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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1998
Commission file number 1-4858
INTERNATIONAL FLAVORS & FRAGRANCES INC.
------------------------------------------------------
(Exact Name of Registrant as specified in its charter)
NEW YORK 13-1432060
------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
521 WEST 57TH STREET, NEW YORK, N.Y. 10019-2960
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 765-5500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares outstanding as of August 10, 1998: 107,199,495
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1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
6/30/98 12/31/97
----------- ----------
ASSETS
Current Assets:
Cash & Cash Equivalents ................................ $ 150,055 $ 216,994
Short-term Investments ................................. 11,908 43,452
Trade Receivables ...................................... 296,161 242,791
Allowance For Doubtful Accounts ........................ (8,279) (8,101)
Inventories: Raw Materials ............................. 211,032 193,136
Work in Process ........................... 6,908 13,593
Finished Goods ............................ 157,804 153,345
---------- ----------
Total Inventories ......................... 375,744 360,074
Other Current Assets ................................... 68,968 80,249
---------- ----------
Total Current Assets ................................... 894,557 935,459
---------- ----------
Property, Plant & Equipment, At Cost ...................... 825,491 810,901
Accumulated Depreciation .................................. (377,197) (364,392)
---------- ----------
448,294 446,509
Other Assets .............................................. 41,798 40,293
---------- ----------
Total Assets .............................................. $1,384,649 $1,422,261
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank Loans ............................................. $ 16,280 $ 10,490
Accounts Payable-Trade ................................. 62,095 57,832
Dividends Payable ...................................... 39,856 40,407
Income Taxes ........................................... 64,591 56,070
Other Current Liabilities .............................. 98,245 100,062
---------- ----------
Total Current Liabilities .............................. 281,067 264,861
---------- ----------
Other Liabilities:
Deferred Income Taxes .................................. 20,664 23,139
Long-term Debt ......................................... 3,900 5,114
Retirement and Other Liabilities ....................... 131,253 128,659
---------- ----------
Total Other Liabilities ................................... 155,817 156,912
---------- ----------
Shareholders' Equity:
Common Stock (115,761,840 shares issued in '98
and in '97) ......................................... 14,470 14,470
Capital in Excess of Par Value ......................... 136,495 137,418
Restricted Stock ....................................... (7,874) (9,000)
Retained Earnings ...................................... 1,205,117 1,166,348
Accumulated Other Comprehensive Income:
Cumulative Translation Adjustment ................... (52,129) (36,851)
---------- ----------
1,296,079 1,272,385
Treasury Stock, at cost -- 8,324,845 shares in '98
and 6,630,911 in '97 ................................ (348,314) (271,897)
---------- ----------
Total Shareholders' Equity ............................. 947,765 1,000,488
---------- ----------
Total Liabilities and Shareholders' Equity ................ $1,384,649 $1,422,261
========== ==========
See Notes to Consolidated Financial Statements
2
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands except per share amounts)
3 Months Ended 6/30
---------------------
1998 1997
-------- --------
Net Sales .......................................... $365,253 $381,470
-------- --------
Cost of Goods Sold ................................. 195,270 204,055
Research and Development Expenses .................. 24,445 23,496
Selling and Administrative Expenses ................ 60,520 57,001
Interest Expense ................................... 459 618
Other (Income) Expense, Net ........................ (1,584) (2,497)
-------- --------
279,110 282,673
-------- --------
Income Before Taxes on Income ...................... 86,143 98,797
Taxes on Income .................................... 30,236 35,488
-------- --------
Net Income ......................................... 55,907 63,309
-------- --------
Other Comprehensive Income:
Foreign Currency Translation Adjustments ........ (4,331) (13,145)
-------- --------
Comprehensive Income ............................... $ 51,576 $ 50,164
======== ========
Earnings Per Share -- Basic ........................ $0.52 $0.58
Earnings Per Share -- Diluted ...................... $0.52 $0.57
Dividends Paid Per Share ........................... $0.37 $0.36
6 Months Ended 6/30
---------------------
1998 1997
-------- --------
Net Sales .......................................... $738,664 $764,283
-------- --------
Cost of Goods Sold ................................. 393,477 411,348
Research and Development Expenses .................. 48,295 47,069
Selling and Administrative Expenses ................ 117,893 113,331
Interest Expense ................................... 918 1,177
Other (Income) Expense, Net ........................ (4,856) (6,568)
-------- --------
555,727 566,357
-------- --------
Income Before Taxes on Income ...................... 182,937 197,926
Taxes on Income .................................... 64,404 71,373
-------- --------
Net Income ......................................... 118,533 126,553
-------- --------
Other Comprehensive Income:
Foreign Currency Translation Adjustments ........ (15,278) (43,272)
-------- --------
Comprehensive Income ............................... $103,255 $ 83,281
======== ========
Earnings Per Share -- Basic ........................ $1.10 $1.16
Earnings Per Share -- Diluted ...................... $1.10 $1.15
Average Number of Shares Outstanding -- Basic ...... 107,825 109,170
Average Number of Shares Outstanding -- Diluted .... 108,241 109,599
Dividends Paid Per Share ........................... $0.74 $0.72
See Notes to Consolidated Financial Statements
3
INTERNATIONAL FLAVORS & FRAGRANCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
6 Months Ended 6/30
-----------------------
1998 1997
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ......................................... $ 118,533 $ 126,553
Adjustments to Reconcile to Net Cash
Provided by Operations:
Depreciation ................................... 23,960 24,765
Deferred Income Taxes .......................... 2,216 (2,071)
Changes in Assets and Liabilities:
Current Receivables .......................... (55,415) (80,435)
Inventories .................................. (19,453) 5,522
Current Payables ............................. 15,377 26,421
Other, Net ................................... 3,591 360
--------- ---------
Net Cash Provided by Operations .................... 88,809 101,115
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds From Sales/Maturities of
Short-term Investments ........................... 30,898 14,573
Purchases of Short-term Investments ................ 0 (4,900)
Additions to Property, Plant & Equipment,
Net of Minor Disposals ........................... (30,961) (24,131)
--------- ---------
Net Cash Used in Investing Activities .............. (63) (14,458)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Dividends Paid to Shareholders ................ (80,315) (79,021)
Increase in Bank Loans ............................. 6,136 3,979
Decrease in Long-term Debt ......................... (1,082) (1,008)
Proceeds From Issuance of Stock Under
Stock Option Plans ............................... 3,503 7,389
Purchase of Treasury Stock ......................... (80,843) (59,752)
--------- ---------
Net Cash Used in Financing Activities .............. (152,601) (128,413)
--------- ---------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents ............................. (3,084) (11,085)
--------- ---------
Net Change in Cash and Cash Equivalents ............ (66,939) (52,841)
Cash and Cash Equivalents at Beginning of Year ..... 216,994 261,370
--------- ---------
Cash and Cash Equivalents at End of Period ......... $ 150,055 $ 208,529
========= =========
Interest Paid ...................................... $ 850 $ 1,090
Income Taxes Paid .................................. $ 48,455 $ 46,816
See Notes to Consolidated Financial Statements
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
These interim statements and management's related discussion and analysis should
be read in conjunction with the consolidated financial statements and their
related notes, and management's discussion and analysis of results of operations
and financial condition included in the Company's 1997 Annual Report to
Shareholders. In the opinion of the Company's management, all normal recurring
adjustments necessary for a fair statement of the results for the interim
periods have been made.
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (FAS 130), Reporting Comprehensive Income, which is effective
for both interim and annual periods ending after December 15, 1997. FAS 130
establishes standards for the reporting and display of comprehensive income and
its components, and requires that an enterprise classify items of other
comprehensive income by their nature in a financial statement, and display the
accumulated balance of other comprehensive income separately in the statement of
financial position. Taxes which would result from dividend distributions by
subsidiary companies are provided to the extent such dividends are anticipated;
no provision is made for additional taxes on undistributed earnings of
subsidiary companies which are intended to be permanently invested. As a result,
no income tax effect is attributable to the currency translation component of
Comprehensive Income. Prior year amounts have been reclassified for
comparability purposes.
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 131 (FAS 131), Disclosures about Segments of an Enterprise and
Related Information, which is effective for periods ending after December 15,
1997. This statement need not be applied to interim financial statements in the
initial year of application. FAS 131 establishes standards for the way public
business enterprises report information about operating segments in reports to
shareholders. The Company's 1998 Annual Report to Shareholders will reflect the
adoption of this standard.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (FAS 133), Accounting for Derivative
Instruments and Hedging Activities, which is effective for fiscal years
beginning after June 15, 1999. FAS 133 establishes accounting and reporting
standards for derivative instruments, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
Company is currently studying the implications of FAS 133.
As described in Note 2 of the Notes to the Consolidated Financial Statements
included in the Company's 1997 Annual Report to Shareholders, the Company
undertook a program to expand and streamline its aroma chemical production
facilities during 1996. The aroma chemical streamlining resulted in a
nonrecurring pretax charge to second quarter 1996 earnings of $49,707,000
($31,315,000 after tax or $.29 per share). Utilization of the reserve in 1998
and the remaining reserve balance at June 30, 1998 were as follows:
5
Balance at Utilized Balance at
12/31/97 in 1998 6/30/98
----------- ---------- -----------
Employee related ................. $ 2,024,000 $ 966,000 $ 1,058,000
Closing manufacturing plants ..... 15,978,000 6,933,000 9,045,000
----------- ---------- -----------
Total ............................ $18,002,000 $7,899,000 $10,103,000
=========== ========== ===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OPERATIONS
Worldwide net sales for the second quarter of 1998 were $365,253,000, compared
to $381,470,000 in the 1997 second quarter. For the first six months of 1998,
net sales totaled $738,664,000, compared to $764,283,000 for the six month
period in 1997. Sales in the second quarter and the first six months of 1998
were unfavorably affected on translation of local currency sales into the
stronger U.S. dollar; the unfavorable currency effect approximated 3% in the
second quarter, and 4% for the six month period. In addition, the ongoing
economic disruption in the Far East adversely affected the Company's results,
partially offsetting local currency gains realized in other operating areas of
the world.
Net income for the second quarter of 1998 totaled $55,907,000 compared to
$63,309,000 in the prior year second quarter; net income for the first six
months of 1998 totaled $118,533,000 compared to $126,553,000 for the comparable
1997 period. Basic and diluted earnings per share for the quarter were both $.52
compared to $.58 and $.57, respectively, in the prior year second quarter; basic
and diluted earnings per share for the first six months of 1998 both totaled
$1.10 compared to $1.16 and $1.15, respectively, for the comparable 1997 period.
The percentage relationship of cost of goods sold and other operating expenses
to sales for the first half 1998 and 1997 are detailed below.
FIRST HALF
-------------------------
1998 1997
---- ----
Cost of Goods Sold ........................ 53.3% 53.8%
Research and Development Expenses ......... 6.5% 6.2%
Selling and Administrative Expenses ....... 16.0% 14.8%
As described in Note 2 of the Notes to the Consolidated Financial Statements
included in the Company's 1997 Annual Report to Shareholders, the Company
undertook a program to expand and streamline its aroma chemical production
facilities during 1996. The aroma chemical streamlining resulted in a
nonrecurring pretax charge to second quarter 1996 earnings of $49,707,000
($31,315,000 after tax or $.29 per share). Utilization of the reserve in 1998
and the remaining reserve balance at June 30, 1998 were as follows:
Balance at Utilized Balance at
12/31/97 in 1998 6/30/98
----------- ---------- -----------
Employee related ................ $ 2,024,000 $ 966,000 $ 1,058,000
Closing manufacturing plants .... 15,978,000 6,933,000 9,045,000
----------- ---------- -----------
Total ........................... $18,002,000 $7,899,000 $10,103,000
=========== ========== ===========
6
The effective tax rates for the second quarter and first six months of 1998 were
35.1% and 35.2%, respectively, as compared to 35.9% and 36.1% for the comparable
periods in 1997. The lower effective tax rate reflects the effects of lower tax
rates in various tax jurisdictions in which the Company operates.
FINANCIAL CONDITION
The financial condition of the Company continued to be strong. Cash, cash
equivalents and short-term investments totaled $161,963,000 at June 30, 1998. At
June 30, 1998, working capital was $613,490,000 compared to $670,598,000 at
December 31, 1997. Gross additions to property, plant and equipment during the
first half of 1998 were $32,084,000.
In the first half of 1998, the Company repurchased approximately 1.8 million
shares of common stock under its existing share repurchase program. At June 30,
1998, approximately 2.9 million shares of common stock had been repurchased
under the plan authorized in September 1996.
In January 1998, the Company's cash dividend was increased to an annual rate of
$1.48 per share from $1.44 in 1997, and $.37 per share was paid to shareholders
in both the first and second quarters of 1998. The Company anticipates that its
growth, capital expenditure programs and share repurchase program will be funded
from internal sources.
The accumulated comprehensive income component of Shareholders' Equity,
comprised principally of the cumulative translation adjustment, at June 30,
1998, was ($52,129,000) compared to ($36,851,000) at December 31, 1997. Changes
in the component result from translating the net assets of the majority of the
Company's foreign subsidiaries into U.S. dollars at current exchange rates as
required by the Statement of Financial Accounting Standards No. 52 on accounting
for foreign currency translation.
7
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) 1998 Annual Meeting
At the annual meeting of Registrant's shareholders held Thursday, May 14, 1998,
at which 99,138,110 shares, or 91.9%, of Registrant's Common Stock were
represented in person or by proxy, the 11 nominees for director of Registrant,
as listed in Registrant's proxy statement dated March 30, 1998 previously filed
with the Commission, were duly elected to Registrant's Board of Directors. There
was no solicitation of proxies in opposition to these nominees. Subsequently,
however, Brian D. Chadbourne resigned effective as of June 1, 1998 as a director
and Senior Vice-President of Registrant.
(b) 1999 Annual Meeting - Notice to Shareholders
If any shareholder of Registrant intends to present a proposal at the next
annual meeting of shareholders of Registrant but not to include the proposal in
the Registrant's Proxy Statement and form of proxy with respect to that meeting
and fails to notify the Registrant of such proposal prior to February 13, 1999,
then the management proxies will be allowed to use their discretionary voting
authority when the proposal is raised at the annual meeting, without any
discussion of the matter in the proxy statement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number
10(a) Agreement dated July 2, 1998 between Registrant and Brian D.
Chadbourne, former director and Senior Vice-President of
Registrant.
27.1 Financial Data Schedule (EDGAR version only).
27.2 Financial Data Schedule for the years ended December 31, 1995 and
1996 (EDGAR version only) which have been restated for the
adoption of Statement of Financial Accounting Standards No. 128,
Earnings Per Share, which requires a dual presentation of basic
and diluted earnings per share.
27.3 Financial Data Schedule for the three months ended March 31,
1996, the six months ended June 30, 1996 and the nine months
ended September 30, 1996 (EDGAR version only) which have been
restated for the adoption of Statement of Financial Accounting
Standards No. 128, Earnings Per Share, which requires a dual
presentation of basic and diluted earnings per share.
27.4 Financial Data Schedule for the three months ended March 31,
1997, the six months ended June 30, 1997 and the nine months
ended September 30, 1997 (EDGAR version only) which have been
restated for the adoption of Statement of Financial Accounting
Standards No. 128, Earnings Per Share, which requires a dual
presentation of basic and diluted earnings per share.
(b) Reports on Form 8-K
Registrant filed no report on Form 8-K during the quarter for which
this report on Form 10-Q is filed.
8
SIGNATURES
Pursuant to the requirements 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.
INTERNATIONAL FLAVORS & FRAGRANCES INC.
Dated: August 14, 1998 By: /s/ DOUGLAS J. WETMORE
-------------------------------------------------
Douglas J. Wetmore, Vice-President and Chief
Financial Officer
Dated: August 14, 1998 By: /s/ STEPHEN A. BLOCK
-------------------------------------------------
Stephen A. Block, Vice-President Law and Secretary
EXHIBIT 10(a)
IFF
INTERNATIONAL FLAVORS & FRAGRANCES INC.
521 WEST 57th STREET, NEW YORK, N.Y.
10019 (212) 765-5500
================================================================================
CREATORS AND MANUFACTURERS OF FLAVORS, FRAGRANCES AND AROMA CHEMICALS
FAX: (212) 708-7132
July 2, 1998
Mr. Brian D. Chadbourne
1 West 72 Street, Apt. 12
New York, New York 10023
Dear Brian:
As we have discussed, you and International Flavors & Fragrances Inc.
("IFF" or the "Company") have agreed that it would be in your best interests,
and those of the Company, for your employment with IFF to terminate and for you
to pursue other business opportunities. This letter (this "Agreement") will set
forth the terms of our agreement in connection with your separation from IFF.
1. Your employment with IFF terminated on June 1, 1998 (the "Termination
Date"). In that connection, please execute the letter of resignation
as a Senior Vice-President and a Director of IFF attached to this
letter as Exhibit A. You also agree to execute such other resignations
as an officer, director and/or trustee of IFF subsidiaries or of IFF
benefit plans as may be requested of you. From and after the
Termination Date, you will continue to receive "Salary Continuation
Payments" of $39,583.33 per month, your IFF salary at the date of your
termination, through and including the earlier of (a) November 30,
1999 or (b) the date on which you commence "Employment," as defined in
Section 3 of this Agreement, with a business that is "competitive," as
defined in Section 10, with IFF (the period during which you receive
Salary Continuation Payments is hereinafter referred to as the
"Severance Period"). Salary Continuation Payments will be made
semi-monthly at the same times as compensation is paid to exempt
employees
MR. BRIAN D. CHADBOURNE
JULY 2, 1998
PAGE 2 OF 7 PAGES
of IFF. Salary Continuation Payments for the month of June 1998 will
be paid to you together with the Salary Continuation Payment due on or
about July 31, 1998.
2. Within thirty (30) days after the date of your execution of this
Agreement and Exhibits A and C, IFF will pay you a sum representing
four (4) weeks' vacation pay in respect of 1998 ("Vacation Pay"). You
understand and agree that you will not be entitled to any other
vacation pay in respect of your employment with the Company.
3. Within thirty (30) days after the date of your execution of this
Agreement and Exhibits A and C, ownership of the IFF-provided
automobile presently in your possession (the "Company Car") will be
transferred to you. If you are required to recognize any compensation
resulting from the transfer, that compensation will be included in
your Form W-2 in respect of 1998.
4. Except as provided in the next sentence, you agree that the Salary
Continuation Payments, Vacation Pay and transfer to you of the Company
Car will be in lieu of all other monetary compensation to which you
may be otherwise entitled in respect of your employment, including but
not limited to any incentive compensation in respect of 1998, whether
under the Management Incentive Compensation Plan or otherwise. You
will be contacted by the IFF Compensation and Benefits Department with
respect to the disposition of your Retirement Investment Fund Plan
(including supplemental plan) accounts.
5. In accordance with the Consolidated Omnibus Budget Reconciliation Act
of 1986 ("COBRA"), you and your eligible dependents will have the
opportunity to continue medical and dental coverage under the IFF
Group Health Plan. Although normally employees desiring such
post-employment coverage would have to pay a monthly premium for it
from the outset, for you IFF will waive the monthly premiums for the
shorter of the Severance Period or until the end of the month in which
you commence new "Employment," as hereinafter defined. Such period is
hereinafter
MR. BRIAN D. CHADBOURNE
JULY 2, 1998
PAGE 3 OF 7 PAGES
referred to as the "Supplemental Benefits Period." For the purpose of
this Agreement, "Employment" will mean your substantially full-time
participation for monetary compensation as an officer, director,
employee, partner, principal, consultant or individual proprietor in
any entity or business. After the expiration of the Supplemental
Benefits Period, you will be able to continue the coverage for up to a
period (including the Supplemental Benefits Period) aggregating
eighteen (18) months after the Termination Date by paying the
applicable monthly premiums.
6. The life insurance coverage (including any coverage under the IFF
Executive Death Benefit Plan) with which you have been provided as an
active IFF employee will continue until the expiration of the
Supplemental Benefits Period. You will have the right to convert the
basic portion of such group life insurance into individual coverage
without the need for a medical history or examination by contacting a
Prudential agent of your choice within thirty-one (31) days after the
expiration of the Supplemental Benefits Period. You will be contacted
by Metropolitan Life Insurance Company with respect to conversion of
the Executive Death Benefit Plan portion of such life insurance
coverage. Upon any conversion of either or both portions of such life
insurance coverage, you will be solely responsible for all premiums.
7. During the Supplemental Benefits Period, IFF will provide you, at no
cost to you, with outplacement assistance to help you find a new
position. The nature of such outplacement assistance will be
determined by the Company in its sole discretion. You agree to provide
reasonable assistance to IFF, at such reasonable times as it may be
requested, in connection with the transition of your responsibilities
as Senior Vice-President and President, IFF Fragrances, to those on
whom such responsibilities may devolve.
8. In the event of your death during the Severance Period, the Salary
Continuation Payments and COBRA coverage (including payment of
premiums by
MR. BRIAN D. CHADBOURNE
JULY 2, 1998
PAGE 4 OF 7 PAGES
IFF) will continue for the remainder of the Severance Period. Salary
Continuation Payments will paid to your legal representative.
9. You agree and acknowledge that, as of the Termination Date, the
Executive Severance Agreement dated December 10, 1996 between you and
IFF will terminate.
10. As part of the consideration for the benefits accruing to you under
this Agreement, you agree that, until the expiration of the Severance
Period, you will not, directly or indirectly, (a) accept Employment,
or become an investor with a beneficial interest of more than one
percent (1%) of the outstanding stock or other equity of, or (b) make
loans or advances of more than one percent (1%) of the outstanding
stock or other equity to, or (c) act as an advisor (whether as a
consultant or otherwise) to, any person, firm, partnership,
corporation or other business, domestic or foreign, who or which
competes, directly or indirectly, with IFF. For purposes of this
Section 10, a business will be deemed "competitive" if its operations
are in the flavor, fragrance or aroma chemicals business or if its
operations adversely affect (i) the availability or price to IFF of
any commodity of the kind purchased, acquired or used by IFF, or (ii)
the demand of others for products made or sold by IFF or the price of
such products, in either case in any locality in which such
availability or demand will exist.
11. You agree that until November 30, 1999, you will neither solicit for
employment by nor hire any IFF employee for, and you will not, either
directly or indirectly, encourage or advise any IFF employee to leave
the employ of IFF and/or accept any position with, any business,
whether or not competitive with IFF and whether or not you are
engaging or intend to engage in such business. For the purpose of this
Section 11, an "IFF employee" is any person who at the relevant time
either is an active employee of IFF or within the preceding twelve
(12) months, whether or not an active employee, has been paid any
compensation, whether as salary, consulting fee
MR. BRIAN D. CHADBOURNE
JULY 2, 1998
PAGE 5 OF 7 PAGES
or severance or salary continuation, by IFF (for the purpose of this
Section 11 pension or other retirement benefits will not be considered
compensation).
12. Under your Security Agreement with IFF, a copy of which is attached to
this Agreement as Exhibit B, and under applicable trade secret law,
you are obliged to keep in confidence all IFF proprietary and
confidential information, including that described above, and not to
divulge it to others or to use it for your own purposes or in the
service of any new employer. Both under your Security Agreement and
under applicable law, this obligation continues not only while you are
employed by IFF, but after cessation of that employment. In that
connection, you acknowledge that during your IFF service, you have
acquired proprietary and confidential knowledge and information of
IFF, including, but not limited to, business, technical, human
resources and legal strategies, and the identity of IFF customers and
suppliers and the quantities of products ordered by or from and the
prices paid by or to those customers and suppliers. In addition, you
have also acquired similar confidential knowledge and information
belonging to IFF's customers and provided to IFF in confidence under
written and oral secrecy agreements. You agree to abide by the terms
and conditions of the Security Agreement both during the Severance
Period and thereafter, but such obligations will in no way be
construed as a continuation of your IFF employment, which terminated
on the Termination Date.
13. Upon your leaving the employ of IFF you are also required to deliver
to IFF all notes, memoranda, records, files or other papers, including
all copies thereof, in your custody or control and relating to any IFF
proprietary and confidential knowledge or information, or any such
information of IFF customers or suppliers (collectively, "IFF
Documents"). You hereby acknowledge that you have delivered all to IFF
all IFF Documents.
14. You and IFF agree:
MR. BRIAN D. CHADBOURNE
JULY 2, 1998
PAGE 6 OF 7 PAGES
(a) At no time will you in any way denigrate, demean or otherwise say
or do anything, whether in oral discussions or in writing, (i) that
would cause any director, officer, employee or representative of IFF,
or any third party, including but not limited to suppliers, customers
and competitors of IFF, to lower his, her or its perception about the
integrity, public or private image, professional competence, or
quality of products or service, of IFF or of any officer, director,
employee or other representative of IFF, or (ii) that might suggest,
directly or indirectly, or cause any such person or entity to conclude
that the termination of your employment with, and/or your resignation
as a director of, IFF was the result of any disagreement with IFF on
any matter relating to the Company's operations, policies or
practices. If IFF is asked by a prospective employer for a reference
with respect to a new position for which you are being considered,
without your prior written consent the Company will do no more than
confirm your dates of employment and your salary history. You hereby
acknowledge that your breach of any of Sections 7, 10, 11, 12, 13 or
14 will entitle the Company (i) immediately to terminate any payment
or other benefit then being made or provided to you or otherwise due
to you under this letter agreement (except for any amounts then due to
you in respect of your RIFP accounts) and (ii) to injunctive relief.
(b) At no time will any director, officer, employee or other
representative of IFF in any way denigrate, demean or otherwise say or
do anything, whether in oral discussions or in writing, that would
cause any other director, officer, employee or representative of IFF,
or any third party, including but not limited to suppliers, customers
and competitors of IFF, to lower his, her or its perception about your
integrity, public or private image or professional competence.
15. Please sign and return the Release attached to this Agreement as
Exhibit C. This Agreement will take effect only upon your execution of
this Agreement and Exhibits A and C.
MR. BRIAN D. CHADBOURNE
JULY 2, 1998
PAGE 7 OF 7 PAGES
16. This Agreement will be governed by and interpreted in accordance with
New York law.
Please sign and date both copies of this letter in the space provided below
and return one fully executed copy, together with the executed letter of
resignation and the Release. The other copy is for your records.
Brian, we appreciate your service to IFF and wish you the best for the
future.
Sincerely yours,
INTERNATIONAL FLAVORS & FRAGRANCES INC.
By: /s/ EUGENE P. GRISANTI
-------------------------------------
Eugene P. Grisanti
Chairman and President
AGREED AND ACCEPTED:
/s/ BRIAN D. CHADBOURNE
- ------------------------------
Brian D. Chadbourne
July 7, 1998
EXHIBIT A
As of June 1, 1998
Stephen A. Block, Esq.
Vice-President and Secretary
International Flavors & Fragrances Inc.
521 West 57th Street
New York, New York 10019
Dear Mr. Block:
I hereby resign as Senior Vice-President and President, Fragrance
Division, and as a member of the Board of Directors of International Flavors &
Fragrances Inc.
/s/ BRIAN D. CHADBOURNE
---------------------------------------
Brian D. Chadbourne
IFF SECURITY AGREEMENT
International Flavors & Fragrances Inc.
521 West 57th St., New York, N.Y. 10019
In consideration of my employment by IFF or any of its subsidiaries (herein
together called IFF), I hereby agree as follows:
1. I acknowledge that in the course of my employment by IFF, I may have
access to, acquire or gain confidential knowledge or information (i) with
respect to formulae, secret processes, plans, devices, products, computer
programs and other intangible property, know-how and other data belonging or
relating to IFF or belonging to a customer or supplier of IFF, or (ii) with
respect to the identity of customers of IFF, and the identity of products and
the quantity and prices of the same ordered by such customers. I acknowledge
that all such information is the sole property of IFF or its customer or
supplier, and I shall treat it as set forth below.
2. I shall keep confidential all such knowledge or information described
above and shall not divulge it to others nor use it for my own private purposes
or personal gain, without the express written consent of IFF. This obligation on
my part shall continue during and after the period of my employment by IFF.
3. Upon termination of my employment, or at any time IFF may request, I
shall deliver to IFF all notes, memoranda, formulae, records, files or other
papers, tapes, discs or programs, and copies thereof, in my custody relating to
any such knowledge or information described above to which I have had access or
which I may have developed during the term of my employment.
4. I shall not, without the prior written permission of IFF, after leaving
the employ of IFF for any reason, work for others, or for my own account, on any
of the secret processes, formulae or programs on which I have worked or to which
I have had access while in the employ of IFF.
5. Any invention, formula, process, product, program, idea, discovery and
improvement conceived or developed by me within the period of my employment,
relating to any activity engaged in by IFF, shall be the sole and exclusive
property of IFF and I shall promptly communicate to IFF full information with
respect to any of the foregoing conceived or developed by me. I shall execute
and deliver all documents and do all other things as shall be deemed by IFF to
be necessary and proper to effect the assignment to IFF of the sole and
exclusive right, title and interest in and to all such inventions, formulae,
processes, products, programs, ideas, discoveries and improvements, and patent
applications and patents thereon.
6. I understand and agree that IFF has no interest in and will not accept
divulgence to it of any confidential knowledge or information which is the
property of any previous employer or other third party. Notwithstanding any
other paragraph of this agreement, I shall not communicate any such confidential
knowledge or information to IFF nor use the same during the course of my
employment.
7-23-96 /s/ BRIAN D. CHADBOURNE
- ----------------------------------- ------------------------------------
(date) (signature)
EXHIBIT C
RELEASE
-------
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned, Brian D.
Chadbourne, 1 West 72 Street, Apt. 12, New York, New York 10023 (hereinafter
referred to as "Employee"), for and in consideration of certain benefits
heretofore paid or to be paid or provided to him by International Flavors &
Fragrances Inc., a New York corporation with a place of business located at 521
West 57th Street, New York, New York 10019 (hereinafter referred to as "IFF
Inc."), as such benefits are set forth in an Agreement dated July 2, 1998, a
copy of which is annexed hereto as Annex A, DOES HEREBY AGREE TO RELEASE and
DOES HEREBY RELEASE IFF Inc. and all of its subsidiaries and affiliates and
their respective directors, officers and employees (hereinafter referred to as
"Releasees") from all "Claims", as hereinafter defined, and Employee agrees
never to file any lawsuit or any claim with any Federal, state or local
administrative agency asserting or in respect of any of such Claims.
As used in this Release, the term "Claims" means and includes all charges,
complaints, claims, liabilities, obligations, promises, agreements, damages,
actions, causes of action, rights, costs, losses and expenses (including
attorneys' fees and costs actually incurred) of any nature whatsoever, known or
unknown, suspected or unsuspected, which Employee now has, or claims to have, or
which Employee at any earlier time had, or claimed to have had, or which
Employee at any future time may have, or claim to have, against each or any of
the Releasees as to any matters occurring or arising on or before the date this
Release is executed by Employee. The Claims Employee is releasing under this
Release include, but are not limited to, rights arising out of alleged
violations of any contracts, express or implied, written or oral, and any Claims
for wrongful discharge, fraud, misrepresentation, infliction of emmotional
distress, or any other tort, and any other claims relating to or arising out of
Employee's employment with IFF Inc. or the termination thereof, and any Claim
for violation of any Federal, state or other governmental statute, regulation or
ordinance including, but not limited to, the following, each as amended to date:
(1) Title VII of the Civil Rights Act of 1964, 42 U.S.C. Sec.Sec.2000e et seq.
(race, color, religion, sex and national origin discrimination); (2) Section
1981 of the Civil Rights Act of 1866, 42 U.S.C. Sec.1981 (race discrimination;
(3) the Age Discrimination in Employment Act, 29 U.S.C. Sec.Sec.621-634 (age
discrimination); (4) the Equal Pay Act of 1963, 29 U.S.C. Sec.206 (equal pay);
(5) Executive Order 11246 (race, color, religion, sex and national origin
discrimination); (6) Executive Order 11141 (age discrimination); (7) Section 503
of the Rehabilitation Act of 1973, 29 U.S.C. Sec.Sec.701 et seq. (handicap
discrimination); (8) the Employee Retirement Income Security Act of 1974, 29
U.S.C. Sec.Sec.1001 et seq. (retirement matters); and (9) any applicable New
York, New Jersey or Connecticut state or local law relating to employment
termination that may be discriminatory or otherwise in contravention of public
policy.
Employee hereby represents that he has not filed any complaints, charges,
or lawsuits against any Releasee with any governmental agency or any court; that
he will not file
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or pursue any at any time hereafter; and that if any such agency or court
assumes jurisdiction of any complaint, charge or lawsuit against any Releasee on
behalf of Employee, he will request such agency or court to withdraw from the
matter. Neither this Release nor the undertaking in this paragraph shall limit
Employee from pursuing Claims for the sole purpose of enforcing his rights under
Annex A or under any employment or retiree benefit plan or program of IFF Inc.
Employee hereby represents that he has been given a period of twenty-one
(21) days to review and consider this Release before signing it. Employee
further understands that he may use none or as much of this 21-day period as he
wishes prior to signing.
Employee is advised that he has the right to and should consult with an
attorney before signing this Release. Employee understands that whether or not
to do so is Employee's decision. Employee has exercised his right to consult
with an attorney to the extent, if any, that he desired.
Employee may revoke this Release within seven (7) days after he signs it.
Revocation can be made by delivering a written notice or revocation to
Vice-President, Human Resources, IFF Inc., 521 West 57th Street, New York, New
York 10019. For such revocation to be effective, written notice must be received
by such Vice-President, Human Resources, not later than the close of business on
the seventh day after the day on which Employee executes this Release. If
Employee revokes this Release, it shall not be effective and the Letter
Agreement described in Annex A shall be null and void.
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Employee understands and acknowledges that IFF Inc. has not made any
promises or representations to Employee other than those in Annex A.
EMPLOYEE ACKNOWLEDGES THAT HE HAS READ THIS RELEASE, UNDERSTANDS IT AND IS
VOLUNTARILY EXECUTING IT.
[PLEASE READ THIS RELEASE CAREFULLY. IT COVERS ALL KNOWN AND UNKNOWN
CLAIMS.]
Executed at New York, New York, on July 8th, 1998
/s/ BRIAN D. CHADBOURNE
-----------------------------------
Brian D. Chadbourne
STATE OF NEW YORK )
COUNTY OF NEW YORK )ss:
Subscribed and sworn to before
me this 8 day of July, 1998
by the said Brian D. Chadbourne
known to me.
/s/ HARRY MILLER
----------------------------------
Notary Public
HARRY MILLER
Notary Public, State of New York
No. 01MI7943773
Qualified in New York County
Commission Expires March 30, 2000
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