Document:

Exhibit
10.2

SALLY BEAUTY HOLDINGS 2007 OMNIBUS
INCENTIVE PLAN

STOCK OPTION AGREEMENT

FOR EMPLOYEES

Optionee:

Total Shares Subject to Option:

Option Exercise Price Per Share:

	
  Date of Grant:

  	
  April 26, 2007

  
	
   

  	
   

  
	
  Vesting Commencement Date:

  	
  September 30, 2006

  
	
   

  	
   

  
	
  Expiration Date:

  	
  April 26, 2017

  
	
   

  	
   

  
	
  Type of Stock Option:

  	
  Non-Statutory Stock Option

  

 

1.             Grant of Option.  Sally Beauty Holdings, Inc., a Delaware
corporation (the “Company”),
hereby grants to the optionee named above (the “Optionee”) an option (the “Option”) to purchase the total number of shares of
Common Stock set forth above (the “Shares”)
at the exercise price per Share set forth above (the “Exercise Price”), in accordance with this Stock Option
Agreement (“Option Agreement”)
and subject to the terms and conditions of the Sally Beauty Holdings 2007
Omnibus Incentive Plan, as amended from time to time (the “Plan”), which are
incorporated herein by reference.  Unless
otherwise defined herein, capitalized terms used herein shall have the same
meanings ascribed to them in the Plan.

2.             Vesting; Time of
Exercise.  Subject to the terms and
conditions of the Plan and this Option Agreement, the Option shall vest and
become exercisable in the following cumulative installments, as follows:

(a)           Twenty-five percent (25%) of the Shares shall be
exercisable at any time on or after the day immediately preceding the first
anniversary of the vesting commencement date set forth above (the “Vesting
Commencement Date”);

(b)           Up to an additional twenty-five percent (25%) of the
Shares shall become exercisable at any time on or after the day immediately
preceding the second anniversary of the Vesting Commencement Date;

(c)           Up to an additional twenty-five percent (25%) of the Shares
shall become exercisable at any time on or after the day immediately preceding
the third anniversary of the Vesting Commencement Date; and

(d)           The remaining Shares shall become exercisable at any time
on or after the day immediately preceding the fourth anniversary of the Vesting
Commencement Date.

If an installment covers
a fractional Share, such installment will be rounded to the next highest Share,
except the final installment, which will be for the balance of the total
Shares; provided, that, absent the occurrence of an Adjustment Event as
described in Section 4.4 of the Plan, the Optionee shall in no event be
entitled under the Option to purchase a number of shares of Common Stock
greater than the “Total Shares Subject to Option” indicated above.  Unless Otherwise provided in the Plan or this
Option Agreement, the Option shall expire on the Expiration Date set forth
above and must be exercised, if at all, on or before the Expiration Date.  Unless otherwise provided below, upon the
effective date of an Optionee’s termination of service the unvested portion of
the Optionee’s Option under this Option Agreement shall be forfeited.

If the Optionee’s service
with the Company or any Subsidiary is terminated as a result of the Optionee’s
Retirement and the Optionee does not agree to be bound by the restrictions of
Section 5.5 of the Plan, then the Option shall be exercisable only to the
extent that the Optionee could exercise it on the date of his or her
Retirement.  If the Optionee’s service
with the Company or any Subsidiary is terminated as a result of the Optionee’s
Retirement and the Optionee agrees to be bound by the restrictive covenants of
Section 5.5 of the Plan for the three-year period following Optionee’s
Retirement then Optionee will continue to vest in the portion of the Option
that was not vested and exercisable as of the date of the Optionee’s Retirement
for the three-year period following Optionee’s Retirement as if the Optionee’s
service had not terminated, unless Optionee violates the any of the restrictive
covenants of Section 5.5 of the Plan during such three-year period.  If, in the sole discretion of the Committee,
the Optionee violates one of the restrictive covenants of Section 5.5 of the
Plan during the three-year period following Optionee’s Retirement, then all
Options, whether or not vested, shall be immediately forfeited and cancelled as
of the date of such violation.  If the
Optionee’s service with the Company or any Subsidiary is terminated as a result
of the Optionee’s death or Disability then the Optionee shall, in addition to
the portion of the Option in which the Optionee was vested as of the effective
date of any such termination of service, vest in that portion of the Option
that becomes vested and exercisable on the next vesting date following the
effective date of the Optionee’s termination of service as a result of the
Optionee’s death or Disability.  If the
Optionee voluntarily terminates service for any other reason the Option shall
be exercisable only to the extent the Optionee was vested on the effective date
of such termination of service.  Unless,
as described in Section 9.2 of the Plan, an Alternative Award replaces this
Option, this Option shall become fully vested and exercisable upon the
occurrence during the term of this Option Agreement of a Change in
Control.  If the Optionee’s service is
terminated for Cause then all Options shall be immediately forfeited and
cancelled as of the date of such termination.

3.             Exercise of
Option.

(a)           Right to Exercise. 
The Option shall be exercisable in accordance with the vesting
provisions contained in Section 2 of this Option Agreement and with the other
applicable provisions of the Plan and this Option Agreement.  The Option shall be subject to the provisions
of Article IX of the Plan relating to the exercisability or termination of the
Option in the event of a Change in Control.

(b)           Method of Exercise. 
The Option shall be exercisable only by delivery to the Company of an
executed Stock Option Exercise Notice (the “Exercise Notice”) in the form
attached hereto as Exhibit A, or in such other form approved by the
Committee, which shall state 

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the Optionee’s election to exercise the
Option, the whole number of Shares in respect of which the Option is being
exercised, and such other provisions as may be required by the Committee or
necessary to comply with securities and other applicable laws. The Exercise
Notice shall be signed by the Optionee and shall be delivered to the Company by
such method as may be permitted by the Committee, accompanied (in any case) by
payment of, or provision for the payment of, the Exercise Price for each Share
covered by the Exercise Notice, as described in Section 4 of this Option
Agreement.  The Option shall be deemed to
be exercised to the extent provided in the Exercise Notice upon receipt by the
Company of such written Exercise Notice and the Exercise Price.

(c)           Issuance of Shares. 
If the Exercise Notice and payment are in a form and substance
satisfactory to the Company (or its counsel), and the Optionee or any other
person permitted to exercise the Option has complied with Section 5 of this
Option Agreement, the Company shall issue or cause the issuance of, in the name
of the Optionee or Optionee’s legal representative, the Shares purchased by
such exercise of the Option.

4.             Method of
Payment. The Optionee’s delivery of the signed Exercise Notice to exercise
the Option (in whole or in part) shall be accompanied by full payment of the
Exercise Price for the Shares being purchased. 
Payment for the Shares may be made in cash (by check) or at the election
of the Optionee and where permitted by law in one or more of the following
methods: (i) if a public market for the Common Stock exists, through a “same
day sale” arrangement between the Optionee and a broker-dealer that is a member
of the National Association of Securities Dealers, Inc. (an “NASD Dealer”)
whereby the Optionee elects to exercise the Stock Option and to sell a portion
of the shares of Common Stock so purchased to pay for the exercise price and
whereby the NASD Dealer commits upon receipt of such shares of Common Stock to
forward the exercise price directly to the Company; (ii) if a public market for
the Common Stock exists, through a “margin” commitment from the Optionee and an
NASD Dealer whereby the Optionee elects to exercise the Stock Option and to
pledge the shares of Common Stock so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
exercise price, and whereby the NASD Dealer commits upon receipt of such shares
of Common Stock to forward the exercise price directly to the Company; (iii) in
any other form of valid consideration that is acceptable to the Committee in
its sole discretion; provided, however, that such other form of consideration
is not otherwise prohibited by the Plan or this Option Agreement; or (iv) by
any combination of the foregoing. 
Notwithstanding the foregoing, the forms of payment provided in (i) or
(ii) above shall not be available to any Optionee who is a member of the
Board or an Executive Officer of the Company if any such form of payment would
be treated as a personal loan prohibited under Section 13(k) of the Exchange
Act, and Optionee shall not provide for payment of the Exercise Price
for the Shares being purchased by surrendering for cancellation shares of
Common Stock owned by the Optionee at the Fair Market Value per share at the
time of exercise.

5.             Tax Withholding
Obligations.  No Shares shall be
delivered to the Optionee, or any other person permitted to exercise the
Option, pursuant to the exercise of the Option until the Optionee or such other
person has made arrangements acceptable to the Committee or its designee for
the satisfaction of all applicable income tax, employment tax, and social
security tax withholding obligations, including obligations incident to the
receipt of Shares.  Upon exercise of the
Option, the Company or the Optionee’s employer may offset or withhold (from any

 3
 

amount owed by the
Company or the Optionee’s employer to the Optionee) or collect from the
Optionee, or such other person, an amount sufficient to satisfy such tax
obligations and/or the employer’s withholding obligations.

6.             Termination or
Change of Service.

(a)           Post-Termination Exercise.  Subject to the provisions of Sections 7 and 8
of this Option Agreement, if the Optionee’s service with the Company or any
Subsidiary terminates, other than as described in Section 6(b) of this Option
Agreement, the Optionee may, to the extent otherwise so entitled at the date of
Optionee’s termination of service (the “Termination Date”), exercise the Option
until the 60th day following the Optionee’s Termination Date
(the “Post-Termination Exercise Period”).  Upon termination of the Optionee’s
service with the Company or any Subsidiary as described in Section 6(b) of this
Option Agreement, the Optionee’s right to exercise the Option shall, except as
otherwise determined by the Committee, terminate concurrently with the
termination of the Optionee’s service with the Company or Subsidiary.  In no event may the Option be exercised later
than the Expiration Date set forth on the first page of this Option
Agreement.  In the event of the Optionee’s
change in status from Employee, non-employee director or Consultant to any
other status of Employee, non-employee director or Consultant, the Option shall
remain in effect and, except to the extent otherwise determined by the
Committee, continue to vest.  Except as
provided in Sections 7 and 8 of this Option Agreement, to the extent that the
Optionee is not entitled to exercise the Option on the Termination Date, or if
the Optionee does not exercise the Option within the Post-Termination Exercise
Period, the Option shall terminate.

(b)           No Post-Termination Exercise.  Unless the Committee otherwise determines, if
the Optionee’s service with the Company or any Subsidiary is terminated either
(i) by the Company or a Subsidiary for Cause, or (ii) if Optionee’s employment
is subject to the terms of a then-effective written employment agreement between
the Optionee and the Company or an affiliate, by the Optionee without
compliance with, or without having any right to do so under, the terms of such
employment agreement, then the Optionee’s right to exercise the Option shall
immediately terminate.  For purposes of
this Option Agreement, the term “Cause” for termination by the Company or a
Subsidiary of the Optionee’s service with the Company or any Subsidiary shall
have the meaning set forth in a then-effective written employment agreement
between the Optionee and the Company or such Subsidiary or, in the absence of
such a definition in a then-effective written employment agreement (in the
determination of the Committee), shall mean Cause as otherwise provided in the
Plan.  The Committee shall have discretion
for the purposes of this Option Agreement to determine whether any termination
of service by the Optionee is in compliance with, or is in accordance with any
right to terminate, under the terms of a then-effective written employment
agreement.

7.             Retirement.
If the Optionee’s service with the Company or any Subsidiary terminates as a
result of the Optionee’s Retirement and the Optionee does not agree to be bound
by the restrictive covenants of Section 5.5 of the Plan then the Optionee may
exercise the Option until the earlier of (i) the twelve-month anniversary of
the effective date of the Optionee’s termination of service as a result of the
Optionee’s Retirement, or (ii) the Expiration Date.  If the Optionee’s service with the Company or
any Subsidiary terminates as a result of the Optionee’s Retirement and the
Optionee agrees to be bound by the restrictive covenants of Section 5.5 of the
Plan then the Optionee will continue to vest in the Options pursuant to the
provisions of Section 2(d)

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of this Option
Agreement and the Optionee may exercise the Option until the earlier of (i) 60
days following the earlier of (A) the third anniversary of the Optionee’s
Retirement, or (B) the twelve-month anniversary following the Optionee’s death,
or (ii) the Expiration Date.

8.             Death or
Disability.  In the event of the
termination of the Optionee’s service with the Company or any Subsidiary as a
result of the Optionee’s death or Disability the Optionee, the Optionee’s
estate, or any person who acquired the right to exercise the Option by bequest
or inheritance, as applicable, may, to the extent the option was vested on the
effective date of the Optionee’s death or Disability, notwithstanding any
additional Options which vested pursuant to the terms of Section 2(d) of this
Option Agreement as a result of the Optionee’s death or Disability, exercise
the Option until the earlier of (i) the twelve-month anniversary of the
effective date of the Optionee’s termination of service as a result of the
Optionee’s death or Disability, or (ii) the Expiration Date.  To the extent the Optionee vests in
additional Options as a result of the Optionee’s death or Disability pursuant
to the terms of Section 2(d) of this Option Agreement, such additional vested
Options may be exercised until the twelve-month anniversary of the effective
date of the Optionee’s termination of service as a result of the Optionee’s
death or Disability regardless of whether such anniversary occurs after the
Expiration Date.

9.             Transferability
of Option.  Neither the Option nor
any of the Optionee’s rights under this Option Agreement may be transferred or
assigned in any manner other than by will or by the law of descent and
distribution or as may otherwise be permitted by the Committee or by the terms
of the Plan.  The Option and those rights
may be exercised during the lifetime of the Optionee only by the Optionee.

10.           Tax Consequences.  Set forth below is a brief summary, as of the
Date of Grant, of some of the federal tax consequences of exercise of the
Option and disposition of the Shares. 
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS
ARE SUBJECT TO CHANGE.  THE OPTIONEE
SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THE OPTION OR DISPOSING OF THE
SHARES.

(a)           Exercise of Non-Qualified Stock Option.  There may be a regular federal income tax
liability upon the exercise of the Option. 
The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise
Price.  If the Optionee is an Employee or
former Employee, the Company will be required to withhold from the Optionee’s
compensation or collect from the Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.

(b)           Disposition of Shares.  If the Shares are held for at least one year
before disposition, any gain on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

11.           Term of Option.  Except as may otherwise be provided under the
Plan in connection with the termination of Optionee’s employment as a result of
the Optionee’s death or Disability, the Option may be exercised no later than
the Expiration Date or such earlier date as otherwise provided in this Option
Agreement.

12.           Entire Agreement;
Governing Law.  The Plan and this
Option Agreement (with the Exercise Notice, if the Option is exercised)
constitute the entire agreement of the Company and the Optionee (collectively
the “Parties”) with respect to the subject matter hereof and 

 5
 

supersede in their
entirety all prior undertakings and agreements of the Parties with respect to
the subject matter hereof, and may not be modified adversely to the Optionee’s
interest except by means of a writing signed by the Parties.  Notwithstanding any language in this
Agreement to the contrary, to the extent of any conflict between this Agreement
and any written employment agreement with Optionee, the terms of such
employment agreement shall control. 
Nothing in the Plan and this Option Agreement (except as expressly
provided therein or herein) is intended to confer any rights or remedies on any
person other than the Parties.  The Plan
and this Option Agreement are to be construed in accordance with and governed
by the internal laws of the State of Delaware without giving effect to any
choice-of-law rule that would cause the application of the laws of any
jurisdiction other than the internal laws of the State of Delaware, to the
rights and duties of the Parties.  Should
any provision of the Plan or this Option Agreement be determined by a court of
law to be illegal or unenforceable, such provision shall be enforced to the
fullest extent allowed by law and the other provisions shall nevertheless
remain effective and shall remain enforceable.

13.           Interpretive
Matters.  Whenever required by the
context, pronouns and any variation thereof shall be deemed to refer to the
masculine, feminine, or neuter, and the singular shall include the plural, and
vice versa.  The term “include” or “including”
does not denote or imply any limitation. 
The captions and headings used in this Option Agreement are inserted for
convenience and shall not be deemed a part of the Option or this Option
Agreement for construction or interpretation.

14.           Notice.  Any notice or other communication required or
permitted hereunder shall be given in writing and shall be deemed given,
effective, and received upon prepaid delivery in person or by courier or upon
the earliest of delivery or the third business day after deposit in the United
States mail if sent by certified mail, with postage and fees prepaid, addressed
to the other Party at its address as shown beneath its signature in this Option
Agreement, or to such other address as such Party may designate in writing from
time to time by notice to the other Party in accordance with this Section 14.

	
  

  	
  SALLY BEAUTY HOLDINGS, INC.

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

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THE OPTIONEE ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
EXPRESSLY PROVIDED OTHERWISE HEREIN, THE SHARES SUBJECT TO THE OPTION SHALL
VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE OPTIONEE’S CONTINUOUS SERVICE
(NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING
SHARES HEREUNDER).  THE OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS OPTION AGREEMENT OR THE PLAN SHALL
CONFER UPON THE OPTIONEE ANY RIGHT WITH RESPECT TO FUTURE GRANTS OR
CONTINUATION OF THE OPTIONEE’S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN
ANY WAY WITH THE OPTIONEE’S RIGHT OR THE RIGHT OF THE OPTIONEE’S EMPLOYER TO
TERMINATE OPTIONEE’S CONTINUOUS SERVICE, WITH OR WITHOUT CAUSE, AND WITH OR
WITHOUT NOTICE.  THE OPTIONEE
ACKNOWLEDGES THAT UNLESS THE OPTIONEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH
THE COMPANY TO THE CONTRARY, THE OPTIONEE’S STATUS IS AT-WILL.

The Optionee acknowledges
receipt of a copy of the Plan, represents that he or she is familiar with the
terms and provisions thereof, and hereby accepts this Option subject to all of
the terms and provisions hereof and thereof. 
The Optionee has reviewed this Option Agreement, the Plan, and the
Exercise Notice in their entirety, has had an opportunity to obtain the advice
of counsel prior to executing this Option Agreement, and fully understands all
provisions of this Option Agreement, the Plan and the Exercise Notice.  The Optionee further agrees to provide the
Company with such information as the Company considers necessary for the
administration of this Option Agreement.

	
  Dated:

  	
   

  	
   

  	
  Signed:

  	
   

  	
   

  
	
   

  	
   

  	
  Optionee

  	
   

  

 

 7

EXHIBIT A

SALLY BEAUTY HOLDINGS 2007 OMNIBUS
INCENTIVE PLAN

STOCK OPTION EXERCISE NOTICE

This Stock Option
Exercise Notice (“Exercise
Notice”) is made this      day of                ,
20     between Sally Beauty Holdings, Inc. (the “Company”), and the
optionee named below (the “Optionee”)
pursuant to the Sally Beauty Holdings 2007 Omnibus Incentive Plan (the “Plan”).  Unless otherwise defined herein, the
capitalized terms used in this Exercise Notice shall have the meaning ascribed
to them in the Plan and in the Stock Option Agreement (“Option Agreement”) to
which this Exercise Notice relates.

Award Number:

Optionee:

Number of Shares Purchased:

Option Exercise Price Per Share:

Aggregate Purchase Price:

Date of Grant:

Vesting Commencement Date:

Type of Stock Option:                            Non-Qualified Stock
Option

The Optionee hereby
delivers to the Company the Aggregate Purchase Price set forth above (“Aggregate Purchase Price”)
in cash as indicated below or to the extent provided for in the Option
Agreement and approved by the Committee by accepting this Exercise Notice, as
follows (as applicable, check and complete):

in cash in the amount of
$                ,
receipt of which is acknowledged by the Company;

through a “same-day-sale”
commitment, delivered herewith, from the Optionee and the NASD Dealer named
therein in the amount of $                            ;

through a “margin”
commitment, delivered herewith, from the Optionee and the NASD Dealer named
therein in the amount of $                          ;

The Company and the Optionee (the “Parties”) hereby
agree as follows:

1.             Purchase of
Shares.  On this date and subject to
the terms and conditions of this Exercise Notice, the Optionee hereby exercises
the Option granted in the Option Agreement between the Parties, dated as of the
Date of Grant set forth above, with respect to the Number of Shares Purchased
set forth above of the Common Stock (the “Shares”) at the Aggregate 

 1
 

Purchase Price
equal to the Option Exercise Price Per Share set forth above multiplied by the
Number of Shares Purchased set forth above. 
The term “Shares” refers to the Shares purchased under this Exercise
Notice and includes all securities received (a) in replacement of the Shares,
and (b) as a result of stock dividends or stock splits in respect of the
Shares.

2.             Representations
of the Optionee.  The Optionee
represents and warrants to the Company that the Optionee has received, read and
understood the Plan, the Option Agreement and this Exercise Notice and agrees
to abide by and be bound by their terms and conditions.

3.             Rights as
Stockholder.  Until Optionee receive
evidence of the issuance of the Shares, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Shares,
notwithstanding the exercise of the Option. 
To the extent the Optionee exercises the Option pursuant to the
execution and delivery of this Exercise Notice, the Company shall issue to
Optionee the shares of Common Stock covered by this Exercise Notice.  Evidence of the issuance of the shares of
Common Stock purchased pursuant to the exercise of the Option may be
accomplished in such manner as the Company or its authorized representatives
shall deem appropriate including, without limitation, electronic registration,
book-entry registration or issuance of a certificate or certificates in
the name of the Optionee or in the name of such other party or parties as the
Company and its authorized representatives shall deem appropriate.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Optionee
receives evidence of the issuance of the Shares.

In the event the shares of Common Stock issued pursuant to the exercise
of this Option remain subject to any additional restrictions, the Company and
its authorized representatives shall take such actions as the Company, or its
authorized representative, deems appropriate to ensure that the Optionee is
prohibited from entering into any transaction, which would violate any such
restrictions, until such restrictions lapse.

4.             Tax Withholding
Obligations.  The Optionee agrees to
satisfy all applicable federal, state and local income, employment and other
tax withholding obligations and herewith delivers to the Company the amount
necessary, or has made arrangements acceptable to the Company, to satisfy such
obligations as provided in the Plan and the Option Agreement.

5.             Tax Consequences.  The Optionee understands that he or she may
suffer adverse tax consequences as a result of the Optionee’s purchase or
disposition of the Shares.  The Optionee
represents that the Optionee has consulted with any tax consultant(s) he or she
deems advisable in connection with the purchase or disposition of the Shares
and that Optionee is not relying on the Company for any tax advice.

6.             Successors and
Assigns.  The Company may assign any
of its rights under this Exercise Notice, and this Exercise Notice shall inure
to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer
herein set forth, this Exercise Notice shall be binding upon the Optionee and
his or her heirs, executors, administrators, successors and permitted assigns.

7.             Interpretive
Matters.  Whenever required by the
context, pronouns and any variation thereof shall be deemed to refer to the
masculine, feminine, or neuter, and the singular shall include the plural, and
vice versa.  The term “include” or “including”
does not denote or imply any limitation. 
The captions and headings used in this Exercise Notice are inserted for 

 2
 

convenience and
shall not be deemed a part of this Exercise Notice for construction or
interpretation.

8.             Entire
Agreement; Governing Law.  This
Exercise Notice, with the Plan and the Option Agreement, constitute the entire
agreement of the Parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Parties with respect to the subject matter hereof, and may not be modified
adversely to the Optionee’s interest except by means of a writing signed by the
Parties.  Nothing in this Exercise Notice
or in the Plan or the Option Agreement (except as expressly provided herein or
therein) is intended to confer any rights or remedies on any person other than
the Parties.  This Exercise Notice (like
the Plan and the Option Agreement) is to be construed in accordance with and
governed by the internal laws of the State of Delaware, without giving effect
to any choice-of-law rule that would cause the application of the laws of any
jurisdiction other than the internal laws of the State of Texas to the rights
and duties of the Parties.  Should any
provision of the Plan, the Option Agreement, or this Exercise Notice be
determined by a court of law to be illegal or unenforceable, such provision
shall be enforced to the fullest extent allowed by law, and the other
provisions shall nevertheless remain effective and shall remain enforceable.

9.             Notice.  Any notice or other communication required or
permitted hereunder shall be given in writing and shall be deemed given,
effective, and received upon prepaid delivery in person or by courier or upon
the earlier of delivery or the third business day after deposit in the United
States mail if sent by certified mail, with postage and fees prepaid, addressed
to the other Party at its address as shown beneath its signature in the Option
Agreement, or to such other address as such Party may designate in writing from
time to time by notice to the other Party in accordance with this
Section 10.

10.           Further
Instruments.  Each Party agrees to
execute such further instruments and to take such further action as may be
necessary or reasonably appropriate to carry out the purposes and intent of
this Exercise Notice.

	
  Submitted by:

  	
  Accepted by:

  
	
   

  	
   

  
	
  OPTIONEE:

  	
   

  	
   

  	
  SALLY BEAUTY HOLDINGS, INC.

  
	
   

  	
  (Print Name)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  Dated: 

  	
   

  	
   

  
								

 

 3Exhibit 10.3

SALLY BEAUTY HOLDINGS

2007 OMNIBUS INCENTIVE PLAN

RESTRICTED STOCK UNIT
AGREEMENT

FOR INDEPENDENT DIRECTORS

(Time Vesting)

THIS RESTRICTED STOCK UNIT AGREEMENT (this
“Agreement”)
is made effective as of                            
(“Effective Date”),
by and between Sally Beauty Holdings, Inc.  (the
“Company”)
and                           
(“Director”).

1.             GRANT OF RESTRICTED STOCK UNITS.  Pursuant to the Sally Beauty Holdings 2007
Omnibus Incentive Plan (the “Plan”) Director is hereby awarded restricted stock units
covering                                                  
shares of the Common Stock of the Company (the “RS Units”).  On any day, the value of an RS Unit shall
equal the Fair Market Value of one share of Common Stock of the Company.  All of the RS Units shall be subject to the prohibition
on the transfer of the RS Units and the obligations to forfeit the RS Units to
the Company as set forth in Section 4 of this Agreement.

2.             EFFECT OF THE PLAN.  The RS Units awarded to Director are subject
to all of the terms and conditions of the Plan, which terms and conditions are
incorporated herein for all purposes, and of this Agreement together with all
rules and determinations from time to time issued by the Committee and by the
Board pursuant to the Plan.  The Company
hereby reserves the right to amend, modify, restate, supplement or terminate
the Plan without the consent of Director, so long as such amendment,
modification, restatement or supplement shall not materially reduce the rights
and benefits available to Director hereunder, and this Award shall be subject,
without further action by the Company or Director, to such amendment,
modification, restatement or supplement unless provided otherwise therein.  Capitalized terms used but not defined in
this Agreement shall have the meanings ascribed to such terms in the Plan.

3.             VESTING OF RS UNITS.  Except as otherwise provided in Section 4 of
this Agreement, all of the RS Units shall vest pursuant to the provisions of
paragraph (c) of Section 4 of this Agreement, on September 30, 2008 (the “Vesting
Date”).

4.             RESTRICTIONS.  Director hereby accepts the Award of the RS
Units and agrees with respect thereto as follows:

(a)           No Transfer.  Unless otherwise determined by the Committee
and provided in this Agreement or the Plan, the RS Units shall not be sold,
assigned, pledged, exchanged, hypothecated or otherwise transferred except by
will or the laws of descent and distribution. 
Any attempted assignment of an RS Unit in violation of this Agreement
shall be null and void.  The Company
shall not be required to honor the transfer of any RS Units that have been sold
or otherwise transferred in violation of any of the provisions of this
Agreement or the Plan.

(b)           Forfeiture of RS Units.  If Director terminates service with the
Company and its Subsidiaries prior to the Vesting Date for any reason other
than Director’s death, Disability, or involuntary termination without Cause,
then Director (or Director’s estate, as applicable) shall, for no
consideration, forfeit all RS Units; provided, however, that the Committee or
its designee may, in the Committee’s or the designee’s sole and absolute
discretion, as applicable, provide for the acceleration of the vesting of the
RS Units, eliminate or make less restrictive any restrictions contained in this
Agreement, waive any restriction or other provision of the Plan or this
Agreement or otherwise amend or modify this Agreement in any manner that is
either (i) not adverse to Director, or (ii) consented to by Director.

(c)           Vesting of RS Units.  If Director provides continuous, eligible
service to the Company and its Subsidiaries, as determined by the Committee or
its designee, in the Committee’s or the designee’s sole and absolute
discretion, as applicable, from the Effective Date until the Vesting Date,
Director shall vest in one hundred percent (100%) of the RS Units.

(d)           Death, Disability, or Involuntary
Termination Without Cause. 
If, as a result of Director’s death, Disability, or involuntary
termination without Cause, Director terminates service with the Company and its
Subsidiaries prior to the Vesting Date, then, provided Director has provided
continuous, eligible service to the Company from the Effective Date until
Director’s death, Disability, or involuntary termination without Cause, Director
shall vest in and have a non-forfeitable right to a pro-rata portion of the RS
Units determined by multiplying the total number of RS Units awarded under this
Agreement by a fraction the numerator of which is the number of whole months
Director served as a member of the board of directors of the Company and the
denominator of which is 12.

(e)           Rights.  RS Units represent an unsecured promise of
the Company to issue shares of Common Stock of the Company as otherwise
provided in this Agreement.  Other than
the rights provided in this Agreement, Director shall have no rights of a
stockholder of the Company with respect to the RS Units awarded under this
Agreement until such RS Units have vested and the related shares of Common Stock
have been issued pursuant to the terms of this Agreement.

(f)            Issuance of Common Stock.  The Company will issue to Director the shares
of Common Stock underlying the vested RS Units on the date which is six months
after the effective date of Director’s termination of service as a member of
the board of directors of the Company, or as soon as administratively
practicable following such date.  Evidence
of the issuance of the shares of Common Stock pursuant to this Agreement may be
accomplished in such manner as the Company or its authorized representatives
shall deem appropriate including, without limitation, electronic registration,
book-entry registration or issuance of a certificate or certificates in
the name of Director or in the name of such other party or parties as the
Company and its authorized representatives shall deem appropriate.

In the event the shares of Common Stock issued pursuant
to this Agreement remain subject to any additional restrictions, the Company
and its authorized representatives shall ensure that Director is prohibited
from entering into any transaction, which would violate any such restrictions,
until such restrictions lapse.

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5.             COMMUNITY INTEREST OF SPOUSE.  The community interest, if any, of any spouse
of Director in any of the RS Units shall be subject to all of the terms,
conditions and restrictions of this Agreement and the Plan, and shall be
forfeited and surrendered to the Company upon the occurrence of any of the
events requiring Director’s interest in such RS Units to be so forfeited and
surrendered pursuant to this Agreement.

6.             BINDING EFFECT.  This Agreement shall be binding upon and
inure to the benefit of any successors to the Company and all persons lawfully
claiming under Director.

7.             TAX MATTERS.

(a)           The vesting of any RS
Units and the related issuance of shares of Common Stock pursuant to paragraph
(f) of Section 4 of this Agreement shall be subject to the satisfaction of all
applicable federal, state and local income and employment tax withholding
requirements (the “Required
Withholding”).  By
execution of this Agreement, Director shall be deemed to have authorized the
Company to withhold from the shares of Common Stock distributed to Director,
the shares of Common Stock necessary to satisfy Director’s Required Withholding,
if any.  The amount of the Required
Withholding and the number of shares of Common Stock required to satisfy Director’s
Required Withholding, if any, as well as the amount reflected on tax reports
filed by the Company, shall be based on the closing price of the Common Stock
on the day the Common Stock is issued to Director pursuant to Section 4 of this
Agreement.  Notwithstanding the
foregoing, the Company may require that Director satisfy Director’s Required
Withholding, if any, by any other means the Company, in its sole discretion,
considers reasonable.  The obligations of
the Company under this Agreement shall be conditioned on such satisfaction of
the Required Withholding.

(b)           Director acknowledges
that the tax consequences associated with the Award are complex and that the
Company has urged Director to review with Director’s own tax advisors the
federal, state, and local tax consequences of this Award.  Director is relying solely on such advisors
and not on any statements or representations of the Company or any of its
agents.  Director understands that Director
(and not the Company) shall be responsible for Director’s own tax liability
that may arise as a result of this Agreement.

IN WITNESS WHEREOF, the Company has
caused this Agreement to be duly executed by an authorized officer and Director
has executed this Agreement, all as of the date first above written.

	
  

  	
  SALLY BEAUTY HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

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DIRECTOR ACKNOWLEDGES AND AGREES THAT THE RS UNITS SUBJECT TO THIS AWARD
SHALL VEST AND THE RESTRICTIONS RESULTING IN THE FORFEITURE OF THE RS UNIT
SHALL LAPSE, IF AT ALL, ONLY DURING THE PERIOD OF DIRECTOR’S SERVICE TO THE
COMPANY OR AS OTHERWISE PROVIDED IN THIS AGREEMENT (NOT THROUGH THE ACT OF
BEING GRANTED THE RS UNITS).  DIRECTOR
FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT OR THE PLAN
SHALL CONFER UPON DIRECTOR ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR
CONTINUATION OF DIRECTOR’S SERVICE TO THE COMPANY.  Director acknowledges receipt of a copy of
the Plan, represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts the Restricted Stock Unit Award subject to all of
the terms and provisions hereof and thereof, including the mandatory dispute
resolution provisions.  Director has
reviewed this Agreement and the Plan in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement, and fully
understands all provisions of this Agreement and the Plan.

	
  

  	
   

  	
   

  	
  DIRECTOR

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  DATED:

  	
   

  	
   

  	
  SIGNED:

  	
   

  

 

 4

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