EXHIBIT 10.02
EMPLOYEE MATTERS
AGREEMENT
This Employee Matters Agreement,
dated as of January 10, 2006, is between Alberto-Culver Company, a
Delaware corporation (“ Alberto-Culver ”), and
Sally Holdings, Inc., a Delaware corporation (“ Spinco
”).
RECITALS
WHEREAS, Alberto-Culver and Spinco
have entered into a Separation Agreement dated as of the date
hereof (the “ Separation Agreement ”) pursuant
to which Alberto-Culver will distribute to the holders of common
stock, $0.22 par value per share, of Alberto-Culver (“
Alberto-Culver Common Stock ”) all of the outstanding
shares of common stock, no par value per share, of Spinco (“
Spinco Common Stock ”) on a pro rata basis (the
“ Distribution ”);
WHEREAS, immediately following the
Distribution, pursuant to the terms of the Agreement and Plan of
Merger (the “ Merger Agreement ”), dated as of
the date hereof, among Alberto-Culver, Spinco, Regis Corporation, a
Minnesota corporation (“ Regis ”), Roger Merger
Inc., a Delaware corporation and a direct, wholly owned Subsidiary
of Regis (“ Merger Sub ”) and Roger Merger Subco
LLC, a Delaware limited liability company and a wholly owned
subsidiary of Regis (“ Subco ”), Merger Sub will
merge with and into Spinco with Spinco continuing as the surviving
corporation (the “ Merger ”) and immediately
following the Merger, Spinco will merge with and into Subco (the
“ Subsequent Merger ”); and
WHEREAS, in connection with the
Distribution, Alberto-Culver and Spinco desire to enter into this
Employee Matters Agreement (the “ Agreement
”).
NOW, THEREFORE, in consideration of
the mutual agreements contained herein and in the Separation
Agreement, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the
following terms shall have the meanings set forth below.
Capitalized terms used but not defined herein shall have the
meanings set forth in the Separation Agreement.
1.01 “ Alberto-Culver
Option ” means
an option to acquire shares of Alberto-Culver Common
Stock.
1.02 “ Alberto-Culver
Option Plan ” means (a) the Alberto-Culver Employee Stock
Option Plan of 2003 and (b) the Alberto-Culver Employee Stock
Option Plan of 1988.
1.03 “ Alberto-Culver
Pre-Distribution Stock Price ” means the closing price per share of
Alberto-Culver Common Stock on the last full Business Day (as
defined in the Merger Agreement) occurring before (i) the
Distribution Date or (ii) if earlier, the date on which
Alberto-Culver Common Stock begins to trade
“ex-dividend.”
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1.04 “ Benefit Plans
” means Pension
Plans, Welfare Plans and Non-ERISA Benefit Arrangements.
1.05 “ COBRA
” means the
Consolidated Omnibus Budget Reconciliation Act of 1985, as codified
at Part 6 of Subtitle B of Title I of ERISA and at section 4980B of
the Code.
1.06 “ Code
” means the U.S.
Internal Revenue Code of 1986, as amended.
1.07 “ ERISA
” means the
Employee Retirement Income Security Act of 1974, as amended, 29
U.S.C. §1001, et seq .
1.08 “ Former Spinco
Employee ” means an individual whose employment with the
Spinco Group was terminated prior to the Distribution Time and who,
subsequent to such termination, was not employed by the
Alberto-Culver Group.
1.09 “ Intrinsic
Value ” means,
in the case of an Alberto-Culver Option prior to the Distribution
Date, the excess, if any, of the Alberto-Culver Pre-Distribution
Stock Price over the exercise price per share of Alberto-Culver
Common Stock subject to such Alberto-Culver Option, multiplied by
the number of shares of Alberto-Culver Common Stock subject to such
Alberto-Culver Option.
1.10 “ IRS
” means the U.S.
Internal Revenue Service.
1.11 “ Non-ERISA Benefit
Arrangement ” means each contract, agreement, policy,
practice, program, plan, trust or arrangement, other than a Pension
Plan or Welfare Plan, providing for benefits, perquisites or
compensation of any nature to any Spinco Employee or Former Spinco
Employee, or to any family member, dependent or beneficiary of any
such Spinco Employee or Former Spinco Employee, including, without
limitation, disability, severance, health, dental, life, accidental
death and dismemberment, travel and accident, tuition
reimbursement, supplemental unemployment, vacation, sick, personal
or bereavement days, holidays, retirement, deferred compensation,
profit sharing, bonus, stock-based compensation or other forms of
incentive compensation.
1.12 “ Pension Plan
” means any pension
plan as defined in section 3(2) of ERISA, without regard to
sections 4(b)(4) or 4(b)(5) of ERISA.
1.13 “ Restricted
Stock ” means
shares of Alberto-Culver Common Stock held by Spinco Employees that
are subject to transfer restrictions, other than by reason of
applicable securities laws, and a substantial risk of forfeiture,
including shares granted pursuant to (a) the Alberto-Culver 2003
Restricted Stock Plan and (b) the Alberto-Culver 1994 Restricted
Stock Plan.
1.14 “ Spinco
Employee ” means any individual who, at the Distribution
Time, is either actively employed by, or on an approved leave of
absence from, a member of the Spinco Group. For purposes of
clarity, the person set forth on Schedule A shall be neither a
“Spinco Employee” nor a “Former Spinco
Employee.”
1.15 “ Spinco Option
” means an option
to acquire shares of Spinco Common Stock.
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1.16 “ Spinco
Post-Distribution Stock Price ” means the value of one share of Spinco Common
Stock, which shall be equal to the product of (i) the Exchange
Ratio (as defined in the Merger Agreement) and (ii) the closing
price per share of Regis Common Stock (as defined in the Merger
Agreement) on the last full Business Day occurring before (A) the
Distribution Date or (B) if earlier, the date on which
Alberto-Culver Common Stock begins to trade
“ex-dividend.”
1.17 “ U.S. ” means the
United States of America.
1.18 “ Welfare Plan
” means any
employee welfare plan as defined in section 3(1) of ERISA, without
regard to sections 4(b)(4) or 4(b)(5) of ERISA.
ARTICLE II
SPINCO EMPLOYEE
MATTERS
2.01 Employment
. Each Spinco Employee shall be an
employee of a member of the Spinco Group immediately following the
Distribution Time.
2.02 Severance Obligations
.
(a) It is not intended that any
Spinco Employee or Former Spinco Employee will be entitled to
termination or severance benefits solely as a result of the
Distribution, Merger, Subsequent Merger or any other transaction
contemplated by this Agreement or the Merger Agreement (other than
payments or benefits with respect to Spinco Employees who separate
from service in connection with such transactions). Alberto-Culver
shall indemnify and hold harmless Spinco in the event that any
Spinco Employee or Former Spinco Employee obtains a final,
nonappealable judgment from a Governmental Entity declaring that
such Spinco Employee or Former Spinco Employee is entitled to
severance benefits under an Alberto-Culver severance plan or
agreement solely as a result of the Distribution, Merger,
Subsequent Merger or any other transaction contemplated by this
Agreement or the Merger Agreement; provided, however, that, for the
avoidance of doubt, Alberto-Culver shall be under no such
obligation with respect to any Spinco Employee whose employment
with the Spinco Group or Regis or any of its Affiliates terminates
after the Distribution. For purposes of this Section 2.02(a)
, Alberto-Culver shall determine in its sole discretion whether any
judgment or determination by a Governmental Entity shall be
appealed, shall notify Spinco in writing of such determination, and
shall pay or reimburse each member of the Spinco Group for its
reasonable expenses incurred in connection with any such appeal. If
Alberto-Culver notifies Spinco in writing that a judgment or
determination by a Governmental Entity shall not be appealed, such
determination shall be deemed a final, nonappealable judgment from
a Governmental Entity as set forth in the first sentence of this
Section 2.02(a).
(b) Except as otherwise provided in
Section 2.02(a) and Section 2.02(c) , from and after
the Distribution Time, Spinco shall assume and be fully responsible
for, and neither Alberto-Culver nor any of its Affiliates shall
have any liability or responsibility for, any termination or
severance payment or benefit obligations with respect to Spinco
Employees or Former Spinco Employees payable after the Distribution
Time, including any severance payments owed, but not yet paid, to
any Former Spinco Employee.
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(c) Alberto-Culver shall retain and
be fully responsible for, and no member of the Spinco Group shall
have any liability or responsibility for, any termination or
severance payments or benefit obligations (i) with respect to the
person set forth on Schedule A or (ii) that become payable in
connection with a termination of employment that occurs, or a
notice of employment termination that is provided, at or prior to
the Distribution Time under a Termination Agreement among
Alberto-Culver, Spinco and each of the Spinco Employees listed on
Schedule B.
2.03 Personnel Records
.
(a) Subject to Applicable Laws, all
information and records regarding employment and personnel matters
of Spinco Employees and Former Spinco Employees shall be retained
after the Distribution Time by Spinco in accordance in all material
respects with Applicable Laws relating to the collection, storage,
retention and disclosure of such records. Access to such records
after the Distribution Time will be provided to Alberto-Culver in
accordance with Article VI of the Separation Agreement.
Notwithstanding the foregoing, Alberto-Culver shall retain
reasonable access, in accordance with Applicable Laws, to those
records necessary to Alberto-Culver’s continued
administration of any plans or programs on behalf of Spinco
Employees and Former Spinco Employees after the Distribution Time
or as otherwise required by Applicable Laws for so long as said
administration continues pursuant to this Agreement or such longer
period as required by Applicable Laws. Alberto-Culver shall also
retain copies of any confidentiality and non-compete agreements
with any Spinco Employee or Former Spinco Employee in which
Alberto-Culver has an interest.
(b) Alberto-Culver shall retain all
information and records regarding employment and personnel matters
of Spinco Employees and Former Spinco Employees and in
Alberto-Culver’s possession immediately after the
Distribution Time, but only to the extent Alberto-Culver is
required to do so under Applicable Laws relating to the collection,
storage, retention and disclosure of such records. Access to such
records after the Distribution Time will be provided to Spinco in
accordance with Article VI of the Separation Agreement.
Notwithstanding the foregoing, Spinco shall retain reasonable
access, in accordance with Applicable Laws, to those records
necessary to Spinco’s continued administration of any plans
or programs on behalf of Spinco Employees and Former Spinco
Employees after the Distribution Time or as otherwise required by
Applicable Laws for so long as said administration continues
pursuant to this Agreement or such longer period as required by
Applicable Laws. Spinco shall also retain any confidentiality and
non-compete agreements with any Spinco Employee or Former Spinco
Employee.
ARTICLE III
WELFARE PLANS
3.01 Cessation of
Participation in Alberto-Culver Welfare Plans
. Except as specifically provided in
this Agreement, each member of the Spinco Group shall cease to be a
participating employer in all Welfare Plans sponsored by
Alberto-Culver (the “ Alberto-Culver Welfare Plans
”), and participation in the Alberto-Culver Welfare Plans
will cease for all Spinco Employees and Former Spinco Employees, if
any, no later than at the Distribution Time.
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3.02 Spinco’s Welfare
Plans . To the extent
applicable to any welfare plans in which Spinco Employees or Former
Spinco Employees participate after the Distribution Time that
provide benefits similar to the benefits that had been provided to
such employees under an Alberto-Culver Welfare Plan immediately
prior to the Distribution Time (the “ Spinco Welfare
Plans ”), Spinco shall cause the Spinco Welfare Plans to
recognize all coverage and contribution elections made by Spinco
Employees and Former Spinco Employees under the Alberto-Culver
Welfare Plans in effect for the period immediately prior to the
Distribution Time and shall apply such elections under the Spinco
Welfare Plans for the remainder of the period or periods for which
such elections are by their terms applicable, in each case to the
extent practicable. All beneficiary designations made by Spinco
Employees and Former Spinco Employees under the Alberto-Culver
Welfare Plans shall, to the extent applicable, be transferred to,
and be in full force and effect under, the Spinco Welfare Plans
until such beneficiary designations are replaced or revoked by the
Spinco Employee or Former Spinco Employee who made the beneficiary
designation.
3.03 Welfare Plan
Liabilities .
(a) Spinco Liabilities .
Spinco shall retain, and be solely responsible for, all Liabilities
incurred with respect to any Spinco Employee or Former Spinco
Employee after the Distribution Time under the Spinco Welfare
Plans, and neither Alberto-Culver nor the Alberto-Culver Welfare
Plans shall assume or retain any such Liabilities.
(b) Alberto-Culver
Liabilities . Alberto-Culver shall continue to be solely
responsible, after the Distribution Time, for all claims for
welfare benefits (and for any Liabilities arising as a result of
such claims), other than severance plan benefits, incurred by any
Spinco Employee or Former Spinco Employee, if any, under the
Alberto-Culver Welfare Plans at or prior to the Distribution Time,
whether such claims have been paid or remain unpaid as of such
date, and neither Spinco nor the Spinco Welfare Plans shall assume
or retain any such Liabilities. Claims for health benefits shall be
considered to be incurred prior to the Distribution Time if the
services related to such claims were provided prior to the
Distribution Time. Claims for all other welfare benefits shall be
considered to be incurred prior to the Distribution Time if the
date of loss occurred prior to the Distribution Time.
(c) COBRA and HIPAA
Liabilities . From and after the Distribution Time, Spinco
shall assume, and be solely responsible for, the continuation
coverage requirements under COBRA and the portability requirements
under the Health Insurance Portability and Accountability Act of
1996 (“ HIPAA ”) with respect to all Spinco
Employees and Former Spinco Employees and their qualified
beneficiaries, which for purposes of clarity shall exclude the
person set forth on Schedule A.
3.04 Flexible Spending
Accounts . From and
after the Distribution Time, Spinco shall retain, and be solely
responsible for, all Liabilities incurred by any Spinco Employee or
Former Spinco Employee under the flexible spending account plan
sponsored by Spinco, and Alberto-Culver shall not assume or retain
any such Liabilities.
3.05 Short-Term Disability
Benefits . From and
after the Distribution Time, Spinco shall retain, and be solely
responsible for, all short-term disability benefits payable to
Spinco Employees at or after the Distribution Time, and
Alberto-Culver shall not assume or retain any such
Liabilities.
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3.06 Long-Term Disability
Benefits . From and
after the Distribution Time, Alberto-Culver shall retain, and be
solely responsible for, all long-term disability benefits payable,
at or after the Distribution Time, to (a) Spinco Employees
receiving long-term disability benefits prior to the Distribution
Time, and (b) Former Spinco Employees, and Spinco shall not assume
or retain any such Liabilities.
ARTICLE IV
COMPENSATION
MATTERS
AND NON-ERISA BENEFIT
ARRANGEMENTS
4.01 Cessation of
Participation in Alberto-Culver Non-ERISA Benefit
Arrangements . Except
as specifically provided in this Agreement, each member of the
Spinco Group shall cease to be a participating employer in all
Alberto-Culver Non-ERISA Benefit Arrangements, and participation in
the Alberto-Culver Non-ERISA Benefit Arrangements will cease for
all Spinco Employees and Former Spinco Employees at the
Distribution Time.
4.02 Assumption of Employee
Related Obligations . From and after the Distribution Time, Spinco
shall assume or retain (as applicable), and be solely responsible
for, all Liabilities related to the agreements and obligations
described in Section 4.02(a) through Section 4.02(f)
and none of Alberto-Culver or any Affiliate of Alberto-Culver or
the Alberto-Culver Non-ERISA Benefit Arrangements shall retain or
have any further liability with respect to such
Liabilities.
(a) Agreements entered into between
the Alberto-Culver Group and Spinco Employees and Former Spinco
Employees, except as otherwise provided in this Agreement. For
purposes of clarity, Alberto-Culver shall retain all Liabilities
related to the Key Executive Deferred Compensation Agreement,
Severance Agreement and Termination Agreement, each between
Alberto-Culver and the person set forth on Schedule A. No Spinco
Employee or Former Spinco Employee is a party to a Key Executive
Deferred Compensation Agreement with Alberto-Culver.
(b) Agreements entered into between
the Alberto-Culver Group and independent contractors providing
services to the extent they are related to the Spinco
Business.
(c) All confidentiality and
non-compete agreements between the Alberto-Culver Group and Spinco
Employees, Former Spinco Employees and independent contractors;
provided, however, that Alberto-Culver and Spinco shall both enjoy
the rights and benefits under such agreements, with respect to such
party’s and its Affiliates’ business
operations.
(d) All wages, salary, ordinary
compensation and commissions payable to Spinco Employees or Former
Spinco Employees after the Distribution Time, whether earned before
or after the Distribution Time; provided that no such amounts were
earned for services as an employee of a member of the
Alberto-Culver Group. For purposes of clarity, Alberto-Culver shall
retain, and be solely responsible for, all wages, salary, ordinary
compensation and commissions payable to Spinco Employees or Former
Spinco Employees to the extent such amounts were earned for
services as an employee of a member of the Alberto-Culver
Group.
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(e) All bonus and incentive
compensation payment obligations, if any, payable after the
Distribution Time to Spinco Employees; provided, however, that
Spinco’s payment obligations with respect to the
Alberto-Culver 1994 Shareholder Value Incentive Plan and the
Alberto-Culver Management Incentive Plan are set forth exclusively
in Section 4.03(a), and not pursuant to this Section
4.02(e).
(f) All Liabilities and obligations
whatsoever of the Spinco Business with respect to claims made by or
with respect to Spinco Employees or Former Spinco Employees
relating to Non-ERISA Benefit Arrangements with respect to the
Spinco Business and not specifically assumed or retained by
Alberto-Culver pursuant to this Agreement. The term
“Liabilities” under this Section 4.02(f)
expressly excludes any payment of any kind, including insurance
coverage, indemnification rights and common law rights, for the
acts or omissions of or by any Spinco officer, director, employee
or agent, which are covered by the Separation Agreement.
The parties agree to negotiate in good faith
with applicable third parties to have the foregoing obligations
assumed by Spinco on terms no less favorable to Spinco than those
that apply to Alberto-Culver. Subject to the foregoing, if any of
the foregoing obligations cannot be assumed by Spinco for a reason
beyond the control of the parties hereto, including the refusal of
any such third party to agree to such an assumption, then Spinco
shall reimburse the Alberto-Culver Group for any such obligation
paid by the Alberto-Culver Group, in accordance with Section
7.03 , as though it had been assumed and paid by
Spinco.
4.03 Certain Incentive Plans;
Nonqualified Deferred Compensation .
(a) From and after the Distribution
Time, Spinco shall assume and thereafter be solely responsible for
all bonus and incentive compensation payment obligations earned by
Spinco Employees as of the Effective Time (as defined in the Merger
Agreement) under the Alberto-Culver 1994 Shareholder Value
Incentive Plan and the Alberto-Culver Management Incentive Plan.
Each such plan shall be treated as though a Change in Control, as
defined in such plan, occurred as of the Effective Time with
respect to all Spinco Employees. Not later than 28 days after the
Effective Time, Alberto-Culver shall (i) determine all bonus and
incentive payment obligations earned by Spinco Employees under the
1994 Shareholder Value Incentive Plan and
