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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, 1998 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 March 23, 1999 of
$5.875): $16,602,650.
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
(March 22, 1999): 7,614,581.
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") and Inter Parfums
Grand Public, S.A.; and the Company's wholly-owned subsidiary, Jean Philippe
Fragrances do Brasil, Ltda. ("Jean Philippe Brasil"), a limited liability
company.
The Company, which has its common stock listed on The Nasdaq Stock
Market, is a manufacturer and world-wide distributor of fragrances and cosmetics
in the following niche markets: domestic and international brand name and
licensed fragrances, domestic and international moderately priced proprietary
fragrances, and domestic alternative designer fragrances and mass market
cosmetics. Inter Parfums, which is traded on the Paris Stock Exchange, markets
its fragrances in more than one hundred (100) countries.
The Company is the world-wide licensee, manufacturer and distributor of
the Burberrys(Registered), S.T. Dupont(Registered), Ombre Rose(Registered) and
Regine's(Registered) fragrance lines and the Jordache(Registered) line of
fragrances and cosmetics; and is the owner of the Intimate(Registered), Parfums
Molyneux(Registered) and Parfums Weil(Registered) fragrance lines, and
Aziza(Registered), a hypo-allergenic line of eye cosmetics.
Products and Selection
-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 one
hundred (100) countries around the world.
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During 1997 Inter Parfums retained a new distributor in the United
States for its Burberry's fragrances and launched two (2) additional new
Burberry's fragrance lines, Week end(Trademark) for men and women in the United
States. In addition, Inter Parfums experienced continued growth of the classic
Burberrys of London lines for men and women.
During 1998, Inter Parfums experienced continue success with the launch
of the Burberrys Week end lines, by extending them to the United States, Italy,
Portugal, Australia and Japan by use of an aggressive marketing plan with heavy
emphasis on promotional items.
For 1999, Inter Parfums intends to continue marketing the classic
Burberry's of London lines and Week end lines, and for the year 2000, intends to
build upon its earlier success with Burberry's brands with the launch of new
Burberry's prestige fragrance lines for men and women.
S. T. Dupont. During 1997, Inter Parfums acquired the license for
another elite fragrance brand, S. T. Dupont. S. T. Dupont is well known in
Europe and the Far East for men's lighters and pens, and market upscale watches,
small leather goods and men's clothing. The license agreement expires on June
30, 2008, subject to certain minimum sales requirements, advertising
expenditures and royalty payments. The new S. T. Dupont lines for men and women
were launched in 1998 in the Far East and Europe, and generated sales of
approximately 40 million French francs (approximately U.S.$6.8 million). Inter
Parfums intends to expand its distribution and launch its second S.T. Dupont
fragrance line for men and women in the year 2000.
Paul Smith. During the latter part of 1998, Inter Parfums entered into
a twelve (12) year world-wide, exclusive license agreement effective January 1,
1999, for the creation and distribution of designer fragrance and cosmetic lines
under the Paul Smith brand name, subject to certain minimum sales requirements,
advertising expenditures and royalty payments.
Paul Smith is an internationally renowned British designer, who creates
fashion with a clear identity. His signature style combines a modern look with
elegance, as well as inventiveness with a satirical wit. This image, in
conjunction with Paul Smith's increasing following, are the driving forces
behind the creation of the perfume and cosmetic lines. Inter Parfums anticipates
that the first fragrance lines for men and women will be launched in the year
2000. Paul Smith has retail outlets in several countries in Europe, North
America and Asia.
Christian LaCroix. During March 1999, Inter Parfums entered into a ten
(10) year world-wide, exclusive license agreement with Christian LaCroix, a
division of Group LVMH, for the creation and distribution of designer fragrance
lines under the Christian LaCroix brand name. The license agreement is subject
to certain minimum sales requirements, advertising expenditures and royalty
payments.
The "Couture House" of Christian LaCroix has been a symbol of tradition
and French elegance for many years. A new line of women's fragrances has been
under development, and therefore, Inter Parfums expects to launch this line in
the fourth quarter of 1999.
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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
successfully launched 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. Also during 1994, the Company 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 brand covers 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.
During 1998, the Company acquired and simultaneously sold the
world-wide trademarks for Chaz fragrances a to a distributor of the Company.
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.
Jordache. In 1990 the Company obtained the exclusive right to use the
trademark Jordache 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
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December 31, 1999, 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 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(Trademark) and Jimmy'z (the
Regine's men's fragrance) outside the United States and Canada.
-Alternative Designer Fragrances
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, including Jean Philippe Fragrances, Elite Parfums and Jean
Philippe Imperial.
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 at retail 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(Trademark), 2 Elite(Trademark),
Uno(Trademark), C Elite(Trademark), Flight(Trademark), Departure(Trademark)
Memphis(Trademark) and Dakota(Trademark).
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.
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-International and Domestic Mid Market 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.
Jean Philippe has recently introduced its newest line, Parfums De'ja
New, which was launched in the first quarter of 1999. The Parfums De'ja New
line, which was conceived, designed and created entirely in-house, is produced
domestically. This new line consists of original fragrances with unique
packaging and premium ingredients, and has a suggested retail price of $15.00 to
$35.00.
One recently developing trend in the fragrance market is the blurring
of the distinction between prestige and mass market products. Certain prestige
or designer fragrances, which were previously marketed solely through select
channels of distribution, have recently been marketed to a growing number of
mass market retail outlets. Simultaneously, a proliferation of quality products
in the emerging middle market and at large-scale specialty retailers, such as
Victoria's Secret, Banana Republic, Gap, etc., have contributed to changing
consumer perceptions of what constitutes a luxury or designer fragrance. In
order to exploit this new emerging market, the Parfums De'ja New line offers an
innovative vision in fragrance marketing which permits the consumer to purchase
a luxurious gift at an affordable price. Fragrances in the Parfums De'ja New
line include Contact(Trademark), designed and packaged with a Zen-like
minimalist approach, and Alcatraz(Trademark), which has bold and commanding
packaging.
Mass Market Cosmetics
The Company markets its Aziza brand of hypo-allergenic line of eye
cosmetics through mass market distribution. The new Aziza line was completely
modernized in 1996 and includes thirty-six (36) of the historically most popular
and best selling mascara, eyeliner and eyeshadow.
Also in the mass market cosmetics category, the Company has created,
produced and markets a Jordache 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 in the United States.
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 and packing,
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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
During fiscal years ended December 31, 1998, 1997 and 1996, no customer
accounted for ten percent (10%) or more of sales on a consolidated basis.
The broad array of Company product lines permits the Company to market
fragrances and cosmetics to all levels of distribution - the Company's brand
name and licensed designer fragrances at the high end, Inter Parfums proprietary
line and Parfums D`eja New at the moderately priced level and alternative
designer fragrances, Jordache and Aziza cosmetics at the mass market.
--International
Marketing and sales of the Company's 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 one hundred (100) 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 1,000 perfumeries.
In addition, 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.
See Note "I" to the Consolidated Financial Statements for information
regarding the Company's operations by geographic areas.
--Brazil
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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 $3.0 million in 1996
and $2.0 million in 1997. During 1997 Jean Philippe Brasil underwent an
organizational change, whereby it terminated its contract with its exclusive
sales representative and attempted to be a direct seller to the Brazilian
marketplace.
However, the decreasing sales trend continued during 1998, with net
sales decreasing to $0.8 million from $2.0 million. In October 1998, the Company
determined that it was in its best interest to close its Brazilian subsidiary.
Management believed that the decline in sales reflected the Brazilian consumers'
fear of a possible currency devaluation, which in fact took place in January
1999. In view of the less than optimistic Brazilian consumer confidence level
and the heavily regulated Brazilian environment, management determined that
further direct investment in Brasil was not warranted.
Such closing is not expected to have a material adverse effect on the
Company's results from operations. See Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations." In addition, the
Company has entered into a distribution agreement with a well known Brazilian
fragrance distributor, which included the purchase of all existing Brazilian
inventory.
--Domestic
The Company markets its alternative designer fragrances, personal care
products, mid-market Parfums De'ja New line and its Aziza and Jordache product
lines through in-house sales executives to mass merchandisers, major drugstore
chains, supermarket chains, "specialty store chains" (multiple outlets of
accessories, jewelry and clothing), and wholesalers. These products are
presently being sold in approximately 10,000 retail outlets.
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 end market for these lines is
the mass market consumer. Some of the mass market merchandisers, major drug
store chains and supermarket chains which are presently carrying the Company's
products include: Walgreen's, Family Dollar, Dollar General, Food Lion,
Bradlees, Drug Emporium, Meijer's Thrifty Acres, Longs Drug Stores, Albertsons
and Hills Department Stores.
Another market for the Company's products consists of distributors and
wholesalers, which service independent stores and international markets. Often,
the trends in this market 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 mass market fragrance and cosmetic
companies.
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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 electronically. 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.
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. 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.
At the present time, management is aware of approximately five (5)
established companies which market similar alternative designer fragrances.
Competition is primarily based upon price. 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 mass 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 are also classified as a "drug," as the categories of
cosmetic and drug are not mutually exclusive. Additional regulatory requirements
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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
Under various license agreements the Company has the right to use the
registered trademarks, Burberrys, S.T. Dupont, Paul Smith, Christian LaCroix,
Ombre Rose, Regine's and Jordache both in the United States and abroad. In
addition, the Company is the registered trademark owner of 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, Fashion Mood, Snow Silk and Memphis. See
"Business-Products and Selection".
Employees
As of March 1, 1999 Inter Parfums and its foreign subsidiaries had 47
full-time employees. Of these, 24 were engaged in sales activities, and 23 in
administrative and marketing activities.
As of March 1, 1999 Jean Philippe had 40 full-time domestic employees.
Of these, 10 were engaged in sales activities, and 30 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) leases are
711,000 French francs and 458,400 French francs, respectively, (approximately
$119,000 and $76,000). 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
Litigation has been commenced against Inter Parfums regarding the Ombre
Rose fragrance license in the French Commercial Court of Paris in February 1997
by the licensor, Jean Charles Brosseau, S.A. ("Brosseau"). Inter Parfums
thereupon asserted claims against Brosseau for $300,000 for interference with
its distriubtors. In response, Brosseau then claimed damages of approximately $7
million agains Inter Parfums, allegedly for the decreased value of his fragrance
brands.
Inter Parfuns vigoursly and categorically denies the claims of
Brosseau, and believes that it has metitorious defenses to its claim. Further,
Inter Parfums has received a letter from its special litigation counsel that in
its opinion, the entry of any substantial judgement against Inter Parfums in
such action is unlikely. Based upon the foregoing, management does not believe
that such litigation will have any material adverse effect upon the financial
condition or operations of the Company. A hearing was held on March 15, 1999
before the French Commerical Court of Paris, and the action is still pending. As
of December 31, 1998, the remaining unamortized portion of the license agreement
is approximately $750,000.
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 1998 High Closing Price Low Closing Price
----------- ------------------ -----------------
Fourth Quarter $6.94 $4.75
Third Quarter $8.25 $6.38
Second Quarter $9.25 $7.44
First Quarter $7.69 $6.25
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
As of March 1, 1999, the number of record holders (brokers and broker's
nominees, etc.) of the Company's Common Stock was 87. Management believes that
there are approximately 1,250 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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Sales of Unregistered Securities
The following table sets forth certain information as to all equity
securities of the Company sold during the past three years, which were not
registered under the Securities Act of 1933, as amended (the "Securities Act").
In each of the two (2) transactions, the Company sold Common Stock to accredited
investors and affiliates of the Company, which were exempt from the registration
requirements of Section 5 of the Securities Act under Sections 4(2) and 4(6) of
the Securities Act.
<TABLE>
<CAPTION>
Date of Sale Number of Shares Sold Identity of Purchasers Aggregate Consideration
- ------------- --------------------- ---------------------- -----------------------
<S> <C> <C> <C>
10/96 18,000 Philippe Benacin $75,906
02/98 7,500 Joseph A. Caccamo $43,826
</TABLE>
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>
Years Ended December 31
(In Thousands Except Share and Per Share Data)
<CAPTION>
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net Sales $ 89,388 $ 91,462 $ 93,281 $ 93,669 $ 75,079
Cost of Sales 47,417 49,388 51,355 48,703 39,036
Selling, General and 32,944 32,334 32,416 32,990 23,773
Administrative
Income Before Taxes and 9,164 8,172 9,081 12,380 11,679
Minority Interest
Net Income 4,613 4,507(1) 5,658 9,038(1),(2) 7,275(2)
Net Income per Share:
Basic $ .53 $ .48(1) $ .57 $ .90(1),(2) $ .71(2)
Diluted $ .52 $ .48(1) $ .57 $ .87(1),(2) $ .70(2)
Average Common Shares
Outstanding:
Basic 8,707,290 9,299,401 9,871,698 10,044,653 10,180,412
Diluted 8,898,805 9,397,329 9,984,463 10,438,896 10,454,555
</TABLE>
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- ----------
(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, for fiscal years ended December 31, 1995 and
December 31, 1994, respectively, resulting from the sale of common stock of
a subsidiary.
As at December 31
(In Thousands Except Share and Per Share Data)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working Capital $ 49,599 $ 44,842 $ 46,568 $ 41,363 $ 31,226
Total Assets 87,739 80,282 85,585 84,001 69,451
Long Term Debt 200 424 485 596 862
Shareholders' Equity 53,680 50,194 53,366 51,976 44,513
</TABLE>
Item 7. Management's Discussion And Analysis Of Financial Condition And Results
Of Operation
Introduction
Jean Philippe Fragrances, Inc. together with its French subsidiary,
Inter Parfums, are manufacturers and distributors of fragrances, cosmetics and
personal care products. The Company's dedication to innovation and diversity,
and its commitment to creating quality products are the catalysts behind new
product introductions and product line expansion.
The Company, produces and distributes, worldwide, a variety of
fragrance, personal care and cosmetic products including:
* Brand name and licensed fragrances.
* Alternative Designer Fragrances and personal care products.
* International moderately priced fragrances.
* Mass market cosmetics.
Jean Philippe is a global company which sells its products in over 100
countries worldwide. The Company's worldwide position, which makes it subject to
global economic turbulence, should also benefit the Company in the future, as
countries emerge from their economic troubles. The economic conditions in a
number of markets during 1998, such as Eastern Europe and Brasil, certainly
dampened the Company's short-term results. However, the
13
<PAGE>
Company's long-term focus will not allow it to abandon these markets, as the
Company would lose the opportunity to capitalize on the potential resurgence of
these economies.
1998 compared to 1997
Net sales aggregated $89.4 million in 1998, as compared to $91.5
million in 1997. On April 30, 1997, the Company divested its Cutex nail and lip
products license and net sales for 1997 includes $3.3 million of Cutex product
sales.
Sales generated by the Company's French subsidiary, Inter Parfums,
posted strong sales growth with an increase of 15% in 1998. At comparable
foreign currency exchange rates, sales by Inter Parfums increased 17% in 1998.
Inter Parfums licensed and brand name lines increased 35% while its
international moderately priced fragrance line decreased 43%. Such increase is
primarily the result of expanded distribution of the Burberrys fragrance line as
well Inter Parfums new product introduction of "I Love You" by Molyneux and the
launch of their new S.T. Dupont fragrance line. Next year is expected to be a
year of continued growth for Inter Parfums, (approximately 10%), as it prepares
for the launch, in early 2000, of its new Paul Smith fragrance line. Inter
Parfums is also preparing new product introductions for its Burberry line for
the year 2000. Management is determined to strengthen these brands with
continued new product development as well as product line expansion. Management
is also actively pursuing new license agreements to build upon the strength of
its existing product lines. During March 1999, Inter Parfums entered into a ten
(10) year world-wide, exclusive license agreement with Christian LaCroix, a
division of Group LVMH, for the creation and distribution of designer fragrance
lines under the Christian LaCroix brand name.
The success of the designer fragrance lines is somewhat mitigated by
sales declines in the international moderately priced fragrance line referred to
above and the domestic Alternative Designer Fragrances. Excluding the effect of
1997 Cutex product sales, net sales generated by the Company's domestic
operations decreased 18% in 1998. These declines were primarily the result of
the economic situation in Eastern Europe and factors leading up to the ultimate
closing of the Company's Brazilian subsidiary.
For the year ended December 31, 1998, the Company's domestic operations
generated net sales from Russian Territories of $0.8 million, as compared to net
sales of approximately $4.1 million in 1997. No assurances can be given that the
economic turmoil will abate in the foreseeable future, and thus management is
uncertain as to when the Russian market will again become viable. However, the
Company does not have any material exposure with respect to accounts receivable
from its Russian Territory customers.
As previously reported, 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. This trend has continued, with net sales declining to $0.8
million in 1998. In October 1998, the Company determined that was in its best
interest to close its Brazilian subsidiary. Management believed that the decline
in sales reflected the Brazilian consumers' fear of a possible currency
devaluation, which in fact took place in January 1999. In view of that less than
optimistic Brazilian consumer confidence level and the heavily regulated
Brazilian environment, further
14
<PAGE>
direct investment in Brasil was not warranted. Such closing did not have a
material adverse effect on the Company's results from operations. The Company
will continue to sell into the Brazilian market and has entered into a
distribution agreement with a well known Brazilian fragrance distributor, which
included the purchase of all existing inventory.
The overall market for Alternative Designer Fragrances is extremely
price sensitive, and customers are reducing their overall inventory levels. This
trend, which is affecting the entire industry, is expected to continue during
1999. In an attempt to combat the negative impact of this industry-wide trend,
in January 1999 the Company introduced its newly created line of domestic mid
market fragrances. Utilizing prestige and upscale concepts in bottle design and
packaging, the Company has created a line of unique and high quality fragrances
to be sold domestically and internationally, in existing and new distribution
channels, at mass market prices. Initial orders have exceeded original
expectations and management expects this line to contribute positively to sales
and earnings in 1999. Although the Company originally anticipated this new line
to be launched in December 1998, certain product development delays caused the
launch date to be postponed until January 1999.
Gross profit margin increased to 47% of sales in 1998, as compared to
46% of sales in 1997. The Company's designer fragrance lines generate a slightly
higher gross profit margin than the Company's other product lines. Sales of the
Company's designer line products continue to experience solid growth, and
therefore, represent a greater portion of the Company's overall sales. The
Company's program of "Product Value Analysis" has also enabled the Company to at
least maintain, and in some areas improve its gross profit margin. These cost
saving techniques are utilized in all new product introductions.
Selling, general and administrative expenses aggregated $32.9 million
and $32.3 million in 1998 and 1997, respectively, and represented 37% of net
sales in 1998 and 35% of net sales in 1997. Domestic selling, general and
administrative expenses declined to $10.5 million in 1998 as compared to $12.5
million in 1997. However, as a result of the decline in sales, selling, general
and administrative expenses increased as a percentage of domestic net sales to
35% in 1998 from 32% in 1997. 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%. Further, as a result of the economic climates
in Russia and Brasil, during 1998 management took the steps it deemed necessary
to reorganize its infrastructure and cut its selling, general and administrative
expenses once again.
Selling, general and administrative expenses incurred by Inter Parfums
increased to $21.5 million or 36.6% of sales in 1998 as compared to $18.6
million or 36.5% of sales in 1997. Such increase is the result of expenses
incurred to support new product introductions, build upon the each 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.
15
<PAGE>
Interest expense declined to $0.5 million in 1998 from $0.7 million in
1997. The Company uses its available credit lines, as needed, to finance its
working capital needs. As a result of profitable operating results and positive
cash flow, overall borrowing levels, during the year, have been reduced.
The Company incurred a loss on foreign currency of $0.1 million in 1998
as compared to a loss of $0.2 million in 1997. The Company, at appropriate
times, enters into foreign currency forward exchange contracts as a hedge for
short-term inter company borrowings, or for receivables to be collected in a
foreign currency.
The Company's effective income tax rate was 39% in 1998, as compared to
36% in 1997. The 1997 rate was favorably impacted by reduction of valuation
reserves on deferred tax assets, relating to the utilization of net operating
loss carry forwards made available to Inter Parfums as a result of the 1996 sale
of the Bal a' Versailles trademarks. No such benefit was available for 1998. In
addition, corporate income tax rates in France have increased from 36% to
approximately 43% in the past two years. The effective tax rate for 1998
includes an expected tax benefit to be realized as a result of the Company's
decision to close its Brazilian subsidiary.
Net income was $4.6 million or $0.52 per diluted share in 1998 as
compared to $4.5 million or $0.48 per diluted share in 1997. 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 declined 6.5% to 8.7 million in
1998, as compared to 9.3 million in 1997. On a diluted basis, average shares
outstanding was 8.9 million in 1998 and 9.4 million in 1997. Such decline is the
result of the Company's ongoing stock buyback program.
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.
16
<PAGE>
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 "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. 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 of 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
benefiting Inter Parfums from the substantial rise of the US dollar relative to
the French franc.
17
<PAGE>
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.
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 benefited 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.
Liquidity and Financial Resources
18
<PAGE>
As a result of continued profitable operating results, the Company's
financial position remains very strong. At December 31, 1998, working capital
aggregated $50 million with a working capital ratio of almost 3 to 1. The
Company had cash and cash equivalents on hand of $23 million, while net book
value aggregated $6.34 per outstanding share as of December 31, 1998.
The 1995 initial public offering in France of approximately 21% of the
common stock of Inter Parfums, has proven to be extremely successful. In
addition to the strength such stock sale provided to the financial position of
Inter Parfums, the proceeds of the offering have enabled Inter Parfums to
control its growth and invest for the future without the need of debt financing.
Long-term debt of Inter Parfums aggregated $0.2 million as of December 30, 1998,
as compared to $0.4 million as of December 31, 1997.
Taking into consideration, the continued growth in both the sales and
earnings of Inter Parfums, in January 1998, the Company decided to 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 2,234,023 as of December 31, 1998. The conversion price
was approximately $14 per share while Inter Parfums stock is presently trading
at approximately $25 per share. The effect of the conversion increased the
Company's ownership of Inter Parfums to 79% as of December 31, 1998, as compared
to 76.4% as of December 31, 1997.
Jean Philippe demonstrates confidence in the long-term growth potential
of its business by its consistent use of share repurchase programs. In addition,
the common stock of Jean Philippe Fragrances is presently trading at
approximately $6.00 per share, which is below the December 31, 1998 net asset
value per share of $6.34. Furthermore, the market value of the Company's
investment in its publicly traded French subsidiary, Inter Parfums, presently
represents approximately $5.82 per share. Therefore, in February 1998, the Board
of Directors authorized the repurchase of an additional 1.0 million shares of
the Company's common stock, bringing the total shares authorized to be
repurchased under the current repurchase program to 3.5 million shares.
The Company has continued to repurchase its common stock pursuant to
its authorized stock repurchase program. Since the inception of the Company's
repurchase program, which began in 1995, the Company has repurchased 2.75
million shares of its common stock, or approximately 27% of outstanding shares,
at an average price of $6.96 per share, bringing total shares outstanding to its
present level of 7.61 million.
The Company's short-term financing requirements are expected to be met
by available cash at December 31, 1998, 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 approximately $12.0 million in
credit lines provided by a consortium of international financial institutions.
19
<PAGE>
Internally generated cash provided by operating activities was $7.4
million for the year ended December 31, 1998. 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
Company's stock repurchase program. During 1998, the Company repurchased 407,500
shares of its common stock at a cost of $2.7 million.
Management of the Company believes that funds generated from
operations, supplemented by its present cash position and 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.
In January 1999, certain member countries of the European Union
established permanent fixed rates between their existing currencies and the
European Union's common currency ("the Euro"). The transition period for the
introduction of the Euro is scheduled to phase in over a period ending January
1, 2002. Management does not believe that the introduction of the Euro and the
phasing out of the other currencies will have a material impact on the Company's
consolidated financial statements.
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, 1998.
Forward Looking Statements
Statements included herein which are not historical in nature are
forward looking statements. Forward looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results to be
materially different from projected results. Such factors include changes in
product acceptance by consumers, effectiveness of sales and marketing efforts,
competition and prevailing economic conditions. Given these uncertainties,
persons are cautioned not to place undue reliance on the forward looking
statements.
Item 8. Financial Statements and Supplementary Data
The required financial statements commence on page F-1.
20
<PAGE>
Supplementary Data
<TABLE>
Quarterly Data (Unaudited)
For the Year Ended December 31, 1998
(In Thousands Except Share and Per Share Data)
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Full Year
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 20,806 $ 24,093 $ 22,505 $ 21,984 $ 89,388
Cost of Sales 10,902 12,840 12,420 11,255 47,417
Net Income 1,222 1,158 1,072 1,161 4,613
Net Income per Share:
Basic $ .14 $ .13 $ .12 $ .14 $ .53
Diluted $ .14 $ .13 $ .12 $ .14 $ .52
Average Common Shares Outstanding:
Basic 8,825,731 8,799,927 8,724,076 8,474,677 8,707,290
Diluted 9,019,620 9,151,554 8,946,954 8,477,093 8,898,805
</TABLE>
<TABLE>
Quarterly Data (Unaudited)
For the Year Ended December 31, 1997
(In Thousands Except Share and Per Share Data)
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Full Year
- -------------------------------------------------------------------------------------------------------------------
<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 49,355
Net Income 341 1,106 1,635 1,425 4,507
Net Income per Share:
Basic $ .04 $ .12 $ .18 $ .16 $ .48
Diluted $ .04 $ .12 $ .18 $ .16 $ .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>
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
21
<PAGE>
PART III
Item 10. Executive Officers And Directors Of Registrant
As of March 15, 1999, 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 38, 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
22
<PAGE>
Parfums; and in January 1997 he became Chief Executive Officer of the Company.
Mr. Madar was previously the managing director of Inter Parfums, from 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 40, 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 42, 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 38, 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 43, a Director of the Company since 1992, is a partner
of Nason, Yeager, Gerson, White & Lioce, P.A., general counsel to the Company.
Mr. Caccamo has been a practicing attorney since 1981, concentrating in the
areas of corporate and securities law, and in September 1991 he became counsel
to the Company. From August 1992 through September 1997, he was a director of
and general counsel to 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.
23
<PAGE>
Jean Levy
Jean Levy, age 66, 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 41 and a Director since March 1997, has
been a Director of Towers Consulting Europe, Ltd. since May 1998. Towers
Consulting Europe, Ltd. is a consulting company based in London, which
specializes in strategic advise in connection with mergers and acquisitions in
the luxury goods business. Mr. Bensoussan-Torres was the Chief Executive Officer
of Christian LaCroix, Paris, a subsidiary of LVMH Group, from February 1993
until May 1998. 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 39, 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 42, 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
24
<PAGE>
Mr. Resnik, age 38, 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.
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 $100,000 per annum for services rendered in all capacities
to the Company and its subsidiaries during fiscal years ended December 31, 1998,
December 31, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Awards
- -----------------------------------------------------------------------------------------------------------------------
Other Annual Securities
Compensation Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) ($) Options (#)(1) Compensation
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jean Madar(2), Chairman of the 1998 280,000 -0- 48,000(3) 130,000 -0-
Board, Chief Executive Officer of 1997 267,000 -0- 18,000(3) 325,000 -0-
Jean Philippe and Director General 1996 210,700 -0- 30,500(3) 33,500 -0-
of Inter Parfums
Philippe Benacin(4), Chief Executive 1998 139,000 10,000 53,000(5) 130,000 -0-
Officer, President of Jean 1997 86,000 25,000 33,000(6) 325,000 -0-
Philippe and President of Inter 1996 101,000 17,200 82,844(7) 33,500 -0-
Parfums
Russell Greenberg(8), Executive Vice 1998 228,446 3,000 2,214 15,500 -0-
President and Chief Financial 1997 213,600 15,000 2,214 22,500 -0-
Officer 1996 200,000 4,500 2,042 6,000 -0-
Bruce Elbilia(9), Executive Vice 1998 146,045 3,000 28,776(10) 15,500 -0-
President 1997 168,000 18,500 78,473(10) 25,500 -0-
1996 168,000 4,571 58,994(10) 6,000 -0-
Wayne C. Hamerling(11), Executive 1998 166,120 13,000 52,590(12) 15,500 -0-
Vice President 1997 166,120 7,000 55,363(13) 25,500 -0-
1996 157,004 3,500 74,903(14) 6,000 -0-
</TABLE>
- ----------
(1) Includes options granted in 1998 and 1997 as replacements for
out-of-the-money or expired options. See Table entitled "10 Year Options
Repricings".
(2) Mr. Madar became Chief Executive Officer in January 1997. As of December
31, 1998, Mr.Madar held 2,466,049 restricted shares of Common Stock, with
an aggregate value of $15,104,550 based upon the closing price of the
Company's Common Stock as reported by the Nasdaq Stock Market, National
Market system, of $6.125.
(3) Consists of lodging expenses.
25
<PAGE>
(4) Mr. Benacin was the Chief Executive Officer in 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, 1998,
Mr.Benacin held 2,318,049 restricted shares of Common Stock, with an
aggregate value of $14,198,050 based upon the closing price of the
Company's Common Stock as reported by the Nasdaq Stock Market, National
Market system, of $6.125.
(5) Consists of $48,000 for lodging expenses and $5,000 for automobile
expenses.
(6) Consists of $31,000 for lodging expenses and $2,000 for automobile
expenses.
(7) 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.
(8) Mr. Greenberg held no restricted shares of Common Stock as of December 31,
1998.
(9) Mr. Elbilia held no shares of common stock as of December 31, 1998.
(10) Consists of selling commissions.
(11) As of December 31, 1998, Mr. Hamerling held no shares of common stock as of
December 31, 1998.
(12) Consists of selling commissions of $48,090 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 $50,863 and non cash compensation of
$4,500 equal to the value of personal use of a company leased automobile.
(14) 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.
The following table sets forth certain information relating to stock
option grants during Fiscal 1998 to the Company's Chief Executive Officer and
each of the four (4) most highly compensated executive officers of the Company
whose compensation exceeded $100,000 per annum for services rendered in all
capacities to the Company and its subsidiaries during Fiscal 1998:
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realized Value at
Assumed Annual Rates of Stock
Individualized Grants Price Appreciation for Option Term
- ----------------------------------------------------------------------------------------------------------------------
Name Number of % of Total Exercise Expiration Five (5%) Ten (10%)
Securities Options/SARs or Base Date Percent Percent
Underlying Granted to Price ($) ($)
Options Employees in ($/Sh)
Granted (#) Fiscal Year
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jean Madar 100,000 27.8 6.50 1/25/03 179,583 396,832
Jean Madar 30,000 8.3 7.75 4/26/03 64,235 141,944
Philippe Benacin 100,000 27.8 6.50 1/25/03 179,583 396,832
Philippe Benacin 30,000 8.3 7.75 4/26/03 64,235 141,944
Russell Greenberg 6,500 1.8 6.50 1/25/03 11,673 25,794
Russell Greenberg 9,000 2.5 7.75 4/26/03 19,271 42,583
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Bruce Elbilia 6,500 1.8 6.50 1/25/03 11,673 25,794
Bruce Elbilia 9,000 2.5 7.75 4/26/03 19,271 42,583
Wayne Hamerling 6,500 1.8 6.50 1/25/03 11,673 25,794
Wayne Hamerling 9,000 2.5 7.75 4/26/03 19,271 42,583
</TABLE>
The following table sets forth certain information relating to option
exercises effected during Fiscal 1998, 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
$100,000 per annum for services rendered in all capacities to the Company and
its subsidiaries during Fiscal 1998:
AGGREGATE OPTION EXERCISES FOR FISCAL 1998
AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value(1) of
Unexercised
In-the-Money
Number of Options at
Unexercised Options December 31,
at December 31, 1998(#) 1998($)
- ------------------------------------------------------------------------------------------------------------
Shares Acquired Value ($) Exercisable/ Exercisable/
Name on Exercise Realized(2) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jean Madar -0- -0- 688,500/-0- 142,300/-0-
Philippe Benacin -0- -0- 688,500/-0- 142,300/-0-
Russell Greenberg -0- -0- 57,000/-0- 9,855/-0-
Bruce Elbilia -0- -0- 60,000/-0- 11,169/-0-
Wayne C. Hamerling -0- -0- 60,000/-0- 11,169/-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 $6.125 on
December 31, 1998.
(2) Value realized in dollars is based upon the difference between the fair
market value of the Common Stock on the date of exercise, and the exercise
price of the option.
The following table sets forth certain information regarding repricing
of options held by all executive officers of the Company for the last ten (10)
years.
27
<PAGE>
<TABLE>
<CAPTION>
10 YEAR OPTION REPRICING
Length of
Number of Original
Securities Market Price Option Term
Underlying of Stock at Exercise Remaining at
Options Time of Price at Time Date of
Repriced or Repricing or of Repricing New Exercise Repricing or
Name Date Amended (#) Amendment ($) or Amendment($) Price ($) Amendment
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jean Madar, Chief 01/26/98 100,000 6.50 7.00 6.50 expired
Executive Officer 1/11/98
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, Director 02/22/94 100,000 10.00 12.00 10.00 01/11/98
General of Inter
Parfums
Jean Madar, Director 11/01/94 100,000 7.00 10.00 7.00 01/11/98
General of Inter
Parfums
Jean Madar, Director 02/22/94 70,687 10.00 11.36 10.00 12/11/97
General of Inter
Parfums
Jean Madar, Director 11/01/94 70,687 7.00 10.00 7.00 12/11/97
General of Inter
Parfums
Jean Madar, Director 11/01/94 60,000 7.00 8.958 7.00 03/15/97
General of Inter
Parfums
Philippe Benacin, 01/26/98 100,000 6.50 7.00 6.50 expired
President 1/11/98
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
</TABLE>
28
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
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, 01/26/98 1,500 6.50 7.00 6.50 04/28/98
Executive V.P.
Russell Greenberg, 01/26/98 5,000 6.50 7.00 6.50 10/12/98
Executive V.P.
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.
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, 01/26/98 1,500 6.50 7.00 6.50 04/28/98
Executive V.P.
Bruce Elbilia, 01/26/98 5,000 6.50 7.00 6.50 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.
</TABLE>
29
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
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, 01/26/98 1,500 6.50 7.00 6.50 04/28/98
Executive V.P.
Wayne Hamerling, 01/26/98 5,000 6.50 7.00 6.50 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.
Jaime Resnik, 01/26/98 2,500 6.50 7.00 6.50 04/28/98
Executive V.P.
Jaime Resnik, 01/26/98 5,000 6.50 7.00 6.50 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 January 1998, 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 by January 1998 or were to expire
shortly thereafter (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 $6.50 per share.
30
<PAGE>
The Stock Committee acknowledged that the market price of the
Corporation's Common Stock as quoted on The Nasdaq Stock Market, National Market
System has declined substantially, thus negating the intended benefit of the
options previously granted with higher exercise prices; and such committee
believed that it was in the best interests of the Company to provide the
intended incentive to management of the Company by canceling the Out of the
Money Options and replacing them with options with exercise prices at the fair
market value at such time. During Fiscal 1998 the Stock Option Committee
consisted of Jean Levy and Francois Heilbronn.
Employment Agreements
As part of the acquisition by the Company of the controlling interest
in Inter Parfums in 1991, the Company entered into an employment agreement with
Philippe Benacin. The agreement provides that Mr. Benacin will be employed as
Vice Chairman of the Board and President and Chief Executive Officer of IP
Holdings and its subsidiary, Inter Parfums. The initial term expired on
September 2, 1992, and has subsequently been automatically renewed for
additional annual periods. The agreement provides for automatic annual renewal
terms, unless either party terminates the agreement upon 120 days notice. Mr.
Benacin is entitled to receive an annual salary of 600,000ff (approximately US$
100,000) together with 5,000ff per month (approximately US$833) for lodging
expenses, both of which are subject to increases in the discretion of the Board
of Directors. In addition he is to receive a nonaccountable expense allowance of
1,200ff (approximately US$ 200) 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's firm receives $500
for each board meeting at which he participates.
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 Joseph A. Caccamo, who is granted options to purchase 4,000 shares.
31
<PAGE>
On February 1, 1999, 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 $6.4375 per share under the 1997 Plan.
Item 12. Security Ownership Of Certain Beneficial Owners And Management
The following table sets forth information, as of March 15, 1999 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:
<TABLE>
<CAPTION>
Name and Address Amount of Beneficial Approximate Percent of
of Beneficial Owner Ownership(1) Class
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Jean Madar 3,429,549(2) 40.0 %
c/o Inter Parfums, S.A.
4, Rond Point Des Champs Elysees
75008 Paris, France
Philippe Benacin 3,281,549(3) 38.2 %
c/o Inter Parfums, S.A.
4, Rond Point Des Champs Elysees
75008 Paris, France
Russell Greenberg
c/o Jean Philippe Fragrances, Inc. 90,000(4) 1.2%
551 Fifth Avenue
New York, NY 10176
Francois Heilbronn 10,500(5) Less than 1%
12 Rue Pierre Leroux
75007 Paris, France
Joseph A. Caccamo 19,000(4) Less than 1%
7509 Ridgefield Lane
Lake Worth, FL 33467
Jean Levy 5,000(4) Less than 1%
29 rue du Colisee
75008 Paris, France
Robert Bensoussan-Torres 4,000(4) Less than 1%
48, Boulevard Raspail
75006 Paris, France
</TABLE>
- ----------
(1) All shares of Common Stock are directly held with sole voting power and
sole power to dispose, unless otherwise stated.
(2) Consists of 2,466,049 shares held directly and options to purchase 963,500
shares.
(3) Consists of 2,318,049 shares held directly and options to purchase 963,500
shares.
(4) Consists of options to purchase shares of Common Stock.
(5) Consists of 4,500 shares held directly and options to purchase 6,000 shares
of Common Stock.
32
<PAGE>
<TABLE>
<S> <C> <C>
Bruce Elbilia 93,000(4) 1.2%
c/o Jean Philippe Fragrances, Inc.
551 Fifth Avenue
New York, NY 10176
Wayne C. Hamerling 93,000(4) 1.2%
c/o Jean Philippe Fragrances, Inc.
551 Fifth Avenue
New York, NY 10176
Jaime Resnik 64,500(4) Less than 1%
c/o Jean Philippe Fragrances, Inc.
551 Fifth Avenue
New York, NY 10176
Wellington Management Company, LLP 516,000(6) 6.8%
75 State Street, Boston, MA 02109
Dimensional Fund Advisors, Inc. 522,800(7) 6.9%
1299 Ocean Avenue, 11th Fl.
Santa Monica, CA 90401
All Directors and Officers 7,090,098(8) 71.5%
as a Group (10 Persons)
</TABLE>
- --------
(6) Information is derived forth in a Schedule 13G dated December 31, 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.
(7) Information is derived forth in a Schedule 13G dated February 11, 1999 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.
(8) Consists of 4,788,598 shares held directly and options to purchase
2,301,500 shares of Common Stock.
Item 13. Certain Relationships And Related 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 was trading at approximately $32 per share at
the time of the conversion.
In connection with the acquisitions by Inter Parfums of the world-wide
rights under the Burberrys License Agreement, the Paul Smith License Agreement
and the Brosseau License Agreement, Jean Philippe guaranteed the obligations of
Inter Parfums under the Burberrys
33
<PAGE>
License Agreement and the Paul Smith License Agreement and the distribution
agreement for Ombre Rose fragrances.
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 during Fiscal
1998, 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., which was general counsel to the
Company during Fiscal 1998. In Fiscal 1998 Mr. Caccamo was paid an aggregate of
$104,324 in legal fees and for reimbursement of disbursements incurred on behalf
of the Company. Commencing in January 1999, Mr. Caccamo's new law firm receives
a monthly retainer of $7,750 together with reimbursement for expenses. Mr.
Caccamo's firm also receives $500 for each board meeting at which he
participates.
On February 1, 1999 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 $6.4375 per share, the fair market value at the time of
grant.
34
<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, 1998
and December 31, 1997 F-3
Consolidated Statements of Income for the Years
ended December 31, 1998, December 31, 1997 and
December 31, 1996 F-4
Consolidated Statements of Changes in Shareholders'
Equity for the Years ended December 31, 1998,
December 31, 1997 and December 31, 1996 F-5
Consolidated Statements of Cash Flows for the
Years ended December 31, 1998, December 31, 1997
and December 31, 1996 F-6
Notes to Financial Statements F-7
(a)(2) Financial Statement Schedules annexed hereto:
Schedule II - Valuation and Qualifying Accounts
and Reserves F-17
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.
35
<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
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
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
36
<PAGE>
10.24 Agreement and Plan of 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 herein by reference to the Company's Current Report on Form 8-K
(date of event - July 15, 1993), as follows:
37
<PAGE>
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
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)
- ----------
(1) Filed in excised form.
38
<PAGE>
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
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:
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
39
<PAGE>
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
40
<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:
4.16 1994 Nonemployee Director Supplemental Stock Option Plan (Listed as no.
4.15 therein)
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
41
<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
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, 1997:
Exhibit No. and Description
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)
42
<PAGE>
The following documents are filed herewith:
3.2 Amended and Restated By-laws
4.17 1997 Nonemployee Director Stock Option Plan
4.18 1999 Stock Option Plan
10.70 Licence Agreement among Paul Smith Limited, Inter Parfums, S.A. and
Jean-Philippe Fragrances, Inc. (excised version)
10.71 Licence Agreement between Christian LaCroix, a division of Group LVMH and
Inter Parfums, S.A (English translation, excised version)
10.72 Revolving Credit Agreement dated June 1, 1998 among Republic National Bank
of New York, Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd.
21 List of Subsidiaries
(b) Reports on Form 8-K:
A Current Report on Form 8-K (date of event October 6, 1998) was filed
during the fourth quarter of Fiscal 1998, reporting items 5 and 7.
43
<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, 1998 and 1997, 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,
1998. 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 reflect total assets and net sales constituting 64%
and 66% of the related consolidated totals for 1998 and 56% and 56% for 1997 and
net sales constituting 42% for 1996. Those statements were audited by other
auditors whose reports have 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 reports 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998 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, 1998. In our opinion, such schedule
presents fairly the information set forth therein in accordance with the
applicable accounting regulations of the Securities and Exchange Commission.
Richard A. Eisner & Company, LLP
New York, New York
March 9, 1999
With respect to accounts for
foreign subsidiaries
March 17, 1999
F-1
<PAGE>
INTER PARFUMS HOLDING AND SUBSIDIARIES
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheets of Inter Parfums
Holding and subsidiaries as of December 31, 1998 and 1997 and the related
consolidated statements of income, retained earnings and cash flows for the
years ended December 31, 1998, 1997 and 1996. 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, 1998 and 1997 and the results of its operations
and its cash flows for the years ended December 31, 1998, 1997 and 1996, in
conformity with generally accepted accounting principles.
Paris, March 17, 1999
Cabinet Cauvin, Angleys, Saint-Pierre
International
Rene Amirkhanian
F-2
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands except share and per share data)
December 31,
--------------------
1998 1997
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 23,356 $ 18,722
Accounts receivable, net of allowances of
$2,432 and $2,995 in 1998 and 1997,
respectively (Note E) 28,014 26,255
Inventories (Notes A and B) 21,939 21,707
Receivables, other 617 622
Other 1,085 470
Deferred tax benefit (Note J) 1,107 1,115
-------- --------
Total current assets 76,118 68,891
Equipment and leasehold improvements, net
(Notes A and C) 2,988 2,122
Other assets 922 1,275
Trademarks and licenses, net (Notes A, D and K) 7,711 7,994
-------- --------
$ 87,739 $ 80,282
======== ========
LIABILITIES
Current liabilities:
Loans payable - banks (Note E) $ 4,172 $ 3,063
Accounts payable 14,300 13,854
Accrued expenses 3,892 3,720
Income taxes payable 2,864 2,335
Deferred tax liability (Note J) 1,291 1,077
-------- --------
Total current liabilities 26,519 24,049
-------- --------
Long-term debt (Note F) 200 424
-------- --------
Minority interest 7,340 5,615
-------- --------
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
8,462,781 and 8,862,781 shares in 1998
and 1997, respectively 8 9
Additional paid-in capital 20,730 20,686
Retained earnings 47,343 42,730
Accumulated other comprehensive income (812) (2,369)
Treasury stock, at cost 2,383,203 and
1,975,703 shares in 1998 and 1997,
respectively (13,589) (10,862)
-------- --------
Total shareholders' equity 53,680 50,194
-------- --------
$ 87,739 $ 80,282
======== ========
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,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 89,388 $ 91,462 $ 93,281
Cost of sales 47,417 49,388 51,355
----------- ----------- -----------
Gross margin 41,971 42,074 41,926
Selling, general and administrative 32,944 32,334 32,416
Loss on divestiture of license 1,300
----------- ----------- -----------
Income from operations 9,027 8,440 9,510
----------- ----------- -----------
Other charges (income):
Interest 471 727 946
Loss on foreign currency 139 242 144
Interest income (788) (705) (647)
Loss (gain) on sale of stock of subsidiary 41 4 (14)
----------- ----------- -----------
(137) 268 429
----------- ----------- -----------
Income before income taxes 9,164 8,172 9,081
Income taxes 3,598 2,945 2,795
----------- ----------- -----------
Income before minority interest 5,566 5,227 6,286
Minority interest in net income of consolidated subsidiary 953 720 628
----------- ----------- -----------
Net income $ 4,613 $ 4,507 $ 5,658
=========== =========== ===========
Net income per share:
Basic $ 0.53 $ 0.48 $ 0.57
Diluted $ 0.52 $ 0.48 $ 0.57
Weighted average number of shares outstanding:
Basic 8,707,290 9,299,401 9,871,698
Diluted 8,898,805 9,397,329 9,984,463
</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>
Common Stock Additional
----------------------- Paid-in Retained Comprehensive
Shares Amount Capital Earnings Income
------------- ------ --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1996 10,009,981 $ 10 $ 20,610 $ 32,565
Comprehensive income:
Net income 5,658 $5,658
Foreign currency translation adjustments (1,291)
-------------
Total comprehensive income $4,367
=============
Shares issued upon exercise of stock options 18,000 76
Purchased treasury shares (425,500)
------------- ----- --------- ----------
Balance - December 31, 1996 9,602,481 10 20,686 38,223
Comprehensive income:
Net income 4,507 $4,507
Foreign currency translation adjustments (2,759)
-------------
Total comprehensive income $1,748
=============
Purchased treasury shares (739,700) (1)
------------- ----- --------- ----------
Balance - December 31, 1997 8,862,781 9 20,686 42,730
Comprehensive income:
Net income 4,613 $4,613
Foreign currency translation adjustments 1,557
-------------
Total comprehensive income $6,170
Shares issued upon exercise of stock options 7,500 44 ============
Purchased treasury shares (407,500) (1)
------------- ----- ----------- ----------
Balance - December 31, 1998 8,462,781 $ 8 $ 20,730 $ 47,343
============= ===== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Treasury
Income Stock Total
----------- ---------- -----------
<S> <C> <C> <C>
Balance - January 1, 1996 $ 1,681 $ (2,890) $ 51,976
Comprehensive income:
Net income 5,658
Foreign currency translation adjustments (1,291) (1,291)
Total comprehensive income
Shares issued upon exercise of stock options 76
Purchased treasury shares (3,053) (3,053)
----------- ---------- -----------
Balance - December 31, 1996 390 (5,943) 53,366
Comprehensive income:
Net income 4,507
Foreign currency translation adjustments (2,759) (2,759)
Total comprehensive income
Purchased treasury shares (4,919) (4,920)
----------- ---------- -----------
Balance - December 31, 1997 (2,369) (10,862) 50,194
Comprehensive income:
Net income 4,613
Foreign currency translation adjustments 1,557 1,557
Total comprehensive income
Shares issued upon exercise of stock options 44
Purchased treasury shares (2,727) (2,728)
----------- ---------- -----------
Balance - December 31, 1998 $ (812) $ (13,589) $53,680
====== =========== ==========
</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,
------------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,613 $ 4,507 $ 5,658
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,401 1,238 1,597
Noncash portion of loss on divestiture of license 854
Loss (gain) on sale of stock of subsidiary 41 4 (14)
Minority interest in net income 953 720 628
Deferred tax provision 165 771 806
Changes in:
Accounts receivable (272) 189 (3,210)
Inventories 632 90 1,958
Other assets (144) 1,426 (923)
Accounts payable and accrued expenses (449) 790 332
Income taxes payable 419 1,538 1,143
-------- -------- --------
Net cash provided by operating activities 7,359 12,127 7,975
-------- -------- --------
Cash flows from investing activities:
Purchase of equipment and leasehold improvements (1,604) (1,149) (425)
Cash portion of trademark and license acquisitions (27) (1,009) (177)
Proceeds from sale of equipment 50
Proceeds from sale of trademark 2,150
-------- -------- --------
Net cash (used in) provided by investing activities (1,631) (2,108) 1,548
-------- -------- --------
Cash flows from financing activities:
Increase (decrease) in loans payable - banks 888 (5,574) 54
Proceeds from sale of stock of subsidiary 60 32
Purchase of treasury stock (2,728) (4,920) (3,053)
Proceeds from exercise of options and warrants 44 76
-------- -------- --------
Net cash used in financing activities (1,736) (10,462) (2,923)
-------- -------- --------
Effect of exchange rate changes on cash 642 (1,040) (599)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 4,634 (1,483) 6,001
Cash and cash equivalents - beginning of year 18,722 20,205 14,204
-------- -------- --------
Cash and cash equivalents - end of year $ 23,356 $ 18,722 $ 20,205
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 560 $ 756 $ 962
Income taxes $ 3,028 $ 736 $ 1,555
</TABLE>
See notes to financial statements
F-6
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
(in thousands except share and per share data)
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] Financial instruments:
The carrying amount of accounts receivable, other receivables, accounts
payable and accrued expenses approximates fair value due to the short
terms to maturity of these instruments. The carrying amount of loans
payable and long-term debt approximates fair value as the interest rates
on the Company's indebtedness approximates current market rates.
[6] Euro conversion:
In January 1999, France adopted the Euro as its common legal currency and
established fixed conversion rates between the French currency and the
Euro. The transition period for the introduction of the Euro will be
between January 1, 1999 and January 1, 2002. Conversion to the Euro is not
expected to have a material effect on the Company's financial condition or
results of operations.
[7] Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market.
F-7
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
(in thousands except share and per share data)
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[8] 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 three and ten years and the shorter of the lease term or
estimated useful asset lives for leasehold improvements.
[9] Trademarks and licenses:
Trademarks are stated at cost and are amortized by the straight-line
method over 20 years. The cost of licenses acquired is being amortized by
the straight-line method over the ten year term of the license.
The Company reviews trademarks and licenses for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be
recoverable.
[10] Revenue recognition:
Revenue is recognized upon shipment of merchandise as sales are final upon
shipment to customers. The Company, at its discretion, permits limited
returns of merchandise and establishes allowances for estimated returns
based upon historic trends.
[11] Issuance of common stock of subsidiary:
The difference between the Company's share of the proceeds received by the
subsidiary and the carrying amount of the portion of the Company's
investment sold is reflected as a gain or loss in the consolidated
statements of income.
[12] 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 employee 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.
[13] Earnings per share:
The Company adopted Statement of Financial Accounting Standards 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.
F-8
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
(in thousands except share and per share data)
NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[14] Recent accounting pronouncements:
During 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosure About Segments of an Enterprise and Related
Information". Adoption of this standard had limited impact on the
disclosures in the Company's financial statements, since the Company
operates in one business segment (see Note I).
During 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", which addresses the
manner in which certain adjustments to shareholders' equity (principally
foreign currency translation) are displayed in the financial statements,
without affecting reported earnings, assets or capital. Accordingly,
comprehensive income is included in the consolidated statement of changes
in shareholders' equity.
NOTE B - INVENTORIES
December 31,
----------------------
1998 1997
--------- ----------
Raw materials and component parts $ 7,571 $ 10,567
Finished goods 14,368 11,140
--------- ----------
$ 21,939 $ 21,707
========= ==========
NOTE C - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
December 31,
----------------------
1998 1997
--------- ----------
Equipment $ 5,721 $ 4,063
Leasehold improvements 382 378
--------- ----------
6,103 4,441
Less accumulated depreciation and
amortization 3,115 2,319
--------- ----------
$ 2,988 $ 2,122
========= ==========
F-9
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
(in thousands except share and per share data)
NOTE D - TRADEMARKS AND LICENSES
December 31,
----------------------
1998 1997
--------- ----------
Trademarks $ 7,852 $ 7,519
Licenses 2,880 2,704
--------- ----------
10,732 10,223
Less accumulated amortization 3,021 2,229
--------- ----------
$ 7,711 $ 7,994
========= ==========
NOTE E - LOANS PAYABLE - BANKS
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
--------- ----------
<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 $ 250 $ 700
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 collateralized loan and bearing interest
at 0.5% above the EURIBOR rate (3% and 3.75% at
December 31, 1998 and 1997, respectively) 1,516 1,411
Borrowings by the Company's foreign subsidiaries under several
bank overdraft facilities bearing interest at 0.6% above the
EURIBOR rate 2,406 117
Other borrowings by the Company's foreign subsidiaries 835
-------- --------
$ 4,172 $ 3,063
======== ========
</TABLE>
NOTE F - LONG-TERM DEBT
Long-term debt represents borrowings by a foreign subsidiary of $200, due in
2004. The loan may be converted by the holder into shares of the Company's
foreign subsidiary at approximately $14 per share. Interest is payable quarterly
at 7% per annum.
F-10
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
(in thousands except share and per share data)
NOTE G - COMMITMENTS
[1] Leases:
The Company leases its office and warehouse facilities under operating
leases expiring through 2003. Rental expense amounted to $1,167 in 1998,
$1,255 in 1997 and $1,313 in 1996. Minimum future rental payments are as
follows:
1999 $ 1,116
2000 1,125
2001 1,133
2002 868
2003 558
---------
$ 4,800
=========
[2] License agreements:
The Company is obligated under 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:
1999 $ 972
2000 1,918
2001 2,129
2002 2,548
2003 2,844
Thereafter 11,110
----------
$ 21,521
==========
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 investment in the convertible debt of Inter
Parfums, S.A. 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%.
F-11
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
(in thousands except share and per share data)
NOTE H - SHAREHOLDERS' EQUITY (CONTINUED)
[1] Issuance of common stock of subsidiary: (continued)
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 investment in Inter Parfums, S.A. convertible debt into
318,000 shares of capital stock of Inter Parfums, S.A. at approximately 80
French francs per share and during 1998, certain minority shareholders
exercised their rights to convert approximately $224 of the convertible
debt into 16,946 shares of capital stock of Inter Parfums, S.A.
Furthermore, 5,486 shares of capital stock of Inter Parfums S.A. were
issued as a result of employees exercising stock options. As a result of
such issuances, the Company's percentage ownership of Inter Parfums, S.A.
was increased from 76.41% to 79% as of December 31, 1998.
The difference between the Company's share of the offering or conversion
proceeds and the carrying amount of the portion of the Company's
investment sold is reflected as a gain or loss in the consolidated
statements of income. Deferred taxes have not been provided because
application of available tax savings strategies would eliminate taxes on
this transaction.
[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 1998, 1997 and 1996 would have been approximately
$4.3 million, $3.9 million and $5.5 million, or $0.48 per diluted share,
$0.42 per diluted share and $0.56 per diluted share, respectively. The
weighted average fair values of the options granted during 1998, 1997 and
1996 are estimated as $1.64, $1.38 and $1.43 per share, respectively, on
the date of grant using the Black-Scholes option pricing model with the
following assumptions: dividend yield 0%, volatility of 35%, risk-free
interest rates at the date of grant 5.40% in 1998, 6.40% in 1997 and 5.80%
in 1996, and an expected life of the option of two years.
F-12
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
(in thousands except share and per share data)
NOTE H - SHAREHOLDERS' EQUITY (CONTINUED)
[2] Stock option plans: (continued)
A summary of the Company's stock option activity, and related information
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------
1998 1997 1996
--------------------- ------------------------ ----------------------
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
year 1,675,800 $ 6.59 1,601,449 $ 7.18 1,541,874 $ 7.23
Options granted 375,050 6.79 791,100 5.77 135,875 6.56
Options exercised (7,500) 5.84 (18,000) 4.22
Options cancelled (284,150) 7.13 (716,749) 7.00 (58,300) 8.07
--------- ---------- ----------
Shares under options - end of year 1,759,200 6.55 1,675,800 6.59 1,601,449 7.18
========= ========== ==========
</TABLE>
Exercise prices for options outstanding as of December 31, 1998 ranged
from $3.84 to $10.50. The weighted average remaining contractual life of
those options is four years.
At December 31, 1998 options for 86,324 shares were available for future
grant under the plans.
NOTE I - GEOGRAPHIC AREAS
Information on the Company's operations by geographical areas is as follows:
Year Ended December 31,
----------------------------------------
1998 1997 1996
-------- -------- --------
Net sales:
United States $ 30,068 $ 38,881 $ 52,592
Europe 58,875 50,953 40,015
South America 811 2,042 3,038
Eliminations (366) (414) (2,364)
-------- -------- --------
$ 89,388 $ 91,462 $ 93,281
======== ======== ========
Net income:
United States $ 1,503 $ 2,431 $ 3,344
Europe 3,609 2,340 1,947
South America (530) (343) 217
Eliminations 31 79 150
-------- -------- --------
$ 4,613 $ 4,507 $ 5,658
======== ======== ========
F-13
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
(in thousands except share and per share data)
NOTE I - GEOGRAPHIC AREAS (CONTINUED)
Year Ended December 31,
--------------------------------
1998 1997 1996
-------- -------- --------
Depreciation and amortization expense:
United States $ 531 $ 584 $ 727
Europe 864 653 870
South America 6 1
-------- -------- --------
$ 1,401 $ 1,238 $ 1,597
======== ======== ========
Interest income:
United States $ 376 $ 475 $ 502
Europe 409 227 327
South America 3 3 11
Eliminations (193)
-------- -------- --------
$ 788 $ 705 $ 647
======== ======== ========
Interest expense:
United States $ 50 $ 94 $ 192
Europe 377 556 881
South America 44 77 66
Eliminations (193)
-------- -------- --------
$ 471 $ 727 $ 946
======== ======== ========
Total assets:
United States $ 41,330 $ 44,289 $ 48,057
Europe 55,893 44,975 46,484
South America 619 589 2,219
Eliminations (10,103) (9,571) (11,175)
-------- -------- --------
$ 87,739 $ 80,282 $ 85,585
======== ======== ========
Additions to long-lived assets:
United States $ 455 $ 684 $ 308
Europe 1,165 1,424 294
South America 11 50
-------- -------- --------
$ 1,631 $ 2,158 $ 602
======== ======== ========
United States export sales were approximately $10,000, $8,500 and $7,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.
F-14
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
(in thousands except share and per share data)
NOTE J - INCOME TAXES
The components of income before income taxes consist of the following:
Year Ended December 31,
------------------------------------
1998 1997 1996
------ ------ ------
U.S. operations $2,304 $3,850 $5,565
Foreign operations 6,806 4,191 3,281
Eliminations 54 131 235
------ ------ ------
$9,164 $8,172 $9,081
====== ====== ======
The provision for current and deferred income tax expense (benefit) consists of
the following:
Year Ended December 31,
------------------------------------
1998 1997 1996
------- ------- -------
Current:
Federal $ 344 $ 765 $ 1,561
State and local 105 269 328
Foreign 2,984 1,140 100
------- ------- -------
3,433 2,174 1,989
------- ------- -------
Deferred:
Federal 283 310 278
State and local 70 76 55
Foreign (188) 385 473
------- ------- -------
165 771 806
------- ------- -------
Total income tax expense $ 3,598 $ 2,945 $ 2,795
======= ======= =======
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, 1998, the deferred tax assets consist of approximately
i) $741 relating to accounts receivable and inventory reserves which are not
currently deductible for tax purposes and the difference between the book basis
and tax basis of fixed assets and intangible assets and ii) $366 relating to the
expected benefit from net operating loss carryover of a foreign subsidiary. At
December 31, 1998 the deferred tax liability consists of $1,291 primarily
relating to the difference between the book basis and tax basis of certain
foreign production equipment.
No valuation allowance has been provided on the Company's deferred tax assets as
management believes that it is more likely than not that the asset will be
realized in reduction of future taxable income.
F-15
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1998 and 1997
(in thousands except share and per share data)
NOTE J - INCOME TAXES (CONTINUED)
Differences between the United States federal statutory income tax rate and the
effective income tax rate were as follows:
Year Ended December 31,
----------------------------
1998 1997 1996
----- ----- -----
Statutory rates 34.0% 34.0% 34.0%
State and local taxes, net of federal
benefit 1.3 2.8 2.8
Reduction of valuation reserve on
deferred tax asset (7.2)
Effect of foreign tax rate in excess
of U.S. statutory rates 4.0
Other (0.8) 1.2
----- ----- -----
Effective rates 39.3% 36.0% 30.8%
===== ===== =====
NOTE K - OTHER MATTERS
[1] 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 to Carson, Inc. and certain
liabilities were assumed by Carson, Inc. These 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.
[2] Subsequent to December 31, 1998, the Company purchased an additional
848,200 shares of its capital stock for treasury at an average price of
$6.50 per share.
[3] Inter Parfums, S.A. ("Inter Parfums") is a party to a litigation with Jean
Charles Brosseau S.A. ("Brosseau"), the Licensor of the Ombre Rose
trademark. The licensor is claiming damages and is seeking termination of
the license agreement. Inter Parfums vigorously and categorically denies
the claims of Brosseau, and believes it has meritorious defenses to its
claims. Further, Inter Parfums has received a letter from its special
litigation counsel that in its opinion, the entry of any substantial
judgement against Inter Parfums in such action is unlikely. As of December
31, 1998, the remaining unamortized portion of the license agreement is
approximately $750,000.
F-16
<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
- -------------------------------------------------------------------------------------------------------------------------------
Additions
-------------------------------------------
Balance (1) (2)
-------------------------------------------
at Charged to
Beginning Charged to Other
of Costs and Accounts -
Description Period Expenses Describe
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Year ended December 31, 1998:
Allowances for sales returns and doubtful accounts $ 2,995 $1,597
======= ======
Year ended December 31, 1997:
Allowances for sales returns and doubtful accounts $ 2,787 $1,453
======= ======
Year ended December 31, 1996:
Allowances for sales returns and doubtful accounts $ 4,208 $1,133
======= ======
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Column A Column D Column E
- ----------------------------------------------------------------------------------------------------------------------
Balance
at
Deductions - End of
Description Describe Period
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1998:
Allowances for sales returns and doubtful accounts $ 2,160 (a) $2,432
======== ======
Year ended December 31, 1997:
Allowances for sales returns and doubtful accounts $ 1,245 (a) $ 2,995
======== =======
Year ended December 31, 1996:
Allowances for sales returns and doubtful accounts $ 2,554 (a) $ 2,787
======== =======
</TABLE>
- ----------
(a) Write off of bad debts and sales returns.
See notes to financial statements
F-17
<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: March 24, 1999
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:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Jean Madar
- ----------------------------
Jean Madar Chairman of the
Board of Directors and
Chief Executive Officer March 24, 1999
/s/ Russell Greenberg
- ----------------------------
Russell Greenberg Chief Financial and
Accounting Officer and
Director March 24, 1999
____________________________
Philippe Benacin Director March __, 1999
/s/ Francois Heilbronn
- ----------------------------
Francois Heilbronn Director March 29, 1999
/s/ Joseph A. Caccamo
- ----------------------------
Joseph A. Caccamo Director March 25, 1999
____________________________
Jean Levy Director March __, 1999
/s/ Robert Bensoussan-Torres
- ----------------------------
Robert Bensoussan-Torres Director March 24, 1999
</TABLE>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS AND EXHIBIT INDEX TO
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, 1998 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)
<PAGE>
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
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
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 of Reorganization dated July 29, 1991 among the
Company, Jean Madar and Philippe Benacin (as No. 10.1 therein)
<PAGE>
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 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
[FN]
- ----------
1 Filed in excised form.
</FN>
<PAGE>
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
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)
<PAGE>
10.44 Acquisition 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:
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
<PAGE>
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:
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.
<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, 1994:
4.16 1994 Nonemployee Director Supplemental Stock Option Plan (Listed as no.
4.15 therein)
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
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
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,
<PAGE>
1997:
Exhibit No. and Description
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)
<PAGE>
The following documents are filed herewith:
Exhibit No. and Description Page No.
3.2 Amended and Restated By-laws _____
4.17 1997 Nonemployee Director Stock Option Plan _____
4.18 1998 Stock Option Plan _____
4.19 1999 Stock Option Plan _____
10.70 Licence Agreement among Paul Smith Limited,
Inter Parfums, S.A. and Jean-Philippe Fragrances, Inc.
(excised version)
10.71 Licence Agreement between Christian LaCroix, a
division of Group LVMH and
Inter Parfums, S.A
(English translation, excised version) _____
10.72 Revolving Credit Agreement dated June 1, 1998
among Republic National Bank of New York, Jean
Philippe Fragrances, Inc. and Elite Parfums, Ltd. _____
21 List of Subsidiaries _____
<PAGE>
Litigation has been commenced against Inter Parfums regarding the Ombre
Rose fragrance license in the French Commercial Court of Paris in February 1997
by the licensor, Jean Charles Brosseau, S.A. ("Brosseau"). Inter Parfums
thereupon asserted claims against Brosseau for $300,000 for interference with
its distributors. In response, Brosseau then claimed damages of approximately $7
million against Inter Parfums, allegedly for the decreased value of his
fragrance brands.
Inter Parfums vigorously and categorically denies the claims of Brosseau,
and believes that it has meritorious defenses to its claims. Further, Inter
Parfums has received a letter from its special litigation counsel that in its
opinion, the likelihood of the entry of any substantial judgment against Inter
Parfums in such action is remote. Based upon the foregoing, management does not
believe that such litigation will have any material adverse effect upon the
financial condition or operations of the Company. A hearing was held on March
15, 1999 before the French Commercial Court of Paris, and the action is still
pending. As of December 31, 1998, the remaining unamortized portion of the
license agreement is approximately $750,000.
<PAGE>
Exhibit 3.2
BY - LAWS
of
JEAN PHILIPPE FRAGRANCES, INC.
ARTICLE I - OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation within the State of Delaware shall be located at the principal
place of business in said state of the Corporation or individual acting as the
Corporation's registered agent in Delaware.
SECTION 2. OTHER OFFICES. --The corporation may have other offices,
either within or without the State of Delaware, at such place or places as the
Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II - MEETING OF STOCKHOLDERS
SECTION I. ANNUAL MEETINGS. --Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the
notice of the meeting, shall be held at such place, either within or without
the State of Delaware, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the meeting.
SECTION 2. OTHER MEETINGS. -- Meetings of stockholders for any
purpose other than the election of directors may be held at such time and
place, within or without the State of Delaware, as shall be stated in the
notice of the meeting.
SECTION 3. VOTING. -- Each stockholder entitled to vote in accordance
with the terms and provisions of the Certificate of Incorporation and these
By-Laws shall be entitled to one vote, in person or by proxy, for each share
of stock entitled to vote held by such stockholder, but no proxy shall be
voted after three years from its date unless such proxy provides for a longer
period. Upon the demand of any stockholder, the vote for directors and upon
any question before the meeting shall be by
<PAGE>
ballot. All elections for directors shall be decided by plurality vote; all
other questions shall be decided by majority vote except as otherwise
provided-by the Certificate of Incorporation or the laws of the State of
Delaware.
SECTION 4. STOCKHOLDER LIST. -- The officer who has charge of the
stock ledger of the corporation shall at least 10 days before each meeting of
stockholders prepare a complete alphabetical addressed list of the
stockholders entitled to vote at the ensuing election, with the number of
shares held by each. Said list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall be available for inspection at
the meeting.
SECTION 5. QUORUM. --Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or
by proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the
stockholders. In case a quorum shall not be present at any meeting, a majority
in interest of the stockholders entitled to vote thereat, present in person or
by proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until the requisite amount of
stock entitled to vote shall be present. At any such adjourned meeting at
which the requisite amount of stock entitled to vote shall be represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed; but only those stockholders entitled to vote at the
meeting as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof.
SECTION 6. SPECIAL MEETINGS. --Special meetings of the stockholders,
for any purpose, unless otherwise prescribed by statute or by the Certificate
of Incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the
directors or stockholders entitled to vote. Such request shall state the
purpose of the proposed meeting.
SECTION 7. NOTICE OF MEETINGS. Written notice of each meeting of
shareholders stating the place, date and hour thereof, and, in the case of a
special meeting, specifying the purpose or purposes thereof, shall be given to
each shareholder entitled to
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vote thereat, not less than ten (10) nor more than sixty (60) days prior to
the meeting, except that where the matter to be acted on is a merger or
consolidation or the Corporation or a sale, lease or exchange of all or
substantially all of its assets, such notice shall be given not less than
twenty (20) nor more than sixty (60) days prior to such meeting.
If at any meeting action is proposed to be taken which, if taken,
would entitle shareholders fulfilling the requirements of section 262 (d) of
the Delaware General Corporation Law to an appraisal of the fair value of
their shares, the notice of such meeting shall contain a statement of that
purpose and to that effect and shall be accompanied by a copy of that
statutory section.
SECTION 8. NATURE OF BUSINESS AT MEETINGS OF SHAREHOLDERS. No
business may be transacted at an annual meeting of shareholders, other than
business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any duly authorized committee thereof), (b) otherwise properly brought before
the annual meeting by or at the direction of the Board of Directors (or any
duly authorized committee thereof) or (c) otherwise properly brought before
the annual meeting by any shareholder of the corporation (i) who is a
shareholder of record on the date of the giving of the notice provided for in
this Section 8 and on the record date for the determination of shareholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 8.
In addition to any other applicable requirement, for business to be
properly brought before an annual meeting by a shareholder, such shareholder
must have given timely notice thereof in proper written form to the Secretary
of the Corporation.
To be timely, a shareholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the anniversary date of the immediately preceding annual meeting of
shareholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the shareholder in order to be timely must be so
received-not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure
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<PAGE>
of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a shareholder's notice to the Secretary
must set forth as to each matter such shareholder proposes to bring before the
annual meeting (a) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and record address of such shareholder, (c) the
class or series and number of shares of capital stock of the Corporation which
are owned-beneficially or of record by such shareholder, (d) a description of
all arrangements or understandings between such shareholder and any other
person or persons (including their names) in connection with the proposal of
such business by such shareholder and any material interest of such
shareholder in such business and (e) a representation that such shareholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
No business shall be conducted at the annual meeting of shareholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 8; provided, however, that, once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 8 shall be deemed to preclude discussion
by any shareholder of any such business. If the Chairman of an annual meeting
determines that business was not properly, brought before the annual meeting
in accordance with the foregoing procedures, then the Chairman shall declare
to the meeting that the business was not properly brought before the meeting
and such business shall not be transacted.
SECTION 9. ACTION WITHOUT MEETING. --Except as otherwise provided by
the Certificate of Incorporation, whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of the statutes or the Certificate of
Incorporation or of these By-Laws, the meeting and vote of stockholders may be
dispensed with, if all the stockholders who would have been entitled by vote
upon the action if such meeting were held, shall consent in writing to such
corporate action being taken.
SECTION 10. NOMINATION OF DIRECTORS. Only persons who are nominated
in accordance with the following procedures shall be eligible for election as
directors of the Corporation. Nominations of persons for election to the Board
of Directors may
4
<PAGE>
be made at any annual meeting of shareholders (a) by or at the direction of
the Board of Directors (or any duly authorized committee thereof) or (b) by
any shareholder of the Corporation (i) who is a shareholder of record on the
date of giving of the notice provided for in this Section 10 and on the record
date for the determination of shareholders entitled to vote at such annual
meeting and (ii) who complies with the notice and other procedures set forth
in this Section 10.
In addition to any other applicable requirements, for a nomination to
be made by a shareholder, such shareholder must give timely notice thereof in
proper written form to the Secretary of the Corporation. To be timely, a
shareholder's notice to the Secretary must be delivered to or mailed and
received at the principal executive offices of the Corporation not less than
sixty (60) days nor more than ninety (90) days prior to the anniversary date
of the immediately preceding annual meeting of shareholders; provided,
however, that in the event that the annual meeting is called for a date that
is not within thirty (30) days before or after such anniversary date, notice
by the shareholder in order to be timely must be received not later than the
close of business on the tenth (10th) day following the day on which notice of
the date of the annual meeting was mailed or such public disclosure of the
date of the annual meeting was made, whichever first occurs.
To be in proper written form, a shareholder's notice to the Secretary
must set forth (a) as to each person whom the shareholder proposes to nominate
for election as a director (i) the, name, age, business and residence address
of the person, (ii) the principal occupation or employment of the person,
(iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
shareholder giving notice (i) the name and record address of such shareholder,
(ii) the class or series and number of shares of capital stock-of the
Corporation which are owned beneficially or of record by such shareholder,
(iii) a description of all arrangements or understandings between such
shareholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nominations are to be made by
such shareholder, (iv) a representation that such shareholder intends to
appear in person or by proxy at the
5
<PAGE>
annual meeting to nominate the persons named in its notice and (v) any other
information relating to such shareholder that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a director if
elected.
No person shall be eligible for election as director of the
Corporation unless nominated in accordance with the procedures set forth in
this Section 10. If the Chairman of the meeting determines that a nomination
was not made in accordance with the foregoing procedures or that any
representation made pursuant to such procedures is materially incomplete or
inaccurate, the Chairman shall declare to the meeting that the nomination was
defective and such defective nomination may be disregarded.
ARTICLE III - DIRECTORS
SECTION 1. NUMBER AND TERM. -- The number of directors shall be set
by resolution of the board of directors, but shall not be less than three but
not more than fifteen.
SECTION 2. RESIGNATIONS. -- Any director, member of a committee or
other officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time
be specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. -- If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum by a majority vote, may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until
his successor shall be duly chosen.
SECTION 4. REMOVAL. --- Any director or directors may be removed
either for or without cause at any time by the affirmative vote of the holders
of a majority of all the shares of stock outstanding and entitled to vote, at
a special meeting of the stockholders called for the purpose and the vacancies
thus created may be filled, at the meeting held for the purpose of removal, by
the affirmative vote of a majority in interest of the
6
<PAGE>
stockholders entitled to vote.
SECTION 5. INCREASE OF NUMBER. -- The exact number of directors
within the minimum and maximum limitations specified herein shall be fixed
from time to time by resolution of a majority of the whole Board of Directors.
SECTION 6. COMPENSATION. -- Directors shall not receive any stated
salary for their services as directors or as members of committees, but by
resolution of the board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
SECTION 7. ACTION WITHOUT MEETING. --Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken with out a meeting, if prior to such action a written
consent thereto is signed by all members of the board, or of such committee as
the case may be, and such written consent is filed with the minutes of
proceedings of the board or committee.
SECTION 8.PARTICIPATION IN MEETINGS BY TELEPHONE. Any one or more
members of the Board of Directors or of any committee of the Board may
participate in a meeting of the Board of Directors or any committee of the
Board may be taken without a meeting if all members of the Board or of such
committee consent thereto in writing. The written consent or consents to each
such action shall be filed with the minutes of the proceedings of the Board or
of the committee taking such action.
SECTION 9.COMMITTEES OF THE BOARD. The Board of Directors, by
resolution adopted by a majority of the whole Board, may designate one or more
committees, each consisting of one (1) or more directors and having such title
as the Board may consider to be properly descriptive of its function, (except
that only one committee, consisting of three (3) or more directors, shall be
designated as the Executive Committee, each of which, to the extent provided
in such resolution, shall have any may exercise all of the powers and
authority of the Board in the management of the business and affairs of the
Corporation). However, no such committee shall have power or authority in
reference to:
(a) amending the certificate of incorporation;
(b) adopting an agreement of merger or consolidation;
(c) recommending to the shareholders the sale, lease or
7
<PAGE>
exchange of all or substantially all of the Corporation's property and assets;
(d) recommending to the shareholders a dissolution of the Corporation
or a revocation of a dissolution; or
(e) amending these By-Laws; and, unless expressly so provided by
resolution of the Board, no such committee shall have power or authority in
reference to;
(f) declaring a dividend; or
(g) authorizing the issuance of shares of the Corporation of any
class.
The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of
any member of any committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place and stead of such absent or disqualified
member.
Each such committee shall serve at the pleasure of the Board of
Directors. It shall keep minutes of its meetings and report the same to the
Board of Directors as and when requested by the Board, and it shall observe
such other procedures with respect to its meetings as are prescribed in these
By-Laws or, to the extent not prescribed herein, as may be prescribed by the
Board in the resolution appointing such committee.
ARTICLE IV - OFFICERS
SECTION 1. OFFICERS. -- The officers of the corporation shall consist
of a President, a Treasurer, and a Secretary, and shall be elected by the
Board of Directors and shall hold office until their successors are elected
and qualified. In addition, the Board of Directors may elect a Chairman, a
Vice Chairman, one or more Vice-Presidents and such Assistant Secretaries and
Assistant Treasurers as it may deem proper. None of the officers of the
corporation need be directors. The officers shall be elected at the first
meeting of the Board of Directors after each annual meeting. More than two
offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. -- The Board of Directors may
appoint such officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such power and perform such
duties as shall be
8
<PAGE>
determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. -- The Chairman of the Board of Directors if one
be elected, shall preside at all meetings of the Board of Directors and he
shall have and perform such other duties as from time to time may be assigned
to him by the Board of Directors. In the absence or disability of the Chairman
of the Board, the Vice Chairman shall preside at all such meetings and he
shall have and perform such other duties as from time to time may be assigned
to him by the Board of Directors.
SECTION 4. PRESIDENT. -- Unless set forth otherwise in a resolution
of the Board of Directors, the President shall be the chief executive officer
of the corporation and shall have the general powers and duties of supervision
and management usually vested in the office of President of a corporation. He
shall have general supervision, direction and control of the business of the
corporation. Except as the Board of Directors shall authorize the execution
thereof in some other manner, he shall execute bonds, mortgages, and other
contracts in behalf of the corporation, and shall cause the seal to be affixed
to any instrument requiring it and when so affixed the seal shall be attested
by the signature of the Secretary or the Treasurer or an Assistant Secretary
or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. --Each Vice-President shall have such
powers and shall perform such duties as shall be assigned to him by the
directors. If there be more than one Vice President, the Board of Directors
may designate one of them as Executive Vice President, in which case he shall
be first in order of seniority, and may also grant to theirs such titles as
shall be descriptive of their respective functions or indicative of their
relative seniority. The Vice President, or, if there be more than one, the
Vice Presidents in the order of their seniority as indicated by their titles
or as otherwise determined by the Board of Directors shall, in the absence or
disability of the Chairman and President, exercise the powers and perform the
duties of those officers subject to the direction of the Board of Directors;
and he or they shall have such other powers and duties as the Board of
Directors or the Chairman may from time to time prescribe.
SECTION 6. TREASURER. --The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors.
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<PAGE>
The Treasurer shall disburse the funds of the corporation as maybe
ordered by the Board of Directors, or the President, taking proper vouchers
for such disbursements. He shall render to the President and Board of
Directors at the regular meetings of the Board of Directors, or whenever they
may request it, an account of all his transactions as Treasurer and of the
financial condition of the corporation. If required by the Board of Directors,
he shall give the corporation a bond for the faithful discharge of his duties
in such amount and with such surety as the board shall prescribe.
SECTION 7. SECRETARY. --The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by law or by these By-Laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors, or stockholders,
upon whose requisition the meeting is called as provided in these By-Laws. He
shall record all the proceedings of the meetings of the corporation and of
directors in a book to be kept for that purpose. He shall keep in safe custody
the seal of the corporation, and when authorized by the Board of Directors,
affix the same to any instrument requiring it, and when so affixed, it shalt
be attested by his signature or by the signature of any assistant secretary.
SECTION 8. ASSISTANT TREASURERS & ASSISTANT SECRETARIES Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
ARTICLE V
SECTION 1. CERTIFICATES OF STOCK. --Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the chairman or vice-chairman of the board of
directors, or the president or a vice-president and the treasurer or an
assistant treasurer, or the secretary of the corporation, certifying the
number of shares owned by him in the corporation. If the corporation shall be
authorized to issue more than one class of stock or more than one series of
any class, the designations, preferences and relative participating, optional
or other special rights of each class of stock or, series thereof and the
qualifications, limitations, or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such class of
series of stock, provided that, except as other wise provided in
10
<PAGE>
section 202 of the General Corporation Law of Delaware, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Where a certificate is countersigned (1) by a
transfer agent other than the corporation or its employee, or (2) by a
registrar other than the corporation or its employee, the signatures of such
officers may be facsimiles.
SECTION 2. LOST CERTIFICATES --New certificates of stock may be
issued in the place of any certificate therefore issued by the corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate or his
legal representatives, to give the corporation a bond, in such sum as they may
direct, not exceeding double the value of the stock, to indemnify the
corporation against it on account of the alleged loss of any such new
certificate.
SECTION 3. TRANSFER OF SHARES. -- The shares of stock of the
corporation shall be transferable only upon its books by the holders thereof
in person or by their duly authorized attorneys or legal representatives, and
upon such transfer the old certificates shall be surrendered to the
corporation by the delivery thereof to the person in charge of the stock and
transfer books and ledgers, or to such other persons as the directors may
designate, by who they shall be cancelled, and new certificates shall
thereupon be issued. A record shall be made of each transfer and whenever a
transfer shall be made for collateral security, and not absolutely, it shall
be so expressed in the entry of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. -- In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty nor less than
ten days before the day of such meeting, nor more than sixty days prior to any
other
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<PAGE>
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 5. DIVIDENDS. -- Subject to the provisions of the Certificate
of Incorporation the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividends there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
SECTION 6. SEAL. -- The corporate seal shall be circular in form and
shall contain the name of the corporation, the year of its creation and the
words "CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or otherwise reproduced.
SECTION 7. FISCAL YEAR. -- The fiscal year of the corporation shall
be determined by resolution of the Board of Directors.
SECTION 8. CHECKS -- All checks, drafts, or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name
of the corporation shall be signed by the officer or officers, agent or agents
of the corporation, and in such manner as shall be determined from time to
time by resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE -- Whenever any notice is
required by these By-Laws to be given, personal notice is not meant unless
expressly stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, postage prepaid,
addressed to the person entitled thereto at his address as it appears on the
records of the corporation, and such notice shall be deemed to have been given
on the day of such mailing. Stockholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
statute.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the corporation or these By-Laws,
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a waiver thereof in writing signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
proper notice.
ARTICLE VI- AMENDMENTS
These By-Laws may be altered and repealed and By-Laws may be made at
any annual meeting of the stockholders or at any special meeting thereof if
notice thereof is contained in the notice of such special meeting by the
affirmative vote of a majority of the stock issued and outstanding or entitled
to vote thereat, or by the regular meeting of the Board of Directors, at any
regular meeting of the Board of Directors, or at any special meeting of the
Board of Directors, if notice thereof is contained in the notice of such
special meeting.
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EXHIBIT 4.17
JEAN PHILIPPE FRAGRANCES, INC.
1997 NONEMPLOYEE DIRECTOR
STOCK OPTION PLAN
**********
1. Purpose of the Plan. The purpose of this 1997 Nonemployee Director
Stock Option Plan (the "Plan") of Jean Philippe Fragrances, Inc., a Delaware
corporation (the "Corporation"), is to make available shares of the Common
Stock, par value $.001 per share, of the Corporation (the "Common Stock") for
purchase by directors of the Corporation who are not employees of the
Corporation, or any parent or subsidiary thereof ("Nonemployee Directors").
Thus, the Plan, in addition to the Company's existing 1994 Nonemployee
Director Stock Option Plan ("1994 Plan"), permits the Corporation to attract
and retain the services of experienced and knowledgeable Nonemployee Directors
for the benefit of the Corporation and its shareholders and to provide
additional incentive for such Nonemployee Directors to continue to work for
the best interests of the Corporation and its shareholders through continuing
ownership of its Common Stock.
2. Stock Subject to the Plan. Subject to the provisions of Article
10, the total number of shares of Common Stock which may be subject to options
under the Plan shall not exceed 32,500, whether authorized but unissued
shares, or shares which shall have been purchased or acquired by the
Corporation for this or any other purpose. Such shares are from time to time
to be allotted for option and sale to Nonemployee Directors in accordance with
the Plan. In the event any option granted under the Plan shall expire or
terminate for any reason without having been exercised in full or shall cease
for any reason to be exercisable in whole or in part, the shares not so
purchased thereby shall again be available for the purposes of the Plan.
3. Administration of the Plan. The Plan shall be self-executing.
However, to the extent permitted herein, the Plan shall be administered by a
committee of two (2) or more Nonemployee Directors (the "Committee") of the
Board of Directors of the Corporation (the "Board") appointed by the Board.
The Committee shall, subject to the express provisions of the Plan, have the
power to interpret the Plan; correct any defect, supply any omission or
reconcile any inconsistency in the Plan; prescribe, amend and rescind rules
and regulations relating to the Plan; and make all other determinations
necessary or advisable for the administration of the Plan. The determination
of the Committee on the matters referred to in this Article 3 shall be
conclusive.
4. Eligibility; Grants.
<PAGE>
(a) Nonemployee Directors shall not include directors who are also
employees of the Corporation or any parent or subsidiary thereof, but shall
include directors of the Corporation who are providing services such as
business, financial, legal or investment banking services, to, for, or on
behalf of the Corporation or any parent or subsidiary thereof, in return for
remuneration, directly or indirectly through one or more entities.
(b) Jean Levy, a Nonemployee Director, shall be granted an option to
purchase 2,000 shares of Common Stock at $6.00 per share, effective as of
March 13, 1997. Robert Bensoussan-Torres, who became a Nonemployee Directors
on March 13, 1997, shall be granted an option to purchase 1,000 shares of
Common Stock at $6.00 per share, effective as of such date. The aforementioned
grant to Robert Bensoussan-Torres is in addition to the grant of 1,000 shares
which Mr. Bensoussan-Torres is entitled to receive under the 1994 Plan for
calendar year 1997. Joseph A. Caccamo, a Nonemployee Director, shall be
granted an option to purchase 7,500 shares of Common Stock at $5.8435,
effective as of April 29, 1997, as a replacement for an option to purchase
7,500 shares of Common Stock at $ 10.50 with an expiration date of November
15, 1997, which was cancelled by the Corporation on April 25, 1997.
(c) Each individual who subsequent to March 13, 1997 becomes a
Nonemployee Director, shall on the date of his initial election or appointment
to the Board be granted an option to purchase 1,000 shares of Common Stock in
addition to the grant of 1,000 shares which such person is entitled to receive
under the 1994 Plan. Upon the earlier of the absence of the availability of
shares of Common Stock for grant under the 1994 Plan, or the expiration or
termination of the 1994 Plan, each individual who subsequent to March 13, 1997
becomes a Nonemployee Director shall on the date of his initial election or
appointment to the Board be granted an option to purchase 2,000 shares of
Common Stock under this Plan.
(d) Upon the earlier of the absence of the availability of shares of
Common Stock for grant under the 1994 Plan, or the expiration or termination
of the 1994 Plan, each Nonemployee Director other than Joseph A. Caccamo,
shall be granted an option to purchase 1,000 shares of Common Stock commencing
on the next February 1st, and each succeeding February 1st throughout the term
of this Plan for so long as he is a Nonemployee Director. In lieu of grants of
options to purchase 1,000 shares, Joseph A. Caccamo shall be granted options
to purchase 4,000 shares hereunder for as long has he is a Nonemployee
Director. Notwithstanding the foregoing, no option shall be granted on such
February 1st grant date to any Nonemployee Director who first becomes a
Nonemployee Director within six (6) months prior to such February 1st grant
date.
(e) If a sufficient number of shares of Common Stock reserved for
issuance upon proper exercise of options to be granted to Nonemployee
Directors on the February 1st grant date does not exist, then the aggregate
remaining number of shares shall be prorated equally among options to be
granted to all Nonemployee Directors at such February 1st grant date, and
options shall be granted to purchase such reduced number of shares.
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<PAGE>
5. Option Price; Fair Market Value.
(a) The price at which shares of the Common Stock may be purchased
pursuant to options granted under the Plan shall be equal to one hundred
percent (100%) of the fair market value of the Common Stock on the date an
option is granted.
(b) The fair market value of the Common stock on any day shall be (a)
if the principal market for the Common Stock is a national securities
exchange, the average between the high and low sales prices of the Common
Stock on such day as reported by such exchange or on a consolidated tape
reflecting transactions on such exchange; (b) if the principal market for the
Common Stock is not a national securities exchange and the Common Stock is
quoted on The Nasdaq Stock Market ("NASDAQ"), and (i) if actual sales price
information is available with respect to the Common Stock, then the average
between the high and low sales prices of the Common Stock on such day on
NASDAQ, or (ii) if such information is not available, then the average between
the highest bid and lowest asked prices for the Common Stock on such day on
NASDAQ; or (c) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on NASDAQ, then the
average between the highest bid and lowest asked prices for the Common Stock
on such day as reported by National Quotation Bureau, Incorporated or a
comparable service; provided that if clauses (a), (b) and (c) of this
paragraph are all inapplicable, or if no trades have been made or no quotes
are available for such day, then the fair market value of the Common Stock
shall be determined by the Committee by any method consistent with applicable
regulations adopted by the Treasury Department relating to stock options. The
determination of the Committee shall be conclusive in determining the fair
market value of the stock.
6. Term of Each Option. The term of each option shall be five (5)
years or such shorter period as is prescribed in Article 9 hereof.
7. Exercise of Options.
(a) Subject to the provisions of Articles 9 and 14, options granted
hereunder shall be exercisable immediately; provided, that options shall not
be exercisable at any time in an amount less than 100 shares (or the remaining
shares then covered by and purchasable under the option if less than 100
shares), or for a fraction of a share.
(b) The purchase price of the shares as to which an option shall be
exercised shall be paid in full at the time of exercise in cash, by certified
check or wire transfer of funds through the Federal Reserve System.
8. Non-Transferability of Options. No option granted under the Plan
shall be transferable otherwise than by will or by the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined
by the Internal Revenue Code, Title I of the Employee Retirement Income
Security Act and the rules thereunder, and an option may be
3
<PAGE>
exercised, during the lifetime of the holder thereof, only by him.
9. Termination of Services on the Board of Directors.
(a) If a Nonemployee Director to whom an option has been granted
under the Plan shall cease to serve on the Board, otherwise than by reason of
death or disability (as that term is defined in paragraph (d) of this Article
9), then such option may be exercised (to the extent that the Nonemployee
Director was entitled to do so at the time of cessation of service) at any
time within three (3) months after such cessation of service but not
thereafter, and in no event after the date on which, except for such cessation
of service, the option would otherwise expire.
(b) If a Nonemployee Director to whom an option has been granted
under the Plan shall cease to serve on the Board by reason of disability, then
the remaining unexercised portion of the option may be exercised in whole or
in part by the Nonemployee Director (notwithstanding that the option had not
yet become exercisable with respect to all or part of such shares at the date
of disability) at any time within one (1) year after such disability but not
thereafter, and in no event after the date on which, except for such
disability, the option would otherwise expire.
(c) If a Nonemployee Director to whom an option has been granted
under the Plan shall die (i) while he is serving on the Board, or (ii) within
three (3) months after cessation of service on the Board, then such option may
be exercised by the legatee or legatees of such option under the Nonemployee
Director's last will, or by his personal representatives or distributee, at
any time within one (1) year after his death, but in no event after the date
on which, except for such death, the option would otherwise expire.
(d) For the purpose of this Article 9, "disability" shall mean
permanent mental or physical disability as determined by the Committee.
10. Adjustment of and Changes in Common Stock.
(a) If the outstanding shares of the Common Stock are increased,
decreased, changed into, or exchanged for a different number or kind of Shares
or securities of the Corporation through reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or the
like, an appropriate and proportionate adjustment shall be made in the number
and kind of securities receivable upon the exercise of an option, without
change in the total price applicable to the unexercised portion of this option
but with a corresponding adjustment in the price for each unit of any security
covered by such option.
(b) Upon the dissolution or liquidation of the Corporation, or upon a
reorganization, merger or consolidation of the Corporation with one or more
corporations as a result of which the Corporation is not the surviving
corporation, or upon the sale of substantially all of the assets of the
Corporation, the Committee shall provide in writing in connection with such
transaction for one or more of the following alternatives, separately or in
combination: (i) the assumption by the
4
<PAGE>
successor entity of the options theretofore granted or the substitution by
such entity for such options of new options covering the stock of the
successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices; or (ii) the
continuance of such option agreements by such successor entity in which such
options shall remain in full force and effect under the terms so provided.
(c) Any adjustments under this Article 10 shall be made by the
Committee, whose good faith determination as to what adjustments shall be
made, and the extent thereof, shall be final, binding and conclusive.
11. Compliance with Securities Laws. As a condition to the exercise
of any option, either (a) a Registration Statement under the Securities Act of
1933, as amended, or any succeeding act (collectively, the "Act"), with
respect to its underlying shares shall be effective at the time of exercise of
the option or (b) in the opinion of counsel to the Corporation, there shall be
an exemption from registration under the Act for the issuance of shares of
Common Stock upon such exercise. Nothing herein shall be construed as
requiring the Corporation to register shares subject to the Plan or any option
under the Act. Each opinion shall be subject to the further requirement that
if, in the opinion of counsel to the Corporation, the listing or qualification
of the shares of Common Stocks subject to such option on any securities
exchange, National Securities Association or under any applicable law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the exercise of such
option or the issue of shares thereunder, such option may not be exercised in
whole or in part unless such listing, qualification, consent or approval shall
have been effected or obtained free of any conditions requiring the
Corporation to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction wherein it has not already
done so and free of any other conditions not customarily imposed by a
securities exchange, law or governmental regulatory body in connection with
such listing, qualification, consent or approval.
12. Amendment and Termination. The Committee may amend, suspend or
terminate the Plan or any portion thereof at any time but may not, without the
approval of the Corporation's shareholders within twelve (12) months before or
after the date of adoption of any such amendment or amendments, make any
alteration or amendment thereof which (a) makes any change in the class of
eligible participants as determined in accordance with Article 4 hereof; (b)
increases the total number of shares of Common Stock for which options may be
granted under the Plan except as provided in Article 10 hereof; (c) extends
the term of the Plan or the maximum option period provided under the Plan; (d)
decreases the option price provided in Article 5 hereof; or (e) materially
increases the benefits accruing to participants under the Plan.
Notwithstanding anything to the contrary contained herein, the Plan shall not
be amended more than once every six (6) months, other than to comport with
changes in the Internal Revenue Code, Employee Retirement Income Security Act
or the rules thereunder.
13. Duties of the Corporation. The Corporation shall, at all times
during the term of each option, reserve and keep available for issuance or
delivery such number of shares of
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<PAGE>
Common Stock as will be sufficient to satisfy the requirements of all options
at the time outstanding, shall pay all original issue taxes with respect to
the issuance or delivery of shares pursuant to the exercise of such options
and all other fees and expenses necessarily incurred by the Corporation in
connection therewith.
14. Term; Effective Period. The Plan shall become effective on March
13, 1997, the date of its adoption by the Board of Directors (as amended by
the Board of Directors on April 29, 1997), subject to
(a) approval by the holders of a majority of shares of the
Corporation's capital stock outstanding and entitled to vote thereon at the
next meeting of its shareholders, or the written consent of the holders of a
majority of shares that would have been entitled to vote thereon, and no
options granted hereunder may be exercised prior to such approval, provided
that, the date of grant of any options granted hereunder shall be determined
as if the Plan had not been subject to such approval; and
(b) notification of the adoption of the Plan to the Nasdaq Stock
Market by the filing of the appropriate documents, forms and exhibits, and no
options granted hereunder may be exercised prior to fifteen (15) days after
such filing, provided that, the date of grant of any options granted hereunder
shall be determined as if the Plan had not been subject to such filing.
(c) No options may be granted under the Plan after February 28, 2007.
Options outstanding on or prior to such date shall, however, in all respects
continue subject to the Plan.
<PAGE>
Exhibit 4.18
1998 STOCK OPTION PLAN
OF
JEAN PHILIPPE FRAGRANCES, INC.
1. Purposes of The Plan. This stock option plan (the "Plan") is
designed to provide an incentive to key employees, officers, directors and
consultants of Jean Philippe Fragrances, Inc., a Delaware corporation (the
"Company"), and its present and future subsidiary corporations, as defined in
Paragraph 17 ("Subsidiaries"), and to offer an additional inducement in
obtaining the services of such individuals. The Plan provides for the grant of
"incentive stock options," within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), nonqualified stock options and
stock appreciation rights ("SARs").
2. Shares Subject To The Plan. The aggregate number of shares of
Common Stock, $.001 par value per share, of the Company ("Common Stock") for
which options or SARs may be granted under the Plan shall not exceed 150,000.
Such shares may, in the discretion of the Board Directors, consist either in
whole or in part of authorized but unissued shares of Common Stock or shares
of Common Stock held in the treasury of the Company. The Company shall at all
times during the term of the Plan reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the requirements of
the Plan. Subject to the provisions of Paragraph 14, any shares subject to an
option or SAR which for any reason expire, are canceled or are terminated
unexercised (other than those which expire, are canceled or terminated
pursuant to the exercise of a tandem SAR or option) shall again become
available for the granting of options or SARs under the Plan. The number of
shares of Common Stock underlying that portion of an option or SAR which is
exercised (regardless of the number of shares actually issued) shall not again
become available for grant under the Plan.
3. Administration Of The Plan.
(a) The Plan shall be administered by the Board of Directors, or if
appointed, by a Stock Option Committee consisting of not less than two (2)
members of the Board of Directors, each of whom shall be a "non-employee
director" within the meaning of Rule 16b-3 promulgated by the Securities and
Exchange Commission. (The group administering the plan is referred to as the
"Committee). The failure of any of the Committee members to qualify as a
"non-employee director" shall not otherwise affect the validity of the grant
of any option or SAR, or the issuance of shares of Common Stock otherwise
validly issued upon exercise of any such option. A majority of the members of
the Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, and any acts
approved in writing by all members without a meeting, shall be the acts of the
Committee.
(b) Subject to the express provisions of the Plan, the Committee
shall have the authority, in its sole discretion, to determine the individuals
who shall receive options and
<PAGE>
SARS; the times when they shall receive them; whether an option shall be an
incentive or a nonqualified stock option; whether an SAR shall be granted
separately, in tandem with or in addition to an option; the number of shares
to be subject to each option and SAR; the term of each option and SAR; the
date each option and SAR shall become exercisable; whether an option or SAR
shall be exercisable in whole, in part or in installments, and if in
installments, the number of shares to be subject to each installment; whether
the installments shall be cumulative, the date each installment shall become
exercisable and the term of each installment; whether to accelerate the date
of exercise of any installment; whether shares may be issued on exercise of an
option as partly paid, and, if so, the dates when future installments of the
exercise price shall become due and the amounts of such installments; the
exercise price of each option and the base price of each SAR; the form of
payment of the exercise price; the form of payment by the Company upon the
optionee's exercise of an SAR; whether to require that the optionee remain in
the employ of the Company or its Subsidiaries for a period of time from and
after the date the option or SAR is granted to him; the amount necessary to
satisfy the Company's obligation to withhold taxes; whether to restrict the
sale or other disposition of the shares of Common Stock acquired upon the
exercise of an option or SAR and to waive any such restriction; to subject the
exercise of all or any portion of an option or SAR to the fulfillment of
contingencies as specified in the Contract (described in Paragraph 12),
including without limitations, contingencies relating to financial objectives
(such as earnings per share, cash flow return, return on investment or growth
in sales) for a specified period for the Company, a division, a product line
or other category, and/or the period of continued employment of the optionee
with the Company or its Subsidiaries, and to determine whether such
contingencies have been met; to construe the respective Contracts and the
Plan; with the consent of the optionee, to cancel or modify an option or SAR,
provided such option or SAR as modified would be permitted to be granted on
such date under the terms of the Plan; and to make all other determinations
necessary or advisable for administering the Plan. The determinations of the
Committee on the matters referred to in this Paragraph 3 shall be conclusive.
4. Eligibility. The Committee may, consistent with the purposes of
the Plan, grant incentive stock options to key employees (including officers
and directors who are employees) and nonqualified stock options and/or SARs to
key employees, officers, directors and consultants of the Company or any of
its Subsidiaries from time to time, within ten (10) years from the date of
adoption of the Plan by the Board of Directors, covering such number of shares
of Common Stock as the Committee may determine; provided, however, that the
aggregate market value (determined at the time the stock option is granted) of
the shares for which any eligible person may be granted incentive stock
options under the Plan or any plan of the Company, or of a Parent or a
Subsidiary of the Company which are exercisable for the first time by such
optionee during any calendar year shall not exceed $100,000. Any option (or
portion thereof) granted in excess of such amount shall be treated as a
nonqualified stock option.
5. Exercise Price And Base Price.
(a) The exercise price of the shares of Common Stock under each
option and the base
<PAGE>
price for each SAR shall be determined by the Committee; provided, however, in
the case of an incentive stock option, the exercise price shall not be less
than 100% of the fair market value of the Common Stock on the date of grant,
and further provided, that if, at the time an incentive stock option is
granted, the optionee owns (or is deemed to own) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock
of the Company, of any of its Subsidiaries or of a Parent, the exercise price
shall not be less than 110% of the fair market value of the Common Stock
subject to the option at the time of the granting of such option.
(b) The fair market value of the Common stock on any day shall be (a)
if the principal market for the Common stock is a national securities
exchange, the average between the high and low sales prices of the Common
stock on such day as reported by such exchange or on a consolidated tape
reflecting transactions on such exchange; (b) if the principal market for the
Common Stock is not a national securities exchange and the Common Stock is
quoted on The Nasdaq Stock Market ("NASDAQ"), and (i) if actual sales price
information is available with respect to the Common Stock, then the average
between the high and low sales prices of the Common Stock on such day on
NASDAQ, or (ii) if such information is not available, then the average between
the highest bid and lowest asked prices for the Common Stock on such day on
NASDAQ; or (c) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on NASDAQ, then the
average between the highest bid and lowest asked prices for the Common Stock
on such day as reported by The Nasdaq Bulletin Board, or a comparable service;
provided that if clauses (a), (b) and (c) of this Paragraph are all
inapplicable, or if no trades have been made or no quotes are available for
such day, then the fair market value of the Common Stock shall be determined
by the Committee by any method consistent with applicable regulations adopted
by the Treasury Department relating to stock options. The determination of the
Committee shall be conclusive in determining the fair market value of the
stock.
6. Term. The term of each option and SAR granted pursuant to the Plan
shall be such term as is established by the Committee, in its sole discretion,
at or before the term of each incentive stock option granted pursuant to the
Plan shall be for a period not exceeding ten (10) years from the date of
granting thereof, and further, provided, that if, at the time an incentive
stock option is granted, the optionee owns (or is deemed to own) stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company, of any of its Subsidiaries or of a
Parent, the term of the incentive stock option shall be for a period not
exceeding five (5) years. Options shall be subject to earlier termination as
hereinafter provided.
7. Exercise.
(a) An option or SAR (or any part or installment thereof) shall be
exercised by giving written notice to the Company at its principal office (at
present 551 Fifth Avenue, New York, NY 10176) stating whether an incentive or
nonqualified stock option or SAR is being exercised, specifying the number of
shares as to which such option or SAR is being exercised, and in the case of
an option, accompanied by payment in full of the aggregate exercise price
<PAGE>
therefor (or the amount due on exercise if the Contract permits installment
payments) in the discretion of the Committee (a) in cash or by certified
check, (b) with previously acquired shares of Common Stock having an aggregate
fair market value, on the date of exercise, equal to the aggregate exercise
price of all options being exercised, or (c) any combination thereof. In
addition, upon the exercise of a nonqualified stock option or SAR, the Company
may withhold cash and/or shares of Common Stock to be issued with respect
thereto having an aggregate fair market value equal to the amount which it
determined is necessary to satisfy its obligation to withhold Federal, state
and local income taxes or other taxes incurred by reason of such exercise.
Alternatively, the Company may require the holder to pay to the Company such
amount, in cash, promptly upon demand. The Company shall not be required to
issue any shares pursuant to any such option or SAR until all required
payments have been made. Fair market value of the shares shall be determined
in accordance with Paragraph 5.
(b) A person entitled to receive Common Stock upon the exercise of an
option or SAR shall not have the rights of a shareholder with respect to such
shares until the date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock certificate is issued, any
option holder using previously acquired shares in payment of an option
exercise price shall have the rights of a shareholder with respect to such
previously acquired shares.
(c) In no case may a fraction of a share be purchased or issued under
the Plan. Any option granted in tandem with an SAR shall no longer be
exercisable to the extent the SAR is exercised, and the exercise of the
related option shall cancel the SAR to the extent of such exercise.
8. Stock Appreciation Rights.
(a) An SAR may be granted separately, in tandem with or in addition
to any option, and may be granted before, simultaneously with or after the
grant of an option hereunder. In addition, the holder of an option may, in
lieu of making the payment required at the time of exercise under Paragraph 7,
include in the written notice referred to therein an "election" to exercise
the option as an SAR. In such case, the Committee shall have fifteen (15) days
from the receipt of notice of the election to decide, in its sole discretion,
whether or not to accept the election and notify the option holder of its
decision. If the Committee consents, such exercise shall be treated as the
exercise of an SAR with a base price equal to the exercise price.
(b) Upon the exercise of an SAR, the holder shall be entitled to
receive an amount equal to the excess of the fair market value of a share of
Common Stock on the date of exercise over the base price of the SAR. Such
amount shall be paid, in the discretion of the Committee, in cash, Common
Stock having a fair market value on the date of payment equal to such amount,
or a combination thereof. For purposes of this Paragraph 8, fair market value
shall be determined in accordance with Paragraph 5.
9. Termination Of Association With The Company.
(a) Any holder of an incentive option whose association with the
Company (and its
<PAGE>
Subsidiaries) has terminated for any reason other than his death or permanent
and total disability (as defined in Section 22(e)(3) of the Code) may exercise
such option, to the extent exercisable on the date of such termination, at any
time within three (3) months after the date of termination, but in no event
after the expiration of the term of the option; provided, however, that if his
association shall be terminated either (i) for cause, or (ii) without the
consent of the Company, said option shall terminate immediately.
(b) Any and all nonqualified stock options or SARs granted under the
Plan shall terminate simultaneously with the termination of association of the
holder of such nonqualified option or SAR with the Company (and its
Subsidiaries) for any reason other than the death or permanent and total
disability (as defined in Section 22(e)(3) of the Code) of such holder.
(c) Options and SARs granted under the Plan shall not be affected by
any change in the status of an optionee so long as he continues to be
associated with the Company or any of the Subsidiaries.
(d) Nothing in the Plan or in any option or SAR granted under the
Plan shall confer on any individual any right to continue to be associated
with the Company or any of its Subsidiaries, or interfere in any way with the
right of the Company or any of its Subsidiaries to terminate the holder's
association at any time for any reason whatsoever without liability to the
Company or any of its subsidiaries.
10. Death Or Disability Of An Optionee.
(a) If an optionee dies while he is associated with the Company or
any of its Subsidiaries, or within three (3) months after such termination for
the holder of an incentive option (unless such termination was for cause or
without the consent of the Company), the option or SAR may be exercised, to
the extent exercisable on the death, by his executor, administrator or other
person at the time entitled by law to his rights under the option or SAR, at
any time within one (1) year after death, but in no event after the expiration
of the term of the option or SAR.
(b) Any holder whose association with the Company or its Subsidiaries
has terminated by reason of a permanent and total disability (as defined in
Section 22(e) (3) of the Code) may exercise his option or SAR, to the extent
exercisable upon the effective date of such termination, at any time within
one (1) year after such date, but in no event after the expiration of the term
of the option or SAR.
11. Compliance With Securities Laws. The Committee may require, in
its discretion, as a condition to the exercise of an option or SAR that either
(a) a registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to such shares shall be effective at the time
of exercise or (b) there is an exemption from registration under the
Securities Act for the issuance of shares of Common Stock upon such exercise.
Nothing herein shall be construed as requiring the Company to register shares
subject to any option or SAR under the Securities Act. In addition, if at any
time the Committee shall determine in its
<PAGE>
discretion that the listing or qualification of the shares subject to such
option or SAR on any securities exchange or under any applicable law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of an option
or SAR, or the issue of shares thereunder, such option or SAR may not be
exercised in whole or in part unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
12. Stock Option And SAR Contracts. Each option and SAR shall be
evidenced by an appropriate Contract which shall be duly executed by the
Company and the optionee, and shall contain such terms and conditions not
inconsistent herewith as may be determined by the Committee, and which shall
provide, among other things, (a) that the optionee agrees that he will remain
in the employ of the Company or its Subsidiaries, at the election of the
Company, for the later of (i) the period of time determined by the Committee
at or before the time of grant or (ii) the date to which he is then
contractually obligated to remain associated with the Company or its
Subsidiaries, (b) that in the event of the exercise of an option or an SAR
which is paid with Common stock, unless the shares of Common Stock received
upon such exercise shall have been registered under an effective registration
statement under the Securities Act, such shares will be acquired for
investment and not with a view to distribution thereof, and that such shares
may not be sold except in compliance with the applicable provisions of the
Securities Act, and (c) that in the event of any disposition of the shares of
Common Stock acquired upon the exercise of an incentive stock option within
two (2) years from the date of grant of the option or one (1) year from the
date of transfer of such shares to him, the optionee will notify the Company
thereof in writing within 30 days after such disposition, pay the Company, on
demand, in cash an amount necessary to satisfy its obligation, if any, to
withhold any Federal, state and local income taxes or other taxes by reason of
such disqualifying disposition and provide the Company, on demand, with such
information as the Company shall reasonably request to determine such
obligation.
13. Adjustments Upon Changes In Common Stock. Notwithstanding any
other provisions of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, merger,
consolidation, reorganization, split-up, combination or exchange of shares or
the like, the aggregate number and kind of shares available under the Plan,
the aggregate number and kind of shares subject to each outstanding option and
SAR and the exercise prices and base prices thereof shall be appropriately
adjusted by the Board of Directors, whose determination shall be conclusive.
14. Amendments And Termination Of The Plan. The Plan was adopted by
the Board of Directors on April 27, 1998. No options may be granted under the
Plan after April 26, 2008. The Board of Directors, without further approval of
the Company's stockholders, may at any time suspend or terminate the Plan, in
whole or in part, or amend it from time to time in such respects as it may
deem advisable, including, without limitation, in order that incentive stock
options granted hereunder meet the requirements for "incentive stock options"
under the Code, or any comparable provisions thereafter enacted and conform to
any change in applicable law or to regulations or rulings of administrative
agencies; provided, however, that no amendment shall be effective without the
prior or subsequent approval of a majority of the
<PAGE>
Company's outstanding stock entitled to vote thereon which would (a) except as
contemplated in Paragraph 13, increase the maximum number of shares for which
options may be granted under the Plan, (b) materially increase the benefits to
participants under the plan or (c) change the eligibility requirements for
individuals entitled to receive options hereunder. No termination, suspension
or amendment of the Plan shall, without the consent of the holder of an
existing option affected thereby, adversely affect his rights under such
option.
15. Nontransferability Of Options. No option or SAR granted under the
Plan shall be transferable otherwise than by will or the laws of descent and
distribution, or qualified domestic relations order as defined in the Code or
Title I of the Employee Retirement Income Security Act, and options and SARs
may be exercised, during the lifetime of the holder thereof, only by him or
his legal representatives. Except to the extent provided above, options and
SARs may not be assigned, transferred, pledged, hypothecated or disposed of in
any way (whether by operation of law or otherwise) and shall not subject to
execution, attachment or similar process.
16. Substitutions And Assumptions Of Options Of Certain Constituent
Corporations. Anything in this Plan to the contrary notwithstanding, the Board
of directors may, without further approval by the stockholders, substitute new
options for prior options and new SARs for prior SARs of a Constituent
Corporation (as defined in Paragraph 17) or assume the prior options or SARs
of such Constituent Corporation.
17. Definitions.
(a) The term "Subsidiary" shall have the same definition as
"subsidiary corporation" in Section 425(f) of the Code.
(b) The term "Parent" shall have the same definition as "parent
corporation" in Section 425(e) of the Code.
(c) The term "Constituent Corporation" shall mean any corporation
which engages with the Company, its Parent or Subsidiary, in a transaction to
which section 425(a) of the Code applies (or would apply if the option or SAR
assumed or substituted were an incentive stock option), or any Parent or any
Subsidiary of such corporation.
18. Conditions Precedent. The Plan shall be subject to
(a) approval by the holders of a majority of shares of the Company's
capital stock outstanding and entitled to vote thereon at the next meeting of
its stockholders, or the written consent of the holders of a majority of
shares that would have been entitled to vote thereon, and no options or SARs
granted hereunder may be exercised prior to such approval, provided that the
date of grant of any options granted hereunder shall be determined as if the
Plan had not been subject to such approval; and
(b) notification of the adoption of the Plan to The Nasdaq Stock
Market by the filing of
<PAGE>
the appropriate documents, forms and exhibits, and no options or SARs granted
hereunder may be exercised prior to fifteen (15) days after such filing,
provided that the date of grant of any options granted hereunder shall be
determined as if the Plan had not been subject to such filing.
<PAGE>
Exhibit 4.19
1999 STOCK OPTION PLAN
OF
JEAN PHILIPPE FRAGRANCES, INC.
1. Purposes of The Plan. This stock option plan (the "Plan") is
designed to provide an incentive to key employees, officers, directors and
consultants of Jean Philippe Fragrances, Inc., a Delaware corporation (the
"Company"), and its present and future subsidiary corporations, as defined in
Paragraph 17 ("Subsidiaries"), and to offer an additional inducement in
obtaining the services of such individuals. The Plan provides for the grant of
"incentive stock options," within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), nonqualified stock options and
stock appreciation rights ("SARs").
2. Shares Subject To The Plan. The aggregate number of shares of Common
Stock, $.001 par value per share, of the Company ("Common Stock") for which
options or SARs may be granted under the Plan shall not exceed 1,000,000. Such
shares may, in the discretion of the Board of Directors, consist either in whole
or in part of authorized but unissued shares of Common Stock or shares of Common
Stock held in the treasury of the Company. The Company shall at all times during
the term of the Plan reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of the Plan. Subject to
the provisions of Paragraph 14, any shares subject to an option or SAR which for
any reason expire, are canceled or are terminated unexercised (other than those
which expire, are canceled or terminated pursuant to the exercise of a tandem
SAR or option) shall again become available for the granting of options or SARs
under the Plan. The number of shares of Common Stock underlying that portion of
an option or SAR which is exercised (regardless of the number of shares actually
issued) shall not again become available for grant under the Plan.
3. Administration Of The Plan.
(a) The Plan shall be administered by the Board of Directors, or if
appointed, by a Stock Option Committee consisting of not less than two (2)
members of the Board of Directors, each of whom shall be a "non-employee
director" within the meaning of Rule 16b-3 promulgated by the Securities and
Exchange Commission. (The group administering the plan is referred to as the
"Committee). The failure of any of the Committee members to qualify as a
non-employee director" shall not otherwise affect the validity of the grant of
any option or SAR, or the issuance of shares of Common Stock otherwise validly
issued upon exercise of any such option. A majority of the members of the
Committee shall constitute a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present, and any acts approved in
writing by all members without a meeting, shall be the acts of the Committee.
(b) Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, to determine the individuals who
shall receive options and
<PAGE>
SARS; the times when they shall receive them; whether an option shall be an
incentive or a nonqualified stock option; whether an SAR shall be granted
separately, in tandem with or in addition to an option; the number of shares to
be subject to each option and SAR; the term of each option and SAR; the date
each option and SAR shall become exercisable; whether an option or SAR shall be
exercisable in whole, in part or in installments, and if in installments, the
number of shares to be subject to each installment; whether the installments
shall be cumulative, the date each installment shall become exercisable and the
term of each installment; whether to accelerate the date of exercise of any
installment; whether shares may be issued on exercise of an option as partly
paid, and, if so, the dates when future installments of the exercise price shall
become due and the amounts of such installments; the exercise price of each
option and the base price of each SAR; the form of payment of the exercise
price; the form of payment by the Company upon the optionee's exercise of an
SAR; whether to require that the optionee remain in the employ of the Company or
its Subsidiaries for a period of time from and after the date the option or SAR
is granted to him; the amount necessary to satisfy the Company's obligation to
withhold taxes; whether to restrict the sale or other disposition of the shares
of Common Stock acquired upon the exercise of an option or SAR and to waive any
such restriction; to subject the exercise of all or any portion of an option or
SAR to the fulfillment of contingencies as specified in the Contract (described
in Paragraph 12), including without limitations, contingencies relating to
financial objectives (such as earnings per share, cash flow return, return on
investment or growth in sales) for a specified period for the Company, a
division, a product line or other category, and/or the period of continued
employment of the optionee with the Company or its Subsidiaries, and to
determine whether such contingencies have been met; to construe the respective
Contracts and the Plan; with the consent of the optionee, to cancel or modify an
option or SAR, provided such option or SAR as modified would be permitted to be
granted on such date under the terms of the Plan; and to make all other
determinations necessary or advisable for administering the Plan. The
determinations of the Committee on the matters referred to in this Paragraph 3
shall be conclusive.
4. Eligibility. The Committee may, consistent with the purposes of the
Plan, grant incentive stock options to key employees (including officers and
directors who are employees) and nonqualified stock options and/or SARs to key
employees, officers, directors and consultants of the Company or any of its
Subsidiaries from time to time, within ten (10) years from the date of adoption
of the Plan by the Board of Directors, covering such number of shares of Common
Stock as the Committee may determine; provided, however, that the aggregate
market value (determined at the time the stock option is granted) of the shares
for which any eligible person may be granted incentive stock options under the
Plan or any plan of the Company, or of a Parent or a Subsidiary of the Company
which are exercisable for the first time by such optionee during any calendar
year shall not exceed $100,000. Any option (or portion thereof) granted in
excess of such amount shall be treated as a nonqualified stock option.
5. Exercise Price And Base Price.
(a) The exercise price of the shares of Common Stock under each option
and the base
<PAGE>
price for each SAR shall be determined by the Committee; provided, however, in
the case of an incentive stock option, the exercise price shall not be less than
100% of the fair market value of the Common Stock on the date of grant, and
further provided, that if, at the time an incentive stock option is granted, the
optionee owns (or is deemed to own) stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company, of
any of its Subsidiaries or of a Parent, the exercise price shall not be less
than 110% of the fair market value of the Common Stock subject to the option at
the time of the granting of such option.
(b) The fair market value of the Common stock on any day shall be (a)
if the principal market for the Common stock is a national securities exchange,
the average between the high and low sales prices of the Common stock on such
day as reported by such exchange or on a consolidated tape reflecting
transactions on such exchange; (b) if the principal market for the Common Stock
is not a national securities exchange and the Common Stock is quoted on The
Nasdaq Stock Market ("NASDAQ"), and (i) if actual sales price information is
available with respect to the Common Stock, then the average between the high
and low sales prices of the Common Stock on such day on NASDAQ, or (ii) if such
information is not available, then the average between the highest bid and
lowest asked prices for the Common Stock on such day on NASDAQ; or (c) if the
principal market for the Common Stock is not a national securities exchange and
the Common Stock is not quoted on NASDAQ, then the average between the highest
bid and lowest asked prices for the Common Stock on such day as reported by The
Nasdaq Bulletin Board, or a comparable service; provided that if clauses (a),
(b) and (c) of this Paragraph are all inapplicable, or if no trades have been
made or no quotes are available for such day, then the fair market value of the
Common Stock shall be determined by the Committee by any method consistent with
applicable regulations adopted by the Treasury Department relating to stock
options. The determination of the Committee shall be conclusive in determining
the fair market value of the stock.
6. Term. The term of each option and SAR granted pursuant to the Plan
shall be such term as is established by the Committee, in its sole discretion,
at or before the term of each incentive stock option granted pursuant to the
Plan shall be for a period not exceeding ten (10) years from the date of
granting thereof, and further, provided, that if, at the time an incentive stock
option is granted, the optionee owns (or is deemed to own) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, of any of its Subsidiaries or of a Parent, the term of the
incentive stock option shall be for a period not exceeding five (5) years.
Options shall be subject to earlier termination as hereinafter provided.
7. Exercise.
(a) An option or SAR (or any part or installment thereof) shall be
exercised by giving written notice to the Company at its principal office (at
present 551 Fifth Avenue, New York, NY 10176) stating whether an incentive or
nonqualified stock option or SAR is being exercised, specifying the number of
shares as to which such option or SAR is being exercised, and in the case of an
option, accompanied by payment in full of the aggregate exercise price
<PAGE>
therefor (or the amount due on exercise if the Contract permits installment
payments) in the discretion of the Committee (a) in cash or by certified check,
(b) with previously acquired shares of Common Stock having an aggregate fair
market value, on the date of exercise, equal to the aggregate exercise price of
all options being exercised, or (c) any combination thereof. In addition, upon
the exercise of a nonqualified stock option or SAR, the Company may withhold
cash and/or shares of Common Stock to be issued with respect thereto having an
aggregate fair market value equal to the amount which it determined is necessary
to satisfy its obligation to withhold Federal, state and local income taxes or
other taxes incurred by reason of such exercise. Alternatively, the Company may
require the holder to pay to the Company such amount, in cash, promptly upon
demand. The Company shall not be required to issue any shares pursuant to any
such option or SAR until all required payments have been made. Fair market value
of the shares shall be determined in accordance with Paragraph 5.
(b) A person entitled to receive Common Stock upon the exercise of an
option or SAR shall not have the rights of a shareholder with respect to such
shares until the date of issuance of a stock certificate to him for such shares;
provided, however, that until such stock certificate is issued, any option
holder using previously acquired shares in payment of an option exercise price
shall have the rights of a shareholder with respect to such previously acquired
shares.
(c) In no case may a fraction of a share be purchased or issued under
the Plan. Any option granted in tandem with an SAR shall no longer be
exercisable to the extent the SAR is exercised, and the exercise of the related
option shall cancel the SAR to the extent of such exercise.
8. Stock Appreciation Rights.
(a) An SAR may be granted separately, in tandem with or in addition to
any option, and may be granted before, simultaneously with or after the grant of
an option hereunder. In addition, the holder of an option may, in lieu of making
the payment required at the time of exercise under Paragraph 7, include in the
written notice referred to therein an "election" to exercise the option as an
SAR. In such case, the Committee shall have fifteen (15) days from the receipt
of notice of the election to decide, in its sole discretion, whether or not to
accept the election and notify the option holder of its decision. If the
Committee consents, such exercise shall be treated as the exercise of an SAR
with a base price equal to the exercise price.
(b) Upon the exercise of an SAR, the holder shall be entitled to
receive an amount equal to the excess of the fair market value of a share of
Common Stock on the date of exercise over the base price of the SAR. Such amount
shall be paid, in the discretion of the Committee, in cash, Common Stock having
a fair market value on the date of payment equal to such amount, or a
combination thereof. For purposes of this Paragraph 8, fair market value shall
be determined in accordance with Paragraph 5.
9. Termination Of Association With The Company.
(a) Any holder of an incentive option whose association with the
Company (and its
<PAGE>
Subsidiaries) has terminated for any reason other than his death or permanent
and total disability (as defined in Section 22(e)(3) of the Code) may exercise
such option, to the extent exercisable on the date of such termination, at any
time within three (3) months after the date of termination, but in no event
after the expiration of the term of the option; provided, however, that if his
association shall be terminated either (i) for cause, or (ii) without the
consent of the Company, said option shall terminate immediately.
(b) Any and all nonqualified stock options or SARs granted under the
Plan shall terminate simultaneously with the termination of association of the
holder of such nonqualified option or SAR with the Company (and its
Subsidiaries) for any reason other than the death or permanent and total
disability (as defined in Section 22(e)(3) of the Code) of such holder.
(c) Options and SARs granted under the Plan shall not be affected by
any change in the status of an optionee so long as he continues to be associated
with the Company or any of the Subsidiaries.
(d) Nothing in the Plan or in any option or SAR granted under the Plan
shall confer on any individual any right to continue to be associated with the
Company or any of its Subsidiaries, or interfere in any way with the right of
the Company or any of its Subsidiaries to terminate the holder's association at
any time for any reason whatsoever without liability to the Company or any of
its subsidiaries.
10. Death Or Disability Of An Optionee.
(a) If an optionee dies while he is associated with the Company or any
of its Subsidiaries, or within three (3) months after such termination for the
holder of an incentive option (unless such termination was for cause or without
the consent of the Company), the option or SAR may be exercised, to the extent
exercisable on the death, by his executor, administrator or other person at the
time entitled by law to his rights under the option or SAR, at any time within
one (1) year after death, but in no event after the expiration of the term of
the option or SAR.
(b) Any holder whose association with the Company or its Subsidiaries
has terminated by reason of a permanent and total disability (as defined in
Section 22(e) (3) of the Code) may exercise his option or SAR, to the extent
exercisable upon the effective date of such termination, at any time within one
(1) year after such date, but in no event after the expiration of the term of
the option or SAR.
11. Compliance With Securities Laws. The Committee may require, in its
discretion, as a condition to the exercise of an option or SAR that either (a) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to such shares shall be effective at the time of
exercise or (b) there is an exemption from registration under the Securities Act
for the issuance of shares of Common Stock upon such exercise. Nothing herein
shall be construed as requiring the Company to register shares subject to any
option or SAR under the Securities Act. In addition, if at any time the
Committee shall determine in its
<PAGE>
discretion that the listing or qualification of the shares subject to such
option or SAR on any securities exchange or under any applicable law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of an option or
SAR, or the issue of shares thereunder, such option or SAR may not be exercised
in whole or in part unless such listing, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
12. Stock Option And SAR Contracts. Each option and SAR shall be
evidenced by an appropriate Contract which shall be duly executed by the Company
and the optionee, and shall contain such terms and conditions not inconsistent
herewith as may be determined by the Committee, and which shall provide, among
other things, (a) that the optionee agrees that he will remain in the employ of
the Company or its Subsidiaries, at the election of the Company, for the later
of (i) the period of time determined by the Committee at or before the time of
grant or (ii) the date to which he is then contractually obligated to remain
associated with the Company or its Subsidiaries, (b) that in the event of the
exercise of an option or an SAR which is paid with Common stock, unless the
shares of Common Stock received upon such exercise shall have been registered
under an effective registration statement under the Securities Act, such shares
will be acquired for investment and not with a view to distribution thereof, and
that such shares may not be sold except in compliance with the applicable
provisions of the Securities Act, and (c) that in the event of any disposition
of the shares of Common Stock acquired upon the exercise of an incentive stock
option within two (2) years from the date of grant of the option or one (1) year
from the date of transfer of such shares to him, the optionee will notify the
Company thereof in writing within 30 days after such disposition, pay the
Company, on demand, in cash an amount necessary to satisfy its obligation, if
any, to withhold any Federal, state and local income taxes or other taxes by
reason of such disqualifying disposition and provide the Company, on demand,
with such information as the Company shall reasonably request to determine such
obligation.
13. Adjustments Upon Changes In Common Stock. Notwithstanding any other
provisions of the Plan, in the event of any change in the outstanding Common
Stock by reason of a stock dividend, recapitalization, merger, consolidation,
reorganization, split-up, combination or exchange of shares or the like, the
aggregate number and kind of shares available under the Plan, the aggregate
number and kind of shares subject to each outstanding option and SAR and the
exercise prices and base prices thereof shall be appropriately adjusted by the
Board of Directors, whose determination shall be conclusive.
14. Amendments And Termination Of The Plan. The Plan was adopted by the
Board of Directors on February 8, 1999. No options may be granted under the Plan
after February 7, 2009. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that incentive stock options
granted hereunder meet the requirements for "incentive stock options" under the
Code, or any comparable provisions thereafter enacted and conform to any change
in applicable law or to regulations or rulings of administrative agencies;
provided, however, that no amendment shall be effective without the prior or
subsequent approval of a majority of the
<PAGE>
Company's outstanding stock entitled to vote thereon which would (a) except as
contemplated in Paragraph 13, increase the maximum number of shares for which
options may be granted under the Plan, (b) materially increase the benefits to
participants under the plan or (c) change the eligibility requirements for
individuals entitled to receive options hereunder. No termination, suspension or
amendment of the Plan shall, without the consent of the holder of an existing
option affected thereby, adversely affect his rights under such option.
15. Nontransferability Of Options. No option or SAR granted under the
Plan shall be transferable otherwise than by will or the laws of descent and
distribution, or qualified domestic relations order as defined in the Code or
Title I of the Employee Retirement Income Security Act, and options and SARs may
be exercised, during the lifetime of the holder thereof, only by him or his
legal representatives. Except to the extent provided above, options and SARs may
not be assigned, transferred, pledged, hypothecated or disposed of in any way
(whether by operation of law or otherwise) and shall not subject to execution,
attachment or similar process.
16. Substitutions And Assumptions Of Options Of Certain Constituent
Corporations. Anything in this Plan to the contrary notwithstanding, the Board
of directors may, without further approval by the stockholders, substitute new
options for prior options and new SARs for prior SARs of a Constituent
Corporation (as defined in Paragraph 17) or assume the prior options or SARs of
such Constituent Corporation.
17. Definitions.
(a) The term "Subsidiary" shall have the same definition as "subsidiary
corporation" in Section 425(f) of the Code.
(b) The term "Parent" shall have the same definition as "parent
corporation" in Section 425(e) of the Code.
(c) The term "Constituent Corporation" shall mean any corporation which
engages with the Company, its Parent or Subsidiary, in a transaction to which
section 425(a) of the Code applies (or would apply if the option or SAR assumed
or substituted were an incentive stock option), or any Parent or any Subsidiary
of such corporation.
18. Conditions Precedent. The Plan shall be subject to
(a) approval by the holders of a majority of shares of the Company's
capital stock outstanding and entitled to vote thereon at the next meeting of
its stockholders, or the written consent of the holders of a majority of shares
that would have been entitled to vote thereon, and no options or SARs granted
hereunder may be exercised prior to such approval, provided that the date of
grant of any options granted hereunder shall be determined as if the Plan had
not been subject to such approval; and
(b) notification of the adoption of the Plan to The Nasdaq Stock Market
by the filing
<PAGE>
of the appropriate documents, forms and exhibits, and no options or SARs granted
hereunder may be exercised prior to fifteen (15) days after such filing,
provided that the date of grant of any options granted hereunder shall be
determined as if the Plan had not been subject to such filing.
<PAGE>
Exhibit 10.70
STRICTLY PRIVATE AND CONFIDENTIAL
DATED ________________ 1998
PAUL SMITH LIMITED (1)
-and-
INTER PARFUMS S.A. (2)
-and-
JEAN-PHILIPPE FRAGRANCES (3)
LICENCE AGREEMENT
FREETH CARTWRIGHT HUNT DICKINS
Solicitors
Express Buildings
29 Upper Parliament Street
Nottingham
NG1 2AQ
DX 10017 Nottingham
Telephone (0115) 9369369
Facsimile (0115) 9350352
<PAGE>
THIS AGREEMENT is made the _______ day of __________ 1998
- --------------
BETWEEN:
(1) PAUL SMITH LIMITED whose registered office is situate at Riverside
Buildings Riverside Way Nottingham England ("the Grantor");
(2) INTER PARFUMS S.A. a corporation duly organised and existing under the
laws of France with its principal office at 4 Rond Point des Champs
Elysees, 75008 Pan's (B350 219 382) ("the Licensee"); and
(3) JEAN-PHILIPPE FRAGRANCES INC. a corporation duly organised and existing
under the laws of Delaware with its principal office at 551,5 th Avenue
New York NY 10176 ("the Guarantor")
WHEREAS:
A. The Grantor designs and manufactures quality clothing and accessories
in the United Kingdom and in other countries
B. The Grantor owns the Trademarks consisting of "PAUL SMITH" and "PS PAUL
SMITH" used alone and in a logo design and has registered the
Trademarks in respect of fragrances in the countries specified in
Exhibit A.
C. The Licensee manufactures and sells perfumes and fragrances throughout
the world.
D. The Licensee wishes to manufacture advertise promote and sell
fragrances under the Trademarks in the Licensed Territory.
E. The Grantor is prepared to grant and the Licensee to take a licence in
the Licensed Territory to manufacture, advertise, promote and sell
fragrances under the Trademarks on the terms and for the consideration
hereinafter appearing
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS
1.1. In this Agreement the following words and phrases shall have
the following meanings unless the context clearly requires
otherwise
<PAGE>
1. 1. 1. "Affiliated Distributors"
Shall mean distributors of the Licensee in which
either the Licensee or the Guarantor either holds
more than 50% of the share voting rights or otherwise
has effective control.
1.1.2. "Business"
Shall mean that part of the business of the Licensee
which involves the manufacture and/or distribution of
the Licensed Products (or any part or parts thereof).
1.1.3. "Business Day"
Shall mean any day which is not a Saturday not a
Sunday and not a recognised public holiday in either
the Grantor's or the Licensee's country.
1.1.4. "Calendar Quarter"
Shall mean a three monthly period commencing on the
first day of each of the months of January, April,
July and October in every year of the Term.
1.1.5. "Contract Year"
Shall mean each of the following twelve (12) years: -
First Contract Year
The period from the 1st day of January 1999 to the
31st day of December 1999;
Second Contract Year
The period from the 1st day of January 2000 to the
31st day of December 2000;
Third Contract Year
The period from the 1st day of January 2001 to the
31st day of December 2001;
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Fourth Contract Year
The period from the 1st day of January 2002 to the
31st day of December 2002;
Fifth Contract Year
The period from the 1st day of January 2003 to the
31st day of December 2003;
Sixth Contract Year
The period from the 1st day of January 2004 to the
31st day of December 2004;
Seventh Contract Year
The period from the 1st day of January 2005 to the
31st day of December 2005;
Eighth Contract Year
The period from the 1st day of January 2006 to the
31st day of December 2006;
Ninth Contract Year
The period from the 1st day of January 2007 to the
31st day of January 2007;
Tenth Contract Year
The period from the 1st day of January 2008 to the
31st day of January 2008;
Eleventh Contract Year
The period from the 1st day of January 2009 to the
31st day of December 2009;
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Twelfth Contract Year
The period from the 1st day of January 2010 to the
31st day of December 2010;
1.1.6. "Excluded Duty Free Outlets"
Shall mean such duty free outlets as may be notified
from time to time by the Grantor to the Licensee
pursuant to clause 6.11 of this Agreement.
1.1.7. "Intellectual Property Rights"
Shall mean all copyrights, registered and
unregistered design rights, patents, trademarks and
all other rights
1.1.8. "Licensed Products"
Shall mean the Products manufactured by or for and
sold by the Licensee and/or any sub licensee of the
Licensee under the Trademarks
1.1.9. "Licensed Territory"
Shall mean the world (excluding the Excluded Duty
Free Outlets)
1.1.10. "Minimum Royalty"
Shall mean
(a) in the First Contract Year there
shall be _____ Minimum Royalty;
(b) in the Second Contract Year a
Royalty of at least
__________________________________
French Francs;
(c) in the Third Contract Year a
Royalty of at least
__________________________________
French Francs;
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(d) in the Fourth Contract Year a
Royalty of at least _____ French
Francs;
(e) in the Fifth Contract Year a
Royalty of at least ________ French
Francs; and
(f) in the Sixth Contract Year and
every subsequent Contract Year of
the Term means the higher of
(i) _______ francs; and
(ii) such other amount as the
Grantor and the Licensee,
negotiating in good faith
shall agreed during the
Fifth Contract Year.
1.1.11. "Royalty"
Shall mean the royalty payable by the Licensee to the
Grantor under clause 5.1 of this Agreement.
1.1.12. "Products"
Shall mean men's and women's and children's
fragrances and cosmetics and related packaging and
promotional materials.
1.1.13. "Restricted Information"
Shall mean any information which is disclosed to
either party to this Agreement by the other pursuant
to or in connection with this Agreement (whether
orally or in writing and whether or not such
information is expressly stated to be confidential or
marked as such)
1.1.14. "Term"
Shall mean the term of this Agreement being the
period of twelve years commencing on lst January 1999
and expiring on 31st December 2010.
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1.1.15. "Trademarks"
Shall mean the trademarks "PAUL SMITH" and "PS PAUL
SMITH" and in each case used with such other
additional word or words as may be approved by the
Grantor in writing from time to time.
1.1.16. "Turnover"
Shall mean aggregate gross sales of each of the
Licensed Products sold by the Licensee (or, if the
price of any Licensed Product re-sold by an
Affiliated Distributor shall be higher than the price
at which the Licensed Product was sold to the
Affiliated Distributor by the Licensee then the
aggregate sales of each such Licensed Product sold by
the Affiliated Distributors shall be substituted for
the gross sales of such Licensed Products by the
Licensee to the Affiliated Distributors) and/or its
sub-licensees to customers in the Licensed Territory
(whether by wholesale or retail and including sales
to the Grantor and its licensees) less:
(a) actual trade discounts and other
discounts approved of in writing by
the Grantor and allowed to
customers (but excluding early
settlement discounts);
(b) returns and credits actually
granted to customers (but excluding
bad debts);
(c) point of sale items (including
gifts, samples and testers given to
customers and show cards);
(d) any commodity or consumption taxes
imposed on the Licensee or (as the
case may be) the Affiliated
Distributors by any Government
within the Licensed Territory in
respect of the Licensed Products;
and
(e) shipping and insurance costs borne
by the Licensee or (as the case may
be) the Affiliated Distributors in
the supply of the Licensed Products
to their customers.
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1.2. Index Linked
In this Agreement where any figure is followed by the words
"(Index Linked)" such figure shall be deemed to be
automatically increased on each anniversary of the date of
this Agreement in line with any increase in indice des prix de
detail since the immediately preceding anniversary of the date
of this Agreement.
2. GRANT
2.1. The Grantor hereby grants to the Licensee throughout the Term
the right to manufacture, advertise, promote, sell and
distribute the Licensed Products in the Licensed Territory and
subject to the provisions of this Agreement to use the
Trademarks only in connection therewith.
2.2. This Licence is an exclusive licence throughout the Licensed
Territory with respect to the Licensed Products and neither
the Grantor itself nor any third party licensed by the Grantor
shall have the right to advertise, promote, manufacture, sell
or distribute, nor cause the advertising, promotion,
manufacture of, sale or distribution of any items or material
directly competitive with any Licensed Product within the
Licensed Territory other than the resale of the Licensed
Products by the Grantor of Licensed Products purchased from
the Licensee or any Affiliated Distributor or any sub-licensee
of the Licensee PROVIDED THAT the Grantor shall not be deemed
to be in breach of the terms of this Agreement if it shall
continue to sell or otherwise distribute fragrances,
moisturisers, talcum powder and/or toothpaste prior to the
commercial launch by the Licensee of each such line of
Licensed Products nor by the sale or other distribution of
stocks of such lines held by or on behalf of the Grantor at
the date of the commercial launch by the Licensee of each such
line of Licensed Products.
2.3. The Licensee shall launch for commercial sale a men's line and
a women's line of the Licensed Products in the Licensed
Territory within the first eighteen months of the Term such
lines to be distributed to similar levels as the Grantor's
competitors' products at the appropriate level in the
following countries within the first Three Contract Years:-
United Kingdom, Japan, United States of America, Canada,
Spain, Portugal, France, Germany, Austria, Italy, Belgium,
Luxembourg, Netherlands, Norway, Finland, Sweden, Denmark,
Hong Kong, Singapore, Taiwan and Australasia.
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Other lines of Licensed Products (including without limitation
a line of Licensed Products for children) shall be launched
for commercial sale at such times as may be mutually agreed
between the Grantor and the Licensee.
3. VALIDATION
Each party hereto shall at its own expense do all things appropriate to
its status as Grantor or as Licensee and necessary for the purpose of
rendering this Agreement valid and enforceable.
4. COMMENCEMENT AND DURATION
4.1. Unless sooner terminated by Clauses 9.3. or 10 hereof this
Agreement shall continue in force from the date hereof to the
expiry of the Term.
4.2. The parties shall commence negotiations in the Ninth Contract
Year regarding the renewal of this Agreement at the end of the
Term.
5. FINANCIAL PROVISIONS
5.1. Royalties
In each Contract Year of the Term the Licensee shall pay to
the Grantor whichever shall be the greater of the Minimum
Royalty or a royalty at the following rates:-
5.1.1. on annual Turnover of up to (and including)
_____________ French Francs (Index Linked) - ___ of
the Turnover of the Licensed Products sold by the
Licensee and (as the case may be) Affiliated
Distributors; and
5.1.2. on annual Turnover of over _____________ French
Francs (Index Linked) and up to (and including)
___________________ French Francs (Index Linked) - __
of the Turnover of the Licensed Products sold by the
Licensee and (as the case may be) Affiliated
Distributors in excess of ______________ French
Francs (Index Linked);
5.1.3. on annual Turnover of over ______________ French
Francs (Index Linked) and up to (and including)
______________________ French Francs (Index Linked) -
___ of the Turnover of the Licensed Products sold by
the Licensee and (as the case may be)
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Affiliated Distributors in excess of
___________________ French Francs (Index Linked); and
5.1.4. on annual Turnover of over _____________________
French Francs (Index Linked) - ___of the Turnover of
the Licensed Products sold by the Licensee and (as
the case may be) Affiliated Distributors in excess of
____________ French Francs (Index Linked).
5.2. The Licensee shall on the date of this Agreement pay to the
Grantor the sum of ___________French Francs on account of the
Royalty payable under this Agreement which shall not be
refundable in any circumstances.
5.3. Within thirty (30) days of the end of each Calendar Quarter in
every year of the Term the Licensee shall pay to the Grantor
whichever shall be the higher of the Minimum Royalty or the
Royalty payable to the Grantor by reference to the Turnover
during the immediately preceding Calendar Quarter (credit
being given for the advance payment of royalty referred to in
clause 5.2 until the aggregate Royalty payable under this
Agreement shall exceed the amount of the advance payment).
5.4. Records
5.4.1. The Licensee shall keep at its usual place of
business books of account relating exclusively to the
sales of the Licensed Products and of the amount
spent by the Licensee on advertising the Licensed
Products and containing such true entries complete in
every particular as may be necessary or proper for
enabling the amount of the Royalty and other payments
and amounts hereby reserved or payable to be
conveniently ascertained; and
5.4.2. The Licensee shall permit the duly authorised
representatives of the Grantor at the Grantor's
expense to inspect the said books and all other
relevant books of account of the Licensee and to take
copies thereof and shall procure that the Affiliated
Distributors and sub-licensees of the Licensee shall
permit the duly authorised representatives of the
Grantor at the Grantor's expense to inspect the
business books of account and all other relevant
books of account of the Affiliated Distributors and
sub licensees of the Licensee not more than once in
each Contract Year (unless such inspection shall
establish that the amount of the Royalty paid to the
Grantor in respect of the period covered by the
inspection is inaccurate by 5% or more of the amount
properly payable the
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Grantor shall be entitled to undertake subsequent
inspections without any limitation on the number or
their frequency) and to take copies thereof and the
Licensee shall give all such other information as may
be necessary or proper to enable the amount of the
Royalty and other payments payable hereunder to be
ascertained as aforesaid at any time during usual
business hours. If the inspection established that
the amount of the Royalty paid to the Grantor in
respect of the periods covered by the inspection is
inaccurate by 5% or more of the amount properly
payable the Licensee will pay on demand the Grantor
the costs of that inspection. If the inspection
established that the amount of the Royalty paid to
the Grantor is inaccurate then the amount of any
Royalty underpaid together with compound interest at
the rate of 4% above the base rate for the time being
of Barclays Bank plc from the date the underpayment
should have been made until the date of actual
payment.
5.5. Reports
5.5.1. The Licensee shall deliver to the Grantor every
Calendar Quarter in each year of the Term a true and
complete statement in writing of all Licensed
Products sold in the Licensed Territory by the
Licensee, the Affiliated Distributors and any sub
licensees of the Licensee during the immediately
preceding Calendar Quarter together with the sales
prices of such Licensed Products.
5.5.2. The Licensee shall deliver to the Grantor every
alternate Calendar Quarter in each year of the Term a
true and complete statement in writing of all amounts
spent by the Licensee in advertising the Licensed
Products in the Licensed Territory in the two
immediately preceding Calendar Quarters.
5.6. Authority to make Payment
If at any time during the continuation of this Agreement the
Licensee is prohibited from making any of the payments
hereunder reserved without appropriate authority then the
Licensee will forthwith inform the Grantor of such prohibition
and commence and diligently pursue all necessary steps to
secure from the appropriate authority permission to make the
said payments and pending the obtaining of such permission
shall place all payments to be made hereunder in an interest
bearing bank account and will pay all such payments together
with interest earned thereon to the Grantor within seven days
of receiving such permission.
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5.7. Place and Currency of Payment
All sums due and payable hereunder shall be payable in London
in French Francs unless the Grantor directs payment in some
other place or currency.
5.8 Rate of Exchange
The conversion rate of one currency to any other currency
shall be the rate of exchange of an authorised British foreign
exchange bank on the day of actual payment. Any dispute over
the rate of exchange will be determined by the certificate of
a Banker of repute nominated by the Grantor.
5.9. Deductions
Any taxes levied by the government of France upon the payments
to be made by the Licensee to the Grantor pursuant to this
Agreement and required to be withheld by the Licensee from
such payments shall be borne by the Grantor and shall be
withheld and paid by the Licensee to the appropriate
authority. The Licensee shall supply the Grantor promptly
after each tax payment official tax receipts and other
evidence of payment issued by the French tax authorities. In
the event that the rate of French withholding taxes changes at
any time during the continuance of this Agreement then the
parties hereto shall be at liberty to re-negotiate and settle
in writing the terms of payment.
6. LICENSEE'S COVENANTS
The Licensee covenants with the Grantor:
6.1. Trademarks
Except as provided by the licence granted under this Agreement
nothing herein or otherwise shall give to the Licensee any
right title interest or claim in or to the Trademarks. The
Trademarks shall continue to be the Grantor's exclusive
property during the period of this Agreement and after its
termination or expiration or otherwise. Any and all uses of
the Trademarks by the Licensee shall inure to the benefit of
Grantor only. In the event the Licensee files an application
to register or receives a registration of any trade name
trademark or service mark comprising or including the words
"PAUL SMITH" or "PS PAUL SMITH" such application for
registration shall have been filed as a constructive trust on
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behalf of the Grantor and the Licensee filing or receiving the
same shall sign all documents necessary to establish record
ownership in the Grantor.
6.2. To promote Sales
6.2.1. To use its best endeavours to promote sales of the
Licensed Products within the Licensed Territory and,
together with its distributors, to spend in each year
of the Term not less than:-
(a) in the Second and Third Contract Years,
__________ French Francs in aggregate; and
(b) in the Fourth Contract Year and every
subsequent Contract Year of the Term, ___ of
the Turnover of the Licensed Products sold
by the Licensee and/ or the Affiliated
Distributors in such Contract Year
in advertising the Licensed Products throughout the
Licensed Territory. For the purpose of this clause
and of clause 5.5.2 of the Agreement the word
"advertising" shall include gifts with purchase,
point of sale items and the cost of producing and
placing advertisements but shall exclude the cost of
promotional staff in stores.
6.2.2. To arrange for the Licensed Products to be
manufactured on commercial scales.
6.2.3. To meet the demand for the Licensed Products in the
Licensed Territory.
6.3. Marking
All Licensed Products made by or on behalf of the Licensee and
any sub licensee of the Licensee shall be marked with one of
the Trademarks in conformity with the following principles
unless the Grantor agrees otherwise in writing:-
6.3.1. The general style of the marking shall conform with
that developed and adopted by the Grantor;
6.3.2. Each Licensed Product shall bear one of the
Trademarks in such place as shall have been approved
in writing by the Grantor but not anywhere else;
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6.3.3. The markings shall comply with the laws of the
Licensed Territory where the Licensed Products are to
be sold.
Subject to the above principles the final decision on the form
of any marking on the Licensed Products shall be made by the
Grantor after consultation with the Licensee.
Save as aforesaid to make no other use of or claim any right
in either of the Trademarks owned by the Grantor except as
expressly permitted by the Grantor and not to use either of
the Trademarks on any goods not being Licensed Products.
6.4. Quality
6.4.1. The Licensed Products manufactured by or for the
Licensee and any sub licensee of the Licensee shall
be of the best quality and shall use only the best
quality materials and components.
6.4.2. As required by the Grantor to submit to the Grantor
free of charge specimen samples of each type of
Licensed Product (including, without limitation
packaging and related items) as manufactured by or
for the Licensee and any sub licensee of the Licensee
immediately prior to each type of Licensed Products
being offered for sale and if requested by the
Grantor to cease to sell or offer for sale or to
permit the sale or offering for sale of any Licensed
Products whose sample supplied to the Grantor is not,
in the opinion of the Grantor, of satisfactory
quality.
6.4.3. To permit duly authorised representatives of the
Grantor to inspect the premises in which the Licensed
Products are manufactured, stored or packed by or for
the Licensee and/or any sub licensee of the Licensee.
6.4.4. To ensure that all Licensed Products submitted for
inspection are selected at random and are made by the
ordinary production methods.
6.4.5. To manufacture the Licensed Products at the
Licensee's own factories or at factories which have
been approved in writing by the Grantor and whose
quality standards are no less than those of the
Licensee.
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6.5. Independent Contractor and Risk
That all aspects of the manufacture, distribution and sale of
the Licensed Products by the Licensee and any sub licensee of
the Licensee shall be at the risk and responsibility and for
the account of the Licensee or sub licensee (as the case may
be). The Licensee and any sub licensee of the Licensee shall
act as independent contractors and the Grantor shall not be
responsible for any breach by the Licensee or any sub licensee
of the Licensee of any obligations imposed by law on the
Licensee or any sub licensee of the Licensee in its capacity
as an employer or as manufacturer distributor and seller of
Licensed Products. The Licensee shall indemnify the Grantor
against all actions claims demands costs charges and expenses
arising out of or in connection with the manufacture use or
sale of the Licensed Products made by or for the Licensee or
any sub licensee of the Licensee.
6.6. Information
6.6.1. To keep the Grantor informed of all Laws Orders or
Regulations made at any time by the Government or any
Public or Local Authority within the Licensed
Territory in any way affecting or in the Licensee's
opinion likely to affect materially the terms of this
Agreement or the manufacture or sale of the Licensed
Products in the Licensed Territory as soon as the
Licensee becomes aware of any such Law Order or
Regulation.
6.6.2. To keep all Restricted Information confidential and
accordingly except as otherwise required by law not
to disclose any Restricted Information to any other
person and not to use any Restricted Information for
any purpose other than the performance of the
Licensee's obligations under this Agreement.
6.7. Take over
That within thirty days of the happening of such an event the
Licensee will give notice to the Grantor of the acquisition of
twenty five per cent (25%) or more of any of the share voting
nights in the Licensee by any person firm or corporation or
group of persons firms or corporations acting in concert
directly or indirectly.
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6.8. Advertising Material
6.8.1. Twice in each Contract Year to submit to the Grantor
free of charge specimen samples of all labels,
brochures, advertisements and publicity material
relating to the use of the Trademarks by the Licensee
proposed to be used by the Licensee in the following
six month period and not to use such material until
the Grantor or its designated agent has certified its
approval in writing. All artwork for advertisements
shall be provided by the Grantor to the Licensee at
the Grantor's normal commercial rates.
6.8.2. Not to appoint an advertising agency in respect of
the Licensed Products without the consent in writing
of the Grantor.
6.9. Sales to the Grantor
The Licensee shall sell to the Grantor the Grantor's
requirements for the Licensed Products for resale in retail
shops owned by the Grantor and for sale to the Grantor's
franchisees upon the Licensee's standard terms and conditions
of sale for the time being in force and at the Licensee's
normal wholesale prices less a discount of 20%.
6.10. Sales Outlets and distribution
6.10.1. To sell the Licensed Products only through high
quality retail outlets approved in writing by the
Grantor (where practicable) prior to acceptance by
the Licensee of the outlet's first order and
otherwise immediately after acceptance by the
Licensee of the outlet's first order and if the
Grantor so requests not to sell or as soon as
practicable to cease selling through any particular
outlet to which the Grantor objects on any ground
whatsoever including (but without prejudice to the
generality of the foregoing) that the style of the
operation of any of the retail outlets does not
conform with the standards associated with the
Trademarks.
6.10.2. To distribute the Licensed Products in accordance
with a distribution policy previously agreed in
writing by the Grantor prior to the launch of each
line of the Licensed Products.
6.10.3. To exploit the Licensed Products on an arm's length
bona fide commercial basis and not in any
circumstances to dispose of the Licensed Products to
any outlet in respect of which it has any interest or
ownership save at the usual commercial wholesale
rates.
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6.11. Duty Free Outlets
The Licensee will not distribute the Licensed Products (or any
range of the Licensed Products) to any duty free outlets in
the Licensed Territory notified in writing by the Grantor to
the Licensee from time to time.
6.12. Japan
Not to sell or distribute the Licensed Products in Japan
otherwise than through the distributorship of a distributor
approved of in writing by the Grantor from time to time.
6.13. Intellectual Property
6.13.1. To hold, as bare trustee for the Grantor all
Intellectual Property Rights of the Licensee in the
Licensed Products (including, without limitation any
Intellectual Property Rights in the Licensed Products
arising in the future) and their constituent parts
and at the Grantor's request to assign such
Intellectual Property Rights to the Grantor without
compensation.
6.13.2. If the Licensee commissions, engages or employs any
third party to create or originate any materials or
work in connection with this Agreement in relation to
which Intellectual Property Rights may be created,
the Licensee shall procure that such third party will
execute and deliver to the Grantor prior to any such
works or materials being created a properly executed
letter from such third party in the form set out in
the draft letter annexed to this Agreement or in such
other form as may be notified by the Grantor.
6.14. Insurance
6.14.1. To obtain and maintain adequate liability insurance
of not less than (pounds) 2 million per claim in
respect of claims arising out of any alleged defects
in the Licensed Products or their use
6.14.2. To furnish evidence of such insurance to the Grantor
promptly following signature of this Agreement and
prior to the sale or distribution of any of the
Licensed Products. The Licensee shall instruct its
insurers in writing (with a copy to the Grantor) to
notify the Grantor directly in the event that the
insurance shall lapse or
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cease. The Licensee shall notify the Grantor of all
claims made to it and notified to its insurers
relating to the Licensed Products.
6.15. Sub Licence Agreements
6.15.1. Not to grant any sub licence of the rights hereby
granted without the prior consent of the Grantor nor
without submitting the proposed sub licence agreement
to the Grantor for the Grantor's approval and
(without limitation to the generality of the
foregoing) to include in any sub licence agreement it
may enter into pursuant to the obtaining of such
consent:-
(a) Covenants by the sub licensee to observe and
perform the terms and conditions contained
in clauses 6.1 to 6.14 inclusive hereof and
clause 8.1 hereof so far as the same in the
opinion of the Grantor are applicable to and
capable of observance and performance by
such sub licensee
(b) Provision for determination as hereinafter
contained in clause 10 and for ipso facto
determination in the event of and
contemporaneously with the determination of
this Agreement and the licence granted
hereunder.
(c) Provision for determination in the event of
the acquisition of fifty per cent (50%) or
more of any of the share voting rights in
the sub licensee or in any holding company
of the sub licensee being (in either case) a
private limited company (but not a public
limited company) by any person firm
corporation or group of persons firms or
corporations acting in concert directly or
indirectly.
6.15.2. To strictly enforce the performance by any sub
licensee of the Licensee of the terms of the relevant
sub-licence agreement.
7. GRANTOR'S COVENANTS
The Grantor covenants with the Licensee:
7.1. Meetings
7.1.1. A representative of the Grantor shall meet with the
executive officers of the Licensee at least twice in
each Contract Year in London in England to inform the
Licensee of developments within
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the Grantor's business and of its designs for its
other product ranges and details of trade marks
applied for and registered and to suggest to the
Licensee themes and ideas for the development of the
Licensed Products and for the advertisement and
promotion of the Licensed Products.
7.1.2. The Grantor shall procure that Mr. Paul Smith shall
(during his life) be available to meet with
representatives of the Licensee to discuss
development of the Licensed Products for one half day
per month during the first eighteen months of the
Term and thereafter at times to be mutually agreed
between the Grantor and the Licensee.
7.1.3. The Licensee shall bear the reasonable travelling
(first class air fares for Directors of the Grantor -
Business Class for other employees and consultants of
the Grantor) and subsistence costs of the Grantor's
representatives attending such meetings in pursuance
of this covenant and of any other meetings arranged
between representatives of the Grantor and of the
Licensee.
7.2. Personal Appearances
The Grantor shall procure the personal appearance of Mr Paul
Smith (during his life) at a limited number of events to be
agreed between the parties provided that the time and place of
such appearance shall have previously been confirmed by the
Grantor. The Licensee shall bear the reasonable travelling
(first class air fares for Directors of the Grantor -Business
Class for other employees and consultants of the Grantor) and
subsistence costs of the Grantor's representatives attending
such events in pursuance of this covenant
7.3. Restricted Information
To keep all Restricted Information confidential and
accordingly except as otherwise required by law not to
disclose any Restricted Information to any other person and
not to use any Restricted Information for any purpose other
than the performance of the Grantor's obligations under this
Agreement
8. ASSIGNABILITY
8.1. The Licensee shall not have power at any time to assign this
Agreement or the whole or parts of its interest therein or in
any way charge mortgage or
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deal with the rights hereby granted except with the written
consent of the Grantor. The grant to the Licensee herein
contained shall be deemed to be by way of licence only and
shall not confer on the Licensee any interest or rights in the
Trademarks.
8.2. The Licensee shall have the right to sell the Business with
the prior written consent of the Grantor and subject to the
conditions listed in sub-clause 8.3.
8.3. The conditions required to obtain the written consent of the
Grantor to the sale of the Business by the Licensee shall be
that:-
8.3.1. any proposed purchaser shall submit his offer in
writing and shall be bona fide and at arms' length
and shall meet the Grantor's standards with respect
to business experience, financial status, character
and ability;
8.3.2. the Licensee must at the time of its application for
consent not be in breach of any of its obligations to
the Grantor under the terms of this Agreement-,
8.3.3. the Grantor shall be satisfied that the proposed
purchaser has adequate financial resources to perform
the obligations of licensee under this Agreement and
to enable it to trade profitably. The Grantor in so
satisfying itself shall not be taken to be making any
representations or giving any warranties to such
prospective purchaser;
8.3.4. payment is made by the Licensee of all costs and all
obligations by or of the Licensee to the Grantor are
discharged without any right of deduction or set-off,
and
8.3.5. the prospective purchaser offers to enter into a
licence agreement with the Grantor on the same terms
as this agreement for the unexpired period of the
Term.
8.4. The Licensee shall as soon as possible inform the Grantor of
its desire to sell the Business and submit to the Grantor a
copy of each written offer received from any proposed
purchaser to purchase the Business from the Licensee together
with:-
8.4.1. a financial statement of affairs and the business
history of the proposed purchaser; and
19
<PAGE>
8.4.2. details of any other terms which may have been agreed
between the Licensee and the proposed purchaser.
8.5. Upon receipt of such notice accompanied by such items the
Grantor shall in addition to its other rights hereunder have
an option to purchase the Business for the same amount and
upon the same terms as the proposed purchaser has offered
(even if the Licensee subsequently receives a higher bid for
the Business). The Grantor shall have a period of fifteen (15)
days after receipt of such written notice and other items to
exercise its option to purchase by notice in writing to the
Licensee. The sale and purchase shall be completed within 75
days following the service of the Grantor's notice. The
Licensee shall notify the Grantor of any variation in the
terms offered by any prospective purchaser and the said period
of fifteen (15) days shall re-commence as from the date of
such notification of a variation in the offered terms. In this
clause the expression "the Business" shall include all assets
employed in or about the conduct of the Business including the
freehold or leasehold interest under which the Licensee
occupies any premises used in the Business.
8.6. If the Grantor shall not exercise the option hereinbefore
contained the Licensee shall be entitled within the period of
six months thereafter to proceed with its application to sell
the Business to a proposed purchaser upon the same or no more
favourable terms to the purchaser than those notified to Paul
Smith pursuant to sub-clause 8.4 hereof.
8.7. Upon the Grantor exercising the option contained in sub-clause
8.5 hereof and upon the satisfaction of the conditions
referred to in sub-clause 8.3 hereof the Grantor and the
Licensee shall each be deemed to have released the other from
the terms of this Agreement save for those provisions which by
their nature or effect survive termination. In addition the
Licensee shall be deemed to have released and discharged the
Grantor from and against all claims and demands whether or not
contingent which the Licensee may have against the Grantor
arising from this Agreement or otherwise in any way out of the
relationship between the Grantor and the Licensee.
8.8. For the purpose of this clause any change in the beneficial
ownership of the issued share capital or of the de facto
control of the Licensee shall be deemed to be an assignment.
8.9. Notwithstanding the previous provisions of this clause the
Licensee shall be permitted to assign the benefit, but subject
to the burden, of this
20
<PAGE>
Agreement to another limited company of comparable financial
standing to the Licensee which is owned (in its entirety) by
either the Guarantor or the Licensee without the prior written
approval of the Grantor subject only to the assignee company
entering into a deed of adherence with the Grantor agreeing to
be bound by the agreements on the part of the Licensee
contained in this Agreement and agreeing to re-assign this
Agreement to the Licensee in the event of the company ceasing
to be wholly owned by the Licensee or the Guarantor. The deed
of adherence shall be prepared by the solicitors of the
Grantor at the cost of the Licensee and on the completion of
such deed of adherence the Grantor shall release the Licensee
named in this Agreement from any liability for any future
breach of the terms of this Agreement.
9. SUPERVENING LAWS AND FORCE MAJEURE
9.1. The rights and obligations of the parties hereto under this
Agreement shall be subject to all applicable laws orders
regulations directions restrictions and limitations of
Governments or other bodies having jurisdiction over the
parties hereto.
9.2. If any such law order regulation direction restriction or
limitation as aforesaid or any treaty or other international
agreement or the final judicial construction of any of them
shall after the date of the execution hereof substantially
alter the relationship between the parties hereto or the
advantages derived from such relationship then the parties
shall on request from the adversely affected party modify this
Agreement to restore the situation if practicable or to
compensate for such alteration. If the parties are unable to
agree on such a modification within three months after the
notice of request has been received by the party not affected
then either party may refer the matter for determination by
the courts in conformity with clause 13 to the intent that the
court shall decide on such modifications or if they are unable
to do so shall make such order as seems to them just and
equitable in all the circumstances of the case.
9.3. If there is any total or partial failure of performance
hereunder by either party occasioned by strikes lockouts
combinations of workmen or any cause whatsoever beyond the
reasonable control of the party thereby affected then once the
cause has been notified by that party to the other such
failure shall not be deemed to be a breach of this Agreement
which shall continue in suspense or part performance for the
period during which such cause exists. As soon as practicable
after such notification the parties shall consult together to
decide how if at all the effects of the force majeure can be
mitigated. If the cause of such suspension or partial
21
<PAGE>
performance exists for a period of more than six (6) months
and substantially affects the operation of this Agreement then
the party not claiming relief under this clause shall be at
liberty to terminate this Agreement on giving to the other
thirty (30) days' notice of its intention to do so and this
Agreement shall terminate on expiration of such notice.
10. TERMINATION
10.1. The Grantor may terminate this Agreement summarily by written
notice to the Licensee if.-
10.1.1. the Licensee or the Guarantor or any sub licensee of
the Licensee becomes insolvent or make any
arrangement or composition with its creditors or
become for any reason whatsoever legally permitted
not to pay its debts as they fall due or ceases to
exist as a separate legal entity or has an
administrative receiver or manager or administrator
appointed or does or suffers any act or thing
equivalent to any of the above;
10.1.2. the Licensee or the Guarantor or any sub licensee of
the Licensee fails to pay:-
(a) each instalment of the Royalty to the
Grantor that falls due within 7 days of the
due date for payment; or
(b) any sum (other than the Royalty) to the
Grantor that falls due within 7 days of
written notice from the Grantor to the
Licensee that the sum is due (or overdue)
for payment;
10.1.3. the Licensee grants a sub-licence of this Agreement
or a sub licensee of the Licensee assigns or grants a
sub licence of its sub licence without the necessary
consent of the Grantor or purports to do so;
10.1.4. the Licensee or any sublicensee of the Licensee is
deprived of or disposes of its business or a
substantial part thereof, "substantial" for the
purposes of this sub-clause meaning a part
which in the last accounting year of the entity
represented 35% or more of the relevant entity's
turnover;
10.1.5. the Licensee or the Guarantor or any sub licensee of
the Licensee has any restriction or limitation placed
on the existing powers of its
22
<PAGE>
directors to manage its business or on the powers of
its shareholders to elect those directors;
10.1.6. the Licensee commits any breach of this Agreement
(other than an obligation on the part of the Licensee
to pay any sum that falls due to the Grantor) and the
Licensee fails to commence to remedy or procure its
remedy within thirty (30) days of the Licensee having
received written notice from the Grantor requiring it
to do so and to have failed to complete the remedying
of such breach or to pay adequate compensation if the
breach cannot be remedied within sixty (60) days of
the receipt of such notice;
10.1.7. the Licensee fails in any year of the Term to pay the
Minimum Royalty;
10.1.8. the Guarantor ceases to retain (directly or
indirectly) more than 51% of the share voting rights
in the Licensee.
10.2. The Licensee may terminate the Agreement summarily by written
notice to the Grantor if the Grantor commits any breach of
this Agreement and fails to remedy it or pay adequate
compensation if the breach cannot be remedied in either case
within sixty (60) days of the Grantor having received written
notice from the Licensee requiring it to do so.
11. RESIDUAL RIGHTS AND OBLIGATIONS
11.1. Termination for any reason of this Agreement shall be without
prejudice to any rights of either party against the other
arising out of events occurring before the date of such
termination.
11.2. Where this Agreement ends or is terminated on any ground all
the Licensee's rights hereunder shall thereupon terminate
shall not thereafter be concerned with the Licensed Products
whether by way of manufacture sale or otherwise.
11.3. Save as is hereinbefore set forth all rights and obligations
of the parties under this Agreement shall cease upon its
termination or expiry.
11.4. At the termination of the Agreement the Licensee shall
immediately cease and refrain from using the Trademarks or any
colourable imitation thereof in any trade name or on any goods
or in the advertising or promotion of any goods or services.
23
<PAGE>
12. GUARANTEE PROVISIONS
12.1. In consideration of the Grantor entering into this Agreement
with the Licensee at the request of the Guarantor, the
Guarantor hereby unconditionally and irrevocably guarantees to
the Grantor the full, prompt and complete payment by the
Licensee of all sums due to the Grantor pursuant to this
Agreement and the due and punctual performance by the Licensee
of all its obligations hereunder.
12.2. The guarantee contained in this Clause 12 is a continuing
guarantee and shall remain in force until all the obligations
of the Licensee under this Agreement have been fully performed
and all sums payable by the Licensee have been fully paid.
12.3. The Grantor may without any consent from the Guarantor and
without affecting the Guarantor's liability hereunder grant
time or indulgence to or compound with the Licensee or any
other person and the guarantee contained in this Clause shall
not be discharged nor shall the Guarantor's liability under it
be affected by anything which would not have discharged or
affected the Guarantor's liability if the Guarantor had been a
principal debtor or principal obligor to the Grantor instead
of a Guarantor.
12.4. If the Guarantor is unable to procure that the Licensee duly
and punctually performs its obligations hereunder then it
shall indemnify the Grantor in respect of all costs, damages.
charges and expenses incurred or suffered by the Grantor as a
result of any of the obligations of the Licensee under this
Agreement being or becoming void, voidable, unenforceable or
ineffective as against the Licensee for any reason, whether or
not known to the Grantor, the amount of such loss being the
amount which the Grantor would otherwise have been entitled to
recover from the Licensee.
12.5. It shall not be necessary, prior to seeking payment or
indemnification from the Guarantor under this guarantee, for
the Grantor to pursue or prosecute any claim it may have
against the Licensee and after any default by the Licensee the
Grantor may at any time make claims and/or take action
(whether in the Courts or otherwise) against the Guarantor as
if the Guarantor was a principal obligor to the Grantor under
this Agreement having joint and several liability with the
Licensee hereunder.
13. NOTICES
Every Notice consent or communication permitted or required to be
served under this Agreement shall be in writing. Notices may be served
by hand, by facsimile
24
<PAGE>
transmission or by pre-paid registered post. A notice served by hand or
by facsimile transmission shall be deemed to be received at the moment
of transmission provided that, in the case of facsimile transmission a
copy of the notice is sent by pre-paid registered post to the addressee
within twenty-four (24) hours after such service; a notice served by
post shall be deemed to be received on the tenth Business Day after it
has been posted to the address of the recipient party as set out in the
preamble to this Agreement or to such other address as that party may
from time to time designate in writing.
14. LANGUAGE AND LAW
This Agreement is written in the English language and shall be
interpreted according to English law. The Courts of England shall have
exclusive jurisdiction over it to which jurisdiction the parties hereby
submit.
15. ACTIONS FOR INFRINGEMENT
15.1. The Licensee agrees to assist the Grantor at the Grantor's
expense to the extent necessary in the procurement of any
protection by the Grantor of rights in the Trademark by
registration or otherwise or to protect any of the Grantor's
rights in and to the Trademarks. The Licensee shall forthwith
give notice in writing to the Grantor of any infringement
suspected or unauthorised use of the Grantor's Trademarks or
copyright.
15.2. The decision as to whether or not to take proceedings against
an infringer shall in all cases rest with the Grantor.
15.3. In the event the Licensee makes the Grantor aware of any
unfair competition or infringement by third parties the
Grantor shall control absolutely all litigation relating to
matters described in this clause 15. The Grantor may join the
Licensee as a party thereto. If the Grantor agrees to take
proceedings against an infringer it shall do so at its own
expense but if the Grantor elects not to take proceedings
against any infringer the Licensee shall have the right but
not the obligation to take such proceedings in the name of the
Grantor on giving the Grantor an indemnity as to costs. The
party not taking proceedings shall be obliged on request and
at its own cost to execute any documents and do any other
things reasonably necessary or desirable for the prosecution
of the action. The party bearing the cost of the proceedings
shall be entitled to any damages accruing from them.
15.4. In the event of a third party commencing litigation against
the Licensee for unfair competition and/or infringement
arising out of the use by the
25
<PAGE>
Licensee in accordance with the terms of this Agreement of the
Trademarks in any country in which the Trademarks are
registered trademarks in respect of the Products the Grantor
shall indemnify and hold harmless the Licensee against any out
of pocket expenses (including reasonable attorney's fees)
directly incurred by the Licensee arising out of and/or
related to the use by the Licensee of the Trademarks in
accordance with the terms of this Agreement in the marketing
distribution and/or sale of the Licensed Products in those
countries subject to the following conditions:-
15.4.1. The Licensee must promptly notify the Grantor in
writing of any allegation of infringement;
15.4.2. The Licensee must make no admission without the
Grantor's written consent; and
15.4.3. The Licensee must at the Grantor's request allow the
Grantor to conduct and if it decides to settle all
negotiations and litigation and must give the Grantor
all reasonable assistance.
16. MISCELLANEOUS
16.1. Headings and commas used in this Agreement are for the purpose
of ease of reference or reading only and shall not affect its
interpretation.
16.2. This Agreement shall not be varied amended or supplemented
except by instrument in writing executed by the duly
authorized representatives of each of the parties.
16.3. The failure of any party hereto at any time to enforce the
terms provisions or conditions of this Agreement shall not be
construed as a waiver of the same or of the right of such
party to enforce the same.
16.4. Unless otherwise expressly stated any waiver of any of the
Licensee's or of the Guarantor's obligations under this
Agreement shall expire at the end of one year from the date on
which it was given.
16.5. If any provision of this Agreement is held by any court or
other competent authority to be void or unenforceable in whole
or part this Agreement shall continue to be valid as to the
other provisions thereof and the remainder of the affected
provision.
26
<PAGE>
16.6. This Agreement constitutes the entire agreement between the
parties pertaining to the subject matter hereof and supersedes
all prior agreements and understandings of the parties hereto
in connection therewith.
16.7. Wherever in this Agreements terms documents materials and/or
proposals are submitted by one party to another unless
specifically stated to the contrary the party who receives
such submission shall have twenty days after receipt to
approve or disapprove such submission. If the party timely
disapproves such submission the disapproving party shall
notify the other party of its disapproval. In the event that
the receiving party neither approves nor disapproves the
submission in a timely manner the submission shall be deemed
approved.
IN WITNESS whereof this Agreement has been executed as a deed on behalf
of the parties in accordance with their respective laws.
27
<PAGE>
Exhibit "A"
Countries where the Trademarks are registered in respect of fragrances
COUNTRY
- --------------------------------------------------------------------------------
Argentina Thailand
Austria United Kingdom
Benelux
Croatia
France
Germany
Greece
Indonesia
Italy
Japan
Macau
Mexico
North Korea
Portugal
South Korea
Spain
Switzerland
28
<PAGE>
EXECUTED AS A DEED by )
- ------------------
PAUL SMITH LIMITED )
- ------------------
acting by the following signatories: )
Director
Director
EXECUTED AS A DEED by
INTER PARFUMS S.A.
acting by the following signatories
EXECUTED AS A DEED by
JEAN-PHILIPPE FRAGRANCES INC.
acting by the following signatories:-
<PAGE>
To:
Paul Smith Limited
Dear Sirs
In consideration of [ ] we hereby assign to Paul Smith Limited all the copyright
and all other rights (including goodwill) for all purposes throughout the world
in the works which F We have carried out for Inter Parfums S.A. ("the Licensee")
in connection with their licence for fragrances ("the Licence") and which I/We
will carry out for the Licensee in the future in connection with the Licence,
and I/We agree that I/We will execute any further documentation which may be
required to effect fully this assignment or to enable Paul Smith Limited to
apply for any registrations or extensions in connection with the works as Paul
Smith Limited thinks fit. I/We also hereby transfer any and all intellectual
property rights in connection with the works (including those of the
exploitation, printing and distribution) to Paul Smith Limited. This assignment
shall be for the full ten-n (including any extension of these rights).
I/We agree that Paul Smith Limited shall be entitled to use and exploit in any
way with my/our works and in whatever manner Paul Smith Limited thinks fit, and
shall be entitled to make any changes, additions or alterations that it may deem
necessary. I/We hereby ]irrevocably waive in Paul Smith Limited's favour all
Moral Rights (as set out in the Copyright, Designs and Patents Act 1988 or any
similar laws existing in any part of the world) in the works.
I/We agree that English law governs this agreement and that this agreement will
apply to any further works which I/ We undertake for the Licensee in connection
with the Licence in the future.
Yours faithfully,
Signed _______________________
Date _________________________
Name _________________________
Address ______________________
______________________________
______________________________
<PAGE>
<TABLE>
<CAPTION>
'PAUL SMITH' - CLASS 3
- ---------------------------------------------------------------------------------------------------
TRADE MARKS - 'PAUL SMITH' CLASS 3 (TOILETRIES/FRANGRANCES ETC)
Country Reg. No. Filing Date Renewal Status
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Argentina 1554979 31.3.95 31.3.2005
Australia 754526 10.2.98 Pending
Austria 139974 22.1.92 22.1.2002
Benelux 500607 13.9.91 13.9.2001
Croatia Z971591 26.6.98 16.10.2007
France 1563240 29.8.89 28.8.99
Germany 11885322 21.8.89 21.8.99
Greece 95676 19.9.89 19.9.99
Indonesia 326993 30.10.93 30.4.2003
Italy 581288 12.1.90 12.1.2000
Japan 2134355 28.4.89 28.10.98 Renewed
Paid 10.6.98
Macau 14-979-M 4.3.96 4.3.2006
Mexico 400023 7.11.90 7.11.2000
North Korea 8599 29.7.95 29.7.2005
Philippines 99977 4.5.95 Pending
Portugal 253966 29.10.93 29.10.2003
Russia 97715710 20.10.97 Pending
South Korea 238633 22.5.92 21.5.2002 Perfumery and
hair products
238634 22.5.92 21.5.2002 Toiletries and
Dentifices
337917 23.4.96 23.4.2006 {PS Logo}
337918 23.4.96 23.4.2006 {PS Logo}
Spain 1512729 20.7.89 20.7.99
1326880 5.8.91 5.8.2001 {PS Logo}
Switzerland 392654 9.9.91 9.9.2011
Thailand Kor22428 8.12.93 8.12.2003
United Kingdom 2051161 12.1.96 12.1.2006
USA 1511432 8.11.88 8.11.2008
Community (EEC) 45393 1.4.96 Pending
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 10.71
AGREEMENT
THIS AGREEMENT IS MADE BY AND BETWEEN
CHRISTIAN LACROIX, a Societe en Nom Collectif (commercial partnership), whose
registered office is at 73, rue du Faubourg St Honore, 75008 PARIS, registered
with PARIS Trade and Companies Register under number 341 265 858 , represented
by Mr Serge Marx.
Hereinafter referred to as "LACROIX"
AND
INTER PARFUMS, Societe Anonyme (French Public Limited Company), whose registered
office is 4, rond point des Champs Elysees, 75008 PARIS, registered with Paris
Trade and Companies Register under number 350 219 382, represented by Mr
Philippe Benacin.
Hereinafter referred to as "INTER PARFUMS"
WHEREAS:
LACROIX, a subsidiary of the company LVMH - MOET HENNESSY.LOUIS VUITTON, is
the owner of the international class 3 "CHRISTIAN LACROIX " trademark,
which, both in France and abroad, enjoys international renown and a
prestigious image in the domain of haute-couture, and of luxury
ready-to-wear clothing and accessories.
INTER PARFUMS is desirous to exploit the CHRISTIAN LACROIX trademark for
the manufacture and distribution of perfumes and derived products under
that trademark under conditions consistent with the prestige of the
trademark and the reputation for high quality of CHRISTIAN LACROIX
products.
<PAGE>
The Parties acknowledge the mutual interest they share in preventing any
detriment to the CHRISTIAN LACROIX brand image. They will act accordingly
to defend its influence and develop its prestige; they will proceed jointly
or severally, promptly in all matters that may contribute to achieving this
objective.
In the perspective of engaging in joint endeavours to confer a style exclusive
to CHRISTIAN LACROIX upon those products constituting the subject matter of this
Agreement,
NOW THEREFORE THE PARTIES HAVE AGREED AS FOLLOWS:
ARTICLE 1: DEFINITION
For the purposes of this Agreement, the meaning of certain terms is specified
below:
1.1 "AGREEMENT" shall mean the present Licence Agreement and its Exhibits.
1.2 "PRODUCTS" shall mean the perfumes, eaux de toilette, products derived
directly from these perfumes, excluding cosmetics, which INTER PARFUMS may
create or shall create in the performance of this Agreement.
1.3 "PRODUCT ENVIRONMENT" shall mean the bottles, the covers or boxes, the
perfume packaging and products derived from the perfumes.
1.4 "TERRITORY" shall mean the whole world, including duty-free points-of-sale.
1.5 "TRADEMARKS" shall mean the existing international class 3 trademark
registrations and/or applications in the name of the CHRISTIAN LACROIX company
as listed in Exhibit 1. The Parties also agree to designate by this term all
future trademark registrations and/or applications in the name of the CHRISTIAN
LACROIX company under this Agreement.
1.6 "CONTRACT YEAR" shall mean the period between 1st January of one year N and
31st December of that same year.
2
<PAGE>
1.7 "RETAILER" shall mean any point-of-sale or retail sale area authorised to
sell Products bearing the CHRISTIAN LACROIX Trademark.
1.8 "DISTRIBUTOR" shall mean any independent company authorised to sell Products
bearing the CHRISTIAN LACROIX Trademark by virtue of a written agreement or of
understandings with INTER PARFUMS to retailers in on or more countries.
ARTICLE 2: SUBJECT MATTER OF THE AGREEMENT
2.1 Under the terms and conditions of this Agreement, LACROIX grants INTER
PARFUMS the exclusive right to use the Trademark for the manufacture and
commercialisation of the Products in the Territory under the circumstances
defined herebelow.
2.2 In this context, the use of the term "exclusive" shall mean that, for the
entire term of this Agreement, LACROIX shall refrain from granting other
licences for the manufacture and/or sale of the Products bearing the Trademarks.
2.3 It is expressly understood and agreed by INTER PARFUMS that LACROIX reserves
the right to open stores anywhere in the world under the "CHRISTIAN LACROIX "
name, and INTER PARFUMS undertakes to supply such stores at their request. INTER
PARFUMS shall keep its Distributors duly informed of the existence of this
exception to the exclusive rights that INTER PARFUMS may have granted them in
their distribution area. INTER PARFUMS shall sell the Products to these stores
at the wholesale price minus ________________.
ARTICLE 3: OBLIGATIONS OF THE PARTIES
3.1 INTER PARFUMS undertakes to actively exploit this Licence throughout the
Territory or at least in those countries of the Territory where exploitation of
the "CHRISTIAN LACROIX" Trademark can be envisaged having regard to the presence
of competing brands, and to conduct an active policy as concerns the manufacture
and commercialisation of the Products. If, in any given country, the Products
are not commercialised for 3 (three) years, the Parties shall meet with a view
to adopting a strategy for that country.
3
<PAGE>
3.2 INTER PARFUMS undertakes that all the Products, as well as all the perfume
extracts or constituents of the Products, shall be made in Europe.
3.3 DISTRIBUTION NETWORK
3.3 a) INTER PARFUMS undertakes to adopt a selective sales policy for the
distribution of the Products and only to sell the Products through
selective points-of-sale, perfume shops and department stores. INTER
PARFUMS further undertakes that the Products shall be commercialised at
a price corresponding to the "CHRISTIAN LACROIX" brand image.
3.3 b) INTER PARFUMS undertakes to ensure the reputation and prestige of
the Trademark is upheld through a suitable marketing policy and sales
methods for the selective distribution system. INTER PARFUMS undertakes
to commercialise the Products in a selective distribution network
covering the entire Territory, within the limits of Article 3.1 above,
and to maintain an administrative and sales structure capable of
ensuring effective control.
3.3 c) In order to maintain the "CHRISTIAN LACROIX" brand image, INTER
PARFUMS undertakes not to commercialise the Products other than in
points-of-sale meeting the criteria for quality and employing competent
personnel. INTER PARFUMS shall insert a corresponding clause in all of
its agreements entered into with its Distributors or with Retailers.
INTER PARFUMS shall furnish LACROIX with a standard model of such
contracts, for information.
3.3 d) In order to check that the Products are being distributed on the
Territory in accordance with the prestige of the Trademark, LACROIX may
visit or have inspectors visit the points-of-sale. If it appears that
some of these fail to meet the requirements set out in subparagraph
3.3c) above, LACROIX may ask INTER PARFUMS to remove the Products or to
have the Products removed from the points-of-sale visited and to
discontinue commercialisation of the Products through those
points-of-sale.
3.3 e) INTER PARFUMS shall regularly forward the list of its Distributors
and Retailers to LACROIX.
3.3 f) INTER PARFUMS shall provide LACROIX with a breakdown of sales of
Products by country once per year.
4
<PAGE>
3.4 INTER PARFUMS undertakes to control its distribution network closely and to
deliver the Products in reasonable quantities with regard to the potential of
each market where the Products are distributed, in order to prevent any sales
outside of the distribution network.
3.5 The Parties agree that the reputation of "CHRISTIAN LACROIX" in
haute-couture and luxury ready-to-wear clothing is the basis of the interest in
its Trademark, and that the impact of this reputation substantially affects the
positioning of the Trademark in the perfume industry.
In this perspective, LACROIX undertakes, as a material and essential conditions
of this Agreement, failing which stipulation the Parties would not have entered
into the Agreement, to obtain from the present and future majority partner,
controlling the CHRISTIAN LACROIX company:
o the express undertaking to regularly support the creative activities
of LACROIX in haute-couture and luxury ready-to-wear clothing, or any
other fashion activity liable to support the image of prestige of the
CHRISTIAN LACROIX Trademark;
o the express undertaking to consolidate the personal notoriety of Mr
Christian LACROIX, in particular through his presence at fashion
parades of haute-couture and ready-to-wear clothing, and by media
appearances.
ARTICLE 4: TIMETABLE FOR LAUNCHING THE PRODUCTS
4.1 INTER PARFUMS undertakes to take all the necessary steps so that, within 12
(twelve) months of the Effective Date of this Agreement, a first perfume,
comprising a line for women, shall have been launched. It is, however, specified
that at the date this Agreement is signed, the development of this first
perfume, at the instigation of LACROIX, is partly in the finalisation stage,
INTER PARFUMS having to ensure the technical finalisation, consisting in
particular in selecting suppliers and negotiating with them the choice of
plastics and quality of moulds. This technical finalisation shall be submitted
to final approval of LACROIX. In addition, the finalisation budget for this
first perfume shall be determined by mutual agreement in a separate letter.
4.2 INTER PARFUMS undertakes to take all the necessary steps so that, within 36
(thirty-six) months of the Effective Date of this Agreement, the first line of
perfume referred to above shall be widely distributed in Europe, North America,
South America, Asia and the Middle East, and shall also be present in duty-free
points-of-sale.
5
<PAGE>
4.3 During the 3rd (third) Contract Year, the Parties, having regard to the
sales figures for the first line of perfume, shall confer about the development
of a second line of perfume (for men and/or for women), possibly for a wider
public. This second line could possibly be designated by the trademark
________________.
4.4 In the 5th (fifth) Contract Year, with the express proviso that the second
line of perfume referred to above has actually been launched, INTER PARFUMS and
LACROIX shall confer about the development of a third line of perfume, which may
possibly be consistent with the image of haute-couture.
ARTICLE 5: TERM
5.1 This Agreement shall come into effect as of 1st March 1999 and shall expire,
unless Article 5.2 is brought into force, on 31st December 2010.
5.2 The Parties shall meet 48 (forty-eight) months before the Expiration Date of
the Agreement as indicated above to negotiate the possible renewal of the
Agreement, it being specified that the criteria forming the basis for discussion
shall pertain to the results actually achieved by INTER PARFUMS in the
performance of this Agreement. The Parties shall use their best efforts to renew
this Agreement on the basis of reasonable figures proposed by INTER PARFUMS, but
which LACROIX may nonetheless decline on the grounds of serious disagreement or
improper performance of this Agreement by INTER PARFUMS or of the strategic
wishes of LACROIX and/or the LVMH Group to manage the development of "CHRISTIAN
LACROIX" perfumes directly within their organisation. Should the Parties fail to
reach a written agreement to this effect by 31st December 2007, this Agreement
shall terminate as of the Expiration Date indicated in Article 5.1.
ARTICLE 6: ROYALTIES
6.1 In consideration for the rights granted to it under this Agreement, INTER
PARFUMS shall pay the following licence fees to LACROIX:
o __________________ of INTER PARFUMS' annual turnover from the sale of
the Products in the bracket between _______________________________
______________________________________________.
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o __________________ of INTER PARFUMS' annual turnover from the sale of
the Products in excess of __________________________________________.
6.2 The basis used for calculating turnover shall be the net total invoiced by
INTER PARFUMS (head office and subsidiaries) to its Retailers and Distributors,
including invoices further to orders by LACROIX, but exclusive of point-of-sale
advertising materials (point-of-sale advertising meaning window displays,
samples, testers, miniatures, etc.) and promotional items such as umbrellas,
bags, cases, etc. given free-of-charge to the Distributors and/or Retailers (the
said materials and items under no circumstances to exceed 10% [ten per cent] of
total sales), excluding taxes on turnover or profits and excluding transport
costs, and after deduction against supporting evidence for any Products returned
unsold.
6.3 The royalties thus calculated in accordance with the provisions of article
6.2, shall be payable quarterly on 30th April, 31st July, 30th October and 31st
January of each year.
6.4 INTER PARFUMS undertakes to pay to LACROIX, within 30 (thirty) days of the
end of each quarter, for the term of the Agreement, the guaranteed minimum
royalties set out below, it being specified, however, that the first annual
guaranteed minimum is applicable over a period of 22 (twenty-two) months, the
first Contract Year being given over to the finalisation and launch of the first
perfume; the first guaranteed minimum shall be paid by 30th April 2000 at the
latest.
PERIOD GUARANTEED MINIMUM (French Francs
excluding VAT)
- --------------------------------------------------------------------------------
1st March 1999 - 31st December 2000
1st January 2001 - 31st December 2001
1st January 2002 - 31st December 2002
1st January 2003 - 31st December 2003
1st January 2004 - 31st December 2004
1st January 2005 - 31st December 2005
1st January 2006 - 31st December 2006
1st January 2007 - 31st December 2007
1st January 2008 - 31st December 2008
1st January 2009 - 31st December 2009
1st January 2010 - 31st December 2010
- --------------------------------------------------------------------------------
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6.5 INTER PARFUMS undertakes, at the dates specified in Article 6.3 above, to
provide quarterly statements indicating the exact amount of royalties due under
this Agreement as calculated in accordance with Articles 6.1 and 6.2 above. At
the same dates, INTER PARFUMS shall pay to LACROIX the exact amount of royalties
thus calculated even if it is in excess of the minimum guaranteed amount set out
in Article 6.4. If this amount is less, INTER PARFUMS shall pay the minimum
guaranteed amount due at that date to LACROIX. However, the payment may be less
than the minimum guaranteed for the same quarter if the aggregate sum paid for
the previous quarters of the Contract Year in course is greater than the
aggregate of the sums actually owed by INTER PARFUMS.
6.6 It is agreed that the annual accounts pertaining to the royalties due shall
be closed each year within 3 (three) months after the end of the corresponding
Contract Year.
6.7 INTER PARFUMS undertakes to submit audited annual accounts relating to the
royalty payments. The said accounts shall be sent to LACROIX before the end of
the third month following the closure of accounts for each corresponding
Contract Year.
6.8 INTER PARFUMS shall maintain complete and precise records of all sales of
the Products under this Agreement and shall allow an agent or authorised
representative of LACROIX to examine the said records, make copies of them and
check the corresponding entries in INTER PARFUMS' books once per year and at
LACROIX's expense for the full term of the Agreement for 3 (three) years after
it has expired.
6.9 INTER PARFUMS discloses below, purely for guidance, its forecast turnover
plan (ex-works) for a period of 10 (ten) years, without it constituting any
contractual obligation upon it:
PERIOD Forecast turnover (ex-works)
- -------------------------------------------------------
1999 Product development
2000
2001
2002
2003
2004
2005
2006
2007
2008
- -------------------------------------------------------
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ARTICLE 7: CREATION, INDUSTRIAL DEVELOPMENT OF THE PRODUCTS AND COMMUNICATION
7.1 The creation of the Products and communication relating to the Products
shall be consistent with a style that is exclusive to "CHRISTIAN LACROIX". In
order to ensure such consistency INTER PARFUMS undertakes to leave LACROIX full
initiative for the creation and advertising communication of the Products,
within the limits of the budget set by INTER PARFUMS and with the express
proviso that LACROIX involves INTER PARFUMS closely in all stages of creation
and development of the communication, in order to allow INTER PARFUMS to suggest
any modifications it feels appropriate. The Parties undertake to do their best
to cooperate in order to achieve together a common project, and this perspective
they define below the conditions for distributing the respective tasks.
7.2 BUSINESS PLAN
a) For all future launches contemplated, INTER PARFUMS shall provide
LACROIX with a Business Plan containing the following items:
o Intended targets and markets
o Price positioning
o Distribution strategy
o Communications strategy
o Budget for creation and communication ("BUDGET")
o Forecast turnover
b) The Business Plan defined above shall be presented at a meeting
between the Parties and any outside contributors they may call in to
discuss the said plan. In particular, the opportuneness of launching a
new Product and the general characteristics of such Product and of the
above Business Plan shall be discussed at such time.
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7.3 PRODUCT CONCEPT AND CREATION
7.3.1 LACROIX shall maintain total control of the concept of any Product
under consideration and of its creation, within the limits of the
Budget set by INTER PARFUMS, and with the express proviso that the
development of the concept and creation shall be submitted for the
approval of INTER PARFUMS at each stage of creation, which shall be as
follows:
o finalisation of the Product concept,
o drawing up of briefs for designers (styling and perfume) giving them
working guidelines,
o finalisation of the bottle styling,
o development and choice of perfume,
o development and choice of packaging,
o choice of the Product name.
7.3.2. LACROIX and INTER PARFUMS shall, by mutual agreement, choose the
creator of the perfume extracts and the designer of the perfume bottle
and packaging from among recognised professionals in their field of
activity.
7.4 INDUSTRIAL DEVELOPMENT OR TECHNICAL FINALISATION OF PRODUCTS
7.4.1 The Parties agree that INTER PARFUMS shall retain complete control of
all stages of industrial development. It shall freely select the
suppliers of packaging items (moulds, caps, pumps, boxes, packing,
labels, etc.), it being understood that the technical finalisation of
the new Product under consideration shall be submitted for final
approval to LACROIX.
7.4.2 INTER PARFUMS shall provide LACROIX, for verification purposes, with
samples of the Products before they are made commercially available.
INTER PARFUMS further undertakes to commercialise only Products in
conformance with the prototypes decided upon by mutual agreement.
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7.5 COMMUNICATION
7.5.1 INTER PARFUMS shall give details of its proposed Budget under the
Business Plan referred to above and set it in agreement with LACROIX;
its communication strategy, relating in particular to the choice of
media or means of communication (point-of-sale advertising,
advertising, public relations, etc.).
7.5.2 INTER PARFUMS shall present a media plan and forward it for approval to
LACROIX insofar as possible.
7.5.3 The Parties agree that the creation of visuals for point-of-sale
advertising, advertising and public relations shall be left to LACROIX,
within the limits of the Budget set for this purpose by mutual
agreement between the Parties and with the express proviso that LACROIX
submits the project for approval to INTER PARFUMS, at each of the
following stages:
o concept of the advertising visuals for the new Product;
o choice of contributors, in particular models, photographers or
visual artists, and the fees paid for their contribution to the
creation of the visuals;
o the end result of the advertising visuals so designed.
ARTICLE 8: SUBCONTRACTORS
8.1 INTER PARFUMS is authorised, under its entire liability, to contract out any
or all of the manufacturing of the Products and to entrust the commercialisation
of the Products to third parties acting in a capacity of sales agents or
Distributors on the following conditions:
o INTER PARFUMS gives an undertaking that all manufacturing of the
Products or perfume extracts by its subcontractors shall be done
in Europe;
o INTER PARFUMS undertakes to have its subcontractors and
Distributors abide by the general terms and conditions of this
Agreement;
o INTER PARFUMS shall from time to time transmit the list of
subcontractors and Distributors to LACROIX, at its request.
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8.2 Quality control - INTER PARFUMS shall regularly control, or have controlled,
the quality of the Products manufactured and packaged by its subcontractors and
undertakes to inform LACROIX at the earliest opportunity of any technical
defects reported and to take all necessary measures to correct such defects.
INTER PARFUMS undertakes to send random samples of the Products to be
commercialised to LACROIX at its request and at most once per month.
ARTICLE 9: MARKETING PLAN
9.1 By 31st October of each year at the latest, INTER PARFUMS shall send a
Marketing Plan relating to the next calendar year to LACROIX for approval. The
said Plan shall contain essentially:
o the update of the Product ranges,
o proposals for retail price positioning,
o programme for events and promotion.
9.2 By 31st January of each year at the latest, INTER PARFUMS shall send to
LACROIX, for information, the following budget forecasts:
o a forecast for the current year's turnover,
o the advertising budget for the current year,
o a draft project for media plans.
ARTICLE 10: ADVERTISING SPENDING
10.1 INTER PARFUMS, jointly with its Distributors, undertakes to invest in
advertising for the Products a minimum of _____________________ of net local
wholesale annual turnover from the sale of the Products for the entire term of
the Agreement. The advertising budget will cover advertising expenses at
points-of-sale (shop windows, samples, miniatures, testers, etc.), advertising
spending on media (magazines, newspapers, television, etc.) and public relations
and promotional expenses. INTER PARFUMS further undertakes to audit the
advertising spending and actions of its Distributors.
10.2 INTER PARFUMS further undertakes that the total amount of its spending on
advertising for the Products, and that of its Distributors, shall be at least
____________________________
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___________________________ for the aggregate expenditure of the second and
third Contract Years.
ARTICLE 11: TRADEMARKS
11.1 INTER PARFUMS acknowledges the present and future rights of LACROIX in the
Trademarks, including in particular the Trademarks described in Article 11.6
hereunder, and undertakes not to contest the said rights. The Parties to this
Agreement acknowledge that all of the rights pertaining to the Trademarks and
deriving from the use thereof by INTER PARFUMS are the sole property of LACROIX.
11.2 INTER PARFUMS undertakes not to use the Trademarks other than in the form
specified in Exhibit 1 and solely in connection with the Products, the Product
Environment, and the sale and promotion thereof.
11.3 INTER PARFUMS shall seek the prior consent of LACROIX for any combined use
of the Trademarks with another name, trademark, logo or other wording or device.
INTER PARFUMS shall further request clear and unequivocal prior consent from
LACROIX before using the Trademarks in its letterheads.
11.4 The Parties hereto shall decide jointly if it becomes necessary to chose
and file applications for one or more new trademarks for the different lines of
Products. To this end, INTER PARFUMS shall provide LACROIX, in the Marketing
Plan referred to in Article 9 above, with full particulars pertaining to the
said trademarks. INTER PARFUMS undertakes to show reasonable restraint in its
wishes to create new trademarks and, in any event, not to plan filing
applications for more than 3 (three) new trademarks during the entire term of
this Agreement.
11.5 INTER PARFUMS shall propose to LACROIX several names and/or logos for the
aforementioned new trademarks after making the relevant searches concerning
prior registrations of such names and/or logos in the countries indicated by
INTER PARFUMS. LACROIX shall file any applications for the said new trademarks
in its own name and at its expense with the relevant institutions for at most 40
(forty) countries in which INTER PARFUMS effectively intends to distribute the
Products. It is understood that the terms and conditions of this Agreement shall
apply to the new trademark thus created.
11.6 If it becomes necessary to file an application for the LACROIX Trademark in
any country where the Trademark is not currently registered, LACROIX shall file
the Trademark application in
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order to allow INTER PARFUMS to distribute the Products in accordance with local
rules and regulations.
11.7 LACROIX shall use its best efforts, if it deems necessary, and insofar as
the possibilities provided by local rules and regulations allow, to combat any
infringing registration of the Trademarks, any passing-off of the Products and
any unlawful use of the Trademarks by third parties in the same field as that of
the Products. LACROIX shall act in consultation with INTER PARFUMS who, for its
part, shall be obliged to provide LACROIX with all possible assistance.
11.8 INTER PARFUMS shall keep LACROIX informed of any infringement and more
generally of any violation of the Trademarks or of any other of LACROIX's
intellectual property rights in the Products which may come to its knowledge.
LACROIX shall take whatever measures it deems appropriate.
11.9 If, for any reason, LACROIX considers it unnecessary to bring any action,
LACROIX shall notify INTER PARFUMS, who shall then be entitled to enforce
LACROIX's rights at its own expense. INTER PARFUMS shall use its best efforts,
under close supervision of LACROIX, to defend LACROIX's rights as best it can,
insofar as local laws and regulations authorise as much. INTER PARFUMS shall
seek the prior consent of LACROIX before taking any action and, in particular,
before making any statements or passing on any information.
11.10 In the countries listed in Exhibit 1 of this Agreement, where the
Trademark applications have not yet been registered, LACROIX shall complete the
registration procedures. However, LACROIX cannot be held liable in any way for
any application being rejected. LACROIX further undertakes to use its best
efforts to renew, at its expense, the registrations of the trademarks listed in
Exhibit 1 throughout the entire term of this Agreement.
11.11 Should any legal or other obstacles impede trademark applications in any
country where the said application would be desirable, the Parties hereto shall
use their best efforts to remove the impediment in question or to find an
alternative.
11.12 If LACROIX so requests, INTER PARFUMS shall do its best to support the
filing of applications and applications for renewal of the Trademarks, in
particular by furnishing all necessary information, by making all necessary
statements and by forwarding all necessary documents.
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11.13 LACROIX hereby consents to INTER PARFUMS being registered, at INTER
PARFUMS' expense, as a "Registered User" of the Products in the countries where
such registrations are recommended or required by law.
11.14 The Parties may, where applicable, decide to protect the Product bottles
and/or boxes by registering a design, such design being registered exclusively
in the name of and at the expense of LACROIX.
ARTICLE 12: PRIOR TERMINATION
12.1 This Agreement may be terminated as of right and without prior notice by
either of the Parties hereto:
a) in the event of either Party becoming insolvent, filing for
bankruptcy, or going into receivership;
b) in the event of either Party ceasing trading for any reason
whatsoever.
12.2 This Agreement shall also be terminated under the following circumstances
after serving official notice without advance warning:
a) in the event of failings seriously affecting the rights of either
Party to this Agreement and if such failings are not remedied
within 30 (thirty) days of a reminder being sent by the other
Party,
b) in the event of breach by INTER PARFUMS of its obligations to
make payments in full of the sums owing pursuant to Article 6,
within 8 (eight) days of notice being sent by recorded delivery
mail.
12.3 Notice of termination and reminder letters shall be sent by recorded
delivery mail.
12.4 If either of the Parties considers the other Party's grounds for
terminating the Agreement are unjustified or unfounded, it may submit the
termination claim to the courts of law.
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ARTICLE 13: EFFECTS OF TERMINATION - OBLIGATIONS OF THE PARTIES
13.1 The termination of this Agreement further to the occurrence of one of the
events listed in Article 12 above in no way releases the Parties from their
obligations hereunder or from the obligations applicable subsequent to the
discharge hereof. If LACROIX is induced to terminate the Agreement because of
what is deemed a serious failing under the Agreement by INTER PARFUMS, all of
the unpaid royalties shall become due immediately.
13.2 At the Expiration Date of this Agreement, INTER PARFUMS shall cease
forthwith all use of the Trademarks and remove all mention of the said
Trademarks from its business documents, invoices, letterheads, advertising, etc.
INTER PARFUMS shall also cease to refer to LACROIX, to the Trademarks, and to
its past collaboration with LACROIX as a business partner or licensee and shall
bear sole responsibility with regard to its sub-licensees.
13.3 Disposal of stock
13.3.1 INTER PARFUMS shall be entitled to commercialise such Products as were
already manufactured or in the process of manufacture at the Expiration
Date of the Agreement for 6 (six) months after the term hereof. INTER
PARFUMS shall send to LACROIX within 15 (fifteen) days as from the
Expiration Date of the Agreement a statement of stocks of the Product
remaining to be disposed of, it being specified that the said stocks
shall not be of a greater volume than the sales of the Products over a
6 (six) month period. The said volume shall be calculated on the basis
of mean output recorded during the 6 (six) months preceding the
expiration of the Agreement. The remainder of the Products shall be
disposed of within 6 (six) months after the expiration of the
Agreement, in accordance with the contractual terms of sale and via the
sales networks previously used or similar networks. INTER PARFUMS shall
draw up a statement of sales thus made at the earliest 6 (six) months
after the Agreement has expired and shall pay the corresponding
royalties to LACROIX, excluding any sales made to LACROIX at cost
price. INTER PARFUMS undertakes to return at cost price the advertising
material in stock at the date the Agreement expires.
13.3.2 If at the end of the 6 (six) month period, INTER PARFUMS has not
disposed of all its stock, the Parties agree as follows:
o LACROIX may, at its option alone, decide whether or not to
purchase at cost price those Products not sold by INTER PARFUMS.
16
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o If the unsold Products are not bought back from INTER PARFUMS,
the Parties shall seek an amicable solution in their common
interest.
13.3.3 LACROIX may purchase the moulds for the Products from INTER PARFUMS for
a price corresponding to their net book value at the date the Agreement
expires.
ARTICLE 14: LIABILITY
14.1 LACROIX warrants that is has no knowledge of any circumstances that would
prevent the Products from being commercialised in the countries named by it in
Exhibit 1, for which Trademarks have already been registered. The Parties shall,
however, agree as to the way to proceed for each country prior to delivery of
the Products.
14.2 In the event of new circumstances arising after the execution hereof of a
nature liable to restrict in a substantial way the rights granted to INTER
PARFUMS to use the Trademark in any major country of the Territory, the Parties
to the Agreement shall negotiate a revision of the royalty payments.
14.3 INTER PARFUMS declares that it has taken out insurance covering the risks
of civil liability towards third parties for injury and/or damage in connection
with defects in the design, manufacture, storage, packaging, transport and sale
of the Products. INTER PARFUMS shall bear sole liability in any proceedings
brought by third parties on the basis of such claims.
ARTICLE 15: WARRANTY - OPERATING LOSSES
15.1 INTER PARFUMS undertakes to subscribe a comprehensive insurance policy to
cover any operating losses it may incur through incapacity to continue its
activity as a result of damage, loss, accident or any other reason beyond its
control. INTER PARFUMS shall provide evidence of such to LACROIX upon request.
The insurance policy thus subscribed shall allow INTER PARFUMS, in the event of
a claim, to pay royalties to LACROIX corresponding to the minimum guaranteed
amounts as set in Article 6.4. The risks covered by the said policy shall not be
considered as instances of force majeure.
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ARTICLE 16: CONFIDENTIALITY
Each of the Parties hereto undertakes to maintain the confidentiality of all
business information relating to the other Party which may come to its knowledge
during the performance of this Agreement and, in particular, to keep the
commercial and professional secrets of the other Party. This obligation of
confidentiality shall survive the discharge of the Agreement.
ARTICLE 17: ASSIGNMENT OF THE AGREEMENT
16.1 The Parties expressly agree that a simple change of majority shareholder or
a change of control of either of the Parties shall not warrant early termination
of this Agreement by the other Party.
16.2 Notwithstanding the provisions of paragraph 17.1 hereof, neither of the
Parties is authorised to transfer or assign in part or in full its rights or
obligations hereunder to any third party. Moreover, INTER PARFUMS undertakes not
to assign total or partial sub-licences for its rights acquired hereunder.
ARTICLE 18: MODIFICATION OF THE AGREEMENT
18.1 Any exemption or supplementary covenant or any rider to this Agreement
shall necessarily be drawn up in writing and executed by the Parties and
appended hereto. Any modification on this basis shall be restricted to the
specific point for which it is agreed.
18.2 If either of the Parties is unable to honour its undertakings under this
Agreement, it shall notify the other Party of such so that they can mutually
agree to amend the Agreement in their common interest.
18.3 If one or more clauses of this Agreement should prove to be void, this
shall in no way affect the validity of the other provisions of the Agreement nor
the validity of the Agreement as a whole. Likewise if this Agreement were to
prove incomplete. The clause to be deleted or which is missing shall be replaced
by a legally valid provision consistent with the subject matter of this
Agreement.
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ARTICLE 19: MISCELLANEOUS
19.1 LACROIX's failure at any time to require that INTER PARFUMS perform its
obligations in full, or to exercise any right acknowledged hereunder shall under
no circumstances be interpreted as a waiver by LACROIX of its right to require
INTER PARFUMS to perform the obligation in question.
19.2 All taxes and duties that may be due as a result of this licence and the
payment of royalties shall be borne by INTER PARFUMS who undertakes to pay them
in good time and to fulfil any tax formalities deriving from this Agreement.
19.3 Expenses relating to administrative formalities for the registration of
this licence with the competent authorities shall be borne by INTER PARFUMS, who
undertakes to pay them.
ARTICLE 20: GOVERNING LAW - ATTRIBUTION OF JURISDICTION
20.1 This Agreement is governed by the laws of France.
20.2 In the event of any dispute arising from the construction, performance or
consequences of this Agreement, the Parties undertake to use their best efforts
to seek an amicable solution.
20.3 If the Parties cannot be reconciled, any dispute shall be brought before
the exclusive jurisdiction of the Courts of Law of Paris.
Done in Paris this eighteenth day of March, in the year nineteen hundred and
ninety-nine.
In two originals
Christian Lacroix Inter Parfums
/s/Serge Marx /s/ Philippe Benacin
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Exhibit 10.72
Republic National Bank
Republic National Bank of New York
452 Fifth Avenue
New York, NY 10018
Telephone 212 525 5000
June 1, 1998
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 line 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 $500,000, 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.
<PAGE>
Republic National Bank of New York
Page 2
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 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,
1999; 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
<PAGE>
Republic National Bank of New York
Page 3
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 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 INITIATED 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 (I) 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
<PAGE>
Republic National Bank of New York
Page 4
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 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
arbitrator's 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
<PAGE>
Republic National Bank of New York
Page 5
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 ALSO HEREBY WAIVE THE
RIGHT TO INTERPOSE 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 July 15, 1998.
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
<PAGE>
Exhibit 21
LIST OF SUBSIDIARIES
Name Jurisdiction
Inter Parfums Holdings, S.A. France
Inter Parfums, S.A. France
Jean Philippe Fragrances do Brasil, Ltda.(1) Brazil
Inter Parfums Grand Public, S.A. France
- -------------
(1) A limited liability company.
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 23,356
<SECURITIES> 0
<RECEIVABLES> 28,014
<ALLOWANCES> 0
<INVENTORY> 21,939
<CURRENT-ASSETS> 76,118
<PP&E> 2,988
<DEPRECIATION> 0
<TOTAL-ASSETS> 87,739
<CURRENT-LIABILITIES> 26,519
<BONDS> 0
0
0
<COMMON> 7,141
<OTHER-SE> 46,539
<TOTAL-LIABILITY-AND-EQUITY> 87,739
<SALES> 89,388
<TOTAL-REVENUES> 89,388
<CGS> 47,417
<TOTAL-COSTS> 80,361
<OTHER-EXPENSES> (137)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 471
<INCOME-PRETAX> 9,164
<INCOME-TAX> 3,598
<INCOME-CONTINUING> 5,566
<DISCONTINUED> 0
<EXTRAORDINARY> 953
<CHANGES> 0
<NET-INCOME> 4,613
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.52
</TABLE>
