Exhibit 10.3b

 

FORM OF

STOCK OPTION AGREEMENT

Under

The Estée Lauder Companies Inc.

Fiscal 1996 Share Incentive Plan (the “Plan”)

 

The within STOCK OPTION AGREEMENT provides for the granting of options by The
Estée Lauder Companies Inc., a Delaware corporation (the “Company”), to the
participant, an employee of the Company or one of its subsidiaries (the
“Employee”), to purchase Shares of the Company’s Class A Common Stock, par value
$0.01 (the “Shares”), on the terms and subject to the conditions hereinafter
provided.  The name of the “Participant”, the “Grant Date”, the aggregate number
of Shares that may be purchased pursuant to this agreement, and the “Exercise
Price” per share are stated in the attached “Notice of Grant”, and incorporated
herein by reference.  The other terms and conditions of the Options are stated
in this agreement and in the Plan.

 

The Stock Options described herein are being granted pursuant to the Company’s
Fiscal 1996 Share Incentive Plan, as may be amended from time to time (the
“Plan”), and are subject in all respects to the provisions of the Plan.  The
Stock Options granted hereunder are not Incentive Stock Options (as defined in
Section 422(b) of the Internal Revenue Code of 1986, as amended).

 

1.  Payment of Exercise Price.  The Company will provide and communicate to the
Employee various methods of exercise.  These methods may include the ability to
receive Shares of Class A Common Stock of the Company or cash at exercise.  To
facilitate exercise, the Company may enter into agreements for coordinated
procedures with one or more brokerage firms or financial institutions.

 

2.  Exercise Period.

 

a.  General.  Subject to other provisions contained herein and in the Plan,
Stock Options granted hereunder shall be exercisable in installments as
specified under “Exercise Period” in the attached “Notice of Grant”.

 

Subject to the last sentence of Paragraph 2b, no Stock Option awarded hereunder
shall be exercisable later than ten (10) years after the Grant Date. The Stock
Option awarded hereunder shall not be transferable otherwise than by will of the
laws of descent or distribution, and shall be exercisable during the Employee’s
lifetime only by the Employee.

 

b.  Death or Disability.  In the event of the Employee’s death or the occurrence
of the Employee’s total and permanent disability (as such status shall be
determined under the Company’s long term disability program), each Stock Option
awarded but not yet exercisable as of the date of death or the determination of
such disability, shall become immediately exercisable. Each Stock Option awarded
(i) in the case of death may be exercised for a period commencing as of the day
after the date of death and continuing for one year thereafter and (ii) in the
case of permanent disability, for a period commencing as of the day after
determination of such disability and continuing through the earlier to occur of
the first anniversary of such determination or the tenth anniversary of the
Grant Date.

 

c.  Retirement.  Subject to Paragraph 3, in the event of Employee’s formal
retirement under the terms of the Estée Lauder Inc. Retirement Growth Account
Plan (or an affiliate or a successor plan or program of similar purpose), each
Stock Option awarded but not yet exercisable as of the date of retirement shall
become immediately exercisable. Each Stock Option awarded may thereafter be
exercised until the tenth anniversary of the Grant Date.

 

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d.  Termination of Employment Without Cause.

 

(1) Subject to Paragraph 3, in the event Employee is terminated at the instance
of the Employee (e.g., resigns voluntarily), each Stock Option exercisable but
unexercised as of the effective date of such termination may be exercised until
the first to occur of (i) the date which shall be ninety (90) days after the
effective date of such termination and (ii) the tenth anniversary of the Grant
Date.  Each Stock Option awarded but unexercisable as of the date of such
termination shall be forfeited as of such date.

 

(2) Subject to Paragraph 3, in the event Employee is terminated at the instance
of the Company or relevant subsidiary without Cause (as defined below), each
Stock Option awarded but unexercisable as of the date of termination shall
become immediately exercisable.  Each Stock Option awarded may be exercised
until the first to occur of (i) the date which shall be ninety (90) days after
the effective date of such termination and (ii) the tenth anniversary of the
Grant Date.  For purposes hereof, “Cause” means any breach by the Employee of
any of his or her material obligations under any Company policy or procedure,
including, without limiting the generality, the Code of Corporate Conduct and
the Policy on Avoidance of Insider Trading.

 

3.  Post-Employment Exercises.  No Stock Option represented by this Agreement
may be exercised after termination of the Employee’s employment with the Company
(or any of its subsidiaries) unless as provided for in Paragraph 2b, 2c or 2d
hereof.  The exercise of any Stock Option after termination of the Employee’s
employment by reason of retirement as provided in Paragraph 2c or by reason of
termination by the Employee or termination by the Company or relevant subsidiary
without Cause as provided in Paragraph 2d shall be subject to satisfaction of
the conditions precedent that the Employee neither (i) competes with, or takes
other employment with or renders services to a competitor of, the Company, its
subsidiaries or affiliates without the written consent of the Company, nor (ii)
conducts herself or himself in a manner adversely affecting the Company.  All
Stock Options that may not be exercised after termination of the Employee’s
employment shall be forfeited.

 

4.  Adjustment Provisions; Change in Control.

 

a.  If there shall be any change in the Class A Common Stock of the Company,
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, reverse stock split, split up, spin-off, combination of Shares,
exchange of Shares, dividend in kind or other like change in capital structure
or distribution (other than normal cash dividends) to stockholders of the
Company, an adjustment shall be made to each outstanding Stock Option such that
each such Stock Option shall thereafter be exercisable for such securities, cash
and/or other property as would have been received in respect of the Class A
Common Stock subject to such Stock Option had it been exercised in full
immediately prior to such change or distribution, and such an adjustment shall
be made successively each time any such change shall occur.  In addition, in the
event of any such change or distribution, in order to prevent dilution or
enlargement of the Employee’s rights hereunder, the Company will have authority
to adjust, in an equitable manner, the number and kind of Shares that may be
issued with respect to any Stock Option hereunder, the number and kind of Shares
subject to outstanding Stock Options, the exercise price applicable to
outstanding Stock Options, and the Market Value (as herein after defined) and
other value determinations applicable to outstanding Stock Options.  Appropriate
adjustments may also be made by the Company in the terms of any Stock Options to
reflect such changes or distributions and to modify any other terms of
outstanding Stock Options on an equitable basis.  In addition, the Company is
authorized to make adjustments to the terms and conditions of Stock Options, in
recognition of unusual or nonrecurring events affecting the Company or the
financial statements of the Company, or in response to changes in applicable
laws, regulations, or accounting principles.  For purposes of this Paragraph 4,
the Market Value of the Shares shall be equal to 100% of the closing price of
the Class A Common Stock on the New York Stock Exchange or any other national
securities exchange or other market system as reported by the Wall Street
Journal for the date on which such Market Value is being fixed, or, if there
shall be no trading on such date, the date next preceding on which trading
occurred.

 

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b.  Notwithstanding any other provision hereunder, if there is a Change in
Control of the Company, all then outstanding Stock Options shall immediately
become exercisable.  For purposes of this Paragraph 4b, a “Change in Control” of
the Company shall be deemed to have occurred upon any of the following events:

 

(i) A change in control of the direction and administration of the Company’s
business of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act; or

 

(ii) During any period of two (2) consecutive years, the individuals who at the
beginning of such period constitute the Company’s Board of Directors or any
individuals who would be “Continuing Directors” (as hereinafter defined) cease
for any reason to constitute at least a majority thereof; or

 

(iii) The Company’s Class A Common Stock shall cease to be publicly traded; or

 

(iv) The Company’s Board of Directors shall approve a sale of all or
substantially all of the assets of the Company, and such transaction shall have
been consummated; or

 

(v) The Company’s Board of Directors shall approve any merger, consolidation, or
like business combination or reorganization of the Company, the consummation of
which would result in the occurrence of any event described in Paragraph 4b (ii)
or (iii) above, and such transaction shall have been consummated.

 

Notwithstanding the foregoing, (A) changes in the relative beneficial ownership
among members of the Lauder family and family-controlled entities shall not, by
themselves, constitute a Change in Control of the Company, (B) any spin-off of a
division or subsidiary of the Company to its stockholders and (C) any event
listed in (i) through (v) above that the Board of Directors determines not to be
a Change in Control of the Company, shall not constitute a Change in Control of
the Company

 

For purposes of this Paragraph 4b, “Continuing Directors” shall mean (x) the
directors of the Company in office on the date that shares are first offered for
sale to the public and (y) any successor to any such director and any additional
director who after such date was nominated or selected by a majority of the
Continuing Directors in office at the time of his or her nomination or
selection.

 

The Company may determine that, upon the occurrence of a Change in Control of
the Company, each Stock Option outstanding hereunder shall terminate within a
specified number of days after notice to the Employee, and the Employee shall
receive, with respect to each share of Class A Common Stock subject to such
Stock Option, an amount equal to the excess of the Market Value of such Shares
of Common Stock immediately prior to the occurrence of such Change in Control
over the exercise price per share of such Stock Option; such amount to be
payable in cash, in one or more kinds of property (including the property, if
any, payable in the transaction) or in a combination thereof, as the Company, in
its discretion, shall determine.

 

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5.  Withholding.  All payments or distributions of Stock Options made hereunder
of Shares covered by Stock Options shall be net of any amounts required to be
withheld pursuant to applicable federal, national, state and local tax
withholding requirements imposed by each taxing authority having jurisdiction. 
The Company (or relevant subsidiary) may require the Employee to remit to it an
amount sufficient to satisfy such tax withholding requirements prior to the
delivery of any certificates for such Shares.  The Company (or relevant
subsidiary) may, in its discretion and subject to such rules as it may adopt
(including any as may be required to satisfy applicable tax and/or non-tax
regulatory requirements), permit the Employee to pay all or a portion of the
federal, national, state and local withholding taxes arising in connection with
any Stock Option by electing to have the Company (or relevant subsidiary)
withhold Shares of Class A Common Stock having a Market Value equal to the
amount to be withheld, provided that such withholding shall only be at rates
required by applicable statutes or regulations.

 

6.  Tenure.  The Employee’s right to continue to serve the Company or any of its
subsidiaries as an officer, employee, or otherwise, shall not be enlarged or
otherwise affected by the award hereunder.

 

7.  Specific Restrictions Upon Option Shares.  The Employee hereby agrees with
the Company as follows:

 

a.  The Employee shall acquire Shares hereunder for investment purposes only and
not with a view to resale or other distribution thereof to the public in
violation of the United States Securities Act of 1933, as amended (the “1933
Act”), and shall not dispose of any such Shares in transactions which, in the
opinion of counsel to the Company, violate the 1933 Act, or the rules and
regulations thereunder, or any applicable state or national securities or “blue
sky” laws; and further,

 

b.  If any Shares shall be registered under the 1933 Act, no public offering
(otherwise than on a national securities exchange, as defined in the United
States Securities Exchange Act of 1934, as amended) of any Shares acquired
hereunder shall be made by the Employee (or any other person) under such
circumstances that he or she (or such person) may be deemed an underwriter, as
defined in the 1933 Act; and further

 

c.  The Employee agrees that the Company shall have the authority to endorse
upon the certificate or certificates representing the Shares acquired hereunder
such legends referring to the foregoing restrictions and any other application
restrictions, as it may deem appropriate.

 

8.  Notices.  Any notice required or permitted under this Option Agreement shall
be deemed to have been duly given if delivered, telecopied or mailed, certified
or registered mail, return receipt requested to the Employee at such address as
the Company (or relevant subsidiary) shall maintain for the Employee or its
personnel records.

 

9.  Failure to Enforce Not a Waiver.  The failure of the Company to enforce at
any time any provision of this agreement shall in no manner be construed to be a
waiver of such provision or of any other provision hereof.

 

10.  Governing Law.  The Option Agreement shall be governed by and construed
according to the laws of the State of New York, applicable to agreements made
and performed in that state.

 

11.  Partial Invalidity.  The invalidity or illegality of any provision herein
shall not be deemed to affect the validity of any other provision.

 

 

The Estée Lauder Companies Inc.

 

 

 

By:

 

 

 

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Notice of Grant

Under

The Estee Lauder Companies Inc.

Fiscal 1996 Share Incentive Plan (The “Plan”)

 

This is to confirm that, upon the recommendation of your management, you were
awarded options to purchase shares of Class A Common Stock of The Estee Lauder
Companies Inc. (the “Shares”) at the most recent meeting of the Stock Plan
Subcommittee of the Compensation Committee of the Board of Directors.  This
award was made in recognition of  the significant contributions you have made as
a key employee of the Company, and to motivate you to achieve future successes
by aligning your interests more closely with those of our stockholders.  These
options are granted under and governed by the terms and conditions of the Plan
and the Stock Option Agreement (the “Agreement”) attached hereto and made part
hereof.  A Summary Plan Description is also attached.  Please read these
documents and keep them for future reference.  The specific terms of your award
are as follows:

 

Participant:      «First_Name» «Middle» «Last_Name»

 

SSN or Tax ID:   «SS»

 

Grant Date:

 

Type of Award:  Non-Qualified Stock Options

 

Exercise Price per Share:  $ (Closing trading price on NYSE of the Class A
Common Stock on the date of grant)

 

Aggregate number of Shares subject to your options:

 

Exercise Period: Your options shall become exercisable on the following dates
(or upon death, disability, retirement, or involuntary termination of employment
if these occurrences are earlier), but are subject to termination or forfeiture
as per Paragraphs 2 and 3 of the Agreement:

 

Number of Shares

 

Date Exercisable

 

Expiration Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Questions regarding the stock option program can be directed to          at
           or              at             .  If you wish to accept this grant,
please sign this Notice of Grant and return immediately to:

 

Compensation Department

767 Fifth Avenue, 41st Floor

New York, New York 10153

Attention:

 

The undersigned hereby accepts, and agrees to, all terms and provisions of the
Agreement, including those contained in this Notice of Grant.

 

By

 

 

Date

 

 

 

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