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):
November 10, 2005
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
Amended and Restated Fiscal 2002 Share Incentive Plan
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On November 10, 2005, the stockholders of The Estee Lauder Companies
Inc. (the "Company") approved The Estee Lauder Companies Inc. Amended and
Restated Fiscal 2002 Share Incentive Plan (the "Amended and Restated 2002 Share
Plan").
The Amended and Restated 2002 Share Plan is intended to provide
incentives which will attract, retain, motivate and reward highly competent
people as officers and employees of, and consultants to, the Company, its
subsidiaries and its affiliates, by providing them with opportunities to acquire
shares of Class A Common Stock of the Company or to receive monetary payments
based on the value of such shares pursuant to the Benefits (as defined below).
In addition, the Amended and Restated 2002 Share Plan is intended to assist in
further aligning the interests of the Company's officers, employees and
consultants with those of its other stockholders.
The following summary describes the material features of the Amended
and Restated 2002 Share Plan but is not intended to be complete and is qualified
in its entirety by reference to the text of the Amended and Restated 2002 Share
Plan, which is attached hereto as Exhibit 10.1 and incorporated by reference
herein.
SHARES AVAILABLE
The maximum number of shares of Class A Common Stock that may be
delivered to participants under the Amended and Restated 2002 Share Plan,
subject to certain adjustments, is an aggregate of 22,000,000 shares plus up to
10,000,000 shares of Class A Common Stock that are represented by awards granted
under any prior plan of the Company (e.g., the Fiscal 1999 Share Incentive Plan
and the Fiscal 1996 Share Incentive Plan) or under any employment agreement with
the Company, which are forfeited, expire or are cancelled without the delivery
of shares or which result in the forfeiture of shares back to the Company. As of
November 10, 2005, 999,706 shares of Class A Common Stock were rolled over into
the Current 2002 Share Plan and count toward the 10,000,000 share limit. In
addition, any shares of Class A Common Stock subject to a stock option or stock
appreciation right which for any reason is cancelled or terminated without
having been exercised, any shares subject to stock awards, performance awards or
stock units which are forfeited, any shares subject to performance awards
settled in cash or any shares delivered to the Company as part or full payment
for the exercise of a stock option or stock appreciation right, shall again be
available for Benefits (as defined below) under the Amended and Restated 2002
Share Plan. The Amended and Restated 2002 Share Plan also imposes certain
additional aggregate and individual maximums. The aggregate number of shares of
Class A Common Stock that may be delivered through stock options shall be the
lesser of (i) 32,000,000 and (ii) the maximum number of shares that may be
delivered under the plan. The number of shares of Class A Common Stock with
respect to which Benefits or stock options and stock appreciation rights may be
granted to an individual participant under the Amended and Restated 2002 Share
Plan may not exceed 2,000,000 in any fiscal year.
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ADMINISTRATION
The Amended and Restated 2002 Share Plan provides for administration by
a committee of the Board of Directors of the Company appointed from among its
members, which is comprised, unless otherwise determined by the Board of
Directors, solely of not less than two members who shall be (i) "Non-Employee
Directors" within the meaning of Rule 16b-3(b)(3) (or any successor rule)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and (ii) "outside directors" within the meaning of Treasury Regulation
section 1.162-27(e)(3) under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). The Board of Directors has determined that the
Stock Plan Subcommittee shall administer the Amended and Restated 2002 Share
Plan. References to the Subcommittee below shall include any subsequent
committee authorized by the Board to administer the Amended and Restated 2002
Share Plan.
The Subcommittee is authorized, subject to the provisions of the
Amended and Restated 2002 Share Plan, to establish such rules and regulations as
it deems necessary for the proper administration of the Amended and Restated
2002 Share Plan and to make such determinations and interpretations and to take
such action in connection with the Amended and Restated 2002 Share Plan and any
Benefits granted as it deems necessary or advisable. Thus, among the
Subcommittee's powers are the authority to select officers and other employees
of the Company and its subsidiaries to receive Benefits, and to determine the
form, amount and other terms and conditions of Benefits. The Subcommittee also
has the power to modify or waive restrictions on Benefits, to amend Benefits, to
grant extensions and accelerations of Benefits or to cancel Benefits. The
Subcommittee may determine the extent to which any Benefit under the Amended and
Restated 2002 Share Plan is required to comply, or not comply with, Section 409A
of the Code, relating to deferrals.
ELIGIBILITY FOR PARTICIPATION
Officers and employees of, and consultants to, the Company or any of
its subsidiaries and affiliates are eligible to participate in the Amended and
Restated 2002 Share Plan. The selection of participants from this group is
within the discretion of the Subcommittee. Members of the Board of Directors of
the Company who are non-employee directors are not eligible to participate in
the Amended and Restated 2002 Share Plan.
TYPES OF BENEFITS
The Amended and Restated 2002 Share Plan provides for the grant of any
or all of the following types of benefits (collectively, "Benefits"): (1) stock
options, including incentive stock options and non-qualified stock options; (2)
stock appreciation rights; (3) stock awards; (4) performance awards; and (5)
stock units. Benefits may be granted singly, in combination, or in tandem as
determined by the Subcommittee. Stock awards, performance awards and stock units
may, as determined by the Subcommittee in its discretion, constitute
Performance-Based Awards, as described below.
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STOCK OPTIONS
Under the Amended and Restated 2002 Share Plan, the Subcommittee may
grant awards in the form of options to purchase shares of Class A Common Stock.
Options may either be incentive stock options, qualifying for special tax
treatment, or non-qualified options. The Subcommittee will, with regard to each
stock option, determine the number of shares subject to the option, the manner
and time of the option's exercise and vesting, and the exercise price per share
of stock subject to the option. The exercise price will not be less than 100% of
the fair market value of the Class A Common Stock (generally the closing price
on the New York Stock Exchange) on the date the stock option is granted (the
"Fair Market Value"). The exercise price may be paid in cash or, in the
discretion of the Subcommittee, by the delivery of shares of Class A Common
Stock then owned by the participant, by the withholding of shares of Class A
Common Stock for which a stock option is exercisable, or by a combination of
these methods. In the discretion of the Subcommittee, payment also may be made
by delivering a properly executed exercise notice to the Company together with a
copy of irrevocable instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the exercise price. The Subcommittee
may prescribe any other method of paying the exercise price that it determines
to be consistent with applicable law and the purposes of the Amended and
Restated 2002 Share Plan. In determining which methods a participant may utilize
to pay the exercise price, the Subcommittee may consider such factors as it
determines are appropriate. No stock option is exercisable later than ten years
after the date it is granted except in the event of a participant's death, in
which case, the exercise period may be extended but not longer than one year
after the participant's death. The exercise of any option which remains
exercisable after termination of employment will be subject to satisfaction of
the conditions precedent that the holder thereof neither (a) competes with or
takes employment with or renders services to a competitor of the Company, its
subsidiaries or affiliates without the consent of the Company nor (b) conducts
himself or herself in a manner adversely affecting the Company.
STOCK APPRECIATION RIGHTS ("SARS")
The Amended and Restated 2002 Share Plan authorizes the Subcommittee to
grant an SAR either in tandem with a stock option or independent of a stock
option. An SAR is a right to receive a payment, in cash, Class A Common Stock,
or a combination thereof, equal to the excess of (x) the Fair Market Value, or
other specified valuation, of a specified number of shares of Class A Common
Stock on the date the right is exercised over (y) the Fair Market Value, or
other specified valuation (which shall not be less than Fair Market Value), of
such shares of Class A Common Stock on the date the right is granted, all as
determined by the Subcommittee. SARs granted under the Amended and Restated 2002
Share Plan are subject to terms and conditions relating to exercisability that
are similar to those imposed on stock options, and each SAR is subject to such
terms and conditions as the Subcommittee shall impose from time to time.
STOCK AWARDS
The Subcommittee may, in its discretion, grant Stock Awards (which may
include mandatory payment of bonus incentive compensation in stock) consisting
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of Class A Common Stock issued or transferred to participants with or without
payments therefor. Stock Awards may be subject to such terms and conditions as
the Subcommittee determines appropriate, including, without limitation,
restrictions on the sale or other disposition of such shares, the right of the
Company to reacquire such shares for no consideration upon termination of the
participant's employment within specified periods, and may constitute
Performance-Based Awards, as described below. The Stock Award will specify
whether the participant will have, with respect to the shares of Class A Common
Stock subject to a Stock Award, all of the rights of a holder of shares of Class
A Common Stock, including the right to receive dividends and to vote the shares.
PERFORMANCE AWARDS
The Amended and Restated 2002 Share Plan allows for the grant of
performance awards which may take the form of shares of Class A Common Stock or
stock units, or any combination thereof. Such awards may, but need not, be
Performance-Based Awards. Such awards will be contingent upon the attainment
over a period to be determined by the Subcommittee of certain performance goals.
The length of the performance period, the performance goals to be achieved and
the measure of whether and to what degree such goals have been achieved will be
determined by the Subcommittee. Payment of earned performance awards will be
made in accordance with terms and conditions prescribed or authorized by the
Subcommittee. The participant may elect to defer, or the Subcommittee may
require the deferral of, the receipt of performance awards upon such terms as
the Subcommittee deems appropriate.
STOCK UNITS
The Subcommittee may, in its discretion, grant Stock Units to
participants. Such Stock Units may, but need not, be Performance-Based Awards. A
"Stock Unit" is a notional account representing one share of Class A Common
Stock. The Subcommittee determines the criteria for the vesting of Stock Units
and whether a participant granted a Stock Unit shall be entitled to Dividend
Equivalent Rights (as defined in the Amended and Restated 2002 Share Plan). Upon
vesting of a Stock Unit, unless the Subcommittee has determined to defer payment
with respect to such unit or a participant has elected, with the permission of
the Subcommittee, to defer receipt of payment, shares of Class A Common Stock
representing the Stock Units will be distributed to the participant (unless the
Subcommittee, with the consent of the participant, provides for the payment of
the Stock Units in cash, or partly in cash and partly in shares of Class A
Common Stock, equal to the value of the shares of Class A Common Stock which
would otherwise be distributed to the participant).
PERFORMANCE-BASED AWARDS
Certain Benefits granted under the Amended and Restated 2002 Share Plan
may be granted in a manner such that the Benefit qualifies for the
performance-based compensation exemption to Section 162(m) of the Code
("Performance-Based Awards"). As determined by the Subcommittee in its sole
discretion, either the granting or vesting of such Performance-Based Awards will
be based upon achievement of hurdle rates and/or growth in one or more of the
following business criteria: (i) net earnings; (ii) earnings per share; (iii)
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net sales; (iv) market share; (v) net operating profit; (vi) expense targets;
(vii) working capital targets relating to inventory and/or accounts receivable;
(viii) operating margin; (ix) return on equity; (x) return on assets; (xi)
planning accuracy (as measured by comparing planned results to actual results);
(xii) market price per share; (xiii) gross margin and (xiv) total return to
stockholders. In addition, Performance-Based Awards may include comparisons to
the performance of other companies, such performance to be measured by one or
more of the foregoing criteria. Furthermore, the measurement of performance
against goals may exclude or adjust for the impact of certain events or
occurrences that were not budgeted or planned for in setting the goals,
including among other things, restructurings, discontinued operations, changes
in foreign currency exchange rates, extraordinary items and other unusual or
non-recurring items, and the cumulative effects of accounting changes. With
respect to Performance-Based Awards, the Subcommittee shall establish in writing
(x) the performance goals applicable to a given period, specifying by an
objective formula or standard, the method for computing the amount of
compensation payable to the participant if such performance goals are obtained
and (y) the individual employees or class of employees to which such performance
goals apply no later than 90 days after the commencement of such period (but in
no event after one quarter of such period has elapsed). No Performance-Based
Award shall be payable to, or vest with respect to, any participant for a given
fiscal period until the Subcommittee certifies in writing that the objective
performance goals (and any other material terms) applicable to such period have
been satisfied.
OTHER TERMS
The Amended and Restated 2002 Share Plan provides that Benefits may be
transferred by will or the laws of descent and distribution. The Subcommittee
determines the treatment to be afforded to a participant in the event of
termination of employment for any reason including death, disability or
retirement. Except with respect to incentive stock options, the Subcommittee may
permit a Benefit to be transferred by a participant to certain members of the
participant's immediate family or trusts for the benefit of such persons or
other entities owned by such person.
Upon the grant of any Benefit under the Amended and Restated 2002 Share
Plan, the Subcommittee may, by way of an agreement with the participant,
establish such other terms, conditions, restrictions and/or limitations covering
the grant of the Benefit as are not inconsistent with the Amended and Restated
2002 Share Plan. No Benefit may be granted after November 10, 2015. The
Subcommittee reserves the right to amend, suspend or terminate the Amended and
Restated 2002 Share Plan at any time. However, no amendment may be made without
approval of the stockholders of the Company if the amendment will: (i)
disqualify any incentive stock options granted under the plan; (ii) increase the
aggregate number of shares of Class A Common Stock that may be delivered through
Stock Options under the plan; (iii) increase the maximum amount which can be
paid to an individual participant under the plan; (iv) change the types of
business criteria on which Performance-Based Awards are to be based under the
plan; (v) modify the requirements as to eligibility for participation in the
plan; or (vi) allow for the repricing of Stock Options or SARs. The Subcommittee
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may amend the terms of any outstanding Benefit or any provision of the plan as
the Subcommittee deems necessary to ensure compliance with Section 409A of the
Code.
The Amended and Restated 2002 Share Plan contains provisions for
equitable adjustment of Benefits in the event of a merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, reverse stock
split, split up, spinoff, combination of shares, exchange of shares, dividend in
kind or other similar change in capital structure, distribution (other than
normal cash dividends) to stockholders or any extraordinary dividend or
distribution of cash or other assets to stockholders of the Company.
In the event of a Change in Control (as defined below), the
Subcommittee, in its discretion, may take such actions as it deems appropriate
with respect to outstanding Benefits, including, without limitation,
accelerating the exercisability or vesting of such Benefits, or such other
actions provided in an agreement approved by the Board of Directors in
connection with a Change in Control and such Benefits shall be subject to the
terms of such agreement as the Subcommittee, in its discretion, shall determine.
The Subcommittee, in its discretion, may determine that, upon the occurrence of
a Change in Control of the Company, each Stock Option and Stock Appreciation
Right outstanding will terminate within a specified number of days after notice
to the holder, and such holder will receive, with respect to each share of
Common Stock subject to such Stock Option or Stock Appreciation Right, an amount
equal to the excess of the Fair Market Value of such shares of Common Stock
immediately prior to the occurrence of such Change in Control over the exercise
price per share of such Stock Option or Stock Appreciation Right; such amount to
be payable in cash, in one or more kinds of property (including the property, if
any, payable in the transaction) or in a combination thereof, as the
Subcommittee, in its discretion, shall determine. For purposes of the Amended
and Restated 2002 Share Plan, a "Change in Control" of the Company will be
deemed to have occurred upon any of the following events:
(i) A change in control of the direction and administration of the
Company's business of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act; or
(ii) 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
hereinafter defined) cease for any reason to constitute at least a
majority thereof; or
(iii) The Company's Class A Common Stock shall cease to be publicly traded;
or
(iv) 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
(v) The Company's Board of Directors shall approve any merger,
consolidation, or like business combination or reorganization of the
Company, the consummation of which would result in the occurrence of
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any event described in clauses (ii) or (iii) above, and such
transaction shall have been consummated.
Notwithstanding the foregoing, (A) changes in the relative beneficial
ownership among members of the Lauder family and family-controlled entities
shall not, by itself, constitute a Change in Control of the Company, and (B) any
spin-off of a division or subsidiary of the Company to its stockholders shall
not constitute a Change in Control of the Company.
"Continuing Directors" means (x) the directors of the Company in office
on the date on which stockholders approve the Amended and Restated 2002 Share
Plan and (y) any successor to any such director and any additional director who
after such date was nominated or elected by a majority of the Continuing
Directors in office at the time of his or her nomination or election.
The Subcommittee may grant Benefits to participants who are subject to
the tax laws of nations other than the United States, which Benefits may have
terms and conditions as determined by the Subcommittee as necessary to comply
with applicable foreign laws. The Subcommittee may take any action which it
deems advisable to obtain approval of such Benefits by the appropriate foreign
governmental entity; provided, however, that no such Benefits may be granted,
and no action may be taken which would violate the Exchange Act, the Code or any
other applicable law.
Amendment to Employment Agreement with Leonard A. Lauder
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On November 16, 2005, at the request of Leonard A. Lauder, who is
Chairman of the Board of Directors and a significant stockholder of the Company,
the Company amended his employment agreement to provide that his salary for
fiscal years beginning on or after July 1, 2005 be reduced by 20% from
$1,800,000 per year to $1,440,000 per year.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
10.1 The Estee Lauder Companies Inc. Amended and Restated Fiscal 2002 Share
Incentive Plan.+
10.2 Amendment, dated as of November 16, 2005, to Employment Agreement
between Leonard A. Lauder and The Estee Lauder Companies Inc.+
+ Exhibit is a management contract or compensatory plan or arrangement.
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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: November 16, 2005 By: /s/ Sara E. Moss
---------------------------------
Sara E. Moss
Executive Vice President, General
Counsel and Secretary
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THE ESTEE LAUDER COMPANIES INC.
EXHIBIT INDEX
Exhibit No. Description
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10.1 The Estee Lauder Companies Inc. Amended and Restated Fiscal
2002 Share Incentive Plan.+
10.2 Amendment, dated as of November 16, 2005, to Employment
Agreement between Leonard A. Lauder and The Estee Lauder
Companies Inc.+
+ Exhibit is a management contract or compensatory plan or arrangement.
10