EXHIBIT 10.12

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT (“Agreement”), dated as of July 1, 2004, between THE ESTÉE LAUDER
COMPANIES INC., a Delaware corporation (the “Company”), and PATRICK
BOUSQUET-CHAVANNE, a resident of New York, New York (the “Executive” or “you”).

 

W I T N E S S E T H:

 

WHEREAS, the Company and its subsidiaries are principally engaged in the
business of manufacturing, marketing and selling skin care, makeup, fragrance
and hair care products and related services (the “Business”); and

 

WHEREAS, the Company desires to continue to retain the services of the
Executive, and to appoint him as Group President, and the Executive desires to
provide such services in such capacity to the Company, upon the terms and
subject to the conditions hereinafter set forth; and

 

WHEREAS, the Compensation Committee of the Board of Directors of the Company
(the “Compensation Committee”) and the Stock Plan Subcommittee of the
Compensation Committee have approved the terms of this Agreement;

 

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 Company hereby agrees to employ the Executive, and the Executive hereby
agrees to enter into employment, as Group President of the Company for the
period commencing on July 1, 2004 and ending June 30, 2007 unless terminated
sooner pursuant to Section 6 hereof (the “Term of Employment”).  The
twelve-month period commencing on July 1, 2004 shall be the “First Contract
Year” hereunder, and subsequent twelve-month periods shall be subsequent
Contract Years.

 

2.             Duties and Extent of Services.

 

(a)           During the Term of Employment, the Executive shall serve as Group
President of the Company, and, in such capacity, he shall serve as the
senior-most executive responsible for one or more of the Company’s brands and/or
business units as he may be assigned from time to time.  In such capacity, he
shall render such executive, managerial, administrative and other services as
customarily are associated with and incident to such positions, and as the
Company may, from time to time, reasonably require of him consistent with such
positions.

 

(b)           The Executive shall also hold such other positions and executive
offices of the Company and/or of any of the Company’s subsidiaries or affiliates
as may from time to time be agreed by the Executive or assigned by the President
and Chief Executive Officer of the Company, the Chairman of the Board of
Directors of the Company or the Board of Directors of the Company, provided that
each such position shall be commensurate with the Executive’s

 

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standing in the business community as Group President.  The Executive shall not
be entitled to any compensation other than the compensation provided for herein
for serving during the Term of Employment in any other office or position of the
Company or any of its subsidiaries or affiliates, unless the Board of Directors
of the Company or the appropriate committee thereof shall specifically approve
such additional compensation.

 

(c)           The Executive shall be a full-time employee of the Company and
shall exclusively devote all his business time and efforts faithfully and
competently to the Company and shall diligently perform to the best of his
ability all of the duties required of him as Group President, and in the other
positions or offices of the Company or its subsidiaries or affiliates assigned
to him hereunder.  Notwithstanding the foregoing provisions of this section, the
Executive may serve as a non-management director of such business corporations
(or in a like capacity in other for-profit or not-for-profit organizations) as
the Board of Directors, Chairman of the Board or President and Chief Executive
Officer of the Company may approve, such approval not to be unreasonably
withheld.

 

3.             (a) Base Salary.  As compensation for all services to be rendered
pursuant to this Agreement and as payment for the rights and interests granted
by Executive hereunder, the Company shall pay or cause any of its subsidiaries
to pay the Executive a base salary of $83,333.33 per month (which equates to
$1,000,000 per annum) (the “Base Salary”).  All amounts of Base Salary provided
for hereunder shall be payable in accordance with the regular payroll policies
of the Company in effect from time to time.

 

(b)           Incentive Bonus Compensation.  The Compensation Committee has
established for the Executive annual opportunities under the Company’s Executive
Annual Incentive Plan or any subsequent Bonus Plan for executives that is
approved by the stockholders of the Company (the “Bonus Plan”) with aggregate
target payouts of $1,750,000 in respect of the First Contract Year, $1,900,000
in respect of the Second Contract Year and $2,000,000 in respect of the Third
Contract Year, subject to the terms and conditions of the Bonus Plan, which are
incorporated herein by reference.

 

(c)           Deferral.  The Executive may elect to defer payment of all or any
part of his incentive bonus compensation payable in accordance with
Section 3(b) hereof in respect of any Contract Year during the Term of
Employment, by giving to the Company written notice thereof, on or before
March 31 of such Contract Year (or such earlier date as may be necessary to
comply with the applicable tax laws and regulations).  Additionally, in the
event that in respect of any fiscal year of the Company any amount of Base
Salary, any amount payable under the Bonus Plan or any other amount payable to
the Executive hereunder or otherwise shall, either alone or in combination with
other amounts payable hereunder or otherwise, result in the payment by the
Company of any amount that shall not be currently deductible by it pursuant to
the provisions of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”), or like or successor provisions (a “Non-Deductible
Amount”), the Company may elect to defer the payment of the Non-Deductible
Amount. Any amounts, so deferred, either by election of the Executive or by
election of the Company shall be credited to a bookkeeping account in the name
of the Executive as of the date scheduled for payment hereunder. Such amounts
shall be credited with interest as of each June 30 during the term of deferral,
compounded annually, at a rate per annum, equal to the annual rate of interest
announced by Citibank, N.A. in New York, New York as its base rate in effect on
such June 30, but in no event shall such rate exceed 9%.  The entire amount
credited to such bookkeeping account shall be paid to the Executive on a date to
be chosen by the Company, but in no event

 

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later than 90 days after the termination of the Executive’s employment with the
Company, unless the Executive requests prior to termination of his employment
from the Company to continue the deferral of such payments until a later date or
dates and the Company agrees to such request.  The Company, in its sole
discretion, may provide an investment facility for all or a portion of such
deferred amounts, but shall not be required to do so.

 

4.             (a)   Stock Options.  The Stock Plan Subcommittee of the
Compensation Committee has approved the grant to the Executive of options to
purchase no fewer than 100,000 shares of the Company’s Class A Common Stock
(“Stock Options”) under the Fiscal 2002 Share Incentive Plan (the “Share
Incentive Plan”) and subject to the provisions of Section 6(i) below in respect
of the First Contract Year. Such grant shall be made at such time during the
Contract Year determined by Stock Plan Subcommittee.  The option grant is
subject to the terms and conditions of the Share Incentive Plan (or applicable
successor plan), which are incorporated herein by reference.  The terms of the
options shall be set forth in a separate grant letter approved by the Stock Plan
Subcommittee of the Compensation Committee.

 

(b)   Equity-Based Compensation.  In respect of the Second and Third Contract
Years, the Company shall recommend to the Stock Plan Subcommittee of the
Compensation Committee that the Executive be awarded under the terms and
conditions of the Fiscal 2002 Share Incentive Plan (which are incorporated
herein by reference) or successor plan and subject to the provisions of
Section 6(i) below Equity-Based Compensation awards in accordance with the
policies and procedures of the Company as in effect from time to time for its
Executive Officers. The terms of such Equity-Based Compensation awards shall be
set forth in a separate grant letter approved by the Stock Plan Subcommittee of
the Compensation Committee.  The recommended equity-based compensation awards
shall be of an equivalent value to a grant of stock option with respect to
100,000 shares of the Company’s Class A Common Stock determined in accordance
with procedures generally utilized by the Company for its financial reporting at
the time of grant.

 

(c)   Certain Conditions.  Executive acknowledges and agrees that any grant of
Stock Options or other Equity-Based Compensation otherwise provided for in this
Section 4 shall be effective as provided herein only to the extent permitted by
the Share Incentive Plan, and this Agreement shall not obligate the Company to
adopt any successor plan providing for the grant of Stock Options (or other
Equity-Based Compensation).  If authority over the Company’s equity compensation
programs is changed from the Stock Plan Subcommittee to the Compensation
Committee (or other committee), then after such change, references herein to the
Stock Plan Subcommittee shall be to the appropriate Committee.

 

5.             Benefits.

 

(a)           Standard Benefits.  During the Term of Employment, the Executive
shall be entitled to (i) participate in any and all benefit programs and
arrangements now in effect and hereinafter adopted and made generally available
by the Company to its senior officers, including but not limited to the Estee
Lauder Companies 401(k) Savings Plan (the “401(k) Savings Plan”), the Estee
Lauder Companies Retirement Growth Account Plan (the “Qualified Plan”), the
related Estee Lauder Inc. Benefit Restoration Plan (the “Non-Qualified Plan”),
contributory and non-contributory Company welfare and benefit plans, disability
plans, and medical, death benefit and life insurance plans for which the
Executive shall be eligible, or may become eligible during the Term of
Employment; (ii) participate in the Company’s automobile program now in effect
and hereinafter adopted and generally made available by the Company

 

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to its senior officers and, in accordance with such program, may elect to be
provided with an automobile having an acquisition value of up to $50,000; and
(iii) paid vacations during each year of the Term of Employment in accordance
with the policies and procedures of the Company as in effect from time to time
for its senior officers.  The prior services of the Executive with the Company
or its subsidiaries shall be recognized for all purposes related to employment
benefit plans of the Company, in accordance with the provisions of such plans.

 

(b)           Perquisite Reimbursement; Financial Counseling.  The Company shall
reimburse the Executive the actual expense incurred by him in connection with
his professional standing, in accordance with the guidelines set out in the
Company’s executive perquisite program.  In no event shall the gross amount of
such reimbursements be greater than $15,000 in respect of any fiscal year during
the Term of Employment.  Additionally, the Executive will reimburse the
Executive for up to $5,000 per year in financial counseling services.  The
Executive acknowledges that participation in such programs will result in the
receipt by him of additional taxable income.

 

(c)           Expenses.  The Company agrees to reimburse the Executive for all
reasonable and necessary travel (including first class air fare), business
entertainment and other business out-of-pocket expenses incurred or expended by
him in connection with the performance of his duties hereunder upon presentation
of proper expense statements or vouchers or such other supporting information as
the Company may reasonably require of the Executive.

 

(d)           Spousal Travel. The Executive may upon prior approval of the
President and Chief Executive Officer or his designee arrange for his spouse to
accompany him on business related travel itineraries, on a reasonable basis, at
Company expense.  In addition, during each full year of employment, the
Executive will be provided first class air fare for two round trips from New
York to Paris and back to New York for himself, his wife and his children.

 

(e)           Executive Term Life Insurance.  During the Term of Employment, the
Company shall continue to pay premiums on the existing term life insurance
policy.

 

6.             Termination.

 

(a)           Permanent Disability.  In the event of the “permanent disability”
(as hereinafter defined) of the Executive during the Term of Employment, the
Company shall have the right, upon written notice to the Executive, to terminate
the Executive’s employment hereunder, effective upon the giving of such notice
(or such later date as shall be specified in such notice).  In the event of such
termination, the Company shall have no further obligations hereunder, except
that the Executive shall be entitled (i) to receive any amounts or benefits to
which the Executive may otherwise have been entitled prior to the effective date
of termination; (ii) to be paid his Base Salary under Section 3(a) hereof for a
period of one (1) year from the effective date of termination; provided,
however, that the Company shall only be required to pay that amount of the
Executive’s Base Salary which shall not be covered by pension benefits or
long-term disability payments, if any, to the Executive under any Company plan
or arrangement and (iii) to receive a pro-rata portion of the annual bonus that
the Executive would have been entitled to receive had he remained in employment
through the end of the Contract Year during which the termination due to
permanent disability occurred.  In addition, upon termination for permanent
disability, the Executive shall continue to participate in any and all pension,
insurance and other benefit plans and programs of the Company during the period
the Executive is continuing to receive his Base Salary in accordance with this
Section 6(a).

 

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Thereafter, the Executive’s rights to participate in such programs and plans, or
to receive similar coverage, if any, shall be as determined under such programs;
provided, however, that, except as otherwise provided in this Section 6(a), the
Company will have no further obligations under Sections 3(b) and 4 hereof.  For
purposes of this Section 6(a), “permanent disability” means any disability as
defined under the Company’s applicable disability insurance policy or, if no
such policy is available, any physical or mental disability or incapacity that
renders the Executive incapable of performing the services required of him in
accordance with his obligations under Section 2 hereof for a period of six
(6) consecutive months or for shorter periods aggregating six (6) months during
any twelve-month period.

 

(b)           Death.  In the event of the death of the Executive during the Term
of Employment, this Agreement shall automatically terminate.  In the event of
such termination the Company shall have no further obligations hereunder, except
to pay the Executive’s beneficiary or legal representative (i) for a period of
one (1) year from the date of his death, the Executive’s Base Salary as
established under Section 3(a) hereof as of the date of his death;
(ii) (A) bonus compensation earned but not paid under Section 3(b) hereof that
relates to any Contract Year ending prior to the date of his death and (B) a
one-time payment equal to fifty percent (50%) of the average of actual annual
bonuses paid or payable during the Term of Employment in accordance with
Section 3(b) hereof, except that if the Executive dies during the First Contract
Year, the sum of $875,000; and (iii) any other amounts to which the Executive
otherwise would have been entitled to hereunder prior to the date of his death;
provided, however, that, except as otherwise provided in this Section 6(b), the
Company will have no further obligations under Sections 3(b) hereof.

 

(c)           Termination Without Cause.  The Company shall have the right, upon
one hundred eighty (180) days’ prior written notice given to the Executive, to
terminate the Executive’s employment for any reason whatsoever.  In the event of
such termination, for a period ending on the latest to occur of (x) a date one
(1) year from the effective date of termination, (y) June 30, 2007, or (z) the
conclusion of a severance period consistent with Company policy (which in no
event will exceed two years), the Executive shall be entitled as damages to
(i) receive his Base Salary as established under Section 3(a) hereof; and
(ii) participate in all pension, insurance and other benefit plans, programs or
arrangements, on terms identical to those applicable to full-term senior
officers of the Company.  In addition, he shall receive a one-time payment equal
to fifty percent (50%) of the average of actual annual bonuses paid or payable
to the Executive during the Term of Employment in accordance with
Section 3(b) hereof, or, if such termination occurs prior to the payment of any
bonus hereunder, the sum of $875,000.  Except as otherwise provided in this
Section 6(c), the Company will have no further obligations under Sections
3(b) and 4 hereof.  In the event of termination pursuant to this Section 6(c),
the Executive shall not be required to mitigate his damages hereunder.

 

(d)           Cause.  The Company shall have the right, upon notice to the
Executive, to terminate the Executive’s employment under this Agreement for
“Cause” (as defined below), effective upon the Executive’s receipt of such
notice (or such later date as shall be specified in such notice), and the
Company shall have no further obligations hereunder, except to pay the Executive
any amounts otherwise payable pursuant to Section 3 hereof and provide the
Executive any benefits to which the Executive may have been otherwise entitled
prorated to the effective date of termination.  The Executive’s right to
participate in any of the Company’s retirement, insurance and other benefit
plans and programs shall be as determined under such programs and plans;
provided, however, that, except as otherwise provided in this Section 6(d), the
Company will have no further obligations under Sections 3(b) and 4 hereof.

 

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For purposes of this Agreement, “Cause” means:

 

(i)            a material breach of, or the willful failure or refusal by the
Executive to perform and discharge duties or obligations he has agreed to
perform or assume under this Agreement (other than by reason of disability or
death) that, if capable of correction, is not corrected within ten (10) business
days following notice thereof to the Executive by the Company, such notice to
state with specificity the nature of the breach, failure or refusal;

 

(ii)           willful misconduct by the Executive, unrelated to the Company or
any of its subsidiaries or affiliates, that could reasonably be anticipated to
have an adverse effect on the Company or any of its subsidiaries or affiliates;

 

(iii)          the Executive’s gross negligence, whether related or unrelated to
the business of the Company or any of its subsidiaries or affiliates which could
reasonably be anticipated to have an adverse effect on the Company or any of its
subsidiaries or affiliates that, if capable of correction, is not corrected
within ten (10) business days following notice thereof to the Executive by the
Company, such notice to state with specificity the nature of the conduct
complained of;

 

(iv)          the Executive’s failure to follow a lawful directive of the chief
Executive Officer of the Company that is within the scope of the Executive’s
duties for a period of ten (10) business days after notice from the Chief
Executive Officer specifying the performance required;

 

(v)           any violation by the Executive of a policy contained in the Code
of Conduct of the Company; or

 

(vi)          drug or alcohol abuse by the Executive that materially affects the
Executive’s performance of his duties under this Agreement.

 

(e)           Termination by Executive.  The Executive shall have the right,
exercisable at any time during the Term of Employment, to terminate his
employment for any reason whatsoever with six (6) months’ prior written notice
to the Company.  Upon such termination, the Company shall have no further
obligations hereunder other than to pay the executive his accrued benefits
through the date of such termination.

 

(f)            Release of Claims.  As a condition precedent to the receipt of
certain payments and benefits pursuant to Section 6, the Executive, or, in the
case of his death or Disability that prevents the Executive from performing his
obligation under this Section 6(f), his personal representative, and his
beneficiary, if applicable, will execute an effective general release of claims
against the Company and its subsidiaries and affiliates and their respective
directors, officers, employees, attorneys and agents; provided, however, that
such release will not affect any right that the Executive, or in the event of
his death, his personal representative or beneficiary, otherwise has to any
payment or benefit provided for in this Agreement or to any vested benefits the
Executive may have in any employee benefit plan of Company or any of its
subsidiaries or affiliates, or any right the Executive has under any other
agreement between the Executive and the Company or any of its subsidiaries or
affiliates that expressly states that the right survives the termination of the
Executive’s employment.

 

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(g)           Certain Limitations. Notwithstanding anything to the contrary
contained herein, in the event that any payment received or to be received by
the Executive pursuant to Section 6 hereof or otherwise (a “Severance Payment”)
would be subject to the excise tax (the “Excise Tax”) imposed by Section 4999 of
the Code (in whole or part), the Severance Payment shall be reduced (but not
below zero) until no portion of such payments would be subject to Excise Tax.

 

(h)           Non-Renewal.  In the event the Company does not offer the
Executive the renewal of the Term of Employment on the basis of terms no less
favorable than those pending at the time of the conclusion of the Term of
Employment, the Executive shall be entitled to a severance arrangement providing
Base Salary and continuation of certain benefits for the greater of one year or
such period consistent with Company policy at that time (which in no event will
exceed two years).

 

(i)          Effect of Termination.  In addition to the foregoing, in the event
that this Agreement shall be terminated pursuant to the provisions of
subparagraphs 6(a), 6(b), 6(c),   or 6(h) above, notwithstanding anything to the
contrary contained in the Company’s Share Incentive Plan or other similar option
plan, all Stock Option awards previously made to the Executive shall vest and
become immediately exercisable for the one (1) year period from the effective
date of such termination, subject to the applicable share incentive plan and
option agreement provisions, after which all such option awards shall expire and
be of no further force or effect. Subject to the preceding sentence, upon the
termination of the Executive’s employment hereunder for any reason, the Company
shall have no further obligations hereunder, except as otherwise provided
herein.  The Executive, however, shall continue to have the obligations provided
for in Sections 7 and 8 hereof. Furthermore, upon such termination, the
Executive shall be deemed to have resigned immediately from all offices and
directorships held by him in the Company or any of its subsidiaries.

 

(j)            Relocation.  In the event of termination of the Executive’s
employment hereunder for any reasons other than for “Cause” pursuant to
Section 6(d) hereof, including non-renewal, the Company shall reimburse the
Executive for the actual cost of relocating Executive and his family from the
New York area to Paris, France.  Such reimbursement shall be subject to
Executive actually undertaking relocation within one year from the termination
of his employment.  In no event shall such reimbursement exceed the gross amount
of $50,000.

 

7.             Confidentiality; Ownership.

 

(a)           The Executive agrees that he shall forever keep secret and retain
in strictest confidence and not divulge, disclose, discuss, copy or otherwise
use or suffer to be used in any manner, except in connection with the Business
of the Company, its subsidiaries or affiliates and any other business or
proposed business of the Company or any of its subsidiaries or affiliates, any
“Protected Information” in any “Unauthorized” manner or for any “Unauthorized”
purpose (as such terms are hereinafter defined).

 

(i)            “Protected Information” means trade secrets, confidential or
proprietary information and all other knowledge, know-how, information,
documents or materials owned, developed or possessed by the Company or any of
its subsidiaries or affiliates, whether in tangible or intangible form,
pertaining to the Business or any other business or proposed

 

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business of the Company or any of its subsidiaries or affiliates, including, but
not limited to, research and development, operations, systems, data bases,
computer programs and software, designs, models, operating procedures, knowledge
of the organization, products (including prices, costs, sales or content),
processes, formulas, techniques, machinery, contracts, financial information or
measures, business methods, business plans, details of consultant contracts, new
personnel hiring plans, business acquisition plans, customer lists, business
relationships and other information owned, developed or possessed by the Company
or its subsidiaries or affiliates; provided that Protected Information shall not
include information that becomes generally known to the public or the trade
without violation of this Section 7.

 

(ii)           “Unauthorized” means: (A) in contravention of the policies or
procedures of the Company or any of its subsidiaries or affiliates;
(B) otherwise inconsistent with the measures taken by the Company or any of its
subsidiaries or affiliates to protect their interests in any Protected
Information; (C) in contravention of any lawful instruction or directive, either
written or oral, of an employee of the Company or any of its subsidiaries or
affiliates empowered to issue such instruction or directive; or (D) in
contravention of any duty existing under law or contract. Notwithstanding
anything to the contrary contained in this Section 7, the Executive may disclose
any Protected Information to the extent required by court order or decree or by
the rules and regulations of a governmental agency or as otherwise required by
law or to his legal counsel and, in connection with a determination under
Section 6(h), to accounting experts; provided that the Executive shall provide
the Company with prompt notice of such required disclosure in advance thereof so
that the Company may seek an appropriate protective order in respect of such
required disclosure.

 

(b)           The Executive acknowledges that all developments, including,
without limitation, inventions (patentable or otherwise), discoveries, formulas,
improvements, patents, trade secrets, designs, reports, computer software, flow
charts and diagrams, procedures, data, documentation, ideas and writings and
applications thereof relating to the Business or any business or planned
business of the Company or any of its subsidiaries or affiliates that, alone or
jointly with others, the Executive may conceive, create, make, develop, reduce
to practice or acquire during the Term of Employment (collectively, the
“Developments”) are works made for hire and shall remain the sole and exclusive
property of the Company.  The Executive hereby assigns to the Company, in
consideration of the payments set forth in Section 3(a) hereof, all of his
right, title and interest in and to all such Developments. The Executive shall
promptly and fully disclose all future material Developments to the Board of
Directors of the Company and, at any time upon request and at the expense of the
Company, shall execute, acknowledge and deliver to the Company all instruments
that the Company shall prepare, give evidence and take all other actions that
are necessary or desirable in the reasonable opinion of the Company to enable
the Company to file and prosecute applications for and to acquire, maintain and
enforce all letters patent and trademark registrations or copyrights covering
the Developments in all countries in which the same are deemed necessary by the
Company.  All memoranda, notes, lists, drawings, records, files, computer tapes,
programs, software, source and programming narratives and other documentation
(and all copies thereof) made or compiled by the Executive or made available to
the Executive concerning the Developments or otherwise concerning the Business
or planned business of the Company or any of its subsidiaries or affiliates
shall be the property of the Company or such subsidiaries or affiliates and
shall be delivered to the Company or such subsidiaries or affiliates promptly
upon the expiration or termination of the Term of Employment.

 

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(c)           The provisions of this Section 7 shall, without any limitation as
to time, survive the expiration or termination of the Executive’s employment
hereunder, irrespective of the reason for any termination.

 

8.             Covenant Not to Compete.  Subject to the last sentence of this
Section 8, the Executive agrees that during the Term of Employment and for a
period of two (2) years commencing upon the expiration or termination of the
Executive’s employment hereunder (the “Non-Compete Period”), the Executive shall
not, directly or indirectly, without the prior written consent of the Company:

 

(a)           solicit, entice, persuade or induce any employee, consultant,
agent or independent contractor of the Company or of any of its subsidiaries or
affiliates to terminate his, her or its employment with the Company or such
subsidiary or affiliate, to become employed by any person, firm or corporation
other than the Company or such subsidiary or affiliate or approach any such
employee, consultant, agent or independent contractor for any of the foregoing
purposes, or authorize or assist in the taking of any such actions by any third
party (for purposes of this Section 8 (a), the terms “employee,” “consultant,”
“agent” and “independent contractor” shall include any persons with such status
at any time during the six (6) months preceding any solicitation in question);
or

 

(b)           directly or indirectly engage, participate, or make any financial
investment in, or become employed by or render consulting, advisory or other
services to or for any person, firm, corporation or other business enterprise,
wherever located, which is engaged, directly or indirectly, in competition with
the Business or any business of the Company or any of its subsidiaries or
affiliates as conducted or any business proposed to be conducted at the time of
the expiration or termination of the Executive’s employment hereunder; provided,
however, that nothing in this Section 8(b) shall be construed to preclude the
Executive from making any investments in the securities of any business
enterprise whether or not engaged in competition with the Company or any of its
subsidiaries or affiliates, to the extent that such securities are actively
traded on a national securities exchange or in the over-the-counter market in
the United States or on any foreign securities exchange and represent, at the
time of acquisition, not more than 0.5% of the aggregate voting power of such
business enterprise.

 

Notwithstanding the foregoing, the Executive shall not be subject to the terms
and provisions of paragraph (b) of this Section 8 if the Term of Employment is
terminated pursuant to Section 6(c) hereof.

 

9.             Specific Performance.  The Executive acknowledges that the
services to be rendered by the Executive are of a special, unique and
extraordinary character and, in connection with such services, the Executive
will have access to confidential information vital to the Company’s Business and
the other current or planned businesses of it and its subsidiaries and
affiliates.  By reason of this, the Executive consents and agrees that if the
Executive violates any of the provisions of Sections 7 or 8 hereof, the Company
and its subsidiaries and affiliates would sustain irreparable injury and that
monetary damages would not provide adequate remedy to the Company and that the
Company shall be entitled to have Section 7 or 8 hereof specifically enforced by
any court having equity jurisdiction.  Nothing contained herein shall be
construed as prohibiting the Company or any of its subsidiaries or affiliates
from pursuing any other remedies available to it or them for such breach or
threatened breach, including the recovery of damages from the Executive.

 

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10.           Deductions and Withholding.  The Executive agrees that the Company
or its subsidiaries or affiliates, as applicable, shall withhold from any and
all compensation paid to and required to be paid to the Executive pursuant to
this Agreement, all Federal, state, local and/or other taxes which the Company
determines are required to be withheld in accordance with applicable statutes or
regulations from time to time in effect and all amounts required to be deducted
in respect of the Executive’s coverage under applicable employee benefit plans. 
For purposes of this Agreement and calculations hereunder, all such deductions
and withholdings shall be deemed to have been paid to and received by the
Executive.

 

11.           Entire Agreement.  Except for the Fiscal 2002 Share Incentive
Plan, the Executive’s outstanding stock option agreements, the Executive Annual
Incentive Plan, the 401(k) Savings Plan, the term life insurance arrangement
between the Company and the Executive , the loan promissory note dated August 2,
2001 between the Company and the Executive, the Qualified Plan and the
Non-Qualified Plan and applicable successor plans or agreements, this Agreement
embodies the entire agreement of the parties with respect to the Executive’s
employment, compensation, perquisites and related items and supersedes any other
prior oral or written agreements, arrangements or understandings between the
Executive and the Company or any of its subsidiaries or affiliates, and any such
prior agreements, arrangements or understandings are hereby terminated and of no
further effect.  This Agreement may not be changed or terminated orally but only
by an agreement in writing signed by the parties hereto.

 

12.           Waiver.  The waiver by the Company of a breach of any provision of
this Agreement by the Executive shall not operate or be construed as a waiver of
any subsequent breach by him. The waiver by the Executive of a breach of any
provision of this Agreement by the Company shall not operate or be construed as
a waiver of any subsequent breach by the Company.

 

13.           Governing Law; Jurisdiction.

 

(a)           This Agreement shall be subject to, and governed by, the laws of
the State of New York applicable to contracts made and to be performed therein.

 

(b)           Any action to enforce any of the provisions of this Agreement
shall be brought in a court of the State of New York located in the Borough of
Manhattan of the City of New York or in a Federal court located within the
Southern District of New York.  The parties consent to the jurisdiction of such
courts and to the service of process in any manner provided by New York law. 
Each party irrevocably waives any objection which it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding brought in
such court and any claim that such suit, action or proceeding brought in such
court has been brought in an inconvenient forum and agrees that service of
process in accordance with the foregoing sentences shall be deemed in every
respect effective and valid personal service of process upon such party.

 

14.           Assignability.  The obligations of the Executive may not be
delegated and, except with respect to the designation of beneficiaries in
connection with any of the benefits payable to the Executive hereunder, the
Executive may not, without the Company’s written consent thereto, assign,
transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any interest herein.  Any such attempted delegation or disposition
shall be null and void and without effect.  The Company and the Executive agree
that this

 

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Agreement and all of the Company’s rights and obligations hereunder may be
assigned or transferred by the Company to and shall be assumed by and be binding
upon any successor to the Company.  The Company shall require any successor by
an agreement in form and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform if no such succession had
taken place.  The term “successor” means, with respect to the Company or any of
its subsidiaries, any corporation or other business entity which, by merger,
consolidation, purchase of the assets or otherwise acquires all or a majority of
the operating assets or business of the Company.

 

15.           Severability.  If any provision of this Agreement or any part
thereof, including, without limitation, Sections 7 and 8 hereof, as applied to
either party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or remaining part thereof, or the validity or
enforceability of this Agreement, which shall be given full effect without
regard to the invalid or unenforceable part thereof.

 

If any court construes any of the provisions of Section 7 or 8 hereof, or any
part thereof, to be unreasonable because of the duration of such provision or
the geographic scope thereof, such court may reduce the duration or restrict or
redefine the geographic scope of such provision and enforce such provision as so
reduced, restricted or redefined.

 

16.           Notices.  All notices to the Company or the Executive permitted or
required hereunder shall be in writing and shall be delivered personally, by
telecopier or by courier service providing for next-day delivery or sent by
registered or certified mail, return receipt requested, to the following
addresses:

 

The Company:

 

The Estée Lauder Companies Inc.

767 Fifth Avenue

New York, New York 10153

Attn:       General Counsel

Tel:         (212) 572-3980

Fax:         (212) 572-3989

 

The Executive:

 

Patrick Bousquet-Chavanne

c/o The Estée Lauder Companies Inc.

767 Fifth Avenue

New York, New York 10153

Tel:         (212) 572- 6945

Fax:         (212) 572- 5414

 

Either party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party.  Any such notice
shall be deemed given, if delivered personally, upon receipt; if telecopied,
when telecopied; if sent by courier service providing for next-day delivery, the
next business day following deposit with such courier service; and if sent

 

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by certified or registered mail, three days after deposit (postage prepaid) with
the U.S. mail service.

 

17.           No Conflicts.  The Executive hereby represents and warrants to the
Company that his execution, delivery and performance of this Agreement and any
other agreement to be delivered pursuant to this Agreement will not (i) require
the consent, approval or action of any other person or (ii) violate, conflict
with or result in the breach of any of the terms of, or constitute (or with
notice or lapse of time or both, constitute) a default under, any agreement,
arrangement or understanding with respect to the Executive’s employment to which
the Executive is a party or by which the Executive is bound or subject.  The
Executive hereby agrees to indemnify and hold harmless the Company and its
directors, officers, employees, agents, representatives and affiliates (and such
affiliates’ directors, officers, employees, agents and representatives) from and
against any and all losses, liabilities or claims (including interest, penalties
and reasonable attorneys’ fees, disbursements and related charges) based upon or
arising out of the Executive’s breach of any of the foregoing representations
and warranties.

 

18.           Paragraph Headings.  The paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

 

19.           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first written above.

 

 

THE ESTÉE LAUDER COMPANIES INC.

 

 

 

 

 

By:

  /s/ Andrew J. Cavanaugh

 

 

Name: Andrew J. Cavanaugh

 

Title:

Senior Vice President, Global Human
Resources

 

 

 

 

 

 /s/ Patrick Bousquet-Chavanne

 

 

Patrick Bousquet-Chavanne

 

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