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EXHIBIT 10.10




ULTA SALON, COSMETICS & FRAGRANCE, INC.




2007 INCENTIVE AWARD PLAN




ARTICLE 1.




PURPOSE




     The purpose of the Ulta Salon, Cosmetics & Fragrance, Inc. 2007 Incentive Award Plan (the
“Plan”) is to promote the success and enhance the value of Ulta Salon, Cosmetics &
Fragrance, Inc. (the “Company”) by linking the personal interests of the members of the
Board, Employees, and Consultants to those of Company stockholders and by providing such
individuals with an incentive for outstanding performance to generate superior returns to Company
stockholders. The Plan is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon
whose judgment, interest, and special effort the successful conduct of the Company’s operation is
largely dependent.



ARTICLE 2.




DEFINITIONS AND CONSTRUCTION




     Wherever the following terms are used in the Plan they shall have the meanings specified
below, unless the context clearly indicates otherwise. The singular pronoun shall include the
plural where the context so indicates.



     2.1 “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right
award, a Performance Share award, a Performance Stock Unit award, a Dividend Equivalents award, a
Stock Payment award, a Deferred Stock award, a Restricted Stock Unit award, a Performance Bonus
Award, or a Performance-Based Award granted to a Participant pursuant to the Plan.



     2.2 “Award Agreement” means any written agreement, contract, or other instrument or
document evidencing an Award, including through electronic medium.



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



     2.4 “Change in Control” means and includes each of the following:



          (a) A transaction or series of transactions (other than an offering of Stock to the general
public through a registration statement filed with the Securities and Exchange Commission) whereby
any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2)
of the Exchange Act) (other than the Company, any of its subsidiaries, an employee benefit plan
maintained by the Company or any of its subsidiaries or a “person” that, prior to such transaction,
directly or indirectly controls, is controlled by, or is under common control with, the Company)
directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company

 









 








possessing more than 50% of the total combined voting power of the Company’s securities
outstanding immediately after such acquisition; or




          (b) During any period of two consecutive years, individuals who, at the beginning of such
period, constitute the Board together with any new director(s) (other than a director designated by
a person who shall have entered into an agreement with the Company to effect a transaction
described in Section 2.4(a) or Section 2.4(c)) whose election by the Board or nomination for
election by the Company’s stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the two-year period or
whose election or nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; or




          (c) The consummation by the Company (whether directly involving the Company or indirectly
involving the Company through one or more intermediaries) of (x) a merger, consolidation,
reorganization, or business combination or (y) a sale or other disposition of all or substantially
all of the Company’s assets in any single transaction or series of related transactions or (z) the
acquisition of assets or stock of another entity, in each case other than a transaction:




               (i) Which results in the Company’s voting securities outstanding immediately before the
transaction continuing to represent (either by remaining outstanding or by being converted into
voting securities of the Company or the person that, as a result of the transaction, controls,
directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of
the Company’s assets or otherwise succeeds to the business of the Company (the Company or such
person, the “Successor Entity”)) directly or indirectly, at least a majority of the
combined voting power of the Successor Entity’s outstanding voting securities immediately after the
transaction, and



               (ii) After which no person or group beneficially owns voting securities representing 50% or
more of the combined voting power of the Successor Entity; provided, however, that no person or
group shall be treated for purposes of this Section 2.4(c)(ii) as beneficially owning 50% or more
of combined voting power of the Successor Entity solely as a result of the voting power held in the
Company prior to the consummation of the transaction; or



          (d) The Company’s stockholders approve a liquidation or dissolution of the Company.



The Committee shall have full and final authority, which shall be exercised in its discretion, to
determine conclusively whether a Change in Control of the Company has occurred pursuant to the
above definition, and the date of the occurrence of such Change in Control and any incidental
matters relating thereto.




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



     2.6 “Committee” means the committee of the Board described in Article 12.



     2.7 “Consultant” means any consultant or adviser if: (a) the consultant or adviser
renders bona fide services to the Company or any Subsidiary; (b) the services rendered by the



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consultant or adviser are not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or maintain a market for the
Company’s securities; and (c) the consultant or adviser is a natural person.



     2.8 “Covered Employee” means an Employee who is, or could be, a “covered employee”
within the meaning of Section 162(m) of the Code.



     2.9 “Deferred Stock” means a right to receive a specified number of shares of Stock
during specified time periods pursuant to Section 8.5.



     2.10 “Director” means a member of the Board, or as applicable, a member of the board
of directors of a Subsidiary.



     2.11 “Disability” means that the Participant qualifies to receive long-term disability
payments under the Company’s long-term disability insurance program, as it may be amended from time
to time.



     2.12 “Dividend Equivalents” means a right granted to a Participant pursuant to Section
8.3 to receive the equivalent value (in cash or Stock) of dividends paid on Stock.



     2.13 “Effective Date” shall have the meaning set forth in Section 13.1.



     2.14 “Eligible Individual” means any person who is an Employee, a Consultant or an
Independent Director, as determined by the Committee.



     2.15 “Employee” means any officer or other employee (as defined in accordance with
Section 3401(c) of the Code) of the Company or any Subsidiary.



     2.16 “Equity Restructuring” shall mean a nonreciprocal transaction between the company
and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or
recapitalization through a large, nonrecurring cash dividend, that affects the shares of Stock (or
other securities of the Company) or the share price of Stock (or other securities) and causes a
change in the per share value of the Stock underlying outstanding Awards.



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



     2.18 “Fair Market Value” means, as of any given date, (a) if Stock is traded on any
established stock exchange, the closing price of a share of Stock as reported in the Wall Street
Journal (or such other source as the Company may deem reliable for such purposes) for such date, or
if no sale occurred on such date, the first trading date immediately prior to such date during
which a sale occurred; or (b) if Stock is not traded on an exchange but is quoted on a national
market or other quotation system, the last sales price on such date, or if no sales occurred on
such date, then on the date immediately prior to such date on which sales prices are reported; or
(c) if Stock is not publicly traded, the fair market value established by the Committee acting in
good faith.



     2.19 “Incentive Stock Option” means an Option that is intended to meet the
requirements of Section 422 of the Code or any successor provision thereto.



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     2.20 “Independent Director” means a Director of the Company who is not an Employee.



     2.21 “Non-Employee Director” means a Director of the Company who qualifies as a
“Non-Employee Director” as defined in Rule 16b-3(b)(3) under the Exchange Act, or any successor
rule.



     2.22 “Non-Qualified Stock Option” means an Option that is not intended to be an
Incentive Stock Option.



     2.23 “Option” means a right granted to a Participant pursuant to Article 5 of the Plan
to purchase a specified number of shares of Stock at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.



     2.24 “Participant” means any Eligible Individual who, as a member of the Board,
Consultant or Employee, has been granted an Award pursuant to the Plan.



     2.25 “Performance-Based Award” means an Award granted to selected Covered Employees
pursuant to Section 8.7, but which is subject to the terms and conditions set forth in Article 9.



     2.26 “Performance Bonus Award” has the meaning set forth in Section 8.7.



     2.27 “Performance Criteria” means the criteria that the Committee selects for purposes
of establishing the Performance Goal or Performance Goals for a Participant for a Performance
Period. The Performance Criteria that will be used to establish Performance Goals are limited to
the following: net earnings (either before or after interest, taxes, depreciation and
amortization), economic value-added, sales or revenue, net income (either before or after taxes),
operating earnings, cash flow (including, but not limited to, operating cash flow and free cash
flow), cash flow, return on capital, return on invested capital, return on net assets, return on
stockholders’ equity, return on assets, stockholder returns, return on sales, gross or net profit
margin, productivity, expense, margins, operating efficiency, customer satisfaction, working
capital, earnings per share, price per share of Stock, market capitalization and market share, any
of which may be measured either in absolute terms or as compared to any incremental increase or as
compared to results of a peer group. The Committee shall define in an objective fashion the manner
of calculating the Performance Criteria it selects to use for such Performance Period for such
Participant.



     2.28 “Performance Goals” means, for a Performance Period, the goals established in
writing by the Committee for the Performance Period based upon the Performance Criteria. Depending
on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be
expressed in terms of overall Company performance or the performance of a division, business unit,
or an individual. The Committee, in its discretion, may, within the time prescribed by Section
162(m) of the Code, adjust or modify the calculation of Performance Goals for such Performance
Period in order to prevent the dilution or enlargement of the rights of Participants (a) in the
event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event,
or development, or (b) in recognition of, or in anticipation of, any other unusual or nonrecurring
events affecting the Company, or the financial statements of



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the Company, or in response to, or in anticipation of, changes in applicable laws,
regulations, accounting principles, or business conditions.



     2.29 “Performance Period” means the one or more periods of time, which may be of
varying and overlapping durations, as the Committee may select, over which the attainment of one or
more Performance Goals will be measured for the purpose of determining a Participant’s right to,
and the payment of, a Performance-Based Award.



     2.30 “Performance Share” means a right granted to a Participant pursuant to Section
8.1, to receive Stock, the payment of which is contingent upon achieving certain Performance Goals
or other performance-based targets established by the Committee.



     2.31 “Performance Stock Unit” means a right granted to a Participant pursuant to
Section 8.2, to receive Stock, the payment of which is contingent upon achieving certain
Performance Goals or other performance-based targets established by the Committee.



     2.32 “Plan” means this Ulta Salon, Cosmetics & Fragrance, Inc. 2007 Incentive Award
Plan, as it may be amended from time to time.



     2.33 “Prior Plans” means, collectively, the following plans of the Company: Ulta
Salon, Cosmetics & Fragrance, Inc. 2002 Equity Incentive Plan, Ulta Salon, Cosmetics & Fragrance,
Inc. Second Amended and Restated Stock Option Plan, and the Ulta Salon, Cosmetics and Fragrance,
Inc. Stock Option Plan — Consultants, in each case as such plan may be amended from time to time.



     2.34 “Public Trading Date” means the first date upon which Stock is listed (or
approved for listing) upon notice of issuance on any securities exchange or designated (or approved
for designation) upon notice of issuance as a national market security on an interdealer quotation
system.



     2.35 “Qualified Performance-Based Compensation” means any compensation that is
intended to qualify as “qualified performance-based compensation” as described in Section
162(m)(4)(C) of the Code.



     2.36 “Restricted Stock” means Stock awarded to a Participant pursuant to Article 6
that is subject to certain restrictions and may be subject to risk of forfeiture.



     2.37 “Restricted Stock Unit” means an Award granted pursuant to Section 8.6.



     2.38 “Securities Act” shall mean the Securities Act of 1933, as amended.



     2.39 “Stock” means the common stock of the Company, par value $0.01 per share, and
such other securities of the Company that may be substituted for Stock pursuant to Article 11.



     2.40 “Stock Appreciation Right” or “SAR” means a right granted pursuant to
Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number
of shares of Stock on the date the SAR is exercised over the Fair Market Value on the date the SAR
was granted as set forth in the applicable Award Agreement.



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     2.41 “Stock Payment” means (a) a payment in the form of shares of Stock, or (b) an
option or other right to purchase shares of Stock, as part of any bonus, deferred compensation or
other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to
Section 8.4.



     2.42 “Subsidiary” means any “subsidiary corporation” as defined in Section 424(f) of
the Code and any applicable regulations promulgated thereunder or any other entity of which a
majority of the outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company.



ARTICLE 3.




SHARES SUBJECT TO THE PLAN




     3.1 Number of Shares.



          (a) Subject to Article 11 and Section 3.1(b), the aggregate number of shares of Stock which
may be issued or transferred pursuant to Awards under the Plan shall be the sum of: (i) 6,500,000
shares and (ii) any shares of Stock which as of the Effective Date are available for issuance under
any of the Prior Plans and which following the Effective Date are not issued under the Prior Plans;
provided, however, that no more than 6,500,000 shares of Stock may be delivered upon the exercise
of Incentive Stock Options.




          (b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of
Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan.
Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or
tax withholding obligation pursuant to any Award shall again be available for the grant of an Award
pursuant to the Plan. To the extent permitted by applicable law or any exchange rule, shares of
Stock issued in assumption of, or in substitution for, any outstanding awards of any entity
acquired in any form of combination by the Company or any Subsidiary shall not be counted against
shares of Stock available for grant pursuant to this Plan. The payment of Dividend Equivalents in
cash in conjunction with any outstanding Awards shall not be counted against the shares available
for issuance under the Plan. Notwithstanding the provisions of this Section 3.1(b), no shares of
Common Stock may again be optioned, granted or awarded if such action would cause an Incentive
Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.




     3.2 Stock Distributed. Any Stock distributed pursuant to an Award may consist, in
whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open
market.



     3.3 Limitation on Number of Shares Subject to Awards. Notwithstanding any provision
in the Plan to the contrary, and subject to Article 11, the maximum number of shares of Stock with
respect to one or more Awards that may be granted to any one Participant during any calendar year
shall be 4,550,000 and the maximum amount that may be paid in cash during any calendar year with
respect to any Performance-Based Award (including, without limitation, any Performance Bonus Award)
shall be $5,000,000; provided, however, that the foregoing



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limitations shall not apply prior to the Public Trading Date and, following the Public Trading
Date, the foregoing limitations shall not apply until the earliest of: (a) the first material
modification of the Plan (including any increase in the number of shares reserved for issuance
under the Plan in accordance with Section 3.1); (b) the issuance of all of the shares of Stock
reserved for issuance under the Plan; (c) the expiration of the Plan; (d) the first meeting of
stockholders at which members of the Board are to be elected that occurs after the close of the
third calendar year following the calendar year in which occurred the first registration of an
equity security of the Company under Section 12 of the Exchange Act; or (e) such other date
required by Section 162(m) of the Code and the rules and regulations promulgated thereunder.



ARTICLE 4.




ELIGIBILITY AND PARTICIPATION




     4.1 Eligibility. Each Eligible Individual shall be eligible to be granted one or more
Awards pursuant to the Plan.



     4.2 Participation. Subject to the provisions of the Plan, the Committee may, from
time to time, select from among all Eligible Individuals, those to whom Awards shall be granted and
shall determine the nature and amount of each Award. No Eligible Individual shall have any right
to be granted an Award pursuant to this Plan.



     4.3 Foreign Participants. Notwithstanding any provision of the Plan to the contrary,
in order to comply with the laws in other countries in which the Company and its Subsidiaries
operate or have Eligible Individuals, the Committee, in its sole discretion, shall have the power
and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine
which Eligible Individuals outside the United States are eligible to participate in the Plan; (iii)
modify the terms and conditions of any Award granted to Eligible Individuals outside the United
States to comply with applicable foreign laws; (iv) establish subplans and modify exercise
procedures and other terms and procedures, to the extent such actions may be necessary or advisable
(any such subplans and/or modifications shall be attached to this Plan as appendices); provided,
however, that no such subplans and/or modifications shall increase the share limitations contained
in Sections 3.1 and 3.3 of the Plan; and (v) take any action, before or after an Award is made,
that it deems advisable to obtain approval or comply with any necessary local governmental
regulatory exemptions or approvals. Notwithstanding the foregoing, the Committee may not take any
actions hereunder, and no Awards shall be granted, that would violate the Exchange Act, the Code,
any securities law or governing statute or any other applicable law.



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ARTICLE 5.




STOCK OPTIONS




     5.1 General. The Committee is authorized to grant Options to Eligible Individuals on
the following terms and conditions:



          (a) Exercise Price. The exercise price per share of Stock subject to an Option shall
be determined by the Committee and set forth in the Award Agreement; provided, that, subject to
Section 5.2(d), the exercise price for any Option shall not be less than 100% of the Fair Market
Value of a share of Stock on the date of grant.




          (b) Time and Conditions of Exercise. The Committee shall determine the time or times
at which an Option may be exercised in whole or in part; provided that the term of any Option
granted under the Plan shall not exceed ten years. The Committee shall also determine the
performance or other conditions, if any, that must be satisfied before all or part of an Option may
be exercised.




          (c) Payment. The Committee shall determine the methods by which the exercise price of
an Option may be paid, the form of payment, including, without limitation: (i) cash, (ii) shares of
Stock held for such period of time as may be required by the Committee in order to avoid adverse
accounting consequences and having a Fair Market Value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof, or (iii) other property
acceptable to the Committee (including through the delivery of a notice that the Participant has
placed a market sell order with a broker with respect to shares of Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a sufficient portion of the
net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that
payment of such proceeds is then made to the Company upon settlement of such sale). The Committee
shall also determine the methods by which shares of Stock shall be delivered or deemed to be
delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, after
the Public Trading Date, no Participant who is a Director or an “executive officer” of the Company
within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise
price of an Option, or continue any extension of credit with respect to the exercise price of an
Option with a loan from the Company or a loan arranged by the Company in violation of Section 13(k)
of the Exchange Act.




          (d) Evidence of Grant. All Options shall be evidenced by an Award Agreement between
the Company and the Participant. The Award Agreement shall include such additional provisions as
may be specified by the Committee.




     5.2 Incentive Stock Options. Incentive Stock Options shall be granted only to
Employees and the terms of any Incentive Stock Options granted pursuant to the Plan, in addition to
the requirements of Section 5.1, must comply with the provisions of this Section 5.2.



          (a) Expiration. Subject to Section 5.2(c), an Incentive Stock Option shall expire and
may not be exercised to any extent by anyone after the first to occur of the following events:




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               (i) Ten years from the date it is granted, unless an earlier time is set in the Award
Agreement;



               (ii) Three months after the Participant’s termination of employment as an Employee; and



               (iii) One year after the date of the Participant’s termination of employment or service on
account of Disability or death. Upon the Participant’s Disability or death, any Incentive Stock
Options exercisable at the Participant’s Disability or death may be exercised by the Participant’s
legal representative or representatives, by the person or persons entitled to do so pursuant to the
Participant’s last will and testament, or, if the Participant fails to make testamentary
disposition of such Incentive Stock Option or dies intestate, by the person or persons entitled to
receive the Incentive Stock Option pursuant to the applicable laws of descent and distribution.



          (b) Dollar Limitation. The aggregate Fair Market Value (determined as of the time the
Option is granted) of all shares of Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation
as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive
Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall
be considered Non-Qualified Stock Options.




          (c) Ten Percent Owners. An Incentive Stock Option shall be granted to any individual
who, at the date of grant, owns stock possessing more than ten percent of the total combined voting
power of all classes of Stock of the Company only if such Option is granted at a price that is not
less than 110% of Fair Market Value on the date of grant and the Option is exercisable for no more
than five years from the date of grant.




          (d) Notice of Disposition. The Participant shall give the Company prompt notice of
any disposition of shares of Stock acquired by exercise of an Incentive Stock Option within (i) two
years from the date of grant of such Incentive Stock Option or (ii) one year after the transfer of
such shares of Stock to the Participant.




          (e) Right to Exercise. During a Participant’s lifetime, an Incentive Stock Option may
be exercised only by the Participant.




          (f) Failure to Meet Requirements. Any Option (or portion thereof) purported to be an
Incentive Stock Option, which, for any reason, fails to meet the requirements of Section 422 of the
Code shall be considered a Non-Qualified Stock Option.




     5.3 Granting of Options to Independent Directors. The Board may from time to time, in
its sole discretion, and subject to the limitations of the Plan:



          (a) Select from among the Independent Directors (including Independent Directors who have
previously been granted Options under the Plan) such of them as in its opinion should be granted
Options;




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          (b) Subject to Section 3.3, determine the number of shares of Stock that may be purchased upon
exercise of the Options granted to such selected Independent Directors; and




          (c) Subject to the provisions of this Article 5, determine the terms and conditions of such
Options, consistent with the Plan.




Options granted to Independent Directors shall be Non-Qualified Stock Options.




ARTICLE 6.




RESTRICTED STOCK AWARDS




     6.1 Grant of Restricted Stock. The Committee is authorized to make Awards of
Restricted Stock to any Eligible Individual selected by the Committee in such amounts and subject
to such terms and conditions as determined by the Committee. All Awards of Restricted Stock shall
be evidenced by an Award Agreement.



     6.2 Issuance and Restrictions. Restricted Stock shall be subject to such restrictions
on transferability and other restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on
the Restricted Stock). These restrictions may lapse separately or in combination at such times,
pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at
the time of the grant of the Award or thereafter.



     6.3 Forfeiture. Except as otherwise determined by the Committee at the time of the
grant of the Award or thereafter, upon termination of employment or service during the applicable
restriction period, Restricted Stock that is at that time subject to restrictions shall be
forfeited; provided, however, that the Committee may (a) provide in any Restricted Stock Award
Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in
whole or in part in the event of terminations resulting from specified causes, and (b) in other
cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.



     6.4 Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan
may be evidenced in such manner as the Committee shall determine. If certificates representing
shares of Restricted Stock are registered in the name of the Participant, certificates must bear an
appropriate legend referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, and the Company may, at its discretion, retain physical possession of the
certificate until such time as all applicable restrictions lapse.



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ARTICLE 7.




STOCK APPRECIATION RIGHTS




     7.1 Grant of Stock Appreciation Rights.



          (a) A Stock Appreciation Right may be granted to any Eligible Individual selected by the
Committee. A Stock Appreciation Right shall be subject to such terms and conditions not
inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award
Agreement.




          (b) A Stock Appreciation Right shall entitle the Participant (or other person entitled to
exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion
of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to
receive from the Company an amount equal to the product of (i) the excess of (A) the Fair Market
Value of the Stock on the date the Stock Appreciation Right is exercised over (B) the Fair Market
Value of the Stock on the date the Stock Appreciation Right was granted and (ii) the number of
shares of Stock with respect to which the Stock Appreciation Right is exercised, subject to any
limitations the Committee may impose.




     7.2 Payment and Limitations on Exercise.



          (a) Subject to Sections 7.2(b) payment of the amounts determined under Sections 7.1(b) above
shall be in cash, in Stock (based on its Fair Market Value as of the date the Stock Appreciation
Right is exercised) or a combination of both, as determined by the Committee in the Award
Agreement.




          (b) To the extent any payment under Section 7.1(b) is effected in Stock, it shall be made
subject to satisfaction of all provisions of Article 5 above pertaining to Options.




ARTICLE 8.




OTHER TYPES OF AWARDS




     8.1 Performance Share Awards. Any Eligible Individual selected by the Committee may
be granted one or more Performance Share awards which shall be denominated in a number of shares of
Stock and which may be linked to any one or more of the Performance Criteria or other specific
performance criteria determined appropriate by the Committee, in each case on a specified date or
dates or over any period or periods determined by the Committee. In making such determinations,
the Committee shall consider (among such other factors as it deems relevant in light of the
specific type of award) the contributions, responsibilities and other compensation of the
particular Participant.



     8.2 Performance Stock Units. Any Eligible Individual selected by the Committee may be
granted one or more Performance Stock Unit awards which shall be denominated in unit equivalent of
shares of Stock and/or units of value including dollar value of shares of Stock and which may be
linked to any one or more of the Performance Criteria or other specific performance criteria
determined appropriate by the Committee, in each case on a specified date



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or dates or over any period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it deems relevant in
light of the specific type of award) the contributions, responsibilities and other compensation of
the particular Participant.



     8.3 Dividend Equivalents.



          (a) Any Eligible Individual selected by the Committee may be granted Dividend Equivalents
based on the dividends declared on the shares of Stock that are subject to any Award, to be
credited as of dividend payment dates, during the period between the date the Award is granted and
the date the Award is exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Stock by such formula and at such
time and subject to such limitations as may be determined by the Committee.




          (b) Dividend Equivalents granted with respect to Options or SARs that are intended to be
Qualified Performance-Based Compensation shall be payable, with respect to pre-exercise periods,
regardless of whether such Option or SAR is subsequently exercised.




     8.4 Stock Payments. Any Eligible Individual selected by the Committee may receive
Stock Payments in the manner determined from time to time by the Committee[; provided, that unless
otherwise determined by the Committee such Stock Payments shall be made in lieu of base salary,
bonus, or other cash compensation otherwise payable to such Participant]. The number of shares
shall be determined by the Committee and may be based upon the Performance Criteria or other
specific performance criteria determined appropriate by the Committee, determined on the date such
Stock Payment is made or on any date thereafter.



     8.5 Deferred Stock. Any Eligible Individual selected by the Committee may be granted
an award of Deferred Stock in the manner determined from time to time by the Committee. The number
of shares of Deferred Stock shall be determined by the Committee and may be linked to the
Performance Criteria or other specific performance criteria determined to be appropriate by the
Committee, in each case on a specified date or dates or over any period or periods determined by
the Committee. Stock underlying a Deferred Stock award will not be issued until the Deferred Stock
award has vested, pursuant to a vesting schedule or performance criteria set by the Committee.
Unless otherwise provided by the Committee, a Participant awarded Deferred Stock shall have no
rights as a Company stockholder with respect to such Deferred Stock until such time as the Deferred
Stock Award has vested and the Stock underlying the Deferred Stock Award has been issued.



     8.6 Restricted Stock Units. The Committee is authorized to make Awards of Restricted
Stock Units to any Eligible Individual selected by the Committee in such amounts and subject to
such terms and conditions as determined by the Committee. At the time of grant, the Committee
shall specify the date or dates on which the Restricted Stock Units shall become fully vested and
nonforfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of
grant, the Committee shall specify the maturity date applicable to each grant of Restricted Stock
Units which shall be no earlier than the vesting date or dates of the Award and may be determined
at the election of the grantee. On the maturity date, the Company shall,




12










 




subject to Section 10.5(b), transfer to the Participant one unrestricted, fully transferable
share of Stock for each Restricted Stock Unit scheduled to be paid out on such date and not
previously forfeited.




     8.7 Performance Bonus Awards. Any Eligible Individual selected by the Committee may
be granted one or more Performance-Based Awards in the form of a cash bonus (a “Performance
Bonus Award”) payable upon the attainment of Performance Goals that are established by the
Committee and relate to one or more of the Performance Criteria, in each case on a specified date
or dates or over any period or periods determined by the Committee. Any such Performance Bonus
Award paid to a Covered Employee shall be based upon objectively determinable bonus formulas
established in accordance with Article 9.



     8.8 Term. Except as otherwise provided herein, the term of any Award of Performance
Shares, Performance Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock or Restricted
Stock Units shall be set by the Committee in its discretion.



     8.9 Exercise or Purchase Price. The Committee may establish the exercise or purchase
price, if any, of any Award of Performance Shares, Performance Stock Units, Deferred Stock, Stock
Payments or Restricted Stock Units; provided, however, that such price shall not be less than the
par value of a share of Stock on the date of grant, unless otherwise permitted by applicable state
law.



     8.10 Exercise upon Termination of Employment or Service. An Award of Performance
Shares, Performance Stock Units, Dividend Equivalents, Deferred Stock, Stock Payments and
Restricted Stock Units shall only be exercisable or payable while the Participant is an Employee,
Consultant or Director, as applicable; provided, however, that the Committee in its sole and
absolute discretion may provide that an Award of Performance Shares, Performance Stock Units,
Dividend Equivalents, Stock Payments, Deferred Stock or Restricted Stock Units may be exercised or
paid subsequent to a termination of employment or service, as applicable, or following a Change in
Control of the Company, or because of the Participant’s retirement, death or disability, or
otherwise; provided, however, that any such provision with respect to Performance Shares or
Performance Stock Units shall be subject to the requirements of Section 162(m) of the Code that
apply to Qualified Performance-Based Compensation.



     8.11 Form of Payment. Payments with respect to any Awards granted under this Article
8 shall be made in cash, in Stock or a combination of both, as determined by the Committee.



     8.12 Award Agreement. All Awards under this Article 8 shall be subject to such
additional terms and conditions as determined by the Committee and shall be evidenced by an Award
Agreement.



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ARTICLE 9.




PERFORMANCE-BASED AWARDS




     9.1 Purpose. The purpose of this Article 9 is to provide the Committee the ability to
qualify Awards other than Options and SARs and that are granted pursuant to Articles 6 and 8 as
Qualified Performance-Based Compensation. If the Committee, in its discretion, decides to grant a
Performance-Based Award to a Covered Employee, the provisions of this Article 9 shall control over
any contrary provision contained in Articles 6 or 8; provided, however, that the Committee may in
its discretion grant Awards to Covered Employees that are based on Performance Criteria or
Performance Goals but that do not satisfy the requirements of this Article 9.



     9.2 Applicability. This Article 9 shall apply only to those Covered Employees
selected by the Committee to receive Performance-Based Awards. The designation of a Covered
Employee as a Participant for a Performance Period shall not in any manner entitle the Participant
to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant
for a particular Performance Period shall not require designation of such Covered Employee as a
Participant in any subsequent Performance Period and designation of one Covered Employee as a
Participant shall not require designation of any other Covered Employees as a Participant in such
period or in any other period.



     9.3 Procedures with Respect to Performance-Based Awards. To the extent necessary to
comply with the Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of
the Code, with respect to any Award granted under Articles 6 or 8 which may be granted to one or
more Covered Employees, no later than ninety (90) days following the commencement of any fiscal
year in question or any other designated fiscal period or period of service (or such other time as
may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (a)
designate one or more Covered Employees, (b) select the Performance Criteria applicable to the
Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable,
which may be earned for such Performance Period, and (d) specify the relationship between
Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be
earned by each Covered Employee for such Performance Period. Following the completion of each
Performance Period, the Committee shall certify in writing whether the applicable Performance Goals
have been achieved for such Performance Period. In determining the amount earned by a Covered
Employee, the Committee shall have the right to reduce or eliminate (but not to increase) the
amount payable at a given level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or corporate performance for the
Performance Period.



     9.4 Payment of Performance-Based Awards. Unless otherwise provided in the applicable
Award Agreement, a Participant must be employed by the Company or a Subsidiary on the day a
Performance-Based Award for such Performance Period is paid to the Participant. Furthermore, a
Participant shall be eligible to receive payment pursuant to a Performance-Based Award for a
Performance Period only if the Performance Goals for such period are achieved. In determining the
amount earned under a Performance-Based Award, the Committee may reduce



14









 




or eliminate the amount of the Performance-Based Award earned for the Performance Period, if
in its sole and absolute discretion, such reduction or elimination is appropriate.




     9.5 Additional Limitations. Notwithstanding any other provision of the Plan, any
Award which is granted to a Covered Employee and is intended to constitute Qualified
Performance-Based Compensation shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or
rulings issued thereunder that are requirements for qualification as qualified performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended
to the extent necessary to conform to such requirements.



ARTICLE 10.




PROVISIONS APPLICABLE TO AWARDS




     10.1 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the
discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other
Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards
may be granted either at the same time as or at a different time from the grant of such other
Awards.



     10.2 Award Agreement. Awards under the Plan shall be evidenced by Award Agreements
that set forth the terms, conditions and limitations for each Award which may include the term of
an Award, the provisions applicable in the event the Participant’s employment or service
terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend,
cancel or rescind an Award.



     10.3 Limits on Transfer. No right or interest of a Participant in any Award may be
pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a
Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any
other party other than the Company or a Subsidiary. Except as otherwise provided by the Committee,
no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by
will or the laws of descent and distribution or pursuant to beneficiary designation procedures
approved from time to time by the Committee (or the Board in the case of Awards granted to
Independent Directors). The Committee by express provision in the Award or an amendment thereto
may permit an Award (other than an Incentive Stock Option) to be transferred to, exercised by and
paid to certain persons or entities related to the Participant, including but not limited to
members of the Participant’s family, charitable institutions, or trusts or other entities whose
beneficiaries or beneficial owners are members of the Participant’s family and/or charitable
institutions, or to such other persons or entities as may be expressly approved by the Committee,
pursuant to such conditions and procedures as the Committee may establish. Any permitted transfer
shall be subject to the condition that the Committee receive evidence satisfactory to it that the
transfer is being made for estate and/or tax planning purposes (or to a “blind trust” in connection
with the Participant’s termination of employment or service with the Company or a Subsidiary to
assume a position with a governmental, charitable, educational or similar non-profit institution)
and on a basis consistent with the Company’s lawful issue of securities.



15









 





     10.4 Beneficiaries. Notwithstanding Section 10.3, a Participant may, in the manner
determined by the Committee, designate a beneficiary to exercise the rights of the Participant and
to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary,
legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is
subject to all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any
additional restrictions deemed necessary or appropriate by the Committee. If the Participant is
married and resides in a community property state, a designation of a person other than the
Participant’s spouse as his or her beneficiary with respect to more than 50% of the Participant’s
interest in the Award shall not be effective without the prior written consent of the Participant’s
spouse. If no beneficiary has been designated or survives the Participant, payment shall be made
to the person entitled thereto pursuant to the Participant’s will or the laws of descent and
distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a
Participant at any time provided the change or revocation is filed with the Committee.



     10.5 Stock Certificates; Book Entry Procedures.



          (a) Notwithstanding anything herein to the contrary, the Company shall not be required to
issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award,
unless and until the Board has determined, with advice of counsel, that the issuance and delivery
of such certificates is in compliance with all applicable laws, regulations of governmental
authorities and, if applicable, the requirements of any exchange on which the shares of Stock are
listed or traded. All Stock certificates delivered pursuant to the Plan are subject to any
stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply
with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and
the rules of any national securities exchange or automated quotation system on which the Stock is
listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the
Board may require that a Participant make such reasonable covenants, agreements, and
representations as the Board, in its discretion, deems advisable in order to comply with any such
laws, regulations, or requirements. The Committee shall have the right to require any Participant
to comply with any timing or other restrictions with respect to the settlement or exercise of any
Award, including a window-period limitation, as may be imposed in the discretion of the Committee.




          (b) Notwithstanding any other provision of the Plan, unless otherwise determined by the
Committee or required by any applicable law, rule or regulation, the Company shall not deliver to
any Participant certificates evidencing shares of Stock issued in connection with any Award and
instead such shares of Stock shall be recorded in the books of the Company (or, as applicable, its
transfer agent or stock plan administrator).




     10.6 Paperless Administration. In the event that the Company establishes, for itself
or using the services of a third party, an automated system for the documentation, granting or
exercise of Awards, such as a system using an internet website or interactive voice response, then
the paperless documentation, granting or exercise of Awards by a Participant may be permitted
through the use of such an automated system.



16









 





ARTICLE 11.




CHANGES IN CAPITAL STRUCTURE




     11.1 Adjustments.



          (a) In the event of any stock dividend, stock split, combination or exchange of shares,
merger, consolidation or other distribution (other than normal cash dividends) of Company assets to
stockholders, or any other change affecting the shares of Stock or the share price of the Stock
other than an Equity Restructuring, the Committee shall make such equitable adjustments, if any, as
the Committee in its discretion may deem appropriate to reflect such change with respect to (a) the
aggregate number and kind of shares that may be issued under the Plan (including, but not limited
to, adjustments of the limitations in Sections 3.1 and 3.3); (b) the terms and conditions of any
outstanding Awards (including, without limitation, any applicable performance targets or criteria
with respect thereto); and (c) the grant or exercise price per share for any outstanding Awards
under the Plan. Any adjustment affecting an Award intended as Qualified Performance-Based
Compensation shall be made consistent with the requirements of Section 162(m) of the Code.




          (b) In the event of any transaction or event described in Section 11.1 or any unusual or
nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the
financial statements of the Company or any affiliate, or of changes in applicable laws, regulations
or accounting principles, the Committee, in its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, either by the terms of the Award or by action taken prior to
the occurrence of such transaction or event and either automatically or upon the Participant’s
request, is hereby authorized to take any one or more of the following actions whenever the
Committee determines that such action is appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan or with respect to
any Award under the Plan, to facilitate such transactions or events or to give effect to such
changes in laws, regulations or principles:




               (i) To provide for either (A) termination of any such Award in exchange for an amount of cash,
if any, equal to the amount that would have been attained upon the exercise of such Award or
realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the
occurrence of the transaction or event described in this Section 11.2 the Committee determines in
good faith that no amount would have been attained upon the exercise of such Award or realization
of the Participant’s rights, then such Award may be terminated by the Company without payment) or
(B) the replacement of such Award with other rights or property selected by the Committee in its
sole discretion;



               (ii) To provide that such Award be assumed by the successor or survivor corporation, or a
parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards
covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and prices;



17









 





               (iii) To make adjustments in the number and type of shares of Common Stock (or other
securities or property) subject to outstanding Awards, and in the number and kind of outstanding
Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or
exercise price), and the criteria included in, outstanding options, rights and awards and options,
rights and awards which may be granted in the future;



               (iv) To provide that such Award shall be exercisable or payable or fully vested with respect
to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the
applicable Award Agreement; and



               (v) To provide that the Award cannot vest, be exercised or become payable after such event.



          (c) In connection with the occurrence of any Equity Restructuring, and notwithstanding
anything to the contrary in Sections 11.1(a) and 11.1(b):




               (i) The number and type of securities subject to each outstanding Award and the exercise price
or grant price thereof, if applicable, will be equitably adjusted. The adjustments provided under
this Section 11.1(c)(i) shall be nondiscretionary and shall be final and binding on the affected
Participant and the Company.



               (ii) The Committee shall make such equitable adjustments, if any, as the Committee in its
discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate
number and kind of shares that may be issued under the Plan (including, but not limited to,
adjustments of the limitations in Sections 3.1 and 3.3).



     11.2 Acceleration Upon a Change in Control. Notwithstanding Section 11.1, and except
as may otherwise be provided in any applicable Award Agreement or other written agreement entered
into between the Company and a Participant, if a Change in Control occurs and a Participant’s
Awards are not converted, assumed, or replaced by a successor entity, then immediately prior to the
Change in Control such Awards shall become fully exercisable and all forfeiture restrictions on
such Awards shall lapse. Upon, or in anticipation of, a Change in Control, the Committee may cause
any and all Awards outstanding hereunder to terminate at a specific time in the future, including
but not limited to the date of such Change in Control, and shall give each Participant the right to
exercise such Awards during a period of time as the Committee, in its sole and absolute discretion,
shall determine. In the event that the terms of any agreement between the Company or any Company
subsidiary or affiliate and a Participant contains provisions that conflict with and are more
restrictive than the provisions of this Section 11.2, this Section 11.2 shall prevail and control
and the more restrictive terms of such agreement (and only such terms) shall be of no force or
effect.



     11.3 No Other Rights. Except as expressly provided in the Plan, no Participant shall
have any rights by reason of any subdivision or consolidation of shares of stock of any class, the
payment of any dividend, any increase or decrease in the number of shares of stock of any class or
any dissolution, liquidation, merger, or consolidation of the Company or any other corporation.
Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no
issuance by the Company of shares of stock of any class, or securities



18









 




convertible into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number of shares of Stock subject to an Award or the
grant or exercise price of any Award.




     11.4 Restrictions on Exercise. In the event of any pending stock dividend, stock
split, combination or exchange of shares, merger, consolidation or other distribution (other than
normal cash dividends) of Company assets to stockholders, or any other change affecting the shares
of Stock or the share price of the Stock including any Equity Restructuring, for reasons of
administrative convenience, the Company in its sole discretion may refuse to permit the exercise of
any Award during a period not to exceed 30 days prior to the consummation of any such transaction.



ARTICLE 12.




ADMINISTRATION




     12.1 Committee. Unless and until the Board delegates administration of the Plan to a
Committee as set forth below, the Plan shall be administered by the full Board, and for such
purposes the term “Committee” as used in this Plan shall be deemed to refer to the Board. The
Board, at its discretion or as otherwise necessary to comply with the requirements of Section
162(m) of the Code, Rule 16b-3 promulgated under the Exchange Act or to the extent required by any
other applicable rule or regulation, may delegate administration of the Plan to a Committee
consisting of two or more members of the Board. Unless otherwise determined by the Board, the
Committee shall consist solely of two or more members of the Board each of whom is an “outside
director,” within the meaning of Section 162(m) of the Code, a Non-Employee Director and an
“independent director” under the rules of the New York Stock Exchange (or other principal
securities market on which shares of Stock are traded); provided that any action taken by the
Committee shall be valid and effective, whether or not members of the Committee at the time of such
action are later determined not to have satisfied the requirements for membership set forth in this
Section 12.1 or otherwise provided in any charter of the Committee. Notwithstanding the foregoing:
(a) the full Board, acting by a majority of its members in office, shall conduct the general
administration of the Plan with respect to all Awards granted to Independent Directors and for
purposes of such Awards the term “Committee” as used in this Plan shall be deemed to refer to the
Board and (b) the Committee may delegate its authority hereunder to the extent permitted by Section
12.5. In its sole discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan except with respect to matters which under Rule
16b-3 under the Exchange Act or Section 162(m) of the Code, or any regulations or rules issued
thereunder, are required to be determined in the sole discretion of the Committee. Except as may
otherwise be provided in any charter of the Committee, appointment of Committee members shall be
effective upon acceptance of appointment; Committee members may resign at any time by delivering
written notice to the Board; and vacancies in the Committee may only be filled by the Board.



     12.2 Action by the Committee. Unless otherwise established by the Board or in any
charter of the Committee, a majority of the Committee shall constitute a quorum and the acts of a
majority of the members present at any meeting at which a quorum is present, and acts approved



19









 




in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of
the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any
report or other information furnished to that member by any officer or other employee of the
Company or any Subsidiary, the Company’s independent certified public accountants, or any executive
compensation consultant or other professional retained by the Company to assist in the
administration of the Plan.




     12.3 Authority of Committee. Subject to any specific designation in the Plan, the
Committee has the exclusive power, authority and discretion to:



          (a) Designate Participants to receive Awards;




          (b) Determine the type or types of Awards to be granted to each Participant;




          (c) Determine the number of Awards to be granted and the number of shares of Stock to which an
Award will relate;




          (d) Determine the terms and conditions of any Award granted pursuant to the Plan, including,
but not limited to, the exercise price, grant price, or purchase price, any reload provision, any
restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or
restrictions on the exercisability of an Award, and accelerations or waivers thereof, any
provisions related to non-competition and recapture of gain on an Award, based in each case on such
considerations as the Committee in its sole discretion determines; provided, however, that the
Committee shall not have the authority to accelerate the vesting or waive the forfeiture of any
Performance-Based Awards;




          (e) Determine whether, to what extent, and pursuant to what circumstances an Award may be
settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other
property, or an Award may be canceled, forfeited, or surrendered;




          (f) Prescribe the form of each Award Agreement, which need not be identical for each
Participant;




          (g) Decide all other matters that must be determined in connection with an Award;




          (h) Establish, adopt, or revise any rules and regulations as it may deem necessary or
advisable to administer the Plan;




          (i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award
Agreement; and




          (j) Make all other decisions and determinations that may be required pursuant to the Plan or
as the Committee deems necessary or advisable to administer the Plan.




     12.4 Decisions Binding. The Committee’s interpretation of the Plan, any Awards
granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the
Committee with respect to the Plan are final, binding, and conclusive on all parties.



20









 





     12.5 Delegation of Authority. To the extent permitted by applicable law, the Board
may from time to time delegate to a committee of one or more members of the Board or one or more
officers of the Company the authority to grant or amend Awards to Participants other than (a)
Employees who are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers
of the Company (or Directors) to whom authority to grant or amend Awards has been delegated
hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Board
specifies at the time of such delegation, and the Board may at any time rescind the authority so
delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section
12.5 shall serve in such capacity at the pleasure of the Board.



ARTICLE 13.




EFFECTIVE AND EXPIRATION DATE




     13.1 Effective Date. The Plan is effective as of the date the Plan is approved by the
Company’s stockholders (the “Effective Date”). The Plan will be deemed to be approved by
the stockholders if it is approved either:



          (a) By a majority of the votes cast at a duly held stockholder’s meeting at which a quorum
representing a representing a majority of outstanding voting stock is, either in person or by
proxy, present and voting on the plan; or




          (b) By a method and in a degree that would be treated as adequate under Delaware law in the
case of an action requiring stockholder approval.




     13.2 Expiration Date. The Plan will expire on, and no Award may be granted pursuant
to the Plan after the tenth anniversary of the Effective Date, except that no Incentive Stock
Options may be granted under the Plan after the earlier of the tenth anniversary of (a) the date
the Plan is approved by the Board or (b) the Effective Date. Any Awards that are outstanding on
the tenth anniversary of the Effective Date shall remain in force according to the terms of the
Plan and the applicable Award Agreement.



ARTICLE 14.




AMENDMENT, MODIFICATION, AND TERMINATION




     14.1 Amendment, Modification, and Termination. Subject to Section 15.14, with the
approval of the Board, at any time and from time to time, the Committee may terminate, amend or
modify the Plan; provided, however, that (a) to the extent necessary and desirable to comply with
any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as required, and (b)
stockholder approval shall be required for any amendment to the Plan that (i) increases the number
of shares available under the Plan (other than any adjustment as provided by Article 11), (ii)
permits the Committee to grant Options with an exercise price that is below Fair Market Value on
the date of grant, or (iii) permits the Committee to extend the exercise period for an Option
beyond ten years from the date of grant. Notwithstanding any provision in this Plan to the
contrary, absent approval of the stockholders of the Company, no Option may be amended to



21









 




reduce the per share exercise price of the shares subject to such Option below the per share
exercise price as of the date the Option is granted and, except as permitted by Article 11, no
Option may be granted in exchange for, or in connection with, the cancellation or surrender of an
Option having a higher per share exercise price.




     14.2 Awards Previously Granted. Except with respect to amendments made pursuant to
Section 15.14, no termination, amendment, or modification of the Plan shall adversely affect in any
material way any Award previously granted pursuant to the Plan without the prior written consent of
the Participant.



ARTICLE 15.




GENERAL PROVISIONS




     15.1 No Rights to Awards. No Eligible Individual or other person shall have any claim
to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is
obligated to treat Eligible Individuals, Participants or any other persons uniformly.



     15.2 No Stockholders Rights. Except as otherwise provided herein, a Participant shall
have none of the rights of a stockholder with respect to shares of Stock covered by any Award until
the Participant becomes the record owner of such shares of Stock.



     15.3 Withholding. The Company or any Subsidiary shall have the authority and the
right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient
to satisfy federal, state, local and foreign taxes (including the Participant’s employment tax
obligations) required by law to be withheld with respect to any taxable event concerning a
Participant arising as a result of this Plan. The Committee may in its discretion and in
satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold
shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a
Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision
of the Plan, the number of shares of Stock which may be withheld with respect to the issuance,
vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such
Award within six months (or such other period as may be determined by the Committee) after such
shares of Stock were acquired by the Participant from the Company) in order to satisfy the
Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to
the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares
which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate
amount of such liabilities based on the minimum statutory withholding rates for federal, state,
local and foreign income tax and payroll tax purposes that are applicable to such supplemental
taxable income.



     15.4 No Right to Employment or Services. Nothing in the Plan or any Award Agreement
shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate
any Participant’s employment or services at any time, nor confer upon any Participant any right to
continue in the employ or service of the Company or any Subsidiary.



22









 





     15.5 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for
incentive compensation. With respect to any payments not yet made to a Participant pursuant to an
Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights
that are greater than those of a general creditor of the Company or any Subsidiary.



     15.6 Indemnification. To the extent allowable pursuant to applicable law, each member
of the Committee or of the Board shall be indemnified and held harmless by the Company from any
loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in
connection with or resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure to act pursuant to
the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in
such action, suit, or proceeding against him or her; provided he or she gives the Company an
opportunity, at its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be entitled pursuant to
the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.



     15.7 Relationship to other Benefits. No payment pursuant to the Plan shall be taken
into account in determining any benefits pursuant to any pension, retirement, savings, profit
sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to
the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.



     15.8 Expenses. The expenses of administering the Plan shall be borne by the Company
and its Subsidiaries.



     15.9 Titles and Headings. The titles and headings of the Sections in the Plan are for
convenience of reference only and, in the event of any conflict, the text of the Plan, rather than
such titles or headings, shall control.



     15.10 Fractional Shares. No fractional shares of Stock shall be issued and the
Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional
shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.



     15.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other
provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then
subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth
in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to
Rule 16b-3 under the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.



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     15.12 Government and Other Regulations. The obligation of the Company to make payment
of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations,
and to such approvals by government agencies as may be required. The Company shall be under no
obligation to register pursuant to the Securities Act, as amended, any of the shares of Stock paid
pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be
exempt from registration pursuant to the Securities Act, as amended, the Company may restrict the
transfer of such shares in such manner as it deems advisable to ensure the availability of any such
exemption.



     15.13 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of [Delaware].



     15.14 Section 409A. To the extent that the Committee determines that any Award
granted under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such
Award shall incorporate the terms and conditions required by Section 409A of the Code. To the
extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Section
409A of the Code and Department of Treasury regulations and other interpretive guidance issued
thereunder, including without limitation any such regulations or other guidance that may be issued
after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event
that following the Effective Date the Committee determines that any Award may be subject to Section
409A of the Code and related Department of Treasury guidance (including such Department of Treasury
guidance as may be issued after the Effective Date), the Committee may adopt such amendments to the
Plan and the applicable Award Agreement or adopt other policies and procedures (including
amendments, policies and procedures with retroactive effect), or take any other actions, that the
Committee determines are necessary or appropriate to (a) exempt the Award from Section 409A of the
Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award,
or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury
guidance and thereby avoid the application of any penalty taxes under such Section.



* * * * *



I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Ulta Salon,
Cosmetics & Fragrance, Inc. on July 17, 2007.




* * * * *



I hereby certify that the foregoing Plan was approved by the stockholders of Ulta Salon, Cosmetics
& Fragrance, Inc. on July ___, 2007.



Executed on this ___day of                                         , 2007.




	 	 	 	 	 
	 

	 	 

Corporate Secretary
	 	 







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