Exhibit 10.1
SUCCESSION AGREEMENT
     THIS SUCCESSION AGREEMENT (the “Agreement”) is entered into April 23, 2010,
by and between Ulta Salon, Cosmetics & Fragrance, Inc., a Delaware corporation
(the “Company”), and Lyn Kirby (the “Executive”).
RECITALS:
     WHEREAS, Executive and the Company are parties to an Employment Agreement
dated June 16, 2008 (the “Employment Agreement”) pursuant to which the Company
employs and Executive has agreed to serve as the Chief Executive Officer of the
Company through March 17, 2011, or if later, the date the Company announces its
fiscal year 2010-2011 earnings (the “Original End Date”);
     WHEREAS, the Company is about to engage a new Chief Operating Officer
(“COO”) with the intent to promote such person to the Chief Executive Officer
position;
     WHEREAS, Executive and the Company mutually desire to provide for an
orderly transition of Executive’s duties and responsibilities to the COO in
connection with his ultimate succession (the “Succession”) and Executive desires
to assist the Company in obtaining an orderly Succession; and
     WHEREAS, Executive and the Company have negotiated and reached an agreement
with respect to all rights, duties and obligations arising between them
regarding Executive’s employment with the Company and the conclusion of that
employment relationship.
     NOW THEREFORE, in consideration of the covenants and mutual promises
recited below, the parties agree as follows:
     1. Voluntary Separation and Resignation from Employment. The Executive
shall voluntarily resign from employment and all offices and positions with the
Company on such date between June 30, 2010 and September 2, 2010 as shall be
mutually agreed upon by the Chairman of the Board of Directors of the Company
and the Executive, but no later than September 2, 2010, with such date being the
“Termination Date.” In addition, on the Termination Date Executive shall resign
all other positions other than her position as a member of the board of
directors of the Company (the “Board”), on which she serves for, on behalf of or
at the request of the Company. On the Termination Date, Executive will execute
such resignations from all offices as the Company shall reasonably request.
     2. Board Position and Resignation. Following the Termination Date Executive
shall continue to serve as a member of the Board. Executive agrees that if
requested by the Board, she will resign from the Board effective on the Original
End Date.
     3. Compensation as an Employee. From the date hereof until the Termination
Date, Executive shall continue to earn and receive her base salary at the rate
in effect on the date hereof. In addition, provided Executive remains employed
through the Termination Date, she shall be entitled to a pro rata portion of any
Annual Bonus (as defined in the Employment Agreement) if any, which may be
earned based on the Company’s performance for fiscal year

 

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2010-2011, to be paid on the Bonus Payment Date (as defined in the Employment
Agreement). Executive and the Company agree that Executive shall not be entitled
to any severance under Section 5 of the Employment Agreement by reason of her
termination of employment.
     4. Stock Option Rights.
     (a) For so long as Executive remains a member of the Board, Executive shall
continue to vest in all outstanding options to purchase Company common stock
held by Executive (“Stock Options”).
     (b) The exercise period of all Stock Options outstanding on the date hereof
(“Current Stock Options”) shall be governed by the terms of the stock option
agreements pursuant to which they were granted. The Company and Executive agree
that her resignation from the employment of the Company shall not be treated as
either a resignation with or without Good Reason, and the post-termination
exercise period for any Current Stock Options shall be triggered when Executive
ceases to be a member of the Board as if Executive remained employed through
such date.
     (c) The Company agrees to grant to Executive the 2010 Option (as defined in
the Employment Agreement) as provided under the Employment Agreement at an
exercise price equal to the greater of $22.86 and the closing price on the date
of grant. Executive shall vest in and the 2010 Option shall become exercisable
as if Executive remained employed through the Original End Date provided that
Executive remains a Board member through the Original End Date. Additionally,
the Company will pay the Executive, with the last payroll of the month in which
the 2010 Option is granted, the positive difference, if any, between the
exercise price of the 2010 Option and $22.86 multiplied by the number of shares
of common stock subject to the 2010 Option.
     (d) The parties also agree that the 31,600 Stock Options scheduled to vest
and become exercisable on October 25, 2011 granted to Executive on October 25,
2009 (the “2009 Performance Options”) pursuant to the terms of that letter
agreement dated July 6, 2007, by and between Executive and the Company (the
“July 2007 Agreement”) shall vest on the Original End Date, provided Executive
remains a member of the Board through the Original End Date. The 2009
Performance Options shall not be exercisable prior to October 25, 2011, and
shall be exercisable only to the extent Executive remains in compliance with the
Policy. Once exercisable the 2009 Performance Options shall be exercisable
through January 25, 2012.
     (e) Executive agrees to cancel and forfeit her right to receive a grant of
63,200 Stock Options as set forth in the July 2007 Agreement on October 25,
2010.
     5. Continued Benefits. The Company agrees that Executive shall continue to
be eligible for coverage on the same basis as active employees for all medical,
dental and life insurance (“Employee Benefits”) through the Original End Date.
In the event that the Company is unable to include Executive in the Company’s
current Employee Benefits policies after the Termination Date, the Company
hereby agrees to pay Executive’s premiums for continued health insurance under
the Consolidated Omnibus Budget Reconciliation Act for so long as the Company is
unable to include Executive in the Company’s current Employee Benefits policies;

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provided, however, that the Company shall in no event be required to pay such
premiums beyond the Original End Date. Notwithstanding anything to the contrary
contained herein, the Company shall not be required to obtain a separate policy
for Employee Benefits of Executive.
     6. Amendment to Policy. In consideration of the Company’s obligations under
Sections 4 and 5, Executive and Company hereby amend the Policy (as defined in
the Employment Agreement) to provide that, solely with respect to Retailers (as
defined in the Policy) and for Competitors (as defined in the Policy) which are
also Multi-Product Retailers (as defined below), the applicable Noncompete
Period and Nonsolicitation Period (both as defined in the Policy) shall commence
following the date she no longer serves as a member of the Board, and not upon
termination of her employment. For all Competitors other than Multi-Product
Retailers, the Noncompete and Nonsolicitation Period shall commence upon her
Termination Date. A “Multi-Product Retailer” shall mean a Competitor, but only
if it is engaged exclusively in the retail distribution of various products,
including hair styling, beauty salon, spa services, fragrance, cosmetics, salon
products or beauty aid/products (i.e., JCPenney, CVS/pharmacy, Target). In all
other respects the Policy shall remain in full force and effect. Executive also
agrees, while she is a Board member, not to provide services to any supplier of
product to the Company.
     7. Inclusion on Shelf Registration. The Company shall include all common
shares held by Executive on any shelf registration statement that it files
within one year of the date herof on Form S-3; provided, however, that if such
registration statement is in connection with an underwritten offering, the
Company shall include such common shares held by Executive as agreed by
Executive and such other shareholders of the Company.
     8. Conditions to Obligations.
     (a) The Company’s obligations under Sections 4 and 5 above shall be
conditioned upon Executive’s execution of the Release (as defined in the
Employment Agreement) within 21 days of the Termination Date and continued
compliance with the Policy (as amended by this Agreement). Any payments or
benefits to be provided under this Agreement shall be made or begin on the 30th
day after the Release is signed, unless revoked. In the event that Executive
revokes the Release or violates the Policy then (i) all Employee Benefits under
Section 5 shall terminate; (ii) Executive shall cease and no longer be entitled
to further vesting in all Stock Options and the post-termination exercise period
for all Stock Options shall be determined from the Termination Date; and
(iii) the Company’s obligations under Section 4(c) and (d) shall terminate.
     (b) Executive agrees that the benefits under Sections 4 and 5 and the
Accrued Benefits (as defined in the Employment Agreement) are the only payments
to which Executive is entitled as a result of or in connection with termination
of her employment pursuant to Section 1 of this Agreement. Notwithstanding the
foregoing, the Executive’s rights and benefits under any of the Company Plans
(as defined in the Employment Agreement) shall be as determined under the terms
thereof and the Executive does not waive any claims for indemnity as an officer
or director of the Company that she may have by law, under the bylaws or
articles of incorporation of the company, or pursuant to any directors and
officers liability insurance.

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     9. Impact on Employment Agreement. Except as otherwise modified by this
Agreement, the Employment Agreement shall remain in full force and effect.
Executive, however, specifically agrees and waives all right to claim Good
Reason under the Employment Agreement and terminate her employment prior to or
on the Termination Date with respect to any actions taken by the Company or the
Board regarding the Succession, which shall include, but not be limited to
(a) appointment of the COO and the granting to him of the President title,
(b) transition of duties and responsibilities from Executive to the COO, (c) the
reassignment of reporting responsibilities such that individuals who now report
to Executive shall report to the COO; and/or (d) the appointment or election of
the COO to the Board. Nothing herein shall otherwise limit Executive’s right to
terminate for Good Reason under the terms of the Employment Agreement.
     10. Withholding. All payments required to be made by the Company hereunder
to the Executive shall be subject to tax and other legally required or
voluntarily elected withholdings as the Company may reasonably determine, in
consultation with the Executive. The Company may withhold from any cash payments
to be made to Executive any legally required withholdings.
     11. Special Rule for U.S. Income Tax Compliance. Notwithstanding anything
in this Agreement to the contrary, the parties intend that this Agreement comply
with Section 409A of the Code and all guidance or regulations thereunder
(“Section 409A”), and this Agreement and the payment of any benefits hereunder
shall be operated and administered accordingly. Notwithstanding anything
contained in this Agreement to the contrary, to the maximum extent permitted by
applicable law, amounts payable to the Executive pursuant to Sections 4 or 5
shall be made in reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation
Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term Deferrals).
However, to the extent any such payments are treated as non-qualified deferred
compensation subject to Section 409A of the Code, then if Executive is deemed at
the time of her separation from service to be a “specified employee” for
purposes of Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed
commencement of any portion of the benefits to which Executive is entitled under
this Agreement is required in order to avoid a prohibited distribution under
Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s termination
benefits shall not be provided to Executive prior to the earlier of (A) the
expiration of the six-month period measured from the date of the Executive’s
“separation from service” or (B) the date of Executive’s death. Upon the earlier
of such dates, all payments deferred pursuant to this Section 11 shall be paid
to the Executive in a lump sum without interest thereon. The determination of
whether the Executive is a “specified employee” for purposes of Section
409A(a)(2)(B)(i) of the Code as of the time of her separation from service shall
made by the Company in accordance with the terms of Section 409A of the Code and
applicable guidance thereunder (including without limitation Treas. Reg.
Section 1.409A-1(i) and any successor provision thereto). For purposes of this
Agreement each installment payable under Section 5 shall be shall be considered
a separate payment.
     12. Non-Reliance. Executive represents to the Company and the Company
represents to Executive that in executing this Agreement they are not relying
and have not relied upon any representation or statement not set forth herein
made by the other or by any of the other’s agents, representatives or attorneys
with regard to the subject matter, basis or effect of this Agreement, or
otherwise.

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     13. Other Agreements and Return of Property.
     (a) Executive shall continue to be bound by the Policy (as amended by this
Agreement) and the Policy shall survive Executive’s resignation and the
execution of this Succession Agreement and the Release.
     (b) Executive agrees that she will return to the Company prior to or upon
the Termination Date all of the Company’s property including but not limited to
original and any copies of any confidential information or trade secrets, all
Company-issued computers, PDA’s, keys, pass cards, customer lists, files,
brochures, documents or computer disks or printouts, equipment and any other
item relating to the Company and its business, other than information that the
Executive needs to continue performing her duties as a member of the Board.
     14. Assignment; Successors. The rights and benefits under this Agreement
are personal to Executive and such rights and benefits shall not be subject to
assignment, alienation or transfer, except to the extent such rights and
benefits are lawfully available to the estate or beneficiaries of Executive upon
death. To the extent any obligations of the Company pursuant to the Agreement
remain unsatisfied upon Executive’s death, the Company shall make payment or
provide the benefits set forth in Sections 4 and 5 above to her spouse,
dependents or estate as applicable. The Company may assign this Agreement to any
parent, affiliate or subsidiary or any entity which at any time whether by
merger, purchase, reconstitution or otherwise acquires all or substantially all
of the assets, stock or business of the Company. This Agreement shall be binding
upon and inure to the benefit of the Company, Executive and their respective
successors, assigns, personnel and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees, as applicable
     15. Entire Agreement. Executive acknowledges and agrees that this
Agreement, the Employment Agreement, the Release, the Stock Option agreements
and the Policy (each of which is incorporated herein by this reference and made
a part hereof) includes the entire agreement and understanding between the
parties and supersedes any prior agreements, written or oral, with respect to
the subject matter hereof, including the termination of Executive’s employment
and all amounts to which Executive shall be entitled from the Company.
     16. Severability/Reasonable Alteration. If any term, provision, covenant or
condition of this Agreement is held by a court of competent jurisdiction to
exceed the limitations permitted by applicable law, as determined by such court
in such action, then the provisions will be deemed reformed to the maximum
limitations permitted by applicable law and the parties hereby expressly
acknowledge their desire that in such event such action be taken. If any
provision of this Agreement is held to be illegal, invalid or unenforceable
during the term of this Agreement after application of the first sentence of
this Section 16, then such provision shall be fully severable; this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a portion of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.

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     17. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by Executive and the Company to express their
mutual intent, and no rule of strict construction will be applied against
Executive or the Company.
     18. Amendment; Waiver. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, signed by the Employee and a duly
authorized officer of the Company. By an instrument in writing similarly
executed, the Employee or a duly authorized officer of the Company may waive
compliance by the other party or parties with any specifically identified
provision of this Agreement that such other party was or is obligated to comply
with or perform; provided, however, that such waiver shall not operate as a
waiver of, or estoppel with respect to, any other or subsequent failure. No
failure to exercise and no delay in exercising any right, remedy, or power
hereunder shall preclude any other or further exercise of any other right,
remedy, or power provided herein or by law or in equity.
     19. Expenses. The Company will reimburse the Executive for reasonable legal
fees and expenses incurred by the Executive in the negotiation and documentation
of this Agreement up to a maximum of $20,000. All such fees and expenses will be
paid by the Company within thirty (30) days after the Company’s receipt of the
invoices therefore.
     20. Injunctive Relief. It is recognized and acknowledged by Executive that
a breach of Executive’s obligations under this Agreement (including, compliance
with the provisions of the Release and the Policy will cause irreparable damage
to the Company and its goodwill, the exact amount of which will be difficult or
impossible to ascertain, and that the remedies at law for any such breach will
be inadequate. Accordingly, Executive agrees that in the event of any breach of
such obligations, in addition to any other remedy which may be available at law,
in equity or pursuant to the terms of the Policy, the Company will be entitled
to specific performance and injunctive relief. Executive agrees not to raise as
a defense or objection to the request or granting of such relief that any breach
of this Agreement is or would be compensable by an award of money damages, and
Executive agrees to waive any requirements for the securing or posting of any
bond in connection with such remedy.
     21. Governing Law; Jurisdiction and Venue. This Agreement shall be
governed, construed, interpreted and enforced in accordance with its express
terms, and otherwise in accordance with the substantive laws of the State of
Illinois, without reference to the principles of conflicts of law or choice of
law of the State of Illinois, or any other jurisdiction, and where applicable,
the laws of the United States. The parties irrevocably agree that all actions to
enforce an arbitrator’s decision pursuant to Section 23 of this Agreement may be
instituted and litigated in federal, state or local courts sitting in Cook
County, Illinois and each of such parties hereby consents to the jurisdiction
and venue of such court, waives any objected based on forum non conveniens and
any right to a jury trial as set forth in Section 22 of this Agreement.
     22. Waiver of Jury Trial. EACH OF EXECUTIVE AND THE COMPANY HEREBY WAIVES,
RELEASES AND RELINQUISHES AND ALL RIGHTS SHE/IT MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY ACTIONS ARISING DIRECTLY OR INDIRECTLY AS A RESULT OR IN
CONSEQUENCE OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATIONS, ANY CLAIM OR
ACTION TO REMEDY ANY BREACH OR ALLEGED BREACH HEREOF, TO ENFORCE ANY

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TERM HEREOF, OR IN CONNECTION WITH ANY RIGHT, BENEFIT OR OBLIGATION ACCORDED OR
IMPOSED BY THIS AGREEMENT.
     23. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement, the Release, Executive’s employment by and/or relationship
with the Company and Executive’s separation from the Company shall be settled
exclusively by arbitration, conducted before a single neutral arbitrator in
Chicago, Illinois in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association (“AAA”) then in
effect, in accordance with this Section 23, except as otherwise prohibited by
any nonwaivable provision of applicable law or regulation. The parties hereby
agree that the arbitrator shall construe, interpret and enforce this Agreement
in accordance with its express terms, and otherwise in accordance with the
governing law as set forth in Section 21 above. Judgment may be entered on the
arbitration award in any court having jurisdiction, provided, however, that the
Company shall be entitled to seek a restraining order or injunction in any court
of competent jurisdiction to prevent any continuation of any violation of the
provisions of this Agreement and Executive hereby consents that such restraining
order or injunction may be granted without requiring the Company to post a bond.
Unless the parties otherwise agree, only individuals who are on the AAA register
of arbitrators shall be selected as an arbitrator. Within twenty (20) days of
the conclusion of the arbitration hearing, the arbitrator shall prepare written
findings of fact and conclusions of law. It is mutually agreed that the written
decision of the arbitrator shall be valid, binding, final and enforceable by any
court of competent jurisdiction. The Company shall pay all administrative fees,
and the fees and expenses of the arbitrator, to the extent that such fees and
expenses exceed the amount that the Executive would have incurred to file a
claim in court. In the event action is brought pursuant to this Section 23, the
arbitrator shall have authority to award fees and costs to the prevailing party,
in accordance with applicable law. If in the opinion of the arbitrator there is
no prevailing party, then each party shall pay its own attorney’s fees and
expenses.
     24. Counterparts and Facsimiles. This Agreement may be executed in several
counterparts, each of which shall be deemed as an original, but all of which
together shall constitute one and the same instrument; signed copies of this
Agreement may be delivered by .pdf, .jpeg or fax and will be accepted as an
original.
     25. Notice. Any notice to be given hereunder shall be in writing and shall
be deemed given when mailed by certified mail, return receipt requested,
addressed as follows:
To the Executive:
Lyn Kirby
[Redacted]

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with a copy to (which shall not constitute notice):
Bachelder & Dowling, P.A.
120 Exchange Street
P.O. Box 7003
Portland, ME 04112-7003
Attention: Stephan G. Bachelder
To the Company at:
Ulta Salon, Cosmetics & Fragrance, Inc.
Attn: General Counsel
1000 Remington Boulevard
Suite 120
Bolingbrook, IL 60440
with a copy to (which shall not constitute notice):
Latham & Watkins LLP
5800 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
Attn: Robin L. Struve
[Signature Page Follows.]

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

            ULTA SALON, COSMETICS & FRAGRANCE, INC.
      By:   /s/ Dennis K. Eck         Name:   Dennis K. Eck        Title:  
Non-Executive Chairman of the Board              /s/ Lyn Kirby       Lyn Kirby