EXHIBIT 10.1

 

THE ESTÉE LAUDER COMPANIES INC.

EXECUTIVE ANNUAL INCENTIVE PLAN

 

1.              PURPOSE.

 

The principal purposes of The Estee Lauder Companies Inc. Executive Annual
Incentive Plan (the “Plan”) are to provide incentives and rewards to the
Executive Officers of The Estée Lauder Companies Inc. (the “Company”), including
those who may be employed by any of the Company’s subsidiaries and affiliates,
and to assist the Company in motivating them to achieve the Company’s annual
performance goals.

 

2.              ADMINISTRATION OF THE PLAN.

 

The Plan will be administered by the Compensation Committee of the Board of
Directors of the Company (the “Board”) from among its members (or such other
Committee as may be appointed by the Board) (the “Committee”) and shall be
comprised, unless otherwise determined by the Board, solely of not less than two
members who shall be “outside directors” within the meaning of Treasury
Regulation Section 1.162-27(e)(3) under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the “Code”).

 

The Committee shall have all the powers vested in it by the terms of this Plan,
such powers to include authority (within the limitations described herein) to
select the persons to be granted opportunities under the Plan, to determine the
time when opportunities will be granted, to determine whether objectives and
conditions for achieving an opportunity have been met, to determine whether
opportunities will be paid out at the end of the opportunity period or deferred,
and to determine whether an opportunity or payout of an opportunity should be
reduced or eliminated.

 

The Committee shall have full power and authority to administer and interpret
the Plan and to adopt such rules, regulations, agreements, guidelines and
instruments for the administration of the Plan and for the conduct of its
business as the Committee deems necessary or advisable. The Committee’s
interpretations of the Plan in its sole discretion, and all actions taken and
determinations made by the Committee pursuant to the powers vested in it
hereunder, shall be conclusive and binding on all parties concerned, including
the Company, its stockholders and any person granted an opportunity under the
Plan.

 

The Committee may delegate all or a portion of its administrative duties under
the Plan to such officers or other employees of the Company as it shall
determine; provided, however, that no delegation shall be made regarding the
selection of Executive Officers of the Company who shall be granted
opportunities under the Plan, the amount and timing thereof, or the objectives
and conditions pertaining thereto.

 

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3.              ELIGIBILITY.

 

The Committee, in its discretion, may grant opportunities to Executive Officers
for each fiscal year of the Company as it shall determine. For purposes of the
Plan, Executive Officers shall be defined as those persons who shall be denoted
as such from time to time by the Company in the Company’s filings with the
Securities and Exchange Commission and those other persons as may be designated
as such from time to time by the Compensation Committee. Executive Officers
granted opportunities for a fiscal year of the Company are referred to as
“participants” for such fiscal year.

 

4.              OPPORTUNITIES.

 

(a)         Setting of Opportunities. For each fiscal year of the Company
commencing with the fiscal year beginning July 1, 2013, each participant shall
be granted an opportunity (or opportunities) under the Plan as soon as
practicable after the start of such fiscal year and no later than 90 days after
the commencement of such fiscal year; provided, however, that if an individual
becomes eligible to participate during a fiscal year and after such 90 day
period that individual may be granted an opportunity (or opportunities) for a
portion of such fiscal year ending on the last day of such fiscal year if such
opportunity (or opportunities) is granted after no more than 25% of the period
of service to which the opportunity (or opportunities) relates has elapsed.

 

(b)         Performance Targets. For each fiscal year of the Company commencing
with the fiscal year beginning July 1, 2013, the annual performance target for
each opportunity shall be determined by the Committee in writing, by resolution
of the Committee or other appropriate action, not later than 90 days after the
commencement of such fiscal year, and each such performance target shall state,
in terms of an objective formula or standard, the method for computing the
amount of compensation payable to the applicable participant if such performance
target is attained; provided, however, that if an individual becomes eligible to
participate during a fiscal year and after such 90 day period that individual’s
performance target (or targets) may be determined by the Committee in writing,
by resolution of the Committee or other appropriate action, after no more than
25% of the period of service to which the performance target (or targets)
relates has elapsed. The annual performance target for each opportunity shall be
based on achievement of hurdle rates, targets and/or growth in one or more
business criteria that apply to the individual participant, one or more business
units or the Company as a whole. The business criteria shall be as follows,
individually or in combination: (i) net earnings; (ii) earnings per share;
(iii) net sales; (iv) market share; (v) net operating profit; (vi) expense
control; (vii) working capital relating to inventory and/or accounts receivable;
(viii) operating margin; (ix) return on equity; (x) return on assets;
(xi) return on invested capital, (xii) planning accuracy (as measured by
comparing planned results to actual results); (xiii) gross margin, (xiv) market
price per share; and (xv) total return to stockholders. In addition, the annual
performance targets may include comparisons to performance at other companies,
such performance to be measured by one or more of the foregoing business
criteria. Furthermore, the measurement of performance against targets may
exclude or adjust for the impact of certain events or occurrences including:
(i) asset impairments; (ii) litigation

 

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or claim judgments or settlements; (iii) the effect of changes in tax laws,
accounting principles, or other laws or regulatory rules affecting reported
results; (iv) any reorganization and restructuring programs; (v) the cumulative
effect of changes in accounting principles; (vi) extraordinary nonrecurring
items as described in FASB Accounting Standards Codification Topic 225 (or any
successor pronouncement thereto) and/or in management’s discussion and analysis
of financial condition and results of operations appearing in the Company’s
reports for the applicable period; (vii) acquisitions, divestitures or
discontinued operations; (viii) gains or losses on refinancing or extinguishment
of debt; (ix) changes in foreign currency exchange rates; (x) a change in the
Company’s fiscal year; (xi) significant changes in the number or type of shares
outstanding (due to events such as stock splits, stock dividends,
recapitalizations and acquisitions involving the stock of the Company); and
(xii) any other specific unusual or nonrecurring events, or objectively
determinable category thereof.

 

(c)          Payout of Opportunities. As a condition to the right of a
participant to receive a payout of an opportunity granted under this Plan, the
Committee shall first be required to certify in writing, by resolution of the
Committee or other appropriate action, that the achievement of the opportunity
has been accurately determined in accordance with the provisions of this Plan.
Opportunities for a fiscal year shall be payable as soon as practicable
following the certification thereof by the Committee for such fiscal year.

 

(d)         Discretion. After an opportunity has been granted, the Committee
shall not increase such opportunity, and after a performance target has been
determined, the Committee shall not revise such performance target.
Notwithstanding the attainment by the Company and a participant of the
applicable targets, the Committee has the discretion, by participant, to reduce,
prior to the certification of the opportunity, some or all of an opportunity
that otherwise would be paid.

 

(e)          Deferral. The Committee may determine that the payout of an
opportunity or a portion of an opportunity shall be deferred, the periods of
such deferrals and any interest, not to exceed a reasonable rate, to be paid in
respect of deferred payments. The Committee may also define such other
conditions of payouts of opportunities as it may deem desirable in carrying out
the purposes of the Plan.

 

(f)           Maximum Payout per Fiscal Year. No individual participant may
receive aggregate opportunities or a payout under the Plan which are more than
$10 million on account of any fiscal year.

 

5.              MISCELLANEOUS PROVISIONS.

 

(a)         Guidelines. The Committee may adopt from time to time written
policies for its implementation of the Plan.

 

(b)         Withholding Taxes. The Company (or the relevant subsidiary or
affiliate) shall have the right to deduct from all payouts of opportunities
hereunder any federal, state, local or foreign taxes required by law to be
withheld with respect to such payouts.

 

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(c)          No Rights to Opportunities. Except as set forth herein, no
Executive Officer shall have any claim or right to be granted an opportunity
under the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any Executive Officer any right to be retained in the employ
of the Company or any of its subsidiaries, divisions or affiliates.

 

(d)         Costs and Expenses. The cost and expenses of administering the Plan
shall be borne by the Company and not charged to any opportunity or payout or to
any Executive Officer receiving an opportunity or a payout.

 

(e)          Funding of Plan. The Plan shall be unfunded. The Company shall not
be required to establish any special or separate fund or to make any other
segregation of assets to assure the payout of any opportunity under the Plan.

 

(f)           Governing Law. The Plan, opportunities granted hereunder and
actions taken in connection herewith shall be governed and construed in
accordance with the laws of the State of New York (regardless of the law that
might otherwise govern under the applicable New York principles of conflict of
laws).

 

6.              EFFECTIVE DATE, AMENDMENTS AND TERMINATION.

 

(a)         Effective Date. The Plan shall be effective as of August 21, 2013,
the date on which the Plan was adopted by the Committee (the “Effective Date”),
provided that the Plan is approved by the stockholders of the Company at an
annual meeting or any special meeting of stockholders of the Company within 12
months of the Effective Date, and such approval of stockholders shall be a
condition to the right of each participant to receive any opportunities or
payouts hereunder. Any opportunities granted under the Plan prior to such
approval of stockholders shall be effective as of the date of grant (unless,
with respect to any opportunity, the Committee specifies otherwise at the time
of grant), but no such opportunity may be paid out prior to such stockholder
approval, and if stockholders fail to approve the Plan as specified hereunder,
any such opportunity shall be cancelled.

 

(b)         Amendments. The Committee may at any time terminate or from time to
time amend the Plan in whole or in part, but no such action shall adversely
affect any rights or obligations with respect to any opportunities theretofore
granted under the Plan. Unless the stockholders of the Company shall have first
approved thereof, no amendment of the Plan shall be effective which would:
(i) increase the maximum amount which can be paid to any participant under the
Plan; (ii) change the types of business criteria on which performance targets
are to be based under the Plan; or (iii) modify the requirements as to
eligibility for participation in the Plan.

 

(c)          Termination. No opportunities shall be granted under the Plan after
ten (10) years after the Effective Date.

 

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