Exhibit 10.7

 

Each of the Stock Plan Subcommittee of the Compensation Committee and the
Compensation Committee of the Board of Directors of The Estée Lauder Companies
Inc. reserves the right to change provisions of this Agreement to comply with
applicable laws or regulations.

 

Performance Share Unit Award Agreement Under

The Estée Lauder Companies Inc.

Amended and Restated Fiscal 2002 Share Incentive Plan (the “Plan”)

 

This PERFORMANCE SHARE UNIT AWARD AGREEMENT (“Agreement”) provides for the
granting of performance share unit awards 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 “Participant”), representing a notional
account equal to a corresponding number of shares of the Company’s Class A
Common Stock, par value $0.01 (the “Shares”), subject to the terms below (the
“Performance Share Units”).  The name of the “Participant,” the “Grant Date,”
the target number of Shares, the “Service Period,” the “Performance Period” and
the Plan Achievement (as defined below) goals are stated in the “Notice of
Grant” attached or posted electronically together with this Agreement and are
incorporated by reference.  The other terms of this Performance Share Unit Award
are stated in this Agreement and in the Plan. Terms not defined in this
Agreement are defined in the Plan, as amended.  The Plan is referred to as the
“Grant Plan” in the electronic Notice of Grant.

 

1.              Award Grant. The Company hereby awards to the Participant a
target award of Performance Share Units in respect of the number of Shares set
forth in the Notice of Grant (the “Target Award”), representing a Stock Unit and
Performance-Based Award under the terms of the Plan.

 

2.              Right to Payment of Performance Share Units. It is understood
that the percentage of the Target Award earned and paid will be established by
the Committee based on the plan achievement (the “Plan Achievement”) during the
Performance Period specified in the Notice of Grant (the “Award Period”).  
Except as otherwise provided in paragraph 3, 4 or 5 below, at the end of the
Performance Period, the number of Shares earned in respect of the Performance
Share Units will be determined in accordance with the notice of grant.

 

3.              Payment of Awards.

 

Payments under this Agreement will be made in the number of Shares that is
equivalent to the number of Performance Share Units earned and payable to the
Participant pursuant to paragraph 2 above. Except as otherwise provided in
paragraph 4 or 5 below, payments will be made as soon as practicable after the
Award Period ends, but in no event later than 2 and 1/2 months following the
last day of the calendar year in which the Award Period ends. The form of payout
will be in Shares.  In addition, each Performance Share Unit that becomes earned
and payable pursuant to paragraph 2 above carries a Dividend Equivalent Right,
payable in cash at the same time as the payment of Shares in accordance with
this paragraph 3 and paragraph 4 or 5.

 

4.              Change in Control.   In the event of a Change in Control that
occurs during employment, each Performance Share Unit with a Performance Period
ending after the Change in Control will become payable to the Participant with
the total number of Shares to be paid equal to the number of Shares earned in
accordance with the Notice of Grant as if the Performance Period ended on the
date of the

 

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Change in Control.  Payment of Shares so earned will be made in two weeks
following the date of the Change in Control.  If the Shares ceased to be
outstanding immediately after the Change in Control (e.g., due to a merger with
and into another entity), then the consideration to be received in respect of
each Share earned under a Performance Share Unit will equal the consideration
paid to each stockholder per Share generally upon the Change in Control.  If the
Performance Period ends on or prior to the Change in Control, the Performance
Share Units shall be paid out in accordance with paragraph 3 or 5 of this
Agreement, as applicable.

 

5.              Termination of Employment. If the Participant’s employment
terminates during the Award Period, payouts will be as follows:

 

(a)                      Death.  If the Participant dies, the Performance Share
Units will be paid as a pro rata Target Award for the number of full months
employed during the Service Period (i.e., the proration of the Target Award
equals a fraction, the numerator of which is the number of full calendar months
of service completed during the Award Period through the Participant’s death and
the denominator of which is the number of full calendar months in the Award
Period).  Payment will occur on the 75th day following the Participant’s death
and in accordance with any applicable laws or Company procedures regarding the
payments.

 

(b)                     Disability.  If the Participant becomes totally and
permanently disabled (as determined under the Company’s long-term disability
program), the Performance Period will terminate and the Participant will be vest
in a pro rata amount of Performance Share Units for the number of full months
employed during the Award Period (determined under the proration methodology in
paragraph 5(a)) based on actual Plan Achievement through the date the
Participant becomes totally and permanently disabled.  Payment of Shares earned
in respect so such Performance Share Units will be made within two weeks
following the date on which Participant terminates employment as a result of
total and permanent disability.

 

(d)                     Termination of Employment Without Cause.  If the
Participant’s employment is terminated at the instance of the Company or
relevant subsidiary without Cause (as defined below) on or prior to the end of
the first year of the Award Period, the Performance Share Unit Award will be
forfeited.  If such termination occurs after the end of the first year after the
Grant Date, the Performance Share Unit Award will continue through the Award
Period and the Participant will vest in a pro rata amount of Performance Share
Units for the number of full months employed during the Award Period (determined
under the proration methodology in paragraph 5(a)) based on actual Plan
Achievement [through the date of termination].  Payment of Shares earned in
respect of such Performance Share Units will be made within two weeks following
the date of termination.

 

(e)                      Termination of Employment By Employee.  If the
Participant terminates his or her employment (e.g., by voluntary resigning), the
Performance Share Unit Award will be forfeited.

 

(f)                        Termination of Employment With Cause.  If the
Participant is terminated for Cause, the Performance Share Unit Award will be
forfeited.  For this purpose, “Cause” is defined in the employment agreement in
effect between the Participant and the Company or any subsidiary, including any
employment agreement entered into after the Grant Date.  In the

 

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absence of an employment agreement, “Cause” means any breach by the Participant
of any of his or her material obligations under any Company policy or procedure,
including, without limitation, the Code of Conduct.

 

(g)                     Post Employment Conduct.  Payout of any Performance
Share Unit Award after termination of employment is subject to satisfaction of
the conditions precedent that the Participant neither (i) competes with, takes
employment with, or renders services to a competitor of the Company, its
subsidiaries, or affiliates without the Company’s written consent, nor (ii)
conducts himself in a manner adversely affecting the Company.  The term
“competitor” means any business that is engaged in, or is preparing to become
engaged in, the makeup, skin care, hair care, toiletries or fragrance business
or other business in which the Company is engaged or preparing to become
engaged, or that otherwise competes with, or is preparing to compete with, the
Company. If the Participant’s employment terminates after the expiration of the
Award Period but prior to payout, payout will be subject to this paragraph 5(g).

 

6.              No Rights of Stock Ownership. This grant of Performance Share
Units does not entitle the Participant to any interest in or to any voting or
other rights normally attributable to Share ownership other than the Dividend
Equivalent Rights granted under paragraph 3 above.

 

7.              Clawback.  Shares earned or delivered under any Performance
Share Unit Award shall be subject to any recoupment policy for awards under the
Plan adopted by the Company as such policy exists from time to time.

 

8.              Withholding. Regardless of any action the Company or the
Participant’s employer (the “Employer”) takes with respect to any or all income
tax, social security, payroll tax, or other tax-related withholding
(“Tax-Related Items”), Participant acknowledges that the ultimate liability for
all Tax-Related Items legally due by Participant is and remains his or her
responsibility.  Furthermore, Participant acknowledges that the Company and/or
the Employer (i) make no representations or undertakings regarding the treatment
of any Tax-Related Items in connection with any aspect of the Performance Share
Units, including the grant of the Performance Share Units, the vesting of the
Performance Share Units, the delivery of Shares, the subsequent sale of Shares
acquired under the Plan and the receipt of any dividends; and (ii) do not commit
to structure the terms of the grant of the Performance Share Units or any aspect
of Participant’s participation in the Plan to reduce or eliminate his or her
liability for Tax-Related Items.

 

Prior to the relevant taxable event, Participant shall pay or make adequate
arrangements satisfactory to the Company and/or the Employer to satisfy all
withholding obligations of the Company and/or the Employer.  In this regard,
Participant authorizes the Company and/or the Employer to withhold all
applicable Tax-Related Items legally payable by Participant from his or her
wages or other cash compensation paid by the Company and/or the Employer or from
proceeds of the sale of the Shares acquired under the Plan.  Alternatively, or
in addition, the Company may (i) sell or arrange for the sale of Shares that
Participant acquires under the Plan to meet the withholding obligation for the
Tax-Related Items, and/or (ii) withhold in Shares, provided that the Company
only withholds the amount of Shares necessary to satisfy the minimum withholding
amount.  If the Company satisfies the Tax-Related Item

 

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withholding obligation by withholding a number of Shares as described herein,
Participant will be deemed to have been issued the full number of Shares due to
Participant at vesting, notwithstanding that a number of the Shares is held back
solely for purposes of such Tax-Related Items.

 

Finally, Participant shall pay to the Company or the Employer any amount of
Tax-Related Items that the Company or the Employer may be required to withhold
as a result of his or her participation in the Plan that cannot be satisfied by
the means previously described.  The Company may refuse to issue Shares under
the Plan and refuse to deliver the Shares if Participant fails to comply with
his or her obligations in connection with the Tax-Related Items as described in
this paragraph.

 

9.              Nonassignability. This award may not be assigned, pledged, or
transferred except, if the Participant dies, to a designated beneficiary or by
will or by the laws of descent and distribution. The foregoing restrictions do
not apply to transfers under a court order, including, but not limited to, any
domestic relations order.

 

10.       Effect Upon Employment. The Participant’s right to continue to serve
the Company or any of its subsidiaries as an officer, employee, or otherwise, is
not enlarged or otherwise affected by an award under this Agreement.  Nothing in
this Agreement or the Plan gives the Participant any right to continue in the
employ of the Company or any of its subsidiaries or to interfere in any way with
any right the Company or any subsidiary may have to terminate his or her
employment at any time.  Payment of Shares is not secured by a trust, insurance
contract or other funding medium, and the Participant does not have any interest
in any fund or specific asset of the Company by reason of this Award or the
account established on his or her behalf.  A Performance Share Unit confers no
rights as a shareholder of the Company until Shares are actually delivered to
the Participant.

 

11.       Notices.  Any notice required or permitted under this Performance
Share Unit Award Agreement is deemed to have been duly given if delivered,
telecopied, mailed (certified or registered mail, return receipt requested), or
sent by internationally-recognized courier guaranteeing next day delivery (a) to
the Participant at the address on file in the Company’s (or relevant
subsidiary’s) personnel records or (b) to the Company, attention Stock Plan
Administration at its principal executive offices, which are currently located
at 767 Fifth Avenue, New York, NY 10153.

 

12.       Disclosure and Use of Information.

 

a.              By acknowledging and agreeing to or signing and returning the
attached Notice of Grant, and as a condition of the grant of the Performance
Share Units, the Participant hereby expressly and unambiguously consents to the
collection, use, and transfer of personal data, including sensitive data, as
described in this paragraph and below by and among, as necessary and applicable,
the Employer, the Company and its subsidiaries and by any agent of the Company
or its subsidiaries for the exclusive purpose of implementing, administering and
managing Participant’s participation in the Plan.

 

b.              The Participant understands that the Employer, the Company
and/or its other subsidiaries holds, by means of an automated data file or
otherwise, certain personal information about the Participant, including, but
not limited to, name, home address and telephone number, date of birth, social
insurance number, salary, nationality, job title, any shares or directorships
held in the Company, details of all Performance Share Units or other entitlement
to shares awarded,

 

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canceled, exercised, vested, unvested, or outstanding in the Participant’s
favor, for purposes of managing and administering the Plan (“Data”).

 

c.               The Participant also understands that part or all of his or her
Data may be held by the Company or its subsidiaries in connection with managing
and administering previous award or incentive plans, pursuant to a prior
transfer made with the Participant’s consent in respect of any previous grant of
performance share units or other awards.

 

d.              The Participant further understands that the Employer may
transfer Data to the Company or its subsidiaries as necessary to implement,
administer, and manage his or her participation in the Plan.  The Company and
its subsidiaries may transfer data among themselves, and each, in turn, may
further transfer Data to any third parties assisting the Company in the
implementation, administration, and management of the Plan (“Data Recipients”).

 

e.               The Participant understands that the Company, its subsidiaries,
and the Data Recipients are or may be located in his or her country of
residence, the United States or elsewhere. The Participant authorizes the
Employer, the Company, its subsidiaries, and such Data Recipients to receive,
possess, use, retain, and transfer Data in electronic or other form to
implement, administer, and manage his or her participation in the Plan,
including any transfer of Data that the Administrator deems appropriate for the
administration of the Plan and any transfer of Shares on his or her behalf to a
broker or third party with whom the Shares may be deposited.

 

f.                 The Participant understands that he or she may request a list
with the names and addresses of any potential recipients of the Data by
contacting his or her local human resources representative.

 

g.              The Participant understands that Data will be held as long as is
reasonably necessary to implement, administer and manage his or her
participation in the Plan and he or she may oppose the processing and transfer
of his or her Data and may, at any time, review the Data, request that any
necessary amendments be made to it, or withdraw his or her consent by notifying
the Company in writing. The Participant further understands that withdrawing
consent may affect his or her ability to participate in the Plan.

 

13.       Discretionary Nature and Acceptance of Award.  The Participant agrees
to be bound by the terms of this Agreement and acknowledges that:

 

a.               The Plan is established voluntarily by the Company, it is
discretionary in nature, and it may be modified, amended, suspended or
terminated by the Company at any time, unless otherwise provided in the Plan and
this Agreement;

 

b.              The award of Performance Share Units is voluntary and
occasional, and does not create any contractual or other right to receive future
awards of Performance Share Units, or benefits in lieu of Performance Share
Units, even if Performance Share Units have been awarded repeatedly in the past.

 

c.               All decisions with respect to future awards, if any, will be at
the sole discretion of the Company;

 

d.              Participant’s participation in the Plan is voluntary;

 

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e.               Participant’s participation in the Plan shall not create a
right to further employment with the Employer and shall not interfere with the
ability of the Company or the Employer to terminate Participant’s employment at
any time;

 

f.                 The Award of the Performance Share Units will be deemed
accepted unless the Award is declined by way of written notice by the
Participant within 30 days of the Grant Date to the Equity Based Compensation
Department of the Company in New York;

 

g.              Performance Share Units are an extraordinary item that does not
constitute compensation of any kind for services of any kind rendered to the
Company or any subsidiary, and which is outside the scope of Participant’s
employment or service contract, if any;

 

h.              The Performance Share Units are not part of normal or expected
compensation or salary for any purposes, including, but not limited to,
calculating any severance, resignation, termination, redundancy, end of service
payments, bonuses, long-service awards, pension or retirement or welfare
benefits or similar payments and in no event should be considered as
compensation for, or relating in any way to, past services for the Company or
any subsidiary;

 

i.                  In the event the Participant is not an employee of the
Company, the Performance Share Units and Participant’s participation in the Plan
will not be interpreted to form an employment or service contract or
relationship with the Company; and furthermore, the Performance Share Units and
Participant’s participation in the Plan will not be interpreted to form an
employment or service contract with any subsidiary of the Company;

 

j.                  The future value of the underlying Shares is unknown and
cannot be predicted with certainty;

 

k.               In consideration of the award of the Performance Share Units,
no claim or entitlement to compensation or damages shall arise from termination
of the Performance Share Units or diminution in value of the Performance Share
Units, or Shares acquired upon vesting of the Performance Share Units, resulting
from termination of Participant’s employment by the Company or any subsidiary
(for any reason whatsoever and whether or not in breach of local labor laws) and
in consideration of the award of the Performance Share Units, Participant
irrevocably releases the Company and any subsidiary from any such claim that may
arise; if, notwithstanding the foregoing, any such claim is found by a court of
competent jurisdiction to have arisen, then, by acknowledging and agreeing to or
signing the Notice of Grant, Participant shall be deemed irrevocably to have
waived his or her right to pursue or seek remedy for any such claim or
entitlement;

 

l.                  In the event of termination of Participant’s employment
(whether or not in breach of local labor laws), Participant’s right to receive
Performance Share Units under the Plan and to vest in such Performance Share
Units, if any, will terminate effective as of the date that Participant is no
longer actively employed and will not be extended by any notice period mandated
under local law (e.g., active employment would not include a period of “garden
leave” or similar period pursuant to local law); the Administrator shall have
the exclusive discretion to determine when Participant is no longer actively
employed for purposes of this Agreement;

 

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m.            The Company is not providing any tax, legal or financial advice,
nor is the Company making any recommendations regarding Participant’s
participation in the Plan or Participant’s acquisition or sale of the underlying
Shares; and

 

n.              Participant is hereby advised to consult with Participant’s own
personal tax, legal and financial advisors regarding Participant’s participation
in the Plan before taking any action related to the Plan.

 

14.       Failure to Enforce Not a Waiver.  The Company’s failure to enforce at
any time any provision of this Agreement does not constitute a waiver of that
provision or of any other provision of this Agreement.

 

15.       Governing Law.  The Performance Share Unit Award Agreement is governed
by and is to be construed according to the laws of the State of New York that
apply to agreements made and performed in that state, without regard to its
choice of law provisions.  For purposes of litigating any dispute that arises
under the Performance Share Units or this Agreement, the parties hereby submit
to and consent to the jurisdiction of the State of New York, and agree that such
litigation will be conducted in the courts of New York County, New York, or the
federal courts for the United States for the Southern District of New York, and
no other courts, where the Performance Share Units are made and/or to be
performed.

 

16.       Partial Invalidity.  The invalidity or illegality of any provision of
the Agreement will be deemed not to affect the validity of any other provision.

 

17.       Section 409A Compliance.  This Agreement is intended to comply with
section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and
any regulations, rulings, or guidance provided thereunder.  Each payment under
this Agreement shall be treated as a separate payment for purposes of Section
409A of the Code.  In no event may the Participant, directly or indirectly,
designate the calendar year of any payment to be made under this Agreement.  The
Company reserves the unilateral right to amend this Agreement upon written
notice to the Participant to prevent taxation under Code section 409A.

 

18.       Electronic Delivery.  The Company may, in its sole discretion, decide
to deliver any documents related to Performance Share Units awarded under the
Plan or future Performance Share Units that may be awarded under the Plan by
electronic means or request Participant’s consent to participate in the Plan by
electronic means.  Participant hereby consents to receive such documents by
electronic delivery and agrees to participate in the Plan through any on-line or
electronic system established and maintained by the Company or another third
party designated by the Company.

 

 

The Estée Lauder Companies Inc.

 

 

 

By:

/s/ Amy DiGeso

 

 

Amy DiGeso

 

 

Executive Vice President,

 

 

Global Human Resources

 

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This is to confirm that you were awarded a grant of Performance Share Units at
the most recent meeting of the Stock Plan Subcommittee of the Compensation
Committee of the Board of Directors representing the right to receive shares of
Class A Common Stock of The Estée Lauder Companies Inc. (the “Shares”), subject
to the terms of the Plan and the Performance Share Unit Award Agreement.  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.  This
Performance Share Unit Award is granted under and governed by the terms and
conditions of the Plan and the Performance Share Unit Award Agreement (the
“Agreement”) which are made a part hereof.  Please read these documents and the
Summary Plan Description and keep them for future reference.  The specific terms
of your award are as follows:

 

Participant:

 

Employee Number:

 

Grant Date:

 

Target Number of Shares:

 

Service Period:

 

Performance Period:

 

Type of Award:                                                            Stock
Unit and Performance-Based Award (referred to herein as a “PSU”)

 

Plan Achievement goal for Performance Period:  Except as otherwise provided in
Section 4 or 5 of the Agreement, the number of Shares that may be earned under
the Performance Share Award shall be the product of the Target Number of Shares
and the “% of Performance Shares Earned based on the table below:

 

EL TSR Performance vs
S&P 500 TSR

 

% of Performance
Shares Earned

>=90th Percentile

 

160%

80th Percentile

 

140%

70th Percentile

 

120%

60th Percentile

 

100%

Median

 

70%

40th Percentile

 

35%

<40th Percentile

 

0

 

For purposes hereof:

 

1.               “EL TSR” means the total return to stockholders of the
Company’s Class A Common Stock during the Performance Period and is calculated
at the ratio of (i) the Average Final Price (as defined below) plus the
dividends paid per share during the Performance Period less (B) the closing
stock price for the Company’s Class A Common Stock on the New York Stock
Exchange on June 30, 2012 (i.e. $54.12) and (ii) the closing stock price for the
Company’s Class A Common Stock on the New York Stock Exchange on June 30, 2012
(i.e. $54.12).   The closing stock price on June 30, 2012 is subject to
adjustment under those circumstances where adjustments to the Performance Share
Units are made under the Plan (e.g., by reason of a stock split after the Grant
Date).   For purposes hereof, “Average Final Price” means the average of the
daily closing stock prices for the Company’s Class A Common Stock on the New
York Stock Exchange over the ten trading days ending on the last day of the
Performance Period (if such last day is not a trading day, then the last trading
day preceding such last day).

 

2.               “S&P 500 TSR” means the total return to stockholders of each of
the 500 companies, other than the Company, comprising the Standard & Poors 500
(“S&P 500”) Index during the Performance Period.  Total return to stockholders
for each such company is calculated in the same way under “EL TSR” in item 1
above.  In the event that a company is no longer in the S&P 500 at the end of
the Performance Period, such company will be excluded from the calculation of
S&P 500 TSR; likewise, if a company is in the S&P 500 at the end of the
Performance Period and was not in the S&P 500 on the first day of the
Performance Period, such company will be excluded from the calculation of S&P
500 TSR.

 

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3.               If actual EL TSR Performance vs. S&P 500 TSR results in a
percentile ranking not listed on the table above, the % of Performance Shares
Earned will be interpolated on a straight-line basis between the percentile
ranking immediately above and below the calculated results.

 

4.               If the Participant’s employment is terminated by reason of, or
pursuant to, Paragraph 5(a), 5(b) or 5(c) of the Agreement, then in determining
the “% of Performance Shares Earned,” the Performance Period shall end on the
date of termination.  If there is a Change in Control, then evaluation of
performance and payout shall be in accordance with Paragraph 4 of the Agreement
and the Performance Period shall end on the date of the Change in Control.

 

5.               The Committee may reduce the payment based on other factors at
the discretion of the Committee unless a Change in Control has occurred.

 

Questions regarding the award can be directed to Thomas Fellenbaum at (212)
572-3705 or Patricia Zakrzewski at (212) 572-6953.

 

If you wish to accept this grant, please sign this Notice of Grant and return it
immediately to:

 

Compensation Department

767 Fifth Avenue, 43rd Floor

New York, New York 10153

Attention: Thomas Fellenbaum

 

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

 

 

By

/s/ Fabrizio Freda

 

Date

September 24, 2012

 

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