EMPLOYEE MATTERS AGREEMENT

Exhibit 10.02

This Employee Matters Agreement, dated as of June 19, 2006, is among New Xxxxx Holdings, Inc., a Delaware corporation (“New Xxxxx”), Xxxxx Holdings, Inc., a Delaware corporation (“Sally”) (New Sally and Sally, collectively the “Sally Parties”), Xxxxxxx-Xxxxxx Company, a Delaware corporation (“Xxxxxxx-Xxxxxx”) and New Aristotle Holdings, Inc., a Delaware corporation (“New Xxxxxxx-Xxxxxx”) (Xxxxxxx-Xxxxxx and New Xxxxxxx-Xxxxxx, collectively the “Xxxxxxx-Xxxxxx Parties”).

RECITALS

WHEREAS, the Xxxxx Parties, the Xxxxxxx-Xxxxxx Parties and New Aristotle Company, a Delaware corporation, have entered into an Investment Agreement, dated as of the date hereof (the “Investment Agreement”) with CDRS Acquisition LLC, a Delaware limited liability company (“Investor”), pursuant to which Investor will purchase shares of New Xxxxx common stock (“New Xxxxx Common Stock”) for $575 million (“Equity Investment”);

WHEREAS, in connection with the transactions contemplated by the Investment Agreement, one or more of the members of the Xxxxx Group will incur $1.85 billion of indebtedness (the “Debt Financing”), so that between the Equity Investment and Debt Financing, a total of $2.425 billion is raised;

WHEREAS, the Board of Directors of Xxxxxxx-Xxxxxx has determined that it is in the best interests of Xxxxxxx-Xxxxxx and its stockholders to effect the transactions contemplated by the Agreement and the Investment Agreement;

WHEREAS, New Sally, Sally, Xxxxxxx-Xxxxxx and New Xxxxxxx-Xxxxxx have entered into a Separation Agreement dated as of the date hereof (the “Separation Agreement”) pursuant to which New Xxxxx will distribute to the holders of shares of New Xxxxx Common Stock, other than the shares held in the treasury of New Xxxxx, on a pro rata basis, (i) all of the issued and outstanding shares of New Xxxxxxx-Xxxxxx common stock (“New Xxxxxxx-Xxxxxx Common Stock”) (the “Share Distribution”) and (ii) a cash dividend of $25 per share (the “Cash Distribution”) (the Share Distribution and the Cash Distribution collectively referred to herein as the “Distributions”); and

WHEREAS, in connection with the Distributions, New Sally, Sally, Xxxxxxx-Xxxxxx and New Xxxxxxx-Xxxxxx desire to enter into this Employee Matters Agreement (this “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 “Xxxxxxx-Xxxxxx Common Stock” means the common stock, $0.22 par value per share, of Xxxxxxx-Xxxxxx.

1.02 “Xxxxxxx-Xxxxxx Employee” means any individual who, at the Distributions Time, is either actively employed by, or on an approved leave of absence from, a member of the Xxxxxxx-Xxxxxx Group.

1.03 “Xxxxxxx-Xxxxxx Option” means an option to acquire shares of Xxxxxxx-Xxxxxx Common Stock.

1.04 “Xxxxxxx-Xxxxxx Option Plan” means (a) the Xxxxxxx-Xxxxxx Employee Stock Option Plan of 2003, (b) the Xxxxxxx-Xxxxxx Employee Stock Option Plan of 1988, (c) the Xxxxxxx-Xxxxxx 2003 Stock Option Plan for Non-Employee Directors and (d) the Xxxxxxx-Xxxxxx 1994 Stock Option Plan for Non-Employee Directors.

1.05 “Xxxxxxx-Xxxxxx Pre-Distribution Stock Price” means the average of the high and low trading prices per share of Xxxxxxx-Xxxxxx Common Stock on the last Business Day (as defined in the Investment Agreement) occurring before the date on which Xxxxxxx-Xxxxxx Common Stock begins to trade “ex-distribution.”

1.06 “Benefit Plans” means Pension Plans, Welfare Plans and Non-ERISA Benefit Arrangements.

1.07 “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.

1.08 “Code” means the U.S. Internal Revenue Code of 1986, as amended.

1.09 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, 29 X.X.X. §0000, et seq.

1.10 “Former Xxxxxxx-Xxxxxx Employee” means an individual whose employment with the Xxxxxxx-Xxxxxx Group was terminated prior to the Distributions Time and who, subsequent to such termination, was not employed by the Xxxxx Group.

1.11 “Former Xxxxx Employee” means an individual whose employment with the Xxxxx Group was terminated prior to the Distributions Time and who, subsequent to such termination, was not employed by the Xxxxxxx-Xxxxxx Group.

1.12 “Intrinsic Value” means, in the case of a New Xxxxx Option prior to the Distributions Time, the excess, if any, of the New Xxxxx Pre-Distribution Stock Price over the exercise price per share of New Xxxxx Common Stock subject to such New Xxxxx Option, multiplied by the number of shares of New Xxxxx Common Stock subject to such New Xxxxx Option.

1.13 “IRS” means the U.S. Internal Revenue Service.

1.14 “New Xxxxxxx-Xxxxxx Option” means an option to acquire shares of New Xxxxxxx-Xxxxxx Common Stock.

1.15 “New Xxxxxxx-Xxxxxx Post-Distribution Stock Price” means the average of the high and low trading prices per share of New Xxxxxxx-Xxxxxx Common Stock on the first full Business Day on which New Xxxxxxx-Xxxxxx Common Stock begins to trade on a “when issued” basis, or such other per share value as the Board of Directors of Xxxxxxx-Xxxxxx shall determine to be appropriate.

1.16 “New Xxxxx Option” means an option to acquire shares of New Xxxxx Common Stock.

1.17 “New Xxxxx Post-Distribution Stock Price” means the average closing price per share of New Xxxxx Common Stock over the first five full Business Days on which Xxxxxxx-Xxxxxx Common Stock begins to trade “ex-distribution.”

1.18 “New Xxxxx Pre-Distribution Stock Price” means the Xxxxxxx-Xxxxxx Pre-Distribution Stock Price.

1.19 “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 Xxxxxxx-Xxxxxx Employee, Former Xxxxxxx-Xxxxxx Employee, Xxxxx Employee or Former Xxxxx Employee, or to any family member, dependent or beneficiary of any such Xxxxxxx-Xxxxxx Employee, Former Xxxxxxx-Xxxxxx Employee, Xxxxx Employee or Former Xxxxx 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.

1.20 “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.

1.21 “Restricted Stock” means shares of Xxxxxxx-Xxxxxx Common Stock 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 Xxxxxxx-Xxxxxx 2003 Restricted Stock Plan, (b) the Xxxxxxx-Xxxxxx 1994 Restricted Stock Plan and (c) the Xxxxxxx-Xxxxxx Management Bonus Plan.

1.22 “Xxxxx Employee” means any individual who, at the Distributions Time, is either actively employed by, or on an approved leave of absence from, a member of the Xxxxx Group; provided that (i) solely for purposes of this Agreement (and not the Investment Agreement) and except as otherwise expressly provided herein, the person set forth on Schedule A shall be considered a “Xxxxx Employee” and not an Xxxxxxx-Xxxxxx Employee or former Xxxxxxx-Xxxxxx Employee and (ii) for the avoidance of doubt, the persons set forth on Schedule B shall be considered “Xxxxx Employees” and not Xxxxxxx-Xxxxxx Employees or Former Xxxxxxx-Xxxxxx Employees.

1.23 “U.S.” means the United States of America.

1.24 “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

EMPLOYEE MATTERS

2.01 Employment. Each Xxxxxxx-Xxxxxx Employee shall remain an employee of a member of the Xxxxxxx-Xxxxxx Group and each Xxxxx Employee shall remain an employee of the Xxxxx Group immediately following the Distributions Time.

2.02 Severance Obligations.

(a) It is not intended that any Xxxxxxx-Xxxxxx Employee, Former Xxxxxxx-Xxxxxx Employee, Xxxxx Employee or Former Xxxxx Employee will be entitled to termination or severance benefits solely as a result of the Distributions or any other transaction contemplated by this Agreement, the Separation Agreement or the Investment Agreement (other than payments or benefits with respect to employees who separate from service in connection with such transactions and are entitled to a termination or severance benefit on account of such separation). Xxxxxxx-Xxxxxx shall indemnify and hold harmless the Xxxxx Parties in the event that any Xxxxx Employee or Former Xxxxx Employee obtains a final, nonappealable judgment from a Governmental Entity declaring that such Xxxxx Employee or Former Xxxxx Employee is entitled to severance benefits under an Xxxxxxx-Xxxxxx xxxxxxxxx plan or agreement solely as a result of the Distributions or any other transaction contemplated by this Agreement, the Separation Agreement or the Investment Agreement; provided, however, that, for the avoidance of doubt, Xxxxxxx-Xxxxxx shall be under no such obligation with respect to any Xxxxx Employee whose employment with the Xxxxx Group terminates after the Distributions Time. For purposes of this Section 2.02(a), Xxxxxxx-Xxxxxx shall determine in its sole discretion whether any judgment or determination by a Governmental Entity shall be appealed, shall notify Xxxxx in writing of such determination, and shall pay or reimburse each member of the Xxxxx Group for its reasonable expenses incurred in connection with any such appeal. If Xxxxxxx-Xxxxxx notifies Xxxxx 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 this Section 2.02(a).

(b) Except as otherwise provided in Section 4.02(a)(i), from and after the Distributions Time, the Xxxxx Parties shall assume and be fully responsible for, and none of the Xxxxxxx-Xxxxxx Parties nor any of their respective Affiliates shall have any liability or responsibility for, any termination or severance payment or benefit obligations with respect to Xxxxx Employees or Former Xxxxx Employees payable after the Distributions Time, including any severance payments owed, but not yet paid, to any Former Xxxxx Employee. Except as expressly provided in Section 2.02(a), the Xxxxx Parties shall assume and be fully responsible for, and none of the Xxxxxxx-Xxxxxx Parties nor any of their respective Affiliates shall have any liability or responsibility for, obligations with respect to Xxxxx Employees under the Xxxxxxx-Xxxxxx Salaried Employees Special Severance Plan.

(c) Xxxxxxx-Xxxxxx shall retain and be fully responsible for, and none of the Xxxxx Parties nor any of their respective Affiliates shall have any liability or responsibility for, any termination or severance payments or benefit obligations with respect to Xxxxxxx-Xxxxxx Employees or Former Xxxxxxx-Xxxxxx Employees payable after the Distributions Time, including any severance payments owed, but not yet paid, to any Former Xxxxxxx-Xxxxxx Employee.

2.03 Personnel Records.

(a) Subject to Applicable Laws, all information and records regarding employment and personnel matters of Xxxxx Employees and Former Xxxxx Employees shall be retained after the Distributions Time by Xxxxx 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 Distributions Time will be provided to Xxxxxxx-Xxxxxx in accordance with Article VI of the Separation Agreement. Notwithstanding the foregoing, Xxxxxxx-Xxxxxx shall retain reasonable access, in accordance with Applicable Laws, to those records necessary to Xxxxxxx-Xxxxxx’x continued administration of any plans or programs on behalf of Xxxxx Employees and Former Xxxxx Employees after the Distributions 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. Xxxxxxx-Xxxxxx shall also retain copies of any confidentiality and non-compete agreements with any Xxxxx Employee or Former Xxxxx Employee in which Xxxxxxx-Xxxxxx has an interest.

(b) Subject to Applicable Laws, all information and records regarding employment and personnel matters of Xxxxxxx-Xxxxxx Employees and Former Xxxxxxx-Xxxxxx Employees shall be retained after the Distributions Time by Xxxxxxx-Xxxxxx 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 Distributions Time will be provided to Xxxxx in accordance with Article VI of the Separation Agreement. Notwithstanding the foregoing, Xxxxx shall retain reasonable access, in accordance with Applicable Laws, to those records necessary to Sally’s continued administration of any plans or programs on behalf of Xxxxxxx-Xxxxxx Employees and Former Xxxxxxx-Xxxxxx Employees after the Distributions 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. Xxxxx shall also retain copies of any confidentiality and non-compete agreements with any Xxxxxxx-Xxxxxx Employee or Former Xxxxxxx-Xxxxxx Employee in which Xxxxx has an interest.

ARTICLE III

WELFARE PLANS

3.01 Cessation of Participation in Xxxxxxx-Xxxxxx Welfare Plans. Except as specifically provided in this Agreement, each member of the Xxxxx Group shall cease to be a participating employer in all Welfare Plans sponsored by a member of the Xxxxxxx-Xxxxxx Group (the “Xxxxxxx-Xxxxxx Welfare Plans”), and participation in the Xxxxxxx-Xxxxxx Welfare Plans will cease for all Xxxxx Employees and Former Xxxxx Employees, if any, no later than at the Distributions Time.

3.02 Sally’s Welfare Plans. To the extent applicable to any Welfare Plans in which Xxxxx Employees or Former Xxxxx Employees participate after the Distributions Time that provide benefits similar to the benefits that had been provided to such employees under an Xxxxxxx-Xxxxxx Welfare Plan immediately prior to the Distributions Time (the “Xxxxx Welfare Plans”), Xxxxx shall cause the Xxxxx Welfare Plans to recognize all coverage and contribution elections made by Xxxxx Employees and Former Xxxxx Employees under the Xxxxxxx-Xxxxxx Welfare Plans in effect for the period immediately prior to the Distributions Time and shall apply such elections under the Xxxxx 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 Xxxxx Employees and Former Xxxxx Employees under the Xxxxxxx-Xxxxxx Welfare Plans shall, to the extent applicable, be transferred to, and be in full force and effect under, the Xxxxx Welfare Plans until such beneficiary designations are replaced or revoked by the Xxxxx Employee or Former Xxxxx Employee who made the beneficiary designation.

3.03 Welfare Plan Liabilities.

(a) Xxxxx Liabilities. Xxxxx shall retain, and the Xxxxx Parties shall be jointly and severally responsible for, all Liabilities incurred with respect to any Xxxxx Employee or Former Xxxxx Employee after the Distributions Time under the Xxxxx Welfare Plans, and none of the Xxxxxxx-Xxxxxx Parties or the Xxxxxxx-Xxxxxx Welfare Plans shall assume or retain any such Liabilities.

(b) Xxxxxxx-Xxxxxx Liabilities. Xxxxxxx-Xxxxxx shall continue to be solely responsible, after the Distributions 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 Xxxxx Employee or Former Xxxxx Employee, if any, under the Xxxxxxx-Xxxxxx Welfare Plans at or prior to the Distributions Time, whether such claims have been paid or remain unpaid as of such date, and neither Xxxxx nor the Xxxxx Welfare Plans shall assume or retain any such Liabilities. Claims for health benefits shall be considered to be incurred prior to the Distributions Time if the services related to such claims were provided prior to the Distributions Time. Claims for all other welfare benefits shall be considered to be incurred prior to the Distributions Time if the date of loss occurred prior to the Distributions Time.

(c) COBRA and HIPAA Liabilities. From and after the Distributions Time, the Xxxxx Parties shall assume, and be jointly and severally 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 Xxxxx Employees and Former Xxxxx Employees and their qualified beneficiaries.

3.04 Flexible Spending Accounts. From and after the Distributions Time, Xxxxx shall retain, and the Xxxxx Parties shall be jointly and severally responsible for, all Liabilities incurred by any Xxxxx Employee or Former Xxxxx Employee under the flexible spending account plan sponsored by Xxxxx, and no Xxxxxxx-Xxxxxx Party shall assume or retain any such Liabilities.

3.05 Short-Term Disability Benefits. From and after the Distributions Time, Xxxxx shall retain, and the Xxxxx Parties shall be jointly and severally responsible for, all short-term disability benefits payable to Xxxxx Employees at or after the Distributions Time, and no Xxxxxxx-Xxxxxx Party shall assume or retain any such Liabilities.

3.06 Long-Term Disability Benefits. From and after the Distributions Time, Xxxxxxx-Xxxxxx shall retain, and be solely responsible for, all long-term disability benefits payable, at or after the Distributions Time, to (a) Xxxxx Employees receiving long-term disability benefits prior to the Distributions Time, and (b) Former Xxxxx Employees, and Xxxxx shall not assume or retain any such Liabilities.

ARTICLE IV

COMPENSATION MATTERS

AND NON-ERISA BENEFIT ARRANGEMENTS

4.01 Cessation of Participation in Xxxxxxx-Xxxxxx Non-ERISA Benefit Arrangements. Except as specifically provided in this Agreement, each member of the Xxxxx Group shall cease to be a participating employer in all Xxxxxxx-Xxxxxx Non-ERISA Benefit Arrangements, and participation in the Xxxxxxx-Xxxxxx Non-ERISA Benefit Arrangements will cease for all Xxxxx Employees and Former Xxxxx Employees at the Distributions Time.

4.02 Assumption of Employee Related Obligations.

(a) From and after the Distributions Time, the Xxxxx Parties 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)(i) through Section 4.02(a)(vi) and none of any Xxxxxxx-Xxxxxx Party, any of their respective Affiliates or the Xxxxxxx-Xxxxxx Non-ERISA Benefit Arrangements shall retain or have any further liability with respect to such Liabilities.

(i) Agreements entered into between the Xxxxxxx-Xxxxxx Group and Xxxxx Employees and Former Xxxxx Employees, except as otherwise provided in this Agreement; provided, however, that Xxxxxxx-Xxxxxx shall retain all Liabilities related to (A) the Key Executive Deferred Compensation Agreement between Xxxxxxx-Xxxxxx and the Xxxxx Employee set forth on Schedule A and (B) all Liability under the Termination Agreement, dated as of June 18, 2006, among Xxxxxxx-Xxxxxx, Xxxxx Holdings, Inc. and the Sally Employee set forth on Schedule A with respect to the “Additional Payment” set forth on Schedule 1 to such Termination Agreement. No other Xxxxx Employee or Former Xxxxx Employee is a party to a Key Executive Deferred Compensation Agreement with Xxxxxxx-Xxxxxx.

(ii) Agreements entered into between a member of the Xxxxxxx-Xxxxxx Group and independent contractors providing services to the extent they are related to the Xxxxx Business.

(iii) All confidentiality and non-compete agreements between a member of the Xxxxxxx-Xxxxxx Group and Xxxxx Employees, Former Xxxxx Employees and independent contractors; provided, however, that Xxxxxxx-Xxxxxx, New Xxxxxxx-Xxxxxx, Xxxxx and New Xxxxx shall all enjoy the rights and benefits under such agreements, with respect to such party’s and their respective Affiliates’ business operations.

(iv) All wages, salary, ordinary compensation and commissions payable to Xxxxx Employees or Former Xxxxx Employees after the Distributions Time, whether earned before or after the Distributions Time.

(v) All bonus and incentive compensation payment obligations, if any, payable after the Distributions Time to Xxxxx Employees and Former Xxxxx Employees; provided, however, that Sally’s payment obligations with respect to the Xxxxxxx-Xxxxxx 1994 Shareholder Value Incentive Plan and the Xxxxxxx-Xxxxxx Management Incentive Plan are set forth exclusively in Section 4.03(a), and not pursuant to this Section 4.02(a)(v).

(vi) All Liabilities and obligations whatsoever of the Xxxxx Business with respect to claims made by or with respect to Xxxxx Employees or Former Xxxxx Employees relating to Non-ERISA Benefit Arrangements with respect to the Xxxxx Business and not specifically assumed or retained by Xxxxxxx-Xxxxxx pursuant to this Agreement. The term “Liabilities” under this Section 4.02(a)(vi) 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 Xxxxx or New Xxxxx 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 the Xxxxx Parties on terms no less favorable to the Xxxxx Parties than those that apply to Xxxxxxx-Xxxxxx. Subject to the foregoing, if any of the foregoing obligations cannot be assumed by the Xxxxx Parties 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 the Xxxxx Parties shall reimburse the Xxxxxxx-Xxxxxx Group for any such obligation paid by the Xxxxxxx-Xxxxxx Group, in accordance with Section 7.03, as though it had been assumed and paid by Xxxxx.

(b) From and after the Distributions Time, the Xxxxxxx-Xxxxxx Parties shall assume or retain (as applicable), and be solely responsible for, all Liabilities related to the agreements and obligations described in Section 4.02(b)(i) through Section 4.02(b)(vi) and none of any Xxxxx Party, any of their respective Affiliates or the Xxxxx Non-ERISA Benefit Arrangements shall retain or have any further liability with respect to such Liabilities.

(i) Agreements entered into between the Xxxxx Group and Xxxxxxx-Xxxxxx Employees and Former Xxxxxxx-Xxxxxx Employees, except as otherwise provided in this Agreement.

(ii) Agreements entered into between a member of the Xxxxx Group and independent contractors providing services to the extent they are related to the Xxxxxxx-Xxxxxx Business.

(iii) All confidentiality and non-compete agreements between a member of the Xxxxx Group and Xxxxxxx-Xxxxxx Employees, Former Xxxxxxx-Xxxxxx Employees and independent contractors; provided, however, that Xxxxxxx-Xxxxxx, New Xxxxxxx-Xxxxxx, Xxxxx and New Xxxxx shall all enjoy the rights and benefits under such agreements, with respect to such party’s and their respective Affiliates’ business operations.

(iv) All wages, salary, ordinary compensation and commissions payable to Xxxxxxx-Xxxxxx Employees or Former Xxxxxxx-Xxxxxx Employees after the Distributions Time, whether earned before or after the Distributions Time.

(v) All bonus and incentive compensation payment obligations, if any, payable after the Distributions Time to Xxxxxxx-Xxxxxx Employees.

(vi) All Liabilities and obligations whatsoever of the Xxxxxxx-Xxxxxx Business with respect to claims made by or with respect to Xxxxxxx-Xxxxxx Employees or Former Xxxxxxx-Xxxxxx Employees relating to Non-ERISA Benefit Arrangements with respect to the Xxxxxxx-Xxxxxx Business and not specifically assumed or retained by Xxxxx pursuant to this Agreement. The term “Liabilities” under this Section 4.02(b)(vi) 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 Xxxxxxx-Xxxxxx or New Xxxxxxx-Xxxxxx 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 the Xxxxxxx-Xxxxxx Parties on terms no less favorable to the Xxxxxxx-Xxxxxx Parties than those that apply to Xxxxx. Subject to the foregoing, if any of the foregoing obligations cannot be assumed by the Xxxxxxx-Xxxxxx Parties 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 the Xxxxxxx-Xxxxxx Parties shall reimburse the Xxxxx Group for any such obligation paid by the Xxxxx Group, in accordance with Section 7.03, as though it had been assumed and paid by Xxxxxxx-Xxxxxx.

4.03 Certain Incentive Plans; Nonqualified Deferred Compensation.

(a) From and after the Distributions Time, the Xxxxx Parties shall assume and thereafter be solely responsible for all bonus and incentive compensation payment obligations earned by Xxxxx Employees as of the Distributions Time under the Xxxxxxx-Xxxxxx 1994 Shareholder Value Incentive Plan and the Xxxxxxx-Xxxxxx Management Incentive Plan. Each such plan shall be treated as though a Change in Control, as defined in such plan, occurred as of the Distributions Time with respect to all employees and former employees. Not later than 28 days after the Distributions Time, Xxxxxxx-Xxxxxx shall (i) determine all bonus and incentive payment obligations earned by Xxxxx Employees and Former Xxxxx Employees under the 1994 Shareholder Value Incentive Plan and the Xxxxxxx-Xxxxxx Management Incentive Plan as of the Distributions Time, if any, and (ii) transfer to Xxxxx x xxxx payment equal to 62% of such amounts, which represents the after-tax cost to Xxxxx of paying such amounts.

(b) From and after the Distributions Time, the Xxxxx Parties shall assume and thereafter be solely responsible for all deferred compensation payment obligations credited to the accounts of all Xxxxx Employees and Former Xxxxx Employees as of the Distributions Time under the Xxxxxxx-Xxxxxx Executive Deferred Compensation Plan. Such plan shall be treated as though

a Change in Control, as defined in such plan, occurred as of the Distributions Time with respect to all Xxxxx Employees and Former Xxxxx Employees, and, subject to the transfer set forth in the next sentence, as soon as reasonably practicable after the Distributions Time, or at such other time as shall be required to comply with section 409A of the Code, Xxxxx shall pay to each such Xxxxx Employee and Former Xxxxx Employee the amount credited to his or her account under such plan as of the Distributions Time. As soon as reasonably practicable after the Distributions Time, Xxxxxxx-Xxxxxx shall (i) determine all deferred compensation payment obligations credited to the accounts of all Xxxxx Employees and Former Xxxxx Employees under the Xxxxxxx-Xxxxxx Executive Deferred Compensation Plan as though a Change in Control occurred as of the Distributions Time, and (ii) transfer to Xxxxx x xxxx payment equal to 62% of such amounts, which represents the after-tax cost to Xxxxx of paying such amounts.

4.04 Equity Compensation Plans.

(a) Xxxxxxx-Xxxxxx Options. Each Xxxxxxx-Xxxxxx Option held by an Xxxxxxx-Xxxxxx Employee, Former Xxxxxxx-Xxxxxx Employee, member or former member of the Xxxxxxx-Xxxxxx Board of Directors (a “Director”), Xxxxx Employee or Former Xxxxx Employee that is outstanding immediately before the Distributions Time shall be converted into a New Xxxxx Option. Each New Xxxxx Option shall have the same terms and conditions as the corresponding Xxxxxxx-Xxxxxx Option to which it relates and shall continue to be subject to the same terms and conditions as the applicable Xxxxxxx-Xxxxxx Option Plan; provided, however, that for purposes of the New Xxxxx Options, unless the context otherwise requires, all references to “Xxxxxxx-Xxxxxx” therein shall be deemed to be to “New Xxxxx” and all references to Xxxxxxx-Xxxxxx Common Stock shall be deemed to be to New Xxxxx Common Stock. For the avoidance of doubt, at no time will an Xxxxxxx-Xxxxxx Option be deemed to pertain to “New Xxxxxxx-Xxxxxx LLC” (as defined in the Investment Agreement). Xxxxxxx-Xxxxxx and New Xxxxx shall each take such actions as may be necessary to effectuate the provisions of this Section.

(b) Options Held by Xxxxxxx-Xxxxxx Employees and Directors. The New Xxxxx Options held by each Xxxxxxx-Xxxxxx Employee, each Former Xxxxxxx-Xxxxxx Employee, each Director (other than non-employee Directors who will serve as independent directors of New Xxxxx after the Distributions) and the Xxxxx Employee listed on Schedule A, which in each case are outstanding as of the Distributions Time, shall become fully exercisable and be converted into a New Xxxxxxx-Xxxxxx Option, effective immediately after the Distributions Time.

(i) The number of shares of New Xxxxxxx-Xxxxxx Common Stock subject to a New Xxxxxxx-Xxxxxx Option and the exercise price per share of New Xxxxxxx-Xxxxxx Common Stock subject to a New Xxxxxxx-Xxxxxx Option shall be determined in accordance with clauses (A) and (B) below (to be interpreted and applied in such a way as to minimize any adverse consequences of any possible application of FAS 123R and Section 409A of the Code to such conversions):

(A) The Intrinsic Value of each New Xxxxx Option shall be maintained under each corresponding New Xxxxxxx-Xxxxxx Option by setting the option exercise price of the New Xxxxxxx-Xxxxxx Option and/or the number of shares subject to such New Xxxxxxx-Xxxxxx Option to ensure that the aggregate difference between the New Xxxxxxx-Xxxxxx Post-Distribution Stock Price and the exercise price of the New Xxxxxxx-Xxxxxx Option equals such Intrinsic Value.

(B) The ratio of the per share option exercise price of the New Xxxxxxx-Xxxxxx Option to the New Xxxxxxx-Xxxxxx Post-Distribution Stock Price shall be fixed in such a way that does not increase the ratio of the per share exercise price of the related New Xxxxx Option to the New Xxxxx Pre-Distribution Stock Price.

(ii) Each New Xxxxxxx-Xxxxxx Option shall have the same terms and conditions as the corresponding New Xxxxx Option to which it relates (except as adjusted as provided herein) and shall continue to be subject to the same terms and conditions as the applicable New Xxxxx Option Plan; provided, however, that for purposes of the New Xxxxxxx-Xxxxxx Options, unless the context otherwise requires, all references to “New Xxxxx” therein shall, after the Distributions Time, be deemed to be to “New Xxxxxxx-Xxxxxx” and all references to New Xxxxx Common Stock shall be deemed to be to New Xxxxxxx-Xxxxxx Common Stock. New Xxxxx and New Xxxxxxx-Xxxxxx shall each take such actions as may be necessary to effectuate the provisions of this Section.

(c) Options Held by Xxxxx Employees and Future Xxxxx Directors. The New Xxxxx Options held by each Xxxxx Employee, other than the Xxxxx Employee listed on Schedule A, each Former Xxxxx Employee and each non-employee Director who will serve as an independent director of New Xxxxx after the Distributions, which in each case are outstanding as of the Distributions Time, shall become fully exercisable and be adjusted, effective immediately after the Distributions Time (each, an “Adjusted New Xxxxx Option”).

(i) The number of shares of New Xxxxx Common Stock subject to an Adjusted New Xxxxx Option and the exercise price per share of New Xxxxx Common Stock subject to an Adjusted New Xxxxx Option shall be determined in accordance with clauses (A) and (B) below (to be interpreted and applied in such a way as to minimize any adverse consequences of any possible application of FAS 123R and Section 409A of the Code to such adjustments):

(A) The Intrinsic Value of each New Xxxxx Option shall be maintained under each corresponding Adjusted New Xxxxx Option by setting the option exercise price of the Adjusted New Xxxxx Option and/or the number of shares subject to such Adjusted New Xxxxx Option to ensure that the aggregate difference between the New Xxxxx Post-Distribution Stock Price and the exercise price of the Adjusted New Xxxxx Option equals such Intrinsic Value.

(B) The ratio of the per share option exercise price of the Adjusted New Xxxxx Option to the New Xxxxx Post-Distribution Stock Price shall be fixed in such a way that does not increase the ratio of the per share exercise price of the related New Xxxxx Option to the New Xxxxx Pre-Distribution Stock Price.

(ii) Each Adjusted New Xxxxx Option shall have the same terms and conditions as the corresponding New Xxxxx Option to which it relates (except as adjusted as provided herein).

(d) Restricted Stock. The Xxxxxxx-Xxxxxx Board of Directors shall take all actions reasonably necessary to ensure that not later than the first business day after the record date of the Distributions all Xxxxxxx-Xxxxxx Employees and Xxxxx Employees shall be fully vested in any shares of Restricted Stock that they hold. All shares of Restricted Stock shall be treated the same as all other outstanding shares of Xxxxxxx-Xxxxxx Common Stock in the Merger and the Distributions, in accordance with the provisions of the Merger Agreement and the Separation Agreement.

4.05 Vacation and Leaves of Absence Programs. From and after the Distributions Time, Xxxxx shall recognize and assume all Liabilities for vacation, holiday, flex days and personal days off to the extent accrued by Xxxxx Employees before the Distributions Time in accordance with the written policies in effect with regard to such Liabilities during the period over which they were accrued. Xxxxx shall also honor the written terms of any approved leaves of absence with an expected duration of not more than 12 months (other than for military or other leave protected by Applicable Law, which shall not be subject to such limitation) after the Distributions Time to the extent such leaves are in effect with regard to Xxxxx Employees at the Distributions Time.

ARTICLE V

QUALIFIED RETIREMENT PLANS

5.01 Defined Contribution Plans.

(a) Xxxxx 401(k) Plan. From and after the Distributions Time, Xxxxx shall retain, and the Sally Parties shall be jointly and severally responsible for, all existing and future employer Liabilities related to the Xxxxx Beauty Company, Inc. 401(k) Savings Plan (the “Sally 401(k) Plan”) and the administration thereof, and the Xxxxxxx-Xxxxxx Parties shall not assume or retain any such Liabilities.

(b) Profit Sharing Plan.

(i) Establishment of Xxxxx Profit Sharing Plan. As soon as administratively practicable after the Distributions Time, Xxxxx Employees shall be eligible to participate in a defined contribution plan and trust adopted, established and maintained by Xxxxx and qualified under section 401(a) and section 501(a) of the Code (which plan may be the Xxxxx 401(k) Plan) (the “Xxxxx Profit Sharing Plan”). Subject to the asset transfers described in Section 5.01(b)(ii), the Xxxxx Parties shall assume and thereafter be jointly and severally responsible for all then existing or future employer Liabilities on behalf of Xxxxx Employees and Former Xxxxx Employees related to the Xxxxx Profit Sharing Plan and the administration thereof and the Xxxxxxx-Xxxxxx Parties shall not assume or retain any such Liabilities. As soon as practicable after the adoption or designation of the Xxxxx Profit Sharing Plan, Xxxxx shall, to the extent applicable, submit an application to the IRS for a determination regarding the qualification of the Xxxxx Profit Sharing Plan and shall take any actions not inconsistent with the other general commitments of the Xxxxx Parties contained in this Agreement and make any amendments necessary to receive a favorable determination letter.

(ii) Transfer of Account Balances. As soon as administratively practicable, and in no event later than 180 days, after the Distributions Time, the Xxxxxxx-Xxxxxx Parties and the Xxxxx Parties shall cooperate to cause the Xxxxxxx-Xxxxxx Company Employees Profit Sharing Plan (the “Xxxxxxx-Xxxxxx Profit Sharing Plan”) to transfer to the Xxxxx Profit Sharing Plan assets having a value as of the applicable valuation date that are equal to the value of the account balances of, and Liabilities with respect to, all Xxxxx Employees and Former Xxxxx Employees with an account balance, whether or not vested, under the Xxxxxxx-Xxxxxx Profit Sharing Plan as of such valuation date. Such transferred assets shall consist of cash, New Xxxxxxx-Xxxxxx Common Stock, New Xxxxx Common Stock and promissory notes for outstanding participant loans, and shall be in accordance with section 414(l) of the Code. Liabilities under any qualified domestic relations orders (as defined in section 414(p) of the Code) received with respect to any assets transferred to the Xxxxx Profit Sharing Plan shall be transferred to the Xxxxx Parties at the time such assets are transferred.

(iii) Past Service Credit and Vesting. With respect to all Xxxxx Employees and without duplication of benefits, the Xxxxx Profit Sharing Plan shall (i) recognize, to the extent applicable, all service, compensation and other determinations that, at the Distributions Time, were recognized under the Xxxxxxx-Xxxxxx Profit Sharing Plan for purposes of determining eligibility, participation, vesting, and calculation of benefits for Xxxxx Employees, and (ii) maintain the vesting schedule applicable under the Xxxxxxx-Xxxxxx Profit Sharing Plan for accounts transferred from the Xxxxxxx-Xxxxxx Profit Sharing Plan.

(iv) Elections and Designations. To the extent applicable, all participant elections and beneficiary designations made by Xxxxx Employees or Former Xxxxx Employees under the Xxxxxxx-Xxxxxx Profit Sharing Plan shall be transferred to, and be in full force and effect under, the Xxxxx Profit Sharing Plan until such participant elections and beneficiary designations are replaced or revoked by the Xxxxx Employee or Former Xxxxx Employee who made the election or designation.

(v) Cessation of Participation in the Xxxxxxx-Xxxxxx Profit Sharing Plan. Each member of the Xxxxx Group shall cease to be a participating employer in the Xxxxxxx-Xxxxxx Profit Sharing Plan, and participation in the Xxxxxxx-Xxxxxx Profit Sharing Plan will cease for all Xxxxx Employees and Former Xxxxx Employees, in each case no later than at the Distributions Time.

(i) Xxxxx shall, subject to the fiduciary and other requirements of ERISA, and any other Applicable Laws, take such actions as are reasonably necessary to ensure that any liquidation of the shares of New Xxxxxxx-Xxxxxx Common Stock held in the Xxxxx 401(k) Plan and the Xxxxx Profit Sharing Plan is orderly and periodic. During the 24-month period beginning at the Distributions Time (or such shorter period as Xxxxx reasonably determines may be required under Applicable Laws), subject to the exercise of its fiduciary duties or other requirements of ERISA and any other Applicable Xxxx, Xxxxx may prohibit purchases of New Xxxxxxx-Xxxxxx Common Stock under the Xxxxx 401(k) Plan and the Xxxxx Profit Sharing Plan but shall not require that such funds of New Xxxxxxx-Xxxxxx Common Stock be liquidated

(ii) Xxxxxxx-Xxxxxx shall, subject to the fiduciary and other requirements of ERISA, and any other Applicable Laws, take such actions as are reasonably necessary to ensure that any liquidation of the shares of New Xxxxx Common Stock held in the Xxxxxxx-Xxxxxx 401(k) Savings Plan (the “Xxxxxxx-Xxxxxx 401(k) Plan”) and the Xxxxxxx-Xxxxxx Profit Sharing Plan is orderly and periodic. During the 24-month period beginning at the Distributions Time (or such shorter period as Xxxxxxx-Xxxxxx reasonably determines may be required under Applicable Laws) subject to the exercise of its fiduciary duties or other requirements of ERISA and any other Applicable Laws, Xxxxxxx-Xxxxxx may prohibit purchases of New Xxxxx Common Stock under the Xxxxxxx-Xxxxxx 401(k) Plan and the Xxxxxxx-Xxxxxx Profit Sharing Plan but shall not require that such funds of New Xxxxx Common Stock be liquidated.

5.02 Further Cooperation. The Xxxxxxx-Xxxxxx Parties and the Xxxxx Parties will cooperate in good faith in the filing of documents required by the transfer of assets and liabilities described in this Agreement to generally effect the purposes of this Agreement and to resolve any discrepancies or obtain any missing data for purposes of determining benefit eligibility, participation, vesting and calculation of benefits with respect to any Xxxxx Employees or Former Xxxxx Employees.

ARTICLE VI

FOREIGN PLANS

At the Distributions Time, or such later date as may be required by Applicable Laws, each Benefit Plan maintained by a member of the Xxxxx Group that covers only Xxxxx Employees employed outside the U.S. (the “Xxxxx Foreign Plans”) shall be the sole responsibility of the Xxxxx Group and no member of the Xxxxxxx-Xxxxxx Group shall have any Liability with respect to such Xxxxx Foreign Plan. At the Distributions Time, or such later date as may be required by Applicable Laws, each Benefit Plan maintained by a member of the Xxxxxxx-Xxxxxx Group that covers only Xxxxxxx-Xxxxxx Employees employed outside the U.S. (the “Xxxxxxx-Xxxxxx Foreign Plans”) shall be the sole responsibility of the Xxxxxxx-Xxxxxx Group and no member of the Xxxxx Group shall have any Liability with respect to such Xxxxxxx-Xxxxxx Foreign Plan. For purposes of this Article VI, “employed outside the U.S.” means compensated under a payroll which is administered outside the 00 Xxxxxx Xxxxxx and the District of Columbia.

ARTICLE VII

GENERAL PROVISIONS

7.01 Preservation of Rights to Amend. The rights of any of the Xxxxx Parties and the Xxxxxxx-Xxxxxx Parties to amend or terminate any plan referred to herein shall not be limited in any way by this Agreement.

7.02 Administrative Complaints/Litigation.

(a) At and after the Distributions Time, the Xxxxx Parties shall assume, and be jointly and severally liable for, the handling, administration, investigation, and defense of actions, including, without limitation, ERISA, occupational safety and health, employment standards, union grievances, wrongful dismissal, discrimination or human rights and unemployment compensation claims, asserted at any time against the Xxxxxxx-Xxxxxx Group or the Xxxxx Group by any Xxxxx Employee, Former Xxxxx Employee or any other person arising out of or relating to employment with the Xxxxx Business or Xxxxx. Any Liabilities arising from such actions shall be deemed Xxxxx Liabilities under the Separation Agreement. The Xxxxxxx-Xxxxxx Parties reserve the right to participate, at their own expense, in the investigation, defense or settlement of any matter to the extent it deems reasonably necessary.

(b) At and after the Distributions Time, the Xxxxxxx-Xxxxxx Parties shall assume, and be jointly and severally liable for, the handling, administration, investigation, and defense of actions, including, without limitation, ERISA, occupational safety and health, employment standards, union grievances, wrongful dismissal, discrimination or human rights and unemployment compensation claims, asserted at any time against the Xxxxx Group or the Xxxxxxx-Xxxxxx Group by any Xxxxxxx-Xxxxxx Employee, Former Xxxxxxx-Xxxxxx Employee or any other person arising out of or relating to employment with the Xxxxxxx-Xxxxxx Business or Xxxxxxx-Xxxxxx. Any Liabilities arising from such actions shall be deemed Xxxxxxx-Xxxxxx Liabilities under the Separation Agreement. The Xxxxx Parties reserve the right to participate, at their own expense, in the investigation, defense or settlement of any matter to the extent it deems reasonably necessary.

7.03 Reimbursement and Indemnification. The parties hereto agree to reimburse one another, within 30 days of receipt from another party of appropriate verification, for all Indemnifiable Losses that each may incur on behalf of the other as a result of any of the Benefit Plans or any of the termination or severance obligations set forth in Section 2.02. All Liabilities retained, assumed or indemnified against by the Xxxxx Parties pursuant to this Agreement shall be deemed Xxxxx Liabilities, and all Liabilities retained, assumed or indemnified against by the Xxxxxxx-Xxxxxx Parties pursuant to this Agreement shall be deemed Xxxxxxx-Xxxxxx Liabilities, and in each case shall be subject to the indemnification provisions of Article IV of the Separation Agreement.

7.04 Payment of and Accounting Treatment for Expenses. Except as specifically provided in the Separation Agreement or as the Xxxxx Parties and the Xxxxxxx-Xxxxxx Parties otherwise mutually agree, all expenses (and the accounting treatment related thereto) through the Distributions Time regarding matters addressed herein shall be handled and administered by the Xxxxxxx-Xxxxxx Parties and the Xxxxx Parties in accordance with past practice of Xxxxxxx-Xxxxxx and Xxxxx, as applicable, accounting and financial practices and procedures pertaining to such matters.

7.05 Sharing of Participant Information. Xxxxxxx-Xxxxxx and Xxxxx shall share, Xxxxxxx-Xxxxxx shall cause each applicable member of the Xxxxxxx-Xxxxxx Group to share, and Xxxxx shall cause each applicable member of the Xxxxx Group to share, with each other and their respective agents and vendors all participant information necessary for the efficient and accurate administration of each of the Xxxxxxx-Xxxxxx Benefit Plans and the Xxxxx Benefit Plans following the Distributions Time. Xxxxxxx-Xxxxxx and Xxxxx and their respective authorized agents shall,

subject to Applicable Laws and understandings regarding confidentiality, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other party, to the extent necessary for such administration. Xxxxx and Xxxxxxx-Xxxxxx shall also cooperate to share all such information regarding any issue relating to the compensation of Xxxxx Employees as may be required in order to satisfy any requirements related to federal, state and/or local income tax reporting (including, for purposes of preparing a Form W-2 for each such employee) and withholding, all in accordance with the terms of the Tax Allocation Agreement.

7.06 Audit Rights. Subject to the requirements of Article VI of the Separation Agreement, for a period of 36 months from and after the Distributions Time, each Xxxxxxx-Xxxxxx Party and each Xxxxx Party, and their duly authorized representatives, shall have the right to conduct audits at mutually agreed times upon reasonable prior notice, at their own expense, with respect to all information provided to it or to any record keeper or third party administrator by another party that is relevant to this Agreement. The auditing party shall have the right to make copies of any records at its expense, subject to the confidentiality provisions set forth in the Separation Agreement, which are incorporated by reference herein. The party being audited shall provide the auditing party’s representatives with reasonable access during normal business hours to its operations, computer systems and paper and electronic files, and provide work space to its representatives. After any audit is completed, the party being audited shall have the right to review a draft of the audit findings and to comment on those findings in writing within fifteen Business Days after receiving such draft.

The auditing party’s audit rights under this Section 7.06 shall include the right to audit, or participate in an audit facilitated by the party being audited, of any Subsidiaries and Affiliates of the party being audited and of any benefit providers and third parties with whom the party being audited has a relationship, or agents of such party, to the extent any such persons are affected by or addressed in this Agreement (collectively, the “Non-parties”). The party being audited shall, upon written request from the auditing party, provide an individual (at the auditing party’s expense) to supervise any audit of any such benefit provider or third party. The auditing party shall be responsible for supplying, at its expense, additional personnel sufficient to complete the audit in a reasonably timely manner.

7.07 Effect If Distributions Do Not Occur. If the Distributions do not occur, then all actions and events that are, under this Agreement, to be taken or occur effective as of the Distributions Time, or otherwise in connection with the Distributions, shall not be taken or occur except to the extent otherwise specifically agreed in writing by Xxxxx and Xxxxxxx-Xxxxxx.

7.08 Relationship of Parties. Nothing in this Agreement shall be deemed or construed by the parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the parties, it being understood and agreed that no provision contained herein, and no act of the parties, shall be deemed to create any relationship between the parties other than the relationship set forth herein.

7.09 No Right to Continued Employment. Nothing contained in this Agreement shall confer on any Xxxxx Employee any right to continued employment with Xxxxx or any member of the Xxxxx Group, except as expressly provided in any individual employment

agreements to which Xxxxx or a member of the Xxxxx Group is a party, under which any Xxxxx Employee has any such rights. Nothing contained in this Agreement shall confer on any Xxxxxxx-Xxxxxx Employee any right to continued employment with Xxxxxxx-Xxxxxx or any member of the Xxxxxxx-Xxxxxx Group, except as expressly provided in any individual employment agreements to which Xxxxxxx-Xxxxxx or a member of the Xxxxxxx-Xxxxxx Group is a party, under which any Xxxxxxx-Xxxxxx Employee has any such rights.

7.10 Cooperation. The Xxxxxxx-Xxxxxx Parties and the Xxxxx Parties shall each cooperate in good faith, including by making personnel available to one another at mutually agreed times, as necessary or appropriate to carry out the purposes of this Agreement.

7.11 No Duplication of Benefits. It is the intention of the parties that nothing in this Agreement shall allow for any Xxxxx Employee or Xxxxxxx-Xxxxxx Employee to receive duplicative benefits. Accordingly, Xxxxxxx-Xxxxxx and Xxxxx shall agree on methods and procedures to prevent Xxxxx Employees and Xxxxxxx-Xxxxxx Employees from receiving duplicative benefits.

ARTICLE VIII

MISCELLANEOUS

8.01 Entire Agreement. This Agreement, the Separation Agreement and other Ancillary Agreements, including any annexes, schedules and exhibits hereto or thereto, and other agreements and documents referred to herein and therein, will together constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and will supersede all prior negotiations, agreements and understandings of the parties of any nature, whether oral or written, with respect to such subject matter.

8.02 Survival of Agreements. Except as specifically contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement will remain in full force and effect and survive the Distributions Time.

8.03 Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware (without giving effect to choice of law principles thereof).

8.04 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (i) on the date of delivery if delivered personally, (ii) upon confirmation of receipt if delivered by facsimile, (iii) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service or (iv) when received if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:


(a)	If to New Xxxxxxx-Xxxxxx or Xxxxxxx-Xxxxxx to
	Xxxxxxx-Xxxxxx:

	Xxxxxxx-Xxxxxx Company
	0000 Xxxxxxxx Xxxxxx
	Xxxxxxx Xxxx, Xxxxxxxx 00000

	Fax:	(000) 000-0000
	Attention:	Chief Executive Officer Senior Vice President and General Counsel (with a separate notice to be sent to each such person)



	with a copy to

	Sidley Austin LLP
	Xxx Xxxxx Xxxxxxxx Xxxxxx
	Xxxxxxx, Xxxxxxxx 00000
	Fax:	(000) 000-0000
	Attention:	Xxxxxxxxx X. Xxxxxxxx, Esq.
		Xxxxx X. Xxxxx, Esq.

(b)	If to New Sally or Sally to Sally

	Xxxxx Holdings, Inc.
	0000 Xxxxxxxx Xxxx.
	Xxxxxx, Xxxxx 00000
	Fax:	(000) 000-0000
	Attention:	Vice President and General Counsel

	with a copy at any time prior to the Distributions Time to

	Sidley Austin LLP
	Xxx Xxxxx Xxxxxxxx Xxxxxx
	Xxxxxxx, Xxxxxxxx 00000
	Fax:	(000) 000-0000
	Attention:	Xxxxxxxxx X. Xxxxxxxx, Esq.
		Xxxxx X. Xxxxx, Esq.

	And with a copy at any time from and after the Distributions Time to

	CDRS Acquisitions LLC
	x/x Xxxxxxx, Xxxxxxxx & Xxxx Xxxx XXX, X.X.
	0000 Xxxxx Xxxx, Xxxxx 000 Xxxxxxxxxx, XX 00000
	Fax:	(000) 000-0000

	With a copy to

	Debevoise & Xxxxxxxx LLP
	000 Xxxxx Xxxxxx
	Xxx Xxxx, Xxx Xxxx 00000
	Fax:	(000) 000-0000
	Attention:	Xxxx X. Xxxx, Esq.

8.05 Consent to Jurisdiction. Each of the Xxxxx Parties and the Xxxxxxx-Xxxxxx Parties irrevocably agrees that any legal action or proceeding with respect to this Agreement, the transactions contemplated hereby, any provision hereof, the breach, performance, validity or invalidity hereof or for recognition and enforcement of any judgment in respect hereof brought by another party hereto or its successors or permitted assigns may be brought and determined in any federal or state court located in the State of Delaware, and each of the Xxxxx Parties and the Xxxxxxx-Xxxxxx Parties hereby irrevocably submits with regard to any such action or proceeding for themselves and in respect to their property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of the Xxxxx Parties and the Xxxxxxx-Xxxxxx Parties hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, the transactions contemplated hereby, any provision hereof or the breach, performance, enforcement, validity or invalidity hereof, (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to lawfully serve process, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by Applicable Laws, that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper and (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

8.06 Amendments. This Agreement cannot be amended except by a written agreement executed by the Xxxxx Parties and the Xxxxxxx-Xxxxxx Parties; provided, that unless the Investment Agreement shall have been terminated, any such amendment shall be subject to the prior written consent of Investor, such consent not to be unreasonably withheld, delayed or conditioned.

8.07 Assignment. No party to this Agreement will (or permit any of the members of its Group) convey, assign or otherwise transfer any of its rights or obligations under this Agreement, in whole or in part, without the prior written consent of the other parties in their sole and absolute discretion; provided, that each of the Xxxxx Parties may assign this Agreement and all of its rights hereunder to its lenders and debt providers for collateral security purposes and provided, further, that unless the Investment Agreement shall have been terminated, any such assignment prior to the Distributions Time shall be subject to the prior written consent of Investor. Any conveyance, assignment or transfer requiring the prior written consent of the other parties or Investor pursuant to this Section 8.07 that is made without such consent will be void ab initio. No assignment of this Agreement will relieve the assigning party of its obligations hereunder. For purposes of clarity, New Xxxxxxx-Xxxxxx may perform any responsibility or exercise any right under this Agreement by causing such responsibility or right to be undertaken or exercised, without limitation, by a New Xxxxxxx-Xxxxxx Subsidiary; provided, however, that

New Xxxxxxx-Xxxxxx shall be fully responsible to Xxxxxxx-Xxxxxx for ensuring compliance by New Xxxxxxx-Xxxxxx and the New Xxxxxxx-Xxxxxx Group with the applicable terms of this Agreement.

8.08 Captions; Currency. The article, section and paragraph captions herein are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof. Unless otherwise specified, all references herein to numbered articles or sections are to articles and sections of this Agreement and all references herein to schedules are to schedules to this Agreement. Unless otherwise specified, all references contained in this Agreement, in any schedule referred to herein or in any instrument or document delivered pursuant hereto to dollars or “$” shall mean United States Dollars.

8.09 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and will in no way be affected, impaired or invalidated thereby. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any party as a result thereof, the parties will negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties, and, if the parties are unable to agree upon a suitable and equitable substitute provision to effect the original intent of the parties, prior to the Distributions Time, the party so materially and adversely affected may terminate this Agreement.

8.10 Parties in Interest. This Agreement is binding upon and is for the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not made for the benefit of any Person not a party hereto, and no Person other than the parties hereto or their respective successors and permitted assigns will acquire or have any benefit, right, remedy or claim under or by reason of this Agreement, except that the provisions in Sections 8.06 and 8.12 shall inure to the benefit of Investor.

8.11 Schedules. All schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Capitalized terms used in the schedules hereto but not otherwise defined therein will have the respective meanings assigned to such terms in this Agreement.

8.12 Waivers; Remedies. Any agreement on the part of a party hereto to waive the performance by the other party of any of its covenants hereunder shall be valid only if set forth in a written instrument signed on behalf of such party; provided, that unless the Investment Agreement shall have been terminated, any such waiver shall be subject to the prior written consent of Investor, such consent not to be unreasonably withheld, delayed or conditioned. No failure or delay on the part of either the Xxxxx Parties or the Xxxxxxx-Xxxxxx Parties in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of either the Xxxxx Parties or the Xxxxxxx-Xxxxxx Parties of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

8.13 Further Assurances. From time to time after the Distributions Time, as and when requested by either party hereto, the other party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such actions as the requesting party may reasonably request to consummate the transactions contemplated by this Agreement.

8.14 Counterparts. This Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement.

8.15 Performance. The Xxxxx Parties will cause to be performed and hereby guarantee the performance of all actions, agreements and obligations set forth herein to be performed by any of their Subsidiaries. The Xxxxxxx-Xxxxxx Parties will cause to be performed and hereby guarantee the performance of all actions, agreements and obligations set forth herein to be performed by any of their Subsidiaries.

8.16 Interpretation. Any reference herein to any federal, state, local, or foreign law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. For the purposes of this Agreement, (a) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (b) the terms “hereof”, “herein”, and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement and (c) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation”. This Agreement shall be deemed to be the joint work product of the Xxxxx Parties and the Xxxxxxx-Xxxxxx Parties and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

8.17 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to pursue specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity.

IN WITNESS WHEREOF, the parties have caused this agreement to be executed in their names by a duly authorized officer as of the date first written above.


NEW XXXXX HOLDINGS, INC.

By:		/s/ Xxxx X. Xxxxxxx
Name:		Xxxx X. Xxxxxxx
Title:		President

XXXXX HOLDINGS, INC.

By:		/s/ Xxxx Xxxxxxxxxxxx
Name:		Xxxx Xxxxxxxxxxxx
Title:		President

XXXXXXX-XXXXXX COMPANY

By:		/s/ Xxxx X. Xxxxxxx
Name:		Xxxx X. Xxxxxxx
Title:		Senior Vice President, General Counsel and Secretary

NEW ARISTOTLE HOLDINGS, INC.

By:		/s/ Xxxx X. Xxxxxxx
Name:		Xxxx X. Xxxxxxx
Title:		President

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Table of Contents

EMPLOYEE MATTERS AGREEMENT

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