EMPLOYMENT AGREEMENT

Exhibit 10.4

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into this 16th day of June, 2008, by and between Ulta Salon, Cosmetics & Fragrance, Inc., a Delaware corporation (the “Company”), and Lyn Kirby (the “Executive”).

WITNESSETH:

      WHEREAS, the Executive and the Company previously have entered into an employment agreement dated as of June 23, 2006 (the “Prior Agreement”), pursuant to which the Company has employed the Executive as its President and Chief Executive Officer; and

      WHEREAS , the parties hereto (the “Parties”) desire to continue the Executive’s employment on the terms and subject to the conditions set forth herein;

      NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows:

      1.  Employment Term . The term of the Executive’s employment under this Agreement shall commence on March 17, 2008 (the “Commencement Date”) and shall continue unless sooner terminated under Section 5 through the later of the third anniversary thereof or the date on which the Company announces its fiscal year 2010-2011 earnings (the “Term”). Upon the expiration of the Term, the Executive’s employment shall automatically terminate without further obligation of the Parties, other than Executive’s continued compliance with the Policy (as defined in Section 10).

      2.  Duties and Extent of Services .

     (a) During the Term, the Executive shall serve as the President and Chief Executive Officer of the Company. In addition, at all times during the Term, the Company will nominate Executive to serve as a member the Board of Directors of the Company (the “Board”). The Executive shall have such duties and responsibilities as may be consistent with the position of President and Chief Executive Officer as reasonably determined, from time to time, by the Board. Executive shall report directly

to the Board and shall be subject to the direction and control of the Board, its committees and its non-executive chairman or any non-executive lead director.

     (b) Notwithstanding Section 2(a), the Executive acknowledges and agrees upon request of the Board that she will participate in and assist and cooperate with the Board to establish and implement a successorship strategy in which she will transition the President and Chief Executive Officer duties to a successor chosen by the Board.

     (c) The Executive shall be a full-time employee of the Company and shall devote her full business time and efforts to the duties required of her in the positions described in this Section 2, and in such other positions or offices of the Company or its subsidiaries or affiliates as may be required of her hereunder consistent with such positions. Notwithstanding the foregoing provisions of this Section 2, the Executive may from time to time engage in such other pursuits, including, without limitation personal legal and personal financial affairs, as shall not materially interfere with the proper performance of her duties and obligations hereunder.

      3.  Compensation .

     (a) Salary . For her services hereunder, effective as of the Commencement Date, the Company shall pay the Executive a base salary of Seven Hundred Seventy Thousand Dollars ($770,000) per annum, subject to review annually by the Compensation Committee of the Board (the “Committee”) and adjustment as the Committee based on such review may determine (such amount, the “Base Salary”) ; provided, however, Executive’s Base Salary may not be decreased without Executive’s express written consent unless the decrease is pursuant to a general compensation reduction applicable to all, or substantially all, officers of the Company.

     (b) Base Salary shall be paid in accordance with the regular payroll policies of the Company in effect from time to time.

     (c) Incentive Bonus Compensation . The Executive shall be eligible to earn a bonus with respect to each fiscal year of the Company (each, a “Fiscal Year”) completed during the Term based on Company achievement of performance targets established by

the Committee (“Annual Bonus”). The performance targets for the Annual Bonus shall be established according to the same terms and conditions applicable to other senior management of the Company. The Executive’s target Annual Bonus for any Fiscal Year shall not be less than 100% of Base Salary (“Target Bonus Objective”), and the Executive shall be eligible to earn a maximum bonus of 200% of Base Salary. The actual bonus will be earned in full by the Executive as of the last day of the related Fiscal Year, based on achievement of the set performance targets, and paid to Executive no later than April 15 following the end of the related Fiscal Year, unless it is administratively not practicable to make payment by April 15 due to unforeseen circumstances, in which case it shall be paid as soon as administratively practical to make such payment but no later than December 31 of such year (the “Bonus Payment Date”).

     (d) Stock Option Grants .

     (1) The 2008 Option . On March 24, 2008, pursuant to the terms of the Company’s 2007 Incentive Award Plan (the “LTIP”) the Company granted the Executive a stock option with respect to 625,000 shares (the “2008 Option Shares”) of the common stock of the Company (“Common Stock”), par value $0.01 per share (the “2008 Option”) at an exercise price equal to $14.06. The 2008 Option and the Executive’s rights thereunder are subject to the terms and conditions of the LTIP and the form option agreement approved by the Committee for option grants under the LTIP; provided, that the 2008 Option shall vest in accordance with the following schedule, subject to Section 5 of this Agreement:

     (A) the 2008 Option shall become vested as to 250,000 of the 2008 Option Shares on the date of the Company’s announcement of its Fiscal Year 2008-2009 earnings;

     (B) the 2008 Option shall become vested as to 250,000 of the 2008 Option Shares on the date of the Company’s announcement of its Fiscal Year 2009-2010 earnings; and

     (C) the 2008 Option shall become vested as to 125,000 of the 2008 Option Shares on the date of the Company’s announcement of its Fiscal Year 2010-2011 earnings.

     In addition, if Executive’s employment is terminated without Cause under Section 5(c) prior to December 31, 2010 then, subject to Section 5(h) and Executive’s continued compliance with the Policy (as defined in Section 10 below), the 2008 Option shall remain exercisable through March 24, 2011.

     (2) The 2009 Option . The Company shall grant to the Executive, on the first date that the Company allows executives of the Company to trade in the Common Stock pursuant to the Company’s trading policy (the “First Trading Date”), following the announcement of its Fiscal Year 2008-2009 earnings (the “2009 Grant Date”), a stock option with respect to 200,000 shares (the “2009 Option Shares”) of Common Stock (the “2009 Option”) at an exercise price equal to Fair Market Value (as determined under the LTIP or any successor plan thereto) on the 2009 Grant Date. The 2009 Option and the Executive’s rights thereunder shall be subject to the terms of the LTIP (or any successor plan thereto) and the standard form option agreement approved by the Committee for option grants from time to time thereunder; provided, however, that the 2009 Option shall vest in accordance with the following schedule, subject to Section 5 of this Agreement:

     (A) the 2009 Option shall become vested as to 100,000 of the 2009 Option Shares on the date of the Company’s announcement of its Fiscal Year 2009-2010 earnings; and

     (B) the 2009 Option shall become vested as to 100,000 of the 2009 Option Shares on the date of the Company’s announcement of its Fiscal Year 2010-2011 earnings.

     (3) The 2010 Option . The Company shall grant to the Executive, on the First Trading Date following the announcement of its Fiscal Year 2009-2010

earnings (the “2010 Grant Date”), a stock option with respect to 200,000 shares (the “2010 Option Shares,” and together with the 2008 and 2009 Options Shares, the “Option Shares”) of Common Stock (the “2010 Option”) at an exercise price equal to Fair Market Value (as determined under the LTIP or any successor plan thereto) on the 2010 Grant Date. The 2010 Option and the Executive’s rights thereunder shall be subject to the terms of the LTIP (or any successor plan thereto) and the standard form option agreement approved by the Committee for grants of options thereunder; provided, however, that the 2010 Option shall become vested on the date of the Company’s announcement of its Fiscal Year 2010-2011 earnings, subject to Section 5 of this Agreement.

     (4) In the event that Executive’s employment is terminated without Cause under Section 5(c) prior to the date on which the 2009 and 2010 Options are otherwise scheduled to be granted under Sections 3(d)(2) and (3) above, then the 2009 and 2010 Options shall, subject to Section 5(h) be granted on the date immediately prior to the date Executive’s employment is so terminated, and shall be fully vested upon grant.

     (5) Subject to continued compliance with the Policy, the 2009 and 2010 Options shall have a term of three years from the 2009 and 2010 Grant Dates (including if the grant date is under Section 3(d)(4)), respectively, during which Executive may exercise the 2009 and 2010 Options regardless of Executive’s continued employment; provided, however, that if Executive’s employment is terminated for Cause under Section 5(b) the 2009 and 2010 Options shall automatically expire and no longer be exercisable.

     (6) Notwithstanding anything to the contrary contained in this Section 3(d), each of the 2008, 2009 and 2010 Options (collectively, the “Contract Options”) shall provide that they shall be fully-exercisable at all times during their respective terms; provided, however, after the termination of Executive’s employment for any reason, the Contract Options may be exercised only with respect to vested Option Shares (including any Contract Options which

vest upon termination) and all unvested Contract Options shall expire. In all events the Contract Options and the Option Shares shall be subject to the vesting provisions set forth in this Section 3(d), and to the extent the Contract Option is exercised before it has become vested, the Option Shares so acquired shall be, until the Executive’s rights with respect to such Option Shares are vested in accordance with this Section 3(d), Restricted Stock (as defined in the LTIP) subject to forfeiture and cancellation upon the same terms and conditions as applicable to the Contract Options prior to their exercise. For this purpose, a Contract Option shall first be deemed to be exercised with respect to the vested portion thereof, and thereafter with respect to that portion which is due to become vested hereunder in the shortest time frame. As a condition to exercising the Contract Options, the Executive shall be required to (i) execute such agreements as ordinarily executed by recipients of Restricted Stock under the LTIP, and (ii) deliver in accordance with any method made available under the Plan by the Committee, cash, vested Option Shares acquired upon exercise of the Contract Options or other unrestricted shares of Common Stock held by Executive for at least six months, with a Fair Market Value (as determined under the LTIP or any successor plan thereto) equal to the minimum amount required to satisfy all income and employment tax withholding obligations of the Executive that may be due upon exercise of the Contract Options, vesting of the Restricted Stock or the filing of an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”) with respect thereto.

     (7) Tolling . In the event that upon the Executive’s termination of employment, (i) the Option Shares may not be issued by reason of any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body or (ii) Executive shall be prohibited from selling the Option Shares by reason of her possession of material nonpublic information regarding the Company, then notwithstanding anything contained in the Contract Option agreements to the contrary, the Contract Options shall be exercisable through the earlier of (A) the term set forth in the option agreement notwithstanding any termination of employment; or (B)

the date that is 90 days following the date that the Company determines that the provisions of clause (i) or (ii) of this Section 3(d)(7) no longer apply. The determination of whether the extension of the option exercise period under this Section 3(d)(7) applies, and when it ends under clause (B) hereof shall be made in the discretion of the Company, with the approval of the Audit Committee of the Board of Directors upon the advice of outside legal counsel to the Company.

     (8) Grants under LTIP . The Executive acknowledges that the Contract Options are being granted to her in lieu of her eligibility to participate in grants under the Company’s Long Term Incentive Plan, any successor thereto, or any other plan or arrangement that the Company may adopt in the future with respect to equity compensation for senior executives. In addition, Executive agrees not to request to the Board or any Committee thereof any further equity compensation grants for herself. However, the parties acknowledge that nothing herein shall preclude the Committee from deciding, in its sole discretion, to grant the Executive additional equity awards at any time after the Commencement Date.

      4.  Benefits .

     (a) Standard Benefits . During the Term, the Executive shall be eligible to participate in such medical, health, pension, welfare, and insurance plans offered by the Company to other management employees as she elects from time to time (subject to the terms of such plans). The Executive shall participate in any other benefit plans or arrangements on a basis that is at least as favorable to the Executive as that which is applicable to any other senior officer of the Company.

     (b) Expenses . The Company agrees to reimburse the Executive for all reasonable travel and business expenses incurred by her in the performance of her duties hereunder in accordance with the Company’s business expense reimbursement policies as in effect from time to time. All such reimbursements shall be made no later than December 31 of the year following the year in which the expense was incurred. The amount of reimbursements provided in one year shall not affect the amounts provided in

any subsequent year. Such reimbursements shall not be subject to liquidation or exchange for another benefit.

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

     (d) Indemnification . The Executive sh