Details of the new sales director compensation plan, announced in July 2007.

Sales directors in Mary Kay are raving about how much the company loves them and how there has never been a better time to be a sales director. But alas, the plan essentially offers bonuses for higher levels… so the vast majority of sales directors will see little to no change in their commission checks from this.

Old plan: A sales director got a $500 bonus when her unit had 5 or more qualified recruits ($600+ initial wholesale order) in a month.

New plan: A sales director will get a $300 bonus when the unit has 3 or 4 qualified recruits in a month. If the unit has 5 or more qualified recruits, she gets a $500 bonus.

Old plan: No bonus for star consultants

New plan: Bonus of $300 to $500 per quarter if the unit has 9 or more star consultants (total wholesale orders of $1,800 or more in a quarter)

Old plan: No wellness benefit

New plan: Cash of $750 to $1,800 once per year, encouraged to be used toward health insurance or other health-related items. Based upon prior year’s wholesale, and must have a minimum production of $5,000 per month on average to qualify for anything.

***The bottom line: A sales director can receive a low of $0 and a high of $7,400 under this plan. Since most sales directors don’t come close to meeting any of these milestones, most will receive nothing under the new bonus plan.***

This plan appears to emphasize recruiting and frontloading, telltale signs of a pyramid scheme.

The details:

Mary Kay began her Company with a vision to reward your commitment to her mission. We are pleased to announce the following enhancements to the Independent Sales Director compensation program. These enhancements are effective July 1, 2007, and are designed to further support you as you lead by example.

You’ll notice that this overview also touches briefly on some of the points that haven’t changed. For details on those points, please refer to your Independent Sales Director Agreement or to the online Advance Brochure. Official written notice regarding the updates that will be made to your Agreements with the Company to reflect these enhancements will be coming in a letter you’ll receive from Gary Jinks in a few weeks. In addition, the online Advance Brochure will be updated soon to include these changes.

Independent Sales Director Compensation Opportunities – Overview

• NEW: $300 Unit Development Bonus for three or four qualified unit recruits. Effective July 1, 2007, a Sales Director is entitled to a Sales Director Unit Development Bonus of $300 for each month three or four “qualified” new unit members are added to her Sales Unit. A qualified unit member is one whose initial order with the Company is $600 or more in wholesale Section 1 products, and it is received and accepted by the Company in the same or following calendar month that her Independent Beauty Consultant Agreement is received and accepted by the Company.
• The $500 Unit Development Bonus remains unchanged: A Sales Director is entitled to a Sales Director Unit Development Bonus of $500 for each month five or more “qualified” new unit members are added to her Sales Unit.
• NEW: Star Consultant Bonus
• Independent Sales Directors qualify for a $300 Bonus when they have 5-9 Star Consultants in their Sales Unit in a contest quarter.
• Independent Sales Directors qualify for a $400 Bonus when they have 10-14 Star Consultants in their Sales Unit in a contest quarter.
• Independent Sales Directors qualify for a $500 Bonus when they have 15 or more Star Consultants in their Sales Unit in a contest quarter.
• NEW: Wellness Award Bonus Program: This special award was designed to encourage you to ensure that your physical wellness is a priority. Naturally, this is a cash award that can be used in any way you choose, but we hope you’ll consider using it to offset the expenses associated with needs or activities that contribute to your physical wellness. With the cost of health care, fitness center dues and even relaxing vacations with your family on the rise each year, we have no doubt you’ll agree that this is a very special award indeed! One check will be paid in January of each year based on net adjusted Section 1 unit wholesale from the previous calendar year as follows:
• Wholesale of $60,000 – $124,999 = $750 Bonus
• Wholesale of $125,000 – $186,999 = $1,200 Bonus
• Wholesale of $187,000+ = $1,800 Bonus
• Independent Sales Director Term Life Insurance Award and Disability Award Programs – No change.
• Personal Team Building Bonus: $100 for each qualified personal recruit – No change.
• Personal Recruiting Commission: 4%, 9%, or 13% – No change.
• Sales Director Unit Volume Commissions of 9% or 13%; and the 10% Unit Volume Bonus beginning at $5,000 wholesale – No change.
• Senior Sales Director and above Offspring Commissions of 4 to 6% – No change.

Questions?

Below are some questions you may have regarding these compensation enhancements.

Q: Why are you making these changes to the compensation program?
A: These enhancements to the program encourage growth through rewarding on pre-existing programs as well as make awards available at more attainable levels, without taking away from the current incentives already in place. We designed these enhancements to compliment each other and the programs already in place.

Q: Why are you focusing on Star Consultants in regard to compensation?
A: As you know, the Star Consultant program was designed to motivate Independent Beauty Consultants to maintain a consistent level of product sales to their customers throughout each quarter of the year. This enhancement to the compensation program helps support you as you continue to motivate the Independent Beauty Consultants in your unit to build their customer bases and maintain consistent product sales. Sales Directors who are Star Consultants count toward their unit’s total Stars in the quarter.

Q: Do I have to use the Wellness Award Program bonus on health insurance, fitness club dues or other costs associated with my physical wellness?
A: No. As an independent contractor, you can use this bonus on anything you choose. However, we know that, among other things associated with your physical wellness, health insurance is a growing concern among Independent Sales Directors and this bonus can help you make your health insurance more affordable. If you’d like information on insurance plans available to you as an independent contractor, you can contact PRO Insurance Managers, Inc. online at www.pro4.us or call them at 1-800-821-7383. PRO Insurance Managers, one of the nation’s leading independent insurance brokers, was chosen as the Direct Selling Associations exclusively endorsed program resource to all member companies.

Q: Do Stars for the June 16 through June 30, 2007, timeframe count toward these compensation enhancements?
A: Yes!

We knew that you’d be excited to learn of these enhancements and the potential they can bring to your business and your earnings potential. As I mentioned earlier in this message, official written notice regarding changes to your Agreement with the Company will be coming in a letter you’ll receive from Gary Jinks in a few weeks.

Have a great weekend, and I’ll see you at Seminar!

Sincerely,

Darrell Overcash
President Mary Kay U.S.