-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SWCL2j3e6UbnP6r3Vaj2fZzRdwXXUCpumk0pQb40Y9OL0hwoKIrUxfoAFw3yCx+/ 3j13TPpqGqbntoDVzDLSeQ== 0000889812-99-001042.txt : 19990402 0000889812-99-001042.hdr.sgml : 19990402 ACCESSION NUMBER: 0000889812-99-001042 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JEAN PHILIPPE FRAGRANCES INC CENTRAL INDEX KEY: 0000822663 STANDARD INDUSTRIAL CLASSIFICATION: PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS [2844] IRS NUMBER: 133275609 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-16469 FILM NUMBER: 99581582 BUSINESS ADDRESS: STREET 1: 551 FIFTH AVE STE 1500 CITY: NEW YORK STATE: NY ZIP: 10176 BUSINESS PHONE: 2129832640 MAIL ADDRESS: STREET 1: 551 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10176 10-K405 1 ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 REPORT ON FORM 10-K (Mark one) /x/ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1998 or /_/ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to ________. Commission File No. 0-16469 Jean Philippe Fragrances, Inc. (Exact name of registrant as specified in its charter) Delaware 13-3275609 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 551 Fifth Avenue, New York, New York 10176 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (212) 983-2640. Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value per share. Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes /x/ No /_/ Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any other amendment to this Form 10K. /x/ State the aggregate market value of the voting stock held by nonaffiliates of the registrant (based on the closing price on March 23, 1999 of $5.875): $16,602,650. Indicate the number of shares outstanding of the registrant's $.001 par value common stock as of the close of business on the latest practicable date (March 22, 1999): 7,614,581. Documents Incorporated By Reference: None. PART I Item 1. Business Introduction Jean Philippe Fragrances, Inc. was organized under the laws of the State of Delaware in May 1985, maintains it executive offices at 551 Fifth Avenue, New York, New York 10176 and its telephone number is 212-983-2640. Unless the context otherwise indicates, the term "Jean Philippe" refers to the parent company, Jean Philippe Fragrances, Inc., and the term the "Company" refers to Jean Philippe Fragrances, Inc. and its consolidated wholly-owned subsidiary, Inter Parfums Holdings, S.A. ("IP Holdings"), and majority-owned indirect subsidiaries, Inter Parfums, S.A. ("Inter Parfums") and Inter Parfums Grand Public, S.A.; and the Company's wholly-owned subsidiary, Jean Philippe Fragrances do Brasil, Ltda. ("Jean Philippe Brasil"), a limited liability company. The Company, which has its common stock listed on The Nasdaq Stock Market, is a manufacturer and world-wide distributor of fragrances and cosmetics in the following niche markets: domestic and international brand name and licensed fragrances, domestic and international moderately priced proprietary fragrances, and domestic alternative designer fragrances and mass market cosmetics. Inter Parfums, which is traded on the Paris Stock Exchange, markets its fragrances in more than one hundred (100) countries. The Company is the world-wide licensee, manufacturer and distributor of the Burberrys(Registered), S.T. Dupont(Registered), Ombre Rose(Registered) and Regine's(Registered) fragrance lines and the Jordache(Registered) line of fragrances and cosmetics; and is the owner of the Intimate(Registered), Parfums Molyneux(Registered) and Parfums Weil(Registered) fragrance lines, and Aziza(Registered), a hypo-allergenic line of eye cosmetics. Products and Selection -Brand Name and Licensed Fragrances Burberrys. Inter Parfums is the exclusive world-wide licensee for Burberrys fragrances in accordance with the terms of a License Agreement entered into in 1993 among Burberrys Limited as licensor, Inter Parfums as licensee and Jean Philippe as the guarantor of Inter Parfums obligations thereunder (the "Burberrys License Agreement"). The Burberrys License Agreement expires December 31, 2003, subject to certain minimum sales requirements and royalty payments. In 1995 Inter Parfums completely redesigned all products under the Burberry's brand name, which achieved successful distribution in more than one hundred (100) countries around the world. 1 During 1997 Inter Parfums retained a new distributor in the United States for its Burberry's fragrances and launched two (2) additional new Burberry's fragrance lines, Week end(Trademark) for men and women in the United States. In addition, Inter Parfums experienced continued growth of the classic Burberrys of London lines for men and women. During 1998, Inter Parfums experienced continue success with the launch of the Burberrys Week end lines, by extending them to the United States, Italy, Portugal, Australia and Japan by use of an aggressive marketing plan with heavy emphasis on promotional items. For 1999, Inter Parfums intends to continue marketing the classic Burberry's of London lines and Week end lines, and for the year 2000, intends to build upon its earlier success with Burberry's brands with the launch of new Burberry's prestige fragrance lines for men and women. S. T. Dupont. During 1997, Inter Parfums acquired the license for another elite fragrance brand, S. T. Dupont. S. T. Dupont is well known in Europe and the Far East for men's lighters and pens, and market upscale watches, small leather goods and men's clothing. The license agreement expires on June 30, 2008, subject to certain minimum sales requirements, advertising expenditures and royalty payments. The new S. T. Dupont lines for men and women were launched in 1998 in the Far East and Europe, and generated sales of approximately 40 million French francs (approximately U.S.$6.8 million). Inter Parfums intends to expand its distribution and launch its second S.T. Dupont fragrance line for men and women in the year 2000. Paul Smith. During the latter part of 1998, Inter Parfums entered into a twelve (12) year world-wide, exclusive license agreement effective January 1, 1999, for the creation and distribution of designer fragrance and cosmetic lines under the Paul Smith brand name, subject to certain minimum sales requirements, advertising expenditures and royalty payments. Paul Smith is an internationally renowned British designer, who creates fashion with a clear identity. His signature style combines a modern look with elegance, as well as inventiveness with a satirical wit. This image, in conjunction with Paul Smith's increasing following, are the driving forces behind the creation of the perfume and cosmetic lines. Inter Parfums anticipates that the first fragrance lines for men and women will be launched in the year 2000. Paul Smith has retail outlets in several countries in Europe, North America and Asia. Christian LaCroix. During March 1999, Inter Parfums entered into a ten (10) year world-wide, exclusive license agreement with Christian LaCroix, a division of Group LVMH, for the creation and distribution of designer fragrance lines under the Christian LaCroix brand name. The license agreement is subject to certain minimum sales requirements, advertising expenditures and royalty payments. The "Couture House" of Christian LaCroix has been a symbol of tradition and French elegance for many years. A new line of women's fragrances has been under development, and therefore, Inter Parfums expects to launch this line in the fourth quarter of 1999. 2 Parfums Weil and Molyneux. The Parfums Weil and Parfums Molyneux world-wide family of trademarks were acquired in 1994 by Inter Parfums, and cover a variety of moderately priced fragrance lines which are distributed in over thirty (30) countries world-wide. Parfums Molyneux, formed in 1927, has established a classic line of fragrances including Captain and Quartz, with representation in all major markets world-wide. Parfums Weil has enjoyed a similar history dating back to the early 1900's with its first production of a range of original perfumes presented in exquisite Baccarat bottles. Through the years the fragrance lines were modernized and expanded, and today include the trademarks Bambou, Fleur de Weil and Secret of Venus, among others. In 1995 Inter Parfums introduced a new fragrance, Le Chic, and in 1996, Inter Parfums followed with a new fragrance, Quartz for men. During 1998, Inter Parfums successfully launched a new Molyneux line, "I Love You", to its loyal fans. Intimate and Chaz. In 1994 the Company acquired from Revlon Consumer Products Corporation ("Revlon") the world-wide trademarks for the Intimate fragrance line. Also during 1994, the Company entered into a 99 year royalty free license agreement with Revlon for the use of the trademark Chaz in connection with men's fragrances, deodorants and body sprays. The Intimate brand covers a variety of moderately priced fragrances for mass market distribution, and are currently distributed in a number of countries throughout the world. The Intimate product line has been available for almost half a century and has gained a reputation for quality and value with women over forty (40) years of age. During 1998, the Company acquired and simultaneously sold the world-wide trademarks for Chaz fragrances a to a distributor of the Company. Ombre Rose. In 1993 Inter Parfums acquired the exclusive world-wide license for Ombre Rose fragrances as well as other fragrances to be developed by Inter Parfums in accordance with the terms of a License Agreement entered into between Jean-Charles Brosseau S.A. as licensor and Inter Parfums as licensee (the "Brosseau License Agreement"). The Brosseau License Agreement is for a term of ten (10) years, subject to certain minimum sales requirements and royalty payments. The Ombre Rose line, with its classically designed bottle, continues to enjoy wide acceptance in the Far East and the United States. French Fragrances, Inc. is the exclusive distributor of Ombre Rose in the United States, Canada and Puerto Rico. Jordache. In 1990 the Company obtained the exclusive right to use the trademark Jordache from Jordache Enterprises, Inc. ("Jordache") in connection with the manufacturing, marketing and distribution of fragrances and cosmetics in the United States. The Company also received the license to manufacture, market and distribute fragrances and cosmetics in various territories abroad, which territories are to become exclusive in nature upon the commencement of substantial bona fide sales in each such territory. The initial term of the license was for five and a half (5-1/2) years and ended on June 30, 1995. In addition the license agreement provides the Company with the right to renew the license for ten (10) annual renewal terms, subject to certain minimum sales and royalty payment requirements. In the first quarter of fiscal year ending 3 December 31, 1999, the Company elected to renew the Jordache license for the next annual period. Since obtaining the right to use the Jordache trademark, the Company has created and produced, and presently markets, a Jordache product line, which consists of a collection of moderately priced fragrances and cosmetics (lipstick and nail polish) geared to the youth market. Regine's. In 1989 the Company became the exclusive world wide distributor for a new fragrance called Regine's, which is sold internationally in approximately sixty (60) countries. The Regine's fragrance was developed by Inter Parfums, the first original fragrance to be created and marketed by the Company. Inter Parfums markets Regine's, Zoa(Trademark) and Jimmy'z (the Regine's men's fragrance) outside the United States and Canada. -Alternative Designer Fragrances The Company produces and markets several lines of fragrances which it sells at a substantial discount from the high image, high retail cost brand name counterparts, including Jean Philippe Fragrances, Elite Parfums and Jean Philippe Imperial. Prior to producing and marketing a new alternative designer product, management of the Company looks for the existence of certain factors with respect to a particular designer fragrance: (i) high retail selling price, (ii) substantial expenditure of advertising dollars and (iii) selective distribution. Management is of the opinion that the presence of all three (3) factors gives a reasonable degree of market presence for such designer fragrance. Management then seeks to create a similar scent which, together with creative packaging and steeply discounted prices, will create what the Company intends will be an appealing fragrance to be sold to wholesalers, mass market merchandisers and drug store chains at substantial discounts from the higher cost, brand name fragrance. The Company's alternative designer fragrances, which are produced in the United States, are similar in scent to highly advertised designer fragrances that are marketed at a high retail price. These products are intended to have an upscale image without a high retail price, and typically sell at retail for under $5.00 at the mass market retail level, substantially discounted from the high cost of designer fragrances which typically range from $30.00 to $200.00 at prestige retail locations. Some of the alternative designer fragrances currently produced and marketed by the Company include: JP Do(Trademark), 2 Elite(Trademark), Uno(Trademark), C Elite(Trademark), Flight(Trademark), Departure(Trademark) Memphis(Trademark) and Dakota(Trademark). Additionally, the Company markets complementary alternative designer fragrance products such as skin creams, deodorant sticks, roll-on deodorants and body sprays. New products are intended to be developed in accordance with market feasibility and demand. Management of the Company believes that demand for new alternative designer fragrances may be created when participants in the designer fragrance industry launch promotional campaigns for new products. 4 -International and Domestic Mid Market Fragrances Inter Parfums creates, produces and markets its proprietary line of fragrances designed to appear expensive, with attractive bottling and packaging, but sold in the middle market. Typical proprietary fragrances sold by Inter Parfums retail between U.S. $10.00 to $15.00. Jean Philippe has recently introduced its newest line, Parfums De'ja New, which was launched in the first quarter of 1999. The Parfums De'ja New line, which was conceived, designed and created entirely in-house, is produced domestically. This new line consists of original fragrances with unique packaging and premium ingredients, and has a suggested retail price of $15.00 to $35.00. One recently developing trend in the fragrance market is the blurring of the distinction between prestige and mass market products. Certain prestige or designer fragrances, which were previously marketed solely through select channels of distribution, have recently been marketed to a growing number of mass market retail outlets. Simultaneously, a proliferation of quality products in the emerging middle market and at large-scale specialty retailers, such as Victoria's Secret, Banana Republic, Gap, etc., have contributed to changing consumer perceptions of what constitutes a luxury or designer fragrance. In order to exploit this new emerging market, the Parfums De'ja New line offers an innovative vision in fragrance marketing which permits the consumer to purchase a luxurious gift at an affordable price. Fragrances in the Parfums De'ja New line include Contact(Trademark), designed and packaged with a Zen-like minimalist approach, and Alcatraz(Trademark), which has bold and commanding packaging. Mass Market Cosmetics The Company markets its Aziza brand of hypo-allergenic line of eye cosmetics through mass market distribution. The new Aziza line was completely modernized in 1996 and includes thirty-six (36) of the historically most popular and best selling mascara, eyeliner and eyeshadow. Also in the mass market cosmetics category, the Company has created, produced and markets a Jordache line of cosmetics (lipstick and nail polish), which is geared to the youth segment of such market. The Company's Jordache cosmetic and Aziza lines are presently distributed in approximately 5,000 mass market outlets in the United States. Production and Supply Substantially all of the Company's products are produced by the Company either in the United States or France. Although the Company does not own a factory or production plant, it acts as a general contractor, and supervises each stage of production from the creation of the fragrance, design and creation of the bottle, dispenser or container, filling of same and packing, 5 all as performed by various subcontractors. Management believes that its relationships with such subcontractors are good, and that there are sufficient alternate subcontractors should one or more subcontractors become unavailable. Inventory The Company purchases its raw materials and component parts from suppliers based upon internal estimates of anticipated need for finished goods, which enables the Company to meet its production requirements for finished goods. The Company generally delivers customer orders within seventy-two (72) hours of their receipt. Sales and Marketing During fiscal years ended December 31, 1998, 1997 and 1996, no customer accounted for ten percent (10%) or more of sales on a consolidated basis. The broad array of Company product lines permits the Company to market fragrances and cosmetics to all levels of distribution - the Company's brand name and licensed designer fragrances at the high end, Inter Parfums proprietary line and Parfums D`eja New at the moderately priced level and alternative designer fragrances, Jordache and Aziza cosmetics at the mass market. --International Marketing and sales of the Company's brand name and licensed designer fragrance lines are conducted through independent distributors, in-house executives and international agents and importing companies and such products are sold in approximately one hundred (100) countries world-wide. Generally, marketing and advertising are subject to approval of the respective licensors. Advertising for the Company's designer fragrance lines appear in high fashion magazines and to a lesser extent on television in France and the Middle East. Inter Parfums maintains its own in-house sales force with executives who are generally responsible for marketing the Inter Parfums designer fragrance lines in specific territories. In France, the Inter Parfums designer fragrance lines are sold in approximately 1,000 perfumeries. In addition, Inter Parfums markets its middle market proprietary fragrances to wholesalers in France, and to distributors and importers predominantly in the Middle East, Far East, Central America and South America through in-house sales executives. See Note "I" to the Consolidated Financial Statements for information regarding the Company's operations by geographic areas. --Brazil 6 In October 1995 the Company commenced marketing its alternative designer fragrances, Inter Parfums proprietary brands and Jordache line through a newly formed limited liability company organized in Brazil, Jean Philippe Brasil. Net sales generated by Jean Philippe Brasil were $3.0 million in 1996 and $2.0 million in 1997. During 1997 Jean Philippe Brasil underwent an organizational change, whereby it terminated its contract with its exclusive sales representative and attempted to be a direct seller to the Brazilian marketplace. However, the decreasing sales trend continued during 1998, with net sales decreasing to $0.8 million from $2.0 million. In October 1998, the Company determined that it was in its best interest to close its Brazilian subsidiary. Management believed that the decline in sales reflected the Brazilian consumers' fear of a possible currency devaluation, which in fact took place in January 1999. In view of the less than optimistic Brazilian consumer confidence level and the heavily regulated Brazilian environment, management determined that further direct investment in Brasil was not warranted. Such closing is not expected to have a material adverse effect on the Company's results from operations. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." In addition, the Company has entered into a distribution agreement with a well known Brazilian fragrance distributor, which included the purchase of all existing Brazilian inventory. --Domestic The Company markets its alternative designer fragrances, personal care products, mid-market Parfums De'ja New line and its Aziza and Jordache product lines through in-house sales executives to mass merchandisers, major drugstore chains, supermarket chains, "specialty store chains" (multiple outlets of accessories, jewelry and clothing), and wholesalers. These products are presently being sold in approximately 10,000 retail outlets. Mass market merchandisers, major drug chains and supermarkets are the most established markets for all of Jean Philippe's product lines, and are the traditional points of distribution for them. The end market for these lines is the mass market consumer. Some of the mass market merchandisers, major drug store chains and supermarket chains which are presently carrying the Company's products include: Walgreen's, Family Dollar, Dollar General, Food Lion, Bradlees, Drug Emporium, Meijer's Thrifty Acres, Longs Drug Stores, Albertsons and Hills Department Stores. Another market for the Company's products consists of distributors and wholesalers, which service independent stores and international markets. Often, the trends in this market mirror those of major drug store chains and mass market retailers. The Company uses the same marketing strategy of providing quality products coupled with flexible programs (i.e., discounts, extended payment terms) in order to compete with other mass market fragrance and cosmetic companies. 7 In addition, the Company has an established electronic ordering and invoicing system, or Electronic Data Interface ("EDI"), which permits the Company to receive orders and submit invoices for products electronically. Such process eliminates the need for hard copy purchase orders and sales invoices for certain major retailers. Management believes that EDI facilitates the receipt, processing and invoicing of customer orders. Product Liability The Company maintains product liability coverage in an amount of $3,000,000, which it believes is adequate to cover substantially all of the exposure it may have with respect to its products. The Company has never been the subject of any material product liability claims. Competition The market for fragrances and beauty related products is highly competitive and sensitive to changing consumer preferences and demands. In the area of high priced, original designer fragrances, there are products which are better known than the products produced for or distributed by the Company. There are also many companies which are substantially larger and more diversified, and which have substantially greater financial and marketing resources than the Company, as well as greater name recognition, and the ability to develop and market products competitive with those distributed by the Company. For these reasons, it may be particularly difficult for the Company to successfully increase market share in the high priced, original designer fragrance market. At the present time, management is aware of approximately five (5) established companies which market similar alternative designer fragrances. Competition is primarily based upon price. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company believes that the quality of its fragrance products, competitive pricing, as well as its ability to quickly and efficiently develop and distribute new products, will enable it to continue to effectively compete with these companies. The market for name brand and budget color cosmetics is highly competitive, with several major cosmetic companies marketing similar products, many with substantial financial resources and national marketing campaigns. However, management believes that brand recognition of its Aziza and Jordache lines, together with the quality and competitive pricing of its products, should enable it to compete with these companies in the mass market. Government Regulation A fragrance is a "cosmetic" as that term is defined under the Federal Food, Drug and Cosmetics Act ("FDC Act"), and must comply with the labeling requirements of the FDC Act, the Fair Packaging and Labeling Act, and the regulations thereunder. Certain of the Company's color cosmetic products may contain menthol, and are also classified as a "drug," as the categories of cosmetic and drug are not mutually exclusive. Additional regulatory requirements 8 for such products include additional labeling requirements, registration of manufacturer and semi-annual update of drug list. The Company's fragrances are subject to approval of the Bureau of Alcohol, Tobacco and Firearms as the result of the use of specially denatured alcohol. To date the Company has not experienced any difficulties in obtaining such approval. Trademarks Under various license agreements the Company has the right to use the registered trademarks, Burberrys, S.T. Dupont, Paul Smith, Christian LaCroix, Ombre Rose, Regine's and Jordache both in the United States and abroad. In addition, the Company is the registered trademark owner of Intimate, Aziza, the Parfums Molyneux family of trademarks (including Captain, Quartz and Lord), the Parfums Weil family of trademarks (including Bambou, Antilope and Kipling), Beverly, Fire by Jean Philippe, Fashion Mood, Snow Silk and Memphis. See "Business-Products and Selection". Employees As of March 1, 1999 Inter Parfums and its foreign subsidiaries had 47 full-time employees. Of these, 24 were engaged in sales activities, and 23 in administrative and marketing activities. As of March 1, 1999 Jean Philippe had 40 full-time domestic employees. Of these, 10 were engaged in sales activities, and 30 in administrative and marketing activities. The Company believes that its relationships with its employees are satisfactory. Item 2. Properties The Company's corporate headquarters are located in approximately 7,000 square feet of office space at 551 Fifth Avenue, New York, New York. These premises are leased for a five (5) year term ending October 31, 2002, at a monthly rental of approximately $17,000, which is subject to escalations. The offices of Inter Parfums and the Company's other French subsidiaries are located at 4 Rond Point Des Champs Elysees, Paris, France, in approximately 6,000 square feet of leased office space pursuant to two (2) leases. The first lease, for approximately 4,000 square feet, and the second lease, for approximately 2,000 square feet, both expire in July 1, 2005, unless terminated earlier by either party on six (6) months written notice at three (3) year specified intervals. The annual rentals for each of the two (2) leases are 711,000 French francs and 458,400 French francs, respectively, (approximately $119,000 and $76,000). Rent is subject to escalations each July 1. 9 Management of the Company is of the belief that the Company's executive office facilities are satisfactory for its present needs and those for the foreseeable future. The Company also occupies a 145,000 square foot distribution center at 60 Stults Road in Dayton, New Jersey. The premises have been leased by the Company for an eight (8) year term expiring October 2003 and requires monthly rental payments of $57,000, aggregating $684,000 per annum. Management of the Company is of the belief that the Company's distribution center is satisfactory for its present needs and those for the foreseeable future. Item 3. Legal Proceedings Litigation has been commenced against Inter Parfums regarding the Ombre Rose fragrance license in the French Commercial Court of Paris in February 1997 by the licensor, Jean Charles Brosseau, S.A. ("Brosseau"). Inter Parfums thereupon asserted claims against Brosseau for $300,000 for interference with its distriubtors. In response, Brosseau then claimed damages of approximately $7 million agains Inter Parfums, allegedly for the decreased value of his fragrance brands. Inter Parfuns vigoursly and categorically denies the claims of Brosseau, and believes that it has metitorious defenses to its claim. Further, Inter Parfums has received a letter from its special litigation counsel that in its opinion, the entry of any substantial judgement against Inter Parfums in such action is unlikely. Based upon the foregoing, management does not believe that such litigation will have any material adverse effect upon the financial condition or operations of the Company. A hearing was held on March 15, 1999 before the French Commerical Court of Paris, and the action is still pending. As of December 31, 1998, the remaining unamortized portion of the license agreement is approximately $750,000. Item 4. Submissions Of Matters To A Vote Of Security Holders Not applicable. 10 PART II Item 5. Market For Registrant's Common Equity And Related Stockholder Matters The Company's Common Stock, $.001 par value per share ("Common Stock") is traded on The Nasdaq Stock Market under the symbols "JEAN". The following table sets forth in dollars, the range of high and low closing prices for the past two (2) fiscal years for the Company's Common Stock. Fiscal 1998 High Closing Price Low Closing Price ----------- ------------------ ----------------- Fourth Quarter $6.94 $4.75 Third Quarter $8.25 $6.38 Second Quarter $9.25 $7.44 First Quarter $7.69 $6.25 Fiscal 1997 High Closing Price Low Closing Price ----------- ------------------ ----------------- Fourth Quarter $8.06 $6.63 Third Quarter $9.13 $6.07 Second Quarter $6.63 $5.38 First Quarter $6.75 $5.75 As of March 1, 1999, the number of record holders (brokers and broker's nominees, etc.) of the Company's Common Stock was 87. Management believes that there are approximately 1,250 beneficial owners of the Company's Common Stock. Dividends Jean Philippe has not paid cash dividends since inception and management of the Company does not foresee Jean Philippe paying cash dividends in the foreseeable future as earned surplus is to be retained as working capital for anticipated growth. 11 Sales of Unregistered Securities The following table sets forth certain information as to all equity securities of the Company sold during the past three years, which were not registered under the Securities Act of 1933, as amended (the "Securities Act"). In each of the two (2) transactions, the Company sold Common Stock to accredited investors and affiliates of the Company, which were exempt from the registration requirements of Section 5 of the Securities Act under Sections 4(2) and 4(6) of the Securities Act.
Date of Sale Number of Shares Sold Identity of Purchasers Aggregate Consideration - ------------- --------------------- ---------------------- ----------------------- 10/96 18,000 Philippe Benacin $75,906 02/98 7,500 Joseph A. Caccamo $43,826
Item 6. Selected Financial Data The following selected financial data have been derived from the Company's financial statements, and should be read in conjunction with such financial statements, including the footnotes relating thereto, referred to in Item 8 of this Form 10-K. Years Ended December 31 (In Thousands Except Share and Per Share Data)
1998 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------- Income Statement Data: Net Sales $ 89,388 $ 91,462 $ 93,281 $ 93,669 $ 75,079 Cost of Sales 47,417 49,388 51,355 48,703 39,036 Selling, General and 32,944 32,334 32,416 32,990 23,773 Administrative Income Before Taxes and 9,164 8,172 9,081 12,380 11,679 Minority Interest Net Income 4,613 4,507(1) 5,658 9,038(1),(2) 7,275(2) Net Income per Share: Basic $ .53 $ .48(1) $ .57 $ .90(1),(2) $ .71(2) Diluted $ .52 $ .48(1) $ .57 $ .87(1),(2) $ .70(2) Average Common Shares Outstanding: Basic 8,707,290 9,299,401 9,871,698 10,044,653 10,180,412 Diluted 8,898,805 9,397,329 9,984,463 10,438,896 10,454,555
12 - ---------- (1) Includes a nonrecurring charge, net of taxes, of $0.8 million or $.08 per diluted share and $1.3 million or $.13 per diluted share, for fiscal years ended December 31, 1997 and December 31, 1995, respectively, relating to the divestiture of the Cutex license in 1997 and discontinuance of a product line in 1995. (2) Includes a net gain of $3.3 million or $.32 per diluted share, $0.2 million or $.02 per diluted share, for fiscal years ended December 31, 1995 and December 31, 1994, respectively, resulting from the sale of common stock of a subsidiary. As at December 31 (In Thousands Except Share and Per Share Data)
1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------- Balance Sheet Data: Working Capital $ 49,599 $ 44,842 $ 46,568 $ 41,363 $ 31,226 Total Assets 87,739 80,282 85,585 84,001 69,451 Long Term Debt 200 424 485 596 862 Shareholders' Equity 53,680 50,194 53,366 51,976 44,513
Item 7. Management's Discussion And Analysis Of Financial Condition And Results Of Operation Introduction Jean Philippe Fragrances, Inc. together with its French subsidiary, Inter Parfums, are manufacturers and distributors of fragrances, cosmetics and personal care products. The Company's dedication to innovation and diversity, and its commitment to creating quality products are the catalysts behind new product introductions and product line expansion. The Company, produces and distributes, worldwide, a variety of fragrance, personal care and cosmetic products including: * Brand name and licensed fragrances. * Alternative Designer Fragrances and personal care products. * International moderately priced fragrances. * Mass market cosmetics. Jean Philippe is a global company which sells its products in over 100 countries worldwide. The Company's worldwide position, which makes it subject to global economic turbulence, should also benefit the Company in the future, as countries emerge from their economic troubles. The economic conditions in a number of markets during 1998, such as Eastern Europe and Brasil, certainly dampened the Company's short-term results. However, the 13 Company's long-term focus will not allow it to abandon these markets, as the Company would lose the opportunity to capitalize on the potential resurgence of these economies. 1998 compared to 1997 Net sales aggregated $89.4 million in 1998, as compared to $91.5 million in 1997. On April 30, 1997, the Company divested its Cutex nail and lip products license and net sales for 1997 includes $3.3 million of Cutex product sales. Sales generated by the Company's French subsidiary, Inter Parfums, posted strong sales growth with an increase of 15% in 1998. At comparable foreign currency exchange rates, sales by Inter Parfums increased 17% in 1998. Inter Parfums licensed and brand name lines increased 35% while its international moderately priced fragrance line decreased 43%. Such increase is primarily the result of expanded distribution of the Burberrys fragrance line as well Inter Parfums new product introduction of "I Love You" by Molyneux and the launch of their new S.T. Dupont fragrance line. Next year is expected to be a year of continued growth for Inter Parfums, (approximately 10%), as it prepares for the launch, in early 2000, of its new Paul Smith fragrance line. Inter Parfums is also preparing new product introductions for its Burberry line for the year 2000. Management is determined to strengthen these brands with continued new product development as well as product line expansion. Management is also actively pursuing new license agreements to build upon the strength of its existing product lines. During March 1999, Inter Parfums entered into a ten (10) year world-wide, exclusive license agreement with Christian LaCroix, a division of Group LVMH, for the creation and distribution of designer fragrance lines under the Christian LaCroix brand name. The success of the designer fragrance lines is somewhat mitigated by sales declines in the international moderately priced fragrance line referred to above and the domestic Alternative Designer Fragrances. Excluding the effect of 1997 Cutex product sales, net sales generated by the Company's domestic operations decreased 18% in 1998. These declines were primarily the result of the economic situation in Eastern Europe and factors leading up to the ultimate closing of the Company's Brazilian subsidiary. For the year ended December 31, 1998, the Company's domestic operations generated net sales from Russian Territories of $0.8 million, as compared to net sales of approximately $4.1 million in 1997. No assurances can be given that the economic turmoil will abate in the foreseeable future, and thus management is uncertain as to when the Russian market will again become viable. However, the Company does not have any material exposure with respect to accounts receivable from its Russian Territory customers. As previously reported, sales generated by the Company's Brazilian subsidiary, Jean Philippe Brasil, were $2.0 million in 1997 as compared to $3.0 million in 1996. This trend has continued, with net sales declining to $0.8 million in 1998. In October 1998, the Company determined that was in its best interest to close its Brazilian subsidiary. Management believed that the decline in sales reflected the Brazilian consumers' fear of a possible currency devaluation, which in fact took place in January 1999. In view of that less than optimistic Brazilian consumer confidence level and the heavily regulated Brazilian environment, further 14 direct investment in Brasil was not warranted. Such closing did not have a material adverse effect on the Company's results from operations. The Company will continue to sell into the Brazilian market and has entered into a distribution agreement with a well known Brazilian fragrance distributor, which included the purchase of all existing inventory. The overall market for Alternative Designer Fragrances is extremely price sensitive, and customers are reducing their overall inventory levels. This trend, which is affecting the entire industry, is expected to continue during 1999. In an attempt to combat the negative impact of this industry-wide trend, in January 1999 the Company introduced its newly created line of domestic mid market fragrances. Utilizing prestige and upscale concepts in bottle design and packaging, the Company has created a line of unique and high quality fragrances to be sold domestically and internationally, in existing and new distribution channels, at mass market prices. Initial orders have exceeded original expectations and management expects this line to contribute positively to sales and earnings in 1999. Although the Company originally anticipated this new line to be launched in December 1998, certain product development delays caused the launch date to be postponed until January 1999. Gross profit margin increased to 47% of sales in 1998, as compared to 46% of sales in 1997. The Company's designer fragrance lines generate a slightly higher gross profit margin than the Company's other product lines. Sales of the Company's designer line products continue to experience solid growth, and therefore, represent a greater portion of the Company's overall sales. The Company's program of "Product Value Analysis" has also enabled the Company to at least maintain, and in some areas improve its gross profit margin. These cost saving techniques are utilized in all new product introductions. Selling, general and administrative expenses aggregated $32.9 million and $32.3 million in 1998 and 1997, respectively, and represented 37% of net sales in 1998 and 35% of net sales in 1997. Domestic selling, general and administrative expenses declined to $10.5 million in 1998 as compared to $12.5 million in 1997. However, as a result of the decline in sales, selling, general and administrative expenses increased as a percentage of domestic net sales to 35% in 1998 from 32% in 1997. In connection with the April 30, 1997 restructuring of the Company's domestic operations, which coincided with the divestiture of the Company's Cutex license, the Company reduced its domestic work force by approximately 20%. Further, as a result of the economic climates in Russia and Brasil, during 1998 management took the steps it deemed necessary to reorganize its infrastructure and cut its selling, general and administrative expenses once again. Selling, general and administrative expenses incurred by Inter Parfums increased to $21.5 million or 36.6% of sales in 1998 as compared to $18.6 million or 36.5% of sales in 1997. Such increase is the result of expenses incurred to support new product introductions, build upon the each brand's awareness, as well as to support Inter Parfums revenue growth. In the first quarter of 1997, the Company took a pre-tax charge against earnings of $1.3 million to write-off intangible assets and other expenses relating to the divestiture of the Cutex license. Management is confident that such charge is sufficient to cover all potential obligations relating to the Cutex business. 15 Interest expense declined to $0.5 million in 1998 from $0.7 million in 1997. The Company uses its available credit lines, as needed, to finance its working capital needs. As a result of profitable operating results and positive cash flow, overall borrowing levels, during the year, have been reduced. The Company incurred a loss on foreign currency of $0.1 million in 1998 as compared to a loss of $0.2 million in 1997. The Company, at appropriate times, enters into foreign currency forward exchange contracts as a hedge for short-term inter company borrowings, or for receivables to be collected in a foreign currency. The Company's effective income tax rate was 39% in 1998, as compared to 36% in 1997. The 1997 rate was favorably impacted by reduction of valuation reserves on deferred tax assets, relating to the utilization of net operating loss carry forwards made available to Inter Parfums as a result of the 1996 sale of the Bal a' Versailles trademarks. No such benefit was available for 1998. In addition, corporate income tax rates in France have increased from 36% to approximately 43% in the past two years. The effective tax rate for 1998 includes an expected tax benefit to be realized as a result of the Company's decision to close its Brazilian subsidiary. Net income was $4.6 million or $0.52 per diluted share in 1998 as compared to $4.5 million or $0.48 per diluted share in 1997. Results for 1997 include a nonrecurring charge of $0.8 million, on an after tax basis, relating to the divestiture of the Cutex license. Excluding the nonrecurring charge, net income was $5.3 million or $0.56 per diluted share in 1997. The weighted average shares outstanding declined 6.5% to 8.7 million in 1998, as compared to 9.3 million in 1997. On a diluted basis, average shares outstanding was 8.9 million in 1998 and 9.4 million in 1997. Such decline is the result of the Company's ongoing stock buyback program. 1997 as Compared to 1996 Net sales aggregated $91.5 million in 1997, as compared to $93.3 million in 1996. On April 30, 1997, the Company divested its Cutex nail and lip products license. As such, 1996 net sales includes sales of Cutex products for the entire year, while 1997 net sales only include sales of Cutex products through April 30, 1997. Excluding Cutex product sales, net sales for 1997 increased 5% as compared to 1996. The Company's Alternative Designer Fragrance lines have been affected in 1997 by heavy discounting by certain competitors, which commenced in the fourth quarter of 1996. In January 1997, the Company matched the competition's pricing structure by reducing selling prices by approximately 30%, and has regained much of the market share initially lost as a result of such price competition. Despite the 30% selling price reduction, sales in this category declined only 13% in 1997, as compared to 1996. This result demonstrates that unit volume in the Company's Alternative Designer Fragrance business continues to grow. 16 Sales generated by the Company's publicly traded French subsidiary, Inter Parfums, increased 29%; at comparable foreign currency exchange rates, sales by Inter Parfums increased 47%. The Burberrys perfume line, which was created by Inter Parfums, has achieved great success in all markets where Burberrys products are sold. The opening of Burberrys to the American and duty-free markets, as well as the initial launch of the new Burberrys "Week end" line, has confirmed the potential of the Burberrys name with distributors around the world. Increasing distribution in over 70 countries and the opening of additional new markets should reinforce this potential. Burberrys has become the flagship brand in the collection of designer fragrance product lines offered by Inter Parfums and is expected to be the catalyst for future sales growth of the entire collection. Consistent with the Company's business strategy of exploring strategic acquisition opportunities as well as in an effort to build upon the success of the Burberrys lines, Inter Parfums entered into a license agreement with S.T. Dupont for the development of an original perfume line. Product design and development is well under way for an expected launch in the fourth quarter of 1998. Sales generated by the Company's Brazilian subsidiary, Jean Philippe Brasil, were $2.0 million in 1997 as compared to $3.0 million in 1996. Management believes such decline reflects the Brazilian consumers' fear of a possible currency devaluation brought on by the Asian crisis. In addition, Jean Philippe Brasil underwent an organizational change during 1997, whereby it terminated its contract with its exclusive sales representative and is now a direct seller to the Brazilian marketplace. Given the less than optimistic Brazilian consumer confidence level and heavily regulated Brazilian environment, no assurance can be given that Jean Philippe Brasil operations will be profitable in 1998. Consolidated gross margin increased to 46% of sales in 1997 as compared to 45% of sales in 1996. The increase is somewhat understated as gross margin for 1996 includes the benefit of higher margin Cutex sales for the entire year while 1997 margin includes such benefit only through April 30, 1997, the date the Company divested its Cutex nail and lip products license. Historically, the Company's combined fragrance businesses (designer and alternative designer fragrances) achieved an approximate 45% gross margin. In response to heavy discounting by certain competitors in the Alternative Designer Fragrance lines, the Company developed a program of "Product Value Analysis", which enabled the Company to match the competition's pricing structure without affecting gross margin in the long-term. Gross margin in the first half of 1997 was affected by the lower selling prices put into effect in January 1997. The positive impact of the measures took effect in the second half of 1997 and is expected to continue to benefit future periods. Gross margin was also favorably impacted by an increase in margin from Inter Parfums. Such increase resulted from exports sold in US dollars, thereby benefiting Inter Parfums from the substantial rise of the US dollar relative to the French franc. 17 Selling, general and administrative expenses aggregated $32.3 million and $32.4 million in 1997 and 1996, respectively, and represented 35% of sales in both 1997 and 1996. In connection with the April 30, 1997 restructuring of the Company's domestic operations, which coincided with the divestiture of the Company's Cutex license, the Company reduced its domestic work force by approximately 20%. As a result of both the work force reduction and the divestiture of the Cutex license, domestic selling, general and administrative expenses declined to $12.5 million or 32% of sales in 1997 as compared to $17.8 million or 34% of sales in 1996. Selling, general and administrative expenses incurred by Inter Parfums increased to $18.6 million or 36% of sales in 1997 as compared to $13.9 million or 35% of sales in 1996. Such increase is the result of expenses incurred to support new Burberrys product line introductions, build upon the brand's awareness, as well as to support Inter Parfums revenue growth. In the first quarter of 1997, the Company took a pre-tax charge against earnings of $1.3 million to write-off intangible assets and other expenses relating to the divestiture of the Cutex license. Management is confident that such charge is sufficient to cover all potential obligations relating to the Cutex business. Interest expense decreased to $0.7 million in 1997 from $0.9 million in 1996. The Company uses its available credit lines, as needed, to finance its working capital needs. The Company incurred a loss on foreign currency of $0.2 million in 1997 as compared to a loss of $0.1 million in 1996. The Company, on occasion enters into foreign currency forward exchange contracts as a hedge for short-term intercompany borrowing or for receivables to be collected in a foreign currency. The Company's effective income tax rate was 36% in 1997 and 31% in 1996. Reductions of valuation reserves on deferred tax assets, relating to the utilization of foreign net operating loss carryforwards have benefited both the 1997 and, to an even greater extent, the 1996 effective tax rates. As of December 31, 1997, a nominal amount of net operating loss carryforwards are available to benefit future periods. Therefore, the Company expects its effective tax rate to be approximately 41% in future periods. Net income was $4.5 million or $0.48 per diluted share in 1997 as compared to $5.7 million or $0.57 per diluted share in 1996. Results for 1997 include a nonrecurring charge of $0.8 million, on an after tax basis, relating to the divestiture of the Cutex license. Excluding the nonrecurring charge, net income was $5.3 million or $0.56 per diluted share in 1997. The weighted average shares outstanding were 9.3 million in 1997 and 9.9 million in 1996, and on a diluted basis, average shares outstanding were 9.4 million in 1997 and 10.0 million in 1996. Such decline is the result of the Company's ongoing stock buyback program. Liquidity and Financial Resources 18 As a result of continued profitable operating results, the Company's financial position remains very strong. At December 31, 1998, working capital aggregated $50 million with a working capital ratio of almost 3 to 1. The Company had cash and cash equivalents on hand of $23 million, while net book value aggregated $6.34 per outstanding share as of December 31, 1998. The 1995 initial public offering in France of approximately 21% of the common stock of Inter Parfums, has proven to be extremely successful. In addition to the strength such stock sale provided to the financial position of Inter Parfums, the proceeds of the offering have enabled Inter Parfums to control its growth and invest for the future without the need of debt financing. Long-term debt of Inter Parfums aggregated $0.2 million as of December 30, 1998, as compared to $0.4 million as of December 31, 1997. Taking into consideration, the continued growth in both the sales and earnings of Inter Parfums, in January 1998, the Company decided to exercised its rights to convert the remaining portion of its convertible debt, approximately $4.4 million, into 318,326 additional shares of Inter Parfums bringing the total shares outstanding to 2,234,023 as of December 31, 1998. The conversion price was approximately $14 per share while Inter Parfums stock is presently trading at approximately $25 per share. The effect of the conversion increased the Company's ownership of Inter Parfums to 79% as of December 31, 1998, as compared to 76.4% as of December 31, 1997. Jean Philippe demonstrates confidence in the long-term growth potential of its business by its consistent use of share repurchase programs. In addition, the common stock of Jean Philippe Fragrances is presently trading at approximately $6.00 per share, which is below the December 31, 1998 net asset value per share of $6.34. Furthermore, the market value of the Company's investment in its publicly traded French subsidiary, Inter Parfums, presently represents approximately $5.82 per share. Therefore, in February 1998, the Board of Directors authorized the repurchase of an additional 1.0 million shares of the Company's common stock, bringing the total shares authorized to be repurchased under the current repurchase program to 3.5 million shares. The Company has continued to repurchase its common stock pursuant to its authorized stock repurchase program. Since the inception of the Company's repurchase program, which began in 1995, the Company has repurchased 2.75 million shares of its common stock, or approximately 27% of outstanding shares, at an average price of $6.96 per share, bringing total shares outstanding to its present level of 7.61 million. The Company's short-term financing requirements are expected to be met by available cash at December 31, 1998, cash generated by operations and short-term credit lines provided by domestic and foreign banks. The principal credit facilities for 1998 are a $12.0 million unsecured revolving line of credit provided by a domestic commercial bank and approximately $12.0 million in credit lines provided by a consortium of international financial institutions. 19 Internally generated cash provided by operating activities was $7.4 million for the year ended December 31, 1998. Cash provided by operating activities continued to be the Company's primary source of funds to finance operating needs and investments in new ventures. Cash provided by operating activities was also used to finance the Company's stock repurchase program. During 1998, the Company repurchased 407,500 shares of its common stock at a cost of $2.7 million. Management of the Company believes that funds generated from operations, supplemented by its present cash position and available credit facilities, will provide it with sufficient resources to meet all present and reasonably foreseeable future operating needs. The Company has substantially completed all projects to address "Year 2000" compliance with respect to its internal information systems. As such, management believes that "Year 2000" transition will not have a material adverse effect on future results. In January 1999, certain member countries of the European Union established permanent fixed rates between their existing currencies and the European Union's common currency ("the Euro"). The transition period for the introduction of the Euro is scheduled to phase in over a period ending January 1, 2002. Management does not believe that the introduction of the Euro and the phasing out of the other currencies will have a material impact on the Company's consolidated financial statements. Inflation rates in the U.S. and foreign countries in which the Company operates have not had a significant impact on operating results for the year ended December 31, 1998. Forward Looking Statements Statements included herein which are not historical in nature are forward looking statements. Forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from projected results. Such factors include changes in product acceptance by consumers, effectiveness of sales and marketing efforts, competition and prevailing economic conditions. Given these uncertainties, persons are cautioned not to place undue reliance on the forward looking statements. Item 8. Financial Statements and Supplementary Data The required financial statements commence on page F-1. 20 Supplementary Data Quarterly Data (Unaudited) For the Year Ended December 31, 1998 (In Thousands Except Share and Per Share Data)
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Full Year - ------------------------------------------------------------------------------------------------------------------- Net Sales $ 20,806 $ 24,093 $ 22,505 $ 21,984 $ 89,388 Cost of Sales 10,902 12,840 12,420 11,255 47,417 Net Income 1,222 1,158 1,072 1,161 4,613 Net Income per Share: Basic $ .14 $ .13 $ .12 $ .14 $ .53 Diluted $ .14 $ .13 $ .12 $ .14 $ .52 Average Common Shares Outstanding: Basic 8,825,731 8,799,927 8,724,076 8,474,677 8,707,290 Diluted 9,019,620 9,151,554 8,946,954 8,477,093 8,898,805
Quarterly Data (Unaudited) For the Year Ended December 31, 1997 (In Thousands Except Share and Per Share Data)
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Full Year - ------------------------------------------------------------------------------------------------------------------- Net Sales $ 20,969 $ 21,847 $ 24,464 $ 24,181 $ 91,462 Cost of Sales 10,923 11,596 14,200 12,669 49,355 Net Income 341 1,106 1,635 1,425 4,507 Net Income per Share: Basic $ .04 $ .12 $ .18 $ .16 $ .48 Diluted $ .04 $ .12 $ .18 $ .16 $ .48 Average Common Shares Outstanding: Basic 9,602,481 9,525,386 9,142,955 8,926,781 9,299,401 Diluted 9,605,404 9,545,285 9,283,661 9,154,967 9,397,329
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure Not applicable. 21 PART III Item 10. Executive Officers And Directors Of Registrant As of March 15, 1999, the executive officers and directors of the Company were as follows: Name Position ---- -------- Jean Madar Chairman of the Board and Chief Executive Officer of Jean Philippe and Director General of Inter Parfums Philippe Benacin Vice Chairman of the Board and President of Jean Philippe and President of Inter Parfums Russell Greenberg Director, Executive Vice President and Chief Financial Officer Francois Heilbronn Director Joseph A. Caccamo Director Jean Levy Director Robert Bensoussan-Torres Director Bruce Elbilia Executive Vice President Wayne C. Hamerling Executive Vice President Jaime Resnik Executive Vice President The directors will serve until the next annual meeting of stockholders and thereafter until their successors shall have been elected and qualified. With the exception of Mr. Benacin, the officers are elected annually by the directors and serve at the discretion of the board of directors. See "Item 11. Executive Compensation- Employment Agreement". There are no family relationships between executive officers or directors of the Company. The following sets forth biographical information as to the business experience of each executive officer and director of the Company for at least the past five (5) years. Jean Madar Jean Madar, age 38, a Director, has been the Chairman of the Board of Directors (since inception), and a co-founder of the Company with Mr. Benacin. From inception until December 1993 he was the President of the Company; in January 1994 he became Director General of Inter 22 Parfums; and in January 1997 he became Chief Executive Officer of the Company. Mr. Madar was previously the managing director of Inter Parfums, from September 1983 until June 1985. At Inter Parfums, he had the responsibility of overseeing the marketing operations of its foreign distribution, including market research analysis and actual marketing campaigns. Mr. Madar graduated from The French Higher School of Economic and Commercial Sciences (ESSEC) in 1983. Philippe Benacin Mr. Benacin, age 40, a Director, has been the Vice Chairman of the Board since September 1991, and is a co-founder of the Company with Mr. Madar. He was elected the Executive Vice President in September 1991, Senior Vice President in April 1993, and President of the Company in January 1994. In addition, has been the President of Inter Parfums for more than the past five (5) years. Mr. Benacin graduated from The French Higher School of Economic and Commercial Sciences (ESSEC) in 1983. Russell Greenberg Mr. Greenberg, age 42, the Chief Financial Officer, was Vice-President, Finance when he joined the Company in June 1992; became Executive Vice President in April 1993; and was appointed to the Board of Directors in February 1995. He is a certified public accountant licensed in the State of New York, and is a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants. After graduating from The Ohio State University in 1980, he was employed in public accounting. From July 1987 through June 1992, he was with Richard A. Eisner & Company, the independent accountants of the Company. Francois Heilbronn Mr. Heilbronn, age 38, a Director, is a graduate of Harvard Business School with a Master of Business Administration degree and is currently working as a consultant for the firm of M.M. Friedrich, Heilbronn & Fiszer, of which he is a partner. He was formerly employed by The Boston Consulting Group, Inc. from 1986 through 1991 as a management consultant. He graduated from Institut D' Etudes Politiques De Paris in June 1983. From 1984 to 1986, he worked as a financial analyst for Lazard Freres & Co. Joseph A. Caccamo Mr. Caccamo, age 43, a Director of the Company since 1992, is a partner of Nason, Yeager, Gerson, White & Lioce, P.A., general counsel to the Company. Mr. Caccamo has been a practicing attorney since 1981, concentrating in the areas of corporate and securities law, and in September 1991 he became counsel to the Company. From August 1992 through September 1997, he was a director of and general counsel to Hydron Technologies, Inc., a company primarily engaged in the development of cosmetic/personal care products, which has its common stock listed on The Nasdaq Stock Market. 23 Jean Levy Jean Levy, age 66, a Director since August 1996, worked for twenty-seven (27) years at L'Oreal, and was the President and Chief Executive Officer of Cosmair, the exclusive United States licensee of L'Oreal from 1983 through June 1987. In addition, he is the former President and Chief Executive Officer of Sanofi Beaute (France). For the past five years, Mr. Levy has been an independent advisor as well as a consultant for economic development to local governments in France. A graduate of "l'Institut d'Etudes Politiques de Paris," he also attended Yale Graduate School and was a recipient of a Fulbright Scholarship. He was also a Professor at "l'Institut d'Etudes Politiques de Paris". Robert Bensoussan-Torres Robert Bensoussan-Torres, age 41 and a Director since March 1997, has been a Director of Towers Consulting Europe, Ltd. since May 1998. Towers Consulting Europe, Ltd. is a consulting company based in London, which specializes in strategic advise in connection with mergers and acquisitions in the luxury goods business. Mr. Bensoussan-Torres was the Chief Executive Officer of Christian LaCroix, Paris, a subsidiary of LVMH Group, from February 1993 until May 1998. Christian LaCroix is a French Houte Couture House and has activities in the field of apparel, accessories and fragrances. From December 1990 through January 1993 he was based in Munich, Germany, as the International Sales Director of The Escada Group. Bruce Elbilia Mr. Elbilia, age 39, Executive Vice President joined the Company in June 1986 as the National Sales Director, and from that time until 1994, he was in charge of the Company's marketing efforts. In 1994 Mr. Elbilia became head of international sales and marketing for Jean Philippe, and has expanded Jean Philippe's export sales to South America, the Middle East and Eastern Europe. Mr. Elbilia received a Bachelor of Business Administration degree, with a major in International Business/Marketing from George Washington University in Washington, D.C., which he attended from 1977-1981. Wayne C. Hamerling Mr. Hamerling, age 42, was Vice President, Sales, from May 1987 through April 1993, when he became Executive Vice President. Mr. Hamerling has over eighteen (18) years experience in the fragrance and cosmetic business. From 1980 through 1983 he was employed by Rite Aid Drug Stores; from 1983 through 1985, he was the Senior Buyer for Valley Fair Stores, and from 1985 through May 1987, he was the National Sales Manager for Happy Valley Fragrances. Jaime Resnik 24 Mr. Resnik, age 38, became an Executive Vice President in July 1994, and is in charge of operations. He joined the Company in April 1992 as Operations Manager in charge of production and planning. From October 1988 through April 1991, Mr. Resnik was the Licensing Audit Manager for Jordache Enterprises, with responsibility for auditing approximately thirty (30) licensees with sales in excess of $250 million. From April 1991 through April 1992, Mr. Resnik was the Director of International Licensing for Jordache Enterprises, with responsibility for overseeing the licensing activities of approximately fifty (50) licensees world wide. Mr. Resnik graduated with honors from the University of Miami in 1983 with a B.A. in management. Item 11. Executive Compensation The following table sets forth a summary of all compensation awarded to, earned by or paid to, the Company's Chief Executive Officer and each of the four (4) most highly compensated executive officers of the Company whose compensation exceeded $100,000 per annum for services rendered in all capacities to the Company and its subsidiaries during fiscal years ended December 31, 1998, December 31, 1997 and December 31, 1996:
SUMMARY COMPENSATION TABLE Annual Compensation Long Term Awards - ----------------------------------------------------------------------------------------------------------------------- Other Annual Securities Compensation Underlying All Other Name and Principal Position Year Salary ($) Bonus ($) ($) Options (#)(1) Compensation - ----------------------------------------------------------------------------------------------------------------------- Jean Madar(2), Chairman of the 1998 280,000 -0- 48,000(3) 130,000 -0- Board, Chief Executive Officer of 1997 267,000 -0- 18,000(3) 325,000 -0- Jean Philippe and Director General 1996 210,700 -0- 30,500(3) 33,500 -0- of Inter Parfums Philippe Benacin(4), Chief Executive 1998 139,000 10,000 53,000(5) 130,000 -0- Officer, President of Jean 1997 86,000 25,000 33,000(6) 325,000 -0- Philippe and President of Inter 1996 101,000 17,200 82,844(7) 33,500 -0- Parfums Russell Greenberg(8), Executive Vice 1998 228,446 3,000 2,214 15,500 -0- President and Chief Financial 1997 213,600 15,000 2,214 22,500 -0- Officer 1996 200,000 4,500 2,042 6,000 -0- Bruce Elbilia(9), Executive Vice 1998 146,045 3,000 28,776(10) 15,500 -0- President 1997 168,000 18,500 78,473(10) 25,500 -0- 1996 168,000 4,571 58,994(10) 6,000 -0- Wayne C. Hamerling(11), Executive 1998 166,120 13,000 52,590(12) 15,500 -0- Vice President 1997 166,120 7,000 55,363(13) 25,500 -0- 1996 157,004 3,500 74,903(14) 6,000 -0-
- ---------- (1) Includes options granted in 1998 and 1997 as replacements for out-of-the-money or expired options. See Table entitled "10 Year Options Repricings". (2) Mr. Madar became Chief Executive Officer in January 1997. As of December 31, 1998, Mr.Madar held 2,466,049 restricted shares of Common Stock, with an aggregate value of $15,104,550 based upon the closing price of the Company's Common Stock as reported by the Nasdaq Stock Market, National Market system, of $6.125. (3) Consists of lodging expenses. 25 (4) Mr. Benacin was the Chief Executive Officer in 1996. Compensation figures for Mr.Benacin are approximate, as he is paid in French francs, and conversion into U.S. dollars was made at the average exchange rates prevailing during the respective periods. As of December 31, 1998, Mr.Benacin held 2,318,049 restricted shares of Common Stock, with an aggregate value of $14,198,050 based upon the closing price of the Company's Common Stock as reported by the Nasdaq Stock Market, National Market system, of $6.125. (5) Consists of $48,000 for lodging expenses and $5,000 for automobile expenses. (6) Consists of $31,000 for lodging expenses and $2,000 for automobile expenses. (7) Consists of noncash compensation of $52,334 attributable to the difference between the exercise price and the value of certain restricted shares of Common Stock acquired upon the exercise of stock options; approximately $2,300 for automobile expenses and $28,200 for lodging expenses. (8) Mr. Greenberg held no restricted shares of Common Stock as of December 31, 1998. (9) Mr. Elbilia held no shares of common stock as of December 31, 1998. (10) Consists of selling commissions. (11) As of December 31, 1998, Mr. Hamerling held no shares of common stock as of December 31, 1998. (12) Consists of selling commissions of $48,090 and non cash compensation of $4,500 equal to the value of personal use of a company leased automobile. (13) Consists of selling commissions of $50,863 and non cash compensation of $4,500 equal to the value of personal use of a company leased automobile. (14) Consists of selling commissions of $70,067 and non cash compensation of $4,836 equal to the value of personal use of a company leased automobile. The following table sets forth certain information relating to stock option grants during Fiscal 1998 to the Company's Chief Executive Officer and each of the four (4) most highly compensated executive officers of the Company whose compensation exceeded $100,000 per annum for services rendered in all capacities to the Company and its subsidiaries during Fiscal 1998: OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realized Value at Assumed Annual Rates of Stock Individualized Grants Price Appreciation for Option Term - ---------------------------------------------------------------------------------------------------------------------- Name Number of % of Total Exercise Expiration Five (5%) Ten (10%) Securities Options/SARs or Base Date Percent Percent Underlying Granted to Price ($) ($) Options Employees in ($/Sh) Granted (#) Fiscal Year - ---------------------------------------------------------------------------------------------------------------------- Jean Madar 100,000 27.8 6.50 1/25/03 179,583 396,832 Jean Madar 30,000 8.3 7.75 4/26/03 64,235 141,944 Philippe Benacin 100,000 27.8 6.50 1/25/03 179,583 396,832 Philippe Benacin 30,000 8.3 7.75 4/26/03 64,235 141,944 Russell Greenberg 6,500 1.8 6.50 1/25/03 11,673 25,794 Russell Greenberg 9,000 2.5 7.75 4/26/03 19,271 42,583
26 Bruce Elbilia 6,500 1.8 6.50 1/25/03 11,673 25,794 Bruce Elbilia 9,000 2.5 7.75 4/26/03 19,271 42,583 Wayne Hamerling 6,500 1.8 6.50 1/25/03 11,673 25,794 Wayne Hamerling 9,000 2.5 7.75 4/26/03 19,271 42,583
The following table sets forth certain information relating to option exercises effected during Fiscal 1998, and the value of options held as of such date by each of the Chief Executive Officer and the four (4) most highly compensated executive officers of the Company whose compensation exceeded $100,000 per annum for services rendered in all capacities to the Company and its subsidiaries during Fiscal 1998: AGGREGATE OPTION EXERCISES FOR FISCAL 1998 AND YEAR END OPTION VALUES
Value(1) of Unexercised In-the-Money Number of Options at Unexercised Options December 31, at December 31, 1998(#) 1998($) - ------------------------------------------------------------------------------------------------------------ Shares Acquired Value ($) Exercisable/ Exercisable/ Name on Exercise Realized(2) Unexercisable Unexercisable - ------------------------------------------------------------------------------------------------------------ Jean Madar -0- -0- 688,500/-0- 142,300/-0- Philippe Benacin -0- -0- 688,500/-0- 142,300/-0- Russell Greenberg -0- -0- 57,000/-0- 9,855/-0- Bruce Elbilia -0- -0- 60,000/-0- 11,169/-0- Wayne C. Hamerling -0- -0- 60,000/-0- 11,169/-0-
- ---------- (1) Total value of unexercised options is based upon the fair market value of the Common Stock as reported by the Nasdaq Stock Market of $6.125 on December 31, 1998. (2) Value realized in dollars is based upon the difference between the fair market value of the Common Stock on the date of exercise, and the exercise price of the option. The following table sets forth certain information regarding repricing of options held by all executive officers of the Company for the last ten (10) years. 27
10 YEAR OPTION REPRICING Length of Number of Original Securities Market Price Option Term Underlying of Stock at Exercise Remaining at Options Time of Price at Time Date of Repriced or Repricing or of Repricing New Exercise Repricing or Name Date Amended (#) Amendment ($) or Amendment($) Price ($) Amendment - ----------------------------------------------------------------------------------------------------------------- Jean Madar, Chief 01/26/98 100,000 6.50 7.00 6.50 expired Executive Officer 1/11/98 Jean Madar, Chief 04/27/97 60,000 5.687 7.00 5.687 expired Executive Officer 3/15/97 Jean Madar, Chief 04/27/97 75,000 5.687 6.825 5.687 9/8/97 Executive Officer Jean Madar, Chief 04/27/97 90,000 5.687 6.833 5.687 10/15/97 Executive Officer Jean Madar, Chief 04/27/97 70,687 5.687 7.00 5.687 12/11/97 Executive Officer Jean Madar, Director 02/22/94 100,000 10.00 12.00 10.00 01/11/98 General of Inter Parfums Jean Madar, Director 11/01/94 100,000 7.00 10.00 7.00 01/11/98 General of Inter Parfums Jean Madar, Director 02/22/94 70,687 10.00 11.36 10.00 12/11/97 General of Inter Parfums Jean Madar, Director 11/01/94 70,687 7.00 10.00 7.00 12/11/97 General of Inter Parfums Jean Madar, Director 11/01/94 60,000 7.00 8.958 7.00 03/15/97 General of Inter Parfums Philippe Benacin, 01/26/98 100,000 6.50 7.00 6.50 expired President 1/11/98 Philippe Benacin, 04/27/97 60,000 5.687 7.00 5.687 expired President 3/15/97 Philippe Benacin, 04/27/97 75,000 5.687 6.825 5.687 9/8/97 President Philippe Benacin, 04/27/97 90,000 5.687 6.833 5.687 10/15/97 President Philippe Benacin, 04/27/97 70,687 5.687 7.00 5.687 12/11/97 President Philippe Benacin, 02/22/94 100,000 10.00 12.00 10.00 01/11/98 Chief Executive Officer Philippe Benacin, 11/01/94 100,000 7.00 10.00 7.00 01/11/98 Chief Executive Officer Philippe Benacin, 02/22/94 70,687 10.00 11.36 10.00 12/11/97 Chief Executive Officer
28 Philippe Benacin, 11/01/94 70,687 7.00 10.00 7.00 12/11/97 Chief Executive Officer Philippe Benacin, 11/01/94 60,000 7.00 8.958 7.00 03/15/97 Chief Executive Officer Russell Greenberg, 01/26/98 1,500 6.50 7.00 6.50 04/28/98 Executive V.P. Russell Greenberg, 01/26/98 5,000 6.50 7.00 6.50 10/12/98 Executive V.P. Russell Greenberg, 04/27/97 6,000 5.687 6.667 5.687 09/9/97 Executive V.P. Russell Greenberg, 04/27/97 7,500 5.687 7.00 5.687 12/11/97 Executive V.P. Russell Greenberg, 06/29/92* 7,500 6.667 8.00 6.667 05/31/97 Executive V.P. Russell Greenberg, 02/22/94 1,500 10.00 12.00 10.00 04/28/98 Executive V.P. Russell Greenberg, 11/01/94 1,500 7.00 10.00 7.00 04/28/98 Executive V.P. Russell Greenberg, 02/22/94 7,500 10.00 11.36 10.00 12/11/97 Executive V.P. Russell Greenberg, 11/01/94 7,500 7.00 10.00 7.00 12/11/97 Executive V.P. Russell Greenberg, 02/22/94 5,000 10.00 12.00 10.00 10/12/98 Executive V.P. Russell Greenberg, 11/01/94 5,000 7.00 10.00 7.00 10/12/98 Executive V.P. Bruce Elbilia, 01/26/98 1,500 6.50 7.00 6.50 04/28/98 Executive V.P. Bruce Elbilia, 01/26/98 5,000 6.50 7.00 6.50 10/12/98 Executive V.P. Bruce Elbilia, 04/27/97 9,000 5.687 6.667 5.687 09/9/97 Executive V.P. Bruce Elbilia, 04/27/97 7,500 5.687 7.00 5.687 12/11/97 Executive V.P. Bruce Elbilia, 03/06/90** 6,000 2.25 4.4625 2.25 12/18/90 Executive V.P. Bruce Elbilia, 02/22/94 1,500 10.00 12.00 10.00 04/28/98 Executive V.P. Bruce Elbilia, 11/01/94 1,500 7.00 10.00 7.00 04/28/98 Executive V.P. Bruce Elbilia, 02/22/94 7,500 10.00 11.36 10.00 12/11/97 Executive V.P.
29 Bruce Elbilia, 11/01/94 7,500 7.00 10.00 7.00 12/11/97 Executive V.P. Bruce Elbilia, 02/22/94 5,000 10.00 12.00 10.00 10/12/98 Executive V.P. Bruce Elbilia, 11/01/94 5,000 7.00 10.00 7.00 10/12/98 Executive V.P. Wayne Hamerling, 01/26/98 1,500 6.50 7.00 6.50 04/28/98 Executive V.P. Wayne Hamerling, 01/26/98 5,000 6.50 7.00 6.50 10/12/98 Executive V.P. Wayne Hamerling, 04/27/97 9,000 5.687 6.667 5.687 09/9/97 Executive V.P. Wayne Hamerling, 04/27/97 7,500 5.687 7.00 5.687 12/11/97 Executive V.P. Wayne Hamerling, 03/06/90** 6,000 2.25 4.4625 2.25 12/18/90 V.P. Sales Wayne Hamerling, 02/22/94 1,500 10.00 12.00 10.00 04/28/98 Executive V.P. Wayne Hamerling, 11/01/94 1,500 7.00 10.00 7.00 04/28/98 Executive V.P. Wayne Hamerling, 02/22/94 7,500 10.00 11.36 10.00 12/11/97 Executive V.P. Wayne Hamerling, 11/01/94 7,500 7.00 10.00 7.00 12/11/97 Executive V.P. Wayne Hamerling, 02/22/94 5,000 10.00 12.00 10.00 10/12/98 Executive V.P. Wayne Hamerling, 11/01/94 5,000 7.00 10.00 7.00 10/12/98 Executive V.P. Jaime Resnik, 01/26/98 2,500 6.50 7.00 6.50 04/28/98 Executive V.P. Jaime Resnik, 01/26/98 5,000 6.50 7.00 6.50 10/12/98 Executive V.P.
- ---------- * The number of shares and the prices have been adjusted to reflect the 3:2 split effected in November 1993. ** The number of shares and the prices have been adjusted to reflect the 1:2.5 reverse split effected in August 1990 and the 3:2 split effected in November 1993. In January 1998, the Stock Option Committee of the Board of Directors ("Stock Option Committee"), on recommendation of the Chairman of the Board, canceled and terminated all outstanding options which had exercise prices in excess of the market price, and either expired by January 1998 or were to expire shortly thereafter (collectively the "Out of the Money Options") for its executive officers, and granted nonqualified stock options as replacement options to such executive officers, each exercisable for a five (5) year period at the purchase of $6.50 per share. 30 The Stock Committee acknowledged that the market price of the Corporation's Common Stock as quoted on The Nasdaq Stock Market, National Market System has declined substantially, thus negating the intended benefit of the options previously granted with higher exercise prices; and such committee believed that it was in the best interests of the Company to provide the intended incentive to management of the Company by canceling the Out of the Money Options and replacing them with options with exercise prices at the fair market value at such time. During Fiscal 1998 the Stock Option Committee consisted of Jean Levy and Francois Heilbronn. Employment Agreements As part of the acquisition by the Company of the controlling interest in Inter Parfums in 1991, the Company entered into an employment agreement with Philippe Benacin. The agreement provides that Mr. Benacin will be employed as Vice Chairman of the Board and President and Chief Executive Officer of IP Holdings and its subsidiary, Inter Parfums. The initial term expired on September 2, 1992, and has subsequently been automatically renewed for additional annual periods. The agreement provides for automatic annual renewal terms, unless either party terminates the agreement upon 120 days notice. Mr. Benacin is entitled to receive an annual salary of 600,000ff (approximately US$ 100,000) together with 5,000ff per month (approximately US$833) for lodging expenses, both of which are subject to increases in the discretion of the Board of Directors. In addition he is to receive a nonaccountable expense allowance of 1,200ff (approximately US$ 200) per week and reimbursement for all out-of-pocket expenses associated with the acquisition, operation and maintenance of an automobile. The agreement also provides for indemnification and a covenant not to compete for one (1) year after termination of employment. Compensation of Directors Each of Mr. Robert Bensoussan-Torres and Mr. Levy receives $1,000 for each board meeting at which they participate. Mr. Caccamo's firm receives $500 for each board meeting at which he participates. On March 13, 1997, the Board of Directors of the Company adopted, subject to the approval of its stockholders, the 1997 Nonemployee Stock Option Plan (the "1997 Plan"). The purpose of the 1997 Plan is to assist the Company in attracting and retaining key directors who are responsible for continuing growth and success of the Company. The 1997 Plan was approved by the stockholders of the Company at the annual meeting of shareholders held in July 1997. The 1997 Plan provides for the grant of nonqualified stock options to nonemployee directors to purchase an aggregate of 25,000 shares of Common Stock. Options to purchase 1,000 shares are granted on each February 1st to all nonemployee directors for as long as each is a nonemployee director on such date except for Joseph A. Caccamo, who is granted options to purchase 4,000 shares. 31 On February 1, 1999, options to purchase 1,000 shares were granted to each of Francois Heilbronn, Jean Levy and Robert Bensoussan-Torres, and an option to purchase 4,000 shares was granted to Joseph A. Caccamo at the exercise price of $6.4375 per share under the 1997 Plan. Item 12. Security Ownership Of Certain Beneficial Owners And Management The following table sets forth information, as of March 15, 1999 with respect to the beneficial ownership of the Company's Common Stock by (a) each person known by the Company to be the beneficial owner of more than five percent (5%) of the Company's outstanding Common Stock, (b) the executive officers and directors of the Company and (c) the directors and officers of the Company as a group:
Name and Address Amount of Beneficial Approximate Percent of of Beneficial Owner Ownership(1) Class - --------------------------------------------------------------------------------------------------- Jean Madar 3,429,549(2) 40.0 % c/o Inter Parfums, S.A. 4, Rond Point Des Champs Elysees 75008 Paris, France Philippe Benacin 3,281,549(3) 38.2 % c/o Inter Parfums, S.A. 4, Rond Point Des Champs Elysees 75008 Paris, France Russell Greenberg c/o Jean Philippe Fragrances, Inc. 90,000(4) 1.2% 551 Fifth Avenue New York, NY 10176 Francois Heilbronn 10,500(5) Less than 1% 12 Rue Pierre Leroux 75007 Paris, France Joseph A. Caccamo 19,000(4) Less than 1% 7509 Ridgefield Lane Lake Worth, FL 33467 Jean Levy 5,000(4) Less than 1% 29 rue du Colisee 75008 Paris, France Robert Bensoussan-Torres 4,000(4) Less than 1% 48, Boulevard Raspail 75006 Paris, France
- ---------- (1) All shares of Common Stock are directly held with sole voting power and sole power to dispose, unless otherwise stated. (2) Consists of 2,466,049 shares held directly and options to purchase 963,500 shares. (3) Consists of 2,318,049 shares held directly and options to purchase 963,500 shares. (4) Consists of options to purchase shares of Common Stock. (5) Consists of 4,500 shares held directly and options to purchase 6,000 shares of Common Stock. 32 Bruce Elbilia 93,000(4) 1.2% c/o Jean Philippe Fragrances, Inc. 551 Fifth Avenue New York, NY 10176 Wayne C. Hamerling 93,000(4) 1.2% c/o Jean Philippe Fragrances, Inc. 551 Fifth Avenue New York, NY 10176 Jaime Resnik 64,500(4) Less than 1% c/o Jean Philippe Fragrances, Inc. 551 Fifth Avenue New York, NY 10176 Wellington Management Company, LLP 516,000(6) 6.8% 75 State Street, Boston, MA 02109 Dimensional Fund Advisors, Inc. 522,800(7) 6.9% 1299 Ocean Avenue, 11th Fl. Santa Monica, CA 90401 All Directors and Officers 7,090,098(8) 71.5% as a Group (10 Persons)
- -------- (6) Information is derived forth in a Schedule 13G dated December 31, 1998 of Wellington Management Company, LLP ("Wellington"). Wellington is a registered investment advisor and may be deemed to be the beneficial owner of the shares which are held of record by its clients. (7) Information is derived forth in a Schedule 13G dated February 11, 1999 of Dimensional Fund Advisor Inc. ("DFA"). DFA may be deemed to be the beneficial owner of the shares which are owned by its advisory clients. DFA disclaims beneficial ownership of all of the shares. (8) Consists of 4,788,598 shares held directly and options to purchase 2,301,500 shares of Common Stock. Item 13. Certain Relationships And Related Transactions Transactions with French Subsidiaries In connection with certain previously reported acquisitions by Inter Parfums in 1993 and 1994, funding for such acquisitions was advanced by Jean Philippe to its direct subsidiary, IP Holdings, which in turn advanced such funds to Inter Parfums, its subsidiary. The advance was carried on the books of IP Holdings as convertible debt. In January 1998, the Company, through IP Holdings, exercised its rights to convert the remaining portion of its convertible debt, approximately $4.4 million, into 318,326 additional shares of Inter Parfums bringing the total shares outstanding to 2,209,000. The conversion price was approximately $14 per share while Inter Parfums stock was trading at approximately $32 per share at the time of the conversion. In connection with the acquisitions by Inter Parfums of the world-wide rights under the Burberrys License Agreement, the Paul Smith License Agreement and the Brosseau License Agreement, Jean Philippe guaranteed the obligations of Inter Parfums under the Burberrys 33 License Agreement and the Paul Smith License Agreement and the distribution agreement for Ombre Rose fragrances. Repurchase of Shares from Officers and Directors In February 1998 Joseph A. Caccamo, a Director and principal of Joseph A. Caccamo Attorney at Law, P.A., general counsel to the Company during Fiscal 1998, exercised an option granted in April 1997 to purchase 7,500 shares of Common Stock at $5.8435 per share. In connection with the Company's stock repurchase program, in February 1998 the Company purchased from Joseph A. Caccamo the 7,500 shares at $7.25 per share, the fair market value at the time of such purchase. Remuneration of Counsel Joseph A. Caccamo, a director of the Company, is the principal of Joseph A. Caccamo Attorney at Law, P.A., which was general counsel to the Company during Fiscal 1998. In Fiscal 1998 Mr. Caccamo was paid an aggregate of $104,324 in legal fees and for reimbursement of disbursements incurred on behalf of the Company. Commencing in January 1999, Mr. Caccamo's new law firm receives a monthly retainer of $7,750 together with reimbursement for expenses. Mr. Caccamo's firm also receives $500 for each board meeting at which he participates. On February 1, 1999 in accordance with the terms of the Company's stock option plan, Mr. Caccamo was granted an option with a term of five (5) years to purchase 4,000 shares at $6.4375 per share, the fair market value at the time of grant. 34 PART IV Item 14. Exhibits, Financial Statement Schedules, And Reports On Form 8-K (a)(1) Financial Statements annexed hereto Page No. Reports of Independent Auditors- F-1 Consolidated Balance Sheets as at December 31, 1998 and December 31, 1997 F-3 Consolidated Statements of Income for the Years ended December 31, 1998, December 31, 1997 and December 31, 1996 F-4 Consolidated Statements of Changes in Shareholders' Equity for the Years ended December 31, 1998, December 31, 1997 and December 31, 1996 F-5 Consolidated Statements of Cash Flows for the Years ended December 31, 1998, December 31, 1997 and December 31, 1996 F-6 Notes to Financial Statements F-7 (a)(2) Financial Statement Schedules annexed hereto: Schedule II - Valuation and Qualifying Accounts and Reserves F-17 Schedules other than those referred to above have been omitted as the conditions requiring their filing are not present or the information has been presented elsewhere in the consolidated financial statements. 35 (a)(3) Exhibits The following documents heretofore filed by the Company with the Securities and Exchange Commission (the "Commission") are hereby incorporated by reference from the Company's Registration Statement on Form S-18, file no. 33-17139-NY: Exhibit No. and Description 3.1 Restated Certificate of Incorporation 4.2 Common Stock Certificate Specimen The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - January 18, 1990), as follows: Exhibit No. and Description 10.13 License Agreement between the Company and Jordache dated January 18, 1990 (as no. 10.1 therein). 10.15 Letter of Indemnification from Jordache to the Company dated January 18, 1990 (as no. 10.3 therein) 10.16 Letter Agreement from Jordache to the Company regarding foreign license rights dated January 18, 1990 (as no. 10.4 therein). The following documents heretofore filed with the Commission is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990: Exhibit No. and Description 3.1(a) Certificate of Amendment of the Restated Certificate of Incorporation The following document heretofore filed with the Commission is incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - July 29, 1991), as follows: Exhibit No. and Description 36 10.24 Agreement and Plan of Reorganization dated July 29, 1991 among the Company, Jean Madar and Philippe Benacin (as No. 10.1 therein) The following document heretofore filed with the Commission is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991: Exhibit No. and Description 10.25 Employment Agreement between the Company and Philippe Benacin dated July 29, 1991 The following documents heretofore filed with the Commission is incorporated by reference to the Company's Registration Statement on Form S-1 (No. 33-48811): Exhibit No. and Description 10.26 Lease for portion of 15th Floor, 551 Fifth Avenue, New York, New York The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992: Exhibit No. and Description 3.1(b) Amendment to the Company's Restated Certificate of Incorporation, as amended, dated July 31, 1992 4.9 1992 Stock Option Plan 4.10 Amendment to 1992 Stock Option Plan 4.11 1993 Stock Option Plan The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - July 15, 1993), as follows: 37 Exhibit No. and Description 10.30 License Agreement dated July 15, 1993, among Burberrys Limited, Inter Parfums, S.A. and Jean Philippe Fragrances, Inc.(1) 10.31 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A. and Inter Parfums, S.A. (original in French)(1) 10.32 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A. and Inter Parfums, S.A.(translation of French into English)(1) 10.33 Agreement dated July 14, 1993, between Alfin, Inc. and Inter Parfums, S.A.(1) 10.34 Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean Philippe Fragrances, Inc., C&C Beauty Sales, Inc. and Parfico, Inc. 10.35 Distribution Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean Philippe Fragrances, Inc. and Fragrance Marketing Group, Inc.(1) The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - February 28, 1994), as follows: Exhibit No. and Description 10.36 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux) 10.37 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Weil) 10.38 Agreement (Acquisition) among Jean Philippe Fragrances, Inc., Inter Parfums, S.A. and Cosmetiques et Parfums de France, S.A. dated February 18, 1994 10.39 Noncompetition Agreement among Jean Philippe Fragrances, Inc., Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 10.40 Commission Agreement among Jean Philippe Fragrances, Inc., Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 10.41 Convention between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re inventory purchase) - ---------- (1) Filed in excised form. 38 10.42 Convention de Nantissement among Cosmetiques et Parfums de France, S.A., Cosmetiques et Parfums de France-I.D., S.A., Sodipe S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. dated February 18, 1994 (re security agreement) 10.43 Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements) 10.44 Acquisition Agreement among Jean Philippe Fragrances, Inc., Revlon Consumer Products Corporation and Revlon Suisse, S.A. dated March 2, 1994 The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Form 8 Amendment no. 1 (dated March 14, 1994) to the Current Report on Form 8-K (date of event - February 28, 1994), as follows: Exhibit No. and Description 10.46. English translation of exhibit no. 10.36, Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux) 10.47. English translation of exhibit no. 10.37, Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Weil) 10.48. English translation of exhibit no. 10.41, Convention between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re inventory purchase) 10.49. English translation of exhibit no. 10.42, Convention de Nantissement among Cosmetiques et Parfums de France, S.A., Cosmetiques et Parfums de France-I.D., S.A., Sodipe S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. dated February 18, 1994 (re security agreement) The following document heretofore filed with the Commission is incorporated herein by reference to the Company's Form 8 Amendment no. 2 (dated March 21, 1994) to the Current Report on Form 8-K (date of event - February 28, 1994), as follows: Exhibit No. and Description 10.50. English translation of exhibit no. 10.43, Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and 39 Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements) The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993: Exhibit No. and Description 3.1(c) Amendment to the Company's Restated Certificate of Incorporation, as amended, dated July 9, 1993 3.3 Articles of Incorporation of Inter Parfums Holding, S.A. 3.3.1 English Translation of Exhibit no. 3.3, Articles of Incorporation of Inter Parfums Holding, S.A. 3.4 Articles of Incorporation of Inter Parfums, S.A. 3.4.1 English Translation of Exhibit no. 3.4, Articles of Incorporation of Inter Parfums, S.A. 4.14 Warrant no. 108 registered in the name of Ladenburg, Thalmann & Co., Inc. dated February 2, 1994 4.15 1994 Nonemployee Director Stock Option Plan 10.51 Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.) 10.51.1 English translation of Exhibit no. 10.51, Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.) 10.52 Lease for portion of 4, Rond Point Des Champs Des Elysees dated September 30, 1993 10.52.1 English translation of Exhibit no. 10.52, Lease for portion of 4, Rond Point Des Champs Des Elysees dated September 30, 1993 10.53 Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2, 1994 10.53.1 English translation of Exhibit no. 10.53, Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2, 1994 40 The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Form 8 Amendment no. 1 (dated August 8, 1994) to the Current Report on Form 8-K (date of event - July 13, 1994), as follows: Exhibit No. and Description 10.58. Engagements de Garanties among Zanimob Enterprise Limited, Jacomo France and Inter Parfums, S.A. dated July 12, 1994, listed as no. 10.53 therein. 10.58.1 English translation of exhibit no. 10.53, Engagements de Garanties among Zanimob Enterprise Limited, Jacomo France and Inter Parfums, S.A. dated July 12, 1994, listed as no. 10.53.1 therein. The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994: 4.16 1994 Nonemployee Director Supplemental Stock Option Plan (Listed as no. 4.15 therein) 10.59 Modification of Lease Agreement dated June 17, 1994 between Metropolitan Life Insurance Company and Jean Philippe Fragrances, Inc. The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995: Exhibit No. and Description 10.60 Guaranty and Security Agreement of Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd. to Republic National Bank of New York (France) dated July 19, 1995 10.61 Lease for 60 Stults Road, South Brunswick, NJ between Forsgate Industrial Complex, a limited partnership, and Jean Philippe Fragrances, Inc. dated July 10, 1995 10.62 Intellectual Property Purchase Agreement between Parlux Fragrances, Inc. and Parfums Jean Desprez, S.A. dated March 12, 1996 10.63 Inventory Purchase Agreement between Parlux Fragrances, Inc. and Jean Desprez, S.A. dated March 12, 1996 11 Statement re: Computation of Earnings Per Share 41 The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996: Exhibit No. and Description 10.65 Asset Repurchase Agreement between Carson, Inc. and Jean Philippe Fragrances, Inc. dated March 27, 1997 11 Statement re: Computation of Earnings Per Share The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997: Exhibit No. and Description 10.67 Second Modification of Lease made as of the 30th day of April, 1997 between Metropolitan Life Insurance Company as landlord and Jean Philippe Fragrances, Inc. as tenant. 10.68 Amendment I to License Agreement dated September 3, 1997 between Jordache Enterprises, Inc. as Licensor and Jean Philippe Fragrances, Inc. as Licensee. 10.69 Exclusive Licence Agreement dated June 20, 1997 between S.T. Dupont, S.A. and Inter Parfums (English translation, excised version) 42 The following documents are filed herewith: 3.2 Amended and Restated By-laws 4.17 1997 Nonemployee Director Stock Option Plan 4.18 1999 Stock Option Plan 10.70 Licence Agreement among Paul Smith Limited, Inter Parfums, S.A. and Jean-Philippe Fragrances, Inc. (excised version) 10.71 Licence Agreement between Christian LaCroix, a division of Group LVMH and Inter Parfums, S.A (English translation, excised version) 10.72 Revolving Credit Agreement dated June 1, 1998 among Republic National Bank of New York, Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd. 21 List of Subsidiaries (b) Reports on Form 8-K: A Current Report on Form 8-K (date of event October 6, 1998) was filed during the fourth quarter of Fiscal 1998, reporting items 5 and 7. 43 INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders Jean Philippe Fragrances, Inc. New York, New York We have audited the accompanying consolidated balance sheets of Jean Philippe Fragrances, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Inter Parfums Holdings, S.A. and subsidiaries, consolidated subsidiaries of the Company, which statements reflect total assets and net sales constituting 64% and 66% of the related consolidated totals for 1998 and 56% and 56% for 1997 and net sales constituting 42% for 1996. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts for Inter Parfums Holdings, S.A. and subsidiaries, is based solely on the reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements enumerated above present fairly, in all material respects, the consolidated financial position of Jean Philippe Fragrances, Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1998 in conformity with generally accepted accounting principles. Our audits referred to above included Schedule II for each of the years in the three-year period ended December 31, 1998. In our opinion, such schedule presents fairly the information set forth therein in accordance with the applicable accounting regulations of the Securities and Exchange Commission. Richard A. Eisner & Company, LLP New York, New York March 9, 1999 With respect to accounts for foreign subsidiaries March 17, 1999 F-1 INTER PARFUMS HOLDING AND SUBSIDIARIES INDEPENDENT AUDITOR'S REPORT We have audited the accompanying consolidated balance sheets of Inter Parfums Holding and subsidiaries as of December 31, 1998 and 1997 and the related consolidated statements of income, retained earnings and cash flows for the years ended December 31, 1998, 1997 and 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Inter Parfums Holding and subsidiaries as of December 31, 1998 and 1997 and the results of its operations and its cash flows for the years ended December 31, 1998, 1997 and 1996, in conformity with generally accepted accounting principles. Paris, March 17, 1999 Cabinet Cauvin, Angleys, Saint-Pierre International Rene Amirkhanian F-2 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands except share and per share data) December 31, -------------------- 1998 1997 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 23,356 $ 18,722 Accounts receivable, net of allowances of $2,432 and $2,995 in 1998 and 1997, respectively (Note E) 28,014 26,255 Inventories (Notes A and B) 21,939 21,707 Receivables, other 617 622 Other 1,085 470 Deferred tax benefit (Note J) 1,107 1,115 -------- -------- Total current assets 76,118 68,891 Equipment and leasehold improvements, net (Notes A and C) 2,988 2,122 Other assets 922 1,275 Trademarks and licenses, net (Notes A, D and K) 7,711 7,994 -------- -------- $ 87,739 $ 80,282 ======== ======== LIABILITIES Current liabilities: Loans payable - banks (Note E) $ 4,172 $ 3,063 Accounts payable 14,300 13,854 Accrued expenses 3,892 3,720 Income taxes payable 2,864 2,335 Deferred tax liability (Note J) 1,291 1,077 -------- -------- Total current liabilities 26,519 24,049 -------- -------- Long-term debt (Note F) 200 424 -------- -------- Minority interest 7,340 5,615 -------- -------- Commitments (Note G) SHAREHOLDERS' EQUITY (Note H) Preferred stock, $.001 par value; authorized 1,000,000 shares; none issued Common stock, $.001 par value; authorized 30,000,000 shares; outstanding 8,462,781 and 8,862,781 shares in 1998 and 1997, respectively 8 9 Additional paid-in capital 20,730 20,686 Retained earnings 47,343 42,730 Accumulated other comprehensive income (812) (2,369) Treasury stock, at cost 2,383,203 and 1,975,703 shares in 1998 and 1997, respectively (13,589) (10,862) -------- -------- Total shareholders' equity 53,680 50,194 -------- -------- $ 87,739 $ 80,282 ======== ======== See notes to financial statements F-3 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Consolidated Statements of Income (in thousands except share and per share data)
Year Ended December 31, ----------------------------------------- 1998 1997 1996 ----------- ----------- ----------- Net sales $ 89,388 $ 91,462 $ 93,281 Cost of sales 47,417 49,388 51,355 ----------- ----------- ----------- Gross margin 41,971 42,074 41,926 Selling, general and administrative 32,944 32,334 32,416 Loss on divestiture of license 1,300 ----------- ----------- ----------- Income from operations 9,027 8,440 9,510 ----------- ----------- ----------- Other charges (income): Interest 471 727 946 Loss on foreign currency 139 242 144 Interest income (788) (705) (647) Loss (gain) on sale of stock of subsidiary 41 4 (14) ----------- ----------- ----------- (137) 268 429 ----------- ----------- ----------- Income before income taxes 9,164 8,172 9,081 Income taxes 3,598 2,945 2,795 ----------- ----------- ----------- Income before minority interest 5,566 5,227 6,286 Minority interest in net income of consolidated subsidiary 953 720 628 ----------- ----------- ----------- Net income $ 4,613 $ 4,507 $ 5,658 =========== =========== =========== Net income per share: Basic $ 0.53 $ 0.48 $ 0.57 Diluted $ 0.52 $ 0.48 $ 0.57 Weighted average number of shares outstanding: Basic 8,707,290 9,299,401 9,871,698 Diluted 8,898,805 9,397,329 9,984,463
See notes to financial statements F-4 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Shareholders' Equity (in thousands except share and per share data)
Common Stock Additional ----------------------- Paid-in Retained Comprehensive Shares Amount Capital Earnings Income ------------- ------ --------- ---------- ------------- Balance - January 1, 1996 10,009,981 $ 10 $ 20,610 $ 32,565 Comprehensive income: Net income 5,658 $5,658 Foreign currency translation adjustments (1,291) ------------- Total comprehensive income $4,367 ============= Shares issued upon exercise of stock options 18,000 76 Purchased treasury shares (425,500) ------------- ----- --------- ---------- Balance - December 31, 1996 9,602,481 10 20,686 38,223 Comprehensive income: Net income 4,507 $4,507 Foreign currency translation adjustments (2,759) ------------- Total comprehensive income $1,748 ============= Purchased treasury shares (739,700) (1) ------------- ----- --------- ---------- Balance - December 31, 1997 8,862,781 9 20,686 42,730 Comprehensive income: Net income 4,613 $4,613 Foreign currency translation adjustments 1,557 ------------- Total comprehensive income $6,170 Shares issued upon exercise of stock options 7,500 44 ============ Purchased treasury shares (407,500) (1) ------------- ----- ----------- ---------- Balance - December 31, 1998 8,462,781 $ 8 $ 20,730 $ 47,343 ============= ===== ========= ==========
Accumulated Other Comprehensive Treasury Income Stock Total ----------- ---------- ----------- Balance - January 1, 1996 $ 1,681 $ (2,890) $ 51,976 Comprehensive income: Net income 5,658 Foreign currency translation adjustments (1,291) (1,291) Total comprehensive income Shares issued upon exercise of stock options 76 Purchased treasury shares (3,053) (3,053) ----------- ---------- ----------- Balance - December 31, 1996 390 (5,943) 53,366 Comprehensive income: Net income 4,507 Foreign currency translation adjustments (2,759) (2,759) Total comprehensive income Purchased treasury shares (4,919) (4,920) ----------- ---------- ----------- Balance - December 31, 1997 (2,369) (10,862) 50,194 Comprehensive income: Net income 4,613 Foreign currency translation adjustments 1,557 1,557 Total comprehensive income Shares issued upon exercise of stock options 44 Purchased treasury shares (2,727) (2,728) ----------- ---------- ----------- Balance - December 31, 1998 $ (812) $ (13,589) $53,680 ====== =========== ==========
See notes to financial statements F-5 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (in thousands except share and per share data)
Year Ended December 31, ------------------------------------------ 1998 1997 1996 -------- -------- -------- Cash flows from operating activities: Net income $ 4,613 $ 4,507 $ 5,658 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,401 1,238 1,597 Noncash portion of loss on divestiture of license 854 Loss (gain) on sale of stock of subsidiary 41 4 (14) Minority interest in net income 953 720 628 Deferred tax provision 165 771 806 Changes in: Accounts receivable (272) 189 (3,210) Inventories 632 90 1,958 Other assets (144) 1,426 (923) Accounts payable and accrued expenses (449) 790 332 Income taxes payable 419 1,538 1,143 -------- -------- -------- Net cash provided by operating activities 7,359 12,127 7,975 -------- -------- -------- Cash flows from investing activities: Purchase of equipment and leasehold improvements (1,604) (1,149) (425) Cash portion of trademark and license acquisitions (27) (1,009) (177) Proceeds from sale of equipment 50 Proceeds from sale of trademark 2,150 -------- -------- -------- Net cash (used in) provided by investing activities (1,631) (2,108) 1,548 -------- -------- -------- Cash flows from financing activities: Increase (decrease) in loans payable - banks 888 (5,574) 54 Proceeds from sale of stock of subsidiary 60 32 Purchase of treasury stock (2,728) (4,920) (3,053) Proceeds from exercise of options and warrants 44 76 -------- -------- -------- Net cash used in financing activities (1,736) (10,462) (2,923) -------- -------- -------- Effect of exchange rate changes on cash 642 (1,040) (599) -------- -------- -------- Net increase (decrease) in cash and cash equivalents 4,634 (1,483) 6,001 Cash and cash equivalents - beginning of year 18,722 20,205 14,204 -------- -------- -------- Cash and cash equivalents - end of year $ 23,356 $ 18,722 $ 20,205 ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid for: Interest $ 560 $ 756 $ 962 Income taxes $ 3,028 $ 736 $ 1,555
See notes to financial statements F-6 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Notes to Financial Statements December 31, 1998 and 1997 (in thousands except share and per share data) NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES [1] Business of the Company: The Company is a manufacturer and distributor of domestic and international brand name and licensed fragrances, alternative designer fragrances and mass market cosmetics. [2] Basis of preparation: The consolidated financial statements include the accounts of Jean Philippe Fragrances, Inc. ("JPF") and its domestic and foreign subsidiaries (the "Company"). All material intercompany balances and transactions have been eliminated. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. [3] Foreign currency translation: For foreign subsidiaries that operate in a foreign currency, assets and liabilities are translated to U.S. dollars at year-end exchange rates. Income and expense items are translated at average rates of exchange prevailing during the year. Gains and losses from translation adjustments are accumulated in a separate component of shareholders' equity. In instances where the financial statements of foreign entities are remeasured into their functional currency (U.S. dollars), the remeasurement adjustment is recorded in operations. [4] Cash equivalents: All highly liquid investments purchased with a maturity of three months or less are considered to be cash equivalents. [5] Financial instruments: The carrying amount of accounts receivable, other receivables, accounts payable and accrued expenses approximates fair value due to the short terms to maturity of these instruments. The carrying amount of loans payable and long-term debt approximates fair value as the interest rates on the Company's indebtedness approximates current market rates. [6] Euro conversion: In January 1999, France adopted the Euro as its common legal currency and established fixed conversion rates between the French currency and the Euro. The transition period for the introduction of the Euro will be between January 1, 1999 and January 1, 2002. Conversion to the Euro is not expected to have a material effect on the Company's financial condition or results of operations. [7] Inventories: Inventories are stated at the lower of cost (first-in, first-out) or market. F-7 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Notes to Financial Statements December 31, 1998 and 1997 (in thousands except share and per share data) NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) [8] Equipment and leasehold improvements: Equipment and leasehold improvements are stated at cost. Depreciation and amortization are provided using the straight-line method and the declining balance method over the estimated useful asset lives for equipment, which range between three and ten years and the shorter of the lease term or estimated useful asset lives for leasehold improvements. [9] Trademarks and licenses: Trademarks are stated at cost and are amortized by the straight-line method over 20 years. The cost of licenses acquired is being amortized by the straight-line method over the ten year term of the license. The Company reviews trademarks and licenses for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. [10] Revenue recognition: Revenue is recognized upon shipment of merchandise as sales are final upon shipment to customers. The Company, at its discretion, permits limited returns of merchandise and establishes allowances for estimated returns based upon historic trends. [11] Issuance of common stock of subsidiary: The difference between the Company's share of the proceeds received by the subsidiary and the carrying amount of the portion of the Company's investment sold is reflected as a gain or loss in the consolidated statements of income. [12] Stock-based compensation: During 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). The provisions of SFAS No. 123 allow companies to either expense the estimated fair value of employee stock options or to continue to follow the intrinsic value method set forth in APB Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro forma effects on net income had the fair value of the option been expensed. The Company has elected to continue to apply APB 25 in accounting for its stock option incentive plans. [13] Earnings per share: The Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share", in the period ended December 31, 1997 and has retroactively applied the effects thereof for all periods presented. Accordingly, the presentation of per share information includes calculations of basic and diluted income per share. The impact on the per share amounts previously reported was not significant. Basic earnings per share are computed using the weighted average number of shares outstanding during each year. Diluted earnings per share are computed using the weighted average number of shares outstanding during each year, plus the incremental shares outstanding assuming the exercise of dilutive stock options. F-8 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Notes to Financial Statements December 31, 1998 and 1997 (in thousands except share and per share data) NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) [14] Recent accounting pronouncements: During 1998, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosure About Segments of an Enterprise and Related Information". Adoption of this standard had limited impact on the disclosures in the Company's financial statements, since the Company operates in one business segment (see Note I). During 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", which addresses the manner in which certain adjustments to shareholders' equity (principally foreign currency translation) are displayed in the financial statements, without affecting reported earnings, assets or capital. Accordingly, comprehensive income is included in the consolidated statement of changes in shareholders' equity. NOTE B - INVENTORIES December 31, ---------------------- 1998 1997 --------- ---------- Raw materials and component parts $ 7,571 $ 10,567 Finished goods 14,368 11,140 --------- ---------- $ 21,939 $ 21,707 ========= ========== NOTE C - EQUIPMENT AND LEASEHOLD IMPROVEMENTS December 31, ---------------------- 1998 1997 --------- ---------- Equipment $ 5,721 $ 4,063 Leasehold improvements 382 378 --------- ---------- 6,103 4,441 Less accumulated depreciation and amortization 3,115 2,319 --------- ---------- $ 2,988 $ 2,122 ========= ========== F-9 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Notes to Financial Statements December 31, 1998 and 1997 (in thousands except share and per share data) NOTE D - TRADEMARKS AND LICENSES December 31, ---------------------- 1998 1997 --------- ---------- Trademarks $ 7,852 $ 7,519 Licenses 2,880 2,704 --------- ---------- 10,732 10,223 Less accumulated amortization 3,021 2,229 --------- ---------- $ 7,711 $ 7,994 ========= ========== NOTE E - LOANS PAYABLE - BANKS
December 31, ---------------------- 1998 1997 --------- ---------- Borrowings under a $12,000 unsecured revolving line of credit. Due on demand, bearing interest at the bank's prime rate or 1.75% above the LIBOR rate $ 250 $ 700 Borrowings by the Company's foreign subsidiaries under a $4,000 credit facility whereby accounts receivable are sold with recourse and accounted for as a collateralized loan and bearing interest at 0.5% above the EURIBOR rate (3% and 3.75% at December 31, 1998 and 1997, respectively) 1,516 1,411 Borrowings by the Company's foreign subsidiaries under several bank overdraft facilities bearing interest at 0.6% above the EURIBOR rate 2,406 117 Other borrowings by the Company's foreign subsidiaries 835 -------- -------- $ 4,172 $ 3,063 ======== ========
NOTE F - LONG-TERM DEBT Long-term debt represents borrowings by a foreign subsidiary of $200, due in 2004. The loan may be converted by the holder into shares of the Company's foreign subsidiary at approximately $14 per share. Interest is payable quarterly at 7% per annum. F-10 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Notes to Financial Statements December 31, 1998 and 1997 (in thousands except share and per share data) NOTE G - COMMITMENTS [1] Leases: The Company leases its office and warehouse facilities under operating leases expiring through 2003. Rental expense amounted to $1,167 in 1998, $1,255 in 1997 and $1,313 in 1996. Minimum future rental payments are as follows: 1999 $ 1,116 2000 1,125 2001 1,133 2002 868 2003 558 --------- $ 4,800 ========= [2] License agreements: The Company is obligated under a number of license agreements for the use of trademark and rights in connection with the manufacture and sale of its products. In connection therewith, the Company is subject to certain minimum annual royalties as follows: 1999 $ 972 2000 1,918 2001 2,129 2002 2,548 2003 2,844 Thereafter 11,110 ---------- $ 21,521 ========== NOTE H - SHAREHOLDERS' EQUITY [1] Issuance of common stock of subsidiary: In 1993, Inter Parfums, S.A., a consolidated subsidiary of the Company, sold shares in a private placement transaction to unaffiliated French institutional investors. In 1994, 10,000 additional shares were sold to enable the stock of Inter Parfums, S.A. to commence trading on the over-the-counter Paris Stock Exchange, and 11,536 shares were issued pursuant to the conversion terms of the Company's long-term debt. In November 1995, Inter Parfums, S.A. completed a public offering of 308,000 shares of its common stock at 130 French francs per share. Net proceeds of such offering aggregated 36.5 million French francs or approximately $7.6 million. In connection with such offering, Inter Parfums Holdings, S.A. ("Holdings"), a wholly owned subsidiary of the Company and direct parent of Inter Parfums, S.A. exercised its right to convert a portion of its investment in the convertible debt of Inter Parfums, S.A. into 250,000 shares of capital stock of Inter Parfums, S.A. at 80 French francs per share. As a result of such issuances, the percentage ownership of Inter Parfums, S.A. was reduced from 90.64% to 76.71%. F-11 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Notes to Financial Statements December 31, 1998 and 1997 (in thousands except share and per share data) NOTE H - SHAREHOLDERS' EQUITY (CONTINUED) [1] Issuance of common stock of subsidiary: (continued) In 1996, certain minority stockholders exercised their rights to convert approximately $57,000 of their convertible debt into 4,157 shares of capital stock of Inter Parfums, S.A. (70 French francs per share), and in 1997 certain employees exercised stock options further reducing the Company's percentage ownership interest to 76.41% at December 31, 1997. In January 1998, Holdings exercised its right to convert the remaining portion of its investment in Inter Parfums, S.A. convertible debt into 318,000 shares of capital stock of Inter Parfums, S.A. at approximately 80 French francs per share and during 1998, certain minority shareholders exercised their rights to convert approximately $224 of the convertible debt into 16,946 shares of capital stock of Inter Parfums, S.A. Furthermore, 5,486 shares of capital stock of Inter Parfums S.A. were issued as a result of employees exercising stock options. As a result of such issuances, the Company's percentage ownership of Inter Parfums, S.A. was increased from 76.41% to 79% as of December 31, 1998. The difference between the Company's share of the offering or conversion proceeds and the carrying amount of the portion of the Company's investment sold is reflected as a gain or loss in the consolidated statements of income. Deferred taxes have not been provided because application of available tax savings strategies would eliminate taxes on this transaction. [2] Stock option plans: The Company maintains a stock option program for key employees, executives and directors. The plans provide for the granting of both nonqualified and incentive options. Options granted under the plans typically vest immediately and are exercisable for a five year period. During 1997, the Company adopted a 1997 Nonemployee Director Stock Option Plan which provides for the issuance of 25,000 shares of common stock. The Company applies APB 25 in accounting for its stock option incentive plans and accordingly recognizes compensation expense for the difference between the fair value of the underlying common stock and the grant price of the option at the date of grant. Pro forma information regarding net income and earnings per share is required by SFAS No. 123. Had compensation cost for the Company's stock option plans been determined based upon the fair value at the grant date, consistent with the methodology prescribed under SFAS No. 123, the Company's net income in 1998, 1997 and 1996 would have been approximately $4.3 million, $3.9 million and $5.5 million, or $0.48 per diluted share, $0.42 per diluted share and $0.56 per diluted share, respectively. The weighted average fair values of the options granted during 1998, 1997 and 1996 are estimated as $1.64, $1.38 and $1.43 per share, respectively, on the date of grant using the Black-Scholes option pricing model with the following assumptions: dividend yield 0%, volatility of 35%, risk-free interest rates at the date of grant 5.40% in 1998, 6.40% in 1997 and 5.80% in 1996, and an expected life of the option of two years. F-12 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Notes to Financial Statements December 31, 1998 and 1997 (in thousands except share and per share data) NOTE H - SHAREHOLDERS' EQUITY (CONTINUED) [2] Stock option plans: (continued) A summary of the Company's stock option activity, and related information follows:
Year Ended December 31, ------------------------------------------------------------------------- 1998 1997 1996 --------------------- ------------------------ ---------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price --------- -------- ---------- --------- ---------- -------- Shares under option - beginning of year 1,675,800 $ 6.59 1,601,449 $ 7.18 1,541,874 $ 7.23 Options granted 375,050 6.79 791,100 5.77 135,875 6.56 Options exercised (7,500) 5.84 (18,000) 4.22 Options cancelled (284,150) 7.13 (716,749) 7.00 (58,300) 8.07 --------- ---------- ---------- Shares under options - end of year 1,759,200 6.55 1,675,800 6.59 1,601,449 7.18 ========= ========== ==========
Exercise prices for options outstanding as of December 31, 1998 ranged from $3.84 to $10.50. The weighted average remaining contractual life of those options is four years. At December 31, 1998 options for 86,324 shares were available for future grant under the plans. NOTE I - GEOGRAPHIC AREAS Information on the Company's operations by geographical areas is as follows: Year Ended December 31, ---------------------------------------- 1998 1997 1996 -------- -------- -------- Net sales: United States $ 30,068 $ 38,881 $ 52,592 Europe 58,875 50,953 40,015 South America 811 2,042 3,038 Eliminations (366) (414) (2,364) -------- -------- -------- $ 89,388 $ 91,462 $ 93,281 ======== ======== ======== Net income: United States $ 1,503 $ 2,431 $ 3,344 Europe 3,609 2,340 1,947 South America (530) (343) 217 Eliminations 31 79 150 -------- -------- -------- $ 4,613 $ 4,507 $ 5,658 ======== ======== ======== F-13 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Notes to Financial Statements December 31, 1998 and 1997 (in thousands except share and per share data) NOTE I - GEOGRAPHIC AREAS (CONTINUED) Year Ended December 31, -------------------------------- 1998 1997 1996 -------- -------- -------- Depreciation and amortization expense: United States $ 531 $ 584 $ 727 Europe 864 653 870 South America 6 1 -------- -------- -------- $ 1,401 $ 1,238 $ 1,597 ======== ======== ======== Interest income: United States $ 376 $ 475 $ 502 Europe 409 227 327 South America 3 3 11 Eliminations (193) -------- -------- -------- $ 788 $ 705 $ 647 ======== ======== ======== Interest expense: United States $ 50 $ 94 $ 192 Europe 377 556 881 South America 44 77 66 Eliminations (193) -------- -------- -------- $ 471 $ 727 $ 946 ======== ======== ======== Total assets: United States $ 41,330 $ 44,289 $ 48,057 Europe 55,893 44,975 46,484 South America 619 589 2,219 Eliminations (10,103) (9,571) (11,175) -------- -------- -------- $ 87,739 $ 80,282 $ 85,585 ======== ======== ======== Additions to long-lived assets: United States $ 455 $ 684 $ 308 Europe 1,165 1,424 294 South America 11 50 -------- -------- -------- $ 1,631 $ 2,158 $ 602 ======== ======== ======== United States export sales were approximately $10,000, $8,500 and $7,000 for the years ended December 31, 1998, 1997 and 1996, respectively. F-14 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Notes to Financial Statements December 31, 1998 and 1997 (in thousands except share and per share data) NOTE J - INCOME TAXES The components of income before income taxes consist of the following: Year Ended December 31, ------------------------------------ 1998 1997 1996 ------ ------ ------ U.S. operations $2,304 $3,850 $5,565 Foreign operations 6,806 4,191 3,281 Eliminations 54 131 235 ------ ------ ------ $9,164 $8,172 $9,081 ====== ====== ====== The provision for current and deferred income tax expense (benefit) consists of the following: Year Ended December 31, ------------------------------------ 1998 1997 1996 ------- ------- ------- Current: Federal $ 344 $ 765 $ 1,561 State and local 105 269 328 Foreign 2,984 1,140 100 ------- ------- ------- 3,433 2,174 1,989 ------- ------- ------- Deferred: Federal 283 310 278 State and local 70 76 55 Foreign (188) 385 473 ------- ------- ------- 165 771 806 ------- ------- ------- Total income tax expense $ 3,598 $ 2,945 $ 2,795 ======= ======= ======= Deferred taxes are provided principally for reserves, and certain other expenses that are recognized in different years for financial reporting and income tax purposes. At December 31, 1998, the deferred tax assets consist of approximately i) $741 relating to accounts receivable and inventory reserves which are not currently deductible for tax purposes and the difference between the book basis and tax basis of fixed assets and intangible assets and ii) $366 relating to the expected benefit from net operating loss carryover of a foreign subsidiary. At December 31, 1998 the deferred tax liability consists of $1,291 primarily relating to the difference between the book basis and tax basis of certain foreign production equipment. No valuation allowance has been provided on the Company's deferred tax assets as management believes that it is more likely than not that the asset will be realized in reduction of future taxable income. F-15 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Notes to Financial Statements December 31, 1998 and 1997 (in thousands except share and per share data) NOTE J - INCOME TAXES (CONTINUED) Differences between the United States federal statutory income tax rate and the effective income tax rate were as follows: Year Ended December 31, ---------------------------- 1998 1997 1996 ----- ----- ----- Statutory rates 34.0% 34.0% 34.0% State and local taxes, net of federal benefit 1.3 2.8 2.8 Reduction of valuation reserve on deferred tax asset (7.2) Effect of foreign tax rate in excess of U.S. statutory rates 4.0 Other (0.8) 1.2 ----- ----- ----- Effective rates 39.3% 36.0% 30.8% ===== ===== ===== NOTE K - OTHER MATTERS [1] On March 27, 1997 Chesebrough Ponds, the licensor of the Cutex trademark, entered into an agreement to sell the Cutex trademarks to Carson, Inc. At the request of Carson, Inc., the Company agreed to relinquish its Cutex nail and lip product license. In connection with the transaction, all of the Company's Cutex inventory was sold to Carson, Inc. and certain liabilities were assumed by Carson, Inc. These transactions closed simultaneously on April 30, 1997. The company incurred a pre-tax charge of approximately $1,300,000 in the first quarter of 1997 due to the write-off of intangible assets and other expenses relating to the relinquishment of the Cutex license. [2] Subsequent to December 31, 1998, the Company purchased an additional 848,200 shares of its capital stock for treasury at an average price of $6.50 per share. [3] Inter Parfums, S.A. ("Inter Parfums") is a party to a litigation with Jean Charles Brosseau S.A. ("Brosseau"), the Licensor of the Ombre Rose trademark. The licensor is claiming damages and is seeking termination of the license agreement. Inter Parfums vigorously and categorically denies the claims of Brosseau, and believes it has meritorious defenses to its claims. Further, Inter Parfums has received a letter from its special litigation counsel that in its opinion, the entry of any substantial judgement against Inter Parfums in such action is unlikely. As of December 31, 1998, the remaining unamortized portion of the license agreement is approximately $750,000. F-16 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Schedule II Valuation and Qualifying Accounts and Reserves (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------- Column A Column B Column C - ------------------------------------------------------------------------------------------------------------------------------- Additions ------------------------------------------- Balance (1) (2) ------------------------------------------- at Charged to Beginning Charged to Other of Costs and Accounts - Description Period Expenses Describe - ------------------------------------------------------------------------------------------------------------------------------- Year ended December 31, 1998: Allowances for sales returns and doubtful accounts $ 2,995 $1,597 ======= ====== Year ended December 31, 1997: Allowances for sales returns and doubtful accounts $ 2,787 $1,453 ======= ====== Year ended December 31, 1996: Allowances for sales returns and doubtful accounts $ 4,208 $1,133 ======= ======
- ---------------------------------------------------------------------------------------------------------------------- Column A Column D Column E - ---------------------------------------------------------------------------------------------------------------------- Balance at Deductions - End of Description Describe Period - ---------------------------------------------------------------------------------------------------------------------- Year ended December 31, 1998: Allowances for sales returns and doubtful accounts $ 2,160 (a) $2,432 ======== ====== Year ended December 31, 1997: Allowances for sales returns and doubtful accounts $ 1,245 (a) $ 2,995 ======== ======= Year ended December 31, 1996: Allowances for sales returns and doubtful accounts $ 2,554 (a) $ 2,787 ======== =======
- ---------- (a) Write off of bad debts and sales returns. See notes to financial statements F-17 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JEAN PHILIPPE FRAGRANCES, INC. By: /s/ Jean Madar ------------------------------- Jean Madar, Chief Executive Officer Date: March 24, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date - --------- ----- ---- /s/ Jean Madar - ---------------------------- Jean Madar Chairman of the Board of Directors and Chief Executive Officer March 24, 1999 /s/ Russell Greenberg - ---------------------------- Russell Greenberg Chief Financial and Accounting Officer and Director March 24, 1999 ____________________________ Philippe Benacin Director March __, 1999 /s/ Francois Heilbronn - ---------------------------- Francois Heilbronn Director March 29, 1999 /s/ Joseph A. Caccamo - ---------------------------- Joseph A. Caccamo Director March 25, 1999 ____________________________ Jean Levy Director March __, 1999 /s/ Robert Bensoussan-Torres - ---------------------------- Robert Bensoussan-Torres Director March 24, 1999
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 EXHIBITS AND EXHIBIT INDEX TO REPORT ON FORM 10-K (Mark one) /X/ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1998 or / / Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to . -------------- - -------------- Commission File No. 0-16469 JEAN PHILIPPE FRAGRANCES, INC. (Exact name of registrant as specified in its charter) The following documents heretofore filed by the Company with the Securities and Exchange Commission (the "Commission") are hereby incorporated by reference from the Company's Registration Statement on Form S-18, file no. 33-17139-NY: Exhibit No. and Description 3.1 Restated Certificate of Incorporation 4.2 Common Stock Certificate Specimen The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - January 18, 1990), as follows: Exhibit No. and Description 10.13 License Agreement between the Company and Jordache dated January 18, 1990 (as no. 10.1 therein). 10.15 Letter of Indemnification from Jordache to the Company dated January 18, 1990 (as no. 10.3 therein) 10.16 Letter Agreement from Jordache to the Company regarding foreign license rights dated January 18, 1990 (as no. 10.4 therein). The following documents heretofore filed with the Commission is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990: Exhibit No. and Description 3.1(a) Certificate of Amendment of the Restated Certificate of Incorporation The following document heretofore filed with the Commission is incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - July 29, 1991), as follows: Exhibit No. and Description 10.24 Agreement and Plan of Reorganization dated July 29, 1991 among the Company, Jean Madar and Philippe Benacin (as No. 10.1 therein) The following document heretofore filed with the Commission is incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991: Exhibit No. and Description 10.25 Employment Agreement between the Company and Philippe Benacin dated July 29, 1991 The following documents heretofore filed with the Commission is incorporated by reference to the Company's Registration Statement on Form S-1 (No. 33-48811): Exhibit No. and Description 10.26 Lease for portion of 15th Floor, 551 Fifth Avenue, New York, New York The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992: Exhibit No. and Description 3.1(b) Amendment to the Company's Restated Certificate of Incorporation, as amended, dated July 31, 1992 4.9 1992 Stock Option Plan 4.10 Amendment to 1992 Stock Option Plan 4.11 1993 Stock Option Plan The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - July 15, 1993), as follows: Exhibit No. and Description 10.30 License Agreement dated July 15, 1993, among Burberrys Limited, Inter Parfums, S.A. and Jean Philippe Fragrances, Inc.1 [FN] - ---------- 1 Filed in excised form. 10.31 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A. and Inter Parfums, S.A. (original in French)(1) 10.32 License Agreement dated May 7, 1993, between Jean-Charles Brosseau, S.A. and Inter Parfums, S.A.(translation of French into English)(1) 10.33 Agreement dated July 14, 1993, between Alfin, Inc. and Inter Parfums, S.A.(1) 10.34 Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean Philippe Fragrances, Inc., C&C Beauty Sales, Inc. and Parfico, Inc. 10.35 Distribution Agreement dated July 16, 1993 among Inter Parfums, S.A., Jean Philippe Fragrances, Inc. and Fragrance Marketing Group, Inc.(1) The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Current Report on Form 8-K (date of event - February 28, 1994), as follows: Exhibit No. and Description 10.36 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux) 10.37 Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Weil) 10.38 Agreement (Acquisition) among Jean Philippe Fragrances, Inc., Inter Parfums, S.A. and Cosmetiques et Parfums de France, S.A. dated February 18, 1994 10.39 Noncompetition Agreement among Jean Philippe Fragrances, Inc., Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 10.40 Commission Agreement among Jean Philippe Fragrances, Inc., Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 10.41 Convention between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re inventory purchase) 10.42 Convention de Nantissement among Cosmetiques et Parfums de France, S.A., Cosmetiques et Parfums de France-I.D., S.A., Sodipe S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. dated February 18, 1994 (re security agreement) 10.43 Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements) 10.44 Acquisition Agreement among Jean Philippe Fragrances, Inc., Revlon Consumer Products Corporation and Revlon Suisse, S.A. dated March 2, 1994 The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Form 8 Amendment no. 1 (dated March 14, 1994) to the Current Report on Form 8-K (date of event - February 28, 1994), as follows: Exhibit No. and Description 10.46. English translation of exhibit no. 10.36, Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Molyneux) 10.47. English translation of exhibit no. 10.37, Cession D'Elements Partiels de Fonds de Commerce between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re: Parfums Weil) 10.48. English translation of exhibit no. 10.41, Convention between Inter Parfums, S.A. and Cosmetiques et Parfums de France-I.D., S.A. dated February 18, 1994 (re inventory purchase) 10.49. English translation of exhibit no. 10.42, Convention de Nantissement among Cosmetiques et Parfums de France, S.A., Cosmetiques et Parfums de France-I.D., S.A., Sodipe S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. dated February 18, 1994 (re security agreement) The following document heretofore filed with the Commission is incorporated herein by reference to the Company's Form 8 Amendment no. 2 (dated March 21, 1994) to the Current Report on Form 8-K (date of event - February 28, 1994), as follows: Exhibit No. and Description 10.50. English translation of exhibit no. 10.43, Convention among Cosmetiques et Parfums de France-I.D., S.A., Cosmetiques et Parfums de France, S.A., Jean Philippe Fragrances, Inc. and Inter Parfums, S.A. and Sodipe S.A. dated February 18, 1994 (re French regulatory requirements) The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993: Exhibit No. and Description 3.1(c) Amendment to the Company's Restated Certificate of Incorporation, as amended, dated July 9, 1993 3.3 Articles of Incorporation of Inter Parfums Holding, S.A. 3.3.1 English Translation of Exhibit no. 3.3, Articles of Incorporation of Inter Parfums Holding, S.A. 3.4 Articles of Incorporation of Inter Parfums, S.A. 3.4.1 English Translation of Exhibit no. 3.4, Articles of Incorporation of Inter Parfums, S.A. 4.14 Warrant no. 108 registered in the name of Ladenburg, Thalmann & Co., Inc. dated February 2, 1994 4.15 1994 Nonemployee Director Stock Option Plan 10.51 Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.) 10.51.1 English translation of Exhibit no. 10.51, Traite D'Apport Partiel D'Actif dated July 30, 1993 (Reorganization Agreement between Inter Parfums, S.A. and Selective Industrie, S.A.) 10.52 Lease for portion of 4, Rond Point Des Champs Des Elysees dated September 30, 1993 10.52.1 English translation of Exhibit no. 10.52, Lease for portion of 4, Rond Point Des Champs Des Elysees dated September 30, 1993 10.53 Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2, 1994 10.53.1 English translation of Exhibit no. 10.53, Lease for portion of 4, Rond Point Des Champs Des Elysees dated March 2, 1994 The following documents heretofore filed with the Commission are incorporated herein by reference to the Company's Form 8 Amendment no. 1 (dated August 8, 1994) to the Current Report on Form 8-K (date of event - July 13, 1994), as follows: Exhibit No. and Description 10.58. Engagements de Garanties among Zanimob Enterprise Limited, Jacomo France and Inter Parfums, S.A. dated July 12, 1994, listed as no. 10.53 therein. 10.58.1 English translation of exhibit no. 10.53, Engagements de Garanties among Zanimob Enterprise Limited, Jacomo France and Inter Parfums, S.A. dated July 12, 1994, listed as no. 10.53.1 therein. The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994: 4.16 1994 Nonemployee Director Supplemental Stock Option Plan (Listed as no. 4.15 therein) 10.59 Modification of Lease Agreement dated June 17, 1994 between Metropolitan Life Insurance Company and Jean Philippe Fragrances, Inc. The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995: Exhibit No. and Description 10.60 Guaranty and Security Agreement of Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd. to Republic National Bank of New York (France) dated July 19, 1995 10.61 Lease for 60 Stults Road, South Brunswick, NJ between Forsgate Industrial Complex, a limited partnership, and Jean Philippe Fragrances, Inc. dated July 10, 1995 10.62 Intellectual Property Purchase Agreement between Parlux Fragrances, Inc. and Parfums Jean Desprez, S.A. dated March 12, 1996 10.63 Inventory Purchase Agreement between Parlux Fragrances, Inc. and Jean Desprez, S.A. dated March 12, 1996 11 Statement re: Computation of Earnings Per Share The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996: Exhibit No. and Description 10.65 Asset Repurchase Agreement between Carson, Inc. and Jean Philippe Fragrances, Inc. dated March 27, 1997 11 Statement re: Computation of Earnings Per Share The following documents heretofore filed with the Commission are incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997: Exhibit No. and Description 10.67 Second Modification of Lease made as of the 30th day of April, 1997 between Metropolitan Life Insurance Company as landlord and Jean Philippe Fragrances, Inc. as tenant. 10.68 Amendment I to License Agreement dated September 3, 1997 between Jordache Enterprises, Inc. as Licensor and Jean Philippe Fragrances, Inc. as Licensee. 10.69 Exclusive Licence Agreement dated June 20, 1997 between S.T. Dupont, S.A. and Inter Parfums (English translation, excised version) The following documents are filed herewith: Exhibit No. and Description Page No. 3.2 Amended and Restated By-laws _____ 4.17 1997 Nonemployee Director Stock Option Plan _____ 4.18 1998 Stock Option Plan _____ 4.19 1999 Stock Option Plan _____ 10.70 Licence Agreement among Paul Smith Limited, Inter Parfums, S.A. and Jean-Philippe Fragrances, Inc. (excised version) 10.71 Licence Agreement between Christian LaCroix, a division of Group LVMH and Inter Parfums, S.A (English translation, excised version) _____ 10.72 Revolving Credit Agreement dated June 1, 1998 among Republic National Bank of New York, Jean Philippe Fragrances, Inc. and Elite Parfums, Ltd. _____ 21 List of Subsidiaries _____ Litigation has been commenced against Inter Parfums regarding the Ombre Rose fragrance license in the French Commercial Court of Paris in February 1997 by the licensor, Jean Charles Brosseau, S.A. ("Brosseau"). Inter Parfums thereupon asserted claims against Brosseau for $300,000 for interference with its distributors. In response, Brosseau then claimed damages of approximately $7 million against Inter Parfums, allegedly for the decreased value of his fragrance brands. Inter Parfums vigorously and categorically denies the claims of Brosseau, and believes that it has meritorious defenses to its claims. Further, Inter Parfums has received a letter from its special litigation counsel that in its opinion, the likelihood of the entry of any substantial judgment against Inter Parfums in such action is remote. Based upon the foregoing, management does not believe that such litigation will have any material adverse effect upon the financial condition or operations of the Company. A hearing was held on March 15, 1999 before the French Commercial Court of Paris, and the action is still pending. As of December 31, 1998, the remaining unamortized portion of the license agreement is approximately $750,000. EX-3.2 2 BY-LAWS OF JEAN PHILIPPE FRAGRANCES, INC. Exhibit 3.2 BY - LAWS of JEAN PHILIPPE FRAGRANCES, INC. ARTICLE I - OFFICES SECTION 1. REGISTERED OFFICE. The registered office of the Corporation within the State of Delaware shall be located at the principal place of business in said state of the Corporation or individual acting as the Corporation's registered agent in Delaware. SECTION 2. OTHER OFFICES. --The corporation may have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors may from time to time appoint or the business of the corporation may require. ARTICLE II - MEETING OF STOCKHOLDERS SECTION I. ANNUAL MEETINGS. --Annual meetings of stockholders for the election of directors and for such other business as may be stated in the notice of the meeting, shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of the meeting. SECTION 2. OTHER MEETINGS. -- Meetings of stockholders for any purpose other than the election of directors may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting. SECTION 3. VOTING. -- Each stockholder entitled to vote in accordance with the terms and provisions of the Certificate of Incorporation and these By-Laws shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. Upon the demand of any stockholder, the vote for directors and upon any question before the meeting shall be by ballot. All elections for directors shall be decided by plurality vote; all other questions shall be decided by majority vote except as otherwise provided-by the Certificate of Incorporation or the laws of the State of Delaware. SECTION 4. STOCKHOLDER LIST. -- The officer who has charge of the stock ledger of the corporation shall at least 10 days before each meeting of stockholders prepare a complete alphabetical addressed list of the stockholders entitled to vote at the ensuing election, with the number of shares held by each. Said list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall be available for inspection at the meeting. SECTION 5. QUORUM. --Except as otherwise required by law, by the Certificate of Incorporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding a majority of the stock of the corporation entitled to vote shall constitute a quorum at all meetings of the stockholders. In case a quorum shall not be present at any meeting, a majority in interest of the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed; but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof. SECTION 6. SPECIAL MEETINGS. --Special meetings of the stockholders, for any purpose, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the directors or stockholders entitled to vote. Such request shall state the purpose of the proposed meeting. SECTION 7. NOTICE OF MEETINGS. Written notice of each meeting of shareholders stating the place, date and hour thereof, and, in the case of a special meeting, specifying the purpose or purposes thereof, shall be given to each shareholder entitled to 2 vote thereat, not less than ten (10) nor more than sixty (60) days prior to the meeting, except that where the matter to be acted on is a merger or consolidation or the Corporation or a sale, lease or exchange of all or substantially all of its assets, such notice shall be given not less than twenty (20) nor more than sixty (60) days prior to such meeting. If at any meeting action is proposed to be taken which, if taken, would entitle shareholders fulfilling the requirements of section 262 (d) of the Delaware General Corporation Law to an appraisal of the fair value of their shares, the notice of such meeting shall contain a statement of that purpose and to that effect and shall be accompanied by a copy of that statutory section. SECTION 8. NATURE OF BUSINESS AT MEETINGS OF SHAREHOLDERS. No business may be transacted at an annual meeting of shareholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any shareholder of the corporation (i) who is a shareholder of record on the date of the giving of the notice provided for in this Section 8 and on the record date for the determination of shareholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 8. In addition to any other applicable requirement, for business to be properly brought before an annual meeting by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the shareholder in order to be timely must be so received-not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure 3 of the date of the annual meeting was made, whichever first occurs. To be in proper written form, a shareholder's notice to the Secretary must set forth as to each matter such shareholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and record address of such shareholder, (c) the class or series and number of shares of capital stock of the Corporation which are owned-beneficially or of record by such shareholder, (d) a description of all arrangements or understandings between such shareholder and any other person or persons (including their names) in connection with the proposal of such business by such shareholder and any material interest of such shareholder in such business and (e) a representation that such shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. No business shall be conducted at the annual meeting of shareholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 8; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 8 shall be deemed to preclude discussion by any shareholder of any such business. If the Chairman of an annual meeting determines that business was not properly, brought before the annual meeting in accordance with the foregoing procedures, then the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. SECTION 9. ACTION WITHOUT MEETING. --Except as otherwise provided by the Certificate of Incorporation, whenever the vote of stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provisions of the statutes or the Certificate of Incorporation or of these By-Laws, the meeting and vote of stockholders may be dispensed with, if all the stockholders who would have been entitled by vote upon the action if such meeting were held, shall consent in writing to such corporate action being taken. SECTION 10. NOMINATION OF DIRECTORS. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board of Directors may 4 be made at any annual meeting of shareholders (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any shareholder of the Corporation (i) who is a shareholder of record on the date of giving of the notice provided for in this Section 10 and on the record date for the determination of shareholders entitled to vote at such annual meeting and (ii) who complies with the notice and other procedures set forth in this Section 10. In addition to any other applicable requirements, for a nomination to be made by a shareholder, such shareholder must give timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the shareholder in order to be timely must be received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. To be in proper written form, a shareholder's notice to the Secretary must set forth (a) as to each person whom the shareholder proposes to nominate for election as a director (i) the, name, age, business and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (b) as to the shareholder giving notice (i) the name and record address of such shareholder, (ii) the class or series and number of shares of capital stock-of the Corporation which are owned beneficially or of record by such shareholder, (iii) a description of all arrangements or understandings between such shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nominations are to be made by such shareholder, (iv) a representation that such shareholder intends to appear in person or by proxy at the 5 annual meeting to nominate the persons named in its notice and (v) any other information relating to such shareholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. No person shall be eligible for election as director of the Corporation unless nominated in accordance with the procedures set forth in this Section 10. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures or that any representation made pursuant to such procedures is materially incomplete or inaccurate, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination may be disregarded. ARTICLE III - DIRECTORS SECTION 1. NUMBER AND TERM. -- The number of directors shall be set by resolution of the board of directors, but shall not be less than three but not more than fifteen. SECTION 2. RESIGNATIONS. -- Any director, member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective. SECTION 3. VACANCIES. -- If the office of any director, member of a committee or other officer becomes vacant, the remaining directors in office, though less than a quorum by a majority vote, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen. SECTION 4. REMOVAL. --- Any director or directors may be removed either for or without cause at any time by the affirmative vote of the holders of a majority of all the shares of stock outstanding and entitled to vote, at a special meeting of the stockholders called for the purpose and the vacancies thus created may be filled, at the meeting held for the purpose of removal, by the affirmative vote of a majority in interest of the 6 stockholders entitled to vote. SECTION 5. INCREASE OF NUMBER. -- The exact number of directors within the minimum and maximum limitations specified herein shall be fixed from time to time by resolution of a majority of the whole Board of Directors. SECTION 6. COMPENSATION. -- Directors shall not receive any stated salary for their services as directors or as members of committees, but by resolution of the board a fixed fee and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor. SECTION 7. ACTION WITHOUT MEETING. --Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken with out a meeting, if prior to such action a written consent thereto is signed by all members of the board, or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. SECTION 8.PARTICIPATION IN MEETINGS BY TELEPHONE. Any one or more members of the Board of Directors or of any committee of the Board may participate in a meeting of the Board of Directors or any committee of the Board may be taken without a meeting if all members of the Board or of such committee consent thereto in writing. The written consent or consents to each such action shall be filed with the minutes of the proceedings of the Board or of the committee taking such action. SECTION 9.COMMITTEES OF THE BOARD. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate one or more committees, each consisting of one (1) or more directors and having such title as the Board may consider to be properly descriptive of its function, (except that only one committee, consisting of three (3) or more directors, shall be designated as the Executive Committee, each of which, to the extent provided in such resolution, shall have any may exercise all of the powers and authority of the Board in the management of the business and affairs of the Corporation). However, no such committee shall have power or authority in reference to: (a) amending the certificate of incorporation; (b) adopting an agreement of merger or consolidation; (c) recommending to the shareholders the sale, lease or 7 exchange of all or substantially all of the Corporation's property and assets; (d) recommending to the shareholders a dissolution of the Corporation or a revocation of a dissolution; or (e) amending these By-Laws; and, unless expressly so provided by resolution of the Board, no such committee shall have power or authority in reference to; (f) declaring a dividend; or (g) authorizing the issuance of shares of the Corporation of any class. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place and stead of such absent or disqualified member. Each such committee shall serve at the pleasure of the Board of Directors. It shall keep minutes of its meetings and report the same to the Board of Directors as and when requested by the Board, and it shall observe such other procedures with respect to its meetings as are prescribed in these By-Laws or, to the extent not prescribed herein, as may be prescribed by the Board in the resolution appointing such committee. ARTICLE IV - OFFICERS SECTION 1. OFFICERS. -- The officers of the corporation shall consist of a President, a Treasurer, and a Secretary, and shall be elected by the Board of Directors and shall hold office until their successors are elected and qualified. In addition, the Board of Directors may elect a Chairman, a Vice Chairman, one or more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as it may deem proper. None of the officers of the corporation need be directors. The officers shall be elected at the first meeting of the Board of Directors after each annual meeting. More than two offices may be held by the same person. SECTION 2. OTHER OFFICERS AND AGENTS. -- The Board of Directors may appoint such officers and agents as it may deem advisable, who shall hold their offices for such terms and shall exercise such power and perform such duties as shall be 8 determined from time to time by the Board of Directors. SECTION 3. CHAIRMAN. -- The Chairman of the Board of Directors if one be elected, shall preside at all meetings of the Board of Directors and he shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors. In the absence or disability of the Chairman of the Board, the Vice Chairman shall preside at all such meetings and he shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 4. PRESIDENT. -- Unless set forth otherwise in a resolution of the Board of Directors, the President shall be the chief executive officer of the corporation and shall have the general powers and duties of supervision and management usually vested in the office of President of a corporation. He shall have general supervision, direction and control of the business of the corporation. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall execute bonds, mortgages, and other contracts in behalf of the corporation, and shall cause the seal to be affixed to any instrument requiring it and when so affixed the seal shall be attested by the signature of the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer. SECTION 5. VICE-PRESIDENT. --Each Vice-President shall have such powers and shall perform such duties as shall be assigned to him by the directors. If there be more than one Vice President, the Board of Directors may designate one of them as Executive Vice President, in which case he shall be first in order of seniority, and may also grant to theirs such titles as shall be descriptive of their respective functions or indicative of their relative seniority. The Vice President, or, if there be more than one, the Vice Presidents in the order of their seniority as indicated by their titles or as otherwise determined by the Board of Directors shall, in the absence or disability of the Chairman and President, exercise the powers and perform the duties of those officers subject to the direction of the Board of Directors; and he or they shall have such other powers and duties as the Board of Directors or the Chairman may from time to time prescribe. SECTION 6. TREASURER. --The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation. He shall deposit all moneys and other valuables in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. 9 The Treasurer shall disburse the funds of the corporation as maybe ordered by the Board of Directors, or the President, taking proper vouchers for such disbursements. He shall render to the President and Board of Directors at the regular meetings of the Board of Directors, or whenever they may request it, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, he shall give the corporation a bond for the faithful discharge of his duties in such amount and with such surety as the board shall prescribe. SECTION 7. SECRETARY. --The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by law or by these By-Laws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the President, or by the directors, or stockholders, upon whose requisition the meeting is called as provided in these By-Laws. He shall record all the proceedings of the meetings of the corporation and of directors in a book to be kept for that purpose. He shall keep in safe custody the seal of the corporation, and when authorized by the Board of Directors, affix the same to any instrument requiring it, and when so affixed, it shalt be attested by his signature or by the signature of any assistant secretary. SECTION 8. ASSISTANT TREASURERS & ASSISTANT SECRETARIES Assistant Treasurers and Assistant Secretaries, if any, shall be elected and shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the directors. ARTICLE V SECTION 1. CERTIFICATES OF STOCK. --Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the chairman or vice-chairman of the board of directors, or the president or a vice-president and the treasurer or an assistant treasurer, or the secretary of the corporation, certifying the number of shares owned by him in the corporation. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the designations, preferences and relative participating, optional or other special rights of each class of stock or, series thereof and the qualifications, limitations, or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class of series of stock, provided that, except as other wise provided in 10 section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Where a certificate is countersigned (1) by a transfer agent other than the corporation or its employee, or (2) by a registrar other than the corporation or its employee, the signatures of such officers may be facsimiles. SECTION 2. LOST CERTIFICATES --New certificates of stock may be issued in the place of any certificate therefore issued by the corporation, alleged to have been lost or destroyed, and the directors may, in their discretion, require the owner of the lost or destroyed certificate or his legal representatives, to give the corporation a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the corporation against it on account of the alleged loss of any such new certificate. SECTION 3. TRANSFER OF SHARES. -- The shares of stock of the corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other persons as the directors may designate, by who they shall be cancelled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer. SECTION 4. STOCKHOLDERS RECORD DATE. -- In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the day of such meeting, nor more than sixty days prior to any other 11 action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. DIVIDENDS. -- Subject to the provisions of the Certificate of Incorporation the Board of Directors may, out of funds legally available therefor at any regular or special meeting, declare dividends upon the capital stock of the corporation as and when they deem expedient. Before declaring any dividends there may be set apart out of any funds of the corporation available for dividends, such sum or sums as the directors from time to time in their discretion deem proper working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the directors shall deem conducive to the interests of the corporation. SECTION 6. SEAL. -- The corporate seal shall be circular in form and shall contain the name of the corporation, the year of its creation and the words "CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. SECTION 7. FISCAL YEAR. -- The fiscal year of the corporation shall be determined by resolution of the Board of Directors. SECTION 8. CHECKS -- All checks, drafts, or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by the officer or officers, agent or agents of the corporation, and in such manner as shall be determined from time to time by resolution of the Board of Directors. SECTION 9. NOTICE AND WAIVER OF NOTICE -- Whenever any notice is required by these By-Laws to be given, personal notice is not meant unless expressly stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as it appears on the records of the corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by statute. Whenever any notice whatever is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation of the corporation or these By-Laws, 12 a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed proper notice. ARTICLE VI- AMENDMENTS These By-Laws may be altered and repealed and By-Laws may be made at any annual meeting of the stockholders or at any special meeting thereof if notice thereof is contained in the notice of such special meeting by the affirmative vote of a majority of the stock issued and outstanding or entitled to vote thereat, or by the regular meeting of the Board of Directors, at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, if notice thereof is contained in the notice of such special meeting. 13 EX-4.17 3 1997 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN EXHIBIT 4.17 JEAN PHILIPPE FRAGRANCES, INC. 1997 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN ********** 1. Purpose of the Plan. The purpose of this 1997 Nonemployee Director Stock Option Plan (the "Plan") of Jean Philippe Fragrances, Inc., a Delaware corporation (the "Corporation"), is to make available shares of the Common Stock, par value $.001 per share, of the Corporation (the "Common Stock") for purchase by directors of the Corporation who are not employees of the Corporation, or any parent or subsidiary thereof ("Nonemployee Directors"). Thus, the Plan, in addition to the Company's existing 1994 Nonemployee Director Stock Option Plan ("1994 Plan"), permits the Corporation to attract and retain the services of experienced and knowledgeable Nonemployee Directors for the benefit of the Corporation and its shareholders and to provide additional incentive for such Nonemployee Directors to continue to work for the best interests of the Corporation and its shareholders through continuing ownership of its Common Stock. 2. Stock Subject to the Plan. Subject to the provisions of Article 10, the total number of shares of Common Stock which may be subject to options under the Plan shall not exceed 32,500, whether authorized but unissued shares, or shares which shall have been purchased or acquired by the Corporation for this or any other purpose. Such shares are from time to time to be allotted for option and sale to Nonemployee Directors in accordance with the Plan. In the event any option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part, the shares not so purchased thereby shall again be available for the purposes of the Plan. 3. Administration of the Plan. The Plan shall be self-executing. However, to the extent permitted herein, the Plan shall be administered by a committee of two (2) or more Nonemployee Directors (the "Committee") of the Board of Directors of the Corporation (the "Board") appointed by the Board. The Committee shall, subject to the express provisions of the Plan, have the power to interpret the Plan; correct any defect, supply any omission or reconcile any inconsistency in the Plan; prescribe, amend and rescind rules and regulations relating to the Plan; and make all other determinations necessary or advisable for the administration of the Plan. The determination of the Committee on the matters referred to in this Article 3 shall be conclusive. 4. Eligibility; Grants. (a) Nonemployee Directors shall not include directors who are also employees of the Corporation or any parent or subsidiary thereof, but shall include directors of the Corporation who are providing services such as business, financial, legal or investment banking services, to, for, or on behalf of the Corporation or any parent or subsidiary thereof, in return for remuneration, directly or indirectly through one or more entities. (b) Jean Levy, a Nonemployee Director, shall be granted an option to purchase 2,000 shares of Common Stock at $6.00 per share, effective as of March 13, 1997. Robert Bensoussan-Torres, who became a Nonemployee Directors on March 13, 1997, shall be granted an option to purchase 1,000 shares of Common Stock at $6.00 per share, effective as of such date. The aforementioned grant to Robert Bensoussan-Torres is in addition to the grant of 1,000 shares which Mr. Bensoussan-Torres is entitled to receive under the 1994 Plan for calendar year 1997. Joseph A. Caccamo, a Nonemployee Director, shall be granted an option to purchase 7,500 shares of Common Stock at $5.8435, effective as of April 29, 1997, as a replacement for an option to purchase 7,500 shares of Common Stock at $ 10.50 with an expiration date of November 15, 1997, which was cancelled by the Corporation on April 25, 1997. (c) Each individual who subsequent to March 13, 1997 becomes a Nonemployee Director, shall on the date of his initial election or appointment to the Board be granted an option to purchase 1,000 shares of Common Stock in addition to the grant of 1,000 shares which such person is entitled to receive under the 1994 Plan. Upon the earlier of the absence of the availability of shares of Common Stock for grant under the 1994 Plan, or the expiration or termination of the 1994 Plan, each individual who subsequent to March 13, 1997 becomes a Nonemployee Director shall on the date of his initial election or appointment to the Board be granted an option to purchase 2,000 shares of Common Stock under this Plan. (d) Upon the earlier of the absence of the availability of shares of Common Stock for grant under the 1994 Plan, or the expiration or termination of the 1994 Plan, each Nonemployee Director other than Joseph A. Caccamo, shall be granted an option to purchase 1,000 shares of Common Stock commencing on the next February 1st, and each succeeding February 1st throughout the term of this Plan for so long as he is a Nonemployee Director. In lieu of grants of options to purchase 1,000 shares, Joseph A. Caccamo shall be granted options to purchase 4,000 shares hereunder for as long has he is a Nonemployee Director. Notwithstanding the foregoing, no option shall be granted on such February 1st grant date to any Nonemployee Director who first becomes a Nonemployee Director within six (6) months prior to such February 1st grant date. (e) If a sufficient number of shares of Common Stock reserved for issuance upon proper exercise of options to be granted to Nonemployee Directors on the February 1st grant date does not exist, then the aggregate remaining number of shares shall be prorated equally among options to be granted to all Nonemployee Directors at such February 1st grant date, and options shall be granted to purchase such reduced number of shares. 2 5. Option Price; Fair Market Value. (a) The price at which shares of the Common Stock may be purchased pursuant to options granted under the Plan shall be equal to one hundred percent (100%) of the fair market value of the Common Stock on the date an option is granted. (b) The fair market value of the Common stock on any day shall be (a) if the principal market for the Common Stock is a national securities exchange, the average between the high and low sales prices of the Common Stock on such day as reported by such exchange or on a consolidated tape reflecting transactions on such exchange; (b) if the principal market for the Common Stock is not a national securities exchange and the Common Stock is quoted on The Nasdaq Stock Market ("NASDAQ"), and (i) if actual sales price information is available with respect to the Common Stock, then the average between the high and low sales prices of the Common Stock on such day on NASDAQ, or (ii) if such information is not available, then the average between the highest bid and lowest asked prices for the Common Stock on such day on NASDAQ; or (c) if the principal market for the Common Stock is not a national securities exchange and the Common Stock is not quoted on NASDAQ, then the average between the highest bid and lowest asked prices for the Common Stock on such day as reported by National Quotation Bureau, Incorporated or a comparable service; provided that if clauses (a), (b) and (c) of this paragraph are all inapplicable, or if no trades have been made or no quotes are available for such day, then the fair market value of the Common Stock shall be determined by the Committee by any method consistent with applicable regulations adopted by the Treasury Department relating to stock options. The determination of the Committee shall be conclusive in determining the fair market value of the stock. 6. Term of Each Option. The term of each option shall be five (5) years or such shorter period as is prescribed in Article 9 hereof. 7. Exercise of Options. (a) Subject to the provisions of Articles 9 and 14, options granted hereunder shall be exercisable immediately; provided, that options shall not be exercisable at any time in an amount less than 100 shares (or the remaining shares then covered by and purchasable under the option if less than 100 shares), or for a fraction of a share. (b) The purchase price of the shares as to which an option shall be exercised shall be paid in full at the time of exercise in cash, by certified check or wire transfer of funds through the Federal Reserve System. 8. Non-Transferability of Options. No option granted under the Plan shall be transferable otherwise than by will or by the laws of descent and distribution, or pursuant to a qualified domestic relations order as defined by the Internal Revenue Code, Title I of the Employee Retirement Income Security Act and the rules thereunder, and an option may be 3 exercised, during the lifetime of the holder thereof, only by him. 9. Termination of Services on the Board of Directors. (a) If a Nonemployee Director to whom an option has been granted under the Plan shall cease to serve on the Board, otherwise than by reason of death or disability (as that term is defined in paragraph (d) of this Article 9), then such option may be exercised (to the extent that the Nonemployee Director was entitled to do so at the time of cessation of service) at any time within three (3) months after such cessation of service but not thereafter, and in no event after the date on which, except for such cessation of service, the option would otherwise expire. (b) If a Nonemployee Director to whom an option has been granted under the Plan shall cease to serve on the Board by reason of disability, then the remaining unexercised portion of the option may be exercised in whole or in part by the Nonemployee Director (notwithstanding that the option had not yet become exercisable with respect to all or part of such shares at the date of disability) at any time within one (1) year after such disability but not thereafter, and in no event after the date on which, except for such disability, the option would otherwise expire. (c) If a Nonemployee Director to whom an option has been granted under the Plan shall die (i) while he is serving on the Board, or (ii) within three (3) months after cessation of service on the Board, then such option may be exercised by the legatee or legatees of such option under the Nonemployee Director's last will, or by his personal representatives or distributee, at any time within one (1) year after his death, but in no event after the date on which, except for such death, the option would otherwise expire. (d) For the purpose of this Article 9, "disability" shall mean permanent mental or physical disability as determined by the Committee. 10. Adjustment of and Changes in Common Stock. (a) If the outstanding shares of the Common Stock are increased, decreased, changed into, or exchanged for a different number or kind of Shares or securities of the Corporation through reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or the like, an appropriate and proportionate adjustment shall be made in the number and kind of securities receivable upon the exercise of an option, without change in the total price applicable to the unexercised portion of this option but with a corresponding adjustment in the price for each unit of any security covered by such option. (b) Upon the dissolution or liquidation of the Corporation, or upon a reorganization, merger or consolidation of the Corporation with one or more corporations as a result of which the Corporation is not the surviving corporation, or upon the sale of substantially all of the assets of the Corporation, the Committee shall provide in writing in connection with such transaction for one or more of the following alternatives, separately or in combination: (i) the assumption by the 4 successor entity of the options theretofore granted or the substitution by such entity for such options of new options covering the stock of the successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; or (ii) the continuance of such option agreements by such successor entity in which such options shall remain in full force and effect under the terms so provided. (c) Any adjustments under this Article 10 shall be made by the Committee, whose good faith determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. 11. Compliance with Securities Laws. As a condition to the exercise of any option, either (a) a Registration Statement under the Securities Act of 1933, as amended, or any succeeding act (collectively, the "Act"), with respect to its underlying shares shall be effective at the time of exercise of the option or (b) in the opinion of counsel to the Corporation, there shall be an exemption from registration under the Act for the issuance of shares of Common Stock upon such exercise. Nothing herein shall be construed as requiring the Corporation to register shares subject to the Plan or any option under the Act. Each opinion shall be subject to the further requirement that if, in the opinion of counsel to the Corporation, the listing or qualification of the shares of Common Stocks subject to such option on any securities exchange, National Securities Association or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the exercise of such option or the issue of shares thereunder, such option may not be exercised in whole or in part unless such listing, qualification, consent or approval shall have been effected or obtained free of any conditions requiring the Corporation to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction wherein it has not already done so and free of any other conditions not customarily imposed by a securities exchange, law or governmental regulatory body in connection with such listing, qualification, consent or approval. 12. Amendment and Termination. The Committee may amend, suspend or terminate the Plan or any portion thereof at any time but may not, without the approval of the Corporation's shareholders within twelve (12) months before or after the date of adoption of any such amendment or amendments, make any alteration or amendment thereof which (a) makes any change in the class of eligible participants as determined in accordance with Article 4 hereof; (b) increases the total number of shares of Common Stock for which options may be granted under the Plan except as provided in Article 10 hereof; (c) extends the term of the Plan or the maximum option period provided under the Plan; (d) decreases the option price provided in Article 5 hereof; or (e) materially increases the benefits accruing to participants under the Plan. Notwithstanding anything to the contrary contained herein, the Plan shall not be amended more than once every six (6) months, other than to comport with changes in the Internal Revenue Code, Employee Retirement Income Security Act or the rules thereunder. 13. Duties of the Corporation. The Corporation shall, at all times during the term of each option, reserve and keep available for issuance or delivery such number of shares of 5 Common Stock as will be sufficient to satisfy the requirements of all options at the time outstanding, shall pay all original issue taxes with respect to the issuance or delivery of shares pursuant to the exercise of such options and all other fees and expenses necessarily incurred by the Corporation in connection therewith. 14. Term; Effective Period. The Plan shall become effective on March 13, 1997, the date of its adoption by the Board of Directors (as amended by the Board of Directors on April 29, 1997), subject to (a) approval by the holders of a majority of shares of the Corporation's capital stock outstanding and entitled to vote thereon at the next meeting of its shareholders, or the written consent of the holders of a majority of shares that would have been entitled to vote thereon, and no options granted hereunder may be exercised prior to such approval, provided that, the date of grant of any options granted hereunder shall be determined as if the Plan had not been subject to such approval; and (b) notification of the adoption of the Plan to the Nasdaq Stock Market by the filing of the appropriate documents, forms and exhibits, and no options granted hereunder may be exercised prior to fifteen (15) days after such filing, provided that, the date of grant of any options granted hereunder shall be determined as if the Plan had not been subject to such filing. (c) No options may be granted under the Plan after February 28, 2007. Options outstanding on or prior to such date shall, however, in all respects continue subject to the Plan. EX-4.18 4 1998 STOCK OPTION PLAN OF JEAN PHILIPPE FRAGRANCE, INC. Exhibit 4.18 1998 STOCK OPTION PLAN OF JEAN PHILIPPE FRAGRANCES, INC. 1. Purposes of The Plan. This stock option plan (the "Plan") is designed to provide an incentive to key employees, officers, directors and consultants of Jean Philippe Fragrances, Inc., a Delaware corporation (the "Company"), and its present and future subsidiary corporations, as defined in Paragraph 17 ("Subsidiaries"), and to offer an additional inducement in obtaining the services of such individuals. The Plan provides for the grant of "incentive stock options," within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), nonqualified stock options and stock appreciation rights ("SARs"). 2. Shares Subject To The Plan. The aggregate number of shares of Common Stock, $.001 par value per share, of the Company ("Common Stock") for which options or SARs may be granted under the Plan shall not exceed 150,000. Such shares may, in the discretion of the Board Directors, consist either in whole or in part of authorized but unissued shares of Common Stock or shares of Common Stock held in the treasury of the Company. The Company shall at all times during the term of the Plan reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of the Plan. Subject to the provisions of Paragraph 14, any shares subject to an option or SAR which for any reason expire, are canceled or are terminated unexercised (other than those which expire, are canceled or terminated pursuant to the exercise of a tandem SAR or option) shall again become available for the granting of options or SARs under the Plan. The number of shares of Common Stock underlying that portion of an option or SAR which is exercised (regardless of the number of shares actually issued) shall not again become available for grant under the Plan. 3. Administration Of The Plan. (a) The Plan shall be administered by the Board of Directors, or if appointed, by a Stock Option Committee consisting of not less than two (2) members of the Board of Directors, each of whom shall be a "non-employee director" within the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission. (The group administering the plan is referred to as the "Committee). The failure of any of the Committee members to qualify as a "non-employee director" shall not otherwise affect the validity of the grant of any option or SAR, or the issuance of shares of Common Stock otherwise validly issued upon exercise of any such option. A majority of the members of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, and any acts approved in writing by all members without a meeting, shall be the acts of the Committee. (b) Subject to the express provisions of the Plan, the Committee shall have the authority, in its sole discretion, to determine the individuals who shall receive options and SARS; the times when they shall receive them; whether an option shall be an incentive or a nonqualified stock option; whether an SAR shall be granted separately, in tandem with or in addition to an option; the number of shares to be subject to each option and SAR; the term of each option and SAR; the date each option and SAR shall become exercisable; whether an option or SAR shall be exercisable in whole, in part or in installments, and if in installments, the number of shares to be subject to each installment; whether the installments shall be cumulative, the date each installment shall become exercisable and the term of each installment; whether to accelerate the date of exercise of any installment; whether shares may be issued on exercise of an option as partly paid, and, if so, the dates when future installments of the exercise price shall become due and the amounts of such installments; the exercise price of each option and the base price of each SAR; the form of payment of the exercise price; the form of payment by the Company upon the optionee's exercise of an SAR; whether to require that the optionee remain in the employ of the Company or its Subsidiaries for a period of time from and after the date the option or SAR is granted to him; the amount necessary to satisfy the Company's obligation to withhold taxes; whether to restrict the sale or other disposition of the shares of Common Stock acquired upon the exercise of an option or SAR and to waive any such restriction; to subject the exercise of all or any portion of an option or SAR to the fulfillment of contingencies as specified in the Contract (described in Paragraph 12), including without limitations, contingencies relating to financial objectives (such as earnings per share, cash flow return, return on investment or growth in sales) for a specified period for the Company, a division, a product line or other category, and/or the period of continued employment of the optionee with the Company or its Subsidiaries, and to determine whether such contingencies have been met; to construe the respective Contracts and the Plan; with the consent of the optionee, to cancel or modify an option or SAR, provided such option or SAR as modified would be permitted to be granted on such date under the terms of the Plan; and to make all other determinations necessary or advisable for administering the Plan. The determinations of the Committee on the matters referred to in this Paragraph 3 shall be conclusive. 4. Eligibility. The Committee may, consistent with the purposes of the Plan, grant incentive stock options to key employees (including officers and directors who are employees) and nonqualified stock options and/or SARs to key employees, officers, directors and consultants of the Company or any of its Subsidiaries from time to time, within ten (10) years from the date of adoption of the Plan by the Board of Directors, covering such number of shares of Common Stock as the Committee may determine; provided, however, that the aggregate market value (determined at the time the stock option is granted) of the shares for which any eligible person may be granted incentive stock options under the Plan or any plan of the Company, or of a Parent or a Subsidiary of the Company which are exercisable for the first time by such optionee during any calendar year shall not exceed $100,000. Any option (or portion thereof) granted in excess of such amount shall be treated as a nonqualified stock option. 5. Exercise Price And Base Price. (a) The exercise price of the shares of Common Stock under each option and the base price for each SAR shall be determined by the Committee; provided, however, in the case of an incentive stock option, the exercise price shall not be less than 100% of the fair market value of the Common Stock on the date of grant, and further provided, that if, at the time an incentive stock option is granted, the optionee owns (or is deemed to own) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, of any of its Subsidiaries or of a Parent, the exercise price shall not be less than 110% of the fair market value of the Common Stock subject to the option at the time of the granting of such option. (b) The fair market value of the Common stock on any day shall be (a) if the principal market for the Common stock is a national securities exchange, the average between the high and low sales prices of the Common stock on such day as reported by such exchange or on a consolidated tape reflecting transactions on such exchange; (b) if the principal market for the Common Stock is not a national securities exchange and the Common Stock is quoted on The Nasdaq Stock Market ("NASDAQ"), and (i) if actual sales price information is available with respect to the Common Stock, then the average between the high and low sales prices of the Common Stock on such day on NASDAQ, or (ii) if such information is not available, then the average between the highest bid and lowest asked prices for the Common Stock on such day on NASDAQ; or (c) if the principal market for the Common Stock is not a national securities exchange and the Common Stock is not quoted on NASDAQ, then the average between the highest bid and lowest asked prices for the Common Stock on such day as reported by The Nasdaq Bulletin Board, or a comparable service; provided that if clauses (a), (b) and (c) of this Paragraph are all inapplicable, or if no trades have been made or no quotes are available for such day, then the fair market value of the Common Stock shall be determined by the Committee by any method consistent with applicable regulations adopted by the Treasury Department relating to stock options. The determination of the Committee shall be conclusive in determining the fair market value of the stock. 6. Term. The term of each option and SAR granted pursuant to the Plan shall be such term as is established by the Committee, in its sole discretion, at or before the term of each incentive stock option granted pursuant to the Plan shall be for a period not exceeding ten (10) years from the date of granting thereof, and further, provided, that if, at the time an incentive stock option is granted, the optionee owns (or is deemed to own) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, of any of its Subsidiaries or of a Parent, the term of the incentive stock option shall be for a period not exceeding five (5) years. Options shall be subject to earlier termination as hereinafter provided. 7. Exercise. (a) An option or SAR (or any part or installment thereof) shall be exercised by giving written notice to the Company at its principal office (at present 551 Fifth Avenue, New York, NY 10176) stating whether an incentive or nonqualified stock option or SAR is being exercised, specifying the number of shares as to which such option or SAR is being exercised, and in the case of an option, accompanied by payment in full of the aggregate exercise price therefor (or the amount due on exercise if the Contract permits installment payments) in the discretion of the Committee (a) in cash or by certified check, (b) with previously acquired shares of Common Stock having an aggregate fair market value, on the date of exercise, equal to the aggregate exercise price of all options being exercised, or (c) any combination thereof. In addition, upon the exercise of a nonqualified stock option or SAR, the Company may withhold cash and/or shares of Common Stock to be issued with respect thereto having an aggregate fair market value equal to the amount which it determined is necessary to satisfy its obligation to withhold Federal, state and local income taxes or other taxes incurred by reason of such exercise. Alternatively, the Company may require the holder to pay to the Company such amount, in cash, promptly upon demand. The Company shall not be required to issue any shares pursuant to any such option or SAR until all required payments have been made. Fair market value of the shares shall be determined in accordance with Paragraph 5. (b) A person entitled to receive Common Stock upon the exercise of an option or SAR shall not have the rights of a shareholder with respect to such shares until the date of issuance of a stock certificate to him for such shares; provided, however, that until such stock certificate is issued, any option holder using previously acquired shares in payment of an option exercise price shall have the rights of a shareholder with respect to such previously acquired shares. (c) In no case may a fraction of a share be purchased or issued under the Plan. Any option granted in tandem with an SAR shall no longer be exercisable to the extent the SAR is exercised, and the exercise of the related option shall cancel the SAR to the extent of such exercise. 8. Stock Appreciation Rights. (a) An SAR may be granted separately, in tandem with or in addition to any option, and may be granted before, simultaneously with or after the grant of an option hereunder. In addition, the holder of an option may, in lieu of making the payment required at the time of exercise under Paragraph 7, include in the written notice referred to therein an "election" to exercise the option as an SAR. In such case, the Committee shall have fifteen (15) days from the receipt of notice of the election to decide, in its sole discretion, whether or not to accept the election and notify the option holder of its decision. If the Committee consents, such exercise shall be treated as the exercise of an SAR with a base price equal to the exercise price. (b) Upon the exercise of an SAR, the holder shall be entitled to receive an amount equal to the excess of the fair market value of a share of Common Stock on the date of exercise over the base price of the SAR. Such amount shall be paid, in the discretion of the Committee, in cash, Common Stock having a fair market value on the date of payment equal to such amount, or a combination thereof. For purposes of this Paragraph 8, fair market value shall be determined in accordance with Paragraph 5. 9. Termination Of Association With The Company. (a) Any holder of an incentive option whose association with the Company (and its Subsidiaries) has terminated for any reason other than his death or permanent and total disability (as defined in Section 22(e)(3) of the Code) may exercise such option, to the extent exercisable on the date of such termination, at any time within three (3) months after the date of termination, but in no event after the expiration of the term of the option; provided, however, that if his association shall be terminated either (i) for cause, or (ii) without the consent of the Company, said option shall terminate immediately. (b) Any and all nonqualified stock options or SARs granted under the Plan shall terminate simultaneously with the termination of association of the holder of such nonqualified option or SAR with the Company (and its Subsidiaries) for any reason other than the death or permanent and total disability (as defined in Section 22(e)(3) of the Code) of such holder. (c) Options and SARs granted under the Plan shall not be affected by any change in the status of an optionee so long as he continues to be associated with the Company or any of the Subsidiaries. (d) Nothing in the Plan or in any option or SAR granted under the Plan shall confer on any individual any right to continue to be associated with the Company or any of its Subsidiaries, or interfere in any way with the right of the Company or any of its Subsidiaries to terminate the holder's association at any time for any reason whatsoever without liability to the Company or any of its subsidiaries. 10. Death Or Disability Of An Optionee. (a) If an optionee dies while he is associated with the Company or any of its Subsidiaries, or within three (3) months after such termination for the holder of an incentive option (unless such termination was for cause or without the consent of the Company), the option or SAR may be exercised, to the extent exercisable on the death, by his executor, administrator or other person at the time entitled by law to his rights under the option or SAR, at any time within one (1) year after death, but in no event after the expiration of the term of the option or SAR. (b) Any holder whose association with the Company or its Subsidiaries has terminated by reason of a permanent and total disability (as defined in Section 22(e) (3) of the Code) may exercise his option or SAR, to the extent exercisable upon the effective date of such termination, at any time within one (1) year after such date, but in no event after the expiration of the term of the option or SAR. 11. Compliance With Securities Laws. The Committee may require, in its discretion, as a condition to the exercise of an option or SAR that either (a) a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), with respect to such shares shall be effective at the time of exercise or (b) there is an exemption from registration under the Securities Act for the issuance of shares of Common Stock upon such exercise. Nothing herein shall be construed as requiring the Company to register shares subject to any option or SAR under the Securities Act. In addition, if at any time the Committee shall determine in its discretion that the listing or qualification of the shares subject to such option or SAR on any securities exchange or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of an option or SAR, or the issue of shares thereunder, such option or SAR may not be exercised in whole or in part unless such listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. 12. Stock Option And SAR Contracts. Each option and SAR shall be evidenced by an appropriate Contract which shall be duly executed by the Company and the optionee, and shall contain such terms and conditions not inconsistent herewith as may be determined by the Committee, and which shall provide, among other things, (a) that the optionee agrees that he will remain in the employ of the Company or its Subsidiaries, at the election of the Company, for the later of (i) the period of time determined by the Committee at or before the time of grant or (ii) the date to which he is then contractually obligated to remain associated with the Company or its Subsidiaries, (b) that in the event of the exercise of an option or an SAR which is paid with Common stock, unless the shares of Common Stock received upon such exercise shall have been registered under an effective registration statement under the Securities Act, such shares will be acquired for investment and not with a view to distribution thereof, and that such shares may not be sold except in compliance with the applicable provisions of the Securities Act, and (c) that in the event of any disposition of the shares of Common Stock acquired upon the exercise of an incentive stock option within two (2) years from the date of grant of the option or one (1) year from the date of transfer of such shares to him, the optionee will notify the Company thereof in writing within 30 days after such disposition, pay the Company, on demand, in cash an amount necessary to satisfy its obligation, if any, to withhold any Federal, state and local income taxes or other taxes by reason of such disqualifying disposition and provide the Company, on demand, with such information as the Company shall reasonably request to determine such obligation. 13. Adjustments Upon Changes In Common Stock. Notwithstanding any other provisions of the Plan, in the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, merger, consolidation, reorganization, split-up, combination or exchange of shares or the like, the aggregate number and kind of shares available under the Plan, the aggregate number and kind of shares subject to each outstanding option and SAR and the exercise prices and base prices thereof shall be appropriately adjusted by the Board of Directors, whose determination shall be conclusive. 14. Amendments And Termination Of The Plan. The Plan was adopted by the Board of Directors on April 27, 1998. No options may be granted under the Plan after April 26, 2008. The Board of Directors, without further approval of the Company's stockholders, may at any time suspend or terminate the Plan, in whole or in part, or amend it from time to time in such respects as it may deem advisable, including, without limitation, in order that incentive stock options granted hereunder meet the requirements for "incentive stock options" under the Code, or any comparable provisions thereafter enacted and conform to any change in applicable law or to regulations or rulings of administrative agencies; provided, however, that no amendment shall be effective without the prior or subsequent approval of a majority of the Company's outstanding stock entitled to vote thereon which would (a) except as contemplated in Paragraph 13, increase the maximum number of shares for which options may be granted under the Plan, (b) materially increase the benefits to participants under the plan or (c) change the eligibility requirements for individuals entitled to receive options hereunder. No termination, suspension or amendment of the Plan shall, without the consent of the holder of an existing option affected thereby, adversely affect his rights under such option. 15. Nontransferability Of Options. No option or SAR granted under the Plan shall be transferable otherwise than by will or the laws of descent and distribution, or qualified domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act, and options and SARs may be exercised, during the lifetime of the holder thereof, only by him or his legal representatives. Except to the extent provided above, options and SARs may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) and shall not subject to execution, attachment or similar process. 16. Substitutions And Assumptions Of Options Of Certain Constituent Corporations. Anything in this Plan to the contrary notwithstanding, the Board of directors may, without further approval by the stockholders, substitute new options for prior options and new SARs for prior SARs of a Constituent Corporation (as defined in Paragraph 17) or assume the prior options or SARs of such Constituent Corporation. 17. Definitions. (a) The term "Subsidiary" shall have the same definition as "subsidiary corporation" in Section 425(f) of the Code. (b) The term "Parent" shall have the same definition as "parent corporation" in Section 425(e) of the Code. (c) The term "Constituent Corporation" shall mean any corporation which engages with the Company, its Parent or Subsidiary, in a transaction to which section 425(a) of the Code applies (or would apply if the option or SAR assumed or substituted were an incentive stock option), or any Parent or any Subsidiary of such corporation. 18. Conditions Precedent. The Plan shall be subject to (a) approval by the holders of a majority of shares of the Company's capital stock outstanding and entitled to vote thereon at the next meeting of its stockholders, or the written consent of the holders of a majority of shares that would have been entitled to vote thereon, and no options or SARs granted hereunder may be exercised prior to such approval, provided that the date of grant of any options granted hereunder shall be determined as if the Plan had not been subject to such approval; and (b) notification of the adoption of the Plan to The Nasdaq Stock Market by the filing of the appropriate documents, forms and exhibits, and no options or SARs granted hereunder may be exercised prior to fifteen (15) days after such filing, provided that the date of grant of any options granted hereunder shall be determined as if the Plan had not been subject to such filing. EX-4.19 5 1999 STOCK OPTION PLAN Exhibit 4.19 1999 STOCK OPTION PLAN OF JEAN PHILIPPE FRAGRANCES, INC. 1. Purposes of The Plan. This stock option plan (the "Plan") is designed to provide an incentive to key employees, officers, directors and consultants of Jean Philippe Fragrances, Inc., a Delaware corporation (the "Company"), and its present and future subsidiary corporations, as defined in Paragraph 17 ("Subsidiaries"), and to offer an additional inducement in obtaining the services of such individuals. The Plan provides for the grant of "incentive stock options," within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), nonqualified stock options and stock appreciation rights ("SARs"). 2. Shares Subject To The Plan. The aggregate number of shares of Common Stock, $.001 par value per share, of the Company ("Common Stock") for which options or SARs may be granted under the Plan shall not exceed 1,000,000. Such shares may, in the discretion of the Board of Directors, consist either in whole or in part of authorized but unissued shares of Common Stock or shares of Common Stock held in the treasury of the Company. The Company shall at all times during the term of the Plan reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of the Plan. Subject to the provisions of Paragraph 14, any shares subject to an option or SAR which for any reason expire, are canceled or are terminated unexercised (other than those which expire, are canceled or terminated pursuant to the exercise of a tandem SAR or option) shall again become available for the granting of options or SARs under the Plan. The number of shares of Common Stock underlying that portion of an option or SAR which is exercised (regardless of the number of shares actually issued) shall not again become available for grant under the Plan. 3. Administration Of The Plan. (a) The Plan shall be administered by the Board of Directors, or if appointed, by a Stock Option Committee consisting of not less than two (2) members of the Board of Directors, each of whom shall be a "non-employee director" within the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission. (The group administering the plan is referred to as the "Committee). The failure of any of the Committee members to qualify as a non-employee director" shall not otherwise affect the validity of the grant of any option or SAR, or the issuance of shares of Common Stock otherwise validly issued upon exercise of any such option. A majority of the members of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, and any acts approved in writing by all members without a meeting, shall be the acts of the Committee. (b) Subject to the express provisions of the Plan, the Committee shall have the authority, in its sole discretion, to determine the individuals who shall receive options and SARS; the times when they shall receive them; whether an option shall be an incentive or a nonqualified stock option; whether an SAR shall be granted separately, in tandem with or in addition to an option; the number of shares to be subject to each option and SAR; the term of each option and SAR; the date each option and SAR shall become exercisable; whether an option or SAR shall be exercisable in whole, in part or in installments, and if in installments, the number of shares to be subject to each installment; whether the installments shall be cumulative, the date each installment shall become exercisable and the term of each installment; whether to accelerate the date of exercise of any installment; whether shares may be issued on exercise of an option as partly paid, and, if so, the dates when future installments of the exercise price shall become due and the amounts of such installments; the exercise price of each option and the base price of each SAR; the form of payment of the exercise price; the form of payment by the Company upon the optionee's exercise of an SAR; whether to require that the optionee remain in the employ of the Company or its Subsidiaries for a period of time from and after the date the option or SAR is granted to him; the amount necessary to satisfy the Company's obligation to withhold taxes; whether to restrict the sale or other disposition of the shares of Common Stock acquired upon the exercise of an option or SAR and to waive any such restriction; to subject the exercise of all or any portion of an option or SAR to the fulfillment of contingencies as specified in the Contract (described in Paragraph 12), including without limitations, contingencies relating to financial objectives (such as earnings per share, cash flow return, return on investment or growth in sales) for a specified period for the Company, a division, a product line or other category, and/or the period of continued employment of the optionee with the Company or its Subsidiaries, and to determine whether such contingencies have been met; to construe the respective Contracts and the Plan; with the consent of the optionee, to cancel or modify an option or SAR, provided such option or SAR as modified would be permitted to be granted on such date under the terms of the Plan; and to make all other determinations necessary or advisable for administering the Plan. The determinations of the Committee on the matters referred to in this Paragraph 3 shall be conclusive. 4. Eligibility. The Committee may, consistent with the purposes of the Plan, grant incentive stock options to key employees (including officers and directors who are employees) and nonqualified stock options and/or SARs to key employees, officers, directors and consultants of the Company or any of its Subsidiaries from time to time, within ten (10) years from the date of adoption of the Plan by the Board of Directors, covering such number of shares of Common Stock as the Committee may determine; provided, however, that the aggregate market value (determined at the time the stock option is granted) of the shares for which any eligible person may be granted incentive stock options under the Plan or any plan of the Company, or of a Parent or a Subsidiary of the Company which are exercisable for the first time by such optionee during any calendar year shall not exceed $100,000. Any option (or portion thereof) granted in excess of such amount shall be treated as a nonqualified stock option. 5. Exercise Price And Base Price. (a) The exercise price of the shares of Common Stock under each option and the base price for each SAR shall be determined by the Committee; provided, however, in the case of an incentive stock option, the exercise price shall not be less than 100% of the fair market value of the Common Stock on the date of grant, and further provided, that if, at the time an incentive stock option is granted, the optionee owns (or is deemed to own) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, of any of its Subsidiaries or of a Parent, the exercise price shall not be less than 110% of the fair market value of the Common Stock subject to the option at the time of the granting of such option. (b) The fair market value of the Common stock on any day shall be (a) if the principal market for the Common stock is a national securities exchange, the average between the high and low sales prices of the Common stock on such day as reported by such exchange or on a consolidated tape reflecting transactions on such exchange; (b) if the principal market for the Common Stock is not a national securities exchange and the Common Stock is quoted on The Nasdaq Stock Market ("NASDAQ"), and (i) if actual sales price information is available with respect to the Common Stock, then the average between the high and low sales prices of the Common Stock on such day on NASDAQ, or (ii) if such information is not available, then the average between the highest bid and lowest asked prices for the Common Stock on such day on NASDAQ; or (c) if the principal market for the Common Stock is not a national securities exchange and the Common Stock is not quoted on NASDAQ, then the average between the highest bid and lowest asked prices for the Common Stock on such day as reported by The Nasdaq Bulletin Board, or a comparable service; provided that if clauses (a), (b) and (c) of this Paragraph are all inapplicable, or if no trades have been made or no quotes are available for such day, then the fair market value of the Common Stock shall be determined by the Committee by any method consistent with applicable regulations adopted by the Treasury Department relating to stock options. The determination of the Committee shall be conclusive in determining the fair market value of the stock. 6. Term. The term of each option and SAR granted pursuant to the Plan shall be such term as is established by the Committee, in its sole discretion, at or before the term of each incentive stock option granted pursuant to the Plan shall be for a period not exceeding ten (10) years from the date of granting thereof, and further, provided, that if, at the time an incentive stock option is granted, the optionee owns (or is deemed to own) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, of any of its Subsidiaries or of a Parent, the term of the incentive stock option shall be for a period not exceeding five (5) years. Options shall be subject to earlier termination as hereinafter provided. 7. Exercise. (a) An option or SAR (or any part or installment thereof) shall be exercised by giving written notice to the Company at its principal office (at present 551 Fifth Avenue, New York, NY 10176) stating whether an incentive or nonqualified stock option or SAR is being exercised, specifying the number of shares as to which such option or SAR is being exercised, and in the case of an option, accompanied by payment in full of the aggregate exercise price therefor (or the amount due on exercise if the Contract permits installment payments) in the discretion of the Committee (a) in cash or by certified check, (b) with previously acquired shares of Common Stock having an aggregate fair market value, on the date of exercise, equal to the aggregate exercise price of all options being exercised, or (c) any combination thereof. In addition, upon the exercise of a nonqualified stock option or SAR, the Company may withhold cash and/or shares of Common Stock to be issued with respect thereto having an aggregate fair market value equal to the amount which it determined is necessary to satisfy its obligation to withhold Federal, state and local income taxes or other taxes incurred by reason of such exercise. Alternatively, the Company may require the holder to pay to the Company such amount, in cash, promptly upon demand. The Company shall not be required to issue any shares pursuant to any such option or SAR until all required payments have been made. Fair market value of the shares shall be determined in accordance with Paragraph 5. (b) A person entitled to receive Common Stock upon the exercise of an option or SAR shall not have the rights of a shareholder with respect to such shares until the date of issuance of a stock certificate to him for such shares; provided, however, that until such stock certificate is issued, any option holder using previously acquired shares in payment of an option exercise price shall have the rights of a shareholder with respect to such previously acquired shares. (c) In no case may a fraction of a share be purchased or issued under the Plan. Any option granted in tandem with an SAR shall no longer be exercisable to the extent the SAR is exercised, and the exercise of the related option shall cancel the SAR to the extent of such exercise. 8. Stock Appreciation Rights. (a) An SAR may be granted separately, in tandem with or in addition to any option, and may be granted before, simultaneously with or after the grant of an option hereunder. In addition, the holder of an option may, in lieu of making the payment required at the time of exercise under Paragraph 7, include in the written notice referred to therein an "election" to exercise the option as an SAR. In such case, the Committee shall have fifteen (15) days from the receipt of notice of the election to decide, in its sole discretion, whether or not to accept the election and notify the option holder of its decision. If the Committee consents, such exercise shall be treated as the exercise of an SAR with a base price equal to the exercise price. (b) Upon the exercise of an SAR, the holder shall be entitled to receive an amount equal to the excess of the fair market value of a share of Common Stock on the date of exercise over the base price of the SAR. Such amount shall be paid, in the discretion of the Committee, in cash, Common Stock having a fair market value on the date of payment equal to such amount, or a combination thereof. For purposes of this Paragraph 8, fair market value shall be determined in accordance with Paragraph 5. 9. Termination Of Association With The Company. (a) Any holder of an incentive option whose association with the Company (and its Subsidiaries) has terminated for any reason other than his death or permanent and total disability (as defined in Section 22(e)(3) of the Code) may exercise such option, to the extent exercisable on the date of such termination, at any time within three (3) months after the date of termination, but in no event after the expiration of the term of the option; provided, however, that if his association shall be terminated either (i) for cause, or (ii) without the consent of the Company, said option shall terminate immediately. (b) Any and all nonqualified stock options or SARs granted under the Plan shall terminate simultaneously with the termination of association of the holder of such nonqualified option or SAR with the Company (and its Subsidiaries) for any reason other than the death or permanent and total disability (as defined in Section 22(e)(3) of the Code) of such holder. (c) Options and SARs granted under the Plan shall not be affected by any change in the status of an optionee so long as he continues to be associated with the Company or any of the Subsidiaries. (d) Nothing in the Plan or in any option or SAR granted under the Plan shall confer on any individual any right to continue to be associated with the Company or any of its Subsidiaries, or interfere in any way with the right of the Company or any of its Subsidiaries to terminate the holder's association at any time for any reason whatsoever without liability to the Company or any of its subsidiaries. 10. Death Or Disability Of An Optionee. (a) If an optionee dies while he is associated with the Company or any of its Subsidiaries, or within three (3) months after such termination for the holder of an incentive option (unless such termination was for cause or without the consent of the Company), the option or SAR may be exercised, to the extent exercisable on the death, by his executor, administrator or other person at the time entitled by law to his rights under the option or SAR, at any time within one (1) year after death, but in no event after the expiration of the term of the option or SAR. (b) Any holder whose association with the Company or its Subsidiaries has terminated by reason of a permanent and total disability (as defined in Section 22(e) (3) of the Code) may exercise his option or SAR, to the extent exercisable upon the effective date of such termination, at any time within one (1) year after such date, but in no event after the expiration of the term of the option or SAR. 11. Compliance With Securities Laws. The Committee may require, in its discretion, as a condition to the exercise of an option or SAR that either (a) a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), with respect to such shares shall be effective at the time of exercise or (b) there is an exemption from registration under the Securities Act for the issuance of shares of Common Stock upon such exercise. Nothing herein shall be construed as requiring the Company to register shares subject to any option or SAR under the Securities Act. In addition, if at any time the Committee shall determine in its discretion that the listing or qualification of the shares subject to such option or SAR on any securities exchange or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of an option or SAR, or the issue of shares thereunder, such option or SAR may not be exercised in whole or in part unless such listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. 12. Stock Option And SAR Contracts. Each option and SAR shall be evidenced by an appropriate Contract which shall be duly executed by the Company and the optionee, and shall contain such terms and conditions not inconsistent herewith as may be determined by the Committee, and which shall provide, among other things, (a) that the optionee agrees that he will remain in the employ of the Company or its Subsidiaries, at the election of the Company, for the later of (i) the period of time determined by the Committee at or before the time of grant or (ii) the date to which he is then contractually obligated to remain associated with the Company or its Subsidiaries, (b) that in the event of the exercise of an option or an SAR which is paid with Common stock, unless the shares of Common Stock received upon such exercise shall have been registered under an effective registration statement under the Securities Act, such shares will be acquired for investment and not with a view to distribution thereof, and that such shares may not be sold except in compliance with the applicable provisions of the Securities Act, and (c) that in the event of any disposition of the shares of Common Stock acquired upon the exercise of an incentive stock option within two (2) years from the date of grant of the option or one (1) year from the date of transfer of such shares to him, the optionee will notify the Company thereof in writing within 30 days after such disposition, pay the Company, on demand, in cash an amount necessary to satisfy its obligation, if any, to withhold any Federal, state and local income taxes or other taxes by reason of such disqualifying disposition and provide the Company, on demand, with such information as the Company shall reasonably request to determine such obligation. 13. Adjustments Upon Changes In Common Stock. Notwithstanding any other provisions of the Plan, in the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, merger, consolidation, reorganization, split-up, combination or exchange of shares or the like, the aggregate number and kind of shares available under the Plan, the aggregate number and kind of shares subject to each outstanding option and SAR and the exercise prices and base prices thereof shall be appropriately adjusted by the Board of Directors, whose determination shall be conclusive. 14. Amendments And Termination Of The Plan. The Plan was adopted by the Board of Directors on February 8, 1999. No options may be granted under the Plan after February 7, 2009. The Board of Directors, without further approval of the Company's stockholders, may at any time suspend or terminate the Plan, in whole or in part, or amend it from time to time in such respects as it may deem advisable, including, without limitation, in order that incentive stock options granted hereunder meet the requirements for "incentive stock options" under the Code, or any comparable provisions thereafter enacted and conform to any change in applicable law or to regulations or rulings of administrative agencies; provided, however, that no amendment shall be effective without the prior or subsequent approval of a majority of the Company's outstanding stock entitled to vote thereon which would (a) except as contemplated in Paragraph 13, increase the maximum number of shares for which options may be granted under the Plan, (b) materially increase the benefits to participants under the plan or (c) change the eligibility requirements for individuals entitled to receive options hereunder. No termination, suspension or amendment of the Plan shall, without the consent of the holder of an existing option affected thereby, adversely affect his rights under such option. 15. Nontransferability Of Options. No option or SAR granted under the Plan shall be transferable otherwise than by will or the laws of descent and distribution, or qualified domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act, and options and SARs may be exercised, during the lifetime of the holder thereof, only by him or his legal representatives. Except to the extent provided above, options and SARs may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) and shall not subject to execution, attachment or similar process. 16. Substitutions And Assumptions Of Options Of Certain Constituent Corporations. Anything in this Plan to the contrary notwithstanding, the Board of directors may, without further approval by the stockholders, substitute new options for prior options and new SARs for prior SARs of a Constituent Corporation (as defined in Paragraph 17) or assume the prior options or SARs of such Constituent Corporation. 17. Definitions. (a) The term "Subsidiary" shall have the same definition as "subsidiary corporation" in Section 425(f) of the Code. (b) The term "Parent" shall have the same definition as "parent corporation" in Section 425(e) of the Code. (c) The term "Constituent Corporation" shall mean any corporation which engages with the Company, its Parent or Subsidiary, in a transaction to which section 425(a) of the Code applies (or would apply if the option or SAR assumed or substituted were an incentive stock option), or any Parent or any Subsidiary of such corporation. 18. Conditions Precedent. The Plan shall be subject to (a) approval by the holders of a majority of shares of the Company's capital stock outstanding and entitled to vote thereon at the next meeting of its stockholders, or the written consent of the holders of a majority of shares that would have been entitled to vote thereon, and no options or SARs granted hereunder may be exercised prior to such approval, provided that the date of grant of any options granted hereunder shall be determined as if the Plan had not been subject to such approval; and (b) notification of the adoption of the Plan to The Nasdaq Stock Market by the filing of the appropriate documents, forms and exhibits, and no options or SARs granted hereunder may be exercised prior to fifteen (15) days after such filing, provided that the date of grant of any options granted hereunder shall be determined as if the Plan had not been subject to such filing. EX-10.70 6 LICENSE AGREEMENT Exhibit 10.70 STRICTLY PRIVATE AND CONFIDENTIAL DATED ________________ 1998 PAUL SMITH LIMITED (1) -and- INTER PARFUMS S.A. (2) -and- JEAN-PHILIPPE FRAGRANCES (3) LICENCE AGREEMENT FREETH CARTWRIGHT HUNT DICKINS Solicitors Express Buildings 29 Upper Parliament Street Nottingham NG1 2AQ DX 10017 Nottingham Telephone (0115) 9369369 Facsimile (0115) 9350352 THIS AGREEMENT is made the _______ day of __________ 1998 - -------------- BETWEEN: (1) PAUL SMITH LIMITED whose registered office is situate at Riverside Buildings Riverside Way Nottingham England ("the Grantor"); (2) INTER PARFUMS S.A. a corporation duly organised and existing under the laws of France with its principal office at 4 Rond Point des Champs Elysees, 75008 Pan's (B350 219 382) ("the Licensee"); and (3) JEAN-PHILIPPE FRAGRANCES INC. a corporation duly organised and existing under the laws of Delaware with its principal office at 551,5 th Avenue New York NY 10176 ("the Guarantor") WHEREAS: A. The Grantor designs and manufactures quality clothing and accessories in the United Kingdom and in other countries B. The Grantor owns the Trademarks consisting of "PAUL SMITH" and "PS PAUL SMITH" used alone and in a logo design and has registered the Trademarks in respect of fragrances in the countries specified in Exhibit A. C. The Licensee manufactures and sells perfumes and fragrances throughout the world. D. The Licensee wishes to manufacture advertise promote and sell fragrances under the Trademarks in the Licensed Territory. E. The Grantor is prepared to grant and the Licensee to take a licence in the Licensed Territory to manufacture, advertise, promote and sell fragrances under the Trademarks on the terms and for the consideration hereinafter appearing NOW IT IS HEREBY AGREED as follows: 1. DEFINITIONS 1.1. In this Agreement the following words and phrases shall have the following meanings unless the context clearly requires otherwise 1. 1. 1. "Affiliated Distributors" Shall mean distributors of the Licensee in which either the Licensee or the Guarantor either holds more than 50% of the share voting rights or otherwise has effective control. 1.1.2. "Business" Shall mean that part of the business of the Licensee which involves the manufacture and/or distribution of the Licensed Products (or any part or parts thereof). 1.1.3. "Business Day" Shall mean any day which is not a Saturday not a Sunday and not a recognised public holiday in either the Grantor's or the Licensee's country. 1.1.4. "Calendar Quarter" Shall mean a three monthly period commencing on the first day of each of the months of January, April, July and October in every year of the Term. 1.1.5. "Contract Year" Shall mean each of the following twelve (12) years: - First Contract Year The period from the 1st day of January 1999 to the 31st day of December 1999; Second Contract Year The period from the 1st day of January 2000 to the 31st day of December 2000; Third Contract Year The period from the 1st day of January 2001 to the 31st day of December 2001; 2 Fourth Contract Year The period from the 1st day of January 2002 to the 31st day of December 2002; Fifth Contract Year The period from the 1st day of January 2003 to the 31st day of December 2003; Sixth Contract Year The period from the 1st day of January 2004 to the 31st day of December 2004; Seventh Contract Year The period from the 1st day of January 2005 to the 31st day of December 2005; Eighth Contract Year The period from the 1st day of January 2006 to the 31st day of December 2006; Ninth Contract Year The period from the 1st day of January 2007 to the 31st day of January 2007; Tenth Contract Year The period from the 1st day of January 2008 to the 31st day of January 2008; Eleventh Contract Year The period from the 1st day of January 2009 to the 31st day of December 2009; 3 Twelfth Contract Year The period from the 1st day of January 2010 to the 31st day of December 2010; 1.1.6. "Excluded Duty Free Outlets" Shall mean such duty free outlets as may be notified from time to time by the Grantor to the Licensee pursuant to clause 6.11 of this Agreement. 1.1.7. "Intellectual Property Rights" Shall mean all copyrights, registered and unregistered design rights, patents, trademarks and all other rights 1.1.8. "Licensed Products" Shall mean the Products manufactured by or for and sold by the Licensee and/or any sub licensee of the Licensee under the Trademarks 1.1.9. "Licensed Territory" Shall mean the world (excluding the Excluded Duty Free Outlets) 1.1.10. "Minimum Royalty" Shall mean (a) in the First Contract Year there shall be _____ Minimum Royalty; (b) in the Second Contract Year a Royalty of at least __________________________________ French Francs; (c) in the Third Contract Year a Royalty of at least __________________________________ French Francs; 4 (d) in the Fourth Contract Year a Royalty of at least _____ French Francs; (e) in the Fifth Contract Year a Royalty of at least ________ French Francs; and (f) in the Sixth Contract Year and every subsequent Contract Year of the Term means the higher of (i) _______ francs; and (ii) such other amount as the Grantor and the Licensee, negotiating in good faith shall agreed during the Fifth Contract Year. 1.1.11. "Royalty" Shall mean the royalty payable by the Licensee to the Grantor under clause 5.1 of this Agreement. 1.1.12. "Products" Shall mean men's and women's and children's fragrances and cosmetics and related packaging and promotional materials. 1.1.13. "Restricted Information" Shall mean any information which is disclosed to either party to this Agreement by the other pursuant to or in connection with this Agreement (whether orally or in writing and whether or not such information is expressly stated to be confidential or marked as such) 1.1.14. "Term" Shall mean the term of this Agreement being the period of twelve years commencing on lst January 1999 and expiring on 31st December 2010. 5 1.1.15. "Trademarks" Shall mean the trademarks "PAUL SMITH" and "PS PAUL SMITH" and in each case used with such other additional word or words as may be approved by the Grantor in writing from time to time. 1.1.16. "Turnover" Shall mean aggregate gross sales of each of the Licensed Products sold by the Licensee (or, if the price of any Licensed Product re-sold by an Affiliated Distributor shall be higher than the price at which the Licensed Product was sold to the Affiliated Distributor by the Licensee then the aggregate sales of each such Licensed Product sold by the Affiliated Distributors shall be substituted for the gross sales of such Licensed Products by the Licensee to the Affiliated Distributors) and/or its sub-licensees to customers in the Licensed Territory (whether by wholesale or retail and including sales to the Grantor and its licensees) less: (a) actual trade discounts and other discounts approved of in writing by the Grantor and allowed to customers (but excluding early settlement discounts); (b) returns and credits actually granted to customers (but excluding bad debts); (c) point of sale items (including gifts, samples and testers given to customers and show cards); (d) any commodity or consumption taxes imposed on the Licensee or (as the case may be) the Affiliated Distributors by any Government within the Licensed Territory in respect of the Licensed Products; and (e) shipping and insurance costs borne by the Licensee or (as the case may be) the Affiliated Distributors in the supply of the Licensed Products to their customers. 6 1.2. Index Linked In this Agreement where any figure is followed by the words "(Index Linked)" such figure shall be deemed to be automatically increased on each anniversary of the date of this Agreement in line with any increase in indice des prix de detail since the immediately preceding anniversary of the date of this Agreement. 2. GRANT 2.1. The Grantor hereby grants to the Licensee throughout the Term the right to manufacture, advertise, promote, sell and distribute the Licensed Products in the Licensed Territory and subject to the provisions of this Agreement to use the Trademarks only in connection therewith. 2.2. This Licence is an exclusive licence throughout the Licensed Territory with respect to the Licensed Products and neither the Grantor itself nor any third party licensed by the Grantor shall have the right to advertise, promote, manufacture, sell or distribute, nor cause the advertising, promotion, manufacture of, sale or distribution of any items or material directly competitive with any Licensed Product within the Licensed Territory other than the resale of the Licensed Products by the Grantor of Licensed Products purchased from the Licensee or any Affiliated Distributor or any sub-licensee of the Licensee PROVIDED THAT the Grantor shall not be deemed to be in breach of the terms of this Agreement if it shall continue to sell or otherwise distribute fragrances, moisturisers, talcum powder and/or toothpaste prior to the commercial launch by the Licensee of each such line of Licensed Products nor by the sale or other distribution of stocks of such lines held by or on behalf of the Grantor at the date of the commercial launch by the Licensee of each such line of Licensed Products. 2.3. The Licensee shall launch for commercial sale a men's line and a women's line of the Licensed Products in the Licensed Territory within the first eighteen months of the Term such lines to be distributed to similar levels as the Grantor's competitors' products at the appropriate level in the following countries within the first Three Contract Years:- United Kingdom, Japan, United States of America, Canada, Spain, Portugal, France, Germany, Austria, Italy, Belgium, Luxembourg, Netherlands, Norway, Finland, Sweden, Denmark, Hong Kong, Singapore, Taiwan and Australasia. 7 Other lines of Licensed Products (including without limitation a line of Licensed Products for children) shall be launched for commercial sale at such times as may be mutually agreed between the Grantor and the Licensee. 3. VALIDATION Each party hereto shall at its own expense do all things appropriate to its status as Grantor or as Licensee and necessary for the purpose of rendering this Agreement valid and enforceable. 4. COMMENCEMENT AND DURATION 4.1. Unless sooner terminated by Clauses 9.3. or 10 hereof this Agreement shall continue in force from the date hereof to the expiry of the Term. 4.2. The parties shall commence negotiations in the Ninth Contract Year regarding the renewal of this Agreement at the end of the Term. 5. FINANCIAL PROVISIONS 5.1. Royalties In each Contract Year of the Term the Licensee shall pay to the Grantor whichever shall be the greater of the Minimum Royalty or a royalty at the following rates:- 5.1.1. on annual Turnover of up to (and including) _____________ French Francs (Index Linked) - ___ of the Turnover of the Licensed Products sold by the Licensee and (as the case may be) Affiliated Distributors; and 5.1.2. on annual Turnover of over _____________ French Francs (Index Linked) and up to (and including) ___________________ French Francs (Index Linked) - __ of the Turnover of the Licensed Products sold by the Licensee and (as the case may be) Affiliated Distributors in excess of ______________ French Francs (Index Linked); 5.1.3. on annual Turnover of over ______________ French Francs (Index Linked) and up to (and including) ______________________ French Francs (Index Linked) - ___ of the Turnover of the Licensed Products sold by the Licensee and (as the case may be) 8 Affiliated Distributors in excess of ___________________ French Francs (Index Linked); and 5.1.4. on annual Turnover of over _____________________ French Francs (Index Linked) - ___of the Turnover of the Licensed Products sold by the Licensee and (as the case may be) Affiliated Distributors in excess of ____________ French Francs (Index Linked). 5.2. The Licensee shall on the date of this Agreement pay to the Grantor the sum of ___________French Francs on account of the Royalty payable under this Agreement which shall not be refundable in any circumstances. 5.3. Within thirty (30) days of the end of each Calendar Quarter in every year of the Term the Licensee shall pay to the Grantor whichever shall be the higher of the Minimum Royalty or the Royalty payable to the Grantor by reference to the Turnover during the immediately preceding Calendar Quarter (credit being given for the advance payment of royalty referred to in clause 5.2 until the aggregate Royalty payable under this Agreement shall exceed the amount of the advance payment). 5.4. Records 5.4.1. The Licensee shall keep at its usual place of business books of account relating exclusively to the sales of the Licensed Products and of the amount spent by the Licensee on advertising the Licensed Products and containing such true entries complete in every particular as may be necessary or proper for enabling the amount of the Royalty and other payments and amounts hereby reserved or payable to be conveniently ascertained; and 5.4.2. The Licensee shall permit the duly authorised representatives of the Grantor at the Grantor's expense to inspect the said books and all other relevant books of account of the Licensee and to take copies thereof and shall procure that the Affiliated Distributors and sub-licensees of the Licensee shall permit the duly authorised representatives of the Grantor at the Grantor's expense to inspect the business books of account and all other relevant books of account of the Affiliated Distributors and sub licensees of the Licensee not more than once in each Contract Year (unless such inspection shall establish that the amount of the Royalty paid to the Grantor in respect of the period covered by the inspection is inaccurate by 5% or more of the amount properly payable the 9 Grantor shall be entitled to undertake subsequent inspections without any limitation on the number or their frequency) and to take copies thereof and the Licensee shall give all such other information as may be necessary or proper to enable the amount of the Royalty and other payments payable hereunder to be ascertained as aforesaid at any time during usual business hours. If the inspection established that the amount of the Royalty paid to the Grantor in respect of the periods covered by the inspection is inaccurate by 5% or more of the amount properly payable the Licensee will pay on demand the Grantor the costs of that inspection. If the inspection established that the amount of the Royalty paid to the Grantor is inaccurate then the amount of any Royalty underpaid together with compound interest at the rate of 4% above the base rate for the time being of Barclays Bank plc from the date the underpayment should have been made until the date of actual payment. 5.5. Reports 5.5.1. The Licensee shall deliver to the Grantor every Calendar Quarter in each year of the Term a true and complete statement in writing of all Licensed Products sold in the Licensed Territory by the Licensee, the Affiliated Distributors and any sub licensees of the Licensee during the immediately preceding Calendar Quarter together with the sales prices of such Licensed Products. 5.5.2. The Licensee shall deliver to the Grantor every alternate Calendar Quarter in each year of the Term a true and complete statement in writing of all amounts spent by the Licensee in advertising the Licensed Products in the Licensed Territory in the two immediately preceding Calendar Quarters. 5.6. Authority to make Payment If at any time during the continuation of this Agreement the Licensee is prohibited from making any of the payments hereunder reserved without appropriate authority then the Licensee will forthwith inform the Grantor of such prohibition and commence and diligently pursue all necessary steps to secure from the appropriate authority permission to make the said payments and pending the obtaining of such permission shall place all payments to be made hereunder in an interest bearing bank account and will pay all such payments together with interest earned thereon to the Grantor within seven days of receiving such permission. 10 5.7. Place and Currency of Payment All sums due and payable hereunder shall be payable in London in French Francs unless the Grantor directs payment in some other place or currency. 5.8 Rate of Exchange The conversion rate of one currency to any other currency shall be the rate of exchange of an authorised British foreign exchange bank on the day of actual payment. Any dispute over the rate of exchange will be determined by the certificate of a Banker of repute nominated by the Grantor. 5.9. Deductions Any taxes levied by the government of France upon the payments to be made by the Licensee to the Grantor pursuant to this Agreement and required to be withheld by the Licensee from such payments shall be borne by the Grantor and shall be withheld and paid by the Licensee to the appropriate authority. The Licensee shall supply the Grantor promptly after each tax payment official tax receipts and other evidence of payment issued by the French tax authorities. In the event that the rate of French withholding taxes changes at any time during the continuance of this Agreement then the parties hereto shall be at liberty to re-negotiate and settle in writing the terms of payment. 6. LICENSEE'S COVENANTS The Licensee covenants with the Grantor: 6.1. Trademarks Except as provided by the licence granted under this Agreement nothing herein or otherwise shall give to the Licensee any right title interest or claim in or to the Trademarks. The Trademarks shall continue to be the Grantor's exclusive property during the period of this Agreement and after its termination or expiration or otherwise. Any and all uses of the Trademarks by the Licensee shall inure to the benefit of Grantor only. In the event the Licensee files an application to register or receives a registration of any trade name trademark or service mark comprising or including the words "PAUL SMITH" or "PS PAUL SMITH" such application for registration shall have been filed as a constructive trust on 11 behalf of the Grantor and the Licensee filing or receiving the same shall sign all documents necessary to establish record ownership in the Grantor. 6.2. To promote Sales 6.2.1. To use its best endeavours to promote sales of the Licensed Products within the Licensed Territory and, together with its distributors, to spend in each year of the Term not less than:- (a) in the Second and Third Contract Years, __________ French Francs in aggregate; and (b) in the Fourth Contract Year and every subsequent Contract Year of the Term, ___ of the Turnover of the Licensed Products sold by the Licensee and/ or the Affiliated Distributors in such Contract Year in advertising the Licensed Products throughout the Licensed Territory. For the purpose of this clause and of clause 5.5.2 of the Agreement the word "advertising" shall include gifts with purchase, point of sale items and the cost of producing and placing advertisements but shall exclude the cost of promotional staff in stores. 6.2.2. To arrange for the Licensed Products to be manufactured on commercial scales. 6.2.3. To meet the demand for the Licensed Products in the Licensed Territory. 6.3. Marking All Licensed Products made by or on behalf of the Licensee and any sub licensee of the Licensee shall be marked with one of the Trademarks in conformity with the following principles unless the Grantor agrees otherwise in writing:- 6.3.1. The general style of the marking shall conform with that developed and adopted by the Grantor; 6.3.2. Each Licensed Product shall bear one of the Trademarks in such place as shall have been approved in writing by the Grantor but not anywhere else; 12 6.3.3. The markings shall comply with the laws of the Licensed Territory where the Licensed Products are to be sold. Subject to the above principles the final decision on the form of any marking on the Licensed Products shall be made by the Grantor after consultation with the Licensee. Save as aforesaid to make no other use of or claim any right in either of the Trademarks owned by the Grantor except as expressly permitted by the Grantor and not to use either of the Trademarks on any goods not being Licensed Products. 6.4. Quality 6.4.1. The Licensed Products manufactured by or for the Licensee and any sub licensee of the Licensee shall be of the best quality and shall use only the best quality materials and components. 6.4.2. As required by the Grantor to submit to the Grantor free of charge specimen samples of each type of Licensed Product (including, without limitation packaging and related items) as manufactured by or for the Licensee and any sub licensee of the Licensee immediately prior to each type of Licensed Products being offered for sale and if requested by the Grantor to cease to sell or offer for sale or to permit the sale or offering for sale of any Licensed Products whose sample supplied to the Grantor is not, in the opinion of the Grantor, of satisfactory quality. 6.4.3. To permit duly authorised representatives of the Grantor to inspect the premises in which the Licensed Products are manufactured, stored or packed by or for the Licensee and/or any sub licensee of the Licensee. 6.4.4. To ensure that all Licensed Products submitted for inspection are selected at random and are made by the ordinary production methods. 6.4.5. To manufacture the Licensed Products at the Licensee's own factories or at factories which have been approved in writing by the Grantor and whose quality standards are no less than those of the Licensee. 13 6.5. Independent Contractor and Risk That all aspects of the manufacture, distribution and sale of the Licensed Products by the Licensee and any sub licensee of the Licensee shall be at the risk and responsibility and for the account of the Licensee or sub licensee (as the case may be). The Licensee and any sub licensee of the Licensee shall act as independent contractors and the Grantor shall not be responsible for any breach by the Licensee or any sub licensee of the Licensee of any obligations imposed by law on the Licensee or any sub licensee of the Licensee in its capacity as an employer or as manufacturer distributor and seller of Licensed Products. The Licensee shall indemnify the Grantor against all actions claims demands costs charges and expenses arising out of or in connection with the manufacture use or sale of the Licensed Products made by or for the Licensee or any sub licensee of the Licensee. 6.6. Information 6.6.1. To keep the Grantor informed of all Laws Orders or Regulations made at any time by the Government or any Public or Local Authority within the Licensed Territory in any way affecting or in the Licensee's opinion likely to affect materially the terms of this Agreement or the manufacture or sale of the Licensed Products in the Licensed Territory as soon as the Licensee becomes aware of any such Law Order or Regulation. 6.6.2. To keep all Restricted Information confidential and accordingly except as otherwise required by law not to disclose any Restricted Information to any other person and not to use any Restricted Information for any purpose other than the performance of the Licensee's obligations under this Agreement. 6.7. Take over That within thirty days of the happening of such an event the Licensee will give notice to the Grantor of the acquisition of twenty five per cent (25%) or more of any of the share voting nights in the Licensee by any person firm or corporation or group of persons firms or corporations acting in concert directly or indirectly. 14 6.8. Advertising Material 6.8.1. Twice in each Contract Year to submit to the Grantor free of charge specimen samples of all labels, brochures, advertisements and publicity material relating to the use of the Trademarks by the Licensee proposed to be used by the Licensee in the following six month period and not to use such material until the Grantor or its designated agent has certified its approval in writing. All artwork for advertisements shall be provided by the Grantor to the Licensee at the Grantor's normal commercial rates. 6.8.2. Not to appoint an advertising agency in respect of the Licensed Products without the consent in writing of the Grantor. 6.9. Sales to the Grantor The Licensee shall sell to the Grantor the Grantor's requirements for the Licensed Products for resale in retail shops owned by the Grantor and for sale to the Grantor's franchisees upon the Licensee's standard terms and conditions of sale for the time being in force and at the Licensee's normal wholesale prices less a discount of 20%. 6.10. Sales Outlets and distribution 6.10.1. To sell the Licensed Products only through high quality retail outlets approved in writing by the Grantor (where practicable) prior to acceptance by the Licensee of the outlet's first order and otherwise immediately after acceptance by the Licensee of the outlet's first order and if the Grantor so requests not to sell or as soon as practicable to cease selling through any particular outlet to which the Grantor objects on any ground whatsoever including (but without prejudice to the generality of the foregoing) that the style of the operation of any of the retail outlets does not conform with the standards associated with the Trademarks. 6.10.2. To distribute the Licensed Products in accordance with a distribution policy previously agreed in writing by the Grantor prior to the launch of each line of the Licensed Products. 6.10.3. To exploit the Licensed Products on an arm's length bona fide commercial basis and not in any circumstances to dispose of the Licensed Products to any outlet in respect of which it has any interest or ownership save at the usual commercial wholesale rates. 15 6.11. Duty Free Outlets The Licensee will not distribute the Licensed Products (or any range of the Licensed Products) to any duty free outlets in the Licensed Territory notified in writing by the Grantor to the Licensee from time to time. 6.12. Japan Not to sell or distribute the Licensed Products in Japan otherwise than through the distributorship of a distributor approved of in writing by the Grantor from time to time. 6.13. Intellectual Property 6.13.1. To hold, as bare trustee for the Grantor all Intellectual Property Rights of the Licensee in the Licensed Products (including, without limitation any Intellectual Property Rights in the Licensed Products arising in the future) and their constituent parts and at the Grantor's request to assign such Intellectual Property Rights to the Grantor without compensation. 6.13.2. If the Licensee commissions, engages or employs any third party to create or originate any materials or work in connection with this Agreement in relation to which Intellectual Property Rights may be created, the Licensee shall procure that such third party will execute and deliver to the Grantor prior to any such works or materials being created a properly executed letter from such third party in the form set out in the draft letter annexed to this Agreement or in such other form as may be notified by the Grantor. 6.14. Insurance 6.14.1. To obtain and maintain adequate liability insurance of not less than (pounds) 2 million per claim in respect of claims arising out of any alleged defects in the Licensed Products or their use 6.14.2. To furnish evidence of such insurance to the Grantor promptly following signature of this Agreement and prior to the sale or distribution of any of the Licensed Products. The Licensee shall instruct its insurers in writing (with a copy to the Grantor) to notify the Grantor directly in the event that the insurance shall lapse or 16 cease. The Licensee shall notify the Grantor of all claims made to it and notified to its insurers relating to the Licensed Products. 6.15. Sub Licence Agreements 6.15.1. Not to grant any sub licence of the rights hereby granted without the prior consent of the Grantor nor without submitting the proposed sub licence agreement to the Grantor for the Grantor's approval and (without limitation to the generality of the foregoing) to include in any sub licence agreement it may enter into pursuant to the obtaining of such consent:- (a) Covenants by the sub licensee to observe and perform the terms and conditions contained in clauses 6.1 to 6.14 inclusive hereof and clause 8.1 hereof so far as the same in the opinion of the Grantor are applicable to and capable of observance and performance by such sub licensee (b) Provision for determination as hereinafter contained in clause 10 and for ipso facto determination in the event of and contemporaneously with the determination of this Agreement and the licence granted hereunder. (c) Provision for determination in the event of the acquisition of fifty per cent (50%) or more of any of the share voting rights in the sub licensee or in any holding company of the sub licensee being (in either case) a private limited company (but not a public limited company) by any person firm corporation or group of persons firms or corporations acting in concert directly or indirectly. 6.15.2. To strictly enforce the performance by any sub licensee of the Licensee of the terms of the relevant sub-licence agreement. 7. GRANTOR'S COVENANTS The Grantor covenants with the Licensee: 7.1. Meetings 7.1.1. A representative of the Grantor shall meet with the executive officers of the Licensee at least twice in each Contract Year in London in England to inform the Licensee of developments within 17 the Grantor's business and of its designs for its other product ranges and details of trade marks applied for and registered and to suggest to the Licensee themes and ideas for the development of the Licensed Products and for the advertisement and promotion of the Licensed Products. 7.1.2. The Grantor shall procure that Mr. Paul Smith shall (during his life) be available to meet with representatives of the Licensee to discuss development of the Licensed Products for one half day per month during the first eighteen months of the Term and thereafter at times to be mutually agreed between the Grantor and the Licensee. 7.1.3. The Licensee shall bear the reasonable travelling (first class air fares for Directors of the Grantor - Business Class for other employees and consultants of the Grantor) and subsistence costs of the Grantor's representatives attending such meetings in pursuance of this covenant and of any other meetings arranged between representatives of the Grantor and of the Licensee. 7.2. Personal Appearances The Grantor shall procure the personal appearance of Mr Paul Smith (during his life) at a limited number of events to be agreed between the parties provided that the time and place of such appearance shall have previously been confirmed by the Grantor. The Licensee shall bear the reasonable travelling (first class air fares for Directors of the Grantor -Business Class for other employees and consultants of the Grantor) and subsistence costs of the Grantor's representatives attending such events in pursuance of this covenant 7.3. Restricted Information To keep all Restricted Information confidential and accordingly except as otherwise required by law not to disclose any Restricted Information to any other person and not to use any Restricted Information for any purpose other than the performance of the Grantor's obligations under this Agreement 8. ASSIGNABILITY 8.1. The Licensee shall not have power at any time to assign this Agreement or the whole or parts of its interest therein or in any way charge mortgage or 18 deal with the rights hereby granted except with the written consent of the Grantor. The grant to the Licensee herein contained shall be deemed to be by way of licence only and shall not confer on the Licensee any interest or rights in the Trademarks. 8.2. The Licensee shall have the right to sell the Business with the prior written consent of the Grantor and subject to the conditions listed in sub-clause 8.3. 8.3. The conditions required to obtain the written consent of the Grantor to the sale of the Business by the Licensee shall be that:- 8.3.1. any proposed purchaser shall submit his offer in writing and shall be bona fide and at arms' length and shall meet the Grantor's standards with respect to business experience, financial status, character and ability; 8.3.2. the Licensee must at the time of its application for consent not be in breach of any of its obligations to the Grantor under the terms of this Agreement-, 8.3.3. the Grantor shall be satisfied that the proposed purchaser has adequate financial resources to perform the obligations of licensee under this Agreement and to enable it to trade profitably. The Grantor in so satisfying itself shall not be taken to be making any representations or giving any warranties to such prospective purchaser; 8.3.4. payment is made by the Licensee of all costs and all obligations by or of the Licensee to the Grantor are discharged without any right of deduction or set-off, and 8.3.5. the prospective purchaser offers to enter into a licence agreement with the Grantor on the same terms as this agreement for the unexpired period of the Term. 8.4. The Licensee shall as soon as possible inform the Grantor of its desire to sell the Business and submit to the Grantor a copy of each written offer received from any proposed purchaser to purchase the Business from the Licensee together with:- 8.4.1. a financial statement of affairs and the business history of the proposed purchaser; and 19 8.4.2. details of any other terms which may have been agreed between the Licensee and the proposed purchaser. 8.5. Upon receipt of such notice accompanied by such items the Grantor shall in addition to its other rights hereunder have an option to purchase the Business for the same amount and upon the same terms as the proposed purchaser has offered (even if the Licensee subsequently receives a higher bid for the Business). The Grantor shall have a period of fifteen (15) days after receipt of such written notice and other items to exercise its option to purchase by notice in writing to the Licensee. The sale and purchase shall be completed within 75 days following the service of the Grantor's notice. The Licensee shall notify the Grantor of any variation in the terms offered by any prospective purchaser and the said period of fifteen (15) days shall re-commence as from the date of such notification of a variation in the offered terms. In this clause the expression "the Business" shall include all assets employed in or about the conduct of the Business including the freehold or leasehold interest under which the Licensee occupies any premises used in the Business. 8.6. If the Grantor shall not exercise the option hereinbefore contained the Licensee shall be entitled within the period of six months thereafter to proceed with its application to sell the Business to a proposed purchaser upon the same or no more favourable terms to the purchaser than those notified to Paul Smith pursuant to sub-clause 8.4 hereof. 8.7. Upon the Grantor exercising the option contained in sub-clause 8.5 hereof and upon the satisfaction of the conditions referred to in sub-clause 8.3 hereof the Grantor and the Licensee shall each be deemed to have released the other from the terms of this Agreement save for those provisions which by their nature or effect survive termination. In addition the Licensee shall be deemed to have released and discharged the Grantor from and against all claims and demands whether or not contingent which the Licensee may have against the Grantor arising from this Agreement or otherwise in any way out of the relationship between the Grantor and the Licensee. 8.8. For the purpose of this clause any change in the beneficial ownership of the issued share capital or of the de facto control of the Licensee shall be deemed to be an assignment. 8.9. Notwithstanding the previous provisions of this clause the Licensee shall be permitted to assign the benefit, but subject to the burden, of this 20 Agreement to another limited company of comparable financial standing to the Licensee which is owned (in its entirety) by either the Guarantor or the Licensee without the prior written approval of the Grantor subject only to the assignee company entering into a deed of adherence with the Grantor agreeing to be bound by the agreements on the part of the Licensee contained in this Agreement and agreeing to re-assign this Agreement to the Licensee in the event of the company ceasing to be wholly owned by the Licensee or the Guarantor. The deed of adherence shall be prepared by the solicitors of the Grantor at the cost of the Licensee and on the completion of such deed of adherence the Grantor shall release the Licensee named in this Agreement from any liability for any future breach of the terms of this Agreement. 9. SUPERVENING LAWS AND FORCE MAJEURE 9.1. The rights and obligations of the parties hereto under this Agreement shall be subject to all applicable laws orders regulations directions restrictions and limitations of Governments or other bodies having jurisdiction over the parties hereto. 9.2. If any such law order regulation direction restriction or limitation as aforesaid or any treaty or other international agreement or the final judicial construction of any of them shall after the date of the execution hereof substantially alter the relationship between the parties hereto or the advantages derived from such relationship then the parties shall on request from the adversely affected party modify this Agreement to restore the situation if practicable or to compensate for such alteration. If the parties are unable to agree on such a modification within three months after the notice of request has been received by the party not affected then either party may refer the matter for determination by the courts in conformity with clause 13 to the intent that the court shall decide on such modifications or if they are unable to do so shall make such order as seems to them just and equitable in all the circumstances of the case. 9.3. If there is any total or partial failure of performance hereunder by either party occasioned by strikes lockouts combinations of workmen or any cause whatsoever beyond the reasonable control of the party thereby affected then once the cause has been notified by that party to the other such failure shall not be deemed to be a breach of this Agreement which shall continue in suspense or part performance for the period during which such cause exists. As soon as practicable after such notification the parties shall consult together to decide how if at all the effects of the force majeure can be mitigated. If the cause of such suspension or partial 21 performance exists for a period of more than six (6) months and substantially affects the operation of this Agreement then the party not claiming relief under this clause shall be at liberty to terminate this Agreement on giving to the other thirty (30) days' notice of its intention to do so and this Agreement shall terminate on expiration of such notice. 10. TERMINATION 10.1. The Grantor may terminate this Agreement summarily by written notice to the Licensee if.- 10.1.1. the Licensee or the Guarantor or any sub licensee of the Licensee becomes insolvent or make any arrangement or composition with its creditors or become for any reason whatsoever legally permitted not to pay its debts as they fall due or ceases to exist as a separate legal entity or has an administrative receiver or manager or administrator appointed or does or suffers any act or thing equivalent to any of the above; 10.1.2. the Licensee or the Guarantor or any sub licensee of the Licensee fails to pay:- (a) each instalment of the Royalty to the Grantor that falls due within 7 days of the due date for payment; or (b) any sum (other than the Royalty) to the Grantor that falls due within 7 days of written notice from the Grantor to the Licensee that the sum is due (or overdue) for payment; 10.1.3. the Licensee grants a sub-licence of this Agreement or a sub licensee of the Licensee assigns or grants a sub licence of its sub licence without the necessary consent of the Grantor or purports to do so; 10.1.4. the Licensee or any sublicensee of the Licensee is deprived of or disposes of its business or a substantial part thereof, "substantial" for the purposes of this sub-clause meaning a part which in the last accounting year of the entity represented 35% or more of the relevant entity's turnover; 10.1.5. the Licensee or the Guarantor or any sub licensee of the Licensee has any restriction or limitation placed on the existing powers of its 22 directors to manage its business or on the powers of its shareholders to elect those directors; 10.1.6. the Licensee commits any breach of this Agreement (other than an obligation on the part of the Licensee to pay any sum that falls due to the Grantor) and the Licensee fails to commence to remedy or procure its remedy within thirty (30) days of the Licensee having received written notice from the Grantor requiring it to do so and to have failed to complete the remedying of such breach or to pay adequate compensation if the breach cannot be remedied within sixty (60) days of the receipt of such notice; 10.1.7. the Licensee fails in any year of the Term to pay the Minimum Royalty; 10.1.8. the Guarantor ceases to retain (directly or indirectly) more than 51% of the share voting rights in the Licensee. 10.2. The Licensee may terminate the Agreement summarily by written notice to the Grantor if the Grantor commits any breach of this Agreement and fails to remedy it or pay adequate compensation if the breach cannot be remedied in either case within sixty (60) days of the Grantor having received written notice from the Licensee requiring it to do so. 11. RESIDUAL RIGHTS AND OBLIGATIONS 11.1. Termination for any reason of this Agreement shall be without prejudice to any rights of either party against the other arising out of events occurring before the date of such termination. 11.2. Where this Agreement ends or is terminated on any ground all the Licensee's rights hereunder shall thereupon terminate shall not thereafter be concerned with the Licensed Products whether by way of manufacture sale or otherwise. 11.3. Save as is hereinbefore set forth all rights and obligations of the parties under this Agreement shall cease upon its termination or expiry. 11.4. At the termination of the Agreement the Licensee shall immediately cease and refrain from using the Trademarks or any colourable imitation thereof in any trade name or on any goods or in the advertising or promotion of any goods or services. 23 12. GUARANTEE PROVISIONS 12.1. In consideration of the Grantor entering into this Agreement with the Licensee at the request of the Guarantor, the Guarantor hereby unconditionally and irrevocably guarantees to the Grantor the full, prompt and complete payment by the Licensee of all sums due to the Grantor pursuant to this Agreement and the due and punctual performance by the Licensee of all its obligations hereunder. 12.2. The guarantee contained in this Clause 12 is a continuing guarantee and shall remain in force until all the obligations of the Licensee under this Agreement have been fully performed and all sums payable by the Licensee have been fully paid. 12.3. The Grantor may without any consent from the Guarantor and without affecting the Guarantor's liability hereunder grant time or indulgence to or compound with the Licensee or any other person and the guarantee contained in this Clause shall not be discharged nor shall the Guarantor's liability under it be affected by anything which would not have discharged or affected the Guarantor's liability if the Guarantor had been a principal debtor or principal obligor to the Grantor instead of a Guarantor. 12.4. If the Guarantor is unable to procure that the Licensee duly and punctually performs its obligations hereunder then it shall indemnify the Grantor in respect of all costs, damages. charges and expenses incurred or suffered by the Grantor as a result of any of the obligations of the Licensee under this Agreement being or becoming void, voidable, unenforceable or ineffective as against the Licensee for any reason, whether or not known to the Grantor, the amount of such loss being the amount which the Grantor would otherwise have been entitled to recover from the Licensee. 12.5. It shall not be necessary, prior to seeking payment or indemnification from the Guarantor under this guarantee, for the Grantor to pursue or prosecute any claim it may have against the Licensee and after any default by the Licensee the Grantor may at any time make claims and/or take action (whether in the Courts or otherwise) against the Guarantor as if the Guarantor was a principal obligor to the Grantor under this Agreement having joint and several liability with the Licensee hereunder. 13. NOTICES Every Notice consent or communication permitted or required to be served under this Agreement shall be in writing. Notices may be served by hand, by facsimile 24 transmission or by pre-paid registered post. A notice served by hand or by facsimile transmission shall be deemed to be received at the moment of transmission provided that, in the case of facsimile transmission a copy of the notice is sent by pre-paid registered post to the addressee within twenty-four (24) hours after such service; a notice served by post shall be deemed to be received on the tenth Business Day after it has been posted to the address of the recipient party as set out in the preamble to this Agreement or to such other address as that party may from time to time designate in writing. 14. LANGUAGE AND LAW This Agreement is written in the English language and shall be interpreted according to English law. The Courts of England shall have exclusive jurisdiction over it to which jurisdiction the parties hereby submit. 15. ACTIONS FOR INFRINGEMENT 15.1. The Licensee agrees to assist the Grantor at the Grantor's expense to the extent necessary in the procurement of any protection by the Grantor of rights in the Trademark by registration or otherwise or to protect any of the Grantor's rights in and to the Trademarks. The Licensee shall forthwith give notice in writing to the Grantor of any infringement suspected or unauthorised use of the Grantor's Trademarks or copyright. 15.2. The decision as to whether or not to take proceedings against an infringer shall in all cases rest with the Grantor. 15.3. In the event the Licensee makes the Grantor aware of any unfair competition or infringement by third parties the Grantor shall control absolutely all litigation relating to matters described in this clause 15. The Grantor may join the Licensee as a party thereto. If the Grantor agrees to take proceedings against an infringer it shall do so at its own expense but if the Grantor elects not to take proceedings against any infringer the Licensee shall have the right but not the obligation to take such proceedings in the name of the Grantor on giving the Grantor an indemnity as to costs. The party not taking proceedings shall be obliged on request and at its own cost to execute any documents and do any other things reasonably necessary or desirable for the prosecution of the action. The party bearing the cost of the proceedings shall be entitled to any damages accruing from them. 15.4. In the event of a third party commencing litigation against the Licensee for unfair competition and/or infringement arising out of the use by the 25 Licensee in accordance with the terms of this Agreement of the Trademarks in any country in which the Trademarks are registered trademarks in respect of the Products the Grantor shall indemnify and hold harmless the Licensee against any out of pocket expenses (including reasonable attorney's fees) directly incurred by the Licensee arising out of and/or related to the use by the Licensee of the Trademarks in accordance with the terms of this Agreement in the marketing distribution and/or sale of the Licensed Products in those countries subject to the following conditions:- 15.4.1. The Licensee must promptly notify the Grantor in writing of any allegation of infringement; 15.4.2. The Licensee must make no admission without the Grantor's written consent; and 15.4.3. The Licensee must at the Grantor's request allow the Grantor to conduct and if it decides to settle all negotiations and litigation and must give the Grantor all reasonable assistance. 16. MISCELLANEOUS 16.1. Headings and commas used in this Agreement are for the purpose of ease of reference or reading only and shall not affect its interpretation. 16.2. This Agreement shall not be varied amended or supplemented except by instrument in writing executed by the duly authorized representatives of each of the parties. 16.3. The failure of any party hereto at any time to enforce the terms provisions or conditions of this Agreement shall not be construed as a waiver of the same or of the right of such party to enforce the same. 16.4. Unless otherwise expressly stated any waiver of any of the Licensee's or of the Guarantor's obligations under this Agreement shall expire at the end of one year from the date on which it was given. 16.5. If any provision of this Agreement is held by any court or other competent authority to be void or unenforceable in whole or part this Agreement shall continue to be valid as to the other provisions thereof and the remainder of the affected provision. 26 16.6. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the parties hereto in connection therewith. 16.7. Wherever in this Agreements terms documents materials and/or proposals are submitted by one party to another unless specifically stated to the contrary the party who receives such submission shall have twenty days after receipt to approve or disapprove such submission. If the party timely disapproves such submission the disapproving party shall notify the other party of its disapproval. In the event that the receiving party neither approves nor disapproves the submission in a timely manner the submission shall be deemed approved. IN WITNESS whereof this Agreement has been executed as a deed on behalf of the parties in accordance with their respective laws. 27 Exhibit "A" Countries where the Trademarks are registered in respect of fragrances COUNTRY - -------------------------------------------------------------------------------- Argentina Thailand Austria United Kingdom Benelux Croatia France Germany Greece Indonesia Italy Japan Macau Mexico North Korea Portugal South Korea Spain Switzerland 28 EXECUTED AS A DEED by ) - ------------------ PAUL SMITH LIMITED ) - ------------------ acting by the following signatories: ) Director Director EXECUTED AS A DEED by INTER PARFUMS S.A. acting by the following signatories EXECUTED AS A DEED by JEAN-PHILIPPE FRAGRANCES INC. acting by the following signatories:- To: Paul Smith Limited Dear Sirs In consideration of [ ] we hereby assign to Paul Smith Limited all the copyright and all other rights (including goodwill) for all purposes throughout the world in the works which F We have carried out for Inter Parfums S.A. ("the Licensee") in connection with their licence for fragrances ("the Licence") and which I/We will carry out for the Licensee in the future in connection with the Licence, and I/We agree that I/We will execute any further documentation which may be required to effect fully this assignment or to enable Paul Smith Limited to apply for any registrations or extensions in connection with the works as Paul Smith Limited thinks fit. I/We also hereby transfer any and all intellectual property rights in connection with the works (including those of the exploitation, printing and distribution) to Paul Smith Limited. This assignment shall be for the full ten-n (including any extension of these rights). I/We agree that Paul Smith Limited shall be entitled to use and exploit in any way with my/our works and in whatever manner Paul Smith Limited thinks fit, and shall be entitled to make any changes, additions or alterations that it may deem necessary. I/We hereby ]irrevocably waive in Paul Smith Limited's favour all Moral Rights (as set out in the Copyright, Designs and Patents Act 1988 or any similar laws existing in any part of the world) in the works. I/We agree that English law governs this agreement and that this agreement will apply to any further works which I/ We undertake for the Licensee in connection with the Licence in the future. Yours faithfully, Signed _______________________ Date _________________________ Name _________________________ Address ______________________ ______________________________ ______________________________
'PAUL SMITH' - CLASS 3 - --------------------------------------------------------------------------------------------------- TRADE MARKS - 'PAUL SMITH' CLASS 3 (TOILETRIES/FRANGRANCES ETC) Country Reg. No. Filing Date Renewal Status - --------------------------------------------------------------------------------------------------- Argentina 1554979 31.3.95 31.3.2005 Australia 754526 10.2.98 Pending Austria 139974 22.1.92 22.1.2002 Benelux 500607 13.9.91 13.9.2001 Croatia Z971591 26.6.98 16.10.2007 France 1563240 29.8.89 28.8.99 Germany 11885322 21.8.89 21.8.99 Greece 95676 19.9.89 19.9.99 Indonesia 326993 30.10.93 30.4.2003 Italy 581288 12.1.90 12.1.2000 Japan 2134355 28.4.89 28.10.98 Renewed Paid 10.6.98 Macau 14-979-M 4.3.96 4.3.2006 Mexico 400023 7.11.90 7.11.2000 North Korea 8599 29.7.95 29.7.2005 Philippines 99977 4.5.95 Pending Portugal 253966 29.10.93 29.10.2003 Russia 97715710 20.10.97 Pending South Korea 238633 22.5.92 21.5.2002 Perfumery and hair products 238634 22.5.92 21.5.2002 Toiletries and Dentifices 337917 23.4.96 23.4.2006 {PS Logo} 337918 23.4.96 23.4.2006 {PS Logo} Spain 1512729 20.7.89 20.7.99 1326880 5.8.91 5.8.2001 {PS Logo} Switzerland 392654 9.9.91 9.9.2011 Thailand Kor22428 8.12.93 8.12.2003 United Kingdom 2051161 12.1.96 12.1.2006 USA 1511432 8.11.88 8.11.2008 Community (EEC) 45393 1.4.96 Pending - ---------------------------------------------------------------------------------------------------
EX-10.71 7 AGREEMENT Exhibit 10.71 AGREEMENT THIS AGREEMENT IS MADE BY AND BETWEEN CHRISTIAN LACROIX, a Societe en Nom Collectif (commercial partnership), whose registered office is at 73, rue du Faubourg St Honore, 75008 PARIS, registered with PARIS Trade and Companies Register under number 341 265 858 , represented by Mr Serge Marx. Hereinafter referred to as "LACROIX" AND INTER PARFUMS, Societe Anonyme (French Public Limited Company), whose registered office is 4, rond point des Champs Elysees, 75008 PARIS, registered with Paris Trade and Companies Register under number 350 219 382, represented by Mr Philippe Benacin. Hereinafter referred to as "INTER PARFUMS" WHEREAS: LACROIX, a subsidiary of the company LVMH - MOET HENNESSY.LOUIS VUITTON, is the owner of the international class 3 "CHRISTIAN LACROIX " trademark, which, both in France and abroad, enjoys international renown and a prestigious image in the domain of haute-couture, and of luxury ready-to-wear clothing and accessories. INTER PARFUMS is desirous to exploit the CHRISTIAN LACROIX trademark for the manufacture and distribution of perfumes and derived products under that trademark under conditions consistent with the prestige of the trademark and the reputation for high quality of CHRISTIAN LACROIX products. The Parties acknowledge the mutual interest they share in preventing any detriment to the CHRISTIAN LACROIX brand image. They will act accordingly to defend its influence and develop its prestige; they will proceed jointly or severally, promptly in all matters that may contribute to achieving this objective. In the perspective of engaging in joint endeavours to confer a style exclusive to CHRISTIAN LACROIX upon those products constituting the subject matter of this Agreement, NOW THEREFORE THE PARTIES HAVE AGREED AS FOLLOWS: ARTICLE 1: DEFINITION For the purposes of this Agreement, the meaning of certain terms is specified below: 1.1 "AGREEMENT" shall mean the present Licence Agreement and its Exhibits. 1.2 "PRODUCTS" shall mean the perfumes, eaux de toilette, products derived directly from these perfumes, excluding cosmetics, which INTER PARFUMS may create or shall create in the performance of this Agreement. 1.3 "PRODUCT ENVIRONMENT" shall mean the bottles, the covers or boxes, the perfume packaging and products derived from the perfumes. 1.4 "TERRITORY" shall mean the whole world, including duty-free points-of-sale. 1.5 "TRADEMARKS" shall mean the existing international class 3 trademark registrations and/or applications in the name of the CHRISTIAN LACROIX company as listed in Exhibit 1. The Parties also agree to designate by this term all future trademark registrations and/or applications in the name of the CHRISTIAN LACROIX company under this Agreement. 1.6 "CONTRACT YEAR" shall mean the period between 1st January of one year N and 31st December of that same year. 2 1.7 "RETAILER" shall mean any point-of-sale or retail sale area authorised to sell Products bearing the CHRISTIAN LACROIX Trademark. 1.8 "DISTRIBUTOR" shall mean any independent company authorised to sell Products bearing the CHRISTIAN LACROIX Trademark by virtue of a written agreement or of understandings with INTER PARFUMS to retailers in on or more countries. ARTICLE 2: SUBJECT MATTER OF THE AGREEMENT 2.1 Under the terms and conditions of this Agreement, LACROIX grants INTER PARFUMS the exclusive right to use the Trademark for the manufacture and commercialisation of the Products in the Territory under the circumstances defined herebelow. 2.2 In this context, the use of the term "exclusive" shall mean that, for the entire term of this Agreement, LACROIX shall refrain from granting other licences for the manufacture and/or sale of the Products bearing the Trademarks. 2.3 It is expressly understood and agreed by INTER PARFUMS that LACROIX reserves the right to open stores anywhere in the world under the "CHRISTIAN LACROIX " name, and INTER PARFUMS undertakes to supply such stores at their request. INTER PARFUMS shall keep its Distributors duly informed of the existence of this exception to the exclusive rights that INTER PARFUMS may have granted them in their distribution area. INTER PARFUMS shall sell the Products to these stores at the wholesale price minus ________________. ARTICLE 3: OBLIGATIONS OF THE PARTIES 3.1 INTER PARFUMS undertakes to actively exploit this Licence throughout the Territory or at least in those countries of the Territory where exploitation of the "CHRISTIAN LACROIX" Trademark can be envisaged having regard to the presence of competing brands, and to conduct an active policy as concerns the manufacture and commercialisation of the Products. If, in any given country, the Products are not commercialised for 3 (three) years, the Parties shall meet with a view to adopting a strategy for that country. 3 3.2 INTER PARFUMS undertakes that all the Products, as well as all the perfume extracts or constituents of the Products, shall be made in Europe. 3.3 DISTRIBUTION NETWORK 3.3 a) INTER PARFUMS undertakes to adopt a selective sales policy for the distribution of the Products and only to sell the Products through selective points-of-sale, perfume shops and department stores. INTER PARFUMS further undertakes that the Products shall be commercialised at a price corresponding to the "CHRISTIAN LACROIX" brand image. 3.3 b) INTER PARFUMS undertakes to ensure the reputation and prestige of the Trademark is upheld through a suitable marketing policy and sales methods for the selective distribution system. INTER PARFUMS undertakes to commercialise the Products in a selective distribution network covering the entire Territory, within the limits of Article 3.1 above, and to maintain an administrative and sales structure capable of ensuring effective control. 3.3 c) In order to maintain the "CHRISTIAN LACROIX" brand image, INTER PARFUMS undertakes not to commercialise the Products other than in points-of-sale meeting the criteria for quality and employing competent personnel. INTER PARFUMS shall insert a corresponding clause in all of its agreements entered into with its Distributors or with Retailers. INTER PARFUMS shall furnish LACROIX with a standard model of such contracts, for information. 3.3 d) In order to check that the Products are being distributed on the Territory in accordance with the prestige of the Trademark, LACROIX may visit or have inspectors visit the points-of-sale. If it appears that some of these fail to meet the requirements set out in subparagraph 3.3c) above, LACROIX may ask INTER PARFUMS to remove the Products or to have the Products removed from the points-of-sale visited and to discontinue commercialisation of the Products through those points-of-sale. 3.3 e) INTER PARFUMS shall regularly forward the list of its Distributors and Retailers to LACROIX. 3.3 f) INTER PARFUMS shall provide LACROIX with a breakdown of sales of Products by country once per year. 4 3.4 INTER PARFUMS undertakes to control its distribution network closely and to deliver the Products in reasonable quantities with regard to the potential of each market where the Products are distributed, in order to prevent any sales outside of the distribution network. 3.5 The Parties agree that the reputation of "CHRISTIAN LACROIX" in haute-couture and luxury ready-to-wear clothing is the basis of the interest in its Trademark, and that the impact of this reputation substantially affects the positioning of the Trademark in the perfume industry. In this perspective, LACROIX undertakes, as a material and essential conditions of this Agreement, failing which stipulation the Parties would not have entered into the Agreement, to obtain from the present and future majority partner, controlling the CHRISTIAN LACROIX company: o the express undertaking to regularly support the creative activities of LACROIX in haute-couture and luxury ready-to-wear clothing, or any other fashion activity liable to support the image of prestige of the CHRISTIAN LACROIX Trademark; o the express undertaking to consolidate the personal notoriety of Mr Christian LACROIX, in particular through his presence at fashion parades of haute-couture and ready-to-wear clothing, and by media appearances. ARTICLE 4: TIMETABLE FOR LAUNCHING THE PRODUCTS 4.1 INTER PARFUMS undertakes to take all the necessary steps so that, within 12 (twelve) months of the Effective Date of this Agreement, a first perfume, comprising a line for women, shall have been launched. It is, however, specified that at the date this Agreement is signed, the development of this first perfume, at the instigation of LACROIX, is partly in the finalisation stage, INTER PARFUMS having to ensure the technical finalisation, consisting in particular in selecting suppliers and negotiating with them the choice of plastics and quality of moulds. This technical finalisation shall be submitted to final approval of LACROIX. In addition, the finalisation budget for this first perfume shall be determined by mutual agreement in a separate letter. 4.2 INTER PARFUMS undertakes to take all the necessary steps so that, within 36 (thirty-six) months of the Effective Date of this Agreement, the first line of perfume referred to above shall be widely distributed in Europe, North America, South America, Asia and the Middle East, and shall also be present in duty-free points-of-sale. 5 4.3 During the 3rd (third) Contract Year, the Parties, having regard to the sales figures for the first line of perfume, shall confer about the development of a second line of perfume (for men and/or for women), possibly for a wider public. This second line could possibly be designated by the trademark ________________. 4.4 In the 5th (fifth) Contract Year, with the express proviso that the second line of perfume referred to above has actually been launched, INTER PARFUMS and LACROIX shall confer about the development of a third line of perfume, which may possibly be consistent with the image of haute-couture. ARTICLE 5: TERM 5.1 This Agreement shall come into effect as of 1st March 1999 and shall expire, unless Article 5.2 is brought into force, on 31st December 2010. 5.2 The Parties shall meet 48 (forty-eight) months before the Expiration Date of the Agreement as indicated above to negotiate the possible renewal of the Agreement, it being specified that the criteria forming the basis for discussion shall pertain to the results actually achieved by INTER PARFUMS in the performance of this Agreement. The Parties shall use their best efforts to renew this Agreement on the basis of reasonable figures proposed by INTER PARFUMS, but which LACROIX may nonetheless decline on the grounds of serious disagreement or improper performance of this Agreement by INTER PARFUMS or of the strategic wishes of LACROIX and/or the LVMH Group to manage the development of "CHRISTIAN LACROIX" perfumes directly within their organisation. Should the Parties fail to reach a written agreement to this effect by 31st December 2007, this Agreement shall terminate as of the Expiration Date indicated in Article 5.1. ARTICLE 6: ROYALTIES 6.1 In consideration for the rights granted to it under this Agreement, INTER PARFUMS shall pay the following licence fees to LACROIX: o __________________ of INTER PARFUMS' annual turnover from the sale of the Products in the bracket between _______________________________ ______________________________________________. 6 o __________________ of INTER PARFUMS' annual turnover from the sale of the Products in excess of __________________________________________. 6.2 The basis used for calculating turnover shall be the net total invoiced by INTER PARFUMS (head office and subsidiaries) to its Retailers and Distributors, including invoices further to orders by LACROIX, but exclusive of point-of-sale advertising materials (point-of-sale advertising meaning window displays, samples, testers, miniatures, etc.) and promotional items such as umbrellas, bags, cases, etc. given free-of-charge to the Distributors and/or Retailers (the said materials and items under no circumstances to exceed 10% [ten per cent] of total sales), excluding taxes on turnover or profits and excluding transport costs, and after deduction against supporting evidence for any Products returned unsold. 6.3 The royalties thus calculated in accordance with the provisions of article 6.2, shall be payable quarterly on 30th April, 31st July, 30th October and 31st January of each year. 6.4 INTER PARFUMS undertakes to pay to LACROIX, within 30 (thirty) days of the end of each quarter, for the term of the Agreement, the guaranteed minimum royalties set out below, it being specified, however, that the first annual guaranteed minimum is applicable over a period of 22 (twenty-two) months, the first Contract Year being given over to the finalisation and launch of the first perfume; the first guaranteed minimum shall be paid by 30th April 2000 at the latest. PERIOD GUARANTEED MINIMUM (French Francs excluding VAT) - -------------------------------------------------------------------------------- 1st March 1999 - 31st December 2000 1st January 2001 - 31st December 2001 1st January 2002 - 31st December 2002 1st January 2003 - 31st December 2003 1st January 2004 - 31st December 2004 1st January 2005 - 31st December 2005 1st January 2006 - 31st December 2006 1st January 2007 - 31st December 2007 1st January 2008 - 31st December 2008 1st January 2009 - 31st December 2009 1st January 2010 - 31st December 2010 - -------------------------------------------------------------------------------- 7 6.5 INTER PARFUMS undertakes, at the dates specified in Article 6.3 above, to provide quarterly statements indicating the exact amount of royalties due under this Agreement as calculated in accordance with Articles 6.1 and 6.2 above. At the same dates, INTER PARFUMS shall pay to LACROIX the exact amount of royalties thus calculated even if it is in excess of the minimum guaranteed amount set out in Article 6.4. If this amount is less, INTER PARFUMS shall pay the minimum guaranteed amount due at that date to LACROIX. However, the payment may be less than the minimum guaranteed for the same quarter if the aggregate sum paid for the previous quarters of the Contract Year in course is greater than the aggregate of the sums actually owed by INTER PARFUMS. 6.6 It is agreed that the annual accounts pertaining to the royalties due shall be closed each year within 3 (three) months after the end of the corresponding Contract Year. 6.7 INTER PARFUMS undertakes to submit audited annual accounts relating to the royalty payments. The said accounts shall be sent to LACROIX before the end of the third month following the closure of accounts for each corresponding Contract Year. 6.8 INTER PARFUMS shall maintain complete and precise records of all sales of the Products under this Agreement and shall allow an agent or authorised representative of LACROIX to examine the said records, make copies of them and check the corresponding entries in INTER PARFUMS' books once per year and at LACROIX's expense for the full term of the Agreement for 3 (three) years after it has expired. 6.9 INTER PARFUMS discloses below, purely for guidance, its forecast turnover plan (ex-works) for a period of 10 (ten) years, without it constituting any contractual obligation upon it: PERIOD Forecast turnover (ex-works) - ------------------------------------------------------- 1999 Product development 2000 2001 2002 2003 2004 2005 2006 2007 2008 - ------------------------------------------------------- 8 ARTICLE 7: CREATION, INDUSTRIAL DEVELOPMENT OF THE PRODUCTS AND COMMUNICATION 7.1 The creation of the Products and communication relating to the Products shall be consistent with a style that is exclusive to "CHRISTIAN LACROIX". In order to ensure such consistency INTER PARFUMS undertakes to leave LACROIX full initiative for the creation and advertising communication of the Products, within the limits of the budget set by INTER PARFUMS and with the express proviso that LACROIX involves INTER PARFUMS closely in all stages of creation and development of the communication, in order to allow INTER PARFUMS to suggest any modifications it feels appropriate. The Parties undertake to do their best to cooperate in order to achieve together a common project, and this perspective they define below the conditions for distributing the respective tasks. 7.2 BUSINESS PLAN a) For all future launches contemplated, INTER PARFUMS shall provide LACROIX with a Business Plan containing the following items: o Intended targets and markets o Price positioning o Distribution strategy o Communications strategy o Budget for creation and communication ("BUDGET") o Forecast turnover b) The Business Plan defined above shall be presented at a meeting between the Parties and any outside contributors they may call in to discuss the said plan. In particular, the opportuneness of launching a new Product and the general characteristics of such Product and of the above Business Plan shall be discussed at such time. 9 7.3 PRODUCT CONCEPT AND CREATION 7.3.1 LACROIX shall maintain total control of the concept of any Product under consideration and of its creation, within the limits of the Budget set by INTER PARFUMS, and with the express proviso that the development of the concept and creation shall be submitted for the approval of INTER PARFUMS at each stage of creation, which shall be as follows: o finalisation of the Product concept, o drawing up of briefs for designers (styling and perfume) giving them working guidelines, o finalisation of the bottle styling, o development and choice of perfume, o development and choice of packaging, o choice of the Product name. 7.3.2. LACROIX and INTER PARFUMS shall, by mutual agreement, choose the creator of the perfume extracts and the designer of the perfume bottle and packaging from among recognised professionals in their field of activity. 7.4 INDUSTRIAL DEVELOPMENT OR TECHNICAL FINALISATION OF PRODUCTS 7.4.1 The Parties agree that INTER PARFUMS shall retain complete control of all stages of industrial development. It shall freely select the suppliers of packaging items (moulds, caps, pumps, boxes, packing, labels, etc.), it being understood that the technical finalisation of the new Product under consideration shall be submitted for final approval to LACROIX. 7.4.2 INTER PARFUMS shall provide LACROIX, for verification purposes, with samples of the Products before they are made commercially available. INTER PARFUMS further undertakes to commercialise only Products in conformance with the prototypes decided upon by mutual agreement. 10 7.5 COMMUNICATION 7.5.1 INTER PARFUMS shall give details of its proposed Budget under the Business Plan referred to above and set it in agreement with LACROIX; its communication strategy, relating in particular to the choice of media or means of communication (point-of-sale advertising, advertising, public relations, etc.). 7.5.2 INTER PARFUMS shall present a media plan and forward it for approval to LACROIX insofar as possible. 7.5.3 The Parties agree that the creation of visuals for point-of-sale advertising, advertising and public relations shall be left to LACROIX, within the limits of the Budget set for this purpose by mutual agreement between the Parties and with the express proviso that LACROIX submits the project for approval to INTER PARFUMS, at each of the following stages: o concept of the advertising visuals for the new Product; o choice of contributors, in particular models, photographers or visual artists, and the fees paid for their contribution to the creation of the visuals; o the end result of the advertising visuals so designed. ARTICLE 8: SUBCONTRACTORS 8.1 INTER PARFUMS is authorised, under its entire liability, to contract out any or all of the manufacturing of the Products and to entrust the commercialisation of the Products to third parties acting in a capacity of sales agents or Distributors on the following conditions: o INTER PARFUMS gives an undertaking that all manufacturing of the Products or perfume extracts by its subcontractors shall be done in Europe; o INTER PARFUMS undertakes to have its subcontractors and Distributors abide by the general terms and conditions of this Agreement; o INTER PARFUMS shall from time to time transmit the list of subcontractors and Distributors to LACROIX, at its request. 11 8.2 Quality control - INTER PARFUMS shall regularly control, or have controlled, the quality of the Products manufactured and packaged by its subcontractors and undertakes to inform LACROIX at the earliest opportunity of any technical defects reported and to take all necessary measures to correct such defects. INTER PARFUMS undertakes to send random samples of the Products to be commercialised to LACROIX at its request and at most once per month. ARTICLE 9: MARKETING PLAN 9.1 By 31st October of each year at the latest, INTER PARFUMS shall send a Marketing Plan relating to the next calendar year to LACROIX for approval. The said Plan shall contain essentially: o the update of the Product ranges, o proposals for retail price positioning, o programme for events and promotion. 9.2 By 31st January of each year at the latest, INTER PARFUMS shall send to LACROIX, for information, the following budget forecasts: o a forecast for the current year's turnover, o the advertising budget for the current year, o a draft project for media plans. ARTICLE 10: ADVERTISING SPENDING 10.1 INTER PARFUMS, jointly with its Distributors, undertakes to invest in advertising for the Products a minimum of _____________________ of net local wholesale annual turnover from the sale of the Products for the entire term of the Agreement. The advertising budget will cover advertising expenses at points-of-sale (shop windows, samples, miniatures, testers, etc.), advertising spending on media (magazines, newspapers, television, etc.) and public relations and promotional expenses. INTER PARFUMS further undertakes to audit the advertising spending and actions of its Distributors. 10.2 INTER PARFUMS further undertakes that the total amount of its spending on advertising for the Products, and that of its Distributors, shall be at least ____________________________ 12 ___________________________ for the aggregate expenditure of the second and third Contract Years. ARTICLE 11: TRADEMARKS 11.1 INTER PARFUMS acknowledges the present and future rights of LACROIX in the Trademarks, including in particular the Trademarks described in Article 11.6 hereunder, and undertakes not to contest the said rights. The Parties to this Agreement acknowledge that all of the rights pertaining to the Trademarks and deriving from the use thereof by INTER PARFUMS are the sole property of LACROIX. 11.2 INTER PARFUMS undertakes not to use the Trademarks other than in the form specified in Exhibit 1 and solely in connection with the Products, the Product Environment, and the sale and promotion thereof. 11.3 INTER PARFUMS shall seek the prior consent of LACROIX for any combined use of the Trademarks with another name, trademark, logo or other wording or device. INTER PARFUMS shall further request clear and unequivocal prior consent from LACROIX before using the Trademarks in its letterheads. 11.4 The Parties hereto shall decide jointly if it becomes necessary to chose and file applications for one or more new trademarks for the different lines of Products. To this end, INTER PARFUMS shall provide LACROIX, in the Marketing Plan referred to in Article 9 above, with full particulars pertaining to the said trademarks. INTER PARFUMS undertakes to show reasonable restraint in its wishes to create new trademarks and, in any event, not to plan filing applications for more than 3 (three) new trademarks during the entire term of this Agreement. 11.5 INTER PARFUMS shall propose to LACROIX several names and/or logos for the aforementioned new trademarks after making the relevant searches concerning prior registrations of such names and/or logos in the countries indicated by INTER PARFUMS. LACROIX shall file any applications for the said new trademarks in its own name and at its expense with the relevant institutions for at most 40 (forty) countries in which INTER PARFUMS effectively intends to distribute the Products. It is understood that the terms and conditions of this Agreement shall apply to the new trademark thus created. 11.6 If it becomes necessary to file an application for the LACROIX Trademark in any country where the Trademark is not currently registered, LACROIX shall file the Trademark application in 13 order to allow INTER PARFUMS to distribute the Products in accordance with local rules and regulations. 11.7 LACROIX shall use its best efforts, if it deems necessary, and insofar as the possibilities provided by local rules and regulations allow, to combat any infringing registration of the Trademarks, any passing-off of the Products and any unlawful use of the Trademarks by third parties in the same field as that of the Products. LACROIX shall act in consultation with INTER PARFUMS who, for its part, shall be obliged to provide LACROIX with all possible assistance. 11.8 INTER PARFUMS shall keep LACROIX informed of any infringement and more generally of any violation of the Trademarks or of any other of LACROIX's intellectual property rights in the Products which may come to its knowledge. LACROIX shall take whatever measures it deems appropriate. 11.9 If, for any reason, LACROIX considers it unnecessary to bring any action, LACROIX shall notify INTER PARFUMS, who shall then be entitled to enforce LACROIX's rights at its own expense. INTER PARFUMS shall use its best efforts, under close supervision of LACROIX, to defend LACROIX's rights as best it can, insofar as local laws and regulations authorise as much. INTER PARFUMS shall seek the prior consent of LACROIX before taking any action and, in particular, before making any statements or passing on any information. 11.10 In the countries listed in Exhibit 1 of this Agreement, where the Trademark applications have not yet been registered, LACROIX shall complete the registration procedures. However, LACROIX cannot be held liable in any way for any application being rejected. LACROIX further undertakes to use its best efforts to renew, at its expense, the registrations of the trademarks listed in Exhibit 1 throughout the entire term of this Agreement. 11.11 Should any legal or other obstacles impede trademark applications in any country where the said application would be desirable, the Parties hereto shall use their best efforts to remove the impediment in question or to find an alternative. 11.12 If LACROIX so requests, INTER PARFUMS shall do its best to support the filing of applications and applications for renewal of the Trademarks, in particular by furnishing all necessary information, by making all necessary statements and by forwarding all necessary documents. 14 11.13 LACROIX hereby consents to INTER PARFUMS being registered, at INTER PARFUMS' expense, as a "Registered User" of the Products in the countries where such registrations are recommended or required by law. 11.14 The Parties may, where applicable, decide to protect the Product bottles and/or boxes by registering a design, such design being registered exclusively in the name of and at the expense of LACROIX. ARTICLE 12: PRIOR TERMINATION 12.1 This Agreement may be terminated as of right and without prior notice by either of the Parties hereto: a) in the event of either Party becoming insolvent, filing for bankruptcy, or going into receivership; b) in the event of either Party ceasing trading for any reason whatsoever. 12.2 This Agreement shall also be terminated under the following circumstances after serving official notice without advance warning: a) in the event of failings seriously affecting the rights of either Party to this Agreement and if such failings are not remedied within 30 (thirty) days of a reminder being sent by the other Party, b) in the event of breach by INTER PARFUMS of its obligations to make payments in full of the sums owing pursuant to Article 6, within 8 (eight) days of notice being sent by recorded delivery mail. 12.3 Notice of termination and reminder letters shall be sent by recorded delivery mail. 12.4 If either of the Parties considers the other Party's grounds for terminating the Agreement are unjustified or unfounded, it may submit the termination claim to the courts of law. 15 ARTICLE 13: EFFECTS OF TERMINATION - OBLIGATIONS OF THE PARTIES 13.1 The termination of this Agreement further to the occurrence of one of the events listed in Article 12 above in no way releases the Parties from their obligations hereunder or from the obligations applicable subsequent to the discharge hereof. If LACROIX is induced to terminate the Agreement because of what is deemed a serious failing under the Agreement by INTER PARFUMS, all of the unpaid royalties shall become due immediately. 13.2 At the Expiration Date of this Agreement, INTER PARFUMS shall cease forthwith all use of the Trademarks and remove all mention of the said Trademarks from its business documents, invoices, letterheads, advertising, etc. INTER PARFUMS shall also cease to refer to LACROIX, to the Trademarks, and to its past collaboration with LACROIX as a business partner or licensee and shall bear sole responsibility with regard to its sub-licensees. 13.3 Disposal of stock 13.3.1 INTER PARFUMS shall be entitled to commercialise such Products as were already manufactured or in the process of manufacture at the Expiration Date of the Agreement for 6 (six) months after the term hereof. INTER PARFUMS shall send to LACROIX within 15 (fifteen) days as from the Expiration Date of the Agreement a statement of stocks of the Product remaining to be disposed of, it being specified that the said stocks shall not be of a greater volume than the sales of the Products over a 6 (six) month period. The said volume shall be calculated on the basis of mean output recorded during the 6 (six) months preceding the expiration of the Agreement. The remainder of the Products shall be disposed of within 6 (six) months after the expiration of the Agreement, in accordance with the contractual terms of sale and via the sales networks previously used or similar networks. INTER PARFUMS shall draw up a statement of sales thus made at the earliest 6 (six) months after the Agreement has expired and shall pay the corresponding royalties to LACROIX, excluding any sales made to LACROIX at cost price. INTER PARFUMS undertakes to return at cost price the advertising material in stock at the date the Agreement expires. 13.3.2 If at the end of the 6 (six) month period, INTER PARFUMS has not disposed of all its stock, the Parties agree as follows: o LACROIX may, at its option alone, decide whether or not to purchase at cost price those Products not sold by INTER PARFUMS. 16 o If the unsold Products are not bought back from INTER PARFUMS, the Parties shall seek an amicable solution in their common interest. 13.3.3 LACROIX may purchase the moulds for the Products from INTER PARFUMS for a price corresponding to their net book value at the date the Agreement expires. ARTICLE 14: LIABILITY 14.1 LACROIX warrants that is has no knowledge of any circumstances that would prevent the Products from being commercialised in the countries named by it in Exhibit 1, for which Trademarks have already been registered. The Parties shall, however, agree as to the way to proceed for each country prior to delivery of the Products. 14.2 In the event of new circumstances arising after the execution hereof of a nature liable to restrict in a substantial way the rights granted to INTER PARFUMS to use the Trademark in any major country of the Territory, the Parties to the Agreement shall negotiate a revision of the royalty payments. 14.3 INTER PARFUMS declares that it has taken out insurance covering the risks of civil liability towards third parties for injury and/or damage in connection with defects in the design, manufacture, storage, packaging, transport and sale of the Products. INTER PARFUMS shall bear sole liability in any proceedings brought by third parties on the basis of such claims. ARTICLE 15: WARRANTY - OPERATING LOSSES 15.1 INTER PARFUMS undertakes to subscribe a comprehensive insurance policy to cover any operating losses it may incur through incapacity to continue its activity as a result of damage, loss, accident or any other reason beyond its control. INTER PARFUMS shall provide evidence of such to LACROIX upon request. The insurance policy thus subscribed shall allow INTER PARFUMS, in the event of a claim, to pay royalties to LACROIX corresponding to the minimum guaranteed amounts as set in Article 6.4. The risks covered by the said policy shall not be considered as instances of force majeure. 17 ARTICLE 16: CONFIDENTIALITY Each of the Parties hereto undertakes to maintain the confidentiality of all business information relating to the other Party which may come to its knowledge during the performance of this Agreement and, in particular, to keep the commercial and professional secrets of the other Party. This obligation of confidentiality shall survive the discharge of the Agreement. ARTICLE 17: ASSIGNMENT OF THE AGREEMENT 16.1 The Parties expressly agree that a simple change of majority shareholder or a change of control of either of the Parties shall not warrant early termination of this Agreement by the other Party. 16.2 Notwithstanding the provisions of paragraph 17.1 hereof, neither of the Parties is authorised to transfer or assign in part or in full its rights or obligations hereunder to any third party. Moreover, INTER PARFUMS undertakes not to assign total or partial sub-licences for its rights acquired hereunder. ARTICLE 18: MODIFICATION OF THE AGREEMENT 18.1 Any exemption or supplementary covenant or any rider to this Agreement shall necessarily be drawn up in writing and executed by the Parties and appended hereto. Any modification on this basis shall be restricted to the specific point for which it is agreed. 18.2 If either of the Parties is unable to honour its undertakings under this Agreement, it shall notify the other Party of such so that they can mutually agree to amend the Agreement in their common interest. 18.3 If one or more clauses of this Agreement should prove to be void, this shall in no way affect the validity of the other provisions of the Agreement nor the validity of the Agreement as a whole. Likewise if this Agreement were to prove incomplete. The clause to be deleted or which is missing shall be replaced by a legally valid provision consistent with the subject matter of this Agreement. 18 ARTICLE 19: MISCELLANEOUS 19.1 LACROIX's failure at any time to require that INTER PARFUMS perform its obligations in full, or to exercise any right acknowledged hereunder shall under no circumstances be interpreted as a waiver by LACROIX of its right to require INTER PARFUMS to perform the obligation in question. 19.2 All taxes and duties that may be due as a result of this licence and the payment of royalties shall be borne by INTER PARFUMS who undertakes to pay them in good time and to fulfil any tax formalities deriving from this Agreement. 19.3 Expenses relating to administrative formalities for the registration of this licence with the competent authorities shall be borne by INTER PARFUMS, who undertakes to pay them. ARTICLE 20: GOVERNING LAW - ATTRIBUTION OF JURISDICTION 20.1 This Agreement is governed by the laws of France. 20.2 In the event of any dispute arising from the construction, performance or consequences of this Agreement, the Parties undertake to use their best efforts to seek an amicable solution. 20.3 If the Parties cannot be reconciled, any dispute shall be brought before the exclusive jurisdiction of the Courts of Law of Paris. Done in Paris this eighteenth day of March, in the year nineteen hundred and ninety-nine. In two originals Christian Lacroix Inter Parfums /s/Serge Marx /s/ Philippe Benacin 19 EX-10.72 8 REVOLVING CREDIT AGREEMENT Exhibit 10.72 Republic National Bank Republic National Bank of New York 452 Fifth Avenue New York, NY 10018 Telephone 212 525 5000 June 1, 1998 Mr. Russell Greenberg Chief Financial Officer/Executive Vice President Jean Philippe Fragrances, Inc. Elite Parfums, Ltd. 551 Fifth Avenue New York, N.Y. 10176 Dear Mr. Greenberg: We are pleased to confirm that we are extending to you a line of credit of up to an aggregate amount of $12,000,000 outstanding at any one time, which line may be used by your company for direct borrowings and acceptance and sight letters of credit exposure for working capital purposes, provided, however, the outstanding amount as to which our Bank is liable, directly or contingently, on behalf of your company in respect of letter of credit and acceptance financings cannot in the aggregate at any one time exceed $2,000,000. This line is subject to the provisions set forth herein and in the other documents entered into in connection with this facility. Borrowings under this line of credit shall be evidenced by a Demand Grid Note, a copy of which is enclosed. Under this facility borrowings may be made from time to time and shall be repayable on demand, but may be prepaid in whole or in part with accrued interest to the date of prepayment. Any amounts outstanding shall bear interest, payable monthly in arrears, at a variable rate per annum equal to 0% above our Bank's Reference Rate established from time to time, all as more fully set forth in the Demand Grid Note. Or, at your option, you may borrow under a LIBOR Pricing Revolving Note up to the maximum amount of $12,000,000 in $100,000 increments, provided however, the amount outstanding under LIBOR Pricing Revolving Notes is no less than $500,000, with advances priced at your option of one month, two months, three months or six months LIBOR plus 1.75% for each LIBOR rate advance and subject to the terms of the LIBOR Pricing Revolving Note; a copy of the LIBOR Pricing Revolving Note is attached herewith. Please note that the advances under the LIBOR Pricing Revolving Note may be prepaid, but only subject to the terms and conditions set forth in that note. Republic National Bank of New York Page 2 Each letter of credit issued for your account shall be issued only pursuant to our standard form of application for commercial letter of credit (the "Application"), as executed by you from time to time. You shall pay a fee of 1/8 of 1% when we issue any letter of credit for your account and each time we amend any such letter of credit. In addition, you shall pay a fee of 1/8 of 1% of the face amount of any sight draft presented to us in accordance with the terms of any letter of credit we issue for your account. Such fee shall be payable when such draft is presented to us and honored by us, all as more fully set forth in the Application. Any amounts due to us from you under the Application shall bear interest payable on demand at a variable rate per annum equal to the rate from time to time in effect under the Demand Grid Note. At our option such amounts may be deemed additional advances evidenced by and repayable in accordance with the Demand Grid Note.] In place of the foregoing demand reimbursement obligation, we may from time to time accept your time drafts of up to 180 days presented to us by you. When such time draft is accepted by us it will be discounted from its date of maturity at a rate per annum equal to 2% plus our acceptance rate for commercial drafts or bills of exchange of comparable amounts and maturities. Your obligations under this line of credit shall be guaranteed by your subsidiary, Elite Parfums, Ltd. (for the obligations of Jean Philippe Fragrances, Inc.) and by your parent, Jean Philippe Fragrances, Inc., (for the obligations of Elite Parfums, Ltd.). This facility may be utilized by you for the period ending May 31, 1999; provided, however, THE CONTINUING AVAILABILITY OF THIS FACILITY IS AT ALL TIMES SUBJECT TO OUR CONTINUING SATISFACTION, AS DETERMINED BY OUR BANK IN ITS SOLE AND ABSOLUTE DISCRETION, WITH THE BUSINESS, AFFAIRS AND FINANCIAL CONDITION OF YOUR COMPANIES AND OF EACH GUARANTOR AND TO YOUR COMPLIANCE, AND THAT OF EACH OTHER PARTY EXECUTING AND DELIVERING DOCUMENTS TO US HEREUNDER OR OTHERWISE IN CONNECTION WITH THIS FACILITY, WITH THE TERMS AND PROVISIONS OF THIS LETTER AND EACH OF THE DOCUMENTS REFERRED TO HEREIN. In addition, the continuing availability of this facility is subject to your furnishing us, (i) within 120 days after the close of your fiscal year, with your audited financial statements certified by your independent certified public accountants as of the end of such period, including a balance sheet and related income statements; and (ii) such other information, including interim financial statements, concerning your business, affairs or financial condition as we may from time to time request. All payments of principal, interest and fees payable by you under this facility shall be made in immediately available funds at our office at 452 Fifth Avenue, New York, New York 10018 and may be charged to any account you maintain with us. Our agreement to extend to you this facility, on the terms set forth herein, is further subject to our receipt in form satisfactory to us of (a) a certified copy of resolutions of your Board of Directors authorizing your execution, delivery and performance of this agreement (and the documents hereinafter referred to); (b) signature cards for your authorized signatories; (c) an executed copy of our Demand Grid Note signed by your duly authorized officer on your behalf, (d) executed copies of our standard form of Guarantee signed by Elite Parfums, Ltd. (for the Republic National Bank of New York Page 3 obligations of Jean Philippe Fragrances, Inc.) and Jean Philippe Fragrances, Inc., (for the obligations of Elite Parfums, Ltd. NO AMENDMENT, MODIFICATION OR WAIVER OF ANY PROVISION OF THIS AGREEMENT NOR CONSENT TO ANY DEPARTURE BY OUR BANK THEREFROM SHALL BE EFFECTIVE, IRRESPECTIVE OF ANY COURSE OF DEALING, UNLESS THE SAME SHALL BE IN WRITING AND SIGNED BY OUR BANK AND THEN SUCH WAIVER OR CONSENT SHALL BE EFFECTIVE ONLY IN THE SPECIFIC INSTANCE AND FOR THE SPECIFIC PURPOSE FOR WHICH GIVEN. This agreement shall be governed by and construed in accordance with the laws of the State of New York. Please note that to the extent any of the terms or provisions of this agreement conflict with those contained in the Demand Grid Note or any of the above-mentioned documents, the terms and provisions of such Note and of such other documents shall govern. YOU AND OUR BANK AGREE THAT ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AGREEMENT, THE NOTE OR ANY OTHER DOCUMENTS RELATING TO THIS FACILITY MAY BE INITIATED AND PROSECUTED IN THE STATE OR FEDERAL COURTS, AS THE CASE MAY BE, LOCATED IN NEW YORK COUNTY, NEW YORK. YOU FURTHER AGREE THAT ANY ACTION, DISPUTE, PROCEEDING, CLAIM OR CONTROVERSY BETWEEN OR AMONG YOU AND US WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE ("DISPUTE" OR "DISPUTES") SHALL, AT OUR ELECTION, WHICH ELECTION MAY BE MADE AT ANY TIME PRIOR TO THE COMMENCEMENT OF A JUDICIAL PROCEEDING BY OUR BANK, OR IN THE EVENT OF A JUDICIAL PROCEEDING INSTITUTED BY YOU AT ANY TIME PRIOR TO THE LAST DAY TO ANSWER AND/OR RESPOND TO A SUMMONS AND/OR COMPLAINT MADE BY YOU, BE RESOLVED BY ARBITRATION IN NEW YORK, NEW YORK IN ACCORDANCE WITH THE PROVISIONS OF THIS PARAGRAPH AND SHALL, AT THE ELECTION OF OUR BANK, INCLUDE ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH (I) THIS AGREEMENT, THE DEMAND GRID NOTE, OR ANY OTHER RELATED AGREEMENTS OR INSTRUMENTS, (II) ALL PAST, PRESENT AND FUTURE AGREEMENTS INVOLVING THE PARTIES, (III) ANY TRANSACTION CONTEMPLATED HEREBY AND ALL PAST, PRESENT AND FUTURE TRANSACTIONS INVOLVING THE PARTIES AND (IV) ANY ASPECT OF THE PAST, PRESENT OR FUTURE RELATIONSHIP OF THE PARTIES. We may elect to require arbitration of any Dispute with us without thereby being required to arbitrate all Disputes between you and us. Any such Dispute shall be resolved by binding arbitration in accordance with Article 75 of the New York Civil Practice Law and Rules and the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). In the event of any inconsistency between such Rules and these arbitration provisions, these provisions shall supersede such Rules. All statutes of limitations which would otherwise be applicable shall apply to any arbitration proceeding under this paragraph. In any arbitration proceeding subject to these provisions, the arbitration panel (the "arbitrator") is specifically empowered to decide (by documents only, or with a hearing, at the Republic National Bank of New York Page 4 arbitrators sole discretion) pre-hearing motions which are substantially similar to pre-hearing motions to dismiss and motions for summary adjudication. In any such arbitration proceeding, the arbitrator shall not have the power or authority to award punitive damages to any party. Judgment upon the award rendered may be entered in any court having jurisdiction. Whenever an arbitration is required, the parties shall select an arbitrator in the manner provided in this paragraph. No provision of, nor the exercise of any rights under, this paragraph shall limit the right of any party (i) to foreclose against any real or personal property collateral through judicial foreclosure, by the exercise of a power of sale under a deed of trust, mortgage or other security agreement or instrument pursuant to applicable provisions of the Uniform Commercial Code, or otherwise pursuant to applicable law, (ii) to exercise self help remedies including but not limited to setoff and repossession, or (iii) to request and obtain from a court having jurisdiction before, during or after the pendency of any arbitration, provisional or ancillary remedies and relief including but not limited to injunctive or mandatory relief or the appointment of a receiver. The institution and maintenance of an action or judicial proceeding for, or pursuit of, provisional or ancillary remedies or exercise of self help remedies shall not constitute a waiver of our right, even if we are the plaintiff, to submit the Dispute to arbitration if we would otherwise have such right. We may require arbitration of any Dispute(s) concerning the lawfulness, unconscionableness, propriety, or reasonableness of any exercise by us of our right to take or dispose of any collateral or our exercise of any other right in connection with collateral including, without limitation, judicial foreclosure, exercising a power of sale under a deed of trust or mortgage, obtaining or executing a writ of attachment, taking or disposing of property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code or otherwise as permitted by applicable law, notwithstanding any such exercise by us. Whenever an arbitration is required under this paragraph, the arbitrator shall be selected, except as otherwise herein provided, in accordance with the Commercial Arbitration Rules of the AAA. A single arbitrator shall decide any claim of $100,000 or less and he or she shall be an attorney with at least five years' experience. Where the claim of any party exceeds $100,000, the Dispute shall be decided by a majority vote of three arbitrators, at least two of whom shall be attorneys (at least one of whom shall have not less than five years' experience representing commercial banks). In the event of any Dispute governed by this paragraph, each of the parties shall, subject to the award of the arbitrator, pay an equal share of the arbitrator's fees. The arbitrator shall have the power to award recovery of all costs and fees (including attorneys' fees, administrative fees, arbitrator's fees, and court costs) to the prevailing party. ANYTHING IN THIS AGREEMENT, THE NOTE OR ANY OTHER DOCUMENTS RELATING TO THIS FACILITY TO THE CONTRARY NOTWITHSTANDING, THE ENUMERATION IN THIS AGREEMENT, THE NOTE OR IN SUCH OTHER DOCUMENTS OF SPECIFIC OBLIGATIONS TO OUR BANK AND/OR CONDITIONS TO THE AVAILABILITY OF THIS FACILITY AND THE NOTE SHALL NOT BE CONSTRUED TO QUALIFY, DEFINE OR OTHERWISE LIMIT OUR RIGHT, POWER OR ABILITY, AT ANY TIME, UNDER APPLICABLE LAW, TO MAKE DEMAND FOR PAYMENT OF THE ENTIRE OUTSTANDING PRINCIPAL OF AND INTEREST DUE UNDER THIS FACILITY AND THE NOTE OR OUR RIGHT NOT TO MAKE ANY EXTENSION OF CREDIT UNDER THIS FACILITY AND YOU AGREE THAT YOUR BREACH OF OR DEFAULT UNDER ANY SUCH ENUMERATED OBLIGATIONS OR CONDITIONS IS NOT THE ONLY BASIS Republic National Bank of New York Page 5 FOR DEMAND TO BE MADE OR FOR A REQUEST FOR AN EXTENSION OF CREDIT TO BE DENIED, AS YOUR OBLIGATION TO MAKE PAYMENT SHALL AT ALL TIMES REMAIN A DEMAND OBLIGATION. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, THIS AGREEMENT DOES NOT CREATE A COMMITMENT OR OBLIGATION TO LEND BY THE BANK AND YOU ACKNOWLEDGE THAT THE BANK HAS NO OBLIGATION TO LEND. EACH OF YOU AND WE HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY OR AGAINST IT ON ANY MATTERS WHATSOEVER, IN CONTRACT OR IN TORT, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE NOTE OR ANY OTHER DOCUMENTS RELATING TO THIS FACILITY. YOU ALSO HEREBY WAIVE THE RIGHT TO INTERPOSE ANY DEFENSE BASED UPON ANY CLAIM OF LACHES OR SET-OFF OR COUNTERCLAIM OF ANY NATURE OR DESCRIPTION, ANY OBJECTION BASED ON FORUM NON CONVENIENS OR VENUE, AND ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES. If this agreement is acceptable to you, please sign and return to us one copy each of the enclosed copy of this letter and the other documents referred to above on or before July 15, 1998. Very truly yours, REPUBLIC NATIONAL BANK OF NEW YORK /s/ Andrew Ross ---------------------------- By: Andrew Ross Title: First Vice President Agreed to and accepted: JEAN PHILIPPE FRAGRANCES, INC. By: /s/ Russell Greenberg ----------------------------- Title: Executive Vice President ELITE PARFUMS, LTD. By: /s/ Russell Greenberg ----------------------------- Title: Executive Vice President EX-21 9 LIST OF SUBSIDIARIES Exhibit 21 LIST OF SUBSIDIARIES Name Jurisdiction Inter Parfums Holdings, S.A. France Inter Parfums, S.A. France Jean Philippe Fragrances do Brasil, Ltda.(1) Brazil Inter Parfums Grand Public, S.A. France - ------------- (1) A limited liability company. EX-27 10 FINANCIAL DATA SCHEDULE
5 1000 YEAR DEC-31-1998 DEC-31-1998 23,356 0 28,014 0 21,939 76,118 2,988 0 87,739 26,519 0 0 0 7,141 46,539 87,739 89,388 89,388 47,417 80,361 (137) 0 471 9,164 3,598 5,566 0 953 0 4,613 0.53 0.52
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