EXHIBIT 10.17
ULTA SALON, COSMETICS & FRAGRANCE, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
(Effective January 1, 2009)

 

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ULTA SALON, COSMETICS & FRAGRANCE, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
     Ulta Salon, Cosmetics & Fragrance, Inc. a Delaware corporation (the
“Company”), hereby establishes the Ulta Salon, Cosmetics & Fragrance, Inc.
Nonqualified Deferred Compensation Plan (the “Plan”), effective January 1, 2009
(the “Effective Date”). The purpose of the Plan is to provide Eligible Employees
with the opportunity to accumulate additional retirement income on a
tax-deferred basis. The Plan is intended to be a deferred compensation plan for
a select group of management and highly compensated employees, as described in
Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. The Plan is also intended to
comply in all respects with the requirements of Code Section 409A, and the
provisions of the Plan shall be construed consistent with the requirements of
Code Section 409A and applicable regulations and other guidance issued
thereunder.
ARTICLE I
DEFINITIONS
     1.1 “Account” or “Accounts” shall mean the bookkeeping account or accounts
established under this Plan pursuant to Article V.
     1.2 “Base Salary” shall mean a Participant’s annual base salary, excluding
incentive and discretionary bonuses, commissions, reimbursements and other
non-regular remuneration, received from the Company prior to reduction for any
salary deferrals under benefit plans sponsored by the Company, including but not
limited to, plans established pursuant to Code Section 125 or qualified pursuant
to Code Section 401(k).
     1.3 “Beneficiary” or “Beneficiaries” shall mean the person, persons or
entity designated as such pursuant to Section 8.1.
     1.4 “Board” shall mean the Board of Directors of the Company.
     1.5 “Bonus(es)” shall mean amounts paid to the Participant by the Company
in the form of discretionary or incentive compensation or any other bonus
designated by the Committee before reductions for contributions to or deferrals
under any benefit plans sponsored by the Company.
     1.6 “Code” shall mean the Internal Revenue Code of 1986, as amended, and
the Treasury regulations and applicable authorities promulgated thereunder.
     1.7 “Committee” shall mean the Company’s Benefits Committee.
     1.8 “Company Contribution Account” shall mean the Account maintained for
the benefit of a Participant which is credited with Company Discretionary
Contributions, if any, pursuant to Article IV.
     1.9 “Company Discretionary Contributions” shall mean the contributions made
by the Company in its discretion pursuant to Article IV.

 

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     1.10 “Compensation” shall mean all amounts eligible for deferral during a
particular Plan Year under Section 3.1.
     1.11 “Deferral Account” shall mean the Account maintained for each
Participant which is credited with Participant deferrals pursuant to Section 5.1
     1.12 “Disability” shall mean (consistent with the requirements of
Section 409A) that the Participant (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, or (ii) is, by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, receiving income replacement benefits for a period of not less
than three months under an accident and health plan covering employees of the
Company. The Committee may require that the Participant submit evidence of such
qualification for disability benefits in order to determine that the Participant
is disabled under this Plan.
     1.13 “Distributable Amount” shall mean the vested balance in the applicable
Account as determined under Article V.
     1.14 “Eligible Employee” shall mean a highly compensated or management
level employee of the Company designated by the Committee as eligible to
participate in the Plan.
     1.15 “ERISA” shall mean the Employee Retirement Income Security Act of
1974, as amended, and the Department of Labor regulations and applicable
authorities promulgated thereunder.
     1.16 “Financial Hardship” shall mean a severe financial hardship to the
Participant resulting from an illness or accident of the Participant, the
Participant’s spouse, or a dependent (as defined in Code Section 152(a)) of the
Participant, loss of the Participant’s property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant, (but shall in all events
correspond to the meaning of the term “unforeseeable emergency” under Code
Section 409A(a)(2)(v)).
     1.17 “Hardship Distribution” shall mean an accelerated distribution of
benefits or a reduction or cessation of current deferrals pursuant to
Section 7.6 to a Participant who has suffered a Financial Hardship.
     1.18 “Investment Fund” or “Funds” shall mean an investment fund or funds
selected by the Committee pursuant to Section 5.4 of the Plan.
     1.19 “Investment Gain” shall mean, for each Investment Fund, an amount
equal to the net gain on the assets of such Investment Fund during each month,
as determined by the Committee.
     1.20 “Investment Loss” shall mean, for each Investment Fund, an amount
equal to the net loss on the assets of such Investment Fund during each month,
as determined by the Committee.

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     1.21 “Participant” shall mean any Eligible Employee who becomes a
Participant in this Plan in accordance with Article II.
     1.22 “Participant Election(s)” shall mean the forms or procedures by which
a Participant makes elections with respect to (1) voluntary deferrals of his or
her Compensation, (2) the Investment Funds which shall act as the basis for
crediting of Investment Gains and/or Investment Losses on Account balances, and
(3) the form and timing of distributions from Accounts. Participant Elections
may take the form of an electronic communication followed by appropriate
confirmation according to specifications established by the Committee.
     1.23 “Payment Date” shall mean the date by which a lump sum payment shall
be made or the date by which installment payments shall commence. Unless
otherwise specified, the Payment Date shall be the last day of the sixth (6th)
month commencing after the event triggering the payout occurs. Subsequent
installments, if any, shall be made in February of each succeeding Plan Year.
The Payment Date of a Scheduled Distribution shall be February of the Plan Year
in which the distribution is scheduled to commence.
     1.24 “Plan Year” shall mean the calendar year.
     1.25 “Qualified Plan” shall mean the Ulta Salon, Cosmetics & Fragrance
401(k) Retirement Plan, as in effect on January 1, 2009, and as amended
thereafter from time to time.
     1.26 “Qualified Plan Limitations” shall mean the limitations imposed on a
Participant’s elective deferrals under the Qualified Plan by Sections 401(k) and
402(g) of the Code.
     1.27 “Retirement” shall mean Termination of Service after having completed
at least five (5) Years of Service.
     1.28 “Scheduled Distribution” shall mean a scheduled distribution date
elected by the Participant for distribution of amounts from a specified Deferral
Account, including Investment Gains and Investment Losses thereon, as provided
under Section 7.5.
     1.29 “Termination of Service” shall mean the termination of a Participant’s
provision of services to the Employer as a result of (i) the Participant’s
“separation from service,” as that term is defined in Code Section 409A and the
Treasury Department regulations issued thereunder, or (ii) the Participant’s
death.
     1.30 “Years of Service” shall mean the cumulative consecutive years of
continuous full-time employment or service with the Company (including approved
leaves of absence of six months or less or legally protected leaves of absence),
beginning on the date the Participant first began service with the Company, and
counting each anniversary thereof. In the event an Eligible Employee incurs a
Termination of Service and is subsequently rehired by the Company and becomes a
Participant, such Eligible Employee shall not receive credit for his or her
prior Years of Service unless the Committee, in its sole discretion, determines
otherwise.

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ARTICLE II
PARTICIPATION
          An Eligible Employee shall become a Participant in the Plan by
completing and submitting to the Committee the appropriate Participant
Elections, including such other documentation and information as the Committee
may reasonably request, during the enrollment period established by the
Committee prior to the beginning of the first Plan Year in which the Eligible
Employee shall be eligible to participate in the Plan.
ARTICLE III
PARTICIPANT DEFERRALS
     3.1 Deferral of Compensation. An Eligible Employee may elect to defer
Compensation by making a deferral election in accordance with Section 3.2. An
Eligible Employee may only elect to defer Compensation attributable to services
provided after the time a deferral election is made. Elections shall take the
form of a whole percentage of not less than 2% and not more than:

  (1)   75% of Base Salary, and     (2)   100% of Bonuses, or     (3)   100% of
Bonuses in excess of a dollar amount specified by the Participant.

     An Eligible Employee may also elect to defer a fixed dollar amount of his
or her Bonus.
     3.2 Deferral Elections. An Eligible Employee may elect to defer
Compensation at such time and in such manner as the Committee shall provide,
subject to the following:
          (a) Subject to paragraph (c) below, a deferral election must be made
by filing a Participant Election during the enrollment period established by the
Committee. Such election period shall end no later than the day preceding the
first day of the Plan Year in which such Compensation would otherwise be earned.
          (b) If an individual first becomes an Eligible Employee during a Plan
Year, such individual shall not be entitled to participate in the Plan during
such Plan Year may make a deferral election to participate in the Plan during
the following Plan Year in accordance with Section 3.2(a). Such deferral
election shall become effective for Compensation earned after the date such
individual makes such deferral election.
          (c) If any Compensation constitutes “performance-based Compensation”
within the meaning of Code Section 409A, the election period established by the
Committee with respect to elections to defer such performance-based Compensation
may extend to the date that is six months before the end of the performance
period to which such performance-based Compensation relates.

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          (d) A Participant may increase, decrease, terminate or recommence a
deferral election with respect to Compensation for any subsequent Plan Year by
filing a Participant Election during the enrollment period established by the
Committee prior to the beginning of such Plan Year, which election shall be
effective on the first day of the next following Plan Year. In the absence of an
affirmative election by the Participant to the contrary, the deferral election
for the prior Plan Year shall continue in effect for future Plan Years. After
the beginning of the Plan Year, deferral elections with respect to Compensation
for services performed during such Plan Year shall be irrevocable except in the
event of Financial Hardship.
ARTICLE IV
COMPANY CONTRIBUTIONS
     The Company shall have the discretion to make Company Discretionary
Contributions to the Plan at any time on behalf of any Participant. Company
Discretionary Contributions shall be made in the complete and sole discretion of
the Company and may take the form of matching or non-matching contributions. No
Participant shall have the right to receive any Company Contribution in any
particular Plan Year regardless of whether Company Contributions are made on
behalf of other Participants.
ARTICLE V
ACCOUNTS
     5.1 Deferral Accounts. The Committee shall establish and maintain Deferral
Accounts for each Participant under the Plan. Each Participant’s Deferral
Account shall be further divided into separate subaccounts (“Investment Fund
Subaccounts”), each of which corresponds to an Investment Fund elected by the
Participant pursuant to Section 5.4(a). A Participant’s Deferral Account shall
be credited as follows:
          (a) As soon as practicable after amounts are withheld from a
Participant’s Compensation, the Committee shall credit the Investment Fund
Subaccounts of the Participant’s Deferral Account with an amount equal to the
Compensation deferred by the Participant in accordance with the Participant’s
election under Section 3.2 that the Participant has elected to be deemed to be
invested in each respective Investment Fund;
          (b) Each business day, each Investment Fund Subaccount of a
Participant’s Deferral Account shall be credited with Investment Gains or
Investment Losses in an amount equal to that determined by multiplying the
balance credited to such Investment Fund Subaccount as of the prior day, less
any distributions valued as of the end of the prior day, by the percentage of
net Investment Gain or Investment Loss for the corresponding Investment Fund as
determined by the Company pursuant to Section 5.4(b); and
          (c) In the event that a Participant elects that a given Plan Year’s
Deferral Account be distributed as a Scheduled Distribution, all amounts
attributed to the deferral of Compensation for such Plan Year shall be accounted
for in a manner which allows separate accounting for the deferral of
Compensation and Investment Gains and Investment Losses associated with amounts
allocated to such each separate Scheduled Distribution.

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     5.2 Company Contribution Account. The Committee shall establish and
maintain a Company Contribution Account for each Participant under the Plan.
Each Participant’s Company Discretionary Contribution Account shall be further
divided into separate Investment Fund Subaccounts corresponding to the
Investment Fund elected by the Participant pursuant to Section 5.4(a). A
Participant’s Company Contribution Account shall be credited as follows:
          (a) As soon as practicable after a Company Discretionary Contribution
is made, the Company shall credit the Investment Fund Subaccounts of the
Participant’s Company Contribution Account with an amount equal to the Company
Discretionary Contributions, if any, made on behalf of that Participant, that
the Participant has elected to be deemed to be invested in each respective
Investment Fund; and
          (b) Each business day, each Investment Fund Subaccount of a
Participant’s Company Contribution Account shall be credited with Investment
Gains or Investment Losses in an amount equal to that determined by multiplying
the balance credited to such Investment Fund Subaccount as of the prior day,
less any distributions valued as of the end of the prior day, by the percentage
of net Investment Gain or Investment Loss for the corresponding Investment Fund
as determined by the Company pursuant to Section 5.4(b).
     5.3 Trust. The Company shall be responsible for the payment of all benefits
under the Plan. At its discretion, the Company may establish one or more grantor
trusts for the purpose of providing for payment of benefits under the Plan. Such
trust or trusts may be irrevocable, but the assets thereof shall be subject to
the claims of the Company’s general creditors. Benefits paid to the Participant
from any such trust or trusts shall be considered paid by the Company for
purposes of meeting the obligations of the Company under the Plan.
     5.4 Investment Elections.
          (a) Participant Direction. At the time of entering the Plan and/or of
making the deferral election under the Plan, the Participant shall designate, on
a Participant Election provided by the Committee, the Investment Funds in which
the Participant’s Account or Accounts shall be deemed to be invested for
purposes of determining the amount of Investment Gains and Investment Losses to
be credited to each Account. The Participant may specify that all or any
percentage of his or her Account or Accounts shall be deemed to be invested, in
whole percentage increments, in one or more of the types of Investment Funds
selected as alternative investments under the Plan from time to time by the
Committee pursuant to subsection (b) of this Section. A Participant may change
the designation made under this Section on a daily basis by electronically
filing a Participant Election in the manner provided by the Committee. During
payout, the Participant’s Account shall continue to be credited or debited with
Investment Gains and Investment Losses. If a Participant fails to make an
investment election under this Section for a particular Account, such Account
shall be invested in the default Investment Fund selected by the Committee for
such purpose.
          (b) Prior to the beginning of each Plan Year, the Committee shall
select, in its sole and absolute discretion, commercially available Investment
Funds for the applicable Plan Year and shall communicate each of the alternative
types of Investment Funds to the Participant pursuant to subsection (a) of this
Section 5.4. The Investment Gains and Investment Losses of

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each such commercially available investment fund shall be used to determine the
amount of Investment Gains or Investment Losses to be credited to Participant’s
Account under Article V. The Participant’s choice among investments shall be
solely for purposes of calculation of Investment Gains and Investment Losses on
Accounts. The Company shall have no obligation to set aside or invest amounts as
directed by the Participant and, if the Company elects to invest amounts as
directed by the Participant, the Participant shall have no more right to such
investments than any other general unsecured general creditor of the Company.
     5.5 Statement of Accounts. The Committee shall provide each Participant
with written or electronic statements at least quarterly setting forth the
Participant’s Account balance as of the end of each calendar quarter.
ARTICLE VI
VESTING
     6.1 Vesting of Deferral Accounts. The Participant shall be vested at all
times in amounts credited to the Participant’s Deferral Account or Accounts.
     6.2 Vesting of Company Contributions Account. Amounts credited to the
Participant’s Company Contribution Account may be subject to such vesting
schedule as the Company may determine at the time it makes a Company
Discretionary Distribution. Any such vesting schedule shall be based upon the
Participant’s completed Years of Service.
          In the event of Termination of Service as a result of Retirement,
Disability or death, regardless of the Participant’s Years of Service, the
Participant’s Company Contribution Account shall be fully vested.
ARTICLE VII
DISTRIBUTIONS
     7.1 Distribution Elections.
          (a) Initial Election. At the time of making a deferral election under
the Plan, the Participant shall designate the time and form of distribution of
deferrals made pursuant to such election (together with any Investment Gains or
Investment Losses) from among the alternatives specified in this Article VII.
          (b) Modification of Election. A distribution election with respect to
previously deferred amounts may only be changed under the terms and conditions
specified in Code Section 409A. Except as expressly provided in Section 7.4 or
as otherwise permitted by the Treasury Department regulations issued under Code
Section 409A, no acceleration of a distribution is permitted. A subsequent
election that delays payment or changes the form of payment shall be permitted
if and only if all of the following requirements are met:
               (1) the new election is submitted prior to a Termination of
Service;
               (2) in the case of payments made on account of Termination of
Service or a Scheduled Distribution, the new election delays payment for at
least five (5) years from the date that payment would otherwise have been made,
absent the new election; and

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               (3) in the case of payments made according to a Scheduled
Distribution, the new election is made not less than twelve (12) months before
the date on which payment would have been made (or, in the case of installment
payments, the first installment payment would have been made) absent the new
election.
For purposes of application of the above change limitations, installment
payments shall be treated as a single payment and only one change shall be
allowed to be made by a Participant with respect to form of benefits to be
received by such Participant upon Retirement. Election changes made pursuant to
this Section 7.1 shall be made in accordance with rules established by the
Committee, and shall comply with all requirement of Code Section 409A and
applicable authorities.
     7.2 Retirement Distributions.
          (a) Timing and Form of Distributions. Except as otherwise provided in
this Article VII, in the event of a Participant’s Retirement or Disability, the
Distributable Amount credited to the Participant’s Deferral Accounts and Company
Contributions Account shall be paid to the Participant in a lump sum commencing
on the Payment Date following the Participant’s Retirement unless the
Participant has made an election on a timely basis pursuant to Section 7.1 to
receive the Retirement benefits in the form of a single lump sum or in
fractional installments over two (2) to fifteen (15) years.
          (b) Small Benefit Exception. If on commencement of benefits payable
from an Account, the Distributable Amount from such Account is less than or
equal to ten thousand dollars ($10,000.00), the total Distributable Amount from
such Account shall be paid in the form of a single lump sum distribution on the
scheduled Payment Date, regardless of the Participant’s Years of Service.
     7.3 Termination Distributions. Except as provided in Section 7.5 with
respect to a Participant’s Deferral Account, in the event of a Participant’s
Termination of Service other than by reason of Retirement, death or Disability,
the Distributable Amount credited to the Participant’s Deferral Accounts or
Company Contribution Account shall be paid in a single lump sum on the Payment
Date following Termination of Service.
     7.4 Death Benefits.
          (a) Prior to Commencement of Benefits. In the event that the
Participant dies prior to commencement of benefit payable from an Account, the
Company shall pay to the Participant’s Beneficiary a death benefit equal to the
Distributable Amount of such Account in a single lump sum on the Payment Date
following the Participant’s death.
          (b) After Commencement of Benefits. In the event that the Participant
dies after commencement of benefits payable from an Account, benefits from such
Account shall continue to be paid to the Participant’s Beneficiary at the same
time and in the same form as they would have been paid to the Participant had
the Participant not died.

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     7.5 Scheduled Distributions.
          (a) Scheduled Distribution Election. Participants shall be entitled to
elect to receive a Scheduled Distribution from the Deferral Account. In the case
of a Participant who has elected to receive a Scheduled Distribution, such
Participant shall receive the Distributable Amount, with respect to the
specified deferrals, including earnings thereon, which have been elected by the
Participant to be subject to such Scheduled Distribution election in accordance
with Section 7.1 of the Plan. In the case of an initial election under
Section 7.1(a) a Participant’s Scheduled Distribution commencement date with
respect to deferrals of Compensation for a given Plan Year shall be no earlier
than three (3) years and no later than ten (10) years from the last day of the
Plan Year for which the deferral election is first effective under
Section 3.2(a). The Participant may elect to receive the Scheduled Distribution
in a single lump sum or fractional annual installments over a period of up to
five (5) years. A Participant may delay and change the form of a Scheduled
Distribution, provided such extension complies with the requirements of Section
3.3.
          (b) Small Benefit Exception. If on commencement of benefits payable by
reason of a Schedule Distribution the total balance of the Distributable Amount
is less than ten thousand dollars ($10,000), the Scheduled Distribution shall be
paid in the form of a single lump sum distribution on the scheduled commencement
date.
          (c) Termination of Service. In the event of a Participant’s
Termination of Service prior to commencement of a Scheduled Distribution, the
Scheduled Distributions shall be distributed in the form applicable to such
Termination of Service under Sections 7.3 or 7.4 above. In the event of a
Participant’s Termination of Service for any reason after a Scheduled
Distribution has commenced in the form of installment payments, such Scheduled
Distribution benefits shall continue to be paid at the same time and in the same
form as they would have been paid to the Participant had the Participant not
terminated service.
          (d) Maximum Number of Scheduled Distributions. A Participant may not
elect more than five (5) Scheduled Distributions remaining to be paid at any
time.
     7.6 Financial Hardship Distribution. Upon a finding that the Participant
(or, after the Participant’s death, a Beneficiary) has suffered a Financial
Hardship, the Committee may, at the request of the Participant or Beneficiary,
accelerate distribution of benefits or approve reduction or cessation of current
deferrals under the Plan in the amount reasonably necessary to alleviate such
Financial Hardship subject to the following conditions:
          (a) The request to take a Hardship Distribution shall be made by
filing a form provided by and filed with the Committee prior to the end of any
calendar month.
          (b) The amount distributed pursuant to this Section with respect to a
Financial Hardship shall not exceed the amount necessary to satisfy such
financial emergency plus amounts necessary to pay taxes reasonably anticipated
as a result of the distribution, after taking into account the extent to which
such hardship is or may be relieved through reimbursement or compensation by
insurance or otherwise or by liquidation of the Participant’s assets (to the
extent the liquidation of such assets would not itself cause severe financial
hardship).

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          (c) The amount determined by the Committee as a Hardship Distribution
shall be paid in a single cash lump sum as soon as practicable after the end of
the calendar month in which the Hardship Distribution election is made and
approved by the Committee.
          (d) Upon a finding that the Participant (or, after the Participant’s
death, a Beneficiary) has suffered a Financial Hardship, subject to Treasury
Regulations promulgated under Code Section 409A the Administrator may at the
request of the Participant, accelerate distribution of benefits or approve
reduction or cessation of current deferrals under the Plan in the amount
reasonably necessary to alleviate such Financial Hardship. The amount
distributed pursuant to this Section with respect to an emergency shall not
exceed the amount necessary to satisfy such emergency plus amounts necessary to
pay taxes reasonably anticipated as a result of the distribution, after taking
into account the extent to which such hardship is or may be relieved through
reimbursement or compensation by insurance or otherwise or by liquidation of the
Participant’s assets (to the extent the liquidation of such assets would not
itself cause severe financial hardship).
ARTICLE VIII
PAYEE DESIGNATIONS AND LIMITATIONS
     8.1 Beneficiaries.
          (a) Beneficiary Designation. The Participant shall have the right, at
any time, to designate any person or persons as Beneficiary (both primary and
contingent) to whom payment under the Plan shall be made in the event of the
Participant’s death. The Beneficiary designation shall be effective when it is
submitted to and acknowledged by the Committee during the Participant’s lifetime
in the format prescribed by the Committee.
          (b) Absence of Valid Designation. If a Participant fails to designate
a Beneficiary as provided above, or if every person designated as Beneficiary
predeceases the Participant or dies prior to complete distribution of the
Participant’s benefits, then the Committee shall direct the distribution of such
benefits to the Participant’s estate.
     8.2 Payments to Minors. In the event any amount is payable under the Plan
to a minor, payment shall not be made to the minor, but instead be paid (a) to
that person’s living parent(s) to act as custodian, (b) if that person’s parents
are then divorced, and one parent is the sole custodial parent, to such
custodial parent, to act as custodian, or (c) if no parent of that person is
then living, to a custodian selected by the Committee to hold the funds for the
minor under the Uniform Transfers or Gifts to Minors Act in effect in the
jurisdiction in which the minor resides. If no parent is living and the
Committee decides not to select another custodian to hold the funds for the
minor, then payment shall be made to the duly appointed and currently acting
guardian of the estate for the minor or, if no guardian of the estate for the
minor is duly appointed and currently acting within sixty (60) days after the
date the amount becomes payable, payment shall be deposited with the court
having jurisdiction over the estate of the minor.
     8.3 Payments on Behalf of Persons Under Incapacity. In the event that any
amount becomes payable under the Plan to a person who, in the sole judgment of
the Committee, is considered by reason of physical or mental condition to be
unable to give a valid receipt

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therefore, the Committee may direct that such payment be made to any person
found by the Committee, in its sole judgment, to have assumed the care of such
person. Any payment made pursuant to such determination shall constitute a full
release and discharge of any and all liability of the Committee and the Company
under the Plan.
     8.4 Inability to Locate Payee. In the event that the Committee is unable to
locate a Participant or Beneficiary within two years following the scheduled
Payment Date, the amount allocated to the Participant’s Deferral Account shall
be forfeited. If, after such forfeiture, the Participant or Beneficiary later
claims such benefit, such benefit shall be reinstated without interest or
earnings.
ARTICLE IX
ADMINISTRATION
     9.1 Committee. The Plan shall be administered by the Committee.
     9.2 Committee’s Rights, Duties and Powers. The Committee shall have all the
powers necessary and appropriate to discharge its duties under the Plan, which
powers shall be exercised in the sole and absolute discretion of the Committee,
including, but not limited to, the power:
          (a) To construe and interpret the provisions of the Plan and to make
factual determinations thereunder, including the power to determine the rights
or eligibility under the Plan and amounts of benefits (if any) under the Plan,
and to remedy ambiguities, inconsistencies or omissions, and such determinations
by the Committee shall be binding on all parties.
          (b) To adopt such rules of procedure and regulations as in its opinion
may be necessary for the proper and efficient administration of the Plan and as
are consistent with the Plan and trust agreement, if any.
          (c) To direct the payment of distributions in accordance with the
provisions of the Plan.
          (d) To employ agents, attorneys, accountants, actuaries or other
persons (who also may be employed by the Employer) and to delegate to them such
powers, rights and duties as the Committee may consider necessary or advisable
to carry out the administration of the Plan.
          (e) To appoint an investment manager to manage (with power to acquire
and dispose of) the assets of the Company that may be used to satisfy benefit
obligations under the Plan, and to delegate to any such investment manager all
of the powers, authorities and discretions granted to the Committee hereunder or
to the trustee of any under Trust established to pay benefits under the Plan.
     9.3 Interested Committee Member. If a member of the Committee is also a
Participant in the Plan, such Committee member may not decide or determine any
matter or question concerning his or her participation in the Plan, unless such
decision or determination

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could be made by the Committee member under the Plan if the Committee member
were not serving on the Committee.
     9.4 Expenses. All costs, charges and expenses reasonably incurred by the
Committee will be paid by the Employer. No compensation will be paid to a member
of the Committee as such.
     9.5 Claims. Claims for benefits under the Plan shall be made in writing to
the Committee or its duly authorized delegate. If the Committee or such delegate
wholly or partially denies a claim for benefits, the Committee or, if
applicable, its delegate shall, within a reasonable period of time, but no later
than ninety (90) days after receipt of the claim, notify the claimant in writing
or electronically of the adverse benefit determination. Notice of an adverse
benefit determination shall be written in a manner calculated to be understood
by the claimant and shall contain:
          (a) the specific reason or reasons for the adverse benefit
determination,
          (b) a specific reference to the pertinent Plan provisions upon which
the adverse benefit determination is based,
          (c) a description of any additional material or information necessary
for the claimant to perfect the claim, together with an explanation of why such
material or information is necessary, and
          (d) an explanation of the Plan’s review procedure and the time limits
applicable to such procedure including a statement of the claimant’s right to
bring a civil action under section 502(a) of ERISA following an adverse benefit
determination.
     If the Committee or its delegate determines that an extension of time is
necessary for processing the claim, the Committee or its delegate shall notify
the claimant in writing of such extension, the special circumstances requiring
the extension and the date by which the Committee expects to render the benefit
determination. In no event shall the extension exceed a period of ninety
(90) days from the end of the initial ninety (90) day period. If notice of the
denial of a claim is not furnished in accordance with this paragraph (a) within
ninety (90) days after the Committee or its duly authorized delegate receives it
(or within one hundred and eighty (180) days after such receipt if the Committee
or its delegate determines an extension is necessary), the claim shall be deemed
denied and the claimant shall be permitted to proceed to the review stage
described below.
     Within sixty (60) days after the claimant receives the written or
electronic notice of an adverse benefit determination, or the date the claim is
deemed denied pursuant to the preceding paragraph, or such later time as shall
be deemed reasonable in the sole discretion of the Committee taking into account
the nature of the benefit subject to the claim and other attendant
circumstances, the claimant may file a written request with the Committee that
it conduct a full and fair review of the adverse benefit determination,
including the holding of a hearing, if deemed necessary by the Committee. In
connection with the claimant’s appeal of the adverse benefit determination, the
claimant may review pertinent documents and may submit issues and

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comments in writing. The Committee shall render a decision on the appeal
promptly, but not later than sixty (60) days after the receipt of the claimant’s
request for review, unless special circumstances (such as the need to hold a
hearing, if necessary) require an extension of time for processing, in which
case the sixty (60) day period may be extended to one hundred and twenty (120)
days. The Committee shall notify the claimant in writing of any such extension,
the special circumstances requiring the extension, and the date by which the
Committee expects to render the determination on review. The claimant shall be
notified of the Committee’s decision in writing or electronically. In the case
of an adverse determination, such notice shall:
          (a) include specific reasons for the adverse determination,
          (b) be written in a manner calculated to be understood by the
claimant,
          (c) contain specific references to the pertinent Plan provisions upon
which the benefit determination is based,
          (d) contain a statement that the claimant is entitled to receive upon
request and free of charge, reasonable access to, and copies of, all documents,
records, and other information relevant to the claimant’s claim for benefits,
and
          (e) contain a statement of the claimant’s right to bring an action
under section 502(a) of ERISA.
     9.6 No Liability. No employee, agent, officer, trustee or director of the
Company or any Related Employer shall, in any event, be liable to any person for
any action taken or omitted to be taken in connection with the interpretation,
construction or administration of this Plan, so long as such action or omission
to act be made in good faith.
ARTICLE X
MISCELLANEOUS
     10.1 Amendment or Termination of Plan. The Company may, at any time, direct
the Committee to amend or terminate the Plan, except that no such amendment or
termination may reduce a Participant’s Account balances. If the Company
terminates the Plan, no further amounts shall be deferred hereunder, and amounts
previously deferred or contributed to the Plan shall be fully vested and shall
be paid in accordance with the provisions of the Plan as scheduled prior to the
Plan termination. Notwithstanding the forgoing, to the extent permitted under
Code Section 409A and applicable authorities, the Company may, in its complete
and sole discretion, accelerate distributions under the Plan in the event of a
“change in ownership” or “effective control” of the Company or a “change in
ownership of a substantial portion of assets” or under such other terms and
conditions as may be specifically authorized under Code Section 409A and
applicable authorities.
     10.2 Unfunded Plan. The Plan shall at all times be entirely unfunded and,
except as provided in the following paragraph, no provision of this Plan shall
at any time be made with respect to segregating any assets of the Company or any
other Employer for payment of any benefits hereunder. Participants and
Beneficiaries shall at all times have the status of general

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unsecured creditors of the Employers, and neither Participants nor Beneficiaries
shall have any rights in or against any specific assets of the Employers. The
Plan constitutes a mere promise by the Employers to make benefit payments in the
future.
     The Company may establish a reserve of assets to provide funds for the
payment of benefits under the Plan. Such reserve may be through the Trust and
such reserve shall, at all times, be subject to the claims of general creditors
of the Employers and shall otherwise be on such terms and conditions as shall
prevent taxation to Participants and Beneficiaries of any amounts held in the
reserve or credited to an account prior to the time payments are made. No
Participant or Beneficiary shall have any ownership rights in or to any reserve.
     10.3 Restriction Against Assignment. The Company shall pay all amounts
payable hereunder only to the person or persons designated by the Plan and not
to any other person or entity. No part of a Participant’s Accounts shall be
liable for the debts, contracts, or engagements of any Participant, Beneficiary,
or their successors in interest, nor shall a Participant’s Accounts be subject
to execution by levy, attachment, or garnishment or by any other legal or
equitable proceeding, nor shall any such person have any right to alienate,
anticipate, sell, transfer, commute, pledge, encumber, or assign any benefits or
payments hereunder in any manner whatsoever. No part of a Participant’s Accounts
shall be subject to any right of offset against or reduction for any amount
payable by the Participant or Beneficiary, whether to the Company or any other
party, under any arrangement other than under the terms of this Plan.
     10.4 Withholding. The Participant shall make appropriate arrangements with
the Company for satisfaction of any federal, state or local income tax
withholding requirements, Social Security and other employee tax or other
requirements applicable to the granting, crediting, vesting or payment of
benefits under the Plan. There shall be deducted from each payment made under
the Plan or any other Compensation payable to the Participant (or Beneficiary)
all taxes which are required to be withheld by the Company in respect to such
payment or this Plan. The Company shall have the right to reduce any payment (or
other Compensation) by the amount of cash sufficient to provide the amount of
said taxes.
     10.5 Protective Provisions. The Participant shall cooperate with the
Company by furnishing any and all information requested by the Committee, in
order to facilitate the payment of benefits hereunder, taking such physical
examinations as the Committee may deem necessary and taking such other actions
as may be requested by the Committee. If the Participant refuses to so
cooperate, the Company shall have no further obligation to the Participant under
the Plan. In the event of the Participant’s suicide during the first two
(2) years in the Plan, or if the Participant makes any material misstatement of
information or non-disclosure of medical history, then no benefits shall be
payable to the Participant under the Plan, except that benefits may be payable
in a reduced amount in the sole discretion of the Committee.
     10.6 Receipt or Release. Any payment made in good faith to a Participant or
the Participant’s Beneficiary shall, to the extent thereof, be in full
satisfaction of all claims against the Committee, its members and the Company.
The Committee may require such Participant or Beneficiary, as a condition
precedent to such payment, to execute a receipt and release to such effect.

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     10.7 Employment Not Guaranteed. Nothing contained in the Plan nor any
action taken hereunder shall be construed as a contract of employment or as
giving any Participant any right to continue the provision of services in any
capacity whatsoever to the Company.
     10.8 Successors of the Company. The rights and obligations of the Company
under the Plan shall inure to the benefit of, and shall be binding upon, the
successors and assigns of the Company.
     10.9 Notice. Any notice or filing required or permitted to be given to the
Company or the Participant under this Agreement shall be sufficient if in
writing and hand-delivered, or sent by registered or certified mail, in the case
of the Company, to the principal office of the Company, directed to the
attention of the Committee, and in the case of the Participant, to the last
known address of the Participant indicated on the employment records of the
Company. Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification. Notices to the Company may be permitted by
electronic communication according to specifications established by the
Committee.
     10.10 Headings. Headings and subheadings in this Plan are inserted for
convenience of reference only and are not to be considered in the construction
of the provisions hereof.
     10.11 Gender, Singular and Plural. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, or neuter, as the identity
of the person or persons may require. As the context may require, the singular
may be read as the plural and the plural as the singular.
     10.12 Governing Law. This Plan shall be governed by and construed in
accordance with the internal laws of the State of Illinois, to the extent not
preempted by the laws of the United States.
     IN WITNESS WHEREOF, the Board of Directors of the Company has approved the
adoption of this Plan as of the Effective Date and has caused the Plan to be
executed by its duly authorized representative this 27 day of October, 2008.

                  ULTA SALON, COSMETICS & FRAGRANCE, INC.    
 
           
 
  By:   /s/ Wayne L’Heureux
 
     
 
  Title:   Senior Vice President, Human Resources    

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