Exhibit 10.1

 

THE ESTÉE LAUDER COMPANIES INC.

AMENDED AND RESTATED FISCAL 2002

SHARE INCENTIVE PLAN

(as of November 12, 2015)

 

1.                                      Purpose.  The Estée Lauder
Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (the
“Plan”) is intended to provide incentives which will attract, retain, motivate
and reward highly competent people as officers, directors and key employees of
The Estée Lauder Companies Inc. (the “Company”) and its subsidiaries and
affiliates, by providing them opportunities to acquire shares of the Class A
Common Stock, par value $.01 per share, of the Company (“Class A Common Stock”)
or to receive monetary payments based on the value of such shares pursuant to
the Benefits (as defined below) described herein. Additionally, the Plan is
intended to assist in further aligning the interests of the Company’s officers,
directors and key employees to those of its other stockholders.

 

2.                                      Administration.

 

(a)                                 The Plan will be administered by a committee
(the “Committee”) appointed by the Board of Directors of the Company (the
“Board”) from among its members (which may be the Compensation Committee or the
Stock Plan Subcommittee) and shall be comprised, unless otherwise determined by
the Board, solely of not less than two members who shall be (i) “Non-Employee
Directors” within the meaning of Rule 16b-3(b)(3) (or any successor rule)
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and (ii) “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 is authorized, subject to the
provisions of the Plan, to establish such rules and regulations as it deems
necessary for the proper administration of the Plan and to make such
determinations and interpretations and to take such action in connection with
the Plan and any Benefits (as defined below) granted hereunder as it deems
necessary or advisable, including the right to establish the terms and
conditions of Benefits, to accelerate the vesting or exercisability of Benefits
and to cancel Benefits. The Committee may determine the extent to which any
Benefit under the Plan is required to comply, or not comply, with Section 409A
of the Code. All determinations and interpretations made by the Committee shall
be binding and conclusive on all participants and their legal representatives.
No member of the Committee and no employee of the Company shall be liable for
any act or failure to act hereunder, except in circumstances involving his or
her bad faith, gross negligence or willful misconduct, or for any act or failure
to act hereunder by any other member or employee or by any agent to whom duties
in connection with the administration of the Plan have been delegated. The
Company shall indemnify members of the Committee and any agent of the Committee
who is an employee of the Company, a subsidiary or an affiliate against any and
all liabilities or expenses to which they may be subjected by reason of any act
or failure to act with respect to their duties on behalf of the Plan, except in
circumstances involving such person’s bad faith, gross negligence or willful
misconduct.

 

(b)                                 The Committee may delegate to one or more of
its members, or to one or more agents, such administrative duties as it may deem
advisable, and the Committee, or any person to whom it has delegated duties as
aforesaid, may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan. The
Committee may employ such legal or other counsel, consultants and agents as it
may deem desirable for the administration of the Plan and may rely upon any
opinion or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent shall be paid by the Company, or the subsidiary or affiliate whose
employees have benefited from the Plan, as determined by the Committee.

 

(c)                                  Notwithstanding any provision of the Plan
to the contrary, the Board may from time to time reserve to a committee (the
“Employee Equity Award Committee”), comprised of one or more members of the
Board whether or not such member(s) serve on the Committee, any or all of the
authority and responsibility of the Committee under the Plan (other than with
respect to Sections 13 and 21 of the Plan) with respect to Benefits granted to
employees of the Company other than (i) executive officers of the Company,
(ii) members of the Board, (iii) any individual who is a “covered employee”
within the meaning of Section 162(m)(3) of the Code, or (iv) any individual who
is subject to the reporting and liability provisions of Section 16 of the
Exchange Act. To the extent and during such time as the Board has so reserved
any authority and responsibility to the Employee Equity Award Committee, the
Employee Equity Award Committee shall have all of the powers of the Committee
hereunder, and any reference herein to the Committee (other than in this
Section 2(c) and in Sections 13 and 21 and of the Plan) shall include the
Employee Equity Award Committee. To the extent that any action of the

 

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Employee Equity Award Committee under the Plan made within such authority
conflicts with actions taken by the Committee, the actions of the Committee
shall control.

 

3.                                      Participants.  Participants will consist
of such officers, directors and key employees of the Company and its
subsidiaries and affiliates as the Committee in its sole discretion determines
to be significantly responsible for the success and future growth and
profitability of the Company and whom the Committee may designate from time to
time to receive Benefits under the Plan. Designation of a participant in any
year shall not require the Committee to designate such person to receive a
Benefit in any other year or, once designated, to receive the same type or
amount of Benefit as granted to the participant in any other year. The Committee
shall consider such factors as it deems pertinent in selecting participants and
in determining the type and amount of their respective Benefits.

 

4.                                      Type of Benefits.  Benefits under the
Plan may be granted in any one or a combination of the following (collectively,
“Benefits”): (a) Stock Options, (b) Stock Appreciation Rights, (c) Stock Awards,
(d) Performance Awards and (e) Stock Units (each as described below). Stock
Awards, Performance Awards, and Stock Units may, as determined by the Committee
in its discretion, constitute Performance-Based Awards, as described in
Section 11 hereof. Benefits shall be evidenced by agreements (which need not be
identical) in such forms as the Committee may from time to time approve (each a
“Benefit Agreement”); provided, however, that in the event of any conflict
between the provisions of the Plan and any Benefit Agreement and subject to
Section 12, the provisions of the Plan shall prevail.

 

5.                                      Common Stock Available Under the Plan;
Minimum Vesting.

 

(a)                                 Subject to the provisions of this Section 5
and any adjustments made in accordance with Section 13 hereof, the maximum
number of shares of Class A Common Stock that is available for issuance to
participants (including permitted assignees) and their beneficiaries under this
Plan shall be 74,000,000 (the “Maximum Aggregate Share Amount”), which may be
authorized and unissued or treasury shares. Any shares of Class A Common Stock
covered by a Benefit (or portion of a Benefit) granted under the Plan, which is
forfeited or canceled, expires or, in the case of a Benefit other than a Stock
Option, is settled in cash, shall again be available for issuance under the
Plan. The preceding sentence shall apply only for purposes of determining the
aggregate number of shares of Class A Common Stock available for Benefits but
shall not apply for purposes of determining (x) the maximum number of shares of
Class A Common Stock with respect to which Benefits (including the maximum
number of shares of Class A Common Stock subject to Stock Options and Stock
Appreciation Rights) may be granted to an individual participant under the Plan
or (y) the maximum number of shares of Class A common Stock that may be
delivered through Stock Options under the Plan.

 

(b)                                 Shares of Class A Common Stock withheld or
tendered (either actually or by attestation) to satisfy tax withholding
obligations for Benefits granted under the Plan or any shares of Class A Common
Stock withheld or tendered to pay the exercise price of Stock Options under the
Plan shall be counted against the shares of Class A Common Stock available for
issuance under the Plan and shall not be available again for grant. Shares of
Class A Common Stock delivered under the Plan in settlement, assumption or
substitution of outstanding awards (or obligations to grant future awards) under
the plans or arrangements of another entity (“Assumed Awards”) shall not reduce
the maximum number of shares of Class A Common Stock available for issuance
under the Plan, to the extent that such settlement, assumption or substitution
is as a result of the Company or its subsidiaries or affiliates acquiring
another entity (or an interest in another entity). This Section 5(b) shall apply
only for purposes of determining the aggregate number of shares of Class A
Common Stock available for Benefits but shall not apply for purposes of
determining (x) the maximum number of shares of Class A Common Stock with
respect to which Benefits (including the maximum number of shares of Class A
Common Stock subject to Stock Options and Stock Appreciation Rights) may be
granted to an individual participant under the Plan or (y) the maximum number of
shares of Class A Common Stock that may be delivered through Stock Options under
the Plan.

 

(c)                                  Subject to any adjustments made in
accordance with Section 13 hereof, the following additional aggregate and
individual maximums are imposed under the Plan. The aggregate number of shares
of Class A Common Stock that may be delivered through Stock Options shall be the
Maximum Aggregate Share Amount. Subject to any adjustments made in accordance
with Section 13 hereof, the number of shares of Class A Common Stock with
respect to which Benefits may be granted to an individual participant under the
Plan in any fiscal year of the Company shall not exceed 4,000,000; provided,
however, that the number of such shares granted to any non-employee director of
the Company in any fiscal year of the Company shall not exceed 24,000.

 

(d)                                 For all Stock Awards, Performance Awards or
Stock Units (collectively, “Share Awards”) granted after August 18, 2010, except
in the event of a participant’s death, disability, or retirement, or in the
event of a Change in Control (as define below) (i) Share Awards granted as to
which vesting is based solely on continuation of service will vest over a

 

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minimum period of three (3) years from the date of grant, (ii) Share Awards
granted that do not exceed 600 shares of Class A Common Stock (subject to any
adjustments made in accordance with Section 13 hereof) per participant as to
which vesting is based solely on continuation of service will vest over a
minimum period of one (1) year, and (iii) Share Awards as to which vesting is
based solely or in part on the achievement of one or more performance conditions
will vest based on a performance period of no shorter than one (1) year (and if
vesting is within one year of the grant date, the grant date must be within the
first three months of the performance period). Notwithstanding the foregoing,
such minimum vesting requirements shall not apply to (x) Assumed Awards and
(y) Share Awards granted after September 8, 2015 involving an aggregate number
of shares of Class A Common Stock not in excess of 5% of the Remaining Available
Shares (as defined below). “Remaining Available Shares” means 16,397,036, which
equals (i) the shares of Class A Common Stock remaining available for issuance
under the Plan as of September 8, 2015 plus (ii) 10,000,000 shares of Class A
Common Stock. Vesting over a minimum period of three (3) years or one (1) year
shall not require cliff vesting and may include periodic vesting over such
applicable period.

 

6.                                      Stock Options.  Stock Options will
consist of awards from the Company that will enable the holder to purchase a
number of shares of Class A Common Stock at set terms. Stock Options may be
“incentive stock options” within the meaning of Section 422 of the Code
(“Incentive Stock Options”), or Stock Options which do not constitute Incentive
Stock Options (“Nonqualified Stock Options”). The Committee will have the
authority to grant to any participant one or more Incentive Stock Options,
Nonqualified Stock Options, or both types of Stock Options (in each case with or
without Stock Appreciation Rights). Each Stock Option shall be subject to such
terms and conditions consistent with the Plan as the Committee may impose from
time to time, subject to the following limitations:

 

(a)                                 Exercise Price.  Each Stock Option granted
hereunder shall have such per-share exercise price as the Committee may
determine at the date of grant; provided, however, except in the case of Assumed
Awards to the extent permitted by Section 409A of the Code and subject to
subsection (d) below, that the per-share exercise price shall not be less than
100% of the Fair Market Value (as defined below) of the Class A Common Stock on
the date the Stock Option is granted.

 

(b)                                 Payment of Exercise Price.  The exercise
price may be paid in cash or, in the discretion of the Committee, by the
delivery of shares of Class A Common Stock of the Company then owned by the
participant, by the withholding of shares of Class A Common Stock for which a
Stock Option is exercisable or by a combination of these methods. In the
discretion of the Committee, payment also may be made by delivering a properly
executed exercise notice to the Company together with a copy of irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds to pay the exercise price. To facilitate the foregoing, the
Company may enter into agreements for coordinated procedures with one or more
brokerage firms. The Committee may prescribe any other method of paying the
exercise price that it determines to be consistent with applicable law and the
purposes of the Plan, including, without limitation, in lieu of the exercise of
a Stock Option by delivery of shares of Class A Common Stock of the Company then
owned by a participant, providing the Company with a notarized statement
attesting to the number of shares owned, in which case upon verification by the
Company, the Company would issue to the participant only the number of
incremental shares to which the participant is entitled upon exercise of the
Stock Option. In determining which methods a participant may utilize to pay the
exercise price, the Committee may consider such factors as it determines are
appropriate.

 

(c)                                  Exercise Period.  Stock Options granted
under the Plan shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee; provided, however,
that no Stock Option shall be exercisable later than ten years after the date it
is granted except, for Stock Options granted before April 10, 2007, in the event
of a participant’s death, the exercise period of such participant’s Stock
Options may be extended beyond such period but no longer than one year after the
participant’s death. All Stock Options shall terminate at such earlier times and
upon such conditions or circumstances as the Committee shall in its discretion
set forth in the Benefit Agreement relating to the option grant.

 

(d)                                 Limitations on Incentive Stock Options. 
Incentive Stock Options may be granted only to participants who are employees of
the Company or one of its subsidiaries (within the meaning of Section 424(f) of
the Code) at the date of grant. The aggregate Fair Market Value (determined as
of the time the Stock Option is granted) of the Class A Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by a
participant during any calendar year (under all option plans of the Company and
of any parent corporation or subsidiary corporation (as defined in
Sections 424(e) and (f) of the Code, respectively)) shall not exceed $100,000
and any Stock Options exercisable in excess of the $100,000 limit shall be
treated as nonqualified Stock Options. For purposes of the preceding
sentence, Incentive Stock Options will be taken into account in the order in
which they are granted. The per-share exercise price of an Incentive Stock
Option shall not be less than 100% of the Fair Market Value of the Class A
Common Stock on the date of grant, and no Incentive Stock Option may be
exercised later than ten years after the date it is granted; provided, however,
that Incentive

 

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Stock Options may not be granted to any participant who, at the time of grant,
owns stock possessing (after the application of the attribution rules of
Section 424(d) of the Code) more than 10% of the total combined voting power of
all classes of stock of the Company or any parent or subsidiary corporation of
the Company, unless the exercise price is fixed at not less than 110% of the
Fair Market Value of the Class A Common Stock on the date of grant and the
exercise of such option is prohibited by its terms after the expiration of five
years from the date of grant of such option.

 

(e)                                  Post-Employment Exercises.  The exercise of
any Stock Option after termination of employment shall be subject to
satisfaction of the conditions precedent that the participant neither
(i) competes with, or takes 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 himself or herself in a manner adversely
affecting the Company.

 

7.                                      Stock Appreciation Rights.

 

(a)                                 The Committee may, in its discretion, grant
Stock Appreciation Rights to the holders of any Stock Options granted hereunder.
In addition, Stock Appreciation Rights may be granted independently of, and
without relation to, Stock Options. A Stock Appreciation Right is a right to
receive a payment in cash, Class A Common Stock or a combination thereof, in an
amount equal to the excess of (x) the Fair Market Value, or other specified
valuation (which shall be no less than the Fair Market Value), of a specified
number of shares of Class A Common Stock on the date the right is exercised over
(y) the Fair Market Value, or other specified valuation (which, except in the
case of Assumed Awards to the extent permitted by Section 409A of the Code,
shall be no less than the Fair Market Value) of such shares of Class A Common
Stock on the date the right is granted, all as determined by the Committee;
provided, however, that if a Stock Appreciation Right is granted in tandem with
or in substitution for a Stock Option, the Fair Market Value designated in the
Benefit Agreement may be the Fair Market Value on the date such Stock Option was
granted. Each Stock Appreciation Right shall be subject to such terms and
conditions as the Committee shall impose from time to time.

 

(b)                                 Stock Appreciation Rights granted under the
Plan shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee; provided, however, that no
Stock Appreciation Right shall be exercisable later than ten years after the
date it is granted except, for Stock Appreciation Rights granted before
April 10, 2007, in the event of a participant’s death, the exercise period of
such participant’s Stock Appreciation Rights may be extended beyond such period
but no longer than one year after the participant’s death. All Stock
Appreciation Rights shall terminate at such earlier times and upon such
conditions or circumstances as the Committee shall in its discretion set forth
in such right.

 

(c)                                  The exercise of any Stock Appreciation
Right after termination of employment shall be subject to satisfaction of the
conditions precedent that the participant 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 himself or herself in a manner adversely affecting the Company.

 

8.                                      Stock Awards.  The Committee may, in its
discretion, grant Stock Awards (which may include mandatory payment of bonus
incentive compensation in stock) consisting of Class A Common Stock issued or
transferred to participants with or without payments therefor. Stock Awards may
be subject to such terms and conditions as the Committee determines to be
appropriate, including, without limitation, restrictions on the sale or other
disposition of such shares and the right of the Company to reacquire such shares
for no consideration upon termination of the participant’s employment within
specified periods, and may constitute Performance-Based Awards, as described in
Section 11 hereof. The Committee may require the participant to deliver a duly
signed stock power, endorsed in blank, relating to the Class A Common Stock
covered by a Stock Award. The Committee also may require that the stock
certificates evidencing such shares be held in custody or bear restrictive
legends until the restrictions thereon shall have lapsed. The Stock Award shall
specify whether the participant shall have, with respect to the shares of
Class A Common Stock subject to a Stock Award, all of the rights of a holder of
shares of Class A Common Stock of the Company, including the right to receive
dividends and to vote the shares.

 

9.                                      Performance Awards.

 

(a)                                 Performance Awards may be granted to
participants at any time and from time to time, as shall be determined by the
Committee. Performance Awards may constitute Performance-Based Awards, as
described in Section 11 hereof. The Committee shall have complete discretion in
determining the number, amount and timing of awards granted to each participant;
provided, that for Performance Awards subject to Section 409A of the Code, these
determinations must be made on or before the date of grant of the Performance
Award. Performance Awards may be in the form of shares of Class A Common Stock
or Stock Units. Performance Awards may be awarded as short-term or long-term
incentives. Performance targets may be based upon Company-wide, divisional
and/or individual performance, or other factors as determined by the Committee.

 

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(b)                                 With respect to those Performance Awards
that are not intended to constitute Performance-Based Awards, the Committee
shall have the authority at any time to make adjustments to performance targets
for any outstanding Performance Awards which the Committee deems necessary or
desirable unless at the time of establishment of such targets the Committee
shall have precluded its authority to make such adjustments, provided that, for
Performance Awards that are subject to Section 409A of the Code, the adjustments
are compliant with Section 409A of the Code and the regulations thereunder.

 

(c)                                  Payment of earned Performance Awards shall
be made in accordance with terms and conditions prescribed or authorized by the
Committee. The participant may elect to defer, or the Committee may require or
permit the deferral of, the receipt of Performance Awards upon such terms as the
Committee deems appropriate, provided that, for Performance Awards that vest on
or after January 1, 2005, any election and deferral is compliant with the
requirements of Section 409A of the Code and the regulations thereunder.

 

10.                               Stock Units.

 

(a)                                 The Committee may, in its discretion, grant
Stock Units to participants hereunder. A “Stock Unit” means a notional account
representing one share of Class A Common Stock. Stock Units shall be evidenced
by a Benefit Agreement, which shall conform to the requirements of the Plan and
may contain such other provisions as the Committee shall deem advisable. Stock
Units may constitute Performance-Based Awards, as described in Section 11
hereof. Each Benefit Agreement evidencing a Stock Unit grant shall specify the
vesting requirements, the duration of any applicable deferral period, the
performance or other conditions (including the termination of a participant’s
service due to death, disability or other reason) under which the Stock Unit may
be forfeited and such other provisions as the Committee shall determine. A Stock
Unit granted by the Committee shall provide for payment in either shares of
Class A Common Stock or cash, as determined by the Committee. Shares of Class A
Common Stock issued pursuant to this Section 10 may be issued with or without
payments or other consideration therefor, as may be required by applicable law
or as may be determined by the Committee. On or before the grant date, the
Committee shall determine whether a participant granted a Stock Unit shall be
entitled to a Dividend Equivalent Right. A “Dividend Equivalent Right” means the
right to receive the amount of any dividend paid on the share of Class A Common
Stock underlying a Stock Unit, which shall be payable in cash or in the form of
additional Stock Units.

 

(b)                                 For Stock Units that vest on or after
January 1, 2005, any deferral feature must comply with the requirements of
Section 409A of the Code and the regulations thereunder.

 

11.                               Performance-Based Awards.  Certain Benefits
granted under the Plan may be granted in a manner such that the Benefits qualify
for the performance-based compensation exception to Section 162(m) of the Code
(“Performance-Based Awards”). As determined by the Committee in its sole
discretion, either the granting or vesting of such Performance-Based Awards
shall be based on achievement of goals 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 and/or margin; (vi) expense targets;
(vii) working capital targets relating to inventory and/or accounts receivable;
(viii) operating income and/or margin; (ix) return on equity; (x) return on
assets; (xi) planning accuracy (as measured by comparing planned results to
actual results); (xii) market price per share; (xiii) gross income and/or
margin; (xiv) return on invested capital; (xv) total return to stockholders and
(xvi) cash flows. In addition, Performance-Based Awards may include comparisons
to the performance of other companies, such performance to be measured by one or
more of the foregoing business criteria. Furthermore, the measurement of
performance against goals may exclude or adjust for the impact of certain events
or occurrences that were not budgeted or planned for in setting the goals,
including, among other things, acquisitions, restructurings, discontinued
operations, changes in foreign currency exchange rates, extraordinary items and
other unusual or non-recurring items, and the cumulative effects of accounting
changes. With respect to Performance-Based Awards, (i) the Committee shall
establish in writing (x) the performance goals applicable to a given period
specifying in terms of an objective formula or standard the method for computing
the amount of compensation payable to the participant if such performance goals
are achieved and (y) the individual employees or class of employees to which
such performance goals apply no later than 90 days after the commencement of
such period (but in no event after one-quarter of such period has elapsed) and
(ii) no Performance-Based Awards shall be payable to or vest with respect to any
participant for a given period until the Committee certifies in writing that the
objective performance goals (and any other material terms) applicable to such
period have been satisfied. With respect to any Benefits intended to qualify as
Performance-Based Awards, after establishment of a performance goal, the
Committee shall not revise such performance goal or increase the amount of
compensation payable thereunder (as determined in accordance with
Section 162(m) of the Code) upon the attainment of such performance goal.
Notwithstanding the preceding sentence, and unless restricted by the applicable
Benefit Agreement,

 

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the Committee may reduce or eliminate the number of shares of Class A Common
Stock or cash granted or the number of shares of Class A Common Stock vested
upon the attainment of such performance goal.

 

12.                               Foreign Laws.  The Committee may grant
Benefits to individual participants who are subject to the tax laws of nations
other than the United States, which Benefits may have terms and conditions which
the Committee determines to be necessary to comply with applicable foreign laws.
The Committee may take any action which it deems advisable to obtain approval of
such Benefits by the appropriate foreign governmental entity; provided, however,
that no Benefits may be granted pursuant to this Section 12 and no action may be
taken which would result in a violation of the Exchange Act, the Code or any
other applicable law.

 

13.                               Adjustment Provisions; Change in Control.

 

(a)                                 If there is 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, the Committee will adjust, in a fair
and equitable manner, the Plan and each outstanding Benefit under the Plan to
prevent dilution or enlargement of participants’ rights under the Plan. The
Committee will make this adjustment each time one of the changes identified
above occurs by (i) adjusting the number of shares of Class A Common Stock
and/or kind of shares of common stock of the Company or other securities that
may be issued under the Plan or that are subject to other share limitations
under the Plan, the number of shares of Class A Common Stock and/or kind of
shares of common stock of the Company or other securities that are subject to
outstanding Benefits, and/or where applicable, the exercise price or purchase
price applicable to outstanding Benefits, (ii) granting a right to receive one
or more payments of securities, cash and/or property (which right may be
evidenced as an additional Benefit under this Plan) in respect of any
outstanding Benefit, or (iii) providing for the settlement of any outstanding
Benefit (other than a Stock Option or Stock Appreciation Right) in such
securities, cash and/or property as would have been received had the Benefit
been settled in full immediately prior to the change. However, any adjustment or
change or other action under this Section 13 shall comply with or otherwise
ensure exemption from Section 409A of the Code, as applicable. Appropriate
adjustments also may be made by the Committee to the terms of any Benefits under
the Plan to reflect such changes or distributions (and any extraordinary
dividend or distribution of cash or other assets) and to modify any other terms
of outstanding Benefits on an equitable basis, including modifications of
performance targets and changes in the length of performance periods (except
that Benefits intended to constitute Performance-Based Awards shall only be
adjusted to the extent permitted under Section 11 hereof, and all Benefits will
only be adjusted to ensure compliance with, or exemption from, Section 409A of
the Code). In addition, other than with respect to Stock Options, Stock
Appreciation Rights, and other awards intended to constitute Performance-Based
Awards, the Committee is authorized to make adjustments to the terms and
conditions of, and the criteria included in, Benefits 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.

 

(b)                                 Notwithstanding any other provision of this
Plan, in the event of a Change in Control (as defined below), the Committee, in
its discretion, may take such actions as it deems appropriate with respect to
outstanding Benefits, including, without limitation, accelerating the
exercisability or vesting of such Benefits on a Change in Control or, if such
Benefits are assumed by an acquirer, on a termination of employment following a
Change in Control, or such other actions provided in an agreement approved by
the Board in connection with a Change in Control and such Benefits shall be
subject to the terms of such agreement as the Committee, in its discretion,
shall determine, provided that all such actions ensure Benefits are compliant
with, or otherwise exempt from, Section 409A of the Code. The Committee, in its
discretion, may determine that, upon the occurrence of a Change in Control, each
Stock Option and Stock Appreciation Right outstanding hereunder shall terminate
within a specified number of days after notice to the holder, and such holder
shall receive, with respect to each share of Common Stock subject to such Stock
Option or Stock Appreciation Right, an amount equal to the excess, if any, of
the Fair Market Value of such shares of Common Stock immediately prior to the
occurrence of such Change in Control over the exercise price or purchase price
per share of such Stock Option or Stock Appreciation Right; 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 Committee,
in its discretion, shall determine. For purposes of this Plan, a “Change in
Control” of the Company shall be deemed to have occurred upon any of the
following events:

 

(i)  On or after the date there are no shares of Class B Common Stock, par value
$.01 per share, of the Company outstanding, any person as such term is used in
Section 13(d) of the Exchange Act or person(s) acting together which would
constitute a “group” for purposes of Section 13(d) of the Exchange Act (other
than the Company, any subsidiary, any employee benefit plan sponsored by the
Company or any member of the Lauder family or any family-controlled entities)
acquires (or has acquired during the 12-month period ending on the date of the
most recent acquisition by such person(s)) and “beneficially owns” (as defined
in Rule 13d-3 under the

 

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Exchange Act), directly or indirectly, at least 30% of the total voting power of
all classes of capital stock of the Company entitled to vote generally in the
election of the Board; or

 

(ii)  During any period of twelve consecutive months, either (A) 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 defined below) cease
for any reason to constitute at least a majority thereof or (B) at any meeting
of the stockholders of the Company called for the purpose of electing directors,
a majority of the persons nominated by the Board for election as directors fail
to be elected; or

 

(iii)  Consummation of a sale or other disposition (in one transaction or a
series of transactions) of all or substantially all of the assets of the
Company; or

 

(iv)  Consummation of a merger or consolidation of the Company (A) in which the
Company is not the continuing or surviving corporation (other than a
consolidation or merger with a wholly-owned subsidiary of the Company in which
all shares of the Company’s common stock outstanding immediately before the
effectiveness of that consolidation or merger are changed into or exchanged for
common stock of the subsidiary) or (B) in which all shares of the Company’s
common stock are converted into cash, securities or other property, except in
either case, a consolidation or merger of the Company in which the holders of
the shares of Common Stock immediately prior to the consolidation or merger
have, directly or indirectly, at least a majority of the shares of Common Stock
of the continuing or surviving corporation immediately after such consolidation
or merger or in which the Board immediately prior to the merger or consolidation
would, immediately after the merger or consolidation, constitute a majority of
the board of directors of the continuing or surviving corporation.

 

Notwithstanding the foregoing, none of the following shall constitute a Change
in Control: (A) changes in the relative beneficial ownership among members of
the Lauder family and family-controlled entities, without other changes that
would constitute a Change in Control; or (B) any spin-off of a division or
subsidiary of the Company to its stockholders.

 

For purposes of this Section 13(b), “Continuing Directors” shall mean (x) the
directors of the Company in office on the Effective Date (as defined below) and
(y) any successor to any such director and any additional director who after the
Effective Date whose appointment or election is endorsed by a majority of the
Continuing Directors at the time of his or her nomination or election.

 

14.                               Nontransferability.  Each Benefit granted
under the Plan to a participant shall not be transferable otherwise than by will
or the laws of descent and distribution, and shall be exercisable, during the
participant’s lifetime, only by the participant. In the event of the death of a
participant, each Stock Option or Stock Appreciation Right theretofore granted
to him or her shall be exercisable during such period after his or her death as
the Committee shall in its discretion set forth in such option or right at the
date of grant and then only by the executor or administrator of the estate of
the deceased participant or the person or persons to whom the deceased
participant’s rights under the Stock Option or Stock Appreciation Right shall
pass by will or the laws of descent and distribution. Notwithstanding the
foregoing, at the discretion of the Committee, an award of a Benefit other than
an Incentive Stock Option may permit the transferability of a Benefit by a
participant solely to the participant’s spouse, siblings, parents, children and
grandchildren or trusts for the benefit of such persons or partnerships,
corporations, limited liability companies or other entities owned solely by such
persons, including trusts for such persons, subject to any restriction included
in the award of the Benefit.

 

15.                               Other Provisions.  The award of any Benefit
under the Plan also may be subject to such other provisions (whether or not
applicable to a Benefit awarded to any other participant) as the Committee
determines appropriate, including without limitation for the forfeiture of, or
restrictions on resale or other disposition of, Class A Common Stock acquired
under any form of Benefit, for the acceleration of exercisability or vesting of
Benefits in the event of a change of control (whether or not a Change in
Control) of the Company, for the payment of the value of Benefits that are
exempt from Section 409A of the Code to participants in the event of a change of
control (whether or not a Change in Control) of the Company, or to comply with
federal and state securities laws, or understandings or conditions as to the
participant’s employment in addition to those specifically provided for under
the Plan. The award of any Benefit under the Plan shall be subject to the
receipt of the Company of consideration required under applicable state law.

 

16.                               Fair Market Value.  For purposes of this Plan
and any Benefits awarded hereunder, Fair Market Value shall be the closing price
of the Class A Common Stock on the date of calculation (or on the last preceding
trading date if Class A Common Stock was not traded on such date) if the Class A
Common Stock is readily tradeable on a national securities exchange or other
market system. If the Class A Common Stock is not readily tradeable, Fair Market
Value shall

 

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mean the amount determined in good faith by the Committee as the fair market
value of the Class A Common Stock; provided that, for Stock Options and Stock
Appreciation Rights that vested on and after January 1, 2005, Fair Market Value
will be determined in accordance with the requirements of Section 409A of the
Code and the regulations thereunder.

 

17.                               Withholding.  All payments or distributions of
Benefits made pursuant to the Plan shall be net of any amounts required to be
withheld pursuant to applicable federal, state and local tax-withholding
requirements at the minimum statutory withholding rates. Notwithstanding the
foregoing, if the Company proposes or is required to distribute Class A Common
Stock pursuant to the Plan, it may require the recipient to remit to it or to
the corporation that employs such recipient an amount sufficient to satisfy such
tax-withholding requirements prior to the delivery of any certificates for such
Class A Common Stock. In lieu thereof, the Company or the employing corporation
shall have the right, to the extent compliant with Section 409A of the Code, to
withhold the amount of such taxes from any other sums due or to become due from
such corporation to the recipient as the Committee shall prescribe. The
Committee 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 an optionee or award or right holder to pay all
or a portion of the federal, state and local withholding taxes arising in
connection with any Benefit consisting of shares of Class A Common Stock by
electing to have the Company withhold shares of Class A Common Stock having a
fair market value, determined based on the average of the high and low trading
prices of Class A Common Stock on the date of vesting (or if the date of vesting
does not fall on a trading day, such average price on the next trading day after
the date of vesting), equal to the amount of tax to be withheld at the minimum
statutory withholding rates.

 

18.                               Tenure.  A participant’s right, if any, to
continued employment with the Company or any of its subsidiaries or affiliates
as an officer, employee, or otherwise, shall not be enlarged or otherwise
affected by his or her designation as a participant under the Plan. For purposes
of this Plan, in respect of participants who are non-employee directors, the
term “employment” shall mean service.

 

19.                               Unfunded Plan.  Participants shall have no
right, title, or interest whatsoever in or to any investments that the Company
may make to aid it in meeting its obligations under the Plan. Nothing contained
in the Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the
Company and any participant, beneficiary, legal representative or any other
person. To the extent that any person acquires a right to receive payments from
the Company under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company. All payments to be made hereunder
shall be paid from the general funds of the Company and no special or separate
fund shall be established and no segregation of assets shall be made to assure
payment of such amounts except as expressly set forth in the Plan.

 

20.                               No Fractional Shares.  No fractional shares of
Class A Common Stock shall be issued or delivered pursuant to the Plan or any
Benefit. On or before the date of grant of any Benefit under the Plan that is
subject to Section 409A of the Code, the Committee shall determine whether cash,
or Benefits, or other property shall be issued or paid in lieu of fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated with respect to that Benefit.

 

21.                               Duration, Amendment and Termination.  No
Benefit shall be granted more than ten years after the Effective Date. The
Committee may amend the Plan from time to time or suspend or terminate the Plan
at any time. No amendment of the Plan may be made without approval of the
stockholders of the Company if the amendment will: (a) disqualify any Incentive
Stock Options granted under the Plan; (b) increase the aggregate number of
shares of Class A Common Stock that may be delivered through Stock Options under
the Plan; (c) increase the maximum amount which can be paid to an individual
participant under the Plan as set forth in the third sentence of
Section 5(c) hereof; (d) change the types of business criteria on which
Performance-Based Awards are to be based under the Plan; (e) modify the
requirements as to eligibility for participation in the Plan, (f) allow for the
repricing of Stock Options or Stock Appreciation Rights for which the
stockholder approval is required by the stock exchange on which the Class A
Common Stock is listed, or (g) allow for the repurchasing of Stock Options or
Stock Appreciation Rights for cash or otherwise. Notwithstanding anything to the
contrary contained herein, the Committee may amend the terms of any outstanding
Benefit or any provision of the Plan as the Committee deems necessary to ensure
compliance with Section 409A of the Code.

 

22.                               Governing Law.  This Plan, Benefits 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 applicable New York principles of
conflict of laws).

 

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23.                               Compliance with Section 409A of the Code and
Section 457A of the Code

 

(a)  General.  The Company intends that any Benefits be structured in compliance
with, or to satisfy an exemption from, Section 409A of the Code, such that there
are no adverse tax consequences, interest, or penalties pursuant to Section 409A
of the Code as a result of the Benefits. Notwithstanding the Company’s
intention, in the event any Benefit is subject to Section 409A of the Code, the
Committee may, in its sole discretion and without a participant’s prior consent,
amend the Plan and/or outstanding Benefits, adopt policies and procedures, or
take any other actions (including amendments, policies, procedures and actions
with retroactive effect) as are necessary or appropriate to (i) exempt the Plan
and/or any Benefit from the application of Section 409A of the Code,
(ii) preserve the intended tax treatment of any such Benefit, or (iii) comply
with the requirements of Section 409A of the Code, including without limitation
any such regulations guidance, compliance programs and other interpretative
authority that may be issued after the date of grant of a Benefit. This Plan
shall be interpreted at all times in such a manner that the terms and provisions
of the Plan and Benefits are exempt from or comply with Section 409A of the
Code.

 

(b)  Payments to Specified Employees.  Notwithstanding any contrary provision in
the Plan or Benefit Agreement, any payment(s) of “nonqualified deferred
compensation” (within the meaning of Section 409A of the Code) that are
otherwise required to be made under the Plan to a “specified employee” (as
defined under Section 409A of the Code) as a result of his or her “separation
from service” (as defined below) (other than a payment that is not subject to
Section 409A of the Code) shall be delayed for the first six (6) months
following such “separation from service” and shall instead be paid (in a manner
set forth in the Benefit Agreement) on the payment date that immediately follows
the end of such six-month period (or, if earlier, within 10 business days
following the date of death of the specified employee) or as soon as
administratively practicable within 90 days thereafter, but in no event later
than the end of the applicable taxable year.

 

(c)  Separation from Service.  A termination of employment shall not be deemed
to have occurred for purposes of any provision of the Plan or any Benefit
Agreement providing for the payment of any amounts or benefits that are
considered nonqualified deferred compensation under Section 409A of the Code
upon or following a termination of employment, unless such termination is also a
“separation from service” within the meaning of Section 409A of the Code and the
payment thereof prior to a “separation from service” would violate Section 409A
of the Code. For purposes of any such provision of the Plan or any Benefit
Agreement relating to any such payments or benefits, references to a
“termination,” “termination of employment,” “termination of continuous service”
or like terms shall mean “separation from service.”

 

(d)  Section 457A.  The Company intends that any Benefits be structured in
compliance with, or to satisfy an exemption from, Section 457A of the Code and
all regulations, guidance, compliance programs and other interpretative
authority thereunder (“Section 457A”), such that there are no adverse tax
consequences, interest, or penalties as a result of the Benefits and
Section 457. Notwithstanding the Company’s intention, in the event any Benefit
is subject to Section 457A, the Committee may, in its sole discretion and
without a Participant’s prior consent, amend the Plan and/or Benefits, adopt
policies and procedures, or take any other actions (including amendments,
policies, procedures and actions with retroactive effect) as are necessary or
appropriate to (i) exempt the Plan and/or any Benefit from the application of
Section 457A, (ii) preserve the intended tax treatment of any such Benefit, or
(iii) comply with the requirements of Section 457A, including without limitation
any such regulations, guidance, compliance programs and other interpretative
authority that may be issued after the date of the grant.

 

(e)  No Guarantee.  Nothing in this Plan shall be a guarantee of any particular
tax treatment.

 

24.                               Recoupment Policy.  Benefits awarded under the
Plan shall be subject to any recoupment policy adopted by the Company as it
exists from time to time.

 

25.                               Effective Date.  The Plan shall be effective
on the date it is approved by stockholders of the Company at an annual meeting
or any special meeting of the stockholders of the Company (the “Effective
Date”).

 

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