Document:

Exhibit 10.33

 

Execution Version

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”), dated as of January 13, 2012 (the “Effective Date”), is entered into by and among 99 Cents Only Stores, a California corporation (the “Company”), Number Holdings, Inc., a Delaware Corporation (“Parent”), and Howard Gold (“Executive”).

 

RECITAL

 

WHEREAS, the Company and Executive are entering into this Agreement in connection with the consummation of the transactions (collectively, the “Merger”) contemplated by that certain Agreement and Plan of Merger (the “Merger Agreement”), dated October 11, 2011, among Parent, Number Merger Sub, Inc., a California Corporation, and the Company; and

 

WHEREAS, the Company, Parent and Executive desire to enter into this Agreement setting forth, among other matters, the terms and conditions of Executive’s employment with the Company.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of Executive’s employment and the covenants and other obligations of the parties contained herein, the Company, Parent and Executive agree as follows:

 

1.                                      Employment.

 

(a)                                 Term.  Executive’s employment under this Agreement shall commence on the Effective Date and shall continue until the fifth anniversary of the Effective Date (“Term”), unless earlier terminated as set forth under Section 4.  After the Term, Executive’s continued employment with the Company shall be pursuant to such terms and conditions as Executive and the Company may agree.

 

(b)                                 Duties and Responsibilities.  Executive shall serve as the full-time Executive Vice President, Special Projects of the Company and shall have the duties and responsibilities customarily associated with such position, and such additional duties and responsibilities as may from time to time be assigned to him by the Company’s Chief Executive Officer and Board of Directors (the “Board”) and that are ordinarily performed, undertaken and exercised by persons situated in a similar capacity at a company the size and nature of the Company.  Executive shall report directly to the Chief Executive Officer.  Executive shall (i) devote his full business time to the business and affairs of the Company and not engage in any other business activities, as a director, officer, employee or consultant or in any other capacity, whether or not he receives compensation therefor and (ii) observe and comply with all rules, regulations, policies and practices of the Company.  Notwithstanding the foregoing, Executive may serve on the boards of charitable organizations, engage in charitable and community affairs and activities, and manage his personal investments, provided that such activities do not adversely interfere with the performance of Executive’s duties and responsibilities hereunder.

 

 

2.                                      Compensation.

 

(a)                                 Base Salary.  So long as he remains employed by the Company, during the Term Executive shall be paid a base salary (“Base Salary”), which initially shall be at the annual rate of $200,000 (the “Initial Base Salary”), payable in installments consistent with the Company’s normal payroll practices.  Executive’s Base Salary shall be reviewed annually by the Board to determine, in the Board’s sole discretion, if such Base Salary should be changed, provided that during the Term, the Base Salary shall not be decreased below $200,000.

 

(b)                                 Annual Incentive Bonus.

 

(i)                                     So long as he remains employed by the Company, during the Term Executive shall be eligible to earn an annual incentive bonus (“Bonus”) for each fiscal year of the Company beginning on or after April 1, 2012.  Executive’s target Bonus shall be 200% of the Initial Base Salary, and the targeted range for the Bonus shall be from 162.5% to 237.5% of the Initial Base Salary, with the actual level of payment contingent upon the level of achievement of pre-established performance goals set by the Board.  The target and range for the Bonus described in the preceding sentence may be adjusted downward by the Board in the event that Executive’s Base Salary is increased from the Initial Base Salary, provided that during the Term, (x) the sum of Executive’s Base Salary and target Bonus shall not be decreased below the sum of such amounts as in effect on the Effective Date and (y) the targeted range for the Bonus shall not be adjusted downward if, as a result of such adjustment, either the low end or high end of the range of Executive’s total compensation opportunity (i.e., his Base Salary plus Bonus) is less than the low end or high end of such range as in effect on the Effective Date.

 

(ii)                                  The Bonus shall not be earned until the date that it is paid, and Executive must be an employee in good standing on such date in order to receive any Bonus; provided, that if Executive’s employment is terminated without Cause (as defined below) or he resigns for Good Reason (as defined below) after the last day of the applicable fiscal year but before annual incentive bonuses are paid, generally, to employees of the Company, then Executive shall be entitled to receive the Bonus (if any) for such fiscal year based on the actual level of achievement of the applicable performance goals, and subject to the terms set forth in Section 4(b).  The Bonus (if any) shall be paid within 90 days following completion of the applicable fiscal year and in no event later than March 15th after each fiscal year end.  Payment of any Bonus will be at the sole discretion of Parent based on its evaluation of the level of achievement of performance goals.

 

(c)                                  Option Grant.  Executive shall be granted non-qualified stock options (the “Options”) to purchase units consisting in the aggregate of up to 1.04167% of each of the Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”) and the Class B Common Stock, par value $0.001 per share (the “Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”), of Parent on a fully-diluted basis as of the Effective Date, subject to the terms of the Stock Option Plan.  The Options with respect to each unit (consisting of one share of Class A Common Stock and one share of Class B Common Stock) shall have an exercise price equal to $1,000. All Options shall vest in equal annual installments over five years from the Effective Date.  If Executive’s employment is terminated by the Company without Cause or Executive resigns his employment for Good Reason, the

 

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vested and unexpired Options shall be exercisable by Executive in cash until (i) the later of (A) 18 months following such termination or resignation and (B) 42 months following the closing of the Merger or (ii) if earlier, the expiration thereof.  Upon the occurrence of a Change in Control (as defined below), all unexpired Options shall immediately vest and become exercisable.

 

(d)                                 Payment.  Payment of all compensation and other amounts to Executive under this Agreement shall be made in accordance with the relevant Company policies in effect from time to time, including normal payroll practices, and shall be subject to applicable withholding requirements.

 

3.                                      Employee Benefits.

 

(a)                                 Business Expenses.  Upon timely submission of itemized expense statements and other documentation in accordance with the procedures specified by the Company, Executive shall be entitled to reimbursement for actual out of pocket business and travel expenses duly incurred by Executive in the course of his duties hereunder in accordance with the policies of the Company then in effect generally applicable to senior executives of the Company.

 

(b)                                 Benefit Plans.  So long as he remains employed by the Company, during the Term Executive shall be entitled to participate in the Company’s employee benefit plans and programs (“Benefit Plans”) as they may exist from time to time, in each case as offered by the Company to its senior executives generally, subject to the terms and conditions thereof.  Nothing in this Agreement shall require the Company to maintain any Benefit Plan, or shall preclude the Company from terminating or amending any Benefit Plan from time to time.

 

(c)                                  Vacation.  Executive shall be entitled to vacation time in accordance with the Company’s vacation policy for senior executives.  Executive acknowledges that given his position at the Company, Executive will remain generally available and accessible to the Company’s senior managers and the Board through an electronic means of communication when reasonably possible.

 

4.                                      Termination of Employment.  This Agreement may be terminated prior to the expiration of the Term in accordance with this Section 4.

 

(a)                                 For Cause.  The Company may terminate Executive’s employment for “Cause” immediately upon written notice for any of the following reasons: (i) Executive has been indicted for or charged with a felony, which causes a material disruption in Executive’s performance of his duties hereunder that is not cured within 30 calendar days following written notice of such breach, (ii) Executive has been convicted of, pled guilty to, or has entered a nolo contendere plea to a misdemeanor where imprisonment of greater than one month is imposed, other than for a traffic-related offense, or a felony, (iii) any act of material misconduct or gross negligence by Executive in the performance of his duties or any act of moral turpitude by Executive, (iv) Executive’s commission of any act of theft, fraud or material dishonesty, (v) Executive’s willful failure to perform any reasonable duties assigned to him by the Board or Executive’s refusal or willful failure to follow the lawful directives of the Board after written notice from the Company of, and 30 calendar days to cure, such refusal or failure, (vi) any material breach by Executive of the material terms set forth in this Agreement (including the Restrictive Covenant Agreement),

 

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the Rollover Letter or the Stockholders Agreement that is not cured within 30 calendar days following written notice of such breach, and (vii) Executive’s unlawful appropriation of a material corporate opportunity.  “Cause” shall cease to exist for an event on the 60th day following the later of (A) its occurrence or (B) knowledge thereof by a majority of the Board (not including Executive or any other employee of the Company, if applicable) that the conduct has occurred and, if applicable, such conduct has resulted in the requisite consequences hereunder, unless the Company has given Executive a notice thereof prior to such date; provided that any waiver by the Company of any conduct, event or occurrence that otherwise would have constituted Cause shall not be a waiver of any subsequent conduct, event or occurrence of the same or any other type, and in addition may be considered by the Company for purposes of the Company’s right to terminate Executive’s employment for Cause in connection with such subsequent conduct, event or occurrence of the same or any other type.

 

Upon termination of Executive’s employment for Cause (i) the Company shall be under no further obligation to Executive, except to pay (A) all accrued but unpaid Base Salary to the date of termination within 30 days following such termination, less all applicable deductions, and (B) any earned and vested benefits and payments pursuant to the terms of any Benefit Plan (the payments and benefits described in subsections (A) and (B) herein shall be referred herein as the “Accrued Benefits”) and (ii) all outstanding vested and unvested Options held by Executive shall immediately terminate and no longer be exercisable.

 

(b)                                 Without Cause; Good Reason.  The Company may terminate Executive’s employment at any time without Cause immediately upon written notice; and Executive may terminate Executive’s employment at any time for Good Reason.  Upon termination of Executive’s employment by the Company without Cause or by Executive for Good Reason during the Term, Executive shall be entitled to receive (i) an amount equal to three times the sum of (A) Executive’s Base Salary, plus (B) Executive’s target Bonus for the fiscal year in which the termination of employment occurs (the “Severance Amount”), one half of which Severance Amount shall be paid in equal installments over three years in accordance with the Company’s regular payroll schedule, and the remainder of which Severance Amount shall be payable in three annual installments (the first installment occurring on the 60th day following termination of employment and the remaining two installments payable on the next two anniversaries thereof), (ii) full vesting of all outstanding and then-unvested Options, (iii) payment of any earned but unpaid Bonus attributable to a previously completed fiscal year and (iv) continued coverage under the Company’s group health plans (or, to the extent such coverage is not permissible under the terms of such plan(s), comparable coverage) for Executive and Executive’s dependents (to the extent covered under such plan(s) immediately prior to such termination), at the Company’s sole expense until the earlier of (A) one year following the date of Executive’s termination of employment with the Company and (B) the date Executive is or becomes eligible for comparable coverage under health plans of another employer.  The foregoing payments and benefits shall commence on the 60th day following termination of employment (or, in the case of (iii) above, at the same time as such bonuses are paid to employees, generally, if later) provided that Executive has executed a release of claims against the Company substantially in the form attached hereto as Exhibit C (“Release”), and such release of claims has become effective, by such date and shall be contingent on Executive’s continued compliance with all post-termination restrictive covenants applicable to Executive, including, without limitation, the covenants contained in the Restrictive Covenant Agreement.  For purposes of the foregoing calculations in this Section 4(b),

 

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“Base Salary” shall mean the base salary in effect on the date of termination of employment without regard to any reduction that may have given rise to Good Reason.

 

A termination of Executive’s employment under this Section 4(b) does not include a termination of employment by reason of Executive’s Disability (as defined below) or upon the death of Executive.

 

“Good Reason” means the occurrence of any of the following events, without Executive’s consent, (i) a material reduction in Executive’s Base Salary, (ii) a material reduction in Executive’s title, or duties and responsibilities, (iii) relocation outside of Los Angeles County, or (iv) a material breach by the Company of any material term set forth in this Agreement (it being acknowledged and agreed that a material term of this Agreement includes, but is not limited to, Sections 2(a) and 2(b)(i)).  The occurrence of the events described in (i) through (iv) above only shall constitute Good Reason if (A) Executive provides the Company written notice within 90 days following the occurrence of the event that allegedly constitutes Good Reason (the “Good Reason Notice”); (B) the Company fails to cure such event within 30 days after receiving such Good Reason Notice; and (C) Executive resigns within 60 days following delivery of such Good Reason Notice.  For the avoidance of doubt, Executive’s job shall require significant travel outside of Los Angeles County, which shall not constitute Good Reason.

 

(c)                                  Resignation.  Executive may resign his employment (without Good Reason) upon providing the Company 30 days prior written notice.  In the event of such resignation by Executive, upon the effective date of Executive’s resignation (i) the Company shall be under no further obligation to Executive, except to pay the Accrued Benefits and (ii) all outstanding vested and unvested Options held by Executive shall immediately terminate and no longer be exercisable.

 

(d)                                 Disability; Death.  The Company may terminate Executive’s employment if Executive experiences a “Disability,” which for purposes of this Agreement means a “Total Disability” (or equivalent) as defined under the Company’s Long Term Disability Plan in effect at the time of the disability.  In the event that Executive’s employment is terminated by reason of Executive’s Disability or upon the death of Executive, (i) the Company shall be under no further obligation to Executive (or his estate), except to pay the Accrued Benefits and (ii) Options that would have vested in the 12 months following such termination of employment had Executive remained employed shall become immediately vested.  In addition, all Options that are vested as of the termination of Executive’s employment (including Options whose vesting accelerates pursuant to this paragraph) shall be exercisable for 12 months following the employment termination date (or, if earlier, the expiration date of the Options), after which time they shall immediately terminate and no longer be exercisable.

 

(e)                                  Cooperation.  Following termination of employment for any reason, Executive shall (i) cooperate with the Company, as reasonably requested by the Company, to effect a transition of Executive’s responsibilities and to ensure that the Company is aware of all matters being handled by Executive and (ii) cooperate and provide assistance to the Company at its reasonable request in connection with any action, suit or proceeding brought by or against the Company or any of its Affiliates (or in which any of them is or may be a party) or that relates in any way to Executive’s acts or omissions while employed by the Company.  The Company

 

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agrees to reimburse Executive promptly for actual out-of-pocket expenses incurred by him in connection with assisting the Company in the manner described in the immediately preceding sentence in accordance with the policies of the Company then in effect generally applicable to senior executives of the Company.  Upon termination for any reason, Executive shall be deemed to have resigned from all offices and directorships then held with the Company or any of its subsidiaries.  Executive’s obligations under this Section 4(e) shall survive the termination of Executive’s employment and the expiration or termination of the Agreement.

 

(f)                                   Company Property.  All assets, property and equipment and all tangible and intangible information relating to the Company, its Affiliates and their respective employees, customers or vendors furnished to, obtained by or prepared by Executive or any other person during the course of or incident to Executive’s employment by the Company or any of its subsidiaries are and shall remain the sole property of the Company (“Company Property”).  Company Property includes, but is not limited to, computer equipment, books, manuals, records, reports, notes, correspondence, contracts, customer lists, business cards, advertising, sales, financial, personnel, operations, and manufacturing materials and information, data processing reports, computer programs, software, customer information and records, business records, price lists or information, and samples, and in each case shall include all copies thereof in any medium, including paper, electronic and magnetic media and all other forms of information storage.  Executive shall further permanently delete any Company information from any computers or other electronic storage devices owned by Executive.  Upon request of the Company, Executive shall certify in writing that Executive has complied with the requirements of this Section 4(f).  Notwithstanding the foregoing, Executive shall be permitted to retain one or more copies of his contacts list and his appointment calendars.  Executive’s obligations under this Section 4(f) shall survive termination of Executive’s employment and the expiration or termination of the Agreement until Executive has returned all Company Property to the Company.

 

(g)                                  Executive’s Put Right.  Certain capitalized terms used in this Section 4(g) are defined in clause (xi) below.

 

(i)                                     Subject to the terms and conditions set forth in this Section 4(g), Executive shall have the right (the “Initial Put Right”), but not the obligation, during the Initial Put Period to cause Parent (or, at Parent’s election, one or more of its designees) to purchase Executive’s Put Units and, subject to the terms and conditions set forth in this Section 4(g), Parent shall be required to purchase such Put Units, upon (A) the termination of his employment by the Company without Cause or (B) Executive’s termination of his employment with the Company for Good Reason.

 

(ii)                                  Executive may exercise the Initial Put Right by delivering to Parent at any time during the Initial Put Period (1) a Put Notice, (2) certificates representing all shares of Common Stock included in the Put Units (the “Certificates”) duly endorsed for transfer in blank, and (3) a duly executed and undated Release.  The Certificates and Release shall be held in escrow by Parent to be released and deemed delivered by Executive in accordance with Section 4(g)(x).

 

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(iii)                               The per unit purchase price for the Put Units purchased pursuant to the exercise of the Initial Put Right shall be the Initial Purchase Price.

 

(iv)                              Parent shall not be required to repurchase any Put Units if, after giving pro  forma effect to (A) such repurchase and all other repurchases pursuant to the exercise, prior to the repurchase of such Put Units, of “put” rights held by any Other Specified Employee (including the incurrence of any debt by the Company or any of its subsidiaries incurred or expected to be incurred to effect any such repurchases) and (B) any severance payments Parent or any of its subsidiaries has made or is obligated to make to Executive or any Other Specified Employee whose employment with the Company has been terminated as of the date of the repurchase of such Put Units, in each case, taking into account the timing such payments are required to be made (the transactions described in the foregoing clauses (A) and (B), the “Pro Forma Transactions”), (x) the Current Cushion or the Projected Cushion would be below 25%, (y) in the reasonable good faith judgment of the Board, such repurchase would be prohibited pursuant to applicable law or regulation or would result in a breach of the terms of any Applicable Contract or (z) the Company would not be permitted to make such repurchase either (1) pursuant to the exception contained in Section 4.07(b)(14) of the Senior Indenture or (2) with amounts then available to make Restricted Payments (as defined in the Senior Indenture) under Sections 4.07(a)(4)(C)(i), (iv) and (v) of the Senior Indenture (or, in each case, any similar clause in any amendment to, or replacement of, the Senior Indenture) (the occurrence of any matter described in the foregoing clause (x), (y) or (z), a “Restriction”).  All calculations and other determinations made in the reasonable good faith judgment of the Board, consistent with past practice, in connection with the determination of the Current Cushion or the Projected Cushion shall be binding on Executive.  If, following the date of this Agreement, Parent or any of its subsidiaries incurs additional indebtedness for borrowed money, Parent shall, or shall cause such subsidiary to, request its lenders to include provisions in any credit facilities or debt agreements governing such indebtedness to permit repurchases of equity as contemplated in this Section 4(g); provided that in no event shall Parent or any such subsidiary be required to accept any adverse term in exchange for such provisions.  Parent shall deliver a written notice to Executive within 5 business days following delivery of a Put Notice specifying whether a Restriction applies and, if so, providing reasonable detail (including relevant calculations) regarding such Restriction.  During the period from and after delivery of such notice through and including the expected Put Closing Date (the “Interim Period”), Parent shall not change its financial or capital budgeting forecasts included in the Internal Projections, including any change to the methodology or assumptions used in deriving such forecasts, for purposes of calculating the Projected Cushion, except to the extent reasonably necessary to reflect (x) the Company’s actual financial results for the fiscal quarter ending prior to delivery of the Put Notice or any fiscal period during the Interim Put Period, (y) the occurrence or discovery during the Interim Period of an event beyond the reasonable control of Parent that, in the reasonable good faith judgment of the Board, materially impairs the Company’s ability to meet the forecasts included in the Internal Projections or (z) changes to the assumptions underlying the forecasts included in the Internal Projections that, in the good faith judgment of the Board, are reasonably necessary to achieve a legitimate business objective and, in any event under clause (x), (y) and (z), any such changes are not for the purpose of avoiding Parent’s obligations under this Section 4(g).

 

(v)                                 If, following the valid exercise of the Initial Put Right, Parent is not required to repurchase the Put Units due to the applicability of a Restriction, and at any time

 

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during the remainder of the Initial Put Period the Restrictions cease to apply, Parent will (A) promptly notify Executive that the Restrictions have ceased to apply and (B) repurchase the Put Units for the Initial Purchase Price (subject to the continued inapplicability of the Restrictions) on the Put Closing Date.

 

(vi)                              If, following the valid exercise of the Initial Put Right, Parent does not repurchase the Put Units due to the fact that Restrictions remain applicable (A) through the remainder of the Initial Put Period or (B) on the expected Put Closing Date following the expiration of the Initial Put Period, then (A) the Put Notice exercising the Initial Put Right will be deemed withdrawn and Parent shall promptly return to Executive the Certificates and Release, (B) Parent shall notify Executive within 10 days following the first date, if any, during the Extended Put Period, on which the Restrictions cease to apply, and (C) subject to the terms and conditions set forth in this Section 4(g), Executive will have the right (the “Second Put Right” and, together with the Initial Put Right, the “Put Rights”), but not the obligation, during the 30 days following receipt of such notice from Parent (the “Second Put Period”), to cause Parent (or, at Parent’s election, one or more of its designees) to purchase the Put Units and, subject to the terms and conditions set forth in this Section 4(g), Parent shall be required to purchase such Put Units.  Executive may exercise the Second Put Right by delivering to Parent at any time during the Second Put Period (1) a Put Notice, (2) the Certificates, duly endorsed for transfer in blank, and (3) a duly executed and undated Release.  The Certificates and Release shall be held in escrow by Parent to be released and deemed delivered by Executive in accordance with Section 4(g)(x).  If, following the valid exercise of the Second Put Right, Parent does not repurchase the Put Units due to the fact that Restrictions are applicable on the expected Put Closing Date, the Executive may elect in his sole discretion to withdraw the Put Notice exercising the Second Put Right at any time that the Restrictions remain applicable, and if Executive so elects, Parent shall promptly return to Executive the Certificates and the Release.  If, following the valid exercise of the Second Put Right, Parent does not repurchase the Put Units due to the fact that Restrictions remain applicable (A) through the remainder of the Extended Put Period or (B) on the expected Put Closing Date following the expiration of the Extended Put Period, then the Put Notice exercising the Second Put Right will be deemed withdrawn and Parent shall promptly return to Executive the Certificates and Release.

 

(vii)                           The per unit purchase price for the Put Units to be purchased pursuant to the exercise of the Second Put Right shall be the fair market value of the Put Units as of the date of delivery of the Put Notice during the Second Put Period as determined by the Appraisal Process.

 

(viii)                        Notwithstanding any other provision in this Section 4(g), if the number of Put Units exceeds the Maximum Required Number, Parent may, at its election, purchase less than all of the Put Units; provided that Parent (or one or more of its designees) shall purchase at least the Maximum Required Number of Put Units.

 

(ix)                              The closing of the repurchase of the Put Units (the “Put Closing”) shall occur on the date (the “Put Closing Date”) that is the first business day following the later of (A) 45 days following the valid exercise of the Put Right, and (B) 5 business days following the determination of the fair market value of the Put Units in accordance with the Appraisal Process

 

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(or, if on the later of such dates the Restrictions are applicable, the first business day thereafter on which the Restrictions are no longer applicable).

 

(x)                                 At the Put Closing, (A) Parent (or one or more of its designees) shall pay to Executive the purchase price by check or wire transfer of immediately available funds to an account designated by Executive in the Put Notice and (B) upon receipt of such funds, (x) the Certificates shall be deemed to be released to Parent and (y) the Release shall be deemed to be delivered to Parent and dated as of the Put Closing Date, and Parent shall be authorized to write such date into the Release, in each case, without any further action by Executive.  Executive shall further execute and deliver such further documents and take such other actions to effectuate the repurchase of the Put Units as Parent may reasonably request.

 

(xi)                              Certain Definitions:

 

“Applicable Contract” means any contract to which Parent or any of its subsidiaries is a party or by which any such Person is bound, including any credit facilities or debt agreements, other than a contract with the Company, any subsidiary of the Company, Ares, CPPIB or any of their respective controlled affiliates.

 

“Appraisal Process” means the following process which shall begin on the business day following delivery of the applicable Put Notice: (i) Executive and Parent shall negotiate to set a valuation in good faith; and (ii) if they cannot agree within 10 days following delivery of the Put Notice (or such longer period as Executive and Parent may agree), then (A) Parent and Executive shall mutually agree upon and promptly appoint an appraiser of national recognition (or, in the event Parent and Executive cannot agree on an appraiser, then Parent and Executive shall each select an appraiser of national recognition, and the appraisers chosen by Parent and Executive shall mutually agree upon and appoint an appraiser of national recognition), (B) each of Parent and Executive shall submit to each other and to such appraiser within 15 days following the engagement of the appraiser (x) its valuation of the fair market value of the Put Units and (y) reasonable documentation in support of such valuation, and (C) the appraiser shall select either Parent’s or Executive’s valuation of the fair market value of the Put Units.  Notwithstanding the foregoing, if Executive delivers a Put Notice during the final 45 days of the Initial Put Period and on such date a Restriction applies, the Appraisal Process described in clause (ii) of the foregoing sentence shall not commence unless and until such Restriction ceases to apply at any time during the remainder of the Initial Put Period.  The appraiser shall make such selection within 20 days after the receipt of both parties’ valuations and documentation with respect thereto, and Parent and Executive shall cooperate in all reasonable respects with the appraiser.  In determining which party’s valuation of the fair market value of the Put Units to select, the appraiser shall not discount the value of the Put Units for illiquidity or minority status or other similar status. The appraiser’s selection of either party’s valuation shall be final, conclusive and binding upon Executive and Parent, and the cost of such appraiser shall be borne entirely by the party whose valuation of the fair market value of the Put Units was not selected by the appraiser.  For the avoidance of doubt, the appraiser’s determination shall be limited solely to selecting Parent or Executive’s valuation of the fair market value of the Put Units.  Each of Parent and Executive shall, promptly following a written request by the other party, provide the other party and its representatives and advisors copies of all documents and other information in such party’s possession reasonably requested by the other party in connection with the Appraisal Process

 

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“Credit Facility” means the Credit Agreement, dated as of January 13, 2012, among the Company, Parent, Royal Bank of Canada, as administrative agent and collateral agent, and the other lenders party thereto (as the same may be amended, modified, supplemented, refinanced or replaced from time to time).

 

“Current Cushion” means, with respect to any financial maintenance covenant in the Senior Indenture, the Credit Facility or any other agreement with unaffiliated third parties governing Parent’s or any of its subsidiaries’ indebtedness for borrowed money, the absolute value (expressed as a percentage) obtained by subtracting (i) the ratio of (A) the financial maintenance covenant level actually achieved by the Company for the most recent four fiscal quarter period ending prior to the delivery of the Put Notice (calculated after giving effect to the Pro Forma Transactions), to (B) the specified financial maintenance covenant level for such period, from (ii) one.

 

“Extended Put Period” means the three year period following the last day of the Initial Put Period.

 

“Initial Purchase Price” means the greater of (x) $1,000 less the per unit amount of any distributions made with respect to the Put Units prior to the repurchase thereof, and (y) the fair market value of the Put Units as of the date of delivery of the Put Notice during the Initial Put Period as determined by the Appraisal Process.

 

“Initial Put Period” means the one year period following the termination of Executive’s employment with the Company without Cause or for Good Reason.

 

“Internal Projections” means the internal financial projections of the Company prepared in the ordinary course of business, as shared with the Board and, if applicable, the Company’s lenders.

 

“Maximum Required Number” means the whole number of Put Units that may be purchased for $12.5 million, at the price per unit determined in accordance with Section 4(g).

 

“Other Specified Employees” means Eric Schiffer and Jeff Gold.

 

“Projected Cushion” means, with respect to any financial maintenance covenant in the Senior Indenture, the Credit Facility or any other agreement with unaffiliated third parties governing Parent’s or any of its subsidiaries’ indebtedness for borrowed money, the absolute value (expressed as a percentage) obtained by subtracting (i) the ratio of (A) the financial maintenance covenant level the Company is expected to achieve for each of the four fiscal quarters ending on or after the delivery of the Put Notice (based on the Internal Projections as shared with the Board and lenders in the ordinary course of business and calculated after giving effect to the Pro Forma Transactions, it being agreed that in the event a replacement Executive Vice President, Special Projects has not been hired by the Company as of the date the Put Notice shall have been delivered such projections shall include estimated compensation for such person which shall not exceed 110% of Executive’s potential total compensation for the relevant period (including Executive’s Base Salary and target Bonus whether or not earned)), to (B) the specified financial maintenance covenant level for such period, from (ii) one.

 

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“Put Notice” means a written, irrevocable notice delivered by Executive to Parent exercising the Put Rights. Such notice shall contain an express, unqualified representation and warranty by Executive to Parent (and its designee) that as of the date of delivery and through the Put Closing Date (A) Executive has, and will have, full right, title and interest in and to the Put Units, (B) Executive has, and will have, all necessary power and authority, and has taken, and will take, all necessary action to sell the Put Units as contemplated by this Section 4(g), and (C) the Put Units are and will be free and clear of any and all liens, claims, charges and encumbrances, other than those arising as a result of or under the terms of this Agreement, the Stockholders Agreement, or under securities laws.

 

“Put Units” means a number of units (each consisting of one share of Class A Common Stock and one share of Class B Common Stock) with respect to which Executive has elected to exercise the Put Right, as specified in the Put Notice; provided that Executive may not exercise the Put Right for more than the lesser of (A) 20,000 units (subject to appropriate adjustment for any stock split, stock dividend, reclassification, subdivision or reorganization, recapitalization or similar event) and (B) such number of units as Executive owns on the date the Put Notice is delivered.

 

“Senior Indenture” means the indenture, dated as of December 29, 2011, among the Company, the guarantors party thereto and Wilmington Trust National Association, as trustee (as the same may be amended, modified, supplemented, refinanced or replaced from time to time).

 

5.                                      Other Agreements.  On the Effective Date, Executive shall execute and deliver to the Company the Restrictive Covenant Agreement.

 

6.                                      Representations, Warranties and Agreements.

 

(a)                                 Executive hereby represents and warrants, for himself and on behalf of his attorneys, heirs, assigns, successors, executors and administrators, that as of the date hereof:  (i) there are no agreements, oral or written, to which Executive is a party or by which Executive is bound that prevent or make unlawful Executive’s execution and delivery of, or performance under, this Agreement; (ii) to the best actual knowledge and belief of Executive, none of the information supplied by Executive to Company in connection with Executive’s employment by Company misstated a material fact or omitted material facts necessary to make the information supplied by Executive not materially misleading; (iii) Executive does not have any business or employment relationship that creates a conflict between the interests of Executive and the Company or any of its subsidiaries; (iv) Executive has no claim to, and no promise has been made by the Company or any of its subsidiaries to Executive for, incentive or any other kind of compensation prior to the Effective Date other than (A) accrued but unpaid salary and unreimbursed business expenses properly incurred by Executive in the ordinary course of business, (B) compensation and benefits disclosed in the Compensation Discussion and Analysis and the accompanying compensation tables in the Company’s definitive proxy statement filed with the Securities Exchange Commission on July 27, 2011, and (C) rental income generated by certain real property leased by Executive or his Affiliates to the Company as disclosed on Exhibit A to the lease letter agreement, dated October 11, 2011, among Parent, the Company, Executive and the other tenants party thereto; and (v) other than claims to enforce his rights under the Rollover Letter or the Stockholders Agreement, Executive has no claim, and Executive

 

11

 

is not aware of any facts that exist to support any claim by Executive, against the Company or any of its subsidiaries of any nature whatsoever, whether in Executive’s capacity as an employee, officer, director, or shareholder of the Company.

 

(b)                                 During the Term, Executive will not disclose to the Company, or use, or induce the Company to use, any proprietary information or trade secrets of others.

 

7.                                      Section 409A.  Notwithstanding anything herein to the contrary:

 

(a)                                 Although the Company does not guarantee to Executive any particular tax treatment relating to the payments and benefits under this Agreement, it is intended that such payments and benefits be exempt from, or comply with, Section 409A of the Internal Revenue Code (the “Code”) and the regulations and guidance promulgated thereunder (collectively, “Section 409A”), and all provisions of this Agreement shall be administered, interpreted and construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A.  Notwithstanding any other provision hereof, in no event shall the Company be liable for, or be required to indemnify Executive for, any liability of Executive for taxes or penalties under Section 409A.

 

(b)                                 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 unless such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of any such provision, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”

 

(c)                                  With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided, that this clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) such payments shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred.

 

(d)                                 Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within ten calendar days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.  If under this Agreement, an amount is to be paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment.

 

(e)                                  Notwithstanding any other provision hereof, if Executive is, as of the date of termination, a “specified employee” for purposes of Treas.  Reg. § 1.409A-1(i), then any amount payable to Executive pursuant to Section 4 hereof that is neither a short-term deferral within the

 

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meaning of Treas.  Reg. § 1.409A-1(b)(4) nor within the involuntary separation pay limit under Treas.  Reg. § 1.409A-1(b)(9)(iii)(A) will not be paid before the date that is six months after the date of termination, or if earlier, the date of Executive’s death, to the extent such delay is necessary in order to avoid the imposition of taxes under Section 409A.  Any payments to which Executive would otherwise be entitled during such non-payment period will be accumulated and paid or otherwise provided to Executive on the first day of the seventh month following such date of termination, or if earlier, within 30 calendar days after Executive’s death to his surviving spouse (or to his estate if Executive’s spouse does not survive him).

 

8.                                      Miscellaneous.

 

(a)                                 Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to conflict of law principles.

 

(b)                                 Assignment and Transfer.  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.

 

(c)                                  Entire Agreement.  This Agreement and its Exhibits, together with the Stock Option Plan and any agreement under which the Options are granted, contain the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersede any prior or contemporaneous written or oral agreements, representations and warranties between them respecting the subject matter hereof.  Without limiting the foregoing, this Agreement expressly supersedes all prior agreements (written or oral) relating to Executive’s employment with the Company or any of its subsidiaries.

 

(d)                                 Amendment and Waiver; Rights Cumulative.  This Agreement may be amended, waived or discharged only by a writing signed by Executive and by a duly authorized representative of the Company (other than 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.  All waivers by either party hereto must be contained in a written instrument signed by the party to be charged and, in the case of the Company, by a duly authorized representative of the Company (other than Executive).  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.

 

(e)                                  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.

 

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(f)                                   Dispute Resolution.  Executive shall be bound by Parent’s mandatory dispute resolution procedures as may be in effect from time to time with respect to all matters pertaining to his employment (including termination of employment) with the Company, which procedures include mandatory arbitration to resolve all issues, and shall execute the Arbitration Agreement attached hereto as Exhibit B and incorporated herein.  This Section 8(f) shall survive the termination of Executive’s employment and the expiration or termination of this Agreement.

 

(g)                                  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 by (i) by nationally recognized overnight courier delivery for next business day delivery, (ii) by hand delivery, or (iii) by facsimile or electronic mail transmission followed by overnight delivery the next business day to the addresses listed below, and shall be deemed given on the date of initial delivery.  Legal counsel for the respective parties may send to the other party any notices, requests, demands or other communications required or permitted to be given hereunder by such party.

 

If to Executive:

 

At the address listed in the Company’s personnel records.

 

If to the Company:

 

99 Cents Only Stores
 4000 Union Pacific Avenue
 Commerce, CA 90023
 Telephone: (323) 980-8145
 Facsimile: (323) 307-9611
 Attention: General Counsel

 

with copies to:

 

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

 

and

 

Proskauer Rose LLP
 2049 Century Park East, Suite 3200
 Los Angeles, CA 90067
 Telephone: (310) 284-4582
 Facsimile: (310) 557-2193 
 Attention: Michael A. Woronoff, Esq.

 

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(h)                                 Further Assurances.  Executive shall, upon the Company’s reasonable request, execute such further documents and take such other actions as may be permitted or reasonably required by law to implement the purposes, objectives, terms, and provisions of this Agreement.

 

(i)                                     Interpretation.  The headings and captions of this Agreement are provided for convenience only and are intended to have no effect in construing or interpreting this Agreement.  The language in all parts of this Agreement shall be in all cases construed according to its fair meaning and not strictly for or against the Company or Executive.  As used herein:  (i)  reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof; (ii) reference to any law, rule or regulation means such law, rule or regulation as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any law, rule or regulation means that provision of such law, rule or regulation from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (iii) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular article, section or other provision hereof; (iv) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; (v) “or” is used in the inclusive sense of “and/or”; and (vi) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

 

(j)                                    Acknowledgement.  Executive understands the terms and conditions set forth in this Agreement and acknowledges having had adequate time to consider whether to agree to the terms and conditions and to consult a lawyer or other advisor of Executive’s choice.

 

(k)                                 Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be considered to have the force and effect of an original.

 

(l)                                     Each Party the Drafter.  Executive understands the terms and conditions set forth in this Agreement and acknowledges having had adequate time to consider whether to agree to the terms and conditions and to consult a lawyer or other advisor of Executive’s choice.  This Agreement and the provisions contained herein shall not be construed or interpreted for or against any party to this Agreement because that party drafted or caused that party’s legal representative to draft any of its provisions.

 

(m)                             Time of Essence.  Time is and shall be of the essence in connection with this Agreement and the terms and conditions contained herein.

 

(n)                                 Survival.  To the extent not otherwise expressly provided in this Agreement, all rights and obligations of any party in Sections 4, 6 and 8 of this Agreement not fully satisfied or performed, as applicable, on the date Executive’s employment is terminated, shall survive the termination of Executive’s employment and the expiration or termination of this Agreement

 

(o)                                 Defined Terms.  As used in this Agreement, the following terms shall have the meanings ascribed to them below:

 

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“Affiliate” means, with respect to any Person, any other Person that controls, is controlled by, or is under common control with such Person.  The term “control,” as used in this definition, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.  “Controlled” and “controlling” have meanings correlative to the foregoing.

 

“Ares” means Ares Corporate Opportunities Fund III, L.P. or any of its Affiliates.

 

“beneficial ownership” has the meaning set forth in Rule 13d-3 promulgated under the Exchange Act.

 

“Change in Control” means the occurrence of any of the following:

 

(i)                                     the acquisition (including any acquisition through purchase, reorganization, merger, consolidation or similar transaction), directly or indirectly, in one or more transactions by a Person (other than Ares or CPPIB, but not including any portfolio company of any of the foregoing) of beneficial ownership of shares or securities representing 50% or more of the total voting power of the Voting Securities, in each case calculated on a fully diluted basis after giving effect to such acquisition; provided, that none of the following shall constitute a Change in Control under this clause (i): (A) any acquisition by any Permitted Holder, (B) any acquisition that does not result in any Person (other than a Permitted Holder), beneficially owning shares or securities representing 50% or more of the total voting power of the Voting Securities, and (C) any acquisition, after which Parent or its Affiliates have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Parent Board.

 

(ii)                                  after an Initial Public Offering, any election has occurred of Persons to the Parent Board that causes two-thirds of the Parent Board to consist of Persons other than (A) members of the Parent Board on the Effective Date, (B) Persons who were nominated for election as members of the Parent Board at a time when two-thirds of the Parent Board consisted of Persons who were members of the Parent Board on the Effective Date and (C) Persons who were designated for election as members of the Parent Board pursuant to the Stockholders Agreement;  provided that any Person nominated for election by a Parent Board at least two-thirds of whom constituted Persons described in clauses (A), (B) or (C) or by Persons who were themselves nominated by such board shall, for this purpose, be deemed to have been nominated by a Parent Board composed of Persons described in clause (A); or

 

(iii)                               (A) a complete liquidation or dissolution of Parent or (B) the sale or other disposition (including by means of a merger or consolidation), directly or indirectly, of all or substantially all of the assets of Parent and its subsidiaries, taken as a whole, to any Person other than a Person at least 50% of whose voting securities, measured by voting power rather than number of securities, are owned and controlled by one or more Permitted Holders.

 

“CPPIB” means Canada Pension Plan Investment Board or any of its Affiliates.

 

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

 

16

 

“group” shall have the meaning given thereto in Section 13(d)(3) or 14(d)(2) of the Exchange Act.

 

“Parent Board” means the board of directors of Parent.

 

“Permitted Holders” means the stockholders of Parent immediately following the consummation of the Merger and their respective Affiliates and Permitted Transferees, and any group consisting solely of such Persons.

 

“Permitted Transferees” shall have the meaning ascribed thereto in the Stockholders Agreement, but, in the case of any investment partnership, shall exclude the limited partners of such partnership and its portfolio companies.

 

“Person” means any individual, entity (including any employee benefit plan or any trust for an employee benefit plan) or group.

 

“Restrictive Covenant Agreement” means the Non-Competition, Non-Solicitation and Confidentiality Agreement attached hereto as Exhibit A, as the same may be amended, modified, supplemented or replaced from time to time.

 

“Rollover Letter” means the agreement entered into simultaneously with the signing of the Merger Agreement by Parent, Executive and the other parties thereto, as the same may be amended, modified, supplemented or replaced from time to time.

 

“Stock Option Plan” means Parent’s stock option plan dated on or about the date hereof, as the same may be amended, modified, supplemented or replaced from time to time.

 

“Stockholders Agreement” means the Stockholders Agreement relating to Parent entered into simultaneously with the closing of the Merger, as the same may be amended, modified, supplemented or replaced from time to time.

 

“Voting Securities” means the securities of Parent entitled to vote in the election of directors of the Parent Board.

 

[Remainder of Page Intentionally Left Blank / Signatures on Next Page]

 

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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above.

 

 

	
99   CENTS ONLY STORES
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Russell Wolpert
    	
 
    
	
Name:   
    	
Russell   Wolpert
    	
 
    
	
Title:   
    	
Secretary
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
NUMBER   HOLDINGS, INC.
    	
 
    
	
 
    	
 
    
	
By:   
    	
/s/   Russell Wolpert
    	
 
    
	
Name:   
    	
Russell   Wolpert
    	
 
    
	
Title:   
    	
Secretary
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
HOWARD   GOLD
    	
 
    
	
 
    	
 
    
	
/s/   Howard Gold
    	
 
    

 

18

 

EXHIBIT A

 

NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY 
 AGREEMENT

 

19

 

EXHIBIT B

 

ARBITRATION AGREEMENT

 

20

 

EXHIBIT C

 

RELEASE

 

21Exhibit 10.34

 

NUMBER HOLDINGS, INC.

 

 

2012 STOCK INCENTIVE PLAN

 

 

Adopted as of February 27, 2012

 

 

NUMBER HOLDINGS, INC.

 

 

2012 STOCK INCENTIVE PLAN

 

 

ARTICLE I

 

PURPOSE

 

This 2012 Stock Incentive Plan is established in connection with the merger (the “Merger”) of 99¢ Only Stores, a California corporation, with Number Merger Sub, Inc., a California corporation, to become a subsidiary of Number Holdings, Inc., a Delaware corporation.  The purpose of this 2012 Stock Incentive Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer Eligible Employees, Consultants and Non-Employee Directors stock-based incentives in the Company to attract, retain and reward such individuals and strengthen the mutuality of interests between such individuals and the Company’s stockholders.

 

ARTICLE II

 

DEFINITIONS

 

For purposes of the Plan, the following terms shall have the following meanings:

 

2.1                               “Acquisition Event” means a merger or consolidation in which the Company is not the surviving entity, any transaction that results in the acquisition of all or substantially all of the Company’s outstanding common stock by a Person, or the sale or Transfer of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole.  The occurrence of an Acquisition Event shall be determined by the Committee.

 

2.2                               “Affiliate” of any specified Person means any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person.  No Person shall be deemed to be an Affiliate of another Person solely by virtue of the fact that both Persons own shares of the capital stock of the Company.

 

2.3                               “Ares” means Ares Corporate Opportunities Fund III, L.P. or any of its Affiliates.

 

2.4                                “Award” means any award under the Plan of any Stock Option, any Restricted Stock or any Other Stock-Based Award.  All Awards shall be subject to the terms of a written or electronic agreement executed by the Company and the Participant.  

 

 

Any reference herein to an agreement in writing shall be deemed to include an electronic writing to the extent permitted by applicable law.

 

2.5                               “Board” means the Board of Directors of the Company.

 

2.6                               “Bylaws” means the Bylaws of the Company, as amended or amended and restated from time to time.

 

2.7                               “Business” means, at any time of determination, (a) the retail sale (including importing, distributing and other levels in the supply chain) of discount, “deep discount” or “extreme value” groceries and other consumer goods, or the private labeling of “deep discount” or “extreme value” groceries and other consumer goods, (b) any business or activity then conducted by the Company or any Subsidiary, and (c) any business that the Company or any Subsidiary has a bona fide intention to conduct and of which the Participant is aware at such time.

 

2.8                               “Certificate of Incorporation” means the Company’s Restated Certificate of Incorporation, as amended or amended and restated from time to time.

 

2.9                               “Cause” means with respect to a Participant’s Termination of Employment or Termination of Consultancy, the following: (a) in the case where there is no employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate of the Company and the Participant at the time of the grant of the Award (or where there is such an agreement but it does not define “cause” (or words of like import) or where it only applies upon the occurrence of a change in control and one has not yet taken place), termination due to: (i) the Participant’s (x) being indicted for or charged with a felony under United States or applicable state law or (y) conviction of, or plea of guilty or nolo contendere to a misdemeanor where imprisonment is imposed (other than for a traffic-related offense); (ii) perpetration by the Participant of an illegal act, dishonesty, or fraud that could cause economic injury to the Company or any Subsidiary or any act of moral turpitude by the Participant; (iii) the Participant’s insubordination, refusal to perform his or her duties or responsibilities for any reason other than illness or incapacity or unsatisfactory performance of his or her duties for the Company or any Subsidiary; (iv) willful and deliberate failure by the Participant to perform the Participant’s duties after the Participant has been given notice and an opportunity to effectuate a cure as determined by the Committee; (v) the Participant’s willful misconduct or gross negligence with regard to the Company or any Subsidiary; (vi) the Participant’s unlawful appropriation of a material corporate opportunity; or (vii) the Participant’s breach of agreement with the Company or any of its Affiliates, including any confidentiality or other restrictive covenant entered into between the Participant and the Company or any of its Affiliates or (b) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate of the Company and the Participant at the time of the grant of the Award that defines “cause” (or words of like import), “cause” as defined under such agreement; provided, that with regard to any agreement under which the definition of “cause” only applies upon an occurrence of a change in control, such definition of “cause” shall not apply until 

 

2

 

a change in control actually takes place and then only with regard to a termination thereafter.  With respect to a Participant’s Termination of Directorship, “cause” means an act or failure to act that constitutes cause for removal of a director under applicable Delaware law.

 

2.10                        “Change in Control” means, unless otherwise determined by the Committee in the applicable Award agreement, the occurrence of any of the following:

 

(a)                                 the acquisition (including any acquisition through purchase, reorganization, merger, consolidation or similar transaction), directly or indirectly, in one or more transactions by a Person (other than Ares or CPPIB, but not including any portfolio company of any of the foregoing) of beneficial ownership of shares or securities representing 50% or more of the total voting power of the Voting Securities, in each case calculated on a fully diluted basis after giving effect to such acquisition; provided that none of the following shall constitute a Change in Control under this clause (a): (i) any acquisition by any Permitted Holder, (ii) any acquisition that does not result in any Person (other than a Permitted Holder), beneficially owning shares or securities representing 50% or more of the total voting power of the Voting Securities, and (iii) any acquisition, after which the Company or its Affiliates have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board;

 

(b)                                 after an Initial Public Offering, any election has occurred of Persons to the Board that causes two-thirds of the Board to consist of Persons other than (i) members of the Board on the Effective Date, (ii) Persons who were nominated for election as members of the Board at a time when two-thirds of the Board consisted of Persons who were members of the Board on the Effective Date and (iii) Persons who were designated for election as members of the Board pursuant to the Stockholders Agreement;  provided that any Person nominated for election by a Board at least two-thirds of whom constituted Persons described in clauses (i), (ii) or (iii) or by Persons who were themselves nominated by such board shall, for this purpose, be deemed to have been nominated by a Board composed of Persons described in clause (i); or

 

(c)                                  (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition (including by means of a merger or consolidation), directly or indirectly, of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any Person other than a Person at least 50% of whose voting securities, measured by voting power rather than number of securities, are owned and controlled by one or more Permitted Holders.

 

Notwithstanding the foregoing, for purposes of the Plan, unless the Committee provides otherwise in an Award agreement, the completion of an Initial Public Offering shall not be considered a Change in Control.

 

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2.11                        “Chief Executive Officer” means the chief executive officer of the Company.

 

2.12                        “Class A Common Stock” means the Class A Common Stock of the Company, par value $0.001 per share.

 

2.13                        “Class B Common Stock” means the Class B Common Stock of the Company, par value $0.001 per share.

 

2.14                        “Code” means the Internal Revenue Code of 1986, as amended.  Any reference to any section of the Code shall also be a reference to any successor provision and any Treasury Regulation promulgated thereunder.

 

2.15                        “Committee” means (a) prior to a Registration Date, a committee or subcommittee of the Board appointed from time to time by the Board and (b) following a Registration Date, a committee or subcommittee of the Board appointed from time to time by the Board that may consist solely of two or more “non-employee directors” as defined in Rule 16b-3 and, to the extent required by applicable stock exchange rules, who are “independent” as defined under applicable stock exchange rules; provided that if for any reason the appointed Committee does not meet the requirements of Rule 16b-3, such noncompliance shall not affect the validity of grants, interpretations or other actions of the Committee.  With respect to the application of the Plan to Non-Employee Directors, the Committee shall mean the Board.  Notwithstanding the foregoing, if and to the extent that no Committee exists that has the authority to administer the Plan, the functions of the Committee shall be exercised by the Board and all references herein to the Committee shall be deemed references to the Board.

 

2.16                        “Common Stock” means the Class A Common Stock and the Class B Common Stock, collectively.

 

2.17                        “Company” means Number Holdings, Inc., a Delaware corporation, and its successors by operation of law.

 

2.18                        “Competitor” means any Person (other than the Company and its Affiliates) engaged in the Business.

 

2.19                        “Consultant” means any natural person who (a) provides bona fide consulting or advisory services to the Company or any of its Affiliates pursuant to a written agreement, which services are not in connection with the offer and sale of securities in a capital-raising transaction, and (b) who does not, directly or indirectly, promote or maintain a market for the Company’s or any of its Affiliates’ securities.

 

2.20                        “control” means, with respect to any Person, the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and words such as “controlled” and “controlling” have meanings correlative to the foregoing.

 

4

 

2.21                        “CPPIB” means Canada Pension Plan Investment Board or any of its Affiliates.

 

2.22                        “Detrimental Activity” means:

 

(a)                                 disclosing, divulging, furnishing or making available to any Person, except as necessary in the furtherance of Participant’s responsibilities to the Company or any of its Affiliates, either during or subsequent to Participant’s service relationship with the Company or any of its Affiliates, any knowledge or information with respect to confidential or proprietary information, methods, processes, plans or materials of the Company or any of its Affiliates, or with respect to any other confidential or proprietary aspects of the business of the Company or any of its Affiliates, acquired by the Participant at any time prior to the Participant’s Termination;

 

(b)                                 any activity while employed by, or performing services for, the Company or any of its Affiliates that results, or if known could result, in the Participant’s Termination for Cause;

 

(c)                                  (i) directly or indirectly soliciting, enticing or inducing any employee of the Company or any of its Affiliates to be employed by any Person that is, directly or indirectly, engaged in the Business; (ii) directly or indirectly approaching any such employee for these purposes; (iii) authorizing or knowingly approving the taking of such actions by other Persons on behalf of any such Person, or assisting any such Person in taking such action; or (iv) directly or directly soliciting Suppliers to provide products or services to support a Competitor; or

 

(d)                                 a material breach of any agreement between the Participant and the Company or an Affiliate of the Company.

 

2.23                        “Disability” means with respect to a Participant’s Termination, a “Total Disability” as defined under the Company’s Long-Term Disability Plan in effect at the time of the disability.  Notwithstanding the foregoing, if the Company does not have a Long-Term Disability Plan in effect at the time of the Disability or, for Awards that are subject to Section 409A of the Code, if the foregoing definition does not comply with Section 409A of the Code, “Disability” shall mean that a Participant is disabled under Section 409A(a)(2)(C)(i) or (ii) of the Code.

 

2.24                        “Effective Date” means the effective date of the Plan as defined in Article XV.

 

2.25                        “Eligible Employee” means each employee of the Company or one of its Affiliates.

 

2.26                         “Exchange Act” means the Securities Exchange Act of 1934, as 

 

5

 

amended, and all rules and regulations promulgated thereunder.  Any references to any section of the Exchange Act shall also be a reference to any successor provision.

 

2.27                        “Exercisable Awards” has the meaning set forth in Section 4.2(d).

 

2.28                        “Fair Market Value” means, unless otherwise required by any applicable provision of the Code, with respect to a share of any class of Common Stock or other security, as of any date, (i) if such class of Common Stock or other security is not then traded on an established securities market, the fair market value of a share of such class of Common Stock or other security as determined by the Committee in whatever manner it considers appropriate, taking into account the requirements of Section 422 or 409A of the Code, as applicable, or (ii) if such class of Common Stock or other security is then traded on an established securities market, the closing price reported on the principal market on which such class or security is traded on such date or, if there is no sale of such class of Common Stock or other security on such date, then on the last previous date on which there was a sale.

 

2.29                        “Family Member” means “family member” as defined in Rule 701 under the Securities Act or, following the filing of a Form S-8 pursuant to the Securities Act with respect to the Plan, as defined in Section A.1.(5) of the general instructions of Form S-8, as may be amended from time to time.

 

2.30                         “Good Reason” with respect to a Participant’s voluntary Termination of Employment shall have the meaning ascribed to such term under an employment or similar agreement in effect between the Company and the Participant; a Participant shall not have “Good Reason” in the absence of such an agreement defining such term.

 

2.31                        “Incentive Stock Option” means any Stock Option awarded to an Eligible Employee of the Company, its Subsidiaries and its Parent (if any) under the Plan intended to be and designated as an “Incentive Stock Option” within the meaning of Section 422 of the Code.

 

2.32                        “Initial Public Offering” means an initial public offering of common stock of the Company pursuant to an effective registration statement filed under the 1933 Act (excluding registration statements filed on Form S-8, any similar successor form or another form used for a purpose similar to the intended use for such forms).

 

2.33                        “Joinder Agreement” means a joinder agreement to the Stockholders Agreement or any similar joinder agreement to a stockholders agreement (or similar agreement) entered into by the Company after the Effective Date.

 

2.34                        “Non-Employee Director” means a non-employee director of the Company as defined in Rule 16b-3.

 

2.35                        “Non-Qualified Stock Option” means any Stock Option awarded under the Plan that is not an Incentive Stock Option.

 

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2.36                        “Other Stock-Based Award” means an Award under Article VIII of this Plan that is valued in whole or in part by reference to, or is payable in or otherwise based on, Common Stock, including an Award valued by reference to an Affiliate.

 

2.37                        “Parent” means any parent corporation of the Company within the meaning of Section 424(e) of the Code.

 

2.38                        “Participant” means an Eligible Employee, Consultant or Non-Employee Director to whom an Award has been granted pursuant to the Plan.

 

2.39                        “Permitted Holder” means the stockholders of the Company immediately following the consummation of the Merger and their respective Affiliates and Permitted Transferees, and any group consisting solely of such Persons.

 

2.40                        “Permitted Transferee” means:

 

(a)                               with respect to a Participant or any stockholder of the Company who is a natural person, (i) such person’s spouse, parents, parents-in-law, descendants, nephews, nieces, brothers, sisters, brothers-in-law, sisters-in-law and children-in-law, (ii) such person’s heirs, legatees, beneficiaries or devisees and (iii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners or other owners of which consist entirely of such person or such other persons referred to in clauses (i) and (ii) above;

 

(b)                               with respect to a trust that is a Permitted Transferee pursuant to section (a)(iii) above, any other trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners or other owners of which consist entirely of such trust or such trust’s beneficiaries;

 

(c)                                with respect to any stockholder of the Company that is an investment fund, an investment partnership or an investment account, any Related Person of such Stockholder; and

 

(d)                               with respect to any stockholder of the Company that is an entity and to which clause (c) above is not applicable, any controlled Affiliate of such Stockholder so long as such transferee remains a controlled Affiliate of such stockholder of the Company following the applicable Transfer;

 

provided that, in any of such cases, such Permitted Transferee is an accredited investor within the meaning of Regulation D under the 1933 Act.

 

2.41                         “Person” means any individual, entity (including any employee benefit plan or any trust for an employee benefit plan) or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision).

 

2.42                        “Plan” means this Number Holdings, Inc. 2012 Stock Incentive Plan, as amended from time to time.

 

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2.43                        “Registration Date” means the first date after the Effective Date (a) on which the Company consummates an Initial Public Offering or (b) any class of common equity securities of the Company is required to be registered under Section 12 of the Exchange Act.

 

2.44                        “Related Person” means, with respect to any Person, (a) an Affiliate of such Person, (b) any investment manager, investment advisor, managing member or general partner of such Person, (c) any investment fund, investment partnership, investment account or other investment Person whose investment manager, investment advisor, managing member or general partner is such Person or a Related Person of such Person, and (d) any equity investor, member, partner or officer of such Person.

 

2.45                        “Restricted Stock” means an Award of shares of Common Stock that is subject to restrictions under Article VII.

 

2.46                        “Restriction Period” has the meaning set forth in Section 7.1(b).

 

2.47                        “Rule 16b-3” means Rule 16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor provision.

 

2.48                        “Section 4.2 Event” has the meaning set forth in Section 4.2(b).

 

2.49                        “Section 409A of the Code” means the nonqualified deferred compensation rules under Section 409A of the Code and any applicable Treasury Regulation or other official guidance promulgated thereunder.

 

2.50                        “Securities Act” means the Securities Act of 1933, and all rules and regulations promulgated thereunder.  Any reference to any section of the Securities Act shall also be a reference to any successor provision.

 

2.51                        “Stock Option” or “Option” means any option to purchase shares of Common Stock granted to Eligible Employees, Non-Employee Directors or Consultants pursuant to Article VI.

 

2.52                        “Stockholders Agreement” means the Stockholders Agreement, dated January 13, 2012, by and among the Company, Ares, CPPIB and the other stockholders party thereto, as the same may be amended, modified, supplemented or replaced from time to time.

 

2.53                        “Subsidiary” means any subsidiary corporation of the Company within the meaning of Section 424(f) of the Code.

 

2.54                        “Supplier” means any Person who supplies products or services to the Company or any Subsidiary and with whom a Participant had material business-related contact (whether in person, by telephone or by paper or electronic correspondence) on behalf of the Company or any of its Affiliates.

 

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2.55                        “Ten Percent Stockholder” means an individual described in Section 422(b) of the Code.

 

2.56                        “Termination” means a Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable.

 

2.57                        “Termination of Consultancy” means:  (a) that the Participant is no longer acting as a consultant to the Company or one of its Affiliates; or (b) that an entity that is retaining a Participant as a Consultant ceases to be an Affiliate of the Company unless the Participant otherwise is, or thereupon becomes, a Consultant to the Company or another of its Affiliates at the time the entity ceases to be an Affiliate of the Company.  In the event that a Consultant becomes an Eligible Employee or a Non-Employee Director upon the termination of his or her consultancy, unless otherwise determined by the Committee, no Termination of Consultancy shall be deemed to occur until such time as such Consultant is no longer a Consultant, an Eligible Employee or a Non-Employee Director.  Notwithstanding the foregoing, the Committee may otherwise define Termination of Consultancy in the Award agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Consultancy thereafter.

 

2.58                        “Termination of Directorship” means that a Participant has ceased to be a Non-Employee Director; except that if such Participant becomes an Eligible Employee or a Consultant upon the termination of his or her directorship, his or her ceasing to be a director of the Company shall not be treated as a Termination of Directorship unless and until such Participant has a subsequent Termination of Employment or Termination of Consultancy, as the case may be.

 

2.59                        “Termination of Employment” means: (a) a termination of employment (for reasons other than a military or personal leave of absence granted by the Company) of a Participant from the Company and its Affiliates; or (b) that an entity that is employing a Participant ceases to be an Affiliate of the Company, unless the Participant otherwise is, or thereupon becomes, employed by the Company or another Affiliate of the Company at the time the entity ceases to be an Affiliate of the Company.  In the event that an Eligible Employee becomes a Consultant or a Non-Employee Director upon the termination of his or her employment, unless otherwise determined by the Committee, no Termination of Employment shall be deemed to occur until such time as such Eligible Employee is no longer an Eligible Employee, a Consultant or a Non-Employee Director.  Notwithstanding the foregoing, the Committee may otherwise define Termination of Employment in the Award agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Employment thereafter.

 

2.60                        “Transfer” means: (a) when used as a noun, any direct or indirect transfer, offer, sale, assignment, pledge, lease, donation, grant, gift, bequest, hypothecation, encumbrance or other disposition (including the issuance of equity in a Person), whether for value or no value and whether voluntary or involuntary (including by operation of law), and (b) when used as a verb, to directly or indirectly transfer, offer, sell, assign, pledge, lease, donate, grant, gift, bequest, encumber, charge, hypothecate or otherwise dispose of (including the issuance of equity in a Person) whether for value or

 

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for no value and whether voluntarily or involuntarily (including by operation of law).  “Transferable” and “Transferred” shall have a correlative meaning.

 

2.61                        “Voting Securities” means the securities of Parent entitled to vote in the election of directors of the Board.

 

ARTICLE III

 

ADMINISTRATION

 

3.1                               The Committee.  The Plan shall be administered and interpreted by the Committee.

 

3.2                               Grants of Awards.  The Committee shall have full authority to grant Awards pursuant to the terms of the Plan, to Eligible Employees, Consultants and Non-Employee Directors.  In particular, the Committee shall have the authority:

 

(a)                                 to select the Eligible Employees, Consultants and Non-Employee Directors to whom Awards may from time to time be granted hereunder;

 

(b)                                 to determine whether and to what extent Awards are to be granted hereunder to one or more Eligible Employees, Consultants or Non-Employee Directors;

 

(c)                                  to determine, in accordance with the terms of the Plan, the number of shares, and class, of Common Stock to be covered by each Award granted hereunder;

 

(d)                                 to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder (including the exercise or purchase price (if any), any restriction or limitation, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver thereof), based on such factors, if any, as the Committee shall determine);

 

(e)                                  to determine whether and under what circumstances the exercise price of any Stock Option may be paid in cash or Common Stock under Section 6.3(d);

 

(f)                                   to determine whether, to what extent and under what circumstances to provide loans (which may be on a recourse basis and shall bear interest at the rate the Committee shall provide) to Participants in order to exercise Awards or to purchase or pay for shares of Common Stock issuable pursuant to Awards under the Plan; provided that (i) on and after the Registration Date executive officers and directors are not eligible to receive such loans, and (ii) all outstanding loans shall be repaid before the Registration Date;

 

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(g)                                  to determine whether a Stock Option is an Incentive Stock Option or Non-Qualified Stock Option;

 

(h)                                 to determine at the time of grant whether to require an Eligible Employee, Non-Employee Director or Consultant, as a condition of the granting of any Stock Option, not to Transfer shares of Common Stock acquired pursuant to the exercise of a Stock Option for a period of time as determined by the Committee, following the date of acquisition of such shares of Common Stock;

 

(i)                                     to modify, extend or renew an Award, subject to Article XI and Section 6.3(f); and

 

(j)                                    generally, to exercise such powers and to perform such acts as the Committee deems necessary or expedient to promote the best interests of the Company that are not in conflict with the provisions of the Plan.

 

The Committee may (i) designate employees of the Company and its Affiliates and advisors (including counsel and consultants) to assist the Committee in the administration of the Plan, (ii) rely upon any opinion received from any such advisor and (iii) (to the extent permitted by applicable law and applicable exchange rules) may grant authority to officers or employees of the Company and its Affiliates to grant Awards or execute agreements or other documents on behalf of the Committee.  Without limiting the foregoing, the Board or the Committee may (to the extent permitted by applicable law and applicable exchange rules) delegate to the Chief Executive Officer, to a committee of officers or employees of the Company or one of its Subsidiaries, or to a committee of one or more members of the Board, the authority to (a) grant Awards pursuant to the terms of the Plan covering up to such number of shares of Common Stock per individual, per year, as the Board or the Committee shall determine, to officers and employees of the Company and its Subsidiaries and Affiliates who are neither (i) subject to Section 16 of the Exchange Act, nor (ii) “covered employees” within the meaning of Code Section 162(m)(3) and (b) grant Awards pursuant to the terms of the Plan covering up to such number of shares of Common Stock per individual as the Board or the Committee shall determine, as an inducement to an individual to accept an offer of employment, including Awards to individuals who may become, upon accepting an offer of employment, (i) officers of the Company and its Subsidiaries and Affiliates who are subject to Section 16 of the Exchange Act, or (ii) “covered employees” within the meaning of Code Section 162(m)(3).  Any such delegation so made shall be consistent with recommendations made by the Committee to the Board regarding non-Chief Executive Officer compensation, incentive-compensation plans and equity-based plans.  When such delegation is so made by the Committee, the Chief Executive Officer or such committee shall have the authority of the Committee described in Sections 3.2(a), 3.2(b), 3.2(c) and 3.2(d) with respect to the granting of such Awards; provided that the Committee may limit or qualify the authority under any such delegation in any manner it deems appropriate.

 

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3.3                               Guidelines.  Subject to Article XI, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan and perform all acts, including the delegation of its responsibilities (to the extent permitted by applicable law and applicable stock exchange rules), as it shall, from time to time, deem advisable; to construe and interpret the terms and provisions of the Plan and any Award granted under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan.  The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to effectuate the purpose and intent of the Plan.  The Committee may adopt special guidelines and provisions for Persons who are residing in or employed in, or subject to, the taxes of, any domestic or foreign jurisdictions to comply with applicable tax and securities laws of such domestic or foreign jurisdictions.  To the extent applicable, the Plan is intended to comply with the applicable requirements of Rule 16b-3 and shall be limited, construed and interpreted in a manner so as to comply therewith.

 

3.4                               Decisions Final.  Any decision, interpretation, determination, evaluation, election, approval, authorization, appointment, consent or other action made or taken by or at the direction of the Company, the Board or the Committee (or any of its members) arising out of or in connection with the Plan shall be within the sole and absolute discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and all employees and Participants, Permitted Transferees and their respective heirs, executors, administrators, successors and assigns.  Nothing in the Plan shall obligate the Company, the Board or the Committee (or any of its members) to treat any Participants alike, and the exercise of any power or discretion by any such Person with respect to any Participant shall not create any obligation on the part of such Person to take any similar action in the case of any other Participant; it being understood that any power or discretion of the Company, the Board or the Committee (or any of its members) shall be treated as having been so conferred as to each Participant separately.

 

3.5                               Procedures.  If the Committee is appointed, the Board shall designate one of the members of the Committee as chairman and the Committee shall hold meetings, subject to the Bylaws of the Company, at such times and places as it shall deem advisable, including by telephone conference or by written consent to the extent permitted by applicable law.  A majority of the Committee members shall constitute a quorum.  All determinations of the Committee shall be made by a majority of its members.  Any decision or determination reduced to writing and signed by all the Committee members in accordance with the Bylaws of the Company, shall be as fully effective as if it had been made by a vote at a meeting duly called and held.  The Committee shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.

 

3.6                               Limitation of Liability; Indemnification.

 

(a)                                 The Committee, its members and any Person designated pursuant to Section 3.3 shall not be liable for any action or determination made in good faith with respect to the Plan.  To the maximum extent permitted by applicable

 

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law, no officer or former officer of the Company or any of its Subsidiaries or member or former member of the Committee or of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted under it.

 

(b)                                 To the maximum extent permitted by applicable law and the Certificate of Incorporation and Bylaws of the Company and to the extent not covered by insurance directly insuring such person, each officer or employee of the Company or any of its Affiliates and member or former member of the Committee or the Board shall be indemnified and held harmless by the Company against any cost or expense (including reasonable fees of counsel reasonably acceptable to the Committee) or liability (including any sum paid in settlement of a claim with the approval of the Committee), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest extent permitted, arising out of any act or omission to act in connection with the administration of the Plan, except to the extent arising out of such officer’s, employee’s, member’s or former officer’s, employee’s or member’s own fraud or bad faith.  Such indemnification shall be in addition to any rights of indemnification the employees, officers, directors or members or former employees, officers, directors or members may have under applicable law or under the Certificate of Incorporation or Bylaws of the Company or any of its Affiliates.  Notwithstanding anything else herein, this indemnification will not apply to the actions or determinations made by an individual with regard to Awards granted to him or her under the Plan.

 

3.7                               Stockholders Agreement.  Notwithstanding anything herein to the contrary, the Plan and the operation and administration of the Plan (including any action taken by the Committee) shall be subject to the terms and conditions set forth in the Stockholders Agreement, including Sections 4.06(c) and 4.06(e) thereof, to the greatest extent permissible under applicable law.

 

ARTICLE IV

 

SHARE LIMITATIONS

 

4.1                               General Limitations.  The aggregate number of shares of Common Stock that may be issued or used for reference purposes under the Plan or with respect to which Awards may be granted under the Plan, including with respect to Incentive Stock Options, shall not exceed 74,603 shares of Class A Common Stock and 74,603 shares of Class B Common Stock (subject, in each case, to any increase or decrease pursuant to Section 4.2), which may be either authorized and unissued Common Stock or Common Stock held in or acquired for the treasury of the Company or both.  If any Award granted under the Plan expires, terminates or, is canceled or is forfeited for any reason (in the case of any Stock Option, without having been exercised in full), the number of shares of Common Stock underlying such Award (in the case of any Stock Option, to the extent unexercised) shall again be available for issuance under the Plan.  To the extent that a distribution pursuant to a Stock Option is made in cash, the share reserve shall be reduced

 

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by the number of shares of Common Stock bearing a value equal to the amount of the cash distribution as of the time that such amount was determined.  No fractional shares of Common Stock shall be issued under the Plan.

 

4.2                               Changes.

 

(a)                                 The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure, (ii) any merger or consolidation of the Company or any of its Affiliates, (iii) any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock, (iv) the dissolution or liquidation of the Company or any of its Affiliates, (v) any sale or Transfer of all or part of the assets or business of the Company or any of its Affiliates, (vi) any Section 4.2 Event or (vii) any other corporate act or proceeding.

 

(b)                                 Subject to the provisions of this Section 4.2(d), in the event of any change in the capital structure of the Company by reason of any stock split, reverse stock split, stock dividend, combination or reclassification of shares, recapitalization, or other change in capital structure of the Company, or an extraordinary cash dividend (a “Section 4.2 Event”) then (i) the aggregate number and kind of shares that thereafter may be issued under the Plan, (ii) the number and kind of shares or other property (including cash) subject to any Award or to be issued upon exercise of an outstanding Stock Option granted under the Plan and (iii) the purchase or exercise price thereof, in each case, shall be appropriately adjusted consistent with such change in such manner as the Committee may determine.  Any such adjustment determined by the Committee shall be final, binding and conclusive on the Company and all Participants, Permitted Transferees and their respective heirs, executors, administrators, successors and assigns.  In connection with any Section 4.2 Event, the Committee may provide for the cancellation of any outstanding Awards and payment in cash or other property in exchange therefor, to the extent any such cancellation and payment does not cause any such Award to fail to comply with Section 409A of the Code.  Except as provided in this Section 4.2 or in the applicable Award agreement, a Participant shall have no rights by reason of any issuance by the Company of any class of securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend, any other increase or decrease in the number of shares of stock of any class, any sale or Transfer of all or part of the Company’s assets or business or any other change affecting the Company’s capital structure or business.

 

(c)                                  Fractional shares of Common Stock resulting from any adjustment in Awards pursuant to Section 4.2(a) or (b) shall be eliminated at the time of such adjustment by rounding-down for any fractional shares.  Notice of any adjustment shall be given by the Committee to each Participant whose Award has been

 

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adjusted and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of the Plan.

 

(d)                                 In the event of an Acquisition Event, the Committee may terminate all outstanding and unexercised Stock Options or other Awards that provide for a Participant elected exercise (“Exercisable Awards”), effective as of the date of the Acquisition Event, by delivering notice of termination to each Participant at least 10 days prior to the date of consummation of the Acquisition Event, in which case during the period from the date on which such notice of termination is delivered to the consummation of the Acquisition Event, each such Participant shall have the right to exercise his or her Exercisable Awards that are then outstanding to the extent vested as of the date on which such notice of termination is delivered (or, at the discretion of the Committee, without regard to any limitations on exercisability otherwise contained in the Award agreements), but any such exercise shall be contingent upon and subject to the occurrence of the Acquisition Event, and, provided that, if the Acquisition Event does not take place within a specified period after giving such notice for any reason whatsoever, the notice and exercise pursuant thereto shall be null and void.  If the Acquisition Event does take place after giving such notice, any Exercisable Awards not exercised prior to the date of the consummation of such Acquisition Event shall be forfeited simultaneous with the consummation of the Acquisition Event.  For the avoidance of doubt, in the event of an Acquisition Event, the Committee may terminate any Exercisable Award for which the exercise price is equal to or exceeds the Fair Market Value of the Common Stock subject to such Exercisable Award on the date of such termination, without payment of consideration therefor.

 

If an Acquisition Event occurs but the Committee does not terminate the outstanding Exercisable Awards pursuant to this Section 4.2(d), then the applicable provisions of Section 4.2(b) and Article X shall apply.

 

4.3                               Minimum Purchase Price.  Notwithstanding any provision of the Plan to the contrary, if authorized but previously unissued shares of Common Stock are issued under the Plan, such shares shall not be issued for a consideration that is less than as permitted under applicable law.

 

ARTICLE V

 

ELIGIBILITY AND GENERAL REQUIREMENTS FOR AWARDS

 

5.1                               General Eligibility.  All current Eligible Employees, Non-Employee Directors and Consultants and prospective Eligible Employees, Consultants and Non-Employee Directors are eligible to be granted Non-Qualified Stock Options, Restricted Stock and Other Stock-Based Awards.  Eligibility for the grant of Awards and actual participation in the Plan shall be determined by the Committee.

 

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5.2                               Incentive Stock Options.  Notwithstanding anything herein to the contrary, only Eligible Employees of the Company, its Subsidiaries and its Parent (if any) are eligible to be granted Incentive Stock Options under the Plan.  Eligibility for the grant of an Incentive Stock Option and actual participation in the Plan shall be determined by the Committee.

 

5.3                               General Requirement.  The granting, vesting and exercise of Awards granted to a prospective Eligible Employee, Consultant or Non-Employee Director are conditioned upon such individual actually becoming an Eligible Employee, Consultant or Non-Employee Director, provided that no Award may be granted to a prospective Eligible Employee, Consultant or Non-Employee Director unless the Company determines that the Award will comply with applicable laws, including the securities laws of all relevant jurisdictions.

 

5.4                               Unless the Committee provides otherwise in an Award agreement, (a) Awards shall be of an equal number of shares of Class A Common Stock and Class B Common Stock and (b) Options may be exercised only for units consisting of an equal number of shares of Class A Common Stock and Class B Common Stock.

 

ARTICLE VI

 

STOCK OPTIONS

 

6.1                               Stock Options.  Each Stock Option granted under the Plan shall be one of two types: (a) an Incentive Stock Option; or (b) a Non-Qualified Stock Option.

 

6.2                               Grants.  The Committee shall have the authority to grant to any Eligible Employee (subject to Section 5.2) Incentive Stock Options, Non-Qualified Stock Options or both types of Stock Options.  To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Stock Option or the portion thereof that does not qualify, shall constitute a separate Non-Qualified Stock Option.  The Committee shall have the authority to grant any Consultant or Non-Employee Director one or more Non-Qualified Stock Options.

 

6.3                               Terms of Stock Options.  Stock Options granted under the Plan shall be subject to the following terms and conditions, and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall determine:

 

(a)                                 Exercise Price.  The exercise price per share of Common Stock subject to a Stock Option shall be determined by the Committee on the date of the grant, provided that the per share exercise price of a Stock Option shall not be less than 100% (or, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, 110%) of the Fair Market Value of the Common Stock on the date of the grant.

 

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(b)                                 Stock Option Term.  The term of each Stock Option shall be fixed by the Committee; provided, that (i) no Stock Option shall be exercisable more than ten years after the date such Stock Option is granted; and (ii) the term of an Incentive Stock Option granted to a Ten Percent Stockholder shall not exceed five years.

 

(c)                                  Exercisability.  Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the time of grant.  If the Committee provides, that any Stock Option is exercisable subject to certain limitations (including that such Stock Option is exercisable only in installments or within certain time periods or upon the attainment of certain financial results or other criteria), the Committee may waive such limitations on the exercisability at any time at or after grant in whole or in part (including waiver of the installment exercise provisions or acceleration of the time at which such Stock Option may be exercised), based on such factors, if any, as the Committee shall determine.  Unless otherwise determined by the Committee at grant, (i) in the event the Participant engages in Detrimental Activity prior to any exercise of the Stock Option, all Stock Options held by the Participant shall thereupon terminate, (ii) as a condition of the exercise of a Stock Option, the Participant shall be required to certify (or shall be deemed to have certified) at the time of exercise in a manner acceptable to the Company that the Participant is in compliance with the terms and conditions of the Plan and that the Participant has not engaged in, and does not intend to engage in, any Detrimental Activity, and (iii) in the event the Participant engages in Detrimental Activity during the one-year period (or such longer period as may be provided in the applicable Award agreement) commencing on the later of the date the Stock Option is exercised or the date of the Participant’s Termination, the Company shall be entitled to recover from the Participant at any time within one year after the end of such one-year period, and the Participant shall pay over to the Company, an amount equal to any gain realized as a result of the exercise of the Stock Option (whether at the time of exercise or thereafter).  In the event that a written employment agreement between the Company and a Participant provides for a vesting schedule that is more favorable than the vesting schedule provided in the form of Stock Option award agreement, the vesting schedule in such employment agreement shall govern, provided that such agreement is in effect on the date of grant and applicable to the specific Stock Option.

 

(d)                                 Method of Exercise.  Subject to any installment exercise and waiting period provisions that apply under subsection (c) above, to the extent vested, a Stock Option may be exercised in whole or in part at any time and from time to time during the Stock Option term by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be acquired.  Such notice shall be accompanied by (x) at the Company’s request, a Joinder Agreement executed by the holder thereof and (y) payment in full of the exercise price as follows: (i) in cash or by check, bank draft or money order payable to the order of the Company; (ii) solely to the extent permitted by applicable law, if the

 

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Common Stock is traded on a national securities exchange or quoted on a national quotation system, through a procedure whereby the Participant delivers irrevocable instructions to a broker reasonably acceptable to the Committee to deliver promptly to the Company an amount equal to the purchase price, to the extent authorized by the Committee; or (iii) on such other terms and conditions as may be acceptable to the Committee.  No shares of Common Stock shall be issued until payment therefor, as provided herein, has been made or provided for.

 

(e)                                  Incentive Stock Option Limitations.  To the extent that the aggregate Fair Market Value (determined as of the date of grant) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an Eligible Employee during any calendar year under the Plan or any other stock option plan of the Company, any Subsidiary or any Parent exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options.  In addition, if an Eligible Employee does not remain employed by the Company, any Subsidiary or any Parent at all times from the time an Incentive Stock Option is granted until three months prior to the date of exercise thereof (or such other period as required by applicable law), such Stock Option shall be treated as a Non-Qualified Stock Option.  Should any provision of the Plan not be necessary in order for the Stock Options to qualify as Incentive Stock Options, or should any additional provisions be required, the Committee may amend the Plan accordingly, without the necessity of obtaining the approval of the stockholders of the Company.

 

(f)                                   Form, Modification, Extension and Renewal of Stock Options.  Subject to the terms and conditions and within the limitations of the Plan, Stock Options shall be evidenced by such form of agreement or grant as is approved by the Committee, and the Committee may (i) modify, extend or renew outstanding Stock Options granted under the Plan (provided that (x) the rights of a Participant are not reduced or adversely affected without his or her consent and (y) such action does not subject the Stock Options to Section 409A of the Code), and (ii) accept the surrender of outstanding Stock Options (to the extent not theretofore exercised) and authorize the granting of new Stock Options in substitution therefor.  Notwithstanding the foregoing, after the Registration Date an outstanding Option may not be modified to reduce the exercise price thereof and a new Option at a lower price may not be substituted for a surrendered Option (other than adjustments or substitutions in accordance with Section 4.2), unless such action is approved by the stockholders of the Company.

 

(g)                                  Early Exercise.  The Committee may provide that a Stock Option include a provision whereby the Participant may elect at any time before the Participant’s Termination to exercise the Stock Option as to any part or all of the shares of Common Stock subject to the Stock Option prior to the full vesting of the Stock Option and such shares shall be subject to certain restrictions as determined by the Committee and be treated as Restricted Stock.  Any unvested shares of Common Stock so purchased may be subject to a repurchase option in

 

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favor of the Company or to any other restriction the Committee determines to be appropriate.

 

(h)                                 Other Terms and Conditions.  Stock Options may contain such other provisions, which shall not be inconsistent with any of the terms of the Plan, as the Committee shall deem appropriate.

 

ARTICLE VII

 

RESTRICTED STOCK

 

7.1                               Awards of Restricted Stock.  (a)  Restricted Stock may be issued either alone or in addition to other Awards granted under the Plan.  The Committee shall determine the Eligible Employees, Consultants and Non-Employee Directors to whom, and the time or times within which, grants of Restricted Stock will be made, the number of shares to be awarded, the purchase price (if any) to be paid by the Participant (subject to Section 7.2), the time or times at which such Awards may be subject to forfeiture (if any), the vesting schedule (if any) and rights to acceleration thereof, and all other terms and conditions of the Awards.  The Committee may condition the grant or vesting of Restricted Stock upon the attainment of specified performance targets or such other factors as the Committee may determine.

 

Unless otherwise determined by the Committee at grant, each Award of Restricted Stock shall provide that in the event the Participant engages in Detrimental Activity prior to, or during the one-year period (or such longer period as may be provided in the applicable Award agreement) after, any vesting of Restricted Stock, the Committee may direct that all unvested Restricted Stock shall be immediately forfeited to the Company and that the Participant shall pay over to the Company an amount equal to the Fair Market Value on the date of vesting of any Restricted Stock that had vested in the period referred to above.

 

(b)                                 Restriction Period.  The Participant shall not be permitted to Transfer shares of Restricted Stock awarded under the Plan during a period set by the Committee (if any) (the “Restriction Period”) commencing with the date of such Award, as set forth in the applicable Award agreement and such agreement shall set forth a vesting schedule and any events that would accelerate vesting of the shares of Restricted Stock.  Within these limits, based on service or such other factors or criteria as the Committee may determine, the Committee may condition the grant or provide for the lapse of such restrictions in installments in whole or in part, or may accelerate the vesting of all or any part of any Restricted Stock Award.

 

7.2                               Awards and Certificates.  An Eligible Employee, Consultant and Non-Employee Director selected to receive Restricted Stock shall not have any rights with respect to such Award, unless and until such Participant has delivered a fully executed copy of the Award agreement evidencing the Award to the Company and has otherwise

 

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complied with the applicable terms and conditions of such Award.  Further, such Award shall be subject to the following conditions:

 

(a)                                 Purchase Price.  The purchase price (if any) of Restricted Stock shall be determined by the Committee, but shall not be less than as permitted under applicable law.

 

(b)                                 Acceptance.  Awards of Restricted Stock must be accepted within a period of 60 days (or such shorter period as the Committee may specify at grant) after the grant date, by executing an Award agreement and by paying whatever price (if any) the Committee has designated thereunder and all applicable withholding taxes due upon the granting and acceptance of the Award (if any) in accordance with the provisions of Section 14.4.

 

(c)                                  Legend.  Each Participant receiving Restricted Stock shall be issued a stock certificate in respect of such shares of Restricted Stock, unless the Committee elects to use another system, such as book entries by the transfer agent, as evidencing ownership of Restricted Stock.  Such certificate shall be registered in the name of such Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:

 

“The anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Number Holdings Inc. (the “Company”) 2012 Stock Incentive Plan (as amended from time to time), and an Award agreement entered into between the registered owner and the Company dated                            .  Copies of such Plan and Award agreement are on file at the principal office of the Company.”

 

(d)                                 Custody.  The Committee may require that any stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any grant of Restricted Stock, the Participant shall have delivered a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such Award.

 

(e)                                  Rights as Stockholder.  Except as provided in this subsection and subsection (d) above and as otherwise determined by the Committee, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a holder of shares of Common Stock of the Company including the right to receive any dividends, the right to vote such shares and, subject to and conditioned upon the full vesting of shares of Restricted Stock, the right to tender such shares.  Notwithstanding the foregoing, the payment of dividends shall be deferred until, and conditioned upon, the expiration of the applicable Restriction Period, unless the Committee specifies otherwise at the time of the Award.

 

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(f)                                   Lapse of Restrictions.  If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, the certificates for such shares shall be delivered to the Participant.  The legend referred to in subsection (c) above shall be removed from said certificates at the time of delivery to the Participant except as otherwise required by applicable law.  Notwithstanding the foregoing, actual certificates shall not be issued to the extent that book entry recordkeeping is used.

 

ARTICLE VIII

 

OTHER STOCK-BASED AWARDS

 

8.1                               Other Awards.  The Committee is authorized to grant to Eligible Employees, Consultants and Non-Employee Directors Other Stock-Based Awards, including shares of Common Stock awarded purely as a bonus and not subject to any restrictions or conditions, shares of Common Stock in payment of the amounts due under an incentive or performance plan sponsored or maintained by the Company or an Affiliate, stock equivalent units, restricted stock units, deferred stock units, and Awards valued by reference to the value of shares of Common Stock.  The Committee may condition the grant or vesting of Other Stock-Based Awards upon the attainment of specified performance criteria or such other factors as the Committee may determine.  The Committee may also provide for the grant of Common Stock under such Awards upon the completion of a specified performance period.  Other Stock-Based Awards may be granted either alone or in addition to or in tandem with other Awards granted under this Plan.

 

Subject to the provisions of this Plan, the Committee shall have authority to determine the Eligible Employees, Consultants and Non-Employee Directors, to whom, and the time or times at which, such Awards shall be made, the number of shares, and class, of Common Stock to be awarded pursuant to such Awards, and all other conditions of the Awards.  To the extent permitted by law, the Committee may permit Eligible Employees or Non-Employee Directors to defer all or a portion of their cash compensation in the form of Other Stock-Based Awards granted under this Plan, subject to the terms and conditions of any deferred compensation arrangement established by the Company, which shall be in a manner intended to comply with Section 409A of the Code.

 

8.2                               Terms and Conditions.  Other Stock-Based Awards made pursuant to this Article VIII shall be subject to the following terms and conditions:

 

(a)                                 Non-Transferability.  Subject to the applicable provisions of the Award agreement and this Plan, neither Other Stock-Based Awards nor the shares of Common Stock subject to them may be Transferred prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.

 

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(b)                                 Dividends.  Unless otherwise determined by the Committee at the time of Award, subject to the provisions of the Award agreement and this Plan, the recipient of an Other Stock-Based Award shall not be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the number of shares of Common Stock covered by the Award.

 

(c)                                  Vesting.  Any Other Stock-Based Award and any Common Stock covered by any such Award shall vest or be forfeited to the extent so provided in the Award agreement, as determined by the Committee.

 

(d)                                 Price.  Common Stock issued on a bonus basis pursuant to an Other Stock-Based Award may be issued for no cash consideration; Common Stock purchased pursuant to a purchase right pursuant to an Other Stock-Based Award shall be priced, as determined by the Committee.

 

(e)                                  Payment.  Form of payment for the Other Stock-Based Award shall be specified in the Award agreement.

 

ARTICLE IX

 

NON-TRANSFERABILITY AND TERMINATION OF
 EMPLOYMENT/CONSULTANCY/DIRECTORSHIP

 

9.1                               Non-Transferability

 

(a)                                 Except as otherwise specifically provided herein, no Stock Option shall be Transferable by the Participant other than by will or by the laws of descent and distribution.  All Stock Options shall be exercisable, during the Participant’s lifetime, only by the Participant.  Any attempt to Transfer Stock Options other than in accordance with the provisions of this Section 9.1 shall be void, and no Award shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any Person who shall be entitled to such Award, or be subject to attachment or legal process for or against such Person.

 

(b)                                 Notwithstanding the foregoing, the Committee may determine at the time of grant or thereafter that a Non-Qualified Stock Option that is otherwise not Transferable pursuant to this Section 9.1 is Transferable to a Family Member in whole or in part and in such circumstances, and under such conditions, as specified by the Committee.  A Non-Qualified Stock Option that is Transferred to a Family Member pursuant to the preceding sentence (i) may not be subsequently Transferred other than by will or by the laws of descent and distribution and (ii) remains subject to the terms of the Plan and the Stock Option agreement.  Any shares of Common Stock acquired upon the exercise of a Stock Option by a Permitted Transferee of a Stock Option or a Permitted Transferee pursuant to a

 

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Transfer after the exercise of the Stock Option shall be subject to the terms of the Plan and the Stock Option agreement, including the provisions of Article XIII.

 

(c)                                  In the event of a Participant’s death, the Committee may require the transferee of a Participant to supply it with written notice of the Participant’s death and to supply it with a copy of the will or such other evidence as the Committee deems necessary to establish the validity of the Transfer of a Stock Option.  The Committee may also require the agreement of the transferee to be bound by all of the terms and conditions of the Plan.

 

(d)                                 Restrictions on Transfer applicable to shares of Common Stock acquired pursuant to Awards under the Plan are set forth in Section 13.2.

 

9.2                               Termination.  Unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter, the following shall apply in the event of a Termination of a Participant:

 

(a)                                 Rules Applicable to Stock Options.

 

(i)                                     Termination by Reason of Death or Disability.  If a Participant’s Termination is by reason of death or Disability, all Stock Options that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination may be exercised by the Participant (or, in the case of death, by the legal representative of the Participant’s estate) at any time within a period of one year after the date of such Termination, but in no event later than the expiration of the stated term of such Stock Options, after which time such Stock Options automatically shall terminate.

 

(ii)                                  Involuntary Termination Without Cause or for Good Reason.  If a Participant’s Termination is by involuntary termination without Cause or by the Participant for Good Reason, all Stock Options that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination may be exercised by the Participant at any time within a period of 90 days after the date of such Termination, but in no event later than the expiration of the stated term of such Stock Options, after which time such Stock Options automatically shall terminate.

 

(iii)                               Termination for Cause; Voluntary Termination without Good Reason.  If a Participant’s Termination: (1) is for Cause, (2) is a voluntary Termination by the Participant after the occurrence of an event that would be grounds for a Termination for Cause, (3) is a voluntary Termination by the Participant without Good Reason, all Stock Options, whether vested or not vested, that are held by such Participant shall automatically terminate on the date of such Termination.

 

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(iv)                              Unvested Stock Options.  Stock Options that are not vested as of the date of a Participant’s Termination for any reason shall terminate on the date of such Termination.

 

(b)                                 Rules Applicable to Restricted Stock.  Unless otherwise determined by the Committee at grant or thereafter, during the relevant Restriction Period, upon a Participant’s Termination for any reason, all Restricted Stock still subject to restriction shall be forfeited.

 

(c)                                  Rules Applicable to other Stock-Based Awards.  The effect of a Participant’s Termination on any Other Stock-Based Award shall be as provided in the applicable Award agreement.

 

ARTICLE X

 

CHANGE IN CONTROL PROVISIONS

 

10.1                        Except as otherwise provided by the Committee in an Award agreement, in the event of a Change in Control after the Effective Date, the Committee may, but shall not be obligated to:

 

(a)                                 accelerate, vest or cause the restrictions to lapse with respect to all or any portion of an Award; or

 

(b)                                 cancel Awards for fair value (as determined by the Committee) which, in the case of Options or other Exercisable Awards may equal the excess, if any, of the value of the consideration to be paid in the Change in Control transaction to holders of the same number of shares of Common Stock subject to such Options or other Exercisable Awards (or, if no consideration is paid in any such transaction, the Fair Market Value of the shares of Common Stock subject to such Options or other Exercisable Awards on the date of such cancellation) over the aggregate exercise price of such Options or Awards;

 

(c)                                  provide for the issuance of substitute Awards that will substantially preserve the otherwise applicable terms of any affected Award previously granted hereunder as determined by the Committee; or

 

(d)                                 if such Change in Control is an Acquisition Event, take any of the actions permitted by Section 4.2(d).

 

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ARTICLE XI

 

TERMINATION OR AMENDMENT

 

11.1                        Notwithstanding any other provision of the Plan, the Board or the Committee may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan (including any amendment deemed necessary to ensure that the Company may comply with any regulatory requirement referred to in Article XIV or Section 409A of the Code as described below), or suspend or terminate it entirely, retroactively or otherwise; provided that if the Committee determines that the rights of a Participant with respect to Awards granted prior to such amendment, suspension or termination, may be adversely impaired, the consent of such Participant shall be required; and provided further, without the approval of the stockholders of the Company entitled to vote in accordance with applicable law, no amendment may be made that would:

 

(a)                                 increase the aggregate number of shares of Common Stock that may be issued under the Plan (other than due to an adjustment under Section 4.2);

 

(b)                                 change the classification of individuals eligible to receive Awards under the Plan;

 

(c)                                  decrease the minimum exercise price of any Stock Option;

 

(d)                                 extend the maximum Stock Option period under Section 6.3;

 

(e)                                  award any Stock Option in replacement of a canceled Stock Option with a higher exercise price, except in accordance with Section 6.3(f); or

 

(f)                                   require stockholder approval in order for the Plan to continue to comply with Section 422 of the Code to the extent applicable to Incentive Stock Options or the rules of any exchange or system on which the Company’s securities are listed or traded at the request of the Company.

 

11.2                        The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, subject to Article IV, provided that no such amendment or other action by the Committee shall adversely impair the rights of any holder without the holder’s consent.  Notwithstanding anything herein to the contrary, the Board or the Committee may amend the Plan or any Award granted hereunder at any time without a Participant’s consent to comply with Section 409A of the Code or any other applicable law.  Nothing in the Plan is intended to provide a guarantee of particular tax treatment to any Participant.

 

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ARTICLE XII

 

UNFUNDED PLAN

 

12.1                        The Plan is intended to constitute an “unfunded” plan.  With respect to any payments as to which a Participant has a fixed and vested interest but that are not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general unsecured creditor of the Company.

 

ARTICLE XIII

 

COMPANY’S RIGHT OF REPURCHASE; RIGHTS OF FIRST REFUSAL; RESTRICTIONS ON TRANSFER

 

13.1                        Repurchase Rights and Rights of First Refusal.  The Committee may provide in the applicable Award agreement repurchase rights or rights of first refusal or rights of first offer at the time of grant (or, thereafter, if no rights of the Participant are reduced) as it may decide.  If a Participant or Permitted Transferee is a party to the Stockholders Agreement or executes a Joinder Agreement (or is a party to or executes a joinder agreement to another stockholders agreement (or similar agreement), such Person shall also be subject to the terms and conditions of such agreement, including provisions with respect to repurchase rights, call rights or rights of first refusal and rights of first offer.

 

13.2                        Restrictions on Transfer.  No Participant shall, directly or indirectly, prior to the Registration Date or such other date determined by the Committee, Transfer any shares of Common Stock acquired pursuant to an Award under the Plan prior to the Participant’s Termination and the expiration of any applicable time period set forth in the applicable Award agreement and the Stockholders Agreement for the exercise of repurchase rights, call rights and rights of first refusal or rights of first offer provided therein.  Notwithstanding the foregoing, the Participant shall have the right to Transfer such shares of Common Stock to a Permitted Transferee who takes the shares subject to the terms of the Plan and applicable Award agreement, provided that such Transfer shall not be effective unless and until the Company shall have been furnished with information reasonably satisfactory to it demonstrating that such Transfer is exempt from or not subject to the provisions of Section 5 of the Securities Act and any other applicable securities laws.  Any attempt to Transfer any shares of Common Stock other than in accordance with the provisions of this Section 13.2 shall be void and immediately cancelled, and no Award shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any Person who shall be entitled to such Award, or be subject to attachment or legal process for or against such Person.

 

13.3                        Effect of Registration.  Notwithstanding the foregoing, unless otherwise determined by the Committee, the Company shall cease to have rights of first refusal or rights of first offer pursuant to this Article XIII on and after the Registration Date.

 

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ARTICLE XIV

 

GENERAL PROVISIONS

 

14.1                        Legend.  The Committee may require each Person receiving shares of Common Stock pursuant to an Award granted under the Plan to represent to and agree with the Company in writing that such Person is acquiring the shares without a view to distribution thereof and such other securities law related representations as the Committee shall request.  In addition to any legend required by the Plan, the certificates and book entry accounts for such shares may include any legend that the Committee deems appropriate to reflect any restrictions on Transfer.

 

All certificates and book entry accounts for shares of Common Stock delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed or any national automated quotation system on which the Common Stock is then quoted, any applicable Federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

14.2                        Other Plans.  Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

 

14.3                        No Right to Employment/Consultancy/Directorship.  Neither the Plan nor the grant of any Award hereunder shall give any Participant or other employee, Consultant or Non-Employee Director any right with respect to continuance of employment, consultancy or directorship by the Company or any of its Affiliates, or shall limit in any way the right of the Company or any of its Affiliates by which an employee is employed or a Consultant or Non-Employee Director is retained to terminate his or her employment, consultancy or directorship at any time.

 

14.4                        Withholding of Taxes.  The Company shall have the right to deduct from any payment to be made to a Participant, or to otherwise require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any Federal, state or local taxes required by law to be withheld.  Upon the vesting of Restricted Stock, or upon making an election under Section 83(b) of the Code, a Participant shall pay all required withholding taxes to the Company.  Any fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash by the Participant.

 

14.5                        Listing and Other Conditions.

 

(a)                                 Unless otherwise determined by the Committee, if at any time the Common Stock is listed on a national securities exchange or national automated

 

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quotation system, the issuance of any shares of Common Stock pursuant to an Award shall be conditioned upon such shares being listed on such exchange or system.  The Company shall have no obligation to issue such shares unless and until such shares are so listed, and the right to exercise any Award with respect to such shares shall be suspended until such listing has been effected.

 

(b)                                 If at any time counsel to the Company shall be of the opinion that any sale or delivery of shares of Common Stock pursuant to an Award is or may in the circumstances be unlawful or result in the imposition of excise taxes on the Company under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act or otherwise with respect to shares of Common Stock or Awards, and the right to exercise any Award shall be suspended until, in the opinion of said counsel, such sale or delivery shall be lawful and will not result in the imposition of excise taxes on the Company.

 

(c)                                  Upon termination of any period of suspension under this Section 14.5, an Award affected by such suspension that shall not then have expired or terminated shall be reinstated as to all shares available before such suspension and as to shares that would otherwise have become available during the period of such suspension, but no such suspension shall extend the term of any Award.

 

(d)                                 A Participant shall be required to supply the Company with any certificates, representations and information that the Company requests and otherwise cooperate with the Company in obtaining any listing, registration, qualification, exemption, consent or approval the Company deems necessary or appropriate.

 

14.6                        Stockholders Agreement and Other Requirements.  Notwithstanding anything herein to the contrary, as a condition to the receipt of shares of Common Stock pursuant to an Award granted under the Plan, 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 or purchase, 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 under the Plan and covered by the Stockholders Agreement or other documentation.  The Company may require, as a condition of exercise, the Participant or any Permitted Transferee to become a party to the Stockholders Agreement or any other existing stockholders agreement or other agreement.

 

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14.7                        Governing Law.  All matters arising out of or relating to the Plan, the actions taken in connection herewith 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.

 

14.8                        Construction.  Wherever any words are used in the Plan 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.”

 

14.9                        Other Benefits.  No Award granted or paid out under the Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company or its Affiliates nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation.

 

14.10                 Costs.  The Company shall bear all expenses associated with administering the Plan, including expenses of issuing Common Stock pursuant to any Award granted hereunder.

 

14.11                 No Right to Same Benefits.  The provisions of Awards need not be the same with respect to each Participant, and Awards granted to individual Participants need not be the same.

 

14.12                 Section 16(b) of the Exchange Act.  On and after the Registration Date, all elections and transactions under the Plan by Persons subject to Section 16 of the Exchange Act involving shares of Common Stock are intended to comply with any applicable exemptive condition under Rule 16b-3.  The Committee may establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Exchange Act, as it may deem necessary or proper for the administration and operation of the Plan and the transaction of business thereunder.

 

14.13                 Severability of Provisions.  If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan 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 Awards granted under the Plan shall be cancelled and terminated.

 

14.14                 Headings and Captions.  The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.

 

14.15                 Securities Act Compliance.  Except as the Company or Committee shall otherwise determine, the Plan is intended to comply with Section 4(2) or Rule 701 of the

 

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Securities Act, and any provisions inconsistent with such Section or Rule of the Securities Act shall be inoperative and shall not affect the validity of the Plan.

 

14.16                 Successors and Assigns.  The Plan shall be binding on all successors and permitted assigns of a Participant, including the estate of such Participant and the executor, administrator or trustee of such estate.

 

14.17                 Payment to Minors, Etc.  Any benefit payable to or for the benefit of a minor, an incompetent person or other Person incapable of receipt thereof shall be deemed paid when paid to such Person’s guardian or to the party providing or reasonably appearing to provide for the care of such Person, and such payment shall fully discharge the Committee, the Board, the Company, its Affiliates and their employees, agents and representatives with respect thereto.

 

14.18                 Agreement. As a condition to the grant of a Award, if requested by the Company or the lead underwriter of any public offering of the Common Stock (the “Lead Underwriter”), a Participant shall irrevocably agree not to sell, contract to sell, grant any option to purchase, transfer the economic risk of ownership in, make any short sale of, pledge or otherwise Transfer or dispose of, any interest in any Common Stock or any securities convertible into, derivative of, or exchangeable or exercisable for, or any other rights to purchase or acquire Common Stock (except Common Stock included in such public offering or acquired on the public market after such offering) during such period of time following the effective date of a registration statement of the Company filed under the Securities Act that the Lead Underwriter shall specify (the “Lock-up Period”).  The Participant shall further agree to sign such documents as may be requested by the Lead Underwriter or the Company to effect the foregoing and agree that the Company may impose stop-transfer instructions with respect to Common Stock acquired pursuant to a Stock Option until the end of such Lock-up Period.

 

14.19                 No Rights as Stockholder.  Subject to the provisions of the Award agreement, no Participant or Permitted Transferee shall have any rights as a stockholder of the Company with respect to any Award until such individual becomes the holder of record of the shares of Common Stock underlying the Award.

 

14.20                 Section 409A of the Code.  To the extent applicable, the Plan is intended to comply with the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent.

 

14.21                 Consideration.  Awards may be awarded in consideration for past services actually rendered to the Company or an Affiliate of the Company for its benefit; provided  that in the case of an Award to be made to a new Eligible Employee, Non-Employee Director, or Consultant who has not performed prior services for the Company or an Affiliate of the Company, the Company will require payment of the par value of the Common Stock by cash or check in order to ensure proper issuance of the shares in compliance with the Delaware General Corporation Law.

 

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ARTICLE XV

 

EFFECTIVE DATE OF PLAN

 

The Plan is effective February 27, 2012, the date of the Plan’s adoption by the Board and the approval of the Plan by the stockholders of the Company in compliance with the Delaware General Corporation Law.

 

ARTICLE XVI

 

TERM OF PLAN

 

No Award shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date, but Awards granted prior to such tenth anniversary may, and the Committee’s authority to administer the terms of such Awards shall, extend beyond that date.

 

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