- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended September 30, 1996.
Commission file number: 33-87280
RENAISSANCE COSMETICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1396287
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
955 MASSACHUSETTS AVENUE
CAMBRIDGE, MASSACHUSETTS 02139
(Address of principal executive offices) (Zip Code)
(617) 497-5584
(Registrant's telephone number, including area code)
Indicate by check mark whether the issuer (1) 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 for 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 [_]
As of November 13, 1996, there were outstanding 825,086 shares
of the registrant's common stock, $.01 par value per share.
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<PAGE>
INDEX
PAGE
PART I - FINANCIAL INFORMATION.................................................5
Item 1. Financial Statements........................................5
Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets as of September 30, 1996
(unaudited) and March 31, 1996..........................6
Consolidated Statements of Operations for the
three and six months ended September 30, 1996
and 1995 (unaudited)....................................8
Consolidated Statements of Cash Flows for the six months
ended September 30, 1996 and 1995 (unaudited)...........9
Notes to Unaudited Consolidated Financial Statements.......11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..............14
PART II - OTHER INFORMATION...................................................23
Item 1. Legal Proceedings..........................................23
Item 2. Changes in Securities......................................23
Item 3. Defaults Upon Senior Securities............................23
Item 4. Submission of Matters to a Vote of Security-Holders........23
Item 5. Other Information..........................................23
Item 6. Exhibits and Reports on Form 8-K...........................24
2
<PAGE>
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
Certain statements under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and elsewhere in
this Form 10-Q, constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are
typically identified by their inclusion of phrases such as "the Company
anticipates," "the Company believes" and other phrases of similar meaning. Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors that may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others: general economic and business conditions;
competition; development and operating costs; advertising and promotional
efforts; brand awareness; acceptance of new product offerings; changes in
business strategy or development plans; quality of management; availability,
terms, and development of capital; and other factors referenced in this Form
10-Q.
3
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Information called for by this item is set forth in the financial
statements contained on the immediately following nine pages.
4
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RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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PAGE
ITEM I. FINANCIAL STATEMENTS:
Consolidated Balance Sheets 6
Consolidated Statements of Operations 8
Consolidated Statements of Cash Flows 9
Notes to Consolidated Financial Statements 11
5
<PAGE>
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
SEPTEMBER 30, MARCH 31,
1996 1996
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 69,523,193 $ 1,431,809
Marketable securities 241,780 173,604
Accounts receivable - net 50,524,914 34,557,409
Inventories 38,509,891 30,236,739
Prepaid expenses and other current assets 7,300,459 6,539,828
------------ ------------
Total current assets 166,100,237 72,939,389
PROPERTY, PLANT AND EQUIPMENT - Net 14,536,325 14,535,363
DEFERRED FINANCING COSTS - Net 7,128,127 8,006,782
OTHER ASSETS - Net 11,588,769 12,242,090
INTANGIBLE ASSETS - Net 91,044,910 76,895,294
------------ ------------
TOTAL ASSETS $290,398,368 $184,618,918
============ ============
See notes to consolidated financial statements.
6
<PAGE>
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1996 1996
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 54,200,000 $ 57,000,000
Accounts payable 13,911,275 19,462,868
Accrued expenses 20,048,834 15,157,127
Other current liabilities -- 2,700,000
------------- -------------
Total current liabilities 88,160,109 94,319,995
------------- -------------
LONG-TERM LIABILITIES:
Long-term debt 67,491,890 67,322,944
Minimum royalty obligation 4,917,756 4,686,039
Deferred tax liability -- 140,619
------------- -------------
Total long-term liabilities 72,409,646 72,149,602
------------- -------------
Total liabilities 160,569,755 166,469,597
------------- -------------
COMMITMENTS AND CONTINGENCIES
SENIOR EXCHANGEABLE REDEEMABLE
PREFERRED STOCK - SERIES B:
Par value $.01 - authorized, 350,000 shares;
issued 115,000 shares at September 30, 1996 78,320,860 --
------------- -------------
REDEEMABLE PREFERRED STOCK:
Par value $.01 - authorized, 40,000 shares;
issued, 11,884 shares at September 30, 1996;
11,594 shares at March 31, 1996 12,410,719 11,697,624
------------- -------------
COMMON STOCKHOLDERS' EQUITY:
Common stock, par value $.01 - authorized,
3,000,000 shares; issued, 830,736 shares at
September 30, 1996; 726,818 shares at March 31, 1996 8,308 7,268
Notes receivable from sale of common stock (517,609) (517,609)
Additional paid-in capital 69,403,049 26,786,732
Treasury stock, at cost (5,650 shares) (210,000) (210,000)
Deficit (28,744,272) (19,563,738)
Cumulative translation adjustment (842,442) (50,956)
------------- -------------
Total common stockholders' equity 39,097,034 6,451,697
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 290,398,368 $ 184,618,918
============= =============
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
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<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 50,354,298 $ 37,169,589 $ 81,042,191 $ 63,804,137
COST OF GOODS SOLD 18,719,037 14,945,359 30,225,124 24,375,542
------------ ------------ ------------ ------------
Gross profit 31,635,261 22,224,230 50,817,067 39,428,595
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Selling 19,984,430 13,211,517 31,316,728 22,377,463
General and administrative 4,287,390 3,924,385 10,087,293 7,901,441
Amortization of intangible and other
assets 1,754,824 1,225,411 3,122,369 2,414,437
------------ ------------ ------------ ------------
Total operating expenses 26,026,644 18,361,313 44,526,390 32,693,341
------------ ------------ ------------ ------------
OPERATING INCOME 5,608,617 3,862,917 6,290,677 6,735,254
INTEREST EXPENSE (INCOME):
Interest expense 5,637,240 4,569,509 10,838,227 9,003,810
Interest income (564,181) (88,329) (734,550) (156,563)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME
TAXES 535,558 (618,263) (3,813,000) (2,111,993)
INCOME TAX PROVISION 463,500 576,038 308,000 697,467
------------ ------------ ------------ ------------
NET INCOME (LOSS) 72,058 (1,194,301) (4,121,000) (2,809,460)
PREFERRED STOCK DIVIDENDS 4,571,594 370,913 5,059,534 660,698
------------ ------------ ------------ ------------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS $ (4,499,536) $ (1,565,214) $ (9,180,534) $ (3,470,158)
============ ============ ============ ============
NET LOSS PER COMMON SHARE $ (6.00) $ (2.17) $ (12.48) $ (4.82)
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 749,971 720,093 735,648 720,093
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
8
<PAGE>
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,121,000) $ (2,809,460)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 1,678,877 1,112,872
Amortization of intangible assets 1,558,903 1,641,257
Amortization of minimum royalty and other assets 1,563,466 773,180
Amortization of deferred financing costs 1,605,064 1,162,145
Accrued interest on senior notes, subordinated seller notes
minimum royalty obligation 657,162 643,687
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable (13,925,486) (23,040,071)
Inventories (6,698,302) (3,054,184)
Prepaid expenses and other assets (1,187,951) (2,865,851)
Accounts payable (6,686,654) (1,342,339)
Accrued expenses 1,551,771 1,973,393
Other current liabilities (2,700,000) --
Other (930,105) 131,434
------------ ------------
Net cash used in operating activities (27,634,255) (25,673,937)
------------ ------------
</TABLE>
See notes to consolidated financial statements.
9
<PAGE>
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities $ -- $ 253,849
Sale of marketable securities (68,176) (4,135,521)
Capital expenditures (1,635,287) --
Acquisition of business - net of cash acquired (15,379,768) --
------------- -------------
Net cash used in investing activities (17,083,231) (3,881,672)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from notes payable -- 25,000,000
Payment of minimum royalty obligation (256,499) --
Net proceeds of issuance of preferred stock - Series A 18,955,000 --
Payment of deferred financing costs (726,409) (900,000)
Net repayment of notes payable (2,800,000) --
Redemption of preferred stock - Series A (20,433,973) --
Net proceeds of issuance of redeemable preferred stock
- Series B 108,320,751 --
Net proceeds from issuance of common stock 9,750,000 --
------------- -------------
Net cash provided by financing activities 112,808,870 24,100,000
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 68,091,384 (5,455,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 1,431,809 7,001,170
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 69,523,193 $ 1,545,561
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 8,188,701 $ 6,741,894
============= =============
Income taxes $ 994,868 $ 597,208
============= =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING TRANSACTIONS:
Accrued dividends and accretion on redeemable
preferred stocks $ 5,059,534 $ 660,698
============= =============
</TABLE>
See notes to consolidated financial statements.
10
<PAGE>
RENAISSANCE COSMETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1. BASIS OF PRESENTATION
The consolidated financial statements of Renaissance Cosmetics, Inc. (the
"Company") have been prepared by the Company and are unaudited and include
the accounts of the Company and its wholly-owned subsidiaries, Cosmar
Corporation ("Cosmar"), Houbigant Ltee, and Dana Perfumes Corporation
("Dana"). All significant intercompany activity has been eliminated. The
results of operations for the six months ended September 30, 1996 are not
necessarily indicative of the results to be expected for any other interim
period or for the entire year.
In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary to present fairly the consolidated financial
position, results of operations and cash flows of the Company have been made
on a consistent basis. Certain information and footnote disclosures included
in consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. The
unaudited financial statements should be read in conjunction with
management's discussion and analysis of financial condition and results of
operations and the consolidated financial statements included in the
Company's Annual Report on Form 10K for the year ended March 31, 1996 filed
with the Securities and Exchange Commission. Certain reclassifications were
made to the 1995 financial statements to conform to the current periods
presentation.
2. INVENTORIES
The components of inventories are as follows:
SEPTEMBER 30, MARCH 31,
1996 1996
Raw materials and advertising supplies $11,370,826 $16,956,874
Work in process 651,407 2,860,139
Finished goods 26,487,658 10,419,726
----------- -----------
$38,509,891 $30,236,739
=========== ===========
The above components are shown net of excess and obsolete inventory reserves
of $1,980,000 and $1,540,000 at September 30, 1996 and March 31, 1996,
respectively. At September 30, 1996 and March 31, 1996, 59.8% and 60.7%,
respectively, of the Company's inventories are stated at the lower of LIFO
cost or market. The excess of current replacement cost over the stated LIFO
value was $0 at September 30, 1996 and March 31, 1996, respectively.
3. NEW ACCOUNTING PRONOUNCEMENT
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based
Compensation, which is effective for the Company beginning April 1, 1996.
SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees in Notes to Annual Financial Statements and
encourages (but does not require) compensation cost to be measured based on
the fair value of the equity instrument
11
<PAGE>
awarded. Companies are permitted, however, to continue to apply APB Opinion
No. 25, which recognizes compensation cost based on the intrinsic value of
the equity instrument awarded. The Company will continue to apply APB Opinion
No. 25 to its stock-based compensation awards to employees and will disclose
the required pro forma effect on net income and earnings per share in its
annual financial statements.
4. SETTLEMENT OF LITIGATION
On July 23, 1996, the Houbigant litigation previously disclosed in our Annual
Report on Form 10K, was settled. The Company paid $1,850,000 owed to
Houbigant, net of the settlement of $850,000.
The Settlement Agreement also included certain modifications of existing
royalty agreements with Houbigant, in order to consolidate the worldwide
exclusive rights to sell the Houbigant Fragrances.
5. ACQUISITION
On August 21, 1996, RCI, through its Cosmar subsidiary, completed its
acquisition of all of the issued and outstanding capital stock of Great
American Cosmetics Company ("GAC") pursuant to a Stock Purchase Agreement
(the "GAC Acquisition Agreement"), dated June 27, 1996, with GAC and Messrs.
Pallini and Carbone, the sole shareholders of GAC (the "Sellers").
GAC outsources, markets, distributes, advertises, promotes and merchandises
mid-priced, mass-marketed lipsticks, eye make-up, nail polish products and
related accessories sold under the Nat Robbins trademark.
The purchase price for the GAC Acquisition was $15,250,000 in cash,
approximately $14,209,000 of which was paid to the Sellers at closing,
approximately $41,000 of which was retained by Cosmar to fund possible
post-closing severance bonuses to certain GAC employees and the remaining
$1,000,000 of which was placed into escrow to secure the Sellers'
post-closing obligation to indemnity Cosmar for breaches of the Sellers'
representations, warranties and covenants contained in the GAC Acquisition
Agreement. Concurrent with the closing, RCI repaid $796,000 of GAC
indebtedness. Immediately prior to the closing, GAC repaid $184,000 of loans
owed to its shareholders. In connection with the closing, the Company agreed
to fund up to $141,000 (with up to $100,000 of its own funds and up to
$41,000 of the purchase price held back from the Sellers for this purpose) of
possible post-closing severance bonuses to certain GAC employees, if earned.
6. PENDING ACQUISITION
On August 6, 1996, RCI, its newly-formed wholly-owned subsidiary, Renaissance
Acquisition, Inc. ("RAI"), and MEM Company, Inc., a New York corporation
("MEM"), entered into an Agreement and Plan of Merger (the "MEM Acquisition
Agreement") pursuant to which RAI will be merged into MEM and each
outstanding share of MEM common stock (the "MEM Stock"), other than
dissenter's shares, will be converted into the right to receive $7.50 per
share in cash (and each share subject to a stock option will be converted
into the right to receive the difference between $7.50 per share and the per
share exercise price of such option) (the "MEM Acquisition"). The aggregate
consideration for the MEM Stock (including the purchase price for the
outstanding MEM stock options that will be settled in cash in the MEM
Acquisition) is approximately $33.8 million, including repayment of MEM's
indebtedness (which estimate is based on the balance of such indebtedness at
June 30, 1996). Due to the seasonality of MEM's business, such amount of
indebtedness could be materially higher depending on the date the MEM
Acquisition is closed.
12
<PAGE>
7. PREFERRED AND COMMON STOCK ISSUANCES
In August and September 1996, the Company completed a private placement of
115,000 Units, each of which consists of one share of the Company's 14.0%
Senior Redeemable Preferred Stock, Series B par value $0.01 per share (the
"Series B Preferred Stock"), and Warrants to purchase 2.970 shares of the
Company's Common Stock. On August 15, 1996, 85,000 units were sold, prior to
the closing of the GAC Acquisition noted above. The remaining units were sold
on September 16, 1996 and September 27, 1996.
The net proceeds from the sale of the Units were used to redeem the
outstanding shares of the Company's Series A Preferred Stock (issued during
the first quarter) including accrued dividends thereon, to finance the GAC
Acquisition, to repay approximately $7.0 million of indebtedness under the
Existing Credit Facility. Additionally, approximately $33.8 million was
placed in a certificate of deposit (included in cash and cash equivalents at
September 30, 1996) set aside for the MEM Acquisition, and the remaining net
proceeds were used for general corporate purposes. Furthermore, the Company
issued 103,858 shares of its Common Stock for net proceeds of $9,750,000.
8. SUBSEQUENT EVENTS
On October 30, 1996, the Company entered into an Agreement to purchase from
Procter & Gamble Company ("P&G") its mass market fragrance brands. The
Company is currently in the process of securing a new credit facility or
similar financing (the "New Credit Facility") in order to refinance its
Current Credit Facility which matures in December 1996. The Company does not
expect to consummate the MEM acquisition or the P&G brand acquisition until
it obtains the New Credit Facility.
******
13
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This discussion and analysis relates to the consolidated results of
operations of Renaissance Cosmetics, Inc. (the "Company"), which includes the
Company's major operating divisions, Dana (the Company's domestic "Fragrance"
business), Cosmar (the Company's domestic "Cosmetics" business) and
International (the Company's "International" business, which includes both
fragrances and cosmetic sales) resulting from the following acquisitions that
have been consummated by the Company (collectively, the "Acquisitions"), each of
which acquisition is discussed in greater detail in Item 1 of the Form 10-K for
the year ended March 31, 1996 under the caption "Acquisitions":
1. The Houbigant Acquisition (July and August 1994), in which the
Company entered into various license agreements pursuant to which it obtained
certain exclusive rights to manufacture and distribute Chantilly, Lutece, Alyssa
Ashley, Raffinee, Demi-Jour, Parfums Parquet French Vanilla, and other mass
market fragrances formerly marketed by Houbigant, Inc. (the "Houbigant
Fragrances").
2. The Cosmar Acquisition (August 1994), in which the Company
acquired its artificial fingernail products and related fingernail care
accessories business.
3. The Dana Acquisition (December 1994), in which the Company
acquired a group of companies engaged in the manufacturing and sale of Tabu,
Ambush, Canoe, Canoe Sport and certain other mass-market fragrance and fragrance
products.
4. The ACB Acquisition (December 1994), in which the Company
acquired the rights to manufacture and market the Houbigant Fragrances in Canada
and which, when combined with the Houbigant Acquisition, gave the Company the
worldwide rights to manufacture and market the Houbigant Fragrances.
In addition, on August 21, 1996, the Company acquired Great American
Cosmetics, Inc. ("GAC"), a company engaged in the outsourcing and marketing of
mid-priced, mass market lipsticks, eye make-up, nail polish products and
accessories sold under the Nat Robbins trademark ("Nat Robbins"). The operation
is being integrated into the Cosmar (the Company's domestic "Cosmetics")
business and the results of operations of GAC are included in the Company's
consolidated financial statements from the date of acquisition.
14
<PAGE>
OPERATIONS FOR THE PERIOD APRIL 1, 1996 THROUGH
SEPTEMBER 30, 1996, AND THE PERIOD APRIL 1, 1995
THROUGH SEPTEMBER 30, 1995
Net Sales. The Company's net sales were as follows (in 000s):
SIX MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------
1996 1995
-------------------------- --------------------------
DIVISION NET SALES % OF TOTAL NET SALES % OF TOTAL
- -------- --------- ---------- --------- ----------
Fragrance $37,398 46.2% $34,932 54.8%
Cosmetic 24,019 29.6% 19,719 30.9%
International 19,625 24.2% 9,153 14.3%
------- ------ ------- ------
Total $81,042 100.0% $63,804 100.0%
Total Company sales increased 27.0%, or $17,238, from $63,804 to
$81,042. Fragrance sales increased 7.1% from $34,932 to $37,398. This increase
was due to an increase in orders for Christmas gift sets over last year which
began shipping in August as well as the impact of sales of Navigator by Canoe
and DREAMS BY TABU, products launched subsequent to last year's period. The
Cosmetics division's sales increased by 21.8% from $19,719 to $24,019.
Contributing to this increase were current year sales of Ultra-Gel and Nail
Fetish which were launched subsequent to last year's period, as well as the
impact of the Nat Robbins sales since the date of the GAC Acquisition (August
21, 1996). International sales for the six months ended September 30, 1996
include the sales of Dana Brazil acquired during December 1995, and a 35.9%
increase in remaining International sales attributable in large part to the
Company's Canadian operation.
Gross Profit. The Company's gross profits were as follows (in 000s):
SIX MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------
1996 1995
----------------------------- -----------------------------
DIVISION GROSS PROFIT % OF NET SALES GROSS PROFIT % OF NET SALES
- -------- ------------ -------------- ------------ --------------
Fragrance $25,771 68.9% $22,193 63.5%
Cosmetic 13,921 58.0% 12,175 61.7%
International 11,125 56.7% 5,061 55.3%
------- ------- ------- -------
Total $50,817 62.7% $39,429 61.8%
Gross profit margin in the Fragrance business improved to 68.9% from
63.5%. Contributing to this improvement were increases in manufacturing
efficiency and continued improvement in material sourcing resulting in lower
cost of finished goods. The decrease in gross profit margin in the Cosmetics
business to 58.0% from 61.7% was the result of an increase in lower-margin
promotional sales on the Company's base products done in conjunction with new
product introductions.
15
<PAGE>
The gross profit margin increase in the International division to 56.7%
from 55.3% was attributable to higher sales and an increase in the proportion of
direct international sales (versus exports) to total international sales.
Selling Expenses. The Company's selling expenses in the first half of
fiscal 1996 and fiscal 1995 were $31,317,000 (38.6% of net sales) and
$22,377,000 (35.1% of net sales), respectively. The increase in selling expenses
as a percentage of sales was principally attributable to increased advertising
and promotional spending relating to the Company's strategy of reinvigoration of
existing brand equities and the introduction of complementary new products.
General and Administrative Expenses. The Company's general and
administrative expenses in the first half of fiscal 1996 and fiscal 1995 were
$10,087,000 (12.4% of net sales) and $7,901,000 (12.4% of net sales),
respectively. The increase in general and administrative expenses was
attributable in part to the addition of key personnel at both the Company's
corporate and operating division management team in anticipation of future
operating needs.
Amortization of Intangibles and Other Assets. Amortization of
intangible and other assets was in the first half of fiscal 1996 $3,122,000
(3.8% of net sales) and $2,414,000 (3.8% of net sales) in the first half of
fiscal 1995.
Operating Income. Operating income was $6,291,000 (7.8% of net sales)
for the first half of fiscal 1996 and $6,735,000 (10.6% of net sales) for the
first half of fiscal 1995. Management believes that an additional measurement,
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), is
useful and meaningful to an understanding of the operating performance of the
Company. However, EBITDA should not be considered by the reader as an
alternative to net income (loss) as an indicator of the Company's operating
performance or to cash flows as a measurement of liquidity. EBITDA is detailed
in the table below:
(in 000s)
-----------------------
1996 1995
---- ----
Operating Income $ 6,291 $ 6,735
Add Amortization 3,122 2,414
Add Depreciation 1,679 1,113
------- -------
EBITDA $11,092 $10,262
EBITDA % of Net Sales 13.7% 16.1%
16
<PAGE>
Interest Expense. The Company's total interest expense was $10,838,000
for the first half of fiscal 1996 and $9,004,000 for the first half of fiscal
1995, while cash interest for the periods was $8,576,000 and $7,198,000,
respectively. Interest expense consisted of the following:
( in 000s)
--------------
CASH INTEREST PAID OR ACCRUED 1996 1995
- ----------------------------- ---- ----
Interest on Senior Notes $ 4,471 $ 4,474
Interest on Sellers Notes (Payable in 2002) 220 204
Interest on Credit Facility 3,830 2,509
Other Interest 55 11
------- -------
Total Cash Interest Expense $ 8,576 $ 7,198
NON-CASH INTEREST EXPENSE
- -------------------------
Accretion of Senior Notes and Seller Notes $ 169 $ 133
Amortization of Deferred Financing Costs 1,605 1,162
Accretion of Interest on Obligations for
Minimum Royalty Payment 488 511
------- -------
Total Non-Cash Interest Expenses $ 2,262 $ 1,806
Total Interest Expenses $10,838 $ 9,004
Income Tax Expense. Income tax expense for the period was $308,000
(0.4% of net sales) for the first half of fiscal 1996 and $697,000 (1.1% of net
sales) for the first half of fiscal 1995. The effective tax rates differ from
the United States federal income tax rate of 35% due to the effects of filing
separate income tax returns in certain state and foreign jurisdictions and
limitations on utilization of federal income tax benefits.
17
<PAGE>
OPERATIONS FOR THE PERIOD JULY 1, 1996 THROUGH
SEPTEMBER 30, 1996, AND THE PERIOD JULY 1, 1995
THROUGH SEPTEMBER 30, 1995
Net Sales. The Company's net sales were as follows (in 000s):
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------
1996 1995
-------------------------- --------------------------
DIVISION NET SALES % OF TOTAL NET SALES % OF TOTAL
- -------- --------- ---------- --------- ----------
Fragrance $26,435 52.5% $22,658 61.0%
Cosmetic 12,268 24.4% 9,487 25.5%
International 11,651 23.1% 5,025 13.5%
------- -------- ------- --------
$50,354 100.0% $37,170 100.0%
Total Company sales increased 35.5%, or $13,184, from $37,170 to
$50,354. Fragrance sales increased 16.7% from $22,658 to $26,435. The increase
was due to higher orders for Christmas gift sets over last year which began
shipping in August and the impact of sales of Navigator by Canoe and DREAMS BY
TABU, products launched subsequent to last year's period. The Cosmetics
division's sales increased by 29.3% from $9,487 to $12,268. Contributing to this
increase were current year sales of Ultra-Gel and Nail Fetish which were
launched subsequent to last year's period, as well as the impact of Nate Robbins
sales since the GAC Acquisition (August 21, 1996). International sales for the
quarter ended September 30, 1996 include the sales of Dana Brazil acquired
during December 1995 and a 61.3% increase in remaining International sales in
large part attributable to the Company's Canadian operation.
Gross Profit. The Company's gross profits were as follows (in 000s):
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------
1996 1995
----------------------------- -----------------------------
DIVISION GROSS PROFIT % OF NET SALES GROSS PROFIT % OF NET SALES
- -------- ------------ -------------- ------------ --------------
Fragrance $18,259 69.1% $13,799 60.9%
Cosmetic 6,910 56.3% 5,711 60.2%
International 6,466 55.5% 2,714 54.0%
------- ------- ------- -------
$31,635 62.8% $22,224 59.8%
The Gross Profit margin in the Fragrance business improved to 69.1%
from 60.9%, resulting from the impact of improved manufacturing efficiency and
continued improvement in material sourcing resulting in lower cost of finished
goods. The Gross Profit margin in the Cosmetics business decreased to 56.3% from
60.2% due to the increase in lower margin promotional sales on the Company's
base products done in conjunction with new product introductions. The Gross
Profit margin increase in the International Division to 55.5% from 54.0% was
attributable to higher sales and an increase in the proportion of direct
international sales (versus exports) to total international sales.
18
<PAGE>
Selling Expenses. The Company's selling expenses in the second quarter
of fiscal 1996 and fiscal 1995 were $19,984,000 (39.7% of net sales) and
$13,212,000 (35.5% of net sales), respectively. The increase in selling expenses
as a percentage of sales was principally attributable to increased advertising
and promotional spending relating to the Company's strategy of reinvigoration of
existing brand equities and the introduction of complementary new products.
General and Administrative Expenses. The Company's general and
administrative expenses in the second quarter of fiscal 1996 and fiscal 1995
were $4,287,000 (8.5% of net sales) and $3,924,000 (10.6% of net sales),
respectively. While general and administrative expenses increased during the
period, they represented a lower percentage of net sales. The increase in
general and administrative expenses was attributable to the addition of key
personnel to the management teams at both the Company's corporate and operating
division levels. These additions were made in previous periods in anticipation
of future operating needs; as a result, the Company believes adequate management
personnel are now in place to support anticipated growth in the business.
Amortization of Intangibles and Other Assets. Amortization of
intangibles and other assets was $1,755,000 (3.5% of net sales) for the second
quarter of fiscal 1996 and $1,225,000 (3.3% of net sales) for the second quarter
of fiscal 1995.
Operating Income. Operating Income was $5,609,000 (11.1% of net sales)
for the second quarter of fiscal 1996 and $3,863,000 (10.4% of net sales) for
the second quarter of fiscal 1995. Management believes an additional
measurement, Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") is useful and meaningful to an understanding of the operating
performance of the Company. However, EBITDA should not be considered by the
reader as an alternative to net income (loss) as an indicator of the Company's
operating performance or to cash flows as a measurement of liquidity. EBITDA is
detailed in the table below:
(in 000s) 1996 1995
---- ----
Operating Income $5,609 $3,863
Add Amortization 1,755 1,225
Add Depreciation 810 588
------ ------
EBITDA $8,174 $5,676
EBITDA % of Net Sales 16.2% 15.3%
Interest Expense. The Company's total interest expense was $5,637,000
for the second quarter of fiscal 1996 and $4,570,000 for the second quarter of
fiscal 1995, while cash interest for the periods was $4,609,000 and $3,627,000
respectively. Interest expense consisted of the following:
19
<PAGE>
(in 000s)
---------
CASH INTEREST PAID OR ACCRUED 1996 1995
- ----------------------------- ---- ----
Interest on Senior Notes $2,237 $2,239
Interest on Sellers Notes (payable in 2002) 112 104
Interest on Credit Facility 2,039 1,281
Other Interest 36 3
------ ------
Total Cash Interest Expense $4,424 $3,627
NON-CASH INTEREST EXPENSES
Accretion of Senior Notes and Seller Notes $ 88 $ 71
Amortization of Deferred Financing Costs 879 617
Accretion of Interest on Obligations for
Minimum Royalty Payment 246 255
------ ------
Total Non-Cash Interest Expenses $1,213 $ 943
Total Interest Expenses $5,637 $4,570
Income Tax Expense. Income tax expense for the period was $464,000
(0.9% of net sales) for the second quarter of fiscal 1996 and $576,000 (1.5% of
net sales) for the second quarter of fiscal 1995. The effective tax rates differ
from the United States federal income tax rate of 35% due to the effects of
filing separate income tax returns in certain state and foreign jurisdictions
and limitations on utilization of federal income tax benefits.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had an outstanding institutional
indebtedness of $121.7 million, including $54.2 million under its Credit
Facility, $31.2 million of which is related to the revolving credit portion. Due
to the nature of the fragrance/cosmetics industry, both the Company's need for
working capital and its income stream are seasonal. The most significant
liquidity requirements occur in connection with the production of inventory
prior to the sales surge and related shipments to customers in advance of the
year-end holiday sales season and other events such as new launches.
On May 29, 1996, the Company entered into a securities purchase
agreement with a Fund, and issued $20.0 million aggregate value of Series A
Senior Exchangeable Redeemable Preferred Stock (the "Series A Preferred"). The
Series A Preferred had a dividend of 12% per annum payable quarterly in cash or
additional preferred stock at the option of the Company. The Holder of Series A
Preferred was granted an option to purchase 4.3% of the Common Stock of the
Company for $5.0 million.
20
<PAGE>
On June 14, 1996, the financial institution with which the Company has
its Current Credit Facility agreed to increase its availability under the
revolving credit facility from $30.0 million to $40.0 million.
During August and September 1996, the Company completed a private
placement of $115.0 million of Senior Redeemable Preferred Stock, Series B (the
"Series B Preferred"). The proceeds were used to retire the $20.0 million Series
A Preferred Stock and provide funds for new acquisitions (see further comments
below) and general corporate purposes. In addition, the Holder of the Series A
Preferred Stock exercised its option and acquired 51,929 shares of the Company's
Common Stock for $5.0 million. The Company also sold an additional 51,929 shares
of its Common Stock to a Holder of the Series B Preferred for $5.0 million.
In connection with the equity financing discussed above, the Current
Credit Facility holder ("Nomura") waived certain provisions of the Facility that
allowed the Company to retain the net proceeds of the equity financing after a
repayment of $7.0 million against the Current Credit Facility. The Company
purchased a certificate of deposit for $33.8 million and granted Nomura a first
priority perfected lien on such certificate of deposit.
On August 21, 1996, the Company acquired all the issued and
outstanding capital stock of GAC for $15.25 million. On August 6, 1996, the
Company and MEM Company, Inc. ("MEM") entered into an Agreement pursuant to
which a subsidiary of the Company will be merged into MEM and each outstanding
share of MEM common stock will be converted into the right to receive $7.50 per
share in cash.
On October 30, 1996, the Company entered into an Agreement to acquire
from Procter & Gamble Co.("Procter & Gamble") its mass market fragrance brands.
The Company is in the process of securing a new credit facility or
similar financing (the "New Credit Facility") in order to refinance the Current
Credit Facility which matures in December 1996, and provide capital for
acquisitions and general corporate purposes. The Company has received proposals
and is in discussions with financial institutions; however, the Company has not
received a commitment letter and there can be no assurance that the Company will
be able to obtain the New Credit Facility. The Company does not expect to
consummate the MEM acquisition or the acquisition of fragrance brands from
Procter & Gamble until it obtains the New Credit Facility. If the Company is
unable to obtain the financing, it may be required to postpone and/or change
significant elements of its business strategy. In addition, although management
believes that the Company has made significant progress in improving sales and
operating efficiency, there can be no assurance that the Company's future
performance will not be adversely affected by economic, financial and business
factors not subject to its control.
Net cash used by the Company in operating activities for the six
months ended September 30, 1996 was $27,634,255, consisting primarily of a net
loss of $4,121,000, less the impact of non-cash items impacting net loss of
$7,063,472, increases in accounts receivable, inventories of $13,925,486,
$6,698,302 and 1,187,951, respectively, and decreases in accounts payable, other
current liabilities and other of $6,684,654, $2,700,000 and $930,105,
respectively; offset by an increase in accrued expenses of $1,551,771.
21
<PAGE>
Net cash used in investing activities was $17,083,231, consisting
primarily of the acquisition of GAC for $15,379,768 and capital expenditures of
$1,635,287. Net cash provided by financing activities was $112,808,870,
consisting primarily of the proceeds from the issuance of the Series B Preferred
Stock and Common Stock, consisting of $118,070,751, net of issuance costs. In
addition, the Company issued and subsequently retired the Series A Preferred
Stock. The net increase in cash and cash equivalents was $68,091,384.
22
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS.
ACB Litigations. In April 1995, the Company and Houbigant, Inc. secured
a temporary restraining order barring the importation or sale in the United
States of certain trademarked goods in an action against ACB Fragrances and
Cosmetics, Inc., and ACB Mercantile Inc. (the "ACB Companies"), the principals
of the ACB Companies, and V&B Distributors, Harold Schiff, A. Rosenblum Sales,
Inc. and Bernard Rosenblum (the "Resellers"). The claims against both ACB and
the Resellers have been settled pursuant to a stipulation of settlement dated
July 31, 1996. Under the settlement, all claims and counterclaims by either
party were dismissed and a payment was due to the Company in the sum of $850,000
(U.S.). The payment of the $850,000 was offset against the Company's obligation
to pay $2.7 million in connection with the purchase of certain inventory from
Houbigant in 1994 and other matters; as a result, the Company paid the net
amount of $1,850,000 during the period.
Atlantis Litigation. The Company is a defendant in a lawsuit filed in
New York State Supreme Court in March 1995 by Atlantis International, Ltd.
("Atlantis") and Brian Appel. The complaint alleges defamation and intentional
interference with Atlantis' contractual and business relationships, and seeks
damages allegedly suffered in the amount of $6,000,000 and punitive damages in
the amount of $1,000,000. The Company has been given an indefinite extension of
time to answer or move against the complaint but intends to vigorously defend
this lawsuit and believes that it has substantial and meritorious defenses.
ITEM 2. CHANGES IN SECURITIES.
N/A.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
N/A.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
N/A.
ITEM 5. OTHER INFORMATION.
N/A.
23
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
EXHIBIT NO. DESCRIPTION OF DOCUMENT
10.1 Stipulation of Settlement
10.2 Amendment, Modification and Settlement Agreement
10.3 License agreement dated July __, 1996 between Houbigant Inc.
and Houbigant (1995) Limitee
10.4 Amendment No. 1 to the various Houbigant license agreements
dated July __, 1996 among Houbigant, Inc., Dana Perfumes
Corp. and Houbigant (1995) Limitee relating to "White
Chantilly" products
10.5 Letter agreement dated July __, 1996 relating to the minimum
royalties to be paid pursuant to the various Houbigant license
agreements
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed the following reports on Form 8-K during the
quarterly period ended September 30, 1996:
Filing Date Date of Event Reported Item(s) reported
- ----------- ---------------------- ----------------
August 21, 1996 August 15, 1996 Series B Preferred private
placement
September 4, 1996 August 21, 1996 Acquisition of Great American
Cosmetics, Inc. ("GAC") stock
24
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RENAISSANCE COSMETICS, INC.
Dated: November 13, 1996 By: /S/ THOMAS T.S. KAUNG
--------------------------
Thomas T.S. Kaung
Group Vice-President, Finance
and Chief Financial Officer
25
<PAGE>
FORM 10-Q
For the Quarter Ended September 30, 1996
RENAISSANCE COSMETICS, INC.
Commission File Number 33-87280
-------------------------
EXHIBITS
-------------------------
The following exhibits are filed with this Form 10-Q and appear below:
EXHIBIT NO. DESCRIPTION OF DOCUMENT
10.1 Stipulation of Settlement
10.2 Amendment, Modification and Settlement Agreement
10.3 License Agreement dated July __, 1996
between Houbigant Inc. and Houbigant
(1995) Limitee
10.4 Amendment No. 1 to the various Houbigant license
agreements dated July __, 1996 among Houbigant, Inc.,
Dana Perfumes Corp. and Houbigant (1995) Limitee
relating to "White Chantilly" products
10.5 Letter agreement dated July __, 1996 relating to
the minimum royalties to be paid pursuant to the
various Houbigant license agreements
27.1 Financial Data Schedule
26
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------------------------------- x
In re: Houbigant, Inc., et al., Case No. 93 B 45767 (JLG)
Debtors, Chapter 11. Jointly Administered
- ----------------------------------------------------------- x
HOUBIGANT, INC.,
Plaintiff,
- against - Adv. Pro. No. 95-9158A (JLG)
ACB MERCANTILE, INC.,
Defendant.
- ----------------------------------------------------------- x
HOUBIGANT, INC. and
PARFUMS PARQUET, INC.,
Plaintiffs,
- against - 95 Civ. 2467 (RWS)
ACB MERCANTILE, INC., ACB FRAGRANCES
COSMETICS, INC., GIACOMO GIULIANO,
AUGUSTINE CELAYA and GILLES PELLERIN,
V&B DISTRIBUTORS, CANADA, INC.,
HAROLD SCHIFF, A. ROSENBLUM SALES,
INC. and ROSENBLUM,
Defendants,
- ----------------------------------------------------------- x
ACB MERCANTILE, INC. and
ACB FRAGRANCES and COSMETICS, INC.,
Counterclaim-Plaintiffs,
- against -
HOUBIGANT, INC., PARFUMS PARQUET, HOUBIGANT (1995) LTEE (f.k.a. 3088766 Canada,
Ltd.), MICHAEL SHERMAN, LUIGI MASSIRONI, ROBERT GRABER, THOMAS BONOMA,
RENAISSANCE COSMETICS, INC., KIDD KAMM & COMPANY, CTC INTERNATIONAL GROUP, LTD.,
BRAD ROBINSON and CHEMICAL BANK NEW JERSEY N.A. (as agent for itself and
National Westminster Bank U.S.A.),
Counterclaim-Defendants.
- ----------------------------------------------------------- x
STIPULATION OF SETTLEMENT
WHEREAS, on November 18, 1993 (the "Filing Date"), Houbigant,
Inc., debtor and debtor in possession, and each of its affiliated debtors and
debtors in possession (collectively,
1
<PAGE>
the "Debtors") filed voluntary petitions for relief under chapter 11 of title 11
of the United States Code, 11 U.S.C. ss. 101 et seq. (the "Bankruptcy Code"),
with the Clerk of the United States Bankruptcy Court for the Southern District
of New York (the "Bankruptcy Court"), Case No. 93 B 45767 (JLG) (the "Chapter 11
Case");
WHEREAS, since the Filing Date, the Debtors have continued in
the management and possession of their business and properties as
debtors-in-possession pursuant to ss.ss. 1107 and 1108 of the Bankruptcy Code;
WHEREAS, the "Debtors' Third Amended Joint Plan of
Reorganization," dated June 6, 1995, as may be amended (the "Plan"),
contemplates that Houbigant will emerge from the Chapter 11 Case as a viable
business enterprise with ongoing operations;
WHEREAS, by order of this Court dated June 14, 1995, the
"Debtors' Third Amended Joint Disclosure Statement Pursuant to Section 1125 of
the United States Bankruptcy Code," dated June 9, 1995, was approved as
containing "adequate information" under Section 1125(b) of the Bankruptcy Code,
and the Debtors were authorized to commence the process of soliciting
acceptances to the Plan;
WHEREAS, the required votes to achieve confirmation have been
obtained;
WHEREAS, pursuant to Order of this Court, a hearing to
consider confirmation of the Plan is scheduled for August 2, 1996;
WHEREAS, there are currently pending three (3) litigations in
separate jurisdictions by and among the Settling Parties (as defined below), as
follows: (1) Houbigant, Inc. v. ACB Mercantile, Inc., pending in the United
States Bankruptcy Court, Southern District of New York, Adv. Pro. Nos. 95-8857A
and 95-9158A (collectively, the "Bankruptcy Court Action"); (2) Houbigant, Inc.
and Parfums Parquet, Inc. v. ACB Mercantile, Inc., ACB Fragrances Cosmetics,
2
<PAGE>
Inc., Giacomo Giuliano, Augustine Celaya and Gilles Pellerin, V & B
Distributors, Canada, Inc., Harold Schiff, A. Rosenblum Sales, Inc. and
Rosenblum, and ACB Mercantile, Inc. and ACB Fragrances and Cosmetics, Inc. v.
Houbigant, Inc., Parfums Parquet, Inc., Houbigant (1995) Ltee (f.k.a. 3088766
Canada, Ltd.), Michael Sherman, Luigi Massironi, Robert Graber, Thomas Bonoma,
Renaissance Cosmetics, Inc., Kidd Kamm & Company, CTC International Group, Ltd.,
Brad Robinson and Chemical Bank New Jersey N.A. (as agent for itself and
National Westminster Bank U.S.A.), pending in the United States District Court,
Southern District of New York, Docket No. 95 Civ. 2467 (RWS) (the "District
Court Action"), and (3) Houbigant (1995) Ltee v. ACB Fragrances and Cosmetics,
Inc., ACB Mercantile, Inc., Houbigant Limitee, Augustine Celaya, Giacomo
Giuliano, and Gilles Pellerin, pending in the Superior Court of Canada, Province
of Quebec, District of Montreal, No. 500-05-005142-953 (the "Canadian Action")
(the three (3) litigations collectively, the "Outstanding Litigations");
WHEREAS, ACB Mercantile, Inc. has filed various counterclaims
in the District Court Action (the "ACB Counterclaims");
WHEREAS, ACB Mercantile, Inc. has filed two (2) unsecured
proofs of claims and three (3) administrative proofs of claims and Houbigant
Ltee has filed an unsecured proof of claim against Houbigant in the Debtors'
Chapter 11 proceedings in the approximate aggregate amount of $30 million which
claims were assigned claim nos. 586, 587, 588, 589, 595 and 346, respectively,
by the Clerk of the Bankruptcy Court (collectively, the "ACB Proofs of Claims");
WHEREAS, ACB has filed objections in the Bankruptcy Court to
the confirmation of the Plan (the "ACB Plan Objections");
WHEREAS, subject to the approval of the Bankruptcy Court and
the District Court, Houbigant, Inc. ("Houbigant"), Michael Sherman, Luigi
Massironi ("Massironi"), Claire
3
<PAGE>
Fragrance, Inc. ("Claire"), Robert Graber, Dana Perfumes Corp. (f/k/a New Dana
Acquisition Corp. and Parfums Parquet, Inc.) ("PPI"), Houbigant (1995) Ltee
(f.k.a. 3088766 Canada, Ltd.) ("PPI Canada"), Thomas Bonoma ("Bonoma"),
Renaissance Cosmetics, Inc. ("Renaissance"), Kidd Kamm & Company ("Kidd Kamm"),
ACB Mercantile, Inc., ACB Fragrances and Cosmetics, Inc., Houbigant Ltee (ACB
Mercantile, Inc., ACB Fragrances and Cosmetics, Inc. and Houbigant Ltee,
collectively "ACB"), and Giacomo Giuliano, Augustine Celaya and Gilles Pellerin
(collectively, the "ACB Individuals") (all of the foregoing parties,
collectively, the "Settling Parties"),1 have reached a settlement of the various
disputes by and between the Settling Parties as asserted in the Outstanding
Litigations, the ACB Counterclaims and the ACB Proofs of Claims;
WHEREAS, the settlement reached shall be a global settlement
and shall encompass and include the Bankruptcy Court Action, the District Court
Action (including the counterclaims asserted therein), the Canadian Action, the
ACB Proofs of Claims and the ACB Plan Objection (as well as the resolution of
certain business disputes between Houbigant and PPI);2
WHEREAS, Claire is a party to that certain License Agreement
with Houbigant dated as of November 10, 1994 (the "License Agreement") under
which it licenses the trademarks "Quelques Fleurs" and "Duc de Vervins", the
value of which is clouded absent this settlement;
- --------
1 The Settling Parties are the only remaining parties in the
Outstanding Litigations. All other named parties in the Outstanding
Litigations have either been dismissed from the respective actions
or have settled their claims pursuant to orders of the applicable
courts.
2 Incidental to the settlement, Houbigant and PPI have executed that
certain "Amendment, Modification and Settlement Agreement," a copy
of which is annexed hereto as Exhibit "1" (the "Amendment
Agreement").
4
<PAGE>
NOW THEREFORE, IT IS HEREBY STIPULATED AND AGREED, subject to
the approval of the Bankruptcy Court and the District Court, by and among the
Settling Parties as follows:
1. Within seven (7) days following the date upon which (i)
approval by the Bankruptcy Court of this Stipulation of Settlement (the
"Settlement Agreement")3 is granted, (ii) approval by the Bankruptcy Court of
the Amendment Agreement is granted, (iii) the District Court shall have signed a
Stipulation of Dismissal with respect to the District Court Action, (iv) the
parties to the Canadian Action shall have filed in the Canadian Court a
"Declaration of Settlement Out of Court" in the form annexed hereto as Exhibit
"2", each party bearing its own costs therefor, and the Canadian Court shall
have dismissed and discontinued, with prejudice, the Canadian Action, and (v)
issuance by the Bankruptcy Court of an order confirming the Plan, all of which
orders shall not have been stayed (the "Effective Date"):
a. Counsel for Houbigant shall deliver to Lavery, de Billy,
as escrow agent, a notice in the form annexed hereto as Exhibit "3" which has
been executed by ACB and PPI Canada;
b. Claire, on behalf of itself, its subsidiaries, affiliates
and officers, shall pay (or cause to be paid) four hundred thousand ($400,000
(U.S.)) dollars by wire transfer to or certified check to the order of PPI (or
its designee), using those funds of Claire Fragrance, Inc. currently on deposit
with Houbigant, and Houbigant shall release such funds and make them available
for such purpose;
c. PPI Canada shall turn over to Claire all of the inventory
in its possession of Quelques Fleurs and Duc de Vervins products and packaging
in Canada, "as is, where is," which the parties agree may have a value of as
much as $120,000 (U.S.), and Houbigant shall waive any rights or claims therein
or thereto; provided, however, that Claire shall cause to be removed from the
premises where such inventory is presently located all such inventory as is
identified by PPI Canada within ninety (90) days following the Effective Date at
Claire's own expense, and further provided, however, that if Claire shall fail
to so remove such
- --------
3 The Settlement Agreement and the Amendment Agreement are
collectively referred to herein as the "Settlement."
5
<PAGE>
inventory within the time prescribed, PPI Canada, in its sole discretion and at
its own expense, shall dispose of such inventory as it deems appropriate. No
party shall have any recourse against PPI Canada, its affiliates or agents,
based upon the market value, content, nature, quality, or merchantability of
such inventory; and
d. ACB expressly disclaims any right, title, and interest,
if any, in any Products inventory currently situated in Canada (as defined in
the Amendment, Modification and Settlement Agreement of even date herewith).
2. Houbigant shall give as valuable consideration various
business accommodations to PPI relating to their ongoing business relationship
as governed by the terms of the various license and other agreements between
Houbigant and PPI as set forth in the Amendment Agreement to be executed
simultaneously upon the execution of this Settlement Agreement.
3. Upon approval of this Settlement Agreement by the
Bankruptcy Court, the ACB Proofs of Claims and the ACB Plan Objections shall be
deemed automatically withdrawn with prejudice and without costs to any party.
ACB and Houbigant Ltee shall file no further proofs of claims in the Debtors'
chapter 11 proceedings, and none of the Settling Parties shall oppose efforts to
confirm the Plan or appeal or seek a stay of any order confirming the Plan.
4. Following the Effective Date, PPI Canada shall, upon
reasonable written request from any of the ACB Individuals (or any of their
authorized agents) make available to and allow the photocopying of any of the
following business and financial records of Houbigant Ltee, ACB and the ACB
Individuals, to the extent then existing and in the possession of PPI Canada, by
any of the ACB Individuals at their sole cost and expense:
(i) compiled financial statements prepared for
Houbigant Ltee, ACB and ACB Individuals by their Canadian
accountants for the periods ended September 30, 1993 and
September 30, 1994;
(ii) ACB's internal balance sheets for December 31,
1992, Decem ber 31, 1993 and December 31, 1994;
6
<PAGE>
(iii) income statements for the ACB Individuals;
(iv) statements of accounts and notes receivable and
payable and internal reconciliations of same of Houbigant Ltee
and ACB;
(v) statement of equity holdings and capital
contributions of the ACB Individuals in ACB; and
(vi) the Canadian income tax returns for ACB and the
ACB Individuals for the years 1993 and 1994;
provided, however, that (a) PPI Canada shall not be required to permit the ACB
Individuals physical access to the premises of PPI Canada, (b) any and all such
requests by any of the ACB Individuals (or any of their authorized agents) shall
be honored only to the extent that such request(s) are necessary and essential
for the preparation of the personal tax returns, the response to audit of
personal tax returns, and the compliance generally with applicable Canadian or
American tax law with respect to the personal tax affairs and obligations of the
ACB Individuals, and (c) that any such request(s) by the ACB Individuals shall
not require PPI Canada to make available or otherwise disclose to the ACB
Individuals confidential, proprietary, protected or secret trade, financial and
business information related to PPI Canada's post-December 12, 1994 business
operations.
5. Pursuant to Rule 41(a)(1)(ii), Fed. R. Civ. P., upon the
signing of the Stipulation of Dismissal by the District Court, the District
Court Action, including the ACB Counterclaims, shall be and hereby is dismissed
with prejudice and without costs to any party.
6. Pursuant to Rule 41(a)(1)(ii), Fed. R. Civ. P., made
applicable by Rule 7041 of the Fed. R. Bankr. P., upon approval of this
Settlement Agreement by the Bankruptcy Court, the Bankruptcy Court Action shall
be and hereby is dismissed with prejudice and without cost to any party.
7. Pursuant to applicable Canadian law, the Canadian Action
shall be deemed settled out of court and transacted without cost to any party,
and PPI, PPI Canada, ACB and such other affiliated Settling Parties as may be
appropriate shall take all such actions necessary to accomplish the foregoing,
including but not limited to the Filing of a "Declaration of Settlement Out of
Court," each party paying its own costs.
7
<PAGE>
8. Simultaneously with the execution of this Settlement
Agreement the Settling Parties shall execute and exchange the twenty-seven (27)
releases annexed hereto as Exhibits "1" through "27," which Releases shall be
held in escrow pending the Effective Date.
9. Except as set forth in the Amendment Agreement, this
Settlement Agreement sets forth the entire agreement between the Settling
Parties and supersedes any and all prior agreements, understandings, promises
and understandings made by and among the Settling Parties concerning the subject
matter hereof. Notwithstanding the foregoing sentence, this Settlement Agreement
does not in any way supersede any prior license or ancillary agreements thereto
between Houbigant and PPI or Houbigant and Claire Fragrance, Inc., and its
subsidiaries and affiliates.
10. The Settling Parties acknowledge that this Settlement
Agreement has been executed after negotiations between and among representatives
of the Settling Parties and consultation by each Settling Party with counsel of
its own choosing. The Settling Parties further acknowledge that no
representations or agreements of any kind have been made to induce any of the
Settling Parties to enter into this Settlement Agreement other than those
expressly contained herein.
11. This Settlement Agreement may not be waived, changed or
terminated, in whole or in part, unless the changes are in writing and signed by
all of the Settling Parties and approved by the Bankruptcy Court.
12. The parties hereto agree that this Settlement Agreement
and all related documents shall be drafted in English. The Settlement Agreement
shall be governed by and construed in accordance with the laws of the State of
New York. With respect to the Canadian Action, the Settlement Agreement and all
related documents executed in connection therewith
8
<PAGE>
shall constitute a transaction within the meaning of Articles 2631 et seq. of
the Civil Code of Quebec.
13. The Settling Parties agree and consent to the retained
jurisdiction of the Bankruptcy Court for the purpose of implementing or
enforcing the provisions of this Settlement Agreement.
14. Nothing herein shall be deemed an admission of any fact or
liability of any of the Settling Parties with respect to the allegations of any
of the pleadings filed in the Bankruptcy Court Action, the District Court
Action, the Canadian Action, the ACB Proofs of Claims, the ACB Plan Objections,
or any matter pertaining to any claims or counterclaims alleged or set forth in
the pleadings in the Bankruptcy Court Action, the District Court Action, the
Canadian Action and the ACB Proofs of Claims.
15. Except as necessary to perform the terms of this
Settlement Agreement, all prior obligations, agreements and indemnifications of
whatever kind or nature of Houbigant, its subsidiaries, affiliates and
principals, on the one hand, and ACB, its subsidiaries, affiliates and
principals, and the ACB Individuals, on the other, pursuant to any agreements
between Houbigant and ACB and/or the ACB Individuals, including the ACB License
Agreement and the ACB Stock Purchase Agreement, both dated April 1, 1993, are
hereby terminated and of no further force or effect. Notwithstanding Section
22(2) of the ACB License Agreement to the contrary, neither Section 22 (2)
(a)-(e) nor any other provisions of the ACB License Agreement shall survive this
Settlement Agreement; provided, however, that
(A) for a period of one (1) year following the Effective Date hereof, ACB and
the ACB Individuals shall not, at any time during the aforesaid period:
i. retain the services of any current or former employees of PPI-Canada in
connection with any business endeavor;
9
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ii. directly or indirectly, divulge to any person, firm, corporation or
other entity, any information with regard to the financial, business,
operations, method of business, customer and supplier information,
independent contractor information, know-how, procedures or other
confidential information regarding the business or affairs of ACB
and/or PPI Canada (as ACB's successor), or any of their respective
stockholders, subsidiaries, affiliates, customers or suppliers, and all
of the foregoing shall be kept confidential and shall not be revealed
to anyone, except if such information,
a. was in the public domain at the time it was obtained;
b. entered into the public domain at the same time or after
it was obtained through no fault of ACB or the ACB Individuals;
c. was rightfully provided to the ACB or the ACB Individuals
by a third party not bound by any obligation of confidentiality; or
d. is disclosed as required by law; or
iii. solicit, interfere with, employ or endeavor to entice away any
customer, supplier, agent or consultant of PPI-Canada (who was a
customer, supplier, agent or consultant prior to December 12, 1994), or
any of its respective subsidiaries or affiliates; or
iv. market and/or advertise any products by means of direct comparison to
trademarked products licensed and/or manufactured by PPI, PPI-Canada
and/or Houbigant; and
(B) following the Effective Date hereof, ACB and the ACB Individuals shall
not, at any time:
i. manufacture, distribute and/or sell any product, the name, mark, style,
scent, design, advertising or packaging of which would be confusingly
similar to those presently utilized by Houbigant, PPI and/or PPI
Canada;
ii. use any trade secrets relating to the formula and components for the
manufacture and production of any Houbigant, PPI and/or PPI-Canada
trademarked products; or
iii. otherwise violate applicable Canadian, U.S. or international trademark
or other relevant laws with respect to the Houbigant Trademarks or the
respective rights and business of Houbigant, PPI and/or PPI-Canada.
16. The Settling Parties acknowledge that Houbigant is the
owner of, among others, the following United States Trademarks: Chantilly
(Registration No. 865,906), Lutece (Registration No. 1,965,064), Raffinee
(Registration No. 1,264,630), Houbigant Raffinee
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(Registration No. 1,256,522), Demi-jour (Registration No. pending), Monsieur
Musk (Registration No. 1,566,699), Presence (Registration No. 309,266), Quelques
Fleurs (Registration No. P865472) and Duc de Vervins (Registration No. 1959036)
(collectively, the "Houbigant Trademarks"), and that Houbigant owns all right,
title and interest in the Houbigant Trademarks throughout the world. ACB and the
ACB Individuals further acknowledge that the Houbigant Trademarks are valid,
existing, subsisting and incontestable and have not been abandoned, and agrees
that ACB and the ACB Individuals will not (i) challenge the validity of the
Houbigant Trademarks now or in the future, (ii) encourage or assist any other
person to challenge the Houbigant Trademarks, and (iii) will not disparage the
Houbigant Trademarks.
17. Notwithstanding anything to the contrary in any agreement
between ACB and the ACB Individuals and any of the other Settling Parties,
neither ACB nor the ACB Individuals shall have any interest, right or claim of
any kind in any of Houbigant's trademarks, including, without limitation, the
Houbigant Trademarks, or in and to any inventory, product, components,
work-in-process, raw materials, promotional items or packaging and other
materials of Houbigant, wherever situated, including that, if any, situated in
Canada and being or becoming vested in either PPI or Claire under this
Settlement Agreement and Amendment Agreement.
18. The Settling Parties will execute such other and further
documents as may be reasonably necessary and required to effectuate the purposes
of this Settlement Agreement.
19. This Settlement shall be binding on each of the Settling
Parties' predecessors, successors, affiliates and assigns.
20. This Settlement Agreement may be executed in separate
counterparts, each of which shall be considered an original document, which
together shall constitute the Settlement
11
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Agreement of the Settling Parties hereto, and facsimile signatures shall be
deemed to be effective as original signatures.
21. The Settling Parties agree that this Settlement Agreement
shall be void and of no force or effect if the Bankruptcy Court, Southern
District of New York does not approve
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the Settlement Agreement and the District Court, Southern District of New York
or the Superior Court of Canada, Province of Quebec, District of Montreal do not
dismiss the actions pending in these courts pursuant to paragraph "1" hereof.
Dated: New York, New York
July __, 1996
Houbigant, Inc. ACB Mercantile Inc.
By: ____________________________ By: ____________________________
Title: Title:
Michael Sherman ACB Fragrances and Cosmetics, Inc.
____________________________ By: ____________________________
Title:
Luigi Massironi Giacomo Giuliano
- ---------------------------- ----------------------------
Robert Graber Augustine Celaya
- ---------------------------- ----------------------------
Claire Fragrance, Inc. Houbigant Ltee
____________________________ By: ____________________________
Title:
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Dana Perfumes Corp., for itself and Gilles Pellerin
as successor to Parfums Parquet, Inc.,
for itself and as successor to
New Fragrance License Corp.
By: ____________________________ ____________________________
Title:
Parfums Parquet, Inc., Houbigant Thomas Bonoma
(1995) Ltee (f.k.a. 3088766 Canada, Ltd.)
By:____________________________ ____________________________
Title:
Kidd Kamm & Co. Renaissance Cosmetics, Inc.
By:____________________________ By: ___________________________
Title: Title:
SO ORDERED:
this __ day of August, 1996
- ------------------------------
United States Bankruptcy Judge
14
AMENDMENT, MODIFICATION AND SETTLEMENT AGREEMENT
This Amendment, Modification and Settlement Agreement dated July __,
1996 (the "Amendment Agreement") by and between (i) Houbigant, Inc. ("Houbigant"
or "Grantor"), a Delaware corporation, duly incorporated and having an office
c/o M.J. Sherman & Associates, Inc., 333 East 68th Street, New York, New York
10021, and herein represented by Michael J. Sherman, an Executive Vice
President-Special Projects of Houbigant, duly authorized for the purposes of
these presents as he so declares, (ii) Dana Perfumes Corp., a Delaware
corporation (f/k/a New Dana Acquisition Corp.), as the successor-in-interest, by
operation of law, of Parfums Parquet, Inc., a Delaware corporation, a
successor-in-interest to New Fragrance License Corp., pursuant to a Plan and
Agreement of Merger, dated as of March 25, 1996 ("PPI"), having a principal
place of business c/o Dana Perfumes, 635 Madison Avenue, New York, New York
10022, and (iii) Houbigant (1995) Ltee ("Limitee"), a Canadian corporation, duly
incorporated, and successor-in-interest to 3088766 Canada Ltd., having a
principal place of business at 1597 Rue Cunard Laval, (Quebec) H7S 2B4 Canada,
and each herein represented by Albert DeChellis, a Group Vice President,
Fragrance of PPI and a Vice President of Limitee, duly authorized for the
purposes of these presents as he so declares:
WHEREAS, Grantor is the owner of numerous and various letters patent,
trade marks, trade names, registrations and/or applications therefor as well as
all rights therein and all technical knowledge with respect thereto as further
set forth in this Amendment Agreement, and is currently engaged in the business
of licensing such rights to third parties to manufacture, market, distribute and
sell products derived from Grantor's proprietary interests; and
WHEREAS, on November 18, 1993, Grantor and several affiliated
domestic corporations filed petitions for reorganization under chapter 11 of the
Bankruptcy Code with the
<PAGE>
Clerk of the Bankruptcy Court, Southern District of New York (the "Bankruptcy
Court") which proceedings (the "Chapter 11 Case") remain pending as of the date
hereof; and
WHEREAS, pursuant to that certain License Agreement dated May, 1994,
as amended (the "Initial Agreement") heretofore approved by order of the
Bankruptcy Court dated June 2, 1994, Grantor, subject to the terms and
provisions of the Initial Agreement granted PPI a license of such letters
patent, trade marks, trade names and/or applications therefor and the technical
knowledge with respect thereto owned and controlled by Grantor (the "Initial
License") to enable PPI to manufacture and sell certain perfumes and fragrance
products of Grantor's "Parfums Parquet" division primarily in the Western
Hemisphere (excluding Canada) (the "Initial Territory"); and
WHEREAS, pursuant to that certain License Agreement dated August 10,
1994, as amended (the "Worldwide Agreement") heretofore approved by order of the
Bankruptcy Court dated September 21, 1994, Grantor, subject to the terms and
provisions of the Worldwide Agreement, granted PPI a license of such letters
patent, trade marks, trade names and/or applications therefor and the technical
knowledge with respect thereto owned and controlled by Grantor (the "Worldwide
License") to enable PPI to manufacture and sell certain perfumes and fragrance
products of Grantor's "Parfums Parquet" division throughout the world, excluding
the Initial Territory and Canada (the "Worldwide Territory"); and
WHEREAS, pursuant to that certain License Agreement dated April 1,
1993, as amended (the "Old Canadian Agreement") entered into prior to the
commencement of the Chapter 11 Case, Grantor, subject to the terms and
provisions of the Old Canadian Agreement, granted ACB Mercantile, Inc. ("ACB") a
license of such letters patent, trade marks, trade names and/or applications
therefor and the technical knowledge with respect thereto owned and controlled
by
2
<PAGE>
Grantor (the "Old Canada License") to enable ACB to manufacture and sell certain
perfumes and fragrance products of Grantor's "Parfums Parquet" division
throughout Canada, which Old Canadian Agreement was sold and assigned by ACB to
Limitee, as assignee and successor licensee, on or about December 12, 1994; and
WHEREAS, the parties hereto desire to amend and modify certain terms
and provisions of the Initial Agreement and the Worldwide Agreement, to execute
and implement a license agreement for the manufacture and sale of certain
perfumes and fragrance products of Grantor's "Parfums Parquet" throughout Canada
consistent and in conformity with the form and substance of the Initial
Agreement, as amended, and Worldwide Agreement, as amended, and in lieu of and
in substitution for the Old Canadian Agreement, and to resolve and settle
various disputes which have arisen in connection with the past operation of the
Initial License, Worldwide License and Old Canada License;
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth in this Amendment Agreement and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS
For purposes of this Amendment Agreement,
(a) "Banks" means, collectively, The Chase Manhattan Bank, formerly known
as Chemical Bank, as successor-in-interest to Chemical Bank New
Jersey, N.A., individually and as Collateral Agent for Itself and
Fleet Bank, national association as successor-in-interest to NatWest
Bank, N.A. (f/k/a National Westminster Bank USA) and any of their
successors or assigns;
(b) "Canadian Agreement" means that certain License Agreement dated
________, 1996, as may be amended, a copy of which is annexed hereto,
incorporated herein and marked as Exhibit "A" hereof;
3
<PAGE>
(c) "Canadian Court" means the Superior Court of Canada, Province of
Quebec, District of Montreal;
(d) "Canadian License" means the license proposed to be granted hereby by
Grantor to Licensee pursuant to the Canadian Agreement to use certain
letters patent, trade marks, trade names and/or applications therefor
and the technical knowledge with respect thereto owned and controlled
by Grantor as set forth in the Canadian Agreement to enable Licensee
to manufacture and sell certain perfumes and fragrance products of
Grantor's "Parfums Parquet" division throughout Canada;
(e) "District Court" means the United States District Court for the
Southern District of New York;
(f) "Effective Date" means the date on and by which
(i) the Bankruptcy Court shall have entered an order approving
and authorizing the execution and implementation of (A)
this Amendment Agreement, including the Canadian
Agreement, and (B) the Settlement Agreement, including the
dismissal and discontinuance, with prejudice, of the
litigation pending before it as described in the
Settlement Agreement,
(ii) the District Court shall have entered an order approving
and authorizing the execution and implementation of the
Settlement Agreement,
(iii) the Canadian Court shall have entered an order dismissing
or discontinuing, with prejudice, the litigation pending
before it as described in the Settlement Agreement, and
(iv) the Bankruptcy Court shall have entered an order
confirming the Plan, the effect of all of which orders
shall not have been stayed.
(g) "License Agreements" means, collectively, the Initial Agreement, the
Worldwide Agreement and the Canadian Agreement.
(h) "Minimum Royalty Adjustment Agreement" means that certain letter
agreement providing for the aggregating of the minimum royalties
contemplated to be paid under the respective License Agreements, a
copy of which is annexed hereto, incorporated herein and marked as
Exhibit "B" hereof.
(i) "Products" means the perfumes and fragrance products and related
promotional products as defined in each of the License Agreements as
applicable to each.
(j) "Settlement Agreement" means that certain "Stipulation of Settlement"
by and among Houbigant, et al. for the resolution of those three (3)
litigations currently pending between such parties in the Bankruptcy
Court, the District Court, and the Canadian Court.
4
<PAGE>
2. GRANT OF CANADIAN LICENSE
(a) Upon the Effective Date, Grantor shall be deemed to have granted to
Limitee the Canadian License to (x) manufacture in Canada the
Products (as defined in the Canadian Agreement) covered by the Trade
Marks (as defined in the Canadian Agreement); (y) distribute, use and
sell throughout Canada the Products covered by the Trade Marks so
manufactured; and (z) use the Trade Marks in conjunction with and as
they relate to the Products in all advertising and letterheads and
collateral promotional material throughout Canada, all as more fully
set forth, and subject to the terms and provisions contained, in the
Canadian Agreement. (b) Upon the Effective Date, the Canadian
Agreement shall be deemed effective as at December 12, 1994, nunc pro
tunc, and the Old Canadian Agreement shall be deemed to have been
terminated and of no subsequent or further force and effect as of
that date. (c) Notwithstanding subparagraph "(b)" hereinabove,
Houbigant shall have the right to audit the books and records of PPI
with respect to all sales of Products covered by the Trademarks
occurring on and after December 12, 1994, and any and all requests or
demands previously issued pursuant to the Old Canadian Agreement by
Houbigant to PPI with respect to royalty reporting, audit rights
and/or royalty payments shall be deemed to have survived the
aforesaid termination of the Old Canadian Agreement and have been
made pursuant to the Canadian Agreement. 3. "WHITE CHANTILLY" FLANKER
(a) Effective as of , 1995, Grantor hereby consents to the
development, marketing, distribution and sale throughout the world by
Licensee of a new line of Products under the name "White Chantilly",
subject to and consistent with the terms and provisions set forth
5
<PAGE>
in that certain agreement entitled "Amendment No. 1 to License
Agreements", a copy of which is annexed hereto, incorporated herein
and marked as Exhibit "C" hereof (the "White Chantilly Agreement").
(b) The White Chantilly Agreement is hereby amended solely and for the
limited purpose of clarifying and confirming that all references
therein to the "Canadian License Agreement" (as defined therein)
shall mean the Canadian Agreement as defined herein and annexed to
this Amendment Agreement.
4. FLANKERS
(a) In the event that Licensee shall seek to develop, market, distribute
and sell any and all other new lines of Products derivative of or
from the Products and the Trade Marks (i.e., a "Flanker"), such
"Flanker" introduction shall be and remain subject to the prior
written consent of Grantor thereto.
(b) Notwithstanding paragraph "7" of, and the formulae contained in each
of, the License Agreements for royalty payments, Houbigant agrees
that as to any pre-approved "flanker" Net Sales (as defined in the
License Agreements) (other than with respect to Net Sales of White
Chantilly which Net Sales shall be governed by Amendent No. 1 to
License Agreements), Licensee shall be obligated to pay to Grantor a
royalty amounting to fifty (50%) percent of the royalty rate that
would otherwise be applicable to the sales of such "flanker" Product
during any first two (2) years following the introduction of the
subject "flanker" Product and seventy-five (75%) percent of the
royalty rate that would otherwise be applicable to the sales of such
"flanker" Product during the immediately ensuing two (2) years;
thereafter, any and all sales of such "flanker" Product shall be at
the full, unadjusted royalty rate as set forth in the relevant
License Agreement, provided, however,
6
<PAGE>
that the foregoing shall not affect, modify or amend Licensee's
minimum royalty payment obligations required in each of the License
Agreements, subject, however, to paragraph "5" hereinbelow.
5. MINIMUM ROYALTIES
Notwithstanding the minimum royalty payment amounts established in
each of the License Agreements, Grantor agrees that same shall be deemed amended
pursuant to and to the extent set forth in the Minimum Royalty Adjustment
Agreement.
6. CROSS-BORDER SHIPMENTS
(a) Notwithstanding any terms or provisions to the contrary and any
prohibitions contained in the License Agreements, Grantor hereby
agrees that Licensee, in furtherance of and in otherwise full
compliance with the terms and provisions of the License Agreements,
shall be permitted to manufacture and distribute, or cause to be
manufactured and distributed, Products intra-Territory (as the term
"Territory" is defined in each of the License Agreements), but only
to and between a licensee under the License Agreements.
7. USE OF THE NAME OF "HOUBIGANT"
Grantor hereby grants to Licensee, and any sub-licensee thereof
appointed in accordance with the License Agreements, during the term of the
applicable License Agreement and any renewals thereof, the non-exclusive right
to use and exhibit the name "Houbigant" as a trade mark or trade name in
connection with (i) the sale, packaging, distribution, advertising, marketing or
promotion of any of the Products throughout the world and (ii) the activities,
programs and efforts of Licensee, in connection with the foregoing.
8. RENEWALS
7
<PAGE>
Paragraph "4", subparagraph "(2)" of each of the License Agreements
is hereby supplemented and amended to provide that upon the exercise of the
first, singular renewal of all of the License Agreements on or before June 1,
1997 and, assuming the aforesaid first, singular renewal being exercised on or
before June 1, 1997, a second (or more) further, additional renewal(s) on or
before December 31, 1999, paragraph "9", subparagraph "(1)" of each of the
License Agreements shall be deemed modified and amended for any and all Contract
Years (as defined in the License Agreements) following the year in which the
Banks' indebtedness, evidenced by the four (4) promissory notes to be issued by
Houbigant to the Banks, pursuant to Houbigant's plan of reorganization, has been
paid in full (including the non-stock portion of that certain "PIK Note" to be
issued to the Banks by Houbigant) to the extent that the three (3) royalty rates
set forth therein shall be adjusted, respectively, as follows: seven (7%)
percent shall be reduced to six (6%) percent; six (6%) percent shall be reduced
to five and a quarter (5.25%) percent and five (5%) percent shall be reduced to
four and a quarter (4.25%) percent.
9. FURTHER AMENDMENTS TO LICENSE AGREEMENTS
(a) Section 35 of the Initial Agreement should be amended by the addition
after the second sentence of the following sentence: "Notwithstanding
the foregoing, the Licensee may transfer all of its rights and
obligations under this Agreement to any other corporation within its
Affiliated Group (as defined in Section 1504(a) of the Internal
Revenue Code of 1986, as amended)."
(b) Section 35 of each of the Worldwide and Canadian Agreements shall,
upon the occurrence of the Effective Date, be deemed amended by the
deletion of the third sentence and the substitution of the following
sentences: "Notwithstanding the foregoing, the Licensee may transfer
all of its rights and obligations under this Agreement to any other
corporation within its Affiliated Group (as defined in Section
1504(a) of the Internal Revenue Code of 1986, as amended). Moreover,
Licensee shall not be entitled to, and hereby agrees that it shall
not sell, transfer or dispose or cause
8
<PAGE>
the sale, transfer and disposition of the ownership and control
(other than as may result from an initial public offering) of
Licensee for a period of two (2) years following the Effective Date
of the Initial Agreement, provided, however, that any such
dispositions to the extent they do not include the sale or transfer
of this Agreement or the rights thereunder shall not be limited
hereby."
10. MISCELLANEOUS
(a) PPI shall pay, or cause to be paid, to Houbigant the sum of
$2,747,000, without interest, on or before the later of five (5)
business days following actual receipt by PPI of written notice of
the occurrence of the Effective Date or May 31, 1996.
(b) Upon the receipt by Houbigant of the aforesaid payment, all amounts
allegedly due from PPI to Houbigant and from Houbigant to PPI as and
to the extent identified and set forth in that certain schedule, a
copy of which is annexed hereto, incorporated herein and marked as
Exhibit "D" hereof shall be deemed resolved, compromised and settled,
subject only to the terms and provisions of this Amendment Agreement.
(c) Grantor agrees that any and all Products inventory, if any, currently
situated, in Canada, as is, where is, shall be deemed the property of
PPI, provided, however, that any Net Sales produced by the
distribution and sale thereof by PPI, shall be subject to the terms
and provisions of the License Agreements.
(d) (1) Houbigant hereby agrees that PPI has been and shall be permitted
to exercise an offset against royalty payments due to Houbigant in
the amount of $120,000 relative and applicable to the third (3rd)
quarter of 1995 and has been and shall be permitted to exercise an
offset against royalty payments due to Houbigant in the amount of
$120,000 relative and applicable to the fourth (4th) quarter of 1995
in connection with alleged brand and trade mark preservation and
maintenance and out-of-pocket defense costs.
9
<PAGE>
(2) PPI hereby agrees and acknowledges that it has not taken any
other offsets or charges, nor shall PPI take any additional offsets
or charges in connection with the litigations and claims being
settled hereunder and under the Settlement Agreement and shall
provide Houbigant with all royalty reports required to date through
the quarter ended immediately prior to the Effective Date hereof.
(e) PPI hereby agrees to release and waive any and all claims it had or
has against Houbigant in accordance with and to the extent contained
and set forth in that certain "Release", a copy of which is annexed
hereto, incorporated herein, and marked as Exhibit "E" hereof.
(f) Houbigant hereby agrees to release PPI and Limitee, as successor to
ACB under the Old Canadian License, from any and all claims it had or
has under, arising from or related to the operation, implementation
and enforcement of the Old Canadian License prior to December 12,
1994.
(g) Nothing contained herein shall be deemed to affect the right to PPI
to fully implement and effectuate that certain settlement agreement
heretofore entered in the District Court with respect to diversions
of Product.
11. EXISTING LICENSE AGREEMENTS
Except to the extent and as set forth in this Amendment Agreement, in
all other respects the License Agreements are and shall be deemed and remain in
full force and effect in accordance with their terms and provisions.
10
<PAGE>
12. NOTICES
Any notices or other communications required or permitted hereunder
shall be sufficiently given if in English and delivered personally or sent by
telecopy, Federal Express (or similar courier service), registered or certified
mail, postage prepaid, addressed as follows to the following addresses:
To Houbigant:
Houbigant, Inc.
c/o Michael J. Sherman
333 East 68th Street, Suite 13A
New York, New York 10021
with copies to:
Kaye, Scholer, Fierman, Hays
& Handler, LLP
425 Park Avenue
New York, New York 10022-3598
Attn: Mitchel H. Perkiel, Esq.
to PPI and Limitee:
c/o Renaissance Cosmetics
635 Madison Avenue, 5th Floor
New York, New York 10022
Attn: John Jackson, Esq.
with copies to:
Parker Chapin Flattau & Klimpl LLP
1211 Avenue of the Americas
New York, New York 10036
Attn: Edward R. Mandell, Esq.
to the Banks:
The Chase Manhattam Bank
270 Park Avenue
New York, New York 10017
Attn: Billie J. Prue
11
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with copies to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attn: Lisa G. Beckerman, Esq.
Such notices or other communication shall be deemed received (a) on the date
delivered if delivered personally or by telecopy or (b) three (3) business days
after being sent if sent by registered or certified mail.
13. SUCCESSORS AND ASSIGNS
This Amendment Agreement shall be binding upon and enure to the
benefit of the parties hereto and their respective successors and assigns.
14. ENTIRE AGREEMENT: ATTACHMENTS
(a) This Amendment Agreement and all exhibits annexed hereto, as well as
any agreements to be delivered by the parties pursuant hereto,
represent the entire understanding and agreement between the parties
hereto with respect to the subject matter hereof, except as to the
License Agreements which are integral parts hereto, and supersede all
prior oral and written and all contemporaneous oral negotiations,
commitments and understandings between such parties.
(b) The Exhibits attached hereto are hereby incorporated as integral
parts, as well, of this Amendment Agreement.
15. EXPENSES
Except as otherwise expressly provided herein Houbigant and the
Licensee shall each pay their own expenses in connection with this Amendment
Agreement.
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16. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
17. SECTION HEADINGS
The section headings are for the convenience of the parties hereto
and in no way alter, modify, amend, limit or restrict the contractual
obligations of the parties.
18. SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Amendment Agreement.
19. COUNTERPARTS
This Amendment Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
be one and the same document.
IN WITNESS WHEREOF, this Amendment Agreement has been duly executed
by the parties hereto as of and on the date first above written.
HOUBIGANT, INC., ET AL.
By: /s/ Michael J. Sherman
--------------------------
Michael J. Sherman
Chief Executive Officer
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DANA PERFUMES CORP.,
for itself and as successor to
New Dana Acquisition Corp.
and Parfums Parquet, Inc.,
for itself and as successor to
New Fragrance License Corp.
By: /s/ John R. Jackson
---------------------------
John R. Jackson
HOUBIGANT (1995) LIMITEE
By: /s/ John R. Jackson
---------------------------
John R. Jackson
THE FOREGOING IS HEREBY
AGREED AND CONSENTED TO:
THE CHASE MANHATTAN BANK, formerly known as Chemical Bank, as
successor-in-interest to Chemical Bank of New Jersey, N.A., individually and as
Collateral Agent for Itself and Fleet Bank,
national association
By: /s/ Billie J. Prue
------------------
Billie J. Prue
Vice President
Fleet Bank, national association as
successor-in-interest to NatWest Bank, N.A.
(f/k/a National Westminster Bank USA)
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By: /s/ Charles Greer
---------------------
Charles Greer
Vice President
15
LICENSE AGREEMENT
THIS AGREEMENT MADE IN THE CITY OF NEW YORK STATE OF NEW YORK,
THIS __th DAY OF __________, 1996 BY AND BETWEEN HOUBIGANT INC., a Delaware
corporation, duly incorporated and having a principal place of business at 1135
Pleasant View Terrace West, Ridgefield, New Jersey (referred to as the
"Grantor") and herein represented by Michael J. Sherman, a Houbigant Vice
President-Special Projects, duly authorized for the purposes of these presents
as he so declares; AND HOUBIGANT (1995) LIMITEE, a Canadian corporation, duly
incorporated and wholly-owned subsidiary of Cosmar Corporation, having a
principal place of business at 1597 Rue Cunard Laval (Quebec), H7S 2B4 Canada
(hereinafter referred to as the "Licensee") and herein represented by Albert
DeChellis, its Vice President, duly authorized for the purposes of these
presents as he so declares;
WHEREAS, Grantor is the owner of certain letters patent, trade
marks, trade names, registrations, and/or applications therefore as well as all
rights therein and all technical knowledge with respect thereto as further set
forth in this Agreement; and
WHEREAS, on November 18, 1993, Grantor and several affiliated
domestic corporations filed petitions for reorganization under chapter 11 of the
Bankruptcy Code with the Clerk of the Bankruptcy Court, Southern District of New
York (the "Bankruptcy Court"), which proceedings remain pending as of the date
hereof; and
WHEREAS, Grantor, from time to time and in the ordinary course
and in furtherance of its general business licenses to manufacture and sell the
Grantor's Products (as that term is hereinafter defined) in the Territory (as
that term is hereinafter defined) for various durations; and
WHEREAS, pursuant to that certain License Agreement, as
amended (the "Initial Agreement") heretofore approved by order of the Bankruptcy
Court dated June 2, 1994, Grantor, subject to the terms and provisions of the
Initial Agreement, granted Parfums Parquet Incorporated ("PPI"), an affiliate of
the Licensee, a license of such letters trade marks, trade names and/or
applications therefor and the technical knowledge with respect thereto owned and
controlled by Grantor (the "Initial License") to enable PPI to manufacture and
sell certain perfumes and fragrance products of Grantor's "Parfums Parquet"
division primarily in the Western Hemisphere (excluding Canada) (the "Initial
Territory); and
WHEREAS, pursuant to that certain License Agreement, as
amended (the "Worldwide Agreement") heretofore approved by order of the
Bankruptcy Court dated September 21, 1994, Grantor, subject to the terms and
provisions of the Worldwide Agreement, granted PPI a license of such letters
trade marks, trade names and/or applications therefor and the technical
knowledge with respect thereto owned and controlled by Grantor (the "Worldwide
License") to enable Licensee to manufacture and sell certain perfumes and
fragrance products of Grantor's "Parfums Parquet" division throughout the world,
excluding the Initial Territory and Canada (the "Worldwide Territory"); and
WHEREAS, PPI was merged with and into New Dana Acquisition
Corp.,
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pursuant to a Plan and Agreement of Merger, dated as of March 25, 1996, which
then changed its name to Dana Perfumes Corp.; and
WHEREAS, all references to Parfums Parquet Incorporated or PPI
shall include its successor-in-interest, by operation of law, Dana Perfumes
Corp., a Delaware corporation; and
WHEREAS, Licensee desires and intends to manufacture and sell
in the Territory certain of Grantor's Products and desires and requires a
license from Grantor under the letters patent, trade marks, trade names and/or
applications therefor and the technical knowledge with respect thereto owned or
controlled by Grantor applicable to such Products; and
WHEREAS, the purpose of this Agreement is that Grantor shall
provide to Licensee a license of such letters patents, trade marks, trade names
and/or applications therefor and the technical knowledge with respect thereto
owned and controlled by Grantor to the extent necessary to enable Licensee to
manufacture and sell the subject Products in the expanded Territory under the
letters patent, trade marks, trade names and/or applications therefor and the
technical knowledge with respect thereto defined and/or scheduled in this
Agreement;
WHEREFORE, in consideration of the mutual promises and
covenants contained in this Agreement, and other good and valuable
considerations, the receipt and sufficiency of which is acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS
In this Agreement,
(a) "Effective Date" means the date on and by
which all the conditions referred to in
paragraph "38" hereinbelow will have been
fulfilled;
(b) "Know-How" includes, among other things, all
technical information, procedures,
processes, trade secrets, formulae for the
perfume oil (commonly known as a "hec") and
the bulk of all of the Products, methods,
practices, techniques, information, bills of
parts, diagrams, drawings, specifications,
blueprints, lists of materials, labor and
general costs, production manuals and data
relating to the design, manufacture,
production, inspection and testing of the
Products known by, available to, used or
owned by Grantor;
(c) "Net Sales" shall mean in respect of any
particular period the greater of (i) the
gross invoice price of the Products sold by
Licensee, less any charges appearing on said
invoice for value added or sales taxes or
other similar taxes payable on the amounts
so charged, freight, insurance, and less any
returns, trade discounts
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and allowances, or (ii) two-thirds (2/3rds)
of the gross invoice price of the Products
sold by Licensee; notwithstanding the
foregoing, in the event that the amounts
calculated under "(ii)" hereof exceed the
amount calculated under "(i)" hereof because
of returns to the Licensee of Products not
in the normal course of business and which
Products are to be repackaged or relaunched
by the Licensee under new packaging or
promotional programs, then the provisions of
"(ii)" hereof shall not apply.
(d) "Products" shall be deemed to be perfumes
and fragrance products and related
promotional products developed by Grantor
and sold within its "Parfums Parquet"
division under the Trademarks or such other
perfumes and fragrance products of Grantor
as may otherwise be hereafter approved by
Grantor, in writing, for distribution and
sale in the Territory, and such other items
of Grantor as may be approved from time to
time as the parties hereto may agree.
(e) "Relevant Country" shall mean Canada.
(f) "Territory" shall mean all Canada; and
(g) "Trade Marks" shall refer to those U.S. and
foreign trade marks, service marks,
imprints, logos, trade dress and trade names
whether or not registered, and all issued
registrations and pending applications
relating thereto as set forth on Schedule
"A" annexed hereto.
2. GRANT OF LICENSE
(1) EXCLUSIVE GRANT: Grantor grants to Licensee the
exclusive right and license in the Territory under the Trade Marks to:
(a) manufacture in the Territory the Products
covered by the Trademarks;
(b) distribute, use and sell throughout the
Territory the Products covered by the
Trademarks so manufactured; and
(c) use the Trade Marks in conjunction with and
as they relate to the Products and all
advertising and letter heads and collateral
promotional material throughout the
Territory.
(2) Grantor grants to Licensee the exclusive rights to
use and exploit the Know-How in the manufacture of the Products within the
Territory.
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(3) Grantor grants to Licensee, and any sub-licensee
thereof, during the term of this Agreement and any renewals thereof, the
non-exclusive right to use and exhibit the name "Houbigant," whether as a
trademark, trade name, or otherwise, in connection with the sale, packaging,
advertising or promotion of any of the Products in the Territory.
(4) Licensee acknowledges that some or all of the
Know-How has been disclosed and delivered to Licensee in confidence prior to and
in contemplation of the execution and Effective Date of this Agreement. The
remainder of the Know-How shall be furnished to Licensee as soon as practicable
after the date of execution of this Agreement but no later than the Effective
Date.
(5) The obligation to furnish the Know-How shall extend
to Know-How existing at the date of this Agreement and to any Know-How which
later during the term hereof and to the extent relevant hereto is acquired by
Grantor.
(6) Grantor warrants that there are no other subsisting
licenses for the Trade Marks in the Territory, and Grantor covenants that no
further disclosure to third parties will be made by it of the Know-How relating
to the Trade Marks for the Territory while this Agreement is in full force and
effect, and Grantor shall
(a) to the extent it owns any rights to the
tooling and molds previously used by
contracted suppliers of components in the
Territory, and has a right to do so, issue
instructions to such suppliers so identified
not to further use the tooling or molds
otherwise then under purchase order from
Licensee or Grantor and will provide to the
Licensee a full list of such suppliers not
later than three (3) weeks after the date
hereof; and
(b) to the extent it holds all copyright and
similar rights in respect of items to be
provided under paragraph "6(1)" hereinbelow,
grant Licensee to use such rights within the
Territory during the term of this Agreement;
PROVIDED, HOWEVER, Grantor shall be under no
obligation whatsoever to file copyright or
similar registration applications in the
Territory in respect of items provided under
paragraph "6(1)" hereinbelow.
(7) Grantor warrants that the Know-How will be sufficient
and suitable to the manufacture of the Products to a quality comparable to the
quality of the sample Products furnished to the Licensee by Grantor, provided
that Licensee at all times conforms strictly to and with the Know-How.
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(8) No further, other or different rights or licenses,
such as the use of any of Grantor's patents, are granted or implied except as
otherwise provided in this Agreement.
3. SUB-LICENSES
(1) Licensee may in its discretion appoint sub-licensees
for the Products within the Territory, PROVIDED, HOWEVER, that in the case of
the appointment of a manufacturing sub-license:
(a) Any such sub-licensees will be acceptable to
Grantor, whose approval shall be sought and
obtained in writing prior to implementation
of any such sub-license, which approval
shall not be unreasonably withheld.
(b) Any such sub-license agreement shall include
terms imposing on the sub-licensee all of
the same obligations of Licensee pursuant to
this Agreement and shall reserve to Grantor
all the rights of Grantor. Licensee and any
sub-licensee shall become and be jointly and
severally liable for all non-economic
obligations hereunder or otherwise to
Grantor.
(c) Any such sub-license agreement shall be
terminable at the option of Grantor by
Grantor in the event of the rightful
termination by Grantor of this Agreement and
shall provide that if it is not terminated
by Grantor on the termination of this
Agreement, the sub-license agreement may at
the option of and with such modifications as
required by Grantor as may be reasonably
acceptable to sub-licensee, continue in full
force and effect as a license agreement
between Grantor and the sub-licensee.
(2) For purposes hereof, an authorized distributor or
wholesaler or like middleman shall not be deemed a "sub-licensee" hereunder.
4. TERM OF AGREEMENT
(1) Subject to the provisions for early termination of
this Agreement as set forth herein, this Agreement shall remain in full force
and effect for a period of approximately five (5) years commencing on the
Effective Date and terminating on June 30, 2001 so as to render this Agreement
co-terminus with the initial term of the Initial Agreement.
(2) RENEWALS: This Agreement shall be automatically
renewed upon its expiry for seven (7) successive five (5) year terms, and
thereafter as the parties hereto may agree, PROVIDED, HOWEVER, that PPI shall
have contemporaneously renewed the Initial Agreement, shall
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<PAGE>
have paid all Royalties (as hereinafter defined) due Grantor in accordance with
both paragraph "7" of the Initial Agreement and paragraph "9" hereinbelow, shall
have paid the required Minimum Royalties (as hereinafter defined) pursuant to
paragraph "7" of the Initial Agreement and paragraph "7" hereinbelow and so long
as this Agreement shall otherwise be in full force and effect. No bona fide
dispute between the parties with respect to the payment of Royalties or other
matters shall be deemed to impair the ability of Licensee to extend this
Agreement. Upon any such renewal, the terms and conditions of this Agreement
shall remain the same with the exception of the Minimum Royalty requirement as
provided in paragraph "7" of the Initial Agreement and paragraph "7" hereinbelow
and otherwise except to the extent mutually agreed by the parties hereto. In the
event that Licensee does not wish to renew this Agreement for any period
following the initial term or any subsequent renewal period, Licensee shall give
Grantor one hundred eighty (180) days' written notice prior to the expiry of the
initial term of the Agreement or any renewal period thereof.
(3) RELATION BACK: When this Agreement becomes effective,
the following shall occur (i) the License Agreement between Houbigant, Inc. and
ACB Mercantile, Inc., a Canadian Corporation ("ACB"), dated as of April 1, 1993,
the ("Old License") heretofore transferred and assigned by ACB to Licensee will
be deemed terminated as of December 12, 1994; (ii) this License Agreement will
be deemed effective retroactive to December 12, 1994; and (iii) Houbigant will
be barred from taking any action to interfere with the right of Licensee to
effectuate and enjoy the benefits of either the transfer and assignment of the
Old License or the rights under this Agreement. The foregoing notwithstanding,
nothing in this paragraph shall affect the right of Houbigant to enforce all of
its rights under this Agreement.
5. IMPROVEMENT
(1) DISCLOSURE: Each party hereto agrees to advise the
other any and all technical data and information relating to any and all
developments or improvements of the Trade Marks or the Products (whether or not
patentable) and of the Know-How that it may develop, identify or acquire during
the term of this Agreement to the extent that such disclosure is not restricted
or prohibited by law, by any undertaking given to, or any condition, restriction
or restraint imposed by third parties, or by considerations relating to the
validity of any Trade Marks or patent in respect of which application is about
to be made.
(2) GRANT UNDER IMPROVEMENTS: Grantor shall grant to
Licensee an exclusive license to manufacture and sell the Products in the
Territory under all improvements and developments to be furnished to Licensee,
together with an ancillary grant of the right to use any associated Know-How,
provided, however, that in the case of any such improvement or development, such
disclosure by Grantor may be subject to any restrictions, legal prohibitions,
undertakings given to or conditions, restrictions or restraints imposed by third
parties or considerations relating to the validity of any patent in respect of
which application is about to be made, any grant by Grantor to Licensee under
this provision shall be limited accordingly.
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(3) FEED-BACK LICENSE: Under all developments or
improvements of the Know-How for the Trade Marks or the Products to be furnished
by Licensee to Grantor, the following additional terms shall apply:
(a) Grantor shall have the exclusive
royalty-free license on any such
improvements on the Know-How for the Trade
Marks or Products now owned or hereafter
made or acquired by Licensee during the term
of this Agreement upon the expiry of this
Agreement or any renewal period thereof and
other agreements to which Grantor and
Licensee are a party. Licensee further
covenants and agrees to notify Grantor of
any improvement and to execute promptly and
without compensation and without expense to
it any and all papers and documents and to
perform whatever lawful acts may be
reasonably deemed necessary by Grantor in
connection with the filing of any
application for letters patent or that may
be necessary or desirable to effect and
maintain Grantor's licensed rights or the
rights of any of Grantor's sub-licensees in
said improvements and application for
letters patent and in all letters patent
issuing from said applications for letters
patent. Except to the extent that Grantor
retains or subsequently reobtains the right
to manufacture, distribute and/or sell the
products covered by the Trademarks, it shall
make no use of such improvements prior to
the expiry of the Agreement or any renewals
hereof. All costs and expenses incurred as
the result of the subsequent use thereof by
Grantor shall be borne by Grantor.
(b) Licensee shall be entitled to apply the
Trade Marks to and to sell the Products
within such form of containers and packaging
which in Licensee's discretion it deems fit
and proper for the particular market within
the Territory towards which such Products
are to be directed.
(4) INFORMATION FROM THIRD PARTIES: Where technical data
and information relating to any developments or improvements of the Products is
legally obtained or obtainable from an unrelated party only upon payment, there
shall be no obligation on either party hereto to make such payment in order to
obtain such technical data and information for disclosure to the other party,
PROVIDED, HOWEVER, that if the party does make such payment, such technical data
and information shall be disclosed to the other party.
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6. OBLIGATIONS OF GRANTOR
(1) MARKETING INFORMATION: To the extent they exist and
are available, Grantor shall provide at its cost to the Licensee sample
marketing information such as installation instructions, technical data and
manuals as may be necessary to promote the sale of the Products, including trade
advertisements and promotional literature, if requested by Licensee. Grantor, if
requested by Licensee, shall also furnish Licensee at Grantor's cost with
available art work, transparencies, and the like, used by Grantor in any
advertising and merchandising campaigns related to the Products. In addition, to
the extent such items used by Grantor's previous distributors in their
advertising and merchandising campaigns related to the Products and for their
packaging are not in the possession of Grantor, if such materials are requested
by Licensee, Grantor shall use its best efforts to obtain and deliver same and
shall charge Licensee no more than its own cost therefor. Licensee shall be
responsible for any model fees or other third party charges for use of same in
the Territory after the Effective Date of this Agreement.
(2) ASSISTANCE: Grantor agrees to assist Licensee and its
customers within the limits of its reasonable ability in solving any problems
they may have in connection with the Products.
(3) TECHNICAL ASSISTANCE: Upon the written request of
Licensee, Grantor shall render all Know-How, training and technical assistance
necessary to be provided by Grantor under this Agreement at times and places
mutually agreed upon and subject to the availability of Grantor's personnel and
facilities. Licensee shall be responsible for the travel, meals and lodging
expenses of Grantor's personnel. Grantor does not warrant or agree that any of
its personnel to be furnished or to be made available to Licensee under this
Agreement will speak any language other than English. Licensee shall obtain any
and all necessary visas, work permits, residence permits or other permits or
approvals necessary for the entry into and working in the Territory of all
technical personnel who are to be provided by Grantor under the terms of this
Agreement.
(4) PROMOTE SALES: Grantor shall, within the limits of
its reasonable ability, assist Licensee in the promotion of the sales of the
Products in the Territory, and conduct its business in a manner so as to enhance
the reputation of the Products and Trade Marks, but only to the extent that
there is no cash expenditure required by Grantor. Grantor shall also require
that all subsequently engaged licensees outside the Territory take no action
which would have the effect of damaging the reputation of the Trademarks and
Know-How within the Territory.
(5) QUALITY CONTROLS: Grantor shall use its best efforts
to maintain the standards of design, materials, quality control, production and
safety testing and inspection of its perfumes and fragrance products at least
equal to applicable international perfume standards.
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7. LICENSEE'S DUTIES
(1) PROMOTE SALES: Licensee shall, within the limits of
its reasonable ability, promote the sales of the Products in the Territory, and
conduct its business in a manner so as to enhance the reputation of the Products
and Trade Marks. With respect to new products which do not use the Trade Marks
and are sold by Grantor or its affiliates through its or their "Parfums Parquet"
division, Licensee may, in Grantor's discretion, be given the right to
manufacture and sell such new products of Grantor in the Territory on the same
terms of this Agreement and as if such new products and their associated trade
marks were respectively included in the definitions of "Products" and "Trade
Marks", PROVIDED, HOWEVER, that the parties hereto shall have first agreed upon
adjusted Minimum Royalties and Royalties (or shall have agreed not to adjust
same).
(2) QUALITY CONTROLS: Licensee shall maintain appropriate
standards of design, materials, quality control, production and safety testing
and inspection, and Grantor, at its own expense, shall be permitted to inspect
the production line while in operation and to call for and inspect samples of
the Products manufactured by the Licensee, and to inspect Licensee's operations
generally, in order to determine if Licensee has adhered to such standards. In
the event that Licensee, in the sole and reasonable opinion of Grantor, fails to
adhere to such standards, Grantor may give Licensee thirty (30) days written
notice of demand to comply, and if Licensee fails to comply (or if compliance by
its nature requires a period longer than thirty (30) days, then if Licensee
fails to commence complying or discontinues the process of correcting the
non-compliance), then Grantor, in addition to any and all other remedies, may
immediately issue a notice of termination of this Agreement by notice in
writing, subject to the provisions of paragraph 20 hereinbelow.
Packaging by Licensee of the Products shall be in such manner
that their distinctiveness, validity and reputation shall not be adversely
affected. Grantor agrees that the foregoing duty shall be incorporated in any
other subsequently executed license agreements with respect to any other
Products for any other territories that Grantor might enter into with any other
licensee(s).
(3) PROMOTION AND ADVERTISING: Licensee agrees diligently
to promote the sale of the Products under this Agreement. Licensee further
agrees that its advertising expenditures for the promotion of the Products
during the course of each fiscal year during the term of this Agreement and any
renewal periods thereof, shall be in an amount at least equal to or greater than
such amount (on a percentage basis) that Licensee spends for promotion and
advertising for like kind products in the Relevant Country in its portfolio
during the fiscal year. A reasonably detailed report concerning such advertising
shall be made to Grantor as reasonably requested in writing by Grantor but no
less frequently than once a year for the preceding period(s).
It is understood that costs for advertising and promotion
shall include the following: (i) national advertising; (ii) cooperative
advertising; (iii) inserts; (iv) remits; (v) gifts
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with purchase; (vi) testers; (vii) samples; (viii) in-store modeling; (ix)
demonstration allowance; (x) point of sale materials, (xi) promotional monies,
(xii) consumer contests, and (xiii) such other sell-through expenditures as the
parties hereto may mutually agree.
(4) COMPLIANCE WITH LOCAL LAWS: Licensee shall procure
and maintain all approvals, licenses, permissions and permits necessary:
(a) for the sale of the Products in such
Relevant Country; and
(b) for Licensee to maintain and operate a place
of business in the Relevant Country (and at
the Licensee's expense).
The reasonable costs and expenses of obtaining and/or maintaining any such
required approvals, licenses, permissions and permits shall be incurred,
advanced and paid by Licensee. If and to the extent that either Grantor or
Licensee become aware of any changes in laws or regulations within any Relevant
Country which may affect the promotion, sales, services or maintenance of the
Products, the parties hereto shall inform the other. Notwithstanding the
obligations contained in paragraph "7(4)(a)" hereinabove, any requirement in a
Relevant Country for an approval of the Products in the nature of the local
equivalent of an FDA approval shall be the responsibility of Licensee who shall
use its best endeavors to obtain the same promptly at its expense.
(5) U.S. LAWS: Licensee shall not knowingly take any
action which will cause Grantor to be in violation of any law of any
jurisdiction including but not limited to the U.S. Foreign Corrupt Practice Act,
the U.S. Export Control laws and the U.S. Anti-Boycott laws.
(6) LOCATION OF PRODUCTION FACILITIES: Licensee must keep
Grantor informed of the locations of its production facilities in a timely
manner.
(7) PURCHASE OF PERFUME OILS AND EXISTING INVENTORY:
Purchase of Perfume Oils: Licensee may purchase any and all perfume oil (hec)
used in the Products manufactured by Licensee from any source, PROVIDED,
HOWEVER, that Grantor shall be given a fair opportunity to bid on hec supply
contracts of the Licensee.
(8) MINIMUM ROYALTIES: During the term of this Agreement
and any renewals hereof, Licensee agrees to pay Grantor or its assigns, in the
aggregate, for each "Contract Year" indicated in Column 1 below, a royalty
amounting to the "Minimum Royalty" for that period as indicated in Column 2
below:
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(Column 1) (Column 2)
CONTRACT YEAR MINIMUM ROYALTY
- ------------- ---------------
Year 1 $525,000(1)
-------
Second (2nd) through 104% of prior year's
Forty-Second (42nd) minimum
Contract Year
Licensee's obligation to pay Minimum Royalties for Contract Year 1 shall be pro
rated by Licensee and Grantor upon the "Effective Date" of this Agreement, as
defined in Paragraph 38 hereinbelow.
Licensee, as a condition of retaining the license granted by this Agreement,
shall pay to Grantor within thirty (30) days from the end of each Contract Year
an amount determined by the following formula:
A - (B+C +D) - E
where:
"A" is the Minimum Royalty payable for the applicable Contract Year;
"B" are the Royalties already paid for that Contract Year plus C (if any);
"C" is any withholding tax deducted from such preceding quarterly Royalties as
permitted under paragraph "9(5)" hereinbelow;
"D" is any withholding tax which applies to the payment of the balance of the
Minimum Royalty under the above formula; and
"E" is all costs and expenses properly paid by Licensee on behalf or for the
benefit of Grantor entitled to reimbursement under this Agreement.
If Licensee fails to pay such sum within the time prescribed, the remedy of
Grantor, in addition to any other remedies Grantor may have, shall be to
terminate this Agreement subject to the provisions of paragraph "20"
hereinbelow. For purposes of this Agreement, a Contract Year shall be a fiscal
year from July 1, to June 30, except that the First Contract Year shall commence
on the
- ------------------------
1 Calculated in Canadian dollars.
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Effective Date and shall terminate on June 30, 1995. If the result of the
aforesaid formula is negative, no payment shall be due thereunder.
8. GRANTOR AND LICENSEE'S PROHIBITIONS
Neither Grantor nor any of its affiliates or licensees shall
knowingly sell, directly or indirectly, any Products inside the Territory, or
establish any branch or maintain any office or depot in relation to the Products
anywhere inside the Territory and Initial Territory.
9. CONSIDERATION
(1) ROYALTIES: As consideration for the license of the
Trade Marks for the Territory granted under this Agreement, Licensee agrees to
pay the Grantor an ongoing and periodic royalty equal to seven (7%) percent of
the first $8.5 million (Canadian) of all Net Sales (as defined in paragraph 1(c)
of this Agreement), six (6%) percent of the next $5.0 million (Canadian) of all
Net Sales, and five (5%) percent of all Net Sales exceeding $13.5 million
(Canadian), of any Products manufactured and/or sold by or on behalf of the
Licensee or its sub-licensees in the Territory (the "Royalties") each and every
year.
(2) PAYMENT PROCEDURES: The Chase Manhattan Bank, as
agent for itself and Fleet Bank (collectively, the "Banks"), has security
interests in and liens upon all assets of Grantor including, without limitation,
any rights to receive the Royalties under any licensing arrangements. Grantor
does hereby direct Licensee to make any and all payments of Royalties to which
Grantor may be entitled by wire transfer, in accordance with instructions to be
provided at or prior to closing to The Chase Manhattan Bank as Agent. Licensee
shall be fully protected in making payments in accordance with this provision.
The direction set forth herein shall be irrevocable unless revoked or altered by
Grantor with a written consent of the Banks. The provisions of this section
shall apply for so long as any amounts are owed by Grantor to the Banks. Upon
retirement of the indebtedness of Grantor to the Banks, which shall be
acknowledged to Licensee in writing by the Banks, all payment obligations of
Licensee hereunder shall immediately be tendered to Grantor or its designee.
(3) PAYMENT PERIOD: Within thirty (30) days of the end of
each quarter in each year, (I.E., within thirty (30) days of 31st March, 30th
June, 30th September and 31st December in each year), Licensee shall deliver to
Grantor and the Banks a report setting out the aggregate Net Sales of each
Product manufactured by or on behalf of Licensee or its sub-licensees and sold
by Licensee or sub-licensees (whether separately or as part of any larger unit
or product) during such preceding quarter. Concurrently with the making of each
such report, Licensee shall remit the Royalties then due to Grantor in respect
of the Products sold by or on behalf of Licensee in the preceding quarter in
accordance with the immediately preceding paragraph. The balance of any
Royalties due shall be payable no later than thirty (30) days after the
Grantor's fiscal year (I.E., June 30).
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(4) SAMPLES: No Royalties shall be payable in respect of
Products sold or otherwise disposed of by Licensee for the purpose of customary
samples or BONA FIDE tests on such Products. Notwithstanding the foregoing,
Royalties shall be payable with respect to Products with a unit cost to Licensee
of more than $.50 (US) that are included or packaged by Licensee with any
Products or other products sold by Licensee that are not the subject of this
Agreement.
(5) NO DEDUCTIONS FOR TAX: All payments to Grantor under
this Agreement shall be made without any deduction of any kind except for
withholding taxes, if any, applicable to the payments, or unless specifically
chargeable against Grantor. Licensee undertakes to take all reasonable steps to
assist Grantor to obtain the benefit of any double taxation agreement which may
apply to any of the payments under this Agreement and to minimize the impact of
any taxation in respect of such payments, without cost to Licensee or so long as
such cost is reimbursed by Grantor.
(6) WITHHOLDING TAXES: In the event that withholding
taxes are applicable to any payments under this Agreement, Licensee shall
withhold the withholding taxes required and shall promptly remit such taxes to
the appropriate taxing authority in the Territory. Upon any such remittance,
Licensee shall promptly provide Grantor with documentation evidencing the
payment of such taxes, and any other documentation that Grantor shall reasonably
require so as to obtain a foreign tax credit in the United States and which can
reasonably be obtained by Licensee.
10. CURRENCY OF PAYMENT
(1) WHERE CONVERTIBLE: To the extent that the Royalties
shall be determined by Net Sales expressed in a currenc(ies)y other than U.S.
Dollars, Royalties shall be computed in U.S. Dollars with respect to each
non-U.S. currency in which there are Net Sales transactions in any quarterly,
royalty reporting period. The Royalties statement shall be accompanied by
Licensee's payment of Royalties in U.S. Dollars, with conversion to be made at
the rate published in the Wall Street Journal on the business day next following
the end of the quarterly, royalty reporting period.
11. WARRANTY RE: TRADE MARKS AND KNOW-HOW
(1) POWER TO GRANT RIGHTS: Grantor warrants that it has the
right to grant the rights granted in this Agreement and that it has granted no
other rights or licenses (other than as expressly set forth in this Agreement)
which would derogate from the rights granted in this Agreement.
(2) ACKNOWLEDGMENT OF VALIDITY: Licensee acknowledges
Grantor's assertion as to the validity and ownership of the Trade Marks and
Know-How in the Territory and further acknowledges that the Trade Marks and
Know-How are and shall remain the property of Grantor. The use of any Trade
Marks by Licensee shall inure to the benefit of Grantor.
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(3) LICENSEE NOT TO INFRINGE: Licensee shall not, after
appropriate inquiry, knowingly in any way do anything to infringe upon, harm, or
contest the validity of the Trade Marks, or any patents or the Know-How owned by
Grantor.
(4) NOTICE OF INFRINGEMENT: Each party hereto shall
advise the other promptly of any instances of infringements, limitations,
illegal use or misuse of any Trade Mark. Licensee shall have the right to
commence legal action for the enforcement of any such Trade Marks in the
Territory, but prior to the commencement of any such action by Licensee,
Licensee shall advise Grantor by notice in writing of its intention to do so.
Grantor shall have the option to be exercised by delivery of notice in writing
to Licensee for Grantor to assume carriage of any such action and appoint
counsel of its choice at any time prior to or during the action, PROVIDED,
HOWEVER that Grantor reimburses Licensee for all reasonable legal costs incurred
by Licensee in connection therewith up to the date of Grantor's intervention.
Grantor and Licensee shall cooperate fully in the prosecution of any such action
free of charge, and each agrees that it shall be joined as a party plaintiff to
the action and authorizes such joinder. Each shall have the right at its own
expense to retain independent counsel or shall designate an individual of its
choosing who shall be kept fully informed of all issues in the action, who shall
be advised in advance of each new step in the action, and who shall be entitled
promptly to receive copies of all pleadings, documents and correspondence
regarding the action. In the event that any such action is successfully
prosecuted against an infringer, any damages, accounting of profits, award of
legal costs or other recovery shall be applied first to reimburse the party
having carriage of the action for its reasonable legal expenses, including any
amounts paid by Grantor to Licensee in assuming carriage of the action, and any
remaining amounts shall then be divided between Grantor and Licensee in
proportion to the damages suffered by Licensee and the Royalties lost by Grantor
with respect to the infringing conduct, subject to arbitration if the parties
are unable to agree upon such proportion. In the event that any such action is
unsuccessful, whoever has initiated or assumed carriage of the action shall be
responsible for paying any legal costs which may be awarded to the successful
defendant.
(5) If for any reason other than the fault of the
Licensee, Licensee is prohibited from using any of the Trade Marks within
Canada, the parties shall promptly meet to determine an equitable adjustment of
the minimum annual royalties payable by Licensee hereunder. In the event the
parties cannot agree, the same shall be submitted to arbitration as hereinafter
provided and the decision of the arbitrator shall be final and binding.
(6) ABANDONMENT OF TRADEMARKS: If in the Grantor's
reasonable judgment the Licensee's failure to use a registered trademark in
Canada renders that Trademark subject to cancellation for abandonment, lack of
use or similar grounds (the "abandonment"), Grantor shall furnish Licensee with
written notice thereof in the manner set forth in this Agreement. Licensee shall
thereupon have a period of sixty (60) days from its receipt of notice to furnish
Grantor with written notice in the prescribed manner of its intention
(a) Not to use the Trademark in the jurisdiction
in which case all of
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Licensee's rights to exploit the Trademark
in the jurisdiction under this Agreement
shall immediately terminate and revert to
the Grantor; or
(b) To use the Trademark in the jurisdiction in
a manner reasonably calculated to cure the
abandonment within a period not to exceed
six (6) months from the date of Licensee's
notice. If, in the Grantor's reasonable
judgment, Licensee has failed to
substantially cure the abandonment by the
end of said six (6) month period, all of
Licensee's rights to exploit the Trademark
in the jurisdiction under this Agreement
shall immediately terminate and revert to
the Grantor subject to a right of the
Licensee to arbitrate the issue pursuant to
paragraph 24 hereinbelow.
(7) ADDITIONAL REPRESENTATIONS AND WARRANTIES OF GRANTOR:
SUBJECT TO THOSE STIPULATIONS, ACKNOWLEDGMENTS AND RELEASES CONTAINED IN THAT
CERTAIN "AMENDMENT, MODIFICATION AND SETTLEMENT AGREEMENT" DATED
_______________, 1996, AND RELATED DOCUMENTS AND EXHIBITS, BETWEEN, AMONG
OTHERS, GRANTOR AND LICENSEE,
(a) Each Trademark is, and all registrations and
applications relating thereto are, to the
best of Grantor's knowledge and belief,
valid and subsisting and in full force and
effect as of the date hereof.
(b) To the best of Grantor's knowledge and
belief, no Trademark and none of the
Know-How infringes upon the rights of any
other person, firm or entity within the
Territory nor has any person claimed that
any Trademark or any know-know has infringed
the rights of any person, firm or entity in
the Territory within the past three (3)
years.
(c) Annexed hereto as Schedule "D" hereof is a
true, accurate and complete schedule and
copies of all registrations and applications
for each U.S. Trademark and to the best of
Grantor's knowledge and belief for each
foreign Trademark within the Territory,
including a schedule of the dates of the
applications or registrations or renewals
thereof as the case may be, and the
expiration dates of each Trademark.
(d) All of the U.S. Trademarks and, to the best
of Grantors knowledge and belief, all
foreign Trademarks, are owned by the Grantor
free and clear of all claims, liens and
encumbrances except as set forth in Schedule
"E" hereof.
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(e) The Products manufactured and/or sold by
Grantor in the Territory prior to the
Effective Date are, to the best of Grantor's
knowledge and belief, fit for the use
intended, have been manufactured, sold and
distributed in compliance with all
applicable law, rules and regulations within
the Territory including, but not limited to,
all requirements of the U.S. Food and Drug
Administration and the U.S. Bureau of
Alcohol Tobacco and Firearms and conform in
all respects to all applicable laws within
the Territory.
(f) Except as set forth in Schedule "F" hereof,
Grantor has not granted in the Territory any
license, franchise or permit to any third
party to use any of the Trademarks or
Know-How.
(g) None of the Trademarks in the U.S. and to
the best of Grantor's knowledge and belief
outside the U.S. in the Territory, is
subject to any outstanding order, decree,
judgment, stipulation, restriction, or
agreement limiting the scope or the use of
any of the Trademarks.
12. INDEMNITY FOR TRADE MARK ACTIONS
(1) INDEMNITY RE TRADE MARKS: Grantor will defend
Licensee, its subsidiaries, affiliates, sublicensors, customers, distributors,
directors, officers, representatives, agents, successors and assigns against any
claim that the sale of any of the Products infringes Trade Marks in the
Territory in which Grantor has registered its Trade Marks, and Grantor will pay
resulting costs, damages and legal fees finally awarded up to a maximum of the
Royalties to which Grantor is entitled under this Agreement (and exclusive of
any royalties otherwise due under the Initial Agreement), PROVIDED, HOWEVER,
that Licensee shall promptly notify Grantor in writing of the claim; and Grantor
has sole control of the defense and all related settlement negotiations subject
to adhering to the reasonable requirements of Licensee.
13. REGISTRATIONS, MAINTENANCE AND FILINGS
(1) REGISTRATIONS AND APPROVALS OF TRADE MARKS: Grantor
shall be responsible for maintaining the Trade Marks in full force and effect
throughout the term of this Agreement, and, at Grantor's expense and Licensee's
reasonable request, for registering its Trade Marks beyond registrations which
already subsist in the Territory.
(2) MAINTENANCE OF TRADE MARKS: Licensee shall follow-up
and advance all renewal registration fees and otherwise maintain the rights in
the Trade Marks in the Territory where presently maintained. Grantor further
agrees (a) to instruct its local trade mark and patent agent(s) to keep Licensee
fully and completely informed of all action taken or scheduled to be taken in
respect of the trade marks and to cooperate with Licensee to take such actions
as need be taken to maintain such trade marks, and (b) to notify Licensee at the
time it makes an application
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for a patent or trade mark or acquires any right in a patent or trade mark which
is or becomes subject to the terms of this Agreement.
(3) FILING FOR PROTECTION: In the event that either
Grantor or Licensee decides not to file for patent protection for any invention
or discovery relating to the Products, Grantor or Licensee, as the case may be,
agree to notify the other party and the Banks within thirty (30) days after such
decision in order to allow such other party to pursue any rights to such
invention or discovery.
(4) ABANDONMENT OF PATENTS: If either Grantor or Licensee
intends to dispose of or abandon any of the patents, rights in the patents,
patent application or the right to file under the Paris Convention for a foreign
patent, if any (the "Patent Interest") which would be covered by this Agreement,
Grantor or Licensee, as the case may be, shall promptly notify the other party
and the Banks of such intention and give such other party sufficient notice to
permit it to take all steps necessary to preserve such Patent Interest. Such
other party shall then have the right during a sixty (60) day period commencing
with such notification to assume any such Patent Interest which the notifying
party intends to dispose of or abandon and to undertake the procuring or
preserving of such Patent Interest to itself. The notifying party will cooperate
with the other party in such endeavor (including making an assignment of full
right, title and interest in the Patent Interest) provided that such other party
shall bear all costs (including any tax liability) in connection therewith.
Subject to paragraph "13(6)" below, nothing in this Agreement shall prevent
Grantor from assigning or selling its rights to receive Royalties or its
reversionary rights in anticipation of termination of the license granted by
this Agreement.
(5) ASSISTANCE RE: PROSECUTION: Each of Licensee and
Grantor shall render all reasonable assistance if so requested by the other in
the prosecution of any future patent applications in the Territory and shall do
all things in its power towards maintaining the validity and enforceability of
any patents which may have issued or which may issue in respect of such patent
applications. Licensee shall render all practicable assistance, if so requested
by Grantor, in connection with and in support of any application by Grantor for
the extension of the terms of any patent without substantial cost to Licensee.
(6) PRE-EMPTION RIGHT RE TRADE MARKS: If during the term
of this Agreement Grantor determines to transfer its reversionary interest in
the Trade Marks (or related patents) (or any of the same), it shall not effect
such transfer before first offering for sale that reversionary interest to
Licensee at a price and on terms no higher than the best BONA FIDE offer for the
same then received by Grantor, and Grantor shall act in the utmost good faith to
Licensee in regard to all matters relating to this pre-emption right. If and in
the event that Licensee determines to accept such offer, Grantor shall ensure
that the sale of such reversionary interest proceeds without delay at the
offered price. In connection with the foregoing, Grantor shall provide Licensee
with true, correct and complete copies of the bona fide written offer and all
related documents that it receives and the Licensee shall then have ten (10)
business days from its receipt of all of such information to determine whether
to elect to purchase the Grantor's reversionary interest in the
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Trademarks, on the terms and conditions in the bona fide written offer. In the
event the Licensee elects to purchase the reversionary interest, it shall send
the Grantor written notice thereof within the ten (10) business day period and
thereafter the parties shall close the transaction at the price and on the terms
and conditions set forth in the bona fide written offer. In the event that the
Licensee shall fail to elect to purchase within the aforesaid time period, the
Grantor shall be free to sell its reversionary interest in the Trademarks
(subject to this License Agreement) only on the precise terms and conditions of
the bona fide written offer. In the event of any change in any of the terms or
conditions of the bona fide written offer, the Grantor shall provide the
Licensee with a copy of the amended bona fide written offer and shall provide
the Licensee with a new right to elect to purchase the Grantor's reversionary
interest in the Trademarks at the price and on the terms and conditions of the
amended bona fide written offer under the procedures set forth above.
(7) Grantor shall be responsible for any and all
reasonable costs and expenses which may be incurred in connection with and in
furtherance of the duties and obligations of Grantor to register, maintain and
file the Trademarks in the countries within the Territory under this Agreement
and the Initial Agreement.
14. TRADE MARKS AND OTHER PROPRIETARY MARKS
(1) DESCRIPTION AS AUTHORIZED LICENSEE: Licensee is
authorized, but not obligated, to describe, refer to and advertise itself as a
licensee of Grantor for the manufacture of the Products in the Territory.
(2) DISPLAY OF TRADE MARK: Licensee agrees to display
prominently on all of the packaging and containers for Products manufactured and
offered for sale, the Trade Marks (see Schedule "A" hereof). Where reasonable or
appropriate, uses of the Trademarks by License shall indicate either "TM" or
"R", as is appropriate. Below this identification or trade mark Licensee may
affix an additional mark showing that the manufacture has been made in the
workshops of Licensee. Text and size, however, shall not exceed one-half of the
size of the Trade Marks.
(3) APPLICATION FOR REGISTRATION OF TRADE MARK: In the
event that Grantor decides to apply for registration of any one or more of the
Trade Marks in connection with the Products in the Territory, Grantor shall
notify Licensee in writing and may request and obtain Licensee's advice and
assistance if required, and keep Licensee informed of pertinent developments
and/or the issuance of registration. The cost of any such registration of trade
marks shall be for the account of Grantor and all such registrations shall be
applied for and issued in the name of and as the sole property rights of
Grantor.
(4) NEW TRADE MARKS: If any Trade Marks of Grantor are
used by Licensee, alone or in combination with other trade marks of Grantor or
Licensee, in such manner as to be distinctive by reason of design, color, format
or any other reason, such distinctive features and associated good will shall
become the property of and enure to the benefit of Grantor, and
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Licensee agrees that it will, without any payment or other consideration, sign
and execute such documents as are necessary to transfer and assign all rights
thereto to Grantor.
(5) TRANSFER TO GRANTOR: Should the law or regulations of
any part of the Territory invest Licensee with any property rights to any of the
Trade Marks, Licensee shall promptly, freely and cooperatively relinquish to
Grantor any and all such rights upon proper termination of this Agreement for
any reason, without recourse or cost to either Grantor or Licensee and shall
thereafter refrain from any claim of right in or further usage of the said Trade
Marks.
15. LICENSEE'S INDEMNITY OF GRANTOR - INSURANCE
(1) NO WARRANTY: Except as otherwise set forth in this
Agreement, Grantor makes no warranty with respect to the Know-How or Products,
and Licensee is strictly prohibited from representing that such a warranty
exists. Except as otherwise set forth in this Agreement, Grantor strictly
disclaims any liability arising out of errors or omissions in the Know-How or in
information provided to Licensee. Licensee shall further indemnify and save
Grantor harmless from all loss, costs or damages which Grantor may suffer or pay
as a result of claims or suits arising out of any injuries to persons and/or
damage to property due to or arising out of or relating to any acts, duties or
obligations or omissions of Licensee or of any personnel employed or otherwise
engaged by Licensee to perform Licensee's obligations under this Agreement, and
Licensee shall, at the request of Grantor, assume the defense of any demand,
claim, action, suit or proceeding brought against Grantor by any reason thereof
and pay any and all damages assessed against or that are payable by Grantor as
the result of the disposition of any such demand, claim, action, suit or
proceeding. Without limiting the generality of the foregoing, Licensee agrees to
indemnify and save Grantor, its directors, officers, employees and agents and
their respective heirs, executors, administrators, successors and assigns and
each of them harmless of and from any and all manner of action, causes of
action, claims, liabilities, debts, covenants, contracts, accounts, duties,
demands, damages or expenses whatsoever, directly or indirectly suffered by it
or them in connection with or otherwise related to product liability, personal
injury and property loss of, to or experienced by third parties in relation to
the Products manufactured after the closing, save and except where the cause of
action is due to a design flaw with respect to the hecs as a result of an act or
omission of Grantor, its officers or employees, as distinct from the manufacture
or application of the Product. Grantor agrees to indemnify, defend and save
Licensee, its directors, officers, employees and agents and their respective
heirs, executors, administrators, successors and assigns and each of them
harmless of and from any and all manner of action, causes of action, claims,
liabilities, debts, covenants, contracts, accounts, duties, demands, damages or
expenses whatsoever, directly or indirectly suffered by it or them in connection
with or otherwise related to product liability, personal injury and property
loss of, to or experienced by third parties in relation to the Products
manufactured prior to closing.
(2) INSURANCE POLICY: For the carrying out of the
covenant contained above, but without limiting the generality thereof, Licensee
shall procure and maintain, in full force and
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effect, a comprehensive general liability insurance policy or policies with
personal injury liability blanket, contractual liability and completed
operations liability insurance endorsements protecting Licensee and Grantor and
their officers and employees against any loss, liability or expense due to
personal injury, death or property damage or otherwise arising out of or
occurring in connection with the business of Licensee. Grantor shall be an
additional insured in such policy or policies which shall be written by a
responsible insurance company or companies licensed to do business in the
Territory and meeting with the reasonable approval of Grantor, with a combined
single limit (which insurance shall also include all other territories wherein
Licensee has rights from Houbigant) of not less than two million ($2,000,000)
dollars plus a ten million ($10,000,000) dollar umbrella (or its equivalent) for
bodily injury or death and for property damage. Any general liability policy or
policies procured by Licensee in accordance herewith shall name the Banks and
their officers and employees as additional insureds thereunder. Such policy or
policies shall provide that they will not be canceled or altered without at
least thirty (30) days' prior notice to Grantor. Prior to commencing shipments
and within thirty (30) days after the Effective Date, Licensee shall furnish
Grantor and the Banks with a certificate or certificates of such insurance,
together with evidence that the premiums therefor have been paid. Maintenance of
such insurance and the performance by Licensee of its obligations under this
paragraph shall not relieve Licensee of liability under the indemnity provisions
set forth in this Agreement.
16. CONFIDENTIALITY
(1) CONFIDENTIAL INFORMATION: All information, including
the Know-How, other than information generally known in the industry or
information made known by a third party to Licensee other than a consequence of
Licensee's relationship with Grantor ("Confidential Information") supplied by or
on behalf of Grantor pursuant to this Agreement shall be treated as confidential
by Licensee and shall be used solely to enable Licensee to manufacture, use,
sell and develop a market for the Products in accordance with this Agreement,
and all documents containing or disclosing such Confidential Information shall
at all times be and remain the property of Grantor; provided, however, that
Grantor shall not during the continuance of this Agreement demand the delivery
of such documents from Licensee.
(2) DUTY NOT TO DISCLOSE: Licensee covenants and agrees
that no Confidential Information given to it by or on behalf of Grantor in the
manner described or otherwise shall be disclosed to anyone outside the
organization of Licensee without the prior written consent of Grantor unless
otherwise required by law but only after notice of same to Grantor and except as
provided herein with respect to sub-licensees.
(3) REASONABLE EFFORTS: Licensee agrees to use all
reasonable efforts to take such actions as may be appropriate to prevent the
unauthorized use and disclosure of, and to keep confidential all such
Confidential Information, including:
(a) ensuring that such Confidential Information
is disclosed only to responsible employees
of Licensee who have first been properly
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instructed to maintain such Confidential
Information in confidence;
(b) save as above not disclosing to any third
party the terms and conditions of this
Agreement;
(c) save as above not disclosing methods of
manufacture or sale of the Products
including production and marketing plans;
and
(d) safeguarding as far as practicable the
confidential information against theft,
damage or access by unauthorized persons.
(4) PERMITTED DISCLOSURE: Nothing contained in this
Agreement shall prevent Grantor or Licensee from making disclosure of any of the
Confidential Information to:
(a) any authorized body for the sole purpose of
obtaining registration of any patent for any
invention or discovery which is the subject
of this Agreement; or
(b) any other person, firm or corporation for
the purpose of promoting the sale or use of
Products by Grantor and any of its other
licensees or by Licensee and any of its
permitted sub-licensees, provided, however,
that Licensee shall obtain from the persons
to whom such disclosure is made a covenant
of nondisclosure in favor of both Grantor
and Licensee; or
(c) except as required by law.
17. BOOKS AND RECORDS
(1) DUTY TO KEEP BOOKS: Licensee shall keep at its
principal place of business, clear and proper books of account showing all sales
of Products under this Agreement and agrees that within thirty (30) days
following the last days of March, June, September and December, it will submit
to Grantor at its offices a written statement giving the Net Sales of the
Products for the quarter being reported (but subject to post quarter adjustment,
for example in respect of returned merchandise).
(2) RIGHT OF ACCESS TO BOOKS: Grantor, at its cost and
expense, may designate and regularly retain an independent accounting firm to
(i) review all Royalties reports and reportings as and when issued and received
and (ii) inspect from time to time Licensee's relevant books and records to
ascertain the accuracy of Licensee's Royalties reporting not more than one (1)
time in each Contract Year, and then on not less than ten (10) days notice.
Licensee shall maintain its principal place of business and its books and
records within the United States. The audit shall be conducted at Licensee's
premises where the relevant books and records are
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maintained during its regular office hours. Licensee shall make available to the
auditor reasonable working space, access to a personal computer or adding
machines, reproduction equipment and telephone lines, PROVIDED, HOWEVER, that if
any audit under this Agreement shall reveal a discrepancy in Licensee's favor of
more than ten (10%) percent of the amount due, Grantor shall thereafter, for the
next two (2) Contract Years have the right to audit up to two (2) times in each
such Contract Year. If Grantor shall fail to audit, or if it audits and fails to
object within one hundred-eighty (180) days from the receipt of the final
royalty report for the Contract Year with respect to which any Royalties
report(s) was rendered for that Contract Year, the Royalties report(s) shall be
deemed final and conclusive and not subject to any further review or
adjustments, except that if any audit shall reveal a discrepancy in Licensee's
favor of more than twenty-five (25%) percent of the amount due with respect to a
prior Contract Year(s), then in that event the Royalties report(s) for that
Contract Year(s) shall be subject to appropriate adjustment. If the auditor
shall discern a discrepancy between the amount of the Net Sales and/or Royalties
reported and Licensee's books and records, the auditor shall promptly notify
both Grantor and Licensee of the perceived discrepancy together with the
auditor's detailing of the asserted discrepancy. At the request of either party
hereto, any such discrepancy perceived in the auditor's report shall be the
subject of a prompt meeting between Grantor, Licensee and the auditor at which
meeting the parties shall discuss the purported discrepancies and attempt to
resolve any dispute concerning it. If the parties shall be unable to resolve the
dispute, then at the request of either party it shall be deemed a dispute
subject to the provisions of paragraph "24" hereinbelow. If any audit under this
Agreement shall reveal a discrepancy in Licensee's favor of ten (10%) percent or
more of the amount due, then all reasonable costs of the audit shall be assessed
against and paid by Licensee.
18. WARRANTY
(1) NO OTHER REPRESENTATIONS TO BE MADE: Licensee shall
not make any representation or warranty to customers which shall differ from or
exceed in any way those made by Grantor, in its published literature or in its
terms and conditions of sale, in either case which will be binding upon the
Grantor.
19. LICENSEE'S STATUS
(1) BUYER AND SELLER ONLY: The relationship between
Licensee and Grantor is intended to be and shall be that of buyer and seller,
and Licensee and its employees, agents and representatives shall under no
circumstances be considered agents, partners, joint venturers or representatives
of Grantor. Neither party shall act or attempt to act, or represent itself,
directly or by implication, as agent, joint venturer, partner or representative
of the other or in any manner assume or attempt to assume or create any
obligations or liability of any kind, nature or sort, express or implied, on
behalf of or in the name of the other.
(2) NO FRANCHISE: The relationship created by this
Agreement does not constitute the granting of a franchise to Licensee by Grantor
and no federal or provincial franchise
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statute, law, regulation or rule is intended to or has been applied by the
parties, nor shall any such franchise, statute, law, regulation or rule be
deemed or construed to apply to the formation, operation, administration or
termination of this Agreement.
20. TERMINATION
(1) In the event that either party hereto believes that
the other party is in default in any material respect in the performance of any
of its material obligations under this Agreement or otherwise commits any
material breach of this Agreement then the following procedures shall apply:
(a) The party claiming a breach or default (the
"Claiming Party") shall immediately notify
the other party (the "Respondent") and the
Banks, in writing of the claimed default or
breach in as specific detail as is
reasonably possible specifying the precise
nature of the claimed breach or default and
shall provide the Respondent with a right to
cure the claimed default or breach, if
curable, within five (5) business days with
respect to defaults in the payment of
monetary obligations and fifteen (15)
business days with respect to non-monetary
defaults.
(b) In the event that the claimed breach or
default is cured to the satisfaction of the
Claiming Party, the Claiming Party shall so
acknowledge, in writing, its satisfaction,
and the Respondent shall not have any
further duty, liability or obligation with
respect to such claimed breach or default.
(c) In the event that the Respondent shall
dispute the validity of the claimed breach
or default in writing or shall dispute in
writing whether the Claiming Party had the
right to provide such notice for whatever
reason, the parties shall meet to discuss
the same within ten (10) days of the receipt
of the written response from the Respondent.
In the event that the parties are unable to
resolve the issue(s), the subject matter of
the dispute shall be submitted to
arbitration in accordance with this
Agreement, unless such arbitration shall
have been at any time preempted by the
commencement of judicial proceedings in the
U.S. Bankruptcy Court, Southern District of
New York, or other court of competent
jurisdiction solely to the extent a request
for equitable relief is being sought
therefrom. If, as and when, as a result of
any such arbitration, the arbitrator
determines that there was no default or
breach, then no party shall have any further
rights or obligations with respect thereto
except that all reasonable costs and
expenses
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(including attorneys fees) of the
arbitration proceeding for both parties
shall be borne by the Claiming Party. In the
event that the arbitrator determines that
there was or is a default or breach, then
notwithstanding anything in this Agreement
to the contrary, the Respondent shall have a
reasonable time after the arbitrator's final
decision to cure the default or breach and
if the default or breach is cured within a
reasonable time or as otherwise specified by
the arbitrator, neither party shall have any
further rights or obligations with respect
thereto.
(d) In the event that after the decision of the
arbitrator that there was a default or
breach, Respondent shall fail to cure the
same within a reasonable time or as
otherwise specified by the arbitrator, then
the Claiming Party may terminate the
Agreement upon written notice.
(2) Grantor, with the consent of the Banks, shall have
the right to terminate this Agreement, effective upon notice to Licensee as
provided herein in the event of (i) Grantor's termination of the Initial
Agreement in accordance with its terms, (ii) Licensee's insolvency or the making
by Licensee of an assignment for the benefit of creditors, (iii) the appointment
of a receiver for all or a substantial portion of Licensee's property, (iv) the
assumption of custody, attachment, sequestration by a court of competent
jurisdiction of all or a significant portion of Licensee's property, or (v)
Licensee ceasing to carry on its business. No assignee for the benefit of
creditors, receiver, liquidator, trustee in bankruptcy, sheriff or any other
officer of the court or official charged with taking over custody of Licensee's
assets or business, shall have any right to continue performance of this
Agreement, and this Agreement may not be assigned by operation of law.
21. EVENTS UPON TERMINATION
(1) Upon termination of this Agreement for any cause
whatsoever,
(a) all Royalties, including Royalties due on
the Products sold for which reports have not
yet been issued, shall immediately become
due and payable;
(b) Licensee shall be entitled for a period of
thirty (30) days following termination to
complete the assembly of Products and shall
then have a further period of one hundred
twenty (120) days to complete the sale of
the Products (such aggregate one hundred
fifty (150) day period hereinafter referred
to as the "Relevant Period"), which sales
shall be subject to the payment to Grantor
of appropriate Royalties;
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<PAGE>
(c) Subject to the rights contained in
subparagraph "b" hereinabove, Grantor will
have the right to require Licensee to sell
to it at Licensee's cost price such of the
assembled or part assembled merchantable
Products as shall not have been disposed of
by Licensee at the date of exercise of such
option and, if Grantor so requires, such
cost price shall be paid within forty-five
(45) days of delivery of the assembled or
part assembled Products; and
(d) Licensee shall forthwith, and not later than
thirty (30) days thereafter, return free of
any charge to Grantor, the technology of the
Know-How and Trade Marks; further, Licensee
agrees that it will forthwith discontinue
the use of and refrain from using,
disclosing or exploiting the Know-How and
any technical data and information
pertaining thereto or any improvements or
development in respect thereof disclosed to
it under this Agreement by Grantor and from
manufacturing or selling the Products, and
Grantor shall forthwith have the right to
institute proceedings for infringement of
any of its Trade Mark rights then in force;
(2) After the earlier of the expiry of the Relevant
Period and the completion of Grantor's purchase of all assembled and part
assembled Products:
(a) Licensee shall turn over to Grantor all sale
inquiries and unfilled orders and the
parties hereto shall negotiate the amount of
compensation, if any, which Licensee may
receive therefor;
(b) Licensee shall cease trading in the Products
and shall notify all dealers and other
interested parties of the termination, and
Licensee shall further cease to make any
representations to the public; and
(c) Licensee shall immediately cease using the
Trade Marks and all other tradenames and
trademarks of Grantor in any manner
whatsoever, and all rights to the name,
labels, style, dress and appearance of the
containers, cartons, advertising material,
packages and other distinctive materials
such as at present exist or such as are
created, developed or acquired subsequent to
the date hereof by Grantor or Licensee
relative to the Products, shall immediately
and automatically become the sole and
exclusive property of Grantor or its
successor, and that Licensee, as well as its
successors and sub-licensees, shall
immediately cease and desist from the use of
said names, labels, style, dress and
appearance of the containers, cartons,
advertising matter and packages used
hereunder.
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<PAGE>
(3) Notwithstanding any such termination:
(a) all warranties set out in this Agreement and
all obligations of indemnification shall
survive and continue to bind the parties
hereto for two (2) years after the date of
termination of this Agreement;
(b) Licensee shall honor any remaining payment
obligations set out in this Agreement; and
(c) Grantor shall use its best efforts to
acquire and carry on the operations of
Licensee in order to ensure the
uninterrupted supply of products to
customers.
22. CONFORMITY WITH LOCAL LAWS
(1) MODIFICATIONS ON NON-CONFORMANCE: The rights and
obligations of the parties under this Agreement shall be subject to all
applicable laws, orders, regulations, directions, restrictions and limitations
of the governments having jurisdiction of the parties. In the event, however,
that any law, order, regulation, direction, restriction or limitation,
expropriation, seizure or interpretation thereof shall in the reasonable
judgment of either party hereto substantially alter the relationship between the
parties under this Agreement, or the advantages derived from such relationship,
either party hereto may request the other party to modify this Agreement, and
if, within fifteen (15) days subsequent to making such request, the parties are
unable to agree upon a mutually satisfactory modification hereof, then the
adversely affected party may terminate this Agreement on fifteen (15) days
notice given to the other party, not later than thirty (30) days following the
end of such thirty (30) day period; provided further, that if the parties are
unable to agree on whether the law, order, regulation, direction, restriction or
limitation, appropriation, seizure or interpretation substantially alters the
relationship between the parties and/or a mutually satisfactory modification of
this Agreement on account of such law, order, etc., then the issues as to which
there is disagreement shall be determined by arbitration in accordance with the
provisions hereof and the decision of the arbitrator with respect thereto shall
be final and binding.
(2) RECORDING OF AGREEMENT: Licensee, at its own expense,
shall take such steps as may be required to satisfy the laws and requirements of
the respective countries wherein the Grantor presently does not directly exploit
the Products with respect to declaring, recording or otherwise rendering this
Agreement valid and enforceable. If such steps are taken by Licensee within
jurisdictions wherein Grantor presently directly exploits the Products, the
reasonable costs and expenses incurred by License shall be reimbursable by
Grantor solely to the extent of deducting same from Royalties due the Grantor.
26
<PAGE>
23. DISCLOSURE
This Agreement may be filed with any governmental agency or
official as determined to be appropriate by either party hereto on prior notice
and only as may be required by law or court order.
24. DISPUTE RESOLUTION
All disputes, controversies or claims arising out of or in
connection with or in relation to this Agreement, including any questions
regarding its existence, validity or termination, but excluding any disputes,
controversies or claims arising out of or in connection with or in relation to
the terms and provisions of paragraph "38" hereinbelow, may be submitted to and
be subject to binding arbitration under the auspices of the American Arbitration
Association. One (1) arbitrator shall be chosen by Grantor and one (1)
arbitrator shall be chosen by Licensee. The third arbitrator shall be jointly
chosen by the arbitrators selected by Grantor and Licensee. The arbitration
shall be held in the State and City of New York. The decision of the arbitrators
shall be final and binding on the parties hereto and may be enforced by any
court of competent jurisdiction, unless such arbitration procedure, either
before the commencement or prior to the issuance of the arbitrator's finding(s)
and award is preempted by the commencement of judicial proceedings in the U.S.
Bankruptcy Court, Southern District of New York, or other court of competent
jurisdiction solely to the extent a request for equitable relief is being sought
therefrom.
25. EXTENDED MEANINGS
Words importing the singular number include the plural and
vice versa, and words importing gender include all genders.
26. INTERPRETATION NOT AFFECTED BY HEADINGS
The division of this Agreement into paragraphs and the
insertion of headings are for convenience of reference only and shall not affect
the construction or interpretation of this Agreement.
27. APPLICABLE LAWS
This Agreement shall be deemed to have been made, executed and
delivered in New York, New York and any controversy arising under or in relation
to this Agreement shall be subject to the jurisdiction of the U.S. Bankruptcy
Court, Southern District of New York (so long as the chapter 11 case of Grantor
remains open) and shall be governed by and construed in accordance with
applicable federal law and the laws of the State of New York.
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28. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject-matter hereof and, except as to the relevant
incorporation by reference of the Initial Agreement and other agreements between
the parties, and certain terms and provisions thereof as stated in this
Agreement and in the instruments and documents to be executed and delivered
pursuant to it, this Agreement contains all of the representations, undertakings
and agreements of all parties respecting the subject-matter hereof. There are no
representations, undertakings or agreements of any kind between the parties
hereto respecting the subject-matter hereof except those contained in this
Agreement.
29. SEVERABILITY
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
or the Agreement as a whole.
30. CURRENCY
Unless otherwise specifically provided in this Agreement, all
references to dollar amounts or other money amounts are expressed in terms of
lawful money of the United States.
31. NOTICES
(1) Any notice or other documents required or permitted
to be given under this Agreement shall be in writing and shall be delivered,
mailed by pre-paid registered mail, return receipt requested or sent by telex or
telecopy addressed to the party or parties to whom it is to be given at the
address shown below or at such other address or addresses as the party or
parties to whom such writing or documents is to be given shall have last
notified all other parties in accordance with the provisions of this paragraph:
(a) if to Licensee at:
Houbigant (1995) Limitee
c/o Dana Perfumes Corp.
635 Madison Avenue
New York, New York 10022
(b) if to Grantor at:
Houbigant, Inc.
c/o Kaye, Scholer, Fierman, Hays
& Handler
425 Park Avenue
New York, New York 10022
Attention: Mitchel H. Perkiel, Esq.
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<PAGE>
(c) if to the Banks at:
The Chase Manhattan Bank as Agent
c/o Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attention: Lewis Kruger, Esq.
(2) Any such notice or other document shall:
(a) if delivered, be deemed to have given and received at
the place of receipt on the date of delivery,
provided that if such date is a day other than a
business day in the place of receipt, such notice or
documents shall be deemed to have been given and
received at the place of receipt on the first
business day in the place of receipt, thereafter;
(b) if transmitted by telex or telecopy, be deemed to
have been given and received at the place of receipt
on the next business day in the place of receipt,
thereafter;
(c) if mailed, be deemed to have been given and received
at the place of receipt on the date of actual
receipt.
(3) In the event of postal disruption, such notices or
documents must either be delivered personally or sent by telex or telecopy.
32. AMENDMENT OF AGREEMENT
None of the terms, conditions or provisions of this Agreement
shall be held to have been changed, waived, varied, modified or altered by any
act or knowledge of either party hereto, their respective agents servants or
employees unless done so in writing signed by both parties hereto. Through and
until the Banks receive all payments and property anticipated to be required
under Grantor's expected chapter 11 plan of reorganization, any material
amendment or modification of Licensee's obligations under this Agreement shall
require the prior written consent of the Banks thereto.
29
<PAGE>
33. WAIVER OF BREACH
No waiver on behalf of any party hereto of any breach of the
provisions shall be effective or binding on such party unless the same shall be
expressed in writing and any waiver so expressed shall not limit or affect such
party's rights with respect to any future breach of any of the provisions of
this Agreement.
34. FURTHER ASSURANCES
Each of the parties hereto covenants and agrees that he, his
heirs, executors, administrators, successors and permitted assigns will execute
such further documents and do and perform or cause to be done and performed such
further and other acts as may be necessary or desirable from time to time in
order to give full effect to the provisions of this Agreement.
35. SUCCESSORS AND ASSIGNS
This Agreement shall be binding on and enure to the benefit of
the successors and assigns of both parties hereto and all persons or
corporations succeeding to or acquiring the business now carried on by Grantor
or Licensee. Licensee shall not be entitled to assign this Agreement in whole or
in part without the prior consent in writing of Grantor and the Banks. Moreover,
Licensee shall not be entitled to, and hereby agrees that it shall not sell,
transfer or dispose or cause the sale, transfer and disposition of the ownership
and control (other than as may result from an initial public offering) of
Licensee for a period of two (2) years following the Date of the Initial License
Agreement, PROVIDED, HOWEVER, that any such dispositions to the extent they do
not include the sale or transfer of this Agreement or the rights thereunder
shall not be limited hereby. Subsequent to the aforesaid two (2) year
proscription, in the event the controlling stock of Licensee or its parent is
sold or transferred (other than as may result from an initial public offering)
to a third party, this paragraph "35" prohibiting the direct or indirect
assignment of this Agreement shall not prevent same to occur PROVIDED, HOWEVER,
that the Minimum Royalties required hereunder pursuant to paragraph "7(8)"
hereinabove shall be immediately adjusted upon the effective date of such sale
or transfer so as to require the Minimum Royalties thereafter to be calculated
and paid at the greater of (i) the Minimum Royalty in effect as at the Effective
Date of such sale or transfer or (ii) the means of (x) the previous full year's
actual Royalties plus (y) the Minimum Royalties then in effect. For purposes of
this Agreement and this paragraph "35", a sub-license by Licensee of the Trade
Marks and Know-How of the Products for portions of the Territory from which the
aggregate Net Sales so generated represent more than fifty (50%) percent of all
Royalties for the entire Territory in any given year shall be deemed a "sale"
hereunder.
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<PAGE>
36. TIME
When calculating the period of time within which or following
which any act is to be done or step taken, the date which is the reference day
in calculating such period shall be excluded.
37. TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
38. CLOSING OF AGREEMENT AND CONDITIONS THERETO
(1) The Closing of this Agreement shall occur as soon as
practicable following the occurrence of all of the following events (with the
date on which the last of all said conditions shall have occurred referred to as
the "Effective Date"), the failure to timely achieve any of the foregoing being
grounds for the termination AB INITIO of this Agreement (except to the extent
waivable and waived hereunder);
(a) The issuance of an Order of the U.S.
Bankruptcy Court, Southern District of New
York, which has not been stayed, approving
this Agreement and authorizing its
implementation;
(b) the approval of this Agreement by The Chase
Manhattan Bank and Fleet Bank, not later
than two (2) business days prior to the
hearing scheduled to consider approval of
this Agreement, which approval Grantor will
use its best efforts to obtain;
(c) Licensee obtaining a report reasonably
satisfactory to it from its appointed trade
mark and patents agents in respect of the
Trade Marks and Grantor shall forthwith
instruct its own trade mark and patent
agent(s) to provide all assistance as may be
required for that exercise;
(d) Licensee approving the contents of Schedule
"A" hereof, whose approval will be deemed
evidenced by the execution hereof;
(e) The issuance by the Banks of an "estoppel
certificate", in form and substance
reasonably satisfactory to Grantor and
Licensee.
(f) The issuance of resolutions of the Board of
Directors and Shareholders of the Grantor,
in form and substance reasonably
satisfactory to Grantor and Licensee,
approving the transactions herein
contemplated, which resolutions shall be
certified by a duly authorized officer of
the Grantor.
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<PAGE>
(g) The issuance of a certificate, in form and
substance reasonably satisfactory to Grantor
and Licensee, of a duly authorized officer
of Grantor certifying that (a) all
representations and warranties of the
Grantor contained in paragraph "11"
hereinbefore upon which Licensee has relied
are materially true and correct on the
Closing Date as if made on and as of such
date, (b) Grantor has complied in all
material respects with all covenants,
agreements and conditions to be complied
with from the date of this Agreement to the
Closing Date, and (c) all other conditions
required for Closing hereunder have been
met.
(h) The issuance of an officer's certificate, in
form and substance reasonably satisfactory
to Grantor and Licensee, that there are no
liens, claims or encumbrances against any of
the Trade Marks, Know-How, or any of the
other assets to be purchased by Licensee
from Grantor under paragraph "7(b)"
hereinabove, other than the liens, claims or
encumbrances of and held by the Banks and
the following other holders of perfected and
enforceable liens and interests as set forth
in Schedule "E" hereto.
(i) The delivery of Forms UCC-1 and related
security agreements as may be reasonably
requested by Licensee, in form and substance
reasonably satisfactory to Grantor and the
Banks, pursuant to which Licensee will be
granted a duly perfected security interest
in the Trade Marks in the United States and
elsewhere, subject only to the prior liens
and interests of the Banks or of other
holders, if any, of perfected and
enforceable liens and interests, as set
forth in Schedule "E" hereto.
(j) An agreement, in form and substance
reasonably satisfactory to Grantor and
Licensee, to the effect that in the event of
a subsequent voluntary chapter 11 case of
the Grantor, and unless such action shall
have already been taken pursuant to the
Initial Agreement whereupon the provisions
of this sub-paragraph "(j)" shall be null
and void, each of the then equity holders
and directors of the Grantor shall take all
appropriate action to enable the Licensee,
at its option, to assert and elect one (1)
additional member to the Board of Directors
of the Grantor, which newly appointed member
shall participate in the activities and
serve in meetings of the Board of Directors
of the Grantor only on the subject and in
the matter of any consideration by the Board
of Directors of the Grantor to
32
<PAGE>
authorize the rejection and disaffirmance
pursuant to ss. 365 of the Bankruptcy Code
of this Agreement, and in connection with
which said newly appointed member shall be
entitled to exercise a veto in any vote
thereon by the Board of Directors of the
Grantor.
(k) An agreement, in form and substance
reasonably satisfactory to the Licensee, to
the effect that after the Closing Date, the
Grantor will continue to operate in the
ordinary course of business as a licensor of
its trademarks, patents and other
proprietary rights and interests and as a
designer, marketer and distributor of
perfumes, fragrance products and related
products and will not enter into
transactions unrelated to its and those
business.
(2) In the event that the aforesaid conditions are not
all fulfilled within ninety (90) days from the date of this Agreement, either
Licensee or Grantor (but subject in the latter case to Grantor having complied
with its obligations in this paragraph "38") shall be entitled to terminate this
Agreement on written notice to the other.
The conditions contained in subparagraph "c" hereinabove shall be waivable by
Grantor in its sole discretion.
39. GRANTOR'S ACCOUNTS RECEIVABLE:
Licensee shall use its reasonable efforts to assist Grantor in
the collection in the Territory of Grantor's and its affiliates existing
accounts receivable relating to the Products if any. Any such accounts
receivables collected by Licensee shall be remitted to Grantor. Licensee shall
also provide reasonable assistance and cooperation to Grantor in connection with
Grantor's efforts to collect outstanding monies due it from any prior licensees
(and anyone related thereto or affiliated therewith) for the Products in the
Territory.
40. RIGHT OF LAST REFUSAL
In the event Grantor shall undertake to sell, albeit subject
to the terms and provisions of this Agreement, those assets which comprise the
terms of this Agreement (i.e., ownership of the Trade Marks), Grantor hereby
grants unto Licensee the right to receive the last opportunity to acquire the
assets provided that Licensee shall be required to conform its proposal to the
entire substance and structure then contemplated by Grantor and the third-party
purchaser. In addition, Grantor hereby grants unto Licensee the right of last
refusal to acquire the post-confirmation issued stock of Grantor (except such
stock which may be held or retained by Grantor's institutional creditors) after
it has been allocated pursuant to Grantor's anticipated court-approved plan of
reorganization (which shall be confirmed to Licensee in writing), except if such
stock is sold or transferred among related/affiliated entities or in a public
offering of Grantor.
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<PAGE>
41. EXCLUSIVE DEALINGS
Subsequent to the date of this Agreement and through and until
the date this Agreement (i) becomes effective in accordance with its terms or
(ii) is rendered a nullity by mutual consent, court order or other events, the
parties hereto agree that unless required by law or court order, neither shall
engage in any discussions or negotiations or provide any information, oral or
written, to any known potential licensee of the Products for the Territory
having as their purpose a transaction of the kind contemplated by this Agreement
or of any other nature whatsoever with such third party.
42. RETENTION OF MANAGEMENT
Due to the relationship of licensor/licensee and, in
particular, the relationship established by this Agreement, Grantor agrees to
use its best efforts to retain and employ, whether through employment,
consulting arrangement, or ownership, Michael J. Sherman in such capacity and in
such office which would facilitate, INTER ALIA, his respective supervision and
assistance in implementation of this Agreement and the rights granted
thereunder.
43. FINANCIAL REPORTING BY GRANTOR
Licensee shall be entitled to receive copies of regularly
issued financial statements of the Grantor, from time to time and as and when
reasonably requested, provided, however, that such requests shall be no more
frequently than quarterly and that such financial statements, when received,
shall be deemed confidential and shall not be disseminated to or permitted to be
used by any other parties, other than officers, employees and agents of
Licensee.
44. GUARANTEE
Prior to the Closing Date, Renaissance Cosmetics, Inc. shall
execute a guarantee of payment, in form and substance reasonably satisfactory to
Grantor, Licensee and the Banks, for the benefit of Grantor and Banks, of all of
the financial obligations of Licensee under this Agreement, including without
limitation, the payment of Royalties. The guarantee will further provide that
through and including the date on which the Banks shall have received all
payments and property anticipated to be required under the Grantor's expected
chapter 11 plan of reorganization, Renaissance Cosmetics, Inc. must maintain a
minimum net worth at all times of not less than ten million $10,000,000)
dollars.
45. REIMBURSEMENT OF EXPENSE ADVANCES
Notwithstanding anything to the contrary herein, any and all
reasonable costs and expenses related thereto deemed under this Agreement to be
the responsibility of the Grantor shall be performed and funded by Licensee and
shall be reimbursable, if in fact advanced by Licensee, by Grantor in the
Contract Year such cost or expense is incurred solely to the extent of deducting
34
<PAGE>
such amount(s) from the royalties due the Grantor under this Agreement, without
carryover and on a non-cumulative basis.
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement as of the date first above written.
HOUBIGANT, INC.
Grantor
Per: /S/ MICHAEL J. SHERMAN
----------------------------
Michael J. Sherman
Vice President-Special Projects
HOUBIGANT (1995) LIMITEE
Licensee
Per: /S/ ALBERT DECHELLIS
----------------------------
Albert DeChellis
Vice President
35
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SCHEDULE "A"
------------
TRADE MARKS
-----------
Chantilly
Lutece
Raffinee
Demi-jour
English Waterlillies
French Garden Flowers
Monsieur Musk
Bistro De Chantilly
French Vanilla
Presence
Parfums Parquet
Ciao
AMENDMENT NO. 1 TO LICENSE AGREEMENTS
-------------------------------------
THIS AMENDMENT MADE IN THE CITY OF NEW YORK, STATE OF NEW YORK BY
AND BETWEEN HOUBIGANT, INC., a Delaware corporation, c/o Kaye, Scholer, Fierman,
Hays & Handler, LLP, 425 Park Avenue, New York, New York (hereinafter referred
to as the "Grantor"), and DANA PERFUMES CORP., a Delaware corporation (f/k/a New
Dana Acquisition Corp.), as the successor-in-interest, by operation of law, of
Parfums Parquet, Inc., a Delaware corporation, a successor-in-interest to New
Fragrance License Corp., pursuant to a Plan and Agreement of Merger, dated as of
March 25, 1996 ("PPI"), 635 Madison Avenue, New York, New York (hereinafter
referred to as "PPI"), and HOUBIGANT (1995) LIMITEE, a Canadian corporation,
duly incorporated, and successor-in-interest to 3088766 Canada Ltd., having a
principal place of business at 1597 Rue Cunard Laval, (Quebec) H7S 2B4 Canada
("Limitee" and together with PPI the "Licensee").
WHEREAS, the Grantor and the Licensee are parties to a certain
license agreement dated May, 1994, as amended, to manufacture and distribute
certain fragrances including Chantilly (the "Fragrances") in the western
hemisphere (excluding Canada) (the "Western Hemisphere License Agreement").
WHEREAS, the Grantor and the Licensee are parties to a certain
license agreement dated August 10, 1994, as amended, to manufacture and
distribute the Fragrances in the balance of the world (excluding Canada) (the
"Worldwide License Agreement").
WHEREAS, Limitee is the assignee from ACB Mercantile Inc. ("ACB") of
a certain license agreement dated April 1, 1993 between Grantor and ACB, as
amended, granting Limitee as ACB's assignee a license to manufacture and
distribute the Fragrances in Canada ("Old License Agreement"), or the License
Agreement, dated __________, 1996, between Houbigant (1995) Limitee and
Houbigant, Inc., as amended, with respect to the Canadian territory, which
agreement will replace the Old License Agreement (together with the Old License
Agreement hereinafter referred to as the "Canadian License" and together with
the Western Hemisphere License Agreement and the Worldwide License Agreement,
the "License Agreements"). Capitalized terms used but not defined herein have
the meanings given them in the respective License Agreement.
WHEREAS, the parties desire to amend each of the License Agreements
to reflect an addition to the schedule of Trade Marks annexed to each of the
License Agreements.
WHEREAS, the parties wish to provide for a modification of the
royalty payments to be due under the License Agreements with respect to a new
line of products to be marketed under the name "White Chantilly" by the Licensee
("White Chantilly Products").
THEREFORE, the parties hereto agree with respect to White Chantilly
as follows:
1. The definition of the term "Trade Marks" in each of the License
Agreements is hereby amended by the addition of the words "White Chantilly" as a
trade mark, and the definition of the term "Products" in each of the License
Agreements shall be deemed to include White Chantilly Products.
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<PAGE>
2. Anything to the contrary in the License Agreements
notwithstanding, Royalties shall be payable to the Grantor under each License
Agreement with respect to sales of White Chantilly Products if and when and to
the extent that the cumulative amount of the Licensee's Net Profit (as defined
in paragraph "3" below), if any, exceeds the Licensee's Investment which
Licensee represents and Grantor accepts being $532,000.
3. "Net Profit" for any period means the excess, if any, of all
sales of White Chantilly Products for that period determined in accordance with
generally accepted accounting principles (less all applicable returns,
allowances and reserves (including reserves for uncollectibles)) ("Net Sales")
over the sum of the following items for or with respect to that period (i) all
Direct Costs, (ii) the portion of Overhead allocated to the White Chantilly
Products and (iii) all applicable sales taxes (as defined in paragraph "4"
below) (collectively, the "Allocated Overhead Portion").
For this purpose:
(i) "Direct Costs" means all variable and fixed costs that directly
benefit and exclusively relate to sales of or sales activities relating to White
Chantilly Products, including but not limited to all costs of sales including
direct labor and direct product costs (such as costs of essential oils and other
components, and of bottling and packaging materials) and expenditures relating
to all shipping and handling, promotion and advertising (including but not
limited to cash and trade discounts, trade programs, national, local and
international advertising (including physical material used for broadcasting or
print promotion expenses (including the preparation and distribution of
promotional material) demonstration allowances, testers, promotion
(ii) "Overhead" means all of the costs and expenses of the Licensee
and its Consolidated Group, other than their Investment and Direct Costs, but
including but not limited to all selling, general and administrative expenses
(such as salespersons' salaries and commissions and related payroll taxes,
general advertising, rent, travel and entertainment, depreciation, amortization,
corporate and administrative salaries, employer payroll taxes, interest accrued
or paid, accounting, auditing and legal expenses).
4. The parties agree that the Allocated Overhead Portion shall be
20% of the Net Sales of White Chantilly Products for each of the first and
second 12 month periods following the initial shipment of White Chantilly
Products and for each 12 month period thereafter shall be 15% of the net sales
of White Chantilly Products.
5. The Licensee shall deliver to the Grantor, within 30 days after
the close of each quarterly period ending on a March 31, June 30, September 30
and December 31 as long as any License Agreement remains in effect (commencing
with the quarterly period ending December 31, 1995), a written report showing,
in reasonable detail, the calculation of the Licensee's cumulative Net Profit,
if any, for that quarter (provided that the first such report shall include the
period from commencement of activities relating to White Chantilly Products
through December 31, 1995).
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<PAGE>
6. Except as expressly set forth above, the License Agreements shall
remain in full force and effect and unaffected hereby.
IN WITNESS WHEREOF, the parties have caused this amendment to be
executed as of July __, 1996.
HOUBIGANT, INC.
By: /s/ Michael Sherman
-----------------------
Michael J. Sherman
Chief Executive Officer
DANA PERFUMS, CORP.
By: /s/ Albert DeChellis
-----------------------
Albert E. DeChellis
Group Vice President
Consented to:
THE CHASE MANHATTAN BANK, formerly known as Chemical Bank, as
successor-in-interest to Chemical Bank of New Jersey, N.A., individually and as
Collateral Agent for Itself and Fleet Bank,
national association
By: /s/ Billie Prue
----------------
Billie J. Prue
Vice President
FLEET BANK, national association as successor-in-
interest to NatWest Bank, N.A. (f/k/a National
WestminsterBank USA)
By: /s/ Charles Greer
-------------
Charles Greer
Vice President
3
HOUBIGANT, INC.
c/o M.J. Sherman & Assoc., Inc.
333 East 68th Street, Suite 13A
New York, New York 10021
July __, 1996
Dana Perfumes Corp.
Houbigant (1995) Limitee
c/o Dana Perfumes Corp.
635 Madison Avenue
New York, New York 10022
Re: Houbigant, Inc., et al.
-----------------------
Gentlemen:
Reference is made to those license agreements between Houbigant,
Inc., as grantor and (a) Dana Perfumes Corp. (f/k/a New Dana Acquisition Corp.)
as the successor-in-interest, by operation of law, of Parfums Parquet, Inc.
(together with its permitted successors or assigns and the permitted successors
or assigns thereof, "PPI"), as licensee under license agreement, (i) dated as of
May 2, 1994, as amended, (the "Initial License Agreement") and (ii) dated August
10, 1994, as amended, (the "Worldwide License Agreement") and (b) (1) Houbigant
(1995) Limitee ("Limitee", and together with PPI, the "Licensee"), as
successor-licensee under a license agreement dated as of April 1, 1993 by and
between Houbigant, Inc., as grantor and ACB Mercantile, Inc., as licensee,
assigned to Limitee on or about December 12, 1994 with the subsequent consent of
Houbigant, Inc., and as amended by that letter agreement dated October __, 1995
(the "Old License Agreement") or with (2) Limitee, as licensee under license
agreement dated _____________, 1996, as amended, with respect to the Canadian
territory, which agreement will replace the Old License Agreement (together with
the Old License Agreement hereinafter referred to as the "Canadian License" and
together with the Initial License Agreement and the Worldwide License Agreement
hereinafter referred to as the "License Agreements"). Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
ascribed to them in the License Agreements.
Each of the License Agreements provides for the payment by the
licensee thereunder of a minimum royalty as therein set forth. This will confirm
our agreement that notwithstanding the minimum royalty payment amounts
established in each of the License Agreements, we hereby agree as follows:
1. Commencing with the second (2nd) Contract Year (i.e., the twelve
(12)month period commenced July 1, 1995), the minimum royalty required to be
paid on account of all three (3) License Agreements shall be the sum of
US$2,650,000 in the aggregate (subject to
1
<PAGE>
adjustment on and after the commencement of the first (1st) and each successive
renewal period, whereby the minimal annual royalty in the upcoming period shall
be equal to the minimum annual royalty during the prior period increased by the
increase in the consumer price index (the "CPI") in the New York metropolitan
area during the immediately preceding five (5) year period (except as to the
first (1st) renewal which shall be based upon the CPI for the immediately
preceding six (6) years) (but none of the renewals to exceed three (3%) percent
per annum compounded) (the "Aggregate Minimum Royalty"). Accordingly, the
definition of "Minimum Royalty" in the Initial License Agreement shall be deemed
to read and be as follows: US$2,650,000, less the aggregate of any amount of
royalty or "Minimum Royalty" calculated under the Worldwide License Agreement
and the Canadian License; the definition of "Minimum Royalty" in the Worldwide
License Agreement shall be deemed to read and be as follows: US$2,650,000 less
the aggregate of any amounts of royalty or "Minimum Royalty" calculated under
the Initial License Agreement and the Canadian License; and the definition of
"Minimum Royalty" in the Canadian License shall be deemed to read and be as
follows: US$2,650,000, less the aggregate of any amounts of royalty or "Minimum
Royalty" calculated under the Initial License Agreement and the Worldwide
License Agreement. Notwithstanding the foregoing, in determining the Aggregate
Minimum Royalty payable hereunder in each contract year, the parties shall (i)
determine annually the amount by which all prior years' royalties on Net Sales
under the Initial License Agreement have exceeded the aggregate minimum
royalties due to date under the Initial License Agreement assuming, for purposes
of this determination, that the definition of Minimum Annual Royalty in the
Initial License Agreement had not been changed as provided above and (ii) allow
as a credit against the Aggregate Minimum Royalty payable in that contract year
the amount of any such excess.
2. To the extent that the sum of the Royalties calculated for any
Contract Year under any or all of the License Agreements exceeds the Aggregate
Minimum Royalty, the Licensee shall have no obligation to pay a Minimum Royalty
under any of the License Agreements for that year. For example, if Royalties
under the Initial License Agreement during the second (2nd) Contract Year amount
to $3,000,000, the Aggregate Minimum Royalty will be deemed to have been met and
no Minimum Royalty would be payable under any of the License Agreements.
Notwithstanding the foregoing, nothing contained herein shall be deemed to amend
or modify or otherwise affect (a) the independent obligations of the Licensee
under each of the License Agreements to timely pay all of the requisite
Royalties based upon percentages of Net Sales within the respective Territories
in accordance with the relevant terms and provisions of each of the License
Agreements or (b) any credits, offsets, or other entitlement to which the
Licensee or Limitee may be entitled.
3. In the event that any one (1) of the deferred License Agreements
are terminated or assigned to an unrelated third party other than the Licensee,
then this Agreement providing for the establishment and payment of the Aggregate
Minimum Royalty shall immediately terminate, and such of the License Agreements
as may be continuing in force and effect with the Licensee as licensee
thereunder shall automatically have restored and be subject to their original
and individual "Minimum Royalty" obligations as first stated in the respective
applicable License Agreements.
2
<PAGE>
4. The Aggregate Minimum Royalty, if due, shall be paid to
Houbigant, Inc. in the form and manner as required by the License Agreements for
the payment of Minimum Royalties.
5. The parties further agree that all royalty amounts payable under
all three of the License Agreements shall be included in determining when the
$7.6 million in royalties referred to in Section 9(1)(b) of the Initial License
Agreement has been paid. In addition when such $7.6 million in royalty payments
have been made under all three of the License Agreements, then the credit
provided to the Licensee under Section 9(1)(b) of the Initial License Agreement
in the sum of $5,000,000 representing a prepayment of royalties shall be applied
as a credit to all of the annual royalty payments in excess of $500,000 per year
otherwise becoming thereafter due under all three License Agreements (whether
based on net sales or minimum royalties); it being understood that in no event
will the Licensee pay to Houbigant less than $500,000 in each contract year when
such credit is being applied and to the extent the credit is not fully applied
as a result of the foregoing in any contract year, such credit shall be carried
forward for as long as may be necessary until the full $5,000,000 credit is
utilized by the Licensee.
6. The parties agree that so long as the Agreements are in effect,
any sale, shipment or transfer of Products (A) among or between the Licensee and
any affiliated company shall (i) be permitted under the above License Agreements
without regard to any limitations or the rights of the company making the
transfer, provided, however, that the foregoing shall not be deemed to grant any
additional rights to sell to unaffiliated companies (ii) not constitute a sale
or transfer under any of the License Agreements for royalty or any other purpose
and (B) by any Licensee under any of the License Agreements to any territory or
customer shall be permitted so long as sales to the territory or customer is
permitted to any Licensee under any of the License Agreements then in effect.
If the foregoing correctly sets forth our agreement, please so
indicate below.
Sincerely,
Houbigant, Inc.
By:/s/ Michael Sherman
--------------------
Michael Sherman
Chief Executive Officer
3
<PAGE>
Agreed:
Dana Perfumes Corp., for itself and as successor to Parfums Parquet, Inc. for
itself and as successor to New Fragrance License Corp.
By:/s/ John R. Jackson
---------------------
John R. Jackson
Vice President
Houbigant (1995) Limitee
By: /s/ John R. Jackson
-----------------------
John R. Jackson
Vice President
Consented to:
THE CHASE MANHATTAN BANK, formerly known as Chemical Bank, as
successor-in-interest to Chemical Bank of New Jersey, N.A., individually and as
Collateral Agent for Itself and Fleet Bank, national association
By: /s/ Billie Prue
---------------
Billie Prue
Vice President
Fleet Bank, national association as
successor-in-interest to NatWest Bank, N.A.
(f/k/a National Westminster Bank USA)
By: /s/ Charles Greer
Charles Greer
Vice President
4
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