Exhibit 10.1
FORM OF AMENDED AND
RESTATED
SEVERANCE
AGREEMENT
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT is
entered into as of
,
2008 (the “Effective Date”) by and between Sally Beauty
Holdings, Inc., a Delaware corporation (the
“Company’), and
(the “Executive”). This Agreement amends and restates
the Severance Agreement between the parties dated as of
November 16, 2006.
WHEREAS, the Executive is serving as a key
employee of the Company and his services and knowledge are valuable
to the Company in connection with the management of one or more of
the Company’s principal operating facilities, divisions,
departments or subsidiaries; and
WHEREAS, the Board (as defined in
Section 1) has determined that it is in the best interests of
the Company and its shareholders to secure the Executive’s
continued services and to ensure the Executive’s continued
dedication and objectivity in the event of any threat or occurrence
of, or negotiation or other action that could lead to, or create
the possibility of, a Change in Control (as defined in
Section 1) of the Company, without concern as to whether the
Executive might be hindered or distracted by personal uncertainties
and risks created by any such possible Change in Control, and to
encourage the Executive’s full attention and dedication to
the Company.
NOW, THEREFORE, for and in consideration of the
premises and the mutual covenants and agreements herein contained,
the Company and the Executive hereby agree as follows:
1.
Definitions
. As used in this Agreement, the
following terms shall have the respective meanings set forth
below:
(a)
“Board” means the Board
of Directors of the Company.
(b)
“Cause” means (1) a
material breach by the Executive of those duties and
responsibilities of the Executive which do not differ in any
material respect from the duties and responsibilities of the
Executive during the six-month period immediately prior to a Change
in Control (other than as a result of incapacity due to physical or
mental illness) which is demonstrably willful and deliberate on the
Executive’s part, which is committed in bad faith or without
reasonable belief that such breach is in the best interests of the
Company and which is not remedied in a reasonable period of time
after receipt of written notice from the Company specifying such
breach or (2) the commission by the Executive of a felony
involving moral turpitude.
(c)
“Change in Control”
means:
(1)
The occurrence of any one or more of
the following events:
(A)
The acquisition by any individual,
entity or group, including any “person” within the
meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act but specifically excluding the Investor or any
affiliate of the Investor (a “Person”), of beneficial
ownership within the meaning of Rule 13d-3 promulgated under
the Exchange Act of 20% or more of the combined voting power of the
then outstanding securities of the Company entitled to vote
generally in the election of directors (the “Outstanding
Company Voting Securities”); provided , however
, that a Change in Control shall not result from an acquisition of
Outstanding Company Voting Securities:
(i)
directly from the Company, except as
otherwise provided in Section 1(c)(2)(A);
(ii)
by the Company, except as otherwise
provided in Section 1(c)(2)(B);
(iii)
by an employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or
(iv)
by any corporation pursuant to a
reorganization, merger or consolidation involving the Company, if,
immediately after such reorganization, merger or consolidation,
each of the conditions described in clauses (i) and
(ii) of Section 1(c)(1)(C) shall be
satisfied.
(B)
The cessation for any reason of the
members of the Incumbent Board (as such term is defined in
Section 1(h)) to constitute at least a majority of the
Board.
(C)
Consummation of a reorganization,
merger or consolidation unless, in any such case, immediately after
such reorganization, merger or consolidation:
(i)
more than 50% of the combined voting
power of the then outstanding securities of the corporation
resulting from such reorganization, merger or consolidation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially
all of the individuals or entities who were the beneficial owners
of the combined voting power of all of the Outstanding Company
Voting Securities immediately prior to such reorganization, merger
or consolidation; and
(ii)
at least a majority of the members
of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such reorganization,
merger or consolidation.
(D)
The sale or other disposition of all
or substantially all of the assets of the Company other than
(x) pursuant to a tax-free spin-off of a subsidiary
or
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other business unit of the Company or
(y) to a corporation with respect to which, immediately after
such sale or other disposition:
(i)
more than 50% of the combined voting
power of the then outstanding securities thereof entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the
combined voting power of all of the Outstanding Company Voting
Securities immediately prior to such sale or other disposition;
and
(ii)
at least a majority of the members
of the board of directors thereof were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other
disposition.
(E)
Approval by the shareholders of the
Company of a plan of complete liquidation or dissolution of the
Company.
(2)
Notwithstanding the provisions of
Section 1(c)(1)(A):
(A)
No acquisition of Outstanding
Company Voting Securities shall be subject to the exception from
the definition of Change in Control contained in clause (i) of
Section 1(c)(1)(A) if such acquisition results from the
exercise of an exercise, conversion or exchange privilege unless
the security being so exercised, converted or exchanged was
acquired directly from the Company; and
(B)
for purposes of clause (ii) of
Section 1(c)(1)(A), if any Person (other than the Company or
any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the
Company) shall, by reason of an acquisition of Outstanding Company
Voting Securities by the Company, become the beneficial owner of
20% or more of the combined voting power of the Outstanding Company
Voting Securities, and such Person shall, after such acquisition of
Outstanding Company Voting Securities by the Company, become the
beneficial owner of any additional Outstanding Company Voting
Securities and such beneficial ownership is publicly announced,
such additional beneficial ownership shall constitute a Change in
Control.
(d)
“Company” means Sally
Beauty Holdings, Inc.
(e)
“Date of Termination”
means (1) the effective date on which the Executive’s
employment by the Company terminates as specified in a prior
written notice by the Company or the Executive, as the case may be,
to the other, delivered pursuant to Section 11 or (2) if
the Executive’s employment by the Company terminates by
reason of death, the date of death of the Executive.
(f)
“Exchange Act” means the
Securities Exchange Act of 1934, as amended.
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(g)
“Good Reason” means,
without the Executive’s express written consent, the
occurrence of any of the following events after a Change in
Control:
(1)
a material diminution in the
Executive’s authority, duties, or responsibilities as in
effect immediately prior to such Change in Control or as the same
may be increased from time to time thereafter;
(2)
a material diminution in the
authority, duties, or responsibilities of the supervisor to whom
the Executive is required to report, including a requirement that
the Executive report to a corporate officer or employee instead of
reporting directly to the Board;
(3)
a material reduction by the Company
in the Executive’s rate of annual base salary as in effect
immediately prior to such Change in Control or as the same may be
increased from time to time thereafter;
(4)
a material diminution in the budget
over which the Executive retains authority;
(5)
a material change in the geographic
location at which the Executive must perform services (it being
acknowledged that a change of 20 miles or more shall be a material
change); or
(6)
any other action or inaction that
constitutes a material breach by the Company of this Agreement,
including, without limitation, any failure by the Company to comply
with and satisfy Section 10(b) of this
Agreement.
A termination by the Executive shall
not constitute termination for Good Reason unless the Executive
shall first have delivered to the Company written notice setting
forth with specificity the occurrence deemed to give rise to a
right to terminate for Good Reason (which notice must be given no
later than 90 days after the occurrence of such event), and there
shall have passed a reasonable time (not less than 30 days) within
which the Company may take action to correct, rescind or otherwise
substantially reverse the occurrence supporting termination for
Good Reason as identified by the Executive.
(h)
“Incumbent Board” means
those individuals who, as of November 16, 2006, constitute the
Board, provided that:
(1)
any individual who becomes a
director of the Company subsequent to such date whose election, or
nomination for election by the Company’s shareholders, was
approved by the vote of at least a majority of the directors then
comprising the Incumbent Board shall be deemed to have been a
member of the Incumbent Board; and
(2)
no individual who was initially
elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act, or any other actual
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or threatened solicitation of proxies or
consents by or on behalf of any Person other than the Board shall
be deemed to have been a member of the Incumbent Board.
(i)
“Nonqualifying
Termination” means a termination of the Executive’s
employment (1) by the Company for Cause, (2) by the
Executive for any reason other than a Good Reason, (3) as a
result of the Executive’s death or (4) by the Company
due to the Executive’s absence from his duties with the
Company on a full-time basis for at least 180 consecutive days as a
result of the Executive’s incapacity due to physical or
mental illness.
(j)
“Termination Period”
means the period of time beginning with a Change in Control and
ending on the earlier to occur of (1) two years following such
Change in Control or (2) the Executive’s
death.
2.
Obligations of the
Executive . The Executive
agrees that in the event of a Change in Control, he shall not
voluntarily leave the employ of the Company without Good Reason
until 90 days following such Change in Control. The Executive
further agrees that in the event that any person or group attempts
a Change in Control, he shall not voluntarily leave the employ of
the Company during such attempted Change in Control unless an event
occurs which would have constituted Good Reason had it occurred
following a Change in Control (for purposes of determining whether
such an event would have constituted Good Reason had it occurred
following a Change in Control, the definition of Good Reason shall
be interpreted as if a Change in Control had occurred when such
attempted Change in Control became known to the Board). The
Executive acknowledges that if he leaves the employ of the Company
for any reason prior to a Change in Control, he shall not be
entitled to any payment or benefit pursuant to this
Agreement.
3.
Payments Upon Termination of
Employment .
(a)
If during the Termination Period the
employment of the Executive shall terminate, other than by reason
of a Nonqualifying Termination, then the Company shall pay to the
Executive (or the Executive’s beneficiary or estate) within
30 days following the Date of Termination (or such later date as
may be required by Section 17 hereof), as compensation for
services rendered to the Company:
(1)
a cash amount equal to the sum of
(i) the Executive’s base salary from the Company and its
affiliated companies through the Date of Termination, to the extent
not theretofore paid, (ii) an amount equal to the
Executive’s annual bonus in an amount determined in
accordance with the terms of the Company’s annual incentive
plan, multiplied by a fraction, the numerator of which is the
number of days in the Company’s fiscal year prior to the Date
of Termination and the denominator of which is 365 (which amount,
notwithstanding the foregoing, shall be paid when and as bonuses
under such plan are ordinarily paid), and (iii) any accrued
vacation pay, in each case to the extent not theretofore paid;
plus
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(2)
provided that the Company has
received a customary release (which release shall extend to all
claims against the Company, the Investor and their respective
affiliates and agents) signed by the Executive, a lump sum payment
equal to [2.99][2.49][1.99][1.49] times the Executive’s
annual base salary at the Date of Termination from the Company and
its affiliated companies plus [2.99][2.49][1.99][1.49] times
the average of the dollar amount of the Executive’s actual or
annualized (for any fiscal year consisting of l
