EXHIBIT 10.1
 
 
Execution Copy
 

 
EMPLOYMENT AGREEMENT

THIS AGREEMENT (“Agreement”), dated as of July 18, 2012, between THE ESTÉE
LAUDER COMPANIES INC., a Delaware corporation (the “Company”), and TRACEY T.
TRAVIS, a resident of Scarsdale, New York (the “Executive” or “you”),

W I T N E S S E T H:

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

WHEREAS, the Company desires to retain the services of the Executive as the
Executive Vice President and Chief Financial Officer and the Executive desires
to provide services in such capacity to the Company, upon the terms and subject
to the conditions hereinafter set forth; and

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

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and obligations hereinafter set forth, the parties hereto, intending to be
legally bound, hereby agree as follows:

1.           Employment Term; Effectiveness

The Company hereby agrees to employ the Executive, and the Executive hereby
agrees to enter into employment, as Executive Vice President and Chief Financial
Officer of the Company as of August 20, 2012 (the “Hire Date”) subject to
termination pursuant to Section 6 hereof.  

The period from the Hire Date through the date of termination of Executive’s
employment with the Company shall be the “Term of Employment”.

2.           Duties and Extent of Services.

(a)           During the Term of Employment, the Executive shall serve as
Executive Vice President and Chief Financial Officer, reporting both to the
President and Chief Executive Officer and to the Executive Chairman.  In such
capacity, the Executive shall render such executive, managerial, administrative
and other services as customarily are associated with and incident to such
positions, and as the Company may, from time to time, reasonably require of her
consistent with such positions.

(b)           The Executive shall also hold such other positions and executive
offices of the Company and/or of any of the Company’s subsidiaries or affiliates
as may from time to time be agreed by the Executive or assigned by the Board of
Directors, provided that each such position shall be commensurate with the
Executive’s standing in the business community as Executive Vice President and
Chief Financial Officer.  The Executive shall not be entitled to any
compensation other than the compensation provided for herein for serving during
the Term of Employment in any other office or position of the Company or any of
its subsidiaries or affiliates,

 
 

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unless the Board of Directors of the Company or the appropriate committee
thereof shall specifically approve such additional compensation.

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

(d)           The Executive shall comply with the Company's stock ownership
guidelines applicable to the Executive as they may be implemented and/or amended
by the Board of Directors or the Compensation Committee of the Board of
Directors.

3.           Cash Compensation

(a)           Base Salary.  As compensation for all services to be rendered
pursuant to this Agreement and as payment for the rights and interests granted
by Executive hereunder, the Company shall pay or cause any of its subsidiaries
to pay the Executive a base salary (the “Base Salary”) during the Term of
Employment subject to the provisions of Section 3(d) at a rate set by the
Compensation Committee from time to time.  The Compensation Committee has
determined that the annual Base Salary shall be $825,000 for the period from the
Hire Date through June 30, 2014, at which time the Base Salary will be
reviewed.  Subject to Section 6(j) of this Agreement, all amounts of Base Salary
provided for hereunder shall be periodically reviewed and, where appropriate in
conjunction with the Company’s compensation policies, adjusted and payable in
accordance with the regular payroll policies of the Company in effect from time
to time.

(b)           Incentive Bonus Compensation.  The Executive shall be eligible to
participate in the Company’s Executive Annual Incentive Plan or any subsequent
Bonus Plan for executives that is approved by the stockholders of the Company
(the “Bonus Plan”), with aggregate target bonus opportunities to be reviewed by
the Compensation Committee from time to time.  The Compensation Committee has
determined that the aggregate target bonus opportunity for the fiscal year
ending June 30, 2013 (“Fiscal 2013”) shall be equal to $825,000. Any target
bonus opportunities granted to the Executive shall be subject to the terms and
conditions of the Bonus Plan, which are incorporated herein by reference;
provided, however, that the bonus payout with respect to any fiscal year shall
be paid to Executive no later than the 15th day of the third month following the
end of such fiscal year.

(c)           Buy Out/Sign On Bonus. The Company shall pay to the Executive a
“Buy Out/Sign On” Bonus of $2,300,000, provided that, at no time shall these
grants exceed or be in respect of more than the equivalent of 79,000 full-value
shares of Class A Common Stock.  This is in addition to the limits provided in
Section 4(c) below. The Buy Out/Sign On Bonus will be payable as follows,
subject to approval by the Stock Plan Subcommittee of the Compensation
Committee:
 

 
 
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(i)  
Fifty (50) percent in restricted stock units pursuant to Section 4(b) below

(ii)  
Fifty (50) percent in stock options pursuant to Section 4(b) below

(iii)  
Restricted stock units will vest and stock options will become exercisable in
equal increments on October 31, 2013, October 31, 2014 and November 2, 2015.

 
(d)            Deferral.

(i)           Deferral Elections—In General.  During the Term of Employment the
Executive may elect to defer payment of all or any part of any salary payable
under Section 3(a) or any incentive bonus compensation payable under Section
3(b) by making an election, in a manner prescribed by the Company, on or before
December 31 of the calendar year before the fiscal year begins (or such earlier
date as may be necessary to comply with the applicable tax laws and
regulations).
 
 

(ii)           Deferral Elections—Performance-Based Compensation.  For any
incentive bonus compensation that qualifies as performance-based compensation
under Treas. Reg. Section 1.409A-1(e) and is based upon a performance period of
at least twelve (12) months, the Executive may make a deferral election at any
time before the date that is six (6) months before the applicable performance
period ends, but only if (i) the incentive bonus compensation is not readily
ascertainable when the election is made and (ii) the service provider has
performed services continuously from the later of the beginning of the
performance period or the date the performance criteria are established.

(iii)           Credit on Amounts Deferred.  Any amounts deferred by Executive
will be credited to a bookkeeping account in the name of the Executive as of the
date scheduled for payment (the “Deferred Compensation Account”).  The Deferred
Compensation Account will be credited with interest as of each June 30 during
the term of deferral, compounded annually, at an annual rate equal to the annual
rate of interest announced by Citibank N.A. in New York, New York as its base
rate in effect on such June 30, but limited to a maximum annual rate of 9%.

(iv)           Payment of Amounts Deferred and Vested.  Subject to Section 6(j),
amounts credited to the Executive’s Deferred Compensation Account will be paid
to the Executive (or the Executive’s designated beneficiary if the Executive
dies before payment), subject to applicable withholding taxes on, or as soon as
practicable after, the date the Executive separates from service with the
Company (as defined in Treas. Reg. section 1.409A-1(h)).  The Company, in its
sole discretion, may provide an investment facility for all or a portion of such
deferred amounts, but is not required to do so.

4.           Equity-Based Compensation

(a)           General.  During her Term of Employment the Executive shall be
eligible to participate in the Amended and Restated Fiscal 2002 Share Incentive
Plan or such other share incentive plan that is approved by the stockholders of
the Company (the “Share Incentive Plan”).  Any awards or opportunities granted
to the Executive shall be subject to the terms and conditions of the Share
Incentive Plan, which are incorporated herein by reference.  The terms
 
 
 
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of such equity-based compensation awards shall be set forth in separate grant
letters approved by the Stock Plan Subcommittee of the Compensation Committee.

 (b)           One-Time Award.   A recommendation will be made to the Stock Plan
Subcommittee of the Compensation Committee at its regularly scheduled meeting in
September 2012, to grant to the Executive as discussed in Section 3(c) above, a
one-time award of restricted stock units and stock options, with the number of
units to be determined in accordance with procedures generally utilized by the
Company for its financial reporting at the time of grant.

(c)           Annual Awards.  For Fiscal 2013, the recommended annual
equity-based compensation award target opportunity under the Share Incentive
Plan shall be of a value at the time of grant of no less than $2,600,000.
Thereafter, the equity-based compensation target opportunity will be reviewed by
the Compensation Committee from time to time. The number of underlying shares
granted will be determined in accordance with procedures generally utilized by
the Company for its financial reporting at the time of grant; provided, however,
at no time shall the aggregate grants during a fiscal year exceed or be in
respect of more than the equivalent of 90,000 full-value shares of Class A
Common Stock.  For purposes of this calculation, shares underlying performance
share units and other performance-based awards shall be at target performance,
which means that above-target performance payouts on performance share units or
any other form of performance-based awards shall not be subject to this
limitation.

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

5.           Benefits.

(a)           Standard Benefits.  During the Term of Employment and the
Non-Compete Period, the Executive shall be entitled to participate in all
pension and retirement savings, fringe benefit and welfare plans, including
group term life insurance, medical, health and accident, disability, and
vacation plans and programs maintained by the Company from time to time for
employees.  During the Term of Employment, the Executive shall also be entitled
to participate in additional benefits and programs as described in Sections 5
(b) through (g) for senior executives at a level commensurate with her
position.  The Executive acknowledges that participation in such programs may
result in the receipt by her of additional taxable income.

(b)           Perquisite Reimbursement; Financial Counseling.  During the Term
of Employment, the Company shall reimburse the Executive for the actual expenses
incurred by her in connection with her professional standing, in accordance with
the guidelines set out in the Company’s Senior Executive Compensation Program
Perquisite Plan and upon presentation of proper expense statements or vouchers
or such other supporting information as the Company may reasonably require of
the Executive.  Such reimbursement shall generally occur within seventy-five
(75) days after the end of the calendar year of presentment, provided that such
presentment occurs within ninety (90) days after the date the related expenses
were incurred.  Notwithstanding the above, to the extent that the expenses were
incurred in one calendar year and
 
 
 
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presentment occurs in the following calendar year, such reimbursement shall
occur by the end of the calendar year in which the presentment occurs.  In no
event shall the gross amount of such reimbursements be greater than $15,000 in
respect of any calendar year, nor shall amounts that are not reimbursed in one
calendar year up to the $15,000 per year limitation be able to be used in
another calendar year or otherwise be made available to the
Executive.  Additionally, the Company will pay directly to the service provider
following presentment of invoice(s) reasonably acceptable to the Company up to
$5,000 per year for reasonable financial counseling services for the Executive,
and in no event shall amounts up to the $5,000 per year limitation that are not
paid in one calendar year be able to be used in another calendar year or
otherwise be made available to the Executive.  The Executive acknowledges that
participation in such programs will result in the receipt by her of additional
taxable income.

(c)           Executive Auto.  During the Term of Employment, the Executive will
participate in the Executive Automobile Program of the Company, and may elect to
be provided an automobile having an acquisition value of up to $50,000, with up
to an additional $10,000 in value as paid by the Executive. Alternatively, the
Executive may receive an automobile allowance in the gross monthly amount of
$1,100.  The Executive acknowledges that participation in this program will
result in the receipt by her of additional taxable income.

(d)           Expenses.  During the Term of Employment,  the Company agrees to
reimburse the Executive for all reasonable and necessary travel (inclusive of
first class air travel), business entertainment and other business out-of-pocket
expenses incurred or expended by her in connection with the performance of her
duties hereunder upon presentation of proper expense statements or vouchers or
such other supporting information as the Company may reasonably require of the
Executive.  The timing of payment of such reimbursements and presentation by the
Executive of expenses incurred shall be in accordance with the rules described
in Section 5(b).

(e)           Spousal/Companion Travel.  During the Term of Employment, the
Executive may upon prior approval of the President & CEO or his respective
designee(s), arrange for her spouse/companion or domestic partner to accompany
her on up to two (2) business related travel itineraries per fiscal year, on a
reasonable basis, at Company expense.  Any reimbursement for such travel shall
require presentation of proper expense statements or vouchers or such other
supporting information as the Company may reasonably require of the Executive,
and shall be payable within seventy-five (75) days after the end of the calendar
year of presentment.  The Executive acknowledges that participation in this
program will result in the receipt by her of additional taxable income.

(f)           Executive Term Life Insurance.  During the Term of Employment, the
Company shall pay premiums on a term life insurance policy or successor life
insurance policy with a face amount of $5,000,000.  Such obligation to pay
premiums is subject to standard underwriting conditions.  The Executive
acknowledges that this coverage will result in the receipt by her of additional
taxable income.

(g)           Modification of Benefits.  Notwithstanding anything to the
contrary contained herein, the Company reserves the right with respect to any
benefit set forth in this Section 5 or in Section 3(d) above to modify such
benefit or not to provide such benefit.  Changes in any benefit provided solely
to Executive Officers of the Company shall be subject to approval of the
Compensation Committee.
 
 
 
 
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6.           Termination.

(a)           Permanent Disability.  In the event of the “permanent disability”
(as hereinafter defined) of the Executive during the Term of Employment, the
Company shall have the right, upon written notice to the Executive, to terminate
the Executive’s employment hereunder, effective upon the giving of such notice
(or such later date as shall be specified in such notice).  In the event of such
termination, the Company shall have no further obligations hereunder, except
that the Executive shall be entitled to receive (i) any accrued but unpaid
salary and other amounts to which the Executive otherwise is entitled hereunder
prior to the date of her termination of employment, in accordance with Section
3(a) and other applicable payment provisions herein; (ii) bonus compensation
earned but not paid under Section 3(b) hereof that relates to any fiscal year
ended prior to the date of her termination of employment, in accordance with
Section 3(b) hereof; (iii) a pro-rata portion of the annual bonus payout that
the Executive would have been entitled to receive had she remained in employment
through the end of the fiscal year during which termination due to permanent
disability occurred, based on the portion of the fiscal year that has elapsed
prior to such termination, and paid in accordance with Section 3(b) hereof
(provided, that such payment shall not be made prior to the sixtieth (60th) day
following the Executive’s date of termination); (iv) reimbursement for financial
counseling services under Section 5(b) hereof for a period of one (1) year from
the date of termination, in accordance with Section 5(b) hereof (provided, that
such payment shall not be made prior to the sixtieth (60th) day following the
Executive’s date of termination); and (v) her Base Salary at a rate equal to the
highest rate during the past twelve (12) months for a period of one (1) year
from the date of termination as a result of permanent disability, in accordance
with Section 3(a) hereof (the “Disability Continuation Period”), paid in
accordance with Section 6(j)(i) hereof (provided, that such payment shall not be
made prior to the sixtieth (60th) day following the Executive’s date of
termination); further provided, however, that the Company shall only be required
to pay that amount of the Executive’s Base Salary which shall not be covered by
short-term disability payments or benefits or long-term disability payments or
benefits, if any, to the Executive under any Company plan or arrangement.  In
addition, upon termination for permanent disability, the Executive shall
continue to participate, to the extent permitted by applicable law and
regulations and the applicable benefit plan, program or arrangement, in any and
all healthcare, life insurance and accidental death and dismemberment insurance
benefit plans, programs or arrangements of the Company during the Disability
Continuation Period (disregarding any required delay in payments under Section
6(j)).  Thereafter, the Executive’s rights to participate in such programs and
plans, or to receive similar coverage, if any, shall be as determined under such
programs.  Because continued participation in any qualified pension and
qualified retirement savings plans of the Company is not permitted during the
Disability Continuation Period, the Company shall provide to the Executive,
subject to Section 6(j), cash payments, to be paid in accordance with Section
6(j)(i), equal to the sum of (x) the maximum qualified defined contribution
retirement savings plan match for pre-tax and after-tax contributions allowable
by the plan and by applicable laws and regulations for each year during the
Disability Continuation Period (or other period as expressly provided herein),
and (v) the excess of the benefit that would have been received by the Executive
had she been credited with additional years of age and service equal to the
Disability Continuation Period (or other period as expressly provided herein)
over the actual benefit to which the Executive is entitled, in each case, under
any and all qualified and non-qualified defined benefit pension plans and
qualified defined contribution retirement savings plans in which the Executive
participates as of the date of termination of employment, calculated as of and
based upon the Executive’s date of termination (such sum the “Pension
Replacement Payment”),(provided, that such payment shall not be made prior to
the sixtieth (60th) day following the Executive’s date of termination).  
 
 
 
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Notwithstanding the above, any amounts payable under this Section 6(a) that are
separation pay as described under Treas. Reg. §1.409A-1(b)(9)(iii)(A) shall be
paid no later than December 31 of the second calendar year following the year in
which the Executive’s termination for permanent disability occurs; any amounts
payable under this Section 6(a) that are not otherwise exempt from Code section
409A are subject to, and payable in accordance with, Section 6(j) of this
Agreement.  Except as otherwise provided in this Section 6(a), the Company will
have no further obligations under Sections 3, 4 and 5 hereof or otherwise.  For
purposes of this Section 6(a), “permanent disability” means any disability as
defined under the Company’s applicable disability insurance policy or, if no
such policy is available, any physical or mental disability or incapacity that
renders the Executive incapable of performing the services required of her in
accordance with her obligations under Section 2 hereof for a period of six (6)
consecutive months or for shorter periods aggregating six (6) months during any
twelve-month period.

(b)           Death.  In the event of the death of the Executive during the Term
of Employment, Executive’s employment and this Agreement shall automatically
terminate.  In the event of such termination the Company shall have no further
obligations hereunder, except to pay the Executive’s beneficiary or legal
representative (i) any accrued but unpaid salary and other amounts to which the
Executive otherwise is entitled hereunder prior to the date of her  death, in
accordance with Section 3(a) and other applicable payment provisions herein;
(ii) bonus compensation earned but not paid under Section 3(b) hereof that
relates to any fiscal year ended prior to the date of her death, in accordance
with Section 3(b) hereof; (iii) a pro-rata portion of the annual bonus payout
the Executive would have been entitled to receive had she remained in the employ
of the Company through the end of the fiscal year during which termination due
to her death occurred, based on the portion of the fiscal year that has elapsed
prior to such termination, and paid in accordance with Section 3(b) hereof
(provided, that such payment shall not be made prior to the sixtieth (60th) day
following the Executive’s date of termination); (iv) reimbursement for financial
counseling services under Section 5(b) hereof for a period of one (1) year from
the date of termination, in accordance with Section 5(b) hereof (provided, that
such payment shall not be made prior to the sixtieth (60th) day following the
Executive’s date of termination); and (v) for a period of one (1) year from the
date of her death, the Executive’s Base Salary as established under Section 3(a)
hereof as of the date of her death, in accordance with Section 3(a) hereof
(provided, that such payment shall not be made prior to the sixtieth (60th) day
following the Executive’s date of termination); further provided, however, that,
except as otherwise provided in this Section 6(b), the Company will have no
further obligations under Sections 3, 4 and 5 hereof or otherwise.

(c)           Termination Without Cause.  The Company shall have the right, upon
ninety (90) days’ prior written notice given to the Executive, to terminate the
Executive’s employment for any reason whatsoever (except for Cause (as defined
below) which is covered by Section 3(d)).  In the event of such termination, the
Company shall have no further obligations hereunder, except that the Executive
shall be entitled to (i) receive any accrued but unpaid salary and other amounts
to which the Executive otherwise is entitled hereunder prior to the date of her
termination without Cause, in accordance with Section 3(a) and other applicable
payment provisions herein; (ii) receive bonus compensation earned but not paid
under Section 3(b) hereof that relates to any fiscal year ended prior to the
date of her termination without Cause, in accordance with Section 3(b) hereof;
(iii) receive a pro-rata portion of the annual bonus payout that the Executive
would have been entitled to receive had she remained in employment through the
end of the fiscal year during which the termination without Cause occurred,
based on the portion of the fiscal year that has elapsed prior to such
termination, and paid in accordance with Section 3(b) hereof (provided, that
such payment shall not be made prior to the sixtieth (60th) day following the
Executive’s date of termination); (iv) receive as
 
 
 
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damages (A) for a period ending on a date two (2) years from the date of
termination without Cause, in accordance with the regular payroll policies of
the Company in effect from time to time, her Base Salary as established under
and in accordance with Section 3(a) hereof and (B) bonus compensation equal to
fifty percent (50%) of the average of the actual annual bonuses (or target
bonus, if the Executive has not yet received an actual bonus) paid or payable to
the Executive under the Bonus Plan during the past two (2) completed fiscal
years paid in accordance with Section 6(j)(i) hereof (provided, that such
payment shall not be made prior to the sixtieth (60th) day following the
Executive’s date of termination); (v) receive reimbursement for financial
counseling services under Section 5(b) hereof for a period of two (2) years from
the date of termination, in accordance with Section 5(b) hereof (provided, that
such payment shall not be made prior to the sixtieth (60th) day following the
Executive’s date of termination); and (vi) participate for a period ending on a
date two (2) years from the date of termination without Cause (the “Without
Cause Continuation Period”), to the extent permitted by applicable law and
regulations and the applicable benefit plan, program or arrangement, in any and
all qualified and non-qualified pension and qualified retirement savings,
healthcare, life insurance and accidental death and dismemberment insurance
benefit plans, programs or arrangements, on terms identical to those applicable
to full-term senior officers of the Company.  Because continued participation in
any qualified pension and qualified retirement savings plans of the Company is
not permitted during the Without Cause Continuation Period, the Company shall
provide to the Executive, subject to Section 6(j), cash payments, to be paid in
accordance with Section 6(j)(i), equal to the Pension  Replacement Payment (as
defined in Section 6(a)) with respect to the Without Cause Continuation Period
(provided, that such payment shall not be made prior to the sixtieth (60th) day
following the Executive’s date of termination).  Notwithstanding the above, any
amounts payable under this Section 6(c) that are separation pay as described
under Treas. Reg. §1.409A-1(b)(9)(iii)(A) shall be paid no later than December
31 of the second calendar year following the year in which the Executive’s
termination pursuant to this section 6(c) occurs; any amounts payable under this
Section 6(c) that are not otherwise exempt from Code section 409A are subject
to, and payable in accordance with, Section 6(j) of this Agreement.  Except as
otherwise provided in this Section 6(c), the Company will have no further
obligations under Sections 3, 4 and 5 hereof or otherwise.  In the event of
termination pursuant to this Section 6(c), the Executive shall not be required
to mitigate her damages hereunder.

(d)           Cause.  The Company shall have the right, upon notice to the
Executive, to immediately terminate the Executive’s employment under this
Agreement for “Cause” (as defined below), effective upon the Executive’s receipt
of such notice (or such later date as shall be specified in such notice), and
the Company shall have no further obligations hereunder, except to pay the
Executive her accrued but unpaid salary, in accordance with Section 3(a) hereof,
and provide the Executive with any benefit under the employee benefit programs
and plans of the Company as determined under such programs and plans upon and as
of such a termination for Cause.  Except as otherwise provided in this Section
6(d), the Company will have no further obligations under Sections 3, 4 and 5
hereof or otherwise.

For purposes of this Agreement, “Cause” means:

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

 
 
 
 
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(ii)
willful misconduct by the Executive, unrelated to the Company or any of its
subsidiaries or affiliates, that could reasonably be anticipated to have a
material adverse effect on the Company or any of its subsidiaries or affiliates
(the determination of Cause to be made by the Company’s President & Chief
Executive Officer in his/her reasonable judgment);

 
(iii)
the Executive’s gross negligence, whether related or unrelated to the business
of the Company or any of its subsidiaries or affiliates which could reasonably
be anticipated to have a material adverse effect on the Company or any of its
subsidiaries or affiliates that, if capable of correction, is not corrected
within ten (10) business days following notice thereof to the Executive by the
Company, such notice to state with specificity the nature of the conduct
complained of (the determination of Cause to be made by the Company’s President
& Chief Executive Officer in his/her reasonable judgment);

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

 
(v)
any violation by the Executive of a policy contained in the Code of Conduct of
the Company (the determination of Cause to be made by the Company’s President &
Chief Executive Officer in his/her reasonable judgment);

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

 
(vii)
conviction of, or the entry of a plea of guilty or nolo contendere by the
Executive for, any felony.

 
(e)           Termination by Executive.  The Executive shall have the right,
exercisable at any time during the Term of Employment, to terminate her
employment for any reason whatsoever, upon ninety (90) days’ prior written
notice to the Company.  Upon such termination, the Company shall have no further
obligations hereunder other than to (i) pay the Executive her accrued but unpaid
salary, in accordance with Section 3(a) hereof; (ii) provide bonus compensation,
if any, earned but not paid under Section 3(b) hereof that relates to any fiscal
year ended prior to the date of such a termination by the Executive, in
accordance with Section 3(b) hereof; and (iii) provide the Executive with any
benefit under the employee benefit programs and plans of the Company as
determined under such programs and plans upon and as of such a termination by
the Executive.  Except as otherwise provided in this Section 6(e), the Company
will have no further obligations under Sections 3, 4 and 5 hereof or otherwise.

 
 
 
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(f)           Termination by Executive for Material Breach.  The Executive shall
have the right, exercisable by notice to the Company, to terminate her
employment effective ninety (90) days after the giving of such notice, if, at
any time during the Term of Employment, the Company shall be in material breach
of its obligations hereunder; provided, however, that such notice must be
provided to the Company within thirty (30) days of the date on which the
Executive obtains knowledge or reasonably should obtain knowledge of such
material breach; and provided further, that such termination will not become
effective if within thirty (30) days after receiving the notice the Company
shall have cured all such material breaches of its obligations hereunder.  For
purposes of this Section 6(f), a material breach shall only be, (i) a material
reduction in the Executive’s authority, functions, duties or responsibilities
provided in Section 2 hereof, (ii) a material reduction in the Executive’s total
aggregate target compensation effective on the Hire Date, as set pursuant to
Sections 3 (a) and (b) and Section 4(c) hereof, but in no event if the reduction
is occasioned as result of similar reductions to executive officers and/or
employees generally, or (iii) the Company's failure to pay any award that the
Executive is entitled to receive pursuant to the terms of this Agreement. Such
termination shall be deemed to be a termination without Cause and shall be
controlled by the provisions of Section 6(c) hereof. Except as otherwise
provided in this Section 6(f), the Company will have no further obligations
under Sections 3, 4 and 5 hereof or otherwise.
 
(g)           Change of Control.

(i)           Definitions.  For purposes of this Agreement,

 
(A)
a “Change of Control” shall be deemed to have occurred upon any of the following
events:

 
(1)
a change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14(A) promulgated under the
Securities Exchange Act of 1934, as amended; or

 
(2)
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 defined below) cease for any
reason to constitute a majority thereof; or

 
(3)
the Company’s Class A Common Stock shall cease to be publicly traded; or

 
(4)
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

 
(5)
the Company’s Board of Directors shall approve any merger, exchange,
consolidation, or like

 
 
 
 
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business combination or reorganization of the Company, the consummation of which
would result in the occurrence of any event described in Section 6(g)(i)(A)(2)
or (3) above, and such transaction shall have been consummated.

 
Notwithstanding the foregoing, (X) changes in the relative beneficial ownership
among members of the Lauder family and family-controlled entities shall not, by
itself, constitute a Change of Control of the Company, (Y) any spin-off of a
division or subsidiary of the Company to its stockholders  shall not constitute
a Change of Control of the Company.

 
(B)
“Continuing Directors” shall mean (1) the directors in office on the date hereof
and (2) any successor to such directors and any additional director who after
the date hereof was nominated or selected by a majority of the Continuing
Directors in office at the time of his or her nomination or selection.

 
(C)
“Good Reason” means the occurrence of any of the following, without the express
written consent of the Executive, within two (2) years after the occurrence of a
Change in Control:

 
(1)
(a) the assignment to the Executive of any duties inconsistent in any material
adverse respect with the Executive’s position, authority or responsibilities as
contemplated by Section 2 hereof, or (b) any other material adverse change in
such position, including title, authority or responsibilities;

 
(2)
any failure by the Company to comply with any provisions of Sections 3, 4 or 5
hereof or a material reduction of the overall amounts set by the Compensation
Committee or the Stock Plan Subcommittee and in effect within twelve (12) months
prior to the Change in Control, other than an insubstantial or inadvertent
failure remedied by the Company promptly after receipt of notice thereof given
by the Executive;

 
(3)
the Company’s requiring the Executive to be based at any office or location more
than fifty (50) miles from that location at which she performed her services
specified under the provisions of Section 2 immediately prior to the Change in
Control, except for travel reasonably required in the performance of the
Executive’s responsibilities; or

 
 
 
 
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(4)
any failure by the Company to obtain the assumption and agreement to perform
this Agreement by a successor as contemplated by Section 14, unless such
assumption occurs by operation of law.

 
(ii)
Termination for Good Reason.  Within two (2) years after the occurrence of a
Change of Control, the Executive may terminate her employment for Good
Reason.  Such termination shall be deemed to be a termination without Cause and
shall be controlled by the provisions of Section 6(c) hereof.  Except as
otherwise provided in this Section 6(g)(ii), the Company will have no further
obligations under Sections 3, 4 and 5 hereof or otherwise.

(h)           Certain Limitations.

(i)          For purposes of this Section 6(h), (A) a “Payment” means any
payment or distribution in the nature of compensation to or for the benefit of
the Executive, whether paid or payable pursuant to this Agreement or otherwise;
(B) “Net After-Tax Receipt” shall mean the Present Value of a Payment net of all
taxes imposed on the Executive with respect thereto under Sections 1 and 4999 of
the Code and under applicable state and local laws, determined by applying the
highest marginal rate under Section 1 of the Code and under state and local laws
which applied to the Executive’s taxable income for the immediately preceding
taxable year, or such other rate(s) as the Executive shall certify, in the
Executive’s sole discretion, as likely to apply to the Executive in the relevant
tax year(s); (C) “Present Value” shall mean such value determined in accordance
with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of Code; (D) “Reduced Amount”
shall mean the amount that (1) has a Present Value that is less than the Present
Value of all Payments (without application of this Section 6(h)) and (2) results
in aggregate Net After-Tax Receipts for all such Payments (after application of
this Section 6(h)) that are greater than the Net After-Tax Receipts for all such
Payments would have been made if this Section 6(h) were not applied; and (E)
“Code” shall mean the Internal Revenue Code of 1986, as amended.

(ii)          Anything in the Agreement to the contrary notwithstanding, in the
event that a nationally recognized certified public accounting firm (other than
the firm serving as the Company’s independent auditor) as may be designated by
the Executive (the “Accountants”) determine that receipt of all Payments would
subject the Executive to tax under Section 4999 of the Code, the Accountants
shall determine whether some amount of Payments meets the definition of “Reduced
Amount.”  If the Accountants determine that there is a Reduced Amount, then the
aggregate Payments shall be reduced to such Reduced Amount.

(iiii)          If the Accountants determine that aggregate Payments should be
reduced to the Reduced Amount, the Company shall promptly give the Executive
notice to that effect and a copy of the detailed calculation thereof, and the
Executive may then elect, in his sole discretion, which and how much of the
Payments shall be eliminated or reduced (as long as after such election the
Present Value of the aggregate Payments equals the Reduced Amount), and shall
advise the Company in writing of his election within ten (10) days of his
receipt of notice; provided, that the Executive shall not be permitted to elect
to reduce any Payment that constitutes “nonqualified deferred
 
 
 
 
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compensation” for purposes of Section 409A of the Code.  If no such election is
made by the Executive within such ten-day period, the Company shall reduce the
Payments in the following order: (1) by reducing amounts payable pursuant to
Section 6(c)(iv) of the Agreement, then (2) by reducing amounts payable pursuant
to Section 6(c)(vi) of the Agreement, then (3) by reducing amounts payable
pursuant to Section 6(c)(v) of the Agreement, then (4) by reducing the amount
payable pursuant to Section 6(c)(iii) of the Agreement, and then (5) by reducing
amounts payable to the Executive pursuant to the Company’s Amended and Restated
Fiscal 2002 Share Incentive Plan, and any award agreement thereunder by and
between the Executive and the Company. All determinations made by the
Accountants under this Section shall be binding upon the Company and the
Executive and shall be made within sixty (60) days of a termination of
employment of the Executive.  As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit of the
Executive such Payments as are then due to the Executive and shall promptly pay
to or distribute for the benefit of the Executive in the future such Payments as
become due to the Executive.

(iv)          As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accountants
hereunder, it is possible that amounts will have been paid or distributed by the
Company to or for the benefit of the Executive pursuant to this Agreement which
should not have been so paid or distributed (“Overpayment”) or that additional
amounts which will have not been paid or distributed by the Company to or for
the benefit of the Executive pursuant to this Agreement could have been so paid
or distributed (“Underpayment”), in each case, consistent with the calculation
of the Reduced Amount hereunder.  In the event that the Accountants, based upon
the assertion of a deficiency by the Internal Revenue Service against either the
Company or the Executive which the Accountants believe has a high probability of
success determine that an Overpayment has been made, any such Overpayment paid
or distributed by the Company to or for the benefit of the Executive shall be
treated for all purposes as a loan to the Executive which the Executive shall
repay to the Company together with interest at the applicable federal rate
provided for in Section 7872(f)(2) of the Code; provided, however, that no such
loan shall be deemed to have been made and no amount shall be payable by the
Executive to the Company if and to the extent such deemed loan and payment would
(A) violate Section 402 of the Sarbanes-Oxley Act of 2002, or (B) not either
reduce the amount on which the Executive is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes.  In the event that
the Accountants, based upon controlling precedent or substantial authority,
determine that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive together
with interest at the applicable federal rate provided for in Section 7872(f)(2)
of the Code.

(v)          All fees and expenses of the Accountants in implementing the
provisions of this Section 6(h) shall be borne by the Company.

(vi)      Subject to the foregoing provisions of this Subsection 6(h), in the
event that any Payments are to be reduced pursuant to this Section 6(h), such
Payments shall be reduced such that the reduction of compensation to be provided
to the Executive as a result of this Section 6(h) is minimized.  In applying
this principle, the reduction shall be made in a manner consistent with the
requirements of Section 409A of the Code. 
 
 
 
 
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(i)           Effect of Termination.  In addition to the foregoing, in the event
that this Agreement shall be terminated pursuant to the provisions of
subparagraphs 6(a), 6(b) and 6(c) above, and the Executive is not considered to
be retirement eligible under the terms and conditions of the Company’s qualified
defined benefit pension plan, if any, notwithstanding anything to the contrary
contained in the Company’s Share Incentive Plan or other similar equity plan,
(i) all stock options granted to the Executive during the Term of Employment
shall become immediately exercisable and shall be exercisable until the earlier
to occur of (A) the end of the stock option term as set forth in the applicable
option agreement(s); or (B) the first anniversary of the date that Base Salary
continuation payments end, after which all such option awards shall expire and
be of no further force or effect and (ii) all restricted stock units and
performance share units granted to the Executive shall continue to vest through
the last date that Base Salary continuation payments, if any, are made
hereunder.  The vesting and exercisability provided for in the previous sentence
shall be subject to all provisions relating to post-employment exercises set
forth in the applicable Share Incentive Plan and option agreement(s).  Subject
to the preceding sentences, upon the termination of the Executive’s employment
hereunder for any reason, the Company shall have no further obligations
hereunder, except as otherwise provided herein.  The Executive, however, shall
continue to have the obligations provided for in Sections 7 and 8 hereof.
Furthermore, upon any such termination, the Executive shall be deemed to have
resigned immediately from all offices and directorships held by her in the
Company or any of its subsidiaries.

(j)           Section 409A of the Code.  It is the intention of the parties to
this Agreement that no payment or entitlement pursuant to this Agreement will
give rise to any adverse tax consequences to the Executive under Section 409A of
the Code and Department of Treasury regulations and other interpretive guidance
issued thereunder, including that issued after the date hereof (collectively,
“Section 409A”).  The Agreement shall be interpreted to that end and, consistent
with that objective and notwithstanding any provision herein to the contrary,
the Company may unilaterally take any action it deems necessary or desirable to
amend any provision herein to avoid the application of an excise tax under
Section 409A.  Further, no effect shall be given to any provision herein in a
manner that reasonably could be expected to give rise to adverse tax
consequences under that provision.  The Company shall from time to time compile
a list of "specified employees" as defined in, and pursuant to, Treas. Reg.
Section 1.409A-1(i).  Notwithstanding any other provision herein, if the
Executive is a specified employee on the date of termination, no payment of
compensation under this Agreement shall be made to the Executive during the
period lasting six (6) months from the date of termination unless the Company
determines that there is no reasonable basis for believing that making such
payment would cause the Executive to suffer any adverse tax consequences
pursuant to Section 409A of the Code.  If any payment to the Executive is
delayed pursuant to the foregoing sentence, such payment instead shall be made
on the first business day following the expiration of the six-month period
referred to in the prior sentence, unless specified otherwise in Section 6(j)(i)
hereof. Although the Company shall consult with Executive in good faith
regarding implementation of this Section 6(j), neither the Company nor its
employees or representatives shall have liability to the Executive with respect
to any additional taxes that the Executive may be subject to in the event that
any amounts under this Agreement are determined to violate Code section 409A.

 
(i)
Notwithstanding the above, amounts described as being subject to payment in
accordance with the provisions of this Section 6(j)(i) shall be subject to a
delay in payment for a six-month period following the date of termination and
shall be paid as follows:  For

 
 
 
 
 
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any Base Salary under Section 6(a)(v) or Section 6(c)(iv)(A) to be continued
beyond the date of termination and for any Pension Replacement Payment, all
payments that would have been made during the six-month period immediately
following the date of termination shall be made in a single cash payment on the
first business day following the expiration of such six-month period, and as of
the first business day following the expiration of such six-month period all
such payments shall resume in accordance with the regular payroll practices of
the Company until the end of the specified period; any bonus payments under
Section 6(c)(iv)(B) shall be paid in a single lump sum payment on the first
business day following the expiration of such six-month period.

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

(m)           Modification of Severance Payments and Benefits.  Nothwithstanding
anything to the contrary contained herein except as provided in Section 6(h) and
this Section 6(m), the Company reserves the right with respect to any severance
payments or benefits set forth in this Section 6 to modify such payments or
benefits or not to provide such payments or benefits.  Changes in any severance
payment or benefit provided to the Executive may only be made by the
Compensation Committee (or the Stock Plan Subcommittee, if there is one, and the
change relates to matters subject to the authority of such
Subcommittee).   Unless agreed to by the Executive or as provided in Section
6(h) herein, no change to any severance payments or benefits set forth in this
Section 6 will be effective until two years after such change is approved by the
Compensation Committee (or Stock Plan Subcommittee).    No changes may be made
in severance payments or benefits set forth in this Section 6 either (i) at such
time the Company is contemplating one or more transactions that will result in a
Change of Control or (ii) after a Change of Control.

7.           Confidentiality; Ownership.

(a)           The Executive agrees that she shall forever keep secret and retain
in strictest confidence and not divulge, disclose, discuss, copy or otherwise
use or suffer to be used in any manner, except in connection with the Business
of the Company, its subsidiaries or affiliates and any other business or
proposed business of the Company or any of its subsidiaries or affiliates, any
“Protected Information” in any “Unauthorized” manner or for any “Unauthorized”
purpose (as such terms are hereinafter defined).
 
 
 
 
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(i)
“Protected Information” means trade secrets, confidential or proprietary
information and all other knowledge, know-how, information, documents or
materials owned, developed or possessed by the Company or any of its
subsidiaries or affiliates, whether in tangible or intangible form, pertaining
to the Business or any other business or proposed business of the Company or any
of its subsidiaries or affiliates, including, but not limited to, research and
development, operations, systems, data bases, computer programs and software,
designs, models, operating procedures, knowledge of the organization, products
(including prices, costs, sales or content), processes, formulas, techniques,
machinery, contracts, financial information or measures, business methods,
business plans, details of consultant contracts, new personnel hiring plans,
business acquisition plans, customer lists, business relationships and other
information owned, developed or possessed by the Company or its subsidiaries or
affiliates; provided that Protected Information shall not include information
that becomes generally known to the public or the trade without violation of
this Section 7.

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

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

(c)           During the Term of Employment, the Company, its subsidiaries and
affiliates shall have the exclusive right to use the Executive’s name and image
throughout the world in its advertising and promotional materials in connection
with the advertising and promotion of the Company, its subsidiaries and
affiliates, and their products.  After the expiration of the Term of Employment,
the Company, its subsidiaries and affiliates shall have the non-exclusive right
in perpetuity to use the Executive’s name and image throughout the world solely
in connection with promotional materials related to the history of the Company,
its subsidiaries and affiliates, and their products.  The consideration for such
rights is the payments set forth in Section 3(a) hereof.  The rights conveyed
hereby may be assigned by the Company, its subsidiaries or affiliates to a
successor in the interest of the Company or the relevant subsidiary or affiliate
or their businesses or product lines.

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

8.           Covenant Not to Compete.

The Executive agrees that during the Executive’s employment with the Company or
any of its subsidiaries or affiliates and for a period of two (2) years
commencing upon the expiration or termination of the Executive’s employment for
any reason whatsoever (the “Non-Compete Period”), the Executive shall not,
directly or indirectly, without the prior written consent of the Company:

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

(b)           directly or indirectly engage, participate, or make any financial
investment in, or become employed by or render consulting, advisory or other
services to or for any person, firm, corporation or other business enterprise,
wherever located, which is engaged, directly or indirectly, in competition with
the Business or any business of the Company or any of its
 
 
 
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subsidiaries or affiliates as conducted or any business proposed to be conducted
at the time of the expiration or termination of the Executive’s employment with
the Company and its subsidiaries and affiliates; provided, however, that nothing
in this Section 8(b) shall be construed to preclude the Executive from making
any investments in the securities of any business enterprise whether or not
engaged in competition with the Company or any of its subsidiaries or
affiliates, to the extent that such securities are actively traded on a national
securities exchange or in the over-the-counter market in the United States or on
any foreign securities exchange and represent, at the time of acquisition, not
more than 3% of the aggregate voting power of such business enterprise.

To ensure that the Company is able to enforce these provisions in Sections 8(a)
and (b) above, the Executive and the Company further agree that if such
noncompetition and nonsolicitation requirements should be violated during this
additional two-year period after the Executive's termination of employment, the
remedy (determined at the Company's option) shall be either equitable relief (in
the form of an injunction to stop the violation), or liquidated damages payable
by the Executive to the Company in an amount equal to (a) (i) (A) twenty-four
(24) minus (B) the number of full months between the date of Executive’s
termination and the date of breach (“Months Complied”) divided by (ii) 12, times
(b) one year’s Base Salary in effect at the time of termination.  In other
words:
 
 
                 Twenty-four (24) – Months Complied                
12
X            One Year’s Base Salary 

 
If equitable relief is elected by the Company as an alternative to liquidated
damages, any equitable relief shall not include any forfeiture or cash refund of
monies or benefits.  If liquidated damages is elected by the Company, the
Company may elect not to pay amounts that would otherwise be payable but for the
breach; provided that, the Executive would remain liable to the Company to the
extent that the liquidated damages exceeded the amounts not paid by the Company.
The foregoing shall have no impact on the operation of the provisions of any
other compensation program of the Company or its subsidiaries, including without
limitation the Amended and Restated Fiscal 2002 Share Incentive Plan.

9.           Specific Performance.

The Executive acknowledges that the services to be rendered by the Executive are
of a special, unique and extraordinary character and, in connection with such
services, the Executive will have access to confidential information vital to
the Company’s Business and the other current or planned businesses of it and its
subsidiaries and affiliates.  By reason of this, the Executive consents and
agrees that if the Executive violates any of the provisions of Sections 7 or 8
hereof, the Company and its subsidiaries and affiliates would sustain
irreparable injury and that monetary damages would not provide adequate remedy
to the Company and that the Company shall be entitled to have Section 7 or 8
hereof specifically enforced by any court having equity jurisdiction.  Nothing
contained herein shall be construed as prohibiting the Company or any of its
subsidiaries or affiliates from pursuing any other remedies available to it or
them for such breach or threatened breach, including the recovery of damages
from the Executive.  This provision shall, without any limitation as to time,
survive the expiration or termination of the Executive’s employment hereunder,
irrespective of the reason for any termination.
 
 
 
 
 
 
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10.           Deductions and Withholding.

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

11.           Entire Agreement.

Except for the Amended and Restated Fiscal 2002 Share Incentive Plan, the
Executive’s outstanding stock option and other equity-compensation agreements,
the Executive Annual Incentive Plan, the Executive Perquisites Program, the
Executive Automobile Program, the term life insurance arrangement between the
Company and the Executive, the Company’s qualified and non-qualified defined
benefit pension plans, the Company’s qualified defined contribution retirement
savings plan and applicable successor plans or agreements, this Agreement
embodies the entire agreement of the parties with respect to the Executive’s
employment, compensation, perquisites and related items and supersedes any other
prior oral or written agreements, arrangements or understandings between the
Executive and the Company or any of its subsidiaries or affiliates, and any such
prior agreements, arrangements or understandings are hereby terminated and of no
further effect.    This Agreement may not be changed or terminated orally but
only by an agreement in writing signed by the parties hereto.

12.           Waiver.

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

13.           Governing Law; Jurisdiction.

(a)           This Agreement shall be subject to, and governed by, the laws of
the State of New York applicable to contracts made and to be performed therein,
without regard to conflict of laws principles.

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

The obligations of the Executive may not be delegated and, except with respect
to the designation of beneficiaries in connection with any of the benefits
payable to the Executive hereunder, the Executive may not, without the Company’s
written consent thereto, assign, transfer, convey, pledge, encumber, hypothecate
or otherwise dispose of this Agreement or any interest herein.  Any such
attempted delegation or disposition shall be null and void and without
effect.  The Company and the Executive agree that this Agreement and all of the
Company’s rights and obligations hereunder may be assigned or transferred by the
Company to and shall be assumed by and be binding upon any successor to the
Company.  Unless assumption occurs by operation of law, the Company shall
require any successor by an agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Company would be required to perform if no
such succession had taken place.  The term “successor” means, with respect to
the Company or any of its subsidiaries, any corporation or other business entity
which, by merger, consolidation, purchase of the assets or otherwise acquires
all or a majority of the operating assets or business of the Company.

15.           Severability.

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

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

16.           Notices.

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

The Company:

The Estée Lauder Companies Inc.
767 Fifth Avenue
New York, New York 10153
Attn:           General Counsel
Tel:           (212) 572-3980
Fax:           (212) 572-3989

 
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The Executive:

Tracey T. Travis
_______________________________
_______________________________
  
 
Either party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party.  Any such notice
shall be deemed given, if delivered personally, upon receipt; if telecopied,
when telecopied; if sent by courier service providing for next-day or two-day
delivery, the next business day or two business days, as applicable, following
deposit with such courier service; and if sent by certified or registered mail,
three days after deposit (postage prepaid) with the U.S. mail service.

17.           No Conflicts.

The Executive hereby represents and warrants to the Company that her execution,
delivery and performance of this Agreement and any other agreement to be
delivered pursuant to this Agreement will not (i) require the consent, approval
or action of any other person or (ii) violate, conflict with or result in the
breach of any of the terms of, or constitute (or with notice or lapse of time or
both, constitute) a default under, any agreement, arrangement or understanding
with respect to the Executive’s employment to which the Executive is a party or
by which the Executive is bound or subject.  The Executive hereby agrees to
indemnify and hold harmless the Company and its directors, officers, employees,
agents, representatives and affiliates (and such affiliates’ directors,
officers, employees, agents and representatives) from and against any and all
losses, liabilities or claims (including interest, penalties and reasonable
attorneys’ fees, disbursements and related charges) based upon or arising out of
the Executive’s breach of any of the foregoing representations and warranties.

18.           Legal Fees.

Following a Change of Control, the Company shall reimburse the Executive up to
$20,000, in the aggregate, for all legal fees and related expenses (including
the costs of experts, evidence and counsel) reasonably and in good faith
incurred by the Executive in an action (i) by the Executive to obtain or enforce
any right or benefit to which the Executive is entitled under this Agreement or
(ii) by the Company to enforce a post-termination covenant referred to in
Section 7 or 8 against the Executive, in each case, provided that the Executive
substantially prevails in such action.  Such amount shall be reimbursed to the
Executive by the end of the calendar year in which the Executive substantially
prevails in such action, based on the date of any settlement, judgment, or other
official document evidencing same.

19.           Cooperation.

During the Term of Employment and thereafter, Executive shall provide reasonable
cooperation in connection with any action or proceeding (or any appeal
therefrom) that relates to events occurring during Executive’s employment with
the Company.

20.           Paragraph Headings.

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

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

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

 
THE ESTÉE LAUDER COMPANIES INC.
             
By:
 
 /s/ Amy DiGeso
 
Name:
 
Amy DiGeso
     
Executive Vice President,
     
Global Human Resources
                         
By:
 
 /s/ Tracey T. Travis
     
Tracey T. Travis

 
 
 
 
 
 
 
 
 
 
 
 
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