EXHIBIT 10.01

 

TAX ALLOCATION AGREEMENT

 

dated as of January 10, 2006

 

between

 

ALBERTO-CULVER COMPANY

 

and

 

SALLY HOLDINGS, INC.

TABLE OF CONTENTS

 

TAX ALLOCATION AGREEMENT

 

TAX ALLOCATION AGREEMENT (this “ Agreement ”), dated as of January 10, 2006 between Alberto-Culver Company, a Delaware corporation (“ Alberto-Culver ”), and Sally Holdings, Inc., a Delaware corporation (“ Spinco ”), and, as of the date hereof, a wholly owned subsidiary of Alberto-Culver.

 

RECITALS

 

WHEREAS, Alberto-Culver is the common parent of an affiliated group of corporations within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), which currently files consolidated federal income Tax Returns;

 

WHEREAS, pursuant to the Separation Agreement dated as of the date hereof between Alberto-Culver and Spinco (as may be amended from time to time in accordance with its terms, the “ Separation Agreement ”), Alberto-Culver will distribute to its stockholders all of the issued and outstanding shares of common stock, no par value of Spinco (“ Spinco Common Stock ”), on a pro rata basis (as described more fully in the Separation Agreement, the “ Distribution ”);

 

WHEREAS, 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 direct, wholly owned Subsidiary of Regis (“ Subco” ), have entered into the Agreement and Plan of Merger dated as of the date hereof (the “ Merger Agreement ”) pursuant to which, immediately following the Distribution, Merger Sub will be merged with and into Spinco (the “ Merger ”), with Spinco being the surviving corporation and immediately following the Merger the surviving corporation in the Merger will merge with and into Subco;

 

WHEREAS, the parties to this Agreement intend that the Distribution qualify under Section 355 of the Code, as a tax-free distribution;

 

WHEREAS, after the Distribution Date (as defined in the Separation Agreement), neither Spinco nor any of the Spinco Subsidiaries (as hereinafter defined) that prior to the Distribution Date was a member of the Alberto-Culver Affiliated Group (as hereinafter defined) for federal income Tax purposes will continue to be a member of the Alberto-Culver Affiliated Group for federal income Tax purposes; and

 

WHEREAS, the Spinco Group and the Alberto-Culver Group (as hereinafter defined) desire on behalf of themselves and their successors to set forth their rights and obligations with respect to Taxes due for periods before, on and after the Distribution Date.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

 

SECTION 1.01. General . Capitalized terms used in this Agreement have the meanings set forth in this Agreement, or, when not so defined, in the Separation Agreement or the Merger Agreement. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

 

“ Affiliate ” has the meaning set forth in the Separation Agreement; provided that the term “Affiliate” shall not include any Shareholder.

 

“ Agreement ” means this Tax Allocation Agreement as the same may be amended from time to time.

 

“ Alberto-Culver ” has the meaning set forth in the preamble.

 

“ Alberto-Culver Affiliated Group ” means the domestic corporations included in the affiliated group, as defined in Section 1504 of the Code, of which Alberto-Culver is the common parent, and any successor group.

 

“ Alberto-Culver Factual Representation ” means any factual descriptions or factual representations with respect to the Alberto-Culver Group, the Alberto-Culver Business, the Spinco Group or the Spinco Business made in writing to the IRS in connection with the Private Letter Ruling Request or made in connection with the Tax Opinion, except that such term shall not include (a) any representation that is a legal conclusion regarding business purpose, lack of device, or Code Section 355(e), (b) any description of the transactions contemplated by the Merger Agreement or any of the Transaction Agreements or (c) any facts or representations provided by Regis or which are not solely with respect to the Alberto-Culver Group, the Alberto-Culver Business, the Spinco Group or the Spinco Business.

 

“ Alberto-Culver Group ” means Alberto-Culver and the Alberto-Culver Subsidiaries.

 

“ Alberto-Culver Subsidiary ” means each direct and indirect Subsidiary of Alberto-Culver (other than Spinco and the Spinco Subsidiaries).

 

“ Alberto-Culver Tainting Act ” means:

 

(a) any inaccuracy of any Alberto-Culver Factual Representation;

 

(b) any action (or failure to take any reasonably available action) by Alberto-Culver or any Alberto-Culver Subsidiary other than an action contemplated by the Merger Agreement or any of the Transaction Agreements;

 

(c) any acquisition or other transaction involving the capital stock of Alberto-Culver or any Affiliate of Alberto-Culver (other than the distribution of the Spinco Common Stock in the Distribution, Regis’s acquisition of Spinco in the Merger, or any action taken by the Shareholders); or

 

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(d) any Prohibited Act performed by Alberto-Culver or an Affiliate of Alberto-Culver.

 

“ Alberto-Culver Taxes ” means any Taxes (excluding Restructuring Taxes) that are attributable to Alberto-Culver or any Alberto-Culver Subsidiary pursuant to the allocation principles of Sections 2.05 , 2.08 and 2.09 .

 

“ Claim ” has the meaning set forth in Section 3.03 .

 

“ Controlling Party ” has the meaning set forth in Section 3.01 .

 

“ Distribution ” has the meaning set forth in the second recital.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ Estimated Retained Tax Amount ” has the meaning set forth in Section 2.08(a) .

 

“ Final Determination ” means with respect to any issue (a) a decision, judgment, decree or other order by any court of competent jurisdiction, which decision, judgment, decree or other order has become final and not subject to further appeal, (b) a closing agreement (whether or not entered into under Section 7121 of the Code) or any other binding settlement agreement (whether or not with the IRS) entered into in connection with or in contemplation of an administrative or judicial proceeding, or (c) the completion of the highest level of administrative proceedings if a judicial contest is not or is no longer available.

 

“ Final Retained Tax Amount ” has the meaning set forth in Section 2.08(b) .

 

“ Final Tax Amount Determination ” has the meaning set forth in Section 2.08(c) .

 

“ Indemnitor ” has the meaning set forth in Section 3.02 .

 

“ Indemnifiable Losses ” has the meaning set forth in the Separation Agreement.

 

“ Independent Expert ” has the meaning set forth in Section 2.08(b) .

 

“ Independent Firm ” has the meaning set forth in Article VI .

 

“ IRS ” means the United States Internal Revenue Service.

 

“ Merger Agreement ” has the meaning set forth in the third recital.

 

“ Objection Notice ” has the meaning set forth in Section 2.08(b) .

 

“ Person ” has the meaning set forth in the Merger Agreement.

 

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“ Post-Distribution Period ” means any Taxable year or other Taxable period beginning after the Distribution Date and, in the case of any Taxable year or other Taxable period that begins on or before and ends after the Distribution Date, that part of the Taxable year or other Taxable period that begins at the beginning of the day after the Distribution Date.

 

“ Pre-Distribution Period ” means any Taxable year or other Taxable period that ends on or before the Distribution Date and, in the case of any Taxable year or other Taxable period that begins on or before and ends after the Distribution Date, that part of the Taxable year or other Taxable period through the close of the Distribution Date.

 

“ Private Letter Ruling ” means any private letter ruling received from the IRS to the effect that, on the basis of the facts, representations and assumptions set forth in the written request for such ruling which are consistent with the state of facts existing at the Distribution Time, the Distribution will constitute a tax-free distribution under Section 355 of the Code.

 

“ Prohibited Acts ” has the meaning specified in Section 4.02(b) .

 

“ Proposed Retained Tax Amount ” has the meaning set forth in Section 2.08(a) .

 

“ Regis Factual Representation ” means any factual descriptions or factual representations provided by Regis and made in writing by Alberto-Culver to the IRS in connection with the Private Letter Ruling Request or made in connection with the Tax Opinion except that such term shall not include (a) any representation that is a legal conclusion regarding business purpose, lack of device, or Code Section 355(e), (b) any description of the transactions contemplated by the Merger Agreement or any of the Transaction Agreements or (c) any facts or representations provided by any member of the Alberto-Culver Group or which are not solely with respect to Regis.

 

“ Restricted Period ” has the meaning specified in Section 4.02(a) .

 

“ Restructuring Taxes ” means any Taxes (and other liabilities, including, without limitation, liability to stockholders and the costs of defending against the imposition of such Taxes and other liabilities) imposed as a result of a Final Determination that (a) the Distribution failed to constitute a tax-free distribution under Section 355 of the Code, or (b) any stock or securities of Spinco failed to qualify as “qualified property” within the meaning of Section 355(c)(2) or Section 361(c)(2) of the Code because of the application of Section 355(d) or Section 355(e) of the Code to the Distribution.

 

“ Retained Tax Amount ” has the meaning set forth in Section 2.08(a) .

 

“ Ruling Request ” means the ruling request and any other materials (including the attachments and supplemental submissions to the IRS) delivered or deliverable by Alberto-Culver and others in connection with the issuance by the IRS of the Private Letter Ruling.

 

“ Separation Agreement ” has the meaning set forth in the second recital.

 

“ Shareholder ” has the meaning assigned to such term in the Shareholders Agreement.

 

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“ Spinco ” has the meaning set forth in the preamble and shall include any successor to Spinco.

 

“ Spinco Group ” means Spinco and the Spinco Subsidiaries.

 

“ Spinco Subsidiary ” means each direct and indirect Subsidiary of Spinco.

 

“ Spinco Tainting Act ” means:

 

(a) any inaccuracy of any Regis Factual Representation;

 

(b) any action (or failure to take any reasonably available action) by Spinco or any Affiliate of Spinco after the Distribution Date other than an action contemplated by the Merger Agreement or any of the Transaction Agreements;

 

(c) any acquisition or other transaction involving the capital stock of Spinco or any Affiliate of Spinco (other than the distribution of the Spinco Common Stock in the Distribution and Regis’s acquisition of Spinco in the Merger or any action taken by the Shareholders); or

 

(d) any Prohibited Act performed by Spinco or any Affiliate of Spinco after the Distribution Date.

 

“ Spinco Taxes ” means any Taxes (excluding Restructuring Taxes and any Taxes related to an excess loss account or a deferred intercompany gain) that are attributable to Spinco or any Spinco Subsidiary pursuant to the allocation principles of Sections 2.05 , 2.08 and 2.09 .

 

“ Subsidiary ” means, when used with respect to any Person, any corporation or other organization, whether incorporated or unincorporated, at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries.

 

“ Tax ” (and, with correlative meaning, “ Taxes ” and “ Taxable ”) means any tax, in any sense, including (a) any federal, state, municipal, county, local, foreign or other Governmental Entity net income, gross income, receipts, windfall profit, severance, real, personal, tangible, escheatable, unclaimed or abandoned property, goods and services, value added, estimated, capital stock, production, sales, use, license, excise, franchise, employment, unemployment, social security, payroll, withholding, alternative or add-on minimum, ad valorem, transfer, stamp, or environmental tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, addition to tax or additional amount imposed by any Governmental Entity, including any fines, penalties or interest arising under ERISA; and (b) any liability of either party for the payment of amounts with respect to payments of a type described in clause (a)  as a result of being a member of an affiliated, consolidated, combined or unitary group.

 

“ Tax Carryover Attribute ” has the meaning specified in Section 2.07 .

 

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“ Tax Opinion ” means the tax opinion described in Section 8.1(i) of the Merger Agreement.

 

“ Tax Return ” means any return, report or similar statement required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax.

 

“ Transaction Taxes ” has the meaning set forth in Section 2.04(b) .

 

ARTICLE II

TAX RETURNS, TAX PAYMENTS AND TAX SHARING OBLIGATIONS

 

SECTION 2.01. Obligations to File Tax Returns . (a) From and after the Distribution Time, Alberto-Culver shall timely file or cause to be timely filed all income Tax Returns with respect to the Spinco Group that include any Pre-Distribution Period and are filed on a consolidated, combined or unitary basis and include Spinco or any Spinco Subsidiary, on the one hand, and Alberto-Culver or any Alberto-Culver Subsidiary, on the other hand. From and after the Distribution Time, Spinco shall timely file or cause to be timely filed any other Tax Return with respect to any member of the Spinco Group. From and after the Distribution Time, subject to the terms and limitations in the Merger Agreement, at Spinco’s request and cost as provided in Section 7.22 of the Merger Agreement, Alberto-Culver shall prepare or cause to be prepared all Tax Returns of Spinco, which have been previously prepared or caused to be prepared by Alberto-Culver on behalf of Spinco, for all Pre-Distribution Periods where such Tax Returns are due after the Distribution Date.

 

(b) Alberto-Culver shall timely file or cause to be timely filed all Tax Returns with respect to the Alberto-Culver Group.

 

(c) Any consolidated, combined or unitary Tax Return filed on or after the Distribution Date that includes Spinco or any Spinco Subsidiary for a Pre-Distribution Period shall be prepared on a basis consistent with the elections, methods of accounting, positions, conventions and principles of taxation and the manner in which any Tax item or other information is reported as reflected in comparable income Tax Returns filed before the date of this Agreement. The preceding sentence shall not apply (i) to the extent otherwise contemplated or required by the Ruling Request or Private Letter Ruling, or (ii) if there has been a change in Applicable Laws. Alber