Document:

Exhibit No. 10(f)(*)

 

AMENDMENT
TO

AMENDED
AND RESTATED COMPENSATION AGREEMENT

FOR
MYRON KUNIN

 

This Amendment (the “Amendment”)
to the Amended and Restated Compensation Agreement entered into between Regis
Corporation, a Minnesota corporation (the “Corporation”), and Myron Kunin (“Kunin”)
as of June 29, 2007 is hereby entered into as of December 23, 2008
(the “Effective Date”).  The Corporation
and Kunin shall be referred to herein together as “the Parties.”

 

WHEREAS, the Parties previously
entered into a Compensation and Non-Competition Agreement, dated May 7,
1997 (the “Original Agreement”); and

 

WHEREAS, the Original Agreement
was amended from time to time and was last amended and restated as of June 29,
2007 (the “Restated Agreement”); and

 

WHEREAS, the Parties wish to
amend the Restated Agreement as of the date hereof to make certain changes to
comply with Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”);

 

NOW, THEREFORE, IN
CONSIDERATION of the mutual agreements hereinafter contained, the parties
hereby agree as follows:

 

1.             Paragraph
1 of the Restated Agreement shall be amended by deleting it in its entirety and
replacing it as follows:

 

Continued
Compensation Payments. 
The Corporation shall continue to pay Kunin the amount specified under
the Agreement, that is, $600,000 per year, increased each year, commencing July 1,
1997, in proportion to any increase in the consumer price index (as defined in
the Original Agreement) from July 1, 1996, to each July 1 thereafter
in which payments are made to Kunin under the Restated Agreement.  Such amount shall be paid to Kunin on a
monthly basis for his lifetime.  Under no
circumstances shall the annual amount payable to Kunin pursuant to this
paragraph 1 be decreased in any year.

 

2.             Paragraph
5 of the Restated Agreement shall be amended by deleting it in its entirety and
replacing it as follows:

 

Change in
Control Benefits. 
In addition to the benefits payable to Kunin under other provisions of
this Restated Agreement, in the event a Change in Control of the Corporation
occurs at any time prior to Kunin’s death, the Corporation shall provide to
Kunin the benefits described in (a), (b), (c), (d) and (e) below:

 

(a)           In lieu of the monthly payments provided under paragraph 1
above, the Corporation shall pay to Kunin within five (5) days after a 

 

 

Change in Control occurs
(provided that for this purpose the Change in Control must also be a change in
control event under Treas. Reg. Section 1.409A-3(i)(5)) a single lump sum
payment equal to the then present value of the future monthly payments
described under paragraph 1 above.  The
discount rate to be used for this purpose shall be equal to the yield to
maturity, at the date of the Change in Control, of U.S. Treasury Notes with a
maturity date nearest the Joint Life Expectancy (as defined in Section 6(d) below)
of Kunin and his spouse.

 

(b)           On the day on which a Change in Control occurs, the
Corporation shall pay to Kunin an amount equal to three times the annual
compensation described in paragraph 1, above, for the 12-month period
immediately preceding the Change in Control.

 

(c)           The excess of:  (i) Kunin’s
“adjusted annual compensation” multiplied by the Joint Life Expectancy (as
defined in Section 6(d) below) of Kunin and his spouse, as determined
as of the date of the Change in Control, with no discount for present value;
over (ii) the present value of the future monthly benefits payable to
Kunin pursuant to paragraph 5(a) above as of the date of the Change in
Control.  Such amount shall be paid to
Kunin in a single sum within thirty (30) days following the date of the Change
in Control.  For purposes of this
subparagraph (c), Kunin’s “adjusted annual compensation” shall mean the annual
amount payable to Kunin pursuant to paragraph 1 above as of the date of the
Change in Control, increased by four percent (4%) for each year in the Joint Life
Expectancy.

 

(d)           200,000  shares of the Corporation’s common
stock free of any restrictions on exercisability (except as may be imposed by
law), deliverable to Kunin upon the Change in Control.  Any such shares awarded under this
subparagraph 5(d) shall be subject to automatic adjustment by the
appropriate Board committee or its delegate to reflect any Corporation share
dividend, share split, combination or exchange of shares, recapitalization or
other change in the capital structure of the Corporation since the date hereof.

 

(e)           An amount equal to any excise tax imposed on Kunin by Section 4999
of the Code and by any comparable and applicable state law (collectively, “Excise
Taxes”), as a result of the payments and stock grant provided under
subparagraphs (a), (b),(c) and (d) of this paragraph 5, and as a
result of any accelerated vesting of Kunin’s options to acquire shares of the
Corporation, and shall further pay to Kunin on a “grossed-up” basis all
additional federal and state income taxes and Excise Taxes payable by Kunin as
a result of the payments provided in this subparagraph 5(e), so that the net
after-tax amount received by Kunin pursuant to this paragraph 5 is equal to the
amount that Kunin would have received if no Excise 

 

2

 

Taxes had been imposed on
income received by or imputed to him by reason of the payments or stock grant
pursuant to this paragraph 5 or by reason of accelerated vesting of Kunin’s
options.  All amounts payable to Kunin
pursuant to this subparagraph 5(e) shall be paid by the end of his taxable
year next following his taxable year in which the related taxes are remitted to
the taxing authority.

 

3.             Paragraph 6(b) of the Restated Agreement shall be
deleted in its entirety and replaced with the following new paragraph 6(b):

 

(b)           A “Change in Control” shall be deemed to have occurred at
such time as any of the following events occur:

 

(i)                                     any
“person” within the meaning of Section 2(a)(2) of the Securities Act
of 1933 and Section 14(d) of the Securities Exchange Act of 1934 (the
“Exchange Act”), is or has become the “beneficial owner,” as defined in Rule 13d-3
under the Exchange Act, of twenty percent (20%) or more of either (A) the
then outstanding shares of Common Stock of the Corporation (the “Outstanding
Common Stock”) or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Voting Securities”), except for an acquisition by
an entity resulting from a Business Combination (as defined below) in which
clauses (1) and (2) of subparagraph (ii) applies;

 

(ii)           consummation of (A) a
merger or consolidation of the Corporation with or into another entity, (B) a
statutory share exchange or (C) the acquisition by any person (as defined
above) of all or substantially all of the assets of the Corporation (each, a “Business
Combination”), unless immediately following such Business Combination, (1) all
or substantially all of the beneficial owners of the Outstanding Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than fifty percent (50%) of the voting power of
the then outstanding shares of voting stock (or comparable voting equity
interests) of the surviving or acquiring entity resulting from such Business
Combination (including such beneficial ownership of an entity that, as a result
of such transaction, owns the Corporation or all or substantially all of the
Corporation’s assets either directly or through one or more subsidiaries), in
substantially the same proportions (as compared to the other beneficial owners
of the Corporation’s voting stock immediately prior to such Business
Combination) as their beneficial ownership of the Corporation’s voting stock
immediately prior to such Business Combination and (2) no person (as
defined above) beneficially owns, directly or indirectly, twenty percent (20%)
or more of the voting power of the outstanding voting stock (or comparable
equity interests) of the surviving or acquiring entity (other than a direct or
indirect parent entity of the surviving or acquiring entity, 

 

3

 

that, after
giving effect to the Business Combination, beneficially owns, directly or
indirectly, 100% of the outstanding voting stock (or comparable equity
interests) of the surviving or acquiring entity), or

 

(iii)          individuals who
constitute the Corporation’s Board of Directors on the Effective Date (the “Incumbent
Board”) have ceased for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to the Effective Date
whose election, or nomination for election by the Corporation’s stockholders,
was approved by a vote of at least three-quarters (75%) of the directors
comprising the Incumbent Board shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board.

 

4.               A
new paragraph 6(d) shall be added to the Restated Agreement as follows:

 

(d)           “Joint Life Expectancy” shall mean
the number of years of life expectancy of Kunin and his spouse at the time of a
Change in Control, as determined by the Joint Life and Last Survivor Expectancy
table published in IRS Publication 590, a successor publication, or in the
absence of either, a comparable table or tables published by a recognized
non-public authority.  If Kunin’s spouse
is not living at the time of a Change in Control, the Single Life Expectancy
table shall be used in lieu of the Joint Life and Last Survivor Expectancy
table.

 

IN WITNESS WHEREOF, the Parties hereto have
executed Amendment as of the day and year first above written.

 

	
   

  	
    REGIS CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul D. Finkelstein

  
	
   

  	
   

  	
  Paul D. Finkelstein, Chairman of the Board of Directors,

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Myron Kunin

  
	
   

  	
   

  	
  Myron Kunin

  

 

4Exhibit No. 10(g)(*)

 

REGIS CORPORATION

 

2004 LONG TERM INCENTIVE PLAN

 

AS AMENDED AND RESTATED EFFECTIVE DECEMBER 31, 2008

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  ESTABLISHMENT AND PURPOSE

  	
   

  	
  1

  
	
  1.1

  	
  Establishment

  	
   

  	
  1

  
	
  1.2

  	
  Purpose

  	
   

  	
  1

  
	
  1.3

  	
  Compliance with 409A

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  DEFINITIONS

  	
   

  	
  1

  
	
  2.1

  	
  Affiliate

  	
   

  	
  1

  
	
  2.2

  	
  Agreement

  	
   

  	
  1

  
	
  2.3

  	
  Award

  	
   

  	
  1

  
	
  2.4

  	
  Beneficiary

  	
   

  	
  2

  
	
  2.5

  	
  Board of Directors or
  Board

  	
   

  	
  2

  
	
  2.6

  	
  Cause

  	
   

  	
  2

  
	
  2.7

  	
  Change in Control

  	
   

  	
  2

  
	
  2.8

  	
  Code

  	
   

  	
  4

  
	
  2.9

  	
  Commission

  	
   

  	
  4

  
	
  2.10

  	
  Committee

  	
   

  	
  4

  
	
  2.11

  	
  Common Stock

  	
   

  	
  4

  
	
  2.12

  	
  Company

  	
   

  	
  4

  
	
  2.13

  	
  Covered Employees

  	
   

  	
  4

  
	
  2.14

  	
  Disability

  	
   

  	
  4

  
	
  2.15

  	
  Effective Date

  	
   

  	
  4

  
	
  2.16

  	
  Exchange Act

  	
   

  	
  4

  
	
  2.17

  	
  Exercise Price

  	
   

  	
  4

  
	
  2.18

  	
  Fair Market Value

  	
   

  	
  4

  
	
  2.19

  	
  Grant Date

  	
   

  	
  5

  
	
  2.20

  	
  Incentive Stock Option

  	
   

  	
  5

  
	
  2.21

  	
  Non-Qualified Stock Option

  	
   

  	
  5

  
	
  2.22

  	
  Option Period

  	
   

  	
  5

  
	
  2.23

  	
  Participant

  	
   

  	
  5

  
	
  2.24

  	
  Performance Unit

  	
   

  	
  5

  
	
  2.25

  	
  Plan

  	
   

  	
  5

  
	
  2.26

  	
  Representative

  	
   

  	
  6

  
	
  2.27

  	
  Restricted Stock

  	
   

  	
  6

  
	
  2.28

  	
  Restricted Stock Unit 

  	
   

  	
  6

  
	
  2.29

  	
  Rule 16b-3

  	
   

  	
  6

  
	
  2.30

  	
  Stock Appreciate Right

  	
   

  	
  6

  
	
  2.31

  	
  Stock Option or Option

  	
   

  	
  6

  
	
  2.32

  	
  Termination of Employment

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  ADMINISTRATION

  	
   

  	
  7

  
	
  3.1

  	
  Committee Structure and
  Actions

  	
   

  	
  7

  
	
  3.2

  	
  Committee Authority

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  	
  SHARES
  SUBJECT TO PLAN

  	
   

  	
  8

  
	
  4.1

  	
  Number of Shares

  	
   

  	
  8

  
	
  4.2

  	
  Release of Shares

  	
   

  	
  8

  
	
  4.3

  	
  Restrictions on Shares

  	
   

  	
  9

  

 

i

 

	
  4.4

  	
  Shareholder Rights

  	
   

  	
  9

  
	
  4.5

  	
  Effect of Certain Changes

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  ELIGIBILITY

  	
   

  	
  10

  
	
  5.1

  	
  Eligibility

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  STOCK OPTIONS

  	
   

  	
  10

  
	
  6.1

  	
  General

  	
   

  	
  10

  
	
  6.2

  	
  Grant

  	
   

  	
  10

  
	
  6.3

  	
  Terms and Conditions

  	
   

  	
  10

  
	
  6.4

  	
  Termination by Reason of
  Death

  	
   

  	
  11

  
	
  6.5

  	
  Termination by Reason of
  Disability

  	
   

  	
  11

  
	
  6.6

  	
  Other Termination

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  STOCK APPRECIATION RIGHTS

  	
   

  	
  12

  
	
  7.1

  	
  General

  	
   

  	
  12

  
	
  7.2

  	
  Grant

  	
   

  	
  12

  
	
  7.3

  	
  Terms and Conditions

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  RESTRICTED STOCK

  	
   

  	
  13

  
	
  8.1

  	
  General

  	
   

  	
  13

  
	
  8.2

  	
  Grant, Awards and
  Certificates

  	
   

  	
  13

  
	
  8.3

  	
  Terms and Conditions

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  PERFORMANCE AWARDS

  	
   

  	
  15

  
	
  9.1

  	
  General

  	
   

  	
  15

  
	
  9.2

  	
  Earning Performance Unit
  Awards

  	
   

  	
  15

  
	
  9.3 

  	
  Termination of Employment
  Due to Death, Disability or Retirement or at the Request of the  Company without Cause 

  	
   

  	
  15

  
	
  9.4

  	
  Nontransferability

  	
   

  	
  15

  
	
  9.5

  	
  Election to Defer

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  CHANGE IN CONTROL PROVISIONS

  	
   

  	
  16

  
	
  10.1

  	
  Impact of Event

  	
   

  	
  16

  
	
  10.2

  	
  Additional Discretion

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  PROVISIONS APPLICABLE TO SHARES
  ACQUIRED UNDER THIS PLAN

  	
   

  	
  16

  
	
  11.1

  	
  No Company Obligation

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XII

  	
  MISCELLANEOUS

  	
   

  	
  17

  
	
  12.1

  	
  Amendments
  and Termination

  	
   

  	
  17

  
	
  12.2

  	
  Unfunded Status of Plan

  	
   

  	
  17

  
	
  12.3

  	
  Provisions Relating to
  Internal Revenue Code Section 162(m)

  	
   

  	
  17

  
	
  12.4

  	
  No Additional Obligation

  	
   

  	
  19

  
	
  12.5

  	
  Withholding

  	
   

  	
  19

  
	
  12.6

  	
  Controlling Law

  	
   

  	
  19

  
	
  12.7

  	
  Offset

  	
   

  	
  20

  
	
  12.8

  	
  Nontransferability;
  Beneficiaries

  	
   

  	
  20

  
	
  12.9

  	
  Gross-Up for Excise Tax

  	
   

  	
  20

  
	
  12.10

  	
  No Rights with Respect to
  Continuance of Employment

  	
   

  	
  20

  

 

ii

 

	
  12.11

  	
  Awards in Substitution for
  Awards Granted by Other Corporations

  	
   

  	
  21

  
	
  12.12

  	
  Foreign Alternatives

  	
   

  	
  21

  
	
  12.13

  	
  Delivery of Stock
  Certificates

  	
   

  	
  21

  
	
  12.14

  	
  Headings

  	
   

  	
  21

  
	
  12.15

  	
  Severability

  	
   

  	
  21

  
	
  12.16

  	
  Successors and Assigns

  	
   

  	
  22

  
	
  12.17

  	
  Entire Agreement

  	
   

  	
  22

  

 

iii

 

REGIS CORPORATION

 

2004 LONG TERM INCENTIVE PLAN

 

ARTICLE I

 

ESTABLISHMENT AND PURPOSE

 

1.1                                 Establishment. The Regis Corporation 2004 Long Term
Incentive Plan (“Plan”) is hereby established by Regis Corporation (“Company”),
effective as of the Effective Date, and restated effective as of December 31,
2008 to incorporate and supersede all prior amendments hereto and to make
certain changes to comply with Section 409A of the Internal Revenue Code
of 1986.

 

1.2                                 Purposes. The purpose of the Plan is to foster and promote the long-term
financial success of the Company and materially increase shareholder value by
motivating performance through incentive compensation. The Plan also is
intended to encourage Participant ownership in the Company, attract and retain
talent, and enable Participants to participate in the long-term growth and
financial success of the Company. The Plan and the grant of Awards thereunder
are expressly conditioned upon the Plan’s approval by the shareholders of the
Company.

 

1.3                                 Compliance with 409A. The Plan is intended to meet the
requirements of paragraph (2), (3) and (4) of Code Section 409A(a) to
the extent applicable, and the terms and provisions of the Plan should be
interpreted and applied in a manner consistent with such requirements,
including the regulations and other guidance issued under Code Section 409A.

 

ARTICLE II

 

DEFINITIONS

 

For purposes of the Plan,
the following terms are defined as set forth below:

 

2.1                                 “Affiliate” means any individual,
corporation, partnership, association, limited liability company, joint-stock
company, trust, unincorporated association or other entity (other than the
Company) that directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Company.

 

2.2                                 “Agreement” means any agreement
entered into pursuant to the Plan by which an Award is granted to a
Participant, and any amendments thereto.

 

2.3                                 “Award” means any Stock Option, Stock
Appreciation Right, Restricted Stock, Restricted Stock Unit or Performance Unit
granted to a Participant under the Plan. Awards shall be subject to the terms
and conditions of the Plan and shall be evidenced by an Agreement containing
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall deem desirable.

 

1

 

2.4                                 “Beneficiary” means any person or
other entity, which has been designated by a Participant in his or her most
recent written beneficiary designation filed with the Committee to receive the
compensation, specified under the Plan to the extent permitted. If there is no
designated beneficiary, then the term means any person or other entity entitled
by will or the laws of descent and distribution to receive such compensation.

 

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

 

2.6                                 “Cause” means, for purposes of
determining whether and when a Participant has incurred a Termination of
Employment for Cause, any act or omission which permits the Company to
terminate the written employment agreement or arrangement between the
Participant and the Company or an Affiliate for “cause” as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term “Cause,”
then “Cause” means the Participant’s intentional participation in illegal
conduct which (i) is materially and directly detrimental to the financial
interests of the Company or an Affiliate and (ii) results in the
Participant’s conviction of a felony.

 

2.7                                 “Change in Control” means:

 

(1)                                  with respect to Awards granted before January 1,
2009, the first to occur of any of the following events:

 

(a)                                 the acquisition by any “person,” as that term
is used in Sections 13(d) and 14(d) of the Exchange Act of “beneficial
ownership,” as defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of 20% or more of the shares of the Company’s capital stock;

 

(b)                                the first day on which less than two-thirds
of the total membership of the Board of Directors shall be Continuing Directors
(as that term is defined in Article VII of the Company’s Articles of
Incorporation);

 

(c)                                 the approval by the shareholders of the
Company of a merger, share exchange, or consolidation of the Company (a “Transaction”),
other than a Transaction which would result in the Voting Stock of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the Voting Stock of the Company or such
surviving entity immediately after such Transaction; or

 

(d)                                the approval by the shareholders of the
Company of a complete liquidation of the Company or a sale or disposition of
all or substantially all the assets of the Company; and

 

(2)                                  with respect to Awards granted on or after January 1,
2009, the first to occur of any of the following events:

 

2

 

(a)                                 any “person” within the meaning of Section 2(a)(2) of
the Securities Act of 1933 and Section 14(d) of the Exchange Act is
or has become the “beneficial owner,” as defined in Rule 13d-3 under the
Exchange Act, of twenty percent (20%) or more of either (i) the then
outstanding shares of Common Stock of the Company (the “Outstanding Common
Stock”) or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Voting Securities”), except for an acquisition by
an entity resulting from a Business Combination (as defined below) in which
clauses (x) and (y) of subparagraph (b) applies;

 

(b)                                consummation of (i) a merger or
consolidation of the Company with or into another entity, (ii) a statutory
share exchange or (iii) the acquisition by any person (as defined above)
of all or substantially all of the assets of the Company (each, a “Business
Combination”), unless immediately following such Business Combination, (x) all
or substantially all of the beneficial owners of the Outstanding Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than fifty percent (50%) of the voting power of
the then outstanding shares of voting stock (or comparable voting equity
interests) of the surviving or acquiring entity resulting from such Business
Combination (including such beneficial ownership of an entity that, as a result
of such transaction, owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries), in
substantially the same proportions (as compared to the other beneficial owners
of the Company’s voting stock immediately prior to such Business Combination)
as their beneficial ownership of the Company’s voting stock immediately prior
to such Business Combination and (y) no person (as defined above)
beneficially owns, directly or indirectly, twenty percent (20%) or more of the
voting power of the outstanding voting stock (or comparable equity interests)
of the surviving or acquiring entity (other than a direct or indirect parent
entity of the surviving or acquiring entity, that, after giving effect to the
Business Combination, beneficially owns, directly or indirectly, 100% of the
outstanding voting stock (or comparable equity interests) of the surviving or
acquiring entity), or

 

(c)                                 individuals who constitute the Company’s
Board of Directors on the Effective Date (the “Incumbent Board”) have
ceased for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Company’s stockholders, was approved by a
vote of at least three-quarters (75%) of the directors comprising the Incumbent
Board shall be, for purposes of this Agreement, considered as though such
person were a member of the Incumbent Board;

 

provided, however, that for
any payment with respect to any Award under the Plan that is subject to Section 409A
of the Code, the Change in Control must also be a change in control event under
Treas. Reg. Section 1.409A-3(i)(5).

 

3

 

2.8                                 “Code” means the Internal Revenue Code
of 1986, as amended from time to time, and any successor, along with related
rules, regulations and interpretations.

 

2.9                                 “Commission” means the Securities and
Exchange Commission or any successor thereto.

 

2.10                           “Committee” means the committee of the
Board responsible for granting Awards under the Plan, which shall be the
Compensation Committee of the Board, until such time as the Board may designate
a different committee. The Committee shall consist solely of two or more
directors, each of whom is a “Non-Employee Director” within the meaning of Rule 16b-3
and each of whom is also an “outside director” under Section 162(m) of
the Code. In addition, each member of the Committee must be an “independent
director” as determined under the corporate governance rules of the New
York Stock Exchange, as amended from time to time.

 

2.11                           “Common Stock” means the shares of the
Company’s common stock, $0.05 par value, whether presently or hereafter issued,
and any other stock or security resulting from adjustment thereof as described
hereinafter, or the common stock of any successor to the Company which is
designated for the purpose of the Plan.

 

2.12                           “Company” means Regis Corporation, a Minnesota corporation, and includes any
successor or assignee corporation or corporations into which the Company may be
merged, changed or consolidated; any corporation for whose securities the
securities of the Company shall be exchanged; and any assignee of or successor
to substantially all of the assets of the Company.

 

2.13                           “Covered Employee” means a Participant
who is a “covered employee” within the meaning of Section 162(m) of
the Code.

 

2.14                           “Disability” means that the
Participant is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months.

 

2.15                           “Effective Date” means May 26,
2004, subject to shareholder approval at the Company’s annual meeting of
shareholders on October 28, 2004.

 

2.16                           “Exchange Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

 

2.17                           “Exercise Price” means the price at
which the Common Stock may be purchased under an Option or may be obtained
under a Stock Appreciation Right. In no event may the Exercise Price per share
of Common Stock covered by an Option, or the Exercise Price of a Stock
Appreciation Right, be reduced through the technique commonly known as “repricing.”

 

2.18                           “Fair Market Value” means the value of
one share of Common Stock, determined pursuant to the applicable method
described below, without regard to whether the Common Stock is restricted or
represents a minority interest:

 

4

 

(1)                                 if the Common Stock is listed on a securities
exchange or quoted on The Nasdaq Stock Market (“Nasdaq”), the closing price of
a share of Common Stock on the grant date (or, if such date is not a business
day or a day on which quotations are reported, then on the immediately
preceding date on which quotations were reported) or if a closing price was not
reported on the grant date, then the arithmetic mean of the high and low prices
on that date or on the first preceding trading date, as reported by the
principal national exchange on which such shares are traded (in the case of an
exchange) or by Nasdaq, as the case may be;

 

(2)                                 if the Common Stock is not listed on a
national securities exchange or quoted on Nasdaq, but is actively traded in the
over-the counter market, the average of the closing bid and asked prices for a
share of the Common Stock on the grant date (or, if such date is not a business
day or a day on which quotations are reported, then on the immediately
preceding date on which quotations were reported), or the most recent preceding
date for which such quotations are reported; and

 

(3)                                 if, on the relevant date, the Common Stock is
not publicly traded or reported as described in (1) or (2) above, the
value determined by the reasonable application of a reasonable valuation method
which is consistent with Treas. Reg. § 1.409A-1(b)(5)(iv), selected in good
faith by the Board.

 

2.19                           “Grant Date” means the date as of
which an Award is granted pursuant to the Plan.

 

2.20                           “Incentive Stock Option” means any
Stock Option intended to be and designated as an “incentive stock option”
within the meaning of Section 422 of the Code. Members of the Board who
are not otherwise employees of the Company do not qualify for Incentive Stock
Options.

 

2.21                           “Non-Qualified Stock Option” means an
Option to purchase Common Stock in the Company granted under the Plan, the
taxation of which is pursuant to Section 83 of the Code.

 

2.22                           “Option Period” means the period
during which the Option shall be exercisable in accordance with an Agreement
and Article VI.

 

2.23                           “Participant” means a person who
satisfies the eligibility conditions of Article V and to whom an Award has
been granted by the Committee under the Plan. In the event that a
Representative is appointed for a Participant, then the term “Participant”
shall mean such appointed Representative. Notwithstanding the appointment of a
Representative, the term “Termination of Employment” shall mean the Termination
of Employment of the Participant.

 

2.24                           “Performance Unit” shall have the
meaning set forth in Section 9.1 hereof.

 

2.25                           “Plan” means the Regis Corporation
2004 Long Term Incentive Plan, as herein set forth and as may be amended from
time to time.

 

5

 

2.26                           “Representative” means (a) the
person or entity acting as the executor or administrator of a Participant’s
estate pursuant to the last will and testament of a Participant or pursuant to
the laws of the jurisdiction in which the Participant had the Participant’s
primary residence at the date of the Participant’s death; (b) the person
or entity acting as the guardian or temporary guardian of a Participant; (c) the
person or entity which is the beneficiary of the Participant upon or following
the Participant’s death; or (d) the person to whom an Award has been
permissibly transferred; provided that only one of the foregoing shall be the
Representative at any point in time as determined under applicable law and
recognized by the Committee.

 

2.27                           “Restricted Stock” means Common Stock
granted to a Participant under Section 8.1 hereof and which is subject to
certain restrictions and to a risk of forfeiture or repurchase by the Company.

 

2.28                           “Restricted Stock Unit “ means an
Award to a Participant under Section 8.1 hereof under which no Common
Stock actually is awarded to the Participant on the date of grant. Each Award
of a Restricted Stock Unit entitles a Participant to receive a share of Common
Stock as of a future date, subject to certain restrictions and to a risk of
forfeiture.

 

2.29                           “Rule 16b-3” means  Rule 16b-3,  as
from time to time in effect and applicable to the Plan and Participants,
promulgated by the Commission under Section 16 of the Exchange Act.

 

2.30                           “Stock Appreciation Right” means a
right granted under Article VII.

 

2.31                           “Stock Option” or “Option”
means a right, granted to a Participant under Section 6.1 hereof, to
purchase Common Stock at a specified price during specified time periods.

 

2.32                           “Termination of Employment” means the
occurrence of any act or event whether pursuant to an employment agreement or
otherwise that actually or effectively causes or results in the person’s
ceasing, for whatever reason, to be any and all of an officer or employee of
the Company or of any Affiliate, or to be any and all of an officer or employee
of any entity that provides services to the Company or an Affiliate, including,
without limitation, death, Disability, dismissal, severance at the election of
the Participant, retirement, or severance as a result of the discontinuance,
liquidation, sale or transfer by the Company or its Affiliates of a business
owned or operated by the Company or its Affiliates.

 

With respect to any person
who is not an employee with respect to the Company or an Affiliate (such as a
non-employee member of the Board), the Agreement shall establish what act or
event shall constitute a Termination of Employment for purposes of the Plan. A
Termination of Employment shall occur with respect to an employee who is
employed by an Affiliate if the Affiliate shall cease to be an Affiliate and
the Participant shall not immediately thereafter become an employee of the
Company or an Affiliate.  To the extent
that an Award granted under the Plan is subject to Internal Revenue Code Section 409A,
a Termination of Employment shall mean a “separation from service” under Code Section 409A
and the regulations and guidance issued with respect thereto (all references
herein to Code Section 409A shall include such regulations and guidance).

 

In addition, certain other
terms used herein have definitions given to them in the first place in which
they are used.

 

6

 

ARTICLE III

 

ADMINISTRATION

 

3.1                                 Committee Structure and Actions. The Plan shall be administered by the
Committee in accordance with the rules and responsibilities of the
Committee.

 

3.2                                Committee Authority. Subject to the terms of the Plan, the
Committee shall have the authority:

 

(1)                                 to select those persons to whom Awards may be
granted from time to time;

 

(2)                                 to determine whether and to what extent
Awards are to be granted hereunder;

 

(3)                                 to determine the number of shares of Common
Stock to be covered by each Award granted hereunder;

 

(4)                                 to determine the terms and conditions of any
Award granted hereunder, provided that the Exercise Price of any Option or
Stock Appreciation Right shall not be less than the Fair Market Value per share
as of the Grant Date;

 

(5)                                 to adjust the terms and conditions, at any
time or from time to time, of any Award, subject to the limitations of Section 12.1;

 

(6)                                 to determine to what extent and under what
circumstances shares of Common Stock and other amounts payable with respect to
an Award shall be deferred;

 

(7)                                 to provide for the forms of Agreement to be
utilized in connection with this Plan;

 

(8)                                 to determine what legal requirements are
applicable to the Plan, Awards, and the issuance of Common Stock, and to
require of a Participant that appropriate action be taken with respect to such
requirements;

 

(9)                                 to cancel, with the consent of the
Participant or as otherwise provided in the Plan or an Agreement, outstanding
Awards;

 

(10)                           to require as a condition of the exercise of
an Award or the issuance or transfer of a certificate (or other representation
of title) of Common Stock, the withholding from a Participant of the amount of
any taxes as may be necessary in order for the Company or any other employer to
obtain a deduction or as may be otherwise required by law;

 

(11)                           to determine whether and with what effect an
individual has incurred a Termination of Employment (or, as applicable, a “separation
from service” pursuant to Code Section 409A);

 

7

 

(12)                           to determine the restrictions or limitations
on the transfer of Common Stock;

 

(13)                           to determine whether an Award is to be
adjusted, modified or purchased, or is to become fully exercisable, under the
Plan or the terms of an Agreement;

 

(14)                           to determine the permissible methods of Award
exercise and payment within the terms and conditions of the Plan and the
particular Agreement;

 

(15)                           to adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable in the administration of this
Plan; and

 

(16)                           to appoint and compensate agents, counsel,
auditors or other specialists to aid it in the discharge of its duties.

 

The Committee shall have the
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall, from time to time, deem advisable, to
interpret the terms and provisions of the Plan and any Award issued under the
Plan (and any Agreement) and to otherwise supervise the administration of the
Plan. The Committee’s policies and procedures may differ with respect to Awards
granted at different times and may differ with respect to a Participant from
time to time, or with respect to different Participants at the same or
different times.

 

Any determination made by
the Committee pursuant to the provisions of the Plan shall be made in its sole
discretion, and in the case of any determination relating to an Award may be
made at the time of the grant of the Award or, unless in contravention of any
express term of the Plan or an Agreement, at any time thereafter. All decisions
made by the Committee pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Company and Participants. Any
determination shall not be subject to de
novo review if challenged in court.

 

ARTICLE IV

 

SHARES SUBJECT TO PLAN

 

4.1                                 Number of Shares. Subject to the adjustment under Section 4.5,
the total number of Common Stock reserved and available for distribution
pursuant to Awards under the Plan shall be 2,500,000  shares of
Common Stock which are hereby authorized for issuance on the Effective Date.
Such shares may consist, in whole or in part, of authorized and unissued shares
or shares acquired from a third party.

 

4.2                                 Release of Shares. Subject to Section 4.1, the Committee
shall have full authority to determine the number of shares of Common Stock
available for Awards, and in its discretion may include (without limitation) as
available for distribution any shares of Common Stock that have ceased to be
subject to an Award; any shares of Common Stock subject to any Award that have
been previously forfeited; any shares under an Award that otherwise terminates
without issuance of Common Stock being made to a Participant; or any shares of
Common Stock that are received by the Company in connection with the exercise
of an Award, including the satisfaction of any tax liability or tax withholding
obligation. Any shares that are available immediately prior 

 

8

 

to the termination of the
Plan, or any shares of Common Stock returned to the Company for any reason
subsequent to the termination of the Plan, may be transferred to a successor
plan.

 

4.3                                 Restrictions on Awards. 
Common Stock issued upon exercise of an Award shall be subject to the
terms and conditions specified herein and to such other terms, conditions and
restrictions as the Committee in its discretion may determine or provide in the
Award Agreement. The Company shall not be required to issue or deliver any
certificates for Common Stock, cash or other property prior to (i) the
completion of any registration or qualification of such shares under federal,
state or other law, or any ruling or regulation of any government body which
the Committee determines to be necessary or advisable; (ii) the
satisfaction of any applicable withholding obligation in order for the Company
or an Affiliate to obtain a deduction or discharge its legal obligation with
respect to the exercise of an Award; or (iii) where required by Code Section 409A
for payments or transfers made upon a Participant’s “separation from service”
as defined in Code Section 409A to a Participant who is a “specified
employee” under Code Section 409A, the first business day after the
expiration of the six month period following such separation from service or if
earlier, the date of Participant’s death. The Company may cause any certificate
(or other representation of title) for any shares of Common Stock to be
delivered to be properly marked with a legend or other notation reflecting the
limitations on transfer of such Common Stock as provided in this Plan or as the
Committee may otherwise require. The Committee may require any person
exercising an Award to make such representations and furnish such information
as it may consider appropriate in connection with the issuance or delivery of
the Common Stock in compliance with applicable law or otherwise. Fractional
shares shall not be delivered, but shall be rounded to the next lower whole
number of shares.

 

4.4                                 Shareholder Rights. No person shall have any rights of a
shareholder as to Common Stock subject to an Award until, after proper exercise
of the Award or other action required, such shares shall have been recorded on
the Company’s official shareholder records as having been issued and
transferred. Upon exercise of the Award or any portion thereof, the Company will
have a reasonable period in which to issue and transfer the shares, and the
Participant will not be treated as a shareholder for any purpose whatsoever
prior to such issuance and transfer.  No
adjustment shall be made for cash dividends or other rights for which the
record date is prior to the date such shares are recorded as issued and
transferred in the Company’s official shareholder records, except as provided
herein or in an Agreement.

 

4.5                                 Effect of Certain Changes.  In
the event of any Company share dividend, share split, combination or exchange
of shares, recapitalization or other change in the capital structure of the
Company, corporate separation or division of the Company (including, but not
limited to, a split-up, spin-off, split-off or distribution to Company
shareholders other than a normal cash dividend), reorganization, rights
offering, a partial or complete liquidation, or any similar transaction,
Company share offering or other event that causes the value of the Company’s
Common Stock to change, then the Committee shall proportionately adjust the
number of Common Stock available for Awards under the Plan, the number of
shares of Common Stock covered by outstanding Awards, the exercise price per
share of outstanding Awards, and any other characteristics or terms of the
Awards as the Committee may deem necessary or appropriate to result in an
equitable adjustment; provided, however, that any fractional shares resulting
from such adjustment shall be eliminated by rounding to the next lower whole
number of shares with proportionate payment for such fractional share as shall
reasonably be determined by the Committee.

 

9

 

ARTICLE V

 

ELIGIBILITY

 

5.1                                 Eligibility. Except as herein provided, the persons who shall be eligible to
participate in the Plan and be granted Awards shall be those persons who are
common law employees of the Company or any Affiliate, non-employee members of
the Board, or other individuals selected by the Committee. Of those persons described
in the preceding sentence, the Committee may, from time to time, select persons
to be granted Awards and shall determine the terms and conditions with respect
thereto. In making any such selection and in determining the form of the Award,
the Committee shall give consideration to such factors deemed appropriate by
the Committee.

 

ARTICLE VI

 

STOCK OPTIONS

 

6.1                                 General. The Committee shall have authority to grant Options under the Plan at
any time or from time to time. An Option shall entitle the Participant to
receive Common Stock upon exercise of such Option, subject to the Participant’s
satisfaction in full of any conditions, restrictions or limitations imposed in
accordance with the Plan or an Agreement (the terms and provisions of which may
differ from other Agreements) including, without limitation, payment of the
Option Price.

 

6.2                                 Grant. The grant of an Option shall occur as of the Grant Date determined by
the Committee. Stock Options may be granted alone or in connection with other
Awards. An Award of Options shall be evidenced by, and subject to the terms of,
an Agreement. Only a person who is a common-law employee of the Company, any
parent corporation of the Company, or a subsidiary (as such terms are defined
in Section 424 of the Code) on the date of grant shall be eligible to be
granted an Incentive Stock Option. To the extent that any Option is not
designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option.

 

6.3                                 Terms and Conditions. Options shall be subject to such terms and
conditions as shall be determined by the Committee, including the following:

 

(1)                                 Exercise Price. The Exercise Price per share shall not be
less than the Fair Market Value per share as of the Grant Date.  If an Option intended to qualify as an
Incentive Stock Option is granted to an individual who owns or who is deemed to
own shares possessing more than ten percent (10%) of the combined voting power
of all classes of shares of the Company, a corporation which is a parent
corporation of the Company, or any subsidiary of the Company (each as defined
in Section 424 of the Code) (a “10% Owner”), the Exercise Price per share
shall not be less than one hundred ten percent (110%) of such Fair Market Value
per share.

 

(2)                                 Option Period. The Option Period of each Option shall be
fixed by the Committee, provided that no Option shall be exercisable more than
ten (10) years 

 

10

 

after the date the Option is
granted. In the case of an Incentive Stock Option granted to a 10% Owner, the
Option Period shall not exceed five (5) years. No Option which is intended
to be an Incentive Stock Option shall be granted more than ten (10) years
from the date the Plan is adopted by the Company or the date the Plan is
approved by the shareholders of the Company, whichever is earlier.

 

(3)                                 Exercisability. Subject to Section 10.1 and the terms
set by the Committee, Options shall be exercisable at the rate of twenty
percent (20%) of the total number of shares as of each anniversary of the Grant
Date. In addition, the Committee may at any time accelerate the exercisability
of all or part of any Option. If the Committee intends that an Option be able
to qualify as an Incentive Stock Option, the Committee may, in its discretion,
provide that the aggregate Fair Market Value (determined at the date of grant
of the Option) of the Common Stock as to which such Incentive Stock Option held
by a Participant which is exercisable for the first time during any calendar
year (including all other incentive stock options held by the Participant
issued under all plans of the Company and its Affiliates), shall not exceed
$100,000.

 

(4)                                 Method of Exercise. 
Subject to the provisions of this Article VI and the Agreement, a
Participant may exercise Options, in whole or in part, during the Option Period
by giving written notice of exercise on a form provided by the Committee to the
Company specifying the number of shares of Common Stock subject to the Option
to be purchased or in such other manner as is prescribed by the Committee or
its delegates. Such notice shall be accompanied by payment in full of the
purchase price by cash or certified check or such other form of payment as the
Company may accept. If permitted by the Committee, payment in full or in part
may also be made by (i) delivering Common Stock already owned by the
Participant having a total Fair Market Value on the date of such delivery equal
to the Option Price; (ii) the delivery of cash by a broker-dealer as a “cashless”
exercise, provided such method of payment may not be used by a director or
executive officer of the Company to the extent it would violate the
Sarbanes-Oxley Act of 2002; or (iii) any combination of the foregoing.

 

(5)                                 Non-transferability of Options. Except as provided under the Plan or an
Agreement, or as otherwise approved by the Committee, no Option shall be sold,
assigned, margined, transferred, encumbered, conveyed, gifted, alienated,
hypothecated, pledged, or otherwise disposed of, other than by will or by the
laws of descent and distribution, and all Options shall be exercisable during
the Participant’s lifetime only by the Participant.

 

6.4                                 Termination by Reason of Death. Unless otherwise provided in an Agreement
or determined by the Committee, if a Participant incurs a Termination of
Employment due to death or dies within three (3) months after a
termination described in Section 6.6, any unexpired and unexercised Option
held by such Participant shall thereafter be fully exercisable for a period of
one (1) year immediately following the date of such death or until the
expiration of the Option Period, whichever period is the shorter.

 

6.5                                 Termination by Reason of Disability. Unless otherwise provided in an Agreement
or determined by the Committee, if a Participant incurs a Termination of
Employment 

 

11

 

due to a Disability, any
unexpired and unexercised Option held by such Participant shall thereafter be
fully exercisable by the Participant for a period of one (1) year
immediately following the date of such Disability or until the expiration of
the Option Period, whichever period is the shorter, and the Participant’s death
at any time following such Termination of Employment due to Disability shall
not affect the foregoing.

 

6.6                                 Other Termination. Unless otherwise provided in an Agreement
or determined by the Committee, if a Participant incurs a Termination of
Employment that is involuntary on the part of the Participant (but is not due
to death, Disability or with Cause) or is voluntary on the part of the
Participant, any Option held by such Participant shall thereupon terminate,
except that such Option, to the extent then exercisable, may be exercised for
the lesser of the ninety (90) consecutive day period commencing with the date
of such Termination of Employment or until the expiration of the Option Period
whichever period is the shorter. If the Participant incurs a Termination of
Employment for Cause, the Option shall terminate immediately. Unless otherwise
provided in an Agreement, the death or Disability of a Participant after a
Termination of Employment otherwise provided herein shall not extend the time
permitted to exercise an Option.

 

ARTICLE VII

 

STOCK APPRECIATION RIGHTS

 

7.1                                 General. The Committee shall have authority to grant Stock Appreciation Rights
under the Plan at any time or from time to time. Stock Appreciation Rights may
be awarded either alone or in addition to other Awards granted under the Plan.
Subject to the Participant’s satisfaction in full of any conditions,
restrictions or limitations imposed in accordance with the Plan or an
Agreement, a Stock Appreciation Right shall entitle the Participant to
surrender to the Company the Stock Appreciation Right and to be paid therefore
in Common Stock the amount described in Section 7.3(2).

 

7.2                                 Grant. The grant of a Stock Appreciation Right shall occur as of the Grant
Date determined by the Committee. In no event shall the Exercise Price per
share be less than the Fair Market Value per share as of the Grant Date. A
Stock Appreciation Right entitles a Participant to receive Common Stock as
described in Section 7.3(2). An Award of Stock Appreciation Rights shall
be evidenced by, and subject to the terms of an Agreement, which shall become
effective upon execution by the Participant.

 

7.3                                 Terms and Conditions. Stock Appreciation Rights shall be subject
to such terms and conditions as shall be determined by the Committee, including
the following:

 

(1)                                 Period and Exercise. The term of a Stock Appreciation Right
shall be established by the Committee. A Stock Appreciation Right shall be for
such period and shall be exercisable at such times and to the extent provided
in the Agreement. Subject to Section 10.1 and the terms set by the
Committee, Stock Appreciation Rights shall be exercisable at the rate of twenty
percent (20%) as of each anniversary of the Grant Date. In addition, the
Committee may at any time accelerate the exercisability of all or part of any
Stock Appreciation Right. Stock Appreciation Rights shall be exercised by the
Participant’s giving written notice of exercise on a form provided by the
Committee (if available) to the Company specifying the 

 

12

 

portion of the Stock
Appreciation Right to be exercised or in such other manner as is prescribed by
the Committee or its delegates.

 

(2)                                 Amount. Upon the exercise of a Stock Appreciation Right, a Participant shall
be entitled to receive an amount in Common Stock equal in value to the excess
of the Fair Market Value per share of Common Stock over the Exercise Price per
share of Common Stock specified in the related Agreement, multiplied by the
number of shares in respect of which the Stock Appreciation Right is exercised
The aggregate Fair Market Value per share of Common Stock shall be determined
as of the date of exercise of such Stock Appreciation Right.

 

(3)                                 Non-transferability of Stock Appreciation
Rights. Except as provided
in the Plan or in an Agreement, no Stock Appreciation Rights shall be sold,
assigned, margined, transferred, encumbered, conveyed, gifted, alienated,
hypothecated, pledged or otherwise disposed of, other than by will or the laws
of descent and distribution, and all Stock Appreciation Rights shall be
exercisable during the Participant’s lifetime only by the Participant.

 

(4)                                 Termination. A Stock Appreciation Right shall be forfeited or terminated at such
time as an Option would be forfeited or terminated under the Plan, unless
otherwise provided in an Agreement.

 

ARTICLE VIII

 

RESTRICTED
STOCK AND RESTRICTED STOCK UNITS

 

8.1                                 General. The Committee shall have authority to grant Restricted Stock and/or
Restricted Stock Units under the Plan at any time or from time to time. The
Committee shall determine the number of shares of Restricted Stock and/or the
number of Restricted Stock Units to be awarded to any Participant, the time or
times within which such Awards may be subject to forfeiture, and any other
terms and conditions of the Awards. Each Award shall be confirmed by, and be
subject to the terms of, an Agreement which shall become effective upon
execution by the Participant.

 

8.2                                 Grant, Awards and Certificates.  An
Award of Restricted Stock or of Restricted Stock Units shall occur as of the
Grant Date determined by the Committee and as provided in an Agreement.  Restricted Stock and Restricted Stock Units
may be awarded either alone or in addition to other Awards granted under the Plan.
Notwithstanding the limitations on issuance of Common Stock otherwise provided
in the Plan, each Participant receiving an Award of Restricted Stock shall be
issued a certificate (or other representation of title) in respect of such
Restricted Stock. Such certificate shall be registered in the name of such
Participant and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award as determined by the
Committee. The Committee may require that the certificates evidencing such
shares be held in custody by the Company until the restrictions thereon shall
have lapsed and that, as a condition of any Award of Restricted Stock, the
Participant shall have delivered a share power, endorsed in blank, relating to
the Common Stock covered by such Award.

 

 

13

 

8.3                                 Terms and Conditions. Restricted Stock and Restricted Stock Units
shall be subject to such terms and conditions as shall be determined by the
Committee, including the following:

 

(1)                                 Limitations on Transferability. The issue prices for Restricted Stock and
Restricted Stock Units shall be set by the Committee and may be zero. Subject
to the provisions of the Plan and the Agreement, during a period set by the
Committee (and, in the case of Restricted Stock Units, until the date of
delivery of Common Stock), commencing with the date of such Award (the “Restriction
Period “), the Participant shall not be permitted to sell, assign, margin,
transfer, encumber, convey, gift, alienate, hypothecate, pledge or otherwise
dispose of Restricted Stock or Restricted Stock Units.

 

(2)                                 Rights. Except as provided in Section 8.3(1), the Participant shall
have, with respect to the Restricted Stock, all of the rights of a shareholder
of the Company holding the class of Common Stock that is the subject of the
Restricted Stock, including, if applicable, the right to vote the shares and
the right to receive any cash dividends, except as limited by this Section 8.3(2).
A Participant shall have no voting rights with respect to any Restricted Stock
Units granted hereunder but shall, to the extent provided in an Agreement, have
the right to receive (with respect to such Restricted Stock Units) cash
payments equivalent in value to, and payable at the same time as, the cash
dividends payable on a like number shares of Common Stock. Unless otherwise
determined by the Committee, cash dividends on Restricted Stock shall not be
distributed prior to vesting of the Restricted Stock, but shall instead be
accumulated and distributed as additional shares of Common Stock after vesting
of the Restricted Stock.

 

(3)                                 Criteria. Based on service, performance by the Participant or by the Company or
the Affiliate, including any division or department for which the Participant
is employed, or such other factors or criteria as the Committee may determine,
the Committee may provide for the lapse of restrictions in installments and may
accelerate the vesting of all or any part of any Award of Restricted Stock and
waive the restrictions for all or any part of such Award of Restricted Stock.

 

(4)                                 Forfeiture. Unless otherwise provided in an Agreement or determined by the
Committee, if the Participant incurs a Termination of Employment due to death
or Disability during the Restriction Period, the restrictions shall lapse and
the Participant shall be fully vested in the Restricted Stock or Restricted
Stock Units. Except to the extent otherwise provided in the applicable
Agreement and the Plan, upon a Participant’s Termination of Employment for any
reason during the Restriction Period other than a Termination of Employment due
to death or Disability, all shares of Restricted Stock and Restricted Stock
Units still subject to restriction shall be forfeited by the Participant,
except the Committee shall have the discretion to waive in whole or in part any
or all remaining restrictions with respect to any or all of such Participant’s
Restricted Stock .

 

(5)                                 Delivery. If a share certificate is issued in respect of Restricted Stock, the
certificate shall be registered in the name of the Participant but shall be
held by the Company for the account of the Participant until the end of the
Restricted 

 

14

 

Period. If and when the
Restriction Period expires without a prior forfeiture of Restricted Stock or
Restricted Stock Units subject to such Restriction Period, unlegended
certificates (or other representation of title) for Common Stock shall be
delivered to the Participant at the time and subject to the conditions provided
in the Agreement governing such Award.

 

(6)                                 Election. A Participant may elect to further defer receipt of the Restricted
Stock or payment of Common Stock with respect to Restricted Stock Units for a
specified period or until a specified event, subject to the Committee’s
approval and to such terms as are determined by the Committee. Subject to any
exceptions adopted by the Committee, such election must be made one at least (1) year
prior to completion of the Restriction Period and in compliance with the terms
and conditions of Section 409A of the Code.

 

ARTICLE IX

 

PERFORMANCE UNITS

 

9.1                                 General. The Committee shall have authority to grant Performance Units under
the Plan at any time or from time to time. A Performance Unit (“Performance
Unit”) consists of the right to receive cash upon achievement of certain
goals relating to performance (“Performance Goals”) and may be awarded
either alone or in addition to other Awards granted under the Plan. The
Committee shall have complete discretion to determine the number of Performance
Units granted to each Participant. Each Performance Unit Award shall be
evidenced by, and be subject to the terms of, an Agreement which will become
effective upon execution by the Participant. The time period during which a
Performance Unit Award shall be earned shall be the “Performance Period,” and
shall be at least one (1) fiscal year in length. Performance Units may be
subject to Performance Goals which shall be established by the Committee.

 

9.2                                 Earning Performance Unit Awards. After the applicable Performance Period
shall have ended, the Committee shall determine the extent to which the
established Performance Goals have been achieved.

 

9.3                                 Termination of Employment Due to Death or
Disability. In the event of
a Termination of Employment due to death or Disability during a Performance
Period, the Participant shall receive a pro rata share of the cash award earned
with respect to the Participant’s Performance Units relating to such
Performance Period. Unless otherwise determined by the Committee, in the event
that a Participant’s employment terminates for any other reason, all
Performance Units shall be forfeited by the Participant to the Company.
Distribution of earned Performance Units on account of Termination of
Employment due to death or Disability may be made at the same time payments are
made to Participants who did not incur a Termination of Employment during the
applicable Performance Period

 

9.4                                 Nontransferability. Unless otherwise provided in an Agreement,
Performance Units may not be sold, assigned, margined, transferred, encumbered,
conveyed, gifted, alienated, hypothecated, pledged, or otherwise disposed of,
other than by will or by the laws of descent and distribution.

 

15

 

9.5                                 Election to Defer. A Participant may elect to defer receipt of
the cash award with respect to Performance Units for a specified period or
until a specified event, subject to the Committee’s approval and to such terms
are determined by the Committee. Subject to any exceptions adopted by the
Committee, such election must be made at least one (1) year prior to
completion of the Performance Period.

 

9.6                                 Payment.  Payment with respect to
Performance Units shall be made in accordance with the related Agreement.  In no event, however, shall any payment with
respect to a Performance Unit be made after the fifteenth day of the third
month after the last day of the applicable Performance Period.

 

ARTICLE X

 

CHANGE IN CONTROL PROVISIONS

 

10.1                           Impact of Event. Notwithstanding any other provision of the
Plan to the contrary and unless otherwise provided in an Agreement, in the
event of a Change in Control:

 

(1)                                 Any Stock Options and Stock Appreciation
Rights outstanding as of the date of such Change in Control and not then
exercisable shall become fully exercisable to the full extent of the original
grant;

 

(2)                                 The restrictions applicable to any Restricted
Stock and Restricted Stock Unit Awards shall lapse. Such Restricted Stock shall
become free of all restrictions and become fully vested and transferable to the
full extent of the original grant, and such Restricted Stock Units shall become
free of all restrictions, fully vested, and payable in shares of Common Stock;
and

 

(3)                                 Any Performance Goal or other condition with
respect to any Performance Units shall be deemed to have been satisfied in
full, and such Award shall be fully distributable.

 

10.2                           Additional Discretion.  In
the event of a Change in Control, the Committee shall make a proportional
adjustment of the terms of Awards granted hereunder in whatever manner as the
Committee deems appropriate to equitably reflect the change (if any) in the
value of the Common Stock due to the Change in Control.  Notwithstanding anything herein or in an
Agreement to the contrary, upon a Change in Control, the Committee shall have
full discretion with respect to an outstanding Award to provide that the
securities of another entity be substituted hereunder for the Common Stock and
to make equitable adjustment with respect thereto.

 

ARTICLE XI

 

PROVISIONS APPLICABLE TO SHARES ACQUIRED UNDER THIS PLAN

 

11.1                           No Company Obligation. Except to the extent required by applicable
securities laws, none of the Company, an Affiliate or the Committee shall have
any duty or obligation to affirmatively disclose material information to a
record or beneficial holder of Common Stock or 

 

16

 

an Award, and such holder
shall have no right to be advised of any material information regarding the
Company or any Affiliate at any time prior to, upon, or in connection with
receipt, exercise or distribution of an Award. The Company makes no
representation or warranty as to the future value of the Common Stock issued or
acquired in accordance with the provisions of the Plan.

 

ARTICLE XII

 

MISCELLANEOUS

 

12.1                           Amendments and Termination. The Board may amend, alter, or discontinue
the Plan at any time, but no amendment, alteration or discontinuation shall be
made which would impair the rights of a Participant under an Award theretofore
granted without the Participant’s consent, except such an amendment (a) made
to cause the Plan to comply with applicable law, including without limitation
an amendment to bring the Award into compliance with, or obtain an exemption from,
the requirements of Code Section 409A; or (b) made to permit the
Company or an Affiliate a tax deduction under applicable law. The Committee may
amend, alter or discontinue the terms of any Award theretofore granted,
prospectively or retroactively, on the same conditions and limitations (and
exceptions to limitations) as apply to the Board, and further subject to any
approval or limitations the Board may impose. 
Notwithstanding the foregoing, any material amendments (as determined
under the rules of the New York Stock Exchange, as amended from time to
time) to the Plan shall require shareholder approval.

 

12.2                           Unfunded Status of Plan. It is intended that the Plan be an “unfunded”
plan for incentive compensation. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Common Stock or make payments; provided, however, that, unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the “unfunded” status of the Plan.

 

12.3                           Provisions Relating to Internal Revenue Code Section 162(m). It is the intent of the Company that Awards
granted to persons who are Covered Employees within the meaning of Section 162(m) of
the Code shall constitute “qualified performance-based compensation” satisfying
the requirements of Code Section 162(m). Accordingly, the Plan shall be
administered and the provisions of the Plan shall be interpreted in a manner
consistent with Code Section 162(m). If any provision of the Plan or any
Agreement relating to such an Award does not comply or is inconsistent with the
requirements of Code Section 162(m), such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements. In addition,
the following provisions shall apply to the Plan or an Award to the extent
necessary to obtain a tax deduction for the Company or an Affiliate:

 

(1)                                 Not later than the date required or permitted
for “qualified performance-based compensation” under Code Section 162(m),
the Committee shall determine the Participants who are Covered Employees who
will receive Awards that are intended as qualified performance-based
compensation and the amount or method for determining the amount of such
compensation.

 

(2)                                 During any three-consecutive calendar year
period, the maximum number of shares of Common Stock for which Options and
Stock Appreciation Rights, in 

 

17

 

the aggregate, may be
granted to any Participant shall not exceed 800,000  shares. For
Performance Unit Awards that are intended to be “performance-based compensation”
(as that term is used in Code Section 162(m), no more than $2,000,000  may
be subject to such Awards granted to any Participant during any three-consecutive
calendar year period. If, after amounts have been earned with respect to
Performance Unit Awards, the payment of such amounts is deferred, any
additional amounts attributable to earnings during the deferral period shall be
disregarded for purposes of this limit.

 

(3)                                 Performance Goals. Awards may be subject to Performance Goals
(as defined in Section 9.1) which shall be measured in a specific
Performance Period (as defined in Section 9.1) established by the
Committee which shall be based on any of the following performance criteria,
either alone or in any combination, and on either a consolidated or business
unit level, as the Committee may determine: sales; cash flow; cash flow from
operations; operating profit or income; net income; operating margin; net
income margin; return on net assets; economic value added; return on total
assets; return on common equity; return on total capital; total shareholder
return; revenue; revenue growth; earnings before interest, taxes, depreciation
and amortization (“EBITDA”); EBITDA growth; funds from operations per share and
per share growth; cash available for distribution; cash available for
distribution per share and per share growth; share price performance on an
absolute basis and relative to an index of earnings per share or improvements
in the Company’s attainment of expense levels; and implementing or completion
of critical projects. The foregoing criteria shall have any reasonable
definitions that the Committee may specify, which may include or exclude any or
all of the following items as the Committee may specify: extraordinary, unusual
or non-recurring items; effects of accounting changes; effects of financing
activities (e.g., effect on earnings per share of issuance of convertible debt
securities); expenses for restructuring or productivity initiatives; other
non-operating items; spending for acquisitions; effects of divestitures; and
effects of litigation activities and settlements. Any such performance
criterion or combination of such criteria may apply to the Participant’s Award
opportunity in its entirety or to any designated portion or portions of the
Award opportunity, as the Committee may specify. Unless the Committee
determines otherwise for any Performance Period, extraordinary items, such as
capital gains and losses, which affect any performance criterion applicable to
the Award (including but not limited to the criterion of net income) shall be
excluded or included in determining on the extent to which the corresponding
performance goal has been achieved, whichever will produce the higher Award. In
the event applicable tax or other laws change to permit the Committee
discretion to alter the governing performance measures without obtaining
shareholder approval of such changes, the Committee shall have sole discretion
to make such changes without obtaining shareholder approval.

 

(4)                                 Earning Performance Awards. After the applicable Performance Period
shall have ended, the Committee shall certify the extent to which the
established Performance Goals have been achieved. Payment with respect to
Performance Units for Covered Employees shall be a direct function of the
extent to which the Company’s Performance Goals have been achieved. A
Performance Unit Award to a Participant who is a Covered Employee shall (unless
the Committee 

 

18

 

determines otherwise)
provide that in the event of the Participant’s Termination of Employment prior
to the end of the Performance Period for any reason, such Award will be payable
only (a) if the applicable Performance Goals are achieved and (b) to
the extent, if any, as the Committee shall determine.

 

(5)                                 Other Section 162(m) Provisions. In the manner required by Section 162(m) of
the Code, the Committee shall, promptly after the date on which the necessary
financial and other information for a particular Performance Period becomes
available, certify the extent to which Performance Goals have been achieved
with respect to any Performance Unit Award intended to qualify as “performance-based
compensation” under Section 162(m) of the Code. The Committee may not
increase the amount of any Performance Unit Award payable to any Participant
above the amount established in accordance with the relevant Performance Goals
with respect to any Performance Unit Award intended to qualify as “performance-based
compensation” under Section 162(m) of the Code

 

12.4                           No Additional Obligation. Nothing contained in the Plan shall prevent
the Company or an Affiliate from adopting other or additional compensation or
benefit arrangements for its employees.

 

12.5                           Withholding. No later than the date as of which an amount first becomes includible
in the gross income of the Participant for federal income tax purposes with
respect to any Award, the Participant shall pay to the Company (or other entity
identified by the Committee), or make arrangements satisfactory to the Company
or other entity identified by the Committee regarding the payment of, any
federal, state, or local taxes of any kind required by law to be withheld with
respect to such income. Unless otherwise determined by the Committee,
withholding obligations may be settled with Common Stock, including shares of
Common Stock that are part of the Award that give rise to the withholding
requirement. The obligations of the Company under the Plan shall be conditional
on such payment or arrangements, and the Company and its Affiliates shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Participant. Subject to approval by the Committee,
a Participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares
of Common Stock to be issued pursuant to any Award a number of shares with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the required statutory minimum (but no more than such required
minimum) with respect to the Company’s withholding obligation, or (ii) transferring
to the Company shares of Common Stock owned by the Participant with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the required statutory minimum (but no more than such required
minimum) with respect to the Company’s withholding obligation.

 

12.6                           Controlling Law. The Plan and all Awards made and actions
taken thereunder shall be governed by and construed in accordance with the laws
of Minnesota (other than its law respecting choice of law). The Plan shall be
construed to comply with all applicable law and to avoid liability to the
Company, an Affiliate or a Participant. 
The Board and the Committee shall administer the Plan, and shall
exercise all authority and discretion under the Plan to satisfy the requirements
of Code Section 409A

 

19

 

12.7                           Offset. Any amounts owed to the Company or an Affiliate by the Participant of
whatever nature may be offset by the Company from the value of any Award to be
transferred to the Participant.

 

12.8                           Nontransferability; Beneficiaries. No Award shall be assignable or
transferable by the Participant, otherwise than by will or the laws of descent
and distribution or pursuant to a beneficiary designation, and Awards shall be
exercisable during the Participant’s lifetime only by the Participant (or by
the Participant’s legal representatives in the event of the Participant’s
incapacity). Each Participant may designate a Beneficiary to exercise any
Option or Stock Appreciation Right or receive any Award held by the Participant
at the time of the Participant’s death or to be assigned any other Award
outstanding at the time of the Participant’s death. If a deceased Participant
has named no Beneficiary, any Award held by the Participant at the time of
death shall be transferred as provided in his or her will or by the laws of
descent and distribution. Except in the case of the holder’s incapacity, only
the holder may exercise an Option or Stock Appreciation Right. Notwithstanding
the foregoing, the Board or the Committee may, in its discretion and subject to
such limitations and conditions as the Board or the Committee deems
appropriate, permit the transfer of an Award by a Participant to a Participant’s
children, stepchildren, grandchildren, parents, stepparents, grandparents,
spouse (including an ex-spouse incident to divorce), siblings, in-laws, or
persons related by reason of legal adoption (collectively, the “Family Members”),
or to a trust for the exclusive benefit of the Grantee’s Family Members or a
partnership, corporation or limited liability the equity interests of which are
owned by the Grantee and/or the Grantee’s Family Members.

 

12.9                           Gross-Up for Excise Tax. If all or any portion of the payments and
benefits (including any acceleration of vesting) provided under this Plan,
either alone or together with other payments and benefits which a Participant
receives or is then entitled to receive from the Company or an Affiliate, would
constitute a “parachute payment” within the meaning of Section 280G of the
Code, the Company shall pay to the Participant, within ten (10) business
days of the determination that the payment would constitute a parachute
payment, a tax “gross-up” payment to the extent necessary so that the net
after-tax benefit to the Participant shall be equal to the net after-tax
benefit if the excise tax associated with the “parachute payment” were not
imposed. The “net after-tax benefit” for these purposes shall mean the sum of (i) the
total amount payable to the Participant under the Plan, plus (ii) all
other payments and benefits which the Participant receives or is then entitled
to receive from the Company or any Affiliate that would constitute a “parachute
payment” within the meaning of Section 280G of the Code, less (iii) the
amount of federal income taxes payable with respect to the foregoing calculated
at the maximum marginal income tax rate for each year in which the foregoing
shall be paid to the Participant (based upon the rate in effect for such year
as set forth in the Code at the time of the payment), less (iv) the amount
of excise taxes imposed with respect to the payments and benefits described in (i) and
(ii) above by Section 4999 of the Code. The determination on whether
or not all or any portion of the payments and benefits provided to the
Participant would constitute parachute payments shall be made by a national
certified public accounting firm selected by the Company, and such
determination shall be conclusive and binding on the Participant.

 

12.10                     No Rights with Respect to Continuance of
Employment. Nothing
contained herein shall be deemed to alter the relationship between the Company
or an Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to 

 

20

 

terminate the employment or
service relationship at any time for any reason, except as provided in a
written contract. The Company or an Affiliate shall have no obligation to
retain the Participant in its employ or service as a result of this Plan. There
shall be no inference as to the length of employment or service hereby, and the
Company or an Affiliate reserves the same rights to terminate the Participant’s
employment or service as existed prior to the individual becoming a Participant
in this Plan.

 

12.11                     Awards in Substitution for Awards Granted by
Other Corporations. Awards
may be granted under the Plan from time to time in substitution for awards held
by employees, directors or service providers of other corporations who are
about to become officers, directors or employees of the Company or an Affiliate
as the result of a merger or consolidation of the employing corporation with
the Company or an Affiliate, or the acquisition by the Company or an Affiliate
of the assets of the employing corporation, or the acquisition by the Company
or Affiliate of the share of the employing corporation, as the result of which
it becomes a designated employer under the Plan. The terms and conditions of
the Awards so granted may vary from the terms and conditions set forth in this
Plan at the time of such grant as the majority of the members of the Committee
may deem appropriate to conform, in whole or in part, to the provisions of the awards
in substitution for which they are granted.

 

12.12                     Foreign Alternatives. Notwithstanding the other provisions of the
Plan, in the case of any Award to any Participant who is an employee of a
foreign subsidiary or foreign branch of the Company or held by a Participant
who is in any other category specified by the Committee, the Committee may
specify that such Award shall not be represented by Common Stock or other
securities but shall be represented by rights approximately equivalent (as
determined by the Committee) to the rights that such Participant would have
received if shares of Common Stock or other securities had been issued in the
name of such Participant otherwise in accordance with the Plan (such rights
being hereinafter called “Share Equivalents”). The Share Equivalents
representing any such Award may subsequently, at the option of the Committee,
be converted into cash or an equivalent number of shares of Common Stock or
other securities under such circumstances and in such manner as the Committee
may determine.

 

12.13                     Delivery of Stock Certificates. To the extent the Company uses certificates
to represent shares of Common Stock, certificates to be delivered to
Participants under this Plan shall be deemed delivered for all purposes when
the Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the Participant, at the
Participant’s last known address on file with the Company. Any reference in
this Section 12.13 or elsewhere in the Plan or an Agreement to actual
stock certificates and/or the delivery of actual stock certificates shall be
deemed satisfied by the electronic record-keeping and electronic delivery of
shares of Common Stock or other mechanism then utilized by the Company and its
agents for reflecting ownership of such shares.

 

12.14                     Headings. The headings contained in this Plan are for reference purposes only
and shall not affect the meaning or interpretation of this Plan.

 

12.15                     Severability. If any provision of this Plan shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not effect any other provision hereby, and this Plan
shall be construed as if such invalid or unenforceable provision were omitted.

 

21

 

12.16                     Successors and Assigns. This Plan shall inure to the benefit of and
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant’s heirs, legal representatives and
successors.

 

12.17                     Entire Agreement. This Plan and each Agreement constitute the
entire agreement with respect to the subject matter hereof and thereof,
provided that in the event of any inconsistency between the Plan and each
Agreement, the terms and conditions of this Plan shall control.

 

22

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