Document:

Exhibit 10.42

 

***      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.

 

THIRD
AMENDMENT TO AMENDED AND RESTATED AGREEMENT

 

 

                THIS
THIRD AMENDMENT TO AMENDED AND RESTATED AGREEMENT (the “Amendment”) is made
this 5th day of September, 2006 by and between QVC, Inc., a Delaware corporation
(“QVC”), with its principal place of business at 1200 Wilson Drive, West
Chester, PA  19380, and Bare Escentuals
Beauty, Inc.  (the “Company”), with its
principal place of business at 71 Stevenson, 22nd Floor, San
Francisco, CA 94105.

 

                WHEREAS,
QVC and Company, as successor-in-interest to Dolphin Acquisition Corp., are
parties to an Amended and Restated Agreement dated as of December 31, 1998, as
amended by an amendment dated as of January 29, 1999, and as amended by an
amendment dated as of February 10, 1999 (the “Agreement”);

 

                WHEREAS,
Section 1(a)(1) of the Agreement provides, among other things, that subject to
certain conditions and exceptions, the Company grants to QVC and its affiliates
the exclusive right to promote, advertise, market, sell and distribute certain
Company products through all means and media in the United States, its
territories and possessions, the Caribbean, Canada, Mexico, the United Kingdom,
Germany and Japan;

 

                WHEREAS,
pursuant to Section 3(a)(ii) of the Agreement, Company terminated QVC’s and its
affiliates’ exclusive rights to sell certain products of Company in Mexico, the
United Kingdom, Germany and Japan (the “Prior Territory Reduction”);

 

                WHEREAS,
QVC and Company are parties to a letter agreement dated June 20, 2003 regarding
royalties to be paid by Company to QVC for internet sales of products offered
on Company infomercials (the “Letter Agreement”); and

 

                WHEREAS,
QVC and Company desire to further amend the Agreement pursuant to the terms of
this Amendment;

 

                NOW,
THEREFORE, in consideration of the mutual promises and undertakings set forth
herein, and intending to be legally bound hereby, the parties agree as follow:

 

1.  Terms
not defined herein shall have the meaning set forth in the Agreement.

 

 

 

2.  Notwithstanding
the Prior Territory Reduction, during the period from the date of this
Amendment to the termination or expiration of the Term, the Company grants to
QVC and its affiliates, the exclusive right to Promote the Products and
Competing Products by Direct Response Television (as defined in Section 7(a)(i)
of the Agreement) in the United States, its territories and possessions, the
United Kingdom, Germany and Japan (the “Amended Territory”).

 

3. 
During the period from the date of this Amendment to the termination or
expiration of the Term, the term “Territory” in the Agreement shall mean the
Amended Territory.

 

4.  Section
1(c) of the Agreement shall be deleted in its entirety and in lieu thereof shall
be inserted the following new Section 1(c):

 

                The
Company shall retain the right to Promote the Products in the Territory via
only (i) the Company’s own boutiques, (ii) the Company’s wholesale distribution
network for supplying hotels and motels, (iii) the Company’s and its affiliates’
websites, advertising, catalogues, direct mail promotions and telephone numbers
listed in the Company’s and its affiliates’ websites, catalogues, and direct
mail promotions (collectively the “Company Direct Marketing Media”), and (iv)
Prestige Retail Channels.  For purposes
of clarity, “Company Direct Marketing Media” shall not include sales of unique
configurations of Products sold by the Company pursuant to Section 1(d) and by
unique telephone numbers that appear in the Company’s Infomercials.  “Prestige Retail Channels” means retail sales
to end-user customers by traditional department stores (e.g. J.C. Penney), specialty
stores, specialty boutiques, beauty salons and the catalogues, direct mail
promotions and websites (the “Prestige Retail Direct Marketing Media”) of the
entities that own and operate such traditional department stores, specialty
stores, specialty boutiques and beauty salons, but not any other method, media
or location for selling products. Company’s agreements with the owners and
operators of Prestige Retail Channels shall provide that the Products may be sold
only by retail sales to end-user customers, and Company shall exercise
reasonable efforts to enforce that provision.

 

5.    The Agreement shall be amended by adding the
following new Section 1(i):

 

                (i)

                                (A)  Commencing on October 1, 2006, within thirty
days after the end of each calendar quarter during the Term, Company shall pay
to QVC an amount equal to the sum of (i) *** multiplied by the U.S. Net Company
Sales (as defined below) of Products sold by means of the Company’s Direct
Marketing Media 

 

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

 

2

 

during the immediately preceding calendar
quarter (other than Internet sales of Products offered in the same unique
configuration as on the Company’s Infomercials), (ii) *** multiplied by the
U.S. Net Company Sales by means of Internet sales of products offered on the
Company’s Infomercials sold by means of the Company’s Direct Marketing Media
during the immediately preceding calendar quarter, and (iii) *** multiplied by
the U.S. Net Company Sales of Products sold to each Prestige Retail Channel
customer during the immediately preceding calendar quarter multiplied by a
fraction, the numerator of which is the net sales of Products through each such
customer’s Prestige Retail Direct Marketing Media during such quarter and the
denominator is each such customer’s total net sales of Products during such
quarter.  “U.S. Net Company Sales” shall
mean the aggregate amount of all revenue generated by Company and its
affiliates through the sale of Products to customers located within the United
States, excluding actual freight, reasonable shipping and handling charges, and
sales or use taxes, and less customer returns and discounts.  Each such payment shall be accompanied by (i)
a statement setting forth the calculation of the payment and (ii) a
certificated statement of an officer of Company that the amount of the payment
is in accordance with the provisions of this Agreement.

 

                                (B) 
Commencing on October 1, 2006, within thirty days after the end of each
calendar quarter during the Term and for a period of one year thereafter,
Company shall pay to QVC an amount equal to the sum of (i) *** multiplied by
the United Kingdom and Germany Net Company Sales (as defined below) of Products
sold by means of the Company’s Direct Marketing Media during the immediately
preceding calendar quarter (other than Internet sales of Products offered in
the same unique configuration as on the Company’s Infomercials), and (ii) ***
multiplied by the Japan Net Company Sales (as defined below) of Products sold
by means of the Company’s Direct Marketing Media during the immediately
preceding calendar quarter (other than Internet sales of Products offered in
the same unique configuration as on the Company’s Infomercials).  “United Kingdom and Germany Net Company Sales”
shall mean the aggregate amount of all revenue generated by Company and its
affiliates through the sale of Products to customers located within the United Kingdom
and Germany, excluding actual freight, reasonable shipping and handling
charges, and sales or use taxes, and less customer returns and discounts.  “Japan Net Company Sales” shall mean the
aggregate amount of all revenue generated by Company and its affiliates through
the sale of Products to customers located within Japan, excluding actual
freight, reasonable shipping and handling, and sales or use taxes, and less
customer returns and discounts.  Each
such payment shall be accompanied by (i) a statement setting forth the
calculation of the payment and (ii) a certificated statement of an officer of
Company that the amount of the payment is in accordance with the provisions of
this Agreement.  In the event that the
Company and Shop Japan do not, on or before October 31, 2006, enter into a
definitive agreement on substantially the terms set forth in a Memorandum of
Understanding dated 

 

 

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

 

 

3

 

April 19, 2006, the number *** set forth
above in this Section 1(i)(B) regarding the payment to QVC with respect to
Japan Net Company Sales of Product shall become ***.

 

                                                (C)
 During the term of this Agreement and
for a period of two years thereafter, QVC
may audit Company’s books and records no more than once during a calendar year for
the purpose of determining the accuracy of Company’s payments to QVC.  If QVC wishes to perform any such audit, QVC
will be required to notify Company at least ten (10) days before the date when
QVC plans to commence such audit. All audits shall be made during regular
business hours, and may be conducted by a firm of certified public
accountants selected by QVC and reasonably acceptable to the Company.  QVC shall require the auditing certified public
accountants to sign a confidentiality agreement for the benefit of the Company,
and such accountants shall disclose to QVC only whether there was an
underpayment of royalties, and if so, by how much.  Each
examination shall be made at QVC’s expense at Company’s regular place of
business where the books and records are maintained; provided, however, that if
any such audit reveals an underpayment of greater than ***
for any calendar quarter, Company shall pay all such past due amounts plus
reasonable expenses of QVC’s audit including reasonable professional fees.  Company shall cooperate with QVC in the
performance of any such audit.

 

6.  Sections
1(d)(2) and 3(d)(ii) of the Agreement shall be deleted in their entirety.

 

7. 
Section 1(d)(3) of the Agreement shall be deleted in its entirety and in
lieu thereof shall be substituted the following new Section 1(d)(3):

 

                The
Company shall give QVC not less than 30 days prior notice of any bona fide
third-party offer for the Infomercial Rights in the United States (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 in the United States, then the
Company shall grant the Infomercial Rights in the United States to QVC and QVC
will exercise such rights in accordance with the terms of this Agreement and
such offer.  This Agreement does not
require Company to give QVC notice of any third-party offers for Infomercial
Rights exclusively outside of the United States and does not give QVC the right
to match any such offer.

 

8.  Section
3(a)(ii) of the Agreement shall be deleted in its entirety and in lieu thereof
shall be substituted the following new Section 3(a)(ii):

 

                Notwithstanding
the foregoing, in the event that total number of Company Minutes (as defined in
Section 3(d)(iii)) during the Initial Term or any Renewal Term for QVC or its
affiliates located in the United Kingdom, Germany and Japan do not equal or
exceed the Country Minimum Minute Amount for any such country, the exclusivity
with regard to the country, and only the country, where QVC or its affiliates
fails to meet the 

 

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

 

 

4

 

Minimum Country Minute Amount shall terminate
if 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 any particular
country and subject to Section 3(b) hereof.  
If the Company terminates QVC exclusivity with regard to any particular
country pursuant to this Agreement, QVC will have the non-exclusive right to
Promote the Products in such country in accordance with the Agreement during
the Initial Term, any Renewal Term and the Non-Exclusive Period (as hereinafter
defined).

 

9.  Section
3(d)(iii) of the Agreement shall be deleted in its entirety and in lieu thereof
shall be substituted the following new Section 3(d)(iii):

 

                For
the purposes of this Agreement, “Minimum Country Minute Amount” shall be
determined in accordance with the following table, which sets forth calendar
years across the horizontal axis and the relevant countries along the vertical
axis; provided that QVC and its affiliates shall not be deemed to have met the
applicable Minimum Country Minute Amount for a particular calendar year for a
particular country unless (i) the Company Minutes during the hours between 6
a.m. and 1 a.m. local time with respect to that calendar year and country
equals or exceeds *** of the corresponding number on the following chart,
and (ii) the number of Company Minutes during Saturdays, Sundays and holidays
with respect to that calendar year and country equals or exceeds *** of the
corresponding number on the following chart; and provided further that the
Minimum Country Minutes Amount for Japan shall initially be *** minutes and
shall not increase from one calendar year to the next as set forth in the table
unless QVC’s Net Sales for Japan increase at a minimum rate of *** per year.

                                

	
   

  	
   

  	
  2006

  	
   

  	
  2007

  	
   

  	
  2008

  	
   

  	
  2009

  	
   

  	
  2010

  	
   

  	
  Thereafter

  	
   

  
	
  United Kingdom

  	
   

  	
  ***

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Germany

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Japan

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

For the purposes of this Agreement, “Company
Minutes” shall be the total number of minutes during which Products are
featured on the television programming of QVC and its affiliates, as recorded
in the ordinary course of business by QVC’s and its affiliates’ systems.

 

10.  Sections
5(a), (c) and (d) of the Agreement shall be deleted in their entirety and in
lieu of Section 5(a) shall be substituted the following new Section 5(a):

 

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

 

5

 

                (a)
Retail Customer List.  The Company
currently compiles a list of the names, addresses, telephone number and/or
e-mail addresses of persons who purchase the Products in its boutiques, by
means of Company Direct Marketing Media and Infomercials or are otherwise
targeted by the Company as potential customers of the Products (the “Retail
Customer List”).  During the Term, the
Company shall not Promote the Products or any other products to persons on the
Retail Customer List other than through the Company’s boutiques, Company Direct
Marketing Media, or infomericals and related telephone numbers and websites, nor
rent, sell, or otherwise make any use of the Retail Customer List.

 

11.   Notwithstanding the provisions of Section
11(a) of the Agreement, the Company may include a copy of the Agreement and
this Amendment as an exhibit to a Form S-1 filed by the Company with the U.S. Securities
and Exchange Commission, provided that the Company applies for confidential
treatment with respect to the dollar amounts, percentages and number of minutes
set forth in Sections 1(i) and 3(d) of the Agreement and Sections 5, 9 and 16 of
this Amendment.

 

12. 
The Agreement shall be amended by adding the following new Section 18:

 

                18.  Company Websites.  During the Term, Company will (i) provide QVC
with a permanent brand placement on the Company’s and its affiliate’s
website(s) featuring special Bare Escentuals values from QVC, (ii) provide QVC
with a co-branded QVC webpage at Company’s website(s) featuring upcoming
Product and show appearances on the QVC program, along with links directly to
QVC’s e-commerce site, (iii) provide QVC with premium placement on the Company’s
and its affiliate’s websites’ home pages during Company dedicated appearances
to focus consumer attention to QVC’s website(s).

 

13. 
The Agreement shall be amended by adding the following new Section 19:

 

                19.  Product Exclusivity.  For a period of six months after QVC sells (i)
any Products as a “Today’s Special Value” product, as a “Grand Collection” on
the QVC television program, or (ii) any “value-priced, open stock product
pairings,” Company will not sell the same Products by any means or media.

 

14. 
Promptly after the execution of this Amendment, QVC and Company shall
negotiate in good faith regarding more detailed provisions regarding the topics
of Sections 18 and 19 of the Agreement, as amended by this Amendment.

 

15.  The
Letter Agreement is terminated.

 

16. 
Within ten days after the execution of this Agreement, Company shall pay
QVC ***
in consideration of QVC’s entering into this Amendment.

 

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

 

6

 

17.  In
consideration of the agreements made herein, QVC hereby releases the Company
and its current and former officers, directors, stockholders, representatives,
subsidiaries and affiliates (collectively, “Affiliates”), both individually and
collectively, from any and all claims that QVC may have against the Company and
such Affiliates on or prior to the date hereof arising out of or relating only to
Company’s alleged breach of the Agreement for having sales through Company
Direct Marketing Media and Prestige Retail Direct Marketing Media.  For the sake of clarity, the parties
expressly agree that the release contemplated by this Section 17 shall not
extend to or in any way affect any other claims arising directly as a result of
the breach of the terms and conditions of the Agreement.  For the purpose of implementing a full and
complete release, except as contemplated by this Section 17, QVC expressly
acknowledges that this Section 17 is intended to include in its effect, without
limitation, all claims which QVC has against the Company or its Affiliates only
by reason of any matter, cause or thing arising out of or relating to the alleged
breach of the Agreement for having sales through Company Direct Marketing Media
and Prestige Retail Channel Websites that could be alleged in any litigation
and/or claims procedure between QVC and the Company, including those claims relating
to the alleged breach of the Agreement for having sales through Company Direct
Marketing Media and Prestige Websites which such parties do not know or suspect
to exist in their favor at the time of the execution of this Agreement.  While this Amendment (including this Section
16) is governed by Pennsylvania law, QVC acknowledges that it is aware of
California civil Code Section 1542, which provides as follows:

 

“A GENERAL RELEASE DOES NOT
EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

 

With full awareness and understanding of the
above provision, QVC hereby waives any rights it may have under Section 1542,
to the extent applicable to QVC’s release hereunder, as well as under any other
statutes or common law principles of similar effect.

 

18.  To
the best of QVC’s knowledge, the Company is not in any respect in breach or
default in the performance of any material provision of the Agreement as
amended.  To the Company’s knowledge, QVC
is not in any respect in breach or default in the performance of any material
provision of the Agreement as amended.

 

19.  Except
as provided herein, the Agreement, as amended shall remain in full force and
effect.  This Amendment and the Agreement
shall be construed according to the internal laws of the Commonwealth of
Pennsylvania, without regard to conflict of laws principles.  Each of QVC, Company and Spokesperson hereby
consent to the jurisdiction of the state courts of the Commonwealth of
Pennsylvania, Chester County, and the United States 

 

7

 

District Court for the Eastern District of
Pennsylvania, in all matters arising out of the Amendment and the
Agreement.  The Agreement, as amended,
supersedes all prior communications between the parties regarding the subject
matter thereof, whether oral or written, and constitutes the entire
understanding of the parties.

 

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

 

 

	
  QVC, INC.

  	
   

  	
  BARE ESCENTUALS BEAUTY,
  INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Neal S. Garbell

  	
   

  	
  By:

  	
  /s/ Myles B. McCormick

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title: 

  	
  Executive Vice President

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date: 

  	
  September 5, 2006

  	
   

  	
   

  	
   

  

 

 

I, Leslie Blodgett, intending to be legally
bound, hereby acknowledge that the terms and conditions set forth in the above
Amendment do not amend or modify my rights and obligations under the provisions
of the Agreement as amended and agree to be personally bound by the provisions
set forth in Section 19 of the above Third Amendment to Amended and Restated
Agreement.

 

	
  /s/ Leslie Blodgett

  
	
  Leslie Blodgett

  
	
   

  	
   

  
	
  Date: 

  	
  9/6/06

  

 

 

 

8Exhibit
10.43

BARE ESCENTUALS BEAUTY, INC.

FIFTH AMENDMENT TO CREDIT
AGREEMENT

This FIFTH AMENDMENT TO CREDIT
AGREEMENT (this “Amendment”) is
dated as of September 11, 2006 and entered into by and among BARE ESCENTUALS, INC., a Delaware corporation, formerly
known as STB Beauty, Inc. (“Holdings”), BARE ESCENTUALS BEAUTY, INC., a Delaware corporation,
formerly known as MD Beauty, Inc. (the “Company”), THE FINANCIAL INSTITUTIONS
LISTED ON THE SIGNATURE PAGES HEREOF, and BNP PARIBAS (“BNP
Paribas”), as administrative agent for Lenders (in such
capacity, “Administrative
Agent”), and solely
for purposes of Section 3 hereof, the Credit Support Parties (as defined
in Section 3 hereof).  Reference
is made to that certain Credit Agreement dated as of February 18, 2005, as
amended by the First Amendment to Credit Agreement dated as of July 21, 2005,
the Second Amendment to Credit Agreement dated as of October 7, 2005, the Third
Amendment to Credit Agreement dated as of March 17, 2006, and the Fourth
Amendment to Credit Agreement dated as of June 7, 2006, in each case by and
among Holdings, Company, the Lenders referenced therein and BNP Paribas, as
Administrative Agent (the “Credit Agreement”).
Capitalized terms used herein without definition shall have the same meanings
as set forth in the Credit Agreement, as amended hereby.

RECITALS

                WHEREAS, Company and Lenders desire to amend the
Credit Agreement as set forth below;

NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:

SECTION 1.                                                    AMENDMENTS TO CREDIT AGREEMENT

1.1                               Amendment to Subsection 1.1: Certain
Defined Terms.

A.            The definition of “Term Loans” set forth
in subsection 1.1 of the Credit Agreement is hereby deleted and replaced with
the following:

“Term Loans” means the Loans made by
Lenders to Company pursuant to subsection 2.1A(i) and any Supplemental Term
Loans made under subsection 2.1A(iv).

B.            New definitions “Fifth Amendment”, “Fifth
Amendment Effective Date” and  “Supplemental
Term Loans” shall be added to subsection 1.1 in alphabetical order reading as
follows:

“Fifth Amendment” means that certain
Fifth Amendment to this Agreement, dated as of September 11, 2006.

“Fifth Amendment Effective Date” means
the date the Fifth Amendment to this Agreement became effective in accordance
with its terms.

 

 

 

“Supplemental Term Loans” has the meaning assigned to that
term in subsection 2.1A(iv) in this Agreement.

1.2                               Amendment to Subsection 2.1: Commitments;
Making of Loans; the Register; Optional Notes.

Subsection 2.1A of the
Credit Agreement is hereby amended by inserting the following new clause (iv)
at the end thereof:

“(iv)        Additional
Term Loan Commitments.  Company may, concurrently
with or any time after an IPO, by notice to Administrative Agent, issue
additional Term Loans under this Agreement in an aggregate amount of not more
than $135,000,000 to Eligible Assignees that are approved by Administrative
Agent (such approval not to be unreasonably withheld or delayed) (each such
additional Term Loan, a “Supplemental Term Loan”,
and collectively, the “Supplemental Term Loans”),
which Supplemental Term Loans may be issued as additional Term Loans or as a
new tranche of Term Loans; provided that

(a)           no Event of Default or Potential
Event of Default shall have occurred and be continuing immediately prior to
such issuance, or after giving effect thereto;

(b)
          immediately after giving effect
to the issuance of the Supplemental Term Loans, the Applicable Consolidated Leverage Ratio shall be 3.80:1.00 or
less (provided,
however, that for this purpose only, if such issuance occurs before
September 30, 2006 or before a Compliance Certificate has been delivered for
the four Fiscal Quarter period ended September 30, 2006, then the Applicable
Consolidated Leverage Ratio will be calculated based on Company’s good faith
estimate of Consolidated EBITDA for the four Fiscal Quarters ending on
September 30, 2006, as certified in an Officer’s Certificate);

(c)           such Supplemental Term Loans shall be
issued on terms and conditions applicable to the Term Loans made pursuant to
subsection 2.1A(i), except  that interest
rates applicable to Supplemental Term Loans may be lower than interest rates
set forth in subsection 2.2A; and

(d)           such issuance will not cause any
portion of the Obligations (including the Supplemental Term Loans) to lose the
benefit of any subordination agreement existing for the benefit of the
Obligations immediately prior to the issuance of such Supplemental Term Loans
(unless the affected subordinated Indebtedness will be immediately repaid in
full upon the issuance of such Supplemental Term Loans).

                Nothing contained in this subsection
2.1A(iv) or otherwise in this Agreement is intended to commit any Lender or any
Agent to provide any portion of any such Supplemental Term Loans.  Effective upon the issuance of Supplemental Term
Loans in accordance with herewith, the Pro Rata Shares of the respective
Lenders in respect of the Term Loans shall be proportionally adjusted.  Administrative Agent and Company may amend
this Agreement and the other Loan Documents without the consent of the Lenders

 

2

 

(notwithstanding
anything to the contrary in subsection 10.6) to the extent necessary to give effect
to the issuance of such Supplemental Term Loans (provided such amendment does
not adversely affect any Lender in a manner not expressly permitted by this
subsection 2.1A(iv)), including, without limitation, for the purposes of
providing for the Supplemental Term Loans and Lenders thereof to share ratably
in the benefits of this Agreement and the other Loan Documents with the other
Loans made under this Agreement.”

1.3                               Amendment to Subsection 2.5: Use of
Proceeds.

Subsection 2.5A of
the Credit Agreement is hereby amended by adding the following sentence at the
end thereof:

“The proceeds of the Supplemental Term Loans, if and when
issued, shall be applied by Company to repay Indebtedness of the Loan Parties
and to pay fees and expenses related to the transactions contemplated by the
Fifth Amendment.”

1.4                               Amendment to Subsection 7.5:  Restricted Junior Payments.

                Subsection 7.5 of the Credit Agreement is hereby amended
by deleting clauses (vi) through (ix) therefrom in its entirety and replacing
with the following:

“(vi) so long as no
Event of Default under any of subsection 8.1, 8.6 or 8.7 shall have occurred
and be continuing, Company may pay Management Fees with respect to and as
provided under the terms of the Management Agreements (and may make any buyout
or termination payment in respect of the Management Agreements in connection
with an IPO, provided that the same do not exceed the Management Fees that
could otherwise be paid in connection with such IPO); (vii) Company may prepay the Second Lien Term Loans
with Net Securities Proceeds from the issuance of any equity Securities of
Holdings; provided that the Applicable Consolidated Leverage Ratio is 3.80:1.00 or less (provided, however, that for this purpose only, (i) the
Applicable Consolidated Leverage Ratio will be calculated to give pro forma
effect to the prepayment of Second Lien Term Loans, and (ii) if such issuance
occurs before September 30, 2006 or before a Compliance Certificate has been
delivered for the four Fiscal Quarter period ended September 30, 2006, then the
Applicable Consolidated Leverage Ratio will be calculated based on Company’s
good faith estimate of Consolidated EBITDA for the four Fiscal Quarters ending
on September 30, 2006, as certified in an Officer’s Certificate); (viii) Company may prepay the Holdings Notes with Net Securities Proceeds
from the issuance of any equity Securities of Holdings or with the proceeds
from the issuance of the Supplemental Term Loans; provided that the
Applicable Consolidated Leverage Ratio is 4.50:1.00 or less (provided, however,
that for this purpose only, the Applicable Consolidated Leverage Ratio will be
calculated (A) to include the amount of the then-outstanding Holdings Notes in
Consolidated Total Debt, and (B) to give pro forma effect to the prepayment of
Indebtedness to be made from such Net Securities Proceeds, including the
proposed prepayment of Holdings Notes); and (ix) Company may make Restricted Junior Payments
to Holdings to the extent necessary to permit Holdings (A) to pay transaction
fees set forth in Section 1.6 of the Holdings Note Purchase Agreement 

 

3

 

and (B) to pay expenses associated with an IPO not to
exceed $5,000,000 in the aggregate.”

1.5                               Amendment to Subsection 7.9:  Transactions with Affiliates.

                Subsection 7.9 of the Credit
Agreement is hereby amended by deleting clause (ix) therefrom in its entirety
and replacing it the following:

“(ix) transactions pursuant
to the Management Agreements which are not otherwise prohibited hereunder (including any buyout
or termination payment in respect of the Management Agreements in connection
with an IPO, provided that the same do not exceed the Management Fees that
could otherwise be paid in connection with such IPO)”

SECTION 2.                                                    REPRESENTATIONS AND WARRANTIES

In order to induce
Lenders and Administrative Agent to enter into this Amendment, Company and
Holdings each represents and warrants to each Lender and Administrative Agent
that the following statements are true, correct and complete:

(i)            each of Company and
Holdings has all requisite corporate power and authority to enter into this
Amendment and to carry out the transactions contemplated by, and perform its
obligations under, the Credit Agreement as amended by this Amendment (the “Amended Agreement”);

(ii)           the execution and
delivery of this Amendment and the performance of the Amended Agreement have
been duly authorized by all necessary corporate action on the part of Company
and Holdings;

(iii)          the execution and
delivery by Company and Holdings of this Amendment and the performance by
Company and Holdings of the Amended Agreement do not and will not (i) violate
any provision of any law or any governmental rule or regulation applicable to
Holdings, Company or any of its Subsidiaries, the Certificate or Articles of
Incorporation or Bylaws of Holdings, Company or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Holdings, Company or any of its Subsidiaries, (ii) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of Holdings, Company or any of its
Subsidiaries, (iii) result in or require the creation or imposition of any Lien
upon any of the properties or assets of Holdings, Company or any of its
Subsidiaries (other than Liens created under any of the Loan Documents in favor
of Administrative Agent on behalf of Lenders and other Liens permitted under
the Amended Agreement), or (iv) require any approval of stockholders or any
approval or consent of any Person under any Contractual Obligation of Holdings,
Company or any of its Subsidiaries, except for with respect to the foregoing
clauses (i) , (ii) and (iv)  above, such violations, conflicts,
breaches, defaults or failures to obtain approvals or consents which could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;

(iv)          the execution and
delivery by Company of this Amendment and the performance by Holdings and
Company of the Amended Agreement do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any

 

4

 

federal, state or
other governmental authority or regulatory body, except for registrations,
consents, approvals, notices and other actions the failure to obtain or take
have not and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;

(v)           this Amendment and
the Amended Agreement have been duly executed and delivered by Company and
Holdings and are the legally valid and binding obligations of Company and
Holdings, enforceable against Company and Holdings in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors’
rights generally or by equitable principles relating to enforceability;

(vi)          the representations
and warranties contained in Section 5 of the Credit Agreement are and will be
true, correct and complete in all material respects on and as of the date
hereof and the Fifth Amendment Effective Date to the same extent as though made
on and as of such dates, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date; and

(vii)         no event has
occurred and is continuing or will result from the consummation of the
transactions contemplated by this Amendment that would constitute an Event of
Default or a Potential Event of Default.

SECTION 3.                 ACKNOWLEDGEMENT AND CONSENT

Each Subsidiary
Guarantor (each individually a “Credit Support Party”
and collectively, the “Credit Support Parties”) has read this Amendment and
consents to the terms hereof and further hereby confirms and agrees that,
notwithstanding the effectiveness of this Amendment, the obligations of such
Credit Support Party under, and the Liens granted by such Credit Support Party
as collateral security for the indebtedness, obligations and liabilities
evidenced by the Credit Agreement and the other Loan Documents pursuant to,
each of the Loan Documents to
which such Credit Support Party is a party shall not be impaired and each of
the Loan Documents to which such
Credit Support Party is a party is, and shall continue to be, in full force and
effect and is hereby confirmed and ratified in all respects.

Each of Holdings,
Company and the Subsidiary Guarantors hereby acknowledges and agrees that the
Secured Obligations under, and as defined in, the Security Agreement dated as
of February 18, 2006, by and among Holdings, Company, the Subsidiary Guarantors
and Administrative Agent (the “Security Agreement”)
will include all Obligations under, and as defined in, the Credit Agreement (as
amended hereby).

Each Subsidiary Guarantor acknowledges and agrees that
(i) notwithstanding the conditions to effectiveness set forth in this
Amendment, such Credit Support Party is not required by the terms of the Credit
Agreement or any other Loan Document to consent to the amendments to the Credit
Agreement effected pursuant to this Amendment and (ii) nothing in the
Credit Agreement, this Amendment or any other Loan Document shall be deemed to
require the consent of such Credit Support Party to any future amendments to
the Credit Agreement.

 

5

 

SECTION 4.                                                    CONDITIONS TO EFFECTIVENESS

Except as set forth
below, this Amendment shall become effective only upon the satisfaction of the
following conditions precedent (the date such conditions are
fulfilled is hereafter referred to as the “Fifth Amendment Effective
Date”):

A.            Amendment. Administrative Agent shall have
executed this Amendment and received a counterpart of this Amendment that bears
the signature of Company, Holdings, Requisite Lenders and each of the other
Credit Support Parties.

B.            Completion of
Proceedings.  All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Administrative
Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in
form and substance to Administrative Agent and such counsel, and Administrative
Agent and such counsel shall have received all such counterpart originals or
certified copies of such documents as Administrative Agent may reasonably
request.

C.            Fees
and Expenses.  Administrative Agent shall have received all
of Administrative Agent’s reasonable costs and expenses as described in
subsection 10.2 of the Credit Agreement incurred by Administrative Agent
(including, without limitation, the reasonable fees and disbursements of O’Melveny
& Myers LLP) in connection with this Amendment and the documents and
transactions related hereto, and any fees separately agreed upon between
Company and Administrative Agent.

D.            No Material Adverse
Effect; No Default.  Since December 31, 2005, there
shall not have occurred (i) a material adverse effect upon the business,
operations, properties, assets, liabilities, condition (financial or otherwise)
or prospects of Holdings, Company and its subsidiaries, taken as a whole or
(ii) a material adverse effect on the ability of Holdings, Company or any of
its subsidiaries executing a Loan Document to perform, or of Administrative
Agent or any Lender to enforce, the obligations under the Loan Documents.  No event shall have occurred and be
continuing that would constitute an Event of Default or a Potential Event of
Default.

E.             Payment of Fee to
Consenting Lenders.  The Administrative Agent shall
have received from the Company on or prior to the Fifth Amendment Effective
Date an amendment fee for the account of each Lender that executed this
Amendment by 5:00 P.M. New York time on September 11, 2006 equal to 0.075% of
the Revolving Loan Exposure and/or Term Loan Exposure, as the case may be, of
such Lender immediately prior to the effectiveness of this Amendment.

SECTION 5.                                                    MISCELLANEOUS

A.            Reference
to and Effect on the Credit Agreement and the Other Loan Documents.

(i)            On
and after the effective date of this Amendment, each reference in the Credit
Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like
import referring to the Credit Agreement and each reference in the other Loan 

 

6

 

Documents to the “Credit Agreement”, “thereunder”, “thereof” or words
of like import referring to the Credit Agreement shall mean and be a reference
to the Credit Agreement as amended hereby.

(ii)           Except
as specifically amended by this Amendment, the Credit Agreement and the other
Loan Documents shall remain in full force and effect and are hereby ratified
and confirmed.

(iii)          The
execution, delivery and performance of this Amendment shall not, except as
expressly provided herein, constitute a waiver of any provision of, or operate
as a waiver of any right, power or remedy of Administrative Agent or any Lender
under the Credit Agreement or any of the other Loan Documents.

B.            Headings. 
Section and subsection headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose or be given any substantive effect.

C.            Applicable
Law.  THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK).

D.            Counterparts. 
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.

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7

 

IN
WITNESS WHEREOF,
the parties hereto have caused this Amendment to be duly executed and delivered
by their respective officers thereunto duly authorized as of the date first
written above.

	
  COMPANY:

  	
   

  
	
   

  	
  BARE
  ESCENTUALS BEAUTY, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Leslie A Blodgett

  
	
   

  	
  Name:

  	
  Leslie
  A Blodgett

  
	
   

  	
  Title:
  

  	
  President,
  Chief Executive Officer and Secretary

  
	
   

  	
   

  	
   

  
	
  HOLDINGS:

  	
   

  	
   

  
	
   

  	
  BARE
  ESCENTUALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Leslie A Blodgett

  
	
   

  	
  Name:

  	
  Leslie
  A Blodgett

  
	
   

  	
  Title:
  

  	
  Chief
  Executive Officer

  

 

 

S-1

 

 

	
  CREDIT
  SUPPORT PARTIES:

  	
   

  	
   

  
	
  (for purposes of Section 3)

  	
  BIOCEUTIX INC.

  	
   

  
	
   

  	
  ID
  DIRECT, INC.

  	
   

  
	
   

  	
  MD
  BEAUTY SALES, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Leslie A Blodgett

  	
   

  
	
   

  	
  Name:

  	
  Leslie A Blodgett

  	
   

  
	
   

  	
  Title:

  	
  President, Chief Executive
  Officer and

  	
   

  
	
   

  	
   

  	
  Secretary

  	
   

  

 

S-2

 

	
  LENDERS:

  	
  BNP PARIBAS,

  
	
   

  	
  individually and as
  Administrative Agent

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Cecile Scherer

  	
   

  
	
   

  	
  Name:

  	
  Cecile Scherer

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  	
  Merchang Banking Corp

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/  PJ de Filippis

  	
   

  
	
   

  	
  Name:

  	
  PJ de Filippis

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  

 

 

 

 

 

S-3

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