<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
PARLUX FRAGRANCES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
PARLUX FRAGRANCES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PARLUX FRAGRANCES, INC.
3725 S.W. 30TH AVENUE
FORT LAUDERDALE, FL 33312
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of
Parlux Fragrances, Inc. (the "Company") will be held at the Holiday Inn, 2905
Sheridan Street, Hollywood, Florida, 33020 on Tuesday, October 14, 1997, at
10:00 a.m. for the following purposes as set forth in the accompanying Proxy
Statement:
1. To approve an amendment to the Company's Certificate of
Incorporation to create a classified board of directors;
2. To elect seven directors;
3. To ratify the appointment of Price Waterhouse L.L.P. as
independent certified public accountants for the Company for
the fiscal year ending March 31, 1998; and
4. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Holders of record of the Company's common stock at the close of
business on August 29, 1997, will be entitled to vote at the meeting.
By order of the Board of Directors
/s/ Ilia Lekach
----------------------------------
Ilia Lekach
Chairman of the Board and
Chief Executive Officer
Dated: August 29, 1997
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED. ANY PERSON GIVING A PROXY
HAS THE POWER TO REVOKE IT AT ANY TIME PRIOR TO THE EXERCISE THEREOF AND IF
PRESENT AT THE MEETING MAY WITHDRAW IT AND VOTE IN PERSON. ATTENDANCE AT THE
MEETING IS LIMITED TO STOCKHOLDERS, THEIR PROXIES AND INVITED GUESTS OF THE
COMPANY.
<PAGE> 3
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
OF PARLUX FRAGRANCES, INC.
TO BE HELD OCTOBER 14, 1997
This proxy statement (the "Proxy Statement") is furnished in connection
with the solicitation by the Board of Directors (the "Board") of Parlux
Fragrances, Inc. (the "Company") of proxies to be voted at the annual meeting of
stockholders (the "Annual Meeting") of the Company to be held at the Holiday
Inn, 2905 Sheridan Street, Hollywood, Florida, 33020 at 10:00 a.m. on Tuesday,
October 14, 1997, or at any adjournment thereof. The Proxy Statement and the
form of proxy are being mailed on or about September 5, 1997, to stockholders as
of the Record Date.
VOTING SECURITIES; PROXIES; REQUIRED VOTE
VOTING SECURITIES
The Board of Directors has fixed the close of business on August 29,
1997, as the record date (the "Record Date") for the determination of
stockholders entitled to notice of, and to vote at, the Annual Meeting. As of
the Record Date, the Company had outstanding 16,707,823 shares of Common Stock,
par value $0.01 per share (the "Common Stock"). Only the holders of Common Stock
are entitled to notice of and to vote at the Annual Meeting. Holders of Common
Stock are entitled to one vote per share.
PROXIES
Mr. Frederick Purches and Mr. Frank Buttacavoli, the persons named as
proxies on the proxy card accompanying this Proxy Statement, were selected by
the Board of Directors of the Company to serve in such capacity. Messrs. Purches
and Buttacavoli are directors of the Company. Each executed and returned proxy
will be voted in accordance with the directions indicated thereon, or if no
direction is indicated, such proxy will be voted in accordance with the
recommendations of the Board of Directors contained in this Proxy Statement.
Each stockholder giving a proxy has the power to revoke it at any time before
the shares it represents are voted. Revocation of a proxy is effective upon
receipt by the Secretary of the Company of either (i) an instrument revoking the
proxy or (ii) a duly executed proxy bearing a later date. Additionally, a
stockholder may change or revoke a previously executed proxy by voting in person
at the Annual Meeting.
REQUIRED VOTE
The holders of at least a majority of the outstanding shares of Common
Stock represented in person or by proxy will constitute a quorum at the Annual
Meeting. At the Annual Meeting, the vote of a majority in the interest of
stockholders present in person or by proxy and entitled to vote thereon is
required to elect directors, and ratify the appointment of Price Waterhouse
L.L.P. as the independent certified public accountants of the Company's
consolidated financial statements for the fiscal year ending March 31, 1998. The
vote of a majority in interest of the issued and outstanding common stock of the
Company is required to approve an amendment to the Company's Certificate of
Incorporation.
The election inspectors appointed for the meeting will tabulate the
votes in person or by proxy at the Annual Meeting and will determine whether or
not a quorum is present. The election inspectors will treat abstention as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum but as unvoted for the purposes of determining the approval of any
matter submitted to the stockholders for a vote. If a broker indicates on the
proxy that it does not have discretionary authority as to
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<PAGE> 4
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
PROPOSAL 1:
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO ESTABLISH A CLASSIFIED BOARD OF DIRECTORS
The Board of Directors has unanimously approved for submission to a
vote of the stockholders of the Company an amendment to the Certificate of
Incorporation (the "Certificate of Incorporation") to add a new Paragraph 11
that would classify the Board into three classes, with one class being elected
each year to serve a staggered three year term. Members of all three classes
would be elected at the 1997 Annual Meeting. Directors initially elected in
Class I would serve until the Annual Meeting in 1998. Directors initially
elected in Class II and Class III would serve until the Annual Meetings in 1999
and 2000, respectively. Following the subsequent election of directors, each
class of directors elected would be elected for a three year term. Any vacancy
on the Board may be filled by the Board of Directors; provided that any director
elected to fill a vacancy not resulting from an increase in the number of
directors shall have the same term as the class of his or her predecessor.
Proposed Paragraph 11 would also require that any amendment to the Certificate
of Incorporation that repeals or circumvents the purpose of proposed Paragraph
11 would require the affirmative vote of 80% of the shares entitled to vote,
voting together as a single class, unless such amendment is recommended by at
least 75% of the members of the Board of Directors.
The Board of Directors believes that classification of the Board of
Directors will promote continuity of membership and stability of management and
policies. Although the Board is not aware of, and has not encountered
difficulties in the past with respect to continuity and stability, the Board
believes that a classified board would decrease the likelihood of difficulties
arising in the future. Absent the removal or resignation of directors, two
annual elections would be required to replace a majority of a Classified Board
of Directors and effect a forced change in the business and affairs of the
Company. The proposed amendment may therefore discourage an individual or entity
from acquiring a significant position in the Company with the intention of
obtaining immediate control of the Board of Directors. The acquiror, however,
could immediately effect a change of control by virtue of the affirmative vote
of 80% of the votes necessary to amend the Certificate of Incorporation to
eliminate classification of the Board of Directors.
The Board of Directors believes that in order to insure the integrity
of Paragraph 11, a super majority vote should be required to alter or amend any
provision of the Certificate of Incorporation in a manner inconsistent with the
purposes of Paragraph 11. Currently, the vote of a majority in interest of the
issued and outstanding common stock of the Company is required to amend the
Certificate of Incorporation.
If the proposed amendment is adopted, changes to the Certificate of
Incorporation in a manner inconsistent with Paragraph 11, may be made only after
the affirmative vote of the holders of not less than 80% of the shares entitled
to vote; provided, however, that this super majority vote will not be required
and only a vote of holders of a majority of the outstanding voting stock of the
Company will be necessary, if the change is recommended by at least 75% of the
members of the Board of Directors. If Proposal 1 is adopted, in the event the
approval of 75% of the members of the Board of Directors is not obtained, the
holders of 20% of the total voting stock would be able to prevent an amendment
to the Certificate of Incorporation that is inconsistent with the purposes of
Paragraph 11, even if such change were desired by the holders of a majority (but
less than 80%) of the outstanding voting stock of the Company.
The complete text of the proposed amendment follows:
11. (a) Subject to the rights, if any, of the holders of any series of
Preferred Stock to elect additional directors under specific
circumstances, the number of directors of
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<PAGE> 5
the Corporation shall be fixed by the Bylaws of the Corporation and
may be increased or decreased, from time to time, in such a manner
as may be prescribed by the Bylaws.
(b) The directors to be elected at the 1997 Annual Meeting of
Stockholders shall be divided into three classes as nearly equal in
number as possible, and designated as Class I, Class II and Class
III. Class I directors shall be elected initially for a term
expiring at the 1998 Annual Meeting of Stockholders, Class II
directors shall be elected initially for a term expiring at the
1999 Annual Meeting of Stockholders, and Class III directors shall
be elected initially for a term expiring at the 2000 Annual Meeting
of Stockholders. Members of each class shall hold office until
their successors are elected and qualified. At the 1998 Annual
Meeting of Stockholders and at each subsequent annual meeting of
the stockholders of the Corporation, the successors of the class of
directors whose term expires at that meeting shall be elected, by a
plurality vote of all votes cast at such meeting, to hold office
for a term expiring at the Annual Meeting of Stockholders held in
the third year following the year of their election, and until
their successors are elected and qualified.
(c) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders
of at least 80 percent of the voting power of the then outstanding
Voting Stock, voting together as a single class, shall be required
to amend or repeal, or adopt any provision inconsistent with this
paragraph 11, unless such amendment, repeal or adoption was
approved by an affirmative vote of at least 75% of the entire Board
of Directors, in which event an affirmative vote of the holders of
a majority of the then outstanding Voting Stock entitled to vote
thereon shall be required.
Proposal 1 must be adopted by a majority of the outstanding shares of
Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 1.
PROPOSAL 2:
NOMINEES FOR ELECTION AS DIRECTORS
The directors elected at the Annual Meeting will hold office until
his/her successor is duly elected and qualified. Assuming stockholder approval
of Proposal 1, Messrs. Ilia and Zalman Lekach and Buttacavoli will hold office
until the 2000 Annual Meeting (Class III), Messrs. Purches and Vercillo will
hold office until the 1999 Annual Meeting (Class II), and Messrs. Gopman and Ms.
De la Vega will hold office until the 1998 Annual Meeting (Class I). If Proposal
1 is not approved by the stockholders, all directors will hold office until the
1998 Annual Meeting. Unless the proxy specifies otherwise, the person named in
the enclosed proxy intends to vote the shares represented by the proxies given
to him for the seven nominees listed below. Messrs. I. Lekach, Z. Lekach,
Buttacavoli, Purches, Vercillo, Gopman, and Ms. de la Vega are all presently
directors of the Company. The Company has no reason to believe that any of the
nominees will become unavailable to serve as directors for any reason before the
Annual Meeting. However, in the event that any of them shall become unavailable,
the person designated as proxy reserves the right to substitute another person
of his choice when voting at the Annual Meeting.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Ilia Lekach 49 Chairman of the Board and Chief Executive Officer
Zalman Lekach 30 President, Chief Operating Officer and Director
Frank A. Buttacavoli 42 Executive Vice President, Chief Financial Officer and Director
Frederick E. Purches 59 Vice Chairman of the Board
Albert F. Vercillo 67 Director
Glenn Gopman 41 Director
Mayi de la Vega 42 Director
</TABLE>
Page 4
<PAGE> 6
ILIA LEKACH is Chairman of the Board of Directors and Chief Executive
Officer of the Company. Mr. Lekach became a director of the Company in November
1987 and resigned in November 1988. He was re-elected to the Board of Directors
in February 1989. Mr. Lekach assumed the position of Chairman of the Board of
the Company in November of 1990 and as Chief Executive Officer of the Company in
December 1993. Prior to resigning in April 1994, he was Chairman of the Board of
Directors and CEO of Perfumania, Inc. ("Perfumania"), an affiliated public
company based in Miami, Florida, and a leading specialty retailer of fragrances
with approximately 250 retail outlets in manufactures' outlet malls and regional
malls. Perfumania also maintains a wholesale operation supplying fragrances and
other beauty related items to customers in North America and internationally.
ZALMAN LEKACH is President and Chief Operating Officer of the Company.
He became a director and an executive in Parlux, S.A., the Company's French
subsidiary, in May 1990. In May 1993, he resigned his executive position and
owned and operated a company exporting foods and health/beauty aids to South
America. In January of 1995, he rejoined the Company as its Chief Operating
Officer and a director. In June 1996, Mr. Zalman Lekach also assumed the
position of President. Messrs. Ilia Lekach and Zalman Lekach are brothers.
FRANK A. BUTTACAVOLI, a Certified Public Accountant, has been Vice
President and Chief Financial Officer of the Company since April 1993, and a
director for the Company since March 1993. From July 1979 through June 1992, Mr.
Buttacavoli was employed by Price Waterhouse, and was a Senior Manager from July
1987 to June 1992. From July 1992 through March 1993, he provided financial
consulting services to the Company. In June 1996, Mr. Buttacavoli was promoted
to Executive Vice President.
FREDERICK E. PURCHES has been a director of the Company since its
formation in July 1984. He has been engaged in the cosmetic/fragrance business
for over 30 years in various executive capacities with Helena Rubinstein, Inc.
and Revlon, Inc. From 1980 through 1988, he was President of Helena Rubinstein,
Inc. He resigned from the latter position in 1989 to take a more active role in
the direction of the Company's operations. In November of 1990 Mr. Purches
resigned as Chairman of the Board in favor of Mr. Lekach, and Mr. Purches
assumed the new position of Vice Chairman of the Board.
ALBERT F. VERCILLO has been a director of the Company since May 1989.
Mr. Vercillo is President of Cambridge Development Corporation, Chairman of
Cambridge Business Services, Inc. and President of Schiaparelli, Inc. The
companies are privately-held companies engaged in providing administrative and
business services, licensing and the distribution of various products since
April 1981.
GLENN GOPMAN has been a director of the Company since October 1995. Mr.
Gopman is the principal shareholder of the public accounting firm Thaw, Gopman
and Associates, and has been associated with that firm for over ten years. He is
a member of the Florida Institute of Certified Public Accountants and actively
participates on its committees and in community activities.
MAYI DE LA VEGA, a director of the Company since October 1995, founded
International Metal Exports, Inc. in May of 1978, a company operating as a
distributor and supplier of aluminum, stainless steel, and other metals to the
aircraft industry. In 1992, the Company was sold to a Swiss multi-national
corporation, and Ms. de la Vega continued as President and a director through
December 1994. She has subsequently been evaluating entrepreneurial
opportunities.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
EACH NOMINEE FOR DIRECTOR NAMED ABOVE.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
In fiscal year 1997, there were three meetings of the Board of
Directors (including regularly scheduled and special meetings), one of which was
conducted by teleconference. All directors attended at least 67% of the meetings
of the Board in fiscal 1997.
The Board of Directors has established two standing committees: the
Audit Committee and the Compensation Committee. The Board of Directors does not
have a Nominating Committee.
AUDIT COMMITTEE
The Audit Committee recommends the appointment of a firm of independent
public accountants to audit the Company's financial statements, as well as
reviews and approves the scope, purpose and type of audit services to be
performed by the external auditors. The Audit Committee is composed of Messrs.
Gopman and Vercillo and Ms. de la Vega. The Audit Committee held two meetings in
fiscal year 1997.
COMPENSATION COMMITTEE
The duties of the Compensation Committee are to make recommendations to
the Board of Directors concerning the salaries of the Company's officers and to
advise and act for the Board of Directors on other compensation matters. The
Compensation Committee is composed of Messrs. Purches and Gopman and Ms. de la
Vega. The Compensation Committee held three meetings in fiscal year 1997.
EXECUTIVE COMPENSATION
The Company effected a two-for-one stock split in the form of a
dividend to shareholders of record as of November 3, 1995. All common stock and
warrant information contained in this proxy statement has been restated to
reflect the stock split. The words "warrant" and "option" have the same meaning
herein, and are used interchangeably.
The following table sets forth information with respect to compensation
paid by the Company for services to the Company during the fiscal year ended
March 31, 1997 and for the two prior fiscal years for (i) the Company's Chief
Executive Officer and (ii) the Company's three most highly compensated executive
officers other than the Chief Executive Officer (collectively the "Named
Executive Officers") whose base compensation and bonus exceeded $100,000 during
the fiscal year ended March 31, 1997.
TABLE I
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
- --------------------------------------------------------------------------------------------------------
Awards
- --------------------------------------------------------------------------------------------------------
Other Compensation Securities
Name and Principal Salary ($) Bonus ($) ($) (1) Underlying
Positions Fiscal Year Options (#)
========================================================================================================
<S> <C> <C> <C> <C> <C>
Ilia Lekach; 1995 163,654 0 0 0
Chairman 1996 185,000 0 0 0
and CEO 1997 239,808 250,000 0 0
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
Zalman Lekach; 1995 41,242 0 0 180,000
President and 1996 165,000 0 0 0
Chief Operating 1997 186,923 0 0 0
Officer
Frank Buttacavoli; 1995 129,266 0 0 0
Executive Vice 1996 145,000 0 0 0
President and 1997 165,000 0 0 0
Chief Financial
Officer
Danielle Petit; 1995 104,726 0 0 0
General Manager, 1996 111,140 0 0 0
Parlux, S.A. 1997 99,710 0 0 0
</TABLE>
(1) No executive officer named in the table received any other compensation
in an amount in excess of the lesser of either $50,000 or 10% of the
total annual salary and loans reported for him in the two preceding
columns for the periods covered by this table.
TABLE II
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table shows stock options exercised by each of the Named
Executives during fiscal 1997, including the aggregate value of gains on the
date of exercise. In addition, this table includes the number of shares covered
by both exercisable and non-exercisable stock options as of fiscal year-end, and
the values for unexercised options.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-The-Money Options At
Options at March 31, 1997 March 31, 1997 (2)
------------------------- ------------------
Shares Value
Acquired Realized
Name On Exercise (1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ilia Lekach 0 $ 0 420,000 0 $183,750 $0
Zalman Lekach 0 0 120,000 60,000 0 0
Frank Buttacavoli 0 0 188,000 0 176,250 0
Danielle Petit 6,000 57,750 5,000 0 5,000 0
</TABLE>
(1) Based on the difference between the closing market price for Common
Stock on the date of exercise of the option and the option exercise
price. The above valuation may not reflect the actual value of
exercised options as the value of exercised options will fluctuate with
market activity.
(2) Based on the difference between the closing market price on March 31,
1997, for Common Stock, which was $2.4375 per share, and the option
exercise price. The above valuation may not reflect the actual value of
unexercised options as the value of unexercised options will fluctuate
with market activity.
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EMPLOYMENT AND CONSULTING AGREEMENTS
As of April 1, 1997, the Company entered into a three-year employment
agreement with Mr. Ilia Lekach, Chairman and Chief Executive Officer, which
called for an annual base salary of $260,000, with annual increases at the
discretion of the Board. There were no warrants granted with the agreement. In
the event of a change in control, the agreement calls for the remaining monies
due under the agreement to be doubled.
As of January 1, 1995, the Company entered into a three-year employment
agreement with Mr. Zalman Lekach, President and Chief Operating Officer, which
called for an annual base salary of $165,000, with annual increases at the
discretion of the Board. Mr. Lekach received options to purchase 180,000 shares
of Common Stock at an exercise price of $3.125 per share (the closing price per
share of Common Stock on the NASDAQ National Market on the date of the grant).
The options are exercisable in quantities of 60,000 each on December 31, 1995,
1996, and 1997, and expire on January 1, 2005. In January 1996, the Compensation
Committee increased Mr. Lekach's annual base salary to $180,000 effective July
1, 1996, and it was subsequently increased to $195,000 when he became President.
As of April 1, 1997, the Company entered into a three-year employment agreement
with Mr. Zalman Lekach, President and Chief Operating Officer, which called for
an annual base salary of $195,000, with annual increases at the discretion of
the Chief Executive Officer. There were no warrants granted with the agreement.
In the event of a change in control, the agreement calls for the remaining
monies due under the agreement to be doubled.
As of April 1, 1997, the Company entered into a three-year employment
agreement with Mr. Frank A. Buttacavoli, Executive Vice President and Chief
Financial Officer, which called for an annual base salary of $180,000 with
annual increases at the discretion of the Chief Executive Officer. There were no
warrants granted with the agreement. In the event of a change in control, the
agreement calls for the remaining monies due under the agreement to be doubled.
On April 1, 1997, the Company entered into a three-year agreement with
Cosmix, Inc., a company owned by Mr. Frederick Purches, the Vice Chairman of the
Board, which provides for annual payments of $100,000. The agreement calls for
Mr. Purches to spend substantial time to assist the Company in the areas of
banking, Securities and Exchange Commission and stockholder relations, financial
planning, assessment and coordination of acquisitions and divestitures, and any
other similar activities which may be assigned by the Board of Directors. Mr.
Purches receives certain insurance benefits as part of his agreement, and in the
event of a change in control, the agreement calls for the remaining monies due
under the agreement to be doubled. There were no warrants granted with the
agreement.
On April 1, 1997, the Company entered into a three-year consulting
agreement commencing on June 1, 1997, with the Cambridge Development
Corporation, a company owned by Mr. Albert F. Vercillo, director of the Company,
which provides for monthly payments of $5,416. The agreement calls for Mr.
Vercillo to devote substantial time to the Company in the areas of U.S. and
international financial analysis and planning. Mr. Vercillo receives certain
insurance benefits as part of the agreement, and in the event of a change in
control, the agreement calls for the remaining monies due under the agreement to
be doubled. There were no warrants granted with the agreement.
BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION
In October of 1995, a Compensation Committee was appointed. The
Committee consists of Mr. Frederick Purches, Mr. Glenn Gopman and Ms. Mayi de la
Vega. Prior to this date, the Board of Directors discussed compensation issues
regarding the Company's executive officers and directors. (See "Employment and
Consulting Agreements" and "Certain Relationships and Related Transactions".)
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DIRECTOR COMPENSATION
The Company compensates outside (non-employee/consultant) members of the Board
of Directors for their activities as directors of the Company, at an annual rate
of $10,000, and awards 2,000 options annually on the anniversary date of each
directors election, at the closing price on such day as reported by the NASDAQ
National Market.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board (The "Compensation Committee"). The
Company's executive compensation program is structured to achieve the Company's
goals as they relate to maximizing corporate performance and stockholder return.
In general, executive compensation is made up of annual salaries, incentive
bonuses and option grants. The Board of Directors believes that total
compensation should increase or decrease with Company performance; as such,
incentive bonuses and option grants constitute a portion of executive
compensation to help align executive and stockholder interests. The Board of
Directors believes that compensation should attract, motivate and retain
executive talent to improve the Company's performance and therefore increase
shareholder returns.
In addition to base salaries and option grants, the Compensation
Committee may elect to award incentive bonuses as part of total compensation to
executive officers who have rendered services during the year that substantially
exceed those normally required or anticipated. These bonuses are intended to
reflect the Compensation Committee's determination to reward any executive who,
through extraordinary effort, has substantially benefited the Company and its
stockholders during the year. Mr. Ilia Lekach was the only named executive
officer to receive an incentive bonus in the fiscal year ended March 31, 1997.
In January of 1996, the Compensation Committee modified the
employment agreements with Messrs. I. Lekach, Z. Lekach, and Buttacavoli to
double the warrants specified in their respective employment contracts in the
event of sale of or a change in control of the Company.
Compensation Deductible under Section 162(m) of the Internal Revenue Code
On August 10, 1993, the Revenue Reconciliation Act of 1993 was enacted
which amended the Internal Revenue Code of 1986, as amended, by adding Section
162(m) which eliminates the deductibility of most cash and non-cash compensation
over $1 million paid to certain "covered employees" (which generally is defined
as a corporation's chief executive officer and the four other highest
compensated employees). Contributions to qualified plans, items excluded from
the employee's gross income, compensation paid pursuant to a binding agreement
entered into on or before February 17, 1993, commission-based compensation, and
certain "performance-based" compensation are types of remuneration that are not
affected by the deduction limitation.
During the fiscal year ended March 31, 1997, none of the Named
Executive Officers received total compensation in excess of $1 million. However,
it is possible that in future years some portion of the compensation paid to the
Company's chief executive officer and its four highest compensated employees
will not be tax deductible under Section 162(m). When the compensation of any of
the Company's affected executives becomes closer to the $1 million deduction
limitation, the Compensation Committee plans to consider the requirements of
Section 162(m) and decide what actions, if any, will be taken when setting the
compensation levels for these executives.
Compensation Committee
Frederick Purches, Chairman
Glenn Gopman
Mayi de la Vega
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STOCKHOLDER RETURN PERFORMANCE: FIVE YEAR GRAPH
Set forth below is a line graph comparing the cumulative total return on
the common stock with the cumulative total return of the Standard and Poors 500
Index, and the Standard and Poors Cosmetic Segment Index for the fiscal years of
1992 through 1997.
<TABLE>
<CAPTION>
TOTAL SHAREHOLDER RETURNS
-------------------------
(Dividends Reinvested)
ANNUAL RETURN PERCENTAGE
Years Ending
Company/Index Mar 93 Mar 94 Mar 95 Mar 96 Mar 97
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PARLUX FRAGRANCES INC. -62.50 62.47 88.47 169.43 -80.31
S&P 500 INDEX 15.19 1.48 15.54 32.00 19.79
*PERSONAL CARE-500 25.41 1.84 30.24 24.35 35.20
</TABLE>
<TABLE>
<CAPTION>
INDEXED RETURNS
Years Ending
Base
Period
Company/Index Mar 92 Mar 93 Mar 94 Mar 95 Mar 96 Mar 97
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<S> <C> <C> <C> <C> <C> <C>
PARLUX FRAGRANCES INC. 100 37.50 60.93 114.82 309.38 60.93
S&P 500 INDEX 100 115.19 116.89 135.06 178.28 213.57
*PERSONAL CARE-500 100 125.41 127.71 166.33 206.83 279.63
</TABLE>
* NAME CHANGE FROM COSMETICS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the Record Date certain information
with respect to the number of shares of Common Stock beneficially owned by (i)
each director of the Company who beneficially owns Common Stock, (ii) the
Company's chief executive officer and the other most highly compensated
executive officers of the Company whose total salary and bonus exceeded $100,000
during fiscal 1997, (iii) all directors and executive officers of the Company as
a group and (iv) based on information available to the Company and a review of
statements filed with the SEC pursuant to Section 13(d) and 13(g) of the
Securities Act of 1934, as amended (the "Exchange Act"), each person or entity
that beneficially owns (directly or together with affiliates) more than 5% of
the Common Stock. The Company believes that each individual or entity named has
sole investment and voting power with respect to shares of Common Stock
indicated as beneficially owned by them, except as otherwise noted.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY PERCENTAGE
OWNED OWNERSHIP(1)
------------ ------------
DIRECTORS AND EXECUTIVE OFFICERS:
<S> <C> <C>
Ilia Lekach(2) 1,801,948 10.5%
Zalman Lekach(3) 236,615 1.4
Frank Buttacavoli (4) 200,000 1.2
Danielle Petit (5) 5,000 *
Albert F. Vercillo(6) 120,000 *
Frederick Purches(7) 113,000 *
Glenn Gopman (8) 7,000 *
Mayi de la Vega(9) 4,000 *
All Director and Officers as a Group (8 Persons) 2,487,563 14.2
</TABLE>
Page 10
<PAGE> 12
<TABLE>
<CAPTION>
OTHER PRINCIPAL STOCKHOLDERS:
<S> <C> <C>
Pacific Investment Group (10) 1,092,560 6.5
Kennedy Capital Management, Inc.(11) 993,200 5.9
Dimensional Fund Advisors, Inc.(12) 803,300 4.8
</TABLE>
(1) Calculated pursuant to Rule 13d-3 of the Exchange Act. Under
Rule 13d-3(d), shares not outstanding which are 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. As of the Record
Date, the Company had 16,707,823 shares of Common Stock
outstanding.
(2) Consists of (a) 289,388 shares owned jointly by Mr. Lekach and
his wife, (b) 1,092,560 shares owned or controlled by Pacific
Investment Group Inc., a corporation owned by Mr. Lekach and
(c) immediately exercisable warrants to purchase 420,000
shares of Common Stock issued to Mr. Lekach pursuant to his
prior employment agreement. The address of Mr. Lekach is 3725
S.W. 30th Avenue, Fort Lauderdale, Florida 33312.
(3) Includes immediately exercisable warrants to purchase 120,000
shares of Common Stock issued to Mr. Lekach pursuant to his
prior employment agreement.
(4) Includes immediately exercisable options to purchase 188,000
shares of Common Stock issued to Mr. Buttacavoli pursuant to
his prior employment agreement.
(5) Includes immediately exercisable options to purchase 5,000
shares of Common Stock issued under the Company's 1987 Stock
Option Plan.
(6) Includes immediately exercisable options to purchase 30,000
exercisable shares of Common Stock pursuant to Mr. Vercillo's
prior consulting agreement and immediately exercisable options
to purchase 30,000 shares of Common Stock issued under the
Company's 1987 Stock Option Plan.
(7) Includes immediately exercisable warrants for 30,000 shares of
Common Stock issued in connection with Mr. Purches' prior
consulting agreement.
(8) Includes immediately exercisable options to purchase 4,000
shares of Common Stock.
(9) Includes immediately exercisable options to purchase 4,000
shares of Common Stock.
(10) Address is c/o Mr. Ilia Lekach, 3725 S.W. 30th Avenue, Fort
Lauderdale, Florida 33312.
(11) Address is 10829 Olive Boulevard, St. Louis, MO 63141-7739.
(12) Address is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA
90401.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company had sales of approximately $26,568,000, $26,187,000 and
$15,230,000 during the fiscal years ended March 31, 1997, 1996 and 1995,
respectively, to Perfumania, Inc. (Perfumania), and sales of $1,272,000 during
the fiscal year ended March 31, 1997, to L. Luria & Son, Inc. (Luria), companies
affiliated with Mr. Ilia Lekach, the Company's Chairman and Chief Executive
Officer. Net amounts due from Perfumania amounted to $22,136,000 and $13,482,000
at March 31, 1997 and 1996, respectively. Amounts due from Luria totaled
$726,000 at March 31, 1997. Amounts due from related parties are non-interest
bearing and are realizable in less than one year.
On August 13, 1997, Luria filed for bankruptcy protection under
Chapter 11 of the United States Bankruptcy Code. At the time of the filing
Luria owed the Company $690,886. The Company is currently in the process of
filing its claim and it is too early to determine the ultimate outcome.
The Company has entered into various employment and consulting
agreements with its executive officers and directors (see "Employment and
Consulting Agreements").
Page 11
<PAGE> 13
In July 1995 and March 1996, Mr. Purches exercised options to acquire a
total of 60,000 shares of the Company's Common Stock at a price of $2.0625, of
which 30,000 shares were registered with an S-3 filing in September 1995, and
30,000 shares were registered with an S-3 filing in August 1996. In August 1995,
Mr. Vercillo exercised options to acquire 50,000 shares of the Company's Common
Stock at a price of $1.875, which were registered with an S-3 filing in
September 1995. In August 1995, Mr. Buttacavoli exercised options to acquire
12,000 shares of the Company's Common Stock at a price of $1.50, which were
registered with an S-3 filing in September 1995.
In June 1995, the Company borrowed on an unsecured basis, $300,000 from
an individual related to the Company's Chairman of the Board. The note bore
interest at 11% per annum, and was due in June 1996. In connection with the
note, the Company had issued warrants to purchase 60,000 shares of Parlux common
stock at a price of $6.94 per share. In July 1996, the warrants were exercised
and a portion of the proceeds was utilized to repay the loan and accrued
interest thereon. The shares were registered with an S-3 filing in August 1996.
PROPOSAL NO. 3:
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has selected Price Waterhouse L.L.P ("Price
Waterhouse") as the independent certified public accountants of the Company for
the fiscal year ending March 31, 1998. Price Waterhouse has served as the
Company's independent certified public accounting firm since 1988.
Representatives of Price Waterhouse will be present at the Annual Meeting and
will be given the opportunity to make a statement if they so desire. They will
also be available to respond to appropriate questions.
If the Company's stockholders do not ratify the appointment of Price
Waterhouse, other certified public accountants will be considered by the Board
of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICE WATERHOUSE L.L.P. AS INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR ENDING MARCH 31, 1998.
EXPENSE SOLICITATION
The cost of soliciting proxies, which also includes the preparation,
printing and mailing of the Proxy Statement, will be borne by the Company.
Solicitation will be made by the Company primarily through the mail.
Shareholders Communication Corporation, New York, New York, has been retained to
assist in the distribution of proxies at an estimated fee of $7,000, plus
expenses. Directors, officers and regular employees of the Company may also
solicit proxies personally, by telephone or telefax. The Company will request
brokers and nominees to obtain voting instructions of beneficial owners of stock
registered in their names and will reimburse them for any expenses incurred in
connection therewith.
PROPOSALS OF STOCKHOLDERS FOR 1998 ANNUAL MEETING
Stockholders of the Company who intend to present a proposal for action
at the 1998 Annual Meeting of Stockholders of the Company, must notify the
Company's management of such intention by notice received at the Company's
principal executive offices no later than May 20, 1998 for such proposal to be
included in the Company's proxy statement and form of proxy relating to such
meeting.
Page 12
<PAGE> 14
FINANCIAL STATEMENTS
The Company's Annual Report to Stockholders for the year ended March
31, 1997 is being delivered with the Proxy to the Company's stockholders. Also
accompanying this Notice of Annual Meeting and Proxy Statement is a copy of the
Company's quarterly report on Form 10-Q for the three-month period ended June
30, 1997, which contains financial information for that period.
OTHER MATTERS
The Board knows of no matters that are expected to be presented for
consideration at the Annual Meeting which are not described herein. However, if
other matters properly come before the meeting, it is intended that the person
named in the accompanying proxy will vote thereon in accordance with his best
judgment.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IN THE UNITED
STATES. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE
THE EXPENSE OF FURTHER MAILINGS.
Fort Lauderdale, FL
August 29, 1997
By order of the Board of Directors
/s/ Ilia Lekach
-----------------------------------
Ilia Lekach
Chairman of the Board and
Chief Executive Officer
Page 13
<PAGE> 15
Appendix A
PARLUX FRAGRANCES, INC. PROXY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS OCTOBER 14, 1997
(THIS PROXY IS SOLICTED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY)
The undersigned stockholder of Parlux Fragrances, Inc. (the "Company")
acknowledges receipt of the Notice of the Annual Meeting of Stockholders and the
accompanying Proxy Statement for the 1997 Annual Meeting and, revoking all prior
proxies, hereby appoints Frederick E. Purches and Frank A. Buttacavoli with full
power of substitution as proxy to vote all the shares of Common Stock of the
Company owned or held by the undersigned at the 1997 Annual Meeting of
Stockholders to be held at the Holiday Inn, 2905 Sheridan Street, Hollywood,
Florida, 33020, on October 14, 1997, at 10:00 a.m., or any adjournment or
postponement hereof.
1. Approval of an amendment to the Company's Certificate of Incorporation to
create a classified Board of Directors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Election of Directors
FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY [ ]
(except as marked to the contrary) to vote for all nominees listed below
Ilia Lekach, Zalman Lekach, Frank A. Buttacavoli, Frederick E. Purches, Albert
F. Vercillo, Glenn Gopman, Mayi de la Vega.
INSTRUCTION: To withhold authority to vote for any individual, write such
nominee's name in the space provided below.
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(Continued and to be signed on reverse side)
<PAGE> 16
3. Approval of Price Waterhouse L.L.P. as Independent Certified Public
Accountants.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Date:
-----------------------------------
----------------------------------------
(Shareholder's signature)
----------------------------------------
(Shareholder's signature)
THIS PROXY SHOULD BE DATED, SIGNED BY
THE STOCKHOLDER(S) EXACTLY AS THE NAME
APPEARS ON THE ENVELOPE IN WHICH THIS
MATERIAL WAS MAILED, AND RETURNED AT THE
EARLIEST CONVENIENCE IN THE ENCLOSED
RETURN ENVELOPE. PERSONS SINGING IN A
FIDUCIARY CAPACITY SHOULD SO INDICATE.
