8
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 20, 2006
The Estee Lauder Companies Inc.
(Exact name of registrant as specified in its charter)
Delaware 11-2408943
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
767 Fifth Avenue, New York, New York 10153
(Address of principal executive offices) (Zip Code)
Commission File Number: 1-14064
212-572-4200
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
Annual Bonus Opportunities for Fiscal 2007
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On September 20, 2006, the Compensation Committee of the Board of
Directors of The Estee Lauder Companies Inc. (the "Company") granted bonus
opportunities for the year ending June 30, 2007 ("fiscal 2007") under the
Company's Executive Annual Incentive Plan to the Company's executive officers.
For the executive officers who will be named in the 2006 proxy statement,
aggregate target bonus opportunities were granted in the following amounts:
Fiscal 2007 Aggregate
Named Executive Officer (title) Target Bonus Opportunities
--------------------------------------------------------------------------------
Leonard A. Lauder (Chairman of the Board) $1,800,000
William P. Lauder (President and Chief Executive $2,000,000
Officer)
Daniel J. Brestle (Chief Operating Officer) $2,000,000
Patrick Bousquet-Chavanne (Group President) $2,000,000
Philip Shearer (Group President) $2,000,000
The opportunities for bonuses for Leonard A. Lauder, William P.
Lauder and Daniel J. Brestle are based on the levels of achievement of net sales
and earnings per share targets by the Company in fiscal 2007. Messrs. W. Lauder
and Brestle also have opportunities based on levels of achievement of working
capital relating to inventory targets for the Company in fiscal 2007. The
opportunities for Patrick Bousquet-Chavanne and Philip Shearer are based on the
levels of achievement of the earnings per share and net sales target for the
Company in fiscal 2007 and levels of achievement of full-year goals for their
respective groups at the start of fiscal 2007, including net sales for the
group, operating margin, working capital relating to inventory and planning
accuracy. Each opportunity has a threshold that must be reached before any
payout is made. Certain opportunities provide for payout in excess of the target
amount for performance that exceeds the target goal. Payouts to Mr. L. Lauder
are limited to 100% of the target opportunities. Measurement of performance is
subject to certain automatic adjustments, such as changes in accounting
principles, the impact of discontinued operations and non-recurring
income/expenses.
Equity-Based Compensation
-------------------------
On September 20, 2006, the Stock Plan Subcommittee of the
Compensation Committee of the Company's Board of Directors granted options with
respect to an aggregate of 650,000 shares of Class A Common Stock, performance
share unit awards with aggregate target payouts of 119,038 shares and restricted
stock units with respect to an aggregate of 119,038 shares to certain executive
officers of the Company pursuant to The Estee Lauder Companies Inc. Amended and
Restated Fiscal 2002 Share Incentive Plan (the "Fiscal 2002 Plan"). The
Subcommittee also granted stock options with respect to an aggregate of 967,914
shares of Class A Common Stock and/or restricted stock units with respect to an
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aggregate of 474,405 shares of Class A Common Stock to certain other officers
and employees of the Company and its subsidiaries.
Options
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Option grants were made to the following executive officers, who
will be listed in the Summary Compensation Table in the Company's 2006 proxy
statement:
Shares of Class A Common
Named Executive Officer Stock Underlying Options
----------------------- ------------------------
William P. Lauder 150,000
Daniel J. Brestle 100,000
Patrick Bousquet-Chavanne 50,000
Philip Shearer 50,000
Each option has an exercise price equal to $39.56 per share. The options are
generally exercisable in three substantially equal annual tranches beginning on
January 1, 2008. Options become exercisable earlier upon death, disability or
retirement of the optionee or a change in control of the Company. All options
expire on September 20, 2016, subject to earlier termination or forfeiture and
the expiration of the one year period after death in the case of death after
September 20, 2015. Earlier termination or forfeiture can occur if the employee
resigns other than by reason of retirement or is terminated. Post-termination
exercises are subject to non-competition and good conduct requirements. Options
granted to persons other than the named executive officers also have an exercise
price of $39.56 per share and similar terms and conditions. There are exceptions
to the general terms and conditions for options granted to employees of our
subsidiaries in certain countries, but none provide for an exercise price less
than $39.56 per share. Aerin Lauder, Senior Vice President, Global Creative
Directions for Estee Lauder and a Director of the Company, received an option
grant in respect to 1,250 shares of Class A Common Stock. The exercise price of
her options and the terms and conditions are the same as those for the executive
officers. A copy of the Form of Stock Option Agreement providing additional
information regarding the terms of each option is incorporated by reference to
Exhibit No. 10.3 to this Form 8-K.
Performance Share Unit Awards
-----------------------------
Performance Share Unit Awards were granted to the following
executive officers who will be listed in the Summary Compensation Table in the
Company's 2006 proxy statement:
Shares of Class A Common
Stock Underlying Target
Named Executive Officer Performance Share Awards
----------------------- ------------------------
William P. Lauder 27,471
Daniel J. Brestle 18,314
Patrick Bousquet-Chavanne 9,157
Philip Shearer 9,157
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Payout of the target amounts, which will be made in shares of Class
A Common Stock, is generally subject to the achievement by the Company of its
net sales and net earnings per share goals for the three years ending June 30,
2009. Under ordinary circumstances, payouts will be made pursuant to an
opportunity unless the threshold for such opportunity is achieved and additional
shares shall be paid out if performance exceeds the targeted performance goals.
Except as provided below, full payout to any executive is subject to his
continued employment through June 30, 2009 (the "Award Period") or formal
retirement under the Company's pension plan during the Award Period. Pro rata
payouts will be made to the executive or his estate if he dies or becomes
permanently disabled during the Award Period or if he is terminated without
cause in the second or third year of the Award Period. Performance Share Units
are forfeited upon voluntary resignation (which does not qualify as retirement),
termination for cause and termination by the Company without cause in the first
year of the Award Period. Full payouts based on target award amounts will be
made in the case of a change in control of the Company. Upon payout, shares will
be withheld to cover minimum statutory tax obligations. Performance Share Units
are accompanied by dividend equivalent rights that will be payable in cash at
the time of payout of the related shares.
Performance Share Unit Awards are Stock Units and Performance-Based
Awards under the Fiscal 2002 Plan. Measurement of performance is subject to
certain automatic adjustments, such as changes in accounting principles, the
impact of discontinued operations and non-recurring income/expenses.
The form of Performance Share Unit Award Agreement is attached
hereto as Exhibit 10.4 and incorporated herein by reference.
Restricted Stock Units
----------------------
Restricted Stock Units were granted to the following executive
officers who will be listed in the Summary Compensation Table in the Company's
2006 proxy statement:
Shares of Class A Common
Stock Underlying Target
Named Executive Officer Restricted Stock Units
----------------------- ----------------------
William P. Lauder 27,471
Daniel J. Brestle 18,314
Patrick Bousquet-Chavanne 9,157
Philip Shearer 9,157
Restricted Stock Units vest ratably in thirds on October 31, 2007
and 2008 and November 2, 2009 (or the first day thereafter that shares may be
traded under the Company's policy). Upon death, disability or involuntary
termination without cause, shares will vest pro rata for full months employed
during the vesting period. Payout upon death will be as soon as practicable
thereafter. Payout upon termination without cause shall be on the first vesting
day after termination that shares may be sold under the Company's policy. Payout
upon disability will be in accordance with the annual vesting schedule. Upon
retirement, unvested shares will vest and be paid out on the first day after
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retirement that such shares may be sold under the Company's policy. Payout of
Restricted Stock Units after termination of employment without cause or due to
retirement shall be subject to non-competition and good conduct requirements.
Restricted Stock Units will vest upon, and be paid out as soon as practicable
after, a change in control of the Company. Unvested Restricted Stock Units will
be forfeited upon termination for cause and upon voluntary resignation that does
not qualify as retirement. Upon payout, shares will be withheld to cover minimum
statutory tax obligations. Restricted Stock Units are accompanied by dividend
equivalent rights that will be payable in cash at the time of payout of the
related shares.
The form of Restricted Stock Unit Agreement for executive officers
is attached hereto as Exhibit 10.5 and incorporated herein by reference. The
restricted stock units granted to other employees have similar terms and
conditions, but there are exceptions, including shorter vesting periods for
grants to certain levels of employees, vesting in accordance with the original
vesting schedule upon retirement and no dividend equivalents.
Aerin Lauder received a restricted stock unit grant in respect of 417
shares of Class A Common Stock. The restricted stock units granted to Ms. Lauder
have similar terms and conditions as those granted to executive officers, except
there are no dividend equivalent rights. The form of her Restricted Stock Unit
Agreement is attached as exhibit 10.6 hereto and is incorporated herein by
reference.
Stock Ownership Guidelines
--------------------------
The Compensation Committee implemented stock ownership
guidelines for executive officers of the Company. The guidelines generally
provide that executive officers own directly or indirectly (excluding shares
underlying unexercised stock options granted by the Company), shares of Class A
Common Stock equal to: 2.5 times annual base salary for the Chief Executive
Officer, 2 times annual base salary for the Chief Operating Officer, 1.5 times
annual base salary for Group Presidents and 1 times annual base salary for all
other executive officers. Current executive officers have until September 2011
to achieve the ownership levels. Lauder family members who are executive
officers already own more shares than are required by the guidelines.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
10.1 The Estee Lauder Companies Inc. Executive Annual Incentive Plan
(filed as Exhibit 10.7 to our Annual Report on Form 10-K for the
year ended June 30, 2005) (SEC File No. 1-14064).*
10.2 The Estee Lauder Companies Inc. Amended and Restated Fiscal 2002
Share Incentive Plan (filed as Exhibit 10.1 to our Current Report on
Form 8-K dated November 10, 2005 )(SEC File No. 1-14064).*
10.3 Form of Stock Option Agreement under The Estee Lauder Companies Inc.
Amended and Restated Fiscal 2002 Share Incentive Plan (filed as
Exhibit 10.1 to our Quarterly Report on Form 10-Q dated May 4, 2006)
(SEC File No. 1-14064).*
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10.4 Form of Performance Share Unit Award Agreement under The Estee
Lauder Companies Inc. Amended and Restated Fiscal 2002 Share
Incentive Plan (including Form of Notice of Grant).
10.5 Form of Restricted Stock Unit Agreement under The Estee Lauder
Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan
for Executive Officers (including Form of Notice of Grant).
10.6 Form of Restricted Stock Unit Agreement under The Estee Lauder
Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan
for Employees other than Executive Officers (including Form of
Notice of Grant).
* Incorporated by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
THE ESTEE LAUDER COMPANIES INC.
Date: September 20, 2006 By: /s/ Amy DiGeso
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Amy DiGeso
Executive Vice President - Global
Human Resources
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Exhibit Index
10.1 The Estee Lauder Companies Inc. Executive Annual Incentive Plan
(filed as Exhibit 10.7 to our Annual Report on Form 10-K for the
year ended June 30, 2005) (SEC File No. 1-14064).*
10.2 The Estee Lauder Companies Inc. Amended and Restated Fiscal 2002
Share Incentive Plan (filed as Exhibit 10.1 to our Current Report on
Form 8-K dated November 10, 2005 )(SEC File No. 1-14064).*
10.3 Form of Stock Option Agreement under The Estee Lauder Companies Inc.
Amended and Restated Fiscal 2002 Share Incentive Plan (filed as
Exhibit 10.1 to our Quarterly Report on Form 10-Q dated May 4, 2006)
(SEC File No. 1-14064).*
10.4 Form of Performance Share Unit Award Agreement under The Estee
Lauder Companies Inc. Amended and Restated Fiscal 2002 Share
Incentive Plan (including Form of Notice of Grant).
10.5 Form of Restricted Stock Unit Agreement under The Estee Lauder
Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan
for Executive Officers (including Form of Notice of Grant).
10.6 Form of Restricted Stock Unit Agreement under The Estee Lauder
Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan
for Employees other than Executive Officers (including Form of
Notice of Grant).
* Incorporated by reference.