe the   non-financial requirements for the Receivable in Ford Credit’s receivables   systems and confirm any comments do not conflict with the prohibited   practices described in the applicable Ford Credit procedure.

 

Test 3.3(h) — 10:   State Disclosures; Contract Form

 

Observe the Contract   and confirm it was completed electronically or, if 
    

 

SB-4

 

	
Representation   and Warranty
   (Section references are to the 
   Receivables Purchase Agreement)
    	
 
    	
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completed on paper,   confirm the form number and revision date on the Contract are on the List of   Approved Contract Forms.

 

Test 3.3(h) — 11:   State Disclosures; Contract Complete

 

Observe the Contract,   taking into account any Amendments, and confirm all lines on the Contract are   completed or properly left blank.

 

Test 3.3(h) — 12:   State Specific Underwriting Requirements

 

Observe the state in   the address of the Dealer on the Contract. If the state is listed below,   perform the tests for the specific state.

 

California

 

California -1 — Used   Vehicle Exception

 

Observe the Contract   and confirm the Financed Vehicle is not identified as “used” or, if so,   confirm Ford Credit’s receivables systems does not indicate the Financed   Vehicle is “new”, or, if the Financed Vehicle is identified as “used” on the   Contract and “new” in Ford Credit’s receivables systems, confirm a completed   and signed “California Used Vehicle Exception” form is in the Receivable   File.

 

California — 2 —   Cancellation Option

 

Observe the Contract   and confirm the Financed Vehicle is not identified as “used” with a cash   price of less than $40,000 and was purchased for personal use or, if so,   confirm a completed and signed contract cancellation option agreement is in   the Receivable File.

 

California — 3 -   Translation

 

Confirm there is no   receipt of translation form or a translated Contract in the Receivable File   or, if so, confirm the receipt of translation form is signed or the   translated Contract is completed.

 

Illinois

 

Confirm there is no   translation acknowledgment form in the Receivable File or, if so, confirm it   is completed and signed.

 

Kansas

 

Observe the Contract   and confirm that no credit insurance was purchased or, if so, confirm the   “Credit Insurance Premium Refund Notice” is in the Receivable File and the   date of the form is within ten days of the Contract purchase date.

 

Louisiana

 

Observe the Contract   and confirm that no GAP product was purchased or, if so, confirm a completed   and signed “GAP Coverage Disclosure Form” is in the Receivable File.

 

Massachusetts

 

Observe the Contract   and confirm that no GAP product was purchased or, if so, confirm the APR on   the Contract, taking into account any Amendments, does not exceed 15%, or if   so, confirm a “Massachusetts GAP Cancellation Worksheet” is in the Receivable   File and confirm the recalculated percentage on the form does not exceed 21%.
    

 

SB-5

 

	
Representation   and Warranty
   (Section references are to the 
   Receivables Purchase Agreement)
    	
 
    	
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Minnesota

 

Confirm a completed   “Purchase/Buyer’s Order” is in the Receivable File.

 

New York

 

Confirm there is no   translation acknowledgment form in the Receivable File or, if so, confirm the   form is completed and signed.

 

Ohio

 

Observe the Contract   and confirm credit insurance was not purchased or, if so, confirm a completed   and signed “Notice of Optional Credit Insurance” form is in the Receivable   File.

 

Pennsylvania

 

Confirm a signed   “Disclosure to Applicant Buyer” form is in the Receivable File.

 

Vermont

 

Confirm a signed “State   of Vermont Disclosure Form” is in the Receivable File and the dollar amounts   on the form match the corresponding dollar amounts on the Contract.  
    
	
 
    	
 
    	
 
    
	
Section 3.3(i) -   Binding Obligation.    The Receivable is on a form contract that includes rights and remedies   allowing the holder to enforce the obligation and realize on the Financed   Vehicle and represents the legal, valid and binding payment obligation of the   Obligor, enforceable in all material respects by the holder of the Receivable,   except as may be limited by bankruptcy, insolvency, reorganization or other   laws relating to the enforcement of creditors’ rights or by general equitable   principles and consumer protection laws.
    	
 
    	
Test 3.3(i) — 1:   Contract Form

 

Observe the Contract   and confirm it was completed electronically or, if completed on paper,   confirm the form number and revision date on the Contract are on the List of   Approved Contract Forms. 
    
	
 
    	
 
    	
 
    
	
Section 3.3(j) -   Security Interest in Financed Vehicle.  The Sponsor has, or the Servicer has started   procedures that will result in the Sponsor having, a perfected, first   priority security interest in the Financed Vehicle, which security interest   was validly created and is assignable by the Sponsor to the Depositor.
    	
 
    	
Test 3.3(j) — 1:   Security Interest in Financed Vehicle

 

Observe the Title   Documents and confirm they show either Ford Credit or Lincoln Automotive   Financial Services, using a name included in the List of Acceptable Name   Variations, as the first lienholder.

 

Observe the Obligor   name(s) on the Contract, taking into account any Amendments, and confirm   it/they match(es) the name(s) on the Title Documents.

 

Observe the vehicle   identification number on the Contract, taking into account any Amendments,   and confirm it matches the vehicle identification number on the Title   Documents.  
    
	
 
    	
 
    	
 
    
	
Section 3.3(k) —   Good Title to Receivable.    Immediately before the sale and assignment under this Agreement, the   Sponsor has good and marketable title to the Receivable free and clear of any   Lien, other than Permitted Liens, and, immediately after the sale and   assignment under this Agreement, the Depositor will have 
    	
 
    	
Test 3.3(k) — 1:   Valid Assignment

 

Observe the Contract   and confirm it was completed electronically or, if completed on paper,   confirm the Dealer’s signature is present as assignor either on the Contract   or on a separate form.

 

Test 3.3(k) — 2:   System Marking

 

Observe the Receivable   in Ford Credit’s receivables systems as of the end of 
    

 

SB-6

 

	
Representation   and Warranty
   (Section references are to the 
   Receivables Purchase Agreement)
    	
 
    	
Tests
    
	
good and marketable   title to the Receivable, free and clear of any Lien, other than Permitted   Liens.
    	
 
    	
the month in which the   sale and assignment under the Agreement takes place and confirm that the   Receivable is marked as sold and the pool number identified matches the pool   number for the transaction related to the Agreement.  
    
	
 
    	
 
    	
 
    
	
Section 3.3(l) -   Chattel Paper.  The   Receivable is either “tangible chattel paper” or “electronic chattel paper”   within the meaning of the applicable UCC and there is only one original   authenticated copy of each Receivable.
    	
 
    	
Test 3.3(l) — 1:   Contract Signed

 

Observe the Contract   and confirm signatures are present for the Dealer and Obligor.

 

Test 3.3(l) — 2:   Contract Form

 

Observe the Contract   and confirm it was completed electronically or, if completed on paper,   confirm the form number and revision date on the Contract are on the List of   Approved Contract Forms.

 

Test 3.3(l) — 3:   One Original

 

Observe the Contract   and confirm it was completed electronically or, if completed on paper,   confirm it states “original” above the ply description line. 
    
	
 
    	
 
    	
 
    
	
Section 3.3(m) -   Servicing.  The   Receivable was serviced in compliance with law and the Servicing Procedures   in all material respects from the time it was originated to the Cutoff Date.
    	
 
    	
Test 3.3(m) — 1:   Payment Application

 

Observe the APR on the   Contract, taking into account any Amendments, and confirm it matches the APR   in Ford Credit’s receivables systems.

 

Compute the number of   days from the date of the Contract, taking into account any Amendments, to   the date the first payment was applied on the Contract and confirm the amount   to be applied to interest and principal was calculated correctly at the APR   indicated in Ford Credit’s receivables systems.

 

Test 3.3(m) — 2:   Credit Bureau Reporting

 

Observe the number of   days the Receivable was past due as indicated in Ford Credit’s receivables   systems for each month preceding the Cutoff Date and confirm it matches the   information reported to the credit bureaus as indicated in Ford Credit’s   receivables systems.

 

Test 3.3(m) — 3:   Obligor Complaints

 

Confirm that   “Complaints/Feedback” is not indicated for the Receivable in Ford Credit’s   receivables systems as of the Cutoff Date or, if so, confirm that the   documentation in Ford Credit’s receivables systems related to the complaint   does not conflict with the applicable Ford Credit procedures.

 

Test 3.3(m) — 4:   Equal Credit Opportunity Act - Servicing

 

Observe the customer   service notes for the Receivable in Ford Credit’s receivables systems and   confirm any comments do not conflict with the prohibited practices described   in the applicable Ford Credit procedure

 

Test 3.3(m) — 5:   Servicemembers Civil Relief Act

 

Confirm that   Servicemembers Civil Relief Act is not indicated for the Receivable in Ford   Credit’s receivables systems as of the Cutoff Date or, if so and military   orders are in the Receivable File, confirm the APR indicated in Ford Credit’s   receivables systems is less than or equal to 6%.  
    
	
 
    	
 
    	
 
    
	
Section 3.3(n) -   No Bankruptcy.  As of   the Cutoff Date, the Sponsor’s receivables systems do not indicate that the   Obligor on the Receivable is a debtor in a bankruptcy 
    	
 
    	
Test 3.3(n) — 1:   No Bankruptcy

 

Observe the “Bankrupt”   field for the Receivable in Ford Credit’s receivables systems as of the   Cutoff Date and confirm it is blank.  
    

 

SB-7

 

	
Representation   and Warranty
   (Section references are to the 
   Receivables Purchase Agreement)
    	
 
    	
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proceeding.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Section 3.3(o) -   Receivable in Force.    As of the Cutoff Date, neither the Sponsor’s receivables systems nor   the Receivable File indicate that the Receivable was satisfied, subordinated   or rescinded, or that the Financed Vehicle was released from the Lien created   under the Receivable.
    	
 
    	
Test 3.3(o) — 1:   Receivable in Force

 

Observe the Receivable   in Ford Credit’s receivables systems, and confirm it was an active account on   the Cutoff Date.  
    
	
 
    	
 
    	
 
    
	
Section 3.3(p) -   No Amendments or Modifications.  No material term of the Receivable has been   affirmatively amended or modified, except amendments and modifications   indicated in the Sponsor’s receivables systems or in the Receivable File.
    	
 
    	
Test 3.3(p) — 1:   No Amendments

 

Confirm Ford Credit’s   receivables systems does not indicate a “Substitution Agreement” and/or   “Transfer of Equity” account message for the Receivable or, if so, confirm a   substitution agreement and/or transfer agreement is in the Receivable File. 
    
	
 
    	
 
    	
 
    
	
Section 3.3(q) -   No Extensions.  As of   the Cutoff Date, the Receivable was not amended to extend the due date for   any payment other than a change of the monthly due date.
    	
 
    	
Test 3.3(q) — 1:   No Extensions

 

Confirm the Receivable   does not indicate any extension in Ford Credit’s receivables systems as of   the Cutoff Date.
    
	
 
    	
 
    	
 
    
	
Section 3.3(r) -   No Defenses.  There   is no right of rescission, setoff, counterclaim or defense asserted or   threatened against the Receivable indicated in the Sponsor’s receivables   systems or in the Receivable File.
    	
 
    	
Test 3.3(r) — 1:   No Defenses

 

Confirm Ford Credit’s   receivables system does not indicate a “Litigation Pending,” “Attorney   Representation” and/or “Second Lien” account messages for the Receivable or,   if so, confirm the account message(s) were not present as of the Cutoff   Date.  
    
	
 
    	
 
    	
 
    
	
Section 3.3(s) -   No Payment Default.    Except for a payment that is not more than 30 days Delinquent as of   the Cutoff Date, no payment default exists on the Receivable.
    	
 
    	
Test 3.3(s) — 1:   No Payment Default

 

Confirm the Receivable   does not indicate it was more than 30 days Delinquent in Ford Credit’s   receivables systems as of the Cutoff Date.
    
	
 
    	
 
    	
 
    
	
Section 3.3(t) -   Term of Receivable.    The original term of the Receivable is not greater than 72 months counting   the period from the origination date to the first payment date as a single   month.
    	
 
    	
Test 3.3(t) — 1:   Term of Receivable

 

Observe the “Number of   Payments” from the payment schedule section of the “Federal Truth-In-Lending   Disclosures” box of the Contract, taking into account any Amendments, and   confirm the total number of payments is 72 or fewer. 
    
	
 
    	
 
    	
 
    
	
Section 3.3(u) -   Scheduled Payments.    The first scheduled due date on the Receivable is not later than 30   days after the Cutoff Date.
    	
 
    	
Test 3.3(u) — 1:   Scheduled Payments

 

Observe the first   scheduled due date in the payment schedule section of the “Federal   Truth-In-Lending Disclosures” box of the Contract, taking into account any   Amendments, and confirm the first scheduled payment date is prior to the Cutoff   Date or, if not prior, is less than or equal to 30 days after the Cutoff   Date.  
    

 

SB-8ex44.htm

Exhibit 4.4

 

OMNITEK ENGINEERING CORP.

2015 LONG-TERM INCENTIVE PLAN

           OMNITEK ENGINEERING CORP., a California corporation (the “Company”), hereby adopts this 2015 Long-Term Incentive Plan (the “Plan”), effective as of September 11, 2015.

1.           Purposes of the Plan.  The Board has adopted this Plan with the intent, and directs that it be administered as necessary, to attract and retain the best available personnel for positions of substantial responsibility; provide additional incentive to Employees, Directors and Consultants and promote the success of the Company’s business.  Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant.  Stock Purchase Rights and Restricted Stock Units may also be granted under the Plan.

2.           Definitions.  As used herein, the following definitions shall apply:

(a)           “Acquisition” means (a) a dissolution, liquidation or sale of all or substantially all of the assets of the Company; (b) a merger or consolidation in which the Company is not the surviving corporation; or (c) a merger in which the Company is the surviving corporation but the shares of the Company’s common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise.

(b)           “Administrator” means the Board or any of its Committees as shall be administering the Plan in accordance with section 4 of the Plan.

(c)           “Applicable Laws” means the requirements relating to the administration of stock option plans under the corporate laws of the state in which the Company is incorporated, federal and state securities laws, the Code, the regulations and policies of any stock exchange or quotation system on which the Common Stock is listed or quoted, and the Applicable Laws of any foreign country or jurisdiction where Options, Stock Purchase Rights, or Restricted Stock Units are or will be granted under the Plan.

(d)           “Award” means an award of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock or Stock Purchase Rights granted to a Service Provider under this Plan.

(e)           “Award Agreement” means the Option Agreement or other written agreement between the Company and a Service Provider evidencing the terms and conditions of an individual Award.  The Award Agreement shall be subject to the terms and conditions of the Plan.

(f)           “Board” means the Board of Directors of the Company.

(g)           “Cause” shall have the meaning ascribed to it in any written employment or service agreement between the Company (or Subsidiary) and the Service Provider.  If not otherwise defined, “Cause” shall mean (a) a failure by the Service Provider to perform his duties or to comply with any material provision of his employment or service agreement with the Company, where such failure is not cured by the Service Provider within thirty (30) days after receiving written notice from the Company (or Subsidiary) specifying in reasonable detail the nature of the failure, (b) a breach of the Service Provider’s fiduciary duty to the Company (or a Parent or Subsidiary) by reason of receipt of personal profits, (c) conviction of a felony, or (d)

any other willful and gross misconduct committed by the Service Provider affecting the Company (or Subsidiary).

 

  

1

  

 

(h)           “Code” means the Internal Revenue Code of 1986, as amended.

(i)           “Committee” means a committee of Directors appointed by the Board in accordance with section 4 of the Plan.

(j)           “Common Stock” means the common stock of the Company.

(k)           “Company” means Omnitek Engineering Corp., a California corporation.

(l)           “Consultant” means any consultant or adviser if: (i) the consultant or adviser renders bona fide services to the Company (or any Subsidiary); (ii) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and (iii) the consultant or adviser is a natural person who has contracted directly with the Company or any Subsidiary of the Company to render such services.

(m)           “Director” means a member of the Board.

(n)           “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

(o)           “Effective Date” means September 11, 2015.

(p)           “Employee” means any person, including an Officer or Director, who is an employee (as defined in accordance with Section 3401(c) of the Code) of the Company (or any Subsidiary).  An Employee shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Subsidiary, or any successor.  For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract.  Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient, by itself, to constitute “employment” by the Company.

(q)           “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto.  Reference to any particular Exchange Act section shall include any successor section and any regulations or authorities promulgated thereunder.

(r)           “Fair Market Value” of a Share means, as of any date, the fair market value determined consistent with the requirements of Sections 422 and 409A of the Code, as follows:

 

(i)           If the Common Stock is listed on any established stock exchange or a national market system, its Fair Market Value shall be the mean between the highest and lowest quoted selling prices for a share of such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

(ii)           If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for a share of the Common Stock on the last market trading day prior to the day of determination; or

 

  

2

  

 

(iii)           In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator in accordance with Applicable Law.

 

(iv)           “Incentive Stock Option” means an Option (or portion thereof) which qualifies as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder, and which is designated as an Incentive Stock Option by the Administrator.

(s)           “Independent Director” means a Director who is not an Employee of the Company.

(t)           “Inside Director” means a Director who is an Employee.

(u)           “Non-Qualified Stock Option” means an Option (or portion thereof) that is not designated as an Incentive Stock Option by the Administrator, or which is designated as an Incentive Stock Option by the Administrator but fails to qualify as an Incentive Stock Option.

(v)           “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

(w)           “Notice of Grant” means a written or electronic notice evidencing certain terms and conditions of an individual Option, Stock Purchase Right, or Restricted Stock Unit grant.  The Notice of Grant is part of, and subject to the terms of, the Option Agreement or the Restricted Stock Units Agreement as applicable.

(x)           “Officer” means a person who is an executive officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(y)           “Option” means a stock option granted pursuant to the Plan.

(z)           “Option Agreement” means the written agreement between the Company and a Service Provider evidencing the terms and conditions of an individual Option grant.  The Option Agreement shall be subject to the terms and conditions of the Plan.

(aa)           “Option Exchange Program” means a program whereby outstanding Options are surrendered in exchange for Options with a lower exercise price.

(bb)           “Optioned Stock” means the Common Stock subject to an Option or Stock Purchase Right.

(cc)           “Optionee” means the holder of an outstanding Option or Stock Purchase Right granted under the Plan.

(dd)           “Outside Director” means a Director who meets the definition of both a “Non-Employee Director” (as defined in Rule 16b-3 of the Exchange Act) and “Outside Director” (as defined in Section 162(m) of the Code).

 

3

 

(ee)           “Parent” means any corporation, other than the Company, whether now or hereafter existing, in an unbroken chain of corporations ending with the Company if each of the corporations other than the last corporation in the unbroken chain owns equity possessing more than fifty percent (50%) of the total combined voting power of all classes of equity in one of the corporations in such chain.

(ff)           “Plan” means this Omnitek Engineering Corp. 2015 Long Term Incentive Plan as the same may be amended and restated from time to time.

(gg)           “Participant” means a Service Provider to whom the Company has granted a Restricted Stock Unit pursuant to section 17 of the Plan.

(hh)           “Restricted Stock” means Shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights under section 11 of the Plan.

(ii)           “Restricted Stock Purchase Agreement” means a written agreement between the Company and the Optionee evidencing the terms and restrictions applying to stock purchased under a Stock Purchase Right.  The Restricted Stock Purchase Agreement is subject to the terms and conditions of the Plan and the Notice of Grant.

(jj)           “Restricted Stock Unit” means a bookkeeping entry representing a right granted to a Participant pursuant to section 12 of the Plan to receive a share of Common Stock on a date determined in accordance with section 12 of the Plan and the Participant’s Restricted Stock Units Agreement.

(kk)           “Restricted Stock Units Agreement” means a written agreement between the Company and a Participant who is granted Restricted Stock Units under the Plan that contains the terms, conditions and restrictions pertaining to the grant of the Restricted Stock Units.

(ll)           “Rule 16b-3” means Rule 16b-3 of the Exchange Act, as such Section may be amended from time to time, or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

(mm)           “Section 16(b)” means Section 16(b) of the Exchange Act.

(nn)           “Securities Act” means the Securities Act of 1933, as amended, or any successor statute or statutes thereto.  Reference to any particular Securities Act section shall include any successor section.

(oo)           “Service Provider” means an Employee, Director or Consultant.

(pp)           “Share” means a share of Common Stock, as adjusted in accordance with section 16 of the Plan.

(qq)           “Stock Purchase Right” means the right to purchase Common Stock pursuant to section 11 of the Plan, as evidenced by a Notice of Grant.

(rr)           “Subsidiary” means any corporation, whether now or hereafter existing (other than the Company), in an unbroken chain of corporations beginning with the Company if each of the entities other than the last corporation in the unbroken chain owns equity possessing more than fifty percent (50%) of the total combined voting power of all classes of equity in one of the other entities in such chain or any other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. Notwithstanding the forgoing, with respect to grant of a Non-qualified Stock Option, to the extent allowed under Section 409A, Subsidiary may include a corporation designated by the Administrator in which the Company has a significant interest at least equal to twenty percent (20%) of the total combined voting power of all classes of stock in such entity and there is a significant business nexus between the Service Provider and the Company and legitimate business criteria to justify the grant of an Award to such Eligible Person.

 

  

4

  

 

3.           Stock Subject to the Plan.  Subject to the provisions of section 16 of the Plan, the maximum aggregate number of Shares on which Options may be granted and which may be sold on the exercise of such Options and under Restricted Stock Purchase Agreements under the Plan is 2,500,000 Shares.  The Shares may be authorized, but unissued, or reacquired Common Stock.  If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full or is surrendered pursuant to an Option Exchange Program, or if Restricted Stock Units are forfeited, the unpurchased or unissued Shares that were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan, whether upon exercise of an Option or Right, or upon the vesting of Restricted Stock Units, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan.

4.           Administration of the Plan.

(a)           Procedure.

(i)           The Board may designate different Committees to administer the Plan with respect to different groups of Service Providers.

(ii)           To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more “Outside Directors” within the meaning of Section 162(m) of the Code.

(iii)           To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.

(iv)           Other than as provided above, the Plan shall be administered by the Board or a Committee, which Committee shall be constituted to satisfy Applicable Laws.

(b)           Powers of the Administrator.  Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:

(i)           to determine the Fair Market Value pursuant to section 2(r) of the Plan;

(ii)           to select the Service Providers to whom Options, Stock Purchase Rights, and Restricted Stock Units may be granted hereunder;

 

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(iii)           to determine the number of Stock Purchase Rights and Shares of Common Stock to be covered by each Option or Stock Purchase Right granted hereunder;

(iv)           to approve forms of agreement for use under the Plan;

(v)           to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option, Stock Purchase Right, or Restricted Stock Unit granted hereunder.  Such terms and conditions include the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Restricted Stock Unit, Option, or Stock Purchase Right or the Shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

(vi)           to cancel any Option or Stock Purchase Right if the Fair Market Value of the Common Stock covered by such Option or Stock Purchase Right shall have declined since the date the Option or Stock Purchase Right was granted and may issue replacement Options or Stock Purchase Rights with an exercise price equal to the then-current Fair Market Value;

(vii)           to institute an Option Exchange Program;

(viii)           to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;

(ix)           to establish, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to subplans established for the purpose of satisfying applicable foreign laws;

(x)           to modify or amend each Option, Stock Purchase Right, or Restricted Stock Unit (subject to section 18(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan;

(xi)           to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option, Stock Purchase Right, or Restricted Stock Unit previously granted by the Administrator;

(xii)           to correct any defect, supply any omission, or reconcile any inconsistency in the Plan or in any Option or Restricted Stock Units Agreement, in a manner and to the extent it shall deem necessary, all of which determinations and interpretations made by the Administrator shall be conclusive and binding on all Optionees and Participants, any other holders of Options or Restricted Stock Units, and their legal representatives and beneficiaries;

(xiii)           except to the extent prohibited by or impermissible in order to obtain treatment desired by the Administrator under Applicable Law or rule, to allocate or delegate all or any portion of its powers and responsibilities to any one or more of its members or to any person(s) selected by it, subject to revocation or modification by the Administrator of such allocation or delegation; and

 

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(xiv)           to make all other determinations deemed necessary or advisable for administering the Plan.

(c)           Effect of Administrator’s Decision.  The Administrator’s decisions, determinations, and interpretations shall be final and binding on all Optionees and Participants and any other holders of Options, Stock Purchase Rights, or Restricted Stock Units.

5.           Eligibility.  Nonstatutory Stock Options, Stock Purchase Rights, and Restricted Stock Units may be granted to Service Providers.  Incentive Stock Options may be granted only to Employees.

6.           Limitations.

(a)           Designation.  Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.  However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all Plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options.  For purposes of this section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted.  The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

(b)           No Right of Continuing Service or Employment.  Neither the Plan nor any Option, Stock Purchase Right, or Restricted Stock Unit shall confer upon an Optionee or Participant any right with respect to continuing the Optionee’s or Participant’s relationship as a Service Provider with the Company, nor shall they interfere in any way with the existing right of the Optionee, Participant, or the Company to terminate such relationship.

7.           Term of Plan.  Subject to section 22 of the Plan, the Plan shall become effective upon its adoption by the Board.  It shall continue in effect for a term of 10 years from the Effective Date unless terminated earlier under section 18 of the Plan.

8.           Term of Option.  The term of each Option shall be stated in the Option Agreement.  In the case of an Incentive Stock Option, the term shall be 10 years from the date of grant or such shorter term as may be provided in the Option Agreement.  Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five years from the date of grant or such shorter term as may be provided in the Option Agreement.

9.           Option Exercise Price and Consideration.

(a)           Exercise Price.  The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator and specified in the Option Agreement, subject to the following:

(i)           In the case of an Incentive Stock Option:

(1)           granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

 

  

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(2)           granted to any Employee other than an Employee described in subsection 9(a)(i)(1) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(ii)           In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator.  In the case of a Nonstatutory Stock Option intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. In this regard, a stock option granted with an exercise price less than FMV on the date of grant is nonqualified deferred compensation subject to the restrictions of Code Section 409A.

(iii)           In the event of a merger or other corporate transaction, a new Option may be substituted for an outstanding Option, or such outstanding Option may be assumed.

(b)           Waiting Period and Exercise Dates.  At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions that must be satisfied before the Option may be exercised.

(c)           Form of Consideration.  The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment.  Such consideration may consist entirely of:

(i)           cash;

(ii)          check;

(iii)         other Shares, provided Shares acquired from the Company have been owned by the Optionee for more than six months on the date of surrender and have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;

(iv)         consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;

(v)          a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee’s participation in any Company-sponsored deferred compensation program or arrangement;

(vi)         any combination of the foregoing methods of payment; or

(vii)        such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.

In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant as set forth in the Option Agreement.  Notwithstanding the form of consideration determined by the Administrator at the time of grant, the Administrator shall have the authority, in its sole and absolute discretion, to accept other forms of consideration as the method of payment.

 

  

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10.           Exercise of Option.

(a)           Procedure for Exercise; Rights as a Stockholder.  Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement.  Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence.  An Option may not be exercised for a fraction of a Share.  An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised.  Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan.  Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse or in the name of a family trust of which the Optionee is a trustee.  Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option.  The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised; provided that if the Company shall be advised by counsel that certain requirements under the federal, state or foreign securities laws must be met before Shares may be issued under this Plan, the Company shall notify all persons who have been issued Options, and the Company shall have no liability for failure to issue Shares under any exercise of Options because of delay while such requirements are being met or the inability of the Company to comply with such requirements.  No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in section 16 of the Plan.  Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(b)           Termination of Relationship as a Service Provider.  If an Optionee ceases to be a Service Provider, other than upon the Optionee’s death, disability or for cause, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement).  In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for 30 days following the Optionee’s termination.  If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan.  If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(c)           Disability of Optionee.  If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement).  In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for 6 months following the Optionee’s termination.  If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan.  If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

 

  

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(d)           Death of Optionee.  If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee’s estate or by a person who acquires the right to exercise the Option by bequest or inheritance, but only to the extent that the Option is vested on the date of death.  In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for 6 months following the Optionee’s termination.  If, at the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan.  The Option may be exercised by the executor or administrator of the Optionee’s estate or, if none, by the person(s) entitled to exercise the Option under the Optionee’s will or the laws of descent or distribution.  If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(e)    Termination of Relationship as a Service Provider For Cause.    If an Optionee is terminated as a Service Provider For Cause, all Options held by the Optionee shall there upon expire at 5 p.m. Pacific Standard Time on the date of termination.

11.           Stock Purchase Rights.

(a)           Rights to Purchase.  Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan.  After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically, by means of a Notice of Grant, of the terms, conditions and restrictions related to the offer, including the number of Shares that the offeree shall be entitled to purchase, the price to be paid, and the time within which the offeree must accept such offer.  The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator.

(b)           Repurchase Option.  Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser’s service with the Company for any reason (including death or Disability).  The purchase price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the original price paid by the purchaser plus interest at the rate of 10% per year from the date of the original purchase and may be paid by cancellation of any indebtedness of the purchaser to the Company.  The repurchase option shall lapse at a rate determined by the Administrator.

(c)           Other Provisions.  The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion.

(d)           Rights as a Stockholder.  Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a stockholder and shall be a stockholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company.  No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in section 16 of the Plan.

 

  

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12.           Restricted Stock Units.

(a)           Restricted Stock Units Agreement.  Each Restricted Stock Units award pursuant to this section 12 shall be evidenced by a Restricted Stock Units Agreement between the Participant and the Company.  Such award shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan and that the Administrator deems appropriate for inclusion in a Restricted Stock Units Agreement.  The provisions of the various Restricted Stock Units Agreements entered into under the Plan need not be identical.

(b)           Purchase Price.  No monetary payment (other than applicable tax withholding, if any) shall be required as a condition of receiving a Restricted Stock Units award, the consideration for which shall be services actually rendered to the Company, a Parent or Subsidiary, or for its benefit.

(c)           Vesting.  Restricted Stock Units may or may not be made subject to vesting conditions based upon the satisfaction of such requirements, conditions, or restrictions, as shall be established by the Administrator and set forth in the Restricted Stock Units Agreement.

(d)           Voting.  Participant shall have no voting rights with respect to Shares represented by Restricted Stock Units until the date of the issuance of such Shares (as evidenced by the appropriate entry on the books of the Company or of a duly-authorized transfer agent of the Company).

(e)           Effect of Termination of Service.  Unless otherwise provided by the Administrator in the grant of Restricted Stock Units and set forth in the Restricted Stock Units Agreement, if a Participant’s service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or Disability), then the Participant shall forfeit to the Company any Restricted Stock Units that remain subject to vesting conditions as of the date of the Participant’s termination of service.

(f)           Settlement of Restricted Stock Unit Award.  The Company shall issue to the Participant as soon as practicable following the dates the vesting conditions or other requirements, conditions, or restrictions applicable thereto shall be satisfied, and in any event, within two and one-half months after such date, a number of whole Shares equal to the number of whole Restricted Stock Units as set forth in and subject to the Restricted Stock Units Agreement that are no longer subject to vesting conditions, subject to withholding of applicable taxes, if any.

(g)           Restrictions on Transfer of Restricted Stock Units.  Restricted Stock Units shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the participant or the Participant’s beneficiary, except: (i) by will or by the laws of descent and distribution; (ii) to a Participant’s family member who has acquired the Restricted Stock Unit Award through a gift or a transfer for value pursuant to a domestic relations order in settlement of marital property rights or a transfer to an entity in which more that 50% of the voting interests owned by a Participant’s family members or the Participant in exchange for an interest in that entity, all as more particularly provided in the general instructions to Form S-8 or any successor form under the Securities Act of 1933; or (iii) as determined otherwise by the Administrator, in which case such Restricted Stock Unit Award shall contain such additional terms and conditions as the Administrator deems appropriate.

 

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13.           Withholding.  If the grant or exercise of an Option or a Stock Purchase Right pursuant to this Plan or any other event in connection with any such grant or exercise, or the award or vesting of a Restricted Stock Unit, the issuance of the Share represented by such Restricted Stock Unit, or any other event in connection with such award, vesting, or issuance, creates an obligation to withhold income and employment taxes pursuant to the Applicable Laws, such obligation may, at the sole and absolute discretion of the Administrator at the time of the grant of the Option, Stock Purchase Right, or Restricted Stock Unit, and to the extent permitted by the terms of the Option, Stock Purchase Right, or Restricted Stock Unit and the then-governing provisions of the Code and the Exchange Act, be satisfied (a) by the holder of the Option, Stock Purchase Right, or Restricted Stock Unit delivering to the Company an amount of cash equal to such withholding obligation; (b) by the Company withholding from any compensation or other amount owing to the holder of the Option, Stock Purchase Right, or Restricted Stock Unit the amount (in cash, stock or other property as the Company may determine) of the withholding obligation; (c) by the Company withholding Shares of stock subject to the Option, Stock Purchase Right, or Restricted Stock Unit with a Fair Market Value equal to such obligation; or (d) by the holder of the Option, Stock Purchase Right, or Restricted Stock Unit either delivering Shares of stock that have been owned by the holder for more than six months or canceling Options or Restricted Stock Units or other rights to acquire stock from the Company that have been held for more than six months with a Fair Market Value equal to such requirements.  In all events, delivery of Shares of stock issuable on exercise of the Option, on grant of the Stock Purchase Right, or on vesting of the Restricted Stock Unit shall be conditioned upon and subject to the satisfaction or making provision for the satisfaction of the withholding obligation of the Company resulting from the grant or exercise of the Option, grant of the Stock Purchase Right, vesting of the Restricted Stock Unit, or any other event in accordance with the foregoing.  The Company shall be further authorized to take such other action as may be necessary, in the opinion of the Company, to satisfy all obligations for the payment of such taxes.

14.           Nontransferability of Options and Stock Purchase Rights.

(a)           An Option or Stock Purchase Right may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee, all save and except only (i) an Optionee’s family member who has acquired the Option or Stock Purchase Right through a gift or a transfer for value pursuant to a domestic relations order in settlement of marital property rights or a transfer to an entity in which more that 50% of the voting interests owned by an Optionee’s family members or the Optionee in exchange for an interest in that entity, all as more particularly provided in the general instructions to Form S-8 or any successor form under the Securities Act of 1933; or (ii) unless determined otherwise by the Administrator, in which case such Option or Stock Purchase Right shall contain such additional terms and conditions as the Administrator deems appropriate.

(b)           An Incentive Stock Option may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.  An Incentive Stock Option can only be exercised by Optionee.  In the event of the death of Optionee while an eligible employee of the Company or within three months after termination thereof, this Option can be exercised by the executor or personal representative of the estate of Optionee or such other person who has acquired this Option as a bequest or by inheritance from Optionee.

15.           Grants to Directors and Officers.  To the extent the Company has a class of securities registered under Section 12 of the Exchange Act, Options, Stock Purchase Rights, or Restricted Stock Units granted under the Plan to Directors and Officers (as used in Rule 16b-3 promulgated under the Exchange Act or any amendment or successor rule of like tenor) intended to qualify for the exemption from Section 16(b) of the Exchange Act provided in Rule 16b-3 shall, in addition to being subject to the other restrictions and limitations set forth in this Plan, be made as follows:

 

  

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(a)           Requirements for Grant to Officer or Director.  A transaction whereby there is a grant of an Option, Stock Purchase Right, or Restricted Stock Unit pursuant to this Plan must satisfy one of the following:

(i)           The transaction must be approved by the Board or duly authorized Committee composed solely of two or more Outside Directors of the Company.

(ii)          The transaction must be approved or ratified, in compliance with Section 14 of the Exchange Act, by either:  (1) the affirmative vote of the holders of a majority of the securities of the Company present or represented and entitled to vote at a meeting of the stockholders of the Company held in accordance with the Applicable Laws of the state of incorporation of the Company; or (2) if allowed by applicable state law, the written consent of the holders of a majority, or such greater percentage as may be required by Applicable Laws of the state of incorporation of the Company, of the securities of the Company entitled to vote.  If the transaction is ratified by the stockholders, such ratification must occur no later than the date of the next annual meeting of stockholders.

(iii)         The stock acquired must be held by the Officer or Director for a period of six months subsequent to the date of the grant; provided that if the transaction involves a derivative security (as defined in Section 16 of the Exchange Act), this condition shall be satisfied if at least six months elapse from the date of acquisition of the derivative security to the date of disposition of the derivative security (other than on exercise or conversion) or its underlying equity security.

(b)           Approval Required for Disposition of Securities.  Any transaction involving the disposition by the Company of its securities in connection with Options, Stock Purchase Rights, or Restricted Stock Units granted pursuant to this Plan to an Officer or Director shall:

(i)           be approved by the Board or duly authorized Committee composed solely of two or more Outside Directors; or

(ii)          be approved or ratified, in compliance with Section 14 of the Exchange Act, by either:  (1) the affirmative vote of the holders of a majority of the securities of the Company present or represented and entitled to vote at a meeting duly held in accordance with the Applicable Laws of the state of incorporation of the Company; or (2) if allowed by applicable state law, the written consent of the holders of a majority, or such greater percentage as may be required by Applicable Laws of the state of incorporation of the Company, of the securities of the Company entitled to vote; provided that such ratification occurs no later than the date of the next annual meeting of stockholders;

unless the securities so acquired are held by the Officer or Director for six months following the date of such acquisition, provided that this condition shall be satisfied with respect to a derivative security if at least six months elapse from the date of acquisition of the derivative security to the date of disposition of the derivative security (other than upon exercise or conversion) or its underlying equity security.

 

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All of the foregoing restrictions and limitations are based on the governing provisions of the Exchange Act and the rules and regulations promulgated thereunder as of the date of adoption of this Plan.  If, at any time, the governing provisions are amended to permit an Option, Stock Purchase Right, or Restricted Stock Unit to be granted or exercised pursuant to Rule 16b-3 or any amendment or successor rule of like tenor without one or more of the foregoing restrictions or limitations, or the terms of such restrictions or limitations are modified, the Administrator may award Options, Stock Purchase Rights, or Restricted Stock Units to Directors and Officers and may modify outstanding Options, Stock Purchase Rights, or Restricted Stock Units in accordance with such changes, all to the extent that such action by the Administrator does not disqualify the Options, Stock Purchase Rights, or Restricted Stock Units from exemption under the provisions of Rule 16b-3 or any amendment or successor rule of similar tenor.

16.           Adjustments upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

(a)           Changes in Capitalization.  Subject to any required action by the stockholders of the Company, the number of Shares of Common Stock covered by each outstanding Option, Stock Purchase Right, and Restricted Stock Unit, the number of Shares of Common Stock that have been authorized for issuance under the Plan but as to which no Options, Stock Purchase Rights, or Restricted Stock Units have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right or the forfeiture of a Restricted Stock Unit, as well as the price per Share of Common Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued Shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued Shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been effected without receipt of consideration within the meaning of the preceding clause.  Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive.  Except as expressly provided herein, no issuance by the Company of Shares of stock of any class, or securities convertible into Shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares of Common Stock subject to an Option, Stock Purchase Right, or Restricted Stock Unit.

(b)           Dissolution or Liquidation.  In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee or Participant as soon as practicable prior to the effective date of such proposed transaction.  The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until 10 days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable.  In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated.  To the extent an Option or Stock Purchase Right has not been previously exercised, or to which a Restricted Stock Unit has not vested, the Option, Stock Purchase Right, or Restricted Stock Unit will terminate immediately prior to the consummation of such proposed action.

(c)           Merger or Asset Sale.  In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option, Stock Purchase Right, and Restricted Stock Unit shall be assumed or an equivalent Option, right, or Restricted Stock Unit substituted by the successor corporation or a Parent or Subsidiary of the successor corporation.  With respect to Options or Restricted Stock Units granted to an Outside Director pursuant to section 15 that are assumed or substituted for, if following such assumption or substitution the Optionee’s or Participant’s status as a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the Optionee or Participant, then the Optionee shall fully vest in and have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable, and the Participant’s Restricted Stock Units shall fully vest and the Shares shall be issued.

 

  

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In the event that the successor corporation refuses to assume or substitute for the Option, Stock Purchase Right, or Restricted Stock Unit, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable, and the Participant’s Restricted Stock Units shall fully vest and the Shares shall be issued.  If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option or Stock Purchase Right shall be fully vested and exercisable for a period of 15 days from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the expiration of such period.

For the purposes of this subsection, the Option, Stock Purchase Right, or Restricted Stock Unit shall be considered assumed if, following the merger or sale of assets, the Option, right, or Restricted Stock Unit confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right or for each Restricted Stock Unit immediately prior to the merger or sale of assets, the consideration (whether stock, cash or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, or the vesting of the Restricted Stock Unit, for each Restricted Stock Unit or Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in Fair Market Value to the per Share consideration received by holders of Common Stock in the merger or sale of assets.

17.           Date of Grant.  The date of grant of an Option, Stock Purchase Right, or Restricted Stock Unit shall be, for all purposes, the date on which the Administrator makes the determination granting such Option, Stock Purchase Right, or Restricted Stock Unit or such other later date as is determined by the Administrator.  Notice of the determination shall be provided to each Optionee or Participant within a reasonable time after the date of such grant.

18.           Amendment and Termination of the Plan.

(a)           Amendment and Termination.  The Board may at any time amend, alter, suspend or terminate the Plan.

(b)           Stockholder Approval.  The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

(c)           Effect of Amendment or Termination.  No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee or Participant, unless mutually agreed otherwise between the Optionee or Participant and the Administrator, which agreement must be in writing and signed by the Optionee or Participant and the Company.  Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Options or Restricted Stock Units granted under the Plan prior to the date of such termination.

 

  

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19.           Conditions upon Issuance of Shares.

(a)           Legal Compliance.  Shares shall not be issued pursuant to the exercise of an Option or Stock Purchase Right or the vesting of a Restricted Stock Unit unless the exercise of such Option or Stock Purchase Right or the vesting of such Restricted Stock Unit and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b)           Investment Representations.  As a condition to the exercise of an Option or Stock Purchase Right or the issuance of Shares upon vesting of a Restricted Stock Unit, the Company may require the person exercising such Option or Stock Purchase Right or whose Restricted Stock Unit is vesting to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

20.           Inability To Obtain Authority.  The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

21.           Reservation of Shares.  The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

22.           Effective Date of Plan and Stockholder Approval.  The Plan was duly adopted and approved by the Board of Directors on September 15, 2015.  The Plan shall be subject to approval by the stockholders of the Company within 12 months after the date the Plan is adopted.  Such stockholder approval shall be obtained in the manner and to the degree required under Applicable Laws.

23.             Governing Law and Jurisdiction.

(a)           The Plan shall be governed by the laws of the State of California, excluding its conflicts or choice of law rules or principles that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.  The Company and any party or Service Provider receiving any aware hereunder, by the acceptance of such award, hereby consents to the nonexclusive jurisdiction of all state and federal courts having jurisdiction in San Diego County, California, as well as to the jurisdiction of all courts to which an appeal may be taken from such courts, for the purpose of any Proceeding arising out of, or in connection with, the Plan or any of the related agreements or any of the transactions contemplated hereby or thereby.  For purposes of this Article, “Proceeding” includes any threatened, pending, or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing, or any other actual, threatened, or completed proceeding, whether brought by or in the right of any entity or otherwise and whether civil, criminal, administrative, or investigative, in which the Company was, is, or will be involved as a party or otherwise.

 

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(b)           Each Party covenants that it shall not challenge or set aside any decision, award, or judgment obtained in accordance with the provisions hereof.

(c)           Each of the Parties hereto hereby expressly waives any and all objections it may have to venue, including the inconvenience of such forum, in any of such courts.  In addition, each of the Parties consents to the service of process by personal service or any manner in which notices may be delivered hereunder in accordance with Section 23.

24.           Privileges of Stock Ownership.

(a)           Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a shareholder and will have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock.

(b)           Financial Statements. Pursuant to regulation 260.140.46 of the Rules of the California Corporations Commissioner, the Company will provide financial statements to each California Participant  prior to such Participant's purchase of Shares under this Plan, and to each Participant annually during the period such Participant has Awards outstanding; provided, however, the Company will not be required to provide such financial statements to Participants whose services in connection with the Company assure them access to equivalent information.

The undersigned, the duly constituted and elected President and Secretary of Omnitek Engineering Corp., hereby certify that in accordance with the requirements of law and the Company’s articles of incorporation and bylaws, the foregoing 2011 Long-Term Incentive Plan was duly adopted and approved by the Board of Directors effective September 11, 2015.

 

	 	 	
/s/ Werner Funk

	 	 	
By: Werner Funk

Its: President and Secretary

 

 

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APPENDIX A

 

TO

OMNITEK ENGINEERING CORP.

2011 LONG-TERM INCENTIVE PLAN

 

(for California residents only)

This Appendix A to the Omnitek Engineering Corp., 2011 Long-Term Incentive Plan shall apply only to Optionees who are residents of the State of California and who are receiving an Option or Stock Purchase Right under the Plan.  Capitalized terms contained herein shall have the same meanings given to them in the Plan, unless otherwise provided by this Appendix A.  Notwithstanding any provisions contained in the Plan to the contrary and to the extent required by Applicable Laws, the following terms shall apply to all Options and Stock Purchase Rights granted to residents of the State of California, until such time as the Administrator amends this Appendix A or the Administrator otherwise provides.

 

B.      Nonstatutory Stock Options granted to a person who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, shall have an exercise price not less than one hundred and ten percent (110%) of the Fair Market Value per Share on the date of grant.  Nonstatutory Stock Options granted to any other person shall have an exercise price that is not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.  Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction.

 

C.      The term of each Option shall be stated in the Option Agreement, provided, however, that the term shall be no more than ten (10) years from the date of grant thereof.  The term of each Restricted Stock Purchase Agreement shall be no more than ten (10) years from the date the agreement is entered into.

 

D.      Unless determined otherwise by the Administrator, Options or Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or the laws of descent and distribution, and may be exercised during the lifetime of the Optionee, only by the Optionee.  If the Administrator in its sole discretion makes an Option or Stock Purchase Right transferable, such Option or Stock Purchase Right may only be transferred (i) by will, (ii) by the laws of descent and distribution, or (iii) as permitted by Rule 701 of the Securities Act of 1933, as amended.

 

E.      Except in the case of Options granted to officers of the Company, Directors and Consultants, Options shall become exercisable at a rate of no less than twenty percent (20%) per year over five (5) years from the date the Options are granted.

 

F.      If an Optionee ceases to be a Service Provider, such Optionee may exercise his or her Option within thirty (30) days of termination, or such longer period of time as specified in the Option Agreement, to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement).

 

G.      If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, Optionee may exercise his or her Option within six (6) months of termination, or such longer period of time as specified in the Option Agreement, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement).

 

  

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H.      If an Optionee dies while a Service Provider, the Option may be exercised within six (6) months following the Optionee’s death, or such longer period of time as specified in the Option Agreement, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement) by the Optionee’s designated beneficiary, personal representative, or by the person(s) to whom the Option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution.

 

I.      The terms of any Stock Purchase Rights offered under this Appendix A shall comply in all respects with Section 260.140.42 of Title 10 of the California Code of Regulations including, without limitation, that except with respect to Shares purchased by officers of the Company, Directors and Consultants, the repurchase option shall in no case lapse at a rate of less than twenty percent (20%) per year over five (5) years from the date of purchase.

 

J.      No Option or Stock Purchase Right shall be granted to a resident of California more than ten (10) years after the earlier of the date of adoption of the Plan or the date the Plan is approved by the stockholders.

 

K.      The Company shall provide to each Optionee and to each individual who acquires Shares under the Plan, not less frequently than annually during the period such Optionee has one or more Options or Stock Purchase Rights outstanding, and, in the case of an individual who acquires Shares pursuant to the Plan, during the period such individual owns such Shares, copies of annual financial statements.  The Company shall not be required to provide such statements to key Employees whose duties in connection with the Company assure their access to equivalent information.

 

L.      In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, may (in its sole discretion) adjust the number and class of shares of common stock that may be delivered under the Plan and/or the number, class, and price of shares covered by each outstanding Option; provided, however, that the Administrator shall make such adjustments to the extent required by Section 25102(o) of the California Corporations Code.

 

M.      This Appendix A shall be deemed to be part of the Plan and the Administrator shall have the authority to amend this Appendix A in accordance with Section 18 of the Plan.

 

2

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