Exhibit 10.1
EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS AGREEMENT
(“Agreement”), effective as of July 1, 2007, between
THE ESTÉE LAUDER COMPANIES INC., a Delaware corporation (the
“Company”), and DANIEL J. BRESTLE, a resident of
[Address] (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dated as of September 1, 1988 as superseded by agreements dated
March 1, 1992, July 1, 1995, July 1, 2001, as amended July 1, 2002,
and July 1, 2004; and
WHEREAS, the Company desires to continue to
retain the services of the Executive as Chief Operating
Officer from July 1, 2007 through June 30, 2009, 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 Chief Operating
Officer from July 1, 2007 through June 30, 2009, 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 Chief
Operating Officer of the Company from July 1, 2007 through
June 30, 2009, reporting to the Chief Executive 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 Executive Officer (or the
Executive’s direct supervisor if not the Chief Executive
Officer), or the Board of Directors consistent with his position as
Chief Operating Officer of the Company. 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 Chief Operating Officer, 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 Executive Officer (or the Executive’s direct
supervisor if not 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 $1,250,000.00. 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 $2,250,000.00. All such opportunities shall be
subject to the terms and conditions of the Bonus Plan, which are
incorporated herein by reference; provided , however
, except that 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 200,000 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
$75,000.00. 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, $1,125,000.00, 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 ca
