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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REPORT ON FORM 10-K
(Mark one)
/X/ Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1997 or
/ / Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to .
Commission File No. 0-16469
JEAN PHILIPPE FRAGRANCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3275609
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
551 Fifth Avenue, New York, New York 10176
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 983-2640.
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common
Stock, $.001 par value per share.
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes /X/ No / /
Indicate by checkmark if disclosure of delinquent filers pursuant to
Item 405 of Regulation SK is not contained herein and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10K or any other
amendment to this Form 10K. /X/
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant (based on the closing price on April 8, 1998 of
$7.81): $29,905,919.
Indicate the number of shares outstanding of the registrant's $.001 par
value common stock as of the close of business on the latest practicable date
(April 8, 1998): 8,799,781.
Documents Incorporated By Reference: None.
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PART I
Item 1. Business
Introduction
Jean Philippe Fragrances, Inc. was organized under the laws of the
State of Delaware in May 1985, maintains it executive offices at 551 Fifth
Avenue, New York, New York 10176 and its telephone number is 212-983-2640.
Unless the context otherwise indicates, the term "Jean Philippe" refers to the
parent company, Jean Philippe Fragrances, Inc., and the term the "Company"
refers to Jean Philippe Fragrances, Inc. and its consolidated wholly-owned
subsidiary, Inter Parfums Holdings, S.A. ("IP Holdings"), and majority-owned
indirect subsidiaries, Inter Parfums, S.A. ("Inter Parfums"), Inter Parfums
Trademarks, S.A. and Inter Parfums Grand Public, S.A.; and the Company's
wholly-owned subsidiaries, Elite Parfums, Ltd. ("Elite") and Jean Philippe
Fragrances do Brasil, Ltda. ("Jean Philippe Brasil"), a limited liability
company.
The Company is a manufacturer and distributor of fragrances and
cosmetics in the following niche markets: domestic and international brand name
and licensed fragrances, alternative designer fragrances and mass market
cosmetics.
The Company is the owner of the Intimate(R), Parfums Molyneux(R) and
Parfums Weil(R) fragrance lines, and Aziza(R), a hypo-allergenic line of eye
cosmetics; and is the world-wide licensee, manufacturer and distributor of the
Burberrys(R), S.T. Dupont(R), Ombre Rose(R) and Regine's(R) fragrance lines and
the Jordache(R) line of fragrances and cosmetics.
Inter Parfums markets its own line of moderately priced fragrances and
certain licensed or brand name fragrances in approximately seventy (70)
countries worldwide.
The Company has in the past acquired, and may in the future seek to
acquire or divest, one (1) or more companies or divisions of companies in the
fragrance or cosmetic business, or fragrance product lines or related cosmetic
products. Any and all discussions had by management to date have been at the
inquiry, pre-negotiation level only, and no assurances can be given that: (i)
management will pursue any transaction should a company, business, division, or
product line become available for sale or purchase; (ii) or if pursued, that any
transaction will be consummated; or (iii) if consummated, that any such
transaction will increase the Company's earnings.
Products and Selection
-Alternative Designer Fragrances
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The Company produces and markets several lines of fragrances which it
sells at a substantial discount from the high image, high retail cost brand name
counterparts. Prior to producing and marketing a new alternative designer
product, management of the Company looks for the existence of certain factors
with respect to a particular designer fragrance: (i) high retail selling price,
(ii) substantial expenditure of advertising dollars and (iii) selective
distribution. Management is of the opinion that the presence of all three (3)
factors gives a reasonable degree of market presence for such designer
fragrance. Management then seeks to create a similar scent which, together with
creative packaging and steeply discounted prices, will create what the Company
intends will be an appealing fragrance to be sold to wholesalers, mass market
merchandisers and drug store chains at substantial discounts from the higher
cost, brand name fragrance.
The Company's alternative designer fragrances, which are produced in
the United States, are similar in scent to highly advertised designer fragrances
that are marketed at a high retail price. These products are intended to have an
upscale image without a high retail price, and typically sell for under $5.00 at
the mass market retail level, substantially discounted from the high cost of
designer fragrances which typically range from $30.00 to $200.00 at prestige
retail locations.
Some of the alternative designer fragrances currently produced and
marketed by the Company include: JP Do(TM), 2 Elite(TM), Uno(TM), C Elite(TM),
Flight(TM), Departure(TM) Memphis(R) and Dakota(TM).
Additionally, the Company markets complementary alternative designer
fragrance products such as skin creams, deodorant sticks, roll-on deodorants and
body sprays. New products are intended to be developed in accordance with market
feasibility and demand. Management of the Company believes that demand for new
alternative designer fragrances may be created when participants in the designer
fragrance industry launch promotional campaigns for new products.
-Brand Name and Licensed Fragrances
Burberrys. Inter Parfums is the exclusive world-wide licensee for
Burberrys fragrances in accordance with the terms of a License Agreement entered
into in 1993 among Burberrys Limited as licensor, Inter Parfums as licensee and
Jean Philippe as the guarantor of Inter Parfums obligations thereunder (the
"Burberrys License Agreement"). The Burberrys License Agreement expires December
31, 2003, subject to certain minimum sales requirements and royalty payments.
In 1995 Inter Parfums completely redesigned all products under the
Burberry's brand name, which achieved successful distribution in more than
seventy (70) countries around the world. Sales of the new Burberry's line have
more than doubled from 1996 to 1997.
Additionally in 1997, Inter Parfums retained a new distributor in the
United States for its Burberry's fragrances for the launch in the United States
of two (2) additional new Burberry's fragrance lines, Week end(TM) for men and
women. In addition, Inter Parfums experienced continued growth of the classic
Burberrys of London line.
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For 1998, Inter Parfums will continue the launch of the Burberrys Week
end lines in the United States, Italy, Portugal, Australia and Japan, using a
very aggressive marketing plan with heavy emphasis on promotional items.
S. T. Dupont. During 1997, Inter Parfums acquired the license for
another elite fragrance brand, S. T. Dupont. It is anticipated that the new S.
T. Dupont line for men and women will be launched in September 1998 in the Far
East and Europe. S. T. Dupont is well known in Europe and the Far East for men's
lighters and pens, and is developing a new watch line. They also have a small
leather goods and men's clothing line. The license agreement expires on June 30,
2008, subject to certain minimum sales requirements, advertising expenditures
and royalty payments.
Parfums Weil and Molyneux. The Parfums Weil and Parfums Molyneux
world-wide family of trademarks were acquired in 1994 by Inter Parfums, and
cover a variety of moderately priced fragrance lines which are distributed in
over thirty (30) countries world-wide. Parfums Molyneux, formed in 1927, has
established a classic line of fragrances including Captain and Quartz, with
representation in all major markets world-wide. Parfums Weil has enjoyed a
similar history dating back to the early 1900's with its first production of a
range of original perfumes presented in exquisite Baccarat bottles. Through the
years the fragrance lines were modernized and expanded, and today include the
trademarks Bambou, Fleur de Weil and Secret of Venus, among others. In 1995
Inter Parfums introduced a new fragrance, Le Chic, and in 1996, Inter Parfums
followed with a new fragrance, Quartz for men. During 1998, Inter Parfums
intends to launch a new Molyneux line, "I Love You", to its loyal fans.
Intimate and Chaz. In 1994 the Company acquired from Revlon Consumer
Products Corporation ("Revlon") the world-wide trademarks for the Intimate
fragrance line, and entered into a 99 year royalty free license agreement with
Revlon for the use of the trademark Chaz in connection with men's fragrances,
deodorants and body sprays.
The Intimate and Chaz brands cover a variety of moderately priced
fragrances for mass market distribution, and are currently distributed in a
number of countries throughout the world. The Intimate product line has been
available for almost half a century and has gained a reputation for quality and
value with women over forty (40) years of age.
The Company intends to enter into back-to-back agreements to acquire
the world-wide trademark for Chaz fragrances and to immediately sell such
trademark to a distributor of the Company. No assurances can be given that the
transaction will be consummated.
Ombre Rose. In 1993 Inter Parfums acquired the exclusive world-wide
license for Ombre Rose fragrances as well as other fragrances to be developed by
Inter Parfums in accordance with the terms of a License Agreement entered into
between Jean-Charles Brosseau S.A. as licensor and Inter Parfums as licensee
(the "Brosseau License Agreement"). The Brosseau License Agreement is for a term
of ten (10) years, subject to certain minimum sales requirements and royalty
payments. The Ombre Rose line, with its classically designed bottle, continues
to enjoy wide acceptance in the Far East and the United States. French
Fragrances, Inc. is the exclusive distributor of Ombre Rose in the United
States, Canada and Puerto Rico.
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Jordache. In 1990 the Company obtained the exclusive right to use the
trademark Jordache(R) from Jordache Enterprises, Inc. ("Jordache") in connection
with the manufacturing, marketing and distribution of fragrances and cosmetics
in the United States. The Company also received the license to manufacture,
market and distribute fragrances and cosmetics in various territories abroad,
which territories are to become exclusive in nature upon the commencement of
substantial bona fide sales in each such territory. The initial term of the
license was for five and a half (5-1/2) years and ended on June 30, 1995. In
addition the license agreement provides the Company with the right to renew the
license for ten (10) annual renewal terms, subject to certain minimum sales and
royalty payment requirements. In the first quarter of fiscal year ending
December 31, 1998, the Company elected to renew the Jordache license for the
next annual period. Since obtaining the right to use the Jordache trademark, the
Company has created and produced, and presently markets, a
Jordache(R) product line, which consists of a collection of moderately priced
fragrances and cosmetics (lipstick and nail polish) geared to the youth market.
Regine's. In 1989 the Company became the exclusive world wide
distributor for a new fragrance called Regine's, which is sold internationally
in approximately sixty (60) countries. The Regine's fragrance was developed by
Inter Parfums, the first original fragrance to be created and marketed by the
Company. Inter Parfums markets Regine's, Zoa(TM) and Jimmy'z (the Regine's men's
fragrance) outside the United States and Canada.
-International Fragrances
Inter Parfums creates, produces and markets its proprietary line of
fragrances designed to appear expensive, with attractive bottling and packaging,
but sold in the middle market. Typical proprietary fragrances sold by Inter
Parfums retail between U.S.$10.00 to $15.00.
Mass Market Cosmetics
In 1994 Jean Philippe entered into a license agreement with
Chesebrough-Pond's, Inc. ("Chesebrough") for the exclusive rights to manufacture
and market Cutex(R) nail care (excluding nail polish remover) and lip color
products in the United States and Puerto Rico (the "Cutex License"). The Cutex
License originally provided for an initial term of seven (7) years together with
three (3) annual renewal periods, and further provided that either party had the
right to cancel the agreement if certain minimum annual sales levels are not
achieved. The Cutex License also provided for the payment of royalties based
upon net sales and included a minimum annual royalty payment.
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In March 1997 Chesebrough, the Licensor, entered into an agreement with
Carson, Inc. ("Carson"), a New York Stock Exchange listed company, to convey the
Cutex trademarks. At the request of Carson, the Company entered into an
agreement with Carson consenting to relinquish its Cutex nail and lip products
license. In connection with this transaction, all current inventory was
purchased and certain liabilities were assumed by Carson. Both transactions
closed simultaneously on April 30, 1997. See Item 7, "Management's Discussion
And Analysis Of Financial Condition And Results Of Operation."
In February 1996 the Company launched its Aziza(R) brand of
hypo-allergenic line of eye cosmetics through mass market distribution. The new
Aziza line was completely modernized and includes thirty-six (36) of the
historically most popular and best selling mascaras, eyeliners and eyeshadows.
The Company acquired the world-wide trademarks for the brand name Aziza in June
1994 from Chesebrough-Pond's USA, Unilever N.V. and various affiliates of
Unilever N.V. for nominal consideration.
Also in the mass market cosmetics category, the Company has created,
produced and markets a Jordache(R) line of cosmetics (lipstick and nail polish),
which is geared to the youth segment of such market.
The Company's Jordache cosmetic and Aziza lines are presently
distributed in approximately 5,000 mass market outlets.
Production and Supply
Substantially all of the Company's products are produced by the Company
either in the United States or France. Although the Company does not own a
factory or production plant, it acts as a general contractor, and supervises
each stage of production from the creation of the fragrance, design and creation
of the bottle, dispenser or container, filling of same, packing and shipping,
all as performed by various subcontractors. Management believes that its
relationships with such subcontractors are good, and that there are sufficient
alternate subcontractors should one or more subcontractors become unavailable.
Inventory
The Company purchases its raw materials and component parts from
suppliers based upon internal estimates of anticipated need for finished goods,
which enables the Company to meet its production requirements for finished
goods. The Company generally delivers customer orders within seventy-two (72)
hours of their receipt.
Sales and Marketing
The broad array of Company product lines permits the Company to market
fragrances and cosmetics to all levels of distribution -- the alternative
designer fragrances, Jordache and Aziza cosmetics at mass market, the Inter
Parfums proprietary line at the moderately priced level and the Company's brand
name and licensed designer fragrances at the high end.
The Company markets its alternative designer fragrances, personal care
products and its Aziza and Jordache product lines through in-house sales
executives to mass merchandisers, major drugstore chains,
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supermarket chains, "specialty store chains" (multiple outlets of accessories,
jewelry and clothing), and wholesalers. The Company's alternative designer
products are presently being sold in approximately 10,000 retail outlets.
In addition, the Company has an established electronic ordering and
invoicing system, or Electronic Data Interface ("EDI"), which permits the
Company to receive orders and submit invoices for products via computer modem.
Such process eliminates the need for hard copy purchase orders and sales
invoices for certain major retailers. Management believes that EDI facilitates
the receipt, processing and invoicing of customer orders.
Mass market merchandisers, major drug chains and supermarkets are the
most established markets for all of Jean Philippe's product lines, and are the
traditional points of distribution for them. The ultimate market for this
business segment is the general public. Some of the mass market merchandisers,
major drug store chains and supermarket chains which are presently carrying the
Company's products include: Walmart, Walgreen's, Winn Dixie, CVS, Family Dollar,
Dollar General, Food Lion, American Stores and Hills.
Another market for the Company's products consists of distributors and
wholesalers, which service independent stores and international markets. Often,
the trends in this business segment mirror those of major drug store chains and
mass market retailers. The Company uses the same marketing strategy of providing
quality products coupled with flexible programs (i.e., discounts, extended
payment terms) in order to compete with other alternative fragrance companies.
During fiscal years ended December 31, 1997, 1996 and 1995, no customer
accounted for ten percent (10%) or more of sales on a consolidated basis.
Foreign Sales and Marketing
Marketing and sales of the Company's alternative designer, brand name
and licensed designer fragrance lines are conducted through independent
distributors, in-house executives and international agents and importing
companies and such products are sold in approximately seventy (70) countries
world-wide. Generally, marketing and advertising are subject to approval of the
respective licensors. Advertising for the Company's designer fragrance lines
appear in high fashion magazines and to a lesser extent on television in France
and the Middle East.
Inter Parfums maintains its own in-house sales force with executives
who are generally responsible for marketing the Inter Parfums designer fragrance
lines in specific territories. In France, the Inter Parfums designer fragrance
lines are sold in approximately 1000 perfumeries.
Inter Parfums markets its middle market proprietary fragrances to
wholesalers in France, and to distributors and importers predominantly in the
Middle East, Far East, Central America and South America through in-house sales
executives.
In October 1995 the Company commenced marketing its alternative
designer fragrances, Inter Parfums proprietary brands and Jordache line through
a newly formed limited liability company organized in Brazil, Jean Philippe
Brasil. Net sales generated by Jean Philippe Brasil were $2.0 million in 1997 as
compared to $3.0 million in 1996. Management believes such decline reflects the
Brazilian consumers' fear of a possible currency
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devaluation brought on by the Asian crisis. In addition, Jean Philippe Brasil
underwent an organizational change during 1997, whereby it terminated its
contract with its exclusive sales representative and is now a direct seller to
the Brazilian marketplace. Management intends to pursue the Brazilian
marketplace for mass market fragrances in 1998, but given the less than
optimistic Brazilian consumer confidence level and heavily regulated Brazilian
environment, no assurance can be given that Jean Philippe Brasil operations will
be profitable in 1998.
See Note "I" to the Consolidated Financial Statements for information
regarding the Company's operations by geographic areas.
Product Liability
The Company maintains product liability coverage in an amount of
$3,000,000, which it believes is adequate to cover substantially all of the
exposure it may have with respect to its products. The Company has never been
the subject of any material product liability claims.
Competition
The market for fragrances and beauty related products is highly
competitive and sensitive to changing consumer preferences and demands. At the
present time, management is aware of approximately five (5) established
companies which market similar alternative designer fragrances. In response to
heavy discounting by certain competitors, which commenced in the fourth quarter
of 1996, the Company immediately developed a program of "Product Value Analysis"
which enabled the Company to match competition pricing structure in January
1997. See Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The Company believes that the quality of its
fragrance products, competitive pricing, as well as its ability to quickly and
efficiently develop and distribute new products, will enable it to continue to
effectively compete with these companies.
The market for name brand and budget color cosmetics is highly
competitive, with several major cosmetic companies marketing similar products,
many with substantial financial resources and national marketing campaigns.
However, management believes that brand recognition of its Aziza and Jordache
lines, together with the quality and competitive pricing of its products, should
enable it to compete with these companies.
In the area of high priced, original designer fragrances, there are
products which are better known than the products produced for or distributed by
the Company. There are also many companies which are substantially larger and
more diversified, and which have substantially greater financial and marketing
resources than the Company, as well as greater name recognition, and the ability
to develop and market products competitive with those distributed by the
Company. For these reasons, it may be particularly difficult for the Company to
successfully increase market share in the high priced, original designer
fragrance market.
Government Regulation
A fragrance is a "cosmetic" as that term is defined under the Federal
Food, Drug and Cosmetics Act ("FDC Act"), and must comply with the labeling
requirements of the FDC Act, the Fair Packaging and Labeling Act, and the
regulations thereunder. Certain of the Company's color cosmetic products may
contain menthol, and
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are also classified as a "drug," as the categories of cosmetic and drug are not
mutually exclusive. Additional regulatory requirements for such products include
additional labeling requirements, registration of manufacturer and semi-annual
update of drug list.
The Company's fragrances are subject to approval of the Bureau of
Alcohol, Tobacco and Firearms as the result of the use of specially denatured
alcohol. To date the Company has not experienced any difficulties in obtaining
such approval.
Trademarks
The Company's registered trademarks include Intimate, Aziza, the
Parfums Molyneux family of trademarks (including Captain, Quartz and Lord), the
Parfums Weil family of trademarks (including Bambou, Antilope and Kipling),
Beverly, Fire by Jean Philippe(R), Fashion Mood(R), Snow Silk(R) and Memphis(R).
In addition, under various license agreements the Company has the right to use
the registered trademarks, Burberrys, S.T. Dupont, Ombre Rose, Regine's and
Jordache both in the United States and abroad. See "Business-Products and
Selection".
Employees
As of March 1, 1998 Jean Philippe had forty-eight (48) full-time
domestic employees. Of these, ten (10) were engaged in sales activities, and
thirty-eight (38) in administrative and marketing activities. As part of
management's planned restructuring of domestic operations, including
relinquishing the Cutex license, the Company eliminated seventeen (17) positions
during 1997.
As of March 1, 1998 Inter Parfums and its foreign subsidiaries had
forty-nine (49) full-time employees. Of these, fifteen (15) were engaged in
sales activities, and thirty-four (34) in administrative and marketing
activities.
The Company believes that its relationships with its employees are
satisfactory.
Item 2. Properties
The Company's corporate headquarters are located in approximately 7,000
square feet of office space at 551 Fifth Avenue, New York, New York. These
premises are leased for a five (5) year term ending October 31, 2002, at a
monthly rental of approximately $17,000, which is subject to escalations.
The offices of Inter Parfums and the Company's other French
subsidiaries are located at 4 Rond Point Des Champs Elysees, Paris, France, in
approximately 6,000 square feet of leased office space pursuant to two (2)
leases. The first lease, for approximately 4,000 square feet, and the second
lease, for approximately 2,000 square feet, both expire in July 1, 2005, unless
terminated earlier by either party on six (6) months written notice at three (3)
year specified intervals. The annual rentals for each of the two (2) lease are
711,000 French francs and 458,400 French francs, respectively, (approximately
$127,000 and $82,000). Rent is subject to escalations each July 1.
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Management of the Company is of the belief that the Company's executive
office facilities are satisfactory for its present needs and those for the
foreseeable future.
The Company also occupies a 145,000 square foot distribution center at
60 Stults Road in Dayton, New Jersey. The premises have been leased by the
Company for an eight (8) year term expiring October 2003 and requires monthly
rental payments of $57,000, aggregating $684,000 per annum. Management of the
Company is of the belief that the Company's distribution center is satisfactory
for its present needs and those for the foreseeable future.
Item 3. Legal Proceedings
There is no litigation pending or, to the knowledge of the Company,
threatened to which the property of the Company is subject or to which the
Company may be a party, which would have a material adverse effect on the
Company.
Item 4. Submissions Of Matters To A Vote Of Security Holders
Not applicable.
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PART II
Item 5. Market For Registrant's Common Equity
And Related Stockholder Matters
The Company's Common Stock, $.001 par value per share ("Common Stock")
is traded on The Nasdaq Stock Market under the symbols "JEAN". The following
table sets forth in dollars, the range of high and low closing prices for the
past two (2) fiscal years for the Company's Common Stock.
Fiscal 1997 High Closing Price Low Closing Price
Fourth Quarter $8.06 $6.63
Third Quarter $9.13 $6.07
Second Quarter $6.63 $5.38
First Quarter $6.75 $5.75
Fiscal 1996 High Closing Price Low Closing Price
Fourth Quarter $7.61 $5.88
Third Quarter $8.63 $6.25
Second Quarter $9.75 $7.50
First Quarter $8.63 $7.38
As of March 1, 1998, the number of record holders (brokers and broker's
nominees, etc.) of the Company's Common Stock was 107. Management believes that
there are approximately 1,600 beneficial owners of the Company's Common Stock.
Dividends
Jean Philippe has not paid cash dividends since inception and
management of the Company does not foresee Jean Philippe paying cash dividends
in the foreseeable future as earned surplus is to be retained as working capital
for anticipated growth.
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Item 6. Selected Financial Data
The following selected financial data have been derived from the
Company's financial statements, and should be read in conjunction with such
financial statements, including the footnotes relating thereto, referred to in
Item 8 of this Form 10-K.
<TABLE>
<CAPTION>
Years Ended December 31
(In Thousands Except Share and Per Share Data)
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 91,462 $ 93,281 $ 93,669 $ 75,079 $ 59,546
Cost of Sales 49,388 51,355 48,703 39,036 32,964
Selling, General and
Administrative 32,334 32,416 32,990 23,773 15,814
Income before taxes and
minority interest 8,172 9,081 12,380 11,679 11,240
Net income 4,507(1) 5,658 9,038(1,2) 7,275(2) 7,099(2)
Net income per share:
Basic $ .48(1) $ .57 $ .90(1,2) $ .71(2) $ .75(2)
Diluted $ .48(1) $ .57 $ .87(1,2) $ .70(2) $ .70(2)
Average common shares
outstanding:
Basic 9,299,401 9,871,698 10,044,653 10,180,412 9,507,806
Diluted 9,397,329 9,984,463 10,438,896 10,454,555 10,132,628
</TABLE>
As at December 31
(In Thousands Except Share and Per Share Data)
1997 1996 1995 1994 1993
Balance Sheet Data:
Working Capital $44,842 $46,568 $41,363 $31,226 $31,967
Total Assets 80,282 85,585 84,001 69,451 49,909
Long Term Debt 424 485 596 862 424
Shareholders' equity 50,194 53,366 51,976 44,513 33,774
- --------
1 Includes a nonrecurring charge, net of taxes, of $0.8 million or $.08
per diluted share and $1.3 million or $.13 per diluted share, for fiscal years
ended December 31, 1997 and December 31, 1995, respectively, relating to the
divestiture of the Cutex license in 1997 and discontinuance of a product line
in 1995.
2 Includes a net gain of $3.3 million or $.32 per diluted share, $0.2
million or $.02 per diluted share, $0.6 million or $.06 per diluted share, for
fiscal years ended December 31, 1995, December 31, 1994 and December 31, 1993,
respectively, resulting from the sale of common stock of a subsidiary.
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Long Term Debt 424 485 596 862 424
Shareholders' equity 50,194 53,366 51,976 44,513 33,774
Item 7. Management's Discussion And Analysis Of
Financial Condition And Results Of Operation
Introduction
The Company's business strategy of building core volume and
profitability, developing products in new categories, exploring strategic
acquisition opportunities, and pursuing expansion in international markets,
remains as management's primary long-term focus.
During 1997, in considering the issues fundamental to the future of
of the Company, management developed a set of priorities to guide the Company in
the years ahead. At the same time, management reaffirmed the Company's
commitment to its basic principles and core businesses. The April 30, 1997
restructuring of domestic operations, which coincided with the divestiture of
the Cutex(R) license, has enabled the Company to focus its resources on its
profitable core fragrance business in the United States and around the world.
The Company's newly instituted program of "Product Value Analysis" has enabled
the Company to effectively compete in a very price sensitive environment.
Earnings growth during the second half of 1997, demonstrates that the Company's
strategy has taken effect. The Company is now well positioned to build upon its
successful businesses to produce further improvements in sales and earnings
growth.
1997 as Compared to 1996
Net sales aggregated $91.5 million in 1997, as compared to $93.3
million in 1996. On April 30, 1997, the Company divested its Cutex nail and lip
products license. As such, 1996 net sales includes sales of Cutex products for
the entire year, while 1997 net sales only include sales of Cutex products
through April 30, 1997. Excluding Cutex product sales, net sales for 1997
increased 5% as compared to 1996.
The Company's Alternative Designer Fragrance lines have been affected
in 1997 by heavy discounting by certain competitors, which commenced in the
fourth quarter of 1996. In January 1997, the Company matched the competition's
pricing structure by reducing selling prices by approximately 30%, and has
regained much of the market share initially lost as a result of such price
competition. Despite the 30% selling price reduction, sales in this category
declined only 13% in 1997, as compared to 1996. This result demonstrates that
unit volume in the Company's Alternative Designer Fragrance business continues
to grow.
Sales generated by the Company's publicly traded French subsidiary,
Inter Parfums, increased 29%; at comparable foreign currency exchange rates,
sales by Inter Parfums increased 47%. The Burberrys perfume line, which was
created by Inter Parfums, has achieved great success in all markets where
Burberrys products are sold. The opening of Burberrys to the American and
duty-free markets, as well as the initial launch of the new Burberrys
13
<PAGE>
"Week end" line, has confirmed the potential of the Burberrys name with
distributors around the world. Increasing distribution in over 70 countries and
the opening of additional new markets should reinforce this potential. Burberrys
has become the flagship brand in the collection of designer fragrance product
lines offered by Inter Parfums and is expected to be the catalyst for future
sales growth of the entire collection.
Consistent with the Company's business strategy of exploring strategic
acquisition opportunities as well as in an effort to build upon the success of
the Burberrys lines, Inter Parfums entered into a license agreement with S.T.
Dupont for the development of an original perfume line. Product design and
development is well under way for an expected launch in the fourth quarter of
1998.
Sales generated by the Company's Brazilian subsidiary, Jean Philippe
Brasil, were $2.0 million in 1997 as compared to $3.0 million in 1996.
Management believes such decline reflects the Brazilian consumers' fear of a
possible currency devaluation brought on by the Asian crisis. In addition, Jean
Philippe Brasil underwent an organizational change during 1997, whereby it
terminated its contract with its exclusive sales representative and is now a
direct seller to the Brazilian marketplace. Management intends to pursue the
Brazilian marketplace for mass market fragrances in 1998, but given the less
than optimistic Brazilian consumer confidence level and heavily regulated
Brazilian environment, no assurance can be given that Jean Philippe Brasil
operations will be profitable in 1998.
Consolidated gross margin increased to 46% of sales in 1997 as compared
to 45% of sales in 1996. The increase is somewhat understated as gross margin
for 1996 includes the benefit of higher margin Cutex sales for the entire year
while 1997 margin includes such benefit only through April 30, 1997, the date
the Company divested its Cutex nail and lip products license.
Historically, the Company's combined fragrance businesses (designer and
alternative designer fragrances) achieved an approximate 45% gross margin. In
response to heavy discounting by certain competitors in the Alternative Designer
Fragrance lines, the Company developed a program of "Product Value Analysis",
which enabled the Company to match the competition's pricing structure without
affecting gross margin in the long-term. Gross margin in the first half of 1997
was affected by the lower selling prices put into effect in January 1997. The
positive impact of the measures took effect in the second half 1997 and is
expected to continue to benefit future periods.
Gross margin was also favorably impacted by an increase in margin from
Inter Parfums. Such increase resulted from exports sold in US dollars, thereby
benefitting Inter Parfums from the substantial rise of the US dollar relative to
the French franc.
Selling, general and administrative expenses aggregated $32.3 million
and $32.4 million in 1997 and 1996, respectively, and represented 35% of sales
in both 1997 and 1996. In connection with the April 30, 1997 restructuring of
the Company's domestic operations, which coincided with the divestiture of the
Company's Cutex license, the Company reduced its domestic work force by
approximately 20%. As a result of both the work force reduction and the
divestiture of the Cutex license, domestic selling, general and administrative
expenses declined to $12.5 million or 32% of sales in 1997 as compared to $17.8
million or 34% of sales in 1996.
14
<PAGE>
Selling, general and administrative expenses incurred by Inter Parfums
increased to $18.6 million or 36% of sales in 1997 as compared to $13.9 million
or 35% of sales in 1996. Such increase is the result of expenses incurred to
support new Burberrys product line introductions, build upon the brand's
awareness, as well as to support Inter Parfums revenue growth.
In the first quarter of 1997, the Company took a pre-tax charge against
earnings of $1.3 million to write-off intangible assets and other expenses
relating to the divestiture of the Cutex license. Management is confident that
such charge is sufficient to cover all potential obligations relating to the
Cutex business.
Interest expense decreased to $0.7 million in 1997 from $0.9 million in
1996. The Company uses its available credit lines, as needed, to finance its
working capital needs.
The Company incurred a loss on foreign currency of $0.2 million in 1997
as compared to a loss of $0.1 million in 1996. The Company, on occasion enters
into foreign currency forward exchange contracts as a hedge for short-term
intercompany borrowing or for receivables to be collected in a foreign currency.
The Company's effective income tax rate was 36% in 1997 and 31% in
1996. Reductions of valuation reserves on deferred tax assets, relating to the
utilization of foreign net operating loss carryforwards have benefitted both the
1997 and, to an even greater extent, the 1996 effective tax rates. As of
December 31, 1997, a nominal amount of net operating loss carryforwards are
available to benefit future periods. Therefore, the Company expects its
effective tax rate to be approximately 41% in future periods.
Net income was $4.5 million or $0.48 per diluted share in 1997 as
compared to $5.7 million or $0.57 per diluted share in 1996. Results for 1997
include a nonrecurring charge of $0.8 million, on an after tax basis, relating
to the divestiture of the Cutex license. Excluding the nonrecurring charge, net
income was $5.3 million or $0.56 per diluted share in 1997.
The weighted average shares outstanding were 9.3 million in 1997 and
9.9 million in 1996, and on a diluted basis, average shares outstanding were 9.4
million in 1997 and 10.0 million in 1996. Such decline is the result of the
Company's ongoing stock buyback program.
1996 as Compared to 1995
Net sales aggregated $93.3 million in 1996, as compared to $93.7
million in 1995. Sales growth from the Company's French operations along with
growth from the 1996 introduction of the Company's Aziza(R) hypo-allergenic eye
cosmetic line were offset by the deletion or curtailment of promotional programs
which did not achieve expected sell through levels in 1995 and resulted in an
unacceptable level of returns in 1996. The Company's Romantic Illusions
promotion, certain Jordache(R) lip and nail promotions and several Cutex(R)
promotions were among those programs curtailed or deleted.
Heavy discounting by certain competitors, which commenced in the fourth
quarter of 1996, affected the growth of the Company's Alternative Designer
Fragrance lines in the fourth quarter. The Company immediately developed a
program of "Product Value Analysis" which enabled the Company to match the
competition pricing
15
<PAGE>
structure in January 1997, without affecting gross margin in the long-term. The
positive impact of the measures taken are expected to be realized in the second
half of 1997.
Sales generated by the Company's French subsidiaries increased 10%; at
comparable foreign currency exchange rates, sales by the Company's French
subsidiaries increased 13%. A very strong fourth quarter, fueled by new product
introductions and product line enhancements, enabled the Company's French
operations to continue to grow in a very competitive marketplace. Sales growth
of the French operations was achieved despite the effect of the sale of the Bal
a Versailles(R) trademarks in March of 1996.
Sales of Cutex(R) products declined approximately $3.0 million in 1996,
primarily as a result of reduced promotional sales. Cutex(R) lip color product
returns, resulting from the line's discontinuance in 1995, did not affect net
sales in 1996 as the reserve established in 1995, of approximately $1.5 million,
proved to be adequate. As of December 31, 1996, the reserve has been fully
utilized; however, management does not believe there to be any material
remaining obligations relating to lip color products.
The Company's Aziza(R) hypo-allergenic eye cosmetic line, which made
its debut in February 1996, represented approximately 3% of sales for the year
ended December 31, 1996. Aziza(R) continues to enjoy a very strong sell through
at the retail level. However, heavy competition for retail space in the
eye-care category at mass market merchandisers and drug store chains continues.
Gross profit margin for 1996 was 45% of sales as compared to 48% in
1995. The lower gross margin is the result of the decline in higher margin
Cutex(R) sales along with the decline in higher margin fragrance promotions. In
addition, the Company continues to convert discontinued and returned merchandise
into cash, via closeout sales at prices below normal margins.
As previously mentioned, in reaction to heavy discounting by certain
competitors in the Alternative Designer Fragrance lines, the Company developed a
program of "Product Value Analysis" which enabled the Company to match the
competition pricing structure without affecting gross margin in the long-term.
Gross margin in the first half of 1997 will be affected by the lower selling
prices put into effect in January of 1997. The positive impact of the measures
taken are expected to be seen in the second half of 1997 when gross margins
generated by the Company's Alternative Designer Fragrance line are expected to
return to their historical rate of approximately 45%. In addition, "Product
Value Analysis" will be used as a permanent tool by the Company in its ongoing
efforts to further improve its gross margins.
Selling, general and administrative expenses declined to $32.4 million
in 1996 from $33.0 million in 1995 and represented 35% of net sales in both 1995
and 1996. Management has made it a top priority to control such expenditures and
plans to continue to take the actions it deems necessary to reduce its overall
selling, general and administrative expenses. As a result of the Company's
recent decision to relinquish its Cutex(R) license the company is restructuring
its domestic operations and will reduce its workforce. In addition, the Company
will incur a pre-tax charge against earnings of approximately $1.3 million in
the first quarter of 1997 to write-off intangible assets and other expenses
relating to the relinquishment of the Cutex(R) license. The combination of the
restructuring and the elimination of selling, general and administrative
expenses relating to the Cutex(R) operations should enable the Company to
significantly reduce its overall selling, general and administrative expenses
both in the aggregate and as a percentage of sales after the transaction closes.
16
<PAGE>
Interest expense decreased to $0.9 million in 1996 from $1.1 million in
1995. The Company uses its available credit lines, as needed, to finance its
working capital needs.
The Company incurred a loss on foreign currency of $0.1 million in 1996
as compared to a gain of $0.2 million in 1995. The Company, on occasion enters
into foreign currency forward exchange contracts as a hedge for short-term
intercompany borrowings.
The Company recognized a net gain on sale of stock of a subsidiary
aggregating $14,000 in 1996 and $3.3 million in 1995. The 1995 gain resulted
primarily from the public offering by Inter Parfums, in France, of 308,000
shares of its common stock. The 1996 gain resulted from the conversion of
long-term debt into common stock of Inter Parfums. Such sale or issuance upon
conversion of shares has been accounted for as a gain on sale of stock of a
subsidiary and is not part of a broader corporate reorganization contemplated by
the Company. Although additional shares may be sold or issued in the future, the
Company has no plans to spin-off its subsidiary nor to repurchase the shares
previously issued.
The Company's effective income tax rate was 31% in 1996 and 26% in
1995. The 1996 rate was favorably impacted by reduction of valuation reserves on
deferred tax assets, relating to the utilization of net operating loss
carryforwards, made available to the Company's foreign subsidiaries as a result
of the March 1996 sale of the Bal a Versailles trademarks. The 1995 rate was
favorably impacted as deferred taxes were not required to be provided on the
gain on sale of stock by Inter Parfums.
Net income was $5.7 million or $0.57 per diluted share as compared to
$9.0 million or $0.87 per diluted share for the year ended December 31, 1995.
Results for 1995 include a nonrecurring charge of $1.3 million, on an after tax
basis, relating to the discontinuance of the Cutex(R) lip color line. Results
for 1995 also include a net gain of $3.3 million from the sale of common stock
of a subsidiary. Excluding the nonrecurring charge and the gain on sale of stock
of a subsidiary, net income was $7.1 million or $0.68 per diluted share in 1995.
The weighted average number of shares outstanding was 9.9 million in
1996 and 10.0 million in 1995, and on a diluted basis, averages shares
outstanding were 10.0 million in 1996 and 10.4 million in 1995; such decline is
the result of the Company's ongoing stock buyback program.
Liquidity and Financial Resources
The Company's financial position continues to show solid strength as a
result of profitable operating results and positive cash flow. At December 31,
1997, working capital aggregated $44.8 million and the Company had cash and cash
equivalents on hand of $18.7 million. The Company's net book value was $5.66 per
share as of December 31, 1997.
The 1995 initial public offering in France of approximately 21% of the
common stock of the Company's subsidiary, Inter Parfums, has proven to be
extremely successful. In addition to the strength such stock sale provided to
the balance sheet of Inter Parfums, the proceeds of the offering have enabled
Inter Parfums to control its growth and invest for the future without incurring
any significant increase in debt. Long-term debt of Inter Parfums stood at $0.4
million as of December 31, 1997.
17
<PAGE>
As a result of the successful operating results of Inter Parfums and
the significant increase in its stock price, in January 1998, the Company
exercised its rights to convert the remaining portion of its convertible debt,
approximately $4.4 million, into 318,326 additional shares of Inter Parfums
bringing the total shares outstanding to 2,209,000. The conversion price was
approximately $14 per share while Inter Parfums stock is presently trading at
approximately $32 per share. The effect of this conversion increases the
Company's ownership percentage from 76.4% to 79.8%.
During 1997, the Board of Directors of the Company once again
authorized an increase of 500,000 shares to the Company's stock repurchase
program, bringing the total authorized to be repurchased to 2,000,000 shares of
the Company's common stock. As of December 31, 1997, 1,489,505 shares have been
purchased at an average price per share of $7.29.
The Company's short-term financing requirements are expected to be met
by available cash at December 31, 1997, cash generated by operations and
short-term credit lines provided by domestic and foreign banks. The principal
credit facilities for 1998 are a $12.0 million unsecured revolving line of
credit provided by a domestic commercial bank and $12.0 million in credit lines
provided by a consortium of international financial institutions.
Internally generated cash provided by operating activities was $12.1
million for the year ended December 31, 1997 as compared to $8.0 million for the
year ended December 31, 1996. Cash provided by operating activities continued to
be the Company's primary source of funds to finance operating needs and
investments in new ventures.
Cash provided by operating activities was also used to finance the
stock repurchase program. During 1997, the Company purchased 739,700 shares of
common stock at a cost of $4.9 million.
Management of the Company believes that funds generated from
operations, supplemented by its available credit facilities, will provide it
with sufficient resources to meet all present and reasonably foreseeable future
operating needs.
The Company has substantially completed all projects to address "Year
2000" compliance with respect to its internal information systems. As such,
management believes that "Year 2000" transition will not have a material adverse
effect on future results.
Inflation rates in the U.S. and foreign countries in which the Company
operates have not had a significant impact on operating results for the year
ended December 31, 1997.
18
<PAGE>
Item 8. Financial Statements and Supplementary Data
The required financial statements commence on page F-1.
Supplementary Data
<TABLE>
<CAPTION>
Quarterly Data (Unaudited)
For the year ended December 31, 1997
(In Thousands Except Share and Per Share Data)
1st 2nd 3rd 4th Full Year
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Net sales $ 20,969 $ 21,847 $ 24,464 $ 24,181 $ 91,462
Cost of Sales 10,923 11,596 14,200 12,669 49,388
Net income 341 1,106 1,635 1,425 4,507
Net income per share:
Basic $ 0.04 $ 0.12 $ 0.18 $ 0.16 $ 0.48
Diluted $ 0.04 $ 0.12 $ 0.18 $ 0.16 $ 0.48
Average Common Shares
outstanding:
Basic 9,602,481 9,525,386 9,142,955 8,926,781 9,299,401
Diluted 9,605,404 9,545,285 9,283,661 9,154,967 9,397,329
</TABLE>
<TABLE>
<CAPTION>
Quarterly Data (Unaudited)
For the year ended December 31, 1996
(In Thousands Except Share and Per Share Data)
1st 2nd 3rd 4th Full Year
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Net sales $ 23,302 $ 22,583 $ 22,578 $ 24,818 $ 93,281
Cost of Sales 12,210 12,589 12,641 13,916 51,355
Net income 1,773 1,278 1,478 1,130 5,658
Net income per share:
Basic $ .18 $ .13 $ .15 $ .12 $ .57
Diluted $ .18 $ .13 $ .15 $ .12 $ .57
Average Common Shares
outstanding:
Basic 9,933,670 9,871,981 9,871,981 9,809,160 9,871,698
Diluted 10,083,757 10,148,168 9,911,691 9,813,108 9,984,463
</TABLE>
19
<PAGE>
Item 9. Changes In And Disagreements With Accountants On
Accounting And Financial Disclosure
Not applicable.
20
<PAGE>
PART III
Item 10. Executive Officers And Directors Of Registrant
As of March 15, 1998, the executive officers and directors of the
Company were as follows:
Name Position
Jean Madar Chairman of the Board and Chief
Executive Officer of Jean Philippe
and Director General of Inter Parfums
Philippe Benacin Vice Chairman of the Board and
President of Jean Philippe and
President of Inter Parfums
Russell Greenberg Director, Executive Vice President
and Chief Financial Officer
Francois Heilbronn Director
Joseph A. Caccamo Director
Jean Levy Director
Robert Bensoussan-Torres Director
Bruce Elbilia Executive Vice President
Wayne C. Hamerling Executive Vice President
Jaime Resnik Executive Vice President
The directors will serve until the next annual meeting of stockholders
and thereafter until their successors shall have been elected and qualified.
With the exception of Mr. Benacin, the officers are elected annually by the
directors and serve at the discretion of the board of directors. See "Item 11.
Executive Compensation-Employment Agreement". There are no family relationships
between executive officers or directors of the Company.
The following sets forth biographical information as to the business
experience of each executive officer and director of the Company for at least
the past five (5) years.
Jean Madar
Jean Madar, age 37, a Director, has been the Chairman of the Board of
Directors (since inception), and a co-founder of the Company with Mr. Benacin.
From inception until December 1993 he was the President of the Company; in
January 1994 he became Director General of Inter Parfums; and in January 1997 he
became Chief Executive Officer of the Company. Mr. Madar was previously the
managing director of Inter Parfums, from
23
<PAGE>
September 1983 until June 1985. At Inter Parfums, he had the responsibility of
overseeing the marketing operations of its foreign distribution, including
market research analysis and actual marketing campaigns. Mr. Madar graduated
from The French Higher School of Economic and Commercial Sciences (ESSEC) in
1983.
Philippe Benacin
Mr. Benacin, age 39, a Director, has been the Vice Chairman of the
Board since September 1991, and is a co-founder of the Company with Mr. Madar.
He was elected the Executive Vice President in September 1991, Senior Vice
President in April 1993, and President of the Company in January 1994. In
addition, has been the President of Inter Parfums for more than the past five
(5) years. Mr. Benacin graduated from The French Higher School of Economic and
Commercial Sciences (ESSEC) in 1983.
Russell Greenberg
Mr. Greenberg, age 41, the Chief Financial Officer, was Vice-President,
Finance when he joined the Company in June 1992; became Executive Vice President
in April 1993; and was appointed to the Board of Directors in February 1995. He
is a certified public accountant licensed in the State of New York, and is a
member of the American Institute of Certified Public Accountants and the New
York State Society of Certified Public Accountants. After graduating from The
Ohio State University in 1980, he was employed in public accounting. From July
1987 through June 1992, he was with Richard A. Eisner & Company, the independent
accountants of the Company.
Francois Heilbronn
Mr. Heilbronn, age 37, a Director, is a graduate of Harvard Business
School with a Master of Business Administration degree and is currently working
as a consultant for the firm of M.M. Friedrich, Heilbronn & Fiszer, of which he
is a partner. He was formerly employed by The Boston Consulting Group, Inc. from
1986 through 1991 as a management consultant. He graduated from Institut D'
Etudes Politiques De Paris in June 1983. From 1984 to 1986, he worked as a
financial analyst for Lazard Freres & Co.
Joseph A. Caccamo
Mr. Caccamo, age 42 and who has been a practicing attorney since 1981,
is a Director and the principal of Joseph A. Caccamo Attorney at Law, P.A., the
general counsel to the Company. From May 1987 through February 1991, he was an
associate of Parker Chapin Flattau & Klimpl, New York City, and from February
1991 through August 1991, he was of counsel to Brandeis, Bernstein & Wasserman,
New York City. In September 1991 he became counsel to the Company through a
predecessor firm, Joseph A. Caccamo Attorney at Law, P.C., and presently is in
private practice. From August 1992 through September 1997, he was formerly a
director of Hydron Technologies, Inc, a company primarily engaged in the
development of cosmetic/personal care products, which has its common stock
listed on The Nasdaq Stock Market.
Jean Levy
24
<PAGE>
Jean Levy, age 65, a Director since August 1996, worked for
twenty-seven (27) years at L'Oreal, and was the President and Chief Executive
Officer of Cosmair, the exclusive United States licensee of L'Oreal from 1983
through June 1987. In addition, he is the former President and Chief Executive
Officer of Sanofi Beaute (France). For the past five years, Mr. Levy has been an
independent advisor as well as a consultant for economic development to local
governments in France. A graduate of "l'Institut d'Etudes Politiques de Paris,"
he also attended Yale Graduate School and was a recipient of a Fulbright
Scholarship. He was also a Professor at "l'Institut d'Etudes Politiques de
Paris".
Robert Bensoussan-Torres
Robert Bensoussan-Torres, age 40, has been the Chief Executive Office
of Christian Lacroix, Paris, a subsidiary of LVMH Group, since February 1993.
Christian Lacroix is a French Houte Couture House and has activities in the
field of apparel, accessories and fragrances. From December 1990 through
January 1993 he was based in Munich, Germany, as the International Sales
Director of The Escada Group.
Bruce Elbilia
Mr. Elbilia, age 38, Executive Vice President joined the Company in
June 1986 as the National Sales Director, and from that time until 1994, he was
in charge of the Company's marketing efforts. In 1994 Mr. Elbilia became head of
international sales and marketing for Jean Philippe, and has expanded Jean
Philippe's export sales to South America, the Middle East and Eastern Europe.
Mr. Elbilia received a Bachelor of Business Administration degree, with a major
in International Business/Marketing from George Washington University in
Washington, D.C., which he attended from 1977-1981.
Wayne C. Hamerling
Mr. Hamerling, age 41, was Vice President, Sales, from May 1987 through
April 1993, when he became Executive Vice President. Mr. Hamerling has over
eighteen (18) years experience in the fragrance and cosmetic business. From 1980
through 1983 he was employed by Rite Aid Drug Stores; from 1983 through 1985, he
was the Senior Buyer for Valley Fair Stores, and from 1985 through May 1987, he
was the National Sales Manager for Happy Valley Fragrances.
Jaime Resnik
Mr. Resnik, age 37, became an Executive Vice President in July 1994,
and is in charge of operations. He joined the Company in April 1992 as
Operations Manager in charge of production and planning. From October 1988
through April 1991, Mr. Resnik was the Licensing Audit Manager for Jordache
Enterprises, with responsibility for auditing approximately thirty (30)
licensees with sales in excess of $250 million. From April 1991 through April
1992, Mr. Resnik was the Director of International Licensing for Jordache
Enterprises, with responsibility for overseeing the licensing activities of
approximately fifty (50) licensees world wide. Mr. Resnik graduated with honors
from the University of Miami in 1983 with a B.A. in management.
25
<PAGE>
Item 11. Executive Compensation
The following table sets forth a summary of all compensation awarded
to, earned by or paid to, the Company's Chief Executive Officer and each of the
four (4) most highly compensated executive officers of the Company whose
compensation exceeded $100,000 per annum for services rendered in all capacities
to the Company and its subsidiaries during fiscal years ended December 31, 1997,
December 31, 1996 and December 31, 1995:
26
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Awards
Name and Year Salary ($) Bonus Other Annual Securities All Other
Principal Position ($) Compensation($) Underlying Compensation
Options (#)(1)
<S> <C> <C> <C> <C> <C> <C>
Jean Madar,(2) Chairman of the Board, 1997 267,000 -0- 18,000(3) 325,000 -0-
Chief Executive Officer of Jean Philippe 1996 210,700 -0- 30,500(3) 33,500 -0-
and Director General of Inter Parfums 1995 175,800 -0- 20,800(3) 100,000 -0-
Philippe Benacin,(4) Chief Executive 1997 86,000 25,000 33,000(5) 325,000 -0-
Officer, President of Jean Philippe and 1996 101,000 17,200 82,844(6) 33,500 -0-
President of Inter Parfums 1995 96,000 -0- 681,200(7) 100,000 -0-
Russell Greenberg(8), Executive Vice 1997 213,600 15,000 2,214 22,500 -0-
President and Chief Financial Officer 1996 200,000 4,500 2,042 6,000 -0-
1995 182,500 4,500 2,219 9,000 -0-
Bruce Elbilia(9) 1997 168,000 18,500 78,473(10) 25,500 -0-
Executive Vice President 1996 168,000 4,571 58,994(10) 6,000 -0-
1995 168,000 18,500 56,510(10) 9,000 -0-
</TABLE>
1 Includes options granted in 1997 as a replacement for out of the
money options. See Table entitled "10 Year Options Repricings".
2 Mr. Madar became Chief Executive Officer in January 1997. As of
December 31, 1997, Mr. Madar held 2,638,049 restricted shares of Common Stock,
with an aggregate value of $18,136,586 based upon the closing price of the
Company's Common Stock as reported by the Nasdaq Stock Market, National Market
system, of $6.875.
3 Consists of lodging expenses.
4 Mr. Benacin was the Chief Executive Officer in 1995 and 1996.
Compensation figures for Mr. Benacin are approximate, as he is paid in French
francs, and conversion into U.S. dollars was made at the average exchange rates
prevailing during the respective periods. As of December 31, 1997, Mr. Benacin
held 2,318,049 restricted shares of Common Stock, with an aggregate value of
$15,936,586 based upon the closing price of the Company's Common Stock as
reported by the Nasdaq Stock Market, National Market system, of $6.875.
5 Consists of $31,000 for lodging expenses and $2,000 for automobile
expenses.
6 Consists of noncash compensation of $52,334 attributable to the
difference between the exercise price and the value of certain restricted shares
of Common Stock acquired upon the exercise of stock options; approximately
$2,300 for automobile expenses and $28,200 for lodging expenses.
7 Consists of noncash compensation of $650,000 attributable to the
difference between the exercise price and the value of certain restricted shares
of Common Stock acquired upon the exercise of stock options; approximately
$2,400 for automobile expenses and $28,800 for lodging expenses.
8 Mr. Greenberg held no restricted shares of Common Stock as of
December 31, 1997.
9 Mr. Elbilia held no shares of common stock as of December 31, 1997.
10 Consists of selling commissions.
27
<PAGE>
<TABLE>
<CAPTION>
Name and Year Salary ($) Bonus Other Annual Securities All Other
Principal Position ($) Compensation($) Underlying Compensation
Options (#)
<S> <C> <C> <C> <C> <C> <C>
Wayne C. Hamerling,(11) 1997 166,120 7,000 55,363(12) 25,500 -0-
Executive Vice President 1996 157,004 3,500 74,903(13) 6,000 -0-
1995 157,004 3,500 86,974(14) 9,000 -0-
</TABLE>
- --------
11 As of December 31, 1997, Mr. Hamerling held 10,000 restricted shares
of Common Stock, with an aggregate value of $68,750 based upon the closing price
of the Company's Common Stock as reported by the Nasdaq Stock Market, National
Market system, of $6.875.
12 Consists of selling commissions of $50,863 and non cash compensation
of $4,500 equal to the value of personal use of a company leased automobile.
13 Consists of selling commissions of $70,067 and non cash compensation
of $4,836 equal to the value of personal use of a company leased automobile.
14 Consists of selling commissions equal to $82,160 and noncash
compensation of $4,814 equal to the value of personal use of a Company leased
automobile.
28
<PAGE>
The following table sets forth certain information relating to stock
option grants during Fiscal 1997 to the Company's Chief Executive Officer and
each of the four (4) most highly compensated executive officers of the Company
whose compensation exceeded $100,000 per annum for services rendered in all
capacities to the Company and its subsidiaries during Fiscal 1997:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realized Value at
Assumed Annual Rates of Stock
Individualized Grants Price Appreciation for Option Term
- ------------------------------------------------------------------------------------ -----------------------------------
Name Number of % of Total Exercise Expiration Five (5%) Ten (10%)
Securities Options/SARs or Base Date Percent Percent
Underlying Granted to Price ($) ($)
Options Employees in ($/Sh)
Granted (#) Fiscal Year
<S> <C> <C> <C> <C> <C> <C>
Jean Madar 30,000 3.9 $5.687 04/26/02 10,369 24,979
Jean Madar 295,000(1) 38.6 $5.687 04/26/02 101,961 245,627
Philippe Benacin 30,000 3.9 $5.687 04/26/02 10,369 24,979
Philippe Benacin 295,000(15) 38.6 $5.687 04/26/02 101,961 245,627
Russell Greenberg 9,000 1.5 $5.687 04/26/02 3,111 7,494
Russell Greenberg 13,500(15) 1.8 $5.687 04/26/02 4,666 11,241
Bruce Elbilia 9,000 1.2 $5.687 04/26/02 3,111 7,494
Bruce Elbilia 16,500(15) 2.2 $5.687 04/26/02 5,703 13,738
Wayne Hamerling 9,000 1.2 $5.687 04/26/02 3,111 7,494
Wayne Hamerling 16,500(15) 2.2 $5.687 04/26/02 5,703 13,738
</TABLE>
- ------------
(1) Consists of options granted in Fiscal 1997 as replacements for, and
repricings of, options previously granted in prior fiscal years. See the table
entitled, "Option Repricings for Last Ten Years."
The foregoing table does not include options granted in Fiscal 1997 as
replacements for, and repricings of, options previously granted in prior fiscal
years. See the table entitled, "Option Repricings for Last Ten Years." which
contains detailed information with respect to the granting of such replacement
options.
29
<PAGE>
The following table sets forth certain information relating to option
exercises effected during Fiscal 1997, and the value of options held as of such
date by each of the Chief Executive Officer and the four (4) most highly
compensated executive officers of the Company whose compensation exceeded
$100,000 per annum for services rendered in all capacities to the Company and
its subsidiaries during Fiscal 1997:
AGGREGATE OPTION EXERCISES FOR FISCAL 1997
AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value(1) of Unexercised
Options at December 31, In-the-Money Options at
1997(#) December 31, 1997($)
Name Shares Acquired Value ($) Exercisable/ Exercisable/
on Exercise Realized(2) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Jean Madar -0- -0- 658,500/-0- $398,662/-0-
Philippe Benacin -0- -0- 658,500/-0- $398,662/-0-
Russell Greenberg -0- -0- 48,000/-0- $28,980/-0-
Bruce Elbilia -0- -0- 51,000/-0- $32,544/-0-
Wayne C. Hamerling -0- -0- 51,000/-0- $32,544/-0-
</TABLE>
- --------
1 Total value of unexercised options is based upon the fair market
value of the Common Stock as reported by the Nasdaq Stock Market of $6.875 on
December 31, 1997.
2 Value realized in dollars is based upon the difference between the
fair market value of the Common Stock on the date of exercise, and the exercise
price of the option.
30
<PAGE>
The following table sets forth certain information regarding repricings
of options held by all executive officers of the Company for the last ten (10)
years.
10 YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Number of Length of
Securities Market Price Exercise Price Original
Underlying of Stock at at Time of Option Term
Options Time of Repricing or Remaining at
Repriced or Repricing or Amendment New Exercise Date of
Name Date Amended (#) Amendment ($) Price ($) Repricing or
($) Amendment
<S> <C> <C> <C> <C> <C> <C>
Jean Madar, Chief 04/27/97 60,000 5.687 7.00 5.687 expired
Executive Officer 3/15/97
Jean Madar, Chief 04/27/97 75,000 5.687 6.825 5.687 9/8/97
Executive Officer
Jean Madar, Chief 04/27/97 90,000 5.687 6.833 5.687 10/15/97
Executive Officer
Jean Madar, Chief 04/27/97 70,687 5.687 7.00 5.687 12/11/97
Executive Officer
Jean Madar, 02/22/94 100,000 10.00 12.00 10.00 01/11/98
Director General of
Inter Parfums
Jean Madar, 11/01/94 100,000 7.00 10.00 7.00 01/11/98
Director General of
Inter Parfums
Jean Madar, 02/22/94 70,687 10.00 11.36 10.00 12/11/97
Director General of
Inter Parfums
Jean Madar, 11/01/94 70,687 7.00 10.00 7.00 12/11/97
Director General of
Inter Parfums
Jean Madar, 11/01/94 60,000 7.00 8.958 7.00 03/15/97
Director General of
Inter Parfums
Philippe Benacin, 04/27/97 60,000 5.687 7.00 5.687 expired
President 3/15/97
Philippe Benacin, 04/27/97 75,000 5.687 6.825 5.687 9/8/97
President
Philippe Benacin, 04/27/97 90,000 5.687 6.833 5.687 10/15/97
President
Philippe Benacin, 04/27/97 70,687 5.687 7.00 5.687 12/11/97
President
Philippe Benacin, 02/22/94 100,000 10.00 12.00 10.00 01/11/98
Chief Executive
Officer
Philippe Benacin, 11/01/94 100,000 7.00 10.00 7.00 01/11/98
Chief Executive
Officer
Philippe Benacin, 02/22/94 70,687 10.00 11.36 10.00 12/11/97
Chief Executive
Officer
Philippe Benacin, 11/01/94 70,687 7.00 10.00 7.00 12/11/97
Chief Executive
Officer
Philippe Benacin, 11/01/94 60,000 7.00 8.958 7.00 03/15/97
Chief Executive
Officer
Russell Greenberg, 04/27/97 6,000 5.687 6.667 5.687 09/9/97
Executive V.P
Russell Greenberg, 04/27/97 7,500 5.687 7.00 5.687 12/11/97
Executive V.P
</TABLE>
31
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Russell Greenberg, 06/29/92* 7,500 6.667 8.00 6.667 05/31/97
Executive V.P
Russell Greenberg, 02/22/94 1,500 10.00 12.00 10.00 04/28/98
Executive V.P
Russell Greenberg, 11/01/94 1,500 7.00 10.00 7.00 04/28/98
Executive V.P
Russell Greenberg, 02/22/94 7,500 10.00 11.36 10.00 12/11/97
Executive V.P
Russell Greenberg, 11/01/94 7,500 7.00 10.00 7.00 12/11/97
Executive V.P
Russell Greenberg, 02/22/94 5,000 10.00 12.00 10.00 10/12/98
Executive V.P
Russell Greenberg, 11/01/94 5,000 7.00 10.00 7.00 10/12/98
Executive V.P
Bruce Elbilia, 04/27/97 9,000 5.687 6.667 5.687 09/9/97
Executive V.P
Bruce Elbilia, 04/27/97 7,500 5.687 7.00 5.687 12/11/97
Executive V.P
Bruce Elbilia, 03/06/90** 6,000 2.25 4.4625 2.25 12/18/90
Executive V.P
Bruce Elbilia, 02/22/94 1,500 10.00 12.00 10.00 04/28/98
Executive V.P
Bruce Elbilia, 11/01/94 1,500 7.00 10.00 7.00 04/28/98
Executive V.P
Bruce Elbilia, 02/22/94 7,500 10.00 11.36 10.00 12/11/97
Executive V.P
Bruce Elbilia, 11/01/94 7,500 7.00 10.00 7.00 12/11/97
Executive V.P
Bruce Elbilia, 02/22/94 5,000 10.00 12.00 10.00 10/12/98
Executive V.P
Bruce Elbilia, 11/01/94 5,000 7.00 10.00 7.00 10/12/98
Executive V.P
Wayne Hamerling, 04/27/97 9,000 5.687 6.667 5.687 09/9/97
Executive V.P
Wayne Hamerling, 04/27/97 7,500 5.687 7.00 5.687 12/11/97
Executive V.P
Wayne Hamerling, 03/06/90** 6,000 2.25 4.4625 2.25 12/18/90
V.P. Sales
Wayne Hamerling, 02/22/94 1,500 10.00 12.00 10.00 04/28/98
Executive V.P
Wayne Hamerling, 11/01/94 1,500 7.00 10.00 7.00 04/28/98
Executive V.P
Wayne Hamerling, 02/22/94 7,500 10.00 11.36 10.00 12/11/97
Executive V.P
Wayne Hamerling, 11/01/94 7,500 7.00 10.00 7.00 12/11/97
Executive V.P
Wayne Hamerling, 02/22/94 5,000 10.00 12.00 10.00 10/12/98
Executive V.P
Wayne Hamerling, 11/01/94 5,000 7.00 10.00 7.00 10/12/98
Executive V.P
</TABLE>
* The number of shares and the prices have been adjusted to reflect the 3:2
split effected in November 1993.
** The number of shares and the prices have been adjusted to reflect the 1:2.5
reverse split effected in August 1990 and the 3:2 split effected in November
1993.
In April 1997, the Stock Option Committee of the Board of Directors
("Stock Option Committee"), on recommendation of the Chairman of the Board,
canceled and terminated all outstanding options which had exercise prices in
excess of the market price, and either expired in March 1997 or were to expire
shortly thereafter
32
<PAGE>
(collectively the "Out of the Money Options") for its executive officers, and
granted nonqualified stock options as replacement options to such executive
officers, each exercisable for a five (5) year period at the purchase of $5.687
per share.
The Stock Committee acknowledged that the market price of the
Corporation's Common Stock as quoted on The Nasdaq Stock Market, National Market
System has declined substantially, thus negating the intended benefit of the
options previously granted with higher exercise prices; and such committee
believed that it was in the best interests of the Company to provide the
intended incentive to management of the Company by canceling the Out of the
Money Options and replacing them with options with exercise prices at the fair
market value at such time. During Fiscal 1997 the Stock Option Committee
consisted of Jean Levy and Francois Heilbronn.
Employment Agreements
As part of the acquisition by the Company of the controlling interest
in Inter Parfums in 1991, the Company entered into an employment agreement
with Philippe Benacin. The agreement provides that Mr. Benacin will be
employed as Vice Chairman of the Board and President and Chief Executive
Officer of IP Holdings and its subsidiary, Inter Parfums. The initial term
expired on September 2, 1992, and has subsequently been automatically renewed
for additional annual periods. The agreement provides for automatic annual
renewal terms, unless either party terminates the agreement upon 120 days
notice. Mr. Benacin is entitled to receive an annual salary is 600,000ff
(approximately US$ 120,000) together with 5,000ff per month (approximately
US$1,000) for lodging expenses, both of which are subject to increases in the
discretion of the Board of Directors. In addition he is to receive a
nonaccountable expense allowance of 1,200ff (approximately US$ 240) per week
and reimbursement for all out-of-pocket expenses associated with the
acquisition, operation and maintenance of an automobile. The agreement also
provides for indemnification and a covenant not to compete for one (1) year
after termination of employment.
Compensation of Directors
Each of Mr. Robert Bensoussan-Torres and Mr. Levy receives $1,000 for
each board meeting at which they participate. Mr. Caccamo receives $500 for
each board meeting at which he participates.
On January 14, 1994, the Board of Directors of the Company adopted
the 1994 Nonemployee Stock Option Plan (the "1994 Plan"). The purpose of the
1994 Plan is to assist the Company in attracting and retaining key directors
who are responsible for continuing growth and success of the Company. The 1994
Plan was approved by the stockholders of the Company on July 8, 1994.
The 1994 Plan provides for the grant of nonqualified stock options to
nonemployee directors to purchase an aggregate of 25,000 shares of Common Stock.
Options to purchase 1,000 shares are granted on each February 1st to
all nonemployee directors for as long as each is a nonemployee director on such
date, except for Joseph A. Caccamo, who is granted options to purchase 4,000
shares. Further, options to purchase 1,000 shares are to be granted to persons
who become nonemployee directors at the time they become nonemployee directors.
The exercise price of all options granted or to be granted under the 1994 Plan
is to be equal to the fair market value of the Company's Common Stock on the
date of grant, and the term of each option shall be for a five (5) year period,
subject to earlier termination as set forth in the 1994 Plan.
In accordance with the terms of the 1994 Plan, options to purchase
shares of common stock were granted at the then fair market value, as follows:
On August 27, 1996, 1,000 shares were granted to Jean Levy at the
33
<PAGE>
exercise price of $6.9375 per share; and on February 1, 1997, 1,000 shares
were granted to Francois Heilbronn, and 4,000 shares were granted to Joseph A.
Caccamo, all at the exercise price of $6.4375 per share.
On March 13, 1997, the Board of Directors of the Company adopted,
subject to the approval of its stockholders, the 1997 Nonemployee Stock Option
Plan (the "1997 Plan"). The purpose of the 1997 Plan is to assist the Company in
attracting and retaining key directors who are responsible for continuing growth
and success of the Company. The 1997 Plan was approved by the stockholders of
the Company at the annual meeting of shareholders held in July 1997.
The 1997 Plan provides for the grant of nonqualified stock options to
nonemployee directors to purchase an aggregate of 25,000 shares of Common Stock.
Options to purchase 1,000 shares are granted on each February 1st to all
nonemployee directors for as long as each is a nonemployee director on such date
(except for Mr. Caccamo as noted above) after all the shares of the 1994 Plan
have been used.
On March 13, 1997, options to purchase 2,000 shares were granted to
each of Jean Levy and Robert Bensoussan-Torres at the exercise price of $6.00
per share under the 1994 Plan and the 1997 Plan.
On February 1, 1998, options to purchase 1,000 shares were granted to
each of Francois Heilbronn, Jean Levy and Robert Bensoussan-Torres, and an
option to purchase 4,000 shares was granted to Joseph A. Caccamo at the exercise
price of $6.97 per share under the 1994 Plan and the 1997 Plan.
Item 12. Security Ownership Of Certain
Beneficial Owners And Management
The following table sets forth information, as of March 15, 1998 with
respect to the beneficial ownership of the Company's Common Stock by (a) each
person known by the Company to be the beneficial owner of more than five percent
(5%) of the Company's outstanding Common Stock, (b) the executive officers and
directors of the Company and (c) the directors and officers of the Company as a
group:
Amount of
Name and Address Beneficial Approximate
of Beneficial Owner Ownership(1) Percent of Class
------------------- ------------ ----------------
Jean Madar 3,301,549(2) 34.9%
c/o Inter Parfums, S.A.
4, Rond Point Des Champs Elysees
75008 Paris, France
Philippe Benacin 2,981,549(3) 31.5%
c/o Inter Parfums, S.A.
4, Rond Point Des Champs Elysees
75008 Paris, France
Russell Greenberg 48,000(4) Less than 1%
c/o Jean Philippe Fragrances, Inc.
551 Fifth Avenue
New York, NY 10176
- -------
(1) All shares of Common Stock are directly held unless otherwise
stated.
(2) Consists of 2,638,049 shares held directly and options to purchase
658,500 shares.
(3) Consists of 2,318,049 shares held directly and options to
purchase 658,500 shares.
(4) Consists of options to purchase shares of Common Stock.
34
<PAGE>
Francois Heilbronn 10,500(5) Less than 1%
12 Rue Pierre Leroux
75007 Paris, France
Joseph A. Caccamo 19,000(6) Less than 1%
7509 Ridgefield Lane
Lake Worth, FL 33467
Jean Levy 4,000(7) Less than 1%
29 rue du Colisee
75008 Paris, France
Robert Bensoussan-Torres 3,000(8) Less than 1%
80, rue de l'Univeinte
75007 Paris, France
Bruce Elbilia 51,000(9) Less than 1%
c/o Jean Philippe Fragrances, Inc.
551 Fifth Avenue
New York, NY 10176
Wayne C. Hamerling 56,000(10) Less than 1%
c/o Jean Philippe Fragrances, Inc.
551 Fifth Avenue
New York, NY 10176
Jaime Resnik 35,500(11) Less than 1%
c/o Jean Philippe Fragrances, Inc.
551 Fifth Avenue
New York, NY 10176
Wellington Management Company, LLP 516,000(12) 5.9%
75 State Street, Boston, MA 02109
Dimensional Fund Advisors, Inc. 512,400(13) 5.8%
1299 Ocean Avenue, 11th Fl.
Santa Monica, CA 90401
All Directors and Officers 6,500,098(14) 62.9%
as a Group (10 Persons)
- --------
(5) Consists of 4,500 shares held directly and options to purchase 6,000
shares of Common Stock.
(6) Consists of options to purchase shares of Common Stock.
(7) Consists of options to purchase shares of Common Stock.
(8) Consists of options to purchase shares of Common Stock.
(9) Consists of options to purchase shares of Common Stock.
(10) Consists of 5,000 shares held directly and options to purchase 51,000
shares of Common Stock.
(11) Consists of options to purchase shares of Common
Stock.
(12) Information is derived forth in a Schedule 13G dated January 14,
1998 of Wellington Management Company, LLP ("Wellington"). Wellington is a
registered investment advisor and may be deemed to be the beneficial owner of
the shares which are held of record by its clients.
(13) Information is derived forth in a Schedule 13G dated February 9, 1998 of
Dimensional Fund Advisor Inc. ("DFA"). DFA may be deemed to be the beneficial
owner of the shares which are owned by its advisory clients. DFA disclaims
beneficial ownership of all of the shares.
(14) Consists of 4,970,598 shares held directly and options to purchase
1,320,374 shares of Common Stock.
35
<PAGE>
Item 13. Certain Relationships And Related Party Transactions
Transactions with French Subsidiaries
In connection with certain previously reported acquisitions by Inter
Parfums in 1993 and 1994, funding for such acquisitions was advanced by Jean
Philippe to its direct subsidiary, IP Holdings, which in turn advanced such
funds to Inter Parfums, its subsidiary. The advance was carried on the books
of IP Holdings as convertible debt.
In January 1998, the Company, through IP Holdings, exercised its rights
to convert the remaining portion of its convertible debt, approximately $4.4
million, into 318,326 additional shares of Inter Parfums bringing the total
shares outstanding to 2,209,000. The conversion price was approximately $14 per
share while Inter Parfums stock is presently trading at approximately $32 per
share.
In connection with the acquisitions by Inter Parfums of the world-wide
rights under the Burberrys License Agreement and the Brosseau License Agreement,
Jean Philippe guaranteed the obligations of Inter Parfums under the Burberrys
License Agreement and the distribution agreement for Ombre Rose fragrances.
Jean Philippe and Elite have guaranteed the obligations of IP Holdings
and Inter Parfums to Republic National Bank of New York (France).
Repurchase of Shares from Officers and Directors
In February 1998 Joseph A. Caccamo, a Director and principal of Joseph
A. Caccamo Attorney at Law, P.A., general counsel to the Company, exercised an
option granted in April 1997 to purchase 7,500 shares of Common Stock at $5.8435
per share. In connection with the Company's stock repurchase program, in
February 1998 the Company purchased from Joseph A. Caccamo the 7,500 shares at
$7.25 per share, the fair market value at the time of such purchase.
Remuneration of Counsel
Joseph A. Caccamo, a director of the Company, is the principal of
Joseph A. Caccamo Attorney at Law, P.A., general counsel to the Company. In
Fiscal 1997, Mr. Caccamo was paid an aggregate of $98,202 in legal fees and for
reimbursement of disbursements incurred on behalf of the Company, and Mr.
Caccamo firm presently receives a monthly retainer of $7,750 together with
reimbursement for expenses. Mr. Caccamo receives $500 for each board meeting at
which he participates.
On February 1, 1998 in accordance with the terms of the Company's stock
option plan, Mr. Caccamo was granted an option with a term of five (5) years to
purchase 4,000 shares at $6.97 per share, the fair market value at the time of
grant.
36
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules,
And Reports On Form 8-K
(a)(1) Financial Statements annexed hereto Page No.
Reports of Independent Auditors- F-1
Consolidated Balance Sheets as at December 31, 1997
and December 31, 1996 F-3
Consolidated Statements of Income for the Years
ended December 31, 1997, December 31, 1996 and
December 31, 1995 F-4
Consolidated Statements of Changes in Shareholders'
Equity for the Years ended December 31, 1997,
December 31, 1996 and December 31, 1995 F-5
Consolidated Statements of Cash Flows for the Years
ended December 31, 1997, December 31, 1996
and December 31, 1995 F-6
Notes to Financial Statements F-7
(a)(2) Financial Statement Schedules annexed hereto:
Schedule II - Valuation and Qualifying Accounts
and Reserves F-16
Schedules other than those referred to above have been omitted as the
conditions requiring their filing are not present or the information
has been presented elsewhere in the consolidated financial
statements.
37
<PAGE>
(a)(3) Exhibits
The following documents heretofore filed by the Company with the
Securities and Exchange Commission (the "Commission") are hereby incorporated
by reference from the Company's Registration Statement on Form S-18, file no.
33-17139-NY:
Exhibit No. and Description
3.1 Restated Certificate of Incorporation
4.2 Common Stock Certificate Specimen
4.4 1987 Stock Option Plan
The following document heretofore filed with the Commission is
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987:
Exhibit No. and Description
3.2 By-laws, as amended
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - January 18, 1990), as follows:
Exhibit No. and Description
10.13 License Agreement between the Company and Jordache dated January 18,
1990 (as no. 10.1 therein).
10.15 Letter of Indemnification from Jordache to the Company dated
January 18, 1990 (as no. 10.3 therein)
10.16 Letter Agreement from Jordache to the Company regarding foreign license
rights dated January 18, 1990 (as no. 10.4 therein).
The following documents heretofore filed with the Commission is
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990:
Exhibit No. and Description
3.1(a) Certificate of Amendment of the Restated Certificate of Incorporation
38
<PAGE>
The following document heretofore filed with the Commission is
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - July 29, 1991), as follows:
Exhibit No. and Description
10.24 Agreement and Plan or Reorganization dated July 29, 1991 among the
Company, Jean Madar and Philippe Benacin (as No. 10.1 therein)
The following document heretofore filed with the Commission is
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991:
Exhibit No. and Description
10.25 Employment Agreement between the Company and Philippe Benacin dated July
29, 1991
The following documents heretofore filed with the Commission is
incorporated by reference to the Company's Registration Statement on Form S-1
(No. 33-48811):
Exhibit No. and Description
10.26 Lease for portion of 15th Floor, 551 Fifth Avenue, New York, New York
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992:
Exhibit No. and Description
3.1(b) Amendment to the Company's Restated Certificate of Incorporation, as
amended, dated July 31, 1992
4.9 1992 Stock Option Plan
4.10 Amendment to 1992 Stock Option Plan
4.11 1993 Stock Option Plan
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Registration Statement on Form S-3
(No. 33-63330):
Exhibit No. and Description
4.12 Form of Warrant Agreement between Bear, Stearns & Co. Inc. and Jean
Philippe Fragrances, Inc.
39
<PAGE>
10.29 Form of Purchase Agreement
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - July 15, 1993), as follows:
Exhibit No. and Description
10.30 License Agreement dated July 15, 1993, among Burberrys Limited, Inter
Parfums, S.A. and Jean Philippe Fragrances, Inc.(1)
10.31 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A.
and Inter Parfums, S.A. (original in French)(1)
10.32 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A.
and Inter Parfums, S.A.(translation of French into English)(1)
10.33 Agreement dated July 14, 1993, between Alfin, Inc. and Inter Parfums,
S.A.(1)
10.34 Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean Philippe
Fragrances, Inc., C&C Beauty Sales, Inc. and Parfico, Inc.
10.35 Distribution Agreement dated July 16, 1993 among Inter Parfums, S.A.,
Jean Philippe Fragrances, Inc. and Fragrance Marketing Group, Inc.(1)
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - February 28, 1994), as follows:
Exhibit No. and Description
10.36 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums,
S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994
(re: Parfums Molyneux)
10.37 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums,
S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994
(re: Parfums Weil)
10.38 Agreement (Acquisition) among Jean Philippe Fragrances, Inc., Inter
Parfums, S.A. and Cosmetiques et Parfums de France, S.A. dated February 18, 1994
10.39 Noncompetition Agreement among Jean Philippe Fragrances, Inc., Inter
Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February
18, 1994
- -------------
(1) Filed in excised form.
40
<PAGE>
10.40 Commission Agreement among Jean Philippe Fragrances, Inc., Inter Parfums,
S.A. and Sodipe S.A. dated February 18, 1994
10.41 Convention between Inter Parfums, S.A. and Cosmetiques et Parfums de
France-I.D., S.A. dated February 18, 1994 (re inventory purchase)
10.42 Convention de Nantissement among Cosmetiques et Parfums de France, S.A.,
Cosmetiques et Parfums de France-I.D., S.A., Sodipe S.A., Jean Philippe
Fragrances, Inc. and Inter Parfums, S.A. dated February 18, 1994 (re security
agreement)
10.43 Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques
et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and Inter Parfums,
S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements)
10.44 Acquisition Agreement among Jean Philippe Fragrances, Inc., Revlon
Consumer Products Corporation and Revlon Suisse, S.A. dated March 2, 1994
10.45 License Agreement among Jean Philippe Fragrances, Inc., Revlon Consumer
Products Corporation and Revlon Suisse, S.A. dated March 2, 1994
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Form 8 Amendment no. 1
(dated March 14, 1994) to the Current Report on Form 8-K (date of event -
February 28, 1994), as follows:
Exhibit No. and Description
10.46. English translation of exhibit no. 10.36, Cession D'Elements Partiels
de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de
France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux)
10.47. English translation of exhibit no. 10.37, Cession D'Elements Partiels
de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de
France-I.D., S.A. dated February 18, 1994 (re: Parfums Weil)
10.48. English translation of exhibit no. 10.41, Convention between Inter
Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February
18, 1994 (re inventory purchase)
10.49. English translation of exhibit no. 10.42, Convention de Nantissement
among Cosmetiques et Parfums de France, S.A., Cosmetiques et Parfums de
France-I.D., S.A., Sodipe S.A., Jean Philippe Fragrances, Inc. and Inter
Parfums, S.A. dated February 18, 1994 (re security agreement)
The following document heretofore filed with the Commission is
incorporated herein by reference to the Company's Form 8 Amendment no. 2
(dated March 21, 1994) to the Current Report on Form 8-K (date of event -
February 28, 1994), as follows:
41
<PAGE>
Exhibit No. and Description
10.50. English translation of exhibit no. 10.43, Convention among Cosmetiques
et Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean
Philippe Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A. dated
February 18, 1994 (re French regulatory requirements)
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993:
Exhibit No. and Description
3.1(c) Amendment to the Company's Restated Certificate of Incorporation, as
amended, dated July 9, 1993
3.3 Articles of Incorporation of Inter Parfums Holding, S.A.
3.3.1 English Translation of Exhibit no. 3.3, Articles of Incorporation of
Inter Parfums Holding, S.A.
3.4 Articles of Incorporation of Inter Parfums, S.A.
3.4.1 English Translation of Exhibit no. 3.4, Articles of Incorporation of Inter
Parfums, S.A.
4.14 Warrant no. 108 registered in the name of Ladenburg, Thalmann & Co., Inc.
dated February 2, 1994
4.15 1994 Nonemployee Director Stock Option Plan
10.51 Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization
Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.)
10.51.1 English translation of Exhibit no. 10.51, Traite D'Apport Partiel
D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums,
S.A. and Selective Industrie, S.A.)
10.52 Lease for portion of 4, Rond Point Des Champs Des Elysees dated
September 30, 1993
10.52.1 English translation of Exhibit no. 10.52, Lease for portion of 4, Rond
Point Des Champs Des Elysees dated September 30, 1993
10.53 Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2,
1994
10.53.1 English translation of Exhibit no. 10.53, Lease for portion of 4, Rond
Point Des Champs Des Elysees dated March 2, 1994
42
<PAGE>
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Form 8 Amendment no. 1
(dated August 8, 1994) to the Current Report on Form 8-K (date of event - July
13, 1994), as follows:
Exhibit No. and Description
10.58. Engagements de Garanties among Zanimob Enterprise Limited, Jacomo France
and Inter Parfums, S.A. dated July 12, 1994, listed as no. 10.53 therein.
10.58.1 English translation of exhibit no. 10.53, Engagements de Garanties among
Zanimob Enterprise Limited, Jacomo France and Inter Parfums, S.A. dated July 12,
1994, listed as no. 10.53.1 therein.
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994:
4.15 1994 Nonemployee Director Supplemental Stock Option Plan
10.59 Modification of Lease Agreement dated June 17, 1994 between Metropolitan
Life Insurance Company and Jean Philippe Fragrances, Inc.
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995:
Exhibit No. and Description
10.60 Guaranty and Security Agreement of Jean Philippe Fragrances, Inc. and
Elite Parfums, Ltd. to Republic National Bank of New York (France) dated July
19, 1995
10.61 Lease for 60 Stults Road, South Brunswick, NJ between Forsgate
Industrial Complex, a limited partnership, and Jean Philippe Fragrances, Inc.
dated July 10, 1995
10.62 Intellectual Property Purchase Agreement between Parlux Fragrances, Inc.
and Parfums Jean Desprez, S.A. dated March 12, 1996
10.63 Inventory Purchase Agreement between Parlux Fragrances, Inc. and Jean
Desprez, S.A. dated March 12, 1996
11 Statement re: Computation of Earnings Per Share
43
<PAGE>
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996:
Exhibit No. and Description
10.65 Asset Repurchase Agreement between Carson, Inc. and Jean Philippe
Fragrances, Inc. dated March 27, 1997
11 Statement re: Computation of Earnings Per Share
44
<PAGE>
The following exhibits are filed herewith:
Exhibit No. and Description
10.66 Revolving Credit Agreement dated September 24, 1997 among Republic
National Bank of New York, Jean Philippe Fragrances, Inc. and Elite Parfums,
Ltd.
10.67 Second Modification of Lease made as of the 30th day of April, 1997
between Metropolitan Life Insurance Company as landlord and Jean Philippe
Fragrances, Inc. as tenant.
10.68 Amendment I to License Agreement dated September 3, 1997 between
Jordache Enterprises, Inc as Licensor and Jean Philippe Fragrances, Inc. as
Licensee.
10.69 Exclusive Licence Agreement dated June 20, 1997 between S.T. Dupont,
S.A. and Inter Parfums (English translation, excised version)
21 List of Subsidiaries
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed during the fourth quarter
of Fiscal 1997.
45
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Jean Philippe Fragrances, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Jean Philippe
Fragrances, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
Inter Parfums Holdings, S.A. and subsidiaries, consolidated subsidiaries of
the Company, which statements include total assets and net sales constituting
56% and 56% of the related consolidated totals for 1997 and 54% and 42% for
1996 and net sales constituting 38% for 1995. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts for Inter Parfums Holdings, S.A. and
subsidiaries, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
consolidated financial statements enumerated above present fairly, in all
material respects, the consolidated financial position of Jean Philippe
Fragrances, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997 in conformity with generally
accepted accounting principles.
Our audits referred to above included Schedule II for each of the years in the
three-year period ended December 31, 1997. In our opinion, such schedule
presents fairly the information set forth therein in accordance with the
applicable accounting regulation of the Securities and Exchange Commission.
Richard A. Eisner & Company, LLP
New York, New York
March 10, 1998
With respect to accounts for
foreign subsidiaries
March 30, 1998
F-1
<PAGE>
INTER PARFUMS HOLDING AND SUBSIDIARIES
INDEPENDENT AUDITOR' REPORT
We have audited the accompanying consolidated balance sheets of Inter Parfums
Holding and subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of income, retained earnings and cash flows for the
years ended December 31, 1997, 1996 and 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Inter Parfums Holding and
subsidiaries as of December 31, 1997 and 1996 and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
Paris, March 30, 1998
Cabinet Cauvin, Angleys, Saint-Pierre
International
/s/
Rene Amirkhanian
F-2
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands except share and per share data)
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1996
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,722 $ 20,205
Accounts receivable, net of allowances of $2,995 and $2,787 in 1997 and 1996,
respectively (Note E) 26,255 25,137
Inventories (Notes A and B) 21,707 23,328
Receivables, other 622 1,124
Other 470 1,057
Deferred tax benefit (Note J) 1,115 1,875
----------- ----------
Total current assets 68,891 72,726
Equipment and leasehold improvements, net (Notes A and C) 2,122 1,734
Other assets 1,275 1,860
Trademarks and licenses, net (Notes A, D and K) 7,994 9,265
----------- ----------
$ 80,282 $ 85,585
=========== ==========
LIABILITIES
Current liabilities:
Loans payable - banks (Note E) $ 3,063 $ 9,468
Accounts payable 17,574 14,740
Income taxes payable 3,412 1,950
----------- ----------
Total current liabilities 24,049 26,158
----------- ----------
Long-term debt (Note F) 424 485
----------- ----------
Minority interest 5,615 5,576
----------- ----------
Commitments (Note G)
SHAREHOLDERS' EQUITY (Note H)
Preferred stock, $.001 par value; authorized 1,000,000 shares; none issued
Common stock, $.001 par value; authorized 30,000,000 shares; outstanding
8,862,781 and 9,602,481 shares in 1997 and 1996, respectively 9 10
Additional paid-in capital 20,686 20,686
Retained earnings 42,730 38,223
Foreign currency translation adjustment (2,369) 390
Treasury stock, at cost 1,975,703 and 1,236,003 shares in 1997 and 1996, respectively (10,862) (5,943)
----------- -----------
Total shareholders' equity 50,194 53,366
----------- -----------
$ 80,282 $ 85,585
=========== ==========
</TABLE>
See notes to financial statements
F-3
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands except share and per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1997 1996 1995
------------- ------------- --------------
<S> <C> <C> <C>
Net sales $ 91,462 $ 93,281 $ 93,669
Cost of sales 49,388 51,355 48,703
------------ ------------- --------------
Gross margin 42,074 41,926 44,966
Selling, general and administrative 32,334 32,416 32,990
Loss on product discontinuance 1,300 2,229
------------ ------------ --------------
Income from operations 8,440 9,510 9,747
------------ ------------- --------------
Other charges (income):
Interest 727 946 1,148
Loss (gain) on foreign currency 242 144 (197)
Interest income (705) (647) (274)
Loss (gain) on sale of stock of subsidiary 4 (14) (3,310)
------------ ------------- --------------
268 429 (2,633)
------------ ------------- --------------
Income before income taxes 8,172 9,081 12,380
Income taxes 2,945 2,795 3,188
------------ ------------- --------------
Income before minority interest 5,227 6,286 9,192
Minority interest in net income of consolidated subsidiary 720 628 154
------------ ------------- --------------
Net income $ 4,507 $ 5,658 $ 9,038
============ ============= ==============
Net income per share:
Basic $0.48 $0.57 $0.90
Diluted $0.48 $0.57 $0.87
Weighted average number of shares outstanding:
Basic 9,299,401 9,871,698 10,044,653
Diluted 9,397,329 9,984,463 10,438,896
</TABLE>
See notes to financial statements
F-4
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity
(in thousands except share and per share data)
<TABLE>
<CAPTION>
Foreign
Common Stock Additional Currency
--------------------- Paid-in Retained Translation Treasury
Shares Amount Capital Earnings Adjustments Stock Total
-------- ---------- ----------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1995 10,242,786 $ 10 $ 20,408 $ 23,527 $ 568 $ 44,513
Shares issued upon exercise
of stock options 91,500 202 202
Net income 9,038 9,038
Translation adjustments 1,113 1,113
Purchased treasury shares (324,305) $ (2,890) (2,890)
------------- ----- ----------- ---------- ----------- ---------- ---------
Balance - December 31, 1995 10,009,981 10 20,610 32,565 1,681 (2,890) 51,976
Shares issued upon exercise
of stock options 18,000 76 76
Net income 5,658 5,658
Translation adjustments (1,291) (1,291)
Purchased treasury shares (425,500) (3,053) (3,053)
------------- ----- --------- ---------- ----------- ---------- ---------
Balance - December 31, 1996 9,602,481 10 20,686 38,223 390 (5,943) 53,366
Net income 4,507 4,507
Translation adjustments (2,759) (2,759)
Purchased treasury shares (739,700) (1) (4,919) (4,920)
------------- ----- --------- ---------- ----------- ---------- ---------
Balance - December 31, 1997 8,862,781 $ 9 $ 20,686 $ 42,730 $ (2,369) $ (10,862) $ 50,194
============= ===== ========= ========== ======== ========== =========
</TABLE>
See notes to financial statements
F-5
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands except share and per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1996 1995
--------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,507 $ 5,658 $ 9,038
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,238 1,597 1,322
Noncash portion of loss on product discontinuance 854
Loss (gain) on sale of stock of subsidiary 4 (14) (3,311)
Minority interest in net income 720 628 158
Changes in:
Accounts receivable 189 (3,210) (2,609)
Inventories 90 1,958 (1,043)
Other assets 1,426 (923) 1,102
Deferred tax benefit 679 1,179 (1,223)
Accounts payable 790 332 (75)
Income taxes payable 1,630 770 (523)
--------- --------- ---------
Net cash provided by operating activities 12,127 7,975 2,836
--------- --------- ---------
Cash flows from investing activities:
Purchase of equipment and leasehold improvements (1,149) (425) (1,244)
Cash portion of trademark and license acquisitions (1,009) (177) (135)
Proceeds from sale of equipment 50
Proceeds from sale of trademark 2,150
--------- --------- ---------
Net cash provided by (used in) investing activities (2,108) 1,548 (1,379)
--------- --------- ---------
Cash flows from financing activities:
Increase (decrease) in loans payable - banks (5,575) 54 3,085
Repayment of long-term debt (499)
Proceeds from sale of stock of subsidiary 32 7,579
Purchase of treasury stock (4,919) (3,053) (2,890)
Proceeds from exercise of options and warrants 76 202
--------- --------- ---------
Net cash provided by (used in) financing activities (10,462) (2,923) 7,477
--------- --------- ---------
Effect of exchange rate changes on cash (1,040) (599) (5)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (1,483) 6,001 8,929
Cash and cash equivalents - beginning of year 20,205 14,204 5,275
--------- --------- ---------
Cash and cash equivalents - end of year $ 18,722 $ 20,205 $ 14,204
========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 756 $ 962 $ 1,146
Income taxes $ 736 $ 1,555 $ 4,968
</TABLE>
F-6
See notes to financial statements
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
(in thousands except share and per share data)
December 31, 1997 and 1996
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
[1] Business of the Company:
The Company is a manufacturer and distributor of domestic and
international brand name and licensed fragrances, alternative designer
fragrances and mass market cosmetics.
[2] Basis of preparation:
The consolidated financial statements include the accounts of Jean
Philippe Fragrances, Inc. ("JPF") and its domestic and foreign
subsidiaries (the "Company"). All material intercompany balances and
transactions have been eliminated.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
[3] Foreign currency translation:
For foreign subsidiaries that operate in a foreign currency, assets and
liabilities are translated to U.S. dollars at year-end exchange rates.
Income and expense items are translated at average rates of exchange
prevailing during the year. Gains and losses from translation
adjustments are accumulated in a separate component of shareholders'
equity. In instances where the financial statements of foreign entities
are remeasured into their functional currency (U.S. dollars), the
remeasurement adjustment is recorded in operations.
[4] Cash equivalents:
All highly liquid investments purchased with a maturity of three months
or less are considered to be cash equivalents.
[5] Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market.
[6] Equipment and leasehold improvements:
Equipment and leasehold improvements are stated at cost. Depreciation
and amortization are provided using the straight-line method and the
declining balance method over the estimated useful asset lives for
equipment, which range between 3 and 10 years and the shorter of the
lease term or estimated useful asset lives for leasehold improvements.
[7] Trademarks and licenses:
Trademarks are stated at cost and are amortized by the straight-line
method over twenty years. The cost of licenses acquired is being
amortized by the straight-line method over the term of the license,
approximately seven to ten years.
The Company reviews trademarks and licenses for impairment whenever
events or changes in circumstances indicate that the carrying amount may
not be recoverable.
F-7
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
(in thousands except share and per share data)
December 31, 1997 and 1996
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[8] Revenue recognition:
Revenue is recognized upon shipment of merchandise. Allowances are
established for estimated returns.
[9] Issuance of common stock of subsidiary:
The Company's share of the proceeds received by the subsidiary in excess
of the carrying amount of the portion of the Company's investment sold
is reflected as a gain in the consolidated income statement.
[10] Stock-based compensation:
During 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123"). The provisions of SFAS No. 123 allow companies to either expense
the estimated fair value of stock options or to continue to follow the
intrinsic value method set forth in APB Opinion 25, "Accounting for
Stock Issued to Employees" ("APB 25") but disclose the pro forma effects
on net income had the fair value of the option been expensed. The
Company has elected to continue to apply APB 25 in accounting for its
stock option incentive plans.
[11] Earnings per share:
The Company adopted SFAS No. 128 "Earnings Per Share" in the period
ended December 31, 1997 and has retroactively applied the effects
thereof for all periods presented. Accordingly, the presentation of per
share information includes calculations of basic and diluted income per
share. The impact on the per share amounts previously reported was not
significant.
Basic earnings per share are computed using the weighted average number
of shares outstanding during each year. Diluted earnings per share are
computed using the weighted average number of shares outstanding during
each year, plus the incremental shares outstanding assuming the exercise
of dilutive stock options.
[12] Recent accounting pronouncements:
In June 1997, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure", and No. 131, "Disclosure about Segments of an
Enterprise and Related Information". The Company believes that the above
pronouncements will not have a significant effect on the information
presented in the financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income", which addresses the manner in which certain adjustments to
stockholders' equity (principally foreign currency translation) are
displayed in the financial statements, with no effect on reported
earnings, assets or capital.
F-8
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
(in thousands except share and per share data)
December 31, 1997 and 1996
NOTE B - INVENTORIES
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
---------- -----------
<S> <C> <C>
Raw materials and component parts $ 10,567 $ 10,738
Finished goods 11,140 12,590
---------- -----------
$ 21,707 $ 23,328
========== ==========
NOTE C - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
<CAPTION>
December 31,
-----------------------
1997 1996
---------- -----------
<S> <C> <C>
Equipment $ 4,063 $ 3,536
Leasehold improvements 378 747
---------- ----------
4,441 4,283
Less accumulated depreciation and amortization 2,319 2,549
---------- ----------
$ 2,122 $ 1,734
========== =========
NOTE D - TRADEMARKS AND LICENSES
<CAPTION>
December 31,
-----------------------
1997 1996
---------- -----------
<S> <C> <C>
Trademarks $ 7,519 $ 8,526
Licenses 2,704 3,108
---------- ----------
10,223 11,634
Less accumulated amortization 2,229 2,369
---------- ----------
$ 7,994 $ 9,265
========== =========
</TABLE>
F-9
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
(in thousands except share and per share data)
December 31, 1997 and 1996
NOTE E - LOANS PAYABLE - BANKS
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
<S> <C> <C>
Borrowings under a $12,000 unsecured revolving line of credit. Due on
demand, bearing interest at the bank's prime rate or 1.75% above the
LIBOR rate $ 700 $ 1,825
Borrowings by the Company's foreign subsidiaries under a $4,000 credit
facility whereby accounts receivable are sold with recourse and
accounted for as a loan and bearing interest at 0.8% above the PIBOR
rate (3.75% at December 31, 1997) 1,411 2,720
Borrowings by the Company's foreign subsidiaries under several bank
overdraft facilities bearing interest at 1.0% above the PIBOR rate 117 3,892
Other borrowings by the Company's foreign subsidiaries 835 1,031
-------- ------
$ 3,063 $ 9,468
======== ========
</TABLE>
NOTE F - LONG-TERM DEBT
Borrowings by the Company's foreign subsidiary of $424, due in 2004. The loan
may be converted into shares of the Company's foreign subsidiary at
approximately $14 per share. Interest is payable quarterly at 7% per annum.
NOTE G - COMMITMENTS
[1] Leases:
The Company leases its office and warehouse facilities under operating
leases expiring through 2003. Rental expense amounted to $1,255 in 1997,
$1,313 in 1996 and $730 in 1995. Minimum future rental payments are as
follows:
1998 $ 1,283
1999 951
2000 905
2001 905
2002 868
Thereafter 558
---------
$ 5,470
=========
F-10
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
(in thousands except share and per share data)
December 31, 1997 and 1996
NOTE G - COMMITMENTS (CONTINUED)
[2] License agreements:
The Company has a number of license agreements for the use of trademark
and rights in connection with the manufacture and sale of its products.
In connection therewith, the Company is subject to certain minimum
annual royalties as follows:
1998 $ 710
1999 847
2000 934
2001 1,045
2002 1,185
Thereafter 2,980
---------
$ 7,701
=========
NOTE H - SHAREHOLDERS' EQUITY
[1] Issuance of common stock of subsidiary:
In 1993, Inter Parfums, S.A., a consolidated subsidiary of the Company,
sold shares in a private placement transaction to unaffiliated French
institutional investors. In 1994, 10,000 additional shares were sold to
enable the stock of Inter Parfums, S.A. to commence trading on the
over-the-counter Paris Stock Exchange, and 11,536 shares were issued
pursuant to the conversion terms of the Company's long-term debt.
In November 1995, Inter Parfums, S.A. completed a public offering of
308,000 shares of its common stock at 130 French francs per share. Net
proceeds of such offering aggregated 36.5 million French francs or
approximately $7.6 million. In connection with such offering, Inter
Parfums Holdings, S.A. ("Holdings"), a wholly-owned subsidiary of the
Company and direct parent of Inter Parfums, S.A. exercised its right to
convert a portion of its convertible debt into 250,000 shares of capital
stock of Inter Parfums, S.A. at 80 French francs per share. As a result
of such issuances, the percentage ownership of Inter Parfums, S.A. was
reduced from 90.64% to 76.71%.
In 1996, certain minority stockholders exercised their rights to convert
approximately $57,000 of their convertible debt into 4,157 shares of
capital stock of Inter Parfums, S.A. (70 French francs per share), and
in 1997 certain employees exercised stock options further reducing the
Company's percentage ownership interest to 76.41% at December 31, 1997.
In January 1998, Holdings exercised its right to convert the remaining
portion of its convertible debt into 318,000 shares of capital stock of
Inter Parfums, S.A. at approximately 80 French francs per share. As a
result of such issuance, the percentage ownership of Inter Parfums, S.A.
was increased from 76.41% to 79.80%.
The Company's share of the offering or conversion proceeds in excess of
the carrying amount of the portion of the Company's investment sold is
reflected as a gain in the consolidated income statement. Deferred taxes
have not been provided because application of available tax savings
strategies would eliminate taxes on this transaction.
F-11
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
(in thousands except share and per share data)
December 31, 1997 and 1996
NOTE H - SHAREHOLDERS' EQUITY (CONTINUED)
[2] Stock option plans:
The Company maintains a stock option program for key employees,
executives and directors. The plans provide for the granting of both
nonqualified and incentive options. Options granted under the plans
typically vest immediately and are exercisable for a five year period.
During 1997, the Company adopted a 1997 Nonemployee Director Stock
Option Plan which provides for the issuance of 25,000 shares of common
stock.
The Company applies APB 25 in accounting for its stock option incentive
plans and accordingly recognizes compensation expense for the difference
between the fair value of the underlying common stock and the grant
price of the option at the date of grant.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123. Had compensation cost for the Company's stock
option plans been determined based upon the fair value at the grant
date, consistent with the methodology prescribed under SFAS No. 123 the
Company's net income in 1995, 1996 and 1997 would have been
approximately $8.7 million, $5.54 million and $3.91 million, or $0.83
per diluted share, $0.56 per diluted share and $0.42 per diluted share,
respectively. The weighted average fair value of the options granted
during 1995, 1996 and 1997 are estimated as $1.78, $1.43 and $1.30 per
share, respectively, on the date of grant using the Black-Scholes option
pricing model with the following assumptions: dividend yield 0%,
volatility of 30%, risk-free interest rates at the date of grant (5.31%
in 1995, 5.80% in 1996 and 6.40% in 1997), and an expected life of the
option of 2 years.
A summary of the Company's stock option activity, and related
information follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------
1997 1996 1995
---------------------- ------------------------ ----------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
--------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares under option - beginning of 1,601,449 $ 7.18 1,541,874 $ 7.23 1,280,474 $ 7.05
year
Options granted 791,100 5.77 135,875 6.56 313,150 8.06
Options exercised (18,000) 4.22 (16,500) 6.20
Options cancelled (716,749) 7.00 (58,300) 8.07 (35,250) 8.61
---------- ------ ---------- ------ ---------- ------
Shares under options - end of year 1,675,800 $ 6.59 1,601,449 $ 7.18 1,541,874 $ 7.23
========== ====== ========== ====== ========== ======
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged from
$3.84 to $12.00. The weighted-average remaining contractual life of those
options is 3 years.
At December 31, 1997 options for 212,774 shares were available for future
grant under the plans. In addition, the Company has outstanding options not
pursuant to any plan for 1,000 shares which remain outstanding at an exercise
price of $12.00.
F-12
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
(in thousands except share and per share data)
December 31, 1997 and 1996
NOTE I - GEOGRAPHIC AREAS
Information on the Company's operations by geographical areas is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales:
United States $ 38,881 $ 52,592 $ 57,382
Europe 50,953 40,015 38,451
South America 2,042 3,038 693
Eliminations (414) (2,364) (2,857)
-------- --------- --------
$ 91,462 $ 93,281 $ 93,669
======== ========= ========
Net income:
United States $ 2,431 $ 3,344 $ 4,256
Europe 2,340 1,947 4,619
South America (343) 217 107
Eliminations 79 150 56
-------- --------- --------
$ 4,507 $ 5,658 $ 9,038
======== ========= ========
<CAPTION>
Year Ended December 31,
----------------------------------------
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Total assets:
United States $ 44,289 $ 48,057 $ 50,767
Europe 44,975 46,484 44,522
South America 589 2,219 900
Eliminations (9,571) (11,175) (12,188)
-------- --------- --------
$ 80,282 $ 85,585 $ 84,001
======== ========= ========
</TABLE>
United States export sales were approximately $8,500, $7,000 and $6,400 for
the years ended December 31, 1997, 1996 and 1995, respectively.
NOTE J - INCOME TAXES
The components of income before income taxes consist of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
----------- ---------- ---------
<S> <C> <C> <C>
U.S. operations $ 3,850 $ 5,565 $ 6,802
Foreign operations 4,191 3,281 5,483
Eliminations 131 235 95
-------- --------- --------
$ 8,172 $ 9,081 $ 12,380
======== ========= ========
</TABLE>
F-13
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
(in thousands except share and per share data)
December 31, 1997 and 1996
NOTE J - INCOME TAXES (CONTINUED)
The provision for current and deferred income tax expense (benefit) consists
of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1997 1996 1995
--------- --------- ----------
<S> <C> <C> <C>
Current:
Federal $ 765 $ 1,561 $ 2,627
State and local 269 328 618
Foreign 1,140 100 316
-------- -------- ---------
$ 2,174 $ 1,989 $ 3,561
======== ======== =========
Deferred:
Federal $ 310 $ 278 $ (555)
State and local 76 55 (143)
Foreign 385 473 325
-------- -------- ---------
$ 771 $ 806 $ (373)
======== ======== =========
</TABLE>
Deferred taxes are provided principally for reserves, and certain other
expenses that are recognized in different years for financial reporting and
income tax purposes. At December 31, 1997, the deferred tax assets consists of
approximately $915 relating to reserves and other expenses which are not
currently deductible for tax purposes and approximately $200 relating to
available foreign net operating loss carryforwards.
Differences between the United States federal statutory income tax rate and
the effective income tax rate were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
Statutory rates 34.0% 34.0% 34.0%
State and local taxes, net of federal benefit 2.8 2.8 2.5
Reduction of valuation reserve on deferred tax asset (7.2)
Nontaxable gain on sale of stock of subsidiary (9.2)
Other (0.8) 1.2 (1.6)
----- ------ ------
Effective rates 36.0% 30.8% 25.7%
===== ====== =====
</TABLE>
F-14
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
(in thousands except share and per share data)
December 31, 1997 and 1996
NOTE K - OTHER MATTERS
[1] In October 1995, the Company discontinued production and sales of the
Cutex lip color line. As a result, the Company recorded a nonrecurring
charge aggregating $2.2 million, before taxes. This charge represented
a writedown of lip product inventory and the effect of potential
customer returns or markdowns of lip products expected in 1996.
[2] On March 27, 1997 Chesebrough Ponds, the licensor of the Cutex
trademark, entered into an agreement to sell the Cutex trademarks to
Carson, Inc. At the request of Carson, Inc., the Company agreed to
relinquish its Cutex nail and lip product license. In connection with
the transaction all of the Company's Cutex inventory was sold and
certain liabilities were assumed by Carson, Inc. Both transactions
closed simultaneously on April 30, 1997. The Company incurred a pre-tax
charge of approximately $1,300,000 in the first quarter of 1997 due to
the write-off of intangible assets and other expenses relating to the
relinquishment of the Cutex license.
F-15
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts and Reserves
(in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ----------------------------------------------------------------------------------------------------------------------------
Additions
------------------------------
(1) (2)
Balance ------------------------------
at Charged to Balance
Beginning Charged - to Other at
of Costs and Accounts - Deductions - End of
Description Period Expenses Describe Describe Period
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowances for sales
returns and doubtful accounts $2,787 $1,453 $1,245 (a) $2,995
====== ====== ====== ======
Year ended December 31, 1996:
Allowances for sales
returns and doubtful accounts $4,208 $1,133 $2,554 (a) $2,787
====== ====== ====== ======
Year ended December 31, 1995:
Allowances for sales returns
and doubtful accounts $2,823 $1,545 $ 160 (a) $4,208
====== ====== ====== ======
</TABLE>
(a) Write off of bad debts and sales returns.
F-16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
JEAN PHILIPPE FRAGRANCES, INC.
By: /s/ Jean Madar
--- ----------
Jean Madar, Chief Executive Officer
Date: April 9, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ Jean Madar Chairman of the
- --- ---------- Board of Directors and
Jean Madar Chief Executive Officer April 9, 1998
/s/ Philippe Benacin Director April 9, 1998
- --- ----------------
Philippe Benacin
/s/ Russell Greenberg Chief Financial and
- --- ----------------- Accounting Officer and
Russell Greenberg Director April 9, 1998
/s/ Francois Heilbronn Director April 10, 1998
- --- ------------------
Francois Heilbronn
/s/ Joseph A. Caccamo Director April 9, 1998
- --- -----------------
Joseph A. Caccamo
/s/ Jean Levy Director April 8, 1998
- --- ---------
Jean Levy
/s/ Robert Bensoussan-Torres Director April 10, 1998
- --- ------------------------
Robert Bensoussan-Torres
<PAGE>
EXHIBIT INDEX
The following documents heretofore filed by the Company with the
Securities and Exchange Commission (the "Commission") are hereby incorporated by
reference from the Company's Registration Statement on Form S-18, file no.
33-17139-NY:
Exhibit No. Description
3.1 Restated Certificate of Incorporation
4.2 Common Stock Certificate Specimen
4.4 1987 Stock Option Plan
The following document heretofore filed with the Commission is
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987:
3.2 By-laws, as amended
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - January 18, 1990), as follows:
10.13 License Agreement between the Company and Jordache dated
January 18, 1990 (as no. 10.1 therein).
10.15 Letter of Indemnification from Jordache to the Company dated
January 18, 1990 (as no. 10.3 therein)
10.16 Letter Agreement from Jordache to the Company regarding
foreign license rights dated January 18, 1990 (as no. 10.4
therein).
The following documents heretofore filed with the Commission is
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990:
3.1(a) Certificate of Amendment of the Restated Certificate of
Incorporation
The following document heretofore filed with the Commission is
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - July 29, 1991), as follows:
10.24 Agreement and Plan or Reorganization dated July 29, 1991 among
the Company, Jean Madar and Philippe Benacin (as No. 10.1
therein)
The following document heretofore filed with the Commission is
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991:
10.25 Employment Agreement between the Company and Philippe Benacin
dated July 29, 1991
The following documents heretofore filed with the Commission is
incorporated by reference to the Company's Registration Statement on Form S-1
(No. 33-48811):
10.26 Lease for portion of 15th Floor, 551 Fifth Avenue, New York,
New York
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992:
3.1(b) Amendment to the Company's Restated Certificate of
Incorporation, as amended, dated July 31, 1992
4.9 1992 Stock Option Plan
4.10 Amendment to 1992 Stock Option Plan
4.11 1993 Stock Option Plan
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Registration Statement on Form S-3
(No. 33-63330):
4.12 Form of Warrant Agreement between Bear, Stearns & Co. Inc. and
Jean Philippe Fragrances, Inc.
10.29 Form of Purchase Agreement
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - July 15, 1993), as follows:
10.30 License Agreement dated July 15, 1993, among Burberrys Limited,
Inter Parfums, S.A. and Jean Philippe Fragrances, Inc.(1)
10.31 License Agreement dated May 7, 1993, between Jean-Charles
Brosseau, S.A. and Inter Parfums, S.A. (original in French)(1)
10.32 License Agreement dated May 7, 1993, between Jean-Charles
Brosseau, S.A. and Inter Parfums, S.A.(translation of French
into English)(1)
10.33 Agreement dated July 14, 1993, between Alfin, Inc. and Inter
Parfums, S.A.(1)
10.34 Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean
Philippe Fragrances, Inc., C&C Beauty Sales, Inc. and Parfico,
Inc.
10.35 Distribution Agreement dated July 16, 1993 among Inter Parfums,
S.A., Jean Philippe Fragrances, Inc. and Fragrance Marketing
Group, Inc.(1)
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Current Report on Form 8-K
(date of event - February 28, 1994), as follows:
- --------
(1) Filed in excised form.
10.36 Cession D'Elements Partiels de Fonds de Commerce between Inter
Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A.
dated February 18, 1994 (re: Parfums Molyneux)
10.37 Cession D'Elements Partiels de Fonds de Commerce between Inter
Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A.
dated February 18, 1994 (re: Parfums Weil)
10.38 Agreement (Acquisition) among Jean Philippe Fragrances, Inc.,
Inter Parfums, S.A. and Cosmetiques et Parfums de France, S.A.
dated February 18, 1994
10.39 Noncompetition Agreement among Jean Philippe Fragrances, Inc.,
Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D.,
S.A. dated February 18, 1994
10.40 Commission Agreement among Jean Philippe Fragrances, Inc.,
Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994
10.41 Convention between Inter Parfums, S.A. and Cosmetiques et
Parfums de France-I.D., S.A. dated February 18, 1994 (re
inventory purchase)
10.42 Convention de Nantissement among Cosmetiques et Parfums de
France, S.A., Cosmetiques et Parfums de France-I.D., S.A.,
Sodipe S.A., Jean Philippe Fragrances, Inc. and Inter Parfums,
S.A. dated February 18, 1994 (re security agreement)
10.43 Convention among Cosmetiques et Parfums de France-I.D., S.A.,
Cosmetiques et Parfums de France, S.A., Jean Philippe
Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A. dated
February 18, 1994 (re French regulatory requirements)
10.44 Acquisition Agreement among Jean Philippe Fragrances, Inc.,
Revlon Consumer Products Corporation and Revlon Suisse, S.A.
dated March 2, 1994
10.45 License Agreement among Jean Philippe Fragrances, Inc., Revlon
Consumer Products Corporation and Revlon Suisse, S.A. dated
March 2, 1994
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Form 8 Amendment no. 1 (dated
March 14, 1994) to the Current Report on Form 8-K (date of event - February 28,
1994), as follows:
10.46. English translation of exhibit no. 10.36, Cession D'Elements
Partiels de Fonds de Commerce between Inter Parfums, S.A. and
Cosmetiques et Parfums de France-I.D., S.A. dated February 18,
1994 (re: Parfums Molyneux)
10.47. English translation of exhibit no. 10.37, Cession D'Elements
Partiels de Fonds de Commerce between Inter Parfums, S.A. and
Cosmetiques et Parfums de France-I.D., S.A. dated February 18,
1994 (re: Parfums Weil)
10.48. English translation of exhibit no. 10.41, Convention between
Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D.,
S.A. dated February 18, 1994 (re inventory purchase)
10.49. English translation of exhibit no. 10.42, Convention de
Nantissement among Cosmetiques et Parfums de France, S.A.,
Cosmetiques et Parfums de France-I.D., S.A., Sodipe S.A.,
Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. dated
February 18, 1994 (re security agreement)
The following document heretofore filed with the Commission is
incorporated herein by reference to the Company's Form 8 Amendment no. 2 (dated
March 21, 1994) to the Current Report on Form 8-K (date of event - February 28,
1994), as follows:
10.50. English translation of exhibit no. 10.43, Convention among
Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques et
Parfums de France, S.A., Jean Philippe Fragrances, Inc. and
Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994
(re French regulatory requirements)
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993:
3.1(c) Amendment to the Company's Restated Certificate of
Incorporation, as amended, dated July 9, 1993
3.3 Articles of Incorporation of Inter Parfums Holding, S.A.
3.3.1 English Translation of Exhibit no. 3.3, Articles of
Incorporation of Inter Parfums Holding, S.A.
3.4 Articles of Incorporation of Inter Parfums, S.A.
3.4.1 English Translation of Exhibit no. 3.4, Articles of
Incorporation of Inter Parfums, S.A.
4.14 Warrant no. 108 registered in the name of Ladenburg, Thalmann
& Co., Inc. dated February 2, 1994
4.15 1994 Nonemployee Director Stock Option Plan
10.51 Traite D'Apport Partiel D'Actif dated July 30,
1993 (Reorganization Agreement between Inter Parfums, S.A. and
Selective Industrie, S.A.)
10.51.1 English translation of Exhibit no. 10.51, Traite D'Apport
Partiel D'Actif dated July 30, 1993 (Reorganization Agreement
between Inter Parfums, S.A. and Selective Industrie, S.A.)
10.52 Lease for portion of 4, Rond Point Des Champs Des Elysees
dated September 30, 1993
10.52.1 English translation of Exhibit no. 10.52, Lease for portion of
4, Rond Point Des Champs Des Elysees dated September 30, 1993
10.53 Lease for portion of 4, Rond Point Des Champs Des Elysees
dated March 2, 1994
10.53.1 English translation of Exhibit no. 10.53, Lease for portion of
4, Rond Point Des Champs Des Elysees dated March 2, 1994
The following documents heretofore filed with the Commission are
incorporated herein by reference to the Company's Form 8 Amendment no. 1 (dated
August 8, 1994) to the Current Report on Form 8-K (date of event - July 13,
1994), as follows:
10.58. Engagements de Garanties among Zanimob Enterprise Limited,
Jacomo France and Inter Parfums, S.A. dated July 12, 1994,
listed as no. 10.53 therein.
10.58.1 English translation of exhibit no. 10.53, Engagements de
Garanties among Zanimob Enterprise Limited, Jacomo France and
Inter Parfums, S.A. dated July 12, 1994, listed as no. 10.53.1
therein.
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994:
4.15 1994 Nonemployee Director Supplemental Stock Option Plan
10.59 Modification of Lease Agreement dated June 17, 1994 between
Metropolitan Life Insurance Company and Jean Philippe
Fragrances, Inc.
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995:
10.60 Guaranty and Security Agreement of Jean Philippe Fragrances,
Inc. and Elite Parfums, Ltd. to Republic National Bank of New
York (France) dated July 19, 1995
10.61 Lease for 60 Stults Road, South Brunswick, NJ between Forsgate
Industrial Complex, a limited partnership, and Jean Philippe
Fragrances, Inc. dated July 10, 1995
10.62 Intellectual Property Purchase Agreement between Parlux
Fragrances, Inc. and Parfums Jean Desprez, S.A. dated March
12, 1996
10.63 Inventory Purchase Agreement between Parlux Fragrances, Inc.
and Jean Desprez, S.A. dated March 12, 1996
11 Statement re: Computation of Earnings Per Share
The following documents heretofore filed with the Commission are
incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996:
10.65 Asset Repurchase Agreement between Carson, Inc. and Jean
Philippe Fragrances, Inc. dated March 27, 1997
11 Statement re: Computation of Earnings Per Share
The following exhibits are filed herewith:
10.66 Revolving Credit Agreement dated September 24, 1997 among
Republic National Bank of New York, Jean Philippe Fragrances,
Inc. and Elite Parfums, Ltd.
10.67 Second Modification of Lease made as of the 30th day of April
1997 between Metropolitan Life Insurance Company as landlord and
Jean Philippe Fragrances, Inc. as tenant.
10.68 Amendment I to License Agreement dated September 3, 1997
between Jordache Enterprises, Inc as Licensor and Jean Philippe
Fragrances, Inc. as Licensee.
10.69 Exclusive Licence Agreement dated June 20, 1997 between S.T.
Dupont, S.A. and Inter Parfums (English translation, excised
version)
21 Subsidiaries
9
<PAGE>
Republic National Bank
Republic National Bank of New York
452 Fifth Avenue
New York, NY 10018
Telephone 212 525 5000
September 24, 1997
Mr. Russell Greenberg
Chief Financial Officer/Executive Vice President
Jean Philippe Fragrances, Inc.
Elite Parfums, Ltd.
551 Fifth Avenue
New York, N.Y. 10176
Dear Mr. Greenberg:
We are pleased to confirm that we are extending to you a line of credit
of up to an aggregate amount of $12,000,000 outstanding at any one time, which
line may be used by your company for direct borrowings and acceptance and sight
letters of credit exposure for working capital purposes provided, however, the
outstanding amount as to which our Bank is liable, directly or contingently, on
behalf of your company in respect of letter of credit and acceptance financings
cannot in the aggregate at any one time exceed $2,000,000. This line is subject
to the provisions set forth herein and in the other documents entered into in
connection with this facility.
Borrowings under this tine of credit shall be evidenced by a Demand
Grid Note, a copy of which is enclosed. Under this facility borrowings may be
made from time to time and shall be repayable on demand, but may be prepaid in
whole or in part with accrued interest to the date of prepayment. Any amounts
outstanding shall bear interest, payable monthly in arrears, at a variable rate
per annum equal to 0% above our Bank's Reference Rate established from time to
time, all as more fully set forth in the Demand Grid Note.
Or, at your option, you may borrow under a LIBOR Pricing Revolving Note
up to the maximum amount of $12,000,000 in $100,000 increments, provided
however, the amount outstanding under LIBOR Pricing Revolving Notes is no less
than $250,000, with advances priced at your option of one month, two months,
three months or six. months LIBOR plus 1.75% for each LIBOR rate advance and
subject to the terms of the LIBOR Pricing Revolving Note; a copy of the LIBOR
Pricing Revolving Note is attached herewith. Please note that the advances under
the LIBOR Pricing Revolving Note may be prepaid, but only subject to the terms
and conditions set forth in that note.
Each letter of credit issued for your account shall be issued only
pursuant to our standard form of application for commercial letter of credit
(the "Application"), as executed by you from time to time. You shall pay a fee
of 1/8 of 1% when we issue any letter of credit for your account and each time
we amend any such letter of credit. In addition, you shall pay a fee of 1/8 of
1% of the face amount of any
<PAGE>
Republic National Bank of New York
sight draft presented to us in accordance with the terms of any letter of credit
we issue for your account. Such fee shall be payable when such draft is
presented to us and honored by us, all as more fully set forth in the
Application. Any amounts due to us from you under the Application shall bear
interest payable on demand at a variable rate per annum equal to the rate from
time to time in effect under the Demand Grid Note. At our option such amounts
may be deemed additional advances evidenced by and repayable in accordance with
the Demand Grid Note.] In place of the foregoing demand reimbursement
obligation, we may from time to time accept your time drafts of up to 180 days
presented to us by you. When such time draft is accepted by us it will be
discounted from its date of maturity at a rate per annum equal to 2% plus our
acceptance rate for commercial drafts or bills of exchange of comparable amounts
and maturities.
Your obligations under this line of credit shall be guaranteed by your
subsidiary, Elite Parfums, Ltd. (for the obligations of Jean Philippe
Fragrances, Inc.) and by your parent, Jean Philippe Fragrances, Inc., (for the
obligations of Elite Parfums, Ltd.).
This facility may be utilized by you for the period ending May 31,
1998; provided, however, THE CONTINUING AVAILABILITY OF THIS FACILITY IS AT ALL
TIMES SUBJECT TO OUR CONTINUING SATISFACTION, AS DETERMINED BY OUR BANK IN ITS
SOLE AND ABSOLUTE DISCRETION, WITH THE BUSINESS, AFFAIRS AND FINANCIAL CONDITION
OF YOUR COMPANIES AND OF EACH GUARANTOR AND TO YOUR COMPLIANCE, AND THAT OF EACH
OTHER PARTY EXECUTING AND DELIVERING DOCUMENTS TO US HEREUNDER OR OTHERWISE IN
CONNECTION WITH THIS FACILITY, WITH THE TERMS AND PROVISIONS OF THIS LETTER AND
EACH OF THE DOCUMENTS REFERRED TO HEREIN. In addition, the continuing
availability of this facility is subject to your furnishing us, (i) within 120
days after the close of your fiscal year, with your audited financial statements
certified by your independent certified public accountants as of the end of such
period, including a balance sheet and related income statements; and (ii) such
other information, including interim financial statements, concerning your
business, affairs or financial condition as we may from time to time request.
All payments of principal, interest and fees payable by you under this
facility shall be made in immediately available funds at our office at 452 Fifth
Avenue, New York, New York 10018 and may be charged to any account you maintain
with us.
Our agreement to extend to you this facility, on the terms set forth
herein, is further subject to our receipt in form satisfactory to us of (a) a
certified copy of resolutions of your Board of Directors authorizing your
execution, delivery and performance of this agreement (and the documents
hereinafter referred to; (b) signature cards for your authorized signatories;
(c) an executed copy of our Demand Grid Note signed by your duly authorized
officer on your behalf, (d) executed copies of our standard form of Guarantee
signed by Elite Parfums, Ltd. (for the obligations of Jean Philippe Fragrances,
Inc.) and Jean Philippe Fragrances, Inc., (for the obligations of Elite Parfums,
Ltd.
NO AMENDMENT, MODIFICATION OR WAIVER OF ANY PROVISION OF THIS AGREEMENT
NOR CONSENT TO ANY DEPARTURE BY OUR BANK THEREFROM SHALL BE EFFECTIVE,
IRRESPECTIVE OF ANY COURSE OF DEALING, UNLESS THE SAME SHALL BE IN WRITING AND
SIGNED BY OUR BANK AND THEN SUCH WAIVER OR CONSENT SHALL BE
2
<PAGE>
Republic National Bank of New York
EFFECTIVE ONLY IN THE SPECIFIC INSTANCE AND FOR THE SPECIFIC PURPOSE FOR WHICH
GIVEN.
This agreement shall be governed by and construed in accordance with
the laws of the State of New York. Please note that to the extent any of the
terms or provisions of this agreement conflict with those contained in the
Demand Grid Note or any of the above-mentioned documents, the terms and
provisions of such Note and of such other documents shall govern.
YOU AND OUR BANK AGREE THAT ANY ACTION, SUIT OR PROCEEDING IN RESPECT
OF OR ARISING OUT OF THIS AGREEMENT, THE NOTE OR ANY OTHER DOCUMENTS RELATING TO
THIS FACILITY MAY BE TED AND PROSECUTED IN THE STATE OR FEDERAL COURTS, AS THE
CASE MAY BE, LOCATED IN NEW YORK COUNTY, NEW YORK.
YOU FURTHER AGREE THAT ANY ACTION, DISPUTE, PROCEEDING, CLAIM OR
CONTROVERSY BETWEEN OR AMONG YOU AND US WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE ("DISPUTE" OR "DISPUTES") SHALL, AT OUR ELECTION, WHICH ELECTION MAY
BE MADE AT ANY TIME PRIOR TO THE COMMENCEMENT OF A JUDICIAL PROCEEDING BY OUR
BANK, OR IN THE EVENT OF A JUDICIAL PROCEEDING INSTITUTED BY YOU AT ANY TIME
PRIOR TO THE LAST DAY TO ANSWER AND/OR RESPOND TO A SUMMONS AND/OR COMPLAINT
MADE BY YOU, BE RESOLVED BY ARBITRATION IN NEW YORK, NEW YORK IN ACCORDANCE WITH
THE PROVISIONS OF THIS PARAGRAPH AND SHALL, AT THE ELECTION OF OUR BANK, INCLUDE
ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH (1) THIS AGREEMENT, THE DEMAND
GRID NOTE, OR ANY OTHER RELATED AGREEMENTS OR INSTRUMENTS, (II) ALL PAST,
PRESENT AND FUTURE AGREEMENTS INVOLVING THE PARTIES, (III) ANY TRANSACTION
CONTEMPLATED HEREBY AND ALL PAST, PRESENT AND FUTURE TRANSACTIONS INVOLVING THE
PARTIES AND (IV) ANY ASPECT OF THE PAST, PRESENT OR FUTURE RELATIONSHIP OF THE
PARTIES. We may elect to require arbitration of any Dispute with us without
thereby being required to arbitrate all Disputes between you and us. Any such
Dispute shall be resolved by binding arbitration in accordance with Article 75
of the New York Civil Practice Law and Rules and the Commercial Arbitration
Rules of the American Arbitration Association ("AAA"). In the event of any
inconsistency between such Rules and these arbitration provisions, these
provisions shall supersede such Rules. All statutes of limitations which would
otherwise be applicable shall apply to any arbitration proceeding under this
paragraph. In any arbitration proceeding subject to these provisions, the
arbitration panel (the "arbitrator") is specifically empowered to decide (by
documents only, or with a hearing, at the arbitrators sole discretion)
pre-hearing motions which are substantially similar to pre-hearing motions to
dismiss and motions for summary adjudication. In any such arbitration
proceeding, the arbitrator shall not have the power or authority to award
punitive damages to any party. Judgment upon the award rendered may be entered
in any court having jurisdiction. Whenever an arbitration is required, the
parties shall select an arbitrator in the manner provided in this paragraph.
No provision of, nor the exercise of any rights under, this paragraph shall
limit the right of any party (i) to foreclose against any real or personal
property collateral through judicial foreclosure, by the exercise of a power
of sale under a deed of trust, mortgage or other security agreement or
3
<PAGE>
Republic National Bank of New York
instrument pursuant to applicable provisions of the Uniform Commercial Code, or
otherwise pursuant to applicable law, (ii) to exercise self help remedies
including but not limited to setoff and repossession, or (iii) to request and
obtain from a court having jurisdiction before, during or after the pendency of
any arbitration, provisional or ancillary remedies and relief including but not
limited to injunctive or mandatory relief or the appointment of a receiver. The
institution and maintenance of an action or judicial proceeding for, or pursuit
of, provisional or ancillary remedies or exercise of self help remedies shall
not constitute a waiver of our right, even if we are the plaintiff, to submit
the Dispute to arbitration if we would otherwise have such right. We may require
arbitration of any Dispute(s) concerning the lawfulness, unconscionableness,
propriety, or reasonableness of any exercise by us of our right to take or
dispose of any collateral or our exercise of any other right in connection with
collateral including, without limitation, judicial foreclosure, exercising a
power of sale under a deed of trust or mortgage, obtaining or executing a writ
of attachment, taking or disposing of property with or without judicial process
pursuant to Article 9 of the Uniform Commercial Code or otherwise as permitted
by applicable law, notwithstanding any such exercise by us. Whenever an
arbitration is required under this paragraph, the arbitrator shall be selected,
except as otherwise herein provided, in accordance with the Commercial
Arbitration Rules of the AAA. A single arbitrator shall decide any claim of
$100,000 or less and he or she shall be an attorney with at least five years'
experience. Where the claim of any party exceeds $100,000, the Dispute shall be
decided by a majority vote of three arbitrators, at least two of whom shall be
attorneys (at least one of whom shall have not less than five years' experience
representing commercial banks). In the event of any Dispute governed by this
paragraph, each of the parties shall, subject to the award of the arbitrator,
pay an equal share of the arbitrators fees. The arbitrator shall have the power
to award recovery of all costs and fees (including attorneys' fees,
administrative fees, arbitrator's fees, and court costs) to the prevailing
party.
ANYTHING IN THIS AGREEMENT, THE NOTE OR ANY OTHER DOCUMENTS RELATING TO
THIS FACILITY TO THE CONTRARY NOTWITHSTANDING, THE ENUMERATION IN THIS
AGREEMENT, THE NOTE OR IN SUCH OTHER DOCUMENTS OF SPECIFIC OBLIGATIONS TO OUR
BANK AND/OR CONDITIONS TO THE AVAILABILITY OF THIS FACILITY AND THE NOTE SHALL
NOT BE CONSTRUED TO QUALIFY, DEFINE OR OTHERWISE LIMIT OUR RIGHT, POWER OR
ABILITY, AT ANY TIME, UNDER APPLICABLE LAW, TO MAKE DEMAND FOR PAYMENT OF THE
ENTIRE OUTSTANDING PRINCIPAL OF AND INTEREST DUE UNDER THIS FACILITY AND THE
NOTE OR OUR RIGHT NOT TO MAKE ANY EXTENSION OF CREDIT UNDER THIS FACILITY AND
YOU AGREE THAT YOUR BREACH OF OR DEFAULT UNDER ANY SUCH ENUMERATED OBLIGATIONS
OR CONDITIONS IS NOT THE ONLY BASIS FOR DEMAND TO BE MADE OR FOR A REQUEST FOR
AN EXTENSION OF CREDIT TO BE DENIED, AS YOUR OBLIGATION TO MAKE PAYMENT SHALL AT
ALL TIMES REMAIN A DEMAND OBLIGATION. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT
TO THE CONTRARY, THIS AGREEMENT DOES NOT CREATE A COMMITMENT OR OBLIGATION TO
LEND BY THE BANK AND YOU ACKNOWLEDGE THAT THE BANK HAS NO OBLIGATION TO LEND.
EACH OF YOU AND WE HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM BROUGHT BY OR AGAINST IT ON ANY MATTERS WHATSOEVER, IN CONTRACT
OR IN TORT, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE NOTE
OR ANY OTHER DOCUMENTS RELATING TO THIS FACILITY. YOU
4
<PAGE>
Republic National Bank of New York
ALSO HEREBY WAIVE THE RIGHT TO IMPOSE ANY DEFENSE BASED UPON ANY CLAIM OF LACHES
OR SET-OFF OR COUNTERCLAIM OF ANY NATURE OR DESCRIPTION, ANY OBJECTION BASED ON
FORUM NON CONVENIENS OR VENUE, AND ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR
SPECIAL DAMAGES.
If this agreement is acceptable to you, please sign and return to us
one copy each of the enclosed copy of this letter and the other documents
referred to above on or before October 15, 1997.
Very truly yours,
REPUBLIC NATIONAL BANK
OF NEW YORK
/s/ Andrew Ross
------------------------------
By: Andrew Ross
Title: First Vice President
Agreed to and accepted:
JEAN PHILIPPE FRAGRANCES, INC.
By: /s/ Russell Greenberg
----------------------------
Title: Executive Vice President
ELITE PARFUMS, LTD.
By: /s/ Russell Greenberg
- --------------------------------
Title: Executive Vice President
5
<PAGE>
SECOND MODIFICATION OF LEASE
Second Modification of Lease ("Agreement") made as of the 30th day of
April, 1997 between METROPOLITAN LIFE INSURANCE COMPANY, a New York corporation
having its principal place of business at One Madison Avenue, New York, New York
10010 ("Landlord") and JEAN PHILLIPE FRAGRANCES, INC., a Delaware corporation,
having an office at 551 Fifth Avenue, New York, New York 10176 ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant heretofore entered into a certain written
lease dated January 13, 1992, as amended by Modification of Lease dated June 17,
1994 (collectively, the "Lease") wherein and whereby Landlord leased to Tenant,
and Tenant hired from Landlord, those certain premises (the "demised premises")
as shown on the plans annexed to the Lease as "Exhibit A" thereto on the 15th
floor in the building known as 551 Fifth Avenue, in the Borough of Manhattan,
City, County and State of New York (the "Building");
WHEREAS, Landlord and Tenant wish to modify the Lease, subject to the
terms and conditions hereinafter set forth, to, inter alia, (i) reduce the
rentable area of the demised premises and (ii) extend the term of the Lease;
WHEREAS, the Lease is in full force and effect; and
WHEREAS, Landlord and Tenant desire to modify the Lease only in the
respects hereinafter stated.
NOW, THEREFORE, in consideration of the premises and the mutual
covenant., hereinafter contained, the parties hereto by these presents do
covenant and agree as follows:
All capitalized terms used herein without definition are used
herein with the meanings assigned to such terms in the Lease, unless the context
otherwise requires.
2. The term of the Lease is hereby extended to October 31, 2002
(the "Extension Period").
<PAGE>
3 . Effective November 1, 1997 through and including the end of the
term of this Lease, Tenant's annual rent shall be amended to be Two Hundred
Twenty Thousand Five Hundred Forty Five Dollars ($220,545.00) per annum which
amount shall include the annual cost of electricity supplied by Landlord to the
demised premises on a rent inclusion basis of Sixteen Thousand Nine Hundred
Sixty Five Dollars ($16,965.00) per annum, the "Electric Charge".
Notwithstanding the foregoing, Landlord agrees to waive to the collection of
annual rent, including the Electric Charge [but not additional rent for "Real
Estate Taxes" (Article 35) or "Operating Expenses" (Article 36)] for the months
of November and December, 1997 and January, November and December, 1998. Further
with reference to the Electric Charge, Tenant acknowledges and affirms its
covenant contained in the Lease that its use of electric current in the demised
premises shall not at any time exceed the capacity of any of the electrical
conductors and facilities in or otherwise serving the demised premises and
Tenant shall not, without Landlord's prior written consent in each instance,
connect any major fixtures, appliances or equipment to the Building' electric
distribution system nor make any alteration or addition to the electric system
of the demised premises. In consideration of the foregoing, Landlord agrees that
during the Extension Period the Electric Charge shall not be increased.
4.A. Effective November 1, 1997, Tenant shall vacate and surrender to
Landlord a portion of the demised premises, the "Surrendered Space" (which
Landlord and Tenant acknowledge contains 1,295 rentable square feet) and,
accordingly, from and after November 1, 1997, the demised premises will be as
shown hatched on Exhibit A-1, attached hereto and made a part hereof (which
Exhibit A-1 shall also show the Surrendered Space, cross-hatched). On or before
November 1, 1997, Tenant shall vacate the Surrendered Premises and surrender
same to Landlord and all alterations, installations, additions and improvements
in and to the Surrendered Premises to the intent and purpose that the estate of
Tenant in and to the Surrendered Premises shall be wholly extinguished. Further
with respect to the Surrendered Space, Tenant shall vacate same on or before
November 1, 1997, broom clean with all personal property removed therefrom in
accordance with the terms of this Lease. In addition, Tenant
2
<PAGE>
hereby covenants that nothing has been done or suffered or will be done or
suffered whereby the estate granted in the Surrendered Space or any part
thereof, or said alterations, installations, additions or improvements, or any
part thereof, have been encumbered in any way whatever; that Tenant has and will
have good right to surrender the same; and that no one other than Tenant has
acquired, or will acquire, through or under Tenant, any right, title or interest
in or to the Surrendered Space or the term or estate thereby granted or in or to
said alterations, installations, additions and improvements or any part thereof.
B. Inasmuch as Tenant currently occupies the demised premises and is
fully aware of the condition thereof, Tenant agrees to accept the demised
premises in the condition which it exists on the first day of the Extension
Period. Further, Tenant understands and agrees that no materials whatsoever are
to be furnished by Landlord and no work whatsoever is to be furnished by
Landlord in connection with the demised premises or any part thereof except that
Landlord agrees, at its sole cost and expense, to demise the demised premises in
accordance with Exhibit A-1 in an expeditious manner.
5. Effective November 1, 1997, Tenant's "Base Tax Year" (Article 35)
shall be amended to be the fiscal tax year of the City of New York commencing
July 1, 1997 and ending June 30, 1998 and Tenant's "Base Operating Period"
(Article 36) shall be amended to be the calendar year commencing January 1, 1998
and Tenant's proportionate share for Real Estate Taxes and Operating Expenses
shall be amended to be "1.662 percent".
6. Tenant represents and warrants to Landlord that it has not dealt
with any real estate agents or brokers in connection with this Agreement other
than The Shorenstein Companies, ("TSC") whose fees, if any, Landlord agrees to
pay and that this Agreement was not brought about or procured through the use or
instrumentality of any other agent or broker. Tenant covenants and agrees to
indemnify and hold Landlord harmless from any and all claims for commissions and
other compensation made by any agent or agents and/or
3
<PAGE>
broker or brokers, other than TSC, based on any dealings between Tenant and any
agent or agents and/or broker or brokers, together with all costs and expenses
incurred by Landlord in resisting such claims (including, without limitation,
attorneys' fees).
7. Except as modified by this Agreement, the Lease and all the terms,
covenants, conditions, provisions, and agreements thereof are hereby in
all respects ratified, confirmed, and approved.
8. The Lease, as modified by this Agreement contains the entire understanding
between the parties. No other representations, warranties, covenants or
agreements have been made.
9. This Agreement may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
10. This Agreement shall be binding upon, and inure to the benefit of the
parties hereto, their respective legal representatives, successors and,
except as other-wise provided in the Lease as modified by this Agreement,
their respective assigns.
11. The submission of this Agreement to Tenant shall not be construed as an
offer, nor shall Tenant have any rights with respect hereto, unless and until
Landlord shall execute a copy of this Agreement and deliver the same to Tenant.
IN WITNESS WHEREOF, the parties hereto have respectively executed this
Agreement as of the day and year first above written.
Landlord:
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/
4
<PAGE>
Tenant:
JEAN PHILLIPE FRAGRANCE, INC.
By: /s/
5
<PAGE>
EXHIBIT A-1
[floor plan of demised premises]
6
<PAGE>
AMENDMENT I TO LICENSE AGREEMENT
AMENDMENT I TO LICENSE AGREEMENT is made this 3rd day of
September, 1997, by and between JORDACHE ENTERPRISES, INC., a New York
corporation, with its principal offices at 1411 Broadway, 33rd Fl., New York, NY
10018 ("LICENSOR") and JEAN PHILIPPE FRAGRANCES, Inc. a Delaware corporation,
with principal offices at 551 Fifth Avenue, New York, NY 10176 ("LICENSEE").
W I T N E S S E T H:
WHEREAS, LICENSOR AND LICENSEE are the parties to the Agreement dated
January 18, 1990 (the "Agreement" ), and the parties hereto desire to amend the
Agreement upon the terms and conditions as set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and promises contained herein, the parties mutually agree as follows:
1. Schedule "B" is hereby amended as follows:
(f) Licensor acknowledges that Licensee has renewed the term of this
Agreement, and has made payment to Licensor of the "Minimums" for the Fourth
Year (ending June 30, 1994), the Fifth Year (ending June 30, 1995) and the First
Renewal Year (ending June 30, 1996).
(g) The Minimums for all renewal terms shall be payable for each
applicable renewal year as follows: one (1) month after the end of each quarter
ending September 30, December 31, March 31 and June 30, of each such renewal
year.
(h) During the "Second Renewal Year" of this Agreement, Licensee shall
pay the sum of TWO HUNDRED FIFTY THOUSAND ($250,000) U.S. Dollars in for (4)
equal installments of SIXTY-TWO THOUSAND FIVE HUNDRED ($62,500.00) U.S. Dollars.
(i) During the "Third Renewal Year" of this Agreement, Licensee shall
pay the sum of TWO HUNDRED FIFTY THOUSAND ($250,000) U.S. Dollars in for (4)
equal installments of SIXTY-TWO THOUSAND FIVE HUNDRED ($62,500.00) U.S. Dollars.
(j) During the "Fourth Renewal Year" of this Agreement, Licensee shall
pay the sum of TWO HUNDRED FIFTY THOUSAND ($250,000) U.S. Dollars in for (4)
equal installments of SIXTY-TWO THOUSAND FIVE HUNDRED ($62,500.00) U.S. Dollars.
(k) During the "Fifth Renewal Year" of this Agreement, Licensee shall
pay the sum of THREE HUNDRED THOUSAND ($300,000) U.S. Dollars in for (4) equal
installments of SEVENTY-FIVE THOUSAND $75,000.00) U.S. Dollars.
(l) During the "Sixth Renewal Year" of this Agreement, Licensee shall
pay the sum of THREE HUNDRED THOUSAND ($300,000) U.S. Dollars in for (4) equal
installments of SEVENTY-FIVE THOUSAND $75,000.00) U.S. Dollars.
(m) During the "Seventh Renewal Year" of this Agreement, Licensee shall
pay the sum of THREE HUNDRED THOUSAND ($300,000) U.S. Dollars in for (4) equal
installments of SEVENTY-FIVE THOUSAND $75,000.00) U.S. Dollars.
(n) During the "Eighth Renewal Year" of this Agreement, Licensee shall
pay the
<PAGE>
sum of THREE HUNDRED THOUSAND ($300,000) U.S. Dollars in for (4) equal
installments of SEVENTY-FIVE THOUSAND $75,000.00) U.S. Dollars.
(o) During the "Ninth Renewal Year" of this Agreement, Licensee shall
pay the sum of THREE HUNDRED THOUSAND ($300,000) U.S. Dollars in for (4) equal
installments of SEVENTY-FIVE THOUSAND $75,000.00) U.S. Dollars.
(p) During the "Tenth Renewal Year" of this Agreement, Licensee shall
pay the sum of THREE HUNDRED THOUSAND ($300,000) U.S. Dollars in for (4) equal
installments of SEVENTY-FIVE THOUSAND $75,000.00) U.S. Dollars.
2. With regard to section 3, "Term":
(a) LICENSOR acknowledges that LICENSEE has renewed the Term of this
Agreement for the First Renewal Term (ending June 30, 1996).
(b) LICENSOR acknowledges that LICENSEE has renewed the Term of this
Agreement for the Second Renewal Term (ending June 30, 1997).
(c) LICENSOR acknowledges that LICENSEE has renewed the Term of this
Agreement for the Third Renewal Term (ending June 30, 1998).
(d) LICENSEE shall have the option to renew this Agreement for an
additional term of one (1) year ("Fourth Renewal Term") thereafter, only if:
(i) During the Third Renewal Term of this Agreement, LICENSEE
has made not less than $5,000,000 of Net Sales of Articles and has paid all
appropriate royalties thereon to LICENSOR.
(ii) LICENSEE is in compliance with all of the material terms
and conditions of this Agreement, both at the time of the option is exercised
and on the last day of the Third Renewal Term.
(iii) Written notice of the election to exercise said option
is delivered to LICENSOR at its address stated above not less than four (4)
months prior to the expiration of the Third Renewal Term.
(e) LICENSEE shall have the option to renew this Agreement for an
additional term of one (1) year ("Fifth Renewal Term") thereafter, only if:
(i) During the Fourth Renewal Term of this Agreement, LICENSEE
has made not less than $5,000,000 of Net Sales of Articles and has paid all
appropriate royalties thereon to LICENSOR.
(ii) LICENSEE is in compliance with all of the material terms
and conditions of this Agreement, both at the time of the option is exercised
and on the last day of the Fourth Renewal Term.
2
<PAGE>
(iii) Written notice of the election to exercise said option
is delivered to LICENSOR at its address stated above not less than four (4)
months prior to the expiration of the Fourth Renewal Term.
(f) LICENSEE shall have the option to renew this Agreement for an
additional term of one (1) year ("Sixth Renewal Term") thereafter, only if:
(i) During the Fifth Renewal Term of this Agreement, LICENSEE
has made not less than $6,000,000 of Net Sales of Articles and has paid all
appropriate royalties thereon to LICENSOR.
(ii) LICENSEE is in compliance with all of the material terms
and conditions of this Agreement, both at the time of the option is exercised
and on the last day of the Fifth Renewal Term.
(iii) Written notice of the election to exercise said option
is delivered to LICENSOR at its address stated above not less than four (4)
months prior to the expiration of the Fifth Renewal Term.
(g) LICENSEE shall have the option to renew this Agreement for an
additional term of one (1) year ("Seventh Renewal Term") thereafter, only if:
(i) During the Sixth Renewal Term of this Agreement, LICENSEE
has made not less than $6,000,000 of Net Sales of Articles and has paid all
appropriate royalties thereon to LICENSOR.
(ii) LICENSEE is in compliance with all of the material terms
and conditions of this Agreement, both at the time of the option is exercised
and on the last day of the Sixth Renewal Term.
(iii) Written notice of the election to exercise said option
is delivered to LICENSOR at its address stated above not less than four (4)
months prior to the expiration of the Sixth Renewal Term.
(h) LICENSEE shall have the option to renew this Agreement for an
additional term of one (1) year ("Eighth Renewal Term") thereafter, only if:
(i) During the Seventh Renewal Term of this Agreement,
LICENSEE has made not less than $6,000,000 of Net Sales of Articles and has paid
all appropriate royalties thereon to LICENSOR.
(ii) LICENSEE is in compliance with all of the material terms
and conditions of this Agreement, both at the time of the option is exercised
and on the last day of the Seventh Renewal Term.
(iii) Written notice of the election to exercise said option
is delivered to LICENSOR at its address stated above not less than four (4)
months prior to the expiration of the Seventh Renewal Term.
3
<PAGE>
(i) LICENSEE shall have the option to renew this Agreement for an
additional term of one (1) year ("Ninth Renewal Term") thereafter, only if:
(i) During the Eighth Renewal Term of this Agreement, LICENSEE
has made not less than $6,000,000 of Net Sales of Articles and has paid all
appropriate royalties thereon to LICENSOR.
(ii) LICENSEE is in compliance with all of the material terms
and conditions of this Agreement, both at the time of the option is exercised
and on the last day of the Eighth Renewal Term.
(iii) Written notice of the election to exercise said option
is delivered to LICENSOR at its address stated above not less than four (4)
months prior to the expiration of the Eighth Renewal Term.
(j) LICENSEE shall have the option to renew this Agreement for an
additional term of one (1) year ("Tenth Renewal Term") thereafter, only if:
(i) During the Ninth Renewal Term of this Agreement, LICENSEE
has made not less than $6,000,000 of Net Sales of Articles and has paid all
appropriate royalties thereon to LICENSOR.
(ii) LICENSEE is in compliance with all of the material terms
and conditions of this Agreement, both at the time of the option is exercised
and on the last day of the Ninth Renewal Term.
(iii) Written notice of the election to exercise said option
is delivered to LICENSOR at its address stated above not less than four (4)
months prior to the expiration of the Ninth Renewal Term.
3. The parties hereto ratify and reconfirm all other terms and
conditions of the Agreement, not specifically altered, amended or modified by
this Amendment No. I and further reconfirm that all of the rights and duties and
obligations of the parties under the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this instrument
the date first above written.
Jordache Enterprises, Inc.
By: /s/ Elliot Lavigne
---------------------------------------
Elliot Lavigne
CEO
By: /s/ Allen S. Wollins
---------------------------------------
Allen S. Wollins,
Director of Licensing
Jean Philippe Fragrances, Inc.
4
<PAGE>
By: /s/ Jean Madar
---------------------------------------
Jean Madar, Chief Executive Officer
5
<PAGE>
State of New York )
County of New York) ss.:
On the 19 day of January, 1998, before me personally came ELLIOT
LAVIGNE, to me known, who being duly sworn, did depose and say that he resides
at 1411 Broadway 33rd Flr., New York, New York 10018; that he is the C.E.O. of
JORDACHE ENTERPRISES, INC., the corporation described in and which executed the
instrument; and that he signed his name hereto by authority of the Board of
Directors of said Corporation.
/s/ Valerie Hansen
------------------
Notary Public
Valerie Hansen
Notary Public, State of New York
No. 43803689
Qualified in Richmond and NY Counties
Commission Expires Dec. 31, 1998
State of New York
County of New York) ss.:
On the 21 day of January, 1998, before me personally came ALLEN S.
WOLLINS, to me known, who being duly sworn, did depose and say that he resides
at 1411 Broadway, 33rd Flr., New York, New York 10018; and that he is the
Director of Licensing of JORDACHE ENTERPRISES, INC., the corporation described
in and which executed the instrument; and that he signed his name hereto by
authority of the Board of Directors of said Corporation.
/s/ Valerie Hansen
------------------
Notary Public
Valerie Hansen
Notary Public, State of New York
No. 43803689
Qualified in Richmond and NY Counties
Commission Expires Dec. 31, 1998
State of New York )
County of New York) ss.:
On the 12th day of December 1997, before me personally came JEAN MADAR,
to me known, who being duly sworn, did depose and say that he resides at 303 E.
57th Street, NY, NY 10022; that he is the CEO of JEAN PHILIPPE FRAGRANCES, INC.,
the corporation described in and which executed the foregoing instrument; and
that he signed his name hereto by authority of the Board of Directors of said
Corporation.
Annie Failler /s/ Annie Failler
- ------------- -----------------
Notary Public, State of New York Notary Public
No. 01FA5023811
Qualified in Queens County
Commission Expires Feb. 14, 1998
<PAGE>
EXCLUSIVE LICENCE AGREEMENT
BETWEEN
S.T. DUPONT S.A., A SWISS LIMITED LIABILITY COMPANY (SOCIETE ANONYME), WHICH
SHARE CAPITAL IS OF 100.000 FS AND IS INCORPORATED AT THE TRADE REGISTER OF
FRIBOURG, WITH ITS REGISTERED OFFICE AT - 20, RUE BEAUMONT - 1700 FRIBOURG -
SWITZERLAND -, HEREINAFTER REFERRED TO AS "STD", REPRESENTED BY MR. GUY MAGNIN,
DIRECTOR,
ON THE ONE HAND
AND
INTER PARFUMS, A COMPANY ORGANIZED UNDER THE LAWS OF FRANCE, WHICH SHARE CAPITAL
IS OF 37.810.420 FRENCH FRANCS AND IS INCORPORATED AT THE TRADE REGISTER OF
PARIS UNDER NO B 350 219 382, WITH ITS REGISTERED OFFICE AT - 4, ROND-POINT DES
CHAMPS-ELYSEES - 75008 PARIS - FRANCE - HEREINAFTER REFERRED TO AS "INTER
PARFUMS", REPRESENTED BY MR PHILIPPE BENACIN, PRESIDENT,
ON THE OTHER HAND
WHEREAS
INTRODUCTION
STD, WHICH A FULLY-OWNED SUBSIDIARY OF S.T. DUPONT (HEREAFTER S.T.DUPONT PARIS),
IS THE OWNER OF THE TRADEMARK S.T.DUPONT, REGISTERED FOR PERFUMERY PRODUCTS. IN
THE WORLD'S LEADING NATIONS, S.T.DUPONT PARIS ENJOYS AN OUTSTANDING REPUTATION
ON THE BASIS OF THE QUALITY OF ITS VARIOUS PRODUCTS BEARING THE S.T.DUPONT NAME
AND INTENDS TO MAINTAIN THIS REPUTATION DURING THE COURSE OF THE CONTRACT.
INTER PARFUMS IS INTERESTED TO EMPLOY THE TRADEMARK S.T.DUPONT FOR PERFUMES
INTENDING TO MARKET SUCH PRODUCTS IN CONSIDERATION AND BY UTILIZATION OF THE
S.T.DUPONT PARIS REPUTATION AND IMAGE.
1/12
<PAGE>
IN CONSIDERATION OF THIS, THE CONTRACTUAL PARTNERS MUTUALLY AGREE TO THE
FOLLOWING:
1. DEFINITIONS
FOR THE PURPOSE OF THIS AGREEMENT, THE FOLLOWING TERMS SHALL HAVE THE
RESPECTIVE MEANINGS INDICATED HEREUNDER:
THE TERM TRADEMARKS SHALL MEAN THE S.T.DUPONT AND D TRADEMARKS, AND
OTHER VARIOUS TRADEMARKS BELONGING TO STD, AND MORE PARTICULARLY
DESCRIBED ON ARTICLE 12 HEREAFTER.
THE TERM PRODUCTS SHALL MEAN PERFUMES, EAUX DE TOILETTES, PARFUMS DE
TOILETTE AND PERFUME-RELATED PRODUCTS WITH THE EXCLUSION OF MAKE-UP AND
SKIN-CARE PRODUCTS.
THE TERM PRODUCTS ENVIRONMENT SHALL MEAN PERFUME BOTTLES AND PERFUMES
AND PERFUME RELATED PRODUCTS PACKAGINGS.
THE TERM TERRITORY SHALL MEAN THE WHOLE WORLD, INCLUDING SALES THROUGH
DUTY-FREE OUTLETS.
THE TERM STD'S FINANCIAL YEAR SHALL MEAN THE PERIOD BETWEEN LST APRIL OF
EACH YEAR AND 31 MARCH OF THE FOLLOWING YEAR.
THE TERM CONTRACT YEAR SHALL MEAN THE PERIOD BETWEEN 1 ST JULY OF EACH
YEAR AND 30 JUNE OF THE FOLLOWING YEAR.
2. SUBJECT OF THE LICENCE
2.1. STD GRANTS INTER PARFUMS THE EXCLUSIVE RIGHT TO USE THE TRADEMARKS FOR
THE MANUFACTURE AND SALE OF THE PRODUCTS.
IT IS AGREED THAT, IN THE CASE STD DECIDES TO ENLARGE THE RANGE OF
THOSE GOODS TO MAKE-UP AND SKIN-CARE PRODUCTS OR OTHER GOODS BELONGING
TO THE SAME FIELD OF PERFUMES BUSINESS, STD WOULD PRIOR PROPOSE TO
INTER PARFUMS AN EXTENSION OF THAT TRADEMARK LICENCE TO SUCH GOODS,
SUBJECT TO MUTUAL AGREEMENT ON REVISED TERMS AND CONDITIONS. INTER
PARFUMS WILL BE FREE TO ACCEPT OR REFUSE THAT PROPOSITION, WITHIN A
PERIOD OF 3 (THREE) MONTHS FROM THE DATE ON WHICH STD MAKES THE FIRST
PROPOSAL. SHOULD INTER PARFUMS REFUSE THAT PROPOSITION, OR FAIL TO
CONFIRM ACCEPTANCE IN WRITING OR OTHERWISE FAIL TO AGREE TERMS WITH STD
IN THIS REGARD WITHIN SUCH 3 MONTHS, STD SHALL BE FREE TO MAKE THIS
PROPOSITION TO A THIRD PARTY.
IN THIS CONTEXT "EXCLUSIVE" MEANS THAT FOR THE DURATION OF THIS
AGREEMENT STD WILL NOT GRANT ANY FURTHER LICENCES FOR THE MANUFACTURE
AND/OR SALE OF PRODUCTS UNDER THE TRADEMARKS.
2/12
2.2. IT IS UNDERSTOOD AND AGREED BY INTER PARFUMS THAT S.T.DUPONT PARIS
RESERVES THE RIGHT TO OPEN, ANYWHERE IN THE WORLD, BOUTIQUES UNDER THE
S.T.DUPONT NAME, SUCH BOUTIQUES SELLING THE WHOLE RANGE OF S.T.DUPONT
PARIS PRODUCTS. INTER PARFUMS UNDERTAKES TO DIRECTLY SUPPLY THE
BOUTIQUE WITH THE
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PRODUCTS REGARDLESS OF THE LEGAL RELATIONSHIP BETWEEN STD, OR
S.T.DUPONT PARIS, AND THE BOUTIQUE IN QUESTION. INTER PARFUMS WILL
DULY INFORM ITS DISTRIBUTORS OF SUCH EXCEPTION OF THE EXCLUSIVE RIGHTS
THAT INTER PARFUMS MAY HAVE GRANTED TO THEM IN THEIR TERRITORY. IN
SUCH CASE, INTER PARFUMS WILL SELL THE PRODUCTS TO STD, OR S.T.DUPONT
PARIS, OR TO ANY DISTRIBUTOR OR AFFILIATE DESIGNATED BY STD, AT
WHOLESALE PRICE MINUS 10 (TEN) %.
3. INTER PARFUMS'S OBLIGATIONS
3.1. INTER PARFUMS IS OBLIGED TO USE THE LICENCE AND TO UNDERTAKE ACTIVE
MANUFACTURING AND MARKETING ACTIVITIES.
3.2 INTER PARFUMS UNDERTAKES TO HAVE THE PRODUCTS, TOGETHER WITH THE
PERFUME EXTRACTS, MADE IN FRANCE EXCLUSIVELY.
3.3. INTER PARFUMS UNDERTAKES TO TAKE ALL NECESSARY STEPS TO ENSURE THAT,
BEFORE THE END OF 18 (EIGHTEEN) MONTHS FOLLOWING THE EFFECTIVE DATE OF
THE PRESENT AGREEMENT, THE FIRST LINE OF PERFUMES WILL BE LAUNCHED AND
DISTRIBUTED EXTENSIVELY IN THE FOLLOWING COUNTRIES : E.E.C. (FRANCE,
UNITED KINGDOM, BELGIUM, NETHERLANDS, LUXEMBURG, SWEDEN, DENMARK,
GERMANY, GREECE, EIRE, ITALY, SPAIN, PORTUGAL, FINLAND, AUSTRIA),
JAPAN, HONG KONG, SINGAPORE, TAFWAN, MALAYSIA, KUWAIT, SAUDI ARABIA,
UNITED ARAB EMIRATES.
3.4 INTER PARFUMS UNDERTAKES TO TAKE ALL NECESSARY STEPS TO ENSURE THAT,
BEFORE THE END OF 36 (THIRTY-SIX) MONTHS FOLLOWING THE EFFECTIVE DATE
OF THE PRESENT AGREEMENT, THE PRODUCTS WILL BE WIDELY DISTRIBUTED AT
LEAST, BUT NOT LIMITED TO, IN THE FOLLOWING COUNTRIES: EUROPE (EEC PLUS
SWITZERLAND), USA, CANADA, MEXICO, BRAZIL, ARGENTINA, CHILE, JAPAN,
HONG KONG, SINGAPORE, TAFWAN, MALAYSIA, SOUTH KOREA, AUSTRALIA, SAUDI
ARABIA, KUWAIT, UNITED ARAB EMIRATES, LEBANON, TOGETHER WITH A
SIGNIFICANT PRESENCE IN THE DUTY-FREE OUTLETS.
3.5. INTER PARFUMS WILL HAVE TO REACH, WITHIN THE PERIOD OF 18 (EIGHTEEN)
MONTHS AFTER THE EFFECTIVE DATE OF THE LAUNCHING OF THE FIRST MARKET, A
CUMULATIVE TURNOVER (NET SALES WITHOUT TAXES) XXXXXXXX.
4. DURATION
4.1. THIS AGREEMENT SHALL COME INTO EFFECT ON LST JULY 1997 FOR A PERIOD OF
ELEVEN (11) YEARS, AND SUBJECT TO ARTICLE 4.2, SHALL TERMINATE ON JUNE
30 , 2008.
3/12
4.2. 36 (THIRTY-SIX) MONTHS BEFORE THE EXPIRATION OF THE AGREEMENT AS
PROVIDED IN ARTICLE 4.1, THE PARTIES WILL MEET IN ORDER TO NEGOTIATE
THE RENEWAL OF THE AGREEMENT. IN CASE THE PARTIES CANNOT REACH A
WRITTEN AGREEMENT ON RENEWAL FOR ANY REASON BEFORE THE DATE OF JUNE
30, 2006, THE PRESENT AGREEMENT SHALL BE TERMINATED ON THE DATE
INDICATED IN ARTICLE 4.1 ABOVE.
5. SUBSUPPLIERS
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INTER PARFUMS IS ALLOWED TO BOTH HAVE THE CONTRACT PRODUCTS
MANUFACTURED -PARTIALLY OR COMPLETELY- BY THIRD PARTIES AS SUBSUPPLIERS
OR HAVE THEM MARKETED BY THIRD PARTIES AS MARKETING AGENTS AND
DISTRIBUTORS, ALL OF WHOM SHALL BE SUBJECT TO STD'S PRIOR WRITTEN
CONSENT, AND AT THE FOLLOWING EXPRESS CONDITIONS :
- THAT INTER PARFUMS UNDERTAKES THAT THOSE POSSIBLE MANUFACTURERS SHALL
AGREE IN WRITING TO HAVE THE PRODUCTS, TOGETHER WITH THE PERFUMES
EXTRACTS, MADE IN FRANCE EXCLUSIVELY,
-THAT INTER PARFUMS UNDERTAKES TO HAVE ITS SUBSUPPLIERS TO AGREE IN
WRITING TO COMPLY WITH THE GLOBAL PROVISIONS OF THIS AGREEMENT,
-AND THAT STD WILL BE REGULARLY, AND WHENEVER ON DEMAND BY STD, DULY
INFORMED OF THE LIST OF ALL THOSE POSSIBLE SUBSUPPLIERS, MARKETING
AGENTS AND DISTRIBUTORS.
6. LICENCE FEES
6.1. IT IS AGREED THAT, ON THE DATE OF SIGNATURE OF THIS LICENCE AGREEMENT,
INTER PARFUMS SHALL PAY TO STD A SETUP CHARGE OF XXXXXXX LESS ANY
WITHHOLDING TAX. THIS AMOUNT SHALL BELONG TO STD ABSOLUTELY AT ALL
TIMES, WHATEVER THE ISSUE OF THE PRESENT AGREEMENT WILL BE, AND INTER
PARFUMS SHALL NOT HAVE THE RIGHT TO ASK FOR A REFUND OF A PART OR OF
THE WHOLE OF THE SAID AMOUNT, FOR ANY REASON WHATSOEVER.
6.2. INTER PARFUMS SHALL PAY TO STD A LICENCE ROYALTY FOR THE RIGHTS GRANTED
TO IT UNDER THIS AGREEMENT, AS FOLLOWS :
O XXXXXXX CALCULATED ON INTER PARFUMS'S YEARLY TURNOVER FOR THE SALE OF
THE PRODUCTS FROM 1 FF TO 50.000.000 FF, AND
O XXXXXXX CALCULATED ON INTER PARFUMS'S YEARLY TURNOVER FOR THE SALE OF
THE PRODUCTS ABOVE 50.000.000 FF.
THE LICENCE ROYALTIES SHALL BE CALCULATED FROM THE NET-TOTALS INVOICED,
BY INTER PARFUMS, HEAD OFFICE AND SUBSIDIARIES, TO THEIR CLIENTS,
INCLUDING STD'S ORDERS, EXCLUDING POINT OF SALE MATERIAL AND PROMOTIONAL
GIFTS WHICH WILL NOT EXCEED 10 % OF TOTAL SALES, WITHOUT ANY
SALES/SURPLUS TAXES, FREIGHT AND EXTRA COSTS AND AFTER DEDUCTION OF ANY
LEGITIMATE RETURNS. PAYMENTS SHALL BE MADE IN FRENCH FRANCS, AFTER
DEDUCTION OF ANY WITHHOLDING TAXES.
4/12
6.3. INTER PARFUMS SHALL PAY TO STD THE FOLLOWING MINIMUM LICENCE ROYALTIES,
FOR THE FIRST PERIOD OF TEN YEARS, BY QUARTERLY PAYMENTS ON 30 OCTOBER,
31 JANUARY, 30 APRIL AND ON 31 JULY OF EACH YEAR:
XXXXXX
6.4 INTER PARFUMS UNDERTAKES, AT THE DATES SET IN ARTICLE 6.3 ABOVE, TO
RENDER QUARTERLY ACCOUNTS, SHOWING THE EXACT AMOUNT CALCULATED
ACCORDING TO ARTICLE 6.2 ABOVE, OF LICENCE ROYALTIES. AT THE SAME
DATES, INTER PARFUMS WILL PAY TO STD THE EXACT AMOUNT OF ROYALTIES IF
IT IS HIGHER THAN THE MINIMUM GUARANTEED ROYALTIES SET IN ARTICLE 6.3
ABOVE. IF THE AMOUNT IS LOWER, THEN INTER PARFUMS WILL PAY TO STD THE
MINIMUM GUARANTEED ROYALTIES FOR THAT DATE. HOWEVER, THIS QUARTERLY
PAYMENT MAY BE LOWER THAN THE MINIMUM GUARANTEED FOR THE SAME QUARTER,
IN THE CASE
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WHERE THE ADDITION OF THE SUMS ALREADY PAID DURING THE SAME CONTRACT
YEAR, IS HIGHER THAN THE ADDITION OF THE SUMS THAT MUST ACTUALLY BE
PAID BY INTER PARFUMS FOR THE SAME PERIOD.
6.5. IT IS UNDERSTOOD THAT THE BALANCED ROYALTY ACCOUNT WILL BE SETTLED
EVERY YEAR, WITHIN A PERIOD OF 3 (THREE) MONTHS AFTER THE END OF THE
PREVIOUS CONTRACT YEAR.
6.6. INTER PARFUMS SHALL TO RENDER AT ITS OWN COST ANNUAL AUDITED ACCOUNTS
AS TO THE LICENCE FEE. THIS MUST BE COMPLETED BY THE END OF THE THIRD
MONTH FOLLOWING THE CLOSING OF EACH CONTRACT YEAR.
6.7. INTER PARFUMS WILL MAINTAIN COMPLETE AND PRECISE RECORDS OF ALL LICENCE
RELATED SALES AND ALLOW AN AGENT OR ANY AUTHORISED REPRESENTATIVE OF
STD TO EXAMINE THESE RECORDS, FROM TIME TO TIME, TO COPY THEM AND TO
MONITOR THE CORRESPONDING ENTRIES IN INTER PARFUMS'S ACCOUNTS. THE
COSTS OF THE AUDIT WILL BE BORNE BY INTER PARFUMS, WHEN IT CAN BE SHOWN
THAT THE LICENCE FEES CALCULATED BY INTER PARFUMS ARE 10 (TEN) % OR
MORE BELOW THOSE DECLARED FOR THE PERIOD UNDER EXAMINATION.
6.8. SHOULD INTER PARFUMS BE LATE IN ITS QUARTERLY AND/OR YEARLY PAYMENTS,
PENALTY FOR LATE PAYMENT WOULD BECOME PAYABLE AT THE RATE OF PIBOR 3
MONTHS.
7. MARKETING PLAN
INTER PARFUMS SHALL FORWARD TO STD FOR ITS APPROVAL ONCE A YEAR, NO LATER
THAN 31ST OCTOBER, A MARKETING PLAN FOR THE FOLLOWING CALENDAR YEAR WHICH
WILL FEATURE AMONG OTHERS:
- ITS PROPOSITIONS ON PRODUCT RANGES, PRICES, DISCOUNT PROPOSALS,
DISTRIBUTION AND COMMUNICATION,
- ITS POSSIBLE WISHES CONCERNING THE TRADEMARKS FOR NEW LINES OF
PRODUCTS (AS DESCRIBED IN ARTICLE 12.2 HEREUNDER),
- A REVISED SALES FORECAST FOR THE NEXT YEAR, - THE ADVERTISING
BUDGET FOR THE NEXT YEAR.
5/12
8. MARKETING CHANNELS
INTER PARFUMS UNDERTAKES THAT THE PRODUCTS SHOULD BE MARKETED VIA
SUPERIOR TRADE OUTLETS, AT A PRICE POINT WHICH FITS WITH THE HIGH
POSITIONING OF THE BRAND, WHICH ARE EXCLUSIVE PERFUMERIES, DEPARTMENT
STORES AND OTHER EXCLUSIVE OUTLETS WHICH, WITHIN 18 MONTHS AFTER LST
JULY 1997, WILL CARRY THE DISTRIBUTION OF PRODUCTS FROM AT LEAST FIVE OF
THE OTHER PREMIUM FOLLOWING FRAGRANCE BRANDS : CHANEL, DIOR, BOUCHERON,
HERMES, CARTIER, GUERLAIN, ST LAURENT, GIVENCHY, NINA RICCI, ESTEE
LAUDER, CLINIQUE, CACHAREL, RALPH LAUREN, AZZARO, PACO RABANE, ISSEY
MIYAKE. IN ADDITION, THE CONTRACTUAL PARTNERS WILL MEET TO AGREE ON
DISTRIBUTION POLICY AT INTERVALS, WITH A MINIMUM OF ONE MEETING EVERY 12
MONTHS.
9. CREATION OF THE PRODUCTS
9.1. IN ORDER TO PRESERVE THE STD'S IMAGE, INTER PARFUMS GRANTS TO STD AN
ABSOLUTE VETO RIGHT ON THE CHOICE OF THE PRODUCTS.
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9.2. INTER PARFUMS WILL BE FREE FOR THE SELECTION OF THE CREATOR, ON THE
EXPRESS CONDITION THAT THIS CREATOR SHALL BE REGARDED AS ONE OF THE
MOST TALENTED ONES IN THIS FIELD, OF THE PERFUME EXTRACTS AND OF THE
PERFUME BOTTLES AND PACKAGINGS.
9.3. INTER PARFUMS UNDERTAKES TO CLOSELY INFORM AND WORK AND CONSULT WITH
STD AS TO ALL THE STEPS OF THE CREATION AND CHOICE OF THE PERFUMES
AND OF THE BOTTLES AND PACKAGINGS, AND IN PARTICULAR, TO SUBMIT TO
STD FOR ITS WRITTEN APPROVAL FOR ITS CHOICE AND ITS POSSIBLE
SUGGESTIONS FOR MODIFICATIONS, A SELECTION OF THE PRODUCTS AND THEIR
ENVIRONMENT.
9.4. INTER PARFUMS WILL FURNISH TO STD, FOR CHECKING, THE SAMPLES OF THE
PRODUCTS AND OF THEIR ENVIRONMENT BEFORE THEIR MARKETING. INTER
PARFUMS FURTHER UNDERTAKES TO ONLY MARKET PRODUCTS DULY APPROVED IN
WRITING BY STD.
9.5. PERFUME EXTRACTS, PERFUMES, PERFUME BOTTLES, PACKAGINGS, AND MORE
GENERALLY THE INGREDIENTS OF THE PRODUCTS AND THE PRODUCTS
ENVIRONMENT, WILL BE EXCLUSIVE TO STD, EVEN AFTER THE EXPIRATION OF
THE PRESENT AGREEMENT. INTER PARFUMS UNDERTAKES TO ENSURE THAT THE
CREATOR UNDER ARTICLE 9.2 SHALL NOT BE ENTITLED TO ANY INTELLECTUAL
PROPERTY RIGHTS IN ANY OF THE PRODUCTS OR PRODUCTS ENVIRONMENT OR ANY
OF THE RELATED PERFUME EXTRACTS, AND TO HAVE ALL RIGHTS ATTACHED TO
THE PRODUCTS AND THE PRODUCTS ENVIRONMENT ASSIGNED TO STD. AT THE
EXPIRATION OF THE PRESENT AGREEMENT, INTER PARFUMS UNDERTAKES TO GIVE
TO STD THE NAME AND ADDRESS OF THE MANUFACTURER OF THE PERFUME
EXTRACT, AND ITS REFERENCE(S). STD WILL BE FREE TO TAKE CONTACT WITH
THE MANUFACTURERS OF THE PERFUME EXTRACT, OF THE PRODUCTS AND OF THE
PRODUCTS ENVIRONMENT, IN ORDER TO HAVE THE PRODUCTS AND THE PRODUCTS
ENVIRONMENT MANUFACTURED, DIRECTLY OR NOT, WITHOUT HAVING TO GIVE TO
INTER PARFUMS ANY INDEMNITY WHATSOEVER.
6/12
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9.6. STD WILL HAVE THE OPTION TO FILE, AT ITS OWN COSTS, AND ON ITS NAME,
ANY DESIGN OR TRADEMARK APPLICATION, ON THE PERFUME BOTTLES AND/OR ON
THE PACKAGINGS. INTER PARFUMS UNDERTAKES TO PROVIDE TO STD, AT STD'S
REQUEST, ANY SIGNATURE OR AUTHORIZATION FOR THAT PURPOSE.
10. ADVERTISING, ADVERTISING MATERIAL
10.1. IN ORDER TO GUARANTEE THE COHERENT NATURE OF THE VISUAL IMAGE OF ALL
ARTICLES SOLD UNDER THE TRADEMARKS, INTER PARFUMS WILL SUBMIT TO STD
FOR ITS WRITTEN APPROVAL THE ADVERTISING AGENCY CHOSEN, AND ALL
ADVERTISING MATERIAL FOR THE PRODUCTS, PRIOR TO THEIR EMPLOYMENT OR
USE. INTER PARFUMS FURTHER UNDERTAKES TO ONLY USE AN ADVERTISING
MATERIAL CONSISTENT WITH THE ONE USED BY STD, AND APPROVED BY STD.
10.2. INTER PARFUMS UNDERTAKES TO INVEST AT LEAST XXXXXXX FOR THE
SECOND AND THE THIRD YEAR OF THIS AGREEMENT, AND XXXXXX FOR
THE FOLLOWING YEARS, OF ITS ANNUAL SALES UNDER LICENCE, AS
DEFINED IN PARAGRAPH 6.1., FOR THE ADVERTISING OF THE
PRODUCTS. THIS ADVERTISING BUDGET WILL INCLUDE: EXPENSES ON
POINTS OF SALE (SHOW-WINDOWS, VISUALS, BEAUTY CONSULTANTS),
MEDIA EXPENSES (MAGAZINES, NEWSPAPERS ... ), SAMPLES AND
TESTERS, EXPENSES FOR PUBLIC RELATIONS.
10.3. INTER PARFUMS UNDERTAKES TO HAVE ITS DISTRIBUTORS INVEST AT
LEAST XXXXXX FOR THE SECOND AND THE THIRD YEAR OF THIS
AGREEMENT, AND XXXXX FOR THE FOLLOWING YEARS, OF THEIR ANNUAL
TURNOVER FOR THE ADVERTISING OF THE PRODUCTS.
10.4. INTER PARFUMS UNDERTAKES THAT, ON BASIS OF REPARTITION FIXED
IN APPENDIX 3, SUCH TOTAL ADVERTISING BUDGET (INTER PARFUMS
AND ITS DISTRIBUTORS) WILL NOT BE LOWER THAN XXXXXXX FOR THE
SECOND CONTRACT YEAR AND THAN XXXXXXX EACH YEAR, FROM THE
THIRD TO THE SIXTH CONTRACT YEAR. FROM THE SEVENTH CONTRACT
YEAR, INTER PARFUMS UNDERTAKES THAT THE ADVERTISING BUDGET
WILL NOT BE LOWER THAN XXXXXXXXX.
10.5. REPORTS, PUBLICATIONS AND INFORMATION TO THIRD PARTIES THAT
ARE RELATED SPECIFICALLY TO THIS CONTRACT, OR GENERALLY TO THE
COOPERATION BETWEEN INTER PARFUMS AND STD, MUST HAVE THE PRIOR
WRITTEN APPROVAL OF STD.
10.6. INTER PARFUMS WILL SUBMIT TO STD'S PRIOR APPROVAL, BEFORE
THEIR USE, ALL THE DISPLAY MATERIAL (SUCH AS DISPLAYS, PACKING
CASES, CATALOGUES, ETC). INTER PARFUMS UNDERTAKES TO ONLY USE
A DISPLAY MATERIAL CONSISTENT WITH THE ONE USED BY STD, AND
APPROVED BY STD IN WRITING.
10.7. INTER PARFUMS WILL FORWARD TO STD EACH YEAR, BEFORE THE 31
AUGUST A COMPLETE REPORT ON THE ADVERTISING INVESTMENTS MADE
DURING THE YEAR BEFORE, AND ALL THE CORRESPONDING PRESS
CUTTINGS WILL BE AT THE DISPOSAL OF STD AT INTER PARFUMS'S
OFFICES.
11. PRODUCTS, LINES OF PRODUCTS
7/12
11. 1. IN ORDER TO PROTECT THE STD'S IMAGE, THE GLOBAL POSITION OF THE
PRODUCTS, INCLUDING PRICE AND DISCOUNT POSITION, WILL BE SET UP BY BOTH
PARTIES.
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11.2. INTER PARFUMS UNDERTAKES TO CONTINUOUSLY KEEP AN AVAILABLE STOCK OF
PRODUCTS FOR THE SALE, OF ABOUT THREE (3) MONTHS OF SALES.
11.3. INTER PARFUMS UNDERTAKES TO TAKE ALL NECESSARY STEPS IN ORDER TO
- PROPOSE AT LEAST TWO LINES OF PRODUCTS, FOR MEN AND WOMEN, AND TO
- EXTEND AS MUCH AS POSSIBLE IN THE FUTURE THE RANGE OF LINES OF THE
PRODUCTS.
12. TRADEMARKS
12.1. INTER PARFUMS RECOGNISES THE CURRENT AND FUTURE RIGHTS OF STD ON THE
TRADEMARKS, INCLUDING, BUT NOT LIMITED TO, THE TRADEMARKS DESCRIBED
HEREUNDER IN ARTICLE 12.2 AND WILL NEITHER CONTEST THIS FACT NOR
INSTIGATE ANY CONTESTATION. THE CONTRACTUAL PARTNERS AGREE THAT ALL
RIGHTS RELATED TO THE TRADEMARKS, DERIVING FROM THEIR USE BY INTER
PARFUMS, ARE THE SOLE PROPERTY OF STD.
INTER PARFUMS UNDERTAKES TO USE THE TRADEMARKS ONLY IN RELATION WITH THE
PRODUCTS, THE PRODUCTS ENVIRONMENT, THEIR SALE AND THEIR PROMOTION
EXCLUSIVELY.
INTER PARFUMS UNDERTAKES NOT TO REGISTER OR HAVE REGISTERED THE
TRADEMARKS IN HIS OWN NAME.
INTER PARFUMS UNDERTAKES TO USE THE S.T.DUPONT AND D TRADEMARKS ONLY IN
THE EXACT FORM AS IT IS SPECIFIED IN APPENDIX 1.
FOR ANY USE OF THE TRADEMARKS COMBINED WITH ANOTHER NAME, TRADEMARK,
LOGO, SIGN OR ELEMENT, INTER PARFUMS WILL ASK FOR PRIOR WRITTEN APPROVAL
BY STD.
INTER PARFUMS FURTHER UNDERTAKES TO ASK FOR STD'S PRIOR WRITTEN APPROVAL
FOR ANY USE OF THE TRADEMARKS ON ITS STATIONARY.
12.2. SHOULD THE CHOICE AND THE REGISTRATION OF ONE OR SEVERAL NEW TRADEMARKS
FOR THE DIFFERENT LINES OF PRODUCTS BECOME NECESSARY, INTER PARFUMS WILL
SUBMIT TO STD IN THE MARKETING PLAN DESCRIBED IN ARTICLE 7 ABOVE ALL
DETAILS CONCERNING THOSE NEW TRADEMARKS, FOR STD'S PRIOR WRITTEN
APPROVAL. INTER PARFUMS UNDERTAKES TO BE REASONABLE AS REGARDS ITS
WISHES FOR SUCH NEW TRADEMARKS, AND IN ANYWAY NOT TO PLAN THE
APPLICATION OF MORE THAN ONE NEW TRADEMARK FOR EACH STD'S FINANCIAL YEAR
WITH A MAXIMUM OF FOUR NEW TRADEMARKS FOR THE DURATION OF THE AGREEMENT.
IT IS UNDERSTOOD THAT THE PRESENT AGREEMENT WILL BE EXTENDED TO SUCH NEW
TRADEMARKS.
INTER PARFUMS WILL PROPOSE TO STD SEVERAL NAMES AND/OR LOGOS FOR THOSE
NEW TRADEMARKS, WHICH WILL BE CHECKED PREVIOUSLY BY INTER PARFUMS IN
ORDER TO MAKE SURE THAT THERE IS NO PRIOR REGISTRATIONS OF THE SAME
NAMES AND/OR LOGOS, IN THE COUNTRIES OF APPLICATIONS, AND THAT THEY MAY
BE REGISTERED. STD WILL BE FREE TO REFUSE
8/12
ANY NAME AND/OR LOGO, FOR WHATEVER REASON. STD WILL FILE THOSE NEW
TRADEMARKS APPLICATIONS ON ITS NAME, SUBJECT TO STD'S DISCRETION, AT ITS
OWN COST, IN A MAXIMUM OF 40 (FORTY) COUNTRIES WHERE INTER PARFUMS
INTENDS TO DISTRIBUTE THE PRODUCTS.
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12.3. STD SHALL USE ITS BEST EFFORTS TO THE EXTENT MADE POSSIBLE BY LOCAL LAWS
TO DEFEND THE RIGHTS RELATED TO THE REGISTERED TRADEMARKS IN THE
RELEVANT COUNTRIES AGAINST DUPLICATE TRADEMARK REGISTRATIONS AND
COUNTERFEIT OR ITS USE BY THIRD PARTIES IN THE SAME AREA AS THE CONTRACT
PRODUCTS. THIS WILL TAKE PLACE IN CONSULTATION WITH INTER PARFUMS, WHICH
IN TURN, IS OBLIGED TO ASSIST IN THIS DEFENCE TO THE BEST OF ITS
ABILITIES. SHOULD THE CONTRACTUAL PARTNERS AGREE TO PROCEED AGAINST
THIRD PARTIES, INTER PARFUMS WILL REFUND TO STD HALF OF THE COST OF SUCH
DEFENCE. IN CASE OF COMPENSATION RECEIVED BY STD FOR THAT DEFENSE, STD
WILL GIVE TO INTER PARFUMS HALF OF THE SUMS RECEIVED.
INTER PARFUMS WILL INFORM STD OF ANY ACTUAL OR POTENTIAL INFRINGEMENT
THAT MAY COME TO ITS NOTICE IN RESPECT OF ANY TRADEMARKS OR OTHER
INDUSTRIAL PROPERTY RIGHT, WHICH ARE THE PROPERTY OF, OR ARE USED BY
STD, AND STD WILL TAKE ALL THE MEASURES THAT IT WILL DEEM APPROPRIATE.
12.4. SHOULD FOR SPECIAL REASONS STD REGARD DEFENSIVE MEASURES AS NOT
NECESSARY, STD WILL INFORM INTER PARFUMS. INTER PARFUMS MAY THEREWITH
TAKE THE DECISION TO DEFEND THE RIGHTS OF STD AT ITS OWN COST. IN SUCH A
CASE, INTER PARFUMS WOULD CARRY OUT SUCH DEFENCE TO THE BEST OF ITS
ABILITY AND TO THE EXTENT MADE POSSIBLE BY LOCAL LAWS, UNDER THE CLOSE
SUPERVISION OF STD. INTER PARFUMS WILL ASK FOR STD'S WRITTEN APPROVAL
BEFORE TAKING ANY STEP IN THIS RESPECT, AND, MORE PARTICULARLY, BEFORE
MAKING ANY DECLARATION OR GIVING ANY INFORMATION.
12.5. IN THOSE COUNTRIES LISTED IN APPENDIX 2 TO THIS CONTRACT, WHERE
TRADEMARKS RIGHTS HAVE BEEN APPLIED FOR BUT NOT YET REGISTERED, STD WILL
CONTINUE THE REGISTRATION PROCESS. NEVERTHELESS STD WILL NOT BE
RESPONSIBLE FOR THE REJECTION OR REFUSAL OF THE TRADEMARKS. MOREOVER,
STD WILL ENDEAVOUR AT ITS OWN EXPENSE TO MAINTAIN ALL THE TRADEMARK
REGISTRATIONS MENTIONED IN APPENDIX I TO THIS CONTRACT FOR THE DURATION
OF THE AGREEMENT.
SHOULD LEGAL OR OTHER FACTORS BE AN OBSTACLE TO THE REGISTRATION OF THE
TRADEMARK IN A COUNTRY WHERE AN APPLICATION AND REGISTRATION SHOULD BE
MADE, BOTH CONTRACTUAL PARTNERS WILL DO THEIR BEST TO EITHER REMOVE THE
HINDRANCES OR FIND AN ALTERNATIVE SOLUTION.
12.6. SHOULD STD SO REQUEST, INTER PARFUMS WILL MAKE ITS BEST EFFORTS TO
SUPPORT THE REGISTRATION OR THE MAINTENANCE OF THE TRADEMARKS,
ESPECIALLY BY GIVING INFORMATION, MAKING NECESSARY DECLARATIONS AND
DELIVERY OF REQUIRED DOCUMENTATION, ETC.
12.7. STD HEREBY AGREES THAT INTER PARFUMS WILL BE ENTERED AS A "REGISTERED
USER" AT THE COST TO INTER PARFUMS FOR THE PRODUCTS, IN THOSE COUNTRIES
WHERE THE NATIONAL LEGAL SYSTEM EITHER PERMITS OR REQUIRES IT.
9/12
13 - TERMINATION
13.1. EITHER PARTY WILL HAVE THE RIGHT TO IMMEDIATELY TERMINATE AS OF RIGHT
THE AGREEMENT AT ANY TIME IN THE FOLLOWING CASES --
-IF THE OTHER PARTNER BECOMES INSOLVENT,
-WHEN LIQUIDATION OR BANKRUPTCY PROCEEDINGS CONCERNING A PARTNER'S
ASSETS COMMENCES,
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- WHEN, DESPITE A REMINDER, A CONTRACTUAL OBLIGATION OR AN
OBLIGATION RESULTING FROM THIS CONTRACT IS NOT FULFILLED WITHIN 30
DAYS,
- WITHOUT A REMINDER, WHEN AN IMPORTANT OBLIGATION, SUCH AS A
NON-AUTHORIZED USE OF THE TRADEMARKS, OR A PRODUCT MARKETED WITHOUT THE
APPROVAL OF STD, IS AGAIN CONTRAVENED OR,
- WITH A ONE-YEAR DELAY, IF, AT THE END OF THE FOURTH CONTRACT YEAR,
OR ANY OTHER FOLLOWING YEAR, THE ANNUAL TURNOVER MADE BY INTER PARFUMS
FOR THE PRODUCTS REMAINS LOWER THAN XXXXXXX OR IF INTER PARFUMS DOES
NOT REACH A TURNOVER OF XXXXXXX DURING ANY TWO CONSECUTIVE YEARS.
STD CAN ALSO TERMINATE THE CONTRACT AT ANY TIME IF INTER PARFUMS
DEFAULTS ON PAYMENT OF THE LICENCE FEES DUE TO STD ONE MONTH AFTER THE
FORWARDING OF A REMINDER.
13.2. TERMINATION AND REMINDERS MUST BE SERVED BY REGISTERED LETTER WITH
ACKNOWLEDGEMENT OF RECEIPT.
13.3. THE TERMINATION OF THIS CONTRACT IN ACCORDANCE WITH THE LISTED
CONDITIONS IN NO WAY FREES THE CONTRACTUAL PARTNERS FROM THE OBLIGATIONS
EITHER CONTAINED IN THIS CONTRACT, ARISING FROM IT, OR BEING DUE
FOLLOWING ITS EXPIRY. IN THE CASE OF JUSTIFIED TERMINATION BY STD AS A
RESULT OF INTER PARFUM'S DEFAULT, ALL OUTSTANDING LICENCE FEES SHALL
BECOME DUE FOR PAYMENT BY INTER PARFUMS.
THE TERMINATION OF THIS AGREEMENT, FOR ANY OF THE REASONS HEREABOVE, BY
ANY OF THE PARTIES, WILL NOT GIVE THE RIGHT FOR THE OTHER PARTY TO ANY
INDEMNITY OR COMPENSATION WHATSOEVER.
13.4. ON THE DAY OF EXPIRY OF THIS CONTRACT, INTER PARFUMS SHALL IMMEDIATELY
STOP ALL USE OF THE TRADEMARKS, SHALL REMOVE THEM FROM ALL BUSINESS
DOCUMENTS, INVOICES, STATIONARY, ADVERTISING, ETC. INTER PARFUMS WILL
ALSO CEASE TO MAKE ANY REFERENCE TO STD AND/OR ITS TRADEMARKS, PREVIOUS
ACTIVITIES/COOPERATION FOR/WITH STD AS PARTNER/ LICENCEE AND ALSO BEARS
THE RESPONSIBILITY FOR ITS SUBLICENCEES.
13.5. INTER PARFUMS WILL HAVE THE RIGHT TO MARKET THE PRODUCTS PREVIOUSLY
MANUFACTURED, OR IN MANUFACTURE, ON THE DAY OF THE AGREEMENT
TERMINATION. IN SUCH EVENT, INTER PARFUMS UNDERTAKES TO SEND TO STD WITH
15 DAYS STARTING FROM THE TERMINATION DATE OF THIS AGREEMENT, A
STATEMENT OF THE REMAINING STOCKS OF THE PRODUCTS. HOWEVER, THE QUANTITY
MAY NOT EXCEED THAT OF A THREE (3) MONTHS
10/12
PRODUCTION QUOTA, ASCERTAINED FROM THE AVERAGE PRODUCTION DURING THE SIX
(6) MONTHS PRIOR TO THE EXPIRY OF THIS AGREEMENT. THESE PRODUCTS MUST BE
SOLD PRIOR TO A DEADLINE OF SIX (6) MONTHS FOLLOWING THE TERMINATION OF
THIS AGREEMENT, IN ACCORDANCE WITH STANDARD CONDITIONS AND VIA THE
PREVIOUSLY USED OR SIMILAR SALES CHANNELS. AT THE END OF THIS 6 MONTH
PERIOD, STD WILL HAVE THE OPTION, AT ITS SOLE DECISION, TO BUY THE
REMAINING STOCKS TO INTER PARFUMS AT THE COST PRICE. INTER PARFUMS WILL
DRAW UP ACCOUNTS CONCERNING THESE SALES WITHIN SIX (6) MONTHS AFTER THE
TERMINATION OF THIS AGREEMENT, AND PAY THE CORRESPONDING LICENCE FEES TO
STD.
14. LIABILITY
14.1. STD HEREBY DECLARES THAT, IN THE COUNTRIES NAMED BY IT IN THE APPENDIX
1, WHERE THE
10
<PAGE>
TRADEMARKS HAVE ALREADY BEEN REGISTERED, THERE ARE NO KNOWN
CIRCUMSTANCES THAT WOULD PREVENT THE MARKETING OF THE PRODUCTS. THE
CONTRACTUAL PARTNERS WILL NEVERTHELESS AGREE IN ADVANCE CONCERNING THE
INDIVIDUAL COUNTRIES PRIOR TO DELIVERY OF THE CONTRACT PRODUCTS.
14.2. SHOULD FRESH CIRCUMSTANCES ARISE FOLLOWING THE SIGNING OF THIS CONTRACT,
WHICH SERIOUSLY LIMIT THE TRADEMARK USAGE RIGHTS OF INTER PARFUMS IN ANY
OF THE MAJOR TERRITORY, THE CONTRACTUAL PARTNERS WILL NEGOTIATE
CONCERNING AN ALTERATION TO THE LICENSING FEES OR TO AN EARLY
TERMINATION OF THE CONTRACTUAL RELATIONSHIP.
14.3. FOR THE DURATION OF THIS CONTRACT AND FOLLOWING ITS TERMINATION, INTER
PARFUMS WILL KEEP STD EXONERATED FROM AND INDEMNIFIED AGAINST LIABILITY
FOR NATIONAL AND INTERNATIONAL CLAIMS, THAT MAY BE RAISED BY THIRD
PARTIES AGAINST STD AND/OR INTER PARFUMS IN CONNECTION WITH THE PRODUCTS
MENTIONED IN AND RELATED TO THIS CONTRACT (IN PARTICULAR THEIR
MANUFACTURE, STORAGE, TRANSPORT, PROMOTION, ADVERTISING, SALES,
APPLICATION AND USE). THE APPROBATION BY STD OF DESIGNS OR/AND
PROTOTYPES, ACCORDING TO PARAGRAPH 9.3 ABOVE, WILL NOT ALTER STD'S
EXONERATION FROM LIABILITY.
INTER PARFUMS SHALL OBLIGE THE MANUFACTURER OF THE PRODUCTS TO
INCORPORATE STD INTO ITS OWN EXISTING THIRD-PARTY LIABILITY INSURANCE AS
A BENEFICIARY AND TO MAINTAIN THE INSURANCE AT HIS OWN EXPENSE.
15. CONFIDENTIALITY
THE CONTRACTUAL PARTNERS MUTUALLY CONSENT TO MAINTAIN THE
CONFIDENTIALITY OF ALL BUSINESS MATTERS AND PROCEDURES, IN PARTICULAR
BUSINESS AND OPERATIONAL SECRETS, BELONGING TO THE OTHER CONTRACTUAL
PARTNER WITH WHICH THEY MAY BECOME FAMILIAR AND WHICH ARE NOT GENERALLY
KNOWN. THIS SHALL APPLY BOTH FOR THE DURATION OF THIS CONTRACT AND AFTER
ITS TERMINATION. THE DISCLOSURE OF ANY INFORMATION TO THIRD PARTIES
REQUIRES THE PREVIOUS EXPLICIT WRITTEN CONSENT OF THE OTHER CONTRACTUAL
PARTNER.
16. MISCELLANEOUS
11/12
16.1. HE PARTIES AGREE THAT, TAKING INTO ACCOUNT THAT S.T. DUPONT PARIS AND
INTER PARFUMS ARE BOTH LISTED AT THE STOCK-EXCHANGE, IT IS EXPRESSLY
UNDERSTOOD THAT THE MODIFICATION OF THE MAJORITY SHAREHOLDERS OF ONE
PARTY WILL NOT ALLOW THE OTHER PARTY TO EARLY TERMINATE THIS AGREEMENT.
THIS STIPULATION WILL NOT BE APPLICABLE IN CASE THE NEW MAJORITY
SHAREHOLDERS OF INTER PARFUMS WOULD BE A DIRECT OR INDIRECT COMPETITOR
OF STD OR OF S.T.DUPONT PARIS. IN SUCH CASE, STD WOULD BE ENTITLED TO
EARLY TERMINATE THIS AGREEMENT AT THE CONDITIONS SET IN ARTICLE 13.1
ABOVE.
16.2. NO CONTRACTUAL PARTNER IS EMPOWERED TO TRANSFER RIGHTS OR DUTIES,
NOTWITHSTANDING THE PROVISIONS OF ARTICLE 5, CONCERNING THE OTHER
PARTNER THAT DERIVE FROM THIS AGREEMENT, OR TO TRANSFER THE AGREEMENT AS
A WHOLE, TO A THIRD PARTY WITHOUT THE PREVIOUS, EXPLICIT WRITTEN
PERMISSION OF THE OTHER CONTRACTUAL PARTNER. THIS ALSO APPLIES TO
TRANSFERS TO COMPANIES CONNECTED TO THE CONTRACTUAL PARTNERS. MOREOVER,
INTER PARFUMS UNDERTAKES NOT TO SUB-LICENCE THIS AGREEMENT ON ITS WHOLE
OR PARTLY, UNLESS WITH STD'S PRIOR WRITTEN CONSENT.
11
<PAGE>
16.3. CHANGES AND/OR ADDITIONS TO THIS CONTRACT ARE ONLY VALID WHEN AGREED IN
WRITTEN FORM AND EXPLICITLY DEFINED AS SUCH. SHOULD ONE OF THE PARTIES
BE UNABLE TO FULFIL THE TERMS OF THE CONTRACT, THE OTHER PARTNER SHOULD
BE INFORMED, IN ORDER THAT A CONTRACTUAL ALTERATION CAN BE MADE.
16.4 STD'S FAILURE TO REQUIRE INTER PARFUMS TO COMPLY FULLY WITH THIS
AGREEMENT AT ANY TIME, AND/OR STD'S FAILURE TO EXERCISE ANY RIGHT
RESULTING HEREUNDER SHALL NOT UNDER ANY CIRCUMSTANCES BE INTERPRETED AS
A WAIVER BY STD OF THE RIGHT TO REQUIRE SUCH PERFORMANCE.
16.5. WHENEVER FEASIBLE, DIFFERENCES OF OPINION CONCERNING THIS CONTRACT
SHOULD BE AMICABLY RESOLVED. SHOULD THIS NOT BE POSSIBLE, LAUSANNE IS
THE PLACE OF JURISDICTION AND THIS CONTRACT IS SUBJECT TO SWISS LAW.
16.6. SHOULD INDIVIDUAL REQUIREMENTS CONTAINED IN THIS CONTRACT PROVE TO BE OR
BECOME INEFFECTIVE, THIS HAS NO EFFECT UPON THE REMAINING STIPULATIONS
OR THE CONTRACT AS A WHOLE. THE SAME APPLIES SHOULD LOOPHOLES APPEAR.
THE INDIVIDUAL STIPULATION TO BE DISCARDED OR THAT IS MISSING, SHOULD BE
COMPENSATED FOR BY A LEGALLY EFFECTIVE CONDITION THAT CORRESPONDS TO THE
PURPOSE OF THIS CONTRACT.
16.7. THE APPENDIX 1 AND 2 ARE AN INTEGRAL ELEMENT WITHIN THIS CONTRACT.
16.8 THIS AGREEMENT IS IN THE FRENCH LANGUAGE ONLY, WHICH LANGUAGE SHALL BE
CONTROLLING IN ALL RESPECTS. NO TRANSLATION OF THIS AGREEMENT INTO ANY OTHER
LANGUAGE SHALL BE OF ANY FORCE OR EFFECT IN THE INTERPRETATION OF THIS AGREEMENT
OR IN A DETERMINATION OF THE INTENT OF EITHER OF THE PARTIES HERETO.
SIGNED IN FRIBOURG, ON 20 JUNE 1997.
S.T. DUPONT INTER PARFUMS
/S/ /S/
GUY MAGNIN, DIRECTOR PHILIPPE BENACIN, PRESIDENT
12/12
12
Exhibit 21
List of Subsidiaries
Name Jurisdiction
Elite Parfums, Ltd Delaware
Inter Parfums Holdings, S.A . France
Inter Parfums, S.A. France
Jean Philippe Fragrances do Brasil, Ltda.(1) Brazil
Inter Parfums Trademarks, S.A. France
Inter Parfums Grand Public, S.A. France
- ---------------
(1) A limited liability company.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 18,722
<SECURITIES> 0
<RECEIVABLES> 26,255
<ALLOWANCES> 0
<INVENTORY> 21,707
<CURRENT-ASSETS> 68,891
<PP&E> 2,122
<DEPRECIATION> 0
<TOTAL-ASSETS> 80,282
<CURRENT-LIABILITIES> 24,049
<BONDS> 0
0
0
<COMMON> 9,833
<OTHER-SE> 40,361
<TOTAL-LIABILITY-AND-EQUITY> 80,282
<SALES> 91,462
<TOTAL-REVENUES> 91,462
<CGS> 49,388
<TOTAL-COSTS> 83,022
<OTHER-EXPENSES> 268
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 727
<INCOME-PRETAX> 8,172
<INCOME-TAX> 2,945
<INCOME-CONTINUING> 5,227
<DISCONTINUED> 0
<EXTRAORDINARY> 720
<CHANGES> 0
<NET-INCOME> 4,507
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
