Document:

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EXHIBIT 10.2

SECURED PROMISSORY NOTE

			
	 	 	 
	$4,094,340.00
	 	June 30, 2006
	 
	 	Chicago, Illinois

     1. Principal Amount. For value received, the undersigned Lyn Kirby, an individual
residing in Illinois (“Maker”), does hereby promise to pay to the order of Ulta Salon, Cosmetics &
Fragrance, Inc., a Delaware corporation (the “Company”), or its assignee (collectively, “Payee”),
the principal sum of FOUR MILLION NINETY FOUR THOUSAND THREE HUNDRED FORTY AND 00/100 DOLLARS
($4,094,340.00) (the “Loan”), upon the terms and conditions set forth herein.

     2. Interest.

     (a) Accrual of Interest. Interest shall accrue on the unpaid principal of this
promissory note (the “Note”) from the date hereof until all amounts due hereunder are paid
in full at an interest rate per annum equal to 5.06%. Interest hereon shall be calculated
on the basis of the actual number of days elapsed and a year of 365 days and shall compound
annually. Payments of interest on the unpaid principal hereof shall be due and payable
pursuant to Sections 3 or 4 hereof, as appropriate.

     (b) No Usury. It is the intention of Maker and Payee to conform to applicable
usury laws, if any. Accordingly, notwithstanding anything to the contrary in this Note or
any other agreement entered into in connection herewith, it is agreed as follows: (i) the
aggregate amount of all interest and any other charges constituting interest under
applicable law whether contracted for, chargeable, or receivable under this Note or
otherwise in connection with the obligation evidenced hereby shall under no circumstances
exceed the maximum amount of interest permitted by applicable law, if any, and any excess
shall be deemed a mistake and cancelled automatically and, if theretofore paid, shall, at
the option of Maker, be refunded to Maker or credited on the principal amount of this Note;
and (ii) in the event that the entire unpaid balance of this Note is declared due and
payable by Payee, then earned interest may never include more than the maximum amount
permitted by applicable law, if any, and any unearned interest shall be cancelled
automatically and, if theretofore paid, shall at the option of Maker, either be refunded to
Maker or credited, to the extent permitted by law, on the principal amount of this Note.

     3. Post-Maturity Interest. Any amount of principal and/or interest hereon which is
not paid when due, whether at stated maturity, by acceleration or otherwise, shall bear interest
from the date when due or, if earlier, the date of the first occurrence of an Event of Default (as
defined below) hereunder, until said principal and/or interest amount is paid in full, at the
greater of (a) an interest rate equal to two percent (2.0%) per annum in excess of the interest
rate set forth in Section 2(a) hereof or (b) the “Prime Rate” (as defined in the Company’s Second
Amended and Restated Loan Agreement dated May 31, 2005), as determined and calculated as set forth
in such loan agreement, plus two percent (2.0%) per annum.

 

 

     4. Payments.

     (a) Principal; Interest and Enforcement Costs. Subject to Sections 5(b) and 8
below, (i) the outstanding principal amount of this Note , (ii) all accrued and unpaid
interest thereon and (iii) all of Payee’s costs and expenses (including reasonable fees and
expenses of Payee’s attorneys, accountants and other professionals) of enforcing this Note
(“Enforcement Costs”), shall be due and payable in full on the earliest to occur of (A) any
acceleration of the Obligations pursuant to Section 8 below, (B) one Business Day (as
defined below) before the Company becomes an “issuer” under the Sarbanes-Oxley Act of 2002,
either by filing a Form S-1 registration statement with the Securities and Exchange
Commission or otherwise (an “IPO”), (C) expiration of the time period provided under the
terms of Maker’s option agreements with the Company and the Company’s stockholders’
agreements for repurchase of shares following termination of Maker’s employment and (D) the
fifth anniversary of the date hereof (each such event, the “Maturity”). All amounts due
under this Note, including, without limitation, principal, interest and Enforcement Costs
are collectively referred to herein as the “Obligations”.

     (b) Interest. Maker shall be obligated to apply the proceeds of any bonus paid
to Maker by the Company while any of the Obligations remain outstanding to repayment of
accrued interest. Should the bonus proceeds be insufficient to pay such interest, the
interest shall be added to the principal hereof and be paid from the following year’s bonus
or upon Maturity.

     (c) Making of Payments. All payments of the Obligations in respect of this
Note shall be made by (i) delivery of a certified or bank cashier’s check or of other
immediately available funds or (ii) payroll withholding with respect to payments under
Section 4(b) and 5(b) and delivered to Payee on the date or dates due at the address of
Payee set forth on the signature page hereof, or at such other place as the holder hereof
may from time to time designate in writing. Whenever any payment on this Note shall be
stated to be due on a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day and such extension of time shall be included in the computation
of the payment of interest on this Note. For purposes of this Note, “Business Day” means
each day other than a Saturday, a Sunday or any other day on which banking institutions in
Chicago, Illinois are authorized or obligated by law or executive order to be closed.

     5. Prepayment.

     (a) Voluntary Prepayment. Maker, without premium or penalty, may prepay the
Obligations in whole or in part upon three (3) Business Days’ prior written notice to Payee.

     (b) Mandatory Prepayment. Notwithstanding any contrary provision in this Note,
all amounts owing hereunder shall become automatically due and payable in full, without
further notice or demand, upon the occurrence of any of the events referred to in Section
4(a) hereof. If Maker is required to repay the loan upon an IPO, if not informed

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of another form of payment, the Company shall offset the outstanding balance of the
Loan by the shares of the Company’s common stock held as collateral on the Note pursuant to
that Stock Pledge Agreement of even date herewith by and between Maker and the Company,
based on the fair market value of such shares, as determined by the Board of Directors of
the Company at such time (i.e. immediately prior to the IPO). In addition, Maker shall
promptly prepay the Obligations (i) with 100% of the proceeds of any transfer, sale,
disposition, pledge, hypothecation or encumbrance (a “Transfer”) of all or any portion of
Maker’s equity interest in the Company (whether owned directly or indirectly), (ii) to the
extent of all proceeds (after any tax withholding) of any distribution received by Maker in
respect of or on account of Maker’s equity interest in the Company (whether owned directly
or indirectly), and (iii) to the extent of 100% of the proceeds (after any tax withholding)
of any bonus payments made by the Company or its subsidiaries to Maker. To the extent
lawful and practicable, Maker hereby instructs the Company to pay over all amounts subject
to mandatory prepayment under this Section 5(b) directly to the Payee, and such payments
shall be deemed to have been made to the Maker by the Company and then paid by Maker to
Payee.

     (c) Application of Prepayment Proceeds. All proceeds of any prepayments made
pursuant to this Section 5 shall be applied first to the payment of Enforcement Costs,
second to the payment of accrued but unpaid interest hereon and third to the payment of the
outstanding principal balance of this Note.

     6. Use of Proceeds. Maker acknowledges and agrees that 100% of the proceeds of the
Loan shall be used pursuant to her Employment Agreement with the Company to exercise her options
(the “Options”) to purchase common stock of the Company and to make related withholding tax or
estimated state and federal income tax payments. It is anticipated that the Company, as Payee,
will apply the proceeds of the Loan directly to the Maker’s exercise of the Options and related
withholding tax payments and that no amount of the proceeds will actually be distributed to Maker.
Upon request, to the extent that any amount of the Loan proceeds is actually distributed directly
to Maker, Maker will provide the Payee with evidence of such tax payments and shall repay any
amounts not used to make such tax payments.

     7. Events of Default. The occurrence of any one or more of the following events shall
constitute an “Event of Default” under this Note:

     (a) Principal Payment Default. Maker shall fail to pay the outstanding
principal amount due hereunder, or any portion thereof within (5) days of when due, whether
at Maturity, at such earlier date as is required by Sections 5(b) and/or 8, or otherwise;

     (b) Interest and Enforcement Cost Payment Default. Maker shall fail to pay any
interest which has accrued and is payable hereunder or any Enforcement Costs within (5) days
of when due;

     (c) Dissolution; Termination. The dissolution, termination and/or liquidation
of the Company;

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     (d) Covenant Default. Maker shall default in the observance or performance of
any covenant or agreement contained in this Note (other than those defaults set forth in
this Section 7) and such default shall not of its nature be curable by Maker, or if such
default shall be curable, such default shall continue uncured for a period of ten (10) days
after receipt by Maker of written notice from Payee to such effect;

     (e) Bankruptcy, etc. Maker or the Company becomes insolvent or generally fails
to pay, or admits in writing their respective inability or refusal to pay, their respective
debts as they become due; or Maker’s or the Company’s application for, consent to or
acquiescence in, the appointment of a trustee in bankruptcy, receiver or other custodian for
Maker or the Company or any of their respective properties or assets, or Maker’s or the
Company’s making a general assignment for the benefit of their respective creditors; or, in
the absence of such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for Maker or the Company or for a substantial part of their
respective properties or assets and such appointment is not discharged within 60 days
thereafter; or any bankruptcy, reorganization, debt arrangement or other case or proceeding
under any bankruptcy or insolvency law, or any liquidation proceeding is commenced in
respect of Maker or the Company and, if such case or proceeding is not commenced by Maker or
the Company, as the case may be, it is either (i) consented to or acquiesced in by Maker or
the Company, as the case may be, or (ii) remains undismissed for 60 days;

     (f) Termination for Cause by Company. The Company shall have terminated the
Maker’s employment with the Company for “Cause,” as defined in Maker’s then current
employment agreement with the Company;

     (g) Default under Stock Pledge Agreement. Maker defaults under the Stock
Pledge Agreement dated as of the date hereof (the “Stock Pledge Agreement”) made by the
Maker in favor of the Payee; and

     (h) Use of Proceeds. Use of the proceeds of the Loan for any purpose other
than those set forth in Section 6 hereof.

     8. Remedies. Upon or at any time after the occurrence of an Event of Default
specified in Sections 7(a), 7(b), 7(c), 7(d), 7(f), 7(g) or 7(h) hereof, the Obligations shall, at
the option of Payee, become due and payable without presentment, demand, protest, notice of
acceleration, notice of intent to accelerate or other notice of any kind, all of which are hereby
expressly waived by Maker, anything in this Note to the contrary notwithstanding. Upon the
occurrence of an Event of Default specified in Section 7(e) hereof, the Obligations shall thereupon
and concurrently therewith become due and payable. The Maker and every endorser or guarantor
hereof agrees, subject only to any limitation imposed by law, to pay on demand all Enforcement
Costs incurred by the holder of this Note in endeavoring to collect any amounts payable hereunder
which are not paid when due, whether by acceleration or otherwise, in addition to any other remedy
available in law or equity.

     9. Waivers. Maker and every endorser and guarantor of this Note hereby jointly and
severally waives presentment, demand, notice, protest and all other demands and notices in

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connection with the delivery, acceptance, performance, default or enforcement hereof that no
such extension or other indulgence, and no substitution, release or surrender of collateral, and no
discharge or release of any other party primarily or secondarily liable hereof, shall discharge or
otherwise affect the liability of Maker. No delay or omission on the part of holder in exercising
any right hereunder shall operate as a waiver of any such right, and the waiver of any such right
on any one occasion shall not be construed as a bar to or waiver of any such right on any future
occasion.

     10. Security. This Note is secured pursuant to a Stock Pledge Agreement by shares
purchased upon the exercise of Maker’s previously granted options to acquire shares of the
Company’s common stock.

     11. Transfer of Note. Until notified by Payee in writing of the transfer of this
Note, Maker shall be entitled to deem Payee or such person who has been so identified by Payee in
writing to Maker as the owner and holder of this Note.

     12. Notices. Every notice or other communication required or desired to be given
hereunder shall be in writing and shall be delivered either by personal delivery, a nationally
recognized courier service, postage-prepaid certified or registered mail, return receipt requested,
or facsimile or other electronic mail transmission with acknowledgment of receipt, addressed to the
party to whom intended at the address set forth on the signature page attached to this Note or at
such other address as the intended recipient previously shall have designated by written notice.
Notice by courier or certified or registered mail shall be effective on the date it is officially
recorded as delivered to the intended recipient by return receipt or similar acknowledgment, or the
date of attempted delivery where delivery is refused by the intended recipient. Notice sent by
overnight, express carrier, shall be deemed to have been delivered and shall be effective on the
next business day immediately following the day sent. All notices and communications delivered in
person shall be deemed to have been delivered to and received by the addressee, and shall be
effective, on the date of personal delivery. Any notice transmitted by telecopy, facsimile or
other electronic mail transmission shall be deemed to have been delivered to and received by the
addressee, and shall be effective, on the date on the date sent if a business day, or if such day
is not a business day, then on the next business day.

     13. Governing Law. This Note shall be governed and construed and the rights and
liabilities of the parties hereto shall be determined in accordance with the internal laws of the
State of Illinois, without giving effect to any conflict of laws principles that would result in
the application of any law other than the State of Illinois.

     14. Jurisdiction; Service of Process. Maker hereby submits to the nonexclusive
jurisdiction of the applicable court having jurisdiction over the matter located in Chicago,
Illinois for all purposes of or in connection with this Agreement; provided that nothing in this
Agreement shall affect Payee’s right to bring any action or proceeding against Maker or Maker’s
property in the courts of any other jurisdiction. Maker hereby consents to process being served in
any suit, action or proceeding of the nature referred to above either (a) by the mailing of a copy
thereof by registered or certified mail, postage prepaid, return receipt requested, to its address
shown below its signature hereto or (b) by serving a copy thereof upon Maker’s authorized agent for
service of process (to the extent permitted by applicable law, regardless

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whether the appointment of such agent for service of process for any reason shall prove to be
ineffective or such agent for service of process shall accept or acknowledge such service);
provided that, to the extent lawful and practicable, written notice of said service upon said agent
shall be mailed by registered or certified mail, postage prepaid, return receipt requested, to
Maker at Maker’s address shown below its signature hereto. Maker agrees that such service, to the
fullest extent permitted by law, (i) shall be deemed in every respect effective service of process
upon it in any such suit, action or proceeding and (ii) shall be taken and held to be valid
personal service upon and personal delivery to Maker. Nothing herein shall affect Payee’s right to
serve process in any other manner permitted by law, or limit Payee’s right to bring proceedings
against Maker in the courts of any other jurisdiction.

     15. Waiver of Jury Trial. MAKER HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS
NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION
WITH OR RELATED TO THIS NOTE, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.

     16. Recourse. Maker acknowledges that the obligations of Maker to Payee under or in
connection with this Note are recourse to Maker as to 100% of the accrued interest hereon and any
principal balance, as well as all Enforcement Costs. For the purposes of clarification and not in
limitation of Payees rights hereunder, in the event that Maker fails to pay all the obligations
hereunder when due and, the value of the collateral under the Stock Pledge Agreement does not fully
defease Maker’s obligations hereunder, Payee shall have recourse to Maker to the extent of any
deficiency up to 100% of outstanding Obligations.

     17. Assignment. This Note and all rights and remedies hereunder shall be fully
assignable by Payee and, following such assignment, any such assignee shall be deemed the “Payee”
for all purposes hereunder. Neither this Note nor any obligations or duties hereunder may be sold,
assigned or delegated by the Maker without the prior written consent of the Payee.

     18. Distribution Instructions. Maker hereby instructs Payee to make payment of all
amounts borrowed hereunder by Maker directly to the Company in payment of the exercise price upon
the exercise of Maker’s options to acquire Company common stock from the Company or by check
payable directly to the taxing authorities which Maker may designate to the Company in writing.

     IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the day and year first
above written.

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	 	MAKER:

 	 
	 	  	/s/ Lyn Kirby
 	 
	 	 	Lyn Kirby 	 
	 	 	 	 
	 

PAYEE’S ADDRESS:

Ulta Salon, Cosmetics & Fragrance, Inc.

Windham Lakes Business Park

1135 Arbor Drive

Romeoville, Illinois 60446

Attention: Chief Financial Officer

Facsimile:

Copy to:

Donald L. Schwartz

Latham & Watkins LLP

Sears Tower, Suite 5800

233 South Wacker Drive

Chicago, IL 60606

Facsimile: (312) 993-9767

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EXHIBIT 10.3

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of the 12th
day of December, 2005, between Ulta Salon, Cosmetics & Fragrance, Inc., a Delaware corporation (the
“Company”) and Bruce Barkus (the “Executive”).

RECITALS

     A. It is the desire of the Company to employ the Executive to serve as the Company’s chief
operating officer as described in this Agreement.

     B. The Executive desires to become an employee and to provide his services to the Company on
the terms set forth in this Agreement.

     NOW, THEREFORE, in consideration of the foregoing, and of the respective covenants and
agreements set forth below, the parties hereto agree as follows:

ARTICLE I.

SERVICES AND TERM

     1.1 Services. The Company agrees to employ the Executive as its Chief Operating
Officer and the Executive accepts such employment upon the terms set forth in this Agreement. The
Executive shall report to and receive direction from the President and Chief Executive Officer of
the Company. Executive shall have those duties, responsibilities and authority customarily
accorded a person holding the position of Chief Operating Officer in a company of a size such as
the Company.

     1.2 Services to Subsidiaries. Executive will also serve, without further
compensation, in such capacities of each subsidiary of the Company as specified by the Board of
Directors of the Company (the “Board”).

     1.3 Term. The term of employment under this Agreement (the “Term”) shall begin on
December 19, 2006 (the “Commencement Date”) and end on the last day of the Company’s fiscal year
(the “Fiscal Year”) ending in February 2009, unless otherwise sooner terminated by the parties
under Article III. The Term shall automatically renew for additional one year period(s), unless
either party provides written notice to the other of their intent not to renew at least sixty (60)
days prior to the then expiration of the Term or as otherwise terminated as herein provided.

ARTICLE II.

COMPENSATION PACKAGE

     2.1 Compensation. The Company shall pay Executive a base salary of $580,000 per year
(the “Base Salary”) in accordance with the normal payment procedures of the Company and subject to
such withholding and other normal employee deductions as may be required by law. The Board shall
perform a performance review of Executive after the end of each Fiscal Year, beginning with the
Fiscal Year ending in 2007. In connection with such

 

 

review the Board may adjust Executive’s Base Salary after taking into account Executive’s and
the Company’s performance, and such other factors as the Board deems appropriate; provided,
however, Executive’s Base Salary may not be decreased without Executive’s express written consent
unless the decrease is pursuant to a general compensation reduction applicable to all, or
substantially all, officers of the Company.

     2.2 Benefits. During the Term, Executive shall be eligible to participate in such
medical, health, pension, welfare, and insurance plans offered by the Company as he elects from
time to time (subject to the terms of such plans), and to receive other fringe benefits that are at
least as favorable as the fringe benefits generally provided to other senior officers of the
Company at the time such other fringe benefits are made available to them.

     2.3 Bonus. Each Fiscal Year during the Term, beginning with the Fiscal Year ending in
2007, Executive will be eligible to earn a cash performance bonus targeted at $725,000 (the “Target
Bonus”). Each Fiscal Year the Board shall establish performance targets based on sales, earnings
before interest and taxes, and other pre-established performance objectives. The actual bonus will
be determined based upon the achievement of the performance targets set by the Board. If the
established performance targets are met or exceeded, then the Target Bonus will be paid to
Executive. The Board in its sole discretion may pay in excess of Target Bonus. Appendix I sets
forth the calculation of bonus payments for the Fiscal Year ending in February 2007.

     2.4 Options. The Company shall grant to Executive, as of the date of the first
meeting of the Board of Directors of the Company on or after the Commencement Date (the “Grant
Date”) the following options:

          (a) a stock option with respect to 600,000 shares of common stock, par value $0.01 per share,
of the Company (the “Common Stock”) at an exercise price equal to the fair market value on the date
of grant, as determined by the Board (the “First Option”). One-third of the First Option shall be
vested on the Grant Date, and one-third of the First Option shall vest, provided the Executive is
employed by the Company, on each anniversary of the Grant Date thereafter, such that the Executive
shall be vested in one hundred percent (100%) of the First Option on the second anniversary of the
Grant Date. All shares of Common Stock acquired upon exercise of the First Option will be subject
to repurchase rights upon cessation of employment at Fair Market Value as described in the
Company’s 2002 Equity Incentive Plan; and

          (b) 400,000 shares of Common Stock at an exercise price equal to fair market value on the date
of grant, as determined by the Board (the “Second Option”). Fifty-percent of the Second Option
shall vest and be exercisable, provided Executive is employed by the Company, on each of the first
and second anniversaries of the date the Company first closes an underwritten offering of its
Common Stock to the public.

     2.5 Business Expenses. The Company will reimburse Executive for reasonable
business-related expenses incurred by him in connection with the performance of his duties
hereunder upon presentation of written documentation, subject, however, to the

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Company’s reasonable policies relating to business-related expenses as then in effect from
time to time.

     2.6 Vacation. Executive shall be entitled to four weeks of annual vacation to be
accrued and taken in accordance with the Company’s vacation policy for senior executives.

     2.7 Attorney’s Fees. The Company shall reimburse Executive for up to $5,000 of
reasonable attorney’s fees and expenses incurred in connection with the negotiation and entering
into this Agreement.

     2.8 Relocation. Executive shall make a good faith effort to relocate to the Chicago,
Illinois area on a permanent basis within a reasonable period of time, given the desire of the
Company that Executive relocate expeditiously. The Company will reimburse Executive for the cost of
such relocation in accordance with the Company’s relocation policy.

     2.9 Indemnification. Executive shall be entitled to the same indemnification under
the terms of the Company’s By-Laws and Articles of Incorporation as is provided, and such liability
insurance as the Company may from time to time purchase, for its Board members and senior officers.

ARTICLE III.

TERMINATION OF SERVICES

     3.1 Termination. This Agreement, the Executive’s employment with the Company and the
Company’s obligations to the Executive under Article II will terminate:

          (a) Death. Automatically, upon the Executive’s death;

          (b) Resignation. Upon the date specified by the Executive at the time of his
resignation;

          (c) Disability. Upon the date elected by the Company, after the failure of the
Executive to render services to the Company for a continuous period of six (6) months because of
the Executive’s physical or mental disability or illness (“Disability”). If there should be any
dispute between the parties as to the Executive’s physical or mental disability at any time, such
question shall be settled by the opinion of an impartial reputable physician agreed upon for such
purpose by the parties or their representatives. The certificate of such physician as to the
matter in dispute shall be final and binding on the parties.

          (d) Cause. Immediately, upon notice to the Executive that the Company is terminating
him for Cause. For purpose of this Agreement “Cause” means (i) the Executive’s gross misconduct,
including any intentional or grossly negligent breach of the Company’s policies and procedures,
including its policies relating to discrimination, harassment or trading in the Company’s
securities, or any material breach of the Company’s Policy Regarding Noncompetition,
Nonsolicitation and Confidential Information; (ii) conviction of, or plea of guilty or nolo
contendere by the Executive with respect to a felony; or (iii) any act of fraud, dishonesty
or moral turpitude committed by the Executive which is materially detrimental to the business or
reputation of the Company as determined by the Board.

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          (e) Termination without Cause. Upon the date specified by the Company, upon written
notice to the Executive that his employment is being terminated without Cause.

          (f) Expiration of Term. The expiration or non-renewal of the Term as provided in
Section 1.3 hereof.

     3.2 Payment on Termination with Cause or Without Good Reason. In the event that
Executive’s employment is terminated for Cause or by the Executive without Good Reason (as defined
below), Executive shall be entitled to receive (a) all earned but unpaid Base Salary through and
including the date of termination; (b) accrued, but unused, vacation time; (c) reimbursement of
unreimbursed business expenses incurred prior to the date of termination; and (d) any vested
benefits under the Company’s employee benefit plans, in accordance with their terms (collectively
the “Accrued Compensation”).

     3.3 Payment on Termination without Cause, for Good Reason or Nonrenewal of Term.
Subject to Executive’s continuing compliance with the provisions of Section 4.3 of this Agreement
and the Policy referred to therein and execution by the Executive of a binding general waiver and
release of claims in the form agreed upon by the parties and attached hereto as Appendix II (a
“Release”), if Executive’s employment is terminated by the Company without Cause, by the Executive
for Good Reason or upon expiration/non-renewal of the Term by reason of the Company providing
Executive notice of nonrenewal in accordance with Section 1.3, then in addition to the Accrued
Compensation, the Executive shall be entitled to receive in full settlement of all obligations of
the Company under this Agreement continuation of the Base Salary (at the rate in effect at the
termination date) for a period of one year following the date of termination, which payments shall
be made ratably in accordance with the Company’s ordinary payroll practices in effect during such
period.

     For purposes of this Agreement, “Good Reason” shall mean without the consent of the Executive:
(i) an adverse or material change in Executive’s reporting responsibilities and/or diminution of
any material duties or responsibilities previously assigned to Executive by the Board; or (ii) the
failure of the Company to pay Executive Base Salary as required by Section 2.1 of this Agreement or
to perform its other material obligations hereunder; (. Executive must give written notice to the
Company within thirty (30) days of the event giving rise to Good Reason and the Company must fail
to cure within thirty (30) days of such notice in order for such event to qualify as a Good Reason
termination.

     3.4 Payment upon Death or Disability. In addition to the Accrued Compensation, in the
event that Executive’s employment is terminated by reason of death or Disability, Executive (or in
the event of Executive’s death, Executive’s estate) shall be entitled to receive, subject to the
execution by Executive (or as appropriate the executor of Executive’s estate or Executive’s
guardian) of a binding Release, payment of a lump-sum equal to the Base Salary (at the rate in
effect at the time of death or Disability) for a one year period minus the amount of any payments
that Executive is entitled to receive from any disability insurance that may be provided at such
time by the Company.

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ARTICLE IV.

COVENANTS

     4.1 Services as Chief Operating Officer. Executive hereby covenants and agrees that
he will faithfully and in conformity with the directions of the Chief Executive Officer and the
Board perform his duties as Chief Operating Officer, and that he shall devote to the performance of
said duties all such time and attention as they shall reasonably require.

     4.2 No Detraction From Performance. The Executive hereby consents and agrees that he
will not, without the express consent of the Board, become engaged in any business other than that
of the Company, which interferes with his duties and responsibilities to the Company.

     4.3 Policy Regarding Noncompetition, Nonsolicitation and Confidential Information.
Executive has signed the Company’s Policy Regarding Noncompetition, Nonsolicitation and
Confidential Information (the “Policy”) and agrees to continue complying with the terms of such
Policy.

     4.4 Remedies. The Executive and the Company agree that the Company will be
irreparably harmed by any violation or threatened violation of any of the foregoing provisions of
this Article 4 if such provisions are not specifically enforced and therefore that the Company
shall be entitled to an injunction restraining any violation of such provisions by the Executive,
or any other appropriate decree of specific performance. Such remedies shall not be exclusive and
shall be in addition to any other remedy to which the Company may be entitled under this Agreement
or at law.

     4.5 Non-Disparagement. Neither Executive nor the Company shall make defamatory or
disparaging remarks about the other following the termination of Executive’s employment with the
Company.

ARTICLE V.

MISCELLANEOUS

     5.1 Successors. This Agreement shall inure to the benefit of the Company and its
successors and assigns, as applicable. If the Company shall merge or consolidate with or into, or
transfer substantially all of its assets, including goodwill, to another corporation or other form
of business organization, this Agreement shall be binding on, and run to the benefit of, the
successor of the Company resulting from such merger, consolidation, or transfer. The Executive
shall not assign, pledge, or encumber his interest in this Agreement, or any part thereof, without
the prior written consent of the Company, and any such attempt to assign, pledge or encumber any
interest in this Agreement shall be null and void and shall have no effect whatsoever.

     5.2 Governing Law. This Agreement is being made and executed in and is intended to be
performed in the State of Illinois and shall be governed, construed, interpreted and enforced in
accordance with the substantive laws of the State of Illinois, without regard to the conflict of
laws principles thereof.

5

 

     5.3 Entire Agreement. This Agreement comprises the entire agreement between the
parties hereto relating to the subject matter hereof and as of the Commencement Date, supersedes,
cancels and annuls all previous agreements between the Company (and/or its predecessors) and the
Executive, as the same may have been amended or modified, and any right of the Executive thereunder
other than for compensation accrued thereunder as of the date hereof, and supersedes, cancels and
annuls all other prior written and oral agreements between the Executive and the Company or any
predecessor to the Company. The terms of this Agreement are intended by the parties to be the
final expression of their agreement with respect to the retention of the Executive by the Company
and may not be contradicted by evidence of any prior or contemporaneous agreement.

     5.4 Gender. Words in the masculine herein may be interpreted as feminine or neuter,
and words in the singular as plural, and vice versa, where the sense requires.

     5.5 Disputes.

          (a) Any dispute or controversy arising under, out of, in connection with or in relation to
this Agreement (except with respect to the Policy referred to in Section 4.3, which shall be
governed by the dispute resolution provisions specified therein), including any claims for
discrimination or other similar violation of federal law, shall be finally determined and settled
by arbitration in Chicago, Illinois, in accordance with the rules and procedures regarding
employment contract disputes as established by the American Arbitration Association, and judgment
upon the award may be entered in any court having jurisdiction thereof.

          (b) If any arbitration or other proceeding is brought for the enforcement of this Agreement,
or because of an alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys’ fees and other costs incurred in that action or proceeding, in addition to
any other relief that may be granted.

     5.6 Severability; Enforceability. If any provision of this Agreement, or the
application thereof to any person, place, or circumstance, shall be held to be invalid,
unenforceable, or void by the final determination of a court of competent jurisdiction in any
jurisdiction and all appeals therefrom shall have failed or the time for such appeals shall have
expired, as to that jurisdiction and subject to this Section 5.6, such clause or provision shall be
deemed eliminated from this Agreement but the remaining provisions shall nevertheless be given full
force and effect. In the event this Agreement or any portion hereof is more restrictive than
permitted by the law of the jurisdiction in which enforcement is sought, this Agreement or such
portion shall be limited in that jurisdiction only, and shall be enforced in that jurisdiction as
so limited to the maximum extent permitted by the law of that jurisdiction.

     5.7 Validity. The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

     5.8 Notices. Any notice, request, claim, demand, document and other communication
hereunder to any party shall be effective upon receipt (or refusal of receipt) and

6

 

shall be in writing and delivered personally or sent by telex, telecopy, or certified or
registered mail, postage prepaid, as follows:

          (a) If to the Company, attn: Chief Executive Officer, Windham Lakes Business Park, 1135 Arbor
Drive Romeoville, IL 60446, with a copy to Donald Schwartz at Latham & Watkins, 5800 Sears Tower,
Chicago, Illinois 60606 (312-993-9767 fax) or to such other address or addresses as the Company
may specify in writing from time to time.

          (b) If to the Executive, to him at the address set forth below under his signature or such
other residence as he may designate to the Company as his residence from time to time; or at any
other address as he may specify in writing from time to time.

     5.9 Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, but all of which together will constitute one and the same
Agreement.

     5.10 Amendments; Waivers. This Agreement may not be modified, amended, or terminated
except by an instrument in writing, approved by the Board and signed by the Executive and the
Company. By an instrument in writing similarly executed, the Executive or the Company may waive
compliance by the other party or parties with any provision of this Agreement that such other party
was or is obligated to comply with or perform; provided, however, that such waiver shall not
operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure
to exercise and no delay in exercising any right, remedy or power hereunder shall preclude any
other or further exercise of any other right, remedy or power provided herein or by law or in
equity. Notwithstanding the foregoing, the Company may amend this Agreement at anytime without the
consent of the Executive and/or take such action as it deems necessary and reasonable in order to
make any payments pursuant to this Agreement compliant with the requirements of Section 409A of the
Internal Revenue Code of 1986, as amended and any guidance issued thereunder.

     5.11 No Inconsistent Actions. The parties hereto shall not voluntarily undertake or
fail to undertake any action or course of action inconsistent with, or to avoid or evade, the
provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties
hereto to act in a fair and reasonable manner with respect to the interpretation and application of
the provisions of this Agreement.

7

 

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first
above written.

	 	 	 	 	 
	ULTA SALON, COSMETICS & 

FRAGRANCE, INC.

	 	

EXECUTIVE
	 	 
	 
	 	 	 	 
	By: /s/ Dennis Eck

	 	/s/ Bruce Barkus	 	 
	Name: Dennis Eck

	 	Name: Bruce Barkus	 	 
	Title: Non-Executive Chairman

	 	Address:	 	 

8

 

Appendix I

If 100% of performance target is met, then Executive shall receive his full bonus. If the
performance targets are not met, then Executive shall be eligible for a bonus equal to a percentage
of his Target Bonus only if at least 91% of the performance targets are met. Such percentage shall
equal 12.5% of his Target Bonus for each 1% increase in performance over 90% of the performance
targets.

	 	 	 	 	 	 	 	 
		Percent of	 	 	 	 	 	 
		Performance Target	 	 	 	 	 	 
		Achieved	 	Bonus Percentage	 	Actual Bonus Paid
		91%
	 	 	12.5
	 	 	  72500
		92%
	 	 	25
	 	 	145000
		93%
	 	 	37.5
	 	 	217500
		94%
	 	 	50
	 	 	290000
		95%
	 	 	62.5
	 	 	362500
		96%
	 	 	75
	 	 	435000
		97%
	 	 	87.5
	 	 	507500
		98%
	 	 	100
	 	 	580000
		99%
	 	 	112.5
	 	 	652500
		100%
	 	 	125
	 	 	725000

9

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