FORM OF TERMINATION
AGREEMENT
This
Termination Agreement (this “Agreement”) is entered
into as of the Agreement Date by and among Alberto-Culver Company,
a Delaware corporation (the “Company”), Sally Holdings,
Inc., a Delaware corporation and a wholly-owned subsidiary of the
Company (“SHI”) and ___(the “Executive”)
and shall be deemed to be effective on the date the last party
signs this Agreement (the “Agreement Date”).
WHEREAS, the
Company and the Executive have entered into the Severance Agreement
dated as of ___(the “Severance Agreement”), pursuant to
which the Executive would be entitled to payments and benefits in
the event that the Executive’s employment were terminated
under the circumstances set forth in the Severance Agreement
following, among other things, the approval by the stockholders of
the Company of a transaction that constitutes a Change in Control
(as defined in the Severance Agreement);
WHEREAS, the
Company and CDRS Acquisition LLC (the “Investor”), an
affiliate of Clayton, Dubilier and Rice, Inc., a Delaware
corporation (“CD&R”), may enter into a transaction
whereby, among other things, (i) the Investor will acquire
approximately 47.5% of the common stock (the “Equity
Investment”) of an entity (“New Sally”) that will
own the Sally/BSG business of the Company, and (ii) the
Consumer Products and Sally/BSG businesses of the Company will be
split into two, separate publicly traded companies (the
“Separation” and, together with the Equity Investment
and the other transactions contemplated thereby, the
“Transaction”);
WHEREAS, the
Company intends to treat the Transaction as though it constitutes a
Change in Control for the purposes of, and as such term is defined
under, the Employee Stock Option Plan of 2003, Employee Stock
Option Plan of 1988, 2003 Restricted Stock Plan and 1994 Restricted
Stock Plan, and accordingly accelerate the vesting of all options
to purchase, and restricted shares of, common stock of the Company
issued under such plans, including those held by the Executive, and
the options to purchase shares of common stock of the Company held
by the Executive shall, effective upon the closing of the
Transaction, be converted into options to purchase shares of common
stock of New Sally;
WHEREAS, in
respect of the Company’s Management Incentive Plan and the
1994 Shareholder Value Incentive Plan, the Company intends to treat
the Transaction as though it constitutes a Change in Control (as
such term is defined therein) for the participants in such plans,
including the Executive; and
WHEREAS, the
Company, SHI and the Executive desire to enter into this Agreement
pursuant to which the Severance Agreement shall be terminated upon
the terms and subject to the conditions contained
herein.
NOW, THEREFORE,
in consideration of the premises and mutual covenants and
agreements contained herein, the Company, SHI and the Executive
hereby agree as follows:
1. Termination of
Severance Agreement. The Company and the Executive acknowledge that
at the effective time of the Separation (the “Effective
Time”), the Executive will cease to be an employee of the
Company or any of its subsidiaries. In order to resolve all issues
that could arise with respect to the Severance Agreement by reason
of the Transaction, the Executive, on behalf of the Executive and
any person claiming through the Executive, and the Company hereby
(a) agree that the Transaction, however effected, including
any actions taken in respect thereof or in connection therewith,
shall not be deemed to constitute a Change in Control for purposes
of the Severance Agreement and (b) terminate effective
immediately prior to the Effective Time the Severance Agreement and
any and all rights the Executive may have to any payments or
benefits pursuant to the Severance Agreement.
2. Consideration
for Termination.
(a) In
consideration for the termination of the Severance Agreement, SHI
and the Executive agree that in the event of the termination of the
Executive’s employment without Cause by SHI or by the
Executive for Good Reason on or after the Agreement Date and prior
to the second anniversary of the Effective Time, the Executive
shall be entitled to the payments and benefits set forth in
Schedule I hereto.
1
(b) As additional
consideration for the termination of the Severance Agreement, SHI
agrees that it and New Sally will enter into a new Severance
Agreement substantially in the form attached hereto as
Exhibit A (the “New Severance Agreement”), which
New Severance Agreement shall become effective at the Effective
Time.
If the
Executive shall be entitled to any payments or benefits pursuant to
the Severance Agreement or the New Severance Agreement in
connection with a Change in Control unrelated to the Transaction,
then the Executive shall not be entitled to any payments or
benefits hereunder.
For purposes of
this Section 2, the term “Cause” shall have the
meaning assigned to it in the Severance Agreement, provided that
(i) the Agreement Date shall be substituted for the term
“Change in Control” each place such term appears in
such definition, (ii) the term “Company” shall, to
the extent the context requires, be deemed to also refer to SHI and
its affiliates. “Good Reason” shall mean, without the
Executive’s consent, the occurrence of any of the following
circumstances during the period beginning on the Agreement Date and
ending on the second anniversary of the Effective Time unless such
circumstances are fully corrected prior to the expiration of the
fifteen (15) calendar day period following delivery to SHI and
its parent corporation of the Executive’s notice of intention
to terminate his employment for Good Reason describing such
circumstances in reasonable detail: (i) a reduction in the
Executive’s rate of annual base salary or (ii) a change
in location of the Executive’s principal office to a location
more than 20 miles from its current location.
3. Limitations on
Payments to the Executive. Solely for the purposes of the
computation of benefits under this Agreement and notwithstanding
any other provisions hereof, payments to the Executive under this
Agreement shall be reduced (but not below zero) so that the present
value, as determined in accordance with Section 280G(d)(4) of
the Internal Revenue Code of 1986, as amended (the
“Code”), of such payments plus any other payments that
must be taken into account for purposes of any computation relating
to the Executive under Section 280G(b)(2)(A)(ii) of the Code,
shall not, in the aggregate, exceed 2.99 times the
Executive’s “base amount,” as such term is
defined in Section 280G(b)(3) of the Code. Notwithstanding any
other provision hereof, no reduction in payments under the
limitation contained in the immediately preceding sentence shall be
applied to payments hereunder which do not constitute “excess
parachute payments” within the meaning of the Code. Any
payments in excess of the limitation of this Section 3 or
otherwise determined to be “excess parachute payments”
made to the Executive hereunder shall be deemed to be overpayments
which shall constitute an amount owing from the Executive to SHI
with interest from the date of receipt by the Executive to the date
of repayment (or offset) at the applicable federal rate under
Section 1274(d) of the Code, compounded semi-annually, which shall
be payable upon demand; provided, however, that no repayment shall
be required under this sentence if in the written opinion of tax
counsel satisfactory to the Executive and delivered to the
Executive and SHI such repayment does not allow such overpayment to
be excluded for federal income and excise tax purposes from the
Executive’s income for the year of receipt or afford the
Executive a compensating federal income tax deduction for the year
of repayment.
4. Withholding
Taxes. SHI may withhold from all payments due to the Executive (or
the Executive’s estate or beneficiaries) hereunder all taxes
which, by applicable federal, state, local or other law, are
required to be withheld therefrom.
5. Agreement Date;
Termination of Agreement. This Agreement shall be
effectiv
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