Exhibit 10.12


 


SALLY BEAUTY HOLDINGS, INC.


INDEPENDENT
DIRECTOR COMPENSATION POLICY


 


The Board of Directors (the “Board”) of Sally
Beauty Holdings, Inc. (the “Company”) has adopted the following
compensation policy, effective as of June 30, 2009, for independent directors
of the Company.  The compensation policy
has been developed to compensate certain independent directors of the Company
for their time, commitment and contributions to the Board.  This policy shall apply to directors of the
Company who are not Company employees and who are not affiliated with Clayton
Dubilier & Rice, Inc., (each an “Independent Director”).


 


CASH COMPENSATION


 


Retainers
for Serving on the Board


 


Independent Directors shall
be paid an annual cash retainer of $35,000, payable in advance in quarterly
installments, for each calendar year of service on the Board.  Cash retainers for partial years of service
shall be pro-rated to reflect the number of days served by an Independent
Director during any such quarter.


 


Retainers
for Serving as Chairpersons


 


An
additional annual cash retainer shall be paid to an Independent Director who
serves as chairperson of the Audit Committee, Compensation Committee,
Nominating and Corporate Governance Committee, or Finance Committee. Such
additional retainer shall be payable in advance in quarterly installments, in
the following annualized amounts:


 


	
   

  	
  Audit
  Committee

  	
  $

  	
  17,500

  	
   

  	
   

  
	
   

  	
  Compensation
  Committee

  	
  $

  	
  7,500

  	
   

  	
   

  
	
   

  	
  Nominating
  & Corporate Governance Committee

  	
  $

  	
  5,000

  	
   

  	
   

  
	
   

  	
  Finance
  Committee

  	
  $

  	
  5,000

  	
   

  	
   

  



 


Additional
retainers paid to chairpersons for partial years of service shall be
pro-rated to reflect the number of days served by an Independent Director
during any such quarter.


 


Meeting
Fees


 


For
in-person Board or committee meetings, each Independent Director in
attendance shall receive $2,000.  For
telephonic Board or committee meetings for which minutes are kept, each
independent director in attendance shall receive $1,000.


 

















 


EQUITY-BASED COMPENSATION


 


Initial Grants


 


Upon
the appointment or election of a new Independent Director to the Board, such
Independent Director shall receive, in accordance with the Company’s Omnibus
Incentive Plan then in effect (“Omnibus Plan”), an initial grant of
options (“Options”) to purchase shares of common stock of the Company (“Common
Stock”).  Such Options shall have a
grant date present value equal to $70,000, and shall become exercisable in four
equal annual installments beginning on the day before the first anniversary of
the grant date.


 


Options
granted to Independent Directors shall have an exercise price per share equal
to the Fair Market Value (as defined in the Omnibus Plan) of a share of Common
Stock on the grant date, and shall have a ten-year maximum term. In the event
an Independent Director’s Board service terminates because of death, disability
or involuntary termination without Cause (as defined in the Omnibus Plan), such
Independent Director’s unvested Options shall become exercisable upon such
termination. If an Independent Director’s Board service is terminated for any
other reason than the foregoing, unvested Options shall be canceled upon such
termination.


 


Following the termination of
an Independent Director’s Board service, such Independent Director’s vested
Options shall remain exercisable until the first to occur of (i) the third anniversary of such termination or (ii) the Option’s normal expiration date.  Notwithstanding the foregoing, if an
Independent Director’s Board service is terminated for Cause, any outstanding
Options shall be forfeited upon such termination.


 


Annual Grants


 


Each Independent Director
shall be granted an annual equity-based retainer award with a value at the time
of issuance of approximately $70,000. Such award shall normally be made at the
first Board meeting each Company fiscal year in the form of grants of
restricted stock units (“RSUs”), in accordance the Omnibus Plan, and
shall vest on the last day of such fiscal year. 
Independent Directors whose Board service begins after the start of a
Company fiscal year shall receive a grant pro-rated to reflect the number of
days remaining in such fiscal year. Upon vesting, Independent Director RSUs
shall be deferred into deferred stock units that shall be distributed six
months after such Independent Director’s Board service terminates.


 


In
the event an Independent Director’s Board service terminates because of death,
disability or involuntary termination without Cause (as defined in the Omnibus 


 

















 


Plan),
a pro rata portion of such Independent Director’s unvested RSUs shall vest upon
such termination. If an Independent Director’s Board service is terminated for
any other reason than the foregoing RSUs shall be canceled upon such
termination.


 


TRAVEL EXPENSE REIMBURSEMENT


 


Each of the Independent
Directors shall be entitled to receive reimbursement for reasonable travel
expenses which they properly incur in connection with their functions and
duties as a director.  With respect to
air travel, reimbursements shall be limited to the cost of first-class
commercial airline tickets for the trip and date in question.


 


EFFECTIVE DATE, AMENDMENT, REVISION AND TERMINATION


 


This policy may be amended,
revised or terminated by the Board at any time and from time-to-time.