SHAREHOLDERS AGREEMENT
Agreement made this 22nd day of November, 1999 by and among XXXX XXXXX
(sometimes "Madar"), an individual residing at 0 xxx xx Xxxxxxxx Xxxxxxx, 00000
Xxxxx, Xxxxxx; XXXXXXXX XXXXXXX (sometimes "Benacin"), an individual residing at
00 xxxxxx Xxxxxx, 00000, Xxxxx, Xxxxxx; and LV CAPITAL USA, INC., a Delaware
corporation (sometimes "LV Capital") and an indirect subsidiary of LVMH Moet
Xxxxxxxx Xxxxx Vuitton, S.A. (sometimes "LVMH"), having an office at Xxx Xxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000.
W I T N E S S E T H:
WHEREAS, Inter Parfums, Inc. a Delaware corporation (the
"Corporation"), is duly organized under the laws of the State of Delaware, and
has its shares of Common Stock listed for trading on The Nasdaq Stock Market,
National Market System;
WHEREAS, the Shareholders have entered into the Stock Purchase
Agreement, whereby shares of Common Stock owned and to be acquired by the
Majority Shareholders and others are to be sold to LV Capital, upon the terms
and subject to the conditions set forth in the Stock Purchase Agreement; and
WHEREAS, the Shareholders desire to promote their mutual interest and
the interest of the Corporation by imposing certain restrictions and obligations
upon themselves, the Corporation, IP France and their several shares of Common
Stock.
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and promises contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Affiliates. Solely for purposes of this Agreement, an "Affiliate,"
in the case of LV Capital, shall mean a corporation, entity or person which
directly or indirectly controls or is controlled by or is under common control
with LV Capital, including but not limited to, those persons and entities listed
in the Schedule 13D dated August 5, 1999, filed by LVMH, but not the
Corporation; in the case of Corporation, shall mean a corporation, entity or
person which directly or indirectly controls or is controlled by or is under
common control with the Corporation, including but not limited to, the Majority
Shareholders, but not LV Capital; and in the case of the Majority Shareholders,
shall mean a corporation, entity or person which directly or indirectly controls
or is controlled by or is under common control with the Majority Shareholders,
including but not limited to, each of the Majority Shareholders and the
Corporation, but not LV Capital.
1.2 Associate. The term "Associate" shall mean any present or future
Associate within the meaning of Rule 12b-2 promulgated under the Exchange Act.
1.3 Beneficial Ownership. The term "Beneficial Ownership" shall have
the meaning set forth in Rule 13d-3 promulgated under the Exchange Act.
1.4 Business of the Corporation and its Subsidiaries. The term
"Business of the Corporation and its Subsidiaries" shall be defined to mean the
production, manufacture, marketing, distribution and sale of fragrance products,
perfumes, eau de toilette, eau de cologne, deodorants, cosmetics, health and
beauty and personal care products, for men, women and children.
1.5 Common Stock. The term "Common Stock" shall mean Corporation's
Common Stock, $.001 par value per share.
1.6 Commission. The term "Commission" shall mean the United States
Securities and Exchange Commission.
1.7 Exchange Act. The term "Exchange Act" shall mean the United States
Securities Exchange Act of 1934, as amended from time to time.
1.8 Fair Market Value of the Common Stock. The term "Fair Market Value
of the Common Stock" on any day shall mean (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 third party bid and lowest third party 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 third party bid and
lowest third party 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 the average of the average of the high and low sales
prices of the Common Stock as reported on a national securities exchange or
NASDAQ, if the principal market for the Common Stock is a national securities
exchange or NASDAQ, as may be the case, for each of the last ten (10) days
within the immediately preceding thirty (30) day period; and if all of the
foregoing is inapplicable, then the Fair Market Value of the Common Stock shall
be determined by the Board of Directors by any method consistent with applicable
regulations adopted by the Treasury Department relating to stock options. The
determination of the Board of Directors shall be conclusive in determining the
Fair Market Value of the Common Stock in good faith; provided that if LV Capital
disagrees with such determination, it shall be entitled, at its own cost and
expense, to select (with the consent of the Majority Shareholders, such consent
not to be unreasonably withheld) an investment banking or accounting firm of
nationally recognized standing to arbitrate such dispute, and the decision of
such arbitrator will be binding upon the parties.
1.9 Group. The term "Group" means a Group within the meaning of Section
13(d) of the Exchange Act.
1.10 IP France. The term "IP France" means Inter Parfums, S.A., an
indirect, majority-owned, French subsidiary of the Corporation.
1.11 LV Capital Designees. The term "LV Capital Designees" shall mean
the two (2) members of the Board of Directors listed in Article 2.2(a)(ii)
hereof, and their successors as appointed in the discretion of LV Capital.
1.12 Majority Shareholders. Madar and Benacin are sometimes
collectively referred to as the "Majority Shareholders".
1.13 Person. The term "person" means any natural person, corporation,
business trust, joint venture, association, company, partnership or government,
or any agency or political subdivision thereof.
1.14 Proxies. The term "Proxies" shall have the meanings used in the
proxy rules promulgated by the Commission pursuant to the Exchange Act.
1.15 Securities Act. The term "Securities Act" shall mean the United
States Securities Act of 1933, as amended from time to time.
1.16 Shareholders. Madar, Benacin and LV Capital are sometimes
collectively referred to as the "Shareholders".
1.17 Solicitation. The term "Solicitation" shall have the meanings used
in the proxy rules promulgated by the Commission pursuant to the Exchange Act.
1.18 Stock Purchase Agreement. The term "Stock Purchase Agreement"
shall mean the agreement among the Shareholders dated November 22, 1999.
1.19 Voting Securities. The term "Voting Securities" shall mean
Corporation's Common Stock, and any other securities of Corporation entitling
the holder to vote for the election of directors of the Corporation, and any
other securities (including rights, warrants and options) convertible into,
exchangeable for or exercisable for any Common Stock of the Corporation or any
other security of the Corporation referred to above (whether or not presently
convertible, exchangeable or exercisable).
ARTICLE II
VOTING OF STOCK,
ELECTION OF DIRECTORS AND EXECUTIVE OFFICERS
AND OTHER MATTERS OF CORPORATE GOVERNANCE
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2.1 Number of Members of the Board of Directors. Upon the execution and
delivery of this Agreement, the Majority Shareholders shall use their best
efforts to cause the number of members of the Board of Directors of the
Corporation to be increased from seven (7) to ten (10) members and the parties
hereto hereby agree to take all necessary actions (including, without
limitation, voting all shares of Common Stock owned by them) to cause the Bylaws
of the Corporation to be so amended and remain in effect.
2.2 Election or Appointment of Individual Board Members.
(a) Upon the execution and delivery of this Agreement,
(i) Xxxxxxxx Xxxxx, the Chief Financial Officer of IP
France, shall be added as a member of the Board of Directors; and
(ii) Xxxxxx Xxxxxx and Xxxx Xxxxxxxx shall be added
as new directors of the Corporation.
(b) Each of the Shareholders agree to vote their respective
shares of Common Stock for the election of, and to continue to vote and to take
such other actions as may be necessary to elect and keep in office, Madar,
Benacin and six (6) nominees of the Majority Shareholders, and two (2) LV
Capital Designees as directors of the Corporation.
(c) The Majority Shareholders shall use their best efforts to
cause one LV Capital Designee to be elected (and to serve at all times this
Agreement shall remain in effect) as a member of the Compensation Committee of
the Board of Directors.
2.3 Election of Officers. The Shareholders agree to use their best
efforts to cause the directors of the Corporation, to vote and to continue to
vote for, and to cause the following persons to be elected as the following
officers of the Corporation:
Xxxx Xxxxx Chairman of the Board and Chief Executive Officer
of the Corporation; and Director General of Inter
Parfums, S.A.
Xxxxxxxx Xxxxxxx Vice Chairman of the Board, President of the
Corporation and President of Inter Parfums, S.A.
2.4 Voting.
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(a) The Majority Shareholders covenant and agree with LV
Capital that the Majority Shareholders will use their best efforts to cause the
Corporation and its members of the Board of Directors and the Corporation's
subsidiaries to act in a manner consistent with the provisions of this
Agreement.
(b) The Majority Shareholders covenant and agree with LV
Capital that they shall use their best efforts, including without limitation
voting all shares of Common Stock owned or controlled by them at any annual or
special meeting of the Corporation, to cause the Amended and Restated
Certificate of Incorporation of the Corporation to be amended as set forth in
Exhibit A hereto (the "Charter Amendment") at the next annual meeting of
shareholders of the Corporation, which meeting shall be held no later than July
2000.
(c) If any of the Majority Shareholders fails or refuses to
vote its Shares as required by this Article II, LV Capital shall have an
irrevocable proxy coupled with an interest to vote those securities on behalf of
the Majority Shareholders in accordance with this Article II, and each Majority
Shareholder hereby grants to LV Capital such irrevocable proxy coupled with an
interest.
(d) Until such time as the Charter Amendment becomes
effective, the Majority Shareholders covenant and agree with LV Capital that the
Corporation and its subsidiaries shall obtain approval of the Board of Directors
for corporate actions as if such amendment were in effect.
2.5 Board Meetings. The Majority Shareholders covenant and agree with
LV Capital that the Majority Shareholders will use their best efforts to cause
the Corporation and its members of the Board of Directors to hold meetings of
the Board of Directors of the Corporation at least once per calendar quarter
during each year, and to hold such meetings during each year as follows: at
least one (1) in New York City, one (1) in Paris, and two (2) by conference
telephone.
2.6 Management Reports. The Majority Shareholders covenant and agree
with LV Capital to cause the Corporation to distribute to LV Capital all reports
and materials prepared for the Board of Directors, including without limitation:
(a) monthly management reports, which are to include net sales, operating income
and disclosure of any significant highlights for the preceding month; and (b)
full quarterly management reports within forty-five (45) days subsequent to the
end of each of the first three (3) quarters, and within ninety (90) days
subsequent to the last quarter, of each fiscal year of the Corporation. LV
Capital covenants and agrees with the Majority Shareholders that LV Capital and
its Affiliates shall hold all information provided to them pursuant to this
Section 2.6 confidential, unless compelled to disclose by judicial or
administrative process or, in the opinion of their counsel, by other
requirements of law (and, to the extent permitted by law, LV Capital agrees to
give prior notice of such opinion to the Corporation); provided that the
foregoing confidentiality obligation shall not apply to information that is (i)
known to LV Capital or its Affiliates prior to its disclosure by the Corporation
hereunder, solely as evidenced by the written records of LV Capital or its
Affiliates, (ii) disclosed
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to LV Capital by a third party not known by LV Capital to be under a legally
binding obligation to keep such information confidential,(iii) publicly
disclosed other than by breach by LV Capital of its obligations hereunder, or
(iv) required by law, regulation or the rules of any national securities
exchange to be disclosed. LV Capital acknowledges its obligations under law not
to buy or sell securities of the Corporation or IP France on the basis of
material non-public information.
ARTICLE III
GRANTS OF OPTIONS AND SHARE PURCHASE OPTION
3.1 Stock Options.
(a) The Majority Shareholders covenant and agree to cause the
Corporation not to, and to cause IP France not to, in any calendar year for each
of the Corporation and IP France, grant options exercisable for in excess of one
and one half percent (1.5%) of the total number of outstanding shares of Common
Stock of each of the Corporation and IP France, respectively, as reflected in
the audited financial statements of the Corporation and IP France, respectively
for the immediately preceding fiscal year. The allocation of the grant of such
options shall be within the discretion of the stock option committee of the
Board of Directors of the Corporation (which shall consist solely of outside
directors and which shall include at least one LV Capital Designee as a member)
and the Board of Directors or stock option committee or similar body of IP
France, which shall be composed entirely of outside directors.
(b) Notwithstanding the foregoing, (i) options granted in
accordance with past practice pursuant to the 1997 Nonemployee Director Stock
Option Plan for nonemployee directors of the Corporation, wherein grants are
automatically made on 1 February each year with an exercise price per share of
Common Stock equal to the Fair Market Value of the Common Stock at the time of
grant (options to purchase 1,000 shares of Common Stock are granted to all
nonemployee directors except Xx. Xxxxxxx, who receives an option to purchase
4,000 shares of Common Stock), and (ii) options to purchase 2,000 shares of
Common Stock are granted to nonemployee directors when first elected or
appointed to Board, as well as any successor plan on substantially the same
terms, shall not be subject to the limitation set forth in Article 3.1(a)
hereof.
3.2 Share Purchase Option. The Majority Shareholders covenant and agree
to cause the Corporation to grant, prior to December 31, 1999, to LV Capital,
the right and option to purchase shares of Common Stock of the Corporation, or
other securities of the Corporation convertible into, exchangeable for or
carrying any rights to purchase shares of Common Stock, with respect to all
shares of Common Stock or any kind of security convertible into, exchangeable
for or carrying any rights to purchase shares of Common Stock of the Corporation
to be issued after the date of closing of the Stock Purchase Agreement
(including without limitation the reissuance of treasury shares) (the
"Subsequently Issued Equity Securities"), as follows (the "Purchase Rights"):
(a) LV Capital shall have the right to acquire, in return for
payment in cash in an amount equal to the fair market value per share of the
consideration to be paid by the purchaser
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of the Subsequently Issued Equity Securities which triggers the Purchase Rights,
a sufficient number of the Subsequently Issued Equity Securities so that, when
combined with the Common Stock held prior to such purchase, the aggregate number
of shares of Common Stock held by LV Capital and its Affiliates after giving
effect to such issuance (and assuming for this purpose the issuance of the
maximum number of shares of Common Stock issuable upon conversion or otherwise
with respect to the Subsequently Issued Equity Securities) would equal the same
percentage of the number of outstanding shares of Common Stock held before the
proposed issuance of Subsequently Issued Equity Securities (and assuming, for
this purpose, the issuance of the maximum number of shares of Common Stock
issuable upon conversion or otherwise with respect to any previously issued
Subsequently Issued Equity Security). Upon the second and each subsequent
application of this provision, the waiver of, or failure to exercise, the
Purchase Rights shall not result in a cumulative right, but rather the
aforementioned percentage in the preceding sentence shall be appropriately
adjusted to take into account each such earlier waiver or failure to exercise
the Purchase Rights.
(b) The Majority Shareholders covenant and agree with LV
Capital that the Majority Shareholders will cause the Corporation and its
members of the Board of Directors to provide LV Capital at least ten (10) days
prior notice in accordance with Article 9.9 (a "Purchase Rights Notice") of any
proposed issuance of Subsequently Issued Equity Securities. The exercise of
Purchase Rights hereunder shall be evidenced by notice to the Corporation, Attn:
President, within ten (10) days of the effective date of the Purchase Rights
Notice.
(c) Notwithstanding the foregoing, LV Capital shall have no
Purchase Rights in the following instances, if Common Stock is to be issued :
(1) as the result of a stock split or stock dividend;
(2) upon exercise of options outstanding on 28 September,
1999;
(3) upon exercise of options described in Articles 3.1(a)
and (b) hereof; and
(4) in excess of the limitation with respect to the number
of shares of Common Stock to be owned by LV Capital and its Affiliates set forth
in Article 5.1(a) of this Agreement (Standstill Provisions), subject to the
provisions of Article 5.2 of this Agreement.
ARTICLE IV
RESTRICTIONS ON SALE OF COMMON STOCK
4.1 Restrictions on Transfer. No Shareholder shall sell his or its
shares of Common Stock, or any part thereof, that is now owned or that may
hereafter be acquired, held or owned, directly or beneficially by him or it,
except upon the terms and subject to the conditions set forth in this Agreement.
Any purported sale in violation of any provision of this Agreement shall be
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void and of no force and effect, shall not operate to transfer any interest in,
or title to, the purported purchaser, and shall give the other Shareholders an
option to purchase such shares in the manner and upon the terms and conditions
provided for herein.
4.2 Offer. If either of the Majority Shareholders or LV Capital (the
"Offeror") desires to sell his or its shares of Common Stock (the "Offered
Shares") or any part of the Offered Shares, then the Offeror shall give notice
("Notice") of the proposed sale (the "Offer") to the non-selling Shareholders
(the "Non-Selling Shareholder"). Such Notice shall specify the number of shares
intended to be transferred (the "Offered Shares").
4.3 Right of First Offer. Each Non-Selling Shareholder shall have the
exclusive and irrevocable right and option, exercisable at any time before the
expiration of ten (10) business days from the latest effective date of the
Notice, to provide notice to the Offeror of its bid to purchase all but not less
than all of the Offered Shares solely in cash (the "Bid"). No Non-Selling
Shareholder shall have the right to bid for less than all of the Offered Shares,
and any Bid once made shall be deemed a continuing irrevocable offer to purchase
until accepted or rejected by the Non-Selling Shareholder.
4.4 Acceptance of Bid. If any Bids are timely submitted, the Offeror
shall, within fifteen (15) business days of the effective date of the Notice,
either accept or reject the highest Bid. If two or more Non-Selling Shareholders
submit equal Bids and no higher Bid is submitted, such equal Bids shall be
deemed to be the highest Bid submitted and such Non-Selling Shareholders shall
be deemed to have bid for their pro rata portion (based on ownership of Common
Stock) of the Offered Shares. If the highest Bid is accepted by the Offeror,
then the sale of the Offered Shares to the Non-Selling Shareholder that
submitted such Bid shall close within five (5) business days of the effective
date of notice of acceptance of the Bid to the Non-Selling Shareholder by the
Offeror.
4.5 Sale to Third Party. If, after compliance with the foregoing
provisions, either no Bid is submitted or is not timely submitted by a
Non-Selling Shareholder, or the highest Bid has not been accepted by the
Offeror, then the Offeror shall have the right to sell the Offered Shares to a
third party not later than sixty (60) days from the expiration of the time
period set forth in Article 4.3 hereof, provided that, such sale shall not be
for a price lower than the highest validly submitted Bid.
4.6 Failure to Sell to Third Party. If sale of the Offered Shares does
not close within the time period set forth in Article 4.5 hereof, then any
attempted subsequent sale of shares of Common Stock shall again be subject to
all of the provisions of this Article IV.
4.7 Permitted Transfers. Notwithstanding anything to the contrary
contained in this Agreement, the provisions of Article IV shall not be
applicable to
(a) sales of Common Stock by any Shareholder, which do not
exceed in the
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aggregate for any such Shareholder for any year, one percent (1%) of the total
number of outstanding shares of Common Stock of the Corporation as of the end of
the immediately preceding fiscal year, as reflected in the audited financial
statements of the Corporation.
(b) any disposition of shares of Common Stock by a Majority
Shareholder to the spouse or children of a Majority Shareholder, provided that
such transferee agrees to be bound by all terms and conditions of this
Agreement.
(c) any transfer of shares of Common Stock by LV Capital to
LVMH or any of its affiliates, provided that such transferee agrees to be bound
by all terms and conditions of this agreement.
4.8 Sale on Change in Control. In the event either or both of the
Majority Shareholders sell, assign, transfer, pledge or otherwise dispose of all
or any portion of their respective shares of Common Stock, or enter into any
agreement to sell, assign, transfer, pledge or otherwise dispose of all or any
portion of their respective shares of Common Stock to a third party which
results or would result in a Change in Control of the Corporation, then in any
such event and as a condition precedent to the consummation of such transaction,
each Majority Shareholder covenants and agrees that LV Capital shall have the
right to join in such sale for all of the shares of Common Stock beneficially
owned by LV Capital and its Affiliates on the same terms and subject to the
conditions as agreed by the Majority Shareholders. For the purposes of this
Article 4.8, a "Change in Control" shall be considered to have resulted if (i)
any person or Group other than the Majority Shareholders or a Group consisting
solely of the Majority Shareholders and LV Capital shall have or, upon the
occurrence of any event, the lapse of time or both, shall have the right to
acquire the power to direct or cause the direction of the management or policies
of the Corporation, whether through ownership of voting securities, by contract
or otherwise or (ii) any person or Group shall at any time Beneficially Own more
shares of Common Stock than the Majority Shareholders, inclusive of all
securities convertible into, or exchangeable or exercisable for any Voting
Securities of the Corporation.
ARTICLE V
STANDSTILL PROVISIONS
5.1 Negative Covenants. LV Capital hereby covenants and agrees with
each of the Majority Shareholders that each of LV Capital and its Affiliates
shall not directly or indirectly, except as otherwise provided herein,
(a) acquire, offer to acquire, or agree to acquire, directly
or indirectly, by purchase, conversion, exercise or otherwise, Beneficial
Ownership of any Voting Securities under any or all of the following
circumstances:
(i) if the Voting Securities are shares of Common
Stock, and when such Voting Securities are added to the number of shares of
Common Stock Beneficially Owned by
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LV Capital and its Affiliates (excluding any shares of Common Stock to which LV
Capital and its affiliates have a right to acquire by exercise, conversion,
exchange or otherwise), such Beneficial Ownership would exceed twenty-five
percent (25%) (the "Maximum LV Percentage") of the total number of outstanding
shares of Common Stock of the Corporation or
(ii) if the Voting Securities are securities other
than Common Stock, and when such Voting Securities are added to the number of
shares of such class of Voting Securities Beneficially Owned by LV Capital and
its Affiliates, such Beneficial Ownership would exceed the Maximum LV Percentage
of the total number of outstanding shares of such class of Voting Securities of
the Corporation;
(b) make, or in any way participate, directly or indirectly,
in any Solicitation of Proxies to vote, or seek to advise or influence any
person, entity or Group with respect to the voting of, any Voting Securities of
the Corporation, or initiate or propose any stockholder proposal with respect to
the Corporation described in Rule 14a-8 promulgated under the Exchange Act; or
(c) form, join or in any way participate in, or in any manner
provide any form of assistance to, a Group with respect to any Voting Securities
of the Corporation, including but not limited to, the sale of shares of Common
Stock to a third party, which would transfer control of the Corporation from the
Majority Shareholders (except for a joint sale with the Majority Shareholders as
described in Article 4.8 hereof); or
(d) otherwise act, alone or in concert with others, to seek
to, or assist or encourage any other person, entity or Group in seeking to,
control or influence the management, board of directors or policies of the
Corporation or propose or effect any form of business combination with the
Corporation or any of its Affiliates or any restructuring, recapitalization or
similar transaction with respect to the Corporation or any of its Affiliates.
5.2 Limited Increase in Cap on Share Holdings. Notwithstanding the
provisions of Article 5.1(a) hereof, the Maximum LV Percentage shall be
automatically increased if any third party or Group becomes the beneficial owner
of more shares of Common Stock than LV Capital, by the amount necessary to
permit LV Capital to own an amount of Common Stock in excess of any third party
or Group equal to one-half of one percent (0.5%) of the total number of
outstanding shares of Common Stock of the Corporation, as reflected in the most
recent audited consolidated financial statements of the Corporation. In the
event the Maximum LV Percentage is increased in accordance with the terms of
this Article 5.2, then in each such event, such amount, once increased, shall
not be reduced if the third party or Group subsequently reduces its ownership.
Notwithstanding the foregoing, such amount, increased in accordance with the
terms of this Article 5.2, shall be reduced to such level reached as the result
of the sale or other disposition of shares of Common Stock if LV Capital and its
Affiliates sell or otherwise dispose of shares of Common Stock, but in no event
to less than twenty-five percent (25%).
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5.3 Breach of Standstill Provisions. In the event that LV Capital or
any of its Affiliates breach the provisions of Articles 5.1 and 5.2 of this
Agreement, then upon the happening of any such event,
(a) the Purchase Rights shall immediately lapse and be of no
further force and effect without any other action being taken by or on behalf of
any party hereto; and
(b) the two (2) LV Capital Designees as directors of the
Corporation shall immediately resign from the Board of Directors of the
Corporation and LV Capital covenants and agrees with the Majority Shareholders
that LV Capital shall immediately cause the resignation from the Board of
Directors of the two (2) LV Capital Designees, and the right of LV Capital to
designate two (2) members of the Board of Directors shall immediately lapse and
be of no further force and effect without any other action being taken by or on
behalf of any party hereto.
ARTICLE VI
NONCOMPETITION
6.1 Negative Covenant. Each of the Majority Shareholders covenants and
agrees with LV Capital, that each shall not directly or indirectly, compete with
or be engaged in the Business of the Corporation and its Subsidiaries or act as
consultant or lender to or owner of any interest in, or agent, representative,
employee, officer, director or partner of, any business or organization which,
directly or indirectly competes with or is engaged in the Business of the
Corporation and its Subsidiaries.
6.2 Exceptions. The provisions of Article 6.1 shall not be deemed
breached solely because a Majority Shareholder Beneficially Owns as a passive
investment no more than one percent (1%) of the outstanding equity securities of
any business, organization or corporation, if, such security is listed on a
recognized securities exchange (whether domestic or foreign) or The Nasdaq Stock
Market, or is regularly traded in the over-the-counter market.
6.3 Duration of Negative Covenant. The provisions of Article 6.1 shall
be effective until either (a) the termination of this Agreement, or (b) with
respect to a Majority Shareholder, until the date on which such Majority
Shareholder is no longer the Beneficial Owner of any shares of Common Stock.
Without limiting the foregoing, it is understood and agreed that if in
connection with a sale or other disposition of all or any portion of the Common
Stock owned by a Majority Shareholder, such Majority Shareholder enters into a
non-competition or similar agreement, LV Capital shall be an express third party
beneficiary of such non-competition or similar agreement, entitled to the
benefits of such agreement and to enforce the provisions thereof.
ARTICLE VII
REGISTRATION RIGHTS
7.1 Registration Rights.
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(a) Subject to Articles 7.1(b) and (c), for so long as LV
Capital and its Affiliates shall Beneficially Own at least ten percent (10%) of
the outstanding Common Stock of the Corporation, LV Capital shall have the
right, exercisable upon written request to the Corporation (a "Demand"), to
cause the Corporation to cause all or a part of the Common Stock owned by LV
Capital and its Affiliates to be registered as soon as reasonably practicable so
as to permit the sale thereof under the Securities Act and, if necessary, the
Exchange Act, and the Corporation shall use its best efforts to effect such a
registration within a reasonable time thereafter.
(b) At any time that the Corporation has an effective shelf
registration that permits the resale of Common Stock held by LV Capital and its
Affiliates in accordance with the Securities Act and the Exchange Act, the
Corporation shall not be required to effect any registration requested by LV
Capital pursuant to paragraph (a) above. The Corporation shall take all actions
reasonably requested by LV Capital to assist LV Capital in any such resale,
including without limitation providing copies of a current prospectus that
complies with the requirements of the Securities Act with respect thereto.
(c) The Corporation shall not be required pursuant to this
Article 7.1 to prepare and file a registration statement that would become
effective within ninety (90) days following the effective date of a registration
statement filed by the Corporation pertaining to an underwritten public offering
of Common Stock for cash for the account of the Corporation if the Demand for
registration is received by the Corporation more than thirty (30) days after the
Corporation gives written notice (which the Corporation hereby agrees to
provide) to LV Capital that the Corporation is commencing to prepare a
Corporation-initiated registration statement and the Corporation is employing
all reasonable efforts to cause such registration statement to become effective.
(d) The Corporation may delay the filing of any registration
statement pursuant to this Article 7.1 if, in the good faith judgment of the
Board of Directors, the Corporation would be required to include in such
registration statement business information which at that time cannot be
publicly disclosed without disruption of a corporate development or transaction
then pending or in progress and without other adverse consequence to the
Corporation and the background and reasons for such judgment are communicated to
LV Capital in writing in reasonable detail; provided that the duration of such
delay shall not exceed sixty (60) days from the date the Corporation became
aware of such business information; provided, further that the Corporation
promptly shall make such filing as soon as the conditions which permit it to
delay such filing no longer exist and that in the event of such deferral, LV
Capital shall have the right to withdraw its request for registration and such
withdrawn request shall not constitute a Demand.
(e) For so long as LV Capital or its Affiliates own any shares
of Common Stock, if the Corporation desires to effect an offering of the Common
Stock registered with the Commission, then the following shall apply:
(i) it shall give LV Capital written notice of any
proposed offering at least thirty (30) days prior to the filing of a
registration statement relating to such proposed
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offering; and
(ii) within twenty-five (25) days after the receipt
of such notice from the Corporation, LV Capital shall have the right to request
in writing that the Corporation register for public sale under the Securities
Act all or a part of the Common Stock Beneficially Owned by LV Capital or its
Affiliates and shall also have the right to request that the Corporation
publicly offer and sell on their behalf all or a part of such stock. If the
registration is an underwritten registration and the managing underwriters
thereof advise the Corporation in writing that the number of shares requested by
LV Capital to be included in the registration exceeds the number which can be
sold in the offering without adversely affecting such offering, then such shares
shall only be included in such offering on a pro rata basis to the extent
considered appropriate by such managing underwriters.
(f) The Corporation shall pay all the expenses in connection
with this Article VII, including all registration, filing and NASD fees, all
fees and expenses of complying with securities or blue sky laws, the fees and
disbursements of counsel for the Corporation and its independent public
accountants and any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but excluding any underwriting discounts and
commissions and transfer taxes, if any. In any registration, LV Capital shall
pay for its own underwriting discounts and commissions and transfer taxes.
(g) In connection with any underwritten public offering
pursuant to this Article VII, the Corporation and LV Capital agree to enter into
an underwriting agreement with the managing underwriter of such offering
containing customary terms and conditions, including with respect to
indemnification and contribution.
7.2 Compliance. The Majority Shareholders covenant and agree with LV
Capital that the Majority Shareholders will cause the Corporation and its
members of the Board of Directors to fully comply with the terms and provisions
of Article 7.1
ARTICLE VIII
TERM OF AGREEMENT
8.1 General. This Agreement shall commence on the date first set forth
above and continue indefinitely unless sooner terminated, as hereinafter
provided.
8.2 Termination. This Agreement shall terminate upon LV Capital and its
Affiliates ceasing to beneficially own more than five percent (5%) of the total
number of outstanding shares of Common Stock of the Corporation as reflected in
the most recent audited financial statements of the Corporation.
ARTICLE IX
MISCELLANEOUS
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9.1 Specific Performance. The parties hereto agree that irreparable
damage would occur if any provision of this Agreement were not performed in
accordance with the terms hereof and that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement or to enforce
specifically the performance of the terms and provisions hereof in any federal
court located in the State of Delaware or any Delaware state court, in addition
to any other remedy to which they are entitled at law or in equity.
9.2 Indemnification. Each of the Majority Shareholders hereby jointly
and severally indemnifies LV Capital and its Affiliates against and agrees to
hold each of them harmless from any and all damage, loss, liability and expense
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit or
proceeding) ("Damages") incurred or suffered by LV Capital or any of its
Affiliates arising out of any misrepresentation or breach of warranty, covenant
or agreement made or to be performed by the Corporation or a Majority
Shareholder pursuant to this Agreement. LV Capital hereby indemnifies the
Corporation and each of the Majority Shareholders and each of their respective
Affiliates against and agrees to hold each of them harmless from any and all
Damages incurred or suffered by them arising out of any misrepresentation or
breach of warranty, covenant or agreement made or to be performed by LV Capital
pursuant to this Agreement.
9.3 No Waiver. The failure of any of the parties hereto to enforce any
provision hereof on any occasion shall not be deemed to be a waiver of any
preceding or succeeding breach of such provision or any other provision.
9.4 Entire Agreement. This Agreement constitutes the entire agreement
and understanding of the parties hereto and no amendment, modification or waiver
of any provision herein shall be effective unless in writing, executed by the
party charged therewith.
9.5 Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with and shall be governed by the laws of the State of
Delaware without regard to the principles of conflicts of laws.
9.6 Binding Effect. This Agreement shall bind and inure to the benefit
of the parties and their successors in interest.
9.7 No Assignment. This Agreement may not be assigned or transferred by
the parties hereto, and any attempted assignment hereof shall be void and of no
effect; except that LV Capital shall have the right to assign its rights and
obligations hereunder to LVMH or any of its affiliates, provided such assignee
or transferee agrees to be bound by the provisions of this Agreement.
9.8 Article Headings. The article headings herein have been inserted
for convenience of reference only, and shall in no way modify or restrict any of
the terms or provisions hereof.
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9.9 Notices. Any notice or other communication under the provisions of
this Agreement shall be in writing, and shall be given by registered or
certified mail (postage prepaid), return receipt requested; by hand delivery
with an acknowledgment copy requested; or by the Express Mail service offered by
the United States Post Office or by telecopy or any reputable overnight delivery
service, directed to the addresses set forth above for LV Capital and with
respect to each of the Majority Shareholders, to the Majority Shareholders c/o
Inter Parfums, Inc., 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, or to any new address
in the City of New York, Borough of Manhattan, of which any party hereto shall
have informed the others by the giving of notice in the manner provided herein.
Such notice or communication shall be effective, if sent by registered or
certified mail, return receipt requested, three (3) days after it is mailed
within the continental United States; if sent by Express Mail or any reputable
overnight delivery service, one (1) day after it is forwarded; or by hand
delivery or by telecopy, upon receipt.
9.10 Consent to Service of Process. Each party hereto hereby
irrevocably consents to the exclusive jurisdiction and venue of the courts of
the State of Delaware with regard to any and all actions or proceedings arising
out of, or relating to, this Agreement, and irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum and agrees that service of process may be
made in the manner for providing notice, as specified in Article 9.9 hereof.
9.11 Cumulative Rights. The rights and remedies granted in this
Agreement are cumulative and not exclusive, and are in addition to any and all
other rights and remedies granted and permitted under and pursuant to law.
9.12 Unenforceability; Severability. If any provision of this Agreement
is found to be void or unenforceable by a court of competent jurisdiction, then
the remaining provisions of this Agreement, shall, nevertheless, be binding upon
the parties and remain in full force and effect. Upon such a determination, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner so that the transactions contemplated hereby shall be consummated as
originally contemplated to the fullest extent possible.
Without limitation of the foregoing, the parties expressly agree and
declare that the limitations contained in Article VI are reasonable in scope and
duration, are properly required for the adequate protection of the other parties
hereto and that, in the event either the scope or the duration of such
limitations, or both, is or are deemed to be unreasonable by the final decision
of a court of competent jurisdiction, then in any such event, LV Capital, the
Corporation and the Majority Shareholders agree and submit to such revision or
modification thereof as such court shall deem to be reasonable.
9.13 No Third Party Rights. The representations, warranties and other
terms and
15
provisions of this Agreement are for the exclusive benefit of the parties
hereto, and no other person shall have any right or claim against any party by
reason of any of those terms and provisions or be entitled to enforce any of
those terms and provisions against any party.
9.14 Attorneys. The parties acknowledge that the law firm of Xxxxx,
Xxxxxx Xxxxxx, White & Xxxxx, P.A. has represented the Corporation and the
Majority Shareholders in connection with the negotiation of this Agreement. Each
of the parties to this Agreement have been advised to obtain separate,
independent counsel to represent them in connection with this Agreement, and all
negotiations leading up to this Agreement.
9.15 Language. The English language version of the Agreement shall
govern and prevail over any and all translations of this Agreement into any
other language.
9.16 Counterparts. This Agreement may be executed in counterparts, all
of which shall be deemed to be duplicate originals. Delivery by facsimile
transmission of an executed signature page to this Agreement shall be effective
as delivery of a manually executed counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have executed this instrument
the date first above written.
/s/ Xxxx Xxxxx
--------------
XXXX XXXXX
/s/ Xxxxxxxx Xxxxxxx
--------------------
XXXXXXXX XXXXXXX
LV CAPITAL USA, INC.
By: /s/ Xxxx Xxxxxxxx
-----------------
Its:
-------------------
16
Exhibit A
CERTIFICATE OF AMENDMENT
The following is the text of the new Article Ninth of the Restated
Certificate of Incorporation, as amended:
NINTH: Without in any way limiting the power and authority of the Board
of Directors as otherwise provided for herein, the following corporate actions
shall require the approval of the Board of Directors:
(a) any sale, transfer, pledge or other disposition of all or
any material portion of the assets of the Corporation (including, without
limitation, any shares of any subsidiary of the Corporation or any of its
subsidiaries);
(b) the acquisition by the Corporation or any of its
subsidiaries of shares, securities or assets of any company or entity, whether
by merger, consolidation or other business combination, share purchase, asset
purchase, contribution to capital or otherwise (other than short-term financial
investments in the ordinary course of business consistent with past practice);
(c) the entry, renewal or termination by the Corporation or
any of its subsidiaries into/of any trademark license agreement; or
(d) any material agreement or material transaction involving
the Company or any of its subsidiaries and not in the ordinary course of
business.
Notwithstanding anything in these Articles to the contrary, the
following corporate actions shall require the unanimous approval of the Board of
Directors (as constituted without any vacancies):
(a) any material change in the business of the Corporation and
its subsidiaries from Business of the Corporation and its subsidiaries;
(b) issuance by the Corporation or any of its subsidiaries of
any securities in return for consideration less than the Fair Market Value
thereof (except for stock splits, stock dividends and employee and nonemployee
director options to acquire Common Stock granted with an exercise price per
share at the Fair Market Value of the Common Stock on the date of grant);
(c) borrowing or issuing any evidence of indebtedness by the
Corporation or any of its subsidiaries unless, after giving effect thereto, the
aggregate amount of indebtedness of the Corporation and its subsidiaries on a
consolidated basis is not greater than the consolidated stockholder's equity as
shown in the audited Consolidated Balance Sheet of the
17
Corporation for the then most recently completed fiscal year;
(d) any transaction by the Corporation or any of its
subsidiaries with a Majority Shareholder or any Affiliate of a Majority
Shareholder; notwithstanding the foregoing, unanimous board consent shall not
apply to executive compensation issues or reimbursement of expenses incurred on
behalf of the Corporation, both in the ordinary course of business in accordance
with its past practices;
(e) declaration or payment of dividends if the aggregate
amount of dividends paid by the Corporation and its subsidiaries (excluding
wholly-owned subsidiaries) in respect of any fiscal year is more than thirty
percent (30%) of the annual net income of the Corporation for the then most
recently completed fiscal year, as indicated by the audited Consolidated
Statements of Income of the Corporation;
(f) direct or indirect sale or other disposition of all or any
substantial portion of the business of or a controlling interest in, or all or
substantially all of the assets of; IP France; notwithstanding the foregoing,
unanimous board consent shall not be deemed to apply to discontinuance of any
product line, unless such discontinuance involves a sale or other disposition,
and the net sales attributable to all such product lines exceeds in the
aggregate five percent (5%) of the net sales of the Corporation for the then
most recently completed fiscal year as indicated by the audited Consolidated
Statements of Income of the Corporation;
(g) merger or consolidation or other business combination
involving the Corporation or any of its subsidiaries (i) if not for fair value;
or (ii) with a person not engaged primarily in the Business of the Corporation
and its Subsidiaries (except for one or a series of mergers or consolidations,
the value of which does not singularly or in the aggregate exceed five percent
(5%) of the total assets of the Corporation as of the then most recently
completed fiscal year (valued at historical cost) as reflected on the audited
Consolidated Balance Sheets of the Corporation);
(h) any change in the number of the members of the Board of
Directors to less than six (6) or more than ten (10) members; and
(i) any amendment to the certificate of incorporation or
by-laws of the Corporation.
In addition, the Corporation shall cause its subsidiaries not to take
any of the foregoing actions except with the unanimous approval of the Board of
Directors of the Corporation (as constituted without any vacancies).
As used in this Article Ninth, the following terms shall have the
meanings as hereinafter set forth:
2
1. Affiliates. Solely for purposes of this Article Ninth, an
"Affiliate," in the case of LV Capital, shall mean a corporation, entity or
person which directly or indirectly controls or is controlled by or is under
common control with LV Capital, including but not limited to, those persons and
entities listed in the Schedule 13D dated August 5, 1999, filed by LVMH, but not
the Corporation; in the case of Corporation, shall mean a corporation, entity or
person which directly or indirectly controls or is controlled by or is under
common control with the Corporation, including but not limited to, the Majority
Shareholders, but not LV Capital; and in the case of the Majority Shareholders,
shall mean a corporation, entity or person which directly or indirectly controls
or is controlled by or is under common control with the Majority Shareholders
including but not limited to, each of the Majority Shareholders and the
Corporation, but not LV Capital.
2. Business of the Corporation and its Subsidiaries. The term "Business
of the Corporation and its Subsidiaries" shall be defined to mean the
production, manufacture, marketing, distribution and sale of fragrance products,
perfumes, eau de toilette, eau de cologne, deodorants, cosmetics, health and
beauty and personal care products, for men, women and children.
3. Fair Market Value. The term "Fair Market Value" of the Common Stock
or other security of the Corporation shall be determined by the Board of
Directors in the exercise of its good faith discretion. The determination of the
Board of Directors shall be conclusive in determining the Fair Market Value of
the Common Stock in good faith; provided that if LV Capital disagrees with such
determination, it shall be entitled, at its own cost and expense, to select
(with the consent of the Majority Shareholders, such consent not to be
unreasonably withheld) an investment banking or accounting firm of nationally
recognized standing to arbitrate such dispute, and the decision of such
arbitrator will be binding upon the parties.
4. Majority Shareholders. The "Majority Shareholders" means Xxxx Xxxxx
and Xxxxxxxx Xxxxxxx.
5. LV Capital and LVMH. The term "LV Capital" means LV Capital USA,
Inc., a Delaware corporation and an indirect subsidiary of LVMH, and the term
LVMH means LVMH Moet Xxxxxxxx Xxxxx Vuitton, S.A., a French corporation.
3
