Document:

exv10wxeey

 

EXHIBIT 10(ee)

PROMISSORY NOTE

	 	 	 
	$11,860,758

	 	November 26, 2003

Salt Lake City, Utah

     FOR VALUE RECEIVED, REGIS CORPORATION, a Minnesota corporation (the
“Borrower”) hereby promises to pay to the order of INFORMATION LEASING
CORPORATION, an Ohio corporation, for Itself and as Agent for Certain
Participants (the “Lender”), in lawful money of the United States of America
and in immediately available funds, the principal sum of ELEVEN MILLION EIGHT
HUNDRED SIXTY THOUSAND SEVEN HUNDRED FIFTY-EIGHT DOLLARS ($11,860,758)
(hereinafter, the “Principal Sum” or the “Loan”), together with interest on the
Principal Sum outstanding from time to time at the rate or rates hereinafter
described, all upon the terms and conditions hereinafter set forth (computed on
the basis of a 360-day year consisting of twelve (12) 30-day months).

     1. Defined Terms. All capitalized terms used herein and not otherwise
defined shall have the meanings given to such terms in the Loan Agreement (as
hereinafter defined).

     2. Repayment of the Loan. The Borrower shall pay the principal amount of
the Loan, together with interest thereon, until maturity (whether by
acceleration, extension or otherwise) at the rate of 7.16% per annum over a
period of 7 years in 28 consecutive quarterly installments of principal and
interest, payable on the first of February, May, August and November in each
year, commencing on February 1, 2004. Each installment of principal and
interest shall be in the amount of $ 539,636.35. The entire unpaid principal
balance of the Loan, together with all accrued and unpaid interest thereon (and
all other amounts due hereunder and under the other Financing Documents), shall
be due and payable on November 1, 2010 (the “Maturity Date”).

     3. Default Rate. In the event any payment is not made when due (whether
at maturity, by acceleration or otherwise, or on demand) such payment shall
thereafter bear interest from the date such payment was due until such payment
is received at the Default Rate. Upon the occurrence of a Default, the entire
unpaid principal balance of this Note shall bear interest at the Default Rate.

     4. Prepayments. The Borrower may prepay this Note in whole, but not in
part, at any time on or after November 1, 2005, subject to the provisions of
this paragraph 4. If Borrower is required or allowed to prepay this Note for
any reason under the terms hereof or under any other Financing Document,
including (without limitation) damage, destruction, condemnation or
acceleration, Borrower shall pay to Lender a prepayment fee in an amount equal
to the greater of (a) three percent of the amount prepaid or (b) an amount
equal to the excess, if any, of (i) the present value, in the aggregate, of the
then remaining monthly principal and interest payments due under this Note from
the date of prepayment through the Maturity Date for this Note, absent the
prepayment, using a discount rate equal to the yield to maturity of the U.S.
Treasury Note with a maturity date closest to the remaining term of this Note,
as published in the Wall Street Journal on the Business Day immediately
preceding the date of the prepayment plus 175 basis points over (ii) the then
outstanding principal balance of this Note, absent the prepayment.
Notwithstanding the aforegoing, in the event that the Borrower elects to repay
the Loan simultaneously with the consummation of a refinancing which involves
the sale of real estate holdings of the Borrower and/or its subsidiaries
(including the Property), the Borrower may prepay the Loan in whole, but not in
part, at any time after November 1, 2005 upon payment to the Lender of a
prepayment fee in an amount equal to the Swap Breakage (hereinafter defined)
plus an amount equal to (a) 2.25% of the original amount of the Loan if the
prepayment occurs between November 1, 2005 and October 31, 2006, (b) 1.625% of
the original amount of the Loan if the prepayment occurs between November 1,
2006

 

 

and October 31, 2007, (c) 1.065% of the original amount of the Loan if the
prepayment occurs between November 1, 2007 and October 31, 2008, (d) 0.6% of
the original amount of the Loan if the prepayment occurs between November 1,
2008 and October 31, 2009, and (e) 0.25% of the original principal amount of
the Loan if the prepayment occurs at any time thereafter prior to the Maturity
Date. As used herein, the term “Swap Breakage” means any loss sustained by the
Lender (or any of its participants) which is directly incurred or incurred
through a payable or in any other way arises out of the termination of any
interest rate swap agreement entered into in connection with the funding of the
Loan. The amount of the loss, if any, resulting from the termination of such
interest rate swap agreement will be directly born by the Borrower. The Lender
(and its participants) will provide to the Borrower written documentation
regarding the calculation of the specific amount of any such loss upon the
written request of the Borrower, which documentation shall be conclusive and
binding on the Borrower in the absence of manifest error.

     5. Manner of Making Payments. Unless otherwise instructed by the Lender,
all payments of principal and interest due hereunder shall be made to the
Lender, in immediately available funds during regular business hours, at the
Lender’s office or such other place as so designated by Lender, and such
payments shall be effective only upon receipt. All payments made hereunder
shall be applied first to accrued and unpaid interest and then to principal and
shall be made in U.S. Dollars, which shall be the exclusive currency for
payment of the obligations hereunder, free of any restrictions or deductions
whatsoever for present or future taxes, charges, assessments, withholdings or
costs, the payment of which shall be the sole responsibility of the Borrower.

     6. Loan Agreement and Other Financing Documents. This Note is the “Note”
referred to in the Loan Agreement of even date herewith by and between the
Borrower and the Lender (as the same may from time to time be amended,
restated, supplemented or otherwise modified being hereinafter called the “Loan
Agreement”). The Lender is entitled to all of the benefits of the Loan
Agreement and the other Financing Documents.

     7. Defaults. In the event the Borrower fails to pay any amount
payable hereunder or under the Loan Agreement within ten (10) days of the date
due and payable or upon the occurrence of any other Default (as defined in the
Loan Agreement), after giving effect to any applicable grace or cure period,
then the Lender may, by notice to the Borrower, declare the outstanding
Principal Sum, together with all accrued but unpaid interest due thereon, any
prepayment fee, and all other amounts payable hereunder to be forthwith due and
payable, whereupon all such sums shall become immediately due and payable
without further demand, notice, presentment or protest, all of which are hereby
waived by the Borrower; provided, however, that in the case of a default under
Sections 6.11 or 6.12 of the Loan Agreement, the balance of this Note, together
with all interest accrued thereon and all other amounts payable hereunder shall
become automatically due and payable, without in each instance having given the
Borrower any notice. In addition, the Borrower shall be liable to the Lender
for all reasonable costs of collection including, without limitation, all court
costs, attorney’s fees and expenses. Upon a Default hereunder or under any
other Financing Document, the Lender may exercise all rights and remedies under
the Financing Documents.

     8. Late Charge. In addition, and without waiving any of its other rights
and remedies, if the Borrower fails to make any payment of principal or
interest as and when due hereunder, the Lender, at its option, may charge a
late charge equal to 5% of the amount delinquent if not paid within ten (10)
days after the same was due. The late charge may be collected only once for
each late payment.

     9. Waiver of Presentment, Etc. The Borrower hereby waives presentment for
payment, demand, notice of demand, notice of non-payment or dishonor, protest
and notice of protest of this Note,

 

 

and all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Note.

     10. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
BORROWER AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES ARISING OUT OF OR IN ANY
WAY PERTAINING TO THE FINANCING DOCUMENTS AND SUCH WAIVER CONSTITUTES A WAIVER
OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THE
FINANCING DOCUMENTS. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE
BY THE BORROWER AND THE LENDER AND THE BORROWER AND THE LENDER HEREBY
ACKNOWLEDGE THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY
INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR
NULLIFY ITS EFFECT. THE BORROWER AND THE LENDER FURTHER ACKNOWLEDGE THAT THEY
HAVE BEEN REPRESENTED IN THE SIGNING OF THE FINANCING DOCUMENTS AND IN THE
MAKING OF THIS WAIVER BY LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND
THAT THEY HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH THEIR COUNSEL.

     11. Remedies. The remedies of the Lender as provided herein and in the
Loan Agreement and in the other Financing Documents shall be cumulative and
concurrent and may be pursued singly, successively or together, at the sole
discretion of the Lender, and may be exercised as often as occasion therefor
shall occur; and the failure to exercise any such right or remedy shall in no
event be construed as a waiver or release thereof.

     12. GOVERNING LAW. THE PARTIES AGREE THAT THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.

     13. Submission to Jurisdiction. The Borrower hereby irrevocably submits
itself to the non-exclusive jurisdiction of the appropriate Federal and state
courts located in the State of New York for the purposes of any suit, action or
other proceeding arising out of this Note or with respect to the subject matter
hereof, and, to the extent permitted by applicable law, hereby waives, and
agrees not to assert, by way of motion, as a defense, or otherwise, in any such
suit, action or proceeding any claim that it is not personally subject to the
jurisdiction of the above-named courts, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper, or that this Note or the subject matter hereof may not
be enforced in or by such court.

     14. Partial Invalidity. In the event any one or more of the provisions of
this Note shall for any reason be held to be invalid, illegal or unenforceable,
in whole or in part or in any respect, or in the event that any one or more of
the provisions of this Note operates or would prospectively operate to
invalidate this Note, then and in any of those events, such provision or
provisions only shall be deemed null and void and shall not affect any other
provision of this Note and the remaining provisions of this Note shall remain
operative and in full force and effect and shall in no way be effected,
prejudiced or disturbed thereby.

 

 

	     15. Notices. Unless otherwise specifically provided herein, all notices
(excluding billings and other communications in the ordinary course of
business) required or permitted by the terms hereof shall be given in the
manner and with the effect provided for in the Loan Agreement.
	 
	     16. Conflicts. In the event of any conflict between the provisions of
this Note and those of the Loan Agreement, the terms of the Loan Agreement
shall control.

[SIGNATURE FOLLOWS ON NEXT PAGE]

 

 

     IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
as of the date first written above.

	 	 	 	 	 
	WITNESS:	 	REGIS CORPORATION
	 
	 	 	 	 
	
	 	By:	 	 
	

	 	 	 	

	

	 	Name:	 	 
	

	 	Title:exv10wxffy

 

EXHIBIT 10 (ff)

DRAFT Dated August 4, 2004

SUBJECT TO REVIEW BY LEGAL COUNSEL

Regis Corporation

2004 Long Term Incentive Plan

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I            ESTABLISHMENT AND PURPOSE
	 	 	1	 
	1.1 Establishment
	 	 	1	 
	1.2 Purpose
	 	 	1	 
	ARTICLE II           DEFINITIONS
	 	 	1	 
	2.1 Affiliate
	 	 	1	 
	2.2 Agreement
	 	 	1	 
	2.3 Award
	 	 	1	 
	2.4 Beneficiary
	 	 	1	 
	2.5 Board of Directors or Board
	 	 	1	 
	2.6 Cause
	 	 	2	 
	2.7 Change in Control
	 	 	2	 
	2.8 Code
	 	 	2	 
	2.9 Commission
	 	 	2	 
	2.10 Committee
	 	 	2	 
	2.11 Common Stock
	 	 	3	 
	2.12 Company
	 	 	3	 
	2.13 Covered Employees
	 	 	3	 
	2.14 Disability
	 	 	3	 
	2.15 Effective Date
	 	 	3	 
	2.16 Exchange Act
	 	 	3	 
	2.17 Exercise Price
	 	 	3	 
	2.18 Fair Market Value
	 	 	3	 
	2.19 Grant Date
	 	 	4	 
	2.20 Incentive Stock Option
	 	 	4	 
	2.21 Non-Qualified Stock Option
	 	 	4	 
	2.22 Option Period
	 	 	4	 
	2.23 Participant
	 	 	4	 
	2.24 Performance Unit
	 	 	4	 
	2.25 Plan
	 	 	4	 
	2.26 Representative
	 	 	4	 
	2.27 Restricted Stock
	 	 	5	 
	2.28 Rule 16b-3
	 	 	5	 
	2.29 Stock Appreciate Right
	 	 	5	 
	2.30 Stock Option or Option
	 	 	5	 
	2.31 Termination of Employment
	 	 	5	 
	ARTICLE III           ADMINISTRATION
	 	 	6	 
	3.1 Committee Structure and Actions
	 	 	6	 
	3.2 Committee Authority
	 	 	6	 

- i -

 

	 	 	 	 	 
	 	 	Page
	ARTICLE IV           SHARES SUBJECT TO PLAN
	 	 	7	 
	4.1 Number of Shares
	 	 	7	 
	4.2 Release of Shares
	 	 	7	 
	4.3 Restrictions on Shares
	 	 	8	 
	4.4 Shareholder Rights
	 	 	8	 
	4.5 Effect of Certain Changes
	 	 	8	 
	ARTICLE V            ELIGIBILITY
	 	 	9	 
	5.1 Eligibility
	 	 	9	 
	ARTICLE VI           STOCK OPTIONS
	 	 	9	 
	6.1 General
	 	 	9	 
	6.2 Grant
	 	 	9	 
	6.3 Terms and Conditions
	 	 	9	 
	6.4 Termination by Reason of Death
	 	 	10	 
	6.5 Termination by Reason of Disability
	 	 	11	 
	6.6 Other Termination
	 	 	11	 
	ARTICLE VII          STOCK APPRECIATION RIGHTS
	 	 	11	 
	7.1 General
	 	 	11	 
	7.2 Grant
	 	 	11	 
	7.3 Terms and Conditions
	 	 	11	 
	ARTICLE VIII         RESTRICTED STOCK
	 	 	12	 
	8.1 General
	 	 	12	 
	8.2 Grant, Awards and Certificates
	 	 	12	 
	8.3 Terms and Conditions
	 	 	13	 
	ARTICLE IX            PERFORMANCE AWARDS
	 	 	14	 
	9.1 General
	 	 	14	 
	9.2 Earning Performance Unit Awards
	 	 	14	 
	9.3 Termination of Employment Due to Death, Disability or
Retirement or at the Request of the Company without Cause
	 	 	14	 
	9.4 Nontransferability
	 	 	14	 
	9.5 Election to Defer
	 	 	14	 
	ARTICLE X            CHANGE IN CONTROL PROVISIONS
	 	 	15	 
	10.1 Impact of Event
	 	 	15	 
	10.2 Additional Discretion
	 	 	15	 

- ii -

 

	 	 	 	 	 
	 	 	Page
	ARTICLE XI             PROVISIONS APPLICABLE TO SHARES ACQUIRED UNDER THIS PLAN
	 	 	15	 
	11.1 No Company Obligation
	 	 	15	 
	ARTICLE XII            MISCELLANEOUS
	 	 	15	 
	12.1 Amendments and Termination
	 	 	15	 
	12.2 Unfunded Status of Plan
	 	 	16	 
	12.3 Provisions Relating to Internal Revenue Code Section 162(m)
	 	 	16	 
	12.4 No Additional Obligation
	 	 	18	 
	12.5 Withholding
	 	 	18	 
	12.6 Controlling Law
	 	 	18	 
	12.7 Offset
	 	 	18	 
	12.8 Nontransferability; Beneficiaries
	 	 	18	 
	12.9 Gross-Up for Excise Tax
	 	 	19	 
	12.10 No Rights with Respect to Continuance of Employment
	 	 	19	 
	12.11 Awards in Substitution for Awards Granted by Other Corporations
	 	 	19	 
	12.12 Foreign Alternatives
	 	 	20	 
	12.13 Delivery of Stock Certificates
	 	 	20	 
	12.14 Headings
	 	 	20	 
	12.15 Severability
	 	 	20	 
	12.16 Successors and Assigns
	 	 	20	 
	12.17 Entire Agreement
	 	 	20	 

- iii -

 

REGIS CORPORATION

2004 LONG TERM INCENTIVE PLAN

ARTICLE I

ESTABLISHMENT AND PURPOSE

     1.1 Establishment. The Regis Corporation 2004 Long Term Incentive Plan
(“Plan”) is hereby established by Regis Corporation (“Company”), effective as
of the Effective Date.

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

ARTICLE II

DEFINITIONS

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

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

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

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

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

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

- 1 -

 

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

     2.7 “Change in Control” means the first to occur of any of the following
events:

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

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

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

     (4) the approval by the shareholders of the Company of a complete
liquidation of the Company or a sale or disposition of all or
substantially all the assets of the Company.

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

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

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

- 2 -

 

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

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

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

     2.14 “Disability” means a mental or physical illness that entitles the
Participant to receive benefits under the long-term disability plan of the
Company or an Affiliate, or if there is no such plan or the Participant is not
covered by such a plan or the Participant is not an employee of the Company or
an Affiliate, a mental or physical illness that renders a Participant totally
and permanently incapable of performing the Participant’s duties for the
Company or an Affiliate. Notwithstanding the foregoing, a Disability shall not
qualify under this Plan if it is the result of (i) a willfully self-inflicted
injury or willfully self-induced sickness; or (ii) an injury or disease
contracted, suffered, or incurred while participating in a criminal offense.
The determination of Disability for purposes of this Plan shall be made by the
Committee and shall not be construed to be an admission of disability for any
other purpose.

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

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

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

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

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

- 3 -

 

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

     (3) if, on the relevant date, the Common Stock is not publicly
traded or reported as described in (a) or (b) above, the value determined
in good faith by the Board as of the last day of the Company’s most
recently ended fiscal year (except as otherwise provided herein or in an
Agreement), based on an annual valuation of the Company from a review of
the Company’s financial statements (or such other approach deemed
appropriate) prepared by an independent valuation or auditing firm
selected by the Board.

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

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

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

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

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

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

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

     2.26 “Representative” means (a) the person or entity acting as the
executor or administrator of a Participant’s estate pursuant to the last will
and testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had the Participant’s primary residence at the date of
the Participant’s death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
beneficiary of the Participant upon or following the Participant’s death; or
(d) the person to whom an Award has been

- 4 -

 

permissibly transferred; provided that only one of the foregoing shall be
the Representative at any point in time as determined under applicable law and
recognized by the Committee.

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

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

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

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

     2.31 “Termination of Employment” means the occurrence of any act or event
whether pursuant to an employment agreement or otherwise that actually or
effectively causes or results in the person’s ceasing, for whatever reason, to
be any and all of an officer or employee of the Company or of any Affiliate, or
to be any and all of an officer or employee of any entity that provides
services to the Company or an Affiliate, including, without limitation, death,
Disability, dismissal, severance at the election of the Participant,
retirement, or severance as a result of the discontinuance, liquidation, sale
or transfer by the Company or its Affiliates of a business owned or operated by
the Company or its Affiliates. With respect to any person who is not an
employee with respect to the Company or an Affiliate (such as a non-employee
member of the Board), the Agreement shall establish what act or event shall
constitute a Termination of Employment for purposes of the Plan. A Termination
of Employment shall occur with respect to an employee who is employed by an
Affiliate if the Affiliate shall cease to be an Affiliate and the Participant
shall not immediately thereafter become an employee of the Company or an
Affiliate.

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

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ARTICLE III

ADMINISTRATION

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

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

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

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

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

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

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

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

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

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

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

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

     (11) to determine whether and with what effect an individual has
incurred a Termination of Employment;

- 6 -

 

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

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

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

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

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

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

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

ARTICLE IV

SHARES SUBJECT TO PLAN

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

     4.2 Release of Shares. Subject to Section 4.1, the Committee shall have
full authority to determine the number of shares of Common Stock available for
Awards, and in its discretion may include (without limitation) as available for
distribution any shares of Common Stock that have ceased to be subject to an
Award; any shares of Common Stock subject to any Award that have been
previously forfeited; any shares under an Award that otherwise terminates
without issuance of Common Stock being made to a Participant; or any shares of
Common Stock that are

- 7 -

 

received by the Company in connection with the exercise of an Award,
including the satisfaction of any tax liability or tax withholding obligation.
Any shares that are available immediately prior to the termination of the Plan,
or any shares of Common Stock returned to the Company for any reason subsequent
to the termination of the Plan, may be transferred to a successor plan.

     4.3 Restrictions on Shares. Common Stock issued upon exercise of an Award
shall be subject to the terms and conditions specified herein and to such other
terms, conditions and restrictions as the Committee in its discretion may
determine or provide in the Award Agreement. The Company shall not be required
to issue or deliver any certificates for Common Stock, cash or other property
prior to (i) the completion of any registration or qualification of such shares
under federal, state or other law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable;
and (ii) the satisfaction of any applicable withholding obligation in order for
the Company or an Affiliate to obtain a deduction or discharge its legal
obligation with respect to the exercise of an Award. The Company may cause any
certificate (or other representation of title) for any shares of Common Stock
to be delivered to be properly marked with a legend or other notation
reflecting the limitations on transfer of such Common Stock as provided in this
Plan or as the Committee may otherwise require. The Committee may require any
person exercising an Award to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of the Common Stock in compliance with applicable law or otherwise.
Fractional shares shall not be delivered, but shall be rounded to the next
lower whole number of shares.

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

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

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ARTICLE V

ELIGIBILITY

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

ARTICLE VI

STOCK OPTIONS

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

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

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

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

- 9 -

 

the Company (each as defined in Section 424 of the Code), the
Exercise Price per share shall not be less than one hundred ten percent
(110%) of such Fair Market Value per share (a “10% Owner”).

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

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

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

     (5) Non-transferability of Options. No Option shall be sold,
assigned, margined, transferred, encumbered, conveyed, gifted, alienated,
hypothecated, pledged, or otherwise disposed of, other than by will or by
the laws of descent and distribution, and all Options shall be
exercisable during the Participant’s lifetime only by the Participant.

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

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

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

ARTICLE VII

STOCK APPRECIATION RIGHTS

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

     7.2 Grant. The grant of a Stock Appreciation Right shall occur as of the
Grant Date determined by the Committee. A Stock Appreciation Right entitles a
Participant to receive Common Stock as described in Section 7.3(2). An Award
of Stock Appreciation Rights shall be evidenced by, and subject to the terms of
an Agreement, which shall become effective upon execution by the Participant.

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

     (1) Period and Exercise. The term of a Stock Appreciation Right
shall be established by the Committee. A Stock Appreciation Right shall
be for such period and shall be exercisable at such times and to the
extent provided in the Agreement. Subject to Section 10.1 and the terms
set by the Committee, Stock Appreciation Rights shall be exercisable at
the rate of twenty percent (20%) as of each anniversary of the Grant
Date. In

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addition, the Committee may at any time accelerate the
exercisability of all or part of any Stock Appreciation Right. Stock
Appreciation Rights shall be exercised by the Participant’s giving
written notice of exercise on a form provided by the Committee (if
available) to the Company specifying the portion of the Stock
Appreciation Right to be exercised.

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

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

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

ARTICLE VIII

RESTRICTED STOCK

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

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

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as a condition of any Award of Restricted Stock, the Participant shall
have delivered a share power, endorsed in blank, relating to the Common Stock
covered by such Award.

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

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

     (2) Rights. Except as provided in Section 8.3(1), the Participant
shall have, with respect to the Restricted Stock, all of the rights of a
shareholder of the Company holding the class of Common Stock that is the
subject of the Restricted Stock, including, if applicable, the right to
vote the shares and the right to receive any cash dividends. Unless
otherwise determined by the Committee and subject to the Plan, cash
dividends on Common Stock that are the subject of the Restricted Stock
shall be automatically reinvested in additional shares of Restricted
Stock, and dividends on Common Stock that are Restricted Stock payable in
Common Stock shall be paid in the form of Restricted Stock.

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

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

     (5) Delivery. If a share certificate is issued in respect of
Restricted Stock, the certificate shall be registered in the name of the
Participant but shall be held by the Company for the account of the
Participant until the end of the Restricted Period. If and when the
Restriction Period expires without a prior forfeiture of the Restricted
Stock subject to such Restriction Period, unlegended certificates (or
other representation of title) for such shares shall be delivered to the
Participant.

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

ARTICLE IX

PERFORMANCE UNITS

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

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

     9.3 Termination of Employment Due to Death, Disability or Retirement or at
the Request of the Company without Cause. In the event of a Termination of
Employment due to death or Disability during a Performance Period, the
Participant shall receive a pro rata share of the cash award earned with
respect to the Participant’s Performance Units relating to such Performance
Period. Unless otherwise determined by the Committee, in the event that a
Participant’s employment terminates for any other reason, all Performance Units
shall be forfeited by the Participant to the Company. Distribution of earned
Performance Units may be made at the same time payments are made to
Participants who did not incur a Termination of Employment during the
applicable Performance Period.

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

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

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ARTICLE X

CHANGE IN CONTROL PROVISIONS

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

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

     (2) The restrictions applicable to any Restricted Stock Awards shall
lapse, and such Restricted Stock shall become free of all restrictions
and become fully vested and transferable to the full extent of the
original grant; and

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

     10.2 Additional Discretion. The Committee shall have full discretion,
notwithstanding anything herein or in an Agreement to the contrary, with
respect to an outstanding Award upon a Change in Control to provide that the
securities of another entity be substituted hereunder for the Common Stock and
to make equitable adjustment with respect thereto.

ARTICLE XI

PROVISIONS APPLICABLE TO SHARES ACQUIRED UNDER THIS PLAN

     11.1 No Company Obligation. Except to the extent required by applicable
securities laws, none of the Company, an Affiliate or the Committee shall have
any duty or obligation to affirmatively disclose material information to a
record or beneficial holder of Common Stock or an Award, and such holder shall
have no right to be advised of any material information regarding the Company
or any Affiliate at any time prior to, upon, or in connection with receipt or
the exercise or distribution of an Award. The Company makes no representation
or warranty as to the future value of the Common Stock issued or acquired in
accordance with the provisions of the Plan.

ARTICLE XII

MISCELLANEOUS

     12.1 Amendments and Termination. The Board may amend, alter, or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would

- 15 -

 

impair the rights of a Participant under an Award theretofore granted
without the Participant’s consent, except such an amendment (a) made to cause
the Plan to comply with applicable law or (b) made to permit the Company or an
Affiliate a tax deduction under applicable law. The Committee may amend, alter
or discontinue the terms of any Award theretofore granted, prospectively or
retroactively, on the same conditions and limitations (and exceptions to
limitations) as apply to the Board, and further subject to any approval or
limitations the Board may impose. Notwithstanding the foregoing, any material
amendments (as determined under the rules of the New York Stock Exchange, as
amended from time to time) to the Plan shall require shareholder approval.

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

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

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

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

     (3) Performance Goals. Awards may be subject to Performance Goals
(as defined in Section 9.1) which shall be measured in a specific
Performance Period (as defined in Section 9.1) established by the
Committee which shall be based on any of the following performance
criteria, either alone or in any combination, and on either a

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

     (4) Earning Performance Awards. After the applicable Performance
Period shall have ended, the Committee shall certify the extent to which
the established Performance Goals have been achieved. Payment with
respect to Performance Units for Covered Employees shall be a direct
function of the extent to which the Company’s Performance Goals have been
achieved. A Performance Unit Award to a Participant who is a Covered
Employee shall (unless the Committee determines otherwise) provide that
in the event of the Participant’s Termination of Employment prior to the
end of the Performance Period for any reason, such Award will be payable
only (a) if the applicable Performance Goals are achieved and (b) to the
extent, if any, as the Committee shall determine.

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

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accordance with the relevant Performance Goals with respect to any
Performance Unit Award intended to qualify as “performance-based
compensation” under Section 162(m) of the Code

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

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

     12.6 Controlling Law. The Plan and all Awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws of
Minnesota (other than its law respecting choice of law). The Plan shall be
construed to comply with all applicable law and to avoid liability to the
Company, an Affiliate or a Participant.

     12.7 Offset. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from the value of
any Award to be transferred to the Participant, and no Common Stock, cash or
other thing of value under this Plan or an Agreement shall be transferred
unless and until all disputes between the Company and the Participant have been
fully and finally resolved and the Participant has waived all claims to such
against the Company or an Affiliate.

     12.8 Nontransferability; Beneficiaries. No Award shall be assignable or
transferable by the Participant, otherwise than by will or the laws of descent
and distribution or pursuant to a beneficiary designation, and Awards shall be
exercisable during the Participant’s lifetime only by the Participant (or by
the Participant’s legal representatives in the event of the Participant’s
incapacity). Each Participant may designate a Beneficiary to exercise any
Option or Stock Appreciation Right or receive any Award held by the Participant
at the time of the Participant’s

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death or to be assigned any other Award outstanding at the time of the
Participant’s death. If a deceased Participant has named no Beneficiary, any
Award held by the Participant at the time of death shall be transferred as
provided in his or her will or by the laws of descent and distribution. Except
in the case of the holder’s incapacity, only the holder may exercise an Option
or Stock Appreciation Right. The Committee may permit the transfer of an Award
by a Participant to a Participant’s children, stepchildren, grandchildren,
parents, stepparents, grandparents, spouse, siblings, in-laws and persons
related by reason of legal adoption.

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

     12.10 No Rights with Respect to Continuance of Employment. Nothing
contained herein shall be deemed to alter the relationship between the Company
or an Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant.
The Company or an Affiliate and each of the Participants continue to have
the right to terminate the employment or service relationship at any time for
any reason, except as provided in a written contract. The Company or an
Affiliate shall have no obligation to retain the Participant in its employ or
service as a result of this Plan. There shall be no inference as to the length
of employment or service hereby, and the Company or an Affiliate reserves the
same rights to terminate the Participant’s employment or service as existed
prior to the individual becoming a Participant in this Plan.

     12.11 Awards in Substitution for Awards Granted by Other Corporations.
Awards may be granted under the Plan from time to time in substitution for
awards held by employees, directors or service providers of other corporations
who are about to become officers, directors or employees of the Company or an
Affiliate as the result of a merger or consolidation of the employing
corporation

- 19 -

 

with the Company or an Affiliate, or the acquisition by the Company or an
Affiliate of the assets of the employing corporation, or the acquisition by the
Company or Affiliate of the share of the employing corporation, as the result
of which it becomes a designated employer under the Plan. The terms and
conditions of the Awards so granted may vary from the terms and conditions set
forth in this Plan at the time of such grant as the majority of the members of
the Committee may deem appropriate to conform, in whole or in part, to the
provisions of the awards in substitution for which they are granted.

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

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

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

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

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

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

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