EMPLOYMENT
AND
DEEERRED COMPENSATION AGREEMENT
AGREEMENT, made as of April 14, 1998, between
REGIS CORPORATION, hereinafter referred to as the "Corporation",
and
Xxxx X. Xxxxxxxxxxx, hereinafter referred to as "Xxxxxxxxxxx".
IN CONSIDERATION of the mutual agreements hereinafter contained, the
parties hereby agree as follows:
1. DEFINITIONS.
"ADJUSTED MONTHLY BENEFIT" shall mean Xxxxxxxxxxx'x Monthly Benefit
increased annually after the first year during which Monthly Benefits are
paid in proportion to any increase in the Consumer Price Index for the
preceding year.
"CAUSE" shall mean (i) the willful and continued failure by
Xxxxxxxxxxx to substantially perform his duties for the Corporation after a
written warning specifically identifying the lack of substantial
performance is delivered to him by the Corporation, (ii) the willful
engaging by Xxxxxxxxxxx in illegal conduct which is materially and
demonstrably injurious to the Corporation, or (iii) conviction of a felony.
"CHANGE IN CONTROL" shall be deemed to have occurred at such time as
any of the following events occur: (i) any person within the meaning of
Section 2(a)(2) of the Securities Act of 1933 and Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than Xxxxxx
Xxxxxx, Inc. or the present shareholders of Xxxxxx Xxxxxx, Inc., is or has
become the "beneficial owner," as defined in Rule 13d-3 under the Exchange
Act, of twenty percent (20%) or more of the common stock of the
Corporation, or (ii) approval by the stockholders of the Corporation of (a)
any consolidation or merger of the Corporation in which the Corporation is
not the continuing or surviving corporation or pursuant to which shares of
stock of the Corporation would be converted into cash, securities or other
property, or (b) any consolidation or merger in which the Corporation is
the continuing or surviving corporation but in which the common
stockholders of the Corporation immediately prior to the consolidation or
merger do not hold at least a majority of the outstanding common stock of
the continuing or surviving corporation, or (c) any sale, lease, exchange
or other transfer of all or substantially all the assets of the
Corporation, or (iii) individuals who constitute the Corporation's Board of
Directors on January 1, 1998 (the Incumbent Board") have ceased for any
reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to January 1, 1998 whose election, or
nomination for election by the Corporation's stockholders, was
approved by a vote of at least three-quarters (3/4) of the directors
comprising the Incumbent Board (either by specific vote or by approval
of the proxy statement of the Corporation in which such person is named
as nominee for director) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board.
"CONSUMER PRICE INDEX" shall be the "Consumer Price Index for all
urban consumers, U.S. city average, for all Items, 1982-1984 equals 100%"
published by the Bureau of Labor Statistics of the United States Department
of Labor. If publication of such Index is discontinued, the Consumer Price
Index shall be based upon comparable statistics on the cost of living as
computed and published by an agency of the United States or by a
responsible financial periodical of recognized authority.
"DISCOUNTED VESTED MONTHLY BENEFIT" shall be an amount determined by
discounting Xxxxxxxxxxx'x Vested Monthly Benefit to present value based on
the number of months between (a) Xxxxxxxxxxx'x age at the time of his
termination of employment, and (b) the date of his 65th birthday. The
discount rate to be used for this purpose shall be equal to the yield to
maturity, at the date of termination of Xxxxxxxxxxx'x employment, of U.S.
Treasury Notes with a maturity date nearest the date of Xxxxxxxxxxx'x 65th
birthday.
"MONTHLY BENEFIT" shall be an amount equal to sixty percent (60%) of
Xxxxxxxxxxx'x average monthly compensation, excluding bonuses, for the
sixty (60) months immediately preceding his termination of employment or
disability.
"VESTED MONTHLY BENEFIT" shall be a percentage of Xxxxxxxxxxx'x
Monthly Benefit determined on the basis of the number of Xxxxxxxxxxx'x
completed years of service with the Corporation according to the following
schedule:
Years of Service Percentage
---------------- ----------
Less than 7 years 0%
7 years 5%
8 years 10%
9 years 15%
10 years 20%
11 years 25%
12 years 30%
13 years 35%
14 years 40%
15 years 50%
16 years 60%
l7 years 70%
18 years 80%
19 years 90%
20 or more years 100%
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A year of service for purposes of vesting shall be a consecutive 12-month
period during which Xxxxxxxxxxx is employed by the Corporation.
2. EMPLOYMENT. The Corporation agrees to continue to employ
Xxxxxxxxxxx, and Xxxxxxxxxxx agrees to continue to serve the Corporation as
President and Chief Executive Officer of the Corporation, upon the terms and
conditions hereinafter set forth.
3. TERM. The employment of Xxxxxxxxxxx pursuant to this Agreement has
commenced as of the date of this Agreement and shall continue until
terminated by either of the parties hereto. The parties agree and acknowledge
that the employment of Xxxxxxxxxxx pursuant to this Agreement is at will and
may be terminated by either party without notice. Notwithstanding the
termination of employment of Xxxxxxxxxxx, this Agreement shall remain in full
force and effect during such time as Xxxxxxxxxxx is entitled to any Monthly
Benefit under this Agreement.
4. DUTIES. Xxxxxxxxxxx shall continue to serve the Corporation
faithfully and to the best of his ability as President and Chief Executive
Officer under the direction of the Board of Directors of the Corporation.
devoting his entire business time, energy and skill to such employment.
After attaining age 65. Xxxxxxxxxxx shall continue to render services to the
Corporation in an executive capacity, including but not limited to serving on
the Corporation's Board of Directors (subject to election to such office by
the shareholders of the Corporation), actively participating in the
Corporation's growth and acquisition strategies, and performing such other
duties as may be mutually agreed upon between Xxxxxxxxxxx and the
Corporation's Board of Directors from time to time. The parties contemplate
that Xxxxxxxxxxx'x services shall continue at least until he attains age 70,
but his inability or failure to continue providing services to the
Corporation after attaining age 65 shall not adversely affect any deferred
compensation or other benefits to which he is otherwise entitled under this
Agreement.
5. BASE COMPENSATION. The Corporation agrees to pay to Xxxxxxxxxxx
during the term of his employment hereunder as base salary for his full time
active services the sum of $500,000 for the fiscal year beginning July 1,
1999. Such base salary shall be increased for each year thereafter by the
greater of (i) four percent (4%), or (ii) the percentage increase in the
Consumer Price Index from July 1, 1999 to each July 1 thereafter in which
Xxxxxxxxxxx is employed by the Corporation.
6. INCENTIVE-BASED COMPENSATION. Xxxxxxxxxxx shall participate with
other senior executive officers of the Corporation in the Corporation's
incentive-based bonus plan.
7. STOCK OPTIONS. During each year of employment with the
Corporation, subject to implementation of an appropriate stock option plan
for other senior executive officers of the Corporation, Xxxxxxxxxxx shall be
granted stock options to acquire shares of the Corporation's stock with the
number of shares subject to such options to be determined by the Compensation
Committee of the Corporation's Board of Directors. The exercise price for
such options shall be the price of the shares on each date when such options
are granted. If the Corporation at any time ceases to maintain a stock option
plan for its senior executives, Xxxxxxxxxxx shall receive in lieu
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of such options other annual benefits at least equal in value to the value of
the stock options annually granted to him while such plan was in effect.
8. SPLIT DOLLAR LIFE INSURANCE. Xxxxxxxxxxx and the Corporation shall
participate in a split dollar life insurance program whereby a trust
established by Xxxxxxxxxxx will acquire a $5 million combined whole-life/term
policy insuring the joint lives of Xxxxxxxxxxx and his spouse. The split
dollar insurance agreement shall provide for payments of premiums and
distribution of death benefits in accordance with Schedule A attached hereto.
9. DEFERRED COMPENSATION. The Corporation shall pay to Xxxxxxxxxxx,
if living, or to his spouse in the event of his death, the following sums
upon the terms and conditions and for the periods hereinafter set forth:
a] PAYMENTS UPON RETIREMENT OR INVOLUNTARY TERMINATION. Commencing
upon the last day of the month next following the month in which
Xxxxxxxxxxx (i) retires from employment with the Corporation after
attaining age 65, (ii) reaches age 65 if he is then disabled within
the meaning of Section 9(d), or (iii) is terminated by the Corporation
without Cause, the Corporation shall pay to Xxxxxxxxxxx his Adjusted
Monthly Benefit and shall continue to pay him such amounts monthly on
the same date of each succeeding month for the remainder of his life.
If Xxxxxxxxxxx'x spouse survives him, the Corporation shall pay to
such spouse for the remainder of her life one-half of Xxxxxxxxxxx'x
Adjusted Monthly Benefit.
b] EARLY VOLUNTARY TERMINATION. In the event Xxxxxxxxxxx voluntarily
terminates his employment with the Corporation before reaching age 65,
and prior to any Change of Control, the Corporation shall pay to
Xxxxxxxxxxx two-thirds of his Discounted Vested Monthly Benefit
commencing upon the last day of the month next following the month in
which the date such termination occurs, and shall continue to pay him
such amount monthly on the same date of each succeeding month for a
total of 240 months. If Xxxxxxxxxxx dies before receiving all 240
monthly payments specified herein, the Corporation shall pay to his
surviving spouse, or to such other person or persons as Xxxxxxxxxxx
shall have designated in writing, the remaining monthly payments as
they become due.
c] SPOUSAL PAYMENTS. If Xxxxxxxxxxx dies while employed by the
Corporation, the Corporation shall pay to his surviving spouse
one-half of the Adjusted Monthly Benefit to which Xxxxxxxxxxx would
have been entitled were he living, such payments to commence within
thirty (30) days after Xxxxxxxxxxx'x death and to continue monthly
for the remainder of her life.
d] PAYMENTS DURING DISABILITY. In addition to the payments provided in
Subsections (a) and (b), should Xxxxxxxxxxx become disabled while
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employed by the Corporation, and such disability continues for a
period of six months the Corporation shall pay to Xxxxxxxxxxx his
Monthly Benefit during each month that Xxxxxxxxxxx remains disabled
until he attains age 65 or until his death prior to attaining such
age, at which time the payments provided in Subsections (a), (b) or
(c) (whichever is applicable) shall begin. The first payment under
this Section (d) shall be made during the seventh month of such
disability, and each succeeding payment shall be made on the same date
of each succeeding month thereafter. Payments shall be made under this
Section (d) only if Xxxxxxxxxxx is disabled within the meaning of the
disability clause of the Corporation's disability insurance policy, as
set forth in the waiver of premium provision.
e] TERMINATION FOR CAUSE. If Xxxxxxxxxxx'x employment with the
Corporation is terminated at any time for Cause, the Corporation shall
have no obligation to make any payments to him under this Agreement
and all such future payments shall be forfeited.
f] REDUCTION IN STATUS. The Corporation shall be deemed to have
terminated Xxxxxxxxxxx'x employment without Cause at such time as (i)
he is removed as Chief Executive Officer of the Corporation, or (ii)
the corporate prerequisites and benefits afforded him, including but
not limited to office space and facilities suitable to his position as
Chief Executive Officer of the Corporation, are reduced so as to be
less favorable than those presently afforded him, except if such
action is taken specifically for Cause.
The Corporation is the owner and beneficiary of certain insurance policies
on Xxxxxxxxxxx'x life and insuring against his disability. No payments shall be
required under Sections (a), (c) or (d) of this Section 9, if because of any act
by Xxxxxxxxxxx, either (i) the applicable policy is canceled by the insurance
company issuing such policy or (ii) the insurance company refuses to pay the
proceeds of said policy.
10. TERMINATION AFTER CHANGE IN CONTROL. Notwithstanding any other
provision of the Agreement, Xxxxxxxxxxx, and upon his death, his surviving
spouse (as provided in Section 9(c) above) shall be entitled to immediate
payment of his Adjusted Monthly Benefit if his employment terminates following a
Change in Control, whether such termination is by Xxxxxxxxxxx or by the
Corporation, unless the termination is by the Corporation for Cause.
11. RESTRICTIVE COVENANT.
a] Xxxxxxxxxxx expressly agrees, as a condition to the performance by the
Corporation of its obligations hereunder, that during the term of this
Agreement and during the further period that such payments to him are
provided by this Agreement, he will not, directly or indirectly, own
any interest in, render any services of any nature
-5-
to, become employed by, or participate or engage in the licensed
beauty salon business, except with the prior written consent of the
Corporation.
b] If Xxxxxxxxxxx voluntarily terminates his employment with the
Corporation and violates the restrictive covenant set forth in
subparagraph a] above during the first twenty-four (24) months after
such termination of employment, and such violation continues for
thirty (30) days after Xxxxxxxxxxx is notified in writing by the
Company that he is in violation of the restrictive covenant, then the
Corporation shall have no further obligation to make any payments to
him under this Agreement and all such future payments shall be
forfeited. If such violation occurs after twenty-four (24) months
after such termination and continues for thirty (30) days after notice
as provided hereinabove, Xxxxxxxxxxx shall forfeit one (1) month of
his Adjusted Monthly Benefit for each month that he is in violation of
the restrictive covenant.
c] If Xxxxxxxxxxx'x employment with the Corporation is terminated by the
Corporation without Cause, and if he at any time after such
termination continues to violate the restrictive covenant for thirty
(30) days after being notified in writing by the Corporation that he
is in violation of the restrictive covenant, he shall forfeit one (1)
month of his Adjusted Monthly Benefit for each month or portion of a
month that he continues in violation of the restrictive covenant.
12. TRUST AGREEMENT. The Corporation has established a Trust Agreement
under the Regis Corporation Deferred Compensation Agreement and said Trust
Agreement is hereby incorporated by reference into this Agreement and made a
part hereof.
13. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the laws of the State of Minnesota.
14. ARBITRATION. All controversies or claims arising out of or
relating to this Agreement or the breach thereof, shall be settled by
arbitration in Minneapolis, Minnesota, administered by the American
Arbitration Association under its then current Commercial Arbitration Rules,
and judgment on the award rendered by the arbitrator(s) may be entered in the
District Court of Hennepin County, Minnesota.
15. PROHIBITION AGAINST ASSIGNMENT. Xxxxxxxxxxx agrees, on behalf of
himself and his personal representatives, and any other person claiming any
benefits under him by virtue of this Agreement, that this Agreement and the
rights, interests and benefits hereunder shall not be assigned, transferred
or pledged in any way by Xxxxxxxxxxx or any person claiming under him by
virtue of this Agreement and shall not be subject to execution, attachment,
garnishment or similar process.
16. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of any successor of the Corporation, and any successor shall be
deemed substituted for the
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Corporation under the terms of this Agreement. As used in this Agreement, the
term "successor" shall include any person, firm, corporation or other business
entity which at any time, whether by merger, purchase, or otherwise, acquires
all or substantially all of the capital stock or assets of the Corporation.
17. PRIOR AGREEMENTS. This Agreement supersedes all prior Employment
and Deferred Compensation Agreements, and any amendments or supplements
thereto, between the parties to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
REGIS CORPORATION
By: /s/ [ILLEGIBLE]
----------------------------
Chief Financial Officer
/s/ Xxxx X. Xxxxxxxxxxx
--------------------------------
Xxxx X. Xxxxxxxxxxx
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SPLIT DOLLAR PLAN
PREPARED FOR
REGIS INC.
Xxxxxxx Xxxxxxxxxxx Age 55 Page 1
Xxxx X. Xxxxxxxxxxx Age 55
$5,000,000 Joint CompLife Plan - ES $100,000.00 Initial Contract Premium
$3,000,000 Basic Amount Incl. $33,000.00 Additional Premium
$1,500,000 Additional Protection
Based on dividend interest rates which changes and are less than or equal to the
current dividend interest rate
Dividends initially used to purchase paid-up additions
This illustration assumes payment of all premiums when due. Policy paid-up at
age 100.
(1) (2) (3) (4) (5) (6) (7) (8)
CORPORATE CUMULATIVE
ANNUAL CORPORATE EXECUTIVE CUMULATIVE
SPLIT SPLIT CORPORATE CORPORATE ANNUAL EXECUTIVE EXECUTIVE EXECUTIVE
DOLLAR DOLLAR DEATH CASH AFTER TAX AFTER TAX DEATH CASH
YEAR AGE PAYMENT* PAYMENT* BENEFIT* VALUE* COST* COST* BENEFIT* VALUE*
---------------------------------------------------------------------------------------------------------
1 55 99,069 99,069 99,069 33,033 931 931 4,900,931 0
2 56 98,896 197,964 197,964 135,099 1,104 2,036 4,802,036 0
3 57 98,730 296,694 296,694 244,044 1,270 3,306 4,703,306 0
4 58 93,526 395,221 395,221 360,664 1,474 4,779 4,604,779 0
5 59 98,333 493,554 493,554 485,075 1,667 6,446 4,506,446 0
6 60 98,060 591,614 591,614 591,614 1,940 8,386 4,408,386 26,299
7 61 97,753 689,372 689,372 689,372 2,242 10,628 4,310,628 69,901
8 62 97,333 786,760 786,760 786,760 2,612 13,240 4,213,240 123,044
9 63 96,995 883,755 883,755 883,755 3,005 16,245 4,116,245 186,358
10 64 96,543 980,298 930,298 980,298 3,457 19,702 4,019,702 260,549
11 65 95,998 1,076,296 1,076,296 1,076,296 4,002 23,704 3,923,704 344,577
12 66 95,406 1,171,702 1,171,702 1,171,702 4,594 23,298 3,828,293 444,759
13 67 94,528 1,266,231 1,266,231 1,266,231 5,472 33,769 3,826,257 556,077
14 68 93,440 1,359,671 1,359,671 1,359,671 6,560 40,329 3,881,541 681,415
15 69 92,112 1,451,713 1,451,783 1,451,783 7,888 43,217 3,943,993 821,768
16 70 90,416 1,542,269 1,542,269 1,542,269 9,514 57,731 4,014,310 978,135
17 71 88,539 1,630,808 1,630,808 1,630,808 11,461 69,192 4,093,278 1,155,663
18 72 86,091 1,716,899 1,716,899 1,716,899 13,909 83,101 4,189,386 1,355,838
19 73 83,091 1,799,990 1,799,990 1,799,990 16,909 100,010 4,302,621 1,530,133
20 74 79,380 1,879,369 1,879,369 1,179,369 20,620 120,631 4,434,476 1,763,216
21 75 -1,879,369 0 0 0 0 120,631 3,533,997 1,382,271
22 76 0 0 0 0 0 120,631 3,569,822 2,007,301
23 77 0 0 0 0 0 120,631 3,615,094 2,138,252
24 78 0 0 0 0 0 120,631 3,669,291 2,275,015
25 79 0 0 0 0 0 120,631 3,731,954 2,417,611
---------------------------------------------------------------------------------------------------------
(SEE SPECIFICATIONS PAGES FOR PERTINENT INFORMATION)
*ILLUSTRATED VALUES AND BENEFITS INCLUDE DIVIDENDS. ILLUSTRATED DIVIDENDS
REFLECT CURRENT (1998 SCALE) CLAIM AND EXPENSE EXPERIENCE AND ARE NOT
ESTIMATES OR GUARANTEES OF FUTURE RESULTS. DIVIDENDS ACTUALLY PAID MAY BE
LARGER OR SMALLER THAN THOSE ILLUSTRATED. THIS ILLUSTRATION DOES NOT
RECOGNIZE THAT, BECAUSE OF INTEREST, A DOLLAR IN THE FUTURE HAS LESS VALUE
THAN A DOLLAR TODAY. 7.39% 1998 VARIABLE RATE LOAN PROVISIONS.
RP S/N SELECT/SELECT PREPARED BY XXXXXXX X. XXXXXXXXXXX, CLU, 2/17/98
ILLUSTRATION NO. MN1320-LRSHD-092409 THE NORTHWESTERN MUTUAL LIFE - MILWAUKEE
(13.2)
