<PAGE>
LCA GROUP INC.
2001 ANNUAL PERFORMANCE INCENTIVE PLAN
(EFFECTIVE AS OF __________ ,_____)
<PAGE>
LCA GROUP INC.
2001 ANNUAL PERFORMANCE INCENTIVE PLAN
(EFFECTIVE AS OF __________ , ____)
1. PURPOSE
The purpose of this Plan is to attract, retain and motivate key
employees by providing cash performance awards to designated key employees of
the Company or its Subsidiaries. This Plan is effective for fiscal years of the
Company commencing on or after October 1, 2000, subject to approval by the
stockholders of the Company in accordance with the laws of the State of
Delaware.
2. DEFINITIONS
Unless the context otherwise requires, the words which follow shall
have the following meaning:
(a) "Award" - shall mean the total annual performance award
as determined by aggregating any Performance Award and
Long Term Incentive Plan Award under the Plan; provided
that for any Performance Period the Committee may, in its
sole discretion, define "Award" to mean only a
Performance Award.
(b) "Board" - shall mean the Board of Directors of the
Company.
2
<PAGE>
(c) "Change in Control of the Company" - shall have the
meaning set forth in Exhibit A hereto.
(d) "Code" - shall mean the Internal Revenue Code of 1986, as
amended and any successor thereto.
(e) "Code Section 162(m)" - shall mean the exception for
performance based compensation under Section 162(m) of
the Code or any successor section and the Treasury
regulations promulgated thereunder.
(f) "Company" - shall mean LCA Group Inc. and any successor
by merger, consolidation or otherwise.
(g) "Committee" - shall mean the Compensation Committee of
the Board or such other Committee of the Board that is
appointed by the Board to administer this Plan; it is
intended that all of the members of any such Committee
shall satisfy the requirements to be outside directors,
as defined under Code Section 162(m).
(h) "Individual Target Award" - shall mean the targeted
Performance Award for a Performance Period as specified
by the Committee in accordance with Section 5 hereof.
3
<PAGE>
(i) "Long Term Incentive Plan Award" - shall mean the amount,
if any, paid or payable under Section 7 hereof.
(j) "Participant" - shall mean an executive employee of the
Company or any Subsidiary selected, in accordance with
Section 4 hereof, to be eligible to receive an Award in
accordance with this Plan.
(k) "Performance Award" - shall mean the amount paid or
payable under Section 6 hereof.
(l) "Performance Goals" - shall mean the objective
performance goals, formulas and standards described in
Section 6 hereof.
(m) "Performance Period" - shall mean the period of one to
three Plan Years (as specified by the Committee) or, if
the initial Plan Year is a short Plan Year, such shorter
period (as specified by the Committee) over which
achievement of the Performance Goals is to be measured.
(n) "Plan" - shall mean the LCA Group Inc. 2001 Annual
Performance Incentive Plan.
(o) "Plan Year" - shall mean a fiscal year of the Company or
in the case of the first Plan Year, if so designated by
the Committee, the period from the date of Spinoff of the
Company by U.S. Industries, Inc. to its stockholders to
the end of the fiscal year in which it occurs.
4
<PAGE>
(p) "Pro Rata" - shall mean a portion of an Award based on
the number of days worked during a Performance Period as
compared to the total number of days in the Performance
Period.
(q) "Subsidiary" - shall mean any subsidiary corporation of
the Company within the meaning of Section 424(f) of the
Code.
3. ADMINISTRATION AND INTERPRETATION OF THE PLAN
The Plan shall be administered by the Committee. The Committee shall
have the exclusive authority and responsibility to: (i) interpret the Plan; (ii)
approve the designation of eligible Participants; (iii) set the performance
criteria and the Performance Period for Awards within the Plan guidelines; (iv)
determine whether a Long Term Incentive Plan Award will be payable with respect
to any Performance Award to be earned for a Performance Period; (v) determine
the timing and form of amounts to be paid out under the Plan and the conditions
for payment thereof; (vi) certify attainment of Performance Goals and other
material terms; (vii) reduce Awards as provided herein; (viii) authorize the
payment of all benefits and expenses of the Plan as they become payable under
the Plan; (ix) adopt, amend and rescind rules and regulations relating to the
Plan; and (x) make all other determinations and take all other actions necessary
or desirable for the Plan's administration, including, without limitation,
correcting any defect, supplying any omission or reconciling any inconsistency
in this Plan in the manner and to the extent it shall deem necessary to carry
this Plan into effect, but only to the extent such action would be permitted
under Code Section 162(m).
5
<PAGE>
Decisions of the Committee shall be made by a majority of its members.
All decisions of the Committee on any question concerning the selection of
Participants and the interpretation and administration of the Plan shall be
final, conclusive and binding upon all parties. The Committee may rely on
information, and consider recommendations, provided by the Board or the
executive officers of the Company. The Plan is intended to comply with Code
Section 162(m), and all provisions contained herein shall be limited, construed
and interpreted in a manner to so comply.
4. ELIGIBILITY AND PARTICIPATION
(a) For each Performance Period, the Committee shall select the employees
of the Company or its Subsidiaries who are to participate in the Plan
from among the executive employees of the Company or its Subsidiaries.
(b) No person shall be entitled to any Award under this Plan for a
Performance Period unless the individual is designated as a Participant
for the Performance Period. The Committee may add to or delete
individuals from the list of designated Participants at any time and
from time to time, in its sole discretion, subject to any limitations
required to comply with Code Section 162(m).
5. INDIVIDUAL TARGET AWARD
For each Participant for each Performance Period, the Committee may, in
its sole discretion, specify a targeted performance award. The Individual Target
Award may be expressed, at the Committee's sole discretion, as a fixed dollar
amount, a percentage of base
6
<PAGE>
pay, or an amount determined pursuant to an objective formula or standard. The
Committee's establishment of an Individual Target Award for a Participant for a
Performance Period shall not imply or require that the same level Individual
Target Award (if any such award is established by the Committee for the relevant
employee) be set for any subsequent Performance Period. At the time the
Performance Goals are established (as provided in subsection 6.2 below), the
Committee shall prescribe a formula to be used to determine the percentages
(which may be greater than one-hundred percent (100%)) of an Individual Target
Award that may be earned or payable based upon the degree of attainment of the
Performance Goals during the Performance Period. Notwithstanding anything else
herein, the Committee may, in its sole discretion, elect to pay a Participant an
amount that is less than the Participant's Individual Target Award (or attained
percentages thereof) regardless of the degree of attainment of the Performance
Goals; provided that no such discretion to reduce an Award earned based on
achievement of the applicable Performance Goals shall be permitted for the
Performance Period in which a Change in Control of the Company occurs, or during
such Performance Period with regard to the prior Performance Period if the
Awards for the prior Performance Period have not been made by the time of the
Change in Control of the Company, with regard to individuals who were
Participants at the time of the Change in Control of the Company.
6. PERFORMANCE AWARD PROGRAM
6.1 Performance Awards. Subject to the satisfaction of any conditions
on payment imposed by the Committee pursuant to Section 6.4 and Section 8
herein, each Participant shall
7
<PAGE>
be eligible to receive up to the achieved percentage of their Individual Target
Award for such Performance Period (or, subject to the last sentence of Section
5, such lesser amount as determined by the Committee in its sole discretion)
based upon the attainment of the objective Performance Goals established
pursuant to subsection 6.2 and the formula established pursuant to Section 5.
Except as specifically provided in Section 8, no Performance Award shall be made
to a Participant for a Performance Period unless the minimum Performance Goals
for such Performance Period are attained.
6.2 Objective Performance Goals, Formulae or Standards. The Committee
in its sole discretion shall establish the objective performance goals, formulae
or standards and the Individual Target Award (if any) applicable to each
Participant or class of Participants for a Performance Period in writing prior
to the beginning of such Performance Period or at such later date as permitted
under Code Section 162(m) and while the outcome of the Performance Goals are
substantially uncertain. Such Performance Goals may incorporate, if and only to
the extent permitted under Code Section 162(m), provisions for disregarding (or
adjusting for) changes in accounting methods, corporate transactions (including,
without limitation, dispositions and acquisitions) and similar type events or
circumstances. To the extent any such provision would create impermissible
discretion under Code Section 162(m) or otherwise violate Code Section 162(m),
such provision shall be of no force or effect. The Performance Goals shall be
based on one or more of the following criteria: (i) the attainment of certain
target levels of, or a specified increase in, enterprise value or value creation
targets of the Company (or any subsidiary, division or other operational unit of
the Company), (ii) the attainment of certain target levels of, or a percentage
increase in after-tax or pre-tax profits of
8
<PAGE>
the Company, including without limitation that attributable to continuing and/or
other operations of the Company (or in either case a subsidiary, division, or
other operational unit of the Company); (iii) the attainment of certain target
levels of, or a specified increase in, operational cash flow of the Company (or
a subsidiary, division, or other operational unit of the Company); (iv) the
attainment of a certain level of reduction of, or other specified objectives
with regard to limiting the level of increase in all or a portion of, the
Company's bank debt or other long-term or short-term public or private debt or
other similar financial obligations of the Company, which may be calculated net
of cash balances and/or other offsets and adjustments as may be established by
the Committee; (v) the attainment of a specified percentage increase in earnings
per share or earnings per share from continuing operations of the Company (or a
subsidiary, division or other operational unit of the Company); (vi) the
attainment of certain target levels of, or a specified percentage increase in,
net sales, revenues, net income or earnings before income tax or other
exclusions of the Company (or a subsidiary, division, or other operational unit
of the Company); (vii) the attainment of certain target levels of, or a
specified increase in, return on capital employed or return on invested capital
of the Company (or any subsidiary, division or other operational unit of the
Company); (viii) the attainment of certain target levels of, or a percentage
increase in, after-tax or pre-tax return on stockholder equity of the Company
(or any subsidiary, division or other operational unit of the Company); (ix) the
attainment of certain target levels in the fair market value of the shares of
the Company's common stock; and (x) the growth in the value of an investment in
the Company's common stock assuming the reinvestment of dividends.
9
<PAGE>
In addition, the Performance Goals may be based upon the attainment of
specified levels of Company (or subsidiary, division or other operational unit
of the Company) performance under one or more of the measures described above
relative to the performance of other corporations. To the extent permitted under
Code Section 162(m) (including, without limitation, compliance with any
requirements for stockholder approval) but only to that extent, the Committee
may: (i) designate additional business criteria on which the Performance Goals
may be based, or (ii) adjust, modify or amend the aforementioned business
criteria.
6.3 Maximum Performance Award. The maximum Performance Award payable to
a Participant (or credited to his account for future payment) based on
achievement of the Performance Goals for a Performance Period is $1,000,000 for
each Plan Year during the Performance Period, including without limitation any
short Plan Year commencing upon the Spinoff of the Company by U.S. Industries,
Inc. to its stockholders to the end of the fiscal year in which it occurs. The
foregoing shall not limit the amount payable to a Participant in a Plan Year so
long as the amounts are from different Performance Periods.
6.4 Payment Date; Committee Certification. The Performance Awards may
be paid at such time after the Performance Period in which they are earned, as
determined by the Committee but not before the Committee certifies in writing
that the Performance Goals specified pursuant to subsection 6.2 were, in fact,
satisfied (except to the extent permitted under Code Section 162(m) and provided
in Section 8 with regard to Change in Control of the Company, death or certain
other termination situations). The Committee shall use its best efforts to make
a determination with regard to satisfaction of the Performance Goals within
10
<PAGE>
two and one-half (2 1/2) months after the end of each Performance Period. The
Committee may defer payment of any Performance Award and may place such
additional conditions on payment thereof as it shall determine.
6.5 Change in Control. In the event of a Change in Control of the
Company, any unpaid portion of any Performance Award that has been earned and
certified, but is being deferred subject to payment conditions shall immediately
fully vest and be paid out (subject to the minimum reduction, if any, required
to satisfy the requirements of Code Section 162(m)).
7. LONG TERM INCENTIVE PLAN AWARD PROGRAM
7.1 Long Term Incentive Plan Award. Except as otherwise determined by
the Committee with regard to any Performance Period, each Participant who is
entitled to receive a Performance Award for a Performance Period shall, subject
to subsection 7.2 and Section 8, also be entitled to be credited with a Long
Term Incentive Plan Award in an amount equal to thirty percent (30%) of his
Performance Award.
7.2 Allocation of Long Term Incentive Plan Award. The Participant's
Long Term Incentive Plan Award for any Performance Period shall be allocated to
the unfunded bookkeeping account maintained for the Participant under the LCA
Group Inc. Long Term Incentive Plan or any successor plan so long as such plan
provides for increase in value based only on either a reasonable rate of
interest or on one or more predetermined actual investments (whether or not
actually invested therein), such that the amount payable by the employer at the
later date will be based on the actual rate of return of a specific investment
(including any
11
<PAGE>
decrease as well as any increase in the value of an investment). Such allocation
shall be credited retroactively as of the end of the Performance Period for
which it is credited.
7.3 Maximum Long Term Incentive Plan Award. The maximum amount of Long
Term Incentive Plan Awards that may, in accordance with subsection 7.1, be
allocated to a Participant for a Performance Period is $300,000 for each Plan
Year during the Performance Period and any such Long Term Incentive Plan Award
shall (between the date as of which such award is credited pursuant to
subsection 7.2 and the payment date) not increase by a measuring factor for each
fiscal year greater than the interest rate on thirty (30) year Treasury bonds on
the first business day of such fiscal year compounded annually. The foregoing
shall not limit the amount allocable to a Participant for any Plan Year so long
as the amounts are from different Performance Periods.
7.4 Payment Date. The Participant shall have no right to receive
payment of the Long Term Incentive Plan Awards until he has a right to receive
such amounts under the terms of the LCA Group Inc. Long Term Incentive Plan or a
successor plan.
8. PARTIAL AWARDS
The Committee, in its sole and absolute discretion, may make a full or
Pro Rata Award to Participants for a Performance Period in circumstances that
the Committee deems appropriate including, but not limited to, a Participant's
death, disability, retirement or other termination of employment during such
Performance Period and the Committee shall be required to make at least a Pro
Rata Award through the date of a Change in Control of the
12
<PAGE>
Company to each Participant who is a Participant at the time of such Change in
Control. All such Awards shall be based on achievements of the Performance Goals
for the Performance Period except that, to the extent permitted under Code
Section 162(m), in the case of death, disability or Change in Control of the
Company during the Performance Period (or such other termination situations as
permitted under Code Section 162(m)) an amount equal to or less than any
Individual Target Awards may be made by the Committee either during or after the
Performance Period without regard to actual achievement of the Performance
Goals. Furthermore, upon a Change in Control of the Company the Committee may,
in its sole discretion but only to the extent permitted under Code Section
162(m), make an Award (payable immediately) equal to a Pro Rata portion (through
the date of the Change in Control of the Company) of the Individual Target Award
payable upon achieving, but not surpassing, the Performance Goals for the
relevant Performance Period; with, if so determined by the Committee, a
corresponding Long Term Incentive Plan Award. Any such immediate Pro Rata
payment and Long Term Incentive Plan Award shall be offset against any other
Award of the same types made for such Performance Period under this Plan.
9. NON-ASSIGNABILITY
No Award under this Plan or payment thereof nor any right or benefit
under this Plan shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance, garnishment, execution or levy of any kind or charge, and
any attempt to anticipate, alienate, sell, assign, pledge, encumber and to the
extent permitted by applicable law, charge, garnish,
13
<PAGE>
execute upon or levy upon the same shall be void and shall not be recognized or
given effect by the Company.
10. NO RIGHT TO EMPLOYMENT
Nothing in the Plan or in any notice of award pursuant to the Plan
shall confer upon any person the right to continue in the employment of the
Company or one of its subsidiaries or affiliates nor affect the right of the
Company or any of its subsidiaries or affiliates to terminate the employment of
any Participant.
11. AMENDMENT OR TERMINATION
While the Company hopes to continue the Plan indefinitely, it reserves
the right in its Board (or a duly authorized committee thereof) to amend,
suspend or terminate the Plan or to adopt a new plan in place of this Plan at
any time; provided, that no such amendment shall, without the prior approval of
the stockholders of the Company in accordance with the laws of the State of
Delaware to the extent required under Code Section 162(m): (i) alter the
Performance Goals as set forth in Section 6.2; (ii) increase the maximum amounts
set forth in subsections 6.3 and 7.3 hereof, except to the extent permitted
under Code Section 162(m) to substitute an approximately equivalent rate in the
event that the thirty (30) year Treasury bond rate ceases to exist; (iii) change
the class of eligible employees set forth in Section 4(a); or (iv) implement any
change to a provision of the Plan requiring stockholder approval in order for
the Plan to continue to comply with the requirements of Code Section 162(m).
Furthermore, no amendment, suspension or termination shall, without the consent
of the Participant, alter or
14
<PAGE>
impair a Participant's right to receive payment of an Award for a Performance
Period otherwise payable hereunder.
12. SEVERABILITY
In the event that any one or more of the provisions contained in the
Plan shall, for any reason, be held to be invalid, illegal or unenforceable, in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of the Plan and the Plan shall be construed as if such
invalid, illegal or unenforceable provisions had never been contained therein.
13. WITHHOLDING
The Company shall have the right to make such provisions as it deems
necessary or appropriate to satisfy any obligations it may have to withhold
federal, state or local income or other taxes incurred by reason of payments
pursuant to the Plan.
14. GOVERNING LAW
This Plan and any amendments thereto shall be construed, administered,
and governed in all respects in accordance with the laws of the State of
Delaware (regardless of the law that might otherwise govern under applicable
principles of conflict of laws).
15
<PAGE>
EXHIBIT A
Change in Control of the Company shall mean that one (1) of the
following have occurred:
(i) any "person" as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act") (other than
the Company, any trustee or other fiduciary holding securities under
any employee benefit plan of the Company, or any company owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of Common Stock,
$.01 par value per share, of the Company ("Common Stock")), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing twenty- five percent (25%) or more of the combined voting
power of the Company's then outstanding securities;
(ii) during any period of two (2) consecutive years individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in
paragraph (i), (iii), or (iv) of this section) whose election by the
Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still
in office who
16
<PAGE>
either were directors at the beginning of the two-year period or whose
election or nomination for election was previously so approved, cease
for any reason to constitute at least a majority of the Board;
(iii) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in
the voting securities 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 fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that
a merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no person acquires more
than twenty- five percent (25%) of the combined voting power of the
Company's then outstanding securities shall not constitute a Change in
Control of the Company; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or the consummation of the sale or
disposition by the Company of all or substantially all of the Company's
assets other than (x) the sale or disposition of all or substantially
all of the assets of the Company to a person or persons who
beneficially own,
17
<PAGE>
directly or indirectly, at least fifty percent (50%) or more of
the combined voting power of the outstanding voting securities of the
Company at the time of the sale or (y) pursuant to a spinoff type
transaction, directly or indirectly, of such assets to the stockholders
of the Company.
18
