Sally Beauty Supply 2006 Annual Report Download - page 134

In addition, Alberto-Culver and Sally Holdings entered into a termination agreement with Mr. Winterhalter, President of Sally
Holdings. The termination agreement with Mr. Winterhalter acknowledges that the transactions under the investment agreement and
other transaction agreements are not a change in control for purposes of his severance agreement. In consideration for Mr.
Winterhalter entering into the agreement, he will be entitled to specified benefits if between June 19, 2006 and the second anniversary
of the transactions his employment is terminated by Sally Holdings without “cause” or by Mr. Winterhalter for “good reason”. In the
event of an eligible termination, Sally Holdings will:
• pay to Mr. Winterhalter a lump sum payment equal to two times his current salary plus two times the average dollar amount o
f
his actual or annualized annual bonus, paid or payable, to Mr. Winterhalter in respect of the five fiscal years of Alberto-Culver
or Sally Holdings immediately preceding the fiscal year in which the date of termination occurs provided that the multiple will
b
e increased to 2.99 times these amounts if the termination occurs after the effective time of the distributions, which payments
as of September 30, 2006, would be an amount equal to $2,096,000 and $3,133,520, respectively;
• for 18 months subsequent to the termination of employment, continue to provide Mr. Winterhalter with specified medical
benefits, subject to specified conditions; and
• provide outplacement services to the extent such services do not exceed $12,000 and are not provided more than one year
following the termination of his employment.
Under Mr. Winterhalter’ s termination agreement, “cause” is defined as either of the following:
• a material breach of his duties and responsibilities which do not differ in any material respect from duties and responsibilities
in effect prior to the date of the agreement, which is demonstrably willful and deliberate and which is committed in bad faith
or without reasonable belief that such breach is in the best interests of Alberto-Culver or Sally Holdings, and which is not
remedied in a reasonable period of time after receipt of written notice specifying such breach; or
• the commission by the executive of a felony involving moral turpitude.
and “good reason” means the occurrence of any of the following, without Mr. Winterhalter’ s consent, during the period beginning on
the date of the termination agreement and ending on the second anniversary of completion of the transactions unless such
circumstances are corrected within the 15-day period following delivery to Sally Holdings and its parent company of
Mr. Winterhalter’ s notice of intention to terminate his employment for “good reason”:
• certain material adverse changes in Mr. Winterhalter’ s duties, responsibilities, positions or status;
• a change in Mr. Winterhalter’ s reporting responsibilities;
• a reduction in Mr. Winterhalter’ s annual base salary;
• any requirement that Mr. Winterhalter relocate by more than 20 miles; or
• the failure of Sally Holdings or its affiliates to (i) provide welfare benefits, (ii) provide fringe benefits, (iii) provide paid
vacation or (iv) reimburse Mr. Winterhalter promptly for all reasonable employment expenses incurred by him, in accordance
with, in each case, the plans, practices, programs and policies as in effect generally at any time with respect to other peer
executives of Sally Holdings.
In addition, under Mr. Winterhalter’ s termination agreement, Sally Holdings and New Sally are obligated to enter into a new
severance agreement with Mr. Winterhalter upon completion of the transactions which provides for certain severance benefits if
within two years after a change in control of New Sally, he is terminated by New Sally without cause or terminates his employment
for good reason. Upon such termination, Mr. Winterhalter would be entitled (subject to reduction to the extent necessary to avoid
imposition of the Internal Revenue Code Section 4999 golden parachute excise tax) to:
• accrued base salary and a prorated annual bonus through the date of termination, and any compensation previously deferred;
• a lump sum payment equal to 2.99 times Mr. Winterhalter’ s current salary plus 2.99 times the average dollar amount of his
actual or annualized annual bonus, paid or payable, to Mr. Winterhalter in respect of the five fiscal years of Alberto-Culver or
Sally Holdings immediately preceding the fiscal year in which
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