Document:

Exhibit
10.12

 

	
  December 8, 2004

  	
  [LOGO]

  	
  425 Bush Street, 3rd
  Floor

  
	
   

  	
   

  	
  San Francisco, CA

  
	
  Myles McCormick

  	
   

  	
  94108

  
	
  1723 Milton Street

  	
   

  	
  415-288-3500

  
	
  Redwood City, CA 94061

  	
   

  	
  Fax: 415-288-3501

  

 

Dear Myles,

 

On behalf of MD Beauty, I am pleased to
extend an offer of full-time employment to you as Chief Financial Officer,
reporting directly to me. This letter will highlight the financial aspects and
terms of this assignment. The offer is contingent upon satisfactory reference
from your current and past employers.

 

In this position you will be responsible for
all of MD Beauty’s Finance functions and Legal matters. You will direct our
accounting, financial control, treasury, taxation, financial planning and
analysis functions, as well as, oversee all legal matters for the Company. We
will look to you to play a critical role in establishing and building these
functions and determining areas of opportunity and growth. In addition, if we
take the Company public you will be responsible for Investor Relations. Below
are the key features of our offer:

 

SALARY

 

•                  Your annualized salary is
$250,000.00 and will be compensated at the rate of $9,615.39 on a bi-weekly
basis.

 

•                  We are on a bi-weekly pay
cycle with 26 pay periods in a year. Pay days are every other Friday, a week after
the pay period ends. You may elect the direct deposit of your pay to your
personal checking and/or savings accounts.

 

BONUS

 

•                  You will participate in our
bonus plan with an annual target bonus of 70% of your base salary
($175,000.00). Normally the actual bonus payment is based upon Company
performance and personal accomplishments. For the calendar year 2005 we will
guarantee a bonus of at least $80,000 (less the customary taxes) assuming a
start date of January 2005.

 

•                  Bonuses are paid once a year
(after the close of the fiscal year). Specific objectives to obtain the
non-guaranteed portion of the bonus will be developed with you after your start
date. Eligibility is also dependent on active employment at the time of payout.

 

 

1

 

STOCK OPTIONS

 

•                  Once you commence employment
with MD Beauty, you will be eligible to receive 400,000 MD Beauty employee
stock options vesting of over 5 years. Of the 400,000 stock options, 35% of the
options (140,000) will be performance based options, and 65% of the options
(260,000) will be time based. The strike price on the options will be $2.6902
per share, which is the current investor cost.

 

BENEFITS

 

•                  MD Beauty offers
comprehensive medical, dental and vision coverage. The majority of the cost of
this coverage for employees is borne by the Company. Coverage begins on the
first day of the month following 30 days of employment.

 

•                  We also provide Company paid
basic life insurance of one times your base salary, and short and long term
disability insurance. Please refer to the benefits summary document attached
for more information.

 

 

EMPLOYMENT AT WILL: Your
employment with the MD Beauty is “at will,” which means that either you or the
MD Beauty has the right to terminate this employment arrangement at any time,
with or without notice, and with or without cause. This policy of “at will”
employment is the sole and entire agreement between you and the MD Beauty as to
the duration of employment and the circumstance under which employment may be
terminated.

 

CONDITIONS OF EMPLOYMENT: As part of the
Company’s employment offer process, a completed employment application is
required for all new employees.

 

Federal Immigration laws require that we
verify the right of all new employees to work in the U.S. Therefore, we ask
that you bring documents to verify your eligibility to work in the United
States on your start date (these documents are typically a passport, or your
right to work document/birth certificate along with a picture id (such as a
drivers license). If you will not be able to provide documents by your start
date, please contact me at 415-288-3511 prior to your scheduled start date.

 

EMPLOYMENT TERMS AND CONDITIONS: With the
exception of employment at will, terms and conditions of employment with the
Company may be modified at the sole discretion of the Company with or without
cause or notice at any time. No implied contract concerning any
employment-related decision or term or condition of employment can be
established by any other statement, conduct, policy or practice. Examples of
the types of terms and conditions of employment that are within the sole
discretion of the Company include, but are not limited to, the following:
promotions; demotions; compensation; benefits; work assignments; job duties and
responsibilities; work hours and schedules; or any other terms and conditions
as determined by the Company.

 

 

2

 

ACKNOWLEDGEMENT: This offer of
employment will expire seven days from the date of this letter, although
additional time for consideration of the offer can be made available if you
find it necessary.

 

If you wish to accept the offer, please sign
in the place provided below and return it to me within seven days. Two (2) copies
of this document are provided; please return one executed copy to me and retain
the second copy for your personal records.

 

Myles, we make this offer of employment with
great enthusiasm and with the firm belief that this will be a mutually
beneficial relationship. We greatly look forward to having you join our Company
and become a member of our team. Should you have any questions about starting
with the Company, please do not hesitate to contact me.

 

	
  Very truly yours,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Leslie A. Blodgett

  	
   

  	
   

  
	
  Leslie A. Blodgett

  	
   

  	
   

  
	
  President and CEO

  	
   

  	
   

  
	
  MD Beauty

  	
   

  	
   

  
	
  425 Bush Street, 3rd
  Floor

  	
   

  	
   

  
	
  San Francisco, CA 94108

  	
   

  	
   

  
	
  415-288-3511

  	
   

  	
   

  

 

 

Enclosed: Benefits Summary

 

 

 

 

ACKNOWLEDGEMENT: I accept the
terms and conditions of employment as outlined above:

 

 

 

 

	
  /s/ Myles McCormick

  	
  Date:

  	
   12-13-04

  	
   

  
	
  Myles McCormick

  	
   

  	
   

  	
   

  
	
   

   

   

  	
   

  	
   

  	
   

  
	
  Est. 12/31/04

  	
   

  	
   

  	
   

  
	
  Start Date

  	
   

  	
   

  	
   

  

 

3Exhibit 10.13

 

***                           CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT (INDICATED BY ASTERISKS) HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT UNDER 17 C.F.R. SECTIONS 200.80(B)(4), 200.83 AND
230.406.

AMENDED AND RESTATED AGREEMENT

THIS AMENDED AND RESTATED AGREEMENT (“Agreement”) is
dated December 31, 1998 and is between QVC, Inc., a Delaware corporation with
its principal place of business at Studio Park, 1200 Wilson Drive, West
Chester, PA 19380 (“QVC”) and DOLPHIN ACQUISITION CORP., a California
corporation d/b/a BARE ESCENTUALS, with its principal place of business at 600
Townsend, Suite 329E, San Francisco, CA 94103 (the “Company”).

Background

A. QVC and its affiliates promote, market, sell and
distribute consumer products throughout the United States and elsewhere in the
world by various means and media, including without limitation, televised
shopping programs (“Programs”).

B. The Company manufactures and/or controls all rights
of distribution, and sale with respect to various health and beauty products,
including, without limitation, cosmetics, color and treatment products, bath
products, body lotions, hair care products, fragrances, combs, bags, continuity
and other skin care products, (all health and beauty products, whether now in
existence or developed hereafter by Company, collectively, the “Products”). For
greater certainty, the term Products shall not include apparel and the
decorative items for the home sold by the Company (e.g., vases).

C. QVC and the Company are parties to an Agreement
dated February 3, 1998 (the “Prior Agreement”) pursuant to which the Company
granted certain rights to QVC with respect to the Products and provided for
Leslie Blodgett, a representative of the Company, to appear on certain Programs
to assist in such promotion.

D. The Company and QVC wish hereby to amend and
restate the Prior Agreement in its entirety.

Covenants

In consideration of the mutual promises and
undertakings set forth herein, and intending to be legally bound hereby, the
parties agree as follows:

1. License Rights.

(a) Grant of Rights. Subject to the terms and
conditions of this Agreement, the Company hereby grants to QVC and its
affiliates the following rights (collectively, the “License Rights”):

(1) Exclusive Rights. Subject to Sections 1
(c), 1 (d), 1 (h) and 3 (a) (ii), the exclusive right to promote, advertise,
market, sell and distribute (collectively, “Promote”) the Products through all
means and media in the United States, its territories and possessions, the

 

1

 

Caribbean, Canada, Mexico, the United Kingdom,
Germany and Japan (the “Territory”) and to the use of the Retail Customer List
(as that term is defined in Section 5(a) hereof).

(2) Non-Exclusive Rights.
The non-exclusive right to Promote the Products in all other countries not
covered by subsection 1 (a) (1) through Direct Response Television (as defined
in Section 7) provided that QVC or its affiliates has/have an equity interest,
directly or, indirectly, in the person or entity offering the Product for sale
to such country. In addition, QVC shall not be deemed to be in breach of this
Agreement if QVC or its affiliates fulfill orders outside of the Territory
based on offerings made within the Territory by QVC or its affiliates
including, without limitation, sales that may result from satellite
transmissions received outside the Territory.

(3) Use of Trademarks.
The right to publish, copy, reproduce, transmit and otherwise use all
trademarks, trade names and logos owned or controlled by the Company with
respect to the Products, whether now in existence or developed hereafter,
including, without limitation, the trademark BAREMINERALS COSMETICSTM (collectively,
the “Trademarks”) to Promote the Products hereunder.

(4) Use of Endorsement.
The right to use the name, likeness, voice, performance, signature, photograph,
film and/or footage (collectively, the “Endorsement”) of the Spokesperson (as
that term is defined in Section 4(a) hereof) to Promote the Products hereunder.

(5) Use of Promotional
Materials. The right, to publish, copy, reproduce, transmit, and otherwise
use any and all artwork, graphics, photographs and other promotional materials
which the Company has developed with respect to the Products, the Trademarks
and the Endorsement (collectively, “Promotional Materials”), copies of which
shall be made available to QVC upon request. QVC shall not alter the
Promotional Materials without the prior written consent of the Company, which
consent shall not be unreasonably withheld. If the Company does not respond
within seven (7) days to any written request by QVC to alter the Promotional
Material, such request shall be deemed approved.

(b) 800 Number. On or
before January 1, 1999, the Company shall assign to QVC, all of its right,
title and interest in and to the toll free telephone number (l-800-227-3990)
(the “800 Number”). Upon the expiration or termination of QVC’s rights to sell
Products pursuant to this Agreement, QVC will assign to the Company all of its
right, title and interest in and to the 800 Number within thirty (30) days
after receipt of written request from the Company to QVC.

(c) Certain Retail Channels. The Company shall retain the right to Promote the Products via (i) the
Company’s own boutiques, (ii) the Company’s wholesale distribution network for
supplying hotels and motels and (iii) Prestige Retail Channels. For purposes of
this Agreement, “Prestige Retail Channels” shall mean traditional department
(e.g., J.C. Penney) and specialty stores, specialty boutiques and beauty
salons, but shall exclude all other retail channels of distribution, including,
without limitation, discount stores, drugstores, warehouse stores, superstores
and retail outlet stores.

 

2

 

(d) Infomercial Rights.

(1) Generally. Notwithstanding the terms of
Section 1 (a) (1), the Company shall have the right to Promote the Products via
Infomercials (as that term is defined in Section 1 (d) (4)) (“Infomercial
Rights”) subject to the terms of this Section l(d).

(2) Right
of First Offer. The Company may not, directly or indirectly, either by
itself or in participation with any other person or entity, market or
distribute or otherwise grant to any other person or entity the right to market
or distribute any of the Products in the Territory via Infomercials, unless the
Company first offers such rights to QVC. Such offer shall include the principal
terms of the proposed offer. QVC shall have a period of 30 days from the date
of its receipt of such offer to accept or reject the Infomercial Rights. If QVC
rejects such offer, then the Company may offer the Infomercial Rights to any
person or entity on terms no more favorable than those offered to QVC. If QVC
accepts such offer, then QVC will exercise such rights in accordance with and
subject to the terms and conditions of this Agreement and in accordance with
the terms set forth in the offer to QVC.

(3) Right of First Refusal. If QVC rejects or
fails timely to accept the Company’s offer of Infomercial Rights, then the
Company may grant such rights to any third party; provided, however,
that the Company shall give QVC not less than 30 days prior notice of any bona
fide third-party offer for the Infomercial Rights (including all pertinent
details of such offer), during which period QVC may match such offer. If QVC
matches any bona fide third-party offer for the Infomercial Rights, then the
Company shall grant the Infomercial Rights to QVC and QVC will exercise such
rights in accordance with the terms of this Agreement and such offer.

(4) Infomercial Defined. For purposes of this
Agreement, an “Infomercial” shall mean a pre-recorded television program of at
least 28 minutes in length but no more than 60 minutes in length, intended or
designed to be aired multiple times and on more than one channel, through which
a consumer is requested to purchase any product by mail, telephone or other
electronic means. Televised electronic retailing programs of the kind
customarily aired by QVC’s televised shopping channel shall not constitute
Infomercials.

(5) Failure to Exercise Rights. If QVC fails to
exercise its Infomercial Rights in accordance with this paragraph, then the
Company shall, as its sole remedy, be free to market and distribute such rights
in accordance with the offer which (i) QVC failed to accept or (ii) accepted
but failed to perform.

(e) Exclusivity. Subject to the terms and
conditions of this Agreement, the rights granted pursuant to Section 1(a)(1)
hereof shall be exclusive to QVC. Without limiting the generality of the
foregoing sentence (and subject to the Company’s rights under Sections 1(c) and
(d), 1 (h), and 3 (a) (ii) hereof), so long as such rights shall be held
exclusively by QVC, the Company shall not, without QVC’s prior written consent:
(i) directly or indirectly, either by itself or in participation with any other
person or entity, engage in marketing or distribution (by any means or medium)
of any of the Products or any other products so similar in design, composition,
content or function to the Products as to be likely to compete directly with
the Products for sales in

 

3

 

the Territory (“Competing Products”), (ii) license or otherwise grant
the right to any other person or entity to engage in marketing or distribution
(by any means or medium) of any of the Products or any Competing Products in
the Territory, or (iii) sell the Products or Competing Products to any other
person or entity for distribution or resale in the Territory.

(f) Exercise of Rights; Disclaimer. The parties
acknowledge that QVC intends to initiate marketing and distribution of the
Products via airings of Programs and other direct mailing methods. QVC may
exercise such other of the License Rights as it shall determine in the
reasonable exercise of its business judgment. Failure by QVC to exercise any
particular right granted hereunder shall not constitute a breach of this
Agreement. QVC makes no representations regarding (i) the particular Products
(and the quantities thereof), if any, that will be offered for sale by QVC and
its affiliates, (ii) the number of times, if any, that Products will be
featured on any Program or otherwise offered for sale by QVC and its affiliates,
(iii) the channels through which QVC and its affiliates may Promote any
Product, (iv) the geographic markets in which QVC and its affiliates may
Promote any Product, or (v) the amount, if any, of revenue that may be
generated from such sales. QVC may, but shall not be required to, promote the
Company’s retail boutiques within the Programs. Notwithstanding the foregoing,
QVC shall exercise any Informercial Rights in accordance with the terms of the
offer of such rights as provided in section 1 (d) hereof.

(g) License of Intellectual Property. This
Agreement shall be deemed to constitute an executory contract under which the
Company is a licensor of intellectual property, as to which QVC may make an
election under Section 365(n) of the United States Bankruptcy Code, 11 U.S.C.
§365(n).

(h)  Non-Competitive
Products.

(1) Notwithstanding the terms of Section 1 (a) (1),
the Company shall have the right, subject to the terms of this Section 1 (h),
to Promote new lines of products (i.e., a line of consumer goods that does not
exist as of the date of this Agreement but is considered Products as defined in
this Agreement and which is not later offered for sale by QVC hereunder) which
are not competitive with any then existing Products being offered by QVC and which
do not use any trademark, servicemark or other identifier of any current or
future Products which are subject to the terms of this Agreement including,
without limitation, “Bare Escentuals” or “Bare Minerals Cosmetics” (the “Non-Competitive
Product Line”).

(2) Right of First Refusal. Upon the development by
the Company, or any affiliate, of any Non-Competitive Product Line, the Company
shall offer such product to QVC on an exclusive basis, subject to the terms and
conditions of this Agreement. Following each such offer, QVC shall have thirty
(30) days to make an initial determination of whether it is interested in
Promoting such Non-Competitive Product Line. Company shall notify QVC, in
writing, upon the expiration of each such thirty (30) day period, and QVC shall
have an additional thirty (30) days, following the receipt of each such notice,
to decide whether to Promote such Non-Competitive Product Line. In the event
that QVC decides to refrain from Promoting any such Non-Competitive Product
Line, Company may Promote such product through any means or media other than
through

 

4

 

Direct Response Television.

(3) Any dispute under this Section 1(h) shall be
submitted to, and determined by, binding arbitration in accordance with the
commercial rules, existing at the date thereof, of the American Arbitration
Association (“AAA”), except those with respect to the selection of arbitrators.
The dispute shall be determined by a single arbitrator mutually appointed by the
parties provided the parties agree within ten (10) days from receipt of Notice.
Failing such appointment the dispute shall be submitted to three arbitrators,
one selected by the Company, one selected by QVC and one selected jointly by
the aforementioned arbitrators. Each arbitrator selected must be an attorney
and not affiliated with the Company or QVC. The arbitration shall be held in
Philadelphia, Pennsylvania. The costs and expenses of the arbitration,
including the costs and expenses of the arbitrators, shall be borne by Company
and QVC equally, unless the arbitrators determine that another allocation would
be more equitable. The award rendered in connection with the arbitration shall
be final and binding upon the parties thereto. The prevailing party shall
present the award to the United States District Court, Eastern District of
Pennsylvania within thirty days of its issuance for judgment on the award
pursuant to 9 U.S.C. §§ 1-14. Any motion to vacate, alter or modify the award
must be made within fifteen days of its issuance or else such a motion shall be
deemed waived. The arbitration proceeding shall be a determination pursuant to
9 U.S.C. §§ 1-14.

2. Products.

(a) Supply.

(i) From time to time, QVC may issue to the Company a
consignment order for Products, the current form of which is attached hereto as
Exhibit A and incorporated herein by reference (each such consignment order, a “Consignment
Order”). Each consignment of Products by QVC shall be made in accordance with
the terms of this Agreement and the Consignment Order issued with respect to
such Products; provided, however, that notwithstanding anything to the
contrary contained in any Consignment Order, QVC shall remit payment to the
Company by the 15th day of each month for Products sold and shipped
by QVC during the previous month (less any applicable reserves and
adjustments). The Company shall maintain sufficient inventories of the Products
to fulfill all reasonably foreseeable Consignment Orders in a timely manner
without delay or interruption. As promptly as practicable after receipt of each
Consignment Order, the Company shall advise QVC of the expected date of
shipment of all quantities of the Products so ordered. Notwithstanding the
above, Company may, but shall be under no obligation, to supply QVC with the
Special Offering Products (as hereinafter defined) or the products set forth on
Exhibit “B” attached hereto. The term Special Offering Products shall mean
products which the Company offers for sale in its retail channels identified in
Section 1 (c) only for not more than four (4) weeks in any one year solely for
special events or holidays (e.g., Valentine’s Day).

(ii) Within thirty (30) days after QVC’s receipt of an
inventory of Products valued at QVC’s cost in excess of $2,000,000, QVC will
advance the Company the sum of $300,000 (the “Advance”) to be applied against
future purchases of the consigned Products in accordance with Section (a) (iii)
below and the amount Advanced shall be deducted from any

 

 

5

 

amounts due the Company by QVC as set forth below. The Advance shall be
subject to increase annually (the “Adjustment”) at the commencement of each
Renewal Term (“Commencement Date”) proportionally to any increase in QVC’s
sales (valued at QVC’s cost) in accordance with the following formula:

 

	
  (Actual Sales

  	
  x

  	
  Current)

  	
  -

  	
  Current

  	
  =

  	
  Adjustment

  
	
  (Base Amount

  	
   

  	
  Advance)

  	
   

  	
  Advance

  	
   

  	
   

  

The amount of any Adjustment will be paid within thirty (30) days after
notice from the Company that an Adjustment is due and owing the Company.

For example, if Actual Sales during the Initial Term were $5,000,000
and the Company or QVC did not exercise its right to terminate the Agreement,
then the Advance would be increased by $75,000 at the commencement of the first
Renewal Term. (($5,000,000 ÷ $4,000,000) x $300,000) - $300,000 = $75,000

For the purposes of this paragraph, the following terms shall have the
meanings described below:

(A) “Actual Sales” shall mean the aggregate cost to
QVC of all Products sold and shipped by QVC in the United States and not
returned, during the one year period immediately preceding the Commencement
Date.

(B) “Base Amount” shall mean $4,000,000 for purposes
of the first Adjustment and after the first Adjustment the aggregate cost to
QVC of all Products sold and shipped by QVC in the United States and not
returned, during the year, prior to the year immediately preceding the
applicable Commencement Date.

(C) “Current Advance” shall mean the Advance
outstanding immediately preceding the Commencement Date.

QVC’s obligation to make Adjustments to the Advance are conditioned on
the continued existence of a reliable source of supply of the Products.

(iii) In addition to any other rights QVC may have at
law or equity, if upon the earlier of expiration or termination of QVC’s
exclusivity or the expiration or termination of this Agreement, the amount
Advanced exceeds the amount due and owing the Company, the Company shall,
within ten (10) days after demand, repay to QVC an amount equal to such excess
amount.

(iv) To secure payment of the Advance and other
amounts set forth below, the Company hereby grants QVC a security interest in:
(A) all the inventory and supplies consigned by the Company under this
Agreement; (B) all after acquired inventory and supplies consigned by the
Company under this Agreement; and (C) all proceeds and products of the property
described in subparagraphs (A) and (B) above including, without limitation,
insurance proceeds (collectively the “Collateral”). The Company shall maintain
adequate liability and other insurance including, without limitation, fire
insurance on the consigned inventory and name QVC as a lost payee on

 

6

 

such policy as QVC’s and the Company’s
interest may appear.

(v) In addition to the
Advance, the security interest created hereby shall secure reimbursement of QVC
for (A) all costs and expenses incurred in collection of all amounts due to
QVC; (B) all future Advances, if any, made by QVC and (C) all costs and
expenses incurred by QVC to preserve the Collateral including, without
limitation, insurance expenses.

(vi) The Company will execute
any financing, continuation or termination statements and other documents that
QVC may deem necessary and appropriate in connection with the security interest
created by this Agreement and the Company hereby irrevocably appoints QVC as
the Company’s attorney in fact to execute and file in the Company’s name all
documents and instruments which QVC may deem necessary or appropriate to
perfect and continue to perfect the security interest in the Collateral created
by this Agreement.

(vii) There shall be a “default”
for purposes of this Section 2 (a) if (A) the Company fails to pay when due the
Advance; (B) Company shall be in default under any other provision of this
Agreement which default is not cured within ten (10) days after written notice
from QVC to the Company or (C) the Company shall breach or fail and perform any
representation, warranty, covenant or agreement contained in this Agreement
which is not cured within ten (10) days after written notice from QVC to the
Company. Notwithstanding the above, Company shall have no right to cure a
breach of Confidentiality (Section 11), Section 5 (b) or the Restrictive
Covenant (Section 7). In the event of a default, QVC shall have and may
exercise any and all rights of a secured party under the Uniform Commercial
Code in force in the Commonwealth of Pennsylvania and any other applicable
laws. If, in the enforcement of such rights, QVC shall propose to dispose of
all or any portion of the Collateral, the Company agrees that ten (10) days
prior written notice, sent to the Company’s place of business shall be adequate
and reasonable notice. The Company shall defend, indemnify and hold harmless
QVC from any loss, liability, damage or expense which QVC may incur as a result
of taking or holding and/or disposing of the Collateral. For purposes of this
Section, the right to cure provision contained in Section 10 hereof shall not
apply to the exercise of QVC’s rights as a secured party under this Section.

(b) Substantiation. At
QVC’s request, the Company shall, at its sole expense, provide to QVC (or its
designee) all research and development materials with respect to the Products
and subject the Products to all necessary or appropriate quality control
procedures, independent consumer and market research and other testing which
may be necessary to ensure that the Products fully comply with claims made or
to be made about them and all applicable laws, rules and regulations.

3. Term.

(a) Generally.

(i) The initial term of this Agreement (the “Initial
Term”) shall commence on the first day of the month following the date hereof
and shall expire one year thereafter. Upon the expiration of the Initial Term,
this Agreement shall automatically and continually renew for

 

7

 

successive additional one-year terms (each, a “Renewal Term,” and the
Initial Term and all Renewal Terms being collectively referred to herein as the
“Term”), unless (i) either party notifies the other in writing, at least 30
days prior to the end of the Initial Term or any Renewal Term, as the case may
be, of its intent, in the case of the Company, to terminate the exclusivity of
QVC’s rights hereunder, or in the case of QVC, QVC’s intent to terminate the
Agreement, and (ii) Net Sales of Products during the Initial Term or such
Renewal Term are less than the Minimum Amount (as such terms are defined in
Sections 3(d) and (e) hereof).

(ii) Notwithstanding the
foregoing, in the event that (A) Net Sales from the internet or commercial
on-line computer services carrying products or services offered by QVC or its
affiliates (e.g., the iQVC Service) (the “Internet”) during the Initial Term or
any Renewal Term do not equal or exceed the Minimum Internet Amount or (B) Net
Sales during the Initial Term or any Renewal Term for QVC or its affiliates
located in Mexico, the United Kingdom, Germany and Japan do not equal or exceed
the Minimum Country Amount for each such country, the exclusivity with regard
to the Internet or any country where QVC fails to acquire the Minimum Country
Amount shall terminate, provided that the Company notifies QVC in writing at
least thirty (30) days prior to the end of the Initial Term or any Renewal
Term, as the case may be, of its intent to terminate the exclusivity rights of
QVC with regard to the Internet or any particular country and subject to
Section 3 (b) hereof. If the Company terminates QVC’s exclusively with regard
to the Internet or any particular country pursuant to that paragraph, QVC will
have the non-exclusive right to Promote the Products in accordance with the
Agreement during the Initial Term, any Renewal Term and the Non-Exclusive
Period (as hereinafter defined).

(b) Right to Cure.
Notwithstanding anything to the contrary contained in Section 3(a) hereof, if
the Company gives QVC timely notice of its intent to terminate the exclusivity
of QVC’s rights due to insufficient Net Sales for the Initial Term or
then-current Renewal Term, as the case may be, then QVC may cure such shortfall
by purchasing or issuing purchase order(s) (as opposed to Consignment Orders)
for Products in quantities which, if sold during such period and added to
existing Net Sales for such period, would yield Net Sales equaling or exceeding
the applicable minimum amount for such period. In such case, if QVC complies in
all material respects with such purchase orders, including payment terms, then
such notice of termination shall be deemed rescinded, and QVC shall retain
exclusivity in all rights granted pursuant to Section 1(a)(1) hereof. Net Sales
derived from Products ordered pursuant to such right to cure shall not be
counted toward the applicable minimum amount applicable to the next succeeding
Renewal Term. Notwithstanding the foregoing, there shall be no right to cure
Minimum Internet Amount and the ability to cure the Minimum Country Amount
shall be limited to one time per country during the Term of this Agreement.

(c) Failure to Achieve
Minimum Amount. If the Company gives QVC timely notice of its intent to
terminate the exclusivity of QVC’s rights due to insufficient Net Sales for the
Initial Term or then-current Renewal Term, as the case may be, and QVC fails to
exercise its right to cure under Section 3(b) hereof, then the License Rights
shall cease being exclusive to QVC as of the end of such period, whereupon QVC
may continue to exercise the License Rights on a nonexclusive basis for an
additional period of 36 months (the “Non-Exclusive Period”). The

 

8

 

Company shall sell Products to QVC during this
Non-Exclusive Period at prices consistent with the prices it charged QVC during
the period of exclusivity, subject to increase or decrease for the actual and
bona fide direct and indirect costs; provided, however, that in no event shall
the indirect cost increase exceed five (5%) percent in any one year period
during the Non-Exclusive Period. Company grants to QVC the right to audit
Company’s books and records related to such increase, once annually, for the
purpose of allowing QVC to verify any such increases, according to the terms
set forth in this paragraph. Failure of QVC to achieve any applicable minimum
amount in the Initial Term or any Renewal Term shall not constitute a breach of
this Agreement.

(d) Minimum Amounts.

(i) For purposes of this
Agreement, “Minimum Amount” shall mean (i) *** in the Initial Term, (ii) *** in
the first Renewal Term, (iii) *** in the second Renewal Term and (iv) for each
succeeding Renewal Term, *** of the Minimum Amount applicable to the preceding
Renewal Term.

(ii) For purposes of this
Agreement, “Minimum Internet Amount” shall mean (i) *** in the Initial Term,
(ii) *** in the first Renewal Term, (iii) *** in the second Renewal Term and
(iv) for each succeeding Renewal Term, *** of the Minimum Internet Amount
applicable to the preceding Renewal Term.

(iii) For purposes of this
Agreement, “Minimum Country Amount” shall mean (i) *** in the Initial Term,
(ii) *** in the first Renewal Term, (iii) *** in the second Renewal Term and
(iv) for each succeeding Renewal Term, *** of the Minimum Country Amount
applicable to the preceding Renewal Term.

(e) Net Sales. For
purposes of this Agreement, “Net Sales” shall mean the  aggregate revenues received by QVC and its
affiliates from sales of the Products worldwide as permitted by this Agreement,
less returns, taxes and shipping and handling charges.

4. Appearances and Other
Services.

(a) Appearances. If
requested by QVC, the Company shall cause Leslie Blodgett or any other mutually
agreed spokesperson (the “Spokesperson”) to make at least eight Appearances (as
defined below) on Programs during each year of the Term. For purposes of this
Agreement, “Appearance” shall mean the personal appearance by the Spokesperson
during a one- to three-day period on Programs in which Products may be offered
for sale. The Company shall also cause the Spokesperson to appear in
promotional announcements promoting her Appearances, at dates and times determined
by QVC, subject to the Spokesperson’s reasonable availability. Unless otherwise
determined by QVC, all Appearances and promotional announcements shall take
place at QVC’s studios in West Chester, Pennsylvania. QVC makes no
representations or warranties with respect to the number of Appearances, if
any, that it may request the Spokesperson to make. The Company shall bear all
costs and expenses incurred by the Spokesperson in connection with all
Appearances and promotional announcements. The

 

***         PORTIONS OF THIS PAGE HAVE BEEN OMITTED
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

 

9

 

Company acknowledges that each Appearance will be on live, unscripted
television and, as a consequence thereof, the Company shall have no prior right
of approval over the content of the Spokesperson’s Appearances.

(b) Substitute Spokesperson. QVC and the
Company may mutually agree to replace the Spokesperson. Upon the death or
disability of the Spokesperson or the failure of the Spokesperson for any other
reason to make an Appearance required by this Agreement, the Company shall use
its best efforts to provide an alternative Spokesperson satisfactory to QVC.

(c) Compensation. The Company acknowledges (and
shall cause the Spokesperson to acknowledge) that the compensation provided to
the Spokesperson by the Company is adequate compensation for her Endorsement of
the Products, the use of the Endorsement in QVC’s Promotion of the Products and
all Appearances and promotional announcements made by the Spokesperson.

(d) Indemnification.

(i) The Company shall defend, indemnify and hold harmless QVC, its affiliates and
their respective officers, directors, shareholders, employees, licensees,
agents, successors and assigns from and against any and all liabilities and
expenses whatsoever, including, without limitation, claims, damages, judgments,
awards, settlements, investigations, costs, and attorneys’ fees and
disbursements which any of them may incur or become obligated to pay arising
out of or resulting from any acts or omissions of the Company or the
Spokesperson in connection with
the Appearances.

(ii) QVC shall defend, indemnify and hold harmless the
Company, its affiliates and their respective officers, directors, shareholders,
employees, licensees, agents, successors and assigns from and against any and
all liabilities and expenses whatsoever, including, without limitation, claims,
damages, judgments, awards, settlements, investigations, costs, and attorneys’
fees and disbursements which any of them may incur or become obligated to pay arising out of or resulting from
any representations made by QVC in connection with the Appearances unless such
claim is based on information or documents given or supplied to QVC by the
Company or its representatives.

(e) Work Made for Hire. The Company grants (and
shall cause the Spokesperson to grant), and QVC shall hold the right to, all
results and proceeds of the Appearances. To that end, the Company acknowledges
(and shall cause the Spokesperson to acknowledge) that the services to be
rendered by the Spokesperson hereunder have been specially ordered and
commissioned by QVC as a “work made for hire” for the sole and exclusive benefit
of QVC.

(f) Other Services. The Company shall, at its
sole expense, provide: (i) training (which will occur at the facilities of QVC
and its affiliates) for QVC’s telemarketing personnel with respect to the
Products as the Company deems reasonably necessary, (ii) photography for
packaging and promotional materials as reasonably requested by QVC, (iii)
consulting and advisory services with respect to QVC’s efforts to Promote the
Products as QVC may request and (iv) such other creative input as QVC may reasonably
request.

 

10

5. Customer
Lists.

(a) Retail Customer List. The Company currently
compiles a list of the names, addresses and telephone numbers of persons who
purchase the Products in its boutiques or are otherwise targeted by the Company
as potential customers of the Products (the “Retail Customer List”). The
Company shall provide QVC with a copy of the Retail Customer List immediately
upon the execution of this Agreement (and thereafter to the extent it may be
updated from time to time). QVC may Promote the Products and other goods to
persons on the Retail Customer List and fulfill orders derived thereby during
the Term and continuing after the expiration or termination of this Agreement.
During the Term, the Company shall not Promote the Products or any other
products to persons on the Retail Customer List nor rent, sell, or otherwise
make any use of the Retail Customer List nor compile additional names, add to
the Retail Customer List or otherwise create or compile lists of such persons
or entities. During the Term, the Company shall refer to QVC all inquiries
concerning products of the Company, including, without limitation, the
Products, received from any person and entity including, without limitation,
those persons or entities on the Retail Customer List.

(b) QVC’s Customer List. QVC may compile a list
of the names, addresses and telephone numbers of persons who order the Products
through it, who are referred to QVC pursuant to Section 5 (a) or are otherwise
targeted by or on behalf of it as potential customers of the Products (QVC’s “Customer
List”). QVC’s Customer List shall be and remain QVC’s exclusive property. While
there is no present intention to share QVC’s Customer List with the Company, to
the extent it receives such information, the Company shall not (i) Promote
Products or any other goods or services to persons appearing on QVC’s Customer
List, (ii) make QVC’s Customer List (or any information contained therein)
available to any third parties or (iii) make any other use of QVC’s Customer
List (or any information contained therein) without the prior written consent
of QVC.

(c) Upon termination of this Agreement including,
without limitation, the Non-Exclusive Period, QVC shall return to the Company a
copy of the Retail Customer List
together with a date of last purchase for all customers appearing on the Retail
Customer List.

(d) Notwithstanding the above, Company shall retain
the right to maintain a list of customers of the retail channels identified in
Section 1 (c) and the right to mail general advertising circulars to customer
of such retail channels provided it is done solely for the purpose of promoting
its retail stores or a special product or service available in the retail
stores and does not request any action to purchase a product or service by mail,
telephone or other electronic means.

6. Warrants. The Company will issue to QVC or
its affiliates, warrants to purchase shares of the Company’s common stock in
accordance with and subject to the terms attached hereto as Exhibit “C”.

 

11

 

7. Restrictive Covenants.

(a) Scope.

(1) Generally. Except as otherwise provided in
Section 7(a)(2) hereof, neither the Company nor the Spokesperson shall,
directly or indirectly, either by itself or herself for in participation with
any other person or entity, Promote or endorse in the Territory (i) the
Products by any means or media except as permitted by Sections 1 (c), 1 (d), 1
(h), and 3 (a) (ii) of this Agreement during the Term and/or (ii) any consumer
goods or services (including, without limitation, the Products) by means of
Direct Response Television during the Term and for one year thereafter. For
purposes of this Agreement, “Direct Response Television” shall mean all
electronic transmissions, whether now in existence or developed hereafter,
through which a consumer is requested to purchase any product by mail,
telephone or other electronic means, including, without limitation, televised
electronic retailing programs, Infomercials and direct response commercial spots.
Notwithstanding the preceding sentence, “Direct Response Television” shall not
include Infomercials if QVC fails to exercise its rights under Sections l(d)(2)
and 1 (d) (3) hereof.

(2) Termination of Spokesperson.
Notwithstanding Section 7(a)(1) hereof, if the Spokesperson ceases to act as
spokesperson hereunder in connection with the termination of her association
with the Company, then the Spokesperson’s obligations pursuant to this Section
7(a) with respect to consumer goods other than the Products shall expire one
year after the date of the Spokesperson’s last Appearance or one year after the
termination of the Spokesperson’s association with the Company, whichever is
later. The Spokesperson’s obligations pursuant to this Section 7(a) with
respect to the Products shall in all cases expire one year after the expiration
or termination of this Agreement, as set forth in Section 7(a)(1).

(b) Non Solicitation.

(i) QVC agrees that during the Initial Term or any
Renewal Term of this Agreement, it will not solicit customers who call in via
the 800 Number to purchase health and beauty products which are directly
competitive to the Products
hereunder during such calls.

(ii) In addition, QVC agrees that during the Term of
this Agreement and any Renewal Term and for a period of one year thereafter, it
will not specifically target customers appearing on Retail Customer List to
purchase health and beauty products which are directly competitive to the
Products hereunder.

(iii) Nothing
in this Section 7 (b) shall prohibit QVC from (a) offering, promoting or taking
any other actions which are not by their terms, specifically directed at only
the customers appearing on the Retail Customer List as a group, (b) offers and
promotions of a general nature or (c) offering or promoting products which are
not directly competitive with the Products.

(c) Enforceability. In the event that any of
the foregoing restrictions shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its extending for too long a
period of time or over too large a geographical area or by reason of its being
too extensive in any other respect, it shall be interpreted to extend only over
the longest period of

 

12

 

time for which it may be enforceable, and/or over the largest
geographical area as to which it may be enforceable and/or to the maximum
extent in all other aspects as to which it may be enforceable, all as
determined by such court in such action. The duration of the foregoing
restriction shall be tolled during any period of violation of such covenants.

8. Proprietary Rights.

(a) The Company’s Intellectual Property.
Subject to the License Rights granted to QVC hereunder, the Company shall
retain all right, title and interest arising under the United States Trademark
Act, the United States Copyright Act and all other applicable laws, rules and regulations in and to the
Products, the Trademarks, the Endorsement and the Company’s Promotional
Materials (collectively, the “Company’s Intellectual Property”).

(b) QVC’s Intellectual Property. QVC shall
retain all right, title and interest arising under the United States Trademark
Act, the United States Copyright Act and all other applicable laws, rules and
regulations in and to QVC’s Intellectual Property (being defined as the entire
editorial, visual, audio, and graphic content of all advertisements and
promotional materials developed by QVC in connection with its activities under
this Agreement, including, without limitation, (i) the Programs, promotional
announcements and the performances recorded therein, (ii) all raw footage shot
in the course of producing the Programs and promotional announcements, (iii)
all trademarks developed or controlled by QVC, (iv) all musical compositions
included in the Programs, and (v) all packaging designs developed by QVC for
the Products). The Company shall not utilize any of QVC’s Intellectual Property
without the prior written consent of QVC.

9. Representations, Warranties and Covenants.

(a) The Company makes the following representations,
warranties and covenants to QVC:

(i) Intellectual Property. The Company owns or
otherwise controls all right, title and interest in and to the Products and the
Company’s Intellectual Property and has all necessary power, licenses,
clearances and other authorization to grant to QVC all of the License Rights;

(ii) No Conflict. The execution and delivery of
this Agreement and the performance of its obligations hereunder, do not
and  will not conflict with or result in
a breach of or a default under the Company’s organizational instruments or any
other agreement instrument, order, law or regulation applicable to it or by
which it may be bound;

(iii) Infringement. Neither the granting of the
License Rights nor the exercise thereof by QVC in accordance with the terms of
this Agreement will infringe or otherwise violate the proprietary rights of any
person or entity under any patent, trademark, copyright, trade secret or
otherwise;

(iv) Adverse Claims. The Company (i) has not
been and is not, as of the date

 

13

 

of this Agreement, a party to any litigation enforcing or defending the
Company’s rights in, to or with respect to the Products or any of the Company’s
Intellectual Property, (ii) is not aware of any claims or demands made or
threatened by any person or entity involving the validity of the Company’s
rights in, to or with respect to the Products or any of the Company’s
Intellectual Property, and (iii) is not aware of any trademarks, copyrights or
other intellectual property rights owned or controlled by any third party which
may infringe or be infringed by the Products or any of the Company’s
Intellectual Property;

(v) Product Claims. All claims concerning the
Products made by the Company are, and will be, true and correct at the time
such claims are made, and supported by data which complies with applicable law;
and

(vi) Place of Business. The Company’s principal
place of business is 600 Townsend, Suite 329E, San Francisco, CA 94103.

(vii) No Liens. The Company is and will be the
absolute owner of all the Collateral, free and clear of all liens, encumbrances
and security interests, except the security interest created by this Agreement.

(b) QVC makes the following representations,
warranties and covenants to Company:

(i) No Conflict. The execution and delivery of
this Agreement and the performance of its obligations hereunder, do not and
will not conflict with or result in a breach of or a default under QVC’s
organizational instruments or any other agreement, instrument, order, law or
regulation applicable to it or by which it may be bound;

10. Termination.

(a) Generally. Either party may terminate this
Agreement upon not less than 30 days written notice thereof to the other party
upon the material breach by the other party of any of its representations,
warranties, covenants or agreements contained in this Agreement. Upon the
expiration of such notice period, this Agreement shall terminate without the
need for further action by either party; provided, however, that if the
breach upon which such notice of termination is based shall have been fully
cured to the reasonable satisfaction of the nonbreaching party within such
30-day period, then such notice of termination shall be deemed rescinded, and
this Agreement shall be deemed reinstated and in full force and effect. Such
right of termination shall be in addition to such other rights and remedies as
the terminating party may have under applicable law.

 

14

 

(b) Sell-Off Period. If the Company terminates
the Agreement pursuant to Section 10(a), then QVC may continue to exercise the
License Rights on a nonexclusive basis for 36 months following the effective
date of termination (the “Sell-Off Period”). During the Sell-Off Period, QVC
may place additional orders with the Company to fulfill any actual or expected
customer orders for the Products. The Company shall sell Products to QVC during
this non-exclusive period at prices consistent with the prices it charged QVC
during the period of exclusivity, subject to increase or decrease for actual
and bona fide direct and indirect costs provided, however, that in no event
shall any indirect cost increase exceed five (5%) percent in any one year
period during the Sell-Off Period. Company grants to QVC the right to audit
Company’s books and records related to such increase, once annually, for the
purpose of allowing QVC to verify such increases, according to the terms set
forth in this Section.

11. Confidentiality.

(a) Generally. All information regarding each
party and its operations which is disclosed to or otherwise obtained by the
other party in conjunction with the performance of this Agreement and all
nonpublic information regarding the sale and promotion of Products and other
goods by each party shall constitute such party’s confidential information (“Confidential
Information”). Each party shall hold all Confidential Information of the other
party in the strictest confidence and shall protect all such Confidential
Information with the same degree of care that it exercises with respect to its
own proprietary information. Without the prior written consent of the
disclosing party, the receiving party shall neither disclose, divulge or otherwise
disseminate any Confidential Information to any person or entity, except for
its attorney and such other professionals as it may retain in order for it to
perform or enforce the provisions of this Agreement.

(b) Exceptions. Notwithstanding Section 11(a)
hereof, neither party shall have any obligations with respect to any
Confidential Information disclosed to it hereunder which (i) is or becomes
within the public domain through no act of the receiving party in breach of
this Agreement, (ii) was lawfully in the possession of the receiving party
without any restriction on use or disclosure prior to its disclosure hereunder, (iii) is lawfully received from
another source subsequent to the date of this Agreement without any restriction
on use or disclosure, (iv) is deemed in writing by the disclosing party no longer to be
Confidential Information, or (v) is required to be disclosed by order of any
court of competent jurisdiction or other governmental authority (provided
in such latter case, however, that (i) the receiving party shall timely inform
the disclosing party of all such legal or governmental proceedings so that the
disclosing party may attempt by appropriate legal means to limit such
disclosure, and (ii) the receiving party shall further use its best efforts to
limit the disclosure and maintain confidentiality to the maximum extent
possible).

12. Injunction. The parties acknowledge that
any breach of the obligations under either Section 5 (b), 7 or 11 hereof may
result in immediate irreparable and continuing injury to the nonbreaching party
for which there is no adequate remedy at law. Accordingly, in the event of any
such breach (or threatened breach), the nonbreaching party may be entitled to
seek from any court of competent jurisdiction, preliminary and permanent
injunctive relief, without bond, with respect to such breach. Such right shall
be cumulative and in addition to any other remedies at law

 

 

15

 

or in equity (including monetary damages) which the nonbreaching party
may have upon any such breach.

13. Independent Contractor. Neither party nor
any of its officers, employees,
agents or representatives is an employee or agent of any other party for any
purpose whatsoever. Rather, each party is and shall at all times remain an
independent contractor.

14. Force Majeure. Neither the Company nor QVC
shall be responsible for any delay or failure to perform any part of this
Agreement to the extent that such delay or failure is caused by fire, flood,
explosion, war, strike, labor unrest, riot, embargo, act of governmental, civil
or military authority, accident, inability to obtain raw materials or supplies
of Products, acts or omissions of carriers, act of God, or other such
contingencies beyond its control. Notice with full details of any such event
shall be given to the other party as promptly as practicable after its
occurrence. The affected party shall use due diligence, where practicable, to
minimize the effects of or  end any such
event so as to facilitate the resumption of full performance hereunder.

15. Publicity. Except for incidental
non-derogatory remarks necessitated by the services provided hereunder, the
Company shall not issue any publicity or press release regarding its
contractual relations with QVC or otherwise make any oral or written reference
regarding its activities hereunder, without obtaining QVC’s prior written
consent, and approval of the contents thereof.

16. Further Actions. The parties shall execute
such additional documents and perform all such other and further acts as may be
necessary or desirable to carry out the purposes and intents of this Agreement.

17. Miscellaneous.

(a) Notices. All notices, requests,
instructions, consents and other communications to be given pursuant to this
Agreement shall be in writing and shall be deemed received (i) on the same day
if delivered in person, by same-day courier or by telegraph, telex or facsimile
transmission, (ii) on the next day if delivered by overnight mail or courier,
or (iii) on the date indicated on the return receipt, or if there is no such
receipt, on the third calendar day (excluding Sundays) if delivered by
certified or registered mail, postage prepaid, to the party for whom intended
to the following addresses:

 

	
  If to QVC:

  	
   

  	
  If to the
  Company:

  
	
   

  	
   

  	
   

  
	
  QVC, Inc.

  	
   

  	
  Bare Escentuals

  
	
  Studio Park

  	
   

  	
  600 Townsend,
  Suite 329E

  
	
  1200 Wilson Drive

  	
   

  	
  San Francisco,
  CA 94103

  
	
  West Chester, PA 19380

  	
   

  	
  Attention:
  Leslie Blodgett, President

  
	
  Attention: General Counsel

  	
   

  	
  FAX: (415)
  487-3409

  
	
  FAX: (610) 701-1380

  	
   

  	
   

  

 

 

16

 

Each party may by written notice given to the other in
accordance with this Agreement change the address to which notices to such party are to be delivered.

(b) Entire Agreement. This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings, whether written
or oral, between them with respect to the subject matter hereof (including,
without limitation, the Prior Agreement, which shall be void and of no
further effect). Each party has executed this Agreement without reliance upon
any promise, representation or warranty other than those expressly set forth
herein.

(c) Amendment. No amendment of this Agreement
shall be effective unless embodied in a written instrument executed by all of
the parties.

(d) Waiver of Breach. The failure of any party
hereto at any time to enforce any of the provisions of this Agreement shall not
be deemed or construed to be a waiver of any such provision, nor in any way to
affect the validity of this Agreement or any provisions hereof or the right of
any party hereto to thereafter enforce each and every provision of this Agreement.
No waiver of any breach of any of the provisions of this Agreement shall be
effective unless set forth in a written instrument executed by the party
against whom or which enforcement of such waiver is sought; and no waiver of
any such breach shall be construed or deemed to be a waiver of any other or
subsequent breach.

(e) Assignability. This Agreement shall be
binding on and inure to the benefit of the parties hereto and their respective
heirs, representatives, successors and assigns; provided, however,
except as otherwise expressly permitted hereunder, no party hereto may assign
this Agreement or any rights hereunder to any person or entity without the
prior written consent of the other party (which shall not be unreasonably
withheld), and any attempted assignment without such consent shall be void
except that QVC may assign this Agreement without such consent to any present
or future subsidiary, parent or affiliate of QVC. It is understood and agreed
that QVC may exercise its rights and perform its obligations hereunder, in
whole or in part, by itself or through any one or more of its existing and
future affiliates.

(f) Governing Law; Jurisdiction. This Agreement
shall be governed by and construed in accordance with the internal substantive
and procedural laws of the Commonwealth of Pennsylvania without regard to
conflict of laws principles. The parties consent to the personal jurisdiction
and venue of the Court of Common Pleas of Chester County (Pennsylvania) and the
United States District Court for the Eastern District of Pennsylvania and
further consent that any process, notice of motion or other application to
either such court or a judge thereof may be served outside the Commonwealth of
Pennsylvania by registered or certified mail or by personal service, provided
that a reasonable time for appearance is allowed.

(g) Severability. All of the provisions of this
Agreement are intended to be distinct and severable. If any provision of this
Agreement is or is declared to be invalid or unenforceable in any jurisdiction,
it shall be ineffective in such jurisdiction only to the extent of such
invalidity or  unenforceability. Such
invalidity or unenforceability shall not affect either the balance of such

 

17

 

provision, to the extent it is not invalid or
unenforceable, or the remaining provisions hereof; nor render invalid or
unenforceable such provision in any other jurisdiction.

(h) Survival. In addition to terms which by
their nature survive termination of this Agreement, the provisions of Sections
2(a) (supply), 4(d) (indemnification), 5 (customer lists), 7 (restrictive
covenants with respect to the time period set forth therein), 8 (proprietary
rights), 9 (representations, warranties and covenants of the Company), 10(b)
(sell-off period with respect to the time period set forth therein), 11
(confidentiality), 17(f) (governing law; jurisdiction) and 17(h) (survival)
shall survive the termination of this Agreement.

(i) Heading. The headings of sections and subsections
have been included for convenience only and shall not be considered in
interpreting this Agreement.

(j) Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute one and the same
Agreement. This Agreement may be executed and delivered via electronic
facsimile transmission with the same force and effect as if it were executed
and delivered by the parties simultaneously in the presence of one another.

IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed on the date first written above.

 

	
  QVC, INC.

  	
   

  	
  DOLPHIN ACQUISITION CORP.

  d/b/a BARE ESCENTUALS

  
	
  By:

  	
   

  	
  /s/ illegible

  	
   

  	
  By:

  	
   

  	
  /s/ Leslie Blodgett

  
	
  Title:

  	
   

  	
  President

  	
   

  	
  Title:

  	
   

  	
  President

  

I, Leslie Blodgett, hereby acknowledge the terms and
conditions set forth in the above Agreement, and, for good and valuable
consideration, the receipt and sufficiency of which is acknowledged, and
intending to be legally bound hereby, agree to be personally bound by the
provisions set forth in Sections 1(a)(4), 4(a), 4(c), 4(e), 7, 11, 15 and 17
of the Agreement.

 

	
  /s/ Leslie Blodgett

  	
   

  	
  Date: 12/30/98

  
	
  Leslie Blodgett

  	
   

  	
   

  

 

 

18

 

Exhibit A

FORM OF CONSIGNMENT ORDER

THIS CONSIGNMENT ORDER (“Order”) IS EXPRESSLY CONDITIONED ON ACCEPTANCE
OF THE TERMS AND CONDITIONS HEREOF. Oral or written notice of acceptance by
Consignor, preparation to perform by Consignor and/or shipment of all or any
part of the merchandise specified in this Order (“Merchandise”) shall
constitute acceptance by Consignor of the terms and conditions contained
herein. BY ACCEPTANCE OF THIS ORDER, CONSIGNOR REPRESENTS AND AGREES AS
FOLLOWS:

1. Consignor will ship to a warehouse designated by Consignee (the “Warehouse”)
the Merchandise on the terms specified herein. All Merchandise shall be held on
consignment at the Warehouse at Consignor’s risk. From time to time, Consignee
may withdraw Merchandise from consigned stock at the Warehouse and take
delivery thereof by packaging Merchandise for delivery to Consignee’s
identified customers. Upon each such withdrawal, title to the Merchandise so
withdrawn shall pass to Consignee at the prices and on the terms and conditions
herein.

2. Consignor hereby grants to Consignee the Irrevocable right, by all
means now or hereafter existing, to: (a) market, promote the sale of and sell
the Merchandise; (b) Use the trademarks, trade names, service marks, patents
and copyrights (collectively the “Marks”) registered, owned, licensed to or
used by Consignor in connection with the Merchandise; (c) use, perform, play,
synchronize and/or demonstrate, as applicable, the Merchandise, its contents,
and/or any promotional, advertising or similar material supplied by Consignor
for use in connection with such Merchandise (“Promotional Material”); and (d)
use the names, photographs, likenesses, voices and/or biographies of any
individuals performing in or otherwise associated with the production of the
Merchandise as contained in the Merchandise. Its contents and/or any
Promotional Material. Consignee makes no representations with regard to the
number of times, if any, that Merchandise will be marketed, promoted or sold by
Consignee.

3. In addition to and without prejudice to any and all other
warranties, express or implied by law, Consignor represents, warrants and
covenants to Consignee that; (a) Consignor possesses all licenses, permits,
rights, powers and consents required to enter into and perform this Order, to
sell to Consignee the Merchandise referenced herein and to grant to Consignee
the rights granted herein; (b) Consignor’s performance hereunder does not
violate any agreement, instrument, judgment, order or award of any court or
arbitrator; (c) all Merchandise furnished hereunder, including the production,
sale, packaging, labeling, safety, testing, importation and transportation
thereof, and all representations, advertising, prices, and allowances,
discounts or other benefits made, offered or authorized by Consignor in
connection therewith, shall at all times comply with all applicable federal,
state, local, industry and foreign statutes, laws, rules, regulations, orders,
standards and guidelines (collectively, “Laws”); (d) where applicable,
reasonable and representative tests as prescribed by Laws or governmental
authorities have been performed or will be performed before shipment from
Consignor to the Warehouse; (e) all Merchandise furnished hereunder shall be
new, first quality merchandise and conform to all representations by Consignor,
instructions, specifications, and samples, shall be free from all defects
(including latent defects) in workmanship, material and design, and shall not
be reworked, rebuilt or refurbished merchandise; (f) all manufacturers' warranties
are effective and enforceable by both Consignee and its customers; (g) all
Marks which are part of or appear in connection with the Merchandise and/or
Promotional Material, and/or any component thereof, are valid and genuine, and
the sale, promotion of the sale and performance of the Merchandise and/or
Promotional Material, and/or any component thereof, will not infringe upon any
domestic or foreign Marks, rights or privacy or publicity and/or any other
third party rights, or cause Consignee to be liable to Consignor or any third
party for any additional fees, costs or expenses; (h) the title of Consignor to
the Merchandise is good and free and clear of all encumbrances and liens, and
its transfer hereunder rightful; (i) neither the Merchandise nor any component
part thereof is subject to any import quota restriction, rule or regulation
preventing or forbidding this importation, use, promotion for sale or sale of
the Merchandise or any component part thereof, or any duty, tariff or penalty
in connection therewith, except as previously disclosed in writing by Consignor
to Consignee; (j) the Merchandise and similar goods are not and have not been
subject to product liability or infringement claims, except as disclosed on the
face hereof; (k) Consignor shall

 

19

 

maintain for the life of the Merchandise general liability insurance
coverage on the Merchandise, including full product liability, infringement and
advertising injury, in amounts no less than One Million Dollars per occurrence,
unless otherwise specified on the face hereof, with carriers acceptable to
Consignee, and which shall include broad form the Company’s coverage in favor
of Consignee, and Consignor will promptly provide Consignee with a certificate
of insurance naming Consignee as an additional insured; and (l) the same or
similar merchandise is not being and will not be offered to any other Consignee
or purchaser at a lesser cost or under more favorable terms than appear herein.
Consignor agrees to provide Consignee with any and all documents requested or
required by Consignee at any time and from time to time to support the
representations, warranties and covenants herein contained.

4. Consignor hereby agrees to protect, defend, hold harmless and
indemnify Consignee, its subsidiaries and affiliates, and each of their
respective customers, programming and other distributors, employees, agents,
officers, directors, successors and assigns, from and against any and all
claims, actions, suits, costs, liabilities, damages and expenses (including,
but not limited to, reasonable attorneys’ fees) based upon or resulting from;
(a) any alleged or actual infringement of any Marks, rights or publicity or
privacy and/or any other third party rights arising from the sale, promotion of
the sale and/or performance of the Merchandise, its contents and/or the Promotional
Material; (b) any alleged or actual defect in any of the Merchandise; (c) any
alleged or actual injury or death to person or damage to property arising out
of the furnishing, use or performance of the Merchandise; (d) breach by
Consignor of any representations, warranties or convenient; and (e) any alleged
or actual violation by Consignor and/or the Merchandise of any applicable Laws.
In the event Consignee notifies Consignor in writing of a claim, demand,
action, sale or other matter (“Claim”) to which the foregoing indemnity
applies, Consignor shall provide prompt assurance of its ability to so
Indemnity Consignee, to Consignee’s reasonable satisfaction, and Consignor
shall commence to defend such Claim, as its sole cost and expense, within five
(5) days after receiving Consignee’s written notice. If Consignor fails to
provide such assurance or fails to commence such defense within such five
(5)-day period, Consignee may, at its option, assume the defense or settlement
of such Claim in its own name and all recoveries from such Claim shall belong
to Consignee. In the latter event, which shall be in addition to any and all
other rights Consignee may have at law or in equity, Consignee may elect
counsel to represent it, and Consignor shall be solely responsible for the
payment or reimbursement, at Consignee’s option, of counsel fees and all other
fees and costs incurred in defending such Claim, for any and all damages
arising thereunder, and for any and all amounts paid by Consignee in settlement
thereof.

5. Time is of the essence. Consignee reserves the right to cancel this
Order or any part hereof, with no liability or obligation to Consignor, in the
event: (a) Consignee is notified that any Merchandise or Mark infringes or is
alleged to infringe upon any third party rights; (b) Consignor breaches or is
anticipated to breach this Order; (c) Merchandise conforming to specifications
will not be delivered or arrive at the Warehouse on the dates and in the
quantities specified on the face hereof; (d) fire, flood, windstorm,
earthquake, war, strike, or any other casualty or occurrence of a similar
nature substantially and adversely affects Consignee’s premises or business; or
(e) any substantial change to Consignee’s business (for whatever reason)
occurs.

6. Merchandise shipped or delivered to the Warehouse prior to the first
permitted ship or delivery date specified on the face hereof, may, at Consignee’s
option be returned to Consignor, at Consignor’s risk, and expense, and upon
such return, shall be held by Consignor for Consignee until shipment or
delivery on the specified date. Merchandise shipped or delivered to the
Warehouse after the last permitted ship or delivery date specified on the face
hereof may, at Consignee’s option, be returned to Consignor, at Consignor’s
risk, and expenses, and upon such return, Consignee may cancel this Order, in
whole or in part, without liability or the Merchandise may be held by Consignee
or consignment hereunder. Unless otherwise stated on the face hereof, Consignor
shall ship the Merchandise in one shipment. In the event of shipment or receipt
of an unauthorized quantity, Consignee may, at its option, either reject or
accept the entire shipment unless partial shipments are authorized on the face
hereof. Additional freight charges resulting from partial shipments shall be
barred by Consignor. Partial shipments shall not cause Consignor's, obligations
to become severable. Unless otherwise stated on the face hereof, Consignor shall
pay or reimburse Consignee, at the direction of Consignee, for all freight,
packing and insurance incident to the shipment of the Merchandise, including,
but not limited to, loading and unloading charges, mileage charges, taxes,
tolls and other fees. Consignor agrees to follow Consignee’s Instructions with
respect to shipment, routing and packaging. Consignor’s failure to comply with
the terms and conditions set forth in this Section or in Consignee’s shipping
regulations (including chargeback program) (“Regulations”) or in any applicable
standards provided by Consignee to Consignor (“Standards”), in effect as of the
date of

 

 

20

this Order, and which are incorporated herein by reference, may, at
Consignee’s option, result in the imposition of charges as set forth in such
documents. Any such charges assessed may be deducted from any amounts due or
which may become due to Consignor. Copies of the Regulations and the Standards
are available to Consignor upon written request to Consignee.

7. Merchandise furnished hereunder which is not in compliance with this
Order, the Regulations or the Standards, which is returned by any of Consignee’s
customers for any reason, which fails to meet Consignee’s quality control
tests, which fails to meet Consignee’s carrier’s quality, drop or other tests,
or which is or may be used in conjunction with merchandise furnished and
rejected (or acceptance thereof revoked) under this Order or another order, may
be rejected (or acceptance thereof revoked) at Consignee’s option and returned
to Consigner. All expense of unpacking, examining, repacking, storing,
returning and reshipping any Merchandise rejected (or acceptance of which has
been revoked) as aforesaid shall be at Consignor’s expense and risk. With respect
to such returned Merchandise, Consignee shall, at its option, receive a credit
or refund of all amounts paid by Consignee for such Merchandise, including,
without limitation, in-bound freight charges (notwithstanding contrary Freight
Terms, if any, set forth on the face hereof). In the event that Consignee shall
opt to receive a refund, Consignor shall pay Consignee in immediately available
funds within fifteen (15) days of Consignee’s request. In the event that
Consignee shall opt to receive a credit, Consignee may apply such a credit
toward any amounts due or which may become due to Consignor. Upon receipt by
Consignee of returns from its customers, title and risk of loss to such
returned Merchandise shall immediately revert to Consignor. Consignor agrees
that Merchandise rejected or returned for any reason pursuant to the terms of
this Order, whether or not such rejection is disputed by Consignor, will not be
resold or otherwise distributed by Consignor unless all labels and other
characteristic identifying Consignee and/or displaying any trade name or
trademark of Consignee have been first removed. Authorization is granted to
Consignee to return Merchandise without additional authorization, and Consignor
hereby agrees to accept such returns even without Consignee’s request for
return authorization labels. Merchandise returned or rejected by Consignee is
not to be replaced by Consignor without the prior written approval of
Consignee. Consignor acknowledges that the Consignee does not inspect each item
at receipt of Merchandise and that defects, imperfections or nonconformity with
any representations, warranties or covenants set forth herein may not be discovered
by Consignee until Merchandise shall have been purchased by its customers and
returned to Consignee. Consignee’s inspection, discovery of a branch of
warranty, failure to make an inspection or failure to discover a breach of
warranty shall not constitute a waiver of any of Consignee’s rights or remedies
whatsoever.

8. Consignee may, at any time, elect to return to Consignor all or any
portion of the Merchandise held on consignment hereunder. Consignee shall give
notice to Consignor of Consignee’s election to make such return, and Consignee
shall, without the requirement of any return authorization return such
Merchandise of portion thereof to Consignor at Consignee’s expense and
Consignor shall accept such Merchandise.

9. Consignor shall not assign this order, or any part hereof, without
the prior written consent of Consignee, and any such attempted assignment shall
be void at the election of Consignee. All claims for money due or to become due
from Consignee shall be subject to deduction by Consignee for any set-off or
counterclaim arising out of this Order or any other of Consignee’s orders or
agreements with Consignor, whether such set-off or counterclaim arose before or
after any assignment by Consignor.

10. Until date of purchase by Consignee, Consignor shall meet its lower
prices and the lower prices of legitimate competition, or accept cancellation
at Consignee’s option. Consignee, in its sole discretion, shall determine the
price at which Merchandise shall be offered for sale to its customers and shall
retain all handling and shipping charges collected from its customers.

11. Prior to the thirtieth (30th) day of each month, Consignee shall
remit payment to Consignor for Merchandise sold and shipped by Consignee to its
customers during the previous month, less the Reserve (as defined below), and
adjusted for any credits, debits, customer returns, refunds, and allowances. If
a percentage greater than zero is indicated in the “Payment Reserve”
designation on the face hereof, then Consignee will withhold an amount equal to
such percentage of the gross monthly sales (the “Reserve”) from each such
monthly payment to Consignor. The amount so withheld shall be applied toward
actual Consignee customer returns occurring during the succeeding calendar
month. In the event that actual returns during such period exceed the Reserve
deducted in the prior month, such excess amount shall, at Consignee’s option be
immediately debited against Consignor’s account with Consignee or paid by
Consignor to Consignee within fifteen (15) days of receipt of Consignee’s
request for such payment. In the event that actual returns during such period
are less than the Reserve deducted in the prior month

 

21

 

for such returns, the balance of the Reserve remaining at the
conclusion of such period shall, at Consignee’s option, be credited to
Consignee’s account or paid to Consignor. Neither the arrival of the
Merchandise at the Warehouse, nor payment hereunder, shall constitute acceptance
of Merchandise, and such arrival or payment is without prejudice to any and all
claims of Consignee against Consignor.

12. At Consignee’s request, Consignor agrees to meet with Consignee or
its agents at a location determined by Consignee to reconcile Consignor and
Consignee records regarding Merchandise. In the event that Consignor fails for
any reason to attend such meeting, or in the event that Consignee shall not
request that a meeting be held, Consignee shall submit its reconciliation
report to Consignor. Any discrepancy must be reconciled within thirty (30) days
from the date of the reconciliation meeting or within thirty (30) days from the
date Consignor’s receipt of Consignee’s reconciliation report (whichever shall
apply) and a reconciliation statement must be signed within such thirty (30)
day period. Should the parties fail to sign a reconciliation statement within
such period of time, Consignee’s records shall be binding on the parties.

13. For purposes of this Order, “Confidential Information” means any
agreement between Consignee and Consignor, all information in whatever form
transmitted relating to the past, present or future business affairs, including
without limitation, the sale of Merchandise, customer lists and other customer
information, research, development, operations, security, broadcasting,
merchandising, marketing, distribution, financial, programming and data
processing information of Consignee or another party whose information
Consignee has in its possession under obligations of confidentiality, which is
disclosed by Consignee, its subsidiaries, affiliates, employees, agents,
officers, or directors to Consignor or which is produced or developed during
the working relationship between the parties. Confidential information shall
not include any information of Consignee that is lawfully required to be
disclosed by Consignor to any governmental agency or is otherwise required to
be disclosed by law, provided that before making such disclosure Consignor
shall give Consignee an adequate opportunity to interpose an objection or take
action to assure confidential handling of such information. Consignor shall not
disclose any Confidential Information to any person or entity except employees
of Consignor as required in the performance of their employment-related duties
in connection with this Order, nor will Consignor use the Confidential
information for any purpose other than those purposes expressly contemplated
herein. Consignor, shall not use any information obtained from Consignee’s customers
(e.g., through warranty cards or otherwise) to offer for sale to such customers
any goods or services. Consignor shall not include with any Merchandise, any
information that would enable Consignee’s customers to acquire, either directly
or indirectly, any additional merchandise from persons other than Consignee,
without first obtaining Consignee’s written consent. In the event of a breach
or threatened breach of this Section by Consignor, Consignee shall be entitled
to obtain from any court of competent jurisdiction, preliminary and permanent
injunctive relief, including, but not limited to, temporary restraining orders,
which remedy shall be cumulative and in addition any other rights and remedies
to which Consignee may be entitled. Consignor agrees that Confidential
Information referred to in this Section is valuable and unique and that
disclosure or use thereof in breach of this Section will result in immediate
irreparable injury to Consignee. Consignor shall inform those persons or
entities having access or exposure to Confidential Information hereunder, of
Consignor’s obligations under this Section.

14. This Order shall be governed by the laws of the Commonwealth of
Pennsylvania applicable to contracts to be performed wholly therein, regardless
of place of acceptance, Consignor and Consignee expressly exclude the
application of the United Nations Convention on Contracts for the International
Sale of Goods, if applicable. Consignor hereby consents to the exclusive
jurisdiction of the state courts of the Commonwealth of Pennsylvania for the
Country of Chester and the federal courts for the Eastern District of
Pennsylvania in all matters arising hereunder. Consignor hereby irrevocably
agrees to service of process by certified mail, return receipt requested, to
its address as set forth on the face of this Order or to such other address as
Consignor may deliver to Consignee in writing.

15. Consignor shall include the value of all consigned stock in any tax
return of personal property required to be filed with the local taxing
authority and Consignor shall pay the taxes applicable thereto.

16. No waiver by Consignee of any term, provision or condition hereof
shall be deemed to constitute a waiver of any other term, provision of
condition of this Order, or a waiver of the same or of any other term,
provision or condition with regard to subsequent transactions or subsequent
parts of the same transaction, including without limitation, subsequent
shipments under this Order.

17. If any provision contained in this Order shall be determined to be
unenforceable or prohibited by law, then such provision shall be void, and the
remaining provisions herein shall not in any way be affected or

 

22

 

impaired thereby.

18. Consignor shall not issue any publicity or press release regarding
Consignee or Consignee’s activities hereunder without first obtaining Consignee’s
prior written approval and consent to such release.

19. This Order and any other written warranties and specifications, the
Regulations and Standards, and the terms, conditions and agreements herein and
therein, constitute the full understanding of the parties hereto and a complete
and exclusive statement of the terms of the parties’ agreement concerning the
Merchandise furnished hereunder.

20. No condition, understanding or agreement purporting to modify or
vary the terms of this Order shall be binding unless hereafter made in writing
and duly executed by the party to be bound, and no modification shall be
effected by the acknowledgement or acceptance of this Order or of invoices,
shipping documents or other documents containing terms or conditions at
variance with or in addition to those set forth herein.

21. Notwithstanding any legal presumption to the contrary, the
covenants, conditions, representations, indemnities and warranties contained in
this Order, including, but not limited to Sections 3, 4, 7 and 13 hereof, shall
survive inspection, delivery, acceptance and payment, shall be binding upon
Consignor and its successors and permitted assigns, and shall run in favor of
Consignee and its successors and assigns.

 

23

 

EXHIBIT “B”

Habit

Hardgoods accessories and prop type merchandise

Books other than books using Bare Escentuals’
trademarks or marks

2 oz sizes and smaller

Custom-scenting/essential oils

Gift baskets

Effervescent Bath Balls

California Spa — being discontinued in near future

 

24

 

EXHIBIT “C”

(1)                Prior
to January 31, 1999, the Company shall issue a Warrant (the “Signing Warrant”)
to QVC to purchase 70,000 shares of Common Stock of the Company at $6.55 per
share. This represents approximately 3% of the equity of the Company. The
number of shares issuable upon exercise of the Signing Warrant shall
automatically be reduced by 17,500 shares if and at each time QVC does not
achieve Net Sales of the Company’s products of at least the following amounts:
$10 million in 1999, $12.5 million in 2000, $14.4 million in 2001 and $16.5
million in 2002.

(2)                The
Company shall issue additional Warrants (the “Performance Warrants”) to
purchase the following number of shares of Common Stock upon achievement of
cumulative sales during the Term from the Company to QVC of the following
amounts: 23,000 shares if sales to QVC reach $6 million, 23,000 shares if sales
to QVC reach $12 million and 23,000 shares if sales to QVC reach $18 million.
The exercise price of the Performance Warrants shall equal the market value of
the Common Stock on the date the foregoing sales targets are achieved, as
determined in good faith by the Company’s Board of Directors.

(3)                The
Signing Warrant and Performance Warrants shall be subject to the following
terms and conditions: (i) termination upon December 31, 2003 (i.e., warrants
survive IPO or sale), (ii) customary antidilution adjustments, and (iii) net
exercise provisions at QVC’s option.

(4)                The
Warrant shall contain such other terms, conditions and representations and
warranties which are customary for such certificates including, without
limitation, piggyback registration rights.

(5)                Sales
targets are not representations, warranties or guaranties as to the amount of
sales QVC may achieve hereunder.

 

25

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