Exhibit 10.5


 


EMPLOYMENT
AGREEMENT


 


THIS AGREEMENT (“Agreement”), dated as of July 1, 2007,
between THE ESTÉE LAUDER COMPANIES INC., a Delaware corporation (the “Company”),
and JOHN DEMSEY, a resident of [OMITTED] (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
and the Executive are parties to an employment agreement dated as of November 1,
2004; and


 


WHEREAS, the Company desires to continue to retain the services of the Executive as Group President from July 1, 2007 through June 30, 2010, and the Executive desires to provide services in such capacities 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.


 


The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to enter into employment as Group President from July 1, 2007
through June 30, 2010, unless
terminated sooner pursuant to Section 6 hereof (the “Term of Employment”).  The twelve-month period commencing on July 1,
2007 and ending on June 30, 2008 shall be the “First Contract Year”
hereunder, and subsequent twelve-month periods shall be subsequent Contract
Years.


 


2.             Duties
and Extent of Services.


 


(a)           During the
Term of Employment, the Executive shall serve as Group President of the Company from July 1, 2007 through June 30, 2010, reporting to the Chief Operating Officer, (or such other direct supervisor as determined
by the Chief Executive Officer from time to time) and, in such capacities, shall render such executive, managerial,
administrative and other services as customarily are associated with and
incident to such positions, and as the Company may, from time to time,
reasonably require of him consistent with such positions.


 


(b)           The
Executive shall also hold such other positions and executive offices of the
Company and/or of any of the Company’s subsidiaries or affiliates as may from
time to


 

















 


time be
agreed by the Executive or assigned by the Chief Operating Officer (or the Executive’s direct supervisor if not the Chief
Operating Officer), the Chief Executive Officer
or the Board of Directors.  The Executive
shall not be entitled to any compensation other than the compensation provided
for herein for serving during the Term of Employment in any other office or
position of the Company or any of its subsidiaries or affiliates, unless the
Board of Directors of the Company or the appropriate committee thereof shall
specifically approve such additional compensation.


 


(c)           The Executive shall be a full-time employee of the Company and shall exclusively devote all his business time and efforts faithfully and competently to the Company and shall diligently perform to the best of his ability all of the duties required of him as Group President, and in the other positions or offices of the Company or its subsidiaries or affiliates assigned to him hereunder.  Notwithstanding the foregoing provisions of this section, the Executive may serve as a non-management director of such business corporations (or in a like capacity in other for-profit or not-for-profit organizations) as the Chief Operating Officer (or the Executive’s direct supervisor if not the Chief Operating Officer), the Chief Executive Officer or the Board of Directors 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.  Base Salary and Incentive Bonus 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(c) below at the annualized
rate of not less than $1,000,000.00. 
Subject to Section 6(l) of this Agreement, all amounts of Base
Salary provided for hereunder shall be payable in accordance with the regular
payroll policies of the Company in effect from time to time.


 


(b)  Incentive Bonus
Compensation.  The Compensation
Committee has established for the Executive the target bonus payout for the
aggregate opportunities that may be awarded in respect of each fiscal year of
the Company under the Company’s Executive Annual Incentive Plan or any
subsequent Bonus Plan for executives that is approved by the stockholders of
the Company (the “Bonus Plan”) in respect of each Contract Year under this
Agreement.   The target bonus payout for
the aggregate opportunities in respect of each Contract Year shall be no less
than $2,000,000.00.  All such
opportunities shall be subject to the terms and conditions of the Bonus Plan,
which are incorporated herein by reference; provided, however,
that except with respect to bonuses deferred in accordance with Section 3(c) hereof,
and as otherwise
indicated under Section 6, 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) Deferral.


 


(i)  Deferral Elections—In General.  The Executive may elect to defer payment of
all or any part of 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 


 


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calendar year before the Contract 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 12 months, the Executive may make a deferral election at any
time before the date that is six 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)  Amounts Subject to Section 162(m).  If any amount of Base Salary, any amount
payable under the Bonus Plan, or any other amount payable to the Executive is
not currently deductible under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the “Code”), or like or successor provisions (a “Non-Deductible
Amount”), the Company will defer payment of the Non-Deductible Amount until
section 162(m) no longer applies to the Executive.  Any amounts so deferred 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
On Or Before December 31, 2004. 
Amounts credited to the Executive’s Deferred Compensation Account on or
before December 31, 2004, and any subsequently credited interest, will be
paid in cash to the Executive (or the Executive’s designated beneficiary if the
Executive dies before payment,)  subject
to applicable withholding taxes.  The
Company will choose the payment date, which will be no later than ninety (90)
days after Executive’s employment with the Company terminates, unless the
Executive requests before terminating a later payment date or dates and the
Company agrees to the request.


 


(v)  Payment of Amounts Deferred and Vested
After December 31, 2004. 
Subject to Section 6(l), amounts credited to the Executive’s
Deferred Compensation Account after December 31, 2004 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 Non-Deductible Amount will be paid at the
earliest date at which the Company reasonably expects that the deduction will
not be limited or eliminated by Code section 162(m).  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.  In respect of each Contract Year, the Company
shall recommend to the Stock Plan Subcommittee of the Compensation Committee
that the Executive be awarded under the terms and conditions of the Amended and
Restated Fiscal 2002 Share Incentive Plan (the “Share Incentive Plan”), which
are incorporated herein by reference, or successor plan and subject to the
provisions of Section 6(k) below, equity-based compensation awards in
accordance with the policies and procedures of the Company as in 


 


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effect
from time to time for its Executive Officers. The terms of such equity-based
compensation awards shall be set forth in separate grant letters approved by
the Stock Plan Subcommittee of the Compensation Committee.  The recommended annual equity-based
compensation awards shall be of an equivalent value to a grant of stock options
with respect to 125,000 shares of the Company’s Class A Common Stock and
determined in accordance with procedures generally utilized by the Company for
its financial reporting at the time of grant.


 


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


 


5.                                       Benefits.


 


(a)                                  Standard
Benefits.  During the Term of
Employment, the Executive shall be entitled to participate in all pension and
retirement savings, fringe benefit and welfare plans, including life insurance,
medical, health and accident, disability, and vacation plans and programs
maintained by the Company from time to time for senior executives at a level
commensurate with his position.  The
Executive acknowledges that participation in such programs may result in the
receipt by him 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 him in connection with his 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 expense were incurred.  Notwithstanding the above, to the extent that
the expenses were incurred in one calendar year and 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 $15,000.00 in respect of any calendar year during the Term of Employment,
nor shall amounts that are not reimbursed in one calendar year up to the
$15,000.00 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 $5,000.00 per year for reasonable financial counseling services for the
Executive, and in no event shall amounts up to the $5,000.00 per year
limitation that are not paid in one calendar year be able to 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 him  of additional taxable income.


 


(c)  Executive Auto. 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
$50,000.00.  Alternatively, the Executive
may receive an automobile allowance in 


 


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the gross monthly amount of $1,100.00. 
The Executive acknowledges that participation in this program will
result in the receipt by him of additional taxable income.


 


(d)  Expenses. 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 him in connection with the
performance of his duties hereunder upon presentation of proper expense
statements or vouchers or such other supporting information as the Company may
reasonably require of the Executive.  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 Travel. The Executive may
upon prior approval of the Chief Executive Officer (or the Executive’s direct
supervisor if not the Chief Executive Officer) or his or her designee arrange
for his spouse or domestic partner to accompany him 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, in accordance with the timeframe described in Section 5(b).  The Executive acknowledges that participation
in this program will result in the receipt by him 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 with a face amount of
$5,000,000.00.  Such obligation to pay
premiums is subject to standard underwriting conditions.  The Executive acknowledges that this coverage will result in the
receipt by him of additional taxable income.


 


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 his termination of employment, such
salary to be paid in accordance with Section 3(a) and such other
amounts to be paid in accordance with applicable payment provisions herein; (ii) bonus
compensation earned but not paid under Section 3(b) hereof that
relates to any Contract Year ended prior to the date of his termination of
employment, to be paid 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 he remained in employment through the end of the
Contract Year during which termination due to permanent disability occurred,
based on the portion of the Contract Year that has elapsed prior to such
termination, and paid in accordance with Section 3(b) hereof; (iv) reimbursement
for financial counseling services specified under Section 5(b) hereof
in the amount of $5,000.00 for a period of one (1) year from the date of
termination, in accordance with Section 5(b) hereof; and (v) his
Base Salary under Section 3(a) hereof for a period of one (1) year
from the date of termination as a result of permanent disability (the “Disability
Continuation Period”), paid in accordance with Section 6(l)(i) hereof;
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 


 


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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(l)).  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(l),
cash payments, to be paid in accordance with Section 6(l)(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 (y) the
excess of the benefit that would have been received by the Executive had he
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”).  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(l) 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 him in accordance with his obligations
under Section 2 hereof for a period of six (6) consecutive months or
for shorter periods aggregating six (6) months during any twelve-month
period.


 


(b)           Death.  In the event of the death of the Executive
during the Term of Employment, 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 his 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 Contract Year
ended prior to the date of his 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 he remained in the
employ of the Company through the end of the Contract Year during which
termination due to his death occurred, based
on the portion of the Contract Year that has elapsed prior to such termination,
and paid in accordance with Section 3(b) hereof; (iv) reimbursement
for financial counseling services specified
under Section 5(b) hereof in the amount
of $5,000.00 per year for a period of one (1) year from the date of
termination, in accordance with Section 5(b) hereof; and (v) for
a period of one (1) year from the date of his death, the Executive’s Base
Salary as established under Section 3(a) hereof as of the date of 


 


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his death, paid in accordance
with Section 3(a) hereof; 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 (excluding for Cause (as defined below)).  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 his
termination without Cause, such salary to be paid in accordance with Section 3(a) and
such other amounts to be paid in accordance with applicable payment provisions
herein; (ii) receive bonus compensation earned but not paid under Section 3(b) hereof
that relates to any Contract Year ended prior to the date of his termination
without Cause, to be paid 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 he remained in employment through the end of the
Contract Year during which the termination without Cause occurred, based on the
portion of the Contract Year that has elapsed prior to such termination, and
paid in accordance with Section 3(b) hereof; (iv) receive as
damages (A) for a period ending on a date two (2) years from the date
of termination without Cause, to be paid in accordance with Section 6(l)(i),
his 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 paid or payable (with respect to completed Contract
Years) to the Executive during the Term of Employment , or, if such termination
occurs prior to the payment of any bonus hereunder, $1,000,000.00, to be paid
in accordance with Section 6(l)(i);
(v) receive reimbursement for financial counseling services specified
under Section 5(b) hereof in the amount of $10,000.00 for a period of
two (2) years from the date of termination, in accordance with Section 5(b) hereof;
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 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(l),
cash payments, to be paid in accordance with Section 6(l)(i), equal to the
Pension Replacement Payment (as defined in Section 6(a)) with respect to
the Without Cause Continuation Period. 
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(l) 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 his damages hereunder.


 


(d)           Cause.  The Company shall have the right, upon notice to the Executive, to terminate the Executive’s employment under this Agreement for “Cause” (as defined below), effective upon the Executive’s receipt of such notice (or such later date as shall be specified in such notice), and the Company shall have no further obligations hereunder, except to pay the Executive his accrued but unpaid salary, in accordance with Section 3(a) hereof, and provide 


 


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


 


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


 


(iv)          the Executive’s failure to follow a
lawful directive of the Chief Operating Officer (or the Executive’s
direct supervisor if not the Chief Operating Officer) or the Board of Directors of
the Company that is within the scope of the Executive’s duties for a period of
ten (10) business days after notice from Chief Operating Officer (or
the Executive’s direct supervisor if not the Chief Operating Officer) or the Board of Directors 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 Chief Executive Officer in his or her reasonable
judgment or the Company’s Board of Directors in its reasonable judgment);


 


(vi)          drug or alcohol abuse by the Executive
that materially affects the Executive’s performance of his 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 his 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 his accrued but unpaid
salary, in accordance with Section 3(a) hereof; (ii) provide
bonus 


 


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compensation, if any,
earned but not paid under Section 3(b) hereof that relates to any
Contract 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 to the extent that any such
benefit is permitted by applicable law and regulations and provided that any
such benefit shall not be provided beyond a period ending on a date two (2) years
from the date of such termination by the Executive.  Any
amounts payable under this Section 6(e) that are not otherwise exempt
from Code section 409A are subject to, and payable in accordance with, Section 6(l) of
this Agreement. 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.


 


(f)            Termination by Executive for
Material Breach.  The Executive shall
have the right, exercisable by notice to the Company, to terminate his
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, or (ii) 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.  Any amounts payable under this Section 6(f) that
are not otherwise exempt from Code section 409A are subject to, and payable in
accordance with, Section 6(l) of this Agreement.  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


 


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(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 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 July 1, 2007 and (2) any successor to such
directors and any additional director who after July 1, 2007 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, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of notice
thereof given by the Executive, provided that the Executive provides such
notice within ninety (90) days after the initial date of such failure by the
Company and provided the Company has been provided at least thirty (30) days
during which it may remedy such failure;


 


(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
he performed his 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


 


(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 his 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) and
Section 6(l) hereof, including the required delay in payment for the
six-month period following the date of termination for any amounts determined
to be subject to Code section 409A, as described in Section 6(l).  Except as 


 


10

















 


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)            Notwithstanding
anything to the contrary contained herein, in the event that any amount
or benefit paid or distributed to the Executive pursuant to this Agreement,
taken together with any amounts or benefits otherwise paid or distributed to
the Executive by the Company or any affiliated company (collectively, the “Covered
Payments”), are or become subject to the tax (the “Excise Tax”) imposed under Section 4999
of the Code, or any similar tax that may hereafter be imposed, the Covered Payments shall be reduced (but
not below zero) until no portion of such payments would be subject to Excise
Tax.


 


(ii)           For
purposes of determining whether any of the Covered Payments will be subject to
the Excise Tax and the amount of such Excise Tax,


 


(A)          such
Covered Payments will be treated as “parachute payments” to the extent they
exceed the “2.99 base amount threshold” within the meaning of Section 280G
of the Code, and all “parachute payments” in excess of the “base amount” (as
defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless, and except to the extent that, in the good
faith judgment of the Company’s independent certified public accountants
appointed prior to the date of the change in ownership or control or tax
counsel selected by such accountants (the “Accountants”), the Company has a
reasonable basis to conclude that such Covered Payments (in whole or in part)
either do not constitute “parachute payments” or are otherwise not subject to
such Excise Tax, and


 


(B)           the
value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles of Section 280G
of the Code.


 


(i)  Non-Renewal. In the event the Company does not offer the Executive renewal
of the Term of Employment on the basis of terms no less favorable, in the
aggregate, than those pending at the time of the conclusion of the Term of
Employment and, as a result, the Company terminates the Executive’s employment
with the Company (“Non-Renewal”), such termination shall be deemed to be a termination
without Cause and shall be controlled by the provisions of Section 6(c) and
Section 6(l) hereof, including the required delay in payment for the six-month
period following the date of termination for any amounts determined to be
subject to Code section 409A, as described in Section 6(l).  Except as otherwise provided in this Section 6(i),
the Company will have no further obligations under Sections 3, 4 and 5 hereof
or otherwise.  This provision shall not
apply if at the time for renewal any of (x) the Board of Directors, (y) the
Compensation Committee and/or the Stock Plan Subcommittee of the Board of
Directors or (z) the stockholders of the Company have changed the Company’s
policy regarding the use of written employment agreements for executives, the
form of equity-based compensation, or the mix of cash and non-cash
compensation.


 


(j)            Continued Employment Beyond the Non-Renewal or
Expiration of the Term of Employment.  Unless the parties otherwise agree in
writing, continuation of Executive’s employment with the Company beyond the
non-renewal or expiration of the Term of Employment shall be deemed an
employment-at-will and shall not be deemed to extend any of the provisions of
this Agreement, and Executive’s employment may thereafter be terminated at will
by either Executive or the Company.


 


11

















 


(k)           Effect of Termination.  In
addition to the foregoing, in the event that this Agreement shall be terminated
pursuant to the provisions of subparagraphs 6(a), 6(b), 6(c), 6(f), 6(g) or
6(i) 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, 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.  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 him in the Company or any of its subsidiaries.


 


(l)            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 or 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(l)(i) hereof.
Although the Company shall consult with Executive in good faith regarding
implementation of this Section 6(l), 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(l)(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 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 


 


12

















 


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.


 


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


 


7.             Confidentiality; Ownership.


 


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


 


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


 


13

















 


decree or
by the rules and regulations of a governmental agency or as otherwise
required by law or to his legal counsel and, in connection with a determination
under Section 6(h), to accounting experts; provided that the
Executive shall provide the Company with prompt notice of such required
disclosure in advance thereof so that the Company may seek an appropriate
protective order in respect of such required disclosure.


 


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


 


(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, it 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, it 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 


 


14

















 


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
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

  	
    x         
  One Year’s Base Salary 

  
	
   

  	
  12

  



 


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.


 


15

















 


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.


 


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


 


13.           Governing Law; Jurisdiction.


 


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


 


16

















 


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


 


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

  



 


17

















 


The Executive:


 


John Demsey


c/o The Estée Lauder Companies Inc.


767 Fifth Avenue


New York, New York 10153


	
  Tel:

  	
   

  	
  (212) 572-3737

  
	
  Fax:

  	
   

  	
  (212) 572-3724

  



 


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


 


18.           Legal Fees.  Following a Change of Control, the Company
shall reimburse the Executive up to $20,000.00, 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.


 


18

















 


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

  
	
   

  	
  Title:

  	
  Executive Vice President, Global

  Human Resources

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ John Demsey

  
	
   

  	
   John Demsey

  
				



 


19