Document:

exv10w8

 

EXHIBIT 10.8

SECOND AMENDMENT AND RESTATEMENT OF THE

ULTA SALON, COSMETICS & FRAGRANCE, INC.

(FORMERLY ULTA3 COSMETICS & SALON, INC.)

RESTRICTED STOCK PLAN

     Section 1. Administration. This Plan (the “Plan”) shall be known as the “Ulta Salon,
Cosmetics & Fragrance, Inc. Restricted Stock Plan.” The purpose of the Plan is to compensate and
incent key Employees and Non-Employee Directors of Ulta Salon, Cosmetics & Fragrance, Inc. (the
“Company”) commensurate with the financial success of the Company. Certain capitalized terms used
herein are defined in Section 8. This Plan shall be administered by a committee (herein the
“Committee”) composed of at least two (2) members of the Company’s Board of Directors (the “Board”)
as appointed by the Board from time to time, but if no Committee is appointed then the entire Board
shall serve as such. Each appointed Committee member may be removed from the Committee by the
Board at any time without cause. In the event the Company has issued any class of common stock
required to be registered under Section 12 of the Exchange Act, the Committee shall be constituted
so as to comply with the disinterested administration requirements under Rule 16b-3 of the Exchange
Act. Members of the Committee shall serve at the pleasure of the Board. The Committee shall have
the right and power at any time and from time to time to make an offer to sell shares of the
Company’s Common Stock, par value $.01 per share (which shares shall be subject to the restrictions
as set forth herein), to any employee or non-employee director of the Company (hereinafter, an
“Employee” or a “Non-Employee Director”, respectively, each a “Participant” and collectively the
“Participants”); provided that the purchase price thereof shall be not less than $.01 per share.
The shares issued to Participants hereunder are referred to as “Restricted Stock”. The Committee
shall have the power to interpret the Plan and to adopt such Rules for the administration,
interpretation and application of the Plan as are consistent therewith, to interpret, amend or
revoke any such Rules. The Committee, may, with the approval of the Board, employ attorneys,
consultants, accountants, appraisers or other persons. The Committee, the Company and the Board
shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions
taken in good faith shall be final and binding upon all Participants, other holders of Restricted
Stock, the Company and all other interested persons. No members of the Committee or the Board
shall be personally liable for any action, determination or interpretation made in good faith with
respect to the Plan or Restricted Stock and all members of the Committee and the Board shall be
fully protected by the Company in respect of any such action, determination or interpretation.

     Section 2. Purchase and Sale of Restricted Stock. Upon the Company’s receipt from a
Participant of a good check in the amount of the purchase price therefor and a dated and executed
Annex I to Restricted Stock Plan substantially in the form attached hereto, with such modifications
as may be approved from time to time by the Committee, the Company will issue a stock certificate
in the name of such Participant representing the number of shares of Restricted Stock subject to
such acceptance and will deliver to such Employee or Non-Employee Director a copy of the
certificate(s) representing such shares. The date of such purchase and sale is referred to herein
as the “Date of Issuance” of such shares. Until the occurrence of a Sale of the
Company, all certificates evidencing such shares may be held at the Company’s option by the
Company for the benefit of such Participant and the other holder(s) of Restricted Stock.

			
	 	 	 
	
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     Section 3. Repurchase Options.

     (a) In the event a Participant no longer provides Services to the Company for any reason (the
date of termination of Services being referred to as the “Termination Date”), the Restricted Stock
issued to such Participant (whether then held by the Participant or one or more transferees) shall
be subject to repurchase by the Company pursuant to the terms and conditions set forth in this
Section 3 (the “repurchase option”); provided that the Company’s right to repurchase such
Restricted Stock shall terminate upon a sale of the Company or a qualified Public Offering. The
repurchase price of each vested share shall be the Market Value of such share as of the date of
repurchase of such shares. The repurchase price of each unvested share shall be the Original Cost.

     (b) Until a share of Restricted Stock becomes a vested share, such share shall be an unvested
share. Subject to Section 3(c) below, unless the Committee determines otherwise, shares of
Restricted Stock issued to a Participant on a particular date of issuance will become Vested Shares
in accordance with the following schedule if as of each date set forth the Participant remains in
the Service of the Company or any subsidiary:

	 	 	 	 	 
	 	 	Cumulative Percentage of
	 	 	Shares of Participant Stock
	Date	 	Which are Vested Shares
	the Date of Issuance
	 	 	0	%
	the first anniversary of the Date of Issuance
	 	 	25	%
	the second anniversary of the Date of Issuance
	 	 	50	%
	the third anniversary of the Date of Issuance
	 	 	75	%
	the fourth anniversary of the Date of Issuance
	 	 	100	%

     (c) In the event of a Sale of the Company, all shares of Restricted Stock not having been
previously vested hereunder shall become Vested Shares on the date of such Sale of the Company. If
the Participant’s Service to the Company is terminated by reason of the Participant’s death or
Disability, all shares of Restricted Stock shall become vested on such Termination Date. If the
Participant’s Service to the Company is terminated by reason of the Participant’s Retirement, all
shares of Restricted Stock which would have become Vested Shares had Participant’s Service to the
Company continued during the twelve (12) months following the Termination Date.

     (d) The Company may elect to purchase all of a Participant’s Restricted Stock by delivery of
written notice (the “Repurchase Notice”) to the holder or holders of such Restricted Stock within
ninety (90) days after the third anniversary date of the Termination Date if the termination was
due to death, Disability or Retirement, or within one hundred eighty (180) days after the
Termination Date where termination was due to any reason except for death, permanent Disability or
Retirement. The Repurchase Notice shall set forth the number of shares of

			
	 	 	 
	
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Restricted Stock to be acquired from such holder, the number of Vested Shares and Unvested
Shares to be acquired from such holder, the aggregate consideration to be paid for such shares and
the time and place for the closing of the transaction.

     (e) If for any reason the Company does not elect to purchase all of the shares of Restricted
Stock of a Participant pursuant to the Repurchase Option, and the Participant and his/her permitted
transferees who owns ten thousand (10,000) or more shares of Restricted Stock, the Investors shall
be entitled to exercise the Company’s Repurchase Option in the manner set forth in Section 3(d) for
the shares of such Restricted Stock the Company has not elected to purchase (the “Available
Shares”). As soon as practicable after the Company has determined that there will be Available
Shares, but in any event no later than sixty (60) days prior to the expiration of the Company’s
period of time to serve the Repurchase Notice, the Company shall deliver written notice (the
“Option Notice”) to the Investors setting forth the number of Available Shares and the price for
each Available Share. The Investors may elect to purchase any number of Available Shares by
delivering written notice to the Company within thirty (30) days after receipt of the Option Notice
from the Company. In the event the aggregate number as to which elections are made exceeds the
number of Available Shares, the shares shall be allocated pro rata according to the number of
shares of Underlying Common Stock held by the Investors at the time of delivery of the Supplemental
Repurchase Notice. As soon as practicable, and in any event within 5 days, after the expiration of
the second thirty (30) day period set forth above, the Company shall notify each holder of
Restricted Stock subject to purchase as to the number of shares being purchased from such holder by
each Investor (the “Supplemental Repurchase Notice”). At the time the Company delivers the
Supplemental Repurchase Notice to the holder(s) of Restricted Stock, the Investors shall also
receive written notice from the Company setting forth the number of shares each of them is entitled
to purchase, the aggregate purchase price and the time and place of the closing of the transaction.
If both the Company and the Investors have exercised their rights to purchase Restricted Stock
pursuant to the Repurchase Option, the number of shares of Restricted Stock to be purchased at
Original Cost and at Market Value or a percentage thereof will be prorated among the Company and
the Investors based upon the total number of shares each is to purchase.

     (f) The closing of the purchase transaction(s) shall take place an the date designated by the
Company in the Repurchase Notice or Supplemental Repurchase Notice, which date shall not be more
than sixty (60) days and not less than ten (10) days after the delivery of the later of either such
notice to be delivered. The Company and/or the Investors will pay for the Restricted Stock to be
purchased pursuant to the Repurchase Option by delivery of a check or checks in the
aggregate amount of the total purchase price. The purchasers of such Restricted Stock will be
entitled to receive customary representations and warranties from the seller regarding the sale of
such Restricted Stock.

     Section 4. Restrictions on Transfer.

     (a) Transfer of Restricted Stock. A Participant may not sell, pledge or otherwise
transfer any interest in any Unvested Shares. A Participant may not sell, pledge or otherwise
transfer any interest in any Vested Shares except pursuant to the provisions of Section 5 and 6
hereof (“Exempt Transfers”) and except pursuant to the provisions of this Section 4; provided that
in no event may any transfer of Restricted Stock pursuant to this Section 4 be made for any

			
	 	 	 
	
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consideration other than cash payable upon the consummation of such transfer. At least sixty (60)
days prior to making any transfer other than an Exempt Transfer, the transferring Participant must
deliver a written notice (the “Sale Notice”) to the Company. The Sale Notice will disclose in
reasonable detail the identity of the prospective transferee(s), the number of shares of Restricted
Stock proposed to be transferred and the terms and conditions of the proposed transfer. The
Participant (and the transferees of each) may not consummate any such transfer until sixty (60)
days after the Sale Notice has been delivered to the Company.

     (b) First Refusal Rights. The Company may elect to purchase all (but not less than
all) of the shares of Restricted Stock proposed to be transferred upon the same terms and
conditions as those set forth in the Sale Notice by delivering a written notice of such election to
the Participant within thirty (30) days after the receipt of the Sale Notice by the Company. If
the Company has not elected to purchase all of the Restricted Stock proposed to be transferred and
the Participant and his/her permitted transferees own ten thousand (10,000) or more shares of
Restricted Stock, the Investors may elect to purchase all (but not less than all) of the Restricted
Stock proposed to be transferred upon the same terms and conditions as those set forth in the Sale
Notice by delivering a written notice of such election to the Participant within sixty (60) days
after the receipt of the Sale Notice by the Company. If more than one Investor elects to purchase
such Restricted Stock, the number of shares to be purchased by the electing Investors will be
allocated among them pro rata on the basis of the number of shares of the Company’s Underlying
Common Stock held by them. Any person who has the right to acquire Restricted Stock pursuant to
this Section 4(b) will be given up to sixty (60) days (after it has been determined that such
person has such right) to consummate the purchase and sale of such Restricted Stock. If neither
the Company nor the Investors have elected to purchase all of the Restricted Stock specified in the
Sale Notice, the Participant may, subject to the provisions of Section 4(c), transfer the
Restricted Stock specified in the Sale Notice at a price and on terms no more favorable to the
transferees) thereof than specified in the Sale Notice during the sixty (60) day period immediately
following the expiration of such days. Any shares of Restricted Stock not transferred within such
sixty (60) day period will continue to be subject to the provisions of this Section 4(b) upon
subsequent transfer.

     (c) Certain Permitted Transfers. The restrictions contained in this Section 4 will
not apply with respect a Participant’s transfer of shares of Restricted Stock (i) pursuant to
applicable laws of descent and distribution or (ii) among such Participant’s family group; provided
that in each case the restrictions contained in this Section will continue to be applicable to the
Restricted Stock after any such transfer and the transferees of such Restricted Stock have so
agreed in writing. The “family group” of a Participant means the spouse and descendants (whether
natural or adopted) of such Participant, and any trust, partnership or entity solely for the
benefit of such Participant and/or such Participant’s spouse and/or descendants.

     (d) Termination of Restrictions. The restrictions on the transfer of Restricted Stock
set forth in this Section 4 will continue with respect to each share of Restricted Stock until the
date on which such Restricted Stock has been transferred in a transaction permitted by this Section
(except in a transaction contemplated by Section 4(c)); provided in any event the restrictions on
transfers set forth in this Section 4 will terminate with respect to particular shares of
Restricted Stock on the first to occur of (i) the tenth anniversary of the Date of Issuance

			
	 	 	 
	
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thereof, (ii) a Qualified Public Offering (as to Vested Shares only) and (iii) a Sale of the
Company.

     (e) Additional Restrictions. Prior to making any transfer of any interest in
Restricted Stock to any Person, a Participant must use reasonable efforts to ascertain whether the
proposed transferees (or any Person affiliated with the proposed transferees) is a competitor of
the Company. If a Participant has reason to believe that the proposed transferee is or is
affiliated with or acting on behalf of such a competitor, the Participant will not transfer any
Restricted Stock to the proposed transferee.

     Section 5. Additional Restrictions on Transfer.

     (a) Each certificate representing Restricted Stock will bear the following legend:

     “THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON                     , HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION
FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET
FORTH IN THE ULTA 3  COSMETICS & SALON, INC. RESTRICTED STOCK PLAN, A COPY OF
WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY’S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE.”

     (b) No holder of Restricted Stock may sell, transfer or dispose of any Restricted Stock
(except in a Public Offering) without first delivering to the Company an opinion of counsel
reasonably acceptable in form and substance to the Company that registration under the Securities
Act of 1933, as amended is not required in connection with such transfer.

     (c) No holder of Restricted Stock may effect any public sale or distribution of any equity
securities of the Company, or any securities convertible into or exchangeable or exercisable for
such securities, during the seven days prior to and the ninety (90) days after the effectiveness of
any Public Offering except as part of Public Offering if permitted.

     (d) In the event that the Restricted Stock issued hereunder is subject to an effective
registration under the Securities Act of 1933, such stock may, in general, be freely transferred
unless the Participant is deemed to be an “affiliate” of the Company as that term is defined
in Rule 144 as promulgated by the Securities and Exchange Commission. Participant is required to
comply with the provisions of Rule 144 to the extent such Rule may be applicable to the Restricted
Stock acquired hereunder, and to refrain from reoffering, reselling or otherwise disposing of any
of the Restricted Stock in any manner which would violate the Securities Act of 1933 or any other
applicable Federal or State securities law.

     Section 6. Sale of the Company.

			
	 	 	 
	
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     (a) If the Board and the holders of a majority of the Preferred Stock then outstanding approve
a Sale of the Company (the “Approved Sale”), the holders of Restricted Stock must consent to and
raise no objection against the Approved Sale, and if the Approved Sale is structured as a sale of
stock, the holders of Restricted Stock must agree to sell all or the proportionate portion of their
shares of Restricted Stock on the terms and conditions approved by the Board and the Directing
Investors. The holders of Restricted Stock must take all necessary and desirable actions in
connection with the consummation of the Approved Sale.

     (b) The obligations of the holders of Restricted Stock with respect to an Approved Sale are
subject to the satisfaction of the following conditions: (i) upon the consummation of the Approved
Sale, all of the holders of the Company’s Common Stock will receive the same form and amount of
consideration per share of the Company’s Common Stock, or if any holders are given an option as to
the form and amount of consideration to be received, all holders will be given the same option,
(ii) all of the holders of the Company’s Common Stock will, after taking into consideration the
conversion price then in effect on the Company’s Preferred Stock, receive the same form and amount
of consideration per share of the Company’s Preferred Stock and (iii) all holders of then
exercisable rights to acquire shares of the Company’s Common Stock will be given an opportunity to
either (A) exercise such rights prior to the consummation of the Approved Sale and participate in
such sale as holders of the Company’s Common Stock or (B) upon the consummation of the Approved
Sale, receive in exchange for such rights consideration equal to the amount determined by
multiplying (1) the same amount of consideration per share of the Company’s Common Stock received
by the holders of the Company’s Common Stock in connection with the Approved Sale less the exercise
price (per share of the Company’s Common Stock) of such rights to acquire the Company’s Common
Stock by (2) the number of shares of the Company’s Common Stock represented by such rights.

     (c) If the Company or the holders of a majority of the Company’s securities enter into any
negotiation or transaction for which Rule 506 (or any similar Rule then in effect) promulgated by
the Securities Exchange Commission may be available with respect to such negotiation or transaction
(including a merger, consolidation or other reorganization), the holders of Restricted Stock must,
at the request of the Company, appoint a purchaser representative (as such term is defined in Rule
501) reasonably acceptable to the Company. If any holder of Restricted Stock appoints the
purchaser representative designated by the Company, the Company will pay the fees of such purchaser
representative, but if any holder of Restricted Stock declines to appoint the purchaser
representative designated by the Company such holder must appoint another purchaser representative
(reasonably acceptable to the Company), and such holder will be responsible for the fees of the
purchaser representative so appointed.

     (d) Each Participant and each other holder of Restricted Stock (if any) will bear his pro rata
share (based upon the number of shares sold) of the costs of any sale of Restricted Stock pursuant
to an Approved Sale to the extent such costs are incurred for the benefit of all holders of the
Company’s Common Stock and are not otherwise paid by the Company or the acquiring party. Costs
incurred by any Participant or any other holder of Restricted Stock on his own behalf will not be
considered costs of the transaction hereunder.

			
	 	 	 
	
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     (e) The provisions of this Section 6 will terminate with respect to particular shares of
Restricted Stock upon the first to occur of (i) the tenth anniversary of the Date of Issuance
thereof, (ii) a Qualified Public Offering and (iii) a Sale of the Company.

     Section 7. Voting Stock. So long as the Investors hold any shares of the Company’s
Underlying Common Stock, each share of Restricted Stock must be voted as directed by the Directing
Investors with respect to a proposed Sale of the Company or in connection with a proposed Public
Offering. Participant and the Company each will take all necessary or desirable actions as are
requested by the Directing Investors, in order to cause all shares of Restricted Stock to be voted
pursuant to such direction of the Directing Investors. Participant will deliver to the Company
upon purchase of any shares of Restricted Stock, an irrevocable proxy with respect to such shares
in favor of the Directing Investors. The provisions of this Section 7 will terminate with respect
to particular shares of Restricted Stock upon the first to occur of a Qualified Public Offering and
the tenth anniversary of the Date of Issuance thereof.

     Section 8. Definitions.

     “Company’s Common Stock” means Common Stock, par value $.01 per share of the Company.

     “Directing Investors” means those Investors holding a majority of the Underlying
Common Stock.

     “Disability” means the mental or physical incapacity of the Participant such that
Participant would qualify for Disability benefits under the Company’s long term Disability plan, if
a participant therein.

     “Independent Third Party” means any person who, immediately prior to the contemplated
transaction, does not own in excess of 5% of the Company’s Common Stock on a fully-diluted basis,
who is not controlling, controlled by or under common control with the Company or any such 5% owner
of the Company’s Common Stock and who is not the spouse or a descendent (by birth or adoption) of
any such 5% owner of the Company’s Common Stock.

     “Investors” means the holders (other than Richard E. George and Terry J. Hanson) of
the Preferred Stock. Any action to be taken or determination to be made under this Plan by the
Investors shall be taken or made by Directing Investors.

     “Market Value” of any share of Restricted Stock means (a) the closing price of the
Company’s Common Stock on the principal exchange on which the Common Stock is then trading, if any
(or as reported on any composite index which includes such principal exchange), on the trading day
previous to such date, or (b) if the Company’s Common Stock is not traded on
an exchange but is reported by the National Association of Securities Dealers, Inc. Automated
Quotations, Inc. National Market System (“NASDAQ System”) or a successor quotation system, the last
sales price on the most recent trading day previous to such date, or (c) of the Common Stock is not
listed on any Securities Exchange or quoted in the NASDAQ System, the Market Value will be the fair
value of the Common Stock as determined in good faith by the Board.

			
	 	 	 
	
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     “Original Cost” of any share of Restricted Stock will be equal to the price paid for
such share on its Date of Issuance (as proportionally adjusted for all stock splits, stock
dividends and other recapitalization affecting the Company’s Common Stock subsequent to such Date
of Issuance).

     “Participant” means any Employee and Non-Employee Director who is selected by the
Committee to receive shares of the Company’s Common Stock pursuant to this Plan.

     “Preferred Stock” means the Series I Convertible Preferred Stock, Series II
Convertible Preferred Stock, Series IV Convertible Preferred Stock of the Company and such other
additional convertible preferred stock as the Company may issue from time to time.

     “Public Offering” means the sale, in an underwritten Public Offering registered under
the Securities Act, of shares of the Company’s Common Stock.

     “Qualified Public Offering” means a Public Offering in which (i) the aggregate cash
proceeds received by the Company for the shares sold in such offering is at least $15 million; (ii)
the price per share paid by the public for the shares sold in such offering implies a total equity
valuation of the Company of at least $100 million; and (iii) the shares sold in such offering are
listed on the American Stock Exchange or the New York Stock Exchange or are quoted on the NASDAQ
System.

     “Restricted Stock” For all purposes of this Plan, Restricted Stock will continue to be
Restricted Stock in the hands of any holder other than the Employee or Non-Employee Director to
whom issued (except for the Company, any Investor and purchasers pursuant to an offering registered
with the Securities Exchange Commission or purchasers pursuant to a Rule 144 transaction), and each
such other holder of Restricted Stock will succeed to all rights and obligations attributable to
such Employee or Non-Employee Director as a holder of Restricted Stock hereunder. Restricted Stock
will also include shares of the Company’s capital stock issued with respect to shares of Restricted
Stock by way of a stock split, stock dividend or other recapitalization.

     “Retirement” means the retirement of the Employee from the Company on or after
attaining age 55, or as otherwise may be agreed upon by the Employee and the Company with the
approval of the Committee.

     “Sale of the Company” means the sale of the Company to an Independent Third Party or
affiliated group of Independent Third Parties pursuant to which such party or parties (i) acquire,
in one transaction or a series of related transactions, capital stock of the Company possessing the
voting power to elect a majority of the Board (whether by merger, consolidation or sale or transfer
of the Company’s capital stock) or (ii) acquire by sale, lease, assignment, transfer or
other conveyance all or substantially all of the Company’s assets determined on a consolidated
basis.

     “Securities Act” means the Securities Act of 1933, as amended from time to time.

     “Service” means the performance of service for the Company, whether as an employee or
as a member of the Board.

			
	 	 	 
	
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     “Subsidiary” means any corporation of which the Company owns securities having a
majority of the ordinary voting power in electing the Board directly or through one or more
subsidiaries.

     “Underlying Common Stock” means (i) the Common Stock issued or issuable upon
conversion of the Preferred Stock and (ii) any Common Stock issued or issuable with respect to the
securities referred to in clause (i) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other reorganization. Any
Person who holds Preferred Stock will be deemed to be the holder of the Underlying Common Stock
obtainable upon conversion of the Preferred Stock in connection with the transfer thereof or
otherwise regardless of any restriction or limitation on the conversion of the Preferred Stock. As
to any particular shares of Underlying Common Stock, such shares will cease to be Underlying Common
Stock when they have been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration Statement covering them or (b) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force).

     Section 9. General Provisions

     (a) Transfers in Violation of Plan Restrictions. Any transfer or attempted transfer
of any Restricted Stock in violation of any provision of this Plan shall be void, and the Company
shall not record such transfer on its books or treat any purported transferee of such Restricted
Stock as the owner of such stock for any purposes

     (b) Severability. Whenever possible, each provision of this Plan will be interpreted
in such manner as to be effective and valid under applicable law, but if any provision of this Plan
is held to be invalid, illegal or unenforceable in any respect under any applicable law or Rule in
any jurisdiction, such invalidity, illegality or unenforceability will not affect any other
provision or any other jurisdiction, but this Plan will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never been contained
herein.

     (c) Successors and Assigns. Except as otherwise provided herein, this Agreement shall
bind and inure to the benefit of and be enforceable by the Participants, the Company, the Investors
and their respective successors and assigns (including subsequent holders of Restricted Stock);
provided that the rights and obligations of Participant under this Agreement shall not be
assignable except in connection with a permitted transfer of Restricted Stock hereunder.

     (d) Choice of Law. The corporate law of the State of Delaware will govern all
questions concerning the relative rights of the Company and the holders of Restricted Stock. All
other questions concerning the construction, validity and interpretation of this Agreement and the
exhibits hereto will be governed by the internal law and not the law of conflicts, of the
State of Delaware.

     (e) Third Party Beneficiaries. The parties hereto hereby acknowledge that the
Investors are third party beneficiaries to this Plan. Accordingly, the provisions of this Plan
applicable to the Investors are intended to inure to the benefit of and be enforceable by the
Investors and their assignees.

			
	 	 	 
	
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     (f) Amendment of the Plan. The Board may, insofar as permitted by law, from time to
time, with respect to any shares of Restricted Stock, suspend or discontinue the Plan or revise or
amend it in any respect whatsoever except that, without approval of the holders of a majority of
the Restricted Stock of the Company, no such revision or amendment shall remove the administration
of the Plan from the Committee. No amendment or termination of the Plan shall, without the consent
of the Participant alter or impair any rights under the Restricted Stock theretofore granted to
such Participant. Notwithstanding the foregoing, this Plan may be modified by the Board to
eliminate the rights of the Investors with respect to all Restricted Stock issued hereunder with
the appropriate consent of the Directing Investors only. Furthermore, the Plan may not, without
the approval of the holders of a majority of the equity securities of the Company, be amended in
any manner which would result in a failure to comply with Section 16(b) of the Securities Exchange
Act of 1934 or similar statutes or Rules or regulations adopted thereunder.

     (g) Notices. All notices required to be given under this Plan shall be deemed given
as of the date of hand delivery or three days after mailing via first class mail. Notices to the
Company shall be given to the Chief Financial Officer or such other officer as the Company may
designate. Notices to Participants shall be given at the last mailing address on file with the
Company.

	 	 	 	 	 	 	 
	DATED:
                     , 2003	 	ULTA SALON, COSMETICS & FRAGRANCE, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	          By.	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	          Its:	 	 	 	 
	 

	 	 	 	 

	 	 

     IN WITNESSETH WHEREOF, the Assistant Secretary of the Company hereby certifies that the Plan
was approved by consent of the required number of Company Shareholders effective                      , 2003.

	 	 	 	 	 
	 

	 	 

Assistant Secretary
	 	 
	 
	 

	 	Dated:                      , 2003	 	 

			
	 	 	 
	
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ANNEX I TO RESTRICTED STOCK PLAN

                                              (“Participant”) hereby accepts the offer of Ulta Salon, Cosmetics &
Fragrance, Inc. (the “Company”) and purchases                     shares (the “Shares”) of the Company’s
Common Stock, par value $.01, per share, pursuant to the terms and provisions of the Second
Amendment and Restatement of the Company’s Restricted Stock Plan (the “Plan”) at a price of $                    per
share. Enclosed with this acceptance is a good check in the amount of $                    , as full payment of the
Shares.

     Participant acknowledges that each of the Shares purchased under this acceptance is a share of
Restricted Stock (as that term is defined in the Plan), subject to the various restrictions on
transfer and the vesting provisions of the Plan.

     (a) Participant agrees that within thirty (30) days after the date hereof, he will make an
effective election with the Internal Revenue Service under Section 83 (b) of the Internal Revenue
Code and the regulations promulgated thereunder.

     (b) Participant represents and warrants to the Company that:

     (i) the shares are, being acquired for his own account and not with a view to, or
present intention of, distribution thereof in violation of the Securities Act of 1933 as
amended (the “Securities Act”) or any applicable state securities laws, and will not be
disposed of in contravention of the Securities Act or any applicable state securities laws;

     (ii) Participant is able to bear the economic risk of his investment in the Shares for
an indefinite period of time because the Shares have not been registered under the
Securities Act and, therefore, cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available;

     (iii) Participant has had an opportunity to ask questions and receive answers
Concerning the terms and conditions of the offering of Shares to him and has had full access
to such other information concerning the Company as he has requested;

     (iv) this acceptance which incorporates by reference each of the terms and provisions
of the Plan constitutes the legal, valid and binding obligation of Participant, enforceable
in accordance with its terms; and

     (v) the execution and deliver of this Agreement and the purchase of the Shares subject
to the Plan, compliance with the terms of the Plan by Participant and Participant’s Service
to the Company (as such term is defined in the Plan) does not and will not conflict with,
violate or cause a breach of any agreement, contract or instrument to which Participant is a
party or any judgment, order or decree to which Participant is subject.

     (c) Participant and the Company acknowledge and agree that the shares will be issued in
connection with and as a part of the compensation and incentive arrangements between the Company
and Participant. Participant agrees that, in addition to the provisions of any other agreement the
Participant may at any time enter into with the Company relating to

			
	 	 	 
	
	 	Second Amendment and Restatement of Restricted Stock Plan
	 
	 	(Following October 2005 Technical Amendments)

i

 

noncompetition, nonsolicitation and confidentiality1, from the date hereof and
continuing for the longer of: (a) a period of one year after Participant no longer owns any shares
of Restricted Stock or (b) if Participant’s Service to the Company is terminated for any reason, a
period of one year after the date of such termination, Participant will not purchase equity
securities of any corporation, become a director, officer, agent or employee of a corporation or a
member of a partnership, engage as a sole proprietor in any business, act as a consultant to or
provide any form of financial assistance to, or otherwise engage directly or indirectly in any
enterprise which, in the reasonable opinion of the Company, is a Competitor (as hereinafter
defined); provided that the restrictions in this sentence shall not apply to (i) the acquisition of
equity securities of a Competitor if such equity securities are received as consideration in a
merger or sale of substantially all of the assets of a corporation in which such Participant owns
equity securities, and which was not a Competitor at the time of such Participant’s initial
investment in such corporation, with or to a corporation that is or subsequently becomes a
Competitor, but only to the extent that any such merger or sale of assets is entered into in good
faith and not for the purpose of avoiding the restrictions hereof, or (ii) the ownership of less
than five percent (5%) of equity securities of a publicly tendered cosmetic or beauty retailer in
the United States.

     “Competitor” means any business, firm or enterprise engaged in a business substantially
similar to the business engaged in by the Company as of the date of this Agreement or during the
Aperiod of Participant’s Service to the Company. A business shall be deemed substantially similar
to the Company if it has a similar business strategy and similar product mix to the Company or has
the intent to develop such a business.

     (d) Participant and the Company acknowledge that Participant, the Company and the Investors
(as that term is defined in the Plan) will be entitled to enforce their rights under this Agreement
specifically, to recover damages and costs (including reasonable attorney’s fees) caused by any
breach of any provision of this Agreement, to exercise all other rights existing in their favor,
and agree and acknowledge that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that Participant, the Company, or the Investors may in their sole
discretion apply to any court of law or equity of competent jurisdiction (without posting any bond
or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent
any violations of the provisions of this Agreement.

     (e) The provisions of this Agreement may be amended and waived only with the prior written
consent of the Company, Participant and the Investors.

 

			
	1	 	Note: At the time of any issuance under the
Plan, the Company should verify that there is also an appropriate form of the
Company’s standard “Agreement Regarding Noncompetition,
Nonsolicitation and Confidential Information”, signed by the Participant,
in the Company’s files.

			
	 	 	 
	
	 	Second Amendment and Restatement of Restricted Stock Plan
	 
	 	(Following October 2005 Technical Amendments)

ii

 

     (f) This acceptance, together with the Plan which is incorporated herein by reference, embody
the complete agreement and understanding of Participant and the Company and supersede and preempt
any prior understandings, agreements or representations by either of them, written or oral, with
respect to the subject matter hereof in any way.

	 	 	 	 	 	 	 	 	 	 	 
	Dated:	 	 	 	 	 	Participant:	 	 
	 

	 	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Acceptance Acknowledged:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	ULTA SALON, COSMETICS & FRAGRANCE, INC.	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Its:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 	 	 	 	 

			
	 	 	 
	
	 	Second Amendment and Restatement of Restricted Stock Plan
	 
	 	(Following October 2005 Technical Amendments)

iiiexv10w9

 

EXHIBIT
10.9

ULTA SALON, COSMETICS & FRAGRANCE, INC.

2002 EQUITY INCENTIVE PLAN (CONFORMED)

     1. Purposes of the Plan. The purposes of the Ulta Salon, Cosmetics & Fragrance, Inc.
2002 Equity Incentive Plan are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees, Directors and Consultants
to promote the success of the Company’s business. Options granted under the Plan may be Incentive
Stock Options or Non-Qualified Stock Options, as determined by the Administrator at the time of
grant.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) “Administrator” means the Board or the Committee responsible for conducting the
general administration of the Plan, as applicable, in accordance with Section 4 hereof.

          (b) “Applicable Laws” means the requirements relating to the administration of stock
option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable
laws of any foreign country or jurisdiction where Options are granted under the Plan.

          (c) “Board” means the Board of Directors of the Company.

          (d) “Cause” means, as determined in the sole discretion of the Board, a Holder’s (i)
commission of a felony; (ii) dishonesty or misrepresentation involving the Company; (iii) serious
misconduct in the performance or non-performance of Holder’s responsibilities to the Company (e.g.
gross negligence, willful misconduct, gross insubordination or unethical conduct); (iv) for
Holder’s who are Employee’s, violation of any material condition of employment; or (v) for Holder’s
who are Employee’s, voluntary termination of employment by the Holder without providing the Company
with a minimum of two weeks notice, unless the giving of such notice is otherwise waived by the
Company.

          (e) “Code” means the Internal Revenue Code of 1986, as amended, or any successor
statute or statutes thereto. Reference to any particular Code section shall include any successor
section.

          (f) “Committee” means a committee appointed by the Board in accordance with Section 4
hereof.

          (g) “Common Stock” means the Common Stock of the Company, par value $0.01 per share.

          (h) “Company” means Ulta Salon, Cosmetics & Fragrance, Inc., a Delaware corporation.

 

 

          (i) “Consultant” means any consultant or adviser if: (i) the consultant or adviser
renders bona fide services to the Company; (ii) the services rendered by the 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 (iii) the
consultant or adviser is a natural person.

          (j) “Directing Investors” means those Investors holding a majority of the Underlying
Common Stock.

          (k) “Director” means a member of the Board.

          (l) “Disability” means the mental or physical incapacity of the Holder such that
Holder would qualify for disability benefits under the definition of disability in the Company’s
long term disability plan, if a participant therein.

          (m) “Employee” means any person, including an Officer or Director, who is an employee
(as defined in accordance with Section 3401(c) of the Code) of the Company or any Parent or
Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i)
any leave of absence approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract. Neither service as a Director nor payment of a
director’s fee by the Company shall be sufficient, by itself, to constitute “employment” by the
Company.

          (n) “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto. Reference to any particular Exchange Act section shall
include any successor section.

          (o) “Fair Market Value” means, as of any date, the value of a share of Common Stock
determined as follows:

               (i) If the Common Stock is listed on any established stock exchange or a national market
system, including, without limitation, the Nasdaq National Market or The Nasdaq SmallCap Market of
The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for a share of such
stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the
last market trading day prior to the time of determination, as reported in The Wall Street Journal
or such other source as the Administrator deems reliable;

               (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, its Fair Market Value shall be the last sales price for a share of the
Common Stock on the last market trading day prior to the day of determination; or

               (iii) In the absence of an established market for the Common Stock, the Fair Market Value
thereof shall be determined in good faith by the Board.

2

 

               (p) “Family Member” means, and is limited to, any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the Holder’s household (other than a tenant or employee), a trust
in which these persons have more than fifty percent of the beneficial interest, a foundation in
which these persons (or the Holder) control the management of assets, and any other entity in which
these persons (or the Holder) own more than fifty percent of the voting interests.

               (q) “Holder” means a person who has been granted or awarded an Option or who holds
Shares acquired pursuant to the exercise of an Option.

               (r) “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and which is designated as an Incentive Stock
Option by the Administrator.

               (s) “Independent Director” means a Director who is not an Employee of the Company.

               (t) “Independent Third Party” means any person who, immediately prior to the
contemplated transaction, does not own in excess of five percent (5%) of the Company’s Common Stock
on a fully-diluted basis, who is not controlling, controlled by or under common control with the
Company or any such five percent (5%) owner of the Company’s Common Stock and who is not the spouse
or a descendent (by birth or adoption) of any such five percent (5%) owner of the Company’s Common
Stock.

               (u) “Investors” means the record owners of the Company’s Preferred Stock as of a date
of determination.

               (v) “Non-Qualified Stock Option” means an Option (or portion thereof) that is not
designated as an Incentive Stock Option by the Administrator, or which is designated as an
Incentive Stock Option by the Administrator but fails to qualify as an incentive stock option
within the meaning of Section 422 of the Code.

               (w) “Officer” means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

               (x) “Option” means a stock option granted pursuant to the Plan.

               (y) “Option Agreement” means a written agreement between the Company and a Holder
evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject
to the terms and conditions of the Plan.

               (z) “Parent” means any corporation, whether now or hereafter existing (other than the
Company), in an unbroken chain of corporations ending with the Company if each of the corporations
other than the last corporation in the unbroken chain owns stock possessing

3

 

     more than fifty percent of the total combined voting power of all classes of stock in one of the other corporations in such
chain.

          (aa) “Plan” means the Ulta Salon, Cosmetics & Fragrance, Inc. 2002 Equity Incentive
Plan.

          (bb) “Preferred Stock” means Series I Convertible Preferred Stock, Series II
Convertible Preferred Stock, Series IV Convertible Preferred Stock of the Company and such other
additional convertible preferred stock as the Company may issue from time to time.

          (cc) “Public Offering” means the sale, in an underwritten public offering registered
under the Securities Act of shares of the Company’s Common Stock.

          (dd) “Public Trading Date” means the first date upon which Common Stock of the Company
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.

          (ee) “Qualified Public Offering” means a Public Offering in which (i) the aggregate
cash proceeds received by the Company for the shares sold in such offering is at least $15 million;
(ii) the price per Share paid by the public for the Shares sold in such offering implies a total
equity valuation of the Company of at least $100 million; and (iii) the Shares sold in such
offering are listed on the American Stock Exchange or the New York Stock Exchange or are quoted on
the NASDAQ System.

          (ff) “Retirement” means the retirement of the Holder from the Company on or after
attaining age 55, or as otherwise may be agreed upon by the Holder and the Company with the
approval of the Administrator.

          (gg) “Rule 16b-3” means that certain Rule 16b-3 under the Exchange Act, as such Rule
may be amended from time to time.

          (hh) “Sale of the Company” means the sale of the Company to an Independent Third Party
or affiliated group of Independent Third Parties pursuant to which such party or parties (i)
acquire, in one transaction or a series of related transactions, capital stock of the Company
possessing the voting power to elect a majority of the Company’s Board (whether by merger,
consolidation or sale or transfer of the Company’s capital stock) or (ii) acquire by sale, lease,
assignment, transfer or other conveyance all or substantially all of the Company’s assets
determined on a consolidated basis.

          (ii) “Section 16(b)” means Section 16(b) of the Exchange Act, as such Section may be
amended from time to time.

          (jj) “Securities Act” means the Securities Act of 1933, as amended, or any successor
statute or statutes thereto. Reference to any particular Securities Act section shall include any
successor section.

4

 

          (kk) “Service Provider” means an Employee, Consultant or an Independent Director.

          (ll) “Share” means a share of Common Stock, as adjusted in accordance with Section 13
below.

          (mm) Subsidiary” means any corporation, whether now or hereafter existing (other than
the Company), in an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock possessing more than
fifty percent of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

          (nn) “Underlying Common Stock” means (i) the Common Stock issued or issuable upon
conversion of the Preferred Stock and (ii) any Common Stock issued or issuable with respect to the
securities referred to in clause (i) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other reorganization. Any
person or entity who holds Preferred Stock will be deemed to be the holder of the Underlying Common
Stock obtainable upon conversion of the Preferred Stock in connection with the transfer thereof or
otherwise regardless of any restriction or limitation on the conversion of the Preferred Stock. As
to any particular shares of Underlying Common Stock, such shares will cease to be Underlying Common
Stock when the), have been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them or (b) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force)

     3. Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan,
the shares of stock subject to Options shall be Common Stock, initially shares of the Company’s
Common Stock, par value $0.01 per share. Subject to the provisions of Section 13 of the Plan, the
maximum aggregate number of Shares which may be issued upon exercise of such Options is 5,686,799
Shares. Shares issued upon exercise of Options may be authorized but unissued, or reacquired
Common Stock. If an Option granted under this Plan, or the Ulta Salon, Cosmetics & Fragrance, Inc.
Second Amended and Restated Stock Option Plan (the “Prior Plan”) expires or becomes unexercisable
without having been exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under this Plan (unless this Plan has terminated).
Shares which are delivered by the Holder or withheld by the Company upon the exercise of an Option
under the Plan, or the Prior Plan, in payment of the exercise price thereof or tax withholding
thereon, may again be optioned, granted or awarded under this Plan, subject to the limitations of
this Section 3. Notwithstanding the provisions of this
Section 3, no Shares 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 Code Section 422.

     4. Administration of the Plan.

          (a) Administrator. Unless and until the Board delegates administration to a Committee
as set forth below, the Plan shall be administered by the Board. The Board may delegate
administration of the Plan to a Committee or Committees of one or more members of the Board, and
the term “Committee” shall apply to any person or persons to whom such

5

 

authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection
with the administration of the Plan, the powers theretofore possessed by the Board, including the
power to delegate to a subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the
Plan, as may be adopted from time to time by the Board. Notwithstanding the foregoing, however,
from and after the Public Trading Date, a Committee of the Board shall administer the Plan and the
Committee shall consist solely of two or more Independent Directors each of whom is both an
“outside director,” within the meaning of Section 162(m) of the Code, and a “non-employee director”
within the meaning of Rule 16b-3. Within the scope of such authority, the Board or the Committee
may (i) delegate to a committee of one or more members of the Board who are not Independent
Directors the authority to grant awards under the Plan to eligible persons who are either (1) not
then “covered employees,” within the meaning of Section 162(m) of the Code and are not expected to
be “covered employees” at the time of recognition of income resulting from such award or (2) not
persons with respect to whom the Company wishes to comply with Section 162(m) of the Code and/or
(ii) delegate to a committee of one or more members of the Board who are not “non-employee
directors,” within the meaning of Rule 16b-3, the authority to grant awards under the Plan to
eligible persons who are not then subject to Section 16 of the Exchange Act. The Board may abolish
the Committee at any time and revest in the Board the administration of the Plan. 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. Vacancies in the Committee may only be
filled by the Board.

          (b) Powers of the Administrator. Subject to the provisions of the Plan and the
specific duties delegated by the Board to such Committee, and subject to the approval of any
relevant authorities, the Administrator shall have the authority in its sole discretion:

               (i) to determine the Fair Market Value;

               (ii) to select the Service Providers to whom Options may from time to time be granted
hereunder;

               (iii) to determine the number of Shares to be covered by each such award granted hereunder;

               (iv) to approve forms of agreement for use under the Plan;

               (v) to determine the terms and conditions of any Option granted hereunder (such terms and
conditions include, but are not limited to, the exercise price, the time or times when Options may
vest or be exercised (which may be based on performance criteria), any vesting acceleration, and
any restriction or limitation regarding any Option or the Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall determine);

6

 

               (vi) to determine whether to offer to buyout a previously granted Option as provided in
subsection 10(h) and to determine the terms and conditions of such offer and buyout (including
whether payment is to be made in cash or Shares);

               (vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including
rules and regulations relating to sub-plans established for the purpose of qualifying for preferred
tax treatment under foreign tax laws;

               (viii) to allow Holders to satisfy withholding tax obligations by electing to have the Company
withhold from the Shares to be issued upon exercise of an Option that number of Shares having a
Fair Market Value equal to the minimum amount required to be withheld based on the statutory
withholding rates for federal and state tax purposes that apply to supplemental taxable income.
The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount
of tax to be withheld is to be determined. All elections by Holders to have Shares withheld for
this purpose shall be made in such form and under such conditions as the Administrator may deem
necessary or advisable;

               (ix) to amend or terminate the Plan as provided in Section 15;

               (x) to amend any outstanding Option Agreement; provided that no such amendment shall impair
the rights of any Holder without the consent of the Holder; and

               (xi) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan
and to exercise such powers and perform such acts as the Administrator deems necessary or desirable
to promote the best interests of the Company which are not in conflict with the provisions of the
Plan.

          (c) Effect of Administrator’s Decision and Indemnification. All decisions,
determinations and interpretations of the Administrator shall be final and binding on all Holders,
the Company and all other interested persons. The Board and/or the Committee, with the approval
of the Board, may employ attorneys, consultants, accountants, appraisers or other persons to assist
in the administration of the Plan. The Board, the Committee and the Company shall be entitled to
rely upon the advice, opinions or valuations of any such persons. No members of the Committee or
the Board shall be personally liable for any action, determination or interpretation made in good
faith with respect to the Plan, any Option and all members of the Committee and the Board shall be
fully protected by the Company in respect of any such action, determination or interpretation.

     5. Eligibility. Non-Qualified Stock Options may be granted to Service Providers. Incentive Stock Options
may be granted only to Employees. If otherwise eligible, a Service Provider who has been granted
an Option may be granted additional Options.

     6. Limitations.

          (a) Each Option shall be designated by the Administrator in the Option Agreement as either an
Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such
designations, to the extent that the aggregate Fair Market Value of Shares subject to a Holder’s
Incentive Stock Options and other incentive stock options granted by the

7

 

Company, any Parent or Subsidiary, which become exercisable for the first time during any calendar year (under all plans
of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options or other options
shall be treated as Non-Qualified Stock Options.

          For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the
order in which they were granted, and the Fair Market Value of the Shares shall be determined as of
the time of grant.

     (b) Neither the Plan nor any Option shall confer upon a Holder any right with respect to
continuing the Holder’s employment or consulting relationship with the Company, nor shall they
interfere in any way with the Holder’s right or the Company’s right to terminate such employment or
consulting relationship at any time, with or without cause.

     (c) No Service Provider shall be granted, in any calendar year, Options to purchase more than
1,000,000 Shares; provided, however, that the foregoing limitation shall not apply prior to the
Public Trading Date and, following the Public Trading Date, the foregoing limitation shall not
apply until the earliest of: (i) 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); (ii) the issuance of all of the shares of Common Stock reserved for issuance under the Plan;
(iii) the expiration of the Plan; (iv) the first meeting of stockholders at which Directors of the
Company 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 (v) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder. The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company’s capitalization as described in
Section 13. For purposes of this Section 6(c), if an Option is canceled in the same calendar year
it was granted (other than in connection with a transaction described in Section 13), the canceled
Option will be counted against the limit set forth in this Section 6(c). For this purpose, if the
exercise price of an Option is reduced, the transaction shall be treated as a cancellation of the
Option and the grant of a new Option.

     (d) Notwithstanding any provision in the Plan to the contrary, Options shall always be granted
and exercised in such a manner as to conform to the provisions of Rule 16b-3, or any successor
rule, adopted pursuant to the provisions of the Exchange Act as the same now exists or may, from
time to time, be amended and all applicable state securities laws.

     7. Term of Plan. The Plan shall become effective upon its initial adoption by the Board and shall continue
in effect until it is terminated under Section 15 of the Plan. No Options may be issued under the
Plan after the tenth (10th) anniversary of the earlier of (i) the date upon which the Plan is
adopted by the Board or (ii) the date the Plan is approved by the stockholders.

     8. Term of Option. The term of each Option shall be stated in the Option Agreement;
provided, however, that the term shall be no more than ten (10) years from the date of grant
thereof. In the case of an Incentive Stock Option granted to a Holder who, at the time the Option
is granted, owns (or is treated as owning under Code Section 424) stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any

8

 

Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant or such shorter
term as may be provided in the Option Agreement.

     9. Option Exercise Price and Consideration.

          (a) Except as provided in Section 13, the per share exercise price for the Shares to be issued
upon exercise of an Option shall be such price as is determined by the Administrator, but shall be
subject to the following:

               (i) In the case of an Incentive Stock Option

                    (A) granted to an Employee who, at the time of grant of such Option, owns (or is treated as
owning under Code Section 424) stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the date
of grant.

                    (B) granted to any other Employee, the per Share exercise price shall be no less than one
hundred percent (100%) of the Fair Market Value per Share on the date of grant.

               (ii) In the case of a Non-Qualified Stock Option

                    (A) granted to a Service Provider who, at the time of grant of such Option, owns stock
representing more than ten percent (10%) of the voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise price shall be no less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of the grant.

                    (B) granted to any other Service Provider, the per Share exercise price shall be no less than
one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

               (iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price
other than as required above pursuant to a merger or other corporate transaction.

          (b) The consideration to be paid for the Shares to be issued upon exercise of an Option,
including the method of payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant). Such consideration may consist
of (1) cash, (2) check, (3) with the consent of the Administrator, a full recourse promissory note
bearing interest (at no less than such rate as shall then preclude the imputation of interest under
the Code) and payable upon such terms as may be prescribed by the Administrator, (4) with the
consent of the Administrator, other Shares which (x) in the case of Shares acquired from the
Company, have been owned by the Holder for more than six (6) months on the date of surrender, and
(y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which such Option shall be exercised, (5) with the consent of the Administrator,
surrendered Shares then issuable upon exercise of the Option

9

 

having a Fair Market Value on the date of exercise equal to the aggregate exercise price of the Option or exercised portion thereof, (6)
property of any kind which constitutes good and valuable consideration, (7) with the consent of the
Administrator, delivery of a notice that the Holder has placed a market sell order with a broker
with respect to Shares then issuable upon exercise of the Options 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, or (8) with the consent of the Administrator, any combination of the
foregoing methods of payment .

     10. Exercise of Option.

          (a) Vesting; Fractional Exercises. Except as provided in Section 13 or unless as
otherwise provided by the Administrator in the Option Agreement, Options granted hereunder shall be
vested and exercisable according to the following schedule:

	 	 	 	 	 
	 	 	Cumulative Percentage of
	Date	 	Option Which is Vested
	Date of grant
	 	 	0	%
	 
	 	 	 	 
	First Anniversary of the date of grant
	 	 	25	%
	 
	 	 	 	 
	Second Anniversary of the date of grant
	 	 	50	%
	 
	 	 	 	 
	Third Anniversary of the date of grant
	 	 	75	%
	 
	 	 	 	 
	Fourth Anniversary of the date of grant
	 	 	100	%

     but in no event shall Options granted to Officers or Directors, become vested and exercisable
at a rate of less than twenty percent (20%) per year over five (5) years from the date the Option
is granted, subject to reasonable conditions, such as continuing to be a Service Provider. An
Option may not be exercised for a fraction of a Share. Notwithstanding the vesting schedule set
forth above or in the Option Agreement, a Holder shall be fully vested in all Options in the event
they cease to be a Service Provider by reason of death or Disability.

     (b) Deliveries upon Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the Company or his or
her office:

               (i) A written or electronic notice complying with the applicable rules established by the
Administrator stating that the Option, or a portion thereof, is exercised. The notice shall be
signed by the Holder or other person then entitled to exercise the Option or such portion of the
Option;

               (ii) Such representations and documents as the Administrator, in its sole discretion, deems
necessary or advisable to effect compliance with Applicable Laws. The Administrator may, in its
sole discretion, also take whatever additional actions it deems

10

 

appropriate to effect such compliance, including, without limitation, placing legends on share certificates and issuing stop
transfer notices to agents and registrars; and

               (iii) In the event that the Option shall be exercised pursuant to Section 10(d) by any person
or persons other than the Holder, appropriate proof of the right of such person or persons to
exercise the Option.

          (c) Conditions to Delivery of Share Certificates. The Company shall not be required
to issue or deliver any certificate or certificates for Shares purchased upon the exercise of any
Option or portion thereof prior to fulfillment of all of the following conditions:

               (i) The admission of such Shares to listing on all stock exchanges on which such class of
stock is then listed;

               (ii) The completion of any registration or other qualification of such Shares under any state
or federal law, or under the rulings or regulations of the Securities and Exchange Commission or
any other governmental regulatory body which the Administrator shall, in its sole discretion, deem
necessary or advisable;

               (iii) The obtaining of any approval or other clearance from any state or federal governmental
agency which the Administrator shall, in its sole discretion, determine to be necessary or
advisable;

               (iv) The lapse of such reasonable period of time following the exercise of the Option as the
Administrator may establish from time to time for reasons of administrative convenience; and

               (v) The receipt by the Company of full payment for such Shares, including payment of any
applicable withholding tax, which in the sole discretion of the Administrator may be in the form of
consideration used by the Holder to pay for such Shares under Section 9(b).

          (d) Death, Disability or Retirement of Holder.

               (i) If a Holder ceases to be a Service Provider as a result of the Holder’s death, Disability
or Retirement, the Holder may exercise his or her Option within such
period of time as is specified in the Option Agreement to the extent the Option is vested on
the date of termination; provided, however, that prior to the Public Trading Date, such period of
time shall not be less than six (6) months following the date the Holder ceased to be a Service
Provider in the event of Holder’s death or Disability (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement).

               (ii) In the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the date the Holder ceased to be a Service Provider as
a result of the Holder’s death, Disability or Retirement.

               (iii) If the Disability is not a “disability” as such term is defined in Section 22(e)(3) of
the Code, in the case of an Incentive Stock Option such Incentive Stock

11

 

Option shall automatically cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a
Non-Qualified Stock Option from and after the day which is three (3) months and one (1) day
following such termination.

               (iv) If, on the date of termination, the Holder is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately cease to be issuable
under the Option and shall again become available for issuance under the Plan. If, after
termination, the Holder or the executor or administrator of the Holder’s estate or, if none, by the
person(s) entitled to exercise the Option under the Holder’s will or the laws of descent and
distribution does not exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall again become available for issuance under
the Plan.

          (e) Termination of Relationship as a Service Provider. If a Holder ceases to be a
Service Provider other than by reason of the Holder’s death, Disability, Retirement or Cause, such
Holder may exercise his or her Option within such period of time as is specified in the Option
Agreement to the extent that the Option is vested on the date of termination; provided, however,
that prior to the Public Trading Date, such period of time shall not be less than thirty (30) days
(but in no event later than the expiration of the term of the Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for three (3) months following the date the Holder ceased to be a Service Provider
other than by reason of the Holder’s death, Disability, Retirement or Cause. If, on the date of
termination, the Holder is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option immediately cease to be issuable under the Option and shall again
become available for issuance under the Plan. If, after termination, the Holder does not exercise
his or her Option within the time period specified herein, the Option shall terminate, and the
Shares covered by such Option shall again become available for issuance under the Plan.

          (f) Termination of Relationship as a Service Provider for Cause. If a Holder ceases
to be a Service Provider as a result of a termination for Cause, the Holder’s Options shall
terminate immediately, unless otherwise specifically agreed to in writing by the Administrator.

          (g) Regulatory Extension. A Holder’s Option Agreement may provide that if the
exercise of the Option following the termination of the Holder’s status as a Service Provider
(other than upon the Holder’s death or Disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under the Securities
Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option
set forth in Section 8 or (ii) the expiration of a period of three (3) months after the termination
of the Holder’s status as a Service Provider during which the exercise of the Option would not be
in violation of such registration requirements.

          (h) Buyout Provisions. The Administrator may at any time offer to buyout for a
payment in cash or Shares, an Option previously granted, based on such terms and conditions as the
Administrator shall establish and communicate to the Holder at the time that such offer is made.

12

 

     11. Non-Transferability of Options.

          (a) Except as provided in Section 11(b) below, Options may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the Holder, only by the
Holder.

          (b) Notwithstanding any provision in the Plan to the contrary, the Administrator, in its sole
discretion, may provide that Options may be transferred to the Holder’s Family Member; provided,
however, that (i) any such transfer is without payment of any consideration whatsoever, (ii) no
such transfer shall be valid unless first approved by the Administrator, acting in its sole
discretion, (iii) any Option so transferred shall remain subject to the terms and conditions of
the Option Agreement, and (iv) the Family Member shall execute any and all such documents requested
by the Administrator in connection with the transfer and to satisfy any requirements for an
exemption for the transfer under applicable federal and state securities laws.

     12. Rights and Restrictions on Shares. The Shares acquired upon exercise of an Option
granted under the Plan shall be subject to such terms and conditions, as the Administrator shall
determine in its sole discretion, including, without limitation, the following rights and
restrictions:

          (a) Company’s Right of First Refusal. Subject to subsection (b) below, before any
Shares held by a Holder or any permitted transferee (each, a “Holder”) may be sold, pledged,
assigned, hypothecated, transferred, or otherwise disposed of (each, a “Transfer”), the Company or
its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and
conditions set forth in this Section (the “Right of First Refusal”). Such Right of First Refusal
shall terminate as to all Shares upon the first to occur of (i) the ninth anniversary of the date
of issuance of the Shares acquired upon exercise of the Option, (ii) a Qualified Public Offering or
(iii) a Sale of the Company.

               (i) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the
Company at least sixty (60) days prior to making a Transfer a written notice (the
“Transfer Notice”) stating: (A) the Holder’s bona fide intention to sell or otherwise
Transfer such Shares; (B) the name of each proposed purchaser or other transferee (“Proposed
Transferee”); (C) the proposed sale price and (D) the number of Shares to be Transferred to each
Proposed Transferee, and the Holder shall offer the Shares at the then Fair Market Value to the
Company or its assignee(s).

               (ii) Exercise of Right of First Refusal. During the thirty (30) days after receipt of
the Transfer Notice, the Company may elect in writing to purchase all, but not less than all, of
the Shares proposed to be Transferred to any one or more of the Proposed Transferees. If the
Company does not elect to purchase all of the Shares proposed to be Transferred within such thirty
(30) day period and the Holder and his or her permitted transferees own 10,000 or more Shares, the
Investors may elect to purchase all, but not less than all, of the Shares proposed to be
Transferred by following the procedures and requirements set forth in Section 8(B) – “Rights of
First Offer” of the Second Amended and Restated Reclassification and

13

 

Sale of Shares Agreement,which is incorporated herein by reference, as such section may be amended from time to time or any
successor provisions thereto. The purchase price will be determined in accordance with clause
(iii) below.

               (iii) Purchase Price. The purchase price (“Purchase Price”) for the Shares
repurchased under this Section shall be the then Fair Market Value.

               (iv) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of
the Transfer Notice or in the manner and at the times set forth in the Transfer Notice.

               (v) Holder’s Right to Transfer. If all of the Shares proposed in the Transfer Notice
to be transferred to a given Proposed Transferee are not purchased by the Company and/or its
assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares
to that Proposed Transferee at the then Fair Market Value or at the sale price set forth in the
Transfer Notice, provided that (A) such sale or other Transfer is consummated within one hundred
twenty (120) days after the date of the Transfer Notice, (B) any such sale or other Transfer is
effected in accordance with any applicable securities laws, (C) the Proposed Transferee agrees in
writing that the provisions of this Section shall continue to apply to the Shares in the hands of
such Proposed Transferee, and (D) prior to making any Transfer, the Holder shall use reasonable
efforts to ascertain whether the Proposed Transferee(s) or any person or entity affiliated with the
Proposed Transferee(s) is a competitor of the Company and if Holder has reason to believe that the
Proposed Transferee is or is affiliated with or acting on behalf of such a competitor, the Holder
shall not transfer any Shares to the Proposed Transferee. If the Shares described in the Transfer
Notice are not Transferred to the Proposed Transferee within such 120 day period, a new Transfer
Notice shall be given to the Company, and the Company and/or its assignees shall again be offered
the Right of First Refusal as provided herein before any Shares held by the Holder may be sold or
otherwise Transferred.

          (b) Exception for Certain Family Transfers. Notwithstanding any provision in the Plan
to the contrary, the Transfer of any or all of the Shares during the Holder’s lifetime to a
Family Member or the Transfer on the Holder’s death by will or intestacy to anyone shall be
exempt from the Right of First Refusal; provided, however, that any Transfer by the Holder during
the Holder’s lifetime to the Holder’s Family Member shall be without payment of any consideration
whatsoever and must be approved in advance by the Administrator. In such case, the transferee or
other recipient shall receive and hold the Shares so Transferred subject to the provisions of this
Section 12 and the Plan, and there shall be no further Transfer of such Shares except in accordance
with the terms of Section 12 and the Plan.

          (c) Voting Stock. So long as the Investors hold any shares of the Company’s
Underlying Common Stock, each Share must be voted as directed by the Directing Investors with
respect to a proposed Sale of the Company or in connection with a proposed Public Offering. The
Holder and the Company each shall take all necessary or desirable actions as are requested by the
Directing Investors, in order to cause all Shares to be voted pursuant to such direction of the
Directing Investors. The Holder shall deliver to the Company upon purchase of

14

 

any Shares pursuant to the Plan, an irrevocable proxy with respect to such shares in favor of the Directing Investors.
The provisions of this subsection (c) will terminate with respect to the Shares upon the first to
occur of a Qualified Public Offering or the ninth anniversary of the date of issuance of the
Shares.

     13. Adjustments upon Changes in Capitalization, Merger or Asset Sale.

          (a) Other than in the event of a Sale of the Company, in the event that the Administrator
determines that any dividend or other distribution (whether in the form of cash, Common Stock,
other securities, or other property), recapitalization, reclassification, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase,
liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially
all of the assets of the Company, or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other securities of the Company,
or other similar corporate transaction or event, in the Administrator’s sole discretion, affects
the Common Stock such that an adjustment is determined by the Administrator to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits intended by the
Company to be made available under the Plan or with respect to any Option, then the Administrator
shall, in such manner as it may deem equitable, adjust any or all of:

               (i) the number and kind of shares of Common Stock (or other securities or property) with
respect to which Options may be granted or awarded (including, but not limited to, adjustments of
the limitations in Section 3 on the maximum number and kind of shares which may be issued and
adjustments of the maximum number of Shares that may be purchased by any Holder in any calendar
year pursuant to Section 6(c));

               (ii) the number and kind of shares of Common Stock (or other securities or property) subject
to outstanding Options; and

               (iii) the grant or exercise price with respect to any Option.

          (b) In the event of any transaction or event described in Section 13(a), the Administrator, in
its sole discretion, and on such terms and conditions as it deems appropriate, either by the terms
of the Option or by action taken prior to the occurrence of such transaction or event and either
automatically or upon the Holder’s request, is hereby authorized to take any one or more of the
following actions whenever the Administrator determines that such action is appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be
made available under the Plan or with respect to any Option granted under the Plan or to facilitate
such transaction or event:

               (i) To provide for either the purchase of any such Option for an amount of cash equal to the
amount that could have been obtained upon the exercise of such Option or realization of the
Holder’s rights had such Option been currently exercisable or fully vested or the replacement of
such Option with other rights or property selected by the Administrator in its sole discretion;

15

 

               (ii) To provide that such Option shall be exercisable as to all shares covered thereby,
notwithstanding anything to the contrary in the Plan or the provisions of such Option;

               (iii) To provide that such Option be assumed by the successor or survivor corporation or
entity, 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 entity, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;

               (iv) To make adjustments in the number and type of shares of Common Stock (or other securities
or property) subject to outstanding Options, and/or in the terms and conditions of (including the
grant or exercise price), and the criteria included in, outstanding Options or Options which may be
granted in the future; and

               (v) To provide that immediately upon the consummation of such event, such Option shall not be
exercisable and shall terminate; provided, that for a specified period of time prior to such event,
such Option shall be exercisable as to all Shares covered thereby, and the restrictions imposed
under an Option Agreement upon some or all Shares may be terminated, notwithstanding anything to
the contrary in the Plan or the provisions of such Option Agreement.

          (c) Subject to Section 3, the Administrator may, in its sole discretion, include such further
provisions and limitations in any Option Agreement or certificate, as it may deem equitable and in
the best interests of the Company.

          (d) If the Company undergoes a Sale of the Company, then any surviving corporation or entity
or acquiring corporation or entity, or affiliate of such corporation or entity, may assume any
Options outstanding under the Plan or may substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the transaction described in this
subsection 13(d)) for those outstanding under the Plan. In the event any surviving corporation or
entity or acquiring corporation or entity in a Sale of the Company, or
affiliate of such corporation or entity, does not assume such Options or does not substitute
similar stock awards for those outstanding under the Plan, then with respect to (i) Options held by
participants in the Plan whose status as a Service Provider has not terminated prior to such event,
the vesting of such Options (and, if applicable, the time during which such awards may be
exercised) shall be accelerated and made fully exercisable and all restrictions thereon shall lapse
at least ten (10) days prior to the closing of the Sale of the Company (and the Options terminated
if not exercised prior to the closing of such Sale of the Company), and (ii) any other Options
outstanding under the Plan, such Options shall be terminated if not exercised prior to the closing
of the Sale of the Company.

          (e) The existence of the Plan or any Option Agreement and the Options granted hereunder shall
not affect or restrict in any way the right or power of the Company or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or other change in
the Company’s capital structure or its business, any merger or consolidation of the Company, any
issue of stock or of options, warrants or rights to purchase

16

 

stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the
rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar character or otherwise.

     14. Time of Granting Options. The date of grant of an Option shall, for all purposes,
be the date on which the Administrator makes the determination granting such Option, or such other
date as is determined by the Administrator. Notice of the determination shall be given to each
Service Provider to whom an Option is so granted within a reasonable time after the date of such
grant.

     15. Amendment and Termination of the Plan.

          (a) Amendment and Termination. The Board may at any time wholly or partially amend,
alter, suspend or terminate the Plan. However, without approval of the Company’s stockholders
given within twelve (12) months before or after the action by the Board, no action of the Board
may, except as provided in Section 13, increase the limits imposed in Section 3 on the maximum
number of Shares which may be issued under the Plan or extend the term of the Plan under Section 7.
Notwithstanding the foregoing, the Plan may be modified by the Board to eliminate the rights of
the Investors as provided herein only with appropriate consent of the Directing Investors.

          (b) Stockholder Approval. The Board shall obtain stockholder approval of any Plan
amendment to the extent necessary and desirable to comply with Applicable Laws.

          (c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Holder, unless mutually agreed otherwise
between the Holder and the Administrator, which agreement must be in writing and signed by the
Holder and the Company. Termination of the Plan shall not affect the
Administrator’s ability to exercise the powers granted to it hereunder with respect to Options
granted or awarded under the Plan prior to the date of such termination.

     16. Stockholder Approval. The Plan will be submitted for the approval of the
Company’s stockholders within twelve (12) months after the date of the Board’s initial adoption of
the Plan. Options may be granted or awarded prior to such stockholder approval, provided that such
Options shall not be exercisable, shall not vest and the restrictions thereon shall not lapse prior
to the time when the Plan is approved by the stockholders, and provided further that if such
approval has not been obtained at the end of said twelve-month period, all Options previously
granted or awarded under the Plan shall thereupon be canceled and become null and void.

     17. Inability to Obtain Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

17

 

     18. Reservation of Shares. The Company, during the term of this Plan, shall at all
times reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

     19. Information to Holders and Purchasers. Prior to the Public Trading Date and to
the extent required by Section 260.140.46 of Title 10 of the California Code of Regulations, the
Company shall provide to each Holder and to each individual who acquires Shares pursuant to the
Plan, not less frequently than annually during the period such Holder or purchaser has one or more
Options outstanding, and, in the case of an individual who acquires Shares pursuant to the Plan,
during the period such individual owns such Shares, copies of annual financial statements.
Notwithstanding the preceding sentence, the Company shall not be required to provide such
statements to key employees whose duties in connection with the Company assure their access to
equivalent information.

     20. Repurchase Provisions.

          (a) Prior to the Public Trading Date and a Sale of the Company, the Administrator in its sole
discretion may provide that the Company may repurchase Shares acquired upon exercise of an Option
upon the occurrence of certain specified events, including, without limitation, a Holder’s
termination as a Service Provider, divorce, bankruptcy or insolvency; provided, however, that any
such repurchase right shall be set forth in the applicable Option Agreement or in another agreement
referred to in such agreement and, provided further,
that to the extent required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations, any such repurchase right set forth in an Option granted prior to
the Public Trading Date to a person who is not an Officer, Director or Consultant shall be upon the
following terms: (i) if the repurchase option gives the Company the right to repurchase the shares
upon termination as a Service Provider at not less than the Fair Market Value of the shares to be
purchased on the date of termination of status as a Service Provider, then (A) the right to
repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the
shares within ninety (90) days of termination of status as a Service Provider (or in the case of
shares issued upon exercise of Options after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be agreed to by the Administrator and
the Plan participant and (B) the right terminates when the shares become publicly traded; and (ii)
if the repurchase option gives the Company the right to repurchase the Shares upon termination as a
Service Provider at the original purchase price for such Shares, then (A) the right to repurchase
at the original purchase price shall lapse at the rate of at least twenty percent (20%) of the
shares per year over five (5) years from the date the Option is granted (without respect to the
date the Option was exercised or became exercisable) and (B) the right to repurchase shall be
exercised for cash or cancellation of purchase money indebtedness for the shares within ninety
(90) days of termination of status as a Service Provider (or, in the case of shares issued upon
exercise of Options, after such date of termination, within ninety (90) days after the date of the
exercise) or such longer period as may be agreed to by the Company and the Plan participant.

     21. Investment Intent. The Company may require a Plan participant, as a condition of
exercising or acquiring stock under any Option, (i) to give written assurances satisfactory to the
Company as to the participant’s knowledge and experience in financial and business matters and/or
to employ a purchaser representative reasonably satisfactory to the Company who is

18

 

knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of exercising the Option;
and (ii) to give written assurances satisfactory to the Company stating that the participant is
acquiring the stock subject to the Option for the participant’s own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (A) the issuance of the
shares upon the exercise or acquisition of stock under the applicable Option has been registered
under a then currently effective registration statement under the Securities Act or (B) as to any
particular requirement, a determination is made by counsel for the Company that such requirement
need not be met in the circumstances under the then applicable securities laws. The Company may,
upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as
such counsel deems necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.

     22. Governing Law. The validity and enforceability of this Plan shall be governed by
and construed in accordance with the laws of the State of Delaware without regard to otherwise
governing principles of conflicts of law.

19

 

* * * * * * *

     I hereby certify that the Plan was duly adopted by the Board of Directors of Ulta Salon,
Cosmetics & Fragrance, Inc. on or about June 17, 2002.

     Executed at Romeoville, Illinois on this ___day of ___, 2002.

	 	 	 	 	 
	 	Name: /s/ Charles Weber

Title: 

 	 
	 	 	 
	 	 	 
	 	 	 
	 

* * * * * * *

     I hereby certify that the Plan was duly adopted by the Board of Directors of Ulta Salon,
Cosmetics & Fragrance, Inc. on or about June 17, 2002.

     Executed at Romeoville, Illinois on this ___day of ___, 2002.

	 	 	 	 	 
	 	 	 
	 	
/s/ Charles Weber
 	 
	 	Secretary    	 
	 	 	 
	 

 

 

* * * * * * * 

     I hereby certify that the foregoing Plan was approved by the stockholders of Ulta Salon,
Cosmetics & Fragrance, Inc. on or about June 17, 2002.

     Executed at Romeoville, Illinois on this ___day of ___, 2002.

	 	 	 	 	 
	 	 	 
	 	Name: 	 
	 	Title: 

	 
	 	 	 
	 

* * * * * * * 

     I hereby certify that the foregoing Plan was approved by the stockholders of Ulta Salon,
Cosmetics & Fragrance, Inc. on or about June 17, 2002.

     Executed at Romeoville, Illinois on this ___day of ___, 2002.

	 	 	 	 	 
	 	 	 
	 	 	 
	 	Secretary 	 
	 	 	 
	 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	

	 	
	 	 	Page	 
	1.

	 	Purposes of the Plan
	 	 	1	 
	2.

	 	Definitions
	 	 	1	 
	3.

	 	Stock Subject to the Plan
	 	 	5	 
	4.

	 	Administration of the Plan.
	 	 	5	 
	5.

	 	Eligibility
	 	 	7	 
	6.

	 	Limitations.
	 	 	7	 
	7.

	 	Term of Plan
	 	 	8	 
	8.

	 	Term of Option
	 	 	8	 
	9.

	 	Option Exercise Price and Consideration.
	 	 	9	 
	10.

	 	Exercise of Option.
	 	 	10	 
	11.

	 	Non-Transferability of Options
	 	 	12	 
	12.

	 	Rights and Restrictions on Shares
	 	 	13	 
	13.

	 	Adjustments upon Changes in Capitalization, Merger or Asset Sale.
	 	 	15	 
	14.

	 	Time of Granting Options
	 	 	17	 
	15.

	 	Amendment and Termination of the Plan.
	 	 	17	 
	16.

	 	Stockholder Approval
	 	 	17	 
	17.

	 	Inability to Obtain Authority
	 	 	17	 
	18.

	 	Reservation of Shares
	 	 	17	 
	19.

	 	Information to Holders and Purchasers
	 	 	17	 
	20.

	 	Repurchase Provisions
	 	 	18	 
	21.

	 	Investment Intent
	 	 	18	 
	22.

	 	Governing Law
	 	 	19	 

i

 

ULTA SALON, COSMETICS & FRAGRANCE, INC.

2002 EQUITY INCENTIVE PLAN

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