Document:

Exhibit 10.25

 

SEVERANCE AGREEMENT

 

THIS SEVERANCE AGREEMENT (this “Agreement”) is entered into as of the 17th day of April, 2013, by and between 99¢ ONLY STORES, a California corporation (the “Company”), and Michael Kvitko, (the “Executive”).

 

W I T N E S S E T H

 

WHEREAS, the Executive currently serves as a key employee of the Company and the Executive’s services and knowledge are valuable to the Company in connection with the management of one or more of the Company’s principal operating functions, departments, divisions or subsidiaries; and

 

WHEREAS, the Board (as defined below) has determined that it is in the best interests of the Company to encourage the Executive’s continued services and to ensure the Executive’s continued dedication by providing specified severance benefits in the event the Executive’s employment is terminated by the Company without Cause or the Executive resigns for Good Reason (each as defined below) as set forth herein; and

 

WHEREAS, to encourage the Executive’s full attention and dedication to the Company, the Board has authorized the Company to enter into this Agreement.

 

NOW, THEREFORE, the Company and the Executive hereby agree as follows:

 

1.                                      Definitions.

 

1.1                               “Board” means the Board of Directors of Number Holdings, Inc.

 

1.2                               “Cause” has the meaning given in the Number Holdings, Inc., 2012 Stock Incentive Plan.

 

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

 

1.4                               “Date of Termination” means the effective date on which the Executive’s employment by the Company terminates.

 

1.5                               “Disability” has the meaning given in the Number Holdings, Inc., 2012 Stock Incentive Plan.

 

1.6                               “Good Reason” means the occurrence of any of the following events without the Executive’s consent:

 

a.              any reduction in annual base salary, other than a one-time reduction not exceeding ten percent that is imposed simultaneously on all executive officers of the Company; or

 

b.              a material diminution in the Executive’s authority, duties or responsibilities or a change in reporting relationship to anyone other than the Chief Executive Officer;

 

 

provided that, the occurrence of an event described in (a) or (b) above only shall constitute Good Reason if (i) the Executive provides the Company with written notice within 90 days following the occurrence of the event allegedly constituting Good Reason (the “Good Reason Notice”); (ii) the Company fails to cure such event within 30 days after receiving the Good Reason Notice; and (iii) the Executive resigns within 60 days following the delivery of such Good Reason Notice.

 

1.7                               “Nonqualifying Termination” means any termination of the Executive’s employment with the Company and all its subsidiaries that is not a Qualifying Termination, including a resignation or termination of employment by the Executive without Good Reason, a termination of employment on account of Executive’s Disability or death or a termination of employment by the Company for Cause.

 

1.8                               “Qualifying Termination” means (a) the involuntary termination of the Executive’s employment with the Company and all its subsidiaries by the Company without Cause or (b) the Executive’s resignation for Good Reason.

 

2.                                      Payments Upon Qualifying Termination of Employment.

 

2.1                               Subject to the subsequent provisions of this Section 2, if the employment of the Executive shall terminate by reason of a Qualifying Termination, the Executive shall be entitled receive continuation of his then-current base salary (but not taking into account any reduction in base salary that serves as the basis for a termination for Good Reason) for a period of 18 months following the Date of Termination (the “Severance Period”), payable in accordance with the Company’s regular payroll schedule and subject to applicable withholding (the “Severance”).

 

2.2                               Payment of the Severance shall commence on the first regularly-scheduled payroll date following the 30th day after the Date of Termination, provided that the Executive has executed a general release of claims against the Company and its affiliates in a form acceptable to the Company (the “Release”), and any revocation period applicable to the Release has expired, on or before such 30th day.  Any portion of the Severance whose payment is delayed on account of the immediately preceding sentence shall be payable as part of the first installment of the Severance.

 

2.3                               If, for any reason, the Executive is entitled to or receives any other severance, separation, notice or termination payments on account of the termination of Executive’s employment with the Company or any affiliate (including any payments required to be paid to the Executive by the Company under the Worker Adjustment and Retraining Notification Act or any similar state law), the Severance will be reduced by the amount of such other payments paid or payable to the Executive.

 

2.4                               The Executive shall notify the Company in writing within five business days after commencing any other employment or service during the Severance Period, which notice shall include the amount of compensation with respect thereto.  The Severance shall be reduced by all compensation earned by the Executive as a result of employment or service during the Severance Period.

 

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2.5                               Payment of the Severance is conditioned upon the Executive’s execution of and continued compliance with the Fair Competition Agreement attached as Exhibit A.

 

3.                                      No Payments Upon Nonqualifying Termination of Employment.  If the employment of the Executive shall terminate by reason of a Nonqualifying Termination, no payments or benefits shall be provided to the Executive hereunder.

 

4.                                      No Lawsuits.

 

4.1                               The Executive promises not to file a lawsuit, administrative complaint, or charge of any kind with any court, governmental or administrative agency or arbitrator against the Company or its officers, directors, agents or employees, asserting any claims that are released in the Release.

 

4.2                               The Executive represents and agrees that, prior to signing this Agreement, he has not filed or pursued any complaints, charges or lawsuits of any kind with any court, governmental or administrative agency or arbitrator against the Company or its officers, directors, agents or employees, asserting any claims that are released in the Release.

 

5.                                      Tender of Severance Payment as a Condition to Challenge of this Agreement.  Should the Executive attempt to challenge the enforceability of this Agreement or the Release, as a further limitation on any right to make such a challenge, the Executive shall initially submit to the Company the total proceeds provided to him in connection with this Agreement plus interest at the standard statutory rate, and invite the Company to retain such monies and agree with the Executive to cancel this Agreement.  In the event the Company accepts this offer, the Company shall retain such monies and this Agreement shall be canceled.  In the event the Company does not accept such offer, the Company shall so notify the Executive and shall place such monies into an interest-bearing escrow account pending resolution of the dispute between the Executive and the Company as to whether this Agreement shall be set aside and/or otherwise rendered unenforceable.

 

6.                                      At-Will Employment.  Nothing in this Agreement shall be deemed to entitle the Executive to continued employment with the Company or its subsidiaries or change the status of the Executive from an “at-will” employee

 

7.                                      Assignment and Transfer.  The Executive’s rights and obligations under this Agreement shall not be transferable by assignment or otherwise, and any purported assignment, transfer or delegation thereof shall be void.  This Agreement shall inure to the benefit of, and be binding upon and enforceable by, any purchaser of substantially all of the Company’s assets, any corporate successor to the Company or any assignee thereof.

 

8.                                      Notices.  All notices and other communications hereunder shall be in writing and shall be deemed properly given and effective when received, if sent by facsimile or telecopy, or by postage prepaid by registered or certified mail, return receipt requested, or by other delivery service that provides evidence of delivery, addressed (a) if to the Executive, to the residence address of the Executive maintained from time to time by the Company; and if to the Company, to its chief executive office, attention Chief Executive Officer, with a copy to the Secretary of the Company; (b) to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

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9.                                      Governing Law.  This Agreement and any contest, dispute, controversy or claim arising hereunder or relating hereto, shall be governed by and construed in accordance with California law notwithstanding any conflicts of laws to the contrary to the extent they would require the application of the laws of another jurisdiction.

 

10.                               Arbitration.  Any claim or controversy arising out of or relating to this Agreement or any breach thereof between the Executive and the Company shall be settled under the procedures set forth in the Company’s Arbitration of Disputes Agreement.  Executive acknowledges that he has read and understands and has executed such agreement.

 

11.                               Counterparts.  This Agreement may be executed in two or more counterparts, including by electronic or facsimile transmission, each of which shall constitute an original, but when taken together, shall constitute a single instrument.

 

12.                               Amendment and Waiver;  Rights Cumulative.  This Agreement may be amended, waived or discharged only by a writing signed by the Executive and by a duly authorized representative of the Company (other than the Executive).  No failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law shall constitute a waiver of any other right, power or privilege or of the same right, power or privilege in any other instance.  The rights and remedies provided by this Agreement are cumulative, and the exercise of any right or remedy by either party hereto (or by its successor), whether pursuant to this Agreement, to any other agreement, or to law, shall not preclude or waive its right to exercise any or all other rights and remedies.

 

13.                               Captions.  Paragraph headings are for convenience only and shall not be considered a part of this Agreement.

 

14.                               No Third Party Beneficiary Rights.  Except as otherwise provided in this Agreement, no person or entity shall have any right to enforce any provision of this Agreement, even if indirectly benefited by it.

 

15.                               Severability.  If any term, provision, covenant or condition of this Agreement, or the application thereof to any person, place or circumstance, shall be held to be invalid, unenforceable or void, the remainder of this Agreement and such term, provision, covenant or condition as applied to other persons, places and circumstances shall remain in full force and effect.

 

16.                               Code Section 409A Compliance.

 

16.1                        The intent of the parties is that payments and benefits under this Agreement comply with, or be exempt from, Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.

 

16.2                        A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment that are considered “nonqualified deferred compensation” under Code Section 409A unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”  If the Executive is deemed on the date of termination to be a

 

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“specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment that is considered non-qualified deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall be made or provided at the date which is the earlier of (a) the expiration of the six-month period measured from the date of such “separation from service” of the Executive, and (b) the date of the Executive’s death (the “Delay Period”).  Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 16 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

 

16.3                        For purposes of Code Section 409A, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.  In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement that is considered non-qualified deferred compensation.  In no event shall the timing of Executive’s execution of the Release directly or indirectly, result in the Executive designating the calendar year of payment, and if a payment that is subject to execution of the Release could be made in more than one taxable year, payment shall be made in the later taxable year.

 

17.                               Entire Agreement.  This Agreement contains the entire agreement and understanding among the parties hereto with respect to the Executive’s entitlement to Severance payments from the Company, and supersedes any prior or contemporaneous written or oral agreements, representations and warranties among them respecting the Executive’s entitlement to Severance payments from the Company, including, but not limited to, the Employment Agreement Terms Summary attached to the offer letter from the Company to the Executive dated November 5, 2012, to the extent such Employment Agreement Terms Summary relates to Severance payments from the Company.  For the avoidance of doubt, this Agreement does not supersede other provisions of the Employment Agreement Terms Summary, including, but not limited to, the provisions relating to repayment of Executive’s signing bonus and relocation reimbursements upon certain terminations of employment.

 

IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement as of the day and year first above written.

 

[Signature Page Follows]

 

 

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99¢ ONLY STORES
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Richard Anicetti
    
	
 
    	
Name:
    	
Richard Anicetti
    
	
 
    	
Title:
    	
Interim President and Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EXECUTIVE:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Michael Kvitko
    
	
 
    	
Michael Kvitko
    

 

6Exhibit 10.26

 

Award Number:  15-002

 

NUMBER HOLDINGS, INC.

 

NON-QUALIFIED STOCK OPTION AGREEMENT
 PURSUANT TO THE
 NUMBER HOLDINGS, INC.
  2012 STOCK INCENTIVE PLAN

 

AGREEMENT (“Agreement”), dated as of the Grant Date, between Number Holdings, Inc., a Delaware corporation (the “Company”), and Bradley Lukow (the “Participant”).

 

Preliminary Statement

 

The Committee hereby grants this non-qualified stock option (the “Option”) as of February 5, 2015 (the “Grant Date”), pursuant to the Number Holdings, Inc. 2012 Stock Incentive Plan, as it may be amended from time to time (the “Plan”),  to purchase the number of shares of Class A Common Stock, $0.001 par value per share of the Company (the “Class A Common Stock”), and Class B Common Stock, par value $0.001 per share, of the Company (the “Class B Common Stock,” and, together with the Class A Common Stock, the “Common Stock”), set forth below to the Participant, as an Eligible Employee of the Company or one of its Affiliates (collectively, the Company and all of its Affiliates shall be referred to as the “Employer”).  Except as otherwise indicated, any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Plan.  A copy of the Plan has been delivered to the Participant.  By signing and returning this Agreement, the Participant acknowledges having received and read a copy of the Plan and agrees to comply with it, this Agreement and all applicable laws and regulations.

 

Accordingly, the parties hereto agree as follows:

 

1.                                      Tax Matters.  No part of the Option is intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.

 

2.                                      Common Stock Subject to Option;  Exercise Price.  Subject in all respects to the Plan and the terms and conditions set forth herein and therein, the Option entitles the Participant to purchase from the Company, upon exercise, 5,000 shares of Class A Common Stock and 5,000 shares of Class B Common Stock, provided that the Participant must exercise the Option with respect to an equal number of shares of Class A Common Stock and Class B Common Stock concurrently. The exercise price under the Option is $1,323 for each unit consisting of one share of Class A Common Stock and one share of Class B Common Stock (the “Unit Exercise Price”).

 

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3.                                      Vesting;  Exercise.

 

(a)                                 Time-Based Vesting.  A portion of the Option equal to 3,750 shares of each class of Common Stock (the “Time-Vested Option”) shall vest and become exercisable on the dates and in the cumulative percentages provided in the table below (which percentages shall apply equally with respect to the Class A Common Stock and the Class B Common Stock subject to the Time-Vested Option), provided, with respect to each vesting date, that the Participant has not experienced a Termination prior to such date.  There shall be no proportionate or partial vesting in the periods prior to each vesting date.

 

	
Time-Vested Option Vesting Date
    	
 
    	
Cumulative Percent
   Vested
    	
 
    
	
January 12, 2016
    	
 
    	
20
    	
%
    
	
January 12, 2017
    	
 
    	
40
    	
%
    
	
January 12, 2018
    	
 
    	
60
    	
%
    
	
January 12, 2019
    	
 
    	
80
    	
%
    
	
January 12, 2020
    	
 
    	
100
    	
%
    

 

Notwithstanding the foregoing, if the Participant’s employment is Terminated without Cause or for Good Reason (as such terms are defined in the Offer Letter from 99 Cents Only Stores LLC to the Participant as in effect on the date hereof (the “Offer Letter”)) within six months following a Change in Control, then (A) if the date of such Change in Control is prior to January 12, 2017, all Time-Vested Options that would otherwise have vested on or prior to the second anniversary of such termination will vest on the date of such termination and (B) if the date of such Change in Control is on or after January 12, 2017, all Time-Vested Options that would otherwise have vested on or prior to the first anniversary of such termination will vest on the date of such termination.  All other non-vested Time-Vested Options will be forfeited on the date of such termination.

 

(b)                                 Performance-Based Vesting.  A portion of the Option equal to 1,250 shares of each class of Common Stock (the “Performance-Vested Option”) shall vest and become exercisable on the date the Option Hurdle (as defined below) is satisfied; provided, that except as provided below, the Participant has not experienced a Termination prior to such date.

 

(i)                                     The “Option Hurdle” will be satisfied on the first date on which all of the following conditions are met: (A) the Returned Capital (as defined below) as of such date (x) results in an IRR (as defined below) greater than 20% and (y) equals or exceeds 50% of the Invested Capital (as defined below); and (B) the Unit Value (as defined below) on such date is at least three times greater than the Unit Value on the Grant Date (subject to appropriate adjustment at the discretion of the Committee for any stock split, stock dividend, reclassification, subdivision, reorganization, recapitalization or similar event).  All determinations relevant to calculating whether the Option Hurdle has been satisfied shall be made by the Committee.

 

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(ii)                                  Definitions

 

“IRR” means, as of any date, a rate of return (taking into account the Returned Capital as of such date and the fair market value of the shares of Class A Common Stock and Class B Common Stock held by the Sponsors (as defined below) on such date), that is the discount rate, compounded annually, which, when applied to the Invested Capital as of such date, produces a net present value equal to zero.

 

“Invested Capital” means, as of any date, the aggregate amount of equity contributions made by the Sponsors in the Company and its subsidiaries through such date; provided, that, for the purposes of calculating IRR, the Sponsors’ equity contribution in the Company prior to the Grant Date will be deemed to be equal to the fair market value of the shares of Class A Common Stock and Class B Common Stock owned by the Sponsors on the Grant Date.

 

“Returned Capital” means, as of any date, the aggregate amount of cash and marketable securities (valued at the fair market value thereof) resulting from (A) dividends in respect of shares of Class A Common Stock and Class B Common Stock and (B) any sale or other exchange of shares of Class A Common Stock and Class B Common Stock, in each case actually distributed to or received by the Sponsors from and after the Grant Date.

 

Returned Capital shall not include (A) amounts placed in escrow that are not released to the Sponsors within 18 months after being placed in escrow or (B) amounts received by the Sponsors that the Sponsors are required to repay to satisfy indemnification claims or similar contingencies.

 

“Sponsors” means Ares Corporate Opportunities Fund III, L.P., the Canada Pension Plan Investment Board and their respective Affiliates.

 

“Unit Value” means on any date the combined fair market value per share of the Class A Common Stock and Class B Common on such date.

 

(c)                                  To the extent that the Option has become vested and exercisable with respect to a number of shares of Common Stock, the Option may thereafter be exercised by the Participant, in whole or in part, at any time or from time to time prior to the expiration of the Option in accordance with the Plan, provided that the Participant must exercise the Option with respect to an equal number of shares of Class A Common Stock and Class B Common Stock concurrently.  Notwithstanding the foregoing, the Participant may not exercise the Option unless the offering of shares of Common Stock issuable upon such exercise (i) is then registered under the Securities Act, or, if such offering is not then so registered, the Company has determined that such offering is exempt from the registration requirements of the Securities Act and (ii) complies with all other applicable laws and regulations governing the Option, and the Participant may not exercise the Option if the Committee determines that such exercise would not be so registered or exempt and otherwise in compliance with such laws and regulations.

 

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4.                                      Option Term.  The term of the Option shall be until the tenth anniversary of the Grant Date, after which time it shall expire (the “Expiration Date”).  Upon the Expiration Date, the Option shall be canceled for no consideration and no longer shall be exercisable.  The Option is subject to termination prior to the Expiration Date to the extent provided in Sections 5 and 6 below.

 

5.                                      Detrimental Activity.  The provisions in the Plan regarding Detrimental Activity shall apply to the Option.

 

6.                                      Termination and Change in Control.  The provisions in the Plan regarding Termination and Change in Control shall apply to the Option, provided that if the Participant’s employment agreement expressly provides more favorable rights with respect to the Option in the event of Termination or Change in Control, such rights shall apply.

 

7.                                      Restriction on Transfer of Option.  Unless otherwise determined by the Committee in accordance with the Plan, (a) no part of the Option shall be Transferable other than by will or by the laws of descent and distribution and (b) during the lifetime of the Participant, the Option may be exercised only by the Participant or the Participant’s guardian or legal representative.  Any attempt to Transfer the Option other than in accordance with the Plan shall be void.

 

8.                                      Company’s Right to Repurchase; Other Restrictions.

 

(a)                                 Company’s Right to Repurchase.  In the event of the Participant’s Termination, the Company shall have the right (the “Repurchase Right”), but not the obligation, to repurchase (or to cause one or more of its designees to repurchase) from the Participant (or his or her transferee) (X) any or all of the shares of Common Stock acquired upon the exercise of the Option and still held at the time of such repurchase by the Participant (or his or her transferee) or (Y) any vested but unexercised portion of the Option at the price determined in the manner set forth below (the “Repurchase Price”), during each period set forth below (each, a “Repurchase Period”) and to the extent set forth below:

 

(i)                                     In the event of Termination for Cause, voluntary Termination without Good Reason, or the discovery that the Participant engaged in Detrimental Activity, the Company may exercise the Repurchase Right with respect to all shares previously acquired pursuant to the exercise of the Option.  The Repurchase Period under this Section 8(a)(i) shall be 180 days from the date of Termination.  The Repurchase Price under this Section 8(a)(i) shall be (1) with respect to each share of Class A Common Stock, the lesser of (A) the Unit Exercise Price or (B) the Fair Market Value of a share of Class A Common Stock on the date of Termination and (2) with respect to each share of Class B Common Stock, the par value thereof.

 

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(ii)                                  In the event of Termination for any reason other than (x) Termination for Cause or (y) voluntary Termination without Good Reason:

 

(A)                               The Company may exercise the Repurchase Right with respect to all shares acquired pursuant to the exercise of the Option on or prior to the date of Termination.  The Repurchase Period under this Section 8(a)(ii)(A) shall be 180 days from the date of Termination.  The Repurchase Price under this Section 8(a)(ii)(A) shall be (1) with respect to each share of Class A Common Stock, the Fair Market Value of a share of Class A Common Stock on the date of Termination and (2) with respect to each share of Class B Common Stock, the par value thereof.

 

(B)                               The Company may exercise the Repurchase Right with respect to all shares acquired pursuant to the exercise of the Option after the date of Termination.  The Repurchase Period under this Section 8(a)(ii)(B) shall be 90 days from the latest date on which the Option is permitted to be exercised under this Agreement.  The Repurchase Price under this Section 8(a)(ii)(B) shall be (1) with respect to each share of Class A Common Stock, the Fair Market Value of a share of Class A Common Stock on the date of repurchase and (2) with respect to each share of Class B Common Stock, the par value thereof.

 

(C)                               the Company may exercise the Repurchase Right with respect to the vested but unexercised portion of the Option.  The Repurchase Period under this Section 8(a)(ii)(C) shall be the latest date on which the Option is permitted to be exercised under this Agreement.  The Repurchase Price under this Section 8(a)(ii)(C) shall be the product of (A) the excess (if any) of the Fair Market Value of a share of Class A Common Stock on the date of Termination over the Unit Exercise Price multiplied by (B) the number of shares of Class A Common Stock covered by the Option being repurchased.  For the avoidance of doubt, upon such repurchase such Option shall no longer be exercisable for any shares of Common Stock.

 

(iii)                               To exercise any Repurchase Right, the Company (or one or more of its designees) shall deliver a written notice to the Participant setting forth the securities to be repurchased and the applicable Repurchase Price thereof, and the date on which such repurchase is to be consummated, which date shall be not less than 15 days or more than 30 days after the date of such notice.  On the date of consummation of the repurchase, the Company will pay the Participant the applicable Repurchase Price in cash or, in the Company’s discretion and to the extent not prohibited by law, by cancellation of indebtedness of the Participant to the Company.  The Company may exercise its Repurchase Rights upon one or more occasions at any time during the Repurchase Periods set forth above.

 

(iv)                              Notwithstanding the foregoing, the Repurchase Period and the date on which any repurchase is to be consummated may be extended by the Company at any time when repurchase by the Company (A) is prohibited pursuant to applicable law, (B) is prohibited under any debt instrument of the Company or any of its Affiliates or (C) would result in adverse accounting consequences for the Company, in each case as determined by the Company.

 

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(b)                                 To ensure that the shares of Common Stock issuable upon exercise of the Option are not transferred in contravention of the terms of the Plan and this Agreement, and to ensure compliance with other provisions of the Plan and this Agreement, the Company may deposit any certificates evidencing such shares with an escrow agent designated by the Company.

 

(c)                                  Notwithstanding anything in this Agreement to the contrary, the Option and any Common Stock purchased pursuant to the exercise thereof shall be subject to the terms of the Stockholders Agreement in addition to the provisions of this Section 8.

 

9.                                      Securities Representations.  Upon the exercise of the Option prior to registration of the offering of the Common Stock subject to the Option pursuant to the Securities Act or other applicable securities laws, the Participant shall be deemed to acknowledge and make the representations and warranties as described below and as otherwise may be requested by the Company for compliance with applicable laws, and any issuances of Common Stock by the Company shall be made in reliance upon the express representations and warranties of the Participant.

 

(a)                                 The Participant is acquiring and will hold the shares of Common Stock for investment for his account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act or other applicable securities laws.

 

(b)                                 The Participant has been advised that offerings of the shares of Common Stock have not been registered under the Securities Act or other applicable securities laws, on the ground that no public offering of the shares of Common Stock is to be effected (it being understood, however, that the shares of Common Stock are being offered in reliance on the exemption provided under Rule 701 under the Securities Act), and that the shares of Common Stock must be held indefinitely, unless they are subsequently registered under the applicable securities laws or the Participant obtains an opinion of counsel (in the form and substance satisfactory to the Company and its counsel) that registration is not required.  In connection with the foregoing, the Company is relying in part on the Participant’s representations set forth in this Section.  The Participant further acknowledges and understands that the Company is under no obligation hereunder to register offerings of the shares of Common Stock.

 

(c)                                  The Participant is aware of the adoption of Rule 144 by the Securities and Exchange Commission under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions.  The Participant acknowledges that he is familiar with the conditions for resale set forth in Rule 144, and acknowledges and understands that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company has no plans to satisfy these conditions in the foreseeable future.

 

(d)                                 The Participant will not sell, transfer or otherwise dispose of the shares of Common Stock in violation of the Plan, this Agreement, the Securities Act (or the rules and regulations promulgated thereunder) or under any other applicable securities laws.  The Participant agrees that he will not dispose of the Common Stock unless and until he has complied with all requirements of this Agreement applicable to the disposition of the shares of Common Stock.

 

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(e)                                  The Participant has been furnished with, and has had access to, such information as he considers necessary or appropriate for deciding whether to invest in the shares of Common Stock, and the Participant has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Common Stock.

 

(f)                                   The Participant is aware that his investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss.  The Participant is able, without impairing his financial condition, to hold the Common Stock for an indefinite period and to suffer a complete loss of his investment in the Common Stock.

 

10.                               No Rights as Stockholder.  The Participant shall have no rights as a stockholder with respect to any shares of Common Stock covered by the Option unless and until the Participant has become the holder of record of such shares, and no adjustments shall be made for dividends (whether in cash, in kind or other property), distributions or other rights in respect of any such shares, except as otherwise specifically provided for in the Plan.

 

11.                               Provisions of Plan Control.  This Agreement is subject to all the terms, conditions and provisions of the Plan, including the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time.  The Plan is incorporated herein by reference.  If and to the extent that this Agreement conflicts or is inconsistent with the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly.

 

12.                               Notices.  All notices, demands or requests made pursuant to, under or by virtue of this Agreement must be in writing and sent to the party to which the notice, demand or request is being made:

 

(a)                                 unless otherwise specified by the Company in a notice delivered by the Company in accordance with this Section 12, any notice required to be delivered to the Company shall be properly delivered if delivered to:

 

	
Number Holdings, Inc.
    
	
c/o Ares Management LLC
    
	
2000 Avenue of the Stars, 12th Floor
    
	
Los Angeles, CA 90067
    
	
Attention:
    	
Adam   Stein
    
	
Telephone:
    	
(310)   201-4100
    
	
Facsimile:
    	
(310)   201-4170
    

 

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with a copy (which shall not constitute notice) to:

 

	
Proskauer Rose LLP
    
	
2049 Century Park East, Suite 3200
    
	
Los Angeles, CA 90067
    
	
Attention:
    	
Michael   A. Woronoff, Esq.
    
	
Telephone:
    	
(310)   284-4550
    
	
Facsimile:
    	
(310)   557-2193
    

 

(b)                                 if to the Participant, to the address on file with the Company.

 

Any notice, demand or request, if made in accordance with this Section 12 shall be deemed to have been duly given:  (i) when delivered in person; (ii) three days after being sent by United States mail; or (iii) on the first business day following the date of deposit if delivered by a nationally recognized overnight delivery service.

 

13.                               No Right to Employment.  This Agreement is not an agreement of employment.  None of this Agreement, the Plan or the grant of the Option hereunder shall (a) guarantee that the Employer will employ the Participant for any specific time period or (b) modify or limit in any respect the Employer’s right to terminate or modify the Participant’s employment or compensation.

 

14.                               Stockholders Agreement.  As a condition to the receipt of shares of Common Stock when the Option is exercised, the Participant shall execute and deliver a Joinder Agreement or such other documentation as required by the Committee which shall set forth certain restrictions on transferability of the shares of Common Stock acquired upon exercise, a right of first refusal or a right of first offer of the Company and other Persons with respect to shares, and such other terms or restrictions as the Board or Committee shall from time to time establish, including any drag along rights, tag along rights, transfer restrictions and registration rights.  The Stockholders Agreement or other documentation shall apply to the Common Stock acquired when the Option is exercised and covered by the Stockholders Agreement or other documentation.

 

15.                               Dispute Resolution.  All controversies and claims arising out of or relating to this Agreement, or the breach hereof, shall be settled by the Employer’s mandatory dispute resolution procedures as may be in effect from time to time with respect to matters arising out of or relating to Participant’s employment with the Employer, including the procedures set forth in the Arbitration Agreement attached hereto as Exhibit A (or any amendment or replacement of such agreement).

 

16.                               Severability of Provisions.  If any provision of this Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Agreement shall be construed and enforced as if such provisions had not been included; provided that if the Company’s call rights and rights of first refusal or rights of first offer set forth in the Stockholders Agreement or other agreement shall be held invalid or unenforceable, the Option shall be cancelled and terminated.

 

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17.                               Governing Law.  All matters arising out of or relating to this Agreement and the transactions contemplated hereby, including its validity, interpretation, construction, performance and enforcement, shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to its principles of conflict of laws.

 

18.                               Construction.  Wherever any words are used in this Agreement in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply.  As used herein, (i) “or” shall mean “and/or” and (ii) “including” or “include” shall mean “including, without limitation.”

 

19.                               Other Shares.  Notwithstanding anything in this Agreement or the Plan to the contrary, none of the shares of Common Stock owned from time to time by a Participant that were not acquired in connection with the grant of an Award to such Participant shall be subject to any of the terms, conditions or provisions of this Agreement or the Plan.

 

[Remainder of Page Left Intentionally Blank]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Grant Date.

 

	
 
    	
NUMBER   HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   
    	
Stéphane   Gonthier
    
	
 
    	
 
    	
Title:   
    	
President   and Chief Executive Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
Employee   Name: Bradley Lukow
    	
 
    
	
Employee   ID Number:
    	
 
    
					

 

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