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EXHIBIT 10:38
XXXXXX XXXXXXXXXX, INC.
August 31, 1995
Xx. Xxxxxx Xxxx
Xxxxxxxxx Xxxxxx International
00 xxx Xxxxxxx
00000 Xxxxx
Xxxxxx
Transition and Termination Agreement
Dear Xx. Xxxx,
Following up on our meeting in Paris on July 12 and our
subsequent telephone conversations, this will confirm our agreement
regarding the transition and termination of the license agreement
between Xxxxxx Xxxxxxxxxx, Inc. (Parlux) and Xxxxxxxxx Xxxxxx
International (Smalto) as follows:
1. As agreed, an 18 month "sell off" period under this transition and
termination agreement will start as of April 1, 1995, and extend
through September 30, 1996.
During that period, Parlux shall continue to balance and manufacture
existing inventories, and in addition, shall be entitled to produce a
maximum of $1,500,000 (at standard cost of goods) of "new" production
of the following products only:
073435 100 ml Xxxxxxxxx Xxxxxx spray ASL
272610 30 ml Xxxxxxxxx Xxxxxx spray EDT
072619 50 ml Xxxxxxxxx Xxxxxx spray EDT
072635 100 ml Xxxxxxxxx Xxxxxx spray EDT
237138 30 ml Molto Smalto spray EDT
039143 50 ml Molto Smalto spray EDT
039163 100 ml Molto Smalto spray EDT
039241 50 ml Molto Smalto spray ASL
It is understood that the above $1,500,000 limit is global for the
above 8 product lines and that it shall apply as of June 8 and June
13, 1995, the dates of the inventory listings Parlux SA sent you on
June 20.
At the end of the "sell off" period, Parlux shall immediately destroy
all remaining inventories and Smalto shall have no purchasing
obligation with respect thereto.
Smalto, however, shall have the option of purchasing all or part of
such inventories at Parlux' standard cost, and be entitled to make
payment by way of offset with any amount due to it by Parlux under
this transition and termination agreement.
2. During the 18 month "sell off" period, Parlux shall attempt to
concentrate sales in traditional retail channels. It shall be
entitled, however, to continue to sell products to Perfumania. Parlux
shall not sell to other discounters.
3. Parlux shall pay Smalto the minimum royalty for the fiscal year ended
March 31, 1995, referred to in our letter of May 19, 1995,
specifically $203,104 (with all previous interest charges not yet paid
being waived). Due to the installment schedule below, payment of this
sum shall be made by check in four installments of $52,300 ($203,104/4
+ 3%) on:
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August 31, 1995
January 1, 1996
April 30, 1996
July 31, 1996
There shall be no interest charges on these payments - which
represents the balance owed by Parlux to Smalto for the fiscal year
ended March 31, 1995 - provided Parlux pays on a timely basis. Should
Parlux be late in making payment, interest shall be charged at the
rate of 1.5% per month.
A check representing the first of these payments is enclosed herewith.
4. During the 18 month "sell off" period Parlux shall pay Smalto total
royalties of $337,500. Payment shall be made by check in six equal
installments of $56,250 each on:
August 31, 1995
November 30, 1995
February 29, 1996
May 31, 1996
August 31, 1996
November 30, 1996
Late payments shall attract interest as outlined in (3) above.
Four checks representing the first of these payments are enclosed herewith.
If Parlux were to be in arrears by more that $50,000 at February 1, 1996 on any
amount due by it to Smalto, including on amounts in (3) above and on interest,
Smalto shall have the right to cancel and terminate forthwith this transition
and termination agreement, and Parlux shall cease manufacturing, producing and
selling licensed products immediately. Smalto shall not be required to
purchase any remaining inventories, and they shall be destroyed, unless Smalto
elects to purchase all or part of such inventories as mentioned under the
conditions set forth in the last sentence of (1).
Any such cancellation and termination shall not release Parlux from paying all
amounts due to Smalto under (3) and (4), including interest through full and
final payment. All such amounts will become due immediately. In addition, a
liquidated damage penalty of 10% of all amounts due to Smalto shall be payable
by Parlux. As a protection for Smalto, we are enclosing a "chain" of
promissory notes for each of the payments listed above in (3) - other than
those covered by the checks enclosed herewith -, i.e., a series of 8 notes.
5. During the 18 month "sell off" period, Parlux shall have no
obligations on minimum advertising expenditures.
Parlux, however, shall have to represent Smalto (fragrance products
only) at the Cannes Tax Free Show in October, 1995.
6. As of September 30, 1996, or earlier in the event of a cancellation
and termination of this agreement before that date, all rights to the
package, design, bottles, fragrance formulae, etc., to the Smalto
product lines handled by Parlux shall belong to Smalto. See (9) below
for further details.
7. Parlux acknowledges that it has no right to use Smalto trademarks
other than through the original license or this transition and
termination agreement and agrees to waive all claims to all Smalto
trademarks as of September 30, 1996, or earlier in the event of a
cancellation and termination of this agreement before that date.
8. At the end of the 18 month "sell off" period, or earlier in the event
of a cancellation and termination of this agreement before that date,
all PWP and GWP items still in inventory bearing
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the Xxxxxxxxx Xxxxxx name or initials will be destroyed. Items
without specific identification may be recycled by Parlux.
9. Smalto shall have the right to accelerate the "sell off" period with
six months advance notice in the event that it secures a new fragrance
licensee.
In the event of such an acceleration, Parlux shall cooperate fully, and Smalto
shall acquire directly or cause the new licensee to acquire all Parlux
inventories as defined in (1) at standard cost. Smalto shall have the right to
acquire the cap/bottle molds, except that the cost will be 20% of the mold cost
of FF 1,368,000 (see attached detail), unless Smalto elects to have the molds
involved destroyed as discussed below. Royalties payments under (4) shall be
reduced on a pro-rata basis at the conclusion of the six month period (e.g., if
notice would start on September 1, 1995, then the new license would commence on
April 1, 1996 and Parlux would be liable for only 12 months royalty, of
$225,000). Any agreed royalties under (3) and any interest and other charges
referred to in this letter, however, will remain payable in full.
In the event that Smalto wants to acquire (or destroy) the cap/bottle molds at
the end of the "sell off" period, or earlier in the event of a cancellation and
termination of this agreement before that date, Parlux shall receive a credit
of FF 50,000 against the royalty payment payable on November 30, 1996 under
(4), or any acceleration date of that payment.
Smalto shall also have the right to decide that the molds may be kept by Parlux
subject to its not making use of them for 5 years and then to utilize them only
for a new label not existing at that time. In the event Smalto makes such a
decision, this will trigger no charges for either Smalto or Parlux.
I believe the above reflects the totality of our discussion. If this is so, I
request that a duplicate copy of this letter agreement be returned to me after
having been accepted by Mr. Xxxxxxxxx Xxxxxx. As a last point, I confirm our
agreement that any dispute concerning this agreement be dealt within the French
Courts (Tribunal de Commerce de Paris) and that French law govern.
Sincerely,
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/s/ Xxxx Xxxxxx
Chairman of the Board
Xxxxxx Xxxxxxxxxx, Inc.
Enclosures (5 checks + 8 notes + mold details)
P.S.: As is customary, I expect that each of the enclosed promissory notes,
as they get paid, will be returned to us marked accordingly.
Accepted
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/s/ Xxxxxxxxx Xxxxxx
