SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ____)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
AZUREL LTD.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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computed pursuant to Exchange Act Rule 0-11 (set forth the
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statement number, or the Form or Schedule and the date of its filing.
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<PAGE>
AZUREL LTD.
509 MADISON AVENUE
NEW YORK, NEW YORK 10022
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
TO THE STOCKHOLDERS OF AZUREL LTD.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Azurel Ltd.
(the "Company") will be held at the offices of Kanan, Corbin, Schupak & Aronow,
Inc., 800 Second Avenue, 5th Floor, New York, New York 10017 on May 28, 1998, at
10:00 A.M., local time for the following purposes:
1. To elect the Board of Directors of Azurel Ltd. for the ensuing
year;
2. To ratify the appointment of Feldman Sherb Ehrlich & Co., P.C. as
the Company's independent certified public accountants for the
ensuing year; and
3. To transact such other business as may properly come before the
meeting and any continuations and adjournments thereof.
Stockholders of record at the close of business on May 1, 1998 are entitled to
notice of and to vote at the meeting.
In order to ensure a quorum, it is important that Stockholders representing a
majority of the total number of shares issued and outstanding and entitled to
vote, be present in person or represented by their proxies. Therefore, whether
you expect to attend the meeting in person or not, please sign, fill out, date
and return the enclosed proxy in the self-addressed, postage-paid envelope also
enclosed. If you attend the meeting and prefer to vote in person, you can revoke
your proxy.
In addition, please note that abstentions and broker non-votes are each included
in the determination of the number of shares present and voting, for purposes of
determining the presence or absence of a quorum for the transaction of business.
Neither abstentions nor broker non-votes are counted as voted either for or
against a proposal.
April 29, 1998
By Order of the Board of Directors
Gerard Semhon
Chairman of the Board of Directors
<PAGE>
AZUREL LTD.
509 MADISON AVENUE
NEW YORK, NEW YORK 10022
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 10:00 A.M., MAY 28, 1998
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of Azurel Ltd.(herein called the
"Company") for use at the Annual Meeting of Stockholders of the Company to be
held at the offices of Kanan, Corbin, Schupak & Aronow, Inc., 800 Second Avenue,
5th Floor, New York, New York 10017 on May 28, 1998, at 10:00 A.M. local time,
and at any continuation and adjournment thereof. Anyone giving a proxy may
revoke it at any time before it is exercised by giving the Chairman of the Board
of Directors of the Company written notice of the revocation, by submitting a
proxy bearing a later date or by attending the meeting and voting. This
statement, the accompanying Notice of Meeting and form of proxy have been first
sent to the Stockholders on or about May 8, 1998.
In addition, please note that abstentions and broker non-votes are each
included in the determination of the number of shares present and voting, for
purposes of determining the presence or absence of a quorum for the transaction
of business. Neither abstentions nor broker non- votes are counted as voted
either for or against a proposal.
All properly executed, unrevoked proxies on the enclosed form, which are
received in time will be voted in accordance with the shareholder's directions,
and unless contrary directions are given, will be voted for the election of
directors of the nominees described below.
OWNERSHIP OF SECURITIES
Only Stockholders of record at the close of business on May 1, 1998, the
date fixed by the Board of Directors in accordance with the Company's By-Laws,
are entitled to vote at the meeting. As of April 24, 1998, there were issued and
outstanding 5,293,745 shares of Common Stock.
Each outstanding share is entitled to one vote on all matters properly
coming before the meeting. A majority of the shares of the outstanding Common
Stock is necessary to constitute a quorum for the meeting.
1
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The following table sets forth certain information as of April 24, 1998
with respect to each beneficial owner of five percent (5%) or more of the
outstanding shares of Common Stock of the Company, each officer and director of
the Company and all officers and directors as a group. The table does not
include options or SARs that have not yet vested or are not exercisable within
60 days of the date hereof. Unless otherwise indicated, the address of each such
person or entity is 509 Madison Avenue, New York, New York 10022.
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) COMMON STOCK
- ------------------- --------------------- ------------
Gerard Semhon(2) 316,534 6.0%
Constantine Bezas 175,551 3.3%
Joseph Truitt Bell 140,900 2.7%
Van Christakos 103,598 2.0%
Frank DeSimone -0- 0.0%
Kay Shortway -0- 0.0%
Norman Grief -0- 0.0%
Tusany Investment & Trade S.A. 1,076,023 20.3%
c/o Morgan and Morgan Trust Co.
Pasea Estate, P.O. Box 3149
Roadtown, Tortola BVI
John Connaughton(3) 410,000 7.7%
62 Viola Drive
Glen Cove, NY 11542
Helena Finnigan(3) 410,000 7.7%
62 Viola Drive
Glen Cove, NY 11542
All officers and directors 736,583 13.9%
as a group (7 persons)
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(1) Pursuant to the rules and regulations of the Securities and Exchange
Commission, shares of Common Stock that an individual or group has a
right to acquire within 60 days pursuant to the exercise of options or
warrants are deemed to be outstanding for the purposes of computing the
percentage ownership of such individual or group, but are not deemed to
be outstanding for the purposes of computing the percentage ownership
of any other person shown in the table.
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(2) Includes 102,267 shares of Common Stock owned by Diane Papas, who is
the wife of Gerard Semhon, of which shares Mr. Semhon disclaims
beneficial ownership.
(3) Includes: (i) 150,000 shares of Common Stock and 50,000 options to
purchase Common Stock owned by Castlebrew Properties, Ltd., and (ii)
210,000 shares of Common Stock owned by Liam Development , Ltd., over
which Mr. Connaughton and Ms. Finnigan exercise shared voting and/or
dispositive power.
THIS PROXY STATEMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH BELOW AND ELSEWHERE IN THIS PROXY STATEMENT.
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PROPOSAL 1
ELECTION OF DIRECTORS
The By-Laws of the Company provide that the authorized number of
directors shall be as set by the Board of Directors but shall not be less than
one nor more than seven. The directors hold office until the next annual meeting
of Stockholders and until their successors have been elected and qualified.
Non-Employee directors are eligible to receive options under the 1997 stock
option plan.
Six Directors, constituting the entire Board of Directors of the
Company, are to be elected at the meeting to serve until the next Annual Meeting
of Stockholders and until their successors have been elected and qualified.
Unless such authority is withheld, proxies will be voted for election of the six
persons named below, each of whom are now serving as Directors, and each of whom
has been designated as a nominee. Van Christakos, who is currently a Director,
has not been nominated for re-election to serve on the Company's Board of
Directors.
STOCKHOLDER VOTE REQUIRED
The election of the directors will require the affirmative vote of the
majority of the shares present in person or represented by proxy at the Annual
Meeting of Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION TO THE BOARD OF DIRECTORS
OF THE COMPANY OF EACH OF THE NOMINEES
The members of the Board of Directors, executive officers of the
Company, significant employees of the Company and their ages and positions with
the Company are as follows:
NOMINEES TO THE COMPANY'S BOARD OF DIRECTORS
NAME AGE POSITION
- ---- --- --------
Gerard Semhon 61 Chairman of the Board, Chief Executive
Officer and Director
Constantine Bezas 51 President and Director
Joseph Truitt Bell 40 Executive Vice President and Director
Frank DeSimone 44 Executive Vice President, Chief
Financial Officer and Director
Kay Shortway 58 Director
Norman Grief 63 Director
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OTHER EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
NAME AGE POSITION
- ---- --- --------
Van Christakos 49 Vice President-Operations, Secretary,
Treasurer and Director
Michael J. Assante 60 President and Chief Executive Officer,
Private Label Group
Directors are elected to serve until the next meeting of stockholders
and until their successors are duly elected and qualified. Meetings of
stockholders of the Company will be held on an annual basis. However, if at any
time an annual meeting is not held for the election of directors, the then
current directors will continue to serve until their successors are elected and
qualified. Vacancies and newly created directorships resulting from any increase
in the number of directors may be filled by a majority vote of Directors then in
office. Officers are appointed by, and serve at the discretion of, the Board of
Directors. Non-employee directors are eligible to receive options under the 1997
Stock Option Plan.
The Board of Directors has established an Audit Committee, consisting
of Gerard Semhon, Kay Shortway and Norman Grief. The Company intends to
establish a Compensation Committee the members of which are expected to be
independent directors.
The following is a brief summary of the background of each director,
executive officer and significant employee of the Company:
GERARD SEMHON has served as Chairman of the Board and Chief Executive
Officer of the Company since its inception in June 1995. Mr. Semhon has over 30
years of management experience in consumer products. From March 1993 to May
1995, Mr. Semhon served as chairman of the board and chief executive officer of
Dominion Associates, Inc. ("Dominion"), a distributor of health and beauty aids
that he helped found. In May 1995, Dominion ceased operations due to a lack of
financial resources. From 1990 to March 1993, Mr. Semhon served as an
international consultant for several cosmetic companies, including Boots Ltd.
and Cambridge Development Corp. In 1983, Mr. Semhon founded Parlux Fragrances,
Inc. ("Parlux"), where he was employed until 1990. Parlux operated as the United
States and Canadian distributor of the Giorgio Armani women's fragrance line.
From 1981 to 1983 Mr. Semhon served as Helena Rubinstein, Inc.'s president of
North American Operations. In 1976, Mr. Semhon became president of ITT Corp.
Cosmetics Division. From 1972 to 1976, Mr. Semhon served as Director of
International Marketing for Revlon International, Inc.
CONSTANTINE BEZAS has served as President and a Director of the Company
since its inception. From March 1993 to May 1995, he served as president of
Dominion. From February 1991 to January 1993, he served as chairman of the board
of Bezas, Tore, Jacobson & Lawrence, Ltd., an advertising firm he co-founded.
From 1974 to 1991, Mr. Bezas was the principal owner/operator of Aspasia, Inc. a
chain of specialty jewelry stores with locations in Connecticut and New York.
During this same period Mr. Bezas also founded Video Cinema, a four store chain
of video rental stores, and Just Delicious, a specialty gourmet food store
chain. From 1971 to 1973, Mr. Bezas was employed by the Aramis Division of Estee
Lauder Cosmetics in various marketing and sales capacities.
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Mr. Bezas and his wife filed a petition under Chapter 11 of the Federal
Bankruptcy Act in December 1992. The case was converted to a proceeding under
Chapter 7 of such Act in August 1994 and Mr. Bezas received a discharge from the
proceeding in January 1995.
JOSEPH TRUITT BELL has served as Executive Vice President and Director
of the Company since its inception. From November 1992 to June 1995, Mr. Bell
served as an independent consultant for several retail establishments. In 1983,
Mr. Bell co-founded Rosenthal-Truitt, Inc., an upscale men's furnishings and
accessories store in Los Angeles, where he worked until October 1992. That
company eventually expanded its business to four stores throughout California
and Texas.
FRANK DESIMONE joined the Company in September, 1997 as Executive Vice
President and Chief Financial Officer. Mr. DeSimone co-founded Cambridge
Business Services in January 1986 and served as President until September 1997.
Prior to founding Cambridge Business Services in 1986, Mr. DeSimone was the
Chief Financial Officer at Parfum Givanchy and Parlux Fragrances.
KAY SHORTWAY was elected to the Company's Board of Directors on February
6, 1998. Ms. Shortway served as the President and CEO of Adrienne Vittadini
Retail Division from January 1, 1989 to June 6, 1995. From January 1, 1984 to
December 31, 1989 Ms. Shortway was Executive Vice President of Charles Jourdan
North America. From February 6, 1981 to December 15, 1984 Ms. Shortway served as
Executive Vice President and General Merchandise Manager at Bergdoff Goodman.
Ms. Shortway served on the Board of Directors of Frost Brothers from March 10,
1985 to December 15, 1990 and is currently the Chairman and Secretary of the
International Fashion Group's Board of Directors.
NORMAN GRIEF was elected to the Company's Board of Directors on February
23, 1998. Mr. Grief is presently the Chief Executive Officer of The Jarrott
Group, Inc., a full service marketing agency with a specialty in developing
cosmetic brands, a position which he has served as since January 3, 1995. From
March 1, 1981 to December 1, 1994 Mr. Grief was the President of Givandan. From
March 9, 1970 to December 15, 1986 Mr. Grief served as the Vice President of
Research and Development at Revlon.
VAN CHRISTAKOS has served as Secretary, Treasurer and a Director of the
Company since its inception. From March 1993 to May 1995, he was employed at
Dominion. From April 1991 to February 1993, Mr. Christakos served as president
of Hamilton Group, a marketing and consulting firm he founded. From 1975 to
1991, Mr. Christakos served as Director of Operations for Aspasia, Inc., a six
store specialty chain of jewelry stores located in Connecticut and New York. In
1984, Mr. Christakos was employed at Just Delicious, a specialty gourmet food
store chain, where he remained until 1986. From 1982 to 1984, he served as the
director of operations for Video Cinema, a four store video rental chain in the
New York Tri-State area.
MICHAEL J. ASSANTE joined the Company in August 1996 as part of the
acquisition of the Private Label Group of which he had been the principal owner
and senior executive for more than forty years. He presently serves as President
and Chief Executive Officer of the Private Label Group.
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COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company has one formal committee, the Audit Committee, consisting
of Gerard Semhon, Kay Shortway and Norman Grief. The Audit Committee is
responsible for communicating with the Company's auditors regarding the
financial and reporting affairs of the Company. The Company does not currently
have a Compensation Committee, a Stock Option Committee or a Nominating
Committee.
There were two meetings of the Company's Board of Directors during 1997
held on July 25, 1997 and September 3, 1997. All of the Directors were present
at such meetings. There were ten unanimous written consents of the Company's
Board of Directors, pursuant to Section 141 of the General Corporation Law of
Delaware, during 1997. The Audit Committee was formed in February 1998, and
therefore did not meet during 1997.
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SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation for
services rendered in all capacities to the Company, for the year ended December
31, 1997 (referred to as "1997" in this table), the year ended December 31, 1996
(referred to as "1996" in this table) and the year ended December 31, 1995
(referred to as "1995" in this table) paid to the Company's Chief Executive
Officer. There was one other executive officer or other person whose
compensation at the end of the above 1997, 1996 and 1995 years whose total
compensation exceeded $100,000 per annum.
<TABLE>
<CAPTION>
RESTRICTED ALL OTHER
NAME AND PRINCIPAL STOCK COMPEN-
POSITION YEAR SALARY BONUS AWARDS OPTIONS/SARS SATION
- -------- ---- ------ ----- ------ ------------ ------
<S> <C> <C> <C> <C>
Gerard Semhon 1997 $ 92,689 $ 400
Chairman, Chief 1996 $ 95,648
Executive Officer (1) 1995 $ 48,000
Michael J. Assante 1997 $195,000 $75,851 $20,196
President, Private 1996 $245,192
Label Group (2) 1995 $250,000
<FN>
(1) During the years ended December 31, 1995 and 1996, Mr. Semhon earned
such amounts for consulting services rendered to the Company, of which
approximately $28,500 and $67,500, respectively, was accrued but not
paid. Mr. Semhon's "other compensation" for 1997 relates to a car
allowance.
(2) Amounts earned prior to August 1996 represent Mr. Assante's salary as
President of the Private Label Group prior to its acquisition by the
Company. Mr. Assante's "other compensation" for 1997 relates to a
$12,000 car allowance and $8,196 for life insurance premiums paid by
the Company.
</FN>
</TABLE>
During 1997, the Company granted 50,000 stock options to Frank
DeSimone, its Chief Financial Officer. The Company does not have any long-term
incentive plans for compensating its executive officers.
EMPLOYMENT AGREEMENTS
On July 31, 1997, the Company entered into a three year employment
agreement with Gerard Semhon, the Company's Chief Executive Officer and Chairman
of the Board, under which Mr. Semhon will serve as a full-time employee and
officer and receive an annual salary of $95,000 and bonuses as determined by the
Board of Directors. The employment agreement entitles Mr. Semhon to an annual
car allowance of $9,600 and the right to participate in welfare plans adopted by
the Company and to enjoy medical, dental and disability insurance benefits and
life insurance benefits under policies obtained by the Company for such
purposes. The agreement is automatically renewable for successive one-year
terms. The employment agreement may be terminated by the Company for cause, as
described in the agreement. In the event that the Company terminates Mr.
Semhon's agreement without cause, Mr. Semhon is to receive his
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full compensation for the remainder of the term of the agreement, but in no
event less than 12 months compensation. In the event of a change in control of
the Board of Directors, Mr. Semhon is to receive two times his full compensation
for the remainder of the term of the agreement. In addition, the agreement
precludes Mr. Semhon from disclosing confidential information, and from
competing with the Company during the term of his employment and for one year
thereafter.
In August 1996, the Company entered into a three year employment
agreement with Michael J. Assante under which he will serve as President and
Chief Executive Officer of each of the two companies that comprise the Private
Label Group. Mr. Assante will receive a base annual salary of $195,000 and an
annual car allowance of $12,000. In addition, the Company will maintain a $1.1
million life insurance policy on the life of Mr. Assante, the beneficiary of
which will be designated by Mr. Assante. The employment agreement is renewable
at his option for an additional two year period. Mr. Assante will receive a
bonus equal to 10% of the amount by which the Private Label Group's annual
profit, before interest and taxes but after depreciation and amortization,
exceeds $500,000 for each of the years ending December 31, 1997, 1998 and 1999.
The employment agreement may be terminated by the Company for cause, as
described in the agreement. Mr. Assante is entitled to receive his salary for
the remaining term of the agreement as severance pay in the event that the
Company terminates the agreement without cause. In addition, the agreement
precludes Mr. Assante from disclosing confidential information during the term
of his employment and for five years thereafter, and from competing with the
Company during the term of his employment and for one year thereafter.
CONSULTING AGREEMENTS
The Company entered into a consulting agreement with ETR & Associates,
Inc. ("ETR") in June 1995, pursuant to which ETR provided general management
advisory services to the Company ("Consulting Agreement"). ETR advised the
Company's Board of Directors on key policy decisions as requested by the
Company. ETR's services have been primarily related to assistance in analyzing
the acquisition of the Private Label Group and identifying persons to enter into
business relationships with the Company. These persons include trademark owners,
packaging sources and owners of skin care ingredients. In addition, ETR has in
the past assisted the Company in securing distributors in England. Pursuant to
the Consulting Agreement, in 1995 and 1996 the Company issued 25,000 shares of
Common Stock to ETR.
In July 1996, the Company entered into a brokerage and consulting
agreement with V.A.N. Marketing Ltd. ("VAN"). Under the agreement, VAN is
entitled to a finder's fee of 2 1/2 percent of the purchase price of the Private
Label Group, 5,000 shares of the Company's Common Stock and options to purchase
20,000 shares of the Company's Common Stock at $4.80 per share, expiring in July
1999. $22,500 of the cash fee was paid upon closing of the acquisition and the
remaining balance is due one year thereafter. Additionally, VAN will received a
monthly consulting fee of $1,500 for each of the first 12 months following the
closing of the acquisition and receives $1,500 for each of the 36 months
thereafter.
The Company, in November 1996, entered into a two year consulting
agreement with Metco pursuant to which Metco provided general management
consulting services and advisory services in the establishment of distribution
channels in the United Kingdom and Ireland (the
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"Metco Consulting Agreement). The consulting fee of $16,500 due under the Metco
Consulting Agreement was prepaid in November 1996.
Mr. Louis DiVita ("DiVita"), a former shareholder of the companies
comprising the Private Label Group, serves as a consultant to the Private Label
Group pursuant to a consulting agreement dated August 17, 1993 pursuant to which
DiVita provides services relating to the Private Label Group's computer system.
The agreement provides for a monthly consulting fee of $11,117 through August
2003.
STOCK OPTION PLAN
In March 1997 the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1997 Stock Option Plan (the "1997 Plan").
The 1997 Plan provides for grants to officers and other employees of the
Company, non-employee directors, consultants and advisors and other persons who
may perform significant services on behalf of the Company and will be
administered by the Board of Directors, or a committee (the "Committee") of two
or more directors, each of whom is a "Non-Employee Director," within the meaning
of Rule 16b-3 under the Exchange Act. Pursuant to the 1997 Plan, options to
acquire an aggregate of 750,000 shares of Common Stock may be granted subject to
adjustment as provided in the 1997 Plan. As of the December 31, 1997 130,750
options have been granted pursuant to the 1997 Plan.
The 1997 Plan authorizes the issuance of incentive stock options
("ISOs"), as defined in Section 422A of the Internal Revenue Code of 1986 (the
"Code"), as amended, as well as non-qualified stock options ("NQSOs"). Only
"employees" (within the meaning of Section 3401(c) of the Code) of the Company
shall be eligible for the grant of Incentive Stock Options. The exercise price
of each ISO may not be less than 100% of the fair market value of the Common
Stock at the time of grant, except that in the case of a grant to an employee
who owns 10% or more of the then outstanding stock of the Company or a
subsidiary or parent of the Company (a "10% Stockholder"), the exercise price
shall be at least 110% of the fair market value of the Common Stock on the date
of grant. The exercise price of each NQSO is determined by the Committee, but
shall not be less than 85% of the fair market value of the Common Stock on the
date of grant. Notwithstanding the foregoing, the exercise price of any option
granted on or after the effective date of the registration of any class of
equity security of the Company pursuant to Section 12 of the Exchange Act, and
prior to six months after the termination of such registration, may be no less
than 100% of the fair market value per share on the date of the grant. The Board
or the Committee shall provide, in each stock option agreement, when the term of
the option subject to such agreement expires and the date when it becomes
exercisable, but in no event will an option granted under the 1997 Plan be
exercisable after the expiration of ten years from the date it is granted.
Options may not be transferred during the lifetime of an option holder and are
only exercisable during the optionee's lifetime only by the optionee or by his
or her guardian or legal representative. The 1997 Plan shall terminate
automatically as of the close of business on the day preceding the 10th
anniversary date of its adoption, subject to earlier termination.
To the extent Fair Market Value, as defined in the Code, of Common Stock
with respect to which Incentive Stock Options granted hereunder are exercisable
for the first time by an optionee in any calendar year exceeds $100,000, such
options granted shall be treated as NQSO's to the extent required by Section 422
of the Code.
If the outstanding shares of Common Stock are changed by reason of an
adjustment to the capitalization of the Company or as a result of a merger or
consolidation, an appropriate adjustment shall be made by the Board or the
Committee in the number, kind and price of shares
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as to which options may be granted and exercised.
Subject to the provisions of the 1997 Plan, the Board of Directors or
the Committee has the authority to determine the individuals to whom stock
options are to be granted, the number of shares to be covered by each option,
the exercise price, the type of option, the option period, the restrictions, if
any, on the exercise of the option, the terms for payment of the option price
and all other terms and provisions of such options (which need not be
identical). Payments by holders of options, upon exercise of an option, may be
made (as determined by the Board or the Committee) in cash or such other form of
payment as may be permitted under the 1997 Plan, including without limitation,
by promissory note or by delivery of shares of Common Stock.
EMPLOYEE PENSION PLAN
The Company does not currently have an employee pension plan.
PERFORMANCE OPTIONS
The Company did not grant any performance options during the year ended
December 31, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1995, the Company entered into a consulting agreement with ETR
& Associates ("ETR) pursuant to which ETR provided general management advisory
services to the Company. ETR advised the Company's Board of Directors on key
policy decisions as requested by the Company. ETR's services were primarily
related to assistance in analyzing the acquisition of the Private Label Group
and identifying persons to enter into business relationships with the Company.
These persons include trademark owners, packaging sources and owners of skin
care ingredients. In addition, Metco assisted the Company in attempting to
secure distributors in England. Pursuant to the consulting agreement, in 1995
and 1996 the Company issued 25,000 shares of Common Stock to ETR, which have
demand and "piggy-back" registration rights.
In July 1995, the Company, as an accommodation maker for Messrs. Semhon
and Bezas, issued a promissory note in the principal amount of $28,750 to ETR.
The proceeds of this loan were paid to Messrs. Semhon and Bezas. The note plus
accrued interest was repaid by the Company in September and October 1995, and
the repayment was treated as an advance to stockholders. As additional
consideration for this loan, ETR was granted an option to purchase 150,000
shares of Common Stock at $1.00 per share, which expires in July 2000.
In September 1995, the Company issued a promissory note in the
principal amount of $50,000 to Bola Business Ltd. ("Bola"). The note accrued
interest at 10% per annum and was secured by an aggregate of 200,000 shares of
Common Stock owned by Messrs. Semhon and Bezas, officers and directors of the
Company. The proceeds of this loan were utilized for working capital. As
additional consideration for the loan, the Company issued Bola 25,000 shares of
Common Stock and granted Bola the option to purchase 50,000 shares of Common
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Stock at $1.00 per share, which option expires in September 2002. The note and
accrued interest were repaid in April 1996.
In October 1995, the Company issued a promissory note of $200,000 to
Tusany Investment and Trade, S.A., a founder and principal stockholder of the
Company ("Tusany"), which accrued interest at 10% per annum. The proceeds of
this loan were advanced to the Private Label Group as part of the Company's
obligation in connection with the acquisition of the Private Label Group. In
July 1996, Tusany converted the principal plus accrued interest due under the
note into 106,972 shares of Common Stock as part of a private placement
completed by the Company in July 1996.
In January 1996, the Company borrowed $50,000 from the wife of a
principal of the underwriter of the Company's initial public offering. The loan
and accrued interest, at 8% per annum, was repaid in April and May 1996. The
Company used the proceeds of this loan as security for its non-recourse
guarantee under an agreement with the Private Label Group's lender, Finova
Capital Corporation ("Finova").
In January 1996, the Company issued a promissory note of $160,000 to
Metco Investors LLC ("Metco"). The note accrued interest at 10% per annum and
was due, as to $100,000, in February 1996, and, as to the remaining principal
plus accrued interest, in March 1996. In consideration for this loan, the
Company issued Metco 25,000 shares of Common Stock and an option to purchase
50,000 shares of Common Stock at $1.25 per share, which expires in January 1999.
Additionally, the Company issued 25,000 shares of Common Stock to Metco as a
penalty for the Company's late repayment of a portion of the loan. The note was
repaid in February and May 1996. The Company used $10,000 of the proceeds of
this loan for working capital and $150,000 as security for its non-recourse
guarantee under the agreement with Finova.
In February 1996, the Company completed a $250,000 private placement of
5 units, each unit consisting of (i) the Company's two month 12% promissory note
in the original principal amount of $50,000, and (ii) 25,000 shares of the
Company's Common Stock to three accredited investors, including 50,000 shares to
Tusany ("February 1996 Private Placement"). The Company received net proceeds of
$210,000 (after deducting expenses of $7,500 and commissions of $32,500 to
Network 1 Financial Securities, Inc. ("Network 1"), the underwriter of the
Company's initial public offering for acting as placement agent). As part of the
Company's obligation in connection with the acquisition of the Private Label
Group, the net proceeds of the February 1996 Private Placement were advanced to
the Private Label Group to pay a portion of a jury award rendered in a legal
proceeding against the Private Label Group.
In connection with the 1995 and February 1996 Private Placements, Gerard
Semhon, the Company's Chief Executive Officer and Chairman of the Board, agreed
to indemnify the Company against any claims that may be asserted against the
Company by creditors of Dominion Associates, Inc. ("Dominion"), a company that
ceased operations in May 1995. Gerard Semhon, the Chief Executive Officer and a
Director of the Company, and Constantine Bezas, the President and a Director of
the Company, served as executive officers of Dominion.
In July 1996, the Company completed the July 1996 Private Placement of
978,747 shares of Common Stock at $2.00 per share to 28 accredited investors,
including 100,000 shares issued to Tusany for its participation in the
financing. The Company received $1,314,950 of net proceeds (after deducting
expenses of $11,050, and commissions of $174,000 to Network 1 and the
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promissory note conversions described below). As part of the July 1996 Private
Placement, certain noteholders of the Company, including holders of notes issued
in the 1995 and February 1996 Private Placements converted an aggregate of
$457,494 principal amount and interest into 278,747 shares of Common Stock. Of
the aggregate debt converted, Tusany converted principal and interest due under
a $50,000 promissory note issued in the February 1996 Private Placement into
52,383 shares of Common Stock and principal and interest due under a $200,000
promissory note issued in October 1995 into 106,972 shares of Common Stock. The
Company used the net proceeds of the July 1996 Private Placement (i) to repay
noteholders that did not convert their indebtedness, (ii) to repay other
indebtedness, (iii) for the purchase price of and other fees related to the
Private Label Group acquisition and (iv) for working capital.
In July 1996, the Company issued a promissory note of $22,000 to Metco.
The note and interest were repaid in September 1996. The Company used the
proceeds of this loan for working capital.
In October 1996, the Company acquired all of the assets of Scent
Overnight, a company of which Gerard Semhon, the Company's Chief Executive
Officer and Chairman of the Board, is a majority stockholder for (i) $225,000
and (ii) the assumption of certain indebtedness totaling approximately $210,000.
The purchase price was arbitrarily determined between affiliates and was not
determined by an independent appraisal of the assets. The purchase price was not
based upon any recognized criteria of value and may have exceeded the fair
market value of the assets acquired. The acquisition was accounted for by the
Company under the purchase method of accounting with the basis used to record
the assets of Scent Overnight as zero, which is Scent Overnight's historical
cost basis. The $225,000 plus interest at 9% per annum is evidenced by the
Company's promissory note ("Scent Note"). In July 1997 the Company paid $70,426
on the Scent Note by the assignment to Scent Overnight of the advance due the
Company from Mr. Semhon in the same amount and extending the due date of the
Scent Note to August 31, 1998. The assumed obligation is due to Liam Development
Ltd. ("Liam") pursuant to a promissory note made by Scent Overnight ("Liam
Note"). In October 1995, the Company granted the right to convert the principal
due under the Liam Note into shares of the Company's Common Stock at $1.00 per
share. Liam converted the principal due under the Liam Note in October 1996 into
210,000 shares. The Company applied approximately $34,000 of the proceeds of the
initial public offering to pay the accrued interest due under the Liam Note.
Scent Overnight was formed by Mr. Semhon to engage in the Distributed Fragrances
business, however, in July 1994, it suspended its operations due to lack of
capital. Prior to the suspension of operations, Scent Overnight had conducted
research into the availability of the resources necessary for the proposed
business, such as locating order taking, order fulfillment, delivery and
advertising services and sources of supply and developed a plan for the
operation of the business. This information was among the assets acquired by the
Company in the acquisition.
Between June 1995 and June 1996, the Company advanced an aggregate of
$184,480 to Messrs. Semhon and Bezas, officers and directors of the Company. Of
the $184,480, $48,130 is jointly and severally owed by Messrs. Semhon and Bezas,
$120,750 is owed by Mr. Semhon and $15,750 is owed by Mr. Bezas. Such advances
were offset against accrued consulting fees due Messrs. Semhon and Bezas. After
such offset Mr. Semhon owes the Company $70,426 and Mr. Bezas will not be
indebted to the Company. The advance does not bear interest and has been
assigned to Scent Overnight in part payment of the Scent Note.
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In October 1996, the Company completed a $300,000 private placement of
12 units, each unit consisting of (i) the Company's 12 month 10% promissory note
(each a "Bridge Note I") and (ii) a warrant to purchase up to 25,000 shares of
Common Stock (each a "Bridge Warrant I") ("October 1996 Private Placement") to
seven accredited investors, including Metco and Tusany , who invested $25,000
and $50,000, respectively. The Company intends to repay the Bridge Notes I out
of the proceeds of this Offering. On the date of this Prospectus, the terms of
the Bridge 300,000 Warrants I will be modified automatically to the terms of the
300,000 Redeemable Warrants. The Company received net proceeds of $270,000,
after deducting commissions of $30,000 to Network 1 Financial Securities, Inc.
for acting as placement agent.
In November 1996, the Company issued a promissory note in the amount of
$55,500 to Mr. Robert E. Lee and used the proceeds of this loan for working
capital. In December 1996 and January 1997, the Company paid $15,000 of
principal and $5,550 of prepaid interest due under the note. The remaining
principal is due on the earlier of February 1, 1997, or upon the date of the
closing of this Offering. In consideration for extending the original maturity
date of this loan, Mr. Lee received warrants to purchase 55,500 shares of Common
Stock at $4.80 per share, which expire in December 2000.
In January 1997, the Company completed a $200,000 private placement of
8 units, each unit consisting of (i) the Company's 12 month 10% promissory note
(each a "Bridge Note II") and (ii) a warrant to purchase up to 25,000 shares of
Common Stock (each a "Bridge Warrant II") ("January 1997 Private Placement") The
Company repaid the Bridge Notes II out of the proceeds of the initial public
offering. The Company received net proceeds of $180,000 after deducting
commissions of $20,000 to the Network 1 Financial Securities, Inc. for acting as
placement agent.
In April 1997, the Company completed a $350,000 private placement of 14
units, each unit consisting of (i) the Company's 12 month 10% promissory note
(each a "Bridge Note III") in the principal amount of $25,000 and (ii) a warrant
to purchase up to 25,000 shares of Common Stock (each a "Bridge Warrant III")
("April 1997 Private Placement") to seven accredited investors, including Metco,
who invested $87,500. The Company repaid the Bridge Note III out of the proceeds
of the initial public offering The Company received net proceeds of $315,000
after deducting commissions of $35,000 to Network 1 Financial Securities, Inc.
for acting as placement agent.
In October 1997, the Company acquired all of the outstanding capital
stock of Cambridge Business Services, Inc. from Frank DeSimone, the Company's
Chief Financial Officer, for a purchase price of $212,000, of which $95,000 was
paid in October 1997 and the balance was paid in February 1998.
Except as disclosed above and pursuant to certain loan transactions
with officers, all previous transactions between the Company and its officers,
directors or 5% stockholders, and their affiliates were made on terms no less
favorable to the Company than those available from unaffiliated parties. All
future transactions between the Company and its officers, directors or 5%
stockholders, and their affiliates, will be on terms no less favorable than
could be obtained from unaffiliated third parties.
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SECTION 16(A) REPORTING
Under the securities laws of the United States, the Company's
directors, its executive (and certain other) officers, and any persons holding
ten percent or more of the Company's Common Stock must report on their ownership
of the Company's Common Stock and any changes in that ownership to the
Securities and Exchange Commission and to the National Association of Securities
Dealers, Inc.'s Automated Quotation System. Specific due dates for these reports
have been established. During the year ended December 31, 1997, the Company
believes all reports required to be filed by Section 16(a) were filed on a
timely basis, although certain forms were filed late. The Company does not
believe that Tusany Investment & Trade S.A., a principal shareholder, filed all
reports on its ownership of the Company's Common Stock, on a timely basis, if at
all.
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<PAGE>
PROPOSAL 2
RATIFICATION OF FELDMAN SHERB EHRLICH & CO., P.C. AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
The Board of Directors has unanimously approved and unanimously
recommends that the Stockholders approve the appointment of Feldman Sherb
Ehrlich & Co., P.C. as the Company as the Company's independent certified public
accountants for the ensuing year. Unless a shareholder signifies otherwise, the
persons named in the proxy will so vote.
SHAREHOLDER VOTE REQUIRED
Ratification of the appointment of Feldman Sherb Ehrlich & Co., P.C. as
independent certified public accountants will require the affirmative vote of
the majority of the shares present in person or represented by proxy at the
Annual Meeting of Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF FELDMAN SHERB EHRLICH & CO., P.C. AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
referred to in the Notice of Meeting which will be presented for consideration
at the meeting. However, it is possible that certain proposals may be raised at
the meeting by one or more Stockholders. In such case, or if any other matter
should properly come before the meeting, it is the intention of the person named
in the accompanying proxy to vote such proxy in accordance with his or her best
judgment.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company.
Solicitations may be made by mail, personal interview, telephone, and telegram
by directors, officers and employees of the Company. The Company will reimburse
banks, brokerage firms, other custodians, nominees and fiduciaries for
reasonable expenses incurred in sending proxy material to beneficial owners of
the Company's capital stock.
STOCKHOLDER PROPOSALS
In order to be included in the proxy materials for the Company's next
Annual Meeting of Stockholders, stockholder proposals must be received by the
Company on or before April 1, 1999.
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<PAGE>
ANNUAL AND QUARTERLY REPORTS TO THE SECURITIES AND EXCHANGE
COMMISSION
The Annual Report on Form 10-KSB for the year ended December 31, 1997,
as filed with the Securities and Exchange Commission, will be made available to
Stockholders free of charge by writing to Azurel Ltd., 509 Madison Avenue, New
York, New York 10022, Attention:
Corporate Secretary.
By Order of the Board of
Directors of Azurel Ltd.
Gerard Semhon
Chairman of the Board of Directors
April 29, 1998
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<PAGE>
GENERAL PROXY - ANNUAL MEETING OF STOCKHOLDERS OF AZUREL, LTD.
The undersigned hereby appoints Gerard Semhon, with full power of
substitution, proxy to vote all of the shares of Common Stock of the undersigned
and with all of the powers the undersigned would possess if personally present,
at the Annual Meeting of Stockholders of Azurel Ltd., to be held at Kanan,
Corbin, Schupak & Aronow, Inc., 800 Second Avenue, 5th Floor, New York, New York
10017 on May 28, 1998 at 10:00 a.m. and at all adjournments thereof, upon the
matters specified below, all as more fully described in the Proxy Statement
dated April 29, 1998 and with the discretionary powers upon all other matters
which come before the meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF AZUREL LTD.'S BOARD OF DIRECTORS.
1. To elect the board of directors for the ensuing year.
__ FOR ALL NOMINEES __ WITHHELD FOR ALL NOMINEES
INSTRUCTION: To withhold authority to vote for any individual, write
that nominee's name in the space provided below:
2. To ratify the appointment of Feldman, Sherb, Ehrlich & Company as the
Company independent certified public accountants.
__ FOR __ AGAINST __ ABSTAIN
3. In their discretion, upon such other matter or matters that may
properly come before the meeting, or and adjournments thereof.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
Every properly signed proxy will be voted in accordance with the specifications
made thereon. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS
1 AND 2.
The undersigned hereby acknowledges receipt of a copy of the accompanying Notice
of Meeting and Proxy Statement and hereby revokes any proxy or proxies
heretofore given.
Please mark, date, sign and mail your proxy promptly in the envelope provided.
Date: ________________________, 1998
______________________________
(Print name of Stockholder)
______________________________
(Print name of Stockholder)
______________________________
Signature
______________________________
Signature
Number of Shares __________________
Note: Please sign exactly as name appears in the
Company's records. Joint owners should
each sign. When signing as attorney,
executor or trustee, please give title as
such.
