United States Securities And Exchange Commission

Washington, D.C. 20549

(AMENDMENT NO.___)

Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material under Rule 14a-12

ULTA SALON, COSMETICS & FRAGRANCE, INC.

Payment of Filing Fee (Check the appropriate box):

þ		No fee required.

o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies:
	(2)		Aggregate number of securities to which transaction applies:
	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)		Proposed maximum aggregate value of transaction:
	(5)		Total fee paid:

o		Fee paid previously with preliminary materials.

o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)		Amount Previously Paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

 

 

 

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 17, 2009

 

 

 

 

 

TO THE STOCKHOLDERS OF ULTA SALON, COSMETICS & FRAGRANCE, INC.:

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Ulta Salon, Cosmetics & Fragrance, Inc. (“Ulta”), a Delaware corporation, will be held on Wednesday, June 17, 2009, at 10:00 A.M. local time, at Ulta’s headquarters located at 1000 Remington Blvd., Bolingbrook, Illinois 60440, for the following purposes:

 

 

The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.

 

The Board of Directors has fixed the close of business on April 20, 2009, as the record date for the determination of stockholders entitled to notice of and to vote on the items listed above at this Annual Meeting and at any adjournment or postponement thereof.

 

By Order of the Board of Directors

 

 

Robert S. Guttman

Senior Vice President, General Counsel and Secretary

 

May 6, 2009

 

Important notice regarding availability of proxy materials
for Ulta’s 2009 Annual Meeting of Stockholders to be held on June 17, 2009:

 

The Proxy Statement and Annual Report to Stockholders on Form 10-K
for the year ended January 31, 2009 are available at http://ir.ulta.com.

 

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, KINDLY MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE (WHICH IS POSTAGE PREPAID, IF MAILED IN THE UNITED STATES). EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES OF RECORD ARE HELD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.

TABLE OF CONTENTS

 

 

1000 Remington Blvd., Suite 120
Bolingbrook, IL 60440

 

 

PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 17, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Record Holders — If your shares are registered directly in your name with our Transfer Agent, American Stock Transfer & Trust Company, you are considered, with respect to those shares, the stockholder of record or Record Holder. As the stockholder of record, you have the right to grant your voting proxy directly to Ulta or to vote in person at the Annual Meeting. We have enclosed or sent a Proxy Card for you to use.

 

Beneficial Owner — If your shares are held in a brokerage account or by another nominee, you are considered the Beneficial Owner of shares held in street name, and these proxy materials are being forwarded to you automatically, along with a voting instruction card from your broker, trustee or nominee. As a Beneficial Owner, you have the right to direct your broker, trustee or nominee how to vote and are also invited to attend the Annual Meeting. Since a Beneficial Owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting. Your broker, trustee or nominee has enclosed or provided voting instructions for you to use in directing how to vote your shares. If you do not give instructions to your broker, your broker can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. The election of Directors and the ratification of the appointment of independent registered public accounting firms are considered discretionary items. On non-discretionary items for which you do not give your broker instructions, the shares will be treated as broker non-votes.

 

 

 

To ensure that your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the Annual Meeting in person. Most stockholders have two options for submitting their votes:

 

 

For further instructions on voting, see your Proxy Card. If you attend the Annual Meeting, you may also submit your vote in person, and any previous votes that you submitted by mail will be superseded by the vote that you cast at the Annual Meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must obtain from the Record Holder a legal proxy issued in your name.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over the course of Ulta’s history, the Board of Directors has developed corporate governance practices consistent with its duties of good faith, due care and loyalty, to help fulfill its responsibilities to our stockholders.

 

Board of Directors meetings and committees

 

During the fiscal year ended January 31, 2009, the Board of Directors held 16 meetings. Commencing fiscal year 2003, Mr. Eck became our Non-Executive Chairman, and typically presides over the executive sessions. The Board of Directors has an audit committee, a nominating and corporate governance committee and a compensation committee. During fiscal year 2008, no director attended fewer than 75% of the aggregate meetings of the Board of Directors and of the committees on which he or she served that were held during the period for which he or she was a Director or committee member, respectively. Directors are invited and are expected to attend the Annual Meeting of Stockholders, and eight of our nine Directors then in office attended our 2008 Annual Meeting of Stockholders.

 

Committee Composition:  The following table provides the composition of each of our committees as of February 1, 2009:

 

 

 

 

 

Nominating and corporate governance committee

 

The nominating and corporate governance committee acts under a written charter that was approved by the Board of Directors and has been published under “Corporate Governance” in the Investor Relations section of the Ulta website at http://ir.ulta.com. The primary responsibility of the nominating and corporate governance committee is to recommend to the Board of Directors candidates for nomination as Directors and membership on committees of the Board. The committee reviews the performance and independence of each Director, and in appropriate circumstances, may recommend the removal of a Director for cause. The committee oversees the evaluation of the Board of Directors and makes recommendations to improve performance. The committee also recommends to the Board of Directors policies with respect to corporate governance. During fiscal year 2008, the nominating and corporate governance committee was composed of the following independent Directors: Messrs. Heilbronn (Chairman), Lebow and Gallagher. Yves Sisteron, also an independent Director, joined the committee on December 2, 2008. The Board of Directors has determined that each committee member qualifies as a

“nonemployee director” under rules and regulations of the Securities and Exchange Commission (the “SEC”), as well as the independence requirements of NASDAQ. The nominating and corporate governance committee met four times during fiscal year 2008.

 

Independence

 

Board member independence is an essential element of Ulta corporate governance. The Board of Directors has determined that each of the current non-employee Directors and each nominee for Director is free of any relationship that would interfere with his or her individual exercise of independent judgment with regard to Ulta. Lyn P. Kirby, Chief Executive Officer and President, is the sole member of the Board of Directors that is not independent due to her office with Ulta. Each member of the nominating and corporate governance committee, compensation committee and audit committee satisfy the current independence requirements of NASDAQ and the SEC.

 

Nominating and corporate governance committee charter

 

The nominating and corporate governance committee charter identifies the roles and responsibilities that govern the nominating and corporate governance committee, such as:

 

 

Nomination process — qualifications

 

The nominating and corporate governance committee is responsible for reviewing the appropriate skills and characteristics required of Directors in the context of prevailing business conditions, and in its nominating committee capacity, for making recommendations regarding the size and composition of the Board of Directors. The objective of the nominating and corporate governance committee is to create and sustain a Board of Directors that brings to Ulta a variety of perspectives and skills derived from high-quality business and professional experience. Although there are no specific minimum qualifications that a director candidate must possess, the nominating and corporate governance committee recommends those candidates who possess the highest personal and professional integrity, have prior experience in corporate management and the industry, maintain academic or operational expertise in an area of our business and demonstrate practical and mature business judgment.

 

We will consider all stockholder recommendations for candidates for the Board of Directors and, to date, we have not received a timely Director nominee from a stockholder. Stockholders who want to suggest a candidate for consideration should send a written notice, addressed to the Corporate Secretary at our principal executive offices at 1000 Remington Blvd., Suite 120, Bolingbrook, IL 60440. Further details about the nomination process may be found in the answer to Question 14 above, entitled “Nomination of Directors — How do I submit a proposed Director nominee to the Board of Directors for consideration?”

This notice must include the following information for each candidate the stockholder proposes to nominate: (1) name, age, business address and residence address, (2) principal occupation or employment, (3) class and number of shares of capital stock beneficially owned by such candidate and (4) and any other information relating to the candidate that is required to be disclosed in solicitations for proxies for the election of Directors pursuant to applicable SEC rules. In addition, the stockholder giving such notice must include his or her (1) name and record address and (2) the class and number of shares such stockholder beneficially owns.

 

We also consider potential director candidates recommended by current Directors, officers, employees and others. We may also retain the services of search firms to provide us with candidates, especially when we are looking for a candidate with a particular expertise, quality, skill or background. The nominating and corporate governance committee screens all potential candidates in the same manner, regardless of the source of the recommendation. Our review is typically based on any written materials provided with respect to potential candidates, and we review such materials to determine the qualifications, experience and background of the candidates. Final candidates are typically interviewed by members of the committee. In making its determinations, the committee evaluates each individual in the context of our Board of Directors as a whole, with the objective of assembling a group that can best perpetuate the success of our company and represent stockholder interests through the exercise of sound judgment. After review and deliberation of all feedback and data, the committee makes a recommendation to the full Board of Directors regarding whom should be nominated by the Board of Directors.

 

Code of Business Conduct

 

All Ulta employees, officers and members of the Board of Directors must act ethically at all times and in accordance with the policies comprising the Ulta Code of Business Conduct. We demand full compliance with this policy from employees, officers and members of the Board of Directors, including our Chief Executive Officer, Chief Financial Officer and such other individuals performing similar functions. Moreover, all corporate employees, officers and members of the Board of Directors have signed a certificate acknowledging that they have read, understood and will continue to comply with the policy, and all corporate employees and officers are required to read and acknowledge this policy on an annual basis. Ulta includes the Code of Business Conduct in new hire materials for all corporate employees. The policy is published and any amendments or waivers thereto will be published under “Corporate Governance” in the Investor Relations section of the Ulta website located at http://ir.ulta.com.

 

Disclosure committee

 

The disclosure committee is a management committee that acts under a written charter approved by the audit committee. Its primary responsibility is to assist our Chief Executive Officer and Chief Financial Officer in fulfilling their responsibility for oversight of the accuracy and timeliness of our disclosures. Management and the disclosure committee have established disclosure controls and procedures designed to ensure that disclosures required by the SEC and other written information to be disclosed to the investment community are recorded, processed, summarized and reported accurately on a timely basis. These disclosure controls and procedures are monitored and evaluated for their effectiveness on a regular basis. The disclosure committee, in conjunction with management, reviews and approves the preparation of SEC filings and various documents distributed to the investment community containing financial information or other material information. The disclosure committee discusses all relevant information with our Chief Executive Officer and Chief Financial Officer and, if needed, the Board of Directors and the audit committee.

 

Stockholder communication

 

Any stockholder is free to communicate in writing with the Board of Directors on matters pertaining to Ulta by addressing their comments to the Board of Directors, c/o General Counsel, Ulta Salon, Cosmetics & Fragrance, Inc., 1000 Remington Blvd., Suite 120, Bolingbrook, IL 60440, or by e-mail at InvestorRelations@ulta.com. Our General Counsel will review all correspondence addressed to our Board of Directors, or any individual Director, for any inappropriate correspondence and correspondence more suitably directed to management. Our General

Counsel will forward appropriate stockholder communications to our Board of Directors prior to the next regularly scheduled meeting of our Board of Directors following the receipt of the communication. Our General Counsel will summarize all correspondence not forwarded to our Board of Directors and make the correspondence available to our Board of Directors for its review upon our Board of Directors’ request.

 

PROPOSAL ONE

 

 

Our Amended and Restated Certificate of Incorporation provides that our Board of Directors be divided into three classes designated Class I, Class II and Class III, with each class consisting, as nearly as possible, of one-third of the total number of Directors. Each class serves a three-year term with one class being elected at each year’s annual meeting of stockholders, beginning in 2008. Vacancies on our Board of Directors may be filled by persons elected by a majority of the remaining Directors. A Director elected by our Board of Directors to fill a vacancy, including a vacancy created by an increase in size of our Board of Directors, will serve for the remainder of the full term of the class of Directors in which the vacancy occurred and until that Director’s successor is elected and qualified.

 

The Board of Directors is presently composed of nine members, eight of whom are non-employee, independent Directors. Each Director was elected to the Board of Directors to serve until a successor is duly elected and qualified or until his or her death, resignation or removal. There are currently no vacancies. Messrs. Gallagher, Defforey and DiRomualdo are the Class II Directors whose terms expire in 2009. Mr. Gallagher previously notified us of his intention not to stand for re-election at this Annual Meeting. Messrs. Defforey and DiRomualdo are nominees for re-election, and Ms. Nagler is a nominee for election, to the Board of Directors. Ms. Nagler, who is standing for election by the stockholders at this Annual Meeting for the first time, was first identified as a candidate by a third party search firm and was recommended by the nominating and corporate governance committee to our Directors. If elected at the Annual Meeting, each of the nominees would serve until the 2012 Annual Meeting of Stockholders and until their successors are elected and qualified, or until their death, resignation or removal. Messrs. Heilbronn and Lebow and Ms. Kirby are the Class III Directors with terms expiring in 2010, and Messrs. Eck, Sisteron and Philippin are the Class I Directors with terms expiring in 2011.

 

The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting will be required to approve the nominees for election and re-election. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this matter has been ratified.

Set forth below is biographical information for each nominee for election for a three-year term expiring at the 2012 Annual Meeting:

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE

 

Directors continuing in office until the 2010 Annual Meeting:

 

 

Directors continuing in office until the 2011 Annual Meeting:

 

 

During fiscal 2008, we granted Charles Philippin an option to purchase 50,000 shares of our common stock for his services as a director. These options vest 25% on each anniversary of the grant date. For the fiscal year ending January 31, 2009, we recognized for financial statement reporting purposes $19,969 in connection with this option, in accordance with SFAS No. 123(R). Assumptions used in the calculation of this expense are included in Note 9 (under Share-based awards) of our Form 10-K for the year ended January 31, 2009 (excluding, however, the impact of estimated forfeitures, as required under SEC rules). No other non-executive directors received fees, options or shares of stock for their services for fiscal 2008.

 

On June 21, 2004, we issued 126,400 shares of common stock to Mr. DiRomualdo pursuant to a restricted stock agreement under which 25% of the shares vest annually beginning February 26, 2005. On February 26, 2008, Mr. DiRomualdo became fully vested with respect to these shares.

 

The audit committee of the Board of Directors has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year 2009, ending January 30, 2010. Services provided to Ulta by Ernst & Young LLP in fiscal year 2008 are described under “Fees to Independent Registered Public Accounting Firm” below. Additional information regarding the audit committee is provided on page 14.

 

Ernst & Young LLP has audited the financial statements of Ulta since 1997. Representatives of Ernst & Young LLP will be present at the Annual Meeting to respond to appropriate questions and to make such statements as they may desire.

 

Stockholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm is not required by our Bylaws or otherwise. However, the Board of Directors is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate governance practice. If the stockholders fail to ratify the selection, the audit committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the audit committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of Ulta and our stockholders.

 

The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting will be required to ratify the selection of Ernst & Young LLP. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this matter has been ratified.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL TWO

 

FEES TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The following table sets forth the aggregate fees billed or expected to be billed by Ernst & Young LLP for professional services rendered for our fiscal years 2008 and 2007:

 

 

Audit Fees.  These amounts represent fees billed or expected to be billed by Ernst & Young LLP for professional services rendered for the audits of our annual financial statements for the fiscal years 2008 and 2007 and the reviews of the financial statements included in our quarterly reports on Form 10-Q. Fiscal 2008 audit fees includes the incremental audit work required for Ernst & Young LLP to provide their initial attestation regarding the effectiveness of our internal controls over financial reporting required by Section 404 of Sarbanes-Oxley.

 

Audit-Related Fees.  These amounts represent fees billed or expected to be billed by Ernst & Young LLP for professional services rendered that were not included under “Audit Fees” above. Audit-Related Fees for fiscal 2007

consists principally of services provided in connection with the initial public offering which was completed on October 24, 2007.

 

Tax Fees.  These amounts represent fees billed or expected to be billed by Ernst & Young LLP for professional services rendered for tax compliance related matters. We have engaged a different service provider for tax compliance services effective with our fiscal 2007 tax year.

 

All Other Fees.  These amounts represent service fees relating to online research software.

 

The audit committee has approved all professional fees paid to Ernst & Young LLP. The audit committee has determined that the rendering of tax services by Ernst & Young LLP is compatible with maintaining its independence.

 

The audit committee has established procedures for the pre-approval of all audit and permitted non-audit-related services provided by our independent registered public accounting firm. The procedures include, in part, that: (1) the audit committee, on an annual basis, shall pre-approve the independent registered public accounting firm’s engagement letter/annual service plan; (2) the audit committee must pre-approve any permitted service not included in the annual service plan; (3) the audit committee chairman may pre-approve any permitted service between regularly scheduled meetings, as applicable, and a report of such services and related fees are to be disclosed to the full audit committee at the next scheduled meeting; and (4) the audit committee will review a summary of the services provided and the fees paid on an annual basis.

 

The audit committee provides assistance to the Board of Directors in fulfilling its responsibility to our stockholders, potential stockholders and the investment community relating to corporate accounting, financial, management and reporting practices, the system of internal controls and the auditing process. Specifically, the audit committee assists the Board of Directors in monitoring the integrity of our financial statements, our independent registered public accounting firm’s qualifications and independence, the performance of our audit function and independent registered public accounting firm and our compliance with legal and regulatory requirements. The audit committee has direct responsibility for the appointment, compensation, retention (including termination) and oversight of our independent registered public accounting firm, and our independent registered public accounting firm reports directly to the audit committee.

 

During fiscal year 2008, the audit committee was composed of the following independent Directors: Messrs. Defforey, DiRomualdo and Philippin. Mr. Defforey has been designated by the Board of Directors as “audit committee financial expert” as defined in applicable SEC Rules. The Board of Directors made a qualitative assessment of Mr. Defforey’s level of knowledge and experience based on a number of factors, including his education and work, management and director experience. The Board of Directors has determined that each committee member qualifies as a “nonemployee director” under SEC rules and regulations, as well as the independence requirements of NASDAQ. All members of our audit committee are financially literate and are independent, as independence is defined in Rule 4350(d)(2)(A)(i) and (ii) of the NASDAQ listing standards and Section 10A(m)(3) of Exchange Act. The audit committee met 13 times during fiscal year 2008, and its report is presented below. The audit committee acts under a written charter that was adopted by the Board of Directors and has been published under “Corporate Governance” in the Investor Relations section of the Ulta website located at http://ir.ulta.com.

 

The audit committee assists the Board of Directors in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of Ulta.

 

The audit committee oversees Ulta’s financial process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. Ulta has an Internal Audit Department that is actively involved in examining and evaluating Ulta’s financial, operational and information systems activities and reports functionally to the Chair of the audit committee and administratively to management. In fulfilling its oversight responsibilities, the audit committee reviewed and discussed with management the periodic reports, including the audited financial statements in our Annual Report on Form 10-K. This included a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.

 

The audit committee reviewed with the independent registered public accounting firm, who is responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States of America, its judgments as to the quality, not just the acceptability, of Ulta’s accounting principles and such other matters as are required to be discussed with the audit committee under generally accepted auditing standards, including Statement on Auditing Standards No. 61 (Communication with Audit committees, AU Section 380), as amended. In addition, the audit committee has discussed with the independent registered public accounting firm the firm’s independence from management and Ulta, including the matters in the written disclosures and the Letter from the Independent Registered Public Accounting Firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the firm’s communications with the audit committee concerning independence.

 

The audit committee discussed with Ulta’s independent registered public accounting firm the overall scope and plans for their audit, and developed a pre-approval process for all independent registered public accounting firm services. The audit committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of their examination, their evaluation of Ulta’s internal and disclosure controls and the overall quality of Ulta’s financial reporting. The audit committee held 13 meetings during fiscal year 2008.

 

In reliance on the reviews and discussions referred to above, the audit committee recommended to the Board of Directors, and the Board of Directors approved, that the audited financial statements be included in Ulta’s Annual Report on Form 10-K for the fiscal year 2008, ended January 31, 2009, for filing with the SEC. The audit committee has appointed Ernst & Young LLP to be Ulta’s independent registered public accounting firm for the fiscal year 2009, ending January 30, 2010.

 

 

Audit Committee of the Board of Directors

 

Hervé J.F. Defforey (Chairman)
Robert F. DiRomualdo
Charles J. Philippin

 

 

The compensation committee met 23 times during fiscal year 2008, and its report is presented below. During fiscal year 2008, the compensation committee was composed of the following independent Directors: Messrs. Eck (Chairman), Lebow and Heilbronn. The Board of Directors has determined that each committee member qualifies as a “nonemployee director” under rules and regulations of the SEC, as well as the independence requirements of NASDAQ. The compensation committee acts under a written charter that was adopted by the Board of Directors and has been published under “Corporate Governance in the Investor Relations section of the Ulta website located at http://ir.ulta.com. Under this charter, the compensation committee is responsible for:

 

 

The compensation committee may under its charter delegate any of its responsibilities to a subcommittee, but only to the extent consistent with our bylaws, articles of incorporation, section 162(m) of the Internal Revenue Code and Nasdaq rules. In connection with the performance of its duties, the compensation committee has sought the input of our Chief Executive Officer with respect to her compensation, as well as, other executives’ compensation. During 2008 the compensation committee engaged Towers Perrin, an outside consultant, to assist in determining whether our compensation programs and pay levels were competitive in the marketplace and to provide advice regarding the overall structure of our compensation programs. Towers Perrin was engaged directly by the compensation committee and performed no other work for Ulta.

 

Compensation committee interlocks and insider participation

 

None of the members of our compensation committee has at any time been one of our officers or employees. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers serving on our Board of Directors or compensation committee.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS²

 

The compensation committee has reviewed and discussed the following Compensation Discussion and Analysis (CD&A) with management. Based on this review and discussion, the compensation committee recommended to the Board of Directors that the CD&A be included in Ulta’s 2008 Annual Report on Form 10-K and this Proxy Statement.

 

Compensation Committee of the Board of Directors

 

Dennis K. Eck (Chairman)
Steven E. Lebow
Charles Heilbronn

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Philosophy

 

Our executive compensation philosophy is to provide compensation opportunities that attract, retain and motivate talented key executives. We accomplish this by:

 

 

Our compensation program consists of a fixed base salary, variable cash bonus and stock option awards, with a significant portion weighted towards the variable components. This mix of compensation is intended to ensure that total compensation reflects our overall success or failure and to motivate executive officers to meet appropriate performance measures.

 

Overview of 2008 compensation

 

In 2008, we entered into a new employment agreement with our chief executive officer, Lyn Kirby. A full description of Ms. Kirby’s employment agreement was included in our Form 10-Q for the quarter ending May 5, 2008 and filed on June 17, 2008. This employment agreement was the result of a series of negotiations between the compensation committee and Ms. Kirby over a period of six months. In connection with negotiating the agreement and approval of the final agreement, the compensation committee sought the advice of Towers Perrin, its outside compensation consultant regarding various market practices, emerging compensation trends and its overall impression of the reasonableness of the compensation package provided. The intent of the new employment agreement was to:

 

 

 

As discussed in further detail below, for 2008, under the terms of our annual bonus plan, no bonuses were earned by any of our executives. However, due to the unforeseen difficulty that the economic downturn and its impact on the retail environment had on their ability to deliver results for 2008, the compensation committee decided to pay limited discretionary bonuses for 2008. In addition, our executives received stock option grants in 2008.

 

The following provides a discussion and analysis of the compensation paid to the executive officers named in the Summary Compensation Table below, or the named executive officers or NEOs, other than Mr. Barkus. Mr. Barkus left our employment on March 21, 2008, and pursuant to SEC rules is included as a named executive officer based on his compensation, including severance for 2008. Mr. Barkus’ compensation for 2008 consists solely of salary earned through his termination date, a guaranteed payment of $100,000 and amounts payable as severance under the terms of his employment agreement which is described below under “Employment Agreements.”

 

Peer group

 

Ms. Kirby’s compensation package under her new employment agreement was reviewed based on three market samples as provided by Towers Perrin:

 

 

 

Her base salary and target bonus opportunity is considered within the median of these comparator groups.

 

The compensation committee reviewed the same market samples in determining levels of merit salary increases for 2008 for the other NEOs.

 

Base salary

 

Base salaries are reviewed annually and are set based on individual contract negotiation, competitiveness versus the external market and internal merit increase budgets. Based on a review of marketplace salary increases

contained in survey data reviewed by the compensation committee, as well as its assessment of current economic and other market conditions, management proposes a merit baseline percentage increase in salaries. Ms. Kirby then recommends to the compensation committee adjustments to the baseline percentage (either up or down) based on her assessment of an individual’s performance, with input from the human resources department.

 

Ms. Kirby’s base salary was increased in 2008 as part of the negotiations for her new employment agreement. Such increase was intended to provide a base salary that approximates median of the market surveys for CEOs, as well as the peer group referenced above.

 

Mr. Bodnar’s base salary was also increased in 2008. In the course of preparation for our IPO in 2007, the compensation committee engaged Towers Perrin to provide guidance regarding whether our compensation plans were competitive and equitable. In connection therewith, Towers Perrin recommended and the compensation committee approved an increase in the base pay for Mr. Bodnar of $45,000, with an immediate $20,000 increase in 2007 and $25,000 in 2008 in order to provide Mr. Bodnar a base salary that approximates median of the retail industry survey data referenced above.

 

Annual bonuses

 

Under the terms of her contract Ms. Kirby has a target bonus of 100% of her base salary, with a maximum bonus equal to 200% of her base salary. Her target bonus was reduced as part of her contract negotiations and is considered within median for chief executive officers in the survey data and peer group discussed above. Mr. Bodnar had a target bonus of 40% of his base salary, with a maximum bonus payout of 100% of his base salary.

 

In fiscal 2008, the bonuses for both Ms. Kirby and Mr. Bodnar were based on achievement of two objective performance targets:

 

 

These targets were weighted 70% EBT and 30% ROIC.

 

No bonus is paid under an objective unless performance exceeds 80% of the target. A maximum of 250% of each target could be earned. Actual EBT for fiscal 2008 was $42.358 million (vs. target of $69.672 million) and ROIC ratio for 2008 was 6.71 (vs. target of 11.47), and therefore no bonuses for 2008 were earned by our executives under either performance objective for 2008.

 

The compensation committee can always use discretion, and did, to determine to pay a discretionary bonus for 2008, even though our overall performance did not meet the objective targets. The compensation committee determined that some bonus during an unpredictable retail environment was merited for Ms. Kirby and Mr. Bodnar due to their leadership and contributions in such environment, and their contribution to our attainment of stronger results than the norm for other retailers in 2008. Mr. Bodnar’s bonus was $17,000 or 13.3% of his target bonus. Ms. Kirby’s bonus was $80,000 or 10.4% of her target bonus. The amount of Mr. Bodnar’s bonus was determined with input from Ms. Kirby. Ms. Kirby also provided input regarding her own bonus, and the compensation committee sought input from the full Board before approving her bonus.

 

Stock options

 

In September 2008, we instituted a long term incentive program (LTIP) pursuant to which we anticipate making annual option grants to our executives and certain other employees. In addition, certain employees are eligible to receive grants of stock options upon hire or promotion. All executives, other than Ms. Kirby are eligible for the LTIP. Ms. Kirby received a significant option grant in 2008 in connection with her employment agreement,

and is entitled to future option grants under the terms of such agreement. As a result, the compensation committee determined that Ms. Kirby did not need any additional equity compensation under the LTIP. Therefore, the terms of her employment agreement provide that she is not eligible for the LTIP.

 

Under the LTIP each employee receives an option grant with a Black Scholes value equal to a targeted percentage of base salary. This targeted percentage was determined based on input from Towers Perrin as to market median practices for long term incentives. Mr. Bodnar’s LTIP target is 55% of his base salary, as was recommended by Towers Perrin for his position, and approved by the compensation committee.

 

Option grants under the LTIP generally have the following characteristics:

 

 

Prior to the adoption of the LTIP, on March 24, 2008 Mr. Bodnar also received an option grant, of 200,000 options. The exercise price for those grants was set based on the greater of the fair market value on March 24, 2008 or the average of the closing prices for our stock for the period March 20, 2008 through April 7, 2008, which was the ten day trading period following announcement of our fiscal 2007 earnings. In setting the exercise prices for these options the compensation committee wanted the market to have fully reacted to the fiscal 2007 earnings announcement before setting the exercise price, but did not want the price to be any lower than the closing price on March 24, 2008 for accounting reasons. Mr. Bodnar’s March option grant was intended to act as a retention device, as the compensation committee did not think that Mr. Bodnar had sufficient equity compensation at that time and could be at risk for retention. Other than how the exercise price was determined, Mr. Bodnar’s March 2008 option grants have the same terms as grants under the LTIP.

 

Option granting policy

 

In 2008 we adopted a general policy of making LTIP and other stock option grants and setting the exercise price for such options based on the closing price of our stock on the third business day following the date our earnings announcement is made for each fiscal quarter. This timing of option grants is, thus, generally consistent with when our executives and directors would be allowed to trade in our common stock under our insider trading policy. The compensation committee determined that setting the exercise price for stock options at this time was prudent in that it allowed for the market to process all reported public information prior to pricing of stock options, including officers and directors. Such a practice thereby eliminates any potential manipulation regarding the timing of stock option grants. All stock option grants are approved in advance by the compensation committee.

 

Benefits, perquisites and tax-gross-ups

 

For all employees, we offer a 401(k) plan with matching contributions equal to 40% of contributions made up to 3% of eligible compensation, and group health, life, accident and disability insurance. In addition, all employees are entitled to a discount on purchases at our stores.

 

In 2007, we became aware of an issue with the State of New York imposing income tax liabilities on our employees who were not residents of New York based on the amount of work for Ulta that these employees performed in New York (including business meetings and attendance at trade shows). This impacted a number of our employees who are residents of Illinois, including Ms. Kirby. Because a large portion of the beauty industry is concentrated in New York, we require certain of our employees to travel to and work in New York from time to time. However, as the income tax rates applicable in New York are substantially higher than those in Illinois, it was more expensive for our employees, on a tax basis, if we asked them to work in New York. Because we did not want to provide a disincentive to our employees to work from time to time in New York, and because the nature of their work

requires travel to New York, the compensation committee determined that it was in our best interests to gross-up non-New York employees for any differences in taxes paid on income in New York versus the rate that such employees would have paid in their home state. This tax gross-up is applicable to all employees impacted, not just executives. This tax issue applied not only in 2007, but also for prior years. Accordingly, the compensation committee determined to reimburse employees for all prior years in 2007, and to continue to gross-up employees for this difference in taxes each year.

 

Ms. Kirby was audited by the New York state tax authorities in connection with taxes owed due to her working in New York on company business. As a result, the company agreed that it should reimburse Ms. Kirby’s legal fees incurred in connection with this audit.

 

The compensation committee also agreed to reimburse Ms. Kirby in 2008 for up to $40,000 of her legal fees incurred in connection with the negotiation and preparation of her most recent employment agreement.

 

Severance

 

Under the terms of her new employment agreement Ms. Kirby will be entitled to certain severance benefits more fully described below under “Employment Agreements.” These severance benefits were increased over the severance benefits to which she would have been entitled under her old employment agreement. In entering into the new employment agreement and enhancing Ms. Kirby’s severance benefits the compensation committee compared Ms. Kirby’s benefits to those of other CEOs in its peer group, as well as among the survey data described above by Towers Perrin. The compensation committee ultimately determined that such benefits were within market practices based on the information provided by Towers Perrin and were provided to retain Ms. Kirby under a three year contract, during which it could implement a successorship plan.

 

Mr. Bodnar does not have any contractual rights to severance. Although we do not have a formal severance plan or policy, upon termination without cause we generally have paid executives six months base salary as severance in exchange for a release of claims. In the event Mr. Bodnar’s employment is terminated without cause, the compensation committee would likely consider a similar severance arrangement for him, but would not be required to provide any severance.

 

Accounting and tax considerations

 

The compensation committee also considers the accounting and tax impact of each element of compensation and in the past has tried to minimize the compensation expense impact of equity grants on our financial statements, while minimizing the tax consequences to executives.

 

A goal of the compensation committee is to comply with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended. Section 162(m) limits the tax deductibility for public companies, of annual compensation in excess of $1,000,000 paid to our Chief Executive Officer and any of our three other most highly compensated executive officers, other than our Chief Financial Officer. However, performance-based compensation that has been approved by our stockholders is excluded from the $1,000,000 limit if, among other requirements, the compensation is payable only upon the attainment of pre-established, objective performance goals and the committee of our Board of Directors that establishes such goals consists only of “outside directors.” The compensation committee is composed solely of outside directors.

 

The compensation committee considers the anticipated tax treatment to us and our executive officers when reviewing executive compensation and our compensation programs. While the tax impact of any compensation arrangement is one factor to be considered, such impact is evaluated in light of the compensation committee’s overall compensation philosophy and objectives. The compensation committee will consider ways to maximize the deductibility of executive compensation, while retaining the discretion it deems necessary to compensate officers in a manner commensurate with performance and the competitive environment for executive talent. From time to time,

the compensation committee may award compensation to our executive officers which is not fully deductible if it determines that such award is consistent with its philosophy and is in our and our stockholders’ best interests.

 

Our 2007 Incentive Award Plan has been designed and implemented with the intent to allow us to pay performance-based compensation under Section 162(m) of the Internal Revenue Code. Accordingly, stock option grants under the 2007 Incentive Award Plan should be performance based and therefore deductible under Section 162(m). The discretionary bonuses paid to the named executive officers in 2009 for 2008 performance will not qualify as performance based and may not be deductible.

 

Summary compensation table

 

The following table sets forth the compensation of our Chief Executive Officer, Chief Financial Officer and our other most highly compensated executive officers for our fiscal year ending January 31, 2009. We refer to these individuals collectively as the NEOs.

 

 

 

 

 

 

Grants of plan-based awards

 

The following table sets forth certain information with respect to grants of plan-based awards for fiscal 2008 to the NEOs.

 

 

 

 

Outstanding equity awards as of January 31, 2009

 

The following table presents information concerning options to purchase shares of our common stock held by the NEOs as of January 31, 2009.

 

 

 

 

Employment contracts

 

As discussed above, in 2008 we entered into a new employment agreement with Lyn Kirby. We also were parties to an employment agreement with Bruce Barkus our former COO, who departed Ulta on March 21, 2008.

 

Lyn Kirby

 

Ms. Kirby’s employment agreement provides for a base salary of $770,000 per year, which salary is subject to annual review and adjustment. Ms. Kirby is also eligible to earn a target bonus equal to 100% of her base salary up to a maximum bonus of 200% of base salary. She was also granted options to purchase 625,000 shares with a grant date of March 24, 2008, at an exercise price equal to $14.06, which was the greater of (i) the closing price of Ulta’s stock on the grant date, or (ii) the average of the closing prices for Ulta’s stock during the period March 19, 2008 — April 4, 2008. These options will vest and become exercisable in three installments on the date Ulta releases its earnings in 2009, 2010 and 2011 for its fiscal year as follows: 250,000 — fiscal year 2008-2009 earnings release date in 2009, 250,000 — fiscal year 2009-2010 earnings release in 2010 and 125,000 — fiscal year 2010-2011 earnings release in 2011. Ms. Kirby is also to receive the following option grants in future years:

 

 

 

In the event that Ms. Kirby’s employment is terminated without cause, or she terminates for “good reason” prior to the later of March 17, 2011 or the date on which we announce our fiscal 2010-2011 earnings, then she will be entitled to the following as severance subject to her providing of a general release of claims:

 

 

In addition, if Ms. Kirby’s employment is terminated without cause or for good reason within 12 months following a change in control, she will vest in all options and restricted stock that she holds regardless of when granted.

 

For this purpose “Cause” shall mean Ms. Kirby’s:

 

 

Any act or failure to act shall be considered “willful” only if done or omitted to be done without a good faith reasonable belief that such act or failure to act was in our best interests.

Ms. Kirby will have “Good Reason” to terminate her employment if:

 

 

Ms. Kirby must give written notice within thirty (30) days of any event giving rise to Good Reason and we must fail to cure within thirty (30) days of such notice in order for such event to qualify as a Good Reason termination.

 

In the event Ms. Kirby’s employment is terminated by reason of death or disability, she or her estate, subject to provision of a general release of claims, will be entitled to:

 

 

In connection with her employment agreement Ms. Kirby entered into an agreement not to disclose or use our confidential information at any time. She also agreed not to work for, or otherwise be involved for a period of one year with any competitor, and for a period of two years for any competitor engaged solely in the retail distribution of hair styling, beauty salon, spa services, fragrance, cosmetics, salon products or beauty aid/products. In addition, she agreed not to solicit any of our employees, customers or suppliers for a period of two years following her termination for any reason.

 

Bruce Barkus

 

We entered into an employment agreement with Mr. Barkus as of December 12, 2005. Under this agreement, Mr. Barkus served as our Chief Operating Officer. Mr. Barkus departed Ulta on March 21, 2008.

 

By the terms of his agreement, Mr. Barkus was entitled to receive an annual base salary of $580,000, as may be adjusted from time to time. Mr. Barkus was also able to earn an annual cash bonus beginning with the 2006 fiscal year, targeted at $725,000 based upon the attainment of pre-established performance criteria. On June 28, 2006, we amended his employment agreement to provide an additional guaranteed annual cash bonus of $100,000 each year beginning in fiscal 2006 until the fiscal year ending in 2012, provided that he were employed by us on such date.

 

On April 26, 2006 we granted Mr. Barkus options to purchase up to 632,000 shares of our common stock, 125,136 of which vested on the date of grant and 125,136 and 128,928 of which were to vest on the first and second anniversaries of December 12, 2005, respectively, for a total of 379,200 of the 632,000 options. All 632,000 options were granted with an exercise price per share equal to the fair market value of our common stock on the date of

grant, as determined by our Board of Directors based on all known facts and circumstances, including valuations prepared by a nationally recognized independent third-party appraisal firm. Mr. Barkus forfeited 252,800 options upon his departure from Ulta.

 

Under the terms of his agreement upon his departure from Ulta, Mr. Barkus received severance equal to one year’s base salary (at the rate in effect on his departure) payable over twelve months. Such severance was subject to his delivery of a general release of claims. Mr. Barkus is also subject to our policy regarding non-competition, non-solicitation and confidential information that will apply for one year following his departure.

 

Potential payments upon termination or change in control

 

The following chart sets forth the amount that Ms. Kirby and Mr. Bodnar would receive in the event that their employment were terminated without cause, for good reason, or due to death or disability, or in connection with a change in control, and they both liquidated all options, all on the last day of the 2008 fiscal year, January 31, 2009. These amounts do not include any value for:

 

 

 

Amounts indicated above for Ms. Kirby are pursuant to her employment agreement described above. Amounts indicated above for Mr. Bodnar assume that he would receive six months severance in exchange for a general release of claims under our general severance guidelines for executives, as described above.

 

Mr. Barkus’ employment with Ulta ended on March 21, 2008 and he received severance of one year of base salary in exchange for execution of a general release of claims and non-compete. This amount is included in the Summary Compensation Table under “All Other Compensation.”

 

The following table presents information concerning the beneficial ownership of the shares of our common stock as of April 20, 2009 by

 

 

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned by them, subject to community property laws where applicable. Shares of our common stock subject to options that are currently exercisable or exercisable within 60 days of April 20, 2009 are deemed to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

This table lists applicable percentage ownership based on 57,744,488 shares of common stock outstanding as of March 26, 2009, as reported in our Annual Report on Form 10-K filed with the SEC on April 2, 2009. Unless otherwise indicated, the address for each of the beneficial owners in the table below is c/o Ulta Salon, Cosmetics & Fragrance, Inc., 1000 Remington Blvd., Suite 120, Bolingbrook, IL 60440.

 

 

 

 

 

 

Section 16(a) of the Exchange Act requires our Directors and executive officers and persons who own more than 10% of a registered class of our equity securities to file reports of beneficial ownership and changes in beneficial ownership with the SEC. To our knowledge, based solely on a review of the copies of such forms furnished to us, and written representations that no other forms were required during the fiscal year ended January 31, 2009, all Section 16(a) filing requirements applicable to our Directors, executive officers and greater than 10% beneficial owners were complied with, except that Steven E. Lebow, a Director, Charles Heilbronn, a Director, and Charles J. Philippin, a Director, each untimely filed one report.

 

Related party transaction approval policy

 

Our Board of Directors has adopted written policies and procedures for the approval or ratification of any “related party transaction,” defined as any transaction, arrangement or relationship in which we are a participant, the amount involved exceeds $120,000 and one of our executive officers, Directors, Director nominees, 5% stockholders (or their immediate family members) or any entity with which any of the foregoing persons is an employee, general partner, principal or 5% stockholder, each of whom we refer to as a “related person,” has a direct or indirect interest as set forth in Item 404 of Regulation S-K. The policy provides that management must present to the audit committee for review and approval each proposed related party transaction (other than related party transactions involving compensation matters, certain ordinary course transactions, transactions involving competitive bids or rates fixed by law, and transactions involving services as a bank depository, transfer agent or similar services). The audit committee must review the relevant facts and circumstances of the transaction, including if the transaction is on terms comparable to those that could be obtained in arms’-length dealings with an unrelated third party and the extent of the related party’s interest in the transaction, take into account the conflicts of interest and corporate opportunity provisions of our code of business conduct, and either approve or disapprove the related party transaction. If advance approval of a related party transaction requiring the audit committee’s approval is not feasible, the transaction may be preliminarily entered into by management upon prior approval of the transaction by the chair of the audit committee subject to ratification of the transaction by the audit committee at its next regularly scheduled meeting. No Director may participate in approval of a related party transaction for which he or she is a related party.

 

Related party transactions and relationships

 

Since the beginning of fiscal 2008, we have engaged in the following transactions with our Directors, executive officers and holders of 5% or more of our common stock.

 

Transactions relating to our common stock

 

On June 21, 2004, we issued 126,400 shares of common stock to one of our Directors, Robert DiRomualdo, pursuant to a restricted stock agreement under which 25% of the shares vest annually beginning February 26, 2005. On February 26, 2008, Mr. DiRomualdo became 100% vested with respect to this stock. Mr. DiRomualdo did not pay any consideration for this stock, and we recognized an aggregate expense of $83,856 for financial statement reporting purposes.

 

Registration rights agreement

 

In connection with our initial public offering in October 2007, the holders of 5% or more of our common stock and certain of our Directors, among others, entered into a Third Amended and Restated Registration Rights Agreement with us relating to the shares of common stock they hold.

 

Transactions with vendors

 

Charles Heilbronn, one of our Directors, is Executive Vice President and Secretary, as well as a director, of Chanel, Inc. In fiscal 2008, Chanel, Inc. sold to Ulta approximately $5.6 million of fragrance on an arms’ length basis pursuant to Chanel’s standard wholesale terms, and is expected to continue to sell fragrance to Ulta during fiscal 2009.

 

Mr. Heilbronn is also a Membre du Conseil de Surveillance (a non-executive board of trustees) of Bourjois SAS (France), the parent company of Bourjois, Ltd. (U.S.). In fiscal 2008, Bourjois, Ltd. sold to Ulta approximately $4.3 million of beauty products on an arms’ length basis pursuant to Bourjois’ standard wholesale terms, and is expected to continue to sell beauty products to Ulta during fiscal 2009.

 

Other Matters

 

The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting of Stockholders. If any other matters are properly brought before the Annual Meeting of Stockholders, it is the intention of the persons named on the accompanying Proxy Card to vote on such matters in accordance with their best judgment.

 

It is important that proxies be returned promptly. Whether or not you expect to attend the Annual Meeting in person, you are requested to complete, date, sign, and return the proxy card as soon as possible.

 

By Order of the Board of Directors

 

Robert S. Guttman

Senior Vice President, General Counsel and Secretary

 

May 6, 2009

 

A COPY OF ULTA’S ANNUAL REPORT TO THE SEC ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 31, 2009, IS AVAILABLE WITHOUT CHARGE THROUGH THE INVESTOR RELATIONS SECTION OF OUR WEBSITE AT HTTP://IR.ULTA.COM, AND UPON WRITTEN REQUEST TO: INVESTOR RELATIONS, ULTA SALON, COSMETICS & FRAGRANCE, INC., 1000 REMINGTON BLVD., SUITE 120, BOLINGBROOK, IL 60440.

Ulta Salon, Cosmetics & Fragrance, Inc.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

     The undersigned hereby appoints Lynelle P. Kirby and Robert S. Guttman as proxies, with full power of substitution, to represent and vote as designated on the reverse side, all the shares of Common Stock of Ulta Salon, Cosmetics & Fragrance, Inc. held of record by the undersigned on April 20, 2009, at the Annual Meeting of Stockholders to be held at the Company’s headquarters located at 1000 Remington Boulevard, Bolingbrook, IL 60440, on June 17, 2009, or any adjournment or postponement thereof.

     Important notice regarding availability of proxy materials for the Annual Meeting of Stockholders to be held on June 17, 2009. The Proxy Statement and Annual Report are available at the Investor Relations section of our website at http://ir.ulta.com.

(Continued and to be signed on the reverse side)

ANNUAL MEETING OF STOCKHOLDERS OF

Ulta Salon, Cosmetics & Fragrance, Inc.

June 17, 2009

Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.

ê Please detach along perforated line and mail in the envelope provided. ê

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x

Signature of Stockholder

Date:

Signature of Stockholder

Date:

		Note:		Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.