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Aerin LLC, Estee Lauder Pen Licensing, Promotional Deal

Royalty rate is set at five percent for fragrance products.

Aerin Lauder will receive an annual fee of $700,000 to serve as a spokeswoman for and consultant to the Estée Lauder Cos. Inc., and her new upscale design and brand management firm, Aerin LLC, will net royalties of up to 5 percent for sales of products bearing the Aerin trademark and A logo.

Financial details of the agreement came to light in a Securities and Exchange Commission filing by Estée Lauder. The former creative director of the Estée Lauder brand, and granddaughter of the firm’s founder, has granted the company the exclusive right to use her name and image to market beauty products and related services for the brand, serve as a spokeswoman for it and work as its “style and image director” in tandem with its creative director.

The agreement calls for the $700,000 annual retainer to increase 4 percent at the end of each fiscal year until its expiration in June 2016 and requires Lauder to provide at least 35 days of personal appearances worldwide for the Estée Lauder brand, the company or its subsidiaries. She’ll be paid $20,000 a day for days beyond the 35, with the daily stipend increasing $1,000 in each contract year. She has agreed to make an additional 10 personal appearances at no cost to her new licensee other than “reasonable travel expenses.”

The company has the exclusive rights as licensee to “core beauty products” — defined as cosmetics, fragrances, toiletries, skin care, hair care, value sets and beauty accessories — bearing the Aerin brand and nonexclusive rights to “noncore” products such as cosmetics bags. The agreement, as outlined in the Form 8-K filed with the SEC, stipulates that Aerin LLC cannot use the name “Lauder” without the prior consent of Estée Lauder’s chief executive officer, Fabrizio Freda, and executive chairman, William Lauder.

Aerin LLC will receive royalties of 5 percent of net sales for fragrance products. Nonfragrance products will earn royalties of 4 percent of sales up to $40 million and 5 percent for sales above that mark. The license runs through June 2017, with extensions through 2032.

The licensee said it will use “reasonable efforts” to launch a limited capsule collection of “some Aerin-branded products” within a year, although it has no obligation to do so prior to the launch of other products under the Aerin “lifestyle brand.” Among the products contemplated by Lauder’s new firm are sunglasses that would fall into what she described to WWD as the “easy” luxury price range.