Exhibit 10.1

PRIVILEGED & CONFIDENTIAL
FORM OF DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENT
     Indemnification Agreement, dated as of January 15, 2007, between Sally
Beauty Holdings Inc., a Delaware corporation (the “Company”) and David L. Rea
(“Indemnitee”).
     WHEREAS, qualified persons are reluctant to serve corporations as
directors, officers or otherwise unless they are provided with broad
indemnification and insurance against claims arising out of their service to and
activities on behalf of the corporations; and
     WHEREAS, the Company has determined that attracting and retaining such
persons is in the best interests of the Company’s stockholders and that it is
reasonable, prudent and necessary for the Company to indemnify such persons to
the fullest extent permitted by applicable law and to provide reasonable
assurance regarding insurance.
     NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
     1. Defined Terms; Construction.
          (a) Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
     “Change in Control” means, and shall be deemed to have occurred if, on or
after the date of this Agreement, (i) any “person” (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended),
other than (A) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries acting in such capacity,
or (B) a corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of stock of the
Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing
more than 20% of the total voting power represented by the Company’s then
outstanding Voting Securities, (ii) during any period of two consecutive years
commencing from and after the date hereof, individuals who at the beginning of
such period constitute the board of directors of the Company and any new
director whose election by the board of directors of the Company or nomination
for election by the Company’s stockholders was approved by a vote of at least a
majority of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof,
(iii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation other than a merger or consolidation that
would result in the Voting Securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity) at least 80% of
the total

 

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voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation,
(iv) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of (in
one transaction or a series of related transactions) all or substantially all of
its assets, or (v) the Company shall file or have filed against it, and such
filing shall not be dismissed, any bankruptcy, insolvency or dissolution
proceedings, or a trustee, administrator or creditors committee shall be
appointed to manage or supervise the affairs of the Company.
     “Corporate Status” means the status of a person who is or was a director
(or a member of any committee of a board of directors), officer, employee or
agent (including without limitation a manager of a limited liability company) of
the Company or any of its subsidiaries, or of any predecessor thereof, or is or
was serving at the request of the Company as a director (or a member of any
committee of a board of directors), officer, employee or agent (including
without limitation a manager of a limited liability company) of another
corporation, limited liability company, partnership, joint venture, trust or
other enterprise, or of any predecessor thereof, including service with respect
to an employee benefit plan.
     “Determination” means a determination that either (x) there is a reasonable
basis for the conclusion that indemnification of Indemnitee is proper in the
circumstances because Indemnitee met a particular standard of conduct (a
“Favorable Determination”) or (y) there is no reasonable basis for the
conclusion that indemnification of Indemnitee is proper in the circumstances
because Indemnitee met a particular standard of conduct (an “Adverse
Determination”). An Adverse Determination shall include the decision that a
Determination was required in connection with indemnification and the decision
as to the applicable standard of conduct.
     “DGCL” means the General Corporation Law of the State of Delaware, as
amended from time to time.
     “Expenses” means all attorneys’ fees and expenses, retainers, court,
arbitration and mediation costs, transcript costs, fees of experts, bonds,
witness fees, costs of collecting and producing documents, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, being or preparing to be a witness in,
appealing or otherwise participating in a Proceeding.
     “Independent Legal Counsel” means an attorney or firm of attorneys
competent to render an opinion under the applicable law, selected in accordance
with the provisions of Section 5(e), who has not otherwise performed any
services for the Company or any of its subsidiaries or for Indemnitee within the
last three years (other than with respect to

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matters concerning the rights of Indemnitee under this Agreement or under
indemnity agreements similar to this Agreement).
     “Proceeding” means a threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, including
without limitation a claim, demand, discovery request, formal or informal
investigation, inquiry, administrative hearing, arbitration or other form of
alternative dispute resolution, including an appeal from any of the foregoing.
     “Voting Securities” means any securities of the Company that vote generally
in the election of directors.
          (b) Construction. For purposes of this Agreement,
          (i) References to the Company or any of its “subsidiaries” shall
include any corporation, limited liability company, partnership, joint venture,
trust or other entity or enterprise that before or after the date of this
Agreement is party to a merger or consolidation with the Company or any such
subsidiary or that is a successor to the Company as contemplated by Section 8(d)
(whether or not such successor has executed and delivered the written agreement
contemplated by Section 8(d)).
          (ii) References to “fines” shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan.
          (iii) References to a “witness” in connection with a Proceeding shall
include any interviewee or person called upon to produce documents in connection
with such Proceeding.
     2. Agreement to Serve.
     Indemnitee agrees to serve as a director or officer of the Company or one
or more of its subsidiaries and in such other capacities as Indemnitee may serve
at the request of the Company from time to time, and, by its execution of this
Agreement, the Company confirms its request that Indemnitee serve as a director
or officer of the Company and in such other capacities. Indemnitee shall be
entitled to resign or otherwise terminate such service with immediate effect at
any time, and neither such resignation or termination nor the length of such
service shall affect Indemnitee’s rights under this Agreement. This Agreement
shall not constitute an employment agreement, supersede any employment agreement
to which Indemnitee is a party or create any right of Indemnitee to continued
employment or appointment.

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     3. Indemnification.
          (a) General Indemnification. The Company shall indemnify Indemnitee,
to the fullest extent permitted by applicable law in effect on the date hereof
or as amended to increase the scope of permitted indemnification, against
Expenses, losses, liabilities, judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges in connection
therewith) incurred by Indemnitee or on Indemnitee’s behalf in connection with
any Proceeding in any way connected with, resulting from or relating to
Indemnitee’s Corporate Status.
          (b) Additional Indemnification Regarding Expenses. Without limiting
the foregoing, in the event any Proceeding is initiated by Indemnitee or the
Company or any of its subsidiaries to enforce or interpret this Agreement or any
rights of Indemnitee to indemnification or advancement of Expenses (or related
obligations of Indemnitee) under the Company’s or any such subsidiary’s
certificate of incorporation or bylaws, any other agreement to which Indemnitee
and the Company or any of its subsidiaries are party, any vote of stockholders
or directors of the Company or any of its subsidiaries, the DGCL, any other
applicable law or any liability insurance policy, the Company shall indemnify
Indemnitee against all Expenses incurred by Indemnitee or on Indemnitee’s behalf
in connection with such Proceeding, whether or not Indemnitee is successful in
such Proceeding, except to the extent that the court presiding over such
Proceeding determines that material assertions made by Indemnitee in such
Proceeding were in bad faith or were frivolous.
          (c) Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for a portion of
any Expenses, losses, liabilities, judgments, fines, penalties and amounts paid
in settlement incurred by Indemnitee, but not for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for such portion.
          (d) Nonexclusivity. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company’s certificate of incorporation or bylaws, any agreement, any
vote of stockholders or directors, the DGCL, any other applicable law or any
liability insurance policy.
          (e) Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated under the Agreement to
indemnify Indemnitee:
          (i) For Expenses incurred in connection with Proceedings initiated or
brought voluntarily by Indemnitee and not by way of defense, counterclaim or
crossclaim, except (x) as contemplated by Section 3(b), (y) in

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specific cases if the board of directors of the Company has approved the
initiation or bringing of such Proceeding, and (z) as may be required by law.
          (ii) For an accounting of profits arising from the purchase and sale
by Indemnitee of securities within the meaning of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or any similar successor statute.
          (f) Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute such documents and do such acts as
the Company may reasonably request to secure such rights and to enable the
Company effectively to bring suit to enforce such rights.
     4. Advancement of Expenses.
     The Company shall pay all Expenses incurred by Indemnitee in connection
with any Proceeding in any way connected with, resulting from or relating to
Indemnitee’s Corporate Status, other than a Proceeding initiated by Indemnitee
for which the Company would not be obligated to indemnify Indemnitee pursuant to
Section 3(e)(i), in advance of the final disposition of such Proceeding and
without regard to whether Indemnitee will ultimately be entitled to be
indemnified for such Expenses and without regard to whether an Adverse
Determination has been made, except as contemplated by the last sentence of
Section 5(f). Indemnitee shall repay such amounts advanced if and to the extent
that it shall ultimately be determined in a decision by a court of competent
jurisdiction from which no appeal can be taken that Indemnitee is not entitled
to be indemnified by the Company for such Expenses. Such repayment obligation
shall be unsecured and shall not bear interest.
     5. Indemnification Procedure.
          (a) Notice of Proceeding; Cooperation. Indemnitee shall give the
Company notice in writing as soon as practicable of any Proceeding for which
indemnification will or could be sought under this Agreement, provided that any
failure or delay in giving such notice shall not relieve the Company of its
obligations under this Agreement unless and to the extent that (i) none of the
Company and its subsidiaries are party to or aware of such Proceeding and (ii)
the Company is materially prejudiced by such failure.
          (b) Settlement. The Company will not, without the prior written
consent of Indemnitee, which may be provided or withheld in Indemnitee’s sole
discretion, effect any settlement of any Proceeding against Indemnitee or which
could have been brought against Indemnitee unless such settlement solely
involves the payment of money by persons other than Indemnitee and includes an
unconditional release of Indemnitee from all liability on any matters that are
the subject of such Proceeding and

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an acknowledgment that Indemnitee denies all wrongdoing in connection with such
matters. The Company shall not be obligated to indemnify Indemnitee against
amounts paid in settlement of a Proceeding against Indemnitee if such settlement
is effected by Indemnitee without the Company’s prior written consent, which
shall not be unreasonably withheld.
          (c) Request for Payment; Timing of Payment. To obtain indemnification
payments or advances under this Agreement, Indemnitee shall submit to the
Company a written request therefor, together with such invoices or other
supporting information as may be reasonably requested by the Company and
reasonably available to Indemnitee. The Company shall make indemnification
payments to Indemnitee no later than 30 days, and advances to Indemnitee no
later than 10 days, after receipt of the written request of Indemnitee.
          (d) Determination. The Company intends that Indemnitee shall be
indemnified to the fullest extent permitted by law as provided in Section 3 and
that no Determination shall be required in connection with such indemnification.
In no event shall a Determination be required in connection with advancement of
Expenses pursuant to Section 4 or in connection with indemnification for
Expenses incurred as a witness or incurred in connection with any Proceeding or
portion thereof with respect to which Indemnitee has been successful on the
merits or otherwise. Any decision that a Determination is required by law in
connection with any other indemnification of Indemnitee, and any such
Determination, shall be made within 30 days after receipt of Indemnitee’s
written request for indemnification, as follows:
          (i) If no Change in Control has occurred, (w) by a majority vote of
the directors of the Company who are not parties to such Proceeding, even though
less than a quorum, with the advice of Independent Legal Counsel, or (x) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, with the advice of Independent Legal Counsel, or (y)
if there are no such directors, or if such directors so direct, by Independent
Legal Counsel in a written opinion to the Company and Indemnitee, or (z) by the
stockholders of the Company.
          (ii) If a Change in Control has occurred, by Independent Legal Counsel
in a written opinion to the Company and Indemnitee.
     The Company shall pay all Expenses incurred by Indemnitee in connection
with a Determination.
          (e) Independent Legal Counsel. If there has not been a Change in
Control, Independent Legal Counsel shall be selected by the board of directors
of the Company and approved by Indemnitee (which approval shall not be
unreasonably withheld or delayed). If there has been a Change in Control,
Independent Legal Counsel

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shall be selected by Indemnitee and approved by the Company (which approval
shall not be unreasonably withheld or delayed). The Company shall pay the fees
and expenses of Independent Legal Counsel and indemnify Independent Legal
Counsel against any and all expenses (including attorneys’ fees), claims,
liabilities and damages arising out of or relating to its engagement.
          (f) Consequences of Determination; Remedies of Indemnitee. The Company
shall be bound by and shall have no right to challenge a Favorable
Determination. If an Adverse Determination is made, or if for any other reason
the Company does not make timely indemnification payments or advances of
Expenses, Indemnitee shall have the right to commence a Proceeding before a
court of competent jurisdiction to challenge such Adverse Determination and/or
to require the Company to make such payments or advances. Indemnitee shall be
entitled to be indemnified for all Expenses incurred in connection with such a
Proceeding in accordance with Section 3(b) and to have such Expenses advanced by
the Company in accordance with Section 4. If Indemnitee fails to timely
challenge an Adverse Determination, or if Indemnitee challenges an Adverse
Determination and such Adverse Determination has been upheld by a final judgment
of a court of competent jurisdiction from which no appeal can be taken, then, to
the extent and only to the extent required by such Adverse Determination or
final judgment, the Company shall not be obligated to indemnify or advance
Expenses to Indemnitee under this Agreement.
          (g) Presumptions; Burden and Standard of Proof. In connection with any
Determination, or any review of any Determination, by any person, including a
court:
          (i) It shall be a presumption that a Determination is not required.
          (ii) It shall be a presumption that Indemnitee has met the applicable
standard of conduct and that indemnification of Indemnitee is proper in the
circumstances.
          (iii) The burden of proof shall be on the Company to overcome the
presumptions set forth in the preceding clauses (i) and (ii), and each such
presumption shall only be overcome if the Company establishes that there is no
reasonable basis to support it.
          (iv) The termination of any Proceeding by judgment, order, finding,
settlement (whether with or without court approval) or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
indemnification is not proper or that Indemnitee did not meet the applicable
standard of conduct or that a court has determined that indemnification is not
permitted by this Agreement or otherwise.

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          (v) Neither the failure of any person or persons to have made a
Determination nor an Adverse Determination by any person or persons shall be a
defense to Indemnitee’s claim or create a presumption that Indemnitee did not
meet the applicable standard of conduct, and any Proceeding commenced by
Indemnitee pursuant to Section 5(f) shall be de novo with respect to all
determinations of fact and law.
     6. Directors and Officers Liability Insurance.
          (a) Maintenance of Insurance. So long as the Company or any of its
subsidiaries maintains liability insurance for any directors, officers,
employees or agents of any such person, the Company shall ensure that Indemnitee
is covered by such insurance in such a manner as to provide Indemnitee the same
rights and benefits as are accorded to the most favorably insured of the
Company’s and any of its subsidiaries’ then current directors and officers.
          (b) Notice to Insurers. Upon receipt of notice of a Proceeding
pursuant to Section 5(a), the Company shall give or cause to be given prompt
notice of such Proceeding to all insurers providing liability insurance in
accordance with the procedures set forth in all applicable or potentially
applicable policies. The Company shall thereafter take all necessary action to
cause such insurers to pay all amounts payable in accordance with the terms of
such policies.
     7. Exculpation, etc.
          (a) Limitation of Liability. Indemnitee shall not be personally liable
to the Company or any of its subsidiaries or to the stockholders of the Company
or any such subsidiary for monetary damages for breach of fiduciary duty as a
director of the Company or any such subsidiary; provided, however, that the
foregoing shall not eliminate or limit the liability of Indemnitee (i) for any
breach of Indemnitee’s duty of loyalty to the Company or such subsidiary or the
stockholders thereof; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of the law; (iii) under
Section 174 of the DGCL or any similar provision of other applicable
corporations law; or (iv) for any transaction from which Indemnitee derived an
improper personal benefit. If the DGCL or such other applicable law shall be
amended to permit further elimination or limitation of the personal liability of
directors, then the liability of Indemnitee shall, automatically, without any
further action, be eliminated or limited to the fullest extent permitted by the
DGCL or such other applicable law as so amended.
          (b) Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company or any of
its subsidiaries against Indemnitee or Indemnitee’s estate, spouses, heirs,
executors, personal or legal representatives, administrators or assigns after
the expiration of two years from

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the date of accrual of such cause of action, and any claim or cause of action of
the Company shall be extinguished and deemed released unless asserted by the
timely filing of a legal action within such two-year period, provided that if
any shorter period of limitations is otherwise applicable to any such cause of
action, such shorter period shall govern.
     8. Miscellaneous.
          (a) Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(i) the validity, legality and enforceability of the remaining provisions of
this Agreement (including without limitation, each portion of any section of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby and shall remain enforceable to the
fullest extent permitted by law; (ii) such provision or provisions shall be
deemed reformed to the extent necessary to conform to applicable law and to give
the maximum effect to the intent of the parties hereto; and (iii) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of any section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested thereby.
          (b) Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) on
the date of delivery if delivered personally, or by facsimile, upon confirmation
of receipt, (ii) on the first business day following the date of dispatch if
delivered by a recognized next-day courier service or (iii) on the third
business day following the date of mailing if delivered by domestic registered
or certified mail, properly addressed, or on the fifth business day following
the date of mailing if sent by airmail from a country outside of North America,
to Indemnitee as shown on the signature page of this Agreement, to the Company
at the address shown on the signature page of this Agreement, or in either case
as subsequently modified by written notice.
          (c) Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by all the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver.
          (d) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns, including without limitation any
acquiror of all or substantially all of the Company’s assets or business, any
person (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) that acquires beneficial ownership of
securities of the Company representing more than

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20% of the total voting power represented by the Company’s then outstanding
Voting Securities and any survivor of any merger or consolidation to which the
Company is party, and shall inure to the benefit of Indemnitee and Indemnitee’s
estate, spouses, heirs, executors, personal or legal representatives,
administrators and assigns. The Company shall require and cause any such
successor, as applicable, by written agreement in form and substance
satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement as if it were named as the Company herein, and the Company shall not
permit any such purchase of assets or business, acquisition of securities or
merger or consolidation to occur until such written agreement has been executed
and delivered. No such assumption and agreement shall relieve the Company of any
of its obligations hereunder, and this Agreement shall not otherwise be
assignable by the Company.
          (e) Choice of Law; Consent to Jurisdiction. This Agreement shall be
governed by and its provisions construed in accordance with the laws of the
State of Delaware, as applied to contracts between Delaware residents entered
into and to be performed entirely within Delaware, without regard to the
conflict of law principles thereof. Each of the Company and Indemnitee hereby
irrevocably consents to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any Proceeding which arises out of or
relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
          (f) Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto,
provided that the provisions hereof shall not supersede the provisions of the
Company’s certificate of incorporation or bylaws, any agreement, any vote of
stockholders or directors, the DGCL or other applicable law, to the extent any
such provisions shall be more favorable to Indemnitee than the provisions
hereof.
          (g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

     
 
SALLY BEAUTY HOLDINGS, INC.
 
   
 
By: /s/ Raal Roos
 
  Name: Raal Roos
Title: Senior Vice President and General Counsel
 
   
 
  Address: 3001 Colorado Boulevard
                Denton, Texas 76210

AGREED TO AND ACCEPTED:
INDEMNITEE:

         
By:
  /s/ David L. Rea    
 
  Name: David L. Rea    
 
  Title: Senior Vice President, Chief Financial Officer and Treasurer    

Address: 1640 Bent Creek Drive
                Southlake, Texas 76092

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