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Business Context and Reporting Period

This Form 8-K, filed on April 7, 2011, reports events occurring on April 6, 2011, for The Estée Lauder Companies Inc. (ELC). The filing details the entry into two material definitive agreements between ELC's subsidiary, Estée Lauder Inc. (ELI), and Aerin Lauder (a member of the ELC Board of Directors and daughter of Chairman Ronald S. Lauder). These agreements establish a new brand partnership and redefine Ms. Lauder's role within the company.

Key Financial Metrics and Agreement Terms

The filing does not report consolidated revenue, profit, cash flow, or debt metrics for the company. Instead, it outlines specific financial terms of the new agreements:

• Creative Consultant Compensation: Ms. Lauder will receive an annual fee of $700,000 through June 30, 2012, increasing by 4% annually thereafter.
• Additional Appearance Fees: $20,000 per day for appearances exceeding the minimum 35 days required in the first year, increasing by $1,000 per day annually.
• Brand Royalties (Aerin LLC):
  • Non-fragrance products: 4% of net sales up to $40 million; 5% on sales exceeding $40 million.
  • Fragrance products: 5% of net sales.
• Marketing Commitment: ELI must spend a minimum of 20% of Aerin-branded net sales on promotion during the initial term, dropping to 15% thereafter (capped at 50% of Aerin LLC's similar expenditures).

Material Changes and Strategic Shifts

As a result of these agreements, Ms. Lauder is resigning from her position as Senior Vice President and Creative Director for the Estée Lauder brand and will no longer be an employee of any ELC company. She will transition to a Style and Image Director role under the Creative Consultant Agreement while remaining a member of the ELC Board of Directors. The company is launching a new "Aerin" brand line, with a "capsule collection" targeted for launch within 12 months of the agreement date.

Outlook, Risks, and Contingencies

Outlook and Milestones:

• ELI is expected to launch a limited "capsule collection" of Aerin-branded products within 12 months.
• Aerin LLC is expected to launch commercially reasonable quantities of products under the Aerin Lifestyle Brand within 18 months.
• The License Agreement has an initial term ending June 30, 2017, with three potential 5-year renewal terms contingent on performance targets.

Risks and Termination Rights:

• Change of Control: Aerin LLC may terminate the License Agreement if an unaffiliated third party acquires more than 50% of ELI's voting power or equity.
• Competitor Transfer: ELI may terminate if control of Aerin LLC is transferred to a competitor or non-prestige retailers.
• Breach: Either party may terminate for uncured material breach.

Related Party Matters: The transactions were approved by the Audit Committee. Multiple family members of Ms. Lauder hold significant positions within ELC, including her father (Chairman), uncle (Chairman Emeritus), and sister (Board Member and Global President).

Key Facts for Investor Verification

• Confirmation of the exact launch date for the "Aerin" capsule collection and subsequent product lines.
• Future financial impact of the royalty payments and marketing spend commitments on ELC's margins.
• Performance of the new Aerin brand against the sales targets required for license renewal.
• Any potential conflicts of interest arising from the dual role of Ms. Lauder as a Board member and a counterparty to a material contract.
• Review of the full text of Exhibits 10.1 and 10.2 for detailed termination clauses and performance metrics.