8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT

(DATE OF EARLIEST EVENT REPORTED):

January 14, 2010

BARE ESCENTUALS, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-33048	20-1062857
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(IRS employer identification number)

71 Stevenson Street, 22nd Floor

San Francisco, CA, 94105

(Address of Principal Executive Offices) (Zip Code)

(415) 489-5000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

Name And Likeness License Agreement

As previously announced, on January 14, 2010, Bare Escentuals, Inc., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Shiseido Company, Limited, a Japanese corporation (“Parent”), and Blush Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Parent (“Purchaser”). Pursuant to the terms of the Merger Agreement, and subject to the conditions thereof, Purchaser has agreed to commence a tender offer (the “Offer”) to purchase all of the outstanding shares of the Company’s common stock. Following the consummation of the Offer, subject to customary conditions, Purchaser will be merged with and into the Company (the “Merger”), with the Company as the surviving corporation. A complete copy of the Merger Agreement was filed with the Securities and Exchange Commission by the Company pursuant to a Form 8-K on January 15, 2010.

On January 14, 2010, concurrently with the execution of the Merger Agreement, the Company entered into an Amended and Restated Name and Likeness License Agreement (the “New License Agreement”) with Leslie Blodgett (“Ms. Blodgett”). The New License Agreement, which would become effective only upon the consummation of the Offer, would amend, restate and replace in its entirety the Name and Likeness License Agreement between the Company and Ms. Blodgett, which was initially entered into on September 26, 2006 (the “Original License Agreement”). Until a majority of the outstanding shares of common stock of the Company (on a fully-diluted basis) have been validly tendered and not withdrawn and the Purchaser has accepted these shares for payment, the Original License Agreement will continue in full force and effect.

Pursuant to the Original License Agreement, Ms. Blodgett granted the Company an exclusive, worldwide license to use her name, likeness, image, voice, signature, photograph (collectively, the “Property”) and other elements or attributes of her persona, identity or personality for its products and services. When the New License Agreement becomes effective, the Company’s license will not extend to elements or attributes of her persona, identity or personality other than the Property. The license will continue to be royalty-free and perpetual under the New License Agreement, except as described in the New License Agreement.

Pursuant to the New License Agreement, the Company will continue to have the exclusive right to use the Property in a manner substantially consistent with the quality, style and image of the existing licensed marks before completion of the Offer or as may be consented to by Ms. Blodgett. Ms. Blodgett (or her legal representative, heirs or estate) may terminate the New License Agreement upon at least 180 days prior written notice at any time beginning three (3) years after Ms. Blodgett ceases to serve as an officer of the Company having a general management role, provided that such termination shall not in any event become effective before the fifth anniversary of the closing of the Offer.

Under the New License Agreement, following the termination of Ms. Blodgett’s employment with the Company for any reason, Ms. Blodgett will be permitted to use the Property and other attributes of her persona, identity and personality to engage in other business activities and to endorse products and engage in other business activities that do not otherwise compete with the

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Company’s brand. If Ms. Blodgett’s employment with the Company terminates without “cause” or by Ms. Blodgett for “good reason,” each as defined in the LB Employment Agreement, Ms. Blodgett would receive a royalty based on those products and services that bear the licensed marks and on which the Company has generated positive net revenue.

A complete copy of the New License Agreement is filed herewith as Exhibit 2.1 and is incorporated herein by reference. The foregoing description of the terms of the New License Agreement does not purport to be complete and is qualified in its entirety by reference to such Exhibit.

ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS

See the disclosures regarding the New License Agreement under Item 1.01 above, which disclosures are incorporated herein by reference.

Employment Agreement with Leslie Blodgett

On January 14, 2010, concurrently with the execution of the Merger Agreement, the Company entered into an employment agreement (the “LB Employment Agreement”) with Ms. Blodgett. The LB Employment Agreement, which would become effective only upon the consummation of the Offer, would amend, restate and replace in its entirety Ms. Blodgett’s existing employment agreement with Bare Escentuals Beauty, Inc., which was entered into on December 19, 2008 (the “Existing LB Employment Agreement”). Until a majority of the outstanding shares of common stock of the Company (on a fully-diluted basis) have been validly tendered and not withdrawn and the Purchaser has accepted these shares for payment, the Existing LB Employment Agreement will continue in full force and effect.

Under the terms of the LB Employment Agreement, upon consummation of the Offer, Ms. Blodgett will resign her role as the Chief Executive Officer of the Company and Bare Escentuals Beauty, Inc. and will be appointed the Executive Chair and member of the board of the directors of the Company and the co-principal executive officer of the Company.

Pursuant to the terms of the LB Employment Agreement, Ms. Blodgett will serve as a full-time spokesperson for the Company and will perform such duties as are commensurate with her position as Executive Chair and co-principal executive officer. Ms. Blodgett’s annual base salary will be $700,000, subject to annual cost of living increases as determined by the board of directors of the Company, in its sole discretion. Ms. Blodgett will also be eligible for (i) an annual cash bonus at the 100% target level under the Company’s annual bonus plan and (ii) a cash-based long-term incentive award with a target value equal to $3.585 million upon the attainment by the Company of specified performance conditions for fiscal years 2010, 2011 and 2012, with such long-term incentive award to be subject to accelerated vesting and payment upon a change of control of the Company. Ms. Blodgett will also be entitled to a car allowance, fully-paid family health insurance and certain other perquisites commensurate with her position.

The term of Ms. Blodgett’s employment will end on the third anniversary of the purchase of shares of the Company’s common stock by Purchaser pursuant to the Offer, subject to extension by the mutual written agreement of Ms. Blodgett and the Company. In the event Ms. Blodgett’s

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employment is terminated due to her death or disability, she or her estate, as applicable, is entitled to receive any earned but unpaid amounts of her base salary, bonus compensation, a pro-rated portion of any bonus she would have earned for the year, the cash value of any accrued but unused vacation and unreimbursed expenses. In the event Ms. Blodgett becomes disabled, the board of directors of the Company may designate another employee to act in her place during any period of disability and she is entitled to receive her base salary and benefits, less any disability income benefits she receives under the Company’s disability income plan.

The LB Employment Agreement provides Ms. Blodgett with certain severance benefits in the event her employment is terminated by the Company other than for “cause” or if she resigns with “good reason,” each as defined in the LB Employment Agreement. In such event, the Company will pay Ms. Blodgett’s accrued base salary through the date of termination, any earned but unpaid bonus, 18 months of her then-current base salary, 150% of the bonus she received for the most recently completed bonus year, the cash value of any accrued but unused vacation, unreimbursed expenses, 18 months of healthcare benefits contributions and a fixed sum to cover life insurance premiums, and, if such termination occurs after December 31, 2010, the long-term incentive award will vest in full and be payable in an amount determined based on (i) with respect to the full fiscal years prior to the termination of Ms. Blodgett’s employment, the actual performance of the Company for such fiscal years and (ii) with respect to the fiscal year in which Ms. Blodgett’s employment is terminated and for each fiscal year thereafter through the end of the long-term incentive award period, the assumed achievement of the target performance conditions for each such fiscal year.

The LB Employment Agreement contains customary nonsolicitation and nondisclosure covenants on the part of Ms. Blodgett.

A complete copy of the LB Employment Agreement is filed herewith as Exhibit 10.1 and is incorporated herein by reference. The foregoing description of the terms of the LB Employment Agreement does not purport to be complete and is qualified in its entirety by reference to such Exhibit.

Employment Agreement with Myles McCormick

On January 14, 2010, concurrently with the execution of the Merger Agreement, the Company entered into an employment agreement (the “MM Employment Agreement”) with Myles McCormick (“Mr. McCormick”), Executive Vice President, Chief Financial Officer and Chief Operating Officer of the Company. The MM Employment Agreement, which would become effective only upon the consummation of the Offer, would amend, supersede and replace in their entirety (i) the employment offer letter between the Company and Mr. McCormick, dated as of December 8, 2004, and all amendments thereto, (ii) the Severance Rights Agreement between the Company and Mr. McCormick, dated as of December 19, 2008, and (iii) all prior employment agreements or arrangements between the Company and Mr. McCormick (collectively, the “Existing MM Employment Agreements”). Until a majority of the outstanding shares of common stock of the Company (on a fully-diluted basis) have been validly tendered and not withdrawn and the Purchaser has accepted these shares for payment, the Existing MM Employment Agreements will continue in full force and effect. Under the terms of the MM Employment Agreement, upon consummation of the Offer, Mr. McCormick will be appointed the Chief Executive Officer of the Company.

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Pursuant to the terms of the MM Employment Agreement, Mr. McCormick will perform such duties as are commensurate with his position as Chief Executive Officer. Mr. McCormick’s annual base salary will be $700,000, subject to annual cost of living increases as determined by the board of directors of the Company, in its sole discretion. Mr. McCormick will also be eligible for (i) an annual cash bonus at the 100% target level under the Company’s annual bonus plan and (ii) a cash-based long-term incentive award with a target value equal to $3.585 million upon the attainment by the Company of specified performance conditions for fiscal years 2010, 2011 and 2012, such long-term incentive award to be subject to accelerated vesting and payment upon a change of control of the Company. Mr. McCormick will also be entitled to a car allowance, fully paid family health insurance and certain other perquisites commensurate with his position.

The term of Mr. McCormick’s employment will end on the third anniversary of the purchase of shares of the Company’s common stock by Purchaser pursuant to the Offer, subject to extension by the mutual written agreement of Mr. McCormick and the Company. In the event Mr. McCormick’s employment is terminated due to his death or disability, he is entitled to receive any earned but unpaid amounts of his base salary, bonus compensation, a pro-rated portion of any bonus he would have earned for the year, the cash value of any accrued but unused vacation and unreimbursed expenses. In the event Mr. McCormick becomes disabled, the board of directors of the Company may designate another employee to act in his place during any period of disability and he is entitled to receive his base salary and benefits, less any disability income benefits he receives under the Company’s disability income plan.

The MM Employment Agreement provides Mr. McCormick with certain severance benefits in the event his employment is terminated by the Company other than for “cause” or if he resigns with “good reason,” each as defined in the MM Employment Agreement. The Company will pay Mr. McCormick’s accrued base salary through the date of termination, any earned but unpaid bonus, 18 months of his then-current base salary, 150% of the bonus he received for the most recently completed bonus year, the cash value of any accrued but unused vacation, unreimbursed expenses, 18 months of healthcare benefits contributions and a fixed sum to cover life insurance premiums, and, if such termination occurs after December 31, 2010, the long-term incentive award will vest in full and be payable in an amount determined based on (i) with respect to the full fiscal years prior to the termination of Mr. McCormick’s employment, the actual performance of the Company for such fiscal years and (ii) with respect to the fiscal year in which Mr. McCormick’s employment is terminated and for each fiscal year thereafter through the end of the long-term incentive award period, the assumed achievement of the target performance conditions for each such fiscal year.

The MM Employment Agreement contains customary nonsolicitation and nondisclosure covenants on the part of Mr. McCormick.

A complete copy of the MM Employment Agreement is filed herewith as Exhibit 10.2 and is incorporated herein by reference. The foregoing description of the terms of the MM Employment Agreement does not purport to be complete and is qualified in its entirety by reference to such Exhibit.

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Transaction Bonus Plan

On January 14, 2010, the Company’s board of directors elected to establish the Bare Escentuals, Inc. Transaction Bonus Plan (the “Transaction Bonus Plan”) in which certain employees, including certain of the Company’s named executive officers, who are critical to the Company’s success and whose retention is necessary to ensure a smooth transition in connection with the Merger and the future success of the Company may participate. Upon the consummation of the transactions contemplated by the Merger Agreement, the Transaction Bonus Plan provides for the payment by the Company to certain of its employees of cash bonuses in an aggregate amount not to exceed $1,119,000, with the individual amounts of such cash bonuses and the eligibility criteria for participation in such Transaction Bonus Plan to be determined by the Company’s board of directors in its reasonable discretion.

Under the Transaction Bonus Plan, the cash bonus payments to each of the Company’s named executive officers will be as follows:

Name	Position	Bonus Amount
Leslie Blodgett	Chief Executive Officer	$	125,655
Myles McCormick	Chief Operating Officer, Chief Financial Officer and Executive Vice President	$	90,940

To participate in the Transaction Bonus Plan, designated employees must remain continuously employed by the Company or a subsidiary of the Company until the date the cash bonus payments are paid under the Transaction Bonus Plan.

A complete copy of the Transaction Bonus Plan is filed herewith as Exhibit 10.3 and is incorporated herein by reference. The foregoing description of the terms of the Transaction Bonus Plan does not purport to be complete and is qualified in its entirety by reference to such exhibit.

Safe Harbor for Forward-Looking Statements

This Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by words such as “anticipate,” “expect,” “believe,” “plan,” “intend,” “predict,” “will,” “may,” and similar terms. Forward-looking statements in this Form 8-K include, but are not limited to, the anticipated timing of filings and approvals relating to the transaction; statements regarding the expected timing of the completion of the transaction; statements regarding the ability to complete the transaction considering the various closing conditions; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. The forward-looking statements contained in this Form 8-K relate to future results and events are based on the Company’s current expectations, estimates and projections about its industry, as well as management’s beliefs and assumptions. Forward-looking statements, by their nature, involve risks and uncertainties and are not guarantees of future performance. Actual results may differ materially from the results discussed in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, but not limited to, uncertainties as to the timing of the Offer and the Merger; uncertainties as to how many of the Company’s stockholders will tender their stock in the Offer; the risk that competing offers will be made; the possibility that various

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closing conditions for the transaction may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; the effects of disruption from the transaction making it more difficult to maintain relationships with employees, licensees, other business partners or governmental entities; other business effects, including the effects of industry, economic or political conditions outside of the Company’s control; transaction costs; actual or contingent liabilities; and other risks and uncertainties discussed in documents filed with the SEC by the Company, including the solicitation/recommendation statement to be filed by the Company. Investors and stockholders are cautioned not to place undue reliance on these forward-looking statements. Unless required by law, the Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

Exhibit 2.1	Amended and Restated Name and Likeness License Agreement, dated as of January 14, 2010, by and between Bare Escentuals, Inc. and Leslie Blodgett.
Exhibit 10.1	Employment Agreement, dated as of January 14, 2010, by and between Bare Escentuals, Inc. and Leslie Blodgett.
Exhibit 10.2	Employment Agreement, dated as of January 14, 2010, by and between Bare Escentuals, Inc. and Myles McCormick.
Exhibit 10.3	Bare Escentuals, Inc. Transaction Bonus Plan

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Bare Escentuals, Inc.
Date: January 19, 2010	By:	/S/    MYLES MCCORMICK
	Name:	Myles McCormick
	Title:	Executive Vice President, Chief Financial Officer and Chief Operating Officer

EXHIBIT INDEX

Exhibit 2.1	Amended and Restated Name and Likeness License Agreement, dated as of January 14, 2010, by and between Bare Escentuals, Inc. and Leslie Blodgett.
Exhibit 10.1	Employment Agreement, dated as of January 14, 2010, by and between Bare Escentuals, Inc. and Leslie Blodgett.
Exhibit 10.2	Employment Agreement, dated as of January 14, 2010, by and between Bare Escentuals, Inc. and Myles McCormick.
Exhibit 10.3	Bare Escentuals, Inc. Transaction Bonus Plan

EX-2.1

Exhibit 2.1

Execution Version

AMENDED AND RESTATED NAME AND LIKENESS LICENSE AGREEMENT

This Amended and Restated Name and Likeness License Agreement (this “Agreement”) is entered into as of January 14, 2010, by and between Leslie Blodgett (“Licensor”) and Bare Escentuals, Inc., a Delaware corporation (the “Company”).

WHEREAS, Licensor and the Company are parties to a Name and Likeness Agreement, dated February 22, 2006 (the “Original Agreement”), pursuant to which Licensor agreed to license certain property to the Company;

WHEREAS, subject to rights granted pursuant to the Original Agreement, Licensor is the exclusive owner of all right, title and interest in and to (i) her image, signature, voice and likeness and goodwill appurtenant thereto, (ii) certain rights of publicity in and to her full and formal name, nickname or alias (her “Name”), image, likeness, voice, signature now used or hereafter to be used, and photograph, (iii) all rights in and to her Name, and (iv) all common law and statutory rights in the foregoing (collectively, the “Property”);

WHEREAS, pursuant to a merger agreement dated January 14, 2010 (the “Merger Agreement”) among the Company, Shine Company, Limited and Blush Acquisition Corporation (“BAC”), BAC has agreed to acquire the Company through a tender offer (the “Offer”) and the subsequent merger of BAC with and into the Company as contemplated by, and more fully described in, the Merger Agreement (the “Merger”); and

WHEREAS, the parties wish to amend and restate the Original Agreement to reflect certain agreements reached in connection with the Offer and the Merger, effective as of the closing of the Offer.

NOW, THEREFORE, in consideration of the mutual premises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Licensor’s Rights. Licensor represents and warrants to the Company that she exclusively owns all right, title and interest throughout the world (the “Territory”) in and to the Property, subject to rights granted pursuant to the Original Agreement. Licensor has not granted to any other party any other rights to use any part of the Property other than as set forth on Exhibit A hereto. Licensor represents and warrants to the Company that, as of the date hereof, she has the power and authority to license the Property on the terms and conditions of this Agreement.

2. Use of the Property.

(a) Subject to the terms and conditions of this Agreement and to the license rights to the Property previously granted by Licensor and listed on Exhibit A hereto, Licensor hereby licenses to the Company the exclusive right to use, and to authorize others to use, pursuant to the terms hereof, any of the Property throughout the Territory by any means, methods and technologies now known or hereafter to become known, in

connection with the creation, development, production, manufacturing, packaging, promotion, distribution and sale of any products and services of the Company or its licensees (such products and services are referred to herein as the “Licensed Products” and the “Licensed Services”) during the term of this Agreement. During the term of any license pursuant to this Agreement, the Company shall use commercially reasonable efforts to preserve the historical goodwill of the Property, the Licensed Products and the Licensed Services. All use of the Property and Licensed Services shall inure solely to the benefit of Licensor. The use of the Property by the Company or any sublicensee thereof shall be of a quality at least substantially consistent with the Historical Standard (as defined below); provided that any use of the Property by the Company prior to the completion of the Offer shall be conclusively presumed to meet the Historical Standard. The “Historical Standard,” as of any date, shall mean the quality, style and image of the Licensed Products or Licensed Services as the Property has been used by the Company after January 1, 2006 and before completion of the Offer (such period being referred to as the “Historical Period”) or pursuant to any Acceptable Use after the Historical Period. Subject to Section 2(b), any new use of the Property following the completion of the Offer shall be permitted only if (i) such use (A) is substantially consistent with the Historical Standard and (B) with respect to which the Company consults with the Licensor (or her legal representatives, heirs or estates) in good faith or (ii) the Company has received the Licensor’s (or her legal representatives’, heirs’ or estates’) consent to such use. Each such use is expressly permitted hereunder and shall be referred to herein as an “Acceptable Use”.

(b) At any time that Licensor is not an officer of the Company having a general management role (other than due to a Termination Trigger, as defined in Section 2(c)), (i) subject to Licensor’s prior written approval, which shall not be unreasonably withheld or delayed, the Company may continue to use the Property in connection with new businesses not planned or developed while the Licensor was an executive having a general management role, and (ii) the Company may develop, use and register new derivatives of the Property not developed while the Licensor was an executive having a general management role, so long as such new Derived Marks (as defined in Section 5(a)) are an Acceptable Use (such businesses and derivatives, “New Uses”). For clarity, New Uses shall not include reasonable extensions of the lines of business in which the Company is engaged at any time during the Historical Period or that are Acceptable Uses, which extensions shall be included in the license contained herein. After Licensor’s death or disability, the Company may use the Property for additional New Uses, provided that any such businesses and derivatives are an Acceptable Use. The Company shall keep Licensor (or her legal representative, heirs or estate) advised of any New Uses in a timely manner, so that Licensor may confirm the Company’s compliance with the terms hereof. Subject to the terms and conditions of this Agreement, Licensor hereby grants to the Company the exclusive right to use and exploit in any and all media her name, image, likeness and voice as it appears in any and all television programs, infomercials and/or videos (including content developed for the Company’s online businesses) produced by or for the Company from time to time in the future during the term of this Agreement.

(c) The use of the Property by the Company pursuant to this Agreement shall be on a royalty-free basis except as set forth in the next sentence of this Section 2(c). The termination of Licensor’s employment with the Company by the Company without Cause, or by Licensor for Good Reason (each as defined in the employment agreement then in effect between Licensor and the Company) shall constitute a “Termination Trigger”. Licensor expressly acknowledges and agrees that none of (1) the execution of the Merger Agreement, (2) the Offer, (3) the Merger or (4) the implementation of any other transaction contemplated by the Merger Agreement will constitute Good Reason for purposes of this Agreement. In the event of a Termination Trigger, Licensor (or her legal representative, heirs or estate, as the case may be) shall receive royalties of: (x) 1% of Net Revenues (as defined below) from Licensed Products or Licensed Services of any kind, or which in any way include any of the Property (including as a portion of any Derived Marks), for the remaining term of this Agreement and (y) 25% of the Company’s royalties, after any and all cost to the Company associated with such royalties, from the sublicense of the Property other than in connection with Licensed Products or Licensed Services, in perpetuity even after termination of this Agreement, provided that Licensor shall be entitled to receive minimum royalties of $50,000 per year in the aggregate from the uses contemplated by clauses (x) and (y) above. Notwithstanding the foregoing, Licensor acknowledges and agrees that the Company is obligated to pay the minimum royalties of $50,000 per year in the aggregate for a particular year only if the Company derives any Net Revenues from the uses contemplated by clauses (x) and (y) during such year. For purposes of this Agreement, the term “Net Revenues” shall mean revenues from product sales, advertising, publication sales, distribution fees or any other sources, net of any taxes, freight charges, discounts and reserves for warranties or returns. Payment of the royalty amounts shall be accompanied by reasonable written detail of the basis therefor. Such royalty amounts shall be payable each calendar quarter, and shall be subject to a late payment fee of 10% per annum in the event not paid within 60 days of the end of the applicable quarter. Licensor (or her legal representative, heirs or estate, as the case may be) shall have the right to audit the royalty payments no more than once per year, and any underpayments shall be immediately due and payable upon conclusion of the audit, plus interest at 10% per annum from the 60th day following the end of the applicable quarter with respect to which the underpaid amount was due.

(d) Upon a Termination Trigger, effective upon the later to occur of (i) the Termination Trigger and (ii) the fifth anniversary of the closing of the Offer, the license provided herein shall become non-exclusive with respect to all then-active businesses of the Company and shall not include a license to use the Property in connection with New Uses. Upon a Termination Trigger, the Company shall automatically be deemed to have granted Licensor a non-exclusive perpetual, worldwide, royalty free license, effective upon the later to occur of (i) the Termination Trigger and (ii) the fifth anniversary of the closing of the Offer, to use the Property as, or as part of, a trademark, service mark or trade name, for any goods or services Licensor desires, to the extent, if any, that said mark or name is likely to cause confusion with or otherwise infringe or violate the Company’s rights in any mark or name the Company owns (the “Termination Trigger License”). The Termination Trigger License shall include, without limitation, the right to use the Property in connection with any goods or services which compete directly with

goods or services of the Company. Notwithstanding the foregoing, Licensor shall not have the right to use any mark or name which is identical to any mark or name owned by the Company. The quality of Licensor’s goods and services sold pursuant to the Termination Trigger License (the “Licensor Goods/Services”) shall be of at least the same kind of quality as goods and services sold by the Company as of the date of the Termination Trigger, and the Company shall have the right to take reasonable steps to monitor the quality of the Licensor Goods/Services. Upon Licensor’s reasonable request, the Company shall use commercially reasonable efforts to register trademarks and/or service marks which are the subject of the Termination Trigger License and shall take reasonable steps to maintain any such registrations, in the Company’s name and at the Company’s sole expense. The Company shall, at its expense, take any action reasonably requested by Licensor to protect any trademark, service mark or trade name which is the subject of the Termination Trigger License.

(e) Except for the other rights to use the Property that Licensor previously has granted and that are listed on Exhibit A hereto and except as otherwise provided in this Agreement, Licensor shall not during the term of this Agreement use commercially or grant any right to use commercially any part of the Property in the Territory. Licensor shall not, without the prior written consent of the Company, amend or renew any license or other agreement listed on Exhibit A pursuant to which she has granted the rights to use the Property.

(f) Notwithstanding any other provision of this Agreement, but subject to any employment or other agreement that Licensor may have from time to time with the Company, the license provided herein shall not prohibit Licensor from: (i) writing books, articles, movies, plays, scripts or other literary products in areas other than the use, manufacturing, distribution or sale of health and beauty products and other elements of the Company’s business as it exists from time to time; (ii) making speeches or public appearances (including on radio, television, in films or over the Internet or similar media) for any purpose other than the promotion of a product that competes in any material respect with the Licensed Products and Licensed Services; (iii) using, following the termination of Licensor’s employment with the Company for any reason, the Property to endorse products other than those covered by this Agreement, including the exclusivity provisions hereof; provided that such products are not competitive with the Licensed Products and Licensed Services and such products and the Licensor’s promotion of such products are not materially inconsistent with the brand image of, and goodwill associated with, the Licensed Products and Licensed Services; (iv) using the Products to engage in business activities other than those covered by this Agreement, including the exclusivity provisions hereof; (v) becoming a director, employee, partner, advisor, member, consultant or shareholder of, investor in or otherwise be engaged with any other company, corporation, partnership or other entity; and (vi) activities which are incidental to and do not significantly infringe on the Company’s rights hereunder.

(g) Any sublicense by the Company of the Property shall contain protections with respect to the Property consistent with the terms hereof and shall acknowledge that such sublicensee does not obtain any ownership rights in, or goodwill to, the Property.

3. Term and Termination.

(a) Perpetual Term. This Agreement shall become effective immediately upon BAC’s purchase of shares of common stock of the Company pursuant to the Offer. Prior to such time, the Original Agreement shall continue in effect in accordance with the terms thereof. If the Merger Agreement is terminated prior to the completion of the Offer, this Agreement shall be null and void ab initio and the Original Agreement shall continue in effect in accordance with the terms thereof. The term of this Agreement shall be perpetual, subject to the provisions of this Agreement.

(b) Termination by Licensor. This Agreement may be terminated by Licensor (or after her death or disability, by her legal representative, heirs or estate) upon at least one hundred eighty (180) days prior written notice at any time beginning three (3) years after Licensor’s ceasing to be an officer of the Company having a general management role; provided that, notwithstanding anything to the contrary in this Section 3(b), such termination shall not in any event become effective before the fifth anniversary of the closing of the Offer.

(c) Termination by the Company. This Agreement may be terminated by the Company upon 30 days prior written notice if a Termination Trigger has occurred and the Company no longer derives any Net Revenues from the uses contemplated by clauses (x) and (y) of Section 2(c).

(d) Termination for Material Breach. This Agreement may be terminated at any time by either party for the other’s material breach upon at least sixty (60) days prior written notice and an opportunity to cure such breach. If the breaching party cures the breach in question during such sixty (60) day period, the non-breaching party shall not have the right to terminate this Agreement as a result of such breach.

(e) Conduct upon Termination. Except as provided below, upon termination of this Agreement pursuant to Section 3(b), 3(c) or 3(d), the Company shall (i) immediately discontinue all use of the Property and any term or designation similar thereto, subject to a six-month sell-off period for the Company with respect to its then-current inventory, (ii) delete the same from its corporate or business name, (iii) cooperate with Licensor or her appointed agent, at the Company’s expense, in applying to the appropriate authorities to cancel the registration of this Agreement from all government records, and (iv) destroy all printed Licensed Products that are in the Company’s possession or control and that use the Property or a Derived Mark as a trademark. Upon written request of Licensor, the Company shall certify in writing to Licensor that the Company has complied with this Section 3(e).

(f) Prior Royalties; Survival. Termination of this Agreement for any reason shall not affect Licensor’s right to royalties for any prior period, and Sections 6, 7 and 8 shall survive termination of this Agreement. Except as provided herein, all rights of the Company in the Property shall cease after the termination of the Agreement and the

Company shall refrain from further use of or reference to the Property except as allowed by law.

(g) Perpetual, Non-Exclusive License to Certain Property. Notwithstanding anything to the contrary herein, Licensor hereby grants the Company a perpetual, non-exclusive license to any of the Property that the Company uses in Licensed Products, Licensed Services or Derived Marks that are Acceptable Uses, to use on a continuing basis as part of such Licensed Product, Licensed Service or Derived Mark, including following a termination of this Agreement. The license set forth in this Section 3(g) shall apply to any such Licensed Product, Licensed Service or Derived Mark, whether or not the Company’s use of such Licensed Product, Licensed Service or Derived Mark occurs pursuant to a third-party agreement. During the period of time beginning at the termination of this Agreement and continuing through the time when the Company ceases using the Licensed Product, Licensed Service or Derived Mark, the license contemplated by this Section 3(g) shall be royalty-free, unless a different royalty rate is payable pursuant to Section 2(c).

4. Quality, Style and Image of Products and Services Provided in Connection with Property. The Company shall provide to Licensor or her designee, successor or assignee, at no cost to him, a sample of each Licensed Product and Licensed Service, as well as a prototype of each type of all promotional, advertising and marketing material used in connection therewith, for the purpose of enabling Licensor to evaluate the quality, style and image of the same. In the event that in Licensor’s reasonable and good faith judgment, any Licensed Product or Licensed Service fails (other than in an immaterial manner) to satisfy the Historical Standard, then Licensor shall serve written notice upon the Company, and then promptly thereafter, but not later than sixty (60) days, the Company and Licensor shall cooperate in good faith to make necessary appropriate changes (if any) in the quality, style or image of such Licensed Product or Licensed Service to comply with the standard provided for herein, provided that nothing in this sentence shall be deemed to affect the substantive rights and obligations of the parties hereunder.

5. The Properties.

(a) Subject to the terms hereof, including Section 2(a), the Company may combine any designation with the Property so as to form a new trademark, service mark, trade name or company name (such names or Property, the “Derived Marks”). The Derived Marks shall include any names or marks used by the Company prior to the date hereof which include or are derived from any Property. Subject to the terms of this Agreement, the Company shall be the owner of the Derived Marks (but not of the Property incorporated therein).

(b) The Company acknowledges that it is not, and will not become by virtue of this Agreement, the owner of any right, title or interest in and to the Property in any form or embodiment. The Company shall not at any time commit any act anywhere in the world that would reasonably be expected to have a material adverse effect on Licensor’s

rights in and to the Property, or any registrations therefor or any applications for registration thereof. The Company shall never challenge anywhere in the world Licensor’s ownership of or the validity of the Property, any application for registration therefor or any rights therein or thereto, except as otherwise expressly provided herein.

(c) The Company, at its expense, shall file appropriate registrations in its own name or in the name of a Company subsidiary of any Derived Marks so as to preserve the goodwill thereof and Licensor’s rights in the Property, shall prosecute and defend such registrations and all common law rights in the Derived Marks and Property consistent with good commercial practices, and shall use all reasonable commercial efforts to defend and otherwise protect the Derived Marks and the Property, provided that following a Termination Trigger, Licensor shall have the right to reasonably direct and control such actions with respect to the Property, in each case at the Company’s expense. At the request of Licensor, her legal representative, heirs or estate, and at the Company’s expense, the Company shall prosecute, including by filing lawsuits or other actions, any potential infringement, dilution, libel, slander or other diminution in the goodwill or other denigration of the Property by any third party, unless outside intellectual property counsel to the Company advises that there is no reasonable basis for such action. The Company shall be entitled to the proceeds, or other legal remedies, of any such action. The Company may also institute such actions where not requested by Licensor, her legal representative, heirs or estate, in the event the Company determines that the protection of the Property or the Derived Marks reasonably requires such action. In the event that the Company learns of any infringement or other violation of rights in or to the Property, it shall promptly notify Licensor thereof. Any recovery from such actions, after payment of expenses from such actions (“Net Proceeds”), shall be subject to the royalty obligations of Section 2(c) of this Agreement; provided, however, that any Net Proceeds payable to Licensor must be attributable to infringing conduct by third parties occurring after a Termination Trigger as set forth in Section 2(c).

(d) At Licensor’s request, the Company shall execute all documents reasonably requested by Licensor to confirm Licensor’s ownership of rights in and to the Property. The Company shall cooperate at Licensor’s reasonable request in connection with the filing and prosecution of applications to register the Property and in connection with the maintenance and renewal of such registrations as may issue. Licensor and the Company shall cooperate in good faith, taking into account their respective interests in and rights to the Property, to determine whether or not such applications are filed and prosecuted and registrations are maintained. The Company shall pay all costs and expenses of any such filings or proceedings.

(e) If one party hereto reasonably requests of the other to take an action in connection with the foregoing, the other party shall cooperate in connection with any such action, including, without limitation, by being a plaintiff or co-plaintiff and by causing its officers, directors, and employees to execute documents and to testify. All costs and expenses of the actions described in this Section 5(e) shall be borne by the Company.

(f) The Company shall take actions to protect the Derived Marks and the goodwill related thereto consistent with the provisions of this Section 5.

6. Indemnity.

(a) The Company shall indemnify, protect, defend and hold harmless Licensor, her heirs, estate, successors and assigns (including reasonable attorneys’ fees and costs) which she or they may suffer or incur in connection with any actual or threatened claim, demand, action or other proceeding by any third party (including any governmental authority) arising from or relating to: (i) the breach by the Company of any material obligation of the Company hereunder or (ii) any acts, whether of omission or commission, that may be committed or suffered by the Company or any of its officers, directors, employees, agents or servants in connection with the Company’s performance of its obligations under this Agreement, including without limitation its use (including sublicensing) of the Property and the Derived Marks hereunder (except to the extent that such claim arises from or relates to Licensor’s rights to grant the license to use the Property contemplated hereby).

(b) Licensor shall indemnify, protect, defend and hold harmless the Company and any of its subsidiaries, directors, officers, employees, agents and stockholders against any and all claims, losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) which it or they may suffer or incur in connection with any actual or threatened claim, demand, action or other proceeding by any third party (including any governmental authority) arising from or relating to (i) the breach of any representation or warranty made by Licensor hereunder or (ii) the breach by Licensor of any material obligation of Licensor hereunder.

(c) In the event that any party seeking indemnification under this Section 6 (each, an “Indemnified Party”) receives notice of a claim as to which indemnification is sought, such party shall reasonably promptly notify the party obligated to provide indemnification to such Indemnified Party (each, an “Indemnifying Party”) thereof, except that the failure to so notify shall not exempt the Indemnifying Party from its obligations hereunder, except to the extent that such failure has actually prejudiced the Indemnifying Party’s legal position with respect to the claim. Upon receipt of notice, the Indemnifying Party shall advise the Indemnified Party that it has assumed the defense thereof. The Indemnified Party shall have the right, at its own expense, to retain legal counsel to participate in and monitor the defense of the claim, provided that the Indemnifying Party shall have the right to direct and control such defense. The Indemnifying Party shall not, without the Indemnified Party’s written consent, settle or compromise any claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party of a release from all liability in respect of such claim, nor shall any Indemnifying Party settle or compromise any claim relating to the Property or the Derived Marks which would limit the use by Licensor or the Company, as the case may be, of the Property in any manner whatsoever without the consent of the Licensor or the Company, as the case may be.

(d) In connection with any action by the Company to enforce, protect or defend the Property or the Derived Marks, Licensor may elect to retain counsel of her own choosing, in addition to Company counsel, in order to monitor and participate in such action. The Company agrees to consider in good faith the views of such counsel and to keep Licensor and such counsel reasonably informed of the progress of any such action, subject to the preceding sentence. The reasonable fees and expenses of such counsel shall be paid for by the Company.

(e) The Company shall maintain in effect at all times errors and omissions insurance, in customary amounts taking into account the size of the Company, the value of the Property and the obligations of the Company hereunder, and shall name Licensor and the other Indemnified Parties hereunder as beneficiaries thereof for purposes of this Agreement.

7. Certain Remedies. The parties agree that the remedies at law for any material breach or threatened material breach of this Agreement, including monetary damages, are inadequate compensation for any loss and that the nonbreaching party shall be entitled to seek specific performance of this Agreement. The parties hereto waive any defense to such claim that a remedy at law would be adequate. In the event of any actual or threatened material default in, or material breach of, any of the terms hereof, the party aggrieved thereby shall have the right to seek specific performance and injunctive or other equitable relief with respect to its rights hereunder, in addition to any remedies available at law.

In the event that a Termination Trigger has occurred and the Company fails to pay the royalty amounts due for any two consecutive quarters, Licensor, after providing the Company with 10 business days’ notice, during which the Company may cure such failures, shall have the right to terminate this Agreement, subject to a three-month sell-off period for the Company with respect to its then-current inventory. To the extent that the Company has entered into any agreement with a third party that is not terminable on such notice and which involves the Property or any Derived Marks, the Company shall seek to terminate such agreement as soon as reasonably practicable and, with respect to any such agreement entered into following the completion of the Offer, shall pay to Licensor a 10% royalty on Net Revenues (in lieu of any royalties payable under Section 2(c)) derived by the Company under such agreement from and after the date of termination under this paragraph. For the avoidance of doubt, any royalties payable under Section 2(c) in respect of such agreements entered into prior to the completion of the Offer will continue to be payable in accordance with Section 2(c). Termination of this Agreement for any reason shall not affect Licensor’s right to royalties for any prior period, nor the indemnity and other obligations of the Company hereunder.

8. Miscellaneous.

(a) Governing Law; Captions. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, without reference to

principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

(b) Release. Licensor hereby waives all rights and releases Licensee, its stockholders, officers, directors, employees, agents, and licensees and assigns from, and shall neither sue not bring any proceeding against any such parties for, any claim or cause of action, whether known or unknown, for defamation, invasion of rights to privacy, appropriation of privacy, infringement of rights of publicity or personality, intrusion, false light or public disclosure of private facts, or any similar matter, or based upon or relating to the use and exploitation of the Property in accordance with this Agreement.

(c) Assignment. This Agreement is assignable by the Company to any successor of the Company that acquires all or substantially all of the assets or businesses of the Company, whether by sale, merger, recapitalization or other business combination, without Licensor’s consent, provided that any such successor or assignee shall provide Licensor with a written agreement that it shall be bound by all the terms of this Agreement. This Agreement shall be inure to the benefit of and be binding upon the successors, legal representative, heirs and assigns of Licensor. Except as specified in this Section 8(c), this Agreement is not assignable.

(d) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law.

(e) Notices. All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Licensor:

Leslie Blodgett

If to the Company:

Bare Escentuals, Inc.

71 Stevenson St., 22nd Floor

San Francisco, CA 94105

Attn: Secretary

With a copy to:

Shiseido Company, Limited

1-6-2 Higashi-shimbashi, Minato-ku

Tokyo 105-8310 Japan                                           

Attn: Carsten Fischer, or his successor in office

Chief Officer, International Business Division    

or to such other address as either party furnishes to the other in writing in accordance with this Section. Notices and communications shall be effective when actually received by the addressee.

(f) Integration; Amendment. This Agreement, together with the Employment Agreement, represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(g) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument.

(h) Mediation and Arbitration. Licensor agrees that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be resolved in accordance with a two step dispute resolution process administered by JAMS involving, first, mediation before a retired judge from the JAMS panel, followed, if necessary, by final and binding arbitration before the same, or if requested by either party, another JAMS panelist. Such mediation and arbitration, if necessary shall be held in San Francisco, California in accordance with the Commercial Arbitration Rules then in effect of JAMS (the “Rules”). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction. The arbitrator(s) will apply California law to the merits of any dispute or claim, without reference to rules of conflicts of law. The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law. Licensor hereby consents to the personal jurisdiction of the state and federal courts located in California for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants. LICENSOR HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. LICENSOR UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, LICENSOR AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF LICENSOR’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO THE LICENSE RIGHTS GRANTED HEREUNDER.

IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written.

LESLIE BLODGETT

/s/ Leslie Blodgett

BARE ESCENTUALS, INC.
By:	/s/ Myles McCormick
	Name: Myles McCormick
	Title: CFO & COO

EXHIBIT A

EXISTING USES

Pursuant to Original Agreement.

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement dated as of January 14, 2010 (the “Agreement”), is entered into by and between Bare Escentuals, Inc., a Delaware corporation (the “Company”), and Leslie A. Blodgett (the “Executive”).

RECITALS

WHEREAS, pursuant to an Agreement and Plan of Merger, dated January 14, 2010 (the “Merger Agreement”), among the Company, Shiseido Company, Ltd., a corporation organized under the laws of Japan (“Parent”), and Blush Acquisition Corporation, a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Purchaser”), the Company will become an indirect wholly owned subsidiary of Parent upon the completion of a tender offer (the “Offer”) and the subsequent merger of Purchaser with and into the Company (the “Merger”), in each case, as contemplated by, and more fully described in, the Merger Agreement;

WHEREAS, as a condition and mutual inducement to the transactions contemplated by the Merger Agreement, and to preserve the value and the goodwill of the business being acquired by Parent in connection with the Offer and the Merger, the Merger Agreement contemplates, among other things, that the Executive shall enter into this Agreement, a Contribution Agreement by and among the Company, Parent, Purchaser, Blush Holdings, LLC, a Delaware limited liability company and an indirect subsidiary of Parent (“Holdings”) and the Executive, of even date herewith (the “Contribution Agreement”), the Limited Liability Company Agreement of Holdings (as the same may be amended from time to time, the “LLC Agreement”), and an amended Name and Likeness License Agreement by and between the Company and the Executive, dated as of September 22, 2006, and amended as of the even date herewith (as amended, the “License Agreement”);

WHEREAS, the Company desires that the Executive continue to be employed by the Company to carry out the duties and responsibilities described below, all on the terms and conditions hereinafter set forth; and

WHEREAS, the Executive desires to accept such employment on such terms and conditions.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions and conditions set forth in this Agreement, the parties hereby agree:

SECTION 1. Employment. Subject to the terms and conditions set forth in this Agreement, the Company hereby offers and the Executive hereby accepts employment as the Executive Chair of the Company.

SECTION 2. Term. Subject to earlier termination as hereinafter provided, the Executive’s employment hereunder shall be for a term commencing immediately upon Purchaser’s purchase of shares of common stock of the Company pursuant to the Offer (such date of such purchase being hereinafter referred to as the “Effective Date”) and ending on the

third anniversary of the Effective Date unless, and to the extent, such term may be extended by mutual written agreement of the Company and the Executive. Unless so extended, the Executive’s employment shall terminate on the last day of the applicable term, and the Executive shall be paid the Accrued Rights (as defined below) within 10 days thereafter, but shall not be entitled to receive any severance benefits or payments. Notwithstanding anything herein to the contrary, in the event that Purchaser’s purchase of shares of the common stock of the Company pursuant to the Offer is abandoned or otherwise fails to occur, and/or the Merger Agreement is terminated prior to the completion of the Offer, this Agreement shall be null and void ab initio. The period from the Effective Date until the termination of the Executive’s employment under this Agreement is hereafter referred to as “the term of this Agreement” or “the term hereof.”

SECTION 3. Capacity and Performance.

(a) During the term hereof, the Executive shall serve the Company in the capacity of an executive officer of the Company as the Executive Chair of the Company and report to Carsten Fischer or his successor in the office of Chief Officer of the International Business Division of Parent, or any successor office following a corporate reorganization of Parent (the “Parent Designated Officer”). In addition, and without further compensation, the Executive shall serve as a member of the Board of Directors of the Company and as a director and/or officer of one or more of the Company’s Subsidiaries (as defined in Section 15 below) if so elected or appointed from time to time. During the term hereof, the Company shall maintain executive offices for the Executive in San Francisco, California.

(b) During the term hereof, the Executive shall be employed by the Company on a full-time basis and shall perform such duties and responsibilities on behalf of the Company as are commensurate with her position as Executive Chair and co-principal executive officer of the Company, as may be reasonably assigned to the Executive by the Parent Designated Officer from time to time, including, without limitation, (i) developing the long-term strategy of the Company in cooperation and consultation with the Chief Executive Officer of the Company and the Parent Designated Officer, (ii) shaping the creative vision, marketing direction and product development for the Company, (iii) building and maintaining external relationships and brand awareness with clients, customers and distributors; and (iv) serving as the spokesperson and face of the Company to the public, media and the industry; provided that it is hereby agreed and understood that (x) the senior executives of the Company responsible for marketing and product development shall report to both the Executive and the Chief Executive Officer of the Company and (y) certain other executives of the Company, who are responsible for corporate functions (e.g., human resources, information technology and legal) may have reporting obligations to Parent and to other Affiliates of the Company in the United States (and employees of Affiliates of the Company may also report to such Company executives), in addition to those to the Executive and otherwise within the Company. The parties hereby acknowledge and agree that during the term hereof it is intended that the responsibilities, duties and authority of the principal executive officers of the Company shall be allocated between (but not necessarily shared by) the Executive Chair and Chief Executive Officer, as contemplated above, and that Myles B. McCormick shall serve the Company as its Chief Executive Officer; provided, however, in the event that Mr. McCormick ceases to serve as the Chief Executive Officer for any reason during the term hereof, the Executive shall be consulted by the Parent Designated Officer in connection

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with the selection of any successor to Mr. McCormick in the office of Chief Executive Officer of the Company.

(c) During the term hereof, the Executive shall devote her full business time and her best efforts, business judgment, skill and knowledge exclusively to the advancement of the business and interests of the Company and its Affiliates (as defined in Section 15 below) and to the discharge of her duties and responsibilities hereunder. The Executive shall not engage in any other business activity or serve in any industry, trade, professional, governmental or academic position during the term of this Agreement, except as may be expressly approved in advance by the Parent Designated Officer in writing; provided that, the Executive shall, to the extent that such activity does not contravene the first sentence of this Section 3(c), be entitled to (i) continue her membership and current level of involvement on the board of governors of Cosmetic Executive Women, Inc., and (ii) join two additional corporate boards of an entity that is not a competitor of the Company or Parent, and devote a reasonable amount of time to activities as a member of such board of directors.

SECTION 4. Compensation and Benefits. Subject to the provisions of this Agreement, as compensation for all services performed by the Executive under and during the term hereof and subject to performance of the Executive’s duties and of the obligations of the Executive to the Company and its Affiliates, pursuant to this Agreement or otherwise:

(a) Base Salary. During the term hereof, the Company shall pay the Executive a base salary at the rate of Seven Hundred Thousand Dollars ($700,000) per annum, payable in accordance with the payroll practices of the Company for its executives and, subject to annual cost of living increases, as determined by the Remuneration Committee of the Board of Directors of Parent (the “Remuneration Committee”), in its sole discretion. Such base salary, as from time to time adjusted, is hereafter referred to as the “Base Salary.”

(b) Incentive and Bonus Compensation. As additional compensation for her services hereunder, the Executive shall be eligible, during the term hereof, to participate in the Company’s annual bonus plan, in effect from time to time, with an annual target bonus equal to 100% of the Executive’s Base Salary, subject to attainment of corporate performance goals as determined by the Remuneration Committee (such target performance goals shall be hereinafter referred to as “Bonus Target Performance”) for each Bonus Year (as defined in Section 15 below) during the term hereof. Any bonus earned and payable under this Section 4(b) is referred to herein as an “Annual Bonus.” If Company performance is at least 91.5% of the Bonus Target Performance for the Bonus Year (“Bonus Threshold Performance”), the Annual Bonus shall be equal to 25% of Base Salary, and if Company performance is equal to or greater than 113% of Bonus Target Performance for the Bonus Year (“Bonus Maximum Performance”), the Annual Bonus shall be equal to 200% of Base Salary, with payouts for Company performance between Bonus Threshold Performance and Bonus Target Performance, and between Bonus Target Performance and Bonus Maximum Performance, respectively, determined ratably by the Remuneration Committee. The performance goals and Bonus Target Performance for the 2010 Bonus Year shall be set forth in a side letter by and between the Company and the Executive, of even date herewith (the “Side Letter”). Notwithstanding the

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foregoing, the Remuneration Committee shall have the discretion, but not the obligation, to pay an Annual Bonus, in an amount not to exceed 25% of the Executive’s Base Salary, with respect to any Bonus Year for which Bonus Threshold Performance is not met or exceeded. The Annual Bonus, if any, due to the Executive for any Bonus Year, shall be paid to the Executive no later than March 15^th of the year following the end of the applicable Bonus Year.

(c) Long-term Incentive Award. On the Effective Date, the Executive shall receive a cash-based, long-term incentive award (the “LTI Award”), which shall have a target value, as determined by the Remuneration Committee, equal to $3.585 million in the aggregate (the “LTI Target Value”) and which shall vest subject to (i) the attainment by the Company of cumulative performance conditions for Bonus Years 2010, 2011 and 2012 (the “LTI Performance Period”), as set forth in the Side Letter (such cumulative target performance conditions shall be hereinafter referred to as “LTI Target Performance”), and (ii) the Executive’s continued employment with the Company until the expiration of the Performance Period. If Company performance during the LTI Performance Period is at least 80% of LTI Target Performance (the “LTI Threshold Performance”), the value of the LTI Award shall be equal to 50% of the LTI Target Value, and if Company performance during the LTI Performance Period is equal to or greater than 120% of LTI Target Performance (“LTI Maximum Performance”), the value of the LTI Award shall be equal to 200% of the LTI Target Value, with payouts for Company performance between LTI Threshold Performance and LTI Target Performance, and between LTI Target Performance and LTI Maximum Performance, respectively, determined ratably by the Remuneration Committee. Subject to the attainment of LTI Threshold Performance for the LTI Performance Period, the LTI Award shall be settled by a lump sum cash payment, in an amount determined in accordance with the preceding sentence, to the Executive within 45 days following the expiration of the LTI Performance Period. Notwithstanding the foregoing, in the event of a Change of Control of the Company (as defined in Section 15 below), the LTI Award shall vest in full and be settled to the Executive within 45 days following the Change of Control, with the payout value determined (x) based on the actual performance of the Company for the full Bonus Years elapsed in the LTI Performance Period prior Change of Control of the Company and (y) assuming performance of the Company at LTI Target Performance for the Bonus Year in which the Change of Control of the Company occurs and any subsequent Bonus Year in the LTI Performance Period; provided that to the extent that the Change of Control of the Company does not satisfy the requirements of a change in control payment event for purposes of Section 409A (as defined in Section 5(j) below), the LTI Award shall be settled to the Executive within 10 days following the first to occur of (i) a Change of Control of the Company meeting the requirements of Section 409A and (ii) the Executive’s termination of employment. For the avoidance of doubt, Bonus Year 2010 shall be deemed to be a full Bonus Year for purposes of determining the number of full Bonus Years elapsed in the LTI Performance Period under this Agreement, notwithstanding the occurrence of the Effective Date after January 1, 2010. It is hereby agreed and understood that during the term hereof, the Executive shall not be eligible for any other long-term incentive compensation from the Company and its Affiliates, other than the LTI Award.

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(d) Vacations and Sick Leave. During the term hereof, the Executive shall be entitled to six weeks of vacation per year and 10 sick days per year, to be taken at such times and intervals as shall be determined by the Executive.

(e) Other Benefits. During the term hereof and subject to any contribution therefore generally required of executives of the Company, the Executive shall be entitled to participate in any and all employee benefit plans from time to time in effect for executives of the Company generally, except to the extent such plans are in a category of benefit otherwise provided to the Executive (e.g., severance pay). Such participation shall be subject to the terms of the applicable plan documents and generally applicable Company policies. The Company may alter, modify, add to or terminate its employee benefit plans (except for the Severance Amount as set forth herein in Section 5(d)(ii)) at any time as it, in its sole judgment, determines to be appropriate, without recourse by the Executive. Notwithstanding the foregoing, the Company shall provide the Executive for the entire term of this Agreement with fully-paid health, dental, disability and life insurance benefits for Executive and her family on terms no less favorable than as of the Effective Date without any required contribution from the Executive.

(f) Business Expenses. The Company shall pay or reimburse the Executive for all reasonable business expenses incurred or paid by the Executive in the performance of her duties and responsibilities hereunder, including but not limited to, (i) a car allowance, in an amount not to exceed $1,200 per month; (ii) a fully-paid on-site parking space at the Company’s headquarters in San Francisco, California; (iii) first class airfare when traveling on Company business; and (iv) expenses incurred in respect of wardrobe required for television appearances made by the Executive in connection with her duties on behalf of the Company and its Affiliates, subject to such reasonable substantiation and documentation as may be specified by the Company from time to time. Any amounts payable under this Section 4(f) shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of the Executive’s taxable year following the taxable year in which the Executive incurred the expenses. The amounts provided under this Section 4(f) during any taxable year of the Executive’s will not affect such amounts provided in any other taxable year of the Executive’s, and the Executive’s right to reimbursement for such amounts shall not be subject to liquidation or exchange for any other benefit.

SECTION 5. Termination of Employment and Severance Benefits. Notwithstanding the provisions of Section 2 hereof, the Executive’s employment hereunder shall terminate prior to the expiration of the term hereof under the following circumstances:

(a) Death. In the event of the Executive’s death during the term hereof, the Executive’s employment hereunder shall immediately and automatically terminate. In such event, the Company shall pay to the Executive’s designated beneficiary or, if no beneficiary has been designated by the Executive, to her estate, (i) the Base Salary earned but not paid through the date of termination (payable within 10 days thereafter), (ii) any bonus compensation earned or awarded but unpaid on the date of termination payable in accordance with Section 4(b) above, (iii) a pro-rated portion of the Annual Bonus that the Executive would have earned for the year of the Executive’s death, pro-rated based on

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actual performance for such year and the period of time served by the Executive during such year, payable when the Company generally pays annual bonuses to employees, but in no event later than March 15^th of the year following the year in which the Executive’s death occurs, (iv) accrued vacation through the date of termination (payable within 10 days thereafter) and (v) unreimbursed expenses for which documentation is properly submitted and payable in accordance with Section 4(f) above (all of the foregoing clauses (i) through (v), the “Final Compensation”). In addition, the LTI Award shall vest on a prorated basis and be settled to the Executive’s beneficiary or her estate, as applicable, within 10 days following the date of her death, with the pro-ration based on the number of full Bonus Years elapsed in the LTI Performance Period prior to the date of the Executive’s death, and with the payout value of the LTI Award based on actual Company performance for such Bonus Years; provided that if the Executive’s death occurs prior to December 31, 2010, the Executive shall not be entitled to the vesting and settlement of the LTI Award, which instead shall be immediately forfeited and cancelled as of the date of her death. The Company shall have no further obligation to the Executive hereunder other than any legal obligations to make health insurance coverage available to the Executive’s dependents, at the dependents’ expense, under COBRA (as defined in Section 15 below).

(b) Disability.

(i) During the term hereof, the Company may terminate the Executive’s employment hereunder, upon notice to the Executive, in the event that the Executive becomes disabled during her employment hereunder through any illness, injury, accident or condition of either a physical or psychological nature and, as a result, is unable to perform substantially all of her duties and responsibilities hereunder, with or without reasonable accommodation, for 120 days during any period of 365 consecutive calendar days. Subject to Section 6, in the event of such termination, the Company shall have no further obligation to the Executive, other than for payment of the Final Compensation, the vesting and, subject to Sections 5(i) and 5(j) below, settlement of the LTI Award within 10 days following the Executive’s termination of employment in accordance with the provisions of Section 5(a), and any legal obligations to make health insurance coverage available to the Executive, at the Executive’s expense, under COBRA; provided that if the Executive’s termination of employment occurs prior to December 31, 2010, the Executive shall not be entitled to the vesting and settlement of the LTI Award, which shall instead be immediately forfeited and cancelled as of the date of such termination.

(ii) The Parent Designated Officer in consultation with the Remuneration Committee may designate another employee to act in the Executive’s place during any period of the Executive’s disability. Notwithstanding any such designation, the Executive shall continue to receive the Base Salary in accordance with Section 4(a) and benefits in accordance with Section 4(e), to the extent permitted by the then-current terms of the applicable benefit plans, until the termination of her employment; provided that such Base Salary shall be reduced by any disability income benefits the Executive receives under the Company’s disability income plan.

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(iii) While receiving disability income payments under the Company’s disability income plan, the Executive shall continue to participate in Company benefit plans in accordance with Section 4(e) and subject to and in accordance with the terms of such plans, until the termination of her employment.

(iv) If any question shall arise as to whether during any period the Executive is disabled through any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to perform substantially all of her duties and responsibilities hereunder, the Executive may, and at the request of the Company shall, submit to a medical examination by a physician selected by the Company to whom the Executive or her duly appointed guardian, if any, has no reasonable objection to determine whether the Executive is so disabled. If the Executive or her duly appointed guardian reasonably objects to the physician selected by the Company, the Executive or her duly appointed guardian and the Company shall mutually select an independent physician. The determination by any physician selected under this section shall for the purposes of this Agreement be conclusive of the issue. In any event, if the Executive shall fail to submit to a medical examination under this section, the Company’s determination of the issue shall be binding on the Executive.

(c) By the Company for Cause. During the term hereof, the Company may terminate the Executive’s employment under this Agreement for Cause at any time upon notice to the Executive setting forth in reasonable detail the nature of such Cause. The following, as determined by the Parent Designated Officer in consultation with the Remuneration Committee in their reasonable judgment, shall constitute Cause for termination:

(i) commission of a felony or any crime involving dishonesty or moral turpitude;

(ii) commission of any fraud, theft, embezzlement, misappropriation of funds, material breach of fiduciary duty as an officer or director or serious act of dishonesty;

(iii) repeated failure to follow the reasonable instructions of the Parent Designated Officer, which failure is materially injurious to the Company or any of its Affiliates, individually or in the aggregate, and which failure does not cease within 15 days after written notice specifying such failure in reasonable detail is given to the Executive by jointly by the Parent Designated Officer and the Remuneration Committee;

(iv) engaging in conduct likely to make the Company or any of its Affiliates subject to criminal liabilities, other than those arising from the Company’s normal business activities; or

(v) willful engagement in any other conduct or gross negligence, in either case that involves a material breach of fiduciary obligation on the part of the Executive as an officer or director or that could reasonably be expected to have a material

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adverse effect upon the business interests or reputation of the Company or any of its Affiliates.

Upon the giving of notice of termination of the Executive’s employment under this Agreement for Cause, the Company shall have no further obligation or liability to the Executive, other than for the Accrued Rights, payable in accordance with Section 5(d)(i) below, the settlement of any LTI Award that had vested prior to the Executive’s termination of employment (as determined in accordance with the following sentence) within 10 days following the termination of the Executive’s employment (subject to Sections 5(i) and 5(j) below), any obligations to make health insurance coverage available, at the Executive’s expense, under COBRA and as may otherwise be set forth in Section 6 below. The LTI Award shall be deemed vested based on the number of full Bonus Years elapsed in the LTI Performance Period prior to the date of the Executive’s termination, with the payout value of the LTI Award based on actual Company performance for such Bonus Years; provided that if the Executive’s termination of employment occurs prior to December 31, 2010, the Executive shall not be entitled to the vesting and settlement of the LTI Award, which shall instead be immediately forfeited and cancelled as of the date of such termination. In the event of any termination pursuant to this Section 5(c), the Executive shall not be entitled to receive any Annual Bonus after the provision of notice of such termination.

(d) By the Company Other than for Cause or by Executive for Good Reason. The Company may terminate the Executive’s employment under this Agreement other than for Cause at any time upon notice to the Executive. The Executive may terminate her employment under this Agreement for Good Reason at any time pursuant to the notice provisions described in Section 5(d)(iii) below. In the event the Company terminates the Executive’s employment without Cause and other than as a result of her death or disability, or if the Executive terminates her employment for Good Reason, in each case, during the term hereof:

(i) The Company shall pay the Executive (A) accrued but unpaid base salary or other wages through the date of termination within 10 days thereafter, (B) accrued but unused vacation through the date of termination within 10 days thereafter, (C) any earned but unpaid Annual Bonus payable in accordance with Section 4(b) below, plus (D) unreimbursed expenses for which documentation is properly submitted and payable in accordance with Section 4(f) above (collectively, the “Accrued Rights”).

(ii) Subject to (A) the Executive’s execution of a general release of all claims, which the Executive allows to become effective, in substantially the form attached hereto as Exhibit A (the “Release”), within 60 days after Executive’s separation from service (the “Release Period”), and (B) the Executive’s compliance with the Executive’s obligations under the Proprietary Agreements (as defined in Section 7 below), the Contribution Agreement and the License Agreement, then the Company will pay the Executive, as severance, (1) cash in an amount equal to 18 months of the Executive’s Base Salary, (2) cash in an amount equal to 150% of the Annual Bonus earned by the Executive in the last completed Bonus Year, (3) an additional cash amount

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equal to $7,000, which the Executive may, but is not obligated to use, to pay the premiums upon converting her Company life insurance policy into an individual policy, and (4) provided that the Executive makes a timely and accurate election for continued coverage under the Company’s medical, dental and vision insurance plans under COBRA for the Executive and her eligible dependents, payment of the premiums for such COBRA coverage for up to 18 months (or such earlier date as she and her dependents cease to be eligible for such coverage), less the applicable active employee contribution for such coverage in an amount not to exceed the premium paid by the Executive immediately prior to her termination date (which amount the Executive will be required to pay directly) (collectively, the “Severance Amount”). Subject to Sections 5(i) and 5(j) below, items (1), (2), (3) and (4) of the Severance Amount will be payable in equal installments on the Company’s regular payroll pay cycle for 18 months commencing with the first payroll cycle following the expiration of the Release Period. In addition, and likewise subject to the execution by the Executive of an effective Release during the Release Period, the LTI Award shall vest in full and be settled to the Executive, subject to Sections 5(i) and 5(j) below, on the first business day immediately following the expiration of the Release Period, with the payout value of the LTI Award determined (x) based on the actual performance of the Company for the full Bonus Years elapsed in the LTI Performance Period prior the Executive’s termination of employment and (y) assuming performance of the Company at LTI Target Performance for the Bonus Year in which the termination of employment occurs and any subsequent Bonus Year in the LTI Performance Period; provided that if the Executive’s termination of employment occurs prior to December 31, 2010, the Executive shall not be entitled to the vesting and settlement of the LTI Award, which shall instead be immediately forfeited and cancelled as of the date of such termination. Notwithstanding the foregoing, none of the Severance Amount shall be paid to the Executive, nor shall the LTI Award vest and be settled to the Executive, in the event that the Release shall not have become effective by the expiration of the Release Period. Subject to Section 6 below, payment by the Company of the Accrued Rights and the Severance Amount and the settlement of the LTI Award shall constitute the entire obligation of the Company to the Executive under this Agreement in the event of the Executive’s termination of employment by the Company without Cause or by the Executive for Good Reason.

(iii) “Good Reason” is defined as the following material adverse changes to the Executive’s employment with the Company without her written consent:

(A) a failure by the Company to continue the Executive as the Executive Chair of the Company,

(B) material diminution of nature or scope of the Executive’s responsibilities, duties or authority as Executive Chair and co-principal executive officer of the Company as set forth in Section 3(b) above, including by reason of the authority of the Parent Designated Officer, the Remuneration Committee or any other officer or agent of Parent to do so,

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(C) requiring the Executive to report to anyone other than the Parent Designated Officer,

(D) termination of Mr. McCormick’s employment with the Company by the Company without “Cause” (as such term is defined in Mr. McCormick’s Employment Agreement with the Company of even date herewith) prior to the first anniversary of the Effective Date,

(E) a Change of Control of the Company,

(F) material breach of the Agreement by the Company, or

(G) requiring the executive to relocate her primary Company office outside of the San Francisco, California area.

In order to resign for Good Reason, the Executive must provide written notice to the Company of the occurrence of any of the foregoing events or conditions without the Executive’s written consent within 30 days after the initial occurrence of such event. The Company or any successor or Affiliate shall have a period of 30 days to cure such event or condition after receipt of written notice of such event from the Executive. Any resignation of the Executive’s employment for “Good Reason” must occur no later than 30 days following the expiration of the cure period and must be a resignation from all positions she then holds with the Company and its Affiliates. The Executive’s resignation from employment with the Company for Good Reason shall be treated as an involuntary termination.

Notwithstanding anything to the contrary in this Agreement or in that certain Amended and Restated Employment Agreement by and between the Company and the Executive, dated as of December 19, 2008 (the “Prior Agreement”), the Executive expressly acknowledges and agrees that none of the following will constitute Good Reason for purposes of this Agreement or the Prior Agreement: (1) the execution of the Merger Agreement (or any other agreement contemplated by the Merger Agreement, including, without limitation, this Agreement, the Contribution Agreement or the License Agreement), (2) the Offer, (3) the Merger, (4) the abandonment or other failure of the Offer or the Merger to be completed or completed or (5) any diminution of nature or scope of the Executive’s responsibilities, duties or authority that results from (x) the delisting of the Company’s securities from The Nasdaq Global Stock Market or (y) the termination of the Company’s obligation to file periodic and current reports with the Securities and Exchange Commission. In addition, the Executive hereby acknowledges and agrees that the Company’s status as a subsidiary of Parent upon Purchaser’s purchase of shares of common stock of the Company pursuant to the Offer shall not constitute Good Reason for purposes of the Prior Agreement. The Executive further acknowledges and agrees that this Agreement shall serve as the writing required under Section 15 of the Prior Agreement.

(e) By Executive Other than For Good Reason. The Executive may terminate the Executive’s employment other than for Good Reason under this Agreement at any

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time upon 30 days’ notice to the Company. In the event of termination of the Executive’s employment pursuant to this Section 5(e), the Parent Designated Officer in consultation with the Remuneration Committee may elect to waive or reduce the period of notice, and, if the Parent Designated Officer so elects, the Company will pay the Executive the Base Salary for the notice period (or for any remaining portion of the period), which amount shall be paid in a lump sum within 10 days following the date of the Executive’s termination of employment, together with the balance of the Accrued Rights. In addition, the LTI Award shall vest on a prorated basis and, subject to Sections 5(i) and 5(j) below, be settled to the Executive within 10 days following the termination of the Executive’s employment, with the pro-ration based on the number of full Bonus Years elapsed in the LTI Performance Period prior to the date of the Executive’s termination, and with the payout value of the LTI Award based on actual Company performance for such Bonus Years; provided that if the Executive’s termination of employment occurs prior to December 31, 2010, the Executive shall not be entitled to the vesting and settlement of the LTI Award, which shall instead be immediately forfeited and cancelled as of the date of such termination. In the event of any termination pursuant to this Section 5(e), the Executive shall not be entitled to receive any Annual Bonus after the provision of notice of such termination. The Executive’s rights to continued health insurance coverage after her termination shall be at her own expense as provided under COBRA.

(f) Mitigation. The Executive shall not be required to mitigate damages with respect to the termination of her employment under this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due to the Executive under this Agreement on account of subsequent employment. Additionally, amounts owed to the Executive under this Agreement shall not be offset by any claims the Company may have against the Executive, and the Company’s obligation to make the payments provided for in this Agreement, and otherwise to perform its obligations hereunder, shall not be affected by any other circumstances, including, without limitation, any counterclaim, recoupment, defense or other right which the Company may have against the Executive or others.

(g) Notice of Termination. Any termination of employment by the Company or the Executive shall be communicated by a written “notice of termination” to the other party hereto given in accordance with Section 5 of this Agreement. In the event of a termination by the Company for Cause, or by the Executive for Good Reason, the notice of termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) specify the date of termination. The failure by the Executive or the Company to set forth in the notice of termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

(h) Resignation from Directorships and Officerships. The termination of the Executive’s employment for any reason shall constitute the Executive’s resignation from

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(i) any director, officer or employee position the Executive has with the Company or any of its Affiliates and (ii) all fiduciary positions (including as a trustee) the Executive holds with respect to any employee benefit plans or trusts established by the Company or any of its Affiliates. The Executive agrees that this Agreement shall serve as written notice of resignation in this circumstance.

(i) Section 280G of the Code. Payments under this Section 5 shall be made without regard to whether the deductibility of such payments (or any other payments to or for the benefit of the Executive) would be limited or precluded by Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and without regard to whether such payments (or any other payments) would subject the Executive to the federal excise tax levied on certain “excess parachute payments” under Section 4999 of the Code; provided, that if the total of all payments to or for the benefit of the Executive, after reduction for all federal taxes (including the tax described in Section 4999 of the Code, if applicable) with respect to such payments (“Executive’s total after-tax payments”), would be increased by the limitation or elimination of any payment under this Section 5, amounts payable under this Section 5 shall be reduced to the extent, and only to the extent, necessary to maximize the Executive’s total after-tax payments (the “required reduction amount”). The determination as to whether and to what extent payments under this Section 5 are required to be reduced in accordance with the preceding sentence shall be made at the Company’s expense by the Company’s independent accountants (the “Outside Firm”). In the event of any mistaken underpayment or overpayment under this Section 5, as determined by the Outside Firm, the amount of such underpayment or overpayment shall forthwith be paid to the Executive or refunded to the Company, as the case may be, with interest at 120% of the applicable Federal rate provided for in Section 7872(f)(2) of the Code. Any reduction in payments required by this Section 5 shall be applied as follows: First out of the cash components of the Severance Amount, second out of COBRA premium component of the Severance Amount, and lastly out of the vesting of any equity awards.

(j) Required Delay for Certain Deferred Compensation. Notwithstanding any other provision of this Agreement, if at the time of separation from service the Executive is determined by the Company to be a specified employee (as defined in Section 409A of the Code (together, with any state law of similar effect, “Section 409A”) and Section 1.409A-1(i) of the Treasury Regulations), and the Company determines that delayed commencement of any portion of the termination payments and benefits payable to the Executive pursuant to this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion of the Executive’s termination payments and benefits shall not be provided to the Executive prior to the earliest of (A) the date that is six months and one day after the Executive’s separation from service, (B) the date of the Executive’s death or (C) such earlier date as is permitted under Section 409A (any such delayed commencement, a “Payment Delay”). Upon the expiration of such Payment Delay, all payments deferred pursuant to a Payment Delay shall be paid in a lump sum to the Executive on the first day following the expiration of the Payment Delay, and any remaining payments due under the Agreement shall be paid on the original schedule provided herein.

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(k) Section 409A. This Agreement is intended to meet the requirements of Section 409A, and shall be interpreted and construed consistent with that intent. References to termination of employment, retirement, separation from service and similar or correlative terms in this Agreement shall mean a “separation from service” (as defined at Section 1.409A-1(h) of the Treasury Regulations) from the Company and from all other corporations and trades or businesses, if any, that would be treated as a single “service recipient” with the Company under Section 1.409A-1(h)(3) of the Treasury Regulations. Each installment of the payments and benefits provided for in this Agreement shall be treated as a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i).

SECTION 6. Effect of Termination. The provisions of this Section 6 shall apply in the event of a termination of the Executive’s employment, whether due to the expiration of the term hereof, pursuant to Section 5 or otherwise.

(a) Payment by the Company of the Accrued Rights, receipt of benefits otherwise due in accordance with the terms of the Company’s 401(k) plan, indemnification under Section 14 below and payments or benefits that may be due the Executive under Section 5 above shall constitute the entire obligation of the Company to the Executive under this Agreement.

(b) Except for health insurance coverage continued pursuant to COBRA (including pursuant to Section 5(d) above) and receipt of benefits otherwise due terminated employees under group insurance coverage consistent with the terms of the applicable Company welfare benefit plan, the Executive’s employee benefits shall terminate pursuant to the terms of the applicable benefit plans based on the date of termination of the Executive’s employment without regard to any continuation of Base Salary or other payment to the Executive following such date of termination.

(c) Provisions of this Agreement shall survive any termination if so provided herein or if necessary or desirable to accomplish the purposes of other surviving provisions, including, without limitation, the obligations of the Executive under Sections 7, 8 and 9 hereof. The obligation of the Company to make payments to or on behalf of the Executive under Section 5 hereof other than the Accrued Rights is expressly conditioned upon the Executive’s continued full performance of obligations under Sections 7, 8 and 9 hereof. The Executive recognizes that, except as expressly provided in Section 5 above and this Section 6, no compensation is payable after termination of employment under this Agreement.

SECTION 7. Confidential Information and Inventions. The Executive affirms her continuing obligations to the Company under the Employee Intellectual Property and Confidentiality Agreement and the Invention Assignment Agreement (together, the “Proprietary Agreements”). The terms of the Proprietary Agreements are incorporated by reference herein.

SECTION 8. Non-Solicitation of Employees. The Executive agrees that for an 18-month period commencing on the date her employment actually terminates, the Executive will not, directly or indirectly, solicit for hire or attempt to solicit for hire any employee of the Company or any of its Affiliates, assist in such soliciting for hire by any Person, or encourage any such employee to terminate his or her relationship with the Company or any of its Affiliates.

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SECTION 9. License Agreement. The Executive affirms her continuing obligations to the Company under the License Agreement and hereby agrees to remain bound by the terms of the License Agreement, as the same may be amended from time to time in accordance with the terms thereof.

SECTION 10. Injunctive Relief. Without intending to limit the remedies available to the Company under this Agreement, the Contribution Agreement or the License Agreement, the Executive agrees that a breach of any of the covenants contained in Sections 7 and 8 of this Agreement may result in material and irreparable injury to the Company and its Affiliates for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company or any of its Affiliates shall be entitled to seek a temporary restraining order or a preliminary or permanent injunction, or both, without bond or other security, restraining the Executive from engaging in activities prohibited by the covenants contained in Sections 7 or 8 of this Agreement or such other relief as may be required specifically to enforce any of the covenants contained in this Agreement or the Proprietary Agreements. Such injunctive relief in any court shall be available to the Company or the Affiliate in lieu of, or prior to or pending determination in, any arbitration proceeding.

SECTION 11. Defense of Claims. The Executive agrees that, during the term hereof, and, to the extent that the Executive is eligible to receive the Severance Amount, for a period of 18 months after termination of the Executive’s employment, upon request from the Company, the Executive will cooperate with the Company in the defense of any claims or actions that may be made by or against the Company that affect the Executive’s prior areas of responsibility, except if the Executive’s reasonable interests are adverse to the Company in such claim or action. The Company agrees to promptly reimburse the Executive for all of the Executive’s reasonable travel and other direct expenses incurred, or to be reasonably incurred, to comply with the Executive’s obligations under this Section 11.

SECTION 12. Nondisparagement. The Executive agrees that at no time during her employment by the Company or thereafter shall she make, or cause or assist any other person to make, any statement or other communication to any reporter, author, producer or similar person or entity or to any general public media in any form (including, without limitation, books, articles or writings of any other kind, as well as film, videotape, audio tape, computer/internet format or any other medium) which impugns or attacks, or is otherwise critical of, the reputation, business or character of the Company or any Affiliate, or any of their respective directors, officers or employees. In turn, the Company and Parent, shall not, in any authorized corporate communications to third parties, and shall endeavor to direct their directors and executive officers, including, without limitation, the Parent Designated Officer and the members of the Remuneration Committee, not to, make, or cause or assist any other person to make, any statement or other communication to any reporter, author, producer or similar person or entity or to any general public media in any form (including, without limitation, books, articles or writings of any other kind, as well as film, videotape, audio tape, computer/internet format or any other medium) which impugns or attacks, or is otherwise critical of, the reputation, business or character of the Executive.

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SECTION 13. Conflicting Agreements. The Executive hereby represents and warrants that the execution of this Agreement and the performance of her obligations hereunder will not breach or be in conflict with any other agreement to which the Executive is a party or is bound and that the Executive is not now subject to any covenants against competition or similar covenants or any court order or other legal obligation that would affect the performance of her obligations hereunder. The Executive will not disclose to or use on behalf of the Company any proprietary information of a third party without such party’s consent.

SECTION 14. Indemnification. The Company will honor and abide by the indemnification agreement between the Company and the Executive, dated August 17, 1994 (the “Indemnification Agreement”), which shall survive the Offer and the Merger and continue in full force and effect in accordance with its terms, whether or not the Company’s insurance covers all such costs. Parent, for a period of six years after the Effective Time, shall cause the certificate of incorporation and by-laws of the Company to contain provisions no less favorable with respect to indemnification and limitation of liabilities of directors and officers and advancement of expenses than are set forth as of the date of this Agreement, which provisions shall not be amended, repealed or otherwise modified in a manner that would adversely affect the rights of the Executive. The rights of the Executive under this Section 14 shall survive the termination of the employment of the Executive with the Company. The Executive agrees to promptly notify the Company of any actual or threatened claim arising out of or as a result of her employment with the Company.

SECTION 15. Definitions. For purposes of this Agreement, the following definitions apply:

“Affiliates” means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company, where control may be by either management authority or equity interest.

“Bankruptcy” shall mean, with respect to any entity, (i) the commencement by the entity of any proceeding seeking relief under any provision or chapter of the federal Bankruptcy Code or any other federal or state law relating to insolvency, bankruptcy or reorganization; (ii) an adjudication that the entity is insolvent or bankrupt; (iii) the entry of an order for relief under the federal Bankruptcy Code with respect to the entity; (iv) the filing of any such petition or the commencement of any such case or proceeding against the entity, unless such petition and the case or proceeding initiated thereby are dismissed within 90 days from the date of such filing; (v) the filing of an answer by the entity admitting the material allegations of any such petition; (vi) the appointment of a trustee, receiver or custodian for all or substantially all of the assets of the entity unless such appointment is vacated or dismissed within 90 days from the date of such appointment but not less than five days before the proposed sale of any assets of the entity; (vii) the insolvency of the entity or the execution by the entity of a general assignment for the benefit of creditors; (viii) the convening by the entity of a meeting of its creditors, or any class thereof, for purposes of effecting a moratorium upon or extension or composition of its debts; (ix) the failure of the entity to pay its debts as they mature; (x) the levy, attachment, execution or other seizure of substantially all of the assets of the entity where such seizure is not discharged within 30 days thereafter; (xi) the admission by the entity in writing of its inability to pay its debts as

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they mature or that it is generally not paying its debts as they become due; or (xii) the decree of the dissolution of the entity by the final judgment of a court of competent jurisdiction.

“Bonus Year” shall mean any fiscal year of the Company.

“Change of Control of the Company” shall mean such time as (a) any Person other than Parent or its direct or indirect subsidiaries shall become the beneficial owner, directly or indirectly, of more than 50% of the then outstanding voting control of the Company, (b) the Company sells or transfers all or substantially all of its assets to any person other than Parent or any of its direct or indirect subsidiaries or (c) there is a Bankruptcy involving the Company; provided, however, that any transaction that also constitutes a Change of Control of Parent shall not constitute a Change of Control of the Company.

“Change of Control of Parent” shall mean (a) the transfer of all or a majority of the outstanding voting power of Parent or the merger or consolidation of Parent with another entity, in each case, which results in the holders of the voting power of Parent immediately prior to such transaction (or series of transactions) holding less than 50% of the voting power of Parent or the surviving or resulting entity, as the case may be, following such transaction, (b) the sale or transfer by Parent of all or substantially all of its assets to any Person other than its direct or indirect subsidiaries or (c) a Bankruptcy involving Parent.

“COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and any state law of similar effect.

“Person” means an individual, a corporation, a limited liability company, an association, a partnership, an estate, a trust and any other entity or organization, other than the Company or any of its Affiliates.

“Subsidiaries” means all persons and entities directly or indirectly controlled by the Company, where control may be by either management authority or equity interest.

SECTION 16. Source of Payments. All payments provided under this Agreement, other than payments made pursuant to a plan which provides otherwise, shall be paid in cash from the general funds of the Company, and no special or separate fund shall be established, and no other segregation of assets shall be made, to assure payment. The Executive shall have no right, title or interest whatsoever in or to any investments which the Company may make to aid the Company in meeting its obligations hereunder. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company.

SECTION 17. Withholding. All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law or contract.

SECTION 18. Assignment. Neither the Company nor the Executive may make any assignment of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other, provided, however, that the Company may assign its rights and obligations under this Agreement without the consent of the Executive in the event

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that the Company shall hereafter effect a reorganization, consolidate with, or merge into, any Person or transfer all or substantially all of its properties or assets to any Person. This Agreement shall inure to the benefit of and be binding upon the Company and the Executive, their respective successors, executors, administrators, heirs and permitted assigns.

SECTION 19. Severability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

SECTION 20. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of either party to require the performance of any term or obligation of this Agreement, or the waiver by either party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

SECTION 21. Notices. Any and all notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be effective when delivered in person or deposited in the United States mail, postage prepaid, registered or certified, and addressed to the Executive at her last known address on the books of the Company or, in the case of the Company, at its principal place of business, attention of the General Counsel, with a copy to Parent, attention of the Parent Designated Officer, or to such other address as either party may specify by notice to the other actually received.

SECTION 22. Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes all prior communications, agreements and understandings, written or oral, with respect to the terms and conditions of the Executive’s employment, including, without limitation, the Prior Agreement, but excluding the Proprietary Agreements, the Side Letter, the Indemnification Agreement, the Contribution Agreement, the LLC Agreement, and the License Agreement.

SECTION 23. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and, prior to the Effective Date, by an expressly authorized representative of each of the Company and of Parent, who shall be deemed to be a third party beneficiary to this Agreement in respect of this Section 23 only to the same extent as if it were a signatory to this Agreement through the Effective Date, and from and after the Effective Date, signed by the Executive and by an expressly authorized representative of the Company. If the Executive and the Company determine that any payments or benefits payable under this Agreement intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A, the Executive and the Company agree to amend this Agreement, or take such other actions as the Executive and the Company deem reasonably necessary or appropriate, to comply with the requirements of Section 409A, the Treasury Regulations thereunder (and any applicable transition relief) while preserving the economic agreement of the parties. If any provision of the Agreement would cause such payments or benefits to fail to so

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comply, such provision shall not be effective and shall be null and void with respect to such payments or benefits, and such provision shall otherwise remain in full force and effect.

SECTION 24. Headings. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope , content or interpretation of any provision of this Agreement or any agreement referenced herein.

SECTION 25. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

SECTION 26. Arbitration. Except as otherwise expressly provided herein, any dispute, controversy or claim between the parties arising under this Agreement shall be settled by arbitration conducted in San Francisco, California in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in force (the “Rules”) and the laws of the State of California. In the event that a party requests arbitration, it shall serve upon the other party a written demand for arbitration stating the substance of the controversy, dispute or claim, and the contention of the party requesting arbitration. If possible, the arbitrator will be selected by mutual agreement. If the parties do not select the arbitrator by mutual agreement, the arbitrator shall be selected in accordance with the Rules of the American Arbitration Association. The decision of the arbitrator shall be in writing and shall set forth the basis therefore. The parties shall abide by all awards rendered in the arbitration proceedings, and all such awards may be enforced and executed upon in any court having jurisdiction over the party against whom enforcement of such award is sought. The Company shall pay the administrative charges, arbitrator’s fees and related expenses of the arbitration, but each party shall pay its own legal fees incurred in connection with such arbitration. This shall not preclude either party from seeking injunctive relief in any court having jurisdiction over the party against whom such injunction is sought, with respect to any violation of this Agreement (including without limitation the Proprietary Agreements) alleged to have occurred subsequent to the termination of employment hereunder and which, if proved, would be of the sort likely to cause harm as to which an award of money damages would not provide an adequate remedy.

SECTION 27. Governing Law. This Agreement, the rights of the parties and all claims, actions, causes of action, suits, litigation, controversies, hearings, charges, complaints or proceedings arising in whole or in part under or in connection herewith, will be governed by and construed in accordance with the domestic substantive laws of the State of California.

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company, by its duly authorized representative, and by the Executive, as of the date first above written.

THE EXECUTIVE:		THE COMPANY:
	/s/ Leslie A. Blodgett	By:	/s/ Myles McCormick
	Leslie A. Blodgett	Name:	Myles McCormick

[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]

Exhibit A

Release of Claims

I understand and agree completely to the terms set forth in my Employment Agreement dated as of January 14, 2010 (the “Agreement”).

I understand that this Release, together with the Agreement (including the Proprietary Agreements), constitutes the complete, final and exclusive embodiment of the entire agreement between Bare Escentuals, Inc., a Delaware corporation (the “Company”) and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated therein. Certain capitalized terms used in this Release are defined in the Agreement.

I hereby confirm my obligations under my Proprietary Agreements.

Except as otherwise set forth in this Release, I hereby generally and completely release the Company and its current and former directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent, and subsidiary entities, insurers, affiliates, and assigns (collectively, the “Released Parties”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Agreement (collectively, the “Released Claims”). The Released Claims include, but are not limited to: (1) all claims arising out of or in any way related to my employment with the Company, or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory and regulatory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair Employment and Housing Act (as amended). Notwithstanding the foregoing, the following are not included in the Released Claims (the “Excluded Claims”): (1) any rights or claims for indemnification I may have pursuant to any written indemnification agreement with the Company to which I am a party (including, without limitation, the Indemnification Agreement), the charter, bylaws, or operating agreements of the Company, or under applicable law; (2) any rights or claims that I may have pursuant to any other agreements with the Company or any of its Affiliates to which I am a party or a beneficiary thereof relating to my status as a shareholder of the Company, intellectual property rights or other matters not directly related to my employment with the Company, including, without limitation, any rights or claims under the Contribution Agreement, the License Agreement, the LLC Agreement and any Guarantee Agreements ancillary to the foregoing agreements; or (3) any rights which are not waivable as a matter of law. In addition, nothing in this Release prevents me from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except that I hereby waive my right to any

monetary benefits or other personal relief in connection with any such claim, charge or proceeding. I hereby represent and warrant that, other than the Excluded Claims, I am not aware of any claims I have or might have against any of the Released Parties that are not included in the Released Claims.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA. I also acknowledge that the consideration given for the Released Claims is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) the Released Claims do not apply to any rights or claims that arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release (although I may choose voluntarily not to do so); (c) I have twenty-one (21) days to consider this Release (although I may choose to voluntarily sign it sooner); (d) I have seven (7) days following the date I sign this Release to revoke the Release by providing written notice to an officer of the Company; and (e) the Release will not be effective until the date upon which the revocation period has expired unexercised, which will be the eighth day after I sign this Release provided that I do not revoke it (“Effective Date”).

I represent and warrant that I have not assigned any of the Released Claims being released under this Release.

I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims hereunder, including but not limited to any unknown claims.

Nothing in this Release will be deemed or construed as an admission of wrongdoing or liability on the part of the Company.

I hereby represent that I have been paid all compensation owed and for all hours worked, I have received all the leave and leave benefits and protections for which I am eligible, and I have not suffered any on-the-job injury for which I have not already filed a workers’ compensation claim.

I acknowledge that to become effective, I must sign following my termination of employment and return this Release to the Company so that it is received not later than twenty-one (21) days following the date it is provided to me, and I must not revoke it thereafter.

Name:	Leslie A. Blodgett
Date:

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EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

This Employment Agreement dated as of January 14, 2010 (the “Agreement”), is entered into by and between Bare Escentuals, Inc., a Delaware corporation (the “Company”), and Myles B. McCormick (the “Executive”).

RECITALS

WHEREAS, pursuant to an Agreement and Plan of Merger, dated January 14, 2010 (the “Merger Agreement”), among the Company, Shiseido Company, Ltd., a corporation organized under the laws of Japan (“Parent”), and Blush Acquisition Corporation, a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Purchaser”), the Company will become an indirect wholly owned subsidiary of Parent upon the completion of a tender offer (the “Offer”) and the subsequent merger of Purchaser with and into the Company (the “Merger”), in each case, as contemplated by, and more fully described in, the Merger Agreement;

WHEREAS, as a condition and mutual inducement to the transactions contemplated by the Merger Agreement, and to preserve the value and the goodwill of the business being acquired by Parent in connection with the Offer and the Merger, the Merger Agreement contemplates, among other things, that the Executive shall enter into this Agreement;

WHEREAS, the Company desires that the Executive continue to be employed by the Company to carry out the duties and responsibilities described below, all on the terms and conditions hereinafter set forth; and

WHEREAS, the Executive desires to accept such employment on such terms and conditions.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions and conditions set forth in this Agreement, the parties hereby agree:

SECTION 1. Employment. Subject to the terms and conditions set forth in this Agreement, the Company hereby offers and the Executive hereby accepts employment as the Chief Executive Officer of the Company.

SECTION 2. Term. Subject to earlier termination as hereinafter provided, the Executive’s employment hereunder shall be for a term commencing immediately upon Purchaser’s purchase of shares of common stock of the Company pursuant to the Offer (such date of such purchase being hereinafter referred to as the “Effective Date”) and ending on the third anniversary of the Effective Date unless, and to the extent, such term may be extended by mutual written agreement of the Company and the Executive. Unless so extended, the Executive’s employment shall terminate on the last day of the applicable term, and the Executive shall be paid the Accrued Rights (as defined below) within 10 days thereafter, but shall not be entitled to receive any severance benefits or payments. Notwithstanding anything herein to the contrary, in the event that Purchaser’s purchase of shares of the common stock of the Company pursuant to the Offer is abandoned or otherwise fails to occur, and/or the Merger Agreement is

terminated prior to the completion of the Offer, this Agreement shall be null and void ab initio. The period from the Effective Date until the termination of the Executive’s employment under this Agreement is hereafter referred to as “the term of this Agreement” or “the term hereof.”

SECTION 3. Capacity and Performance.

(a) During the term hereof, the Executive shall serve the Company in the capacity of an executive officer of the Company as the Chief Executive Officer of the Company and report to Carsten Fischer or his successor in the office of Chief Officer of the International Business Division of Parent, or any successor office following a corporate reorganization of Parent (the “Parent Designated Officer”). In addition, and without further compensation, the Executive may serve as a director and/or officer of one or more of the Company’s Subsidiaries (as defined in Section 14 below) if so elected or appointed from time to time. During the term hereof, the Company shall maintain executive offices for the Executive in San Francisco, California; provided, however, that the Executive understands and agrees that in accordance with, and in furtherance of his duties hereunder, he will be required to travel from time to time for business reasons.

(b) During the term hereof, the Executive shall be employed by the Company on a full-time basis and shall perform such duties and responsibilities on behalf of the Company, as are commensurate with his position as Chief Executive Officer and co-principal executive officer of the Company, as may be reasonably assigned to the Executive by the Parent Designated Officer from time to time, including, without limitation, developing the long-term strategy of the Company in consultation with the Parent Designated Officer and the Executive Chair of the Company; provided that it is hereby agreed and understood that (i) the senior executives of the Company responsible for marketing and product development shall report to both the Executive and the Executive Chair of the Company, (ii) certain other executives of the Company who are responsible for corporate functions (e.g., human resources, information technology and legal) within the Company shall report directly to the Executive, and such executive officers may also have reporting obligations to Parent and to other Affiliates of the Company in the United States (and employees of Affiliates of the Company may also report to such Company executives), in addition to those to the Executive and otherwise within the Company, and (iii) the Executive may not, without the advance approval of the Parent Designated Officer, increase the compensation of or terminate the employment of the Executive’s direct reports. The parties hereby acknowledge and agree that during the term hereof it is intended that the responsibilities, duties and authority of the principal executive officers of the Company shall be allocated between (but not necessarily shared by) the Chief Executive Officer and the Executive Chair, as contemplated above, and that Leslie A. Blodgett shall serve the Company as its Executive Chair.

(c) During the term hereof, the Executive shall devote his full business time and his best efforts, business judgment, skill and knowledge exclusively to the advancement of the business and interests of the Company and its Affiliates (as defined in Section 15 below) and to the discharge of his duties and responsibilities hereunder. The Executive shall not engage in any other business activity or serve in any industry, trade, professional, governmental or academic position during the term of this Agreement, except as may be expressly approved in advance by the Parent Designated Officer in writing; provided that, the Executive shall, to the

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extent that such activity does not contravene the first sentence of this Section 3(c), be entitled to join two additional corporate boards of an entity that is not a competitor of the Company or Parent, subject to advance written approval by the Parent Designated Officer, which approval may not be unreasonably withheld.

SECTION 4. Compensation and Benefits. Subject to the provisions of this Agreement, as compensation for all services performed by the Executive under and during the term hereof and subject to performance of the Executive’s duties and of the obligations of the Executive to the Company and its Affiliates, pursuant to this Agreement or otherwise:

(a) Base Salary. During the term hereof, the Company shall pay the Executive a base salary at the rate of Seven Hundred Thousand Dollars ($700,000) per annum, payable in accordance with the payroll practices of the Company for its executives and, subject to annual cost of living increases, as determined by the Remuneration Committee of the Board of Directors of Parent (the “Remuneration Committee”), in its sole discretion. Such base salary, as from time to time adjusted, is hereafter referred to as the “Base Salary.”

(b) Incentive and Bonus Compensation. As additional compensation for his services hereunder, the Executive shall be eligible, during the term hereof, to participate in the Company’s annual bonus plan, in effect from time to time, with an annual target bonus equal to 100% of the Executive’s Base Salary, subject to attainment of corporate performance goals as determined by the Remuneration Committee (such target performance goals shall be hereinafter referred to as “Bonus Target Performance”) for each Bonus Year (as defined in Section 14 below) during the term hereof. Any bonus earned and payable under this Section 4(b) is referred to herein as an “Annual Bonus.” If Company performance is at least 91.5% of the Bonus Target Performance for the Bonus Year (“Bonus Threshold Performance”), the Annual Bonus shall be equal to 25% of the Base Salary, and if Company performance is equal to or greater than 113% of Bonus Target Performance for the Bonus Year (“Bonus Maximum Performance”), the Annual Bonus shall be equal to 200% of Base Salary, with payouts for Company performance between Bonus Threshold Performance and Bonus Target Performance, and between Bonus Target Performance and Bonus Maximum Performance, respectively, determined ratably by the Remuneration Committee. The performance goals and Bonus Target Performance for the 2010 Bonus Year shall be set forth in a side letter by and between the Company and the Executive, of even date herewith (the “Side Letter”). Notwithstanding the foregoing, the Remuneration Committee shall have the discretion, but not the obligation, to pay an Annual Bonus, in an amount not to exceed 25% of the Executive’s Base Salary, with respect to any Bonus Year for which Bonus Threshold Performance is not met or exceeded. The Annual Bonus, if any, due to the Executive for any Bonus Year, shall be paid to the Executive no later than March 15^th of the year following the end of the applicable Bonus Year.

(c) Long-term Incentive Award. On the Effective Date, the Executive shall receive a cash-based, long-term incentive award (the “LTI Award”), which shall have a target value, as determined by the Remuneration Committee, equal to $3.585 million in the aggregate (the “LTI Target Value”) and which shall vest subject to (i) the attainment

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by the Company of cumulative performance conditions for Bonus Years 2010, 2011 and 2012 (the “LTI Performance Period”), as set forth in the Side Letter (such cumulative target performance conditions shall be hereinafter referred to as “LTI Target Performance”), and (ii) the Executive’s continued employment with the Company until the expiration of the Performance Period. If Company performance during the LTI Performance Period is at least 80% of LTI Target Performance (the “LTI Threshold Performance”), the value of the LTI Award shall be equal to 50% of the LTI Target Value, and if Company performance during the LTI Performance Period is equal to or greater than 120% of LTI Target Performance (“LTI Maximum Performance”), the value of the LTI Award shall be equal to 200% of the LTI Target Value, with payouts for Company performance between LTI Threshold Performance and LTI Target Performance, and between LTI Target Performance and LTI Maximum Performance, respectively, determined ratably by the Remuneration Committee. Subject to the attainment of LTI Threshold Performance for the LTI Performance Period, the LTI Award shall be settled by a lump sum cash payment, in an amount determined in accordance with the preceding sentence, to the Executive within 45 days following the expiration of the LTI Performance Period. Notwithstanding the foregoing, in the event of a Change of Control of the Company (as defined in Section 15 below), the LTI Award shall vest in full and be settled to the Executive within 45 days following the Change of Control, with the payout value determined (x) based on the actual performance of the Company for the full Bonus Years elapsed in the LTI Performance Period prior Change of Control of the Company and (y) assuming performance of the Company at LTI Target Performance for the Bonus Year in which the Change of Control of the Company occurs and any subsequent Bonus Year in the LTI Performance Period; provided that to the extent that the Change of Control of the Company does not satisfy the requirements of a change in control payment event for purposes of Section 409A (as defined in Section 5(j) below), the LTI Award shall be settled to the Executive within 10 days following the first to occur of (i) a Change of Control of the Company meeting the requirements of Section 409A and (ii) the Executive’s termination of employment. For the avoidance of doubt, Bonus Year 2010 shall be deemed to be a full Bonus Year for purposes of determining the number of full Bonus Years elapsed in the LTI Performance Period under this Agreement, notwithstanding the occurrence of the Effective Date after January 1, 2010. It is hereby agreed and understood that during the term hereof, the Executive shall not be eligible for any other long-term incentive compensation from the Company and its Affiliates, other than the LTI Award.

(d) Vacations and Sick Leave. During the term hereof, the Executive shall be entitled to four weeks of vacation per year and 10 sick days per year, to be taken at such times and intervals as shall be determined by the Executive.

(e) Other Benefits. During the term hereof and subject to any contribution therefore generally required of executives of the Company, the Executive shall be entitled to participate in any and all employee benefit plans from time to time in effect for executives of the Company generally, except to the extent such plans are in a category of benefit otherwise provided to the Executive (e.g., severance pay). Such participation shall be subject to the terms of the applicable plan documents and generally applicable Company policies. The Company may alter, modify, add to or terminate its employee

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benefit plans (except for the Severance Amount as set forth herein in Section 5(d)(ii)) at any time as it, in its sole judgment, determines to be appropriate, without recourse by the Executive. Notwithstanding the foregoing, the Company shall provide the Executive for the entire term of this Agreement with fully-paid health, dental, disability and life insurance benefits for Executive and his family on terms no less favorable than as of the Effective Date without any required contribution from the Executive.

(f) Business Expenses. The Company shall pay or reimburse the Executive for all reasonable business expenses incurred or paid by the Executive in the performance of his duties and responsibilities hereunder, including, but not limited to, (i) a car allowance, in an amount not to exceed $1,200 per month; (ii) a fully-paid on-site parking space at the Company’s headquarters in San Francisco, California; and (iii) business class airfare when traveling on Company business, subject to such reasonable substantiation and documentation as may be specified by the Company from time to time. Any amounts payable under this Section 4(f) shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of the Executive’s taxable year following the taxable year in which the Executive incurred the expenses. The amounts provided under this Section 4(f) during any taxable year of the Executive’s will not affect such amounts provided in any other taxable year of the Executive’s, and the Executive’s right to reimbursement for such amounts shall not be subject to liquidation or exchange for any other benefit.

SECTION 5. Termination of Employment and Severance Benefits. Notwithstanding the provisions of Section 2 hereof, the Executive’s employment hereunder shall terminate prior to the expiration of the term hereof under the following circumstances:

(a) Death. In the event of the Executive’s death during the term hereof, the Executive’s employment hereunder shall immediately and automatically terminate. In such event, the Company shall pay to the Executive’s designated beneficiary or, if no beneficiary has been designated by the Executive, to his estate, (i) the Base Salary earned but not paid through the date of termination, payable within 10 days thereafter, (ii) any bonus compensation earned or awarded but unpaid on the date of termination payable in accordance with Section 4(b), (iii) a pro-rated portion of the Annual Bonus that Executive would have earned for the year of the Executive’s death, pro-rated based on actual performance for such year and the period of time served by the Executive during such year, payable when the Company generally pays annual bonuses to employees, but in no event later than March 15^th of the year following the year in which the Executive’s death occurs, (iv) accrued vacation through the date of termination, payable within 10 days thereafter, and (v) unreimbursed expenses for which documentation is properly submitted and payable in accordance with Section 4(f) above (all of the foregoing clauses (i) through (v), the “Final Compensation”). In addition, the LTI Award shall vest on a prorated basis and be settled to the Executive’s beneficiary or his estate, as applicable, within 10 days following the date of his death, with the pro-ration based on the number of full Bonus Years elapsed in the LTI Performance Period prior to the date of the Executive’s death, and with the payout value of the LTI Award based on actual Company performance for such Bonus Years; provided that if the Executive’s death occurs prior to December 31, 2010, the Executive shall not be entitled to the vesting and settlement of

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the LTI Award, which instead shall be immediately forfeited and cancelled as of the date of his death. The Company shall have no further obligation to the Executive hereunder other than any legal obligations to make health insurance coverage available to the Executive’s dependents, at the dependents’ expense, under COBRA (as defined in Section 14 below).

(b) Disability.

(i) During the term hereof, the Company may terminate the Executive’s employment hereunder, upon notice to the Executive, in the event that the Executive becomes disabled during his employment hereunder through any illness, injury, accident or condition of either a physical or psychological nature and, as a result, is unable to perform substantially all of his duties and responsibilities hereunder, with or without reasonable accommodation, for 120 days during any period of 365 consecutive calendar days. Subject to Section 6, in the event of such termination, the Company shall have no further obligation to the Executive, other than for payment of the Final Compensation, the vesting and, subject to Sections 5(i) and 5(j) below, settlement of the LTI Award within 10 days following the Executive’s termination of employment in accordance with the provisions of Section 5(a), and any legal obligations to make health insurance coverage available to the Executive, at the Executive’s expense, under COBRA; provided that if the Executive’s termination of employment occurs prior to December 31, 2010, the Executive shall not be entitled to the vesting and settlement of the LTI Award, which shall instead be immediately forfeited and cancelled as of the date of such termination.

(ii) The Parent Designated Officer in consultation with the Remuneration Committee may designate another employee to act in the Executive’s place during any period of the Executive’s disability. Notwithstanding any such designation, the Executive shall continue to receive the Base Salary in accordance with Section 4(a) and benefits in accordance with Section 4(e), to the extent permitted by the then-current terms of the applicable benefit plans, until the termination of his employment; provided that such Base Salary shall be reduced by any disability income benefits the Executive receives under the Company’s disability income plan.

(iii) While receiving disability income payments under the Company’s disability income plan, the Executive shall continue to participate in Company benefit plans in accordance with Section 4(e) and subject to and in accordance with the terms of such plans, until the termination of his employment.

(iv) If any question shall arise as to whether during any period the Executive is disabled through any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to perform substantially all of his duties and responsibilities hereunder, the Executive may, and at the request of the Company shall, submit to a medical examination by a physician selected by the Company to whom the Executive or his duly appointed guardian, if any, has no reasonable objection to determine whether the Executive is so disabled. If the Executive or his duly appointed guardian reasonably objects to the physician selected by the Company, the

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Executive or his duly appointed guardian and the Company shall mutually select an independent physician. The determination by any physician selected under this section shall for the purposes of this Agreement be conclusive of the issue. In any event, if the Executive shall fail to submit to a medical examination under this section, the Company’s determination of the issue shall be binding on the Executive.

(c) By the Company for Cause. During the term hereof, the Company may terminate the Executive’s employment under this Agreement for Cause at any time upon notice to the Executive setting forth in reasonable detail the nature of such Cause. The following, as determined by the Parent Designated Officer in consultation with the Remuneration Committee in their reasonable judgment, shall constitute Cause for termination:

(i) commission of a felony or any crime involving dishonesty or moral turpitude;

(ii) commission of any fraud, theft, embezzlement, misappropriation of funds, material breach of fiduciary duty as an officer or director or serious act of dishonesty;

(iii) repeated failure to follow the reasonable instructions of the Parent Designated Officer, which failure is materially injurious to the Company or any of its Affiliates, individually or in the aggregate, and which failure does not cease within 15 days after written notice specifying such failure in reasonable detail is given to the Executive by jointly by the Parent Designated Officer and the Remuneration Committee;

(iv) engaging in conduct likely to make the Company or any of its Affiliates subject to criminal liabilities, other than those arising from the Company’s normal business activities; or

(v) willful engagement in any other conduct or gross negligence, in either case that involves a material breach of fiduciary obligation on the part of the Executive as an officer or director or that could reasonably be expected to have a material adverse effect upon the business interests or reputation of the Company or any of its Affiliates.

Upon the giving of notice of termination of the Executive’s employment under this Agreement for Cause, the Company shall have no further obligation or liability to the Executive, other than for the Accrued Rights, payable in accordance with Section 5(d)(i) below, the settlement of any LTI Award that had vested prior to the Executive’s termination of employment (as determined in accordance with the following sentence) within 10 days following the termination of the Executive’s employment (subject to Sections 5(i) and 5(j) below), any obligations to make health insurance coverage available, at the Executive’s expense, under COBRA and as may otherwise be set forth in Section 6 below. The LTI Award shall be deemed vested based on the number of full Bonus Years elapsed in the LTI Performance Period prior to the date of the Executive’s termination, with the payout value of the LTI Award based on actual Company

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performance for such Bonus Years; provided that if the Executive’s termination of employment occurs prior to December 31, 2010, the Executive shall not be entitled to the vesting and settlement of the LTI Award, which shall instead be immediately forfeited and cancelled as of the date of such termination. In the event of any termination pursuant to this Section 5(c), the Executive shall not be entitled to receive any Annual Bonus after the provision of notice of such termination.

(d) By the Company Other than for Cause or by Executive for Good Reason. The Company may terminate the Executive’s employment under this Agreement other than for Cause at any time upon notice to the Executive. The Executive may terminate his employment under this Agreement for Good Reason at any time pursuant to the notice provisions described in Section 5(d)(iii) below. In the event the Company terminates the Executive’s employment without Cause and other than as a result of his death or disability, or if the Executive terminates his employment for Good Reason, in each case, during the term hereof:

(i) The Company shall pay the Executive (A) accrued but unpaid base salary or other wages through the date of termination within 10 days thereafter, (B) accrued but unused vacation through the date of termination within 10 days thereafter, (C) any earned but unpaid Annual Bonus payable in accordance with Section 4(b), plus (D) unreimbursed expenses for which documentation is properly submitted and payable in accordance with Section 4(f) above (collectively, the “Accrued Rights”).

(ii) Subject to (A) the Executive’s execution of a general release of all claims, which the Executive allows to become effective, in substantially the form attached hereto as Exhibit A (the “Release”), within 60 days after Executive’s separation from service (the “Release Period”), and (B) the Executive’s compliance with the Executive’s obligations under the Proprietary Agreements (as defined in Section 7 below), then the Company will pay the Executive, as severance, (1) cash in an amount equal to 18 months of the Executive’s Base Salary, (2) cash in an amount equal to 150% of the Annual Bonus earned by the Executive in the last completed Bonus Year, (3) an additional cash amount equal to $7,000, which the Executive may, but is not obligated to use, to pay the premiums upon converting his Company life insurance policy into an individual policy, and (4) provided that the Executive makes a timely and accurate election for continued coverage under the Company’s medical, dental and vision insurance plans under COBRA for the Executive and his eligible dependents, payment of the premiums for such COBRA coverage for up to 18 months (or such earlier date as he and his dependents cease to be eligible for such coverage), less the applicable active employee contribution for such coverage in an amount not to exceed the premium paid by the Executive immediately prior to his termination date (which amount the Executive will be required to pay directly) (collectively, the “Severance Amount”). Subject to Sections 5(i) and 5(j) below, items (1), (2), (3) and (4) of the Severance Amount will be payable in equal installments on the Company’s regular payroll pay cycle for 18 months commencing with the first payroll cycle following the expiration of the Release Period. In addition, and likewise subject to the execution by the Executive of an effective Release during the Release Period, the LTI Award shall vest in full and be settled to the

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Executive, subject to Sections 5(i) and 5(j) below, on the first business day immediately following the expiration of the Release Period, with the payout value of the LTI Award determined (x) based on the actual performance of the Company for the full Bonus Years elapsed in the LTI Performance Period prior the Executive’s termination of employment and (y) assuming performance of the Company at LTI Target Performance for the Bonus Year in which the termination of employment occurs and any subsequent Bonus Year in the LTI Performance Period; provided that if the Executive’s termination of employment occurs prior to December 31, 2010, the Executive shall not be entitled to the vesting and settlement of the LTI Award, which shall instead be immediately forfeited and cancelled as of the date of such termination. Notwithstanding the foregoing, none of the Severance Amount shall be paid to the Executive, nor shall the LTI Award vest and be settled to the Executive, in the event that the Release shall not have become effective by the expiration of the Release Period. Subject to Section 6 below, payment by the Company of the Accrued Rights and the Severance Amount and the settlement of the LTI Award shall constitute the entire obligation of the Company to the Executive in the event of the Executive’s termination of employment by the Company without Cause or by the Executive for Good Reason.

(iii) “Good Reason” is defined as the following material adverse changes to the Executive’s employment with the Company without his written consent:

(A) a failure by the Company to continue the Executive as the Chief Executive Officer of the Company,

(B) material diminution of nature or scope of the Executive’s responsibilities, duties or authority as Chief Executive Officer and co-principal executive officer of the Company as set forth in Section 3(b) above, including by reason of the authority of the Parent Designated Officer, the Remuneration Committee or any other officer or agent of Parent to do so,

(C) requiring the Executive to report to anyone other than the Parent Designated Officer,

(D) termination of Ms. Blodgett’s employment with the Company by the Company without “Cause” (as such term is defined in Ms. Blodgett’s Employment Agreement with the Company of even date herewith) prior to the first anniversary of the Effective Date,

(E) a Change of Control of the Company,

(F) material breach of the Agreement by the Company, or

(G) requiring the executive to relocate his primary Company office outside of the San Francisco, California area.

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In order to resign for Good Reason, the Executive must provide written notice to the Company of the occurrence of any of the foregoing events or conditions without the Executive’s written consent within 30 days after the initial occurrence of such event. The Company or any successor or Affiliate shall have a period of 30 days to cure such event or condition after receipt of written notice of such event from the Executive. Any resignation of the Executive’s employment for “Good Reason” must occur no later than 30 days following the expiration of the cure period and must be a resignation from all positions he then holds with the Company and its Affiliates. The Executive’s resignation from employment with the Company for Good Reason shall be treated as an involuntary termination.

Notwithstanding anything to the contrary in this Agreement or in that that certain Severance Rights Agreement by and between the Company and the Executive, dated as of December 19, 2008 (the “Prior Agreement”), the Executive expressly acknowledges and agrees that none of the following will constitute Good Reason for purposes of this Agreement or the Prior Agreement: (1) the execution of the Merger Agreement (or any other agreement contemplated by the Merger Agreement, including, without limitation, this Agreement, the Contribution Agreement or the License Agreement), (2) the Offer, (3) the Merger, (4) the abandonment or other failure of the Offer or the Merger to be completed or completed or (5) any diminution of nature or scope of the Executive’s responsibilities, duties or authority that results from (x) the delisting of the Company’s securities from The Nasdaq Global Stock Market or (y) the termination of the Company’s obligation to file periodic and current reports with the Securities and Exchange Commission. In addition, the Executive hereby acknowledges and agrees that the Company’s status as a subsidiary of Parent upon Purchaser’s purchase of shares of common stock of the Company pursuant to the Offer shall not constitute Good Reason for purposes of the Prior Agreement. The Executive further acknowledges and agrees that this Agreement shall serve as the writing required under Section 8 of the Prior Agreement.

(e) By Executive Other than For Good Reason. The Executive may terminate the Executive’s employment other than for Good Reason under this Agreement at any time upon 30 days’ notice to the Company. In the event of termination of the Executive’s employment pursuant to this Section 5(e), the Parent Designated Officer in consultation with the Remuneration Committee may elect to waive or reduce the period of notice, and, if the Parent Designated Officer so elects, the Company will pay the Executive the Base Salary for the notice period (or for any remaining portion of the period), which amount shall be paid in a lump sum within 10 days following the date of the Executive’s termination of employment, together with the balance of the Accrued Rights. In addition, the LTI Award shall vest on a prorated basis and, subject to Sections 5(i) and 5(j) below, be settled to the Executive within 10 days following the termination of the Executive’s employment, with the pro-ration based on the number of full Bonus Years elapsed in the LTI Performance Period prior to the date of the Executive’s termination, and with the payout value of the LTI Award based on actual Company performance for such Bonus Years; provided that if the Executive’s termination of employment occurs prior to December 31, 2010, the Executive shall not be entitled to the vesting and settlement of the LTI Award, which shall instead be immediately forfeited and cancelled as of the date of such termination. In the event of any termination pursuant to this Section 5(e), the Executive shall not be entitled to receive any Annual Bonus after the provision of notice

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of such termination. The Executive’s rights to continued health insurance coverage after his termination shall be at his own expense as provided under COBRA.

(f) Mitigation. The Executive shall not be required to mitigate damages with respect to the termination of his employment under this Agreement by seeking other employment or otherwise, and there shall be no offset against amounts due to the Executive under this Agreement on account of subsequent employment. Additionally, amounts owed to the Executive under this Agreement shall not be offset by any claims the Company may have against the Executive, and the Company’s obligation to make the payments provided for in this Agreement, and otherwise to perform its obligations hereunder, shall not be affected by any other circumstances, including, without limitation, any counterclaim, recoupment, defense or other right which the Company may have against the Executive or others.

(g) Notice of Termination. Any termination of employment by the Company or the Executive shall be communicated by a written “notice of termination” to the other party hereto given in accordance with Section 5 of this Agreement. In the event of a termination by the Company for Cause, or by the Executive for Good Reason, the notice of termination shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) specify the date of termination. The failure by the Executive or the Company to set forth in the notice of termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

(h) Resignation from Directorships and Officerships. The termination of the Executive’s employment for any reason shall constitute the Executive’s resignation from (i) any director, officer or employee position the Executive has with the Company or any of its Affiliates and (ii) all fiduciary positions (including as a trustee) the Executive holds with respect to any employee benefit plans or trusts established by the Company or any of its Affiliates. The Executive agrees that this Agreement shall serve as written notice of resignation in this circumstance.

(i) Section 280G of the Code. Payments under this Section 5 shall be made without regard to whether the deductibility of such payments (or any other payments to or for the benefit of the Executive) would be limited or precluded by Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and without regard to whether such payments (or any other payments) would subject the Executive to the federal excise tax levied on certain “excess parachute payments” under Section 4999 of the Code; provided, that if the total of all payments to or for the benefit of the Executive, after reduction for all federal taxes (including the tax described in Section 4999 of the Code, if applicable) with respect to such payments (“Executive’s total after-tax payments”), would be increased by the limitation or elimination of any payment under this Section 5, amounts payable under this Section 5 shall be reduced to the extent, and only to the

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extent, necessary to maximize the Executive’s total after-tax payments (the “required reduction amount”). The determination as to whether and to what extent payments under this Section 5 are required to be reduced in accordance with the preceding sentence shall be made at the Company’s expense by the Company’s independent accountants (the “Outside Firm”). In the event of any mistaken underpayment or overpayment under this Section 5, as determined by the Outside Firm, the amount of such underpayment or overpayment shall forthwith be paid to the Executive or refunded to the Company, as the case may be, with interest at 120% of the applicable Federal rate provided for in Section 7872(f)(2) of the Code. Any reduction in payments required by this Section 5 shall be applied as follows: First out of the cash components of the Severance Amount, second out of COBRA premium component of the Severance Amount, and lastly out of the vesting of any equity awards.

(j) Required Delay for Certain Deferred Compensation. Notwithstanding any other provision of this Agreement, if at the time of separation from service the Executive is determined by the Company to be a specified employee (as defined in Section 409A of the Code (together, with any state law of similar effect, “Section 409A”) and Section 1.409A-1(i) of the Treasury Regulations), and the Company determines that delayed commencement of any portion of the termination payments and benefits payable to the Executive pursuant to this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion of the Executive’s termination payments and benefits shall not be provided to the Executive prior to the earliest of (A) the date that is six months and one day after the Executive’s separation from service, (B) the date of the Executive’s death or (C) such earlier date as is permitted under Section 409A (any such delayed commencement, a “Payment Delay”). Upon the expiration of such Payment Delay, all payments deferred pursuant to a Payment Delay shall be paid in a lump sum to the Executive on the first day following the expiration of the Payment Delay, and any remaining payments due under the Agreement shall be paid on the original schedule provided herein.

(k) Section 409A. This Agreement is intended to meet the requirements of Section 409A, and shall be interpreted and construed consistent with that intent. References to termination of employment, retirement, separation from service and similar or correlative terms in this Agreement shall mean a “separation from service” (as defined at Section 1.409A-1(h) of the Treasury Regulations) from the Company and from all other corporations and trades or businesses, if any, that would be treated as a single “service recipient” with the Company under Section 1.409A-1(h)(3) of the Treasury Regulations. Each installment of the payments and benefits provided for in this Agreement shall be treated as a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i).

SECTION 6. Effect of Termination. The provisions of this Section 6 shall apply in the event of a termination of the Executive’s employment, whether due to the expiration of the term hereof, pursuant to Section 5 or otherwise.

(a) Payment by the Company of the Accrued Rights, receipt of benefits otherwise due in accordance with the terms of the Company’s 401(k) plan, indemnification under

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Section 13 below, and payments or benefits that may be due the Executive under Section 5 above shall constitute the entire obligation of the Company to the Executive.

(b) Except for health insurance coverage continued pursuant to COBRA (including pursuant to Section 5(d) above) and receipt of benefits otherwise due terminated employees under group insurance coverage consistent with the terms of the applicable Company welfare benefit plan, the Executive’s employee benefits shall terminate pursuant to the terms of the applicable benefit plans based on the date of termination of the Executive’s employment without regard to any continuation of Base Salary or other payment to the Executive following such date of termination.

(c) Provisions of this Agreement shall survive any termination if so provided herein or if necessary or desirable to accomplish the purposes of other surviving provisions, including, without limitation, the obligations of the Executive under Sections 7 and 8 hereof. The obligation of the Company to make payments to or on behalf of the Executive under Section 5 hereof other than the Accrued Rights is expressly conditioned upon the Executive’s continued full performance of obligations under Sections 7 and 8 hereof. The Executive recognizes that, except as expressly provided in Section 5 and this Section 6, no compensation is payable after termination of employment.

SECTION 7. Confidential Information and Inventions. The Executive affirms his continuing obligations to the Company under the Employee Intellectual Property and Confidentiality Agreement and the Invention Assignment Agreement (together, the “Proprietary Agreements”). The terms of the Proprietary Agreements are incorporated by reference herein.

SECTION 8. Non-Solicitation of Employees. The Executive agrees that for an 18-month period commencing on the date his employment actually terminates, the Executive will not, directly or indirectly, solicit for hire or attempt to solicit for hire any employee of the Company or any of its Affiliates, assist in such soliciting for hire by any Person, or encourage any such employee to terminate his or his relationship with the Company or any of its Affiliates.

SECTION 9. Injunctive Relief. Without intending to limit the remedies available to the Company under this Agreement, the Executive agrees that a breach of any of the covenants contained in Sections 7 and 8 of this Agreement may result in material and irreparable injury to the Company and its Affiliates for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company or any of its Affiliates shall be entitled to seek a temporary restraining order or a preliminary or permanent injunction, or both, without bond or other security, restraining the Executive from engaging in activities prohibited by the covenants contained in Sections 7 or 8 of this Agreement or such other relief as may be required specifically to enforce any of the covenants contained in this Agreement or the Proprietary Agreements. Such injunctive relief in any court shall be available to the Company or the Affiliate in lieu of, or prior to or pending determination in, any arbitration proceeding.

SECTION 10. Defense of Claims. The Executive agrees that, during the term hereof, and, to the extent that the Executive is eligible to receive the Severance Amount, for a period of 18 months after termination of the Executive’s employment, upon request from the

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Company, the Executive will cooperate with the Company in the defense of any claims or actions that may be made by or against the Company that affect the Executive’s prior areas of responsibility, except if the Executive’s reasonable interests are adverse to the Company in such claim or action. The Company agrees to promptly reimburse the Executive for all of the Executive’s reasonable travel and other direct expenses incurred, or to be reasonably incurred, to comply with the Executive’s obligations under this Section 10.

SECTION 11. Nondisparagement. The Executive agrees that at no time during his employment by the Company or thereafter shall he make, or cause or assist any other person to make, any statement or other communication to any reporter, author, producer or similar person or entity or to any general public media in any form (including, without limitation, books, articles or writings of any other kind, as well as film, videotape, audio tape, computer/internet format or any other medium) which impugns or attacks, or is otherwise critical of, the reputation, business or character of the Company or any Affiliate or any of their respective directors, officers or employees. In turn, the Company and Parent, shall not, in any authorized corporate communications to third parties, and shall endeavor to direct their directors and executive officers, including, without limitation, the Parent Designated Officer and the members of the Remuneration Committee, not to, make, or cause or assist any other person to make, any statement or other communication to any reporter, author, producer or similar person or entity or to any general public media in any form (including, without limitation, books, articles or writings of any other kind, as well as film, videotape, audio tape, computer/internet format or any other medium) which impugns or attacks, or is otherwise critical of, the reputation, business or character of the Executive.

SECTION 12. Conflicting Agreements. The Executive hereby represents and warrants that the execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any other agreement to which the Executive is a party or is bound and that the Executive is not now subject to any covenants against competition or similar covenants or any court order or other legal obligation that would affect the performance of his obligations hereunder. The Executive will not disclose to or use on behalf of the Company any proprietary information of a third party without such party’s consent.

SECTION 13. Indemnification. The Company will honor and abide by the indemnification agreement between the Company and the Executive, dated December 30, 2004 (the “Indemnification Agreement”), which shall survive the Offer and the Merger and continue in full force and effect in accordance with its terms, whether or not the Company’s insurance covers all such costs. Parent, for a period of six years after the Effective Time, shall cause the certificate of incorporation and by-laws of the Company to contain provisions no less favorable with respect to indemnification and limitation of liabilities of directors and officers and advancement of expenses than are set forth as of the date of this Agreement, which provisions shall not be amended, repealed or otherwise modified in a manner that would adversely affect the rights of the Executive. The rights of the Executive under this Section 13 shall survive the termination of the employment of the Executive with the Company. The Executive agrees to promptly notify the Company of any actual or threatened claim arising out of or as a result of his employment with the Company.

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SECTION 14. Definitions. For purposes of this Agreement, the following definitions apply:

“Affiliates” means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company, where control may be by either management authority or equity interest.

“Bankruptcy” shall mean, with respect to any entity, (i) the commencement by the entity of any proceeding seeking relief under any provision or chapter of the federal Bankruptcy Code or any other federal or state law relating to insolvency, bankruptcy or reorganization; (ii) an adjudication that the entity is insolvent or bankrupt; (iii) the entry of an order for relief under the federal Bankruptcy Code with respect to the entity; (iv) the filing of any such petition or the commencement of any such case or proceeding against the entity, unless such petition and the case or proceeding initiated thereby are dismissed within 90 days from the date of such filing; (v) the filing of an answer by the entity admitting the material allegations of any such petition; (vi) the appointment of a trustee, receiver or custodian for all or substantially all of the assets of the entity unless such appointment is vacated or dismissed within 90 days from the date of such appointment but not less than five days before the proposed sale of any assets of the entity; (vii) the insolvency of the entity or the execution by the entity of a general assignment for the benefit of creditors; (viii) the convening by the entity of a meeting of its creditors, or any class thereof, for purposes of effecting a moratorium upon or extension or composition of its debts; (ix) the failure of the entity to pay its debts as they mature; (x) the levy, attachment, execution or other seizure of substantially all of the assets of the entity where such seizure is not discharged within 30 days thereafter; (xi) the admission by the entity in writing of its inability to pay its debts as they mature or that it is generally not paying its debts as they become due; or (xii) the decree of the dissolution of the entity by the final judgment of a court of competent jurisdiction.

“Bonus Year” shall mean any fiscal year of the Company.

“Change of Control of the Company” shall mean such time as (a) any Person other than Parent or its direct or indirect subsidiaries shall become the beneficial owner, directly or indirectly, of more than 50% of the then outstanding voting control of the Company, (b) the Company sells or transfers all or substantially all of its assets to any person other than Parent or any of its direct or indirect subsidiaries or (c) there is a Bankruptcy involving the Company; provided, however, that any transaction that also constitutes a Change of Control of Parent shall not constitute a Change of Control of the Company.

“Change of Control of Parent” shall mean (a) the transfer of all or a majority of the outstanding voting power of Parent or the merger or consolidation of Parent with another entity, in each case, which results in the holders of the voting power of Parent immediately prior to such transaction (or series of transactions) holding less than 50% of the voting power of Parent or the surviving or resulting entity, as the case may be, following such transaction, (b) the sale or transfer by Parent of all or substantially all of its assets to any Person other than its direct or indirect subsidiaries or (c) a Bankruptcy involving Parent.

“COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and any state law of similar effect.

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“Person” means an individual, a corporation, a limited liability company, an association, a partnership, an estate, a trust and any other entity or organization, other than the Company or any of its Affiliates.

“Subsidiaries” means all persons and entities directly or indirectly controlled by the Company, where control may be by either management authority or equity interest.

SECTION 15. Source of Payments. All payments provided under this Agreement, other than payments made pursuant to a plan which provides otherwise, shall be paid in cash from the general funds of the Company, and no special or separate fund shall be established, and no other segregation of assets shall be made, to assure payment. The Executive shall have no right, title or interest whatsoever in or to any investments which the Company may make to aid the Company in meeting its obligations hereunder. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company.

SECTION 16. Withholding. All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law or contract.

SECTION 17. Assignment. Neither the Company nor the Executive may make any assignment of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other, provided, however, that the Company may assign its rights and obligations under this Agreement without the consent of the Executive in the event that the Company shall hereafter effect a reorganization, consolidate with, or merge into, any Person or transfer all or substantially all of its properties or assets to any Person. This Agreement shall inure to the benefit of and be binding upon the Company and the Executive, their respective successors, executors, administrators, heirs and permitted assigns.

SECTION 18. Severability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

SECTION 19. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of either party to require the performance of any term or obligation of this Agreement, or the waiver by either party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

SECTION 20. Notices. Any and all notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be effective when delivered in person or deposited in the United States mail, postage prepaid, registered or certified, and addressed to the Executive at his last known address on the books of the Company or, in the case of the Company, at its principal place of business, attention of the General

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Counsel, with a copy to Parent, attention of the Parent Designated Officer, or to such other address as either party may specify by notice to the other actually received.

SECTION 21. Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes all prior communications, agreements and understandings, written or oral, with respect to the terms and conditions of the Executive’s employment, including, without limitation, the Prior Agreement, but excluding the Proprietary Agreements, the Side Letter and the Indemnification Agreement.

SECTION 22. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and, prior to the Effective Date, by an expressly authorized representative of each of the Company and of Parent, who shall be deemed to be a third party beneficiary to this Agreement in respect of this Section 22 only to the same extent as if it were a signatory to this Agreement through the Effective Date, and from and after the Effective Date, signed by the Executive and by an expressly authorized representative of the Company. If the Executive and the Company determine that any payments or benefits payable under this Agreement intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A, the Executive and the Company agree to amend this Agreement, or take such other actions as the Executive and the Company deem reasonably necessary or appropriate, to comply with the requirements of Section 409A, the Treasury Regulations thereunder (and any applicable transition relief) while preserving the economic agreement of the parties. If any provision of the Agreement would cause such payments or benefits to fail to so comply, such provision shall not be effective and shall be null and void with respect to such payments or benefits, and such provision shall otherwise remain in full force and effect.

SECTION 23. Headings. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope, content or interpretation of any provision of this Agreement or any agreement referenced herein.

SECTION 24. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

SECTION 25. Arbitration. Except as otherwise expressly provided herein, any dispute, controversy or claim between the parties arising under this Agreement shall be settled by arbitration conducted in San Francisco, California in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in force (the “Rules”) and the laws of the State of California. In the event that a party requests arbitration, it shall serve upon the other party a written demand for arbitration stating the substance of the controversy, dispute or claim, and the contention of the party requesting arbitration. If possible, the arbitrator will be selected by mutual agreement. If the parties do not select the arbitrator by mutual agreement, the arbitrator shall be selected in accordance with the Rules of the American Arbitration Association. The decision of the arbitrator shall be in writing and shall set forth the basis therefore. The parties shall abide by all awards rendered in the arbitration proceedings, and all such awards may be enforced and executed upon in any court having jurisdiction over the party against whom enforcement of such award is sought. The Company shall pay the administrative charges, arbitrator’s fees and related expenses of the arbitration, but each party

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shall pay its own legal fees incurred in connection with such arbitration. This shall not preclude either party from seeking injunctive relief in any court having jurisdiction over the party against whom such injunction is sought, with respect to any violation of this Agreement (including without limitation the Proprietary Agreements) alleged to have occurred subsequent to the termination of employment hereunder and which, if proved, would be of the sort likely to cause harm as to which an award of money damages would not provide an adequate remedy.

SECTION 26. Governing Law. This Agreement, the rights of the parties and all claims, actions, causes of action, suits, litigation, controversies, hearings, charges, complaints or proceedings arising in whole or in part under or in connection herewith, will be governed by and construed in accordance with the domestic substantive laws of the State of California.

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company, by its duly authorized representative, and by the Executive, as of the date first above written.

THE EXECUTIVE:	THE COMPANY:
/s/ Myles B. McCormick	By:	/s/ Leslie Blodgett
Myles B. McCormick	Name:	Leslie Blodgett

[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]

Exhibit A

Release of Claims

I understand and agree completely to the terms set forth in my Employment Agreement dated as of January 14, 2010 (the “Agreement”).

I understand that this Release, together with the Agreement (including the Proprietary Agreements), constitutes the complete, final and exclusive embodiment of the entire agreement between Bare Escentuals, Inc., a Delaware corporation (the “Company”) and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated therein. Certain capitalized terms used in this Release are defined in the Agreement.

I hereby confirm my obligations under my Proprietary Agreements.

Except as otherwise set forth in this Release, I hereby generally and completely release the Company and its current and former directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent, and subsidiary entities, insurers, affiliates, and assigns (collectively, the “Released Parties”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Agreement (collectively, the “Released Claims”). The Released Claims include, but are not limited to: (1) all claims arising out of or in any way related to my employment with the Company, or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory and regulatory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair Employment and Housing Act (as amended). Notwithstanding the foregoing, the following are not included in the Released Claims (the “Excluded Claims”): (1) any rights or claims for indemnification I may have pursuant to any written indemnification agreement with the Company to which I am a party (including, without limitation, the Indemnification Agreement), the charter, bylaws, or operating agreements of the Company, or under applicable law; or (2) any rights which are not waivable as a matter of law. In addition, nothing in this Release prevents me from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except that I hereby waive my right to any monetary benefits or other personal relief in connection with any such claim, charge or proceeding. I hereby represent and warrant that, other than the Excluded Claims, I am not aware of any claims I have or might have against any of the Released Parties that are not included in the Released Claims.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA. I also acknowledge that the consideration given for the Released Claims is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) the Released Claims do not apply to any rights or claims that arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release (although I may choose voluntarily not to do so); (c) I have twenty-one (21) days to consider this Release (although I may choose to voluntarily sign it sooner); (d) I have seven (7) days following the date I sign this Release to revoke the Release by providing written notice to an officer of the Company; and (e) the Release will not be effective until the date upon which the revocation period has expired unexercised, which will be the eighth day after I sign this Release provided that I do not revoke it (“Effective Date”).

I represent and warrant that I have not assigned any of the Released Claims being released under this Release.

I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims hereunder, including but not limited to any unknown claims.

Nothing in this Release will be deemed or construed as an admission of wrongdoing or liability on the part of the Company.

I hereby represent that I have been paid all compensation owed and for all hours worked, I have received all the leave and leave benefits and protections for which I am eligible, and I have not suffered any on-the-job injury for which I have not already filed a workers’ compensation claim.

I acknowledge that to become effective, I must sign following my termination of employment and return this Release to the Company so that it is received not later than twenty-one (21) days following the date it is provided to me, and I must not revoke it thereafter.

Name: Myles B. McCormick

Date:

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EX-10.3

Exhibit 10.3

BARE ESCENTUALS, INC.

TRANSACTION BONUS PLAN

(January 14, 2010)

1. PURPOSE

The purpose of the Bare Escentuals, Inc. Transaction Bonus Plan is to motivate and reward certain employees of Bare Escentuals, Inc., a Delaware corporation, and its subsidiaries by providing them with the opportunity to earn cash bonuses upon the consummation of the transactions contemplated by the Merger Agreement. The Plan shall also serve a retention incentive for those employees who are critical to the Company’s success and whose retention is necessary to ensure a smooth transition in connection with the Merger and the future success of the Company.

2. DEFINITIONS

The following definitions shall be applicable throughout the Plan:

(a) “Board” means the Board of Directors of the Company, as constituted from time to time.

(b) “Bonus Agreement” means a written agreement which provides a Participant with the opportunity to earn a Transaction Bonus under the Plan.

(c) “Closing Date” has the meaning set forth in the Merger Agreement.

(d) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

(e) “Company” means Bare Escentuals, Inc. and its successors and assigns.

(f) “Merger Agreement” means the Agreement and Plan of Merger, dated as of January 14, 2010, among Shiseido Co., Ltd., a Japanese corporation, Blush Acquisition Corporation, a Delaware corporation and an indirect wholly-owned subsidiary of Shiseido Co., Ltd., and the Company.

(g) “Participant” means any officer or employee of the Company or any subsidiary of the Company who is designated as a Participant by the Board pursuant to a Bonus Agreement.

(h) “Plan” means this Transaction Bonus Plan, as amended from time to time.

(i) “Transaction Bonus” means a cash incentive payable under the Plan to a Participant upon consummation of the transactions contemplated by the Merger Agreement. The amount of a Participant’s Transaction Bonus shall be determined by the Board in its sole discretion and shall be separately communicated to the Participant in the Bonus Agreement delivered to such Participant.

3. ADMINISTRATION

The Board, in its sole discretion, shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

(a) To determine which employees of the Company and its subsidiaries shall be designated as Participants entitled to participation in the Plan and the terms under which they will be entitled to participate;

(b) To determine the amount of each Participant’s Transaction Bonus; and

(c) To make any and all determinations necessary or advisable for the administration of the Plan.

The Board shall have the discretionary authority to interpret the provisions of the Plan, and the decisions of the Board shall be final and binding on all parties making claims under the Plan. No member of the Board or its delegate will be liable for any action or determination made by the Board or its delegate with respect to the Plan or any distribution paid under the Plan and all members of the Board and its delegate shall be fully indemnified and held harmless by the Company or its successor in respect of any such action, determination or interpretation.

4. ELIGIBILITY

Officers and employees of the Company and its subsidiaries shall be eligible to participate in the Plan as determined in the sole discretion of the Board, which participation shall be evidenced by a Bonus Agreement. Exhibit A to the Plan sets forth a list of the initial Participants in the Plan.

5. MAXIMUM AMOUNT OF BONUS POOL

The maximum amount of Transaction Bonuses that may be paid under the Plan shall not exceed $1,119,000.00.

6. AMOUNT OF TRANSACTION BONUS

The Board shall determine the individual amount of each Participant’s Transaction Bonus and the Board shall communicate such amount to each Participant in his or her Bonus Agreement.

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7. CONDITIONS FOR PAYMENT AND PAYMENT OF TRANSACTION BONUS

(a) If the conditions for payment set forth in the Plan are satisfied, subject to Section 7(d) below, a Participant shall be entitled to receive from the Company one hundred percent (100%) of his or her Transaction Bonus.

(b) A Participant must remain continuously employed by the Company or a subsidiary of the Company until the date that the Transaction Bonuses are paid under Section 7(c) of the Plan in order to be eligible to be paid his or her Transaction Bonus. Upon a termination of a Participant’s employment for any reason prior to the date the Transaction Bonuses are paid hereunder, such Participant shall no longer be a participant in the Plan and shall not be entitled to receive any payment under the Plan.

(c) The Company shall pay the Transaction Bonuses in cash to Participants as soon as practicable following the Closing Date, but in no event later than the first payroll cycle of the Company which follows the Closing Date, unless such payroll cycle occurs within three (3) business days after the Closing Date, in which case the Company shall pay the Transaction Bonuses as soon as practicable following the Closing Date, but in no event later than the second payroll cycle of the Company following the Closing Date; provided, however, that, notwithstanding the foregoing, in no event shall the Transaction Bonuses be paid later than thirty (30) days following the Closing Date.

(d) Anything in the Plan to the contrary not withstanding, if any payment or benefit a Participant receives or is entitled to receive from the Company under the Plan or otherwise (a “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payments shall be equal to the Reduced Amount. The Reduced Amount shall be either (x) the largest portion of the Payments that would result in no portion of the Payments being subject to the Excise Tax; or (y) the largest portion, up to and including the total amount, of the Payments, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes and the Excise Tax (all computed at the highest applicable marginal rate), results it the Participant’s receipt, on an after-tax basis, of the greater amount of the Payments. The determination as to whether and to what extent Payments are required to be reduced in accordance with the preceding sentence shall be made at the Company’s expense by the Company’s independent accountants (the “Outside Firm”). In the event of any mistaken underpayment or overpayment under this Section 7(d), as determined by the Outside Firm, the amount of such underpayment or overpayment shall forthwith be paid to the

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Participant or refunded to the Company, as the case may be, with interest at 120% of the applicable Federal rate provided for in Section 7872(f)(2) of the Code. Any reduction in Payments required by this Section 7(d) shall be applied as follows: first, reduction of cash payments, second, cancellation of accelerated vesting of equity awards, and third, reduction of employee benefits. In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of the Participant’s stock awards.

8. GENERAL

(a) TAX WITHHOLDING. The Company shall have the right to deduct from each Transaction Bonus any federal, state or local income and/or payroll taxes required by law to be withheld with respect to such payments.

(b) SECTION 409A. The Plan and each Transaction Bonus are intended to be exempt from the rules of Section 409A of the Code, and the Plan and each Transaction Bonus shall be construed accordingly. Notwithstanding anything to the contrary in the Plan or a Bonus Agreement, neither the Company, nor the Board, nor any person acting on behalf of the Company or the Board, shall be liable to any Participant or to any other person by reason of any acceleration of income, or any additional tax, asserted by reason of the failure of a Transaction Bonus to satisfy the requirements of Section 409A of the Code.

(c) CLAIM TO TRANSACTION BONUSES AND EMPLOYMENT RIGHTS. Nothing in the Plan shall confer on any Participant the right to continued employment with the Company or any of its subsidiaries, or affect in any way the right of the Company or any subsidiary of the Company to terminate the Participant’s employment at any time, and for any reason. If earned, Transaction Bonuses represent unfunded and unsecured obligations of the Company and a holder of any right hereunder in respect of any earned Transaction Bonus shall have no rights other than those of a general unsecured creditor to the Company.

(d) NONTRANSFERABILITY; SUCCESSORS. A person’s rights and interests under the Plan, including any amounts payable under the Plan, may not be assigned, pledged, or transferred, except in accordance with the laws of descent and distribution. The Plan, and the Company’s obligations hereunder, shall be binding on any successor to the Company and references to the “Company” shall mean the Company as hereinbefore defined and any successor to the Company.

(e) EXPENSES. The expenses of administering the Plan shall be borne by the Company.

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(f) TITLES AND HEADINGS. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

(g) GOVERNING LAW. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan, and any Transaction Bonus shall be determined in accordance with the laws of the State of Delaware (without giving effect to principles of conflicts of laws thereof) and applicable Federal law.

(h) AMENDMENTS AND TERMINATION. The Board may from time to time amend, modify, or discontinue the Plan or any provision hereof; provided, however, that no such amendment to, or discontinuance, or termination of the Plan shall, without the written consent of a Participant, adversely affect any rights of such Participant with respect to his or her outstanding Transaction Bonus; and further, provided, however, that following acceptance of shares of Company common stock by Parent (as such term is defined in the Merger Agreement) in the Offer (as such term is defined in the Merger Agreement), no amendment, modification or termination of the Plan or any provision hereof or any outstanding Transaction Bonus may be effected and any action in contravention of the foregoing will be void and not given effect. The Plan shall automatically terminate upon the earlier of (i) the completion of all payments under the terms of the Plan or (ii) the termination of the Merger Agreement in accordance with its terms.

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