Document:

Filed by Bowne Pure Compliance

EXHIBIT 10.6

SEVERANCE AGREEMENT

THIS SEVERANCE AGREEMENT (this “Agreement”), dated as of October 8, 2003, by and between
Winston Laboratories, Inc., a Delaware corporation (the “Company”), and Scott B. Phillips (the
“Executive”).

WITNESSETH:

WHEREAS, the Executive is a senior executive or key employee of the Company and has made and
is expected to continue to make major contributions to the short and long-term profitability,
growth and financial strength of the Company;

WHEREAS, the Company recognizes that, as is the case of most companies, the possibility of a
Change in Control exists;

WHEREAS, the Company desires to assure itself of both present and future continuity of
management and desires to establish certain minimum severance benefits for certain of its senior
executive officers and other key employees, including the Executive, applicable in the event of a
Change in Control;

WHEREAS, the Company wishes to ensure that its senior executives and other key employees are
not practically disabled from discharging their duties in respect of a proposed or actual
transaction involving Change in Control; and

WHEREAS, the Company desires to provide additional inducement for the Executive to continue to
remain in the ongoing employ of the Company.

NOW, THEREFORE, the Company and the Executive agree as follows:

1. Certain Defined Terms: In addition to terms defined elsewhere herein, the
following terms have the following meanings when used in this Agreement with initial capital
letters:

(a) “Base Pay” means the Executive’s annual base salary at a rate not less than the
Executive’s annual fixed or base compensation as in effect for Executive immediately prior to the
occurrence of a Change in Control or such higher rate as may be determined from time to time by the
Board of Directors of the Company (the “Committee” or the “Board”) or a Committee thereof;

(b) “Change in Control” means the occurrence during the Term of any of the following events:

(i) The Company is merged, consolidated or reorganized into or with another corporation or
other legal person, and as a result of such merger, consolidation or reorganization less than a
majority of the combined voting power of the then-outstanding securities of such corporation or
person immediately after such transaction are held in the
aggregate by the holders of Voting Stock (as that term is hereafter defined) of the Company
immediately prior to such transaction;

 

 

 

(ii) The Company sells or otherwise transfers all or substantially all of its assets to
another corporation or other legal person, and as a result of such sale or transfer less than a
majority of the combined voting power of the then-outstanding securities of such corporation or
person immediately after such sale or transfer is held in the aggregate by the holders of Voting
Stock of the company immediately prior to such sale or transfer;

(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule,
form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), disclosing that (x) any person (as the term “person” is used in Section 13
(d) (3) or Section 14 (d) (2) of the Exchange Act) (other than Joel E. Bernstein and affiliates or
associates of Joel E. Bernstein) has become the beneficial owner (as the term “beneficial owner” is
defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of
securities representing 50% or more of the combined voting power of the then-outstanding securities
entitled to vote generally in the election of directors of the Company (“Voting Stock”);

(iv) The Company files a report or proxy statement with the Securities and Exchange Commission
pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in control of the Company has occurred or
will occur in the future pursuant to any then-existing contract or transaction; or

Notwithstanding the foregoing provisions of Section 1 (b) (iii) or 1 (b) (iv), unless otherwise
determined in a specific case by majority vote of the Board, a “Change in Control” shall not be
deemed to have occurred for purposes of Sections 1 (b) (iii) or I (b) (iv) solely because (1) the
Company, (2) an entity in which the Company directly or indirectly beneficially owns 50% or more of
the voting securities (a “Subsidiary”, or (3) any employee stock ownership plan or any other
employee benefit plan of the Company or any Subsidiary either files or becomes obligated to file a
report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act
disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 50% or
otherwise, or because the Company reports that a change in control of the Company has occurred or
will occur in the future by reason of such beneficial ownership.

(c) “Cause” means that, prior to any termination pursuant to Section 3 (c) hereof, the
Executive shall have committed:

(i) an intentional act of fraud, embezzlement or theft in connection with his duties or in the
course of his employment with the Company or any Subsidiary;

(ii) intentional wrongful damage to property of the Company or any Subsidiary;

(iii) intentional wrongful disclosure of secret processes or confidential information of the
Company or any Subsidiary; or

(iv) intentional wrongful engagement in any Competitive Activity;

 

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and any such act shall have been materially harmful to the Company. For purposes of this
Agreement, no act or failure to act on the part of the Executive shall be deemed “intentional” if
it was due primarily to an error in judgment or negligence, but shall be deemed “intentional” only
if done or omitted to be done by the Executive not in good faith and without reasonable belief that
his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for “Cause” hereunder unless and until there
shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the Board then in office at a meeting of the Board called
and held for such purpose, after reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel (if the Executive chooses to have counsel present at such
meeting), to be heard before the Board, finding that, in the good faith opinion of the Board, the
Executive had committed an act constituting “Cause” as herein defined and specifying the
particulars thereof in detail. Nothing herein will limit the right of the Executive or his
beneficiaries to contest the validity or propriety of any such determination;

(d) “Competitive Activity” means the Executive’s participation, without the written consent of
an officer of the Company, in the management of any business enterprise if such enterprise engages
in substantial and direct competition with the Company and such enterprise’s sales of any product
or service competitive with any product or service of the Company amounted to 10% of such
enterprise’s net sales for its most recently completely fiscal year and if the Company’s net sales
of said product or service amounted to 10% of the Company’s net sales for its most recently
completed fiscal year. “Competitive Activity” will not include (i) the mere ownership of securities
in any such enterprise and the exercise of rights appurtenant thereto and (ii) participation
connection with the competitive operations of such enterprise;

(e) “Employee Benefits” means the perquisites, benefits and service credit for benefits as
provided under any and all employee retirement income and welfare benefit policies, plans, programs
or arrangements in which Executive is entitled to participate, including without limitation any
purchase, stock appreciation, savings, pension, supplemental executive retirement, or other
retirement income or welfare benefit, deferred compensation, incentive compensation, group or other
life, health, medical/hospital, dental or other insurance (whether funded by actual insurance or
self-insured by the Company), disability, salary continuation, expense reimbursement and other
employee benefit policies, plans, programs or arrangements that may now exist or any equivalent
successor policies, plans, programs or arrangements that may be adopted hereafter by the Company,
providing perquisites, benefits and service credit for benefits at least as great in the aggregate
as are payable thereunder prior to a Change in Control;

(f) “Incentive Pay” means an annual amount equal to not less than the highest aggregate annual
bonus, incentive or other payments of cash compensation, in addition to Base Pay, made or to be
made in regard to services rendered in any calendar year during the three calendar years
immediately preceding the year in which the Change in Control occurred pursuant to any bonus,
incentive, profit-sharing, performance, discretionary pay or similar agreement, policy plan,
program or arrangement (whether or not funded) of the Company, or any successor
thereto providing benefits at least as great as the benefits payable thereunder prior to a
Change in Control;

 

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(g) “Severance Period” means the period of time commencing on the date of an occurrence of a
Change in Control and continuing until the earliest of (i) the first anniversary of the occurrence
of the Change in Control, (ii) the Executive’s death, or (iii) the Executive’s attainment of age
65; provided, however, that commencing on the 30th day following each anniversary of the Change in
Control, the Severance Period will automatically be extended for an additional year unless, not
later than 120 calendar days prior to such date, either the Company or the Executive shall have
given written notice to the other that the Severance Period is not be so extended; and

(h) “Term” means the period commencing as of the date hereof and expiring as of the later of
(i) the close of business on December 31, 2006, or (ii) the expiration of the Severance Period;
provided, however, that (A) commencing on January 1, 2004 and each January 1 thereafter, the term
of this Agreement will automatically be extended for an additional year unless, not later than
September 30 of the immediately preceding year, the Company or the Executive shall have given
notice that it or the Executive, as the case may be, does not wish to have the Term extended and
(B) if, prior to a Change in Control, the Executive ceases for any reason to be an employee of the
Company or any Subsidiary, thereupon without further action the Term shall be deemed to have
expired and this Agreement will immediately terminate and be of no further effect. For purposes of
this Section 1 (h), the Executive shall not be deemed to have ceased to be an employee of the
Company or any Subsidiary by reason of the transfer of Executive’s employment between the Company
and any Subsidiary, or among Subsidiaries.

2. Operation of Agreement: This Agreement will be effective and binding immediately
upon its execution, but anything in this Agreement to the contrary notwithstanding, this Agreement
will not be operative unless and until the Change in Control occurs, whereupon without further
action this Agreement shall become immediately operative.

3. Termination Following a Change in Control: (a) In the event of the occurrence of a
Change in Control, the Executive’ s employment may be terminated by the Company during the
Severance Period and the Executive shall not be entitled to the benefits provided by Section 4 only
upon the occurrence of one or more of the following events:

(i) The Executive’s death;

(ii) If the Executive becomes permanently disabled within the meaning of, and begins actually
to receive disability benefits pursuant to, the long-term disability plan in effect for, or
applicable to, Execute immediately prior to the Change in Control; or

(iii) Cause.

If, during the Severance Period, the Executive’s employment is terminated by the Company other than
pursuant to Section 3 (a) (i), 3 (a) (ii) or 3 (a) (iii), the Executive will be entitled to the
benefits provided by Section 4 hereof.

 

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(b) In the event of the occurrence of a Change in Control, the Executive may terminate
employment with the Company and any Subsidiary during the Severance Period with the right to
severance compensation as provided in Section 4 upon the occurrence of one or more of the following
events (regardless of whether any other reason, other than Cause as hereinabove provided, for such
termination exists or has occurred, including without limitation other employment):

(i) Failure to elect or reelect or otherwise to maintain the Executive in the office or the
position, or a substantially equivalent office or position, of or with the Company and/or
Subsidiary, as the case may be, which the Executive held immediately prior to a Change in Control,
or the removal of the Executive as a Director of the Company (or any successor thereto) if the
Executive shall have been a Director of the Company immediately prior to the Change in Control;

(ii) (I) A significant adverse change in the nature or scope of the authorities, powers,
functions, responsibilities or duties attached to the position with the Company and any Subsidiary
which the Executive held immediately prior to the Change in Control; (II) a reduction in the
aggregate of the Executive’s Base Pay and Incentive Pay received from the Company and any
Subsidiary; or (III) the termination or denial of the Executive’s rights to Employee Benefits or a
reduction in the scope or value thereof.

(iii) A determination by the Executive (which determination will be conclusive and binding
upon the parties hereto provided it has been made in good faith and in all events will be presumed
to have been made in good faith unless otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred following a Change in Control, including,
without limitation, a change in the scope of the business or other activities for which the
Executive was responsible immediately prior to the Change in Control, which has rendered the
Executive substantially unable to carry out, has substantially hindered Executive’s performance of,
or has caused Executive to suffer a substantial reduction in, any of the authorities, powers,
functions, responsibilities or duties attached to the position held by the Executive immediately
prior to the Change in Control, which situation is not remedied within 10 calendar days after
written notice to the Company from the Executive of such determination;

(iv) The liquidation, dissolution, merger, consolidation or reorganization of the Company or
transfer of all or substantially all of its business and/or assets, unless the successor or
successors (by liquidation, merger, consolidation, reorganization, transfer or otherwise) to which
all or substantially all of its business and/or assets have been transferred (directly or by
operation of law) assumed all duties and obligations of the Company under this Agreement pursuant
to Section 10 (a);

(v) The Company relocates its principal executive offices, or Executive to have his principal
location of work changed, to any location which is in excess of 25 miles from the location thereof
immediately prior to the Change of Control, or requires the Executive to travel away from his
office in the course of discharging his responsibilities or duties hereunder at least 20% more (in
terms of aggregate days in any calendar year or in any calendar quarter when annualized for
purposes of comparison to any prior year) than was required of
Executive in any of the three fall years immediately prior to the Change of Control without,
in either case, his prior written consent; or

 

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(vi) Without limiting the generality or effect of the foregoing, material breach of this
Agreement by the Company or any successor thereto.

(c) A termination by the Company pursuant to Section 3 (a) or by the Executive pursuant to
Section 3 (b) will not affect any rights which the Executive may have pursuant to any agreement,
policy, plan, program or arrangement of the Company providing Employee Benefits, which rights shall
be governed by the terms thereof.

4. Severance Compensation: (a) If, following the occurrence of a Change in Control,
the Company terminates the Executive’s employment during the Severance Period other than pursuant
to Section 3 (a), or if the Executive terminates his employment pursuant to Section 3 (b), the
Company will pay to the Executive the following amounts within five business days after the date
(the “Termination Date”) that the Executive’s employment is terminated (the effective date of which
shall be the date of termination, or such other date that may be specified by the Executive if the
termination is pursuant to Section 3 (b) ) and continue to provide to the Executive the following
benefits:

(i) A lump slim payment (the “Severance Payment”) in an amount equal to the multiple set forth
under Column I on Annex A hereto times the sum of (A) Base Pay (at the highest rate in effect for
any period prior to the Termination Date), plus (B) Incentive Pay (determined in accordance with
the standards set forth in Section 1 (f)).

(ii) (A) for the number of months set forth under Column II on Annex A hereto (the
“Continuation Period”) following the Termination Date, the Company will arrange to provide the
Executive with Employee Benefits that are welfare benefits (but not stock option, stock purchase,
stock appreciation or similar compensatory benefits) substantially similar to those which the
Executive was receiving or entitled to receive immediately prior to the Termination Date, and (B)
such Continuation Period will be considered service with the Company for the purpose of determining
vesting and benefits accrued and payable to the Executive under the Company’s retirement income,
supplemental executive retirement and other benefit plans of the Company applicable to the
Executive, his dependents or his beneficiaries immediately prior to the Termination Date. If and to
the extent that any benefit described in subsections (A) and (B) of this Section 4 (a) (ii) is not
or cannot be paid or provided under any policy, plan, program or arrangement of the Company or any
Subsidiary, as the case may be, then the Company will itself pay or provide for the payment to the
Executive, his dependents and beneficiaries, of such Employee Benefits. Without otherwise limiting
the purposes or effect of Section 5, Employee Benefits otherwise receivable by the Executive
pursuant to the subsection (A) of this Section 4 (a) (ii) will be reduced to the extent comparable
welfare benefits are actually received by the Executive from another employer during the
Continuation Period following the Executive’s Termination Date.

(b) There will be no right of set-off or counterclaim in respect of any claim, debt or
obligation against any payment to or benefit for the Executive provided for in this Agreement,
except as expressly provided in the last sentence of Section 4 (a) (ii).

 

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(c) Without limiting the rights of the Executive at law or in equity, if the Company fails to
make any payment or provide any benefit required to be made or provided hereunder on a timely
basis, the Company will pay interest on the amount or value thereof at an annualized rate of
interest equal to the so-called composite “prime rate” as quoted from time to time during the
relevant period in The Wall Street Journal. Such interest will be payable as it accrues on demand.
Any change in such prime rate will be effective on and as of the date of such change.

(d) Notwithstanding any other provision hereof, the parties’ respective Rights and obligations
under this Section 4 and under Section 7 will survive any termination or expiration of this
Agreement following a Change in Control or the termination of the Executive’s employment following
a Change in Control for any reason whatsoever.

5. No Mitigation Obligation: The Company hereby acknowledges that it will be
difficult and may be impossible (a) for the Executive to find reasonably comparable employment
following the Termination Date, and (b) to measure the amount of damages which Executive may suffer
as a result of termination of employment hereunder. Accordingly, the payment of the severance
compensation by the Company to the Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable and will be liquidated damages, and the
Executive will not be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits
from any source whatsoever create any mitigation, offset, reduction or any other obligation on the
part of the Executive hereunder or otherwise, except as expressly provided in the last sentence of
Section 4 (a) (ii).

6. Certain Additional Payments by the Company: (a) Anything in this Agreement to the
contrary notwithstanding, in the event that this Agreement shall become operative and it shall be
determined (as hereafter provided) that any payment or distribution by the Company or any of its
affiliates to or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the teens of this Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement, including without limitation any stock
option, stock appreciation right or similar right, or the lapse or termination of any restriction
on or the vesting or exercisability of any of the foregoing (a “Payment”), would be subject to the
excise tax imposed by Section 4999 of the Code (or any successor provision thereto) by reason of
being considered “contingent on a change in ownership or control” of the Company, within the
meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties with respect to such tax (such tax or
taxes, together with any such interest and penalties, being hereafter collectively referred to as
the “Excise Tax”), then the Executive shall be entitled to receive an additional payment or
payments (collectively, a “Gross-Up Payment”); provided, however, that no Gross-Up
Payment shall be made with respect to the Excise Tax, if any, attributable to (A) any incentive
stock option, as defined by Section 422 of the Code (“ISO”) granted prior to the execution of this
Agreement, or (B) any stock appreciation or similar rights, whether or not limited, granted in
tandem with any ISO described in clause (A). The Gross-Up Payment shall be in an amount such that,
after payment by the Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment.

 

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(b) Subject to the provisions of Section 6 (f) hereof, all determinations required to be made
under this Section 6, including whether an Excise Tax is payable by the Executive and the amount of
such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to the
Executive and the amount of such Gross-Up Payment, if any, shall be made by a nationally recognized
accounting firm (the “Accounting Firm”) selected by the Executive in his sole discretion. The
Executive shall direct the Accounting Finn to submit its determination and detailed supporting
calculations to both the Company and the Executive within 30 calendar days after the termination
Date, if applicable, and any such other time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the
Company shall pay the required Gross-Up Payment to the Executive within five business days after
receipt of such determination and calculations with respect to any Payment to the Executive. If
the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the
same time as it makes such determination, furnish the Company and the Executive an opinion that the
Executive has substantial authority not to report any Excise Tax on his federal, state or local
income or other tax return. As a result of the uncertainty in the application of Section 4999 of
the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made by the Company
should have been made (an ‘Underpayment”), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to
Section 6 (f) hereof and the Executive thereafter is required to make a payment of any Excise Tax,
the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has
occurred and to submit its determination and detailed supporting calculations to both the Company
and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the
Company to, or for the benefit of, the Executive within five business days after receipt of such
determination and calculations.

(c) The Company and the Executive shall each provide the Accounting Firm access to and copies
of any books, records and documents in the possession of the Company or the Executive, as the case
may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and calculations
contemplated by Section 6 (b) hereof. Any determination by the Accounting Firm as to the amount of
the Gross-Up Payment shall be binding upon the Company and the
Executive.

(d) The federal, state and local income or other tax returns filed by the Executive shall be
prepared and filed on a consistent basis with the determination of the Accounting Finn with respect
to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount
of any Excise payment, and at the request of the Company, provide to the Company true and correct
copies (with any amendments) of his federal income tax return as filed with the Internal revenue
Service and corresponding state and local tax returns, if relevant, as filed with the applicable
taxing authority, and such other documents reasonably requested by the Company, evidencing such
payment. If prior to the filing of the Executive’s
federal income tax return, or corresponding state or local tax return, if relevant, the
Accounting Finn determines that the amount of the Gross-Up Payment should be reduced, the Executive
shall within five business days pay to the Company the amount of such reduction.

 

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(e) The fees and expenses of the Accounting Firm for its services in connection with the
determinations and calculations contemplated by Section 6 (b) hereof shall be borne by the Company.
If such fees and expenses are initially paid by the Executive, the Company shall reimburse the
Executive the full amount of such fees and expenses within five business days after receipt from
the Executive of a statement therefor and reasonable evidence of his payment thereof.

(f) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service or any other taxing authority that, if successful, would require the payment by the Company
of a Gross-Up Payment. Such notification shall be given as promptly as practicable but no later
than 10 business days after the Executive actually receives notice of such claim and the Executive
shall further apprise the Company of the nature of such claim and the date on which such claim is
requested to be paid (in each case, to the extent known by the Executive). The Executive shall not
pay such claim prior to the earlier of (i) the expiration of the 30 calendar day period following
the date on which he gives such notice to the Company and (ii) the date that any payment of amount
with respect to such claim is due. If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive shall:

(i) provide the Company with any written records or documents in his possession relating to
such claim reasonably requested by the Company;

(ii) take such action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including without limitation accepting legal representation
with respect to such claim by an attorney competent in respect of the subject matter and reasonably
selected by the Company;

(iii) cooperate with the Company in good faith in order effectively to contest such claim; and

(iv) permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such contest and shall
indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise Tax or
income tax, including interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limiting the foregoing provisions of
this Section 6(f), the Company shall control all proceedings taken in connection with the contest
of any claim contemplated by this Section 6(f), and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearing and conferences with the taxing authority in
respect of such claim (provided, however, that the Executive may participate therein at his own
cost and expense) and may, at its option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner,

 

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and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall determine; provided,
however, that if the Company directs the Executive to pay the tax claimed and sue far a
refund, the Company shall advance the amount of such payment to the Executive on an interest-free
basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise
Tax or income other tax, including interest or penalties with respect thereto, imposed with respect
to such advance; and provided further, however, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the Executive with
respect to which the contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company’s control of any such contested claim shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

(g) If, after the receipt by the Executive of an amount advanced by the Company pursuant to
Section 6(f) hereof, the Executive receives any refund with respect to such claim, the Executive
shall (subject to the Company’s complying with the requirements of Section 6(f) hereof) promptly
pay to the Company the amount of such refund (together with any interest paid or credited thereon
after any taxes applicable thereto). If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 6(f) hereof, a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and. the Company does not notify the
Executive in writing of its intent to contest such denial or refund prior to the expiration of 30
calendar days after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of any such advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid by the Company to the Executive pursuant to this
Section 6.

7. Legal Fees and Expenses: It is the intent of the Company that the Executive not be
required to incur legal fees and the related expenses associated with the interpretation,
enforcement or defense of Executive’s rights under this Agreement by litigation or otherwise
because the cost and expense thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, if it should appear to the Executive that the
Company has failed to comply with any of its obligations under this Agreement or in the event that
the Company or any other person takes or threatens to take any action to declare this Agreement
void or unenforceable, or institutes any litigation or other action or proceeding designed to deny,
or to recover from, the Executive the benefits provided or intended to be provided to the Executive
hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of
Executive’s choice, at the expense of the Company as hereafter provided, to advise and represent
the Executive in connection with any such interpretation, enforcement or defense, including without
limitation the initiation or defense of any litigation or other legal action, whether by or against
the Company or any Director, officer, employee, stockholder or other person affiliated with the
Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship
between the Company and such counsel, the Company irrevocably consents to the Executive’s entering
into an attorney-client relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship shall exist between the Executive and such
counsel. Without respect to
whether the Executive prevails, in whole or in part, in connection with any of the foregoing,
the Company will pay and be solely financially responsible for any and all attorneys’ and related
fees and expenses incurred by the Executive in connection with any of the foregoing.

 

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8. Employment Rights; Termination Prior to Change in Control: Nothing expressed or
implied in this Agreement will create any right or duty on the part of the Company or the Executive
to have the Executive remain in the employment of the Company or any Subsidiary prior to or
following any Change in Control. Any termination of employment of the Executive or the removal of
the Executive from the office or position in the Company following the commencement of any
discussion with a third person that ultimately results in a Change in Control shall be deemed to be
a termination or removal of the Executive after a Change in Control for purposes of this Agreement.

9. Withholding of Taxes: The Company may withhold from any amounts payable under this
Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant
to any law or government regulation or ruling.

10. Successors and Binding Agreement: (a) The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement in form and
substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Company would be required to perform if no such
succession had taken place. This Agreement will be binding upon and inure to the benefit of the
Company and any successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of the Company whether by
purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter
be deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable
transferable or delegable by the Company.

(b) This Agreement will inure to the benefit of and be enforceable by the Executive’s personal
or legal representatives, executors, administrators, successors, heirs, distributees and legatees.

(c) This Agreement is personal in nature and neither of the parties hereto shall, without the
consent of the other, assign, transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 10 (a) and 10 (b) hereof. Without limiting the
generality or effect of the foregoing, the Executive’s right to receive payments hereunder will not
be assignable, transferable or delegable, whether by pledge, creation of a security interest, or
otherwise, other than by a transfer by Executive’s will or by the laws of descent and distribution
and, in the event of any attempted assignment or transfer contrary to this Section 10 (c), the
Company shall have no liability to pay any amount so attempted to be assigned, transferred or
delegated.

 

11

 

11. Notices: For all purposes of this Agreement, all communications, including
without limitation notices, consents, requests or approvals, required or permitted to be given
hereunder will be in writing and will be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five
business days after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been sent by a nationally
recognized overnight courier service such as Federal Express, UPS, or Purolator, addressed to the
Company ( to the attention of the Secretary of the Company) at its principal executive office and
to the Executive at his principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except that notices of changes of
address shall be effective only upon receipt.

12. Governing Law: The validity, interpretation, construction and performance of this
Agreement will be governed by and construed in accordance with the substantive laws of the State of
Illinois, without giving effect to the principles of conflict of laws of such State.

13. Validity: If any provision of this Agreement or the application of any provision
hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the
remainder of this Agreement and the application of such provision to any other person or
circumstances will not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it
enforceable, valid or legal.

14. Miscellaneous: No provision of this Agreement may be modified, or discharged
unless such waiver, modification or discharge is agreed to in writing signed by the Executive and
the Company. No waiver by either party hereto at any time of any breach by the other party hereto
or compliance with any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise, expressed or
implied with respect to the subject matter hereof have been made by either party which are not set
forth, expressly in this Agreement. References to Sections are to references to Sections of this
Agreement.

15. Counterparts: This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and same
agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered
as of the date first above written.

	 	 	 	 	 
	 	WINSTON LABORATORIES, INC.

 	 
	 	By:  	/s/ Joel E. Bernstein, M.D.
 	 
	 	 	Joel E. Bernstein, MD, Chairman & CEO 	 

 

12

 

Severance Agreement

Between Winston Laboratories, Inc. and Scott B. Phillips

Annex A

	 	 	 
	 	 	Months of Welfare Benefit
	Multiple of Annual Base Salary	 	Continuation and Additional
	and Incentive Pay Severance	 	Retirement Income Service Credit
	 	 	 
	2.00
	 	24Filed by Bowne Pure Compliance

EXHIBIT 10.7

100 Fairway Drive

Suite 134

Vernon Hills, Illinois 60061

P: 847.362.8200

F: 847.362.8394

January 26, 2006

www.winstonlabs.com

Scott B. Phillips, M.D.

400 E. Randolph, #2409

Chicago, IL 60601

Dear Scott:

In addition to the “Change-in-Control” Agreement (“CICA”) that you already have with Winston
Laboratories, Inc. (“Winston” or the “Company”), the Company is herein providing you with a general
severance agreement to supplement/compliment the CICA. You agree that you will at all times
faithfully, industriously and to the best of your ability, experience, and talents, perform all of
the duties that have been, are, or may be required of you to the reasonable satisfaction of
Winston. Winston may discharge you in the event you violate any reasonable or customary rule or
regulation that may be established from time to time for the conduct of Winston’s business or for
any material breach or neglect of any duty or obligation of yours after written notice. Your
employment may be terminated at the sole option of Winston on thirty (30) days written notice from
Winston to you. If Winston terminates your employment you will receive your base salary and
medical and life insurance benefits at that time for an additional six (6) months from the date of
your termination, to be paid monthly as full compensation in payment for all claims under this
contract. If Winston terminates your employment, all benefits, not fully vested, cease and are
extinguished as of the date you receive the written notice of termination except for those
provisions heretofore stated as full compensation in payment for all claims under this contract.
COBRA benefits shall begin at the expiration of severance.

Winston’s exercise of its right to terminate hereunder shall be without prejudice to any other
remedy to which Winston may be entitled at law, in equity or under this agreement. You may upon
fourteen (14) days written notice terminate your employment with Winston. Likewise, the exercise
of your right to terminate hereunder shall be without prejudice to any other remedy to which you
may be entitled by law, in equity, or under this agreement. All legal issues shall be determined
in accordance with the laws of the state of Illinois in the Illinois state court that is mutually
agreeable to both parties. If you terminate your employment all salary and benefits from Winston
will immediately cease as of your termination date, and you will not be entitled to any benefits
which have not been fully vested at the time of your termination including bonuses for company
performance or for an equity transaction for the company. This agreement constitutes the agreement
between the parties and this contract shall not inure to the benefit of your successors, heirs
and/or legal representative.

 

 

 

Please sign and date below to represent that you are in full agreement with the severance terms
detailed herein.

	 	 	 
	Sincerely,
	 	 
	 
	 	 
	/s/ Joel E. Bernstein, M.D.
 

	 	 
	Joel E. Bernstein, M.D.
	 	 
	Founder, CEO
	 	 
	 
	 	 
	/s/ Scott B. Philips

	 	2/15/06
	 

	 	 
	Signature of Employee

	 	Date

 

2

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