<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
( Mark One )
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 ( d ) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1995
-----------------
Or
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15( d ) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0-15491
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PARLUX FRAGRANCES, INC.
- --------------------------------------------------------------------------------
( Exact name of registrant as specified in its charter )
DELAWARE 22-2562955
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( State or other jurisdiction of ( IRS employer
incorporation or organization ) identification no. )
3725 S.W. 30th Avenue, Ft. Lauderdale, FL 33312
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( Address of principal executive offices ) ( Zip code )
Registrant's telephone number, including area code 954-316-9008
-----------------------------
650 S.W. 16th Terrace, Pompano Beach, FL 33069
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report
Indicate with an "X" whether the registrant ( 1 ) has filed all
reports required to be filed by Section 13 or 15 ( d ) of the Securities
Exchange Act of 1934 during the preceding 12 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate with an "X" whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, or 15( d ) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of February 7, 1996, 9,860,822 shares of the issuer's common stock
were outstanding, following a two-for-one stock split on November 10, 1995.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
See pages 9 to 12.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Registrant's ( the Company's ) financial
position and operating results during the periods included in the accompanying
financial statements and notes. This discussion and analysis should be read in
conjunction with such financial statements and notes.
RECENT DEVELOPMENTS
On January 31, 1996, the Company entered into an agreement to purchase all of
the assets and assume certain liabilities, of Richard Barrie Fragrances, Inc.
( RBF ) for a combination of cash and Parlux common stock. The agreement is
subject to the approval of RBF's board of directors, shareholders and
convertible note holders. The Company anticipates that, if the agreement is
approved, closing would take place prior to May 31, 1996.
On January 11, 1996, the Company entered into a non-binding letter of intent
with Parfums Jean Desprez, to purchase, for cash, the world-wide trademarks for
the Bal A Versailles fragrance brand (BAV). In addition, the Company would
purchase certain inventories and fixed assets relating to the BAV brand. The
letter of intent stipulates a closing on or before March 31, 1996.
On December 27, 1995, the Company consummated the acquisition of substantially
all of the assets and operations of Alexandra de Markoff (AdM), a prestige
cosmetic line, pursuant to an asset purchase agreement entered into on
September 21, 1995 between the Company and Revlon Holdings, Inc. (Revlon). See
Note C to the accompanying consolidated financial statements for further
discussion.
On October 26, 1995, the Company announced a two-for-one stock split in the
form of a dividend to shareholders of record as of November 3, 1995.
Distribution was effected on November 10, 1995. All comparable share
information in this Form 10-Q has been restated to reflect the split.
2
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RESULTS OF OPERATIONS
COMPARISON OF THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1995 WITH THE
THREE-MONTH PERIOD ENDED DECEMBER 31, 1994.
During the quarter ended December 31, 1995, net sales increased 93% to
$23,834,025 as compared to $12,355,831 for the same period for the prior year.
Of these, sales of Parlux "continued brands" were $9,093,891 compared to
$4,366,673 in the prior year, an increase of 108%. Sales of Perry Ellis
products were $11,014,181 in the current period, compared to $3,153,625 in the
prior year as the acquisition of the Perry Ellis license from Sanofi Beaute was
only completed in December 1994. Sales of Fred Hayman Beverly Hills, Inc.
( FHBH ) products were $4,121,229 in the current period, compared with sales of
$5,019,174 in the prior year, a reduction of 18%.
Sales to unaffiliated parties increased 86% to $13,470,763 in the current
period compared to $7,234,572 in the same period in the prior year. Sales to
affiliated parties increased 102% to $10,363,262 in the current quarter
compared to $5,121,259 in the same period in the prior fiscal year.
In June 1991, the Company entered into a barter arrangement ( the Barter
Agreement ) for which the Company would receive advertising credits in exchange
for inventory of one of its "discontinued brands," Joan Collins. The Company
expects to be able to fully utilize these advertising credits as part of its
normal ongoing advertising expenditures. Advertising credits, less unearned
income, are accounted for as prepaid expenses on the Company's balance sheet at
the time such inventory is bartered. Unearned income equals the amount of
advertising credits minus the cost of goods bartered. As advertising credits
are used by the Company, unearned income is debited and the cost of goods sold
is credited. As a result, as the advertising credits are used, the aggregate
cost of goods sold as a percentage of net sales decreases and gross margin as a
percentage of net sales increases.
Cost of goods sold for the quarter ended December 31, 1995 decreased to 43% of
net sales as compared to 46% of net sales in the same period in the prior year.
The Company utilized advertising credits amounting to $308,000 in the current
quarter ( $255,000 in 1994 ) generating $163,000 of earned income ( $138,000 in
1994 ) which partially offset cost of goods sold during the periods. Without
the effects of the Barter Agreement, cost of goods sold would have been 43% for
the current quarter compared to 47% for the same quarter in the prior year.
The decrease was mainly attributable to the increased sale of Perry Ellis
products to unaffiliated parties, which resulted in higher margins, coupled
with the reduction in costs of certain componentry utilized in production.
Operating expenses increased by 82% compared to the prior fiscal year from
$4,550,176 to $8,294,114. As a percentage of sales, operating expenses
decreased to 35% of net sales in the current fiscal period, as compared to 37%
of net sales for the prior fiscal year. Advertising and promotional expenses
increased 196% to $4,835,918 compared to $1,633,072 in the prior year period,
reflecting increased print advertising and promotional expenses in connection
with the U.S. domestic department and specialty store business resulting
mainly from Perry Ellis brand activities. Selling and distribution costs
increased by 7% to $1,446,053 in the current fiscal period as compared to
$1,350,661 in the same
3
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period of the prior fiscal year, but decreased as a percentage of net sales
from 11% to 6%. General and administrative expenses increased by 4% compared
to the prior year period from $1,361,235 to $1,413,736 but decreased as a
percentage of net sales from 11% to 6%, further reflecting the economies of
scale realized from the FHBH and Perry Ellis acquisitions. Royalties increased
to $598,407 for the current period compared to $205,208 in the prior year,
principally due to the royalties required on the sale of Perry Ellis brand
products.
As a result of the above, the Company had operating income of $5,393,348 or 23%
of net sales for the three-month period ended December 31, 1995, compared to
$2,084,438 or 17% of net sales for the comparable period in the prior year.
Interest expense increased by 76% to $479,150 in the current fiscal year as
compared to $272,014 in the same period in the prior year. The increase was
mainly attributable to the increase in debt related to the Perry Ellis
acquisition. Exchange losses were $22,562 in the current year as compared to
gains of $20,344 in the same period in the prior year. Income before taxes for
the current fiscal year was $4,891,636 or 21% of net sales, compared to
$1,832,768 or 15 % of net sales, in the same period in the prior year.
During the fiscal year ended March 31, 1995, the Company utilized all remaining
operating loss carryforwards. Accordingly, the tax provision for the quarter
ended December 31, 1995 reflects an effective tax rate of approximately 39%
compared to 33% in the prior year comparable period. Giving effect to the tax
provision, the Company reported net income of $2,990,754 or 13% of net sales
for the current quarter ended December 31, 1995, as compared to $1,227,955 or
10% of net sales for the same quarter in the prior fiscal year.
COMPARISON OF THE NINE-MONTH PERIOD ENDED DECEMBER 31, 1995 WITH THE NINE-MONTH
PERIOD ENDED DECEMBER 31, 1994.
During the nine months ended December 31, 1995, net sales increased 81% to
$47,968,008 as compared to $26,457,164 for the same period for the prior year.
Of these, sales of Parlux "continued brands" were $18,156,678 compared to
$11,362,803 in the prior year, an increase of 60%, while sales of Fred Hayman
Beverly Hills, Inc. (FHBH) products were $11,443,666 in the current period,
compared with sales of $12,248,663 in the prior year, a reduction of 7% Sales
of Perry Ellis products were $19,529,263 in the current period, compared to
$3,153,625 in the prior year as the acquisition of the Perry Ellis license from
Sanofi Beaute was only completed in December 1994.
Sales to unaffiliated parties increased 94% to $30,182,604 in the current
period compared to $15,586,560 in the same period in the prior year. Sales to
affiliated parties increased 64% to $17,785,404 in the current period compared
to $10,870,604 in the same period in the prior fiscal year. As a percentage of
total net sales, sales to affiliates were 37% in the current period, compared
to 41% in the same period in the prior year.
Cost of goods sold for the nine months ended December 31, 1995 decreased to 39%
of net sales as compared to 43% of net sales in the same period in the prior
year. The Company utilized advertising credits amounting to $684,000 in the
current period ($955,000 in 1994) generating $363,000 of earned income
($516,000 in 1994) which partially offset cost of goods sold during the
periods. Without the effects of the Barter
4
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Agreement, cost of goods sold would have been 40% for the current period
compared to 45% for the same period in the prior year. The decrease was mainly
attributable to the increased sales to unaffiliated parties, which resulted in
higher margins, coupled with the reduction in costs of certain componentry
utilized in production.
Operating expenses increased by 79% compared to the prior fiscal year from
$10,432,219 to $18,628,098, but remained relatively constant at 39% of net
sales during both periods. Advertising and promotional expenses increased 164%
to $9,898,653 compared to $3,755,932 in the prior year period, reflecting
increased print advertising and promotional expenses in connection with the
launch of the Todd Oldham fragrance and U.S. department and specialty store
business resulting from the FHBH and Perry Ellis brand activities. Selling and
distribution costs increased by 16% to $3,398,960 in the current fiscal period
as compared to $2,922,873 in the same period of the prior fiscal year, but
decreased as a percentage of net sales from 11% to 7%. General and
administrative expenses increased by 23% compared to the prior year period from
$3,449,174 to $4,239,257, but decreased as a percentage of net sales from 13%
to 9%, reflecting the economies of scale realized from the FHBH and Perry Ellis
acquisitions. Royalties increased to $1,091,228 for the current period
compared to $304,240 in the prior year, principally due to the royalties
required on the sale of Perry Ellis brand products.
As a result of the above, the Company had operating income of $10,629,781 or
22% of net sales for the nine-month period ended December 31, 1995, compared to
$4,631,159 or 18% of net sales for the comparable period in the prior year.
Interest expense increased by 94% to $1,414,240 in the current fiscal year as
compared to $729,521 in the same period in the prior year. The increase was
mainly attributable to the increase in debt related to the FHBH and Perry Ellis
acquisitions. Exchange losses were $117,802 in the current year as compared to
losses of $27,374 in the same period in the prior year. Income before taxes
for the current fiscal year was $9,097,739 or 19% of net sales, compared to
$3,874,264 or 15 % of net sales, in the same period in the prior year.
During the fiscal year ended March 31, 1995, the Company utilized all remaining
operating loss carryforwards. Accordingly, the tax provision for the nine
months ended December 31, 1995 reflects an effective tax rate of approximately
38% compared to 33% in the prior year comparable period. Giving effect to the
tax provision, the Company reported net income of $5,640,599 or 12% of net
sales for the nine months ended December 31, 1995, as compared to $2,590,985 or
10% of net sales for the same period in the prior fiscal year.
Liquidity and Capital Resources
Working capital increased to $20,418,687 at December 31, 1995 from $4,842,290
at March 31, 1995. The increase was mainly attributable to ( all references to
shares are on a post-split basis): ( i ) During the nine months ended December
31, 1995, certain warrants and employee stock options totaling 1,570,350 shares
were exercised into common stock, increasing working capital and stockholders'
equity by approximately $2,600,000; ( ii ) During the period August 1995
through December 1995, the Company issued 668,444 shares of common stock in
private placements pursuant to Regulation S or Rule 144 at an average price of
$6.31 per share, increasing working capital and stockholders' equity by
approximately $4,220,000, net of placement costs; ( iii ) In connection with
the AdM
5
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acquisition, the Company issued 424,000 shares of common stock to Revlon, which
increased stockholders' equity by $3,392,000, and, ( iv ) current period net
income.
During the period November 2, 1995 through December 28, 1995, the Company
issued $3,700,000 of 7% convertible debentures and $7,000,000 of 5% convertible
debentures (the Debentures). Of these amounts, $1,700,000 and $5,000,000 of
the 7% and 5% Debentures, respectively, require mandatory conversion during
periods ranging from February 15, 1996 to April 7, 1996.
On September 21, 1995, in connection with the proposed purchase of the AdM
cosmetic line, the Company entered into a $2,400,000 loan agreement with
Revlon. The loan was non-interest bearing, and was repaid upon closing of the
AdM transaction.
In August 1995, the Company entered into an agreement to borrow, on an
unsecured basis, $500,000 from Distribudora de Perfumes Senderos, Ltda., with
an additional $500,000 available at the option of the Company, to be drawn upon
prior to October 31, 1995. The note bears interest at 12% per annum and is due
on February 23, 1996. In connection with the note, the Company issued warrants
to purchase 53,978 shares of Parlux common stock at a price of $8.11 per share,
which expire on August 21, 1997. The Company borrowed a total of $674,722
under the agreement.
In June 1995, the Company borrowed, on an unsecured basis, $300,000 from an
individual related to the Company's Chairman of the Board. The note bears
interest at 11% per annum and is due on June 27, 1996. In connection with the
note, the Company issued warrants to purchase 60,000 shares of Parlux common
stock at a price of $6.94 per share, which expire on June 27, 1997.
In December 1994, the Company entered into a Loan and Security Agreement ( the
Credit Agreement ) with Finova Capital Corporation, ( formerly Greyhound
Financial Corporation ) pursuant to which the Company is able to borrow, on a
revolving basis for a three-year period, up to $5,000,000 at an interest rate
of 2% in excess of the Citibank, N.A. "base or prime rate." Finova has taken
a security interest in substantially all of the domestic assets of the Company.
The Credit Agreement contains customary events of default and covenants which
prohibit, among other things, incurring additional indebtedness in excess of a
specified amount, paying dividends, creating liens, and engaging in mergers and
consolidations without the prior consent of Finova. The Credit Agreement also
contains certain financial covenants relating to net worth, interest coverage
and other financial ratios.
Simultaneously with the closing of the Credit Agreement, the Company
restructured a prior loan extended by the National Bank of Kuwait SAK ( NBK )
by paying NBK approximately $2,120,000, including interest, from borrowings
under the Credit Agreement. In exchange for such payment, NBK released Parlux,
and its subsidiaries, from all outstanding liabilities and guarantees owed to
NBK except for those obligations relating to a new $560,000 term loan, and a
$1,000,000 letter of credit made available to support the Finova loan. The
combined $1,560,000 facility is fully cash collateralized by certain
shareholders' deposits. In addition, these shareholders have signed a
subordination agreement in connection with the Credit Agreement. The term loan
has been reduced to $160,000 at December 31, 1995.
6
<PAGE> 7
The Company is currently pursuing additional facilities, including an increase
in the Credit Agreement, to finance future growth. There can be no assurance
that such financing facilities will become available, or, if available, that
they will be on terms satisfactory to the Company.
Impact of Currency Exchange
The Company's sales and purchases are virtually all in U.S. dollars or French
francs. Since approximately 10% of the Company's sales are currently
manufactured in France, a strengthening of the French franc vis-a-vis the U.S.
dollar results in exchange rate losses for the Company. Conversely, a weakening
of the French franc vis-a-vis the U.S. dollar results in exchange rate gains
for the Company.
The Company monitors exchange rates on a daily basis and regularly seeks to
evaluate long-term expectations for the French franc in order to minimize its
exchange rate risk. To date, the Company has not elected to engage in currency
hedging transactions, but may pursue this alternative.
The Company is in the process of centralizing manufacturing in the United
States which will minimize the currency exchange impact on intercompany
transactions for the future.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings of any significance.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
( a ) Exhibit No. Description
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4.7 7% Convertible Debenture dated November 2,
1995 between the Company and Gershon
Partners, L.P.
4.8 7% Convertible Debenture dated November 2,
1995 between the Company and Granite Global
Debt Fund. Ltd.
4.9 7% Convertible Debenture dated December 5,
1995 between the Company and Master
Investments Corporation
4.10 7% Convertible Debenture dated December 5,
1995 between the Company and Taryak, Inc.
4.11 7% Convertible Debenture dated December 6,
1995 between the Company and Privatinvest
Bank AG
4.12 7% Convertible Debenture dated December 7,
1995 between the Company and Faisal Finance
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4.13 5% Convertible Debenture dated December 18,
1995 between the Company and Newsun Limited
4.14 5% Convertible Debenture dated December 18,
1995 between the Company and T.H.C., Inc.
4.15 5% Convertible Debenture dated December 28,
1995 between the Company and Wood Gundy
London, Ltd.
27 Financial Data Schedule (for SEC use only)
( b ) Reports on Form 8-K
On January 9, 1996, the Company filed a Current Report on Form
8-K with respect to the December 27, 1995 acquisition from Revlon
Holdings Inc. of the rights to manufacture, sell and distribute
Alexandra de Markoff, Inc. cosmetics and fragrances.
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PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS December 31, March 31,
- ------ 1995 1995
-------------- -------------
CURRENT ASSETS: (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 352,715 $ 575,700
Receivables, net of allowance for
doubtful accounts, sales returns and
allowances of approximately $3,163,000 and $2,055,000
at December 31, 1995 and March 31, 1995, respectively 8,301,724 4,888,250
Due from affiliates 7,365,894 4,893,710
Inventories 25,168,602 16,963,006
Prepaid credit for future inventory purchases 3,940,278 -
Prepaid expenses and other current assets 5,783,411 4,908,321
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TOTAL CURRENT ASSETS 50,912,624 32,228,987
Equipment and leasehold improvements, net 1,883,888 2,043,758
Trademarks, licenses and goodwill, net 19,711,906 11,380,201
Other 173,858 97,107
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TOTAL ASSETS $72,682,276 $45,750,053
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Short-term borrowings $10,095,721 $13,785,878
Convertible debenture 2,000,000 -
Accounts payable 11,015,292 7,337,910
Accrued expenses 7,382,925 3,811,850
Advances from customers - 2,451,059
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TOTAL CURRENT LIABILITIES 30,493,938 27,386,697
Long-term borrowings 4,814,864 5,280,689
Convertible debentures 2,000,000 -
Mandatory convertible debentures 6,700,000 -
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TOTAL LIABILITIES 44,008,802 32,667,386
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COMMITMENTS - -
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STOCKHOLDERS' EQUITY :
Preferred stock, $0.01 par value, 5,000,000 shares
authorized, 0 issued and outstanding - -
Common stock, $0.01 par value, 20,000,000
shares authorized, 9,643,222 and 6,980,428
shares issued at December 31, 1995 and March 31, 1995, respectively 96,432 34,902
Additional paid-in capital 21,580,626 11,563,537
Retained earnings 6,868,557 1,271,947
Cumulative translation adjustment 261,331 345,753
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28,806,946 13,216,139
Less - 39,000 shares of common stock in treasury, at cost (133,472) (133,472)
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TOTAL STOCKHOLDERS' EQUITY 28,673,474 13,082,667
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $72,682,276 $45,750,053
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended December 31, Nine months ended December 31,
------------------------------- ------------------------------
1995 1994 1995 1994
------------- ------------ ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales:
Unaffiliated customers $13,470,763 $ 7,234,572 $30,182,604 $15,586,560
Affiliates 10,363,262 5,121,259 17,785,404 10,870,604
----------- ----------- ----------- -----------
23,834,025 12,355,831 47,968,008 26,457,164
Cost of goods sold 10,146,563 5,721,217 18,710,129 11,393,786
----------- ----------- ----------- -----------
Gross margin 13,687,462 6,634,614 29,257,879 15,063,378
----------- ----------- ----------- -----------
Operating expenses:
Advertising and promotional 4,835,918 1,633,072 9,898,653 3,755,932
Selling and distribution 1,446,053 1,350,661 3,398,960 2,922,873
General and administrative 1,413,736 1,361,235 4,239,257 3,449,174
Royalties 598,407 205,208 1,091,228 304,240
----------- ----------- ----------- -----------
Total operating expenses 8,294,114 4,550,176 18,628,098 10,432,219
----------- ----------- ----------- -----------
Operating income 5,393,348 2,084,438 10,629,781 4,631,159
Interest expense and bank charges 479,150 272,014 1,414,240 729,521
Exchange losses (gains) 22,562 (20,344) 117,802 27,374
----------- ----------- ----------- -----------
Income before income taxes 4,891,636 1,832,768 9,097,739 3,874,264
Income taxes 1,900,882 604,813 3,457,140 1,283,279
----------- ----------- ----------- -----------
Net income $ 2,990,754 $ 1,227,955 $ 5,640,599 $ 2,590,985
=========== =========== =========== ===========
Earnings per share:
Primary $ 0.29 $ 0.14 $ 0.57 $ 0.32
=========== =========== =========== ===========
Fully diluted $ 0.29 $ 0.14 $ 0.57 $ 0.32
=========== =========== =========== ===========
Weighted average shares 10,424,224 9,045,078 9,890,997 8,766,030
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
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PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
------------------------ ADDITIONAL EARNINGS CUMULATIVE
NUMBER PAR PAID-IN (ACCUMULATED TRANSLATION
ISSUED VALUE CAPITAL DEFICIT) ADJUSTMENT
---------- ------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE at April 1, 1993 2,812,642 $28,127 $ 8,712,669 ($4,321,470) $169,243
Net income - - - 1,362,206 -
Issuance of common stock upon exercise of:
Employee stock options 36,547 365 111,445 - -
Warrants 12,000 120 44,880 - -
Foreign currency translation adjustment - - - - (39,985)
--------- ------- ----------- ----------- --------
BALANCE at March 31, 1994 2,861,189 28,612 8,868,994 (2,959,264) 129,258
Net income - - - 4,231,211 -
Issuance of common stock in connection with:
Exercise of employee stock options 19,025 190 61,020 - -
Sale of stock in private placement 110,000 1,100 493,900 - -
Acquisition of assets 500,000 5,000 2,195,000 - -
Costs in connection with the
registration of common stock,
options and warrants - - (55,377) - -
Foreign currency translation adjustment - - - - 216,495
Purchase of 19,500 shares of treasury stock, at cost - - - - -
--------- ------- ----------- ----------- --------
BALANCE at March 31, 1995 3,490,214 34,902 11,563,537 1,271,947 345,753
Net income - - - 5,640,599 -
Issuance of common stock upon exercise of:
Employee stock options 11,175 111 33,910 - -
Warrants 774,000 7,740 2,557,845 - -
Sale of stock in private placement 544,914 5,450 4,214,098 - -
Acquisition of assets 424,000 4,240 3,387,760 - -
Adjustment for stock split 4,398,919 43,989 - (43,989) -
Costs in connection with the issuance and
registration of common stock,
options and warrants - - (176,524) - -
Foreign currency translation adjustment - - - - (84,422)
--------- ------- ----------- ----------- --------
BALANCE at December 31, 1995 (Unaudited) 9,643,222 $96,432 $21,580,626 $ 6,868,557 $261,331
========= ======= =========== =========== ========
<CAPTION>
TREASURY
STOCK TOTAL
------------ ------------
<S> <C> <C>
BALANCE at April 1, 1993 $ - $ 4,588,569
Net income - 1,362,206
Issuance of common stock upon exercise of:
Employee stock options - 111,810
Warrants - 45,000
Foreign currency translation adjustment - (39,985)
--------- -----------
BALANCE at March 31, 1994 - 6,067,600
Net income - 4,231,211
Issuance of common stock in connection with:
Exercise of employee stock options - 61,210
Sale of stock in private placement - 495,000
Acquisition of assets - 2,200,000
Costs in connection with the
registration of common stock,
options and warrants - (55,377)
Foreign currency translation adjustment - 216,495
Purchase of 19,500 shares of treasury stock, at cost (133,472) (133,472)
--------- -----------
BALANCE at March 31, 1995 (133,472) 13,082,667
Net income - 5,640,599
Issuance of common stock upon exercise of:
Employee stock options - 34,021
Warrants - 2,565,585
Sale of stock in private placement - 4,219,548
Acquisition of assets - 3,392,000
Adjustment for stock split - -
Costs in connection with the issuance and
registration of common stock,
options and warrants - (176,524)
Foreign currency translation adjustment - (84,422)
--------- -----------
BALANCE at December 31, 1995 (Unaudited) ($133,472) $28,673,474
========= ===========
</TABLE>
See notes to consolidated financial statements.
11
<PAGE> 12
PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended December 31,
------------------------------
(Unaudited)
1995 1994
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $5,640,599 $2,590,985
---------- ----------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,009,063 439,946
Provision for losses on accounts receivable 512,132 181,995
Changes in assets and liabilities net of effect of acquisitions:
(Increase) decrease in receivables - customers (4,521,606) 4,600,013
(Increase) decrease in receivables - affiliates (2,472,184) 1,531,882
(Increase) decrease in inventories (8,232,664) 1,795,235
(Increase) decrease in prepaid expenses and other current assets (643,590) 1,174,330
Increase in other non-current assets (76,751) (238,058)
Increase (decrease) in accounts payable 3,677,381 (1,643,133)
Increase in accrued expenses 3,749,825 817,598
(Decrease) increase in advances from customers (2,451,059) 335,652
---------- ----------
Total adjustments (9,449,453) 8,995,460
---------- ----------
Net cash (used by) provided by operating activities (3,808,854) 11,586,445
---------- ----------
Cash flows from investing activities:
Purchases of equipment and leasehold improvements (508,778) (166,686)
Purchases of trademarks (71,811) (10,179)
Cash paid in acquisition of:
Fred Hayman Beverly Hills - (2,000,000)
Perry Ellis - (7,500,000)
Alexandra de Markoff (8,608,000) -
Purchases of treasury stock - (26,742)
---------- ----------
Net cash used in investing activities (9,188,589) (9,703,607)
---------- ----------
Cash flows from financing activities:
Proceeds - overdraft facilities 117,193 120,501
Proceeds (payments) - receivable financing facilities 42,511 (276,971)
Proceeds - notes payable related parties 300,000 -
Proceeds - note payable Dist. de Perfumes Sendero 674,722 -
Proceeds - note payable to Finova Capital Corp. 504,988 3,063,076
Payments - note payable to National Bank of Kuwait (400,000) (2,040,000)
Proceeds - note payable to Eagle Bank 195,378 65,000
Payments - note payable to Sanofi Beaute, Inc. (5,055,543) -
Payments - note payable to Fred Hayman Beverly Hills (87,591) (2,780,027)
Proceeds - 7% debentures, net 3,666,000 -
Proceeds - 5% debentures, net 6,802,500 -
Proceeds from issuance of common stock, net 6,113,881 556,210
---------- ----------
Net cash provided by (used in) financing activities 12,874,039 (1,292,211)
---------- ----------
Effect of exchange rate changes on cash (99,581) 66,119
---------- ----------
Net (decrease) increase in cash and cash equivalents (222,985) 656,746
Cash and cash equivalents, beginning of year 575,700 38,692
---------- ----------
Cash and cash equivalents, end of period $ 352,715 $ 695,438
========== ==========
</TABLE>
See notes to consolidated financial statements.
12
<PAGE> 13
PARLUX FRAGRANCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. The Consolidated Balance Sheet as of December 31, 1995, the
Consolidated Statements of Income for the three-month and nine-month periods
ended December 31, 1995 and 1994, and the Consolidated Statements of Cash Flows
for the nine-month periods ended December 31, 1995 and 1994, have been prepared
without audit. In the opinion of management, the statements reflect all
adjustments consisting of normal recurring adjustments necessary to present
fairly the financial position of Parlux Fragrances, Inc., and subsidiaries at
December 31, 1995 and the results of their operations and their cash flows for
the three-month and nine-month periods ended December 31, 1995 and 1994.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's March 31, 1995 Form 10-K as filed with the
Securities and Exchange Commission on June 28, 1995.
Certain reclassifications were made to the December 31, 1994 financial
statements to conform with the presentation of the December 31, 1995 financial
statements. All comparable share information has been restated to reflect the
two-for-one stock split consummated in November 1995.
B. INVENTORIES
Inventories are stated at the lower of cost ( first-in, first-out method ) or
market. The components of inventories are as follows:
<TABLE>
<CAPTION>
December 31, 1995 March 31, 1995
----------------- --------------
<S> <C> <C>
Raw Material, Packaging and Components $19,638,018 $10,380,904
Finished Products 5,530,584 6,582,102
----------- -----------
$25,168,602 $16,963,006
=========== ===========
</TABLE>
C. ACQUISITIONS
On September 21, 1995, the Company entered into an asset purchase agreement
with Revlon Holdings, Inc., ( Revlon ) to acquire the assets and operations of
Alexandra de Markoff ( AdM ), a prestige cosmetic line formerly operated by
Revlon, for a combination of cash and Parlux common stock. The agreement was
consummated on December 27, 1995.
Parlux acquired from Revlon: a) certain inventories relating to AdM; b)
certain fixed assets relating to AdM; and c) the rights in certain trademarks
relating to AdM.
13
<PAGE> 14
Parlux provided as consideration, $8,608,000 in cash and 424,000
shares of common stock valued at $3,392,000.
The estimated fair value of the assets acquired is summarized as follows:
<TABLE>
<S> <C>
Goodwill, licenses and trademarks $ 8,400,000
Prepaid credit for future inventory purchases 4,000,000
Reserve for sales returns ( 400,000)
-------------
Total fair value of net assets acquired $ 12,000,000
=============
</TABLE>
The Company is awaiting a complete listing of purchased fixed assets relating
to the AdM brand. Upon final valuation, the Company will reduce the amount
allocated to goodwill, licenses and trademarks and transfer such amount to
fixed assets.
In December 1994, the Company consummated the acquisition of the license for
the worldwide manufacturing and distribution rights and for the use of the
trademarks associated with the Perry Ellis International, Inc. ( Perry Ellis )
line of fragrances and beauty products pursuant to an Asset Purchase Agreement
entered into in October 1994 between the Company and Sanofi Beaute, Inc., the
prior holder of the Perry Ellis fragrances license. In addition to the
acquisition of the license, which is renewable every two years if the Company
meets certain average sales levels, Parlux acquired from Sanofi: a) the
assets, licensed rights, claims and contracts relating to the brands Perry
Ellis for Men and 360(degree) Perry Ellis(R) ( the Brands ); b) certain
inventories relating to the Brands; c) certain fixed assets relating to the
Brands; and d) the licensed rights in certain trademarks relating to the
Brands. At closing, Parlux provided as consideration $7,500,000 in cash and
$6,535,660 in the form of a one-year promissory note, bearing interest at 7%
and secured by the assets acquired under the Purchase Agreement.
The estimated fair value of the assets acquired is summarized as follows:
<TABLE>
<S> <C>
Goodwill, licenses and trademarks $ 7,500,000
Inventories 4,528,925
Promotional supplies 1,073,135
Molds and other fixed assets 933,600
-------------
Total fair value of assets acquired $ 14,035,660
=============
</TABLE>
On June 15, 1994, the Company entered into an Asset Purchase Agreement with
Fred Hayman Beverly Hills, Inc. ( FHBH ) pursuant to which the Company
purchased substantially all of the assets and liabilities of the FHBH fragrance
division, including inventory, accounts receivable ( excluding those backed by
non-cancelable letters of credit issued prior to June 2, 1994 ), molds, and
assignable contracts. In addition, FHBH granted Parlux an exclusive 55-year,
royalty-free license to use FHBH's United States Class 3 trademarks for "Fred
Hayman", "273", "Touch", "With Love", and "Fred Hayman Personal Selections" and
the corresponding international registrations.
In consideration for the purchased assets, the Company provided the following
to the seller: ( i ) payment of $2,000,000 in cash; ( ii ) issuance of 500,000
shares of the Company's common stock; ( iii ) delivery of a short-term
non-interest bearing note in the amount of $2,544,942; and ( iv ) delivery of a
10-year, 7.25% note in the amount of
14
<PAGE> 15
$5,950,774. In addition, the Company granted FHBH an option to purchase
100,000 shares of the Company's common stock, for a ten-year period, at an
exercise price of $4.50 per share, which was exercised during May 1995. The
acquisition was accounted for as a purchase by the Company. The cost of the
net assets acquired is summarized as follows:
<TABLE>
<S> <C>
Accounts receivable, net $ 2,252,796
Inventories 6,461,236
Prepaid promotional supplies and expense 1,407,897
Molds 477,894
Goodwill, license and trademarks 2,655,719
-----------
13,255,542
Accounts payable and accrued expenses (559,827)
-----------
Net assets acquired $12,695,715
===========
</TABLE>
Goodwill, licenses and trademarks recorded in connection with the acquisitions
are being amortized over 25 years.
15
<PAGE> 16
D. BORROWINGS - BANKS AND OTHERS
The composition of debt is as follows:
<TABLE>
<CAPTION>
December 31, 1995 March 31, 1995
----------------- --------------
<S> <C> <C>
Note payable to Sanofi Beaute, Inc.,
secured by the acquired inventory and
license agreement with Perry Ellis
International, Inc., interest at 7%,
payable in equal monthly installments $ 445,992 $ 5,588,325
through January 1996
Note payable to FHBH, secured by the
acquired licensed trademarks, interest at
7.25%, payable in equal monthly
installments of $69,863 through June 2004 5,288,098 5,725,689
Revolving credit facility payable to Finova
Capital Corporation, interest at Citibank
N.A. prime (9% at December 31, 1995) plus
2%, payable on December 27, 1997 4,794,304 4,289,316
Note payable to Distribudora de Perfumes
Senderos, Ltda., unsecured, interest at
12%, due February 23, 1996 674,722 --
Loan payable to NBK, interest at the bank's
prime rate plus 1.5%, secured by
shareholders' deposits, payable in varying
installments through February 1996 160,000 560,000
Unsecured $500,000 line of credit payable
to Eagle National Bank, interest at the
bank's prime rate plus 2%, due August 1, 276,392 81,014
1996
Overdraft facilities, interest from 9.45%
to 10.95%, payable on demand (1) 618,111 500,918
Receivable financing facilities, interest
at 9.20% to 10.45%, payable on demand (1) 1,384,656 1,342,145
Note payable to stockholder, interest at
10%, payable on demand (l) 549,441 560,291
Related party notes payable, interest at
11%, due March 27, 1996 and June 28, 1996 700,000 400,000
Other notes payable 18,869 18,869
----------- -----------
14,910,585 19,066,567
Less: long-term borrowings 4,814,864 (5,280,689)
----------- -----------
Short-term borrowings $10,095,721 $13,785,878
=========== ===========
(l) Denominated in French francs
</TABLE>
16
<PAGE> 17
In December 1994, the Company entered into a Loan and Security Agreement ( the
Credit Agreement ) with Finova Capital Corporation ( Finova ), ( formerly
Greyhound Financial Corporation ) pursuant to which the Company is able to
borrow, depending on the availability of a borrowing base, as defined in the
Credit Agreement, on a revolving basis for a three-year period, up to
$5,000,000, at an interest rate of 2% in excess of Citibank, N.A. "base or
prime rate." Finova has taken a security interest in substantially all of the
domestic assets of the Company. The Credit Agreement contains customary events
of default and covenants which prohibit, among other things, incurring
additional indebtedness in excess of a specified amount, paying dividends,
creating liens, and engaging in mergers and consolidation without the prior
consent of Finova. The Credit Agreement also contains certain financial
covenants relating to net worth, interest coverage and other financial ratios.
Simultaneously with the closing of the Credit Agreement, the Company
restructured a prior loan extended by the National Bank of Kuwait SAK ( NBK )
by paying NBK approximately $2,120,015, including interest, from borrowings
under the Credit Agreement. In exchange for such payment, NBK released Parlux,
and all of its subsidiaries, from all outstanding liabilities and guarantees
owed to NBK, except for those obligations relating to a new $560,000 term loan,
and a $1,000,000 letter of credit made available to support the Finova loan.
The combined $1,560,000 facility is fully cash collateralized by certain
shareholders' deposits. In addition, the shareholders have signed a
subordination agreement in connection with the Credit Agreement.
The Company has overdraft and trade financing facilities aggregating 13,400,000
French francs ( approximately $2,732,000 as of December 31, 1995 ). These
credit facilities are renewed annually.
On September 21, 1995, in connection with the proposed purchase of the AdM
cosmetic line, the Company entered into a $2.4 million loan agreement with
Revlon. The loan was repaid on December 27, 1995 upon closing of the AdM
transaction.
In August, 1995, the Company entered into an agreement to borrow, on an
unsecured basis, $500,000 from Distribudora de Perfumes Senderos, Ltda., with
an additional $500,000 available at the option of the Company, to be drawn upon
prior to October 31, 1995. The note bears interest at 12% per annum and is due
on February 23, 1996. The Company borrowed a total of $674,722 under the
agreement.
In June 1995, the Company borrowed $300,000 from an individual related to the
Company's Chairman of the Board. The unsecured note bears interest at 11% per
annum, and is due on June 28, 1996.
The Company is currently pursuing additional facilities, including an increase
in the Credit Agreement, to finance future growth. There can be no assurance
that such financing facilities will become available, or, if available, that
they will be on terms satisfactory to the Company.
17
<PAGE> 18
E. CONVERTIBLE DEBENTURES
During the period November 2, 1995 through December 28, 1995, the Company
issued $3,700,000 of 7% convertible debentures and $7,000,000 of 5% convertible
debentures (the Debentures). Of these amounts, $1.7 million and $5 million of
the 7% and 5% Debentures, respectively, require mandatory conversion during
periods ranging from February 15, 1996 to April 7, 1996.
All of the Debentures are convertible based on 85% of a calculated market value
of the Company's common stock on the date of conversion.
F. TRANSACTIONS WITH AFFILIATES
Sales to Perfumania, Inc., a public company affiliated with the Company's
Chairman of the Board, amounted to $17,785,404 or 37% of net sales for the
nine-month period ended December 31, 1995, as compared to $10,870,604 or 41% of
net sales in the same period for the prior fiscal year.
Amounts due from Perfumania amounted to $7,365,894 and $4,893,710 at December
31, 1995 and March 31, 1995, respectively.
G. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
On October 26, 1995, the Company announced a two-for-one stock split in the
form of a dividend to shareholders of record as of November 3, 1995. The
following share and per share data have been retroactively adjusted to reflect
the transaction.
Earnings per common and common equivalent share have been computed based upon
the weighted average number of shares of common stock outstanding of 10,424,224
and 9,890,997 for the three-month and nine-month periods ended December 31,
1995, respectively ( 9,045,078 and 8,766,030, respectively, for 1994 ). The
modified treasury stock method was used to determine the dilutive effect of the
options, warrants, and convertible debentures since the number of shares of
common stock issuable upon their exercise exceeds 20% of the outstanding common
shares.
H. CASH FLOW INFORMATION
The Company considers temporary investments with an original maturity of three
months or less to be cash equivalents. Supplemental disclosures of cash flow
information are as follows:
<TABLE>
<CAPTION>
Nine-months ended December 31,
------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash paid for:
Interest $1,276,545 $ 789,993
Income taxes $ 185,800 $ 56,655
</TABLE>
18
<PAGE> 19
In addition to the AdM, FHBH and Perry Ellis acquisitions discussed in Note C,
which were partially funded through the issuance of common stock and notes, the
Company used barter credits totaling $684,000 ( $955,000 in 1994 ) in payment
of advertising expenses.
Additionally, during 1995, notes payable and accrued interest in the amount of
$350,000 and $178,750, respectively, were repaid through the issuance of common
stock in connection with the exercise of certain warrants and options.
I. INCOME TAXES
As of March 31, 1995, the Company had utilized its remaining U.S. net operating
loss carryovers. The provision for income taxes for the period ended December
31, 1994 was calculated based upon the estimated income tax rate for the full
fiscal year ended March 31, 1995, including the utilization of the U.S. net
operating loss carryovers on a pro-rata basis. The tax provision for the period
ended December 31, 1995 reflects an effective tax rate of approximately 38%.
I. LICENSE AND DISTRIBUTION AGREEMENTS
PERRY ELLIS: As discussed in Note C, the Company acquired the Perry Ellis
license from Sanofi Beaute. The Perry Ellis license is entering its eleventh
year, and is renewable every two years if the average annual sales in the
completed period exceed 75% of the average sales of the previous four years.
All minimum sales levels have been met by the previous licensee, and the
Company believes that this will continue. The license requires the payment of
royalties, which decline as a percentage of net sales as net sales volume
increases, and the spending of certain minimum amounts for advertising based
upon net sales levels achieved in the prior year.
VICKY TIEL: In September 1992, the Company entered into an exclusive
worldwide license agreement with VICKY TIEL S.A. in which the Company secured
the rights to manufacture and distribute fragrances and beauty care products
using the VICKY TIEL trademark for an initial five-year period, renewable for
a subsequent five-year period upon achieving specified sales or minimum
royalty levels. Under this agreement, the Company is obligated to pay
royalties calculated as a percentage of net sales, which decline as net sales
volume increases. The Company is also obligated to spend certain minimum
amounts for advertising based upon the annual net sales of the products.
TODD OLDHAM: In December 1992, the Company entered into an exclusive
worldwide licensing agreement with L-7 Designs, Inc. in which the Company
secured the rights to manufacture and distribute fragrances and beauty care
products using the TODD OLDHAM trademark for an initial period of three-years,
renewable for subsequent three-year and four-year periods upon achieving
specified sales or minimum royalty levels. The license requires the payment of
royalties, which decline as a percentage of net sales as net sales volume
increases, and the spending of certain minimum amounts for advertising based
upon net sales levels. The Company launched a TODD OLDHAM women's fragrance
line in March 1995.
PHANTOM OF THE OPERA: In April 1993, the Company entered into an exclusive
worldwide agreement with Creative Fragrances, Inc., for the worldwide
19
<PAGE> 20
distribution rights to PHANTOM OF THE OPERA covering men's and women's
fragrances and beauty related products. The agreement expires in April 1998.
Royalties are payable at 7% of net sales, and there are no minimum royalty
requirements, nor are there minimum requirements for sales or advertising.
FRANCESCO SMALTO: In May 1995, the Company terminated its license
agreement with FRANCESCO SMALTO INTERNATIONAL ( SMALTO )for breach of contract.
On October 5, 1995, the Company entered into a transition and termination
agreement with SMALTO which provides for the continued use of the Francesco
Smalto trademark through September 30, 1996. The agreement contains certain
production restrictions and requires a fixed amount of royalties during the
period, which the Company anticipates will not exceed 5% of net sales. Sales
of Francesco Smalto products represented approximately 8% of total Company net
sales for the year ended March 31, 1995.
J. SUBSEQUENT EVENTS
On January 31, 1996, the Company entered into an agreement to purchase all of
the assets and assume certain liabilities, of Richard Barrie Fragrances, Inc.
(RBF) for a combination of cash and Parlux common stock. The agreement is
subject to the approval of RBF's board of directors, shareholders and
convertible note holders. The Company anticipates that, if the agreement is
approved, closing would take place prior to May 31, 1996.
On January 11, 1996, the Company entered into a non-binding letter of intent
with Parfums Jean Desprez, to purchase, for cash, the world-wide trademarks for
the Bal A Versailles fragrance brand (BAV). In addition, the Company would
purchase certain inventories and fixed assets relating to the BAV brand. The
letter of intent stipulates a closing on or before March 31, 1996.
* * * * * * * * * *
20
<PAGE> 21
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.
PARLUX FRAGRANCES, INC.
/s/ Ilia Lekach
- ---------------
Ilia Lekach, Chairman and Chief Executive Officer
/s/ Frank A. Buttacavoli
- ------------------------
Frank A. Buttacavoli, Vice President, Chief Financial Officer and Director
Date: February 13, 1996
21
<PAGE> 1
Parlux Fragrances, Inc. Exhibit 4.7
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") AND MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR TO
OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S UNDER
THE ACT) EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAW.
No. 2 $1,200,000 U.S.
PARLUX FRAGRANCES, INC.
7% CONVERTIBLE DEBENTURE DUE OCTOBER 20, 1997.
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Parlux Fragrances, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (the "Company") designated as its 7% Convertible
Debentures Due October 20, 1997, in an aggregate principal amount not exceeding
One Million Two Hundred Thousand Dollars (U.S. $1,200,000).
FOR VALUE RECEIVED, The Company promises to pay to Gershon Partners,
L.P., the registered holder hereof and its successors and assigns (the
"Holder"), the principal sum of One Million Two Hundred Thousand Dollars (U.S.
$1,200,000) on October 20, 1997, (the "Maturity Date") and to pay interest on
the principal sum outstanding, at the rate of 7% per annum due and payable
quarterly. Accrual of the interest shall commence on the first business day to
occur after the date hereof and shall continue until payment in full of the
principal sum has been made or duly provided for. The interest so payable will
be paid to the person in whose name this Debenture (or one or more predecessor
Debentures) is registered on the records of the Company regarding registration
and transfers of the Debentures (the "Debenture Register"); provided, however,
that the Company's obligation to a transferee of this Debenture arises only if
such transfer, sale or other disposition is made in accordance with the terms
and conditions of the Offshore Securities Subscription Agreement dated as of
October 27, 1995 between the Company and ershon Partners, L.P.(the
"Subscription Agreement"). The principal of, and interest on, this Debenture
are payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts, at the
address last appearing on the Debenture Register of the Company as designated
in writing by the Holder hereof from time to time. The Company will pay the
principal of and all accrued and unpaid interest due upon this Debenture on the
Maturity Date, less any amounts required by law to be deducted or withheld, to
the Holder of this Debenture as of the tenth (10th) day prior to the Maturity
Date and addressed to such Holder at the last
1
<PAGE> 2
address appearing on the Debenture Register. The forwarding of such check shall
constitute a payment of principal and interest hereunder and shall satisfy and
discharge the liability for principal and interest on this Debenture to the
extent of the sum represented by such check plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Five Hundred
Thousand Dollars ($500,000 U.S.) and integral multiples thereof. The Debentures
are exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same. No service charge will be made for such registration or transfer or
exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933 as
amended ( the "Act") and applicable state securities laws. Prior to due
presentment for the transfer of this Debenture, the Company and any agent of
the Company may treat the person in whose name this Debenture is duly
registered on the Company's Debenture Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes,
whether or not this Debenture be overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.
4. (a) The Holder of the Debenture is entitled, at its
option, at any time commencing ninety (90) days after issue hereof, to convert
any or all of the original principal amount of the Debenture into shares of
Common Stock (but not more than 25% of the Debentures in any two (2) week
period) at a conversion price for each share of Common Stock equal to eight
five percent (85%) of the market price, as defined below, of the Common Stock.
The "Market Price" shall be the average closing bid price of the Common Stock
for the five (5) trading days immediately preceding the conversion date, as
reported by the National Association of Securities Dealer's Automated Quotation
System. Such conversion shall be effectuated by surrendering the Debentures to
be converted ( with a copy, by facsimile or courier, to the Company) to the
Company, with the form of conversion notice attached hereto as Exhibit 1
executed by the Holder of this Debenture evidencing such Holder's intention to
convert this Debenture or a specified portion (as above provided) hereof, and
accompanied, if required by the Company, by proper assignment hereof in blank.
2
<PAGE> 3
Accrued but unpaid interest shall not be subject to conversion. No fractional
shares or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded to the nearest whole share,
with the fraction paid in cash at the discretion of the Company. The conversion
date shall be deemed to be the date on which the Holder has delivered this
Debenture, with the conversion notice duly executed, to the Company, or if the
duly executed notice of conversion is delivered prior to delivery of the
Debenture, the date of receipt by the Company of such notice of conversion so
long as this Debenture is received by the Company within five (5) business days
thereafter. Any Common Stock issued to the holder will be free of a legend or
any other trading restrictions.
(b) Notwithstanding the provisions of paragraph 4(a)
hereof, the Company is entitled, at its option, with five(5) business days'
notification to the Holder, to redeem part or all of the Debentures up to a
maximum of the amount outstanding for which no conversion notice has been given
through the fourth (4th) trading day following the Company's redemption notice,
at one hundred-fifteen percent (115%) of face value by paying to the holder the
product of (i) the Market Price, and (ii) the number of shares of Common Stock
that would be issuable for such Debentures pursuant to the calculation in
paragraph 4(a). Such payment shall include accrued interest to such date, and
shall be less any amounts required by law to be deducted or withheld. Such
payment shall be made by delivering immediately available funds in United
States Dollars by wire transfer to the Holder, or if no wiring instructions
have been provided to the Company, by cashier's or certified check to the last
address of Holder appearing on the Debenture Register. The wiring of such funds
or the forwarding of such check shall constitute a payment of principal and
interest hereunder and shall satisfy and discharge the liability for principal
and interest on this Debenture to the extent of the sum represented by such
wire or check plus any amount so deducted.
(c) If the Company shall issue shares of Common Stock in
a Regulation S transaction within ninety (90) days of the date hereof at a time
when any or all of the Debentures remain outstanding, at a price which is lower
than the Holder's conversion price pursuant to subparagraph 4(a) above, then
upon conversion of any Debentures still outstanding the number of shares to be
issued to the Holder pursuant to subparagraph 4(a) shall be increased to the
number of shares necessary to reduce Holder's conversion price to that lower
issue price.
(d) The Holder shall have a right of first refusal (to be
exercised within five (5) trading days) on Regulation S issues by the Company
for a period of one hundred eighty (180) days from the date hereof, so long as
the Holder still holds any Debentures. The Company shall give the Holder
written notice of its proposal to issue securities pursuant to Regulations S
and
3
<PAGE> 4
shall provide with such notice copies of the documentation, with the economic
terms of the transaction specified, pursuant to which the issuance is to be
effected. Such Holder shall have seven (7) New York business days from receipt
of such notice to deliver a written notice to the Company that such Holder
wishes to exercise its right of first refusal with respect to the entire
issuance or a part thereof. Failure by such Holder to respond within such
period shall be deemed an irrevocable waiver of its rights pursuant to this
subparagraph 4(d). If such Holder exercises its right of first refusal it must
close the transactions contemplated by the proposed issuance within five (5)
New York business days of the exercise of its right hereunder on the same
economic terms and using the same documentation provided in the Company's
notice to the Holder. If the Holder fails to close the transaction for any
reason other than a breach by the Company of its obligations hereunder, such
Holder's right of first refusal shall irrevocably terminate.
(e) Upon receipt of a notice of conversion pursuant to
subparagraph 4(a) or a redemption notice pursuant to subparagraph 4(b), the
Shares or the payment will be delivered to the Holder within four (4) trading
days.
5. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place and rate, and
in the coin or currency, herein prescribed.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate bringing of suit and diligence
in taking any action to collect amounts called for hereunder and shall be
directly and primarily liable for the payment of all sums owing and to be owing
hereon, regardless of and without any notice, diligence, act or omission as or
with respect to the collection of any amount called for hereunder.
7. The Company agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the Holder in collecting
any amount due under this Denbenture.
8. If one or more of following described "Events of Default"
shall occur:
(a) The Company shall default in the payment of (i)
interest on, and such default shall continue for
three (3) business days after the due date thereof,
or (ii) the principal of this Debenture; or
(b) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement,
4
<PAGE> 5
or in any certificate or financial or other
statements heretofore or hereafter furnished by or on
behalf of the Company in connection with the
execution and delivery of this Debenture or the
Subscription Agreement shall be false or misleading
in any material respect at the time made; or
(c) The Company shall fail to perform or observe any
other covenant, terms, provision, condition,
agreement or obligation of the Company under this
Debenture and such failure shall continue uncured for
a period of thirty (30) days after notice from the
Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in
writing its inability to pay its debts generally as
they mature; (3) make an assignment for the benefit
of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for
it or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
(f) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not be dismissed
within sixty (60) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or
similar process in excess of One Hundred Thousand
Dollars ($100,000) in the aggregate shall be entered
or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of thirty (30) days
or in any event later than ten (10) days prior to the
date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company, and if
instituted against the Company, shall not be
dismissedwithin sixty (60) days after such
institution or the Company
5
<PAGE> 6
shall by any action or answer approve of, consent to,
or acquiesce in any such proceedings or admit the
material allegations of, or default in answering a
petition filed in any such proceedings; or
(i) The Company shall have its Common Stock delisted from
an exchange or over-the-counter market.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law.
9. No recourse shall be had for the payment of the principal of,
or the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or director,
as such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
10. The Holder of this Debenture, by acceptance hereof, agrees
that this Debenture is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Debenture or the shares of Common
Stock issuable upon exercise thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky law or
similar laws relating to the sale of securities.
11. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
12. This Debenture and the agreements referred to in this
Debenture constitute the full and entire understanding and agreement between
the Company and the Holder with respect to the
6
<PAGE> 7
subject hereof. Neither this Debenture nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the Company and the Holder.
13. This Debenture shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized.
November 2, 1995
Parlux Fragrances, Inc.
By: /s/Ilia Lekach
--------------
Title: Chairman & CEO
--------------
7
<PAGE> 8
EXHIBIT 1
NOTICE OF CONVERSIONS
(To be Executed by Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $___________________
of the above Debenture No._________________________into______________________
shares of Common Stock of Parlux Fragrances, Inc. (the "Company") according to
the conditions set forth in such Debenture, as of the date written below.
The undersigned represents that it is not a U.S. Person as defined in
Regulation S promulgated under the Securities Act of 1933, as amended, and is
not converting the Debenture on behalf of any U.S. Person
________________________________________
Date of Conversion*
________________________________________
Applicable Conversion Price
________________________________________
Signature
________________________________________
Name
________________________________________
Address
*The original Debenture and this Notice of Conversion must be received by the
Company within five (5) business days following the Date of Conversion.
8
<PAGE> 1
Parlux Fragrances, Inc. Exhibit 4.8
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") AND MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR TO
OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S UNDER
THE ACT) EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAW.
No. 1 $800,000 U.S.
PARLUX FRAGRANCES, INC.
7% CONVERTIBLE DEBENTURE DUE OCTOBER 20, 1997.
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Parlux Fragrances, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (the "Company") designated as its 7% Convertible
Debentures Due October 20, 1997, in an aggregate principal amount not exceeding
Eight Hundred Thousand Dollars (U.S. $800,000).
FOR VALUE RECEIVED, The Company promises to pay to Granite Global Debt
Fund, Ltd., the registered holder hereof and its successors and assigns (the
"Holder"), the principal sum of Eight Hundred Thousand Dollars (U.S. $800,000)
on October 20, 1997, (the "Maturity Date") and to pay interest on the principal
sum outstanding, at the rate of 7% per annum due and payable quarterly. Accrual
of the interest shall commence on the first business day to occur after the
date hereof and shall continue until payment in full of the principal sum has
been made or duly provided for. The interest so payable will be paid to the
person in whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the Company regarding registration and transfers
of the Debentures (the "Debenture Register"); provided, however, that the
Company's obligation to a transferee of this Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions of the Offshore Securities Subscription Agreement dated as of
October 27, 1995 between the Company and Granite Global Debt Fund, Ltd. (the
"Subscription Agreement"). The principal of, and interest on, this Debenture
are payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts, at the
address last appearing on the Debenture Register of the Company as designated
in writing by the Holder hereof from time to time. The Company will pay the
principal of and all accrued and unpaid interest due upon this Debenture on the
Maturity Date, less any amounts required by law to be deducted or withheld, to
the Holder of this Debenture as of the tenth (10th) day prior to the Maturity
Date and addressed to such Holder at
1
<PAGE> 2
the last address appearing on the Debenture Register. The forwarding of such
check shall constitute a payment of principal and interest hereunder and shall
satisfy and discharge the liability for principal and interest on this
Debenture to the extent of the sum represented by such check plus any amounts
so deducted.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Five Hundred
Thousand Dollars ($500,000 U.S.) and integral multiples thereof. The Debentures
are exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same. No service charge will be made for such registration or transfer or
exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933 as
amended ( the "Act") and applicable state securities laws. Prior to due
presentment for the transfer of this Debenture, the Company and any agent of
the Company may treat the person in whose name this Debenture is duly
registered on the Company's Debenture Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes,
whether or not this Debenture be overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.
4. (a) The Holder of the Debenture is entitled, at its
option, at any time commencing ninety (90) days after issue hereof, to convert
any or all of the original principal amount of the Debenture into shares of
Common Stock (but not more than 25% of the Debentures in any two (2) week
period) at a conversion price for each share of Common Stock equal to eight
five percent (85%) of the market price, as defined below, of the Common Stock.
The "Market Price" shall be the average closing bid price of the Common Stock
for the five (5) trading days immediately preceding the conversion date, as
reported by the National Association of Securities Dealer's Automated Quotation
System. Such conversion shall be effectuated by surrendering the Debentures to
be converted ( with a copy, by facsimile or courier, to the Company) to the
Company, with the form of conversion notice attached hereto as Exhibit 1
executed by the Holder of this Debenture evidencing such Holder's intention to
convert this Debenture or a specified portion (as above provided) hereof, and
accompanied, if
2
<PAGE> 3
required by the Company, by proper assignment hereof in blank. Accrued but
unpaid interest shall not be subject to conversion. No fractional shares or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded to the nearest whole share, with the
fraction paid in cash at the discretion of the Company. The conversion date
shall be deemed to be the date on which the Holder has delivered this
Debenture, with the conversion notice duly executed, to the Company, or if the
duly executed notice of conversion is delivered prior to delivery of the
Debenture, the date of receipt by the Company of such notice of conversion so
long as this Debenture is received by the Company within five (5) business days
thereafter. Any Common Stock issued to the holder will be free of a legend or
any other trading restrictions.
(b) Notwithstanding the provisions of paragraph 4(a)
hereof, the Company is entitled, at its option, with five(5) business days'
notification to the Holder, to redeem part or all of the Debentures up to a
maximum of the amount outstanding for which no conversion notice has been given
through the fourth (4th) trading day following the Company's redemption notice,
at one hundred-fifteen percent (115%) of face value by paying to the holder the
product of (i) the Market Price, and (ii) the number of shares of Common Stock
that would be issuable for such Debentures pursuant to the calculation in
paragraph 4(a). Such payment shall include accrued interest to such date, and
shall be less any amounts required by law to be deducted or withheld. Such
payment shall be made by delivering immediately available funds in United
States Dollars by wire transfer to the Holder, or if no wiring instructions
have been provided to the Company, by cashier's or certified check to the last
address of Holder appearing on the Debenture Register. The wiring of such funds
or the forwarding of such check shall constitute a payment of principal and
interest hereunder and shall satisfy and discharge the liability for principal
and interest on this Debenture to the extent of the sum represented by such
wire or check plus any amount so deducted.
(c) If the Company shall issue shares of Common Stock in
a Regulation S transaction within ninety (90) days of the date hereof at a time
when any or all of the Debentures remain outstanding, at a price which is lower
than the Holder's conversion price pursuant to subparagraph 4(a) above, then
upon conversion of any Debentures still outstanding the number of shares to be
issued to the Holder pursuant to subparagraph 4(a) shall be increased to the
number of shares necessary to reduce Holder's conversion price to that lower
issue price.
(d) The Holder shall have a right of first refusal (to be
exercised within five (5) trading days) on Regulation S issues by the Company
for a period of one hundred eighty (180) days from the date hereof, so long as
the Holder still holds any Debentures. The Company shall give the Holder
written notice of
3
<PAGE> 4
its proposal to issue securities pursuant to Regulations S and shall provide
with such notice copies of the documentation, with the economic terms of the
transaction specified, pursuant to which the issuance is to be effected. Such
Holder shall have seven (7) New York business days from receipt of such notice
to deliver a written notice to the Company that such Holder wishes to exercise
its right of first refusal with respect to the entire issuance or a part
thereof. Failure by such Holder to respond within such period shall be deemed
an irrevocable waiver of its rights pursuant to this subparagraph 4(d). If such
Holder exercises its right of first refusal it must close the transactions
contemplated by the proposed issuance within five (5) New York business days of
the exercise of its right hereunder on the same economic terms and using the
same documentation provided in the Company's notice to the Holder. If the
Holder fails to close the transaction for any reason other than a breach by the
Company of its obligations hereunder, such Holder's right of first refusal
shall irrevocably terminate.
(e) Upon receipt of a notice of conversion pursuant to
subparagraph 4(a) or a redemption notice pursuant to subparagraph 4(b), the
Shares or the payment will be delivered to the Holder within four (4) trading
days.
5. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place and rate, and
in the coin or currency, herein prescribed.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate bringing of suit and diligence
in taking any action to collect amounts called for hereunder and shall be
directly and primarily liable for the payment of all sums owing and to be owing
hereon, regardless of and without any notice, diligence, act or omission as or
with respect to the collection of any amount called for hereunder.
7. The Company agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the Holder in collecting
any amount due under this Denbenture.
8. If one or more of following described "Events of Default"
shall occur:
(a) The Company shall default in the payment of (i)
interest on, and such default shall continue for
three (3) business days after the due date thereof,
or (ii) the principal of this Debenture; or
4
<PAGE> 5
(b) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in
any certificate or financial or other statements
heretofore or hereafter furnished by or on behalf of
the Company in connection with the execution and
delivery of this Debenture or the Subscription
Agreement shall be false or misleading in any
material respect at the time made; or
(c) The Company shall fail to perform or observe any
other covenant, terms, provision, condition,
agreement or obligation of the Company under this
Debenture and such failure shall continue uncured for
a period of thirty (30) days after notice from the
Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in
writing its inability to pay its debts generally as
they mature; (3) make an assignment for the benefit
of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for
it or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
(f) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not be dismissed
within sixty (60) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or
similar process in excess of One Hundred Thousand
Dollars ($100,000) in the aggregate shall be entered
or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of thirty (30) days
or in any event later than ten (10) days prior to the
date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the
5
<PAGE> 6
Company, and if instituted against the Company, shall
not be dismissed within sixty (60) days after
such institution or the Company shall by any action
or answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceedings; or
(i) The Company shall have its Common Stock delisted from
an exchange or over-the-counter market.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law.
9. No recourse shall be had for the payment of the principal of,
or the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or director,
as such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
10. The Holder of this Debenture, by acceptance hereof, agrees
that this Debenture is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Debenture or the shares of Common
Stock issuable upon exercise thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky law or
similar laws relating to the sale of securities.
11. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
6
<PAGE> 7
12. This Debenture and the agreements referred to in this
Debenture constitute the full and entire understanding and agreement between
the Company and the Holder with respect to the subject hereof. Neither this
Debenture nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Company and the Holder.
13. This Debenture shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized.
November 2, 1995
Parlux Fragrances, Inc.
By: /s/Ilia Lekach
--------------
Title: Chairman & CEO
--------------
7
<PAGE> 8
EXHIBIT 1
NOTICE OF CONVERSIONS
(To be Executed by Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $___________________
of the above Debenture No._________________________into______________________
shares of Common Stock of Parlux Fragrances, Inc. (the "Company") according to
the conditions set forth in such Debenture, as of the date written below.
The undersigned represents that it is not a U.S. Person as defined in
Regulation S promulgated under the Securities Act of 1933, as amended, and is
not converting the Debenture on behalf of any U.S. Person
________________________________________
Date of Conversion*
________________________________________
Applicable Conversion Price
________________________________________
Signature
________________________________________
Name
________________________________________
Address
*The original Debenture and this Notice of Conversion must be received by the
Company within five (5) business days following the Date of Conversion.
8
<PAGE> 1
Parlux Fragrances, Inc. Exhibit 4.9
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") AND MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S UNDER
THE ACT) EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAW.
No. 9 $100,000 U.S.
PARLUX FRAGRANCES, INC.
7% CONVERTIBLE DEBENTURE DUE OCTOBER 20, 1997.
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Parlux Fragrances, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (the "Company") designated as its 7% Convertible
Debentures Due October 20, 1997, in an aggregate principal amount not exceeding
One Hundred Thousand Dollars (U.S. $100,000).
FOR VALUE RECEIVED, The Company promises to pay to Master Investments
Corporation, the registered holder hereof and its successors and assigns (the
"Holder"), the principal sum of One Hundred Thousand Dollars (U.S. $100,000) on
October 20, 1997, (the "Maturity Date") and to pay interest on the principal
sum outstanding, at the rate of 7% per annum due and payable quarterly. Accrual
of the interest shall commence on the first business day to occur after the
date hereof and shall continue until payment in full of the principal sum has
been made or duly provided for. The interest so payable will be paid to the
person in whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the Company regarding registration and transfers
of the Debentures (the "Debenture Register"); provided, however, that the
Company's obligation to a transferee of this Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions of the Offshore Securities Subscription Agreement dated as of
November 29, 1995 between the Company and Master Investments Corporation(the
"Subscription Agreement"). The principal of, and interest on, this Debenture
are payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts, at the
address last appearing on the Debenture Register of the Company as designated
in writing by the Holder hereof from time to time. The Company will pay the
principal of and all accrued and unpaid interest due upon this Debenture on the
Maturity Date, less any amounts required by law to be deducted or withheld, to
the Holder of this Debenture as of the tenth (10th) day prior to the Maturity
Date and addressed to such Holder at
1
<PAGE> 2
the last address appearing on the Debenture Register. The forwarding of such
check shall constitute a payment of principal and interest hereunder and shall
satisfy and discharge the liability for principal and interest on this
Debenture to the extent of the sum represented by such check plus any amounts
so deducted.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Five Hundred
Thousand Dollars ($500,000 U.S.) and integral multiples thereof. The Debentures
are exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same. No service charge will be made for such registration or transfer or
exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933 as
amended ( the "Act") and applicable state securities laws. Prior to due
presentment for the transfer of this Debenture, the Company and any agent of
the Company may treat the person in whose name this Debenture is duly
registered on the Company's Debenture Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes,
whether or not this Debenture be overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.
4. (a) The Holder of the Debenture shall (90) days after
issue hereof, be entitled to convert up to twenty-five percent (25% )of the
original principal amount of this Debenture into shares of common stock, $0.01
par value per share, of the Company (the "Common Stock")at a conversion price
for each share of Common Stock equal to eight five percent (85%) of the Market
Price(as defined below) of the Company's Common Stock. Thereafter, the Holder
may convert the balance of the principal amount of the Debentures at any time
prior to 120 days after issue hereof into Common Stock at a conversion price
for each share of Common Stock equal to 85% of the Market Price, but in no
event may such Holder convert more than 25% of the original principal amount of
the Debenture during any calendar week period. For purposes of this Section 4
(a), the "Market Price" shall be the average closing bid price of the Common
Stock for the five (5) business days immediately preceding the conversion date,
as reported by the National Association of Securities
2
<PAGE> 3
Dealer's Automated Quotation System ("NASDAQ"). Such conversion shall be
effectuated by surrendering the Debentures to be converted ( with a copy, by
facsimile or courier, to the Company) to the Company, with the form of
conversion notice attached hereto as Exhibit 1 executed by the Holder of this
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion (as above provided) hereof, and accompanied, if required by
the Company, by proper assignment hereof in blank. Accrued but unpaid interest
shall not be subject to conversion. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share, with the fraction paid in
cash at the discretion of the Company. The conversion date shall be deemed to
be the date on which the Holder has delivered this Debenture, with the
conversion notice duly executed, to the Company, or if the duly executed notice
of conversion is delivered prior to the delivery of the Debenture, the date of
receipt by the Company of such notice of conversion so long as this Debenture
is received by the Company within five (5) business days thereafter.
(b) Notwithstanding the provisions of paragraph 4(a)hereof, the
Company is entitled, at its option, to redeem part or all of the
Debentures on 120 days after issue hereof by paying to the holder the
product of (i) the Market Price, and (ii) the number of shares of
Common Stock that would be issuable for such Debentures pursuant to the
calculation in paragraph 4(a). Such payment shall include accrued
interest to such date, and shall be less any amounts required by law to
be deducted or withheld. Such payment shall be made by delivering
immediately available funds in United States Dollars by wire transfer
to the Holder, or if no wiring instructions have been provided to the
Company, by cashier's or certified check to the last address of Holder
appearing on the Debenture Register. The wiring of such funds or the
forwarding of such check shall constitute a payment of principal and
interest hereunder and shall satisfy and discharge the liability for
principal and interest on this Debenture to the extent of the sum
represented by such wire or check plus any amount so deducted.
5. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place and rate, and
in the coin or currency, herein prescribed.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate bringing of suit and diligence
in taking any action to collect amounts called for hereunder and shall be
directly and primarily liable for the payment of all sums owing and to be
3
<PAGE> 4
owing hereon, regardless of and without any notice, diligence, act or omission
as or with respect to the collection of any amount called for hereunder.
7. The Company agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the Holder in collecting
any amount due under this Denbenture.
8. If one or more of following described "Events of Default"
shall occur:
(a) The Company shall default in the payment of principal
or interest on, and such default shall continue for
five (5) business days after the due date thereof, or
(ii) the principal of this Debenture; or
(b) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in
any certificate or financial or other statements
heretofore or hereafter furnished by or on behalf of
the Company in connection with the execution and
delivery of this Debenture or the Subscription
Agreement shall be false or misleading in any
material respect at the time made; or
(c) The Company shall fail to perform or observe any
other covenant, term, provision, condition, agreement
or obligation of the Company under this Debenture and
such failure shall continue uncured for a period of
thirty (30) days after notice from the Holder of such
failure; or
(d) The Company shall (1) become insolvent; (2) admit in
writing its inability to pay its debts generally as
they mature; (3) make an assignment for the benefit
of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
(f) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not
4
<PAGE> 5
be dismissed within thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or
similar process in excess of One Hundred Thousand
Dollars ($100,000) in the aggregate shall be entered
or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of thirty (30) days
or in any event later than ten (10) days prior to the
date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company, and if
instituted against the Company, shall not be
dismissedwithin thirty (30) days after such
instruction of the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceedings; or
(i) The Company shall have its Common Stock delisted from
an exchange or over-the-counter market.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law.
9. No recourse shall be had for the payment of the principal of,
or the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or director,
as such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
5
<PAGE> 6
10. The Holder of this Debenture, by acceptance hereof, agrees
that this Debenture is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Debenture or the shares of Common
Stock issuable upon exercise thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky law or
similar laws relating to the sale of securities.
11. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
12. This Debenture and the agreements referred to in this
Debenture constitute the full and entire understanding and agreement between
the Company and the Holder with respect to the subject hereof. Neither this
Debenture nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Company and the Holder.
13. This Debenture shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized.
December 5, 1995
Parlux Fragrances, Inc.
By:/s/Ilia Lekach
--------------
Title: Chairman & CEO
--------------
6
<PAGE> 7
EXHIBIT 1
NOTICE OF CONVERSIONS
(To be Executed by Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $___________________
of the above Debenture No._________________________into______________________
shares of Common Stock of Parlux Fragrances, Inc. (the "Company") according to
the conditions set forth in such Debenture, as of the date written below. The
undersigned represents that it is not a U.S. Person as defined in Regulation S
promulgated under the Securities Act of 1933, as amended, and is not converting
the Debenture on behalf of any U.S. Person
----------------------------------------
Date of Conversion*
----------------------------------------
Applicable Conversion Price
----------------------------------------
Signature
----------------------------------------
Name
----------------------------------------
Address
*The original Debenture and this Notice of Conversion must be received by the
Company within five (5) business days following the Date of Conversion.
7
<PAGE> 1
Parlux Fragrances, Inc. Exhibit 4.10
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") AND MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S UNDER
THE ACT) EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAW.
No. 10 $100,000 U.S.
PARLUX FRAGRANCES, INC.
7% CONVERTIBLE DEBENTURE DUE OCTOBER 20, 1997.
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Parlux Fragrances, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (the "Company") designated as its 7% Convertible
Debentures Due October 20, 1997, in an aggregate principal amount not exceeding
Five Million Dollars (U.S. $5,000,000).
FOR VALUE RECEIVED, The Company promises to pay to Taryak, Inc., the
registered holder hereof and its successors and assigns (the "Holder"), the
principal sum of One Hundred Thousand Dollars (U.S. $100,000) on October 20,
1997, (the "Maturity Date") and to pay interest on the principal sum
outstanding, at the rate of 7% per annum due and payable quarterly. Accrual of
the interest shall commence on the first business day to occur after the date
hereof and shall continue until payment in full of the principal sum has been
made or duly provided for. The interest so payable will be paid to the person
in whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the Company regarding registration and transfers
of the Debentures (the "Debenture Register"); provided, however, that the
Company's obligation to a transferee of this Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions of the Offshore Securities Subscription Agreement dated as of
November 29, 1995 between the Company and Taryak, Inc.(the "Subscription
Agreement"). The principal of, and interest on, this Debenture are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts, at the address last
appearing on the Debenture Register of the Company as designated in writing by
the Holder hereof from time to time. The Company will pay the principal of and
all accrued and unpaid interest due upon this Debenture on the Maturity Date,
less any amounts required by law to be deducted or withheld, to the Holder of
this Debenture as of the tenth (10th) day prior to the Maturity Date and
addressed to such Holder at the last address appearing on the Debenture
1
<PAGE> 2
Register. The forwarding of such check shall constitute a payment of principal
and interest hereunder and shall satisfy and discharge the liability for
principal and interest on this Debenture to the extent of the sum represented
by such check plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Five Hundred
Thousand Dollars ($500,000 U.S.) and integral multiples thereof. The Debentures
are exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same. No service charge will be made for such registration or transfer or
exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933 as
amended ( the "Act") and applicable state securities laws. Prior to due
presentment for the transfer of this Debenture, the Company and any agent of
the Company may treat the person in whose name this Debenture is duly
registered on the Company's Debenture Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes,
whether or not this Debenture be overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.
4. (a) The Holder of the Debenture shall (90) days after
issue hereof, be entitled to convert up to twenty-five percent (25% )of the
original principal amount of this Debenture into shares of common stock, $0.01
par value per share, of the Company (the "Common Stock")at a conversion price
for each share of Common Stock equal to eight five percent (85%) of the Market
Price(as defined below) of the Company's Common Stock. Thereafter, the Holder
may convert the balance of the principal amount of the Debentures at any time
prior to 120 days after issue hereof into Common Stock at a conversion price
for each share of Common Stock equal to 85% of the Market Price, but in no
event may such Holder convert more than 25% of the original principal amount of
the Debenture during any calendar week period. For purposes of this Section 4
(a), the "Market Price" shall be the average closing bid price of the Common
Stock for the five (5) business days immediately preceding the conversion date,
as reported by the National Association of Securities Dealer's Automated
Quotation System ("NASDAQ"). Such conversion
2
<PAGE> 3
shall be effectuated by surrendering the Debentures to be converted ( with a
copy, by facsimile or courier, to the Company) to the Company, with the form of
conversion notice attached hereto as Exhibit 1 executed by the Holder of this
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion (as above provided) hereof, and accompanied, if required by
the Company, by proper assignment hereof in blank. Accrued but unpaid interest
shall not be subject to conversion. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share, with the fraction paid in
cash at the discretion of the Company. The conversion date shall be deemed to
be the date on which the Holder has delivered this Debenture, with the
conversion notice duly executed, to the Company, or if the duly executed notice
of conversion is delivered prior to the delivery of the Debenture, the date of
receipt by the Company of such notice of conversion so long as this Debenture
is received by the Company within five (5) business days thereafter.
(b) Notwithstanding the provisions of paragraph 4(a)hereof, the
Company is entitled, at its option, to redeem part or all of the
Debentures on 120 days after issue hereof by paying to the holder the
product of (i) the Market Price, and (ii) the number of shares of
Common Stock that would be issuable for such Debentures pursuant to
the calculation in paragraph 4(a). Such payment shall include accrued
interest to such date, and shall be less any amounts required by law
to be deducted or withheld. Such payment shall be made by delivering
immediately available funds in United States Dollars by wire transfer
to the Holder, or if no wiring instructions have been provided to the
Company, by cashier's or certified check to the last address of Holder
appearing on the Debenture Register. The wiring of such funds or the
forwarding of such check shall constitute a payment of principal and
interest hereunder and shall satisfy and discharge the liability for
principal and interest on this Debenture to the extent of the sum
represented by such wire or check plus any amount so deducted.
5. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place and rate, and
in the coin or currency, herein prescribed.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate bringing of suit and diligence
in taking any action to collect amounts called for hereunder and shall be
directly and primarily liable for the payment of all sums owing and to be owing
hereon, regardless of and without any notice, diligence,
3
<PAGE> 4
act or omission as or with respect to the collection of any amount called for
hereunder.
7. The Company agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the Holder in collecting
any amount due under this Denbenture.
8. If one or more of following described "Events of Default"
shall occur:
(a) The Company shall default in the payment of principal
or interest on, and such default shall continue for
five (5) business days after the due date thereof, or
(ii) the principal of this Debenture; or
(b) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in
any certificate or financial or other statements
heretofore or hereafter furnished by or on behalf of
the Company in connection with the execution and
delivery of this Debenture or the Subscription
Agreement shall be false or misleading in any
material respect at the time made; or
(c) The Company shall fail to perform or observe any
other covenant, term, provision, condition, agreement
or obligation of the Company under this Debenture and
such failure shall continue uncured for a period of
thirty (30) days after notice from the Holder of such
failure; or
(d) The Company shall (1) become insolvent; (2) admit in
writing its inability to pay its debts generally as
they mature; (3) make an assignment for the benefit
of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
(f) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not
4
<PAGE> 5
be dismissed within thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or
similar process in excess of One Hundred Thousand
Dollars ($100,000) in the aggregate shall be entered
or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of thirty (30) days
or in any event later than ten (10) days prior to the
date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company, and if
instituted against the Company, shall not be
dismissedwithin thirty (30) days after such
instruction of the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceedings; or
(i) The Company shall have its Common Stock delisted from
an exchange or over-the-counter market.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law.
9. No recourse shall be had for the payment of the principal of,
or the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or director,
as such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
5
<PAGE> 6
10. The Holder of this Debenture, by acceptance hereof, agrees
that this Debenture is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Debenture or the shares of Common
Stock issuable upon exercise thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky law or
similar laws relating to the sale of securities.
11. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
12. This Debenture and the agreements referred to in this
Debenture constitute the full and entire understanding and agreement between
the Company and the Holder with respect to the subject hereof. Neither this
Debenture nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Company and the Holder.
13. This Debenture shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized.
December 5, 1995
Parlux Fragrances, Inc.
By:/s/Ilia Lekach
--------------
Title: Chairman & CEO
--------------
6
<PAGE> 7
EXHIBIT 1
NOTICE OF CONVERSIONS
(To be Executed by Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $___________________
of the above Debenture No._________________________into______________________
shares of Common Stock of Parlux Fragrances, Inc. (the "Company") according to
the conditions set forth in such Debenture, as of the date written below. The
undersigned represents that it is not a U.S. Person as defined in Regulation S
promulgated under the Securities Act of 1933, as amended, and is not converting
the Debenture on behalf of any U.S. Person
----------------------------------------
Date of Conversion*
----------------------------------------
Applicable Conversion Price
----------------------------------------
Signature
----------------------------------------
Name
----------------------------------------
Address
*The original Debenture and this Notice of Conversion must be received by the
Company within five (5) business days following the Date of Conversion.
7
<PAGE> 1
Parlux Fragrances, Inc. Exhibit 4.11
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") AND MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S UNDER
THE ACT) EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAW.
No. 4 $1,000,000 U.S.
PARLUX FRAGRANCES, INC.
7% CONVERTIBLE DEBENTURE DUE OCTOBER 20, 1997.
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Parlux Fragrances, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (the "Company") designated as its 7% Convertible
Debentures Due October 20, 1997, in an aggregate principal amount not exceeding
Five Million Dollars (U.S. $5,000,000).
FOR VALUE RECEIVED, The Company promises to pay to Privatinvest Bank
AG, the registered holder hereof and its successors and assigns (the "Holder"),
the principal sum of One Million Dollars (U.S. $1,000,000) on October 20, 1997,
(the "Maturity Date") and to pay interest on the principal sum outstanding, at
the rate of 7% per annum due and payable quarterly. Accrual of the interest
shall commence on the first business day to occur after the date hereof and
shall continue until payment in full of the principal sum has been made or duly
provided for. The interest so payable will be paid to the person in whose name
this Debenture (or one or more predecessor Debentures) is registered on the
records of the Company regarding registration and transfers of the Debentures
(the "Debenture Register"); provided, however, that the Company's obligation to
a transferee of this Debenture arises only if such transfer, sale or other
disposition is made in accordance with the terms and conditions of the Offshore
Securities Subscription Agreement dated as of November 29, 1995 between the
Company and Privatinvest Bank AG(the "Subscription Agreement"). The principal
of, and interest on, this Debenture are payable in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts, at the address last appearing on the Debenture
Register of the Company as designated in writing by the Holder hereof from time
to time. The Company will pay the principal of and all accrued and unpaid
interest due upon this Debenture on the Maturity Date, less any amounts
required by law to be deducted or withheld, to the Holder of this Debenture as
of the tenth (10th) day prior to the Maturity Date and addressed to such Holder
at
1
<PAGE> 2
the last address appearing on the Debenture Register. The forwarding of such
check shall constitute a payment of principal and interest hereunder and shall
satisfy and discharge the liability for principal and interest on this
Debenture to the extent of the sum represented by such check plus any amounts
so deducted.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Five Hundred
Thousand Dollars ($500,000 U.S.) and integral multiples thereof. The Debentures
are exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same. No service charge will be made for such registration or transfer or
exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933 as
amended ( the "Act") and applicable state securities laws. Prior to due
presentment for the transfer of this Debenture, the Company and any agent of
the Company may treat the person in whose name this Debenture is duly
registered on the Company's Debenture Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes,
whether or not this Debenture be overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.
4. (a) The Holder of the Debenture shall (90) days after
issue hereof, be entitled to convert up to twenty-five percent (25% )of the
original principal amount of this Debenture into shares of common stock, $0.01
par value per share, of the Company (the "Common Stock")at a conversion price
for each share of Common Stock equal to eight five percent (85%) of the Market
Price(as defined below) of the Company's Common Stock. Thereafter, the Holder
may convert the balance of the principal amount of the Debentures at any time
prior to 120 days after issue hereof into Common Stock at a conversion price
for each share of Common Stock equal to 85% of the Market Price, but in no
event may such Holder convert more than 25% of the original principal amount of
the Debenture during any calendar week period. For purposes of this Section 4
(a), the "Market Price" shall be the average closing bid price of the Common
Stock for the five (5) business days immediately preceding the conversion date,
as reported by the National Association of Securities
2
<PAGE> 3
Dealer's Automated Quotation System ("NASDAQ"). Such conversion shall be
effectuated by surrendering the Debentures to be converted ( with a copy, by
facsimile or courier, to the Company) to the Company, with the form of
conversion notice attached hereto as Exhibit 1 executed by the Holder of this
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion (as above provided) hereof, and accompanied, if required by
the Company, by proper assignment hereof in blank. Accrued but unpaid interest
shall not be subject to conversion. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share, with the fraction paid in
cash at the discretion of the Company. The conversion date shall be deemed to
be the date on which the Holder has delivered this Debenture, with the
conversion notice duly executed, to the Company, or if the duly executed notice
of conversion is delivered prior to the delivery of the Debenture, the date of
receipt by the Company of such notice of conversion so long as this Debenture
is received by the Company within five (5) business days thereafter.
(b) Notwithstanding the provisions of paragraph 4(a)hereof, the
Company is entitled, at its option, to redeem part or all of the
Debentures on 120 days after issue hereof by paying to the holder the
product of (i) the Market Price, and (ii) the number of shares of
Common Stock that would be issuable for such Debentures pursuant to
the calculation in paragraph 4(a). Such payment shall include accrued
interest to such date, and shall be less any amounts required by law
to be deducted or withheld. Such payment shall be made by delivering
immediately available funds in United States Dollars by wire transfer
to the Holder, or if no wiring instructions have been provided to the
Company, by cashier's or certified check to the last address of Holder
appearing on the Debenture Register. The wiring of such funds or the
forwarding of such check shall constitute a payment of principal and
interest hereunder and shall satisfy and discharge the liability for
principal and interest on this Debenture to the extent of the sum
represented by such wire or check plus any amount so deducted.
5. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place and rate, and
in the coin or currency, herein prescribed.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate bringing of suit and diligence
in taking any action to collect amounts called for hereunder and shall be
directly and primarily liable for the payment of all sums owing and to be
3
<PAGE> 4
owing hereon, regardless of and without any notice, diligence, act or omission
as or with respect to the collection of any amount called for hereunder.
7. The Company agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the Holder in collecting
any amount due under this Denbenture.
8. If one or more of following described "Events of Default"
shall occur:
(a) The Company shall default in the payment of principal
or interest on, and such default shall continue for
five (5) business days after the due date thereof, or
(ii) the principal of this Debenture; or
(b) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in
any certificate or financial or other statements
heretofore or hereafter furnished by or on behalf of
the Company in connection with the execution and
delivery of this Debenture or the Subscription
Agreement shall be false or misleading in any
material respect at the time made; or
(c) The Company shall fail to perform or observe any
other covenant, term, provision, condition, agreement
or obligation of the Company under this Debenture and
such failure shall continue uncured for a period of
thirty (30) days after notice from the Holder of such
failure; or
(d) The Company shall (1) become insolvent; (2) admit in
writing its inability to pay its debts generally as
they mature; (3) make an assignment for the benefit
of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
(f) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not
4
<PAGE> 5
be dismissed within thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or
similar process in excess of One Hundred Thousand
Dollars ($100,000) in the aggregate shall be entered
or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of thirty (30) days
or in any event later than ten (10) days prior to the
date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company, and if
instituted against the Company, shall not be
dismissedwithin thirty (30) days after such
instruction of the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceedings; or
(i) The Company shall have its Common Stock delisted from
an exchange or over-the-counter market.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law.
9. No recourse shall be had for the payment of the principal of,
or the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or director,
as such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
5
<PAGE> 6
10. The Holder of this Debenture, by acceptance hereof, agrees
that this Debenture is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Debenture or the shares of Common
Stock issuable upon exercise thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky law or
similar laws relating to the sale of securities.
11. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
12. This Debenture and the agreements referred to in this
Debenture constitute the full and entire understanding and agreement between
the Company and the Holder with respect to the subject hereof. Neither this
Debenture nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Company and the Holder.
13. This Debenture shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized.
December 6, 1995
Parlux Fragrances, Inc.
By: /s/Ilia Lekach
--------------
Title: Chairman & CEO
--------------
6
<PAGE> 7
EXHIBIT 1
NOTICE OF CONVERSIONS
(To be Executed by Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $___________________
of the above Debenture No._________________________into______________________
shares of Common Stock of Parlux Fragrances, Inc. (the "Company") according to
the conditions set forth in such Debenture, as of the date written below. The
undersigned represents that it is not a U.S. Person as defined in Regulation S
promulgated under the Securities Act of 1933, as amended, and is not converting
the Debenture on behalf of any U.S. Person
----------------------------------------
Date of Conversion*
----------------------------------------
Applicable Conversion Price
----------------------------------------
Signature
----------------------------------------
Name
----------------------------------------
Address
*The original Debenture and this Notice of Conversion must be received by the
Company within five (5) business days following the Date of Conversion.
7
<PAGE> 1
Parlux Fragrances, Inc. Exhibit 4.12
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") AND MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE ACT) OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S UNDER
THE ACT) EXCEPT PURSUANT TO REGISTRATION UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAW.
No. 11 $500,000 U.S.
PARLUX FRAGRANCES, INC.
7% CONVERTIBLE DEBENTURE DUE OCTOBER 20, 1997.
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Parlux Fragrances, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (the "Company") designated as its 7% Convertible
Debentures Due October 20, 1997, in an aggregate principal amount not exceeding
Five Million Dollars (U.S. $5,000,000).
FOR VALUE RECEIVED, The Company promises to pay to Faisal Finance, the
registered holder hereof and its successors and assigns (the "Holder"), the
principal sum of Five Hundred Thousand Dollars (U.S. $500,000) on October 20,
1997, (the "Maturity Date") and to pay interest on the principal sum
outstanding, at the rate of 7% per annum due and payable quarterly. Accrual of
the interest shall commence on the first business day to occur after the date
hereof and shall continue until payment in full of the principal sum has been
made or duly provided for. The interest so payable will be paid to the person
in whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the Company regarding registration and transfers
of the Debentures (the "Debenture Register"); provided, however, that the
Company's obligation to a transferee of this Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions of the Offshore Securities Subscription Agreement dated as of
November 29, 1995 between the Company and Faisal Finance(the "Subscription
Agreement"). The principal of, and interest on, this Debenture are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts, at the address last
appearing on the Debenture Register of the Company as designated in writing by
the Holder hereof from time to time. The Company will pay the principal of and
all accrued and unpaid interest due upon this Debenture on the Maturity Date,
less any amounts required by law to be deducted or withheld, to the Holder of
this Debenture as of the tenth (10th) day prior to the Maturity Date and
addressed to such Holder at the last address
1
<PAGE> 2
appearing on the Debenture Register. The forwarding of such check shall
constitute a payment of principal and interest hereunder and shall satisfy and
discharge the liability for principal and interest on this Debenture to the
extent of the sum represented by such check plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Five Hundred
Thousand Dollars ($500,000 U.S.) and integral multiples thereof. The Debentures
are exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same. No service charge will be made for such registration or transfer or
exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933 as
amended ( the "Act") and applicable state securities laws. Prior to due
presentment for the transfer of this Debenture, the Company and any agent of
the Company may treat the person in whose name this Debenture is duly
registered on the Company's Debenture Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes,
whether or not this Debenture be overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.
4. (a) The Holder of the Debenture shall (90) days after
issue hereof, be entitled to convert up to twenty-five percent (25% )of the
original principal amount of this Debenture into shares of common stock, $0.01
par value per share, of the Company (the "Common Stock")at a conversion price
for each share of Common Stock equal to eight five percent (85%) of the Market
Price(as defined below) of the Company's Common Stock. Thereafter, the Holder
may convert the balance of the principal amount of the Debentures at any time
prior to 120 days after issue hereof into Common Stock at a conversion price
for each share of Common Stock equal to 85% of the Market Price, but in no
event may such Holder convert more than 25% of the original principal amount of
the Debenture during any calendar week period. For purposes of this Section 4
(a), the "Market Price" shall be the average closing bid price of the Common
Stock for the five (5) business days immediately preceding the conversion date,
as reported by the National Association of Securities Dealer's Automated
Quotation System ("NASDAQ"). Such conversion
2
<PAGE> 3
shall be effectuated by surrendering the Debentures to be converted ( with a
copy, by facsimile or courier, to the Company) to the Company, with the form of
conversion notice attached hereto as Exhibit 1 executed by the Holder of this
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion (as above provided) hereof, and accompanied, if required by
the Company, by proper assignment hereof in blank. Accrued but unpaid interest
shall not be subject to conversion. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share, with the fraction paid in
cash at the discretion of the Company. The conversion date shall be deemed to
be the date on which the Holder has delivered this Debenture, with the
conversion notice duly executed, to the Company, or if the duly executed notice
of conversion is delivered prior to the delivery of the Debenture, the date of
receipt by the Company of such notice of conversion so long as this Debenture
is received by the Company within five (5) business days thereafter.
(b) Notwithstanding the provisions of paragraph 4(a)hereof, the
Company is entitled, at its option, to redeem part or all of the
Debentures on 120 days after issue hereof by paying to the holder the
product of (i) the Market Price, and (ii) the number of shares of
Common Stock that would be issuable for such Debentures pursuant to
the calculation in paragraph 4(a). Such payment shall include accrued
interest to such date, and shall be less any amounts required by law
to be deducted or withheld. Such payment shall be made by delivering
immediately available funds in United States Dollars by wire transfer
to the Holder, or if no wiring instructions have been provided to the
Company, by cashier's or certified check to the last address of Holder
appearing on the Debenture Register. The wiring of such funds or the
forwarding of such check shall constitute a payment of principal and
interest hereunder and shall satisfy and discharge the liability for
principal and interest on this Debenture to the extent of the sum
represented by such wire or check plus any amount so deducted.
5. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place and rate, and
in the coin or currency, herein prescribed.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate bringing of suit and diligence
in taking any action to collect amounts called for hereunder and shall be
directly and primarily liable for the payment of all sums owing and to be owing
hereon, regardless of and without any notice, diligence,
3
<PAGE> 4
act or omission as or with respect to the collection of any amount called for
hereunder.
7. The Company agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the Holder in collecting
any amount due under this Denbenture.
8. If one or more of following described "Events of Default"
shall occur:
(a) The Company shall default in the payment of principal
or interest on, and such default shall continue for
five (5) business days after the due date thereof, or
(ii) the principal of this Debenture; or
(b) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in
any certificate or financial or other statements
heretofore or hereafter furnished by or on behalf of
the Company in connection with the execution and
delivery of this Debenture or the Subscription
Agreement shall be false or misleading in any
material respect at the time made; or
(c) The Company shall fail to perform or observe any
other covenant, term, provision, condition, agreement
or obligation of the Company under this Debenture and
such failure shall continue uncured for a period of
thirty (30) days after notice from the Holder of such
failure; or
(d) The Company shall (1) become insolvent; (2) admit in
writing its inability to pay its debts generally as
they mature; (3) make an assignment for the benefit
of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
(f) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not
4
<PAGE> 5
be dismissed within thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or
similar process in excess of One Hundred Thousand
Dollars ($100,000) in the aggregate shall be entered
or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of thirty (30) days
or in any event later than ten (10) days prior to the
date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company, and if
instituted against the Company, shall not be
dismissedwithin thirty (30) days after such
instruction of the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceedings; or
(i) The Company shall have its Common Stock delisted from
an exchange or over-the-counter market.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law.
9. No recourse shall be had for the payment of the principal of,
or the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or director,
as such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
5
<PAGE> 6
10. The Holder of this Debenture, by acceptance hereof, agrees
that this Debenture is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Debenture or the shares of Common
Stock issuable upon exercise thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky law or
similar laws relating to the sale of securities.
11. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
12. This Debenture and the agreements referred to in this
Debenture constitute the full and entire understanding and agreement between
the Company and the Holder with respect to the subject hereof. Neither this
Debenture nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Company and the Holder.
13. This Debenture shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized.
December 7, 1995
Parlux Fragrances, Inc.
By:/s/Ilia Lekach
--------------
Title: Chairman & CEO
--------------
6
<PAGE> 7
EXHIBIT 1
NOTICE OF CONVERSIONS
(To be Executed by Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $___________________
of the above Debenture No._________________________into______________________
shares of Common Stock of Parlux Fragrances, Inc. (the "Company") according to
the conditions set forth in such Debenture, as of the date written below. The
undersigned represents that it is not a U.S. Person as defined in Regulation S
promulgated under the Securities Act of 1933, as amended, and is not converting
the Debenture on behalf of any U.S. Person
----------------------------------------
Date of Conversion*
----------------------------------------
Applicable Conversion Price
----------------------------------------
Signature
----------------------------------------
Name
----------------------------------------
Address
*The original Debenture and this Notice of Conversion must be received by the
Company within five (5) business days following the Date of Conversion.
7
<PAGE> 1
Parlux Fragrances, Inc. Exhibit 4.13
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE BECAUSE THEY ARE
BELIEVED TO BE EXEMPT FROM REGISTRATION UNDER REGULATION S PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ( THE "ACT"). THE SECURITIES MAY NOT BE
RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM.
No. R6-10 $2,500,000 U.S.
PARLUX FRAGRANCES, INC.
5% CONVERTIBLE DEBENTURE DUE DECEMBER 15, 1996.
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Parlux Fragrances, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (the "Company") designated as its 5% Convertible
Debentures Due December 15, 1996, in an aggregate principal amount not
exceeding Five Million Dollars (U.S. $5,000,000).
FOR VALUE RECEIVED, The Company promises to pay to Newsun Limited, the
registered holder hereof(the "Holder"), the principal sum of US$2,500,000,on
December 15, 1996, (the "Maturity Date") and to pay interest on the principal
sum outstanding from time to time in arrears on the Maturity Date or,if
earlier, on each Conversion Date ( as hereinafter defined ) at the rate of 5%
per annum, computed on the basis of the actual number of days elapsed in a
365-day year. Accrual of the interest shall commence on the date hereof until
payment in full of the principal sum has been made or duly provided for. All
accrued and unpaid interest shall bear interest at the same rate from and after
the due date of the interest payment until so paid. The interest so payable,
less any amounts required by law to be deducted or withheld, will be paid on
the Maturity Date or, if earlier, on the Conversion Date, to the person in
whose name this Debenture (or one or more predecessor Debentures) is registered
on the records of the Company regarding registration and transfers of the
Debentures (the "Debenture Register")on the Conversion Date or tenth day prior
to the Maturity Date, as the case may be; provided, however, that the Company's
obligation to a transferee of this Debenture arises only if such transfer, sale
or other disposition is made in accordance with the terms and conditions of the
Regulation S Subscription Agreement executed by the original Holder in
connection with the purchase of this Debenture(the "Subscription Agreement").
The principal of, and interest on, this Debenture are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing
on the Debenture Register of the Company as designated in writing by the Holder
from time to time. The
1
<PAGE> 2
forwarding of the Company's check shall, subject to collection, constitute a
payment of interest and principal hereunder and shall satisfy and discharge the
liability for principal and interest on this Debenture to the extent of the sum
represented by such check.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Two Hundred
and Fifty Thousand Dollars ($250,000 U.S.) and integral multiples thereof. The
Debentures are exchangeable for an equal aggregate principal amount of
Debentures of different authorized denominations, as requested by the Holders
surrendering the same. No service charge will be made for such registration or
transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws
or other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933 as
amended ( the "Act"). Prior to due presentment for the transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this Debenture be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
4. (a) The Holder of the Debenture shall, at any time during
the period commencing on February 15, 1996 and expring on March 15,
1996,convert up to One Hundred Percent (100%)of the principal amount of this
Debenture ( in increments of not less than Two Hundred Fifty Thousand Dollars
($250,000)) into shares of common stock, $0.01 par value per share, of the
Company (the "Common Stock")at a conversion price for each share of Common
Stock equal to eight five percent (85%) of the Market Price of the Company's
Common Stock; provided however, that in no event will the conversion price be
greater than $8.50 per share of Common Stock. For purposes of this Section 4,
the Market Price shall be the average closing bid prices of the Common Stock
over the five consecutive trading days ending on the Conversion Date, as
reported by the National Association of Securities Dealer's Automated Quotation
System ("NASDAQ"), or the average of the closing bid prices of the Common Stock
in the over-the-counter market over the five consecutive trading days ending on
the Conversion Date or, in the event the Common Stock is listed on a national
stock exchange, the Market Price shall be the average of
2
<PAGE> 3
the closing prices of the Common Stock on such exchange,as reported in The Wall
Street Journal,over five consecutive trading days ending on the Conversion
Date. Such conversion shall be effectuated by surrendering the Debentures to be
converted to the Company, with the form of conversion notice attached hereto as
Exhibit A, executed by the Holder of the Debenture evidencing such Holder's
intention to convert this Debenture or a specified portion (as above provided)
hereof. The amount of accrued but unpaid interest as of the Conversion Date
shall be subject to conversion and paid in shares of Common Stock valued at the
Market Price. No fractional shares of the Common Stock or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. The date on which notice
of conversion is given shall be deemed to be the date on which the Holder has
delivered this Debenture, with the conversion notice duly executed, to the
Company, or if earlier, the date set forth in such notice of conversion if the
Debenture is received by the Company within three business days thereafter.
Such date is referred to herein as the "Conversion Date". Facsimile delivery
of the conversion notice shall be accepted by the Company. Certificates
representing Common Stock upon conversion will be delivered to the Holder
within three (3) business days from the date the notice of conversion is
delivered to the Company.
5. Any of the following shall constitute and "Event of
Default":
(a) The Company shall default in the payment of principal
or interest on this Debenture as and when the same
shall be due and payable and such default shall
continue for five (5) business days after the due
date thereof; or
(b) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in
any certificate or financial or other statements
heretofore or hereafter furnished by or on behalf of
the Company in connection with the execution and
delivery of this Debenture or the Subscription
Agreement shall be false or misleading in any
material respect at the time made; or
(c) The Company shall fail to perform or observe any
other covenant, term, provision, condition, agreement
or obligation of the Company under this Debenture or
the Subsription Agreement and such failure shall
continue uncured for a period of five(5)business days
after the first date on which such failure arises
it being understood that in the case of defaults
which can not reasonably be cured within a 5-day
period no grace period shall be necessary as a
precondition to the failure to
3
<PAGE> 4
perform such convenant constituting and Event of
Default; or
(d) The Company shall(1) make an assignment for the
benefit of creditors or commence proceedings for its
dissolution; or (2) apply for or consent to the
appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
f) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company, and if
instituted against the Company, shall not be
dismissed within sixty (60) days after such
instruction of the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceedings; or
(g) The Company shall have its Common Stock delisted from
the NASDAQ Small Cap Market or suspended from trading
thereon, and shall not have its Common Stock relisted
or have such suspension lifted, as the case may be,
within five (5) days; or
(h) The Company shall default on the payment of any
material indebtedness for borrowed money beyond any
applicable grace period; or
(i) Any judgment, levy or attachment, shall be rendered
against the Company or any of its assets or
properties in an amount inexcess of $100,000 and such
judgement, levy or attachment shall not be dismissed,
stayed, bonded, or discharged within thrity (30) days
of the date of entry hereof; or
(j) The Company shall be a party to any merger or
consolidation or shall dispose of all or
substantially all of its assets in one or more
transactions or shall redeem more than a
de minimus amount of its outstanding shares of capital
stock.
4
<PAGE> 5
Upon the occurrence of any Event of Default or at any time thereafter, and in
each and every such case,unless such Event of Default shall have been waived in
writing by the Holder (which waiver shall not be deemed to be a waiver of any
subsequent Event of Default) at the option of the Holder and in the Holder's
sole discretion, the Holder may, upon written notice to the Company, consider
this Debenture immediately due and payable in an amount equal to the product of
(x)the number of shares of Common Stock into which this Debenture is then
convertible and (y) the Market Price of the Common Stock, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived, anything herein or in any note or other instruments contained to the
contrary notwithstanding, and the Holder may immediately, and without
expiration of any period of grace, enforce any and all of the Holder's rights
and remedies afforded by law.
6. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place and rate, and
in the coin or currency, herein prescribed. This Debenture and all other
Debentures now or hereafter issued of similar terms are direct obligations of
the Company. This Debenture ranks equally with all other Debentures now or
hereafter issued under the terms set forth herein.
7. No recourse shall be had for the payment of the principal of,
or the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or director,
as such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
8. This Debenture shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the choice
of law provisions thereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
December 18, 1995
Parlux Fragrances, Inc.
By:/s/Ilia Lekach
--------------
Title: Chairman & CEO
--------------
5
<PAGE> 6
EXHIBIT A
NOTICE OF CONVERSIONS
(To be Executed by Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture
No.______ shares of Common Stock of Parlux Fragrances, Inc. (the "Company")
according to the conditions hereof, as of the date written below. The
undersigned represents that it is not a U.S. Person as defined in Regulation S
promulgated under the Securities Act of 1933, and is not converting the
Debenture on behalf of any U.S. Person
----------------------------------------
Date of Conversion*
----------------------------------------
Applicable Conversion Price
----------------------------------------
Signature
----------------------------------------
Name
----------------------------------------
Address
*The original Debenture and Notice of Conversion must be received by the
Company by the third business day following the Date of Conversion.
6
<PAGE> 1
Parlux Fragrances, Inc. Exhibit 4.14
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE BECAUSE THEY ARE
BELIEVED TO BE EXEMPT FROM REGISTRATION UNDER REGULATION S PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ( THE "ACT"). THE SECURITIES MAY NOT BE
RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM.
No. R1-5 $2,500,000 U.S.
PARLUX FRAGRANCES, INC.
5% CONVERTIBLE DEBENTURE DUE DECEMBER 15, 1996.
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Parlux Fragrances, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (the "Company") designated as its 5% Convertible
Debentures Due December 15, 1996, in an aggregate principal amount not
exceeding Five Million Dollars (U.S. $5,000,000).
FOR VALUE RECEIVED, The Company promises to pay to T.H.C. Inc., the
registered holder hereof(the "Holder"), the principal sum of US$2,500,000,on
December 15, 1996, (the "Maturity Date") and to pay interest on the principal
sum outstanding from time to time in arrears on the Maturity Date or,if
earlier, on each Conversion Date ( as hereinafter defined ) at the rate of 5%
per annum, computed on the basis of the actual number of days elapsed in a
365-day year. Accrual of the interest shall commence on the date hereof until
payment in full of the principal sum has been made or duly provided for. All
accrued and unpaid interest shall bear interest at the same rate from and after
the due date of the interest payment until so paid. The interest so payable,
less any amounts required by law to be deducted or withheld, will be paid on
the Maturity Date or, if earlier, on the Conversion Date, to the person in
whose name this Debenture (or one or more predecessor Debentures) is registered
on the records of the Company regarding registration and transfers of the
Debentures (the "Debenture Register")on the Conversion Date or tenth day prior
to the Maturity Date, as the case may be; provided, however, that the Company's
obligation to a transferee of this Debenture arises only if such transfer, sale
or other disposition is made in accordance with the terms and conditions of the
Regulation S Subscription Agreement executed by the original Holder in
connection with the purchase of this Debenture(the "Subscription Agreement").
The principal of, and interest on, this Debenture are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing
on the Debenture Register of the Company as designated in writing by the Holder
from time to time. The forwarding of the
1
<PAGE> 2
Company's check shall, subject to collection, constitute a payment of interest
and principal hereunder and shall satisfy and discharge the liability for
principal and interest on this Debenture to the extent of the sum represented
by such check.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Two Hundred
and Fifty Thousand Dollars ($250,000 U.S.) and integral multiples thereof. The
Debentures are exchangeable for an equal aggregate principal amount of
Debentures of different authorized denominations, as requested by the Holders
surrendering the same. No service charge will be made for such registration or
transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws
or other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933 as
amended ( the "Act"). Prior to due presentment for the transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this Debenture be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
4. (a) The Holder of the Debenture shall, at any time during
the period commencing on February 15, 1996 and expring on March 15,
1996,convert up to One Hundred Percent (100%)of the principal amount of this
Debenture ( in increments of not less than Two Hundred Fifty Thousand Dollars
($250,000)) into shares of common stock, $0.01 par value per share, of the
Company (the "Common Stock")at a conversion price for each share of Common
Stock equal to eight five percent (85%) of the Market Price of the Company's
Common Stock; provided however, that in no event will the conversion price be
greater than $8.50 per share of Common Stock. For purposes of this Section 4,
the Market Price shall be the average closing bid prices of the Common Stock
over the five consecutive trading days ending on the Conversion Date, as
reported by the National Association of Securities Dealer's Automated Quotation
System ("NASDAQ"), or the average of the closing bid prices of the Common Stock
in the over-the-counter market over the five consecutive trading days ending on
the Conversion Date or, in the event the Common Stock is listed on a national
stock exchange, the Market Price shall be the average of the closing prices of
the Common Stock on such exchange, as
2
<PAGE> 3
reported in The Wall Street Journal,over five consecutive trading days ending
on the Conversion Date. Such conversion shall be effectuated by surrendering
the Debentures to be converted to the Company, with the form of conversion
notice attached hereto as Exhibit A, executed by the Holder of the Debenture
evidencing such Holder's intention to convert this Debenture or a specified
portion (as above provided) hereof. The amount of accrued but unpaid interest
as of the Conversion Date shall be subject to conversion and paid in shares of
Common Stock valued at the Market Price. No fractional shares of the Common
Stock or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded to the nearest whole share.
The date on which notice of conversion is given shall be deemed to be the date
on which the Holder has delivered this Debenture, with the conversion notice
duly executed, to the Company, or if earlier, the date set forth in such notice
of conversion if the Debenture is received by the Company within three business
days thereafter. Such date is referred to herein as the "Conversion Date".
Facsimile delivery of the conversion notice shall be accepted by the Company.
Certificates representing Common Stock upon conversion will be delivered to the
Holder within three (3) business days from the date the notice of conversion is
delivered to the Company.
5. Any of the following shall constitute and "Event of
Default":
(a) The Company shall default in the payment of principal
or interest on this Debenture as and when the same
shall be due and payable and such default shall
continue for five (5) business days after the due
date thereof; or
(b) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in
any certificate or financial or other statements
heretofore or hereafter furnished by or on behalf of
the Company in connection with the execution and
delivery of this Debenture or the Subscription
Agreement shall be false or misleading in any
material respect at the time made; or
(c) The Company shall fail to perform or observe any
other covenant, term, provision, condition, agreement
or obligation of the Company under this Debenture or
the Subsription Agreement and such failure shall
continue uncured for a period of five(5) business
days after the first date on which such failure
arises ( it being understood that in the case of
defaults which can not reasonably be cured within a
5-day period no grace period shall be necessary as a
precondition to the failure to
3
<PAGE> 4
perform such convenant constituting and Event of
Default; or
(d) The Company shall(1) make an assignment for the
benefit of creditors or commence proceedings for its
dissolution; or (2) apply for or consent to the
appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
f) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company, and if
instituted against the Company, shall not be
dismissed within sixty (60) days after such
instruction of the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceedings; or
(g) The Company shall have its Common Stock delisted from
the NASDAQ Small Cap Market or suspended from trading
thereon, and shall not have its Common Stock relisted
or have such suspension lifted, as the case may be,
within five (5) days; or
(h) The Company shall default on the payment of any
material indebtedness for borrowed money beyond any
applicable grace period; or
(i) Any judgment, levy or attachment, shall be rendered
against the Company or any of its assets or
properties in an amount inexcess of $100,000 and such
judgement, levy or attachment shall not be dismissed,
stayed, bonded, or discharged within thrity (30) days
of the date of entry hereof; or
(j) The Company shall be a party to any merger or
consolidation or shall dispose of all or
substantially all of its assets in one or more
transactions or shall redeem more than a
de minimus amount of its outstanding shares of capital
stock.
4
<PAGE> 5
Upon the occurrence of any Event of Default or at any time thereafter, and in
each and every such case,unless such Event of Default shall have been waived in
writing by the Holder (which waiver shall not be deemed to be a waiver of any
subsequent Event of Default) at the option of the Holder and in the Holder's
sole discretion, the Holder may, upon written notice to the Company, consider
this Debenture immediately due and payable in an amount equal to the product of
(x)the number of shares of Common Stock into which this Debenture is then
convertible and (y) the Market Price of the Common Stock, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived, anything herein or in any note or other instruments contained to the
contrary notwithstanding, and the Holder may immediately, and without
expiration of any period of grace, enforce any and all of the Holder's rights
and remedies afforded by law.
6. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place and rate, and
in the coin or currency, herein prescribed. This Debenture and all other
Debentures now or hereafter issued of similar terms are direct obligations of
the Company. This Debenture ranks equally with all other Debentures now or
hereafter issued under the terms set forth herein.
7. No recourse shall be had for the payment of the principal of,
or the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or director,
as such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
8. This Debenture shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the choice
of law provisions thereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
December 18, 1995
Parlux Fragrances, Inc.
By:/s/Ilia Lekach
--------------
Title: Chairman & CEO
--------------
5
<PAGE> 6
EXHIBIT A
NOTICE OF CONVERSIONS
(To be Executed by Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture
No.______ shares of Common Stock of Parlux Fragrances, Inc. (the "Company")
according to the conditions hereof, as of the date written below. The
undersigned represents that it is not a U.S. Person as defined in Regulation S
promulgated under the Securities Act of 1933, and is not converting the
Debenture on behalf of any U.S. Person
----------------------------------------
Date of Conversion*
----------------------------------------
Applicable Conversion Price
----------------------------------------
Signature
----------------------------------------
Name
----------------------------------------
Address
*The original Debenture and Notice of Conversion must be received by the
Company by the third business day following the Date of Conversion.
6
<PAGE> 1
Parlux Fragrances, Inc. Exhibit 4.15
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE BECAUSE THEY ARE
BELIEVED TO BE EXEMPT FROM REGISTRATION UNDER REGULATION S PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ( THE "ACT"). THE SECURITIES MAY NOT BE
RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM.
No. R-1 $2,000,000 U.S.
PARLUX FRAGRANCES, INC.
5% CONVERTIBLE DEBENTURE DUE DECEMBER 27, 1996.
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Parlux Fragrances, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (the "Company") designated as its 5% Convertible
Debentures Due December 27, 1996, in an aggregate principal amount not
exceeding Two Million Dollars (U.S. $2,000,000).
FOR VALUE RECEIVED, The Company promises to pay to Wood Gundy London,
Ltd., the registered holder hereof(the "Holder"), the principal sum of
US$2,000,000,on December 27, 1996, (the "Maturity Date") and to pay interest on
the principal sum outstanding from time to time in arrears on the Maturity Date
or,if earlier, on each Conversion Date ( as hereinafter defined ) at the rate
of 5% per annum, computed on the basis of the actual number of days elapsed in
a 365- day year. Accrual of the interest shall commence on the date hereof
until payment in full of the principal sum has been made or duly provided for.
All accrued and unpaid interest shall bear interest at the same rate from and
after the due date of the interest payment until so paid. The interest so
payable, less any amounts required by law to be deducted or withheld, will be
paid on the Maturity Date or, if earlier, on the Conversion Date, to the person
in whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the Company regarding registration and transfers
of the Debentures (the "Debenture Register")on the Conversion Date or tenth day
prior to the Maturity Date, as the case may be; provided, however, that the
Company's obligation to a transferee of this Debenture arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions of the Regulation S Subscription Agreement executed by the original
Holder in connection with the purchase of this Debenture(the "Subscription
Agreement"). The principal of, and interest on, this Debenture are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts, at the address last
appearing on the Debenture Register of the Company as designated in writing by
the Holder from time to time. The
1
<PAGE> 2
forwarding of the Company's check shall, subject to collection, constitute a
payment of interest and principal hereunder and shall satisfy and discharge the
liability for principal and interest on this Debenture to the extent of the sum
represented by such check.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Two Hundred
and Fifty Thousand Dollars ($250,000 U.S.) and integral multiples thereof. The
Debentures are exchangeable for an equal aggregate principal amount of
Debentures of different authorized denominations, as requested by the Holders
surrendering the same. No service charge will be made for such registration or
transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws
or other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933 as
amended ( the "Act"). Prior to due presentment for the transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this Debenture be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
4. (a) The Holder of the Debenture shall, at any time during
the period commencing on March 15, 1996 and expring on the Maturity
Date,convert up to One Hundred Percent (100%)of the principal amount of this
Debenture ( in increments of not less than Two Hundred Fifty Thousand Dollars
($250,000)) into shares of common stock, $0.01 par value per share, of the
Company (the "Common Stock")at a conversion price for each share of Common
Stock equal to eight five percent (85%) of the Market Price of the Company's
Common Stock; provided however, that in no event will the conversion price be
greater than $8.50 per share of Common Stock. For purposes of this Section 4,
the Market Price shall be the average closing bid prices of the Common Stock
over the five consecutive trading days ending on the Conversion Date, as
reported by the National Association of Securities Dealer's Automated Quotation
System ("NASDAQ"), or the average of the closing bid prices of the Common Stock
in the over-the-counter market over the five consecutive trading days ending on
the Conversion Date or, in the event the Common Stock is listed on a national
stock exchange, the Market Price shall be the average of
2
<PAGE> 3
the closing prices of the Common Stock on such exchange,as reported in The Wall
Street Journal,over five consecutive trading days ending on the Conversion
Date. Such conversion shall be effectuated by surrendering the Debentures to be
converted to the Company, with the form of conversion notice attached hereto as
Exhibit A, executed by the Holder of the Debenture evidencing such Holder's
intention to convert this Debenture or a specified portion (as above provided)
hereof. The amount of accrued but unpaid interest as of the Conversion Date
shall be subject to conversion and paid in shares of Common Stock valued at the
Market Price. No fractional shares of the Common Stock or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. The date on which notice
of conversion is given shall be deemed to be the date on which the Holder has
delivered this Debenture, with the conversion notice duly executed, to the
Company, or if earlier, the date set forth in such notice of conversion if the
Debenture is received by the Company within three business days thereafter.
Such date is referred to herein as the "Conversion Date". Facsimile delivery
of the conversion notice shall be accepted by the Company. Certificates
representing Common Stock upon conversion will be delivered to the Holder
within three (3) business days from the date the notice of conversion is
delivered to the Company.
5. Any of the following shall constitute and "Event of
Default":
(a) The Company shall default in the payment of principal
or interest on this Debenture as and when the same
shall be due and payable and such default shall
continue for five (5) business days after the due
date thereof; or
(b) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in
any certificate or financial or other statements
heretofore or hereafter furnished by or on behalf of
the Company in connection with the execution and
delivery of this Debenture or the Subscription
Agreement shall be false or misleading in any
material respect at the time made; or
(c) The Company shall fail to perform or observe any
other covenant, term, provision, condition, agreement
or obligation of the Company under this Debenture or
the Subsription Agreement and such failure shall
continue uncured for a period of five(5)business days
after the first date on which such failure arises (
it being understood that in the case of defaults
which can not reasonably be cured within a 5-day
period no grace period shall be necessary as a
precondition to the failure to
3
<PAGE> 4
perform such convenant constituting and Event of
Default; or
(d) The Company shall(1) make an assignment for the
benefit of creditors or commence proceedings for its
dissolution; or (2) apply for or consent to the
appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
f) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company, and if
instituted against the Company, shall not be
dismissed within sixty (60) days after such
instruction of the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceedings; or
(g) The Company shall have its Common Stock delisted from
the NASDAQ Small Cap Market or suspended from trading
thereon, and shall not have its Common Stock relisted
or have such suspension lifted, as the case may be,
within five (5) days; or
(h) The Company shall default on the payment of any
material indebtedness for borrowed money beyond any
applicable grace period; or
(i) Any judgment, levy or attachment, shall be rendered
against the Company or any of its assets or
properties in an amount inexcess of $100,000 and such
judgement, levy or attachment shall not be dismissed,
stayed, bonded, or discharged within thrity (30) days
of the date of entry hereof; or
(j) The Company shall be a party to any merger or
consolidation or shall dispose of all or
substantially all of its assets in one or more
transactions or shall redeem more than a
de minimus amount of its outstanding shares of capital
stock.
4
<PAGE> 5
Upon the occurrence of any Event of Default or at any time thereafter, and in
each and every such case,unless such Event of Default shall have been waived in
writing by the Holder (which waiver shall not be deemed to be a waiver of any
subsequent Event of Default) at the option of the Holder and in the Holder's
sole discretion, the Holder may, upon written notice to the Company, consider
this Debenture immediately due and payable in an amount equal to the product of
(x)the number of shares of Common Stock into which this Debenture is then
convertible and (y) the Market Price of the Common Stock, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived, anything herein or in any note or other instruments contained to the
contrary notwithstanding, and the Holder may immediately, and without
expiration of any period of grace, enforce any and all of the Holder's rights
and remedies afforded by law.
6. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place and rate, and
in the coin or currency, herein prescribed. This Debenture and all other
Debentures now or hereafter issued of similar terms are direct obligations of
the Company. This Debenture ranks equally with all other Debentures now or
hereafter issued under the terms set forth herein.
7. No recourse shall be had for the payment of the principal of,
or the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or director,
as such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
8. This Debenture shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the choice
of law provisions thereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
December 28, 1995
Parlux Fragrances, Inc.
By:/s/Frank A.Buttacavoli
----------------------
Title:Vice-President & CFO
--------------------
5
<PAGE> 6
EXHIBIT A
NOTICE OF CONVERSIONS
(To be Executed by Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture
No.______ shares of Common Stock of Parlux Fragrances, Inc. (the "Company")
according to the conditions hereof, as of the date written below. The
undersigned represents that it is not a U.S. Person as defined in Regulation S
promulgated under the Securities Act of 1933, and is not converting the
Debenture on behalf of any U.S. Person
----------------------------------------
Date of Conversion*
----------------------------------------
Applicable Conversion Price
----------------------------------------
Signature
----------------------------------------
Name
----------------------------------------
Address
*The original Debenture and Notice of Conversion must be received by the
Company by the third business day following the Date of Conversion.
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENTS OF INCOME AS OF AND FOR THE PERIOD
ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 352,715
<SECURITIES> 0
<RECEIVABLES> 11,464,724
<ALLOWANCES> 3,163,000
<INVENTORY> 25,168,602
<CURRENT-ASSETS> 50,912,624
<PP&E> 4,826,827
<DEPRECIATION> 2,942,939
<TOTAL-ASSETS> 72,682,276
<CURRENT-LIABILITIES> 30,493,938
<BONDS> 0
0
0
<COMMON> 96,432
<OTHER-SE> 28,577,042
<TOTAL-LIABILITY-AND-EQUITY> 72,682,276
<SALES> 47,968,008
<TOTAL-REVENUES> 47,968,008
<CGS> 18,710,129
<TOTAL-COSTS> 18,628,098
<OTHER-EXPENSES> 117,802
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,414,240
<INCOME-PRETAX> 9,097,739
<INCOME-TAX> 3,457,140
<INCOME-CONTINUING> 5,640,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,640,599
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
</TABLE>
