9.	Share-Based Payments:

The Company maintains a stock option program for key employees, executives and directors. The plans, all of which have been approved by shareholder vote, provide for the granting of both nonqualified and incentive options. Options granted under the plans typically have a six-year term and vest over a four to five-year period. The fair value of shares vested for both the nine months ended September 30, 2016 and 2015 aggregated $0.05 million and $0.03 million, respectively. Compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. It is generally our policy to issue new shares upon exercise of stock options.

The following table sets forth information with respect to nonvested options for the nine month period ended September 30, 2016:

			Weighted Average Grant Date Fair
	Number of Shares		Value
Nonvested options – beginning of period		414,850	$	6.86
Nonvested options granted		5,000	$	6.50
Nonvested options vested or forfeited		(26,770)	$	6.82
Nonvested options – end of period		393,080	$	6.85

Share-based payment expense decreased income before income taxes by $0.28 million and $0.70 million for the three and nine months ended September 30, 2016, respectively, as compared to $0.20 million and $0.59 million for the corresponding periods of the prior year. Share-based payment expense decreased income attributable to Inter Parfums, Inc. by $0.16 million and $0.42 million for the three and nine months ended September 30, 2016, respectively, as compared to $0.12 million and $0.35 million for the corresponding periods of the prior year.

The following table summarizes stock option information as of September 30, 2016:

	Shares		Weighted Average Exercise Price

Outstanding at January 1, 2016		709,300	$	24.34
Options granted		5,000		26.40
Options cancelled		(22,250)		27.21
Options exercised		(66,290)		18.62

Outstanding at September 30, 2016		625,760	$	24.86

Options exercisable		232,680	$	22.81
Options available for future grants		195,295

As of September 30, 2016, the weighted average remaining contractual life of options outstanding is 3.27 years (2.04 years for options exercisable), the aggregate intrinsic value of options outstanding and options exercisable is $5.1 million and $2.4 million, respectively, and unrecognized compensation cost related to stock options outstanding of Inter Parfums, Inc. aggregated $2.1 million.

Cash proceeds, tax benefits and intrinsic value related to stock options exercised during the nine months ended September 30, 2016 and September 30, 2015 were as follows:

	September 30,		September 30,
(In thousands)	2016		2015

Cash proceeds from stock options exercised	$	1,235	$	451
Tax benefits		–		–
Intrinsic value of stock options exercised		947		482

The weighted average fair values of the options granted by Inter Parfums, Inc. during the nine months ended September 30, 2016 and 2015 were $6.50 and $6.73 per share, respectively, on the date of grant using the Black-Scholes option pricing model to calculate the fair value of options granted.

The assumptions used in the Black-Scholes pricing model for the periods ended September 30, 2016 and 2015 are set forth in the following table:

	September 30,			September 30,
	2016			2015

Weighted average expected stock-price volatility		33	%		34	%
Weighted average expected option life		5 years			5 years
Weighted average risk-free interest rate		1.42	%		1.28	%
Weighted average dividend yield		2.2	%		1.8	%

Expected volatility is estimated based on historic volatility of the Company’s common stock. The expected term of the option is estimated based on historic data. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant of the option and the dividend yield reflects the assumption that the dividend payout as authorized by the Board of Directors would increase as the earnings of the Company and its stock price increases.

In September 2016, Interparfums SA, approved a plan to grant an aggregate of 15,100 free shares of its stock to employees with no performance condition requirement, and an aggregate of 133,000 free shares to officers and managers, subject to certain corporate performance conditions. The shares will be distributed in September 2019 so long as the individual is employed by Interparfums SA at the time, and in the case of officers and managers, only to the extent that the performance conditions have been met. Once distributed, the shares will be unrestricted and the employees will be permitted to trade their shares.

The fair value of the grant of €22.46 per share (approximately $25.00 per share) has been determined based on the quoted stock price of Interparfums SA shares as reported by the NYSE Euronext on the date of grant taking into account the dividend yield as no dividends on this grant will be earned until the shares are distributed. The estimated number of shares to be distributed of 137,381 has been determined taking into account employee turnover. The aggregate cost of the grant of €3.1 million (approximately $3.4 million) will be recognized as compensation cost by Interparfums SA on a straight-line basis over the requisite three year service period. For the three months ended September 30, 2016, $0.1 million of compensation cost has been recognized.

To avoid dilution of the Company’s ownership of Interparfums SA,, all shares to be distributed pursuant to this plan will be pre-existing shares of Interparfums SA, purchased in the open market by Interparfums SA. As of September 30, 2016, a total of 90,524 shares of have been acquired in the open market at an aggregate cost of $2.47 million, and such amount has been classified as an equity transaction on the accompanying balance sheet.