<PAGE>
As filed with the Securities and Exchange Commission on July 18, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________
PARLUX FRAGRANCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2562955
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
_________________
3725 S.W. 30th Avenue
Ft. Lauderdale, Florida 33312
(954) 316-9008
(Address, including zip code and telephone number, including
area code, of registrant's principal executive offices)
Ilia Lekach
Chairman and Chief Executive Officer
Parlux Fragrances, Inc.
3725 S.W. 30th Avenue
Ft. Lauderdale, Florida 33312
(954) 316-9008
(Name, address, including zip code, and telephone number
including area code, of agent for service)
_________________
Copies to:
Barry P. Biggar, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
[ ]___________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]______________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
==============================================================================
Amount Proposed Proposed
Title of Each Class of to be Maximum Maximum Amount of
Securities to be Registered Offering Aggregate Registration
Registered Price Per Offering Fee
Share(1) Price(1)
- ------------------------------------------------------------------------------
Common Stock, par 2,077,646 $8.25 $17,140,579.50 $5,910.59
value $.01 per share
==============================================================================
[FN]
(1) Estimated in accordance with Rule 457 solely for the purpose of determining
the registration fee and based on the average closing bid and ask prices as
reported by the National Association of Securities Dealers Automatic Quotation
System National Market on July 15, 1996.
________________
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
Subject to Completion, dated July 18, 1996
2,077,646 Shares
PARLUX FRAGRANCES, INC.
Common Stock
Unless the context indicates or requires otherwise, references in this
Prospectus to the "Company" are to Parlux Fragrances, Inc., a Delaware
corporation, and its subsidiaries. This Prospectus has been prepared for use
in connection with the proposed sale by FBR Capital Corporation, GFL
Performance Fund Ltd. ("GFL"), Newsun Limited ("Newsun") and Messrs. Efima
Lekach and Frederick E. Purches (collectively, the "Selling Stockholders") of
an aggregate of 2,077,646 shares (the "Shares") of the Company's common stock,
$.01 par value per share (the "Common Stock"), which includes an aggregate of
1,617,646 shares of Common Stock that may be received upon the conversion on
some future date of the Company's 5% convertible debentures in the aggregate
principal amount of $10,000,000 held by GFL and Newsun. The Shares may be
offered and sold by the Selling Stockholders from time to time directly or
through agents designated from time to time or to or through broker-dealers
designated from time to time. The Shares may be sold in one or more
transactions at a fixed price or prices, which may be changed, at market prices
prevailing at the same time of sale, at prices related to such prevailing
market prices or at prices determined on a negotiated or competitive bid basis.
Shares may be sold through a broker-dealer acting as agent or broker for the
Selling Stockholders, or to a broker-dealer acting as principal. See "Plan
of Distribution."
The Common Stock is traded on the Nasdaq National Market under the
trading symbol PARL. On July 15, 1996, the closing price for the Common
Stock as reported on the Nasdaq National Market was $8.00 per share.
The Company will receive no portion of the proceeds of the sale of the
Shares offered hereby and will bear certain of the expenses incident to their
registration. See "Plan of Distribution" and "Selling Stockholders."
The Shares have not been registered for sale under the securities laws
of any state or jurisdiction as of the date of this Prospectus. Brokers or
dealers effecting transactions in the Shares should confirm the existence of
any exemption from registration or the registration thereof under the
securities laws of the states in which such transactions occur.
See "Risk Factors" beginning on page 3 for a discussion of certain
matters that should be considered by prospective purchasers of the Shares.
----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------
The date of this Prospectus is 1996
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "SEC"). Reports, proxy statements,
and other information filed by the Company with the SEC can be inspected
and copied at the public reference facilities maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, as well as the regional offices
of the SEC at the Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511, and Seven World Trade Center, New York, New
York 10048. Copies of such material can be obtained from the Public
Reference Section of the SEC in its Washington D.C. office at prescribed
rates. The Common Stock is traded on the Nasdaq National Market.
This Prospectus constitutes a part of the Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") filed by the Company with the SEC under the
Securities Act of 1933, as amended (the "1933 Act"). This Prospectus omits
certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement for further
information with respect to the Company and the securities offered hereby.
Any statements contained herein concerning the provisions of any document
filed as an exhibit to the Registration Statement or otherwise filed with
the SEC are not necessarily complete, and in each instance reference is
made to the copy of such documents so filed. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed with the SEC by the Company
pursuant to the 1934 Act, are incorporated by reference:
(a) Annual Report on Form 10-K for the year ended March 31, 1996.
(b) The description of the Common Stock contained under the caption
"Description of Registrant's Securities to be Registered" included
in the Company's Registration Statement on Form 8-A, filed with the
SEC on March 13, 1987, including any amendment or report filed for
the purpose of updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the 1934 Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock pursuant
hereto shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for
purposes of this document to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or
oral request of such person, a copy of any or all documents that have been
incorporated by reference in this Prospectus (not including exhibits to the
documents that are incorporated by reference unless such exhibits are
specifically incorporated by reference into the documents that this
Prospectus incorporates). Requests for such copies should be directed to
the Company at 3725 S.W. 30th Avenue, Ft. Lauderdale, Florida 33312,
Attention: Corporate Secretary, telephone number (954) 316-9008.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES HEREBY OFFERED
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN ANY CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE SUCH DATE, OR IN THE CASE OF INFORMATION
INCORPORATED HEREIN BY REFERENCE, THE DATE OF FILING OF SUCH INCORPORATED
INFORMATION WITH THE SECURITIES AND EXCHANGE COMMISSION.
THE COMPANY
The Company is engaged in the design, development and marketing of
prestige fragrances and personal care products. The Company sells its
product lines under such designer brand names as Todd Oldham(R), Vicky Tiel
Sirene(R), Fred Hayman's Touch(R), 273(R), Personal Selection(R), With Love(R),
Phantom of the Opera(R), Perry Ellis for Men(R), 360 Degrees Perry Ellis(R),
Perry Ellis America(R) and Baryshnikov(R) pursuant to exclusive license
agreements. The Company also sells its product lines under the brand names
Alexandra de Markoff(R), Animale(R), Bal A Versailles(R), Daniel de Fasson(R),
Decadence(R) and Limousine(R). The Company's products are designed and
marketed to promote a high level of brand recognition and consumer appeal by
combining quality, prestige fragrances and cosmetics with distinctively
styled packaging tailored to each product's image. The Company's basic
products generally retail at prices ranging from $20 to $300 per item.
The Company was incorporated in the State of Delaware on July 23,
1984. Its principal executive offices are located at 3725 S.W. 30th
Avenue, Ft. Lauderdale, Florida 33312, and its telephone number is (954)
316-9008.
RISK FACTORS
Lack of Substantial Historical Profitability; Decline in Revenues;
Future Operating Results. Although the Company achieved growth in revenues
for the fiscal years ended March 31, 1992 and 1993, the Company had limited
profitability during each such year. In addition, revenues for the year
ended March 31, 1994 declined by 10.8% from the year ended March 31, 1993,
principally as a result of discontinued sales of certain licensed products.
Revenues for the years ended March 31, 1995 and March 31, 1996, however,
increased by 50.6% and 77.3%, respectively, as compared to the results from
the respective prior fiscal year, primarily as a result of product
acquisitions. There can be no assurance, however, that the Company's
revenues will not decline in the future or that the Company's future
operations will continue to be profitable.
Risk of Acquisitions; Uncertainty of Product Integration. Since June
1994, the Company has rapidly expanded through a series of acquisitions of
trademarks and/or license agreements for fragrance and beauty products.
The Company has committed and expects to continue to commit significant
financial and other resources in connection with the continued development
and commercialization of the products it acquired in these various
acquisitions. Successful commercialization of such products will be
dependent upon the Company meeting targeted production costs for such
products, and may also depend upon the timely introduction of new products
under the acquired brands into the marketplace. The Company's efforts are
subject to all of the risks inherent in the development and
commercialization of new products, including unanticipated delays,
expenses, problems or difficulties, as well as the possible insufficiency
of funds, which could result in abandonment or substantial change in
product commercialization. There can be no assurance that the Company will
be able to successfully integrate newly acquired or developed products into
its operations, that sales of such products will result in significantly
increased levels of revenues or profitable operations or that unanticipated
problems will not occur which would result in increased costs or material
delays in product commercialization. In addition, the Company may require
additional debt and/or equity financing to continue its business plan of
acquiring strategic trademarks and license agreements. No assurance can be
made, however, that additional financing will be available or, if
available, be on terms that are acceptable to the Company. The failure to
continue its expansion by acquisition or the integration of newly acquired
or developed products into the Company's operations could have a material
adverse effect on the Company's financial condition and results of
operations.
Possible Adverse Effects of Loan Covenants. On December 29, 1994,
Parlux, Ltd., a wholly-owned subsidiary of the Company, entered into a
three-year $5,000,000 revolving credit facility (the "Credit Agreement")
with Finova Capital Corporation ("Finova").
In May 1996, the Credit Agreement was amended to provide for
a temporary $1,000,000 increase in the revolving credit facility until
August 29, 1996. Parlux, Ltd. granted a security interest in
substantially all of its assets as collateral for loans made under the
Credit Agreement. In addition, the Company has guaranteed substantially
all of the obligations of Parlux, Ltd. under the Credit Agreement and
pledged all of its assets, including its intellectual property rights and
Parlux, Ltd. stock holdings as additional collateral for loans under the
Credit Agreement. The Credit Agreement contains covenants which prohibit
Parlux, Ltd. from, among other things, incurring additional indebtedness in
excess of a specified amount without the prior written consent of Finova,
except for trade payables and other contractual obligations to suppliers
and customers incurred in the ordinary course of business. In addition to
certain financial covenants relating to net worth, interest coverage and
other financial ratios, the Credit Agreement limits or prohibits Parlux,
Ltd., without the prior written consent of Finova, from merging or
consolidating with another corporation, paying dividends, acquiring all or
substantially all of the assets of another corporation, selling all or
substantially all of its assets, creating liens or security interests on
Parlux, Ltd.'s assets, entering into transactions with affiliates and
changing the composition of its Board of Directors. Failure to comply with
loan covenants under the Credit Agreement could result in an event of
default under the Credit Agreement which, in turn, could result in a
foreclosure on substantially all of the assets of the Company.
Outstanding Indebtedness; Personal Guarantees and Pledges. As of June
30, 1996, the Company had an aggregate of approximately $15,404,000
principal amount of outstanding secured indebtedness, of which
approximately (i) $5,057,000 represents amounts owed to Fred Hayman Beverly
Hills, Inc. ("Fred Hayman") pursuant to a ten-year promissory note secured
by certain Fred Hayman trademarks, (ii) $2,794,000 represents indebtedness
incurred in recent acquisitions by the Company, (iii) $5,638,000 represents
outstanding indebtedness under the Credit Agreement and (iv) $1,915,000
represents demand indebtedness of the Company's wholly-owned subsidiary,
Parlux S.A. The foregoing creditors of the Company, as a group, have
security interests in substantially all present and future acquired assets
of the Company. In the event that the Company defaults on an obligation
owed to one of these creditors, such creditor could accelerate its loan and
foreclose on its pledged property, possibly requiring the Company to use
additional capital resources, if available, to repay any deficiency owned
to such creditor. To the extent that the Company uses additional capital
resources to repay such indebtedness or to replace the foreclosed
collateral, if possible, the Company would have less resources available to
it to devote to the continued operation and expansion of its business which
would have a material adverse effect on the Company's results of
operations. In addition, as of June 30, 1996, the Company had issued
convertible debentures in the aggregate principal amount of $10,250,000
($20,500,000 as of July 15, 1996) which may be converted into shares of
Common Stock at the option of the holder pursuant to a specified formula.
The Company has been able to borrow substantial sums as a result of
the personal guarantees and pledges of personal assets of Ilia Lekach, the
Company's Chairman of the Board and Chief Executive Officer, Frederick E.
Purches, the Company's Vice Chairman of the Board, and Zouheir Beidoun, a
stockholder and a former director of the Company. Messrs. Beidoun and
Purches have deposited approximately $1,000,000 with the National Bank of
Kuwait SAK to support a $1,000,000 letter of credit which serves as part of
the collateral under the Credit Agreement. There can be no assurance that
such personal guarantees or pledged assets will be available in the future
or that the absence of any such personal guarantees or pledged assets will
not adversely affect the Company's ability to borrow.
Liquidity; Significant Capital Requirements; Possible Need for
Additional Financing. The Company's capital requirements have been and
will continue to be significant. The Company has in the past been
substantially dependent on bank borrowings and loans from affiliates in
order to finance its working capital requirements. The Company
anticipates, based on currently proposed plans and assumptions relating to
its operations (including the timetable of, and costs associated with,
potential acquisitions and new product development), that cash flow from
operations, existing working capital, and borrowings under the Credit
Agreement will be sufficient to satisfy its anticipated cash requirements
for approximately twelve months following the date of this Prospectus. In
the event that the Company's assumptions change or prove to be inaccurate,
it may be necessary for the Company to seek additional financing sooner
than anticipated. There can be no assurance that any such additional
financing will be available to the Company on acceptable terms, if at all.
Dependence on Principal Customer. To date, a substantial portion of
the Company's revenues have been derived from Perfumania, an affiliate of
the Company. For the years ended March 31, 1994, 1995 and 1996, sales of
products to Perfumania accounted for 48.9%, 39.9% and 38.7%, respectively,
of the Company's revenues. Net amounts owed by Perfumania to the Company
totaled $13,482,423 at March 31, 1996. The Company is dependent on sales
to Perfumania of its excess inventory at discount prices and peaked or
matured products, such as Decadence(R), Phantom of the Opera(R) and
Limousine(R) (which are sold almost exclusively to Perfumania). The Company
does not maintain contracts with any of its customers, which purchase products
from the Company pursuant to purchase orders placed from time to time in the
ordinary course of business. The loss of any of the Company's principal
customers, particularly Perfumania, or a decline in the economic prospects
of such customers, resulting in a substantial reduction in the purchase of
the Company's products, would have a material adverse effect on the
Company. Perfumania reported a loss of $2,396,759, a profit of $1,325,000
and a profit of $2,002,110 for the years ended January 29, 1994, January
28, 1995 and February 3, 1996, respectively. There can be no assurance
that the Company will be able to retain existing customers or attract and
retain new customers, or that it will not remain largely dependent on a
limited customer base for all or a substantial portion of its revenues.
Significant Competition; Consumer Preferences and Industry Trends.
The Company faces significant competition in the marketing and sale of its
products. The Company's products compete for consumer recognition and
shelf space with fragrance and cosmetic products which have achieved
significant international, national and regional brand name recognition and
consumer loyalty. These products are marketed by companies with
significantly greater financial, marketing, distribution, personnel and
other resources than the Company, thereby permitting such companies to
implement extensive advertising and promotional programs, both generally
and in response to efforts by additional competitors to enter into new
markets and introduce new products. The fragrance and cosmetic industry is
also characterized by the frequent introduction of new products,
accompanied by substantial promotional campaigns, and is subject to rapidly
changing consumer preferences and industry trends resulting in short
product life cycles, which may adversely affect the Company's ability to
plan for future design, development and promotion of its products. The
Company's success will depend on the Company's ability to anticipate and
respond to various competitive factors affecting this industry, including
new products which may be introduced, new market entrants, changes in
consumer preferences, demographic trends, international, national, regional
and local economic conditions and discount pricing strategies by
competitors, including Perfumania, all of which could adversely affect the
Company.
Fluctuations in Operating Results; Seasonality. The Company's
operating results vary from period to period as a result of the seasonal
nature of the Company's business, as well as from purchasing patterns of
customers, the timing and introduction of new products by the Company and
its competitors, the Company's product mix resulting from newly acquired
and discontinued products, variations in sales by distribution channels and
products and competitive pricing. The Company's operating results may also
fluctuate from period to period as a result of significant initial or
additional orders by customers which fail to achieve significant
"sell-through," resulting in product returns and decreased revenues in
subsequent periods. Sales of the Company's products are highly seasonal,
with peak product shipments occurring in the third and fourth quarters, as
a result of increased demand for fragrance products in anticipation of the
Christmas holiday season. Unanticipated events, including delays in
securing adequate inventories of products at the time of peak sales, or
significant decreases in sales during such periods, could adversely affect
the Company's results. In addition, the Company follows industry practice
to provide department stores with rights to return merchandise, and as
such, the Company establishes reserves and provides allowances for product
returns at the time of sale. While the Company believes that such reserves
and allowances are adequate based on past experience, no assurances can be
made that reserves and allowances will continue to be adequate. If product
returns are in excess of the reserves and allowances made by the Company,
sales will be reduced in later periods.
Importance of Third-Party License Agreements. The Company has
obtained exclusive rights to market Todd Oldham(R), Vicky Tiel Sirene(R),
Fred Hayman's Touch(R), 273(R), Personal Selection(R), With Love(R), Phantom
of the Opera(R), Perry Ellis for Men(R), 360 Degrees Perry Ellis(R), Perry
Ellis America(R) and Baryshnikov(R) fragrances and related products pursuant
to exclusive license agreements with third parties. For the year ended
March 31, 1996, sales from licensed products increased to approximately 78%
of the Company's revenues, as compared to approximately 74% for the prior
fiscal year, primarily as a result of product acquisitions. Certain of
these license agreements require the Company, among other things, to pay
royalties, satisfy minimum sales requirements (which increase each year and
upon renewal) and devote significant sums for advertising. In May of 1995,
the Company terminated its license agreement with Francesco Smalto,
International for breach of contract. On October 5, 1995, the Company
entered into a transition and termination agreement with Francesco Smalto
International which provides for the continued use of the Francesco Smalto
trademark by the Company through September 30, 1996. The agreement
contains certain production restrictions, and requires a fixed amount of
royalty payments during the period, which the Company believes will
approximate 5% of total Company net sales of Francesco Smalto products
during the transition period. Sales of Francesco Smalto products
represented approximately 7% of total Company net sales for the year ended
March 31, 1996.
Failure by the Company to satisfy its obligations under license
agreements or note agreements thereunder may result in modification of the
terms or termination of the relevant agreement. While the Company has
satisfied all of its obligations under the license agreements in the past,
there can be no assurance that the Company will have the ability to satisfy
all of its obligations under the license agreements in the future.
Modification or termination of such license agreements could have a
material adverse effect on the business and financial condition of the
Company.
Foreign Operations; Currency Fluctuations. The Company conducts a
part of its operations in France through its wholly-owned subsidiary,
Parlux S.A. For the years ended March 31, 1994, 1995 and 1996, Parlux S.A.
accounted for 33.2%, 18.9% and 17.5%, respectively, of the Company's
revenues and, at March 31, 1996, accounted for 7.1% of the Company's
assets. The Company is subject to various risks inherent in foreign sales,
such as increased credit risks, shipping delays, import quotas and other
trade restrictions, all of which could adversely affect the Company's
ability to deliver products on a timely and competitive basis. Presently,
approximately 5% of the Company's products are purchased in France using
the French franc and, as such, the Company is subject to the risk that the
value of the dollar will decline against the French franc. The Company
continues to transition all manufacturing of its products to the United
States during the current fiscal year, and intends to consolidate its
worldwide distribution activities in the United States. Prior to the
completion of these transitions, significant fluctuations in foreign
exchange rates could affect the prices obtainable for sale of the Company's
products denominated in foreign currencies. To date, the Company has not
engaged in currency hedging transactions.
Dependence on Third-Party Manufacturers and Suppliers. The Company is
mainly dependent on third-party manufacturers and suppliers, some of which
are presently located in France, for all of its supply of fragrances and
related products and packaging materials for resale to its customers. The
Company currently obtains all of its materials and products from a limited
number of manufacturers and suppliers, certain of which provide a
significant portion of the Company's requirements. The Company is
substantially dependent on the ability of its manufacturers and suppliers
to dedicate sufficient production capacity to provide adequate inventories
of finished products, components and raw materials on a timely basis and on
favorable pricing and other terms. Failure or delay by manufacturers and
suppliers in supplying finished products to the Company on favorable terms
could have an adverse effect on the Company.
Outstanding Trade Payables. At March 31, 1996, the Company owed
approximately $18,700,000 to various trade and other creditors,
approximately $1,400,000 of which was more than 120 days old. Although the
Company has in the past been able to work with its suppliers and has been
able to maintain continuity of supply by accepting higher prices and longer
lead times, there can be no assurance that vendors will continue to supply
materials or services to the Company without substantial payments or
otherwise seek to enforce their rights against the Company. The inability
to obtain credit on commercially reasonable terms, or at all, resulting in
an interruption of supplies or services, could have a material adverse
effect on the Company.
Reliance on Trademarks. The Company holds and is currently being
assigned several United States and international registered trademarks with
respect to its products and has exclusive licenses to use the trademarks
relating to its licensed products, which the Company believes are of
material importance to its business. There can be no assurance, however,
as to the breadth or degree of protection which existing or future
trademarks, if any, may afford the Company. Although the Company believes
that its trademarks and the trademarks of its licensors do not and will not
infringe on the proprietary rights of third parties, there can be no
assurance that such trademarks do not or will not violate the proprietary
rights of others. In the event that the Company's or its licensors'
trademarks infringe trademarks or proprietary rights of others, the Company
could, under certain circumstances, become liable for damages, which could
have a material adverse effect on the Company.
Product Liability and Insurance. The Company may be exposed to
potential product liability claims by consumers who use the Company's
products. The Company currently maintains product liability insurance
coverage in the amount of $5,000,000 and an additional "umbrella" insurance
policy in the amount of $5,000,000. The Company believes that its current
level of insurance is adequate for the types of products currently
marketed. There can be no assurance, however, that such insurance will be
sufficient to cover potential claims or that the present level of coverage
will be available in the future at a reasonable cost.
Dependence on Key Personnel. The success of the Company is largely
dependent on the personal efforts of Ilia Lekach, its Chairman of the Board
and Chief Executive Officer, Zalman Lekach, its President and Chief
Operating Officer, Frank A. Buttacavoli, its Executive Vice President and
Chief Financial Officer, and other key personnel. Although the Company has
entered into three-year employment agreements with each of such individuals
as of April 1994, January 1995, and April 1993 (which has been extended for
one year), respectively, the loss of the services of such individuals or
other key employees could have a material adverse effect on the Company's
business and prospects. The success of the Company may also be dependent
upon its ability to hire and retain additional qualified financial,
marketing and other personnel.
Concentration of Ownership; Potential Conflicts of Interest. As of
July 15, 1996, Ilia Lekach, Chairman of the Board and Chief Executive
Officer of the Company, together with other officers, directors and
affiliates of the Company, beneficially owned an aggregate of approximately
21.3% of the outstanding shares of the Company's Common Stock.
Accordingly, such persons are in a position to effectively control the
Company, elect all or a majority of the Company's directors, increase
authorized capital, merge or sell the assets of the Company and generally
direct the affairs of the Company. In addition, Mr. Ilia Lekach
beneficially owns, approximately 31.6% of the outstanding voting securities
of Perfumania, the Company's largest customer. Transactions between the
Company and Perfumania or other affiliates may involve conflicts arising
from Mr. Lekach's respective interests in the Company and Perfumania. The
Company has also entered into other transactions with persons and entities
deemed to be affiliates of the Company, including borrowings from relatives
of Mr. Ilia Lekach and from Mr. Zouheir Beidoun. The Company believes that
the terms of the transactions between the Company and Perfumania and other
affiliates have been on terms no less favorable to the Company than could
have been obtained from unaffiliated parties. There can be no assurance,
however, that future conflicts of interest will not arise with respect
thereto, or that if conflicts do arise, they will be resolved in a manner
favorable to the Company. Pursuant to the terms of the Credit Agreement,
the Company is prohibited from entering into any transactions with
officers, directors, principal stockholders or affiliates unless the terms
thereof are disclosed to Finova and are no less favorable to the Company
than could be obtained in arm's length transactions with independent third
parties.
Substantial Dilution Caused by Outstanding Options, Warrants and
Convertible Debentures. As of June 30, 1996, there were outstanding stock
options and warrants to purchase an aggregate of 2,115,978 shares of Common
Stock, at exercise prices ranging from $1.44 to $8.11 per share, and
$10,250,000 aggregate principal amount of convertible debentures
($20,500,000 as of July 15, 1996), which may be converted at the option of
the holder into shares of Common Stock based on a conversion rate of 85%
(86% for the convertible debentures issued by the Company on July 2, 1996
in the aggregate principal amount of $10,000,000) of the average closing
price of the Common Stock on the Nasdaq National Market during a specified
time period prior to the date of conversion. As of June 30, 1996, $250,000
of these debentures had been converted into 30,165 shares of Common Stock.
To the extent that the outstanding stock options and/or warrants are
exercised and when the convertible debentures are converted, dilution to
the interests of the Company's stockholders will occur. Moreover, the
terms upon which the Company will be able to obtain additional equity
capital may be adversely affected since the holders of the outstanding
options and warrants can be expected to exercise them at a time when the
Company would, in all likelihood, be able to obtain any needed capital on
terms more favorable to the Company than those provided in the outstanding
options and warrants.
Authorization of Preferred Stock. The Company's Certificate of
Incorporation authorizes the issuance of "blank check" preferred stock with
such designations, rights and preferences as may be determined from time to
time by the Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the
Company's Common Stock. In the event of issuance, the preferred stock
could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
Although the Company has no present intention to issue any shares of its
preferred stock, there can be no assurance that the Company will not do so
in the future.
No Dividends. The Company has not paid any cash dividends on its
Common Stock and does not expect to declare or pay any cash dividends for
the foreseeable future. Any payment of dividends will be at the discretion
of the Board of Directors and will be dependent on the earnings and
financial requirements of the Company and other factors, including
restrictions imposed by the Delaware General Corporation Law on the payment
of dividends, covenants in the Credit Agreement, and such other factors as
the Board of Directors deems relevant.
Volatility of Market Price for the Common Stock. The market price for
the Common Stock prior to the date hereof has been highly volatile.
Factors such as the Company's operating results and announcements by the
Company or its competitors concerning new products may have a significant
impact on the market price for the Common Stock. Additionally, in recent
years, the stock market has experienced a high level of price and volume
volatility and market prices for the stock of many companies have
experienced wide price fluctuations not necessarily related to the
operating performance of such companies.
Shares Eligible for Future Sale. As of July 15, 1996, the Company had
outstanding 13,689,711 shares of Common Stock, of which 12,431,343 are
freely tradeable under the 1933 Act and 1,258,368 are "restricted"
securities, as that term is defined under Rule 144 promulgated under the
1933 Act, of which 798,368 are presently eligible for immediate sale under
Rule 144 and 460,000 will be eligible for immediate sale as a result of
this registration. In addition, the Company will register hereunder an
aggregate of 1,617,646 shares of Common Stock that may be received upon the
conversion on some future date of the Company's 5% convertible debentures
in the aggregate principal amount of $10,000,000 held by GFL and Newsun.
The possibility that substantial amounts of Common Stock may be sold in the
public market may adversely affect prevailing market prices for the Common
Stock and could impair the Company's ability to raise capital through the
sale of its equity securities.
USE OF PROCEEDS
Any Shares sold pursuant to this Prospectus will be sold by the
Selling Stockholders for their own account and the Company will not receive
any proceeds from such sales.
SELLING STOCKHOLDERS
The following table sets forth the name of the Selling Stockholders,
the number of shares of Common Stock beneficially owned by the Selling
Stockholders as of July 15, 1996, the maximum number of shares of Common
Stock to be held by the Selling Stockholders assuming that all the Shares
owned by them are sold in this offering, and the percentage of outstanding
Common Stock owned by the Selling Stockholders assuming that all the Shares
are sold.
Maximum Minimum Minimum
Number Number of Number of Percentage
of Shares Shares to Shares to of Common
Owned Prior be Sold be Owned Stock Owned
to the in the After the After the
Name Offering(1) Offering Offering(1) Offering(1)
---- --------<F1> -------- --------<F1> --------<F1>
FBR Capital Corporation... 370,000(2) 370,000 0 0%
<F2>
GFL Performance Fund Ltd.. 808,823(3) 808,823 0 0%
<F3>
Newsun Limited............ 1,535,567(3)(4) 808,823 726,744 5.0
<F3><F4>
Efima Lekach.............. 60,000(5) 60,000 0 0
<F5>
Frederick E. Purches...... 83,000 30,000(6) 53,000 4
<F6>
_______________________
<F1>
(1) Calculated pursuant to Rule 13d-3(d) of the 1934 Act. Under such
Rule, shares subject to options, warrants, rights or conversion
privileges exercisable within 60 days are deemed outstanding for the
purpose of calculating the number and percentage owned by such person,
but not deemed outstanding for the purpose of calculating the
percentage owned by each other person listed. At July 15, 1996, there
were 13,689,711 shares of Common Stock issued and outstanding.</F1>
<F2>
(2) FBR Capital Corporation (f/k/a Richard Barrie Fragrances, Inc.)
("FBR") acquired its shares of Common Stock on June 28, 1996 in
connection with the Company's acquisition of all of the material
assets of FBR. Pursuant to the terms of a registration rights
agreement that the Company entered into with FBR, the Company will pay
all costs, expenses and fees associated with registering FBR's shares
of Common Stock. The Company also agreed pursuant to a separate
registration rights agreement to indemnify and hold harmless FBR
against any loss, liability, claim, damage or expense whatsoever which
FBR is required to pay as a result of the Company's registration of
FBR's shares of Common Stock. Mr. Richard Barrie, a director of the
Company, owns approximately 2% of the issued and outstanding shares of
FBR's Common Stock.</F2>
<F3>
(3) In accordance with the $5,000,000 convertible debenture agreements
that the Company entered into with each of GFL and Newsun, each
debenture is convertible into shares of Common Stock based on a
conversion rate of 85% of the average closing price of the Common
Stock during the five day period immediately prior to the date of
conversion. In connection with these debenture agreements, the
Company also agreed to register under the 1933 Act the shares of
Common Stock underlying the convertible debentures prior to their
conversion. Thus, for purposes of determining the number of shares of
Common Stock to be registered hereunder for each of GFL and Newsun,
the Company based its calculation on (i) the closing price of the
Common Stock on July 15, 1996 (the "Base Convertible Shares") plus
(ii) the product of .10 times the Base Convertible Shares in order to
cover fluctuations in the price of the Common Stock prior to the
actual conversion date of the debentures. Should the foregoing amount
be insufficient to cover all of the shares of Common Stock that GFL
and Newsun are entitled to have registered, the Company will file a
post-effective amendment to this Registration Statement to cover such
shortfall.</F3>
<F4>
(4) Includes: (i) 808,823 shares of Common Stock pursuant to the
calculation set forth in footnote (3) above, and (ii) 726,744 shares
of Common Stock that Newsun may receive after August 12, 1996 upon the
conversion of the convertible debentures it purchased from the Company
on July 2, 1996 in the aggregate principal amount of $5,000,000 (the
"July Convertible Debenture Agreement"). In accordance with the terms
of the July Convertible Debenture Agreement, each debenture thereunder
is convertible into shares of Common Sock based on a conversion rate
of 86% of the average closing price of the Common Stock during the
five day period immediately prior to the date of conversion. For
purposes of calculating Newsun's beneficial ownership of shares of
Common Stock that may be converted pursuant to the July Convertible
Debenture Agreement, the Company used the closing price of the Common
Stock on July 15, 1996. The address of Newsun is c/o ABN AMRO Trust
Company, 80 Rue due Rhone, 1204 Geneva, Switzerland.</F4>
<F5>
(5) Mr. Efima Lekach received his shares of Common Stock as a result of
the exercise of warrants granted to him by the Company in June 1995 in
connection with a $300,000 unsecured loan which he entered into with
the Company. Mr. Efima Lekach is related to Mr. Ilia Lekach, the
Company's Chairman and Chief Executive Officer.</F5>
<F6>
(6) Mr. Purches acquired the 30,000 shares of Common Stock being
registered hereunder on March 31, 1996 in connection with the exercise
of warrants previously issued to him by the Company. Mr. Purches is
the Company's Vice-Chairman and a director.</F6>
PLAN OF DISTRIBUTION
If and when the Shares are sold, it is anticipated that such Common
Stock will be sold from time to time primarily in transactions on the
Nasdaq National Market or any other exchange on which the Common Stock is
listed, at the market price then prevailing, although sales may also be
made in negotiated transactions or otherwise, at prices related to such
prevailing market price or otherwise. If Shares are sold through brokers,
the Selling Stockholders may pay customary brokerage commissions and
charges. The Selling Stockholders may effect such transactions by selling
Shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders and/or the purchasers of Shares for whom such
broker-dealers may act as agent or to whom they may sell as principal, or
both (which compensation as to a particular broker-dealer might be in
excess of customary commissions). The Selling Stockholders and any
broker-dealers that act in connection with the sale of the Shares hereunder
might be deemed to be "underwriters" within the meaning of Section 2(11) of
the 1933 Act, and any commissions received by them and any profit on the
resale of Shares as principal might be deemed to be underwriting discounts
and commissions under the 1933 Act.
The Selling Stockholders have advised the Company that during such
times as the Selling Stockholders may be deemed to be engaged in a
distribution of the Company's Common Stock, and therefore deemed an
"underwriter" under the 1933 Act, they will comply with Rules 10b-6 and
10b-7 under the 1934 Act and will, among other things: (i) not engage in
any stabilization activities in connection with the Company's securities;
(b) furnish each broker through which Shares may be offered copies of this
Prospectus, as may be amended from time to time, as requested by a broker;
and (iii) not bid for or purchase any securities of the Company or attempt
to induce any person to purchase any securities of the Company other than
as permitted under the 1934 Act.
There can be no assurances that the Selling Stockholders will sell any
or all of the Shares offered hereunder.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-K of Parlux Fragrances, Inc. for the year
ended March 31, 1996 have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent certified public accountants, given on
the authority of said firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon on
behalf of the Company by Mayer, Brown & Platt, New York, New York.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses (all of which
will be borne by the Company) incurred in connection with the issuance and
distribution of the securities being registered, other than underwriting
discounts and commissions (if any). All of the amounts shown are
estimates, except the SEC registration fee.
SEC registration fee.................................... $5,910.59
Legal fees and expenses................................. 10,000.00
Accounting fees and expenses............................ 5,000.00
Miscellaneous........................................... 2,000.00
-----------
Total............................................. $22,910.59
===========
Item 15. Indemnification of Directors and Officers
(a) The General Corporation Law of the State of Delaware (Section
145) gives Delaware corporations broad powers to indemnify their present
and former directors and officers and those of affiliated corporations
against expenses incurred in the defense of any lawsuit to which they are
made parties by reason of being or having been such directors or officers,
subject to specified conditions and exclusions; gives a director or officer
who successfully defends an action the right to be so indemnified; and
authorizes the Company to buy directors' and officers' liability insurance.
Such indemnification is not exclusive of any other rights to which those
indemnified may be entitled under any by-laws, agreement, vote of
stockholders or otherwise.
(b) Article 10 of the Certificate of Incorporation of the Company
requires, and Bylaws of the Company provides for, indemnification of
directors, officers, employees and agents to the full extent permitted by
law.
(c) In accordance with Section 102(b)(7) of the Delaware General
Corporation Law, the Company's Certificate of Incorporation provides that
directors shall not be personally liable for monetary damages for breaches
of their fiduciary duty as directors except for (1) breaches of their duty
of loyalty to the Company or its stockholders, (2) acts or omissions not in
good faith or which involve intentional misconduct or knowing violations of
law, (3) under Section 174 of the General Corporation Law of the State of
Delaware (unlawful payment of dividends) or (4) transactions from which a
director derives improper personal benefit.
(d) The Company has entered into various acquisition agreements
pursuant to which the Seller therein may be required to indemnify the
officers, directors and controlling persons of the Company under certain
circumstances.
Item 16. Exhibits and Financial Statement Schedules.
See the Exhibit Index which is incorporated herein by reference.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
and of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8
or Form F-3, and the information required to be included in
a post-effective amendment by those paragraphs is contained
in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration
statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions of the
registrant's articles of incorporation or by-laws or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fort Lauderdale, State of
Florida, on this 18th day of July, 1996.
PARLUX FRAGRANCES, INC.
By: /s/ Ilia Lekach
----------------------
Name: Ilia Lekach
Title: Chairman of the Board and
Chief Executive Officer
Each person whose signature appears below hereby constitutes and
appoints Ilia Lekach and Frederick E. Purches, and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power
of substitution and resubstitution, for and in the name, place and stead of
the undersigned and to file the same, with all exhibits thereto, in any and
all capabilities, to sign any and all amendments and any registration
statement filed pursuant to Rule 462(b) of the Securities Act of 1933, as
amended (including post-effective amendments thereto and other documents in
connection therewith), with the Securities and Exchange Commission, and
hereby grants to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in
their respective capacities on this 18th day of July, 1996.
Signature Title
--------- -----
/s/ Ilia Lekach Chairman of the Board and Chief Executive Officer
--------------- (Principal Executive Officer)
Ilia Lekach
/s/ Zalman Lekach President, Chief Operating Officer, and a
----------------- Director
Zalman Lekach
/s/ Frank A. Buttacavoli Executive Vice President, Chief Financial
------------------------ Officer, and a Director (Principal Financial
Frank A. Buttacavoli Officer and Principal Accounting Officer)
/s/ Frederick E. Purches Vice Chairman of the Board
------------------------
Frederick E. Purches
/s/ Albert F. Vercillo Director
----------------------
Albert F. Vercillo
/s/ Mayi de la Vega Director
----------------------
Mayi de la Vega
/s/ Glenn Gopman Director
----------------------
Glenn Gopman
/s/ Richard Barrie Director
----------------------
Richard Barrie
EXHIBIT INDEX
Sequential
Exhibit Number Description of Documents Page No.
- -------------- ------------------------ ----------
2.1 Asset Purchase Agreement, dated June 15, 1994, by
and between Fred Hayman Beverly Hills Inc. and the
Company (incorporated by reference to Exhibit 1 to
the Company's Current Report on Form 8-K, filed
with the Securities and Exchange Commission (the
"SEC") on June 15, 1994 and as amended on June 29,
1994 and August 26, 1994)
2.2 Asset Purchase Agreement, dated November 2, 1994,
by and between Sanofi Beaute, Inc. ("Sanofi") and
the Company (incorporated by reference to Exhibit 2.1
to the Company's Current Report on Form 8-K, filed
with the SEC on January 11, 1995 (the "1995 Form 8-K)
2.3 Asset Purchase Agreement, dated December 27, 1995,
by and between Revlon Holdings Inc. and the Company
(incorporated by reference to the Company's Current
Report on Form 8-K, filed with the SEC on January 11,
1996)
2.4 Asset Purchase Agreement, dated January 1, 1996, by
and between Richard Barrie Fragrances, Inc. and the
Company* <F7>
4.1 Certificate of Incorporation of the Company, filed
July 23, 1984 (incorporated by reference to Exhibit
No. 3.1 to the Form S-3 Registration Statement
(File No. 33-89806), declared effective on March 13,
1995 (the "Prior S-3 Registration Statement"))
4.2 Amendment No. 1 to the Company's Certificate of
Incorporation, filed August 15, 1986 (incorporated
by reference to Exhibit 3.2 to the Prior S-3
Registration Statement)
4.3 Amendment No. 2 to the Company's Certificate of
Incorporation, filed October 15, 1988 (incorporated
by reference to Exhibit 3.3 to the Prior S-3
Registration Statement)
4.4 Certificate of Renewal to the Company's Certificate
of Incorporation, filed September 23, 1988
(incorporated by reference to Exhibit 3.4 to the
Prior S-3 Registration Statement)
4.5 Amendment No. 3 to the Company's Certificate of
Incorporation, filed November 8, 1991 (incorporated
by reference to Exhibit 3.5 to the Prior S-3
Registration Statement)
4.6 Bylaws of the Company (incorporated by reference
to Exhibit 3.6 to the Prior S-3 Registration
Statement)
4.7 7% Convertible Debenture, dated November 2, 1995,
between the Company and Gershon Partners, L.P.
(incorporated by reference to Exhibit 4.7 to the
Company's Form 10-Q for the period ended December
31, 1995 (the "Form 10-Q"))
4.8 7% Convertible Debenture, dated November 2, 1995,
between the Company and Granite Global Debt Fund,
Ltd. (incorporated by reference to Exhibit 4.8 to
the Company's Form 10-Q)
4.9 7% Convertible Debenture, dated December 5, 1995,
between the Company and Master Investments Corporation
(incorporated by reference to Exhibit 4.9 to the
Company's Form 10-Q)
4.10 7% Convertible Debenture, dated December 5, 1995,
between the Company and Taryak, Inc. (incorporated
by reference to Exhibit 4.10 to the Company's
Form 10-Q)
4.11 7% Convertible Debenture, dated December 6, 1995,
between the Company and Privatinvest Bank AG
(incorporated by reference to Exhibit 4.11 to the
Company's Form 10-Q)
4.12 7% Convertible Debenture, dated December 7, 1995,
between the Company and Faisal Finance (incorporated
by reference to Exhibit 4.12 to the Company's
Form 10-Q)
4.13 Security Agreement, dated December 27, 1994,
among Sanofi, the Company, and Parlux, Ltd.
("Ltd.") (incorporated by reference to Exhibit 4.1
to the 1995 Form 8-K)
4.14 Reversionary Assignment and Assumption, dated
December 27, 1994, between Sanofi and the Company
(incorporated by reference to Exhibit 4.2 to the
1995 Form 8-K)
4.15 Promissory Note, dated December 27, 1994, made
by the Company to the order of Sanofi (incorporated
by reference to Exhibit 4.3 to the 1995 Form 8-K)
4.16 Loan and Security Agreement, dated December 29,
1994, between Ltd. and Finova Capital Corporation
("Finova") (incorporated by reference to Exhibit
4.4 to the 1995 Form 8-K)
4.17 Continuing Guaranty, dated December 29, 1994,
by the Company for the benefit of Finova
(incorporated by reference to Exhibit 4.5 to
the 1995 Form 8-K)
4.18 Security Agreement, dated December 29, 1994,
between the Company and Finova (incorporated
by reference to Exhibit 4.6 to the 1995 Form 8-K)
4.19 Stock Pledge Agreement, dated December 29, 1994,
by and between the Company and Finova (incorporated
by reference to Exhibit 4.7 to the 1995 Form 8-K)
4.20 Collateral Assignment of Trademarks and Trademark
Licenses (Security Agreement), dated December 29,
1994, between the Company and Finova (incorporated
by reference to Exhibit 4.8 to the 1995 Form 8-K)
4.21 5% Convertible Debenture dated March 1, 1996
between the Company and Karle Limited (incorporated
by reference to Exhibit 4.16 to the Company's
Form 10-K for the year ended March 31, 1996
(the "1996 Form 10-K"))
4.22 5% Convertible Debenture dated March 4, 1996
between the Company and Newsun Limited
(incorporated by reference to Exhibit 4.17
to the 1996 Form 10-K"))
4.23 5% Convertible Debenture dated March 11, 1996
between the Company and Kempton Investments Ltd
(incorporated by reference to Exhibit 4.18 to
the 1996 Form 10-K")
4.24 5% Convertible Debenture dated March 11, 1996
between the Company and Newsun Limited
(incorporated by reference to Exhibit 4.19 to
the 1996 Form 10-K")
4.25 5% Convertible Debenture dated April 16, 1996
between the Company and Kempton Investments, Ltd.
(incorporated by reference to Exhibit 4.20 to the
1996 Form 10-K")
4.26 5% Convertible Debenture dated April 16, 1996
between the Company and Newsun Limited
(incorporated by reference to Exhibit 4.21
to the 1996 Form 10-K")
4.27 5% Convertible Debenture dated May 12, 1996
between the Company and Newsun Limited
(incorporated by reference to Exhibit 4.22
to the 1996 Form 10-K")
4.28 5% Convertible Debenture dated May 17, 1996
between the Company and GFL Performance Fund,
Ltd. (incorporated by reference to Exhibit 4.23
to the 1996 Form 10-K")
4.29 5% Convertible Debenture dated July 2, 1996
between the Company and Newsun Limited............
4.30 5% Convertible Debenture dated July 2, 1996
between the Company and Kempton Investments Ltd...
5 Opinion of Mayer, Brown & Platt...................
23.1 Consent of Mayer, Brown & Platt (included in
the opinion filed as Exhibit 5)
23.2 Consent of Price Waterhouse LLP...................
24 Powers of Attorney (included on the signature
page in Part II of this Registration Statement)
==============================================================================
<F7>
* The schedules and exhibits to this agreement have not been filed pursuant
to Item 601(b)(2) of Regulation S-K. Such schedules and exhibits will be
filed supplementally upon the request of the Securities and Exchange
Commission.</F7>
EXHIBIT 2.4
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into this 31st day of January, 1996, by and between Richard Barrie
Fragrances, Inc., a Nevada corporation (the "Seller") and Parlux
Fragrances, Inc., a Delaware corporation (the "Buyer").
WHEREAS, the Seller is engaged in the business of selling, marketing,
manufacturing and distributing licensed fragrances, cosmetics and personal
care products, and providing warehousing and other services to customers
(the "Business");
WHEREAS, the Seller desires to sell or otherwise transfer to the
Buyer substantially all of the assets owned and used by Seller in the
conduct of the Business (except for those specifically excluded), together
with certain of the liabilities of the Seller incurred in the operation of
the Business (except for those specifically excluded); and
WHEREAS, the Buyer desires to purchase and acquire said assets and
agrees to assume certain of said liabilities of the Seller.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
intending to be legally bound hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
The following terms are used with the meanings given them herein:
1.1. "Affiliate" shall mean with respect to a specified person, any
officer or director of such specified person, and any person who directly,
or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such specified person.
1.2. "Baker Properties Lease" shall mean Lease of Improved
Properties, dated December 10, 1993, between Baker Properties Limited
Partnership and Seller, relating to that certain property at 15 Executive
Boulevard, Orange, Connecticut.
1.3. "Excluded Assets" shall mean the assets and properties referred
to in Section 2.2.
1.4. "Financial Statements" shall mean the financial statements of
Seller referred to in Section 5.5.
1.5. "GAAP" shall mean generally accepted accounting principles
1.6. "Income Taxes" shall mean all federal, state, local or foreign
income taxes (inclusive of all interest and penalties thereon) imposed upon
Seller with respect to the Business or the assets of Seller, and which are
based in whole or in part upon income, but excluding any Taxes.
1.7. "Inventory" shall mean all finished goods, raw materials,
packaging components, work-in-process, and all advertising materials
relating to the Baryshnikov and Melrose Place brands.
1.8. "Notes" shall mean the $5,157,750 principal amount of 10%
Convertible Subordinated Promissory Notes of Seller.
1.9. "Purchased Assets" shall have the meaning given to such term in
Section 2.1.
1.10. "Taxes" shall mean all federal, state, local or foreign taxes,
assessments, additions to tax, deficiencies, duties, fees and other
governmental charges or impositions of any kind whatsoever, whether
measured by properties, assets, wages, payroll, withholding, purchases,
value added, payments, sales, use, business, capital stock or surplus
income arising from or in connection with the Business or the assets of
Seller prior to the Closing Date, or the transactions contemplated by this
Agreement (inclusive of all interest and penalties thereon), but excluding
any Income Taxes.
1.11. "Transaction Documents" shall mean this Agreement, the Bill of
Sale, the Assignment and Assumption Agreement, the Employment Agreements,
the Registration Rights Agreement, and any other instruments or documents
executed and delivered in connection with the transactions contemplated
hereby.
ARTICLE II
PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF CERTAIN LIABILITIES
2.1. Assets to be Sold. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined below)
the Seller shall sell, transfer, assign and deliver to the Buyer, free and
clear of all claims, charges, liens, contracts, rights, options, pledges,
security interests, mortgages, encumbrances and restrictions whatsoever
(collectively, the "Claims"), all with the intention that the Business
shall be transferred to the Buyer as a going concern, substantially all of
the assets, properties and rights owned by the Seller or in which the
Seller has any right or interest, of every type and description, real,
personal and mixed, tangible and intangible (the assets being purchased by
the Buyer being referred to as the "Purchased Assets"), including without
limitation the following:
(a) Cash, cash equivalents, marketable securities, prepaid
expenses, accounts receivable and other rights to receive payment
with respect to the Business, as reflected on a closing balance sheet
to be delivered by Seller not more than ten (10) business days after
the Closing Date (the "Closing Balance Sheet");
(b) All of the Seller's licenses, sublicenses, patents,
trademarks, trade names, service marks, copyrights, trade secrets or
other intangible assets or rights used or useful in connection with
the Business, including but not limited to those listed on Schedule
2.1(b) (collectively, the "Intellectual Property"), but excluding
those trademarks and trade names listed on Schedule 2.1(b) hereto;
(c) All Inventory, both on premises and at contract
manufacturers, as defined in Section 1.6 hereof;
(d) All owned equipment relating to the Business (collectively,
the "Equipment"), including but not limited to the assets listed on
Schedule 2.1(d) hereto;
(e) All office furnishings, office equipment and fixtures owned
by the Seller which are capable of being sold by Seller and which
have not been attached to the premises, the result of which the
landlord possesses certain ownership rights;
(f) Those security and other deposits and advances, including
"Key-Man" insurance funding, maintained for use in the conduct of the
Business which appear on the Financial Statements, but as they may
exist at the Closing;
(g) All customer files and lists of customers, suppliers and
distributors of the Business;
(h) All rights and claims under (x) those purchase orders
listed on Schedule 5.22, (y) supply orders accepted by Seller in the
ordinary course of business, and (z) those commitments related to the
Business as shall be specified by Buyer prior to or at Closing;
(i) All rights to and under those specific computer, equipment
and other leases (including any leasehold improvements) related to
the Business as are set forth on Schedule 2.1(i);
(j) Subject to Section 10.3, all documents and records relating
to the Purchased Assets, and the operations of the Business
(including historical costing and pricing data, employment and
personnel records for all Employees of the Business (as defined in
Section 5.6 hereof) hired by Buyer);
(k) All of Seller's right, title and interest in and to all
contracts or agreements to which Seller is a party or shall become a
party prior to the Closing Date (other than this Agreement and the
agreements executed pursuant hereto or contemplated hereby)
(collectively, the "Contracts");
(l) All accounting books, records, ledgers and electronic data
processing materials relating to the Business;
(m) All software and documentation thereof owned by Seller
which are used or intended to be used in the conduct of the Business;
(n) All transferable rights to telephone numbers of the
Business;
(o) All goodwill associated with the Business;
(p) All other assets, properties, rights and claims owned by
Seller related to the operations of the Business which arise in or
from the conduct thereof; and
(q) All rights to barter transactions;
provided, however, that the definition of Purchased Assets shall not
include any items defined below as Excluded Assets.
2.2. Excluded Assets. The following assets (the "Excluded Assets")
shall not be sold or transferred to Buyer:
(a) Corporate accounting journals and corporate books of
account which comprise Seller's permanent accounting or tax records;
(b) Any Contract which, by its terms, is not assignable by
Seller without the waiver or consent of another party thereto and as
to which such waiver or consent shall not have been given by Closing;
(c) All corporate documents relating to the legal or financial
structure of the Seller, including but not limited to, minute books,
stock records, corporate seal and documents filed with the Securities
and Exchange Commission; and
(d) All rights of the Seller under this Agreement and the
agreements executed in connection herewith, including the
consideration to be received by Seller hereunder.
2.3. Assumed Liabilities. Upon the terms and subject to the
conditions of this Agreement, at Closing, Buyer shall assume the following
liabilities only (the "Assumed Liabilities"):
(a) Liabilities under leases specified in Schedule 2.1(i)
commencing with the period from and after the Closing Date;
(b) Liabilities of Seller which are set forth on the Balance
Sheet of Seller dated September 30, 1995 (other than the Notes), to
the extent that they exist on the Closing Date;
(c) Such additional amounts of liabilities of Seller of the
types reflected on said Balance Sheet as may arise between September
30, 1995 and the Closing Date in the ordinary course of business and
as reflected on the Closing Balance Sheet; and
(d) All obligations under Contracts, customer orders, purchase
orders, and other agreements and commitments relating to the Business
that are included in the Purchased Assets (except liabilities of
Seller on any of the foregoing arising from Seller's defaults, if
any, thereon, or liabilities for benefits received by Seller through
the Closing Date, except as pro-rated at Closing);
2.4. Excluded Liabilities and Obligations. Except as expressly set
forth in Section 2.3, Buyer does not assume and shall not be liable for any
debt, obligation, responsibility or liability of the Business through the
Closing Date or of Seller, whether known or unknown, contingent or
absolute, or otherwise (collectively, the "Excluded Liabilities"), and
Seller agrees to indemnify and hold harmless Buyer from and against any
Excluded Liabilities in accordance with Section 12.2 hereof. In
particular, but without limiting the generality of the foregoing, Buyer
shall have no responsibility with respect to the following Excluded
Liabilities:
(a) Liabilities and obligations of Seller to the holders of the
Notes (collectively, the "Noteholders"), including without limitation
for any principal of or interest on the Notes, whether or not
accrued;
(b) Liabilities and obligations relating to accrued vacation,
sick leave, or holiday pay, or the relocation or termination of
employees of the Business whether or not they are retained by Buyer;
(c) Liabilities and obligations with respect to any Employee
Plan (as defined in Section 5.18 hereof) maintained or contributed to
at any time by Seller for the benefit of any Employees of Seller used
in connection with the Business;
(d) All legal, accounting and other fees (if any), Taxes or
other expenses incurred by Seller in connection with this Agreement
and the transactions contemplated hereby, including without
limitation any applicable sales taxes or transfer taxes in connection
with the sale of the Purchased Assets;
(e) All other Taxes for periods prior to the Closing;
(f) All Income Taxes;
(g) Liabilities and obligations in respect of the Excluded
Assets; and
(h) Liabilities and obligations relating to any pending or
threatened suits, actions or claims against Seller, whether or not
known to Seller or Buyer.
ARTICLE III
CONSIDERATION FOR TRANSFER
3.1. Purchase Price. The purchase price for all of the Purchased
Assets (the "Purchase Price") shall be (a) 370,000 shares of newly-issued
Common Stock of the Buyer (the "Acquisition Shares") and (b) $750,000, to
be paid at Closing by wire transfer of immediately available funds in U.S.
dollars to an account as instructed by Seller not less than five (5)
business days prior to the Closing.
ARTICLE IV
THE CLOSING AND TRANSFER OF PURCHASED ASSETS
4.1. Closing. The transfer of the Purchased Assets contemplated by
this Agreement (the "Closing") shall occur at the offices of Mayer, Brown &
Platt, 1675 Broadway, New York, New York 10019 at 10:00 A.M. on April 30,
1996 or at such other place or time as soon thereafter as practicable as
may be agreed upon by the parties in writing (the "Closing Date"). Upon
consummation, the Closing shall be deemed to take place as of the Closing
Date.
4.2. Closing Physical Inventory Extension. Not more than thirty (30)
days nor less than ten (10) days prior to Closing, Seller at its own cost
shall conduct a physical count of the Inventory, upon which the Inventory
will be established, and shall permit Buyer and its representatives to
observe the procedures and the results thereof shall be delivered to Buyer
along with copies of all work papers in reasonable detail within ten (10)
days after the Closing.
4.3. Deliveries by Buyer. At the Closing, Buyer shall deliver the
following:
(a) The cash portion of the Purchase Price as provided for in
Section 3.1 hereof;
(b) Stock certificates evidencing the Acquisition Shares, in
the name or names and, as applicable, in such amounts, as requested
by Seller in writing not less than five (5) business days prior to
the Closing;
(c) Opinion of counsel contemplated by Section 9.2;
(d) Certified resolutions and officer's certificate
contemplated by Sections 9.4 and 9.1;
(e) Employment Agreements contemplated by Section 7.3;
(f) Registration Rights Agreement in favor of the Noteholders
contemplated by Section 7.4;
(g) The Assignment and Assumption Agreement in form acceptable
to Buyer's counsel providing for the assignment to Buyer of certain
Purchased Assets and the assumption by Buyer of all Assumed
Liabilities;
(h) Each of the other Transaction Documents to which Buyer is a
party; and
(i) Such other instruments or documents as may be reasonably
requested by Seller to carry out the transactions contemplated by
this Agreement and to comply with the terms hereof.
4.4. Deliveries by Seller. At the Closing, Seller shall deliver the
following documents:
(a) The Assignment and Assumption Agreement;
(b) Bill of Sale in form acceptable to Buyer's counsel for all
of the Purchased Assets;
(c) Opinion of counsel contemplated by Section 8.2;
(d) Certified resolutions and officer's certificate
contemplated by Sections 8.5 and 8.1;
(e) All Schedules required by this Agreement;
(f) Employment Agreements contemplated by Section 7.3;
(g) Registration Rights Agreement in favor of the Noteholders
contemplated by Section 7.4;
(h) Each of the other Transaction Documents to which Seller is
a party; and
(i) Such other instruments or documents as may be reasonably
requested by Buyer to carry out the transactions contemplated by this
Agreement and to comply with the terms hereof.
At the Closing and thereafter, Seller shall take all steps necessary to put
Buyer in actual possession and operating control of the Business and the
Purchased Assets.
ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof and as
of the Closing Date, as follows:
5.1. Authority. The execution and delivery by Seller of this
Agreement and the other Transaction Documents, the performance by Seller of
its obligations hereunder, and the consummation of the transactions
contemplated hereby, have been duly and validly authorized by all necessary
corporate action on the part of the Seller (subject, prior to the Closing
Date, to the approval thereof by the stockholders of Seller and the
Noteholders) and Seller has all necessary corporate power with respect
thereto.
5.2. Other Consents and Approvals; Validity. Except as disclosed on
Schedule 5.2 hereto, no filing with, and no authorization, consent or
approval of, any governmental agency or other person is necessary for the
consummation of the transactions contemplated hereby. Subject to Schedule
5.2, all such filings, authorizations, consents and approvals have been, or
will be, obtained or made prior to Closing by Seller. This Agreement and
each of the other Transaction Documents to be executed and delivered by
Seller at Closing will at such time be duly executed and delivered and are
the lawful, valid and legally binding obligations of Seller, enforceable in
accordance with their respective terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, rearrangement, reorganization
or similar debtor relief legislation affecting the rights of creditors,
generally. Subject to obtaining the consents and approvals set forth on
Schedule 5.2, the execution and delivery of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby will not result in the creation of any lien, charge or
encumbrance on the Purchased Assets and are not prohibited by, do not
violate or conflict with any provision of, and do not result in a default
under or a breach of (i) the charter or By-laws of Seller, (ii) any
contract or other instrument to which Seller is a party or by which Seller
or any of Seller's assets may be bound, (iii) any regulation, order, decree
or judgment of any court or governmental agency, or (iv) any law applicable
to Seller, except for such violations, conflicts or defaults which do not
(x) prevent the consummation of the transactions contemplated hereby, or
(y) have a material adverse effect on Seller or the Business.
5.3. Due Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of Nevada, and has
full corporate power and authority to own or lease its properties and to
carry on the Business. Seller is duly licensed and qualified to do
business as a foreign corporation and is in good standing in all
jurisdictions where, by the nature of its business or the character and
location of its property or personnel, failure to be so licensed or
qualified would have a material adverse effect on the Business.
5.4. Transactions with Affiliates. Except as disclosed in Schedule
5.4 hereto, no Affiliate of Seller, or any corporation or other business in
which any of the foregoing has any controlling interest:
(i) has a controlling interest in any corporation, firm or
other entity which is a competitor, material supplier or customer of
the Business; or
(ii) owns any property or right used in the conduct of the
Business.
5.5. SEC Documents; Financial Statements. Seller has delivered to
Buyer a true and complete copy of each form, report, schedule, registration
statement and definitive proxy statement filed by Buyer with the Securities
and Exchange Commission (the "SEC") since June 30, 1995 which are all the
documents (other than preliminary material) that Seller was required to
file with the SEC since such date (the "SEC Documents") and, without
duplication, the audited Financial Statements of Seller for the prior five
(5) fiscal years. As of their respective dates, the SEC Documents (other
than preliminary material) complied in all material respects with the
Securities Act of 1933, as amended (the "Securities Act") or the Securities
Exchange Act of 1934, as amended, (the "Exchange Act"), as applicable, and
none of the SEC Documents (including all Financial Statements included
therein and exhibits and schedules thereto and documents incorporated by
reference therein) contained any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Financial Statements comply as to form
in all material respects with applicable accounting requirements and with
the rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto, or in
the case of the unaudited Financial Statements, as permitted by Exchange
Act Form 10-QSB) and fairly present (subject, in the case of unaudited
financial statements, to normal recurring audit adjustments that,
individually and in the aggregate, were not material) the consolidated
financial position of Seller as at the date thereof and the consolidated
results of their operations and cash flows for the periods then ended.
5.6. Absence of Adverse Change; Conduct of Business. Except as set
forth on Schedule 5.6 hereof, since June 30, 1995, there has been no
material adverse change in the Business, financial condition, operations,
property or affairs of the Seller, other than those disclosed in the SEC
Documents, and there is no condition or development or contingency of any
kind existing or in prospect which, so far as reasonably can be foreseen by
the Seller, may result in any such material adverse change. Without
limiting the generality of the foregoing, except as set forth on Schedule
5.6, since June 30, 1995 there has not been, occurred or arisen:
(a) Any damage, destruction or loss to any Purchased Asset
(whether or not covered by insurance) that, individually or in the
aggregate, would have a material adverse effect on the Business or
its prospects;
(b) Any material change in the business or operations of Seller
or in the manner of conducting the Business or sale or other
disposition or any right, title or interest in or to any assets or
properties used in the Business or any revenues derived therefrom
other than in the ordinary course of business;
(c) Any increase in any compensation or benefits payable to any
employee or consultant of the Seller (collectively, "Employees"),
other than those outlined in the Permanent Manpower Budget for the
period commencing January 1, 1996, or any bonus, service, pension,
award, percentage compensation or other benefit paid, granted or
accrued to or for the benefit of any Employee;
(d) Any sale, assignment or transfer of any of the tangible
Purchased Assets used by the Seller except in the ordinary course of
business consistent with past practice, or cancellation of any debt
or claim owing to or owed by the Seller;
(e) Any sale, assignment, transfer or grant of any
Intellectual Property used or useful in the Business;
(f) Any material transaction other than in the ordinary course
of business;
(g) Any amendment or modification of any material Contract,
franchise, permit or license; or
(h) Any commitment (contingent or otherwise) to do any of the
foregoing.
5.7. Intellectual Property. Schedule 2.1(b) contains a complete and
correct list and summary description of all of the Intellectual Property
used or useful in the Business, other than rights that are set forth on
Schedule 2.1(b), and contains a complete and correct list and summary
description of all licenses and other agreements relating to any of the
foregoing Intellectual Property. Except as disclosed in Schedule 2.1(b),
with respect to the foregoing items of Intellectual Property, (i) Seller is
the sole and exclusive owner and, to the best of its knowledge, Seller has
the sole and exclusive right to use the same in the conduct of the
Business, free and clear of any and all Claims; (ii) no proceedings have
been instituted, are pending or to the best of Seller's knowledge are
threatened which challenge any rights in respect thereto or the validity
thereof; (iii) to the best of Seller's knowledge none of the Intellectual
Property or Seller's use thereof infringes upon or otherwise violates the
rights of others or is being infringed upon by others, and none is subject
to any outstanding order, decree, judgment, stipulation or charge; (iv) no
licenses, sublicenses or agreements pertaining to any of the Intellectual
Property have been granted by Seller; and (v) Seller has no notice of any
patent, invention or application therefor which would infringe upon any of
the Intellectual Property.
5.8. Insurance. The Seller is, and will be through the Closing,
fully insured with nationally recognized insurers in respect of its
properties, assets and business against risks normally insured against by
entities in similar lines of business under similar circumstances.
Schedule 5.8 contains a complete and correct list and summary description
(including the type, name of the insurer, policy number, coverage, limits,
premium and expiration date) of all policies of insurance relating to the
Purchased Assets or the Business, which insurance will remain in full force
and effect with respect to all events occurring prior to the Closing.
5.9. Title to Purchased Assets. Seller is the sole and exclusive
legal and equitable owner of all right and interest in and has good and
marketable title to all of the tangible Purchased Assets. Except as set
forth in Schedule 5.9, none of such property and assets is subject to (i)
any contract of sale, except inventory to be disposed of in the ordinary
course of business, or (ii) any Claims of any kind or character, direct or
indirect, whether accrued, absolute, contingent or otherwise. On the
Closing Date, Seller shall convey to Buyer good, marketable and
indefeasible title to all of the tangible Purchased Assets free and clear
of any Claims. Except for the Purchased Assets and the Excepted Assets,
there are no other assets or agreements which are presently used by Seller
or which Seller deems necessary to carry on the Business which are not
being transferred to Buyer pursuant to this Agreement.
All of the tangible Purchased Assets are in good condition, operable
and useable for the purposes and in the manner for which they are presently
being used (ordinary wear and tear excepted), and the tangible Purchased
Assets have not been damaged by any fire, accident, act of God or any other
casualty to an extent that materially and adversely impairs the Business or
any such tangible Purchased Asset.
5.10. Employees. Schedule 5.10 contains a complete and correct list
and a summary description of all written and oral employment contracts with
officers, directors and other Employees of Seller, incentive arrangements,
"Keyman" insurance plans, pension plans, profit sharing plans and other
employee compensation or benefit plans, arrangements or understandings of
Seller or to which Seller is a party or otherwise bound, other than
Employee Plans disclosed in Section 5.18. None of Seller's employees are
covered by collective bargaining agreements. Schedule 5.10 also sets forth
the name, position and present rate of compensation, direct and indirect,
of each employee of the Business together with the title or job
classification of each such person and the base annual and the total
compensation paid to each such person by the Seller in calendar year 1995
and anticipated to be paid in calendar year 1996. Except as set forth on
Schedule 5.10, none of such persons has an employment agreement or
understanding, whether oral or written, with the Seller which is not
terminable on notice by the Seller without cost or other liability to the
Seller. No person listed on Schedule 5.10 has notified the Seller that he
or she intends to terminate his or her employment with the Seller or seek a
material change in his or her duties or status.
5.11. Material Contracts. All contracts, agreements, instruments,
plans and leases (other than those entered into after the date hereof with
the written consent of Buyer or as otherwise permitted hereby) related to
the Business or by which any of Seller's properties are subject or bound,
meeting any of the descriptions set forth below (the "Material Contracts"),
are listed on Schedule 5.11, identified by each applicable paragraph
number:
(a) any lease of real estate;
(b) any lease of equipment, computer hardware or other personal
property;
(c) any continuing, or requirements contract or agreement for
the purchase of any materials or supplies by Seller;
(d) any contract involving any expenditure in excess of
$10,000; and
(e) any continuing, or requirements agreements or commitments
obligating Seller to sell or deliver any product or service.
Except as set forth in Schedule 5.11, (i) all Material Contracts are
valid and binding in accordance with their terms and are in full force and
effect, (ii) no party to any Material Contract has prepaid any amounts due
thereunder for performance by the other party, and (iii) Seller is not, and
to its best knowledge, no other party is, in breach of any material
provision of, in material violation of, or in default under any material
term of, any Material Contract, and (iv) neither party has asserted or to
Seller's best knowledge, threatened to assert any default under any
Material Contract. Seller will deliver not later than fifteen days prior
to Closing true and complete copies of all Material Contracts and all other
Contracts, leases and commitments included in the Purchased Assets.
5.12. Product Liability. Schedule 5.12 attached hereto, to be
updated at Closing, contains a complete and accurate list and summary
description of all claims asserted against Seller arising from or alleged
to arise from actual or alleged injury to persons or property as a result
of the conduct of the Business or the ownership, possession, or use of any
Purchased Asset manufactured prior to the date of this Agreement (and, as
updated, through the Closing Date). There are no recalls pending, or to
the best knowledge of Seller threatened with respect to any of the
Purchased Assets. No report has been filed by Seller under any applicable
act or statute with respect to any product defects or hazards in connection
with the Purchased Assets and there have been to the best knowledge of
Seller, no material recurring defects therein which create a hazard.
5.13. Litigation. There is no (i) action, suit, claim, proceeding
or investigation pending or, to the best of the Seller's knowledge,
threatened against or affecting the Seller or the Business (whether or not
the Seller is a party or prospective party thereto), at law or in equity,
or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, (ii) arbitration proceeding relating to the Seller or the
Business or (iii) governmental inquiry pending or to the best of Seller's
knowledge threatened against or involving the Seller or the Business, and,
to the Seller's best knowledge, there is no basis for any of the foregoing.
There are no outstanding orders, writs, judgments, injunctions or decrees
of any court, governmental agency or arbitration tribunal against,
involving or affecting the Seller and the Seller is not in default with
respect to any order, writ, injunction or decree known to or served upon it
from any court or of any Federal, state, municipal other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign. There is no action or suit by the Seller pending or threatened
against others.
5.14. Certain Practices. Neither the Seller nor any of its officers,
employees or consultants has, directly or indirectly, given or agreed to
give any significant rebate, gift or similar benefit to any supplier,
customer, governmental employee or other person who was, is or may be in a
position to help or hinder the Seller (or assist in connection with any
actual or proposed transaction) which (i) could subject the Seller or the
Buyer to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, or (ii) if not continued in the future, could
have an adverse effect on the Business.
5.15. Compliance with Law. The Seller has complied with and is not
in default under, all laws, ordinances, legal requirements, rules,
regulations and orders applicable to it, its operations, properties,
assets, products and services, except for violations or defaults which,
individually or in the aggregate, do not have a material adverse effect on
the Seller, the Purchased Assets or the Business. There is no existing
law, rule, regulation or order, and the Seller is not aware of any proposed
law, rule, regulation or order, whether Federal or state, which would
prohibit or materially restrict Buyer from, or otherwise materially
adversely affect the Buyer in, conducting the Business in any jurisdiction
in which such business is now conducted.
5.16. Licenses and Permits. The Seller has all licenses, permits,
consents, approvals and authorizations of or from any public or
governmental agency, used in or otherwise necessary in the conduct of the
Business (collectively, the "Permits"), and, other than as set forth on
Schedule 5.16, all Permits will be duly and validly transferred to the
Buyer. The Seller has complied with all conditions and requirements of the
Permits and the Seller has not received any notice of, and has no reason to
believe, that any appropriate authority intends to cancel or terminate any
of the Permits or that valid grounds for such cancellation or termination
exist. The Seller owns or has the right to use the Permits in accordance
with the terms thereof without any conflict or alleged conflict or
infringement with the rights of others and subject to no Claim, and each
Permit is valid and in full force and effect, and will not be terminated or
adversely affected by the transactions contemplated hereby.
5.17. Labor and Employee Relations. The Seller is not a party to or
bound by any collective bargaining agreement with any labor organization,
group or association covering any of its Employees, and the Seller does not
have any knowledge of any attempt to organize any of its Employees by any
person, unit or group seeking to act as their bargaining agent. There are
no pending or to the best of Seller's knowledge threatened charges (by
employees, their representatives or governmental authorities) of unfair
labor practices or of employment discrimination or of any other wrongful
action with respect to any aspect of employment of any person employed or
formerly employed by the Seller. The Seller has not experienced any work
stoppages during the last three (3) years, and to the best of the Seller's
knowledge, no work stoppage is planned or threatened.
5.18. Employee Benefits. Set forth on Schedule 5.18 is a list of
any pension, profit sharing, retirement, deferred compensation, stock
purchase, stock option, incentive, bonus, vacation, severance, disability,
hospitalization, medical insurance, life insurance, fringe benefit, welfare
and other employee benefit plans, programs or arrangements to which
Employees of the Seller are entitled (the "Employee Plans").
The Seller will maintain the benefits, if any, of the Employee Plans
listed on Schedule 5.18 in full force and effect through the Closing Date,
and thereafter with respect to events occurring on or prior to the Closing.
The Buyer shall not have any obligation of any kind or nature for any
compensation or benefits of any kind or nature of the Seller's Employees
for services rendered prior to the Closing.
Each "Employee Welfare Benefit Plan" (as defined in Section 3(1) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
covering any present or former employee of the Seller subject to the
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") has complied with all requirements for continuation coverage
under group health benefit plans under COBRA and there are no claims
against the Seller for a failure or alleged failure to comply with the
COBRA continuation requirements.
Each Employee Plan, if any, which is subject to ERISA conforms to,
and its operation and administration are in compliance with, all applicable
requirements of ERISA. There are no actions, suits or claims pending
(other than routine claims for benefits) or, to the best knowledge of the
Seller and the Stockholders, to the best of Seller's knowledge threatened
against any Employee Plan or against the assets of any Employee Plan.
5.19. Environmental Matters. The Seller and all premises occupied
and used by it are in material compliance with all applicable laws, rules,
regulations, orders, ordinances, judgments and decrees of all governmental
authorities with respect to all environmental statutes, rules and
regulations. The Seller is not aware of, nor has the Seller received
notice of, any past, present or future events, conditions, circumstances,
activities, practices, incidents, actions or plans of the Seller, which may
interfere with or prevent continued compliance, or which may give rise to
any common law or legal liability, or otherwise form the basis of any
claim, action, suit, proceeding, hearing, or investigation, based on or
related to the disposal, storage, handling, manufacture, processing,
distribution, use, treatment, or transport, or the emission, discharge,
release or threatened release into the environment, of any Substances (as
defined below). The Seller has obtained and holds all registrations,
permits, licenses and authorizations issued by or on behalf of any Federal,
state or local government body or agency that are required in connection
with the conduct of the Seller's business, the discharge or emission of
Substances from its facilities or the generation, treatment, storage,
transportation or disposal of any Substances. As used in this Section
5.19, the term "Substances" shall mean any pollutant, hazardous substance,
hazardous material, hazardous waste or toxic waste, as defined in any
presently enacted Federal, state or local statute or any regulation that
has been promulgated pursuant thereto.
5.20. Subsidiaries. Seller has no subsidiaries.
5.21. Customers. Schedule 5.21 is a complete list of all customers
of the Business who purchased products from Seller in excess of $5,000 in
fiscal 1995. Except as disclosed in Schedule 5.21, none of such customers
who accounted for more than 5% of sales in fiscal 1995 has, to the best
knowledge of Seller, as of the date of this Agreement and the Closing Date,
discontinued or decreased its purchases of products from Seller, and Seller
has received no notice of any intention of such customers to discontinue
purchasing any products of the Business previously purchased by them.
5.22. Purchase Orders. Schedule 5.22 correctly sets forth the
quantities and the total aggregate amount (within 5%) applicable to the
purchase orders of Seller described thereon, and Seller is not materially
in default in respect of any shipping release requirements thereof. The
original quantities ordered and the outstanding amounts thereon are not in
excess of normal requirements.
5.23. Taxes. Seller has filed all tax returns and reports required
by law to have been filed by it and has paid all Taxes thereby shown to be
owing.
5.24. All Material Information. No representation or warranty in
any document, schedule, certificate, or other instrument furnished or to be
furnished to Buyer by Seller in connection with the transactions
contemplated by this Agreement contains or will contain any untrue
statement of a material fact or omits to state any material facts necessary
in order to make any statements of fact contained herein or therein, in
light of the circumstances under which they are made, not misleading.
ARTICLE VI
REPRESENTATIONS AND
WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Seller as of the date
hereof, and as of the Closing Date, as follows:
6.1. Authority. Buyer has full legal right, power and authority to
execute and deliver this Agreement and the other Transaction Documents to
which it is a party and to carry out the transactions contemplated hereby
and thereby, and all corporate and other actions required to be taken by
Buyer to authorize the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party and
all transactions contemplated hereby and thereby will have been duly and
properly taken. No consents of third parties are necessary in connection
with the execution, delivery and performance of this Agreement and such
other Transaction Documents.
6.2. Validity. This Agreement and the other Transaction Documents
to be executed and delivered by Buyer at Closing have been, or will at
Closing be, duly executed and delivered by the Buyer and are the lawful,
valid and legally binding obligations of the Buyer, enforceable in
accordance with their respective terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, rearrangement, reorganization
or similar debtor relief legislation affecting the rights of creditors.
The execution and delivery of this Agreement does not and the consummation
of the transactions contemplated hereby will not result in the creation of
any lien, charge or encumbrance or the acceleration of any indebtedness or
other obligation of the Buyer and are not prohibited by, do not violate or
conflict with any provision of, and do not result in a default under or a
breach of (i) the Buyer's charter or By-laws, (ii) any contract, agreement
or other instrument to which the Buyer is a party, (iii) any regulation,
order, decree or judgment of any court or governmental agency, or (iv) any
law applicable to the Buyer, except for such violations, conflicts or
defaults which do not (x) prevent the consummation of the transactions
contemplated hereby, or (y) have a material adverse effect on Buyer.
6.3. Due Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, with full power and authority to own or lease its properties and
to carry on the business in which it is engaged.
6.4. Capitalization. The authorized capital stock of Seller
consists of 20,000,000 shares of Common Stock, $0.01 par value ("Common
Stock"), of which 9,860,822 shares are outstanding and 5,000,000 shares of
preferred stock, $0.01 par value per share, none of which are outstanding
(without giving effect to the transactions contemplated hereby which will
occur at or concurrently with the Closing). Each outstanding share of
Common Stock is, and the Acquisition Shares to be issued at the Closing
will be, duly and validly issued, fully paid and non-assessable. Except
for the Acquisition Shares, and the options, warrants and other rights
described in Schedule 6.4 hereto, there are no outstanding options,
warrants or other rights to which Buyer is a party or otherwise bound which
provide for the acquisition, disposition or issuance of any securities of
the Buyer. There are no preemptive or similar rights attached to the
Common Stock. Upon the issuance by Buyer to Seller or its designees of the
Acquisition Shares, the Seller (or such designees) will have good and valid
title to the Acquisition Shares, free and clear of any liens, claims or
encumbrances of any nature whatsoever.
6.5. All Material Information. No representation or warranty in any
document, schedule, certificate, other instrument furnished or to be
furnished to Seller by Buyer in connection with the transactions
contemplated by this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material
facts necessary in order to make any statement of fact contained herein, or
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE VII
COVENANTS
7.1. Access and Information. Seller shall afford to Buyer, its
counsel, its accountants and other representatives full access, during
regular business hours, to the properties, assets, plants, offices,
warehouses, books and records of Seller in order that Buyer may have full
opportunity to make such investigations as it shall desire to make of the
Business and the Purchased Assets, and Seller will cause its respective
officers and accountants to furnish such additional financial and operating
data and other information as Buyer shall from time to time reasonably
request; provided, however, that any such investigation shall be conducted
in such a manner as not to interfere unreasonably with the operation of the
Business. Buyer shall furnish to Seller and its representatives all such
information and documents relating to Buyer as Seller may reasonably
request.
7.2. Books and Records. Buyer and Seller shall, for a period of at
least seven years following the Closing, maintain and make available to the
other party and its representatives for inspection and reproduction, during
regular business hours, all books and records relating to Seller, the
Purchased Assets, the Business or the Assumed Liabilities.
7.3. Employment Agreements. On or before the Closing Date, Buyer
shall execute and deliver an Employment Agreement with each of Messrs.
Buvel, Stein, Mahoney and Barrie effective on the Closing Date
substantially in the form of Exhibits A, B, C and D, respectively, attached
hereto and made a part hereof (collectively, the "Employment Agreements").
7.4. Registration Rights Agreement. On or before the Closing Date,
Buyer shall execute and deliver a Registration Rights Agreement covering
the Acquisition Shares in favor of the Noteholders substantially in the
form of Exhibit E attached hereto and made a part hereof ("Registration
Rights Agreement").
7.5. Cooperation; Public Statements. Buyer and Seller shall fully
cooperate in preparing and filing all tax returns, reports and other
instruments and documents which are required by any statute, rule or
regulation in connection with the transactions contemplated herein. Buyer
and Seller shall consult with each other prior to issuing any press
release, public announcement or other statement with respect to this
Agreement or the transactions contemplated hereby.
7.6. Conduct of Business.
From the date hereof through the Closing Date, Seller agrees
that it will, consistent with its past practices and policies with
respect to the Business:
(a) Conduct the Business in the usual, regular and ordinary
course.
(b) Keep the Purchased Assets in good operating condition and
repair and make all normal and necessary repairs, renewals,
replacements and improvements thereto.
(c) Maintain its existing policies of insurance and apply any
insurance recovery to the prompt repair or replacement of any insured
loss. Any insurance recoveries which cannot be used for the repair
or replacement of any insured loss prior to the Closing Date shall,
if the transaction contemplated hereby is closed, be paid to Buyer at
the Closing.
(d) Comply with all laws, regulations and orders applicable to
the Purchased Assets, to the Business and to Seller.
(e) Perform in all material respects its obligations under all
material Contracts.
(f) Use its best efforts to preserve good business
relationships with its customers, suppliers, dealers, employees,
lessors and others having relationships with Seller relating to the
Business, provided that Seller shall provide Buyer with prompt
written notice of the loss of any customer representing 5% or more of
Seller's revenues.
(g) Use its best efforts to maintain all Intellectual Property
relating to the Business.
(h) Maintain its past level of sales activities and continue
to order materials and supplies consistently with such prior levels
of activities.
(i) Maintain the Purchased Assets by replacing or repairing
the same.
(j) Not permit any of the following events to occur:
(i) Any material adverse change in the Business;
(ii) Any decreases in the prices charged for Seller's
products used in the Business otherwise than in the ordinary
course of business;
(iii) Any material change in security or other deposits or
advances, including "Key-Man" insurance funding, maintained for
use in the conduct of the Business from that appearing on the
most recent Financial Statements provided to Buyer;
(iv) Any mortgage, pledge or other disposition of any of
the Purchased Assets, provided that Seller may sell Inventory in
the ordinary course of business consistent with past practices;
(v) Any material change in the indebtedness of Seller from
that reflected in the Financial Statements;
(vi) Any material alteration in Seller's marketing or
promotions policies relating to the Business, or in any
expenditures attendant thereto; or
(vii) Any material change in Seller's contractual
relationships with any vendor, customer, dealer, distributor,
supplier or other party which might reasonably be expected to
adversely affect the Business or its prospects or give Seller
any reason to believe any such vendor, customer, dealer,
distributor, supplier or other party will not continue to do
business with Buyer after the date hereof.
7.7. Warehousing Agreement. Seller shall use its best efforts to
obtain any waivers or consents to the assignment to Buyer, prior to the
Closing Date, of the Administration, Selling and Warehousing Agreement,
dated as of June 6, 1995, between Seller and Muelhens Inc. (the "Muelhens
Contract"). Without limiting the generality of the foregoing, Seller shall
use its best efforts to take such actions as shall in Buyer's reasonable
opinion be necessary or appropriate (i) in order that the rights and
obligations of Seller under the Muelhens Contract are preserved for the
benefit of Buyer, (ii) to obtain any necessary waivers or consents to the
assignment to Buyer of any amended or modified Muelhens Contract or any
Contract executed by Seller in substitution for the Muelhens Contract, and
(iii) to facilitate the collection of monies due and payable and to become
due and payable to Seller in respect of the Muelhens Contract, as it may be
amended or modified, or any such replacement Contract, and Seller shall
hold all such monies in trust for the benefit of Buyer and shall promptly
pay such amounts to Buyer.
7.8. Change of Corporate Name. On the Closing Date, or as soon
thereafter as practicable, Seller shall change its corporate name to a new
name which does not include the term "Richard Barrie Fragrances" or any
variation thereof or similar name and otherwise is not likely to be
confused with Seller's present name, so as to make Seller's present name
available to Buyer. From and after the Closing Date, and until such name
change shall be effective, Seller may continue to use its corporate name to
the extent necessary to effect an orderly transition.
7.9. Cooperation Concerning Approval of Stockholders and Noteholders
of Seller. In connection with Seller's efforts to obtain approval of the
transactions contemplated hereunder, which is a condition precedent
pursuant to Sections 8.6, 8.7, 9.6 and 9.7, Seller will require certain
assistance and cooperation by Buyer and its public accountants in order to
permit Seller to provide to its stockholders and Noteholders information
concerning Buyer. Buyer shall cooperate in furnishing Seller with such
information and documents as may be reasonably requested by Seller of the
nature described on Schedule 14A (SEC Rule 101) and SEC Rule 502. To the
extent that such information shall be derived from or presented by
incorporation by reference to any form, report, schedule, registration
statement or definitive proxy statement filed by Buyer with the SEC
("Buyer's SEC Documents"), Buyer represents that, as of their respective
dates, Buyer's SEC Documents (other than preliminary material) complied in
all material respects with the Securities Act or the Exchange Act, as
applicable, and none of Buyer's SEC Documents (including all financial
statements included therein and exhibits and schedules thereto incorporated
by reference therein) contained any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. Any such financial statements comply as to
form in all material respects with applicable accounting requirements and
with the rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis in the
periods involved (except as may be indicated in the notes thereto) or in
the case of unaudited financial statements, as permitted by Exchange Act
Form 10-Q, and fairly present (subject, in the case of unaudited financial
statements, to normal recurring audit adjustments that, individually and in
the aggregate, were not material) the consolidated financial position of
Buyer as of the date thereof and the consolidated results of Buyer's
operations and cashflows for the periods then ended.
ARTICLE VIII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF BUYER
Each and all of the obligations of Buyer to consummate the
transactions contemplated by this Agreement are subject to fulfillment
prior to or at the Closing of the following conditions:
8.1. Accuracy of Warranties; Performance of Covenants. The
representations and warranties of Seller contained herein shall be accurate
in all respects as if made on and as of the Closing Date, as well as on the
date when made except for such non-materially adverse changes therein as
may have occurred in the ordinary course of business and which are
disclosed to Buyer in revised Schedules delivered at or prior to the
Closing. Seller shall have performed each and all of the obligations and
complied with each and all of the covenants specified in this Agreement to
be performed or complied with on or prior to the Closing, and Seller shall
have delivered to Buyer a certificate dated the Closing Date to such
effect.
8.2. Opinion of Counsel. Seller shall have delivered to Buyer (in
form and substance satisfactory to Buyer) an opinion of counsel dated the
Closing Date, to the effect that:
(a) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada;
(b) The execution, delivery and performance of this Agreement
and each of the Transaction Documents to be delivered by Seller are
within the corporate authority and power of Seller and have been duly
authorized and approved by all requisite corporate action of Seller;
(c) This Agreement and all Transaction Documents to be
delivered by Seller have been duly executed and delivered and
constitute valid and binding obligations of Seller, enforceable in
accordance with their terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and subject
to any equity principles limiting the right to obtain specific
performance of Seller's obligations hereunder;
(d) The instruments executed and delivered pursuant to this
Agreement to Buyer at the Closing are valid in accordance with their
terms and effectively vest in Buyer all of the right, title and
interest of Seller in and to the assets, properties, rights and
claims to be conveyed, assigned and transferred hereunder;
(e) Except as disclosed in this Agreement, to the knowledge of
such counsel, there is no litigation, arbitration or other judicial
or regulatory proceeding pending against Seller with respect to the
Business or any of the Purchased Assets or the transactions
contemplated by this Agreement;
(f) Neither the execution and delivery of this Agreement or any
other Transaction Document to which Seller is a party nor compliance
with the provisions hereof or thereof will conflict with, violate or
result in a default under the terms, conditions or provisions of the
corporate charter or bylaws of Seller, or, to such counsel's
knowledge, of any agreement or instrument to which Seller is a party,
which conflict, violation or default would result in the creation of
a lien or other encumbrance upon the Purchased Assets or affect
Seller's ability to perform its obligations hereunder or thereunder;
and
(g) To the knowledge of such counsel there are no consents,
approvals or authorizations of any governmental authority or third
parties required in connection with the execution, delivery and
performance by Seller of this Agreement and the other Transaction
Documents to be executed and delivered by Seller in connection with
the transactions contemplated hereby, other than those that have been
obtained by the Closing Date.
8.3. No Pending Action. No judicial or administrative proceeding
shall be pending seeking to enjoin or prevent, nor shall any order or
injunction have been issued prohibiting, consummation of the transactions
contemplated hereby.
8.4. Condition of Business and Purchased Assets. From the date of
this Agreement, there shall have been no material adverse change in the
Business or the financial condition of Seller, and the Purchased Assets
shall not have been materially damaged, lost or otherwise materially
adversely affected in any way by any act of God, fire, flood, war, or other
event constituting force majeure.
8.5. Certified Resolutions. Seller shall have delivered to Buyer
resolutions adopted by Seller's Board of Directors and stockholders,
certified by Seller's secretary, authorizing the execution of this
Agreement and the other Transaction Documents to which Seller is a party
and the consummation of the transactions contemplated hereby and thereby.
8.6. Approval of Seller's Stockholders. Seller shall have provided
evidence to Buyer of the required approval of Seller's stockholders to
consummate the transactions contemplated by this Agreement by the requisite
vote of Seller's stockholders in accordance with applicable law and
Seller's certificate of incorporation and by-laws, and such approval shall
be in full force and effect.
8.7. Noteholders' Consents. Seller shall have provided evidence to
Buyer that the Noteholders representing not less than $5,001,750 in
aggregate principal amount of the Notes shall have consented to the
transactions contemplated by this Agreement, and such consents shall be in
full force and effect.
8.8. Assignment of Certain Contracts. Seller shall have provided
evidence to Buyer of the required consent to the assignment to Buyer of the
Baker Properties Lease and such consent shall be in full force and effect.
ARTICLE IX
CONDITIONS PRECEDENT TO
SELLER'S OBLIGATIONS
Each and all of the obligations of Seller to consummate the
transactions contemplated by this Agreement are subject to fulfillment
prior to or at the Closing of the following conditions:
9.1. Accuracy of Warranties; Performance of Covenants. The
representations and warranties of Buyer contained herein shall be accurate
in all respects as if made on and as of the Closing Date, as well as on the
date when made, except for non-materially adverse changes therein as may
have occurred in the ordinary course of business and which are disclosed to
Seller in revised Schedules delivered at or prior to Closing. Buyer shall
have performed each and all of the obligations and complied with each and
all of the covenants specified in this Agreement to be performed or
complied with on or prior to the Closing and Buyer shall have delivered to
Seller a certificate dated the Closing Date to such effect.
9.2. Opinion of Counsel. Buyer shall have delivered to Seller (in
form and substance satisfactory to Seller) an opinion of Mayer, Brown &
Platt, Buyer's counsel, dated the Closing Date, to the effect that:
(a) Buyer is a corporation validly existing and in good
standing under the laws of the State of Delaware;
(b) The execution, delivery and performance of this Agreement
and the other Transaction Documents to be delivered by Buyer are
within the corporate authority and power of Buyer and have been duly
authorized and approved by all requisite corporate action of Buyer;
(c) This Agreement and each of the other Transaction Documents
to which Buyer is a party have been duly executed and delivered and
constitutes the valid and binding obligation of Buyer, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to affecting creditors' rights and subject to any equity
principles limiting the right to obtain specific performance of
Buyer's obligations hereunder and thereunder;
(d) Neither the execution and delivery of this Agreement or the
other Transaction Documents to which Buyer is a party nor compliance
with the provision hereof or thereof will conflict with, violate or
result in a default under the terms, conditions or provisions of the
corporate charter or By-laws of Buyer, or, to such counsel's
knowledge, of any agreement or instrument to which Buyer is now a
party which would affect its ability to perform its obligations
hereunder or thereunder;
(e) To the knowledge of such counsel, there are no consents,
approvals or authorizations of any governmental authority or other
person in connection with the execution, delivery and performance by
Buyer of this Agreement and the other Transaction Documents to which
Buyer is a party which have not been obtained; and
(f) The Acquisition Shares are duly authorized, validly issued,
fully paid and nonassessable.
9.3. No Pending Action. No judicial or administrative proceeding is
pending seeking to enjoin or prevent, nor shall any governmental order or
injunction have been issued prohibiting, the consummation of the
transactions contemplated hereby.
9.4. Certified Resolutions. Buyer shall have delivered to Seller
resolutions adopted by Buyer's Board of Directors, certified by Buyer's
secretary, authorizing the execution of this Agreement and the consummation
of the transactions contemplated hereby.
9.5. Condition of Assets. The Purchased Assets shall not have been
substantially destroyed, damaged or lost by any act of God, fire, flood,
war or other event constituting force majeure which is not covered by
insurance.
9.6. Approval of Seller's Stockholders. Seller shall have provided
evidence to Buyer of the required approval of Seller's stockholders to
consummate the transactions contemplated by this Agreement by the requisite
vote of Seller's stockholders in accordance with applicable law and
Seller's certificate of incorporation and by-laws, and such approval shall
be in full force and effect.
9.7. Noteholders' Consents. Seller shall have provided evidence to
Buyer that the Noteholders representing not less than $5,001,750 in
aggregate principal amount of the Notes shall have consented to the
transactions contemplated by this Agreement, and such consents shall be in
full force and effect.
9.8. Side Letter. Buyer and Seller shall have entered into a letter
agreement covering such post-Closing and other matters as to which Buyer
and Seller shall mutually agree.
ARTICLE X
EMPLOYEES
10.1. Continued Association with the Business. Seller shall use its
best efforts to encourage the Employees of the Business to continue until
Closing and thereupon to accept and retain employment with Buyer, provided
that, except as contemplated in Section 7.3 or as otherwise agreed to by
Buyer in its sole discretion, Buyer shall have no obligation to hire any
Employees of Seller.
10.2. Severance. Concurrently with the Closing, Seller shall
terminate all employees of the Business and shall pay to each such employee
any amounts owing applicable to the period through the Closing Date
including all vacation and sick pay.
10.3. Personnel Records. Unless prohibited by law, Seller shall
make available to Buyer all personnel records for all Employees of Seller,
including but not limited to names, social security numbers, dates of hire
by Seller, dates of birth, number of hours worked in each calendar year,
and salary histories, provided that Seller and Buyer shall cooperate in
securing any necessary releases or waivers of confidentiality with respect
to such personnel records and otherwise in order to ensure an orderly and
effective transition. Not later than the Closing Date, Buyer shall advise
Seller as to which Employees of Seller Buyer will be hiring.
ARTICLE XI
NONCOMPETITION COVENANTS OF SELLER
11.1. Seller's Covenants. In consideration for the purchase by
Buyer of the Purchased Assets, Seller agrees and covenants that neither it
nor its Affiliates (other than Messrs. Buvel, Stein, Mahoney and Barrie)
will from and after Closing directly or indirectly for a period of seven
years engage in the manufacture or sale, or licensing for manufacture or
sale, in the United States or any foreign country, of the Purchased Assets.
The parties agree that this covenant is necessary to protect the value of
the Business purchased hereunder, and Seller agrees that any breach of the
restrictive covenant set forth above will result in irreparable damage to
Buyer to which Buyer will have no adequate remedy at law, and Seller
consents to any injunction by any court of competent jurisdiction in favor
of Buyer enjoining any breach of such covenant, without prejudice to any
other right or remedy to which Buyer shall be entitled. In the event that
this covenant shall be determined by any court of competent jurisdiction to
be unenforceable by reason of its being extended to too great a period of
time or too large a geographic area or over too great a range of
activities, it should be interpreted to extend only over the maximum period
of time, geographic area, or range of activities as to which it may be
enforceable.
ARTICLE XII
SURVIVAL AND INDEMNIFICATION
12.1. Survival. All representations, warranties, covenants and
agreements contained in this Agreement or in any document delivered
pursuant hereto shall survive the Closing, but only with respect to claims
for breach of any such representation or warranty which are made in writing
by either party against the other and are delivered to the other within two
years after the Closing. The representations and warranties set forth in
this Agreement shall not be affected by any investigation, verification or
approval by any party hereto or by anyone on behalf of any such party.
12.2. Indemnification.
(a) Seller agrees to indemnify, defend and hold harmless Buyer
from and against any and all loss, damage, expense (including
reasonable attorneys' fees), suit, action, claim, liability or
obligation related to, caused by or arising from (i) any
misrepresentation, breach of warranty or failure of Seller to fulfill
any covenant or agreement of Seller in or pursuant to this Agreement,
unless waived by Buyer, provided, however, that Seller's liability
therefor shall be limited to $3,700,000, and provided, further, that
Seller shall not be liable for any claim arising from a breach of a
representation, warranty or covenant contained herein, that is not
made in writing delivered to Seller within two years after the
Closing, (ii) any Excluded Liabilities, or (iii) any liability
arising from the operation of the Business prior to the Closing Date,
including but not limited to liability arising from damage or injury
(real or alleged) to person or property arising from the ownership,
possession or use of any finished goods manufactured by the Business
or Seller through the Closing Date.
(b) Buyer shall indemnify, defend and hold harmless Seller from
and against any and all loss, damage, expense (including reasonable
attorneys' fees) suit, action, claims, liability or obligation
related to, caused by or arising from (i) any misrepresentation,
breach of warranty or failure of Buyer to fulfill any covenant or
agreement in or pursuant to this Agreement, unless waived by Seller,
or any liability of the Business expressly assumed in writing by
Buyer, provided, that Buyer shall not be liable for any claim arising
from a breach of a representation, warranty or covenant contained
herein that is not made in writing delivered by Seller within two
years after the Closing, (ii) any Assumed Liabilities, or (iii) any
liability arising from the operation of the Business by the Buyer
after the Closing Date.
(c) Each party indemnified under the provisions of this Section
12.2, upon receipt of written notice of any claim of the service of a
summons or other initial legal process upon it in any action
instituted against it, in respect of which indemnity may be sought on
account of any indemnity agreement contained in this Section 12.2,
shall promptly give written notice of such claim, or the commencement
of such action, or threat thereof, to the party from whom indemnity
shall be sought hereunder. Such indemnifying party shall be entitled
at its own expense to participate in the defense of such claim or
action, or, if it shall elect, to assume such defense, in which event
such defense shall be conducted by counsel chosen by such
indemnifying party, which counsel may be any counsel reasonably
satisfactory to the indemnifying party against whom such claim is
asserted or who shall be the defendant in such action, and such
indemnified party shall bear the fees and expenses of any additional
counsel retained by it or them. If the indemnifying party shall
elect not to assume the defense of such claim or action, such
indemnifying party will reimburse such indemnified party for the
reasonable fees and expenses of any counsel retained by it, and shall
be bound by the results obtained by the indemnified party; provided,
however, that no such claim or action shall be settled without the
written consent of the indemnifying party.
(d) Notwithstanding anything contained herein to the contrary,
the indemnities provided for in this Section 12.2 shall not be
enforceable unless and until the aggregate amount of claims by the
party entitled to indemnification (including the full asserted
amounts of claims against the party entitled to indemnification)
exceeds the sum of Ten Thousand Dollars ($10,000), whereupon the
entire aggregate amount of claims (including the first $10,000), and
all additional claims shall be enforceable in full.
ARTICLE XIII
GENERAL PROVISIONS
13.1. Waiver of Conditions. Each party may, at its option, waive in
writing any or all of the conditions herein contained to which its
obligations hereunder are subject.
13.2. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be sent by
registered or certified mail, postage prepaid, as follows:
(a) If to Seller:
Richard Barrie Fragrances, Inc.
15 Executive Boulevard
Orange, Connecticut 06477-0532
Attention: President
With a copy to:
Peter M. Ziemba Esq.
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
(b) If to Buyer:
Parlux Fragrances, Inc.
3725 S.W. 30th Avenue
Ft. Lauderdale, Florida 33312
Attention: Ilia Lekach, Chief Executive Officer
With a copy to:
Barry P. Biggar, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Any party may change its address for receiving notice by written notice
given to the others named above.
13.3. Modifications and Amendments. The terms and provisions of
this Agreement may be modified or amended only by written agreement
executed by all parties hereto.
13.4. Waivers and Consents. The terms and provisions of this
Agreement may be waived, or consent for the departure therefrom granted,
only by written document executed by the party entitled to the benefits of
such terms or provisions. No such waiver or consent shall be deemed to be
or shall constitute a waiver or consent with respect to any other terms or
provisions of this Agreement, whether or not similar. Each such waiver or
consent shall be effective only in the specific instance and for the
purpose for which it was given, and shall not constitute a continuing
waiver or consent.
13.5. Assignment. Neither this Agreement, nor any right hereunder,
may be assigned by any of the parties hereto without the prior written
consent of the other parties, except that the Buyer may assign all or part
of its rights and obligation under this Agreement (other than its
obligations to issue the Acquisition Shares or execute and deliver the
agreements referred to in Sections 7.3 and 7.4) to one or more direct or
indirect affiliates (in which event, representations and warranties
relating to the Buyer and the opinion of counsel to be delivered by the
Buyer shall be appropriately modified).
13.6. Jurisdiction and Service of Process. Any legal action or
proceeding with respect to this Agreement may be brought in the courts of
the State of New York or of the United States of America for the Southern
District of New York. By execution and delivery of this Agreement, each of
the parties hereto accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts.
The parties hereby irrevocably waive any objection or defense that they may
now or hereafter have to the assertion of personal jurisdiction by any such
court in any such action or to the laying of venue of any such action in
any such court, and hereby waive, to the extent not prohibited by law, and
agree not to assert, by way of motion, as a defense, or otherwise, in any
such proceeding, any claim that it is not subject to the jurisdiction of
the above-named courts for such proceedings. Each of the parties hereto
irrevocably consents to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered mail, postage prepaid, to the party at its address set forth in
Section 13.2 hereof and irrevocably waive any objection or defense that it
may now or hereafter have to the sufficiency of any such service of process
in any such action. Nothing in this Section 13.6 shall affect the rights
of the parties to commence any such action in any other forum or to serve
process in any such action in any other manner permitted by law.
13.7. Interpretation. The parties hereto acknowledge and agree
that: (i) each party and its counsel reviewed and negotiated the terms and
provisions of this Agreement (except with respect to the disclosure
schedules regarding the Business which are the sole responsibility of the
Seller) and have contributed to its revision; (ii) the rule of construction
to the effect that any ambiguities are resolved against the drafting party
shall not be employed in the interpretation of this Agreement; and (iii)
the terms and provisions of this Agreement shall be construed fairly as to
all parties hereto and not in favor of or against any party, regardless of
which party was generally responsible for the preparation of this
Agreement.
13.8. Entire Transaction. This Agreement and the documents referred
to herein embody the entire agreement and understanding among the parties
with respect to the transactions contemplated hereby and supersede all
prior oral or written agreements and understandings among the parties.
13.9. Applicable Law. This Agreement shall be governed in its
interpretation and application by the internal laws of the State of New
York without giving effect to the conflict of law principles thereof.
13.10. Litigation Arising from the Business Activities. It is
recognized that in the future litigation may arise relating to the Business
and the conduct, products, property or assets thereof, which may relate
directly or indirectly to the period prior to the Closing, the period
subsequent to the Closing or both. Therefore, each of the parties agrees
that, to the extent reasonable under the circumstances, it will assist and
provide information, records and documents and the Employees covered by the
Employment Agreements to any other parties with respect to any such
litigation or potential litigation in which such other party is or may be
involved.
13.11. Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
13.12. Brokers. Each party warrants to the other that it has not
retained any brokers or finders or incurred any liability for any brokerage
fees, commissions or finder's fees with respect to this Agreement or the
transactions contemplated hereby.
13.13. Expenses. Except as otherwise expressly provided herein or
in another Transaction Document, each party to this Agreement shall pay its
own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this
Agreement and the transactions contemplated hereby.
13.14. Severability. If any term or provision of this Agreement
shall to any extent be decreed by a court of competent jurisdiction to be
invalid or unenforceable, such term or provision shall not thereby be
deemed invalid or unenforceable in any other jurisdiction, and the
remainder of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.
13.15. Counterparts. This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by a duly authorized officer all as of the date
first written above.
RICHARD BARRIE FRAGRANCES, INC.
By /s/ Richard Barrie
---------------------
Name:
Title:
PARLUX FRAGRANCES, INC.
By /s/ Ilia Lekach
--------------------
Name:
Title:
EXHIBIT 4.29
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
WERE ISSUED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF
THE ACT UNDER REGULATION D. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT COVERING SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THE SECURITIES, REASONABLY ACCEPTABLE TO THE
ISSUER, TO THE EFFECT THAT SUCH SALE, TRANSFER OR OTHER DISPOSITION IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
No. R-1 US $500,000
PARLUX FRAGRANCES, INC.
5% CONVERTIBLE DEBENTURE DUE JUNE 1, 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 5%
Convertible Debenture Due June 1, 1997, in an aggregate principal amount
not exceeding US$20,000,000.
FOR VALUE RECEIVED, the Company promises to pay to Newsun Limited,
the registered holder hereof (the "Holder"), the principal sum of
US$500,000, on June 1, 1997 (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 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
each 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
Securities Subscription Agreement, dated the date hereof, 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 or in accordance
with paragraph 4 herein, 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 Company's check, subject to collection, or the
delivery of shares of Common Stock, shall 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 or number and amount of shares of Common Stock.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Two Hundred and
Fifty Thousand Dollars (US $250,000) 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 set forth in the
Subscription Agreement and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"). Prior
to due presentment for 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. In accordance with the provisions of Sections 4(c), 12(b) and 16
of the Subscription Agreement, but subject to the approval by the
Stockholders of the Company of the increase in the authorized number of
shares of Common Stock to thirty million as contemplated by Section 4(e) of
the Subscription Agreement, the Holder of this Debenture may, at any time
after the earliest to occur of (i) the date that the Registration Statement
(referred to in and defined in Section 4(c) of the Subscription Agreement)
is declared effective by the Securities and Exchange Commission, (ii) the
date that the Stockholders of the Company approve the increase in the
authorized number of shares of Common Stock to thirty million as
contemplated by Section 4(e) of the Subscription Agreement, (iii) the 180th
day after the date hereof or (iv) a "change-in control" of the Company (as
defined in the Subscription Agreement), 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, par value $.01 per share (the "Common Stock"), of the Company at a
conversion price for each share of Common Stock equal to Eighty Six Percent
(86%) of the Market Price of the Company's Common Stock (the difference
between One Hundred Percent (100%) of the Market Price of the Common Stock
and the conversion price of Common Stock hereunder is referred to as the
"Discount"); provided, however, that in no event will the conversion price
be greater than $11.375 per share of Common Stock; and, provided, further,
that the Discount may be increased in certain circumstances as provided in
Section 12(a) of the Subscription Agreement. For purposes of this Section
4, the Market Price shall be the average of the closing bid prices of the
Common Stock over the five consecutive trading days ending on the trading
day immediately preceding the Conversion Date, as reported by the National
Association of Securities 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 trading day immediately preceding 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 reported in The Wall Street Journal, over the five consecutive
trading days ending on the trading day immediately preceding 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 fraction of shares of the
Common Stock or scrip representing fractions of shares will be issued on
conversion, but the number of shares of the Common Stock 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 original notice
of conversion and the original Debenture to be converted are delivered to
the Company.
5. Any of the following shall constitute an "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 written 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, in any material
respect, any covenant, term, provision, condition, agreement or
obligation of the Company under this Debenture or the
Subscription Agreement and such failure shall continue uncured
for a period of five (5) business days after the first date on
which notice of such failure is given to the Company (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 perform such
covenant constituting an 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
institution or the Company shall by any action or answer approve
of, consent to, or acquiesce in any such proceeding or admit the
material allegations of, or default in answering a petition
filed in any such proceeding; or
g. The Company shall have its Common Stock delisted from the NASDAQ
National 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 ten (10) 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 in
excess of $100,000 and such judgment, levy or attachment shall
not be dismissed, stayed, bonded or discharged within thirty
(30) days of the date of entry thereof;
j. The Company shall be a party to any merger or consolidation in
which it shall not be the surviving entity or shall dispose of
all or substantially all of its assets in one or more
transactions or shall redeem more than a de minimis amount of
its outstanding shares of capital stock; or
k. The stockholders of the Company shall not have approved the
increase in the authorized number of shares of Common Stock to
thirty million as contemplated by Section 4(e) of the
Subscription Agreement within 150 days of the date hereof.
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 principal amount of the Debenture, as set forth on the first
page hereof, together with any accrued and unpaid interest thereon, 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 or 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 or shares of Common Stock, 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 will be construed and enforced in accordance with
and governed by the laws of the State of New York, except for matters
arising under the Act, without reference to principles of conflicts of law.
Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the State of New York or the state
courts of the State of New York in connection with any dispute arising
under this Debenture and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on forum non conveniens,
to the bringing of any such proceeding in such jurisdictions. Each party
hereby agrees that if another party to this Debenture obtains a judgment
against it in such a proceeding, the party which obtained such judgment may
enforce same by summary judgment in the courts of any country having
jurisdiction over the party against whom such judgment was obtained, and
each party hereby waives any defenses available to it under local law and
agrees to the enforcement of such a judgment. Each party to this Debenture
irrevocably consents to the service of process in any such proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein
shall affect the right of any party to serve process in any other manner
permitted by law.
9. This Debenture shall be binding upon the Company and its
successors, including, but not limited to, a successor to the Company by
consolidation or merger or a transferee of all or substantially all of its
assets.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
PARLUX FRAGRANCES, INC.
By: /s/ Ilia Lekach
-------------------
Name: Ilia Lekach
Title: Chairman Of The Board
Dated: July 2, 1996
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above
Debenture No. ___ into Shares of Common Stock of PARLUX FRAGRANCES, INC.
(the "Company") according to the conditions of the Debentures, as of the
date written below.
________________________________
Date of Conversion
_______________________________
Applicable Conversion Price
NEWSUN LIMITED
_______________________________
Signature
Address:
Newsun Limited
c/o ABN AMRO Trust Company
80 Rue due Rhone
1204 Geneva, Switzerland
* This original Debenture and Notice of Conversion must be received by
the Company by the third business day following the Date of Conversion.
EXHIBIT 4.30
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND WERE ISSUED
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE ACT UNDER
REGULATION D. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT COVERING SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL
FOR THE HOLDER OF THE SECURITIES, REASONABLY ACCEPTABLE TO THE ISSUER, TO
THE EFFECT THAT SUCH SALE, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT.
No. R-11 US$500,000
PARLUX FRAGRANCES, INC.
5% CONVERTIBLE DEBENTURE DUE JUNE 1, 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 5%
Convertible Debenture Due June 1, 1997, in an aggregate principal amount
not exceeding US$20,000,000.
FOR VALUE RECEIVED, the Company promises to pay to Kempton Investments
Ltd., the registered holder hereof (the "Holder"), the principal sum of
US$500,000, on June 1, 1997 (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 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
each 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
Securities Subscription Agreement, dated the date hereof, 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 or in accordance with paragraph 4 herein, 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 Company's check,
subject to collection, or the delivery of shares of Common Stock, shall
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 or number and amount of
shares of Common Stock.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Two Hundred and
Fifty Thousand Dollars (US $250,000) 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 set forth in the
Subscription Agreement and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"). Prior
to due presentment for 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. In accordance with the provisions of Sections 4(c), 12(b) and 16 of
the Subscription Agreement, but subject to the approval by the Stockholders
of the Company of the increase in the authorized number of shares of Common
Stock to thirty million as contemplated by Section 4(e) of the Subscription
Agreement, the Holder of this Debenture may, at any time after the earliest
to occur of (i) the date that the Registration Statement (referred to in
and defined in Section 4(c) of the Subscription Agreement) is declared
effective by the Securities and Exchange Commission, (ii) the date that the
Stockholders of the Company approve the increase in the authorized number
of shares of Common Stock to thirty million as contemplated by Section 4(e)
of the Subscription Agreement, (iii) the 180th day after the date hereof or
(iv) a "change-in control" of the Company (as defined in the Subscription
Agreement), 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, par value $.01
per share (the "Common Stock"), of the Company at a conversion price for
each share of Common Stock equal to Eighty Six Percent (86%) of the Market
Price of the Company's Common Stock (the difference between One Hundred
Percent (100%) of the Market Price of the Common Stock and the conversion
price of Common Stock hereunder is referred to as the "Discount");
provided, however, that in no event will the conversion price be greater
than $11.375 per share of Common Stock; and, provided, further, that the
Discount may be increased in certain circumstances as provided in Section
12(a) of the Subscription Agreement. For purposes of this Section 4, the
Market Price shall be the average of the closing bid prices of the Common
Stock over the five consecutive trading days ending on the trading day
immediately preceding the Conversion Date, as reported by the National
Association of Securities 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 trading day immediately preceding 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 reported in The Wall Street Journal, over the five consecutive
trading days ending on the trading day immediately preceding 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 fraction of shares of the
Common Stock or scrip representing fractions of shares will be issued on
conversion, but the number of shares of the Common Stock 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 original notice
of conversion and the original Debenture to be converted are delivered to
the Company.
5. Any of the following shall constitute an "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
written 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, in any material respect, any
covenant, term, provision, condition,
agreement or obligation of the Company
under this Debenture or the
Subscription Agreement and such failure
shall continue uncured for a period of
five (5) business days after the first
date on which notice of such failure is
given to the Company (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 perform such covenant
constituting an 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 institution or the Company
shall by any action or answer approve
of, consent to, or acquiesce in any
such proceeding or admit the material
allegations of, or default in answering
a petition filed in any such
proceeding; or
g. The Company shall have its Common Stock
delisted from the NASDAQ National
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 ten
(10) 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 in excess of $100,000 and such
judgment, levy or attachment shall not
be dismissed, stayed, bonded or
discharged within thirty (30) days of
the date of entry thereof;
j. The Company shall be a party to any
merger or consolidation in which it
shall not be the surviving entity or
shall dispose of all or substantially
all of its assets in one or more
transactions or shall redeem more than
a de minimis amount of its outstanding
shares of capital stock; or
k. The stockholders of the Company shall
not have approved the increase in the
authorized number of shares of Common
Stock to thirty million as contemplated
by Section 4(e) of the Subscription
Agreement within 150 days of the date
hereof
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 principal amount of the Debenture, as set forth on the first
page hereof, together with any accrued and unpaid interest thereon, 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 or 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 or shares of Common Stock, 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 will be construed and enforced in accordance with
and governed by the laws of the State of New York, except for matters
arising under the Act, without reference to principles of conflicts of law.
Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the State of New York or the state
courts of the State of New York in connection with any dispute arising
under this Debenture and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on forum non conveniens,
to the bringing of any such proceeding in such jurisdictions. Each party
hereby agrees that if another party to this Debenture obtains a judgment
against it in such a proceeding, the party which obtained such judgment may
enforce same by summary judgment in the courts of any country having
jurisdiction over the party against whom such judgment was obtained, and
each party hereby waives any defenses available to it under local law and
agrees to the enforcement of such a judgment. Each party to this Debenture
irrevocably consents to the service of process in any such proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein
shall affect the right of any party to serve process in any other manner
permitted by law.
9. This Debenture shall be binding upon the Company and its
successors, including, but not limited to, a successor to the Company by
consolidation or merger or a transferee of all or substantially all of its
assets.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
PARLUX FRAGRANCES, INC.
By:_________________________
Name: Ilia Lekach
Title: Chairman of the Board
Dated: July 2, 1996
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above
Debenture No. ____ into Shares of Common Stock of PARLUX FRAGRANCES, INC.
(the "Company") according to the conditions of the Debentures, as of the
date written below.
____________________________
Date of Conversion
____________________________
Applicable Conversion Price
KEMPTON INVESTMENTS LTD.
____________________________
Signature
Address:
Kempton Investments Ltd.
1183 Finch Avenue West
North York, M3J2G2, Canada
* This original Debenture and Notice of Conversion must be received by the
Company by the third business day following the Date of Conversion.
EXHIBIT 5
July 18, 1996
Parlux Fragrances, Inc.
3725 S.W. 30th Avenue
Ft. Lauderdale, Florida 33312
Ladies and Gentlemen:
We are acting as special counsel to Parlux Fragrances, Inc. (the
"Company") in connection with the registration under the Securities Act of
1933, as amended, of 2,077,646 shares (the "Shares") of the Company's
common stock, $.01 par value per share (the "Common Stock"), to be offered
by certain selling stockholders of the Company (the "Selling Stockholders")
upon the terms and subject to the conditions set forth in the Company's
Registration Statement on Form S-3 covering the Shares (the "Registration
Statement") filed with the Securities and Exchange Commission.
In connection therewith, we have examined the Registration Statement and
such other documents and instruments as we have deemed necessary or
appropriate for the expression of the opinions contained herein.
We have assumed the authenticity and completeness of all records,
certificates and other instruments submitted to us as originals, the
conformity to original documents of all records, certificates and other
instruments submitted to us as copies, the authenticity and completeness of
the originals of those records, certificates and other instruments
submitted to us as copies and the correctness of all statements of fact
contained in all records, certificates and other instruments that we have
examined.
Based on and in reliance upon the foregoing, we are of the opinion that
the Shares proposed to be offered by the Selling Stockholders have been
duly and validly authorized for issuance and (i) are fully paid and
nonassessable shares of Common Stock or (ii) will be fully paid and
nonassessable shares of Common Stock upon the conversion of the Company's
5% convertible debentures in the aggregate principal amount of $10 million
held by GFL and Newsun (as such terms are defined in the Registration
Statement), as the case may be.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters."
Very truly yours,
Mayer, Brown & Platt
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus constituting part of this Registration Statement on
Form S-3 of our report dated June 28, 1996 appearing on page F-2
of Parlux Fragrances, Inc.'s Annual Report on Form 10-K for the
year ended March 31, 1996. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
July 16, 1996
Miami, Florida
