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. 1)
Filed by the registrant |X| Filed by a party other than the registrant
|_| Check the appropriate box: |X| Preliminary proxy statement |_|
Definitive proxy statement |_| Definitive additional materials |_|
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Richard Barrie Fragrances, Inc.
(Name of Registrant as Specified in Its Charter)
Ronit V. Fischer, Esq. for Lynn Barrie, Secretary
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
|_| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(j)(2).
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
Parlux Fragrances, Inc. common stock, par value $.005 per
share (the "Parlux Common Stock")
(2) Aggregate number of securities to which transactions applies:
370,000 shares of Parlux Common Stock
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1 The Parlux
Common Stock valued at $7.625 per share, the average of the
high and low sale prices for such shares on the Nasdaq
National Market on February 20, 1996. The Company will also
receive $750,000 in cash.
(4) Proposed maximum aggregate value of transaction:
$3,571,250
(5) Total Fee Paid:
$714.25
|X| 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:
- --------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
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PRELIMINARY COPY
15 Executive Boulevard
Orange, Connecticut 06477
Telephone: (203) 795-5300
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
May 3, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders
of Richard Barrie Fragrances, Inc. (the "Company") will be held at the offices
of the Company at 15 Executive Boulevard, Orange, Connecticut, on Friday, May 3,
1996, at 11:00 a.m., for the following purposes, all as more fully described in
the attached Proxy Statement:
1. To approve the sale by the Company of virtually all of its assets (the
"Asset Sale") to Parlux Fragrances, Inc. ("Parlux") in exchange for
$750,000 in cash and 370,000 shares of Parlux common stock (the "Parlux
Stock");
2. To approve the subsequent sale of the Parlux Stock;
3. To amend the Company's Articles of Incorporation to change the name of the
Company immediately after completion of the Asset Sale from Richard Barrie
Fragrances, Inc. to FBR Capital Corporation;
4. To elect two directors to take office immediately after completion of the
Asset Sale and to serve until the next Annual Meeting of Stockholders of
the Company and until their respective successors are elected and
qualified; and
5. To transact such other business as may properly come before the meeting and
any and all adjournments thereof.
The Board of Directors has fixed the close of business on
March 20, 1996, as the record date for the determination of stockholders
entitled to notice of, and to vote at, the meeting or any adjournment thereof.
You are earnestly requested to date, sign and return the
accompanying form of proxy in the envelope enclosed for that purpose (to which
no postage need be affixed if mailed in the United States) whether or not you
expect to attend the meeting in person. The proxy is revocable by you at any
time prior to its exercise and will not affect your right to vote in person in
the event you attend the meeting or any adjournment thereof. The prompt return
of the proxy will be of assistance in preparing for the meeting and your
cooperation in this respect will be appreciated.
By Order of the Board of Directors
Lynn Barrie, Secretary
Orange, Connecticut
March 22, 1996
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RICHARD BARRIE FRAGRANCES, INC.
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 3, 1996
This Proxy Statement is furnished to stockholders of Richard
Barrie Fragrances, Inc. (the "Company") in connection with the solicitation of
proxies, in the accompanying form, by the Board of Directors for use in voting
at the Special Meeting of Stockholders to be held at the offices of the Company,
15 Executive Boulevard, Orange, Connecticut, on Friday, May 3, 1996, at 11:00
a.m., and at any and all adjournments thereof. Any proxy given pursuant to this
solicitation may be revoked by the person giving it by giving notice to the
Secretary of the Company in person, or by written notification actually received
by the Secretary, at any time prior to its being exercised. Unless otherwise
specified in the proxy, shares represented by proxies will be voted (i) for the
approval of the sale of virtually all of the Company's assets (the "Asset Sale")
to Parlux Fragrances, Inc. ("Parlux"), (ii) for the approval of the subsequent
sale of the shares of Parlux common stock received as part of the consideration
in the Asset Sale, (iii) for the amendment to the Company's Articles of
Incorporation to change the Company's name, and (iv) for the election of the
nominees for director listed herein.
The Company's executive offices are located at 15 Executive
Boulevard, Orange, Connecticut 06477. On or about March 22, 1996, this Proxy
Statement and the accompanying form of proxy, together with a copy of the Annual
Report of the Company on Form 10-KSB for the fiscal year ended June 30, 1995,
the Company's Quarterly Reports on Form 10-QSB for the fiscal quarters ended
September 30, 1995 and December 31, 1995, the Annual Report of Parlux on Form
10-K for the fiscal year ended March 31, 1995 and the Quarterly Report of Parlux
on Form 10-Q for the fiscal quarter ended December 31, 1995 are to be mailed to
each stockholder of record at the close of business on March 20, 1996.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the
Securities and Exchange Commission (the "Commission") by the Company (Commission
File No. 1-10320) pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), are incorporated by reference in this Proxy Statement:
1. Annual Report on Form 10-KSB for the fiscal year ended June 30, 1995.
2. Quarterly Reports on Form 10-QSB for the fiscal quarters ended September
30, 1995 and December 31, 1995.
3. Annual Report of Parlux on Form 10-K for the fiscal year ended March 31,
1995.
4. Quarterly Report of Parlux on Form 10-Q for the fiscal quarter ended
December 31, 1995.
Any statement incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Proxy Statement 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 Proxy
Statement.
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VOTING SECURITIES
The Board of Directors has fixed the close of business on
March 20, 1996 as the record date for the determination of stockholders entitled
to notice of, and to vote at, the meeting. Only stockholders of record at the
close of business on that date will be entitled to vote at the meeting or any
and all adjournments thereof. As of March 20, 1996, the Company had issued and
outstanding 4,419,548 shares of common stock, the Company's only class of voting
securities outstanding. Each stockholder of the Company will be entitled to one
vote for each share of common stock registered in his name on the record date.
The presence, in person or by proxy, of a majority of all of the outstanding
shares of common stock constitutes a quorum at the meeting.
The following table sets forth certain information as of March
20, 1996, except as indicated below, with respect to (i) those persons or groups
known to the Company to beneficially own more than 5% of the Company's common
stock, (ii) each director and nominee for director, (iii) each executive officer
whose compensation exceeded $100,000 in fiscal 1995, and (iv) all directors and
officers as a group. The information is determined in accordance with Rule 13d-3
promulgated under the Securities Exchange Act of 1934 based upon information
furnished by the persons listed or contained in filings made by them with the
Securities Exchange Commission. Except as indicated below, the stockholders
listed possess sole voting and investment power with respect to their shares.
Amount and
Nature of
Beneficial Percent of
Beneficial Owner Ownership Class
Richard Barrie and Lynn Barrie .................. 505,223(1) 11.4%
Anthony Silverman ............................... 294,277(2)(9) 7.0%
Peter T. Pochna ................................. 28,045(3) *
Arch Nadler ..................................... 23,667(4) *
Ronald Stein .................................... 17,834(5)(8)(9) *
Stephen T. Meadow ............................... 18,834(6)(9) *
Charles D. Snead, Jr ............................ 0(7) --
All Directors and Executive Officers as a
Group (7 persons) ............................... 574,769(8)(9) 12.8%
- ---------------------------------
* Less than one percent.
(1) Richard and Lynn Barrie are married. The number of shares indicated
includes (i) 477,400 shares owned by Richard Barrie, who possesses sole
voting and investment power with respect to such shares; (ii) 4,823 shares
owned by Lynn Barrie, who possesses sole voting and investment power with
respect to such shares; and (iii) 23,000 shares issuable to Lynn Barrie
upon the exercise of presently exercisable options, as to which she will
possess sole voting and investment power upon exercise of such options. Mr.
and Mrs. Barrie's business address is 15 Executive Boulevard, Orange,
Connecticut 06477.
(2) Includes (i) 173,334 shares issuable to Mr. Silverman upon the conversion
of $390,000 principal amount of the Company's 10% Convertible Subordinated
Promissory Notes (the "Notes") and (ii) 69,276 shares issuable upon the
exercise of presently exercisable warrants. Does not include shares
issuable upon conversion of accrued but unpaid interest on the Notes held
by Mr. Silverman. Mr. Silverman's business address is 11811 N. Tatum
Boulevard, Phoenix, Arizona 85028. The information in this footnote is as
of February 1, 1994 and was derived from Mr. Silverman's Schedule 13D dated
that date.
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(3) Includes 15,000 shares issuable to Mr. Pochna upon the exercise of
presently exercisable options.
(4) Includes 23,000 shares issuable to Mr. Nadler upon the exercise of
presently exercisable options.
(5) Includes 2,500 shares owned by Contemporary Sales Inc. Pension Trust (the
"Trust") for the benefit of Mr. Stein. Also includes 8,667 shares issuable
to the Trust for the benefit of Mr. Stein upon conversion of $19,500
principal amount of Notes. Does not include shares issuable upon conversion
of accrued but unpaid interest on the Notes held by the Trust for the
benefit of Mr. Stein. Mr. Stein's business address is 15 Executive
Boulevard, Orange, Connecticut 06477.
(6) Includes 1,500 shares owned by the Rosalyn M. Meadow, P.C., Defined Benefit
Pension Plan for the benefit of Rosalyn M. Meadow, his wife. Also includes
17,334 shares issuable upon conversion of $39,000 principal amount of
Notes. Does not include shares issuable upon conversion of accrued but
unpaid interest on the Notes held by Mr. Meadow. Mr. Meadow's business
address is 5611 North 16th Street, Phoenix, Arizona 85016.
(7) Mr. Snead's business address is c/o Stone Gatehouse, 37637 N. Pima Road,
Scottsdale, Arizona 85262.
(8) Includes an aggregate of 69,667 shares issuable to the Company's directors
and executive officers as follows: (i) 61,000 issuable upon exercise of
presently exercisable options; and (ii) 8,667 shares upon conversion of
$19,500 principal amount of Notes. Does not include shares issuable upon
conversion of accrued but unpaid interest on the Notes.
(9) The number of shares issuable upon conversion of the Notes is calculated at
the current stated conversion price of $2.25 per share and does not give
effect to the Company's proposed exchange with the holders of the Company's
outstanding and past due Notes. See the discussion set forth under the
caption "Proposed Exchange."
PROPOSAL I: SALE OF ASSETS
The Company proposes to sell virtually all of its assets (the "Asset
Sale") to Parlux Fragrances, Inc. in consideration for $750,000 in cash and
370,000 shares of the common stock, par value $.01 per share, of Parlux (the
"Parlux Stock"), pursuant to the terms of an Asset Purchase Agreement, dated
January 31, 1996, between the Company and Parlux.
Reasons for the Transaction
The Company is in default under the terms of its 10% Convertible
Subordinated Promissory Notes (the "Notes") and the entire principal amount of
$5,157,750, together with accrued interest thereon ($560,905 at December 31,
1995) is currently due and payable. At December 31, 1995, the Company had a
negative net worth of $14,244. The Company does not have the ability to pay the
amounts due on the Notes.
For the past nine months, the Company has sought out and explored
various proposals to obtain additional financing, to combine the Company's
operations with other companies by merger or consolidation or to sell the
Company's operations. None of those proposals (other than the proposed Asset
Sale) came to fruition.
The Company will proceed with the Asset Sale only if holders (the
"Noteholders") of at least $5,001,750 aggregate principal amount (approximately
97% of the principal amount outstanding) of the Notes approve the Asset Sale and
tender their Notes for exchange in connection with the Proposed Exchange
described below, and holders of a majority of the outstanding shares of the
Company's outstanding common stock approve the Asset Sale.
The Company is proposing to exchange (the "Proposed Exchange") for each
$19,500 principal amount Note (each, a "Note") two shares of its newly
designated Series A Preferred Stock, par value $.01 per share (the "Preferred
Shares"), and 2,300 shares of the Company's common stock, par value $.005 per
share (the "Common Shares" and together with the Preferred Shares, the "Exchange
Shares"). The Company will conclude the Proposed Exchange only
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if the holders of at least $5,001,750 principal amount of Notes tender their
Notes for exchange in connection therewith. The Company is currently seeking the
tender of Notes from its Noteholders in connection with the Proposed Exchange.
See "The Proposed Exchange."
There can be no assurance that the Noteholders will approve the Asset
Sale by tendering their Notes in the Proposed Exchange. However, if the Asset
Sale and the Proposed Exchange are completed in accordance with their terms,
some value will be preserved for the Company's stockholders. Upon completion of
the Asset Sale and the Proposed Exchange, once the Parlux Stock has been
registered for resale, the stockholders will own stock in a publicly-held
corporation with liquid assets (the value of which will be determined by the
then current market price of the Parlux Stock) and no known liabilities other
than those accruing for current expenses and the Company's obligation to redeem
the Preferred Shares as described below. Such a publicly-held corporation could
be used by the stockholders as an acquisition vehicle in the future. As such an
acquisition vehicle, the Company will be free to investigate businesses of
essentially any kind or nature, including but not limited to, finance,
technology, manufacturing, service, research and development, healthcare,
communications, insurance or transportation. The Company has not chosen (nor
will it choose prior to the completion of the Asset Sale and the Proposed
Exchange) any particular area of business in which it may propose to engage and
has not conducted any market studies with respect to any business, property or
industry. Nothing contained herein is, nor shall it be deemed to be, a
representation regarding the viability of the Company after completion of the
Asset Sale and the Proposed Exchange or of the availability, viability or
success of any subsequent acquisition or the results of operations of the
Company in connection with such subsequent acquisition or business venture.
In order to make the Company more attractive as an acquisition vehicle
and to reduce the impact on the Company and the other stockholders of the
issuance of the Common Shares in the Proposed Exchange, the Company's President
and largest stockholder, Richard Barrie, has agreed to contribute to the
Company's capital 377,400 shares of the Company's common stock held by him
simultaneously with the completion of the Asset Sale and the Proposed Exchange.
The Board of Directors believes that the only alternative to completing
the Asset Sale and the Proposed Exchange would be a voluntary filing under the
United States Bankruptcy Code. The Company believes that in a bankruptcy
proceeding, the stockholders' equity interest in the Company would be
eliminated.
Background
On November 1, 1995, the Company and Parlux signed a letter of intent
under which Parlux would purchase virtually all of the assets (the "Acquired
Assets") of the Company and would assume virtually all of the liabilities of the
Company, expressly excluding the Company's obligations under the Notes. The
purchase price for the Acquired Assets is 370,000 shares of Parlux common stock
(giving effect to a two-for-one stock split effected by Parlux after executing
the letter of intent) and $750,000 in cash. On October 31, 1995, the high and
low sale prices of Parlux common stock on the Nasdaq National Market were
$8.1875 and $8.00, respectively (giving effect to the two-for-one stock split
effected by Parlux). The high, low and closing sale prices for the Company's
common stock on the Pacific Stock Exchange on the same date were each $0.25. On
March 18, 1996, the closing sale prices for Parlux common stock on the Nasdaq
National Market and for the Company's common stock on the Pacific Stock Exchange
were $___________ and $____________, respectively.
Information Concerning Parlux
Parlux was incorporated in Delaware in 1984 and is engaged in the
creation, design, manufacture, distribution and sale of prestige fragrances and
beauty related products marketed primarily through specialty stores and national
department stores. Parlux's principal products are fragrances. The fragrance
market is generally divided into a prestige segment (distributed primarily
through department and specialty stores) and a mass market segment. Parlux's
products are positioned primarily in the prestige segment. Each fragrance is
distributed in a variety of sizes and packaging. Each fragrance line also may be
complemented by beauty-related products such as soaps, deodorants, body lotions,
cremes and dusting powders. Parlux's basic products generally retail at prices
ranging from $20 to $300 per item. Additionally, Parlux manufactures and
distributes certain brands through Perfumania Inc., an affiliated national chain
which is a leading specialty retailer of fragrances. Currently, Parlux engages
in the manufacture (through subcontractors), distribution and sale of PERRY
ELLIS, FRED HAYMAN BEVERLY HILLS, TODD OLDHAM, VICKY TIEL and PHANTOM OF THE
OPERA fragrances and grooming items on an exclusive worldwide basis, as a
licensee. The principal executive
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offices of Parlux are located at 650 S.W. 16th Terrace, Pompano Beach, Florida
33069 and its telephone number is (305) 946-7700.
Additional Information Concerning the Company and Parlux
Information concerning the Company, including the Company's Financial
Statements for the fiscal year ended June 30, 1995 and for the fiscal quarters
ended September 30, 1995 and December 31, 1995 and the Management's Discussion
and Analysis with respect to such periods, is incorporated herein by reference
to the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30,
1995 and the Quarterly Reports on Form 10-QSB for the fiscal quarters ended
September 30, 1995 and December 31, 1995. Copies of those reports are being
mailed to the stockholders of the Company with this Proxy Statement.
Additional information concerning Parlux, including Parlux's Financial
Statements for the fiscal year ended March 31, 1995 and for the fiscal quarter
ended December 31, 1995, and the Management's Discussion and Analysis with
respect to such periods, and the Selected Financial Data for the fiscal years
ended March 31, 1991, 1992, 1993, 1994 and 1995 is incorporated herein by
reference to Parlux's Annual Report on Form 10-K for the fiscal year ended March
31, 1995 and the Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 1995. Copies of those reports are being mailed to the stockholders
of the Company with this Proxy Statement.
Summary of the Terms of the Asset Purchase Agreement
On January 31, 1996, the Company and Parlux entered into the Asset
Purchase Agreement. Set forth below is a summary of the material terms of that
agreement.
Assets to be Sold. The Company proposes to sell to Parlux virtually all
of the assets, properties and rights owned by the Company or in which the
Company has any right or interest (the "Sold Assets"), but excluding (i)
corporate accounting journals and corporate books of account comprising the
Company's permanent accounting and tax records, (ii) contracts which are not
assignable without the waiver or consent of another party whose waiver or
consent is not obtained prior to the closing (the "Closing") of the Asset Sale,
(iii) all corporate documents relating to the legal or financial structure of
the Company, and (iv) the rights of the Company under the Asset Purchase
Agreement and the agreements executed in connection therewith (collectively, the
"Excluded Assets").
Liabilities to be Assumed by Parlux. Parlux has agreed to assume only
the following liabilities (the "Assumed Liabilities") of the Company: (i)
liabilities under certain leases for periods from and after the Closing; (ii)
liabilities of the Company set forth on the Company's balance sheet ("Balance
Sheet") dated September 30, 1995 (but expressly excluding any liability with
respect to the Notes) to the extent such liabilities exist on the date of the
Closing (the "Closing Date"); (iii) additional liabilities of the Company of the
types reflected on the Balance Sheet as the same may arise in the ordinary
course of business between September 30, 1995 and the Closing Date and which are
reflected on a balance sheet dated as of the Closing Date; and (iv) all
obligations under contracts, customer orders, purchase orders, and other
agreements and commitments that are included in the Acquired Assets.
Liabilities Not to Be Assumed by Parlux. Parlux has agreed to assume
only those liabilities described above under the caption "Liabilities to be
Assumed by Parlux." Pursuant to the Asset Purchase Agreement Parlux is expressly
not assuming the following liabilities of the Company: (i) any liability with
respect to the Notes or the Noteholders; (ii) liabilities and obligations to the
Company's employees; (iii) legal, accounting and other fees, taxes and other
expenses incurred in connection with the Asset Sale; (iv) taxes (other than
income taxes) for periods prior to the Closing Date and income taxes, for all
periods; (v) liabilities and obligations with respect to the Excluded Assets;
and (vi) liabilities and obligations arising from pending or threatened
litigation or claims against the Company (collectively, the "Excluded
Liabilities").
Purchase Price. In consideration of the acquisition by Parlux of the
Acquired Assets, Parlux will deliver to the Company at the Closing $750,000 in
cash and 370,000 shares of Parlux common stock.
Anticipated Closing Date. May, 1996
Conditions to Closing. The consummation of the Asset Sale is subject to
the approval of (i) the Company's stockholders holding a majority of the
Company's outstanding common stock, (ii) Noteholders holding not less than
$5,001,750 in aggregate principal amount of the Notes (approximately 97% of the
outstanding principal amount of Notes),
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and (iii) the consent of the Company's landlord to the assignment to Parlux of
the Company's lease of the Company's facility in Orange, Connecticut.
Covenant Not to Compete. Pursuant to the terms of the Asset Purchase
Agreement the Company agrees for a period of seven years not to engage in the
manufacture or sale, or licensing for manufacture or sale, in the United States
or any foreign country, of any of the Acquired Assets.
Indemnification. The Company will indemnify, defend and hold harmless
Parlux with respect to claims caused by or arising from (i) any
misrepresentation, breach of warranty and breach of any term or provision of the
Asset Purchase Agreement to a maximum amount of $3,700,000, provided such claim
is made in writing within two years after the Closing, (ii) any Excluded
Liabilities, or (iii) relating to liabilities arising from the operation of the
Company's business prior to the Closing of the Asset Sale.
Parlux will indemnify, defend, and hold harmless the Company with
respect to claims caused by or arising from (i) any misrepresentation, breach of
warranty and breach of any term or provision of the Asset Purchase Agreement,
provided such claim is made in writing within two years after the Closing, (ii)
any Assumed Liabilities, or (iii) any liability arising from the operation of
the business of the Company by Parlux after the Closing.
No indemnification rights are enforceable by either party until the
aggregate amount of claims subject to such rights in favor of such party exceeds
$10,000, whereupon the entire amount of such claims (including the first
$10,000) shall be enforceable in full.
Employment Agreements. In connection with the Asset Sale, Parlux will
enter into employment agreements with each of Messrs. Barrie, Buvel, Stein and
Mahoney, each of whom are currently executive officers of the Company. The
description of the employment agreements of each of these individuals with
Parlux is set forth under the caption "Interests of Certain Persons in the Asset
Sale."
Registration Rights Agreement. In connection with the Asset Sale,
Parlux will execute a Registration Rights Agreement in favor of the Company.
Pursuant to the terms of the Registration Rights Agreement and subject to
certain limitations set forth therein, Parlux agrees to use its best efforts to
register the Parlux Stock under the Securities Act of 1933, as amended (the
"Act"), on demand and at any time Parlux proposes to register any of its equity
securities under the Act. Parlux has agreed to pay the costs and expenses
incurred in connection with the registration of the Parlux Stock in accordance
with the terms of the Registration Rights Agreement. Following the completion of
the Asset Sale, the Company intends to exercise its rights under the
Registration Rights Agreement.
Letter Agreement. Pursuant to the terms of a letter agreement between
the Company and Parlux, Parlux has agreed to permit Messrs. Barrie and Buvel to
provide certain services to the Company after completion of the Asset Sale.
Pursuant to the letter agreement, Messrs. Barrie and Buvel are permitted and
directed to devote a reasonable amount of time and take such reasonable actions
as may be required (i) to fulfill the Company's obligations under the terms of
the Asset Purchase Agreement, (ii) to assist the Company in completing certain
financial statements and the audits relating thereto, and (iii) to assist the
Company in meeting its reporting requirements under the Exchange Act.
Interests of Certain Persons in the Asset Sale
In connection with the Asset Sale, Parlux will enter into employment
agreements with each of Messrs. Barrie, Buvel, Stein and Mahoney, each of whom
are currently executive officers of the Company. A summary of the terms of those
agreements are set forth below:
Richard Barrie: Mr. Barrie will be employed by Parlux in the capacity
of President of U.S. Operations for an initial term ending on March 31, 1999.
Mr. Barrie's employment with Parlux will automatically renew for an additional
three-year term unless notice of non-renewal is given by either party at least
six months prior to the expiration of the initial term. Mr. Barrie's salary will
be $241,400 per annum for the period ending March 31, 1997 and will be adjusted
each year thereafter to take account of any increase in the cost of living. Mr.
Barrie will receive non-qualified stock options to purchase 180,000 shares of
Parlux common stock at an exercise price of $6.875 per share, the closing price
of the stock on the date the employment agreement was executed. The options
become exercisable at the rate of 60,000 shares each on March 31, 1997, 1998 and
1999 and remain exercisable for ten years from the date of grant. Parlux has
also agreed to continue to pay the premium on the Company's "split-dollar" life
insurance policy on Mr. Barrie's life.
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Upon the termination of Mr. Barrie's employment for any reason, Parlux will
assign and transfer to Mr. Barrie all right, title and interest in and to the
name "Richard Barrie Fragrances" and any and all derivations thereof.
Joseph Buvel: Mr. Buvel will be employed by Parlux in the capacity of Vice
President - Finance for U.S. Operations for an initial term ending on March 31,
1999. Mr. Buvel's employment with Parlux will automatically renew for an
additional one-year term unless notice of non-renewal is given by either party
at least three months prior to the expiration of the initial term. Mr. Buvel's
salary will be $94,200 per annum for the period ending March 31, 1997 with such
increases thereafter as may be determined by the Chief Financial Officer of
Parlux.
Leo Mahoney: Mr. Mahoney will be employed by Parlux in the capacity of Vice
President - Distribution for U.S. Operations for an initial term ending on March
31, 1999. Mr. Mahoney's employment with Parlux will automatically renew for an
additional one-year term unless notice of non-renewal is given by either party
at least three months prior to the expiration of the initial term. Mr. Mahoney's
salary will be $99,900 per year for the period ending March 31, 1997 with such
increases thereafter as may be determined by the Vice President - Operations of
Parlux.
Ronald Stein: Mr. Stein will be employed by Parlux in the capacity of Vice
President - Sales for U.S. Operations for an initial term ending on March 31,
1999. Mr. Stein's employment with Parlux will automatically renew for an
additional one-year term unless notice of non-renewal is given by either party
at least three months prior to the expiration of the initial term. Mr. Stein's
salary will be $100,900 per year for the period ending March 31, 1997 with such
increases thereafter as may be determined by the President of U.S. Operations of
Parlux.
Each of Messrs. Buvel, Mahoney and Stein will receive non-qualified
stock options to purchase 10,000 shares of Parlux common stock at an exercise
price of $6.875 per share, the closing price of the stock on the date their
employment agreements were executed. The options become exercisable at the rate
of 3,333 shares each on March 31, 1997 and 1998 and 3,334 on March 31, 1999. The
stock options remain exercisable for ten years from the date of grant.
Certain Transactions Between the Company and Parlux.
Since fiscal 1994, the Company has performed certain production and
filling services for Parlux. Services are provided on the basis of purchase
orders submitted by Parlux and accepted by the Company. For the fiscal years
ended June 30, 1994 and 1995 the total amounts billed to Parlux under the P&F
Agreement were $35,573 and $221,821, respectively.
By letter agreement dated January 4, 1996, the Company entered into a
Warehousing and Distribution Agreement (the "W&D Agreement") with Parlux.
Pursuant to the W&D Agreement, the Company provides certain warehousing and
distribution services to Parlux with respect to Parlux products located at the
Company's facility in Orange, Connecticut. Pursuant to the W&D Agreement, the
Company also provides Parlux with an office and certain furniture, fixtures and
office equipment to enable Parlux to perform certain functions required of it
under the terms of the W&D Agreement. In consideration for its services and the
use of its facilities under the W&D Agreement, the Company receives three
percent (3%) of the gross sales of Parlux products shipped from the Company's
facility. The W&D Agreement has an initial term of one year and continual
renewal options of two years each.
The Company's obligations under both the P&F Agreement and the W&D
Agreement will terminate upon the consummation of the Asset Sale.
The Proposed Exchange
The Notes are in default and principal and interest thereon is and
has been due and payable. As of December 31, 1995, the total amount of principal
and accrued interest under the Notes was $5,718,655. Interest is accruing at the
default rate of 15% per annum. The total amount of principal and accrued
interest through April 30, 1996 will be $5,978,692.
In the near future, the Company will distribute to Noteholders a
Private Offering Memorandum pursuant to which the Company proposes to exchange
for each $19,500 principal amount Note two Preferred Shares and 2,300 Common
Shares.
7
<PAGE>
The Preferred Shares
The Preferred Shares will be issued as a series of the Company's authorized
and previously unissued preferred stock. Pursuant to the Company's Articles of
Incorporation, the Company is authorized to issue up to 10,000,000 shares of
preferred stock, par value $.01 per share, having "such designations,
preferences and relative, participating, optional or other special rights, or
qualifications, limitations or restrictions . . . as shall be stated in the
resolution or resolutions providing for the issue of each series adopted by the
Board of Directors . . . ."
The Preferred Shares will have the following rights and privileges: The
Preferred Shares, as a class, will have a preference in liquidation of
$2,962,400 ($5,600 per share). The Company will be obligated to redeem the
Preferred Shares for an aggregate redemption price of $2,962,400 one year from
their date of issuance. If the Company does not effect the mandatory redemption
within such one year period, the holders of a majority of the Preferred Shares
will have the right to demand the liquidation of the Company and receive their
liquidation preference. The Company has the right to call the Preferred Shares
for redemption at any time after issuance for an aggregate redemption price of
$2,962,400. Holders of the Preferred Shares will have no voting rights except
the right to vote as a class with respect to (i) any sale of Company assets
having a fair market value of $250,000 or more, alone or in the aggregate with
all other sales of Company assets, unless all of the proceeds of such sale are
applied to the payment of the redemption price of the Preferred Shares; (ii) any
amendments to the Company's Articles of Incorporation; and (iii) the issuance of
any shares of the Company's stock (other than any issuance pursuant to currently
outstanding rights or options) unless the Preferred Shares will be redeemed in
connection with the transaction pursuant to which such shares are to be issued.
For all matters on which the holders of Preferred Shares are entitled to vote as
a class, the affirmative vote of holders holding a majority of the Preferred
Shares outstanding shall be required for approval of such matter. The Preferred
Shares have no right to dividends.
Conditions to the Proposed Exchange
The Company will proceed with the Proposed Exchange only if holders of
at least $5,001,750 aggregate principal amount of Notes (approximately 97% of
the outstanding principal amount of the Notes) approve the Asset Sale and tender
their Notes for exchange (the "Minimum Tenders") pursuant to the terms of the
Proposed Exchange. If the Minimum Tenders are obtained, any Note not tendered
for satisfaction will continue to be an obligation and liability of the Company.
Accordingly, the maximum aggregate principal amount payable to all such
non-consenting Noteholders would be $156,000 with accrued interest thereon. As
of April 30, 1996, the principal and accrued interest for all such non-tendered
Notes would be $180,830.
There can be no assurance that the Minimum Tenders will be obtained.
However, if the Minimum Tenders are not obtained, the Company will not complete
the Asset Sale or the Proposed Exchange. In such event, Noteholders will
continue to be able to enforce their rights to collect the Company's obligations
to them under the Notes. The Company believes that the only alternative then
available to the Company will be to file under the United States Bankruptcy
Code.
8
<PAGE>
Pro Forma Financial Information For the Company
The following table sets forth the Company's unaudited balance sheet at
December 31, 1995, pro forma to reflect the Asset Sale, and as further adjusted
to reflect the completion of the Proposed Exchange.
<TABLE>
December 31, 1995
(unaudited)
<CAPTION>
As
Actual Pro Forma(3) Adjusted(4)
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents ............................................ $ 466,014 $ 750,000 $ 750,000
Accounts Receivable .................................................. 1,521,149 -- --
Inventory and Promotional Merchandise ................................ 2,324,730 -- --
Other Current Assets ................................................. 199,996 -- --
Investment in Marketable Securities(1) ............................... -- 3,283,750 3,283,750
----------- ----------- -----------
Total Current Assets ............................................... 4,511,889 4,033,750 4,033,750
Fixed Assets, Net .................................................... 1,040,358 -- --
Debt Issuance Cost, Net .............................................. 6,302 -- --
Other Long Term Assets ............................................... 1,825,404 -- --
----------- ----------- -----------
Total Assets ....................................................... $ 7,383,953 $ 4,033,750 $ 4,033,750
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Convertible Notes Payable ............................................ $ 5,157,750 $ 5,157,750 $ --
Accounts Payable(5) .................................................. 573,676 75,000 75,000
Accrued Expenses(2) .................................................. 1,666,771 560,905 --
----------- ----------- -----------
Total Liabilities .................................................. 7,398,197 5,793,655 75,000
----------- ----------- -----------
Mandatory Redeemable Preferred Stock(6) ................................ -- -- 2,962,400
----------- ----------- -----------
Stockholders' Equity (Deficit):
Preferred Stock, 0.01 par value, 10,000,000 shares ................... -- -- --
authorized, 529 shares outstanding as Mandatory
Redeemable Preferred Stock (6)
Common Stock, $0.005 par value, 16,666,667 shares .................... 22,097 22,097 23,252
authorized, 4,419,548 (Actual and Pro Forma) and
4,650,498 (as adjusted) issued and outstanding
Additional Paid-In Capital ........................................... 6,982,738 7,041,707 7,076,638
Accumulated Deficit .................................................. (7,019,079) (8,764,740) (6,103,540)
Treasury Stock ....................................................... -- (58,969) --
----------- ----------- -----------
Total Stockholders' Equity (Deficit) ............................... (14,244) (1,759,905) 996,350
----------- ----------- -----------
Total Liabilities and Stockholders' Equity (Deficit) ............. $ 7,383,953 $ 4,033,750 $ 4,033,750
=========== =========== ===========
- ----------------------------
<FN>
(1) Represents Parlux Stock.
(2) Includes accrued interest at December 31, 1995 on Notes of $560,905.
(3) Pro forma to reflect the sale of virtually all assets to, and
assumption of virtually all liabilities by, Parlux in exchange for
370,000 shares of Parlux common stock (valued at $8.875 per share, the
per share market price of the Parlux common stock on December 31, 1995)
and $750,000 in cash. Also adjusted to reflect the contribution by
Richard Barrie of 377,400 shares of the Company's common stock to the
capital of the Company.
(4) As adjusted to reflect the issuance of 529 Preferred Shares and 608,350
Common Shares to the Noteholders in payment of $3,057,455 of principal
and interest due (of which $2,962,400 is attributable to the Preferred
Shares
9
<PAGE>
and $95,055 is attributable to the Common Shares) and in settlement and
extinguishment of the remaining $2,661,200 principal and interest due
at December 31, 1995. Assumes exchange of all outstanding Notes for
Exchange Shares. It should be noted, however, that the Company will
complete the Asset Sale and the Proposed Exchange only if the holders
of at least $5,001,750 principal amount of Notes (the "Minimum
Tenders") tender such Notes in the Proposed Exchange. If the Minimum
Tenders are received in connection with the Proposed Exchange, up to
$156,000 principal amount of Notes may remain outstanding after the
completion of the Proposed Exchange which would remain an obligation
and liability of the Company and the Company would issue fewer Exchange
Shares. The closing price of the Company's common stock on the Pacific
Stock Exchange on December 31, 1995 was $0.15625.
(5) Pro forma and as adjusted accrual for expenses of the transaction and other
costs.
(6) As adjusted for the issuance of the Preferred Shares having a mandatory
redemption feature.
</FN>
</TABLE>
Pro Forma Financial Information For Parlux and the Company Combined
The following tables set forth the unaudited Statements of Operations
for the Company and Parlux (other than the actual information for Parlux at
March 31, 1995, which is audited) for the periods ended March 31, 1995 and
December 31, 1995, pro forma to reflect the Asset Sale, and pro forma as
adjusted to give effect to the income tax provision which would, on a pro forma
basis, have been experienced by the Company and Parlux on a combined basis at
Parlux's effective income tax rate.
<TABLE>
Twelve Months Ended March 31, 1995
(Unaudited Except Parlux Actual) ($)
<CAPTION>
----------------------------------------------------------------
Actual Pro Forma
---------------------- --------------------------------------
Company Parlux Combined Adjustments As Adjusted
<S> <C> <C> <C> <C> <C>
Net Sales
Unaffiliated Customers ..................................... 18,304,252 22,978,956 41,283,208 41,283,208
Affiliated ................................................. 15,230,143 15,230,143 15,230,143 15,230,143
----------- ---------- ---------- -----------
18,304,252 38,209,099 56,513,351 56,513,351
Cost of Sales ................................................ 5,799,252 14,957,475 20,756,727 20,756,727
---------- ---------- ---------- -----------
Gross Profit ........................................ 12,505,000 23,251,624 35,756,624 35,756,624
---------- ---------- ---------- ----------
Operating Expenses
Advertising and Promotion .................................. 8,093,269 7,248,839 15,342,108 15,342,108
Selling, General and
Administrative ........................................... 5,429,135 8,179,032 13,608,167 13,608,167
Royalties .................................................. 281,542 823,223 1,104,765 1,104,765
--------- --------- ---------- -----------
Total Operating Expenses ................................ 13,803,946 16,251,094 30,055,040 30,055,040
---------- ---------- ---------- -----------
Operating Income (Loss) .................................... (1,298,946) 7,000,530 5,701,584 5,701,584
----------- ---------- ---------- -----------
Other Income(Expense)
Interest Expense - Net ..................................... (456,949) (1,189,658) (1,646,607) (1,646,607)
Miscellaneous Income -Net .................................. 140,260 140,260 140,260
Exchange Losses ............................................ (300,661) (300,661) (300,661)
--------- ----------- ----------- -----------
Total Other Income(Expense) ............................... (316,689) (1,490,319) (1,807,008) (1,807,008)
--------- ----------- ----------- -----------
Income(Loss) Before
Provision for Income Taxes .................................. (1,615,635) 5,510,211 3,894,576 3,894,576
Provision for Income Taxes ................................... 0 (1,279,000) (1,279,000) 375,012 (903,988)
--------- ----------- ----------- ------- -----------
Net Income(Loss) ........................................... (1,615,635) 4,231,211 2,615,576 375,012 2,990,588
=========== ========== ========== ======= ===========
</TABLE>
10
<PAGE>
<TABLE>
Nine Months Ended December 31, 1995
(Unaudited) ($)
<CAPTION>
----------------------------------------------------------------------------------------------
Actual Pro Forma
---------------------------------------- -----------------------------------------------
Company Parlux Combined Adjustments As Adjusted
<S> <C> <C> <C> <C> <C>
Net Sales
Unaffiliated Customers 10,975,964 30,182,604 41,158,568 41,158,568
Affiliated Customers 17,785,404 17,785,404 17,785,404
10,975,964 47,968,008 58,943,972 58,943,972
Cost of Sales 3,236,507 18,710,129 21,946,636 21,946,836
Gross Profit 7,739,457 29,257,879 36,997,336 36,997,336
---------------------------------------------------------------------------------------------
Operating Expenses
Advertising and Promotion 5,018,249 8,898,663 13,916,912 13,916,912
Selling, General and
Administrative 3,473,400 7,638,207 11,111,607 11,111,607
Royalties 468,612 1,091,228 1,559,840 1,559,840
---------------------------------------------------------------------------------------------
Total Operating Expenses 8,960,261 17,628,098 26,588,359 26,588,359
---------------------------------------------------------------------------------------------
Operating Income (Loss) (1,220,804) 11,629,781 10,408,977 10,408,977
---------------------------------------------------------------------------------------------
Other Income(Expense)
Interest Expense - Net (397,887) (1,414,240) (1,812,127) (1,812,127)
Miscellaneous Income -Net 1,041,947 117,802 1,159,749 1,159,749
---------------------------------------------------------------------------------------------
Total Other Income(Expense) 644,060 (1,296,438) (652,378) (652,378)
---------------------------------------------------------------------------------------------
Income(Loss) Before
Provision for Income Taxes (576,744) 10,333,343 9,756,599 9,756,599
Provision for Income Taxes 0 (3,457,140) (3,457,140) 192,956 (3,264,184)
---------------------------------------------------------------------------------------------
Net Income(Loss) (576,744) 8,876,203 6,299,459 192,956 6,492,415
=============================================================================================
</TABLE>
Accounting Treatment and Certain Federal Income Tax Considerations
The Asset Sale will be treated as a sale for accounting purposes.
The following summary describes the principal federal income tax
considerations applicable to the Company and those Noteholders who tender the
Notes held by them in the Proposed Exchange. Such summary is based upon current
provisions of the Internal Revenue Code (the "Code") and administrative
interpretations thereof, which are subject to change. Moreover, substantial
uncertainties exist with respect to various tax consequences of the Proposed
Exchange, and no ruling has been or will be requested from the Internal Revenue
Service (the "Service") on any tax matter concerning the Proposed Exchange.
Accordingly, no absolute assurances can be given with respect to certain federal
income tax consequences of the Proposed Exchange. In addition, the discussion
below does not address the state, local or foreign tax consequences that may
result from the Proposed Exchange, nor does it deal with taxpayers subject to
special treatment under the federal income tax laws (such as foreign persons,
life insurance companies, tax-exempt organizations, and taxpayers subject to
alternative minimum tax).
Tax Consequences to the Company of the Asset Sale. The Company will
recognize gain or loss upon the sale of virtually all of the Company's assets to
Parlux measured by the difference between (i) the aggregate of the $750,000 in
cash and the market value of 370,000 shares of Parlux Stock received by the
Company plus the liabilities assumed by Parlux and (ii) the adjusted tax basis
to the Company of the assets sold. The Company believes that it will recognize a
loss on this sale.
Tax Consequences to the Company of the Proposed Exchange. Completion of
the Proposed Exchange will reduce the amount of the Company's outstanding
indebtedness. Under the Proposed Exchange, the Company proposes to exchange
Preferred Shares with a liquidation preference and mandatory redemption price of
approximately $2,960,000 (discounted present value of approximately $2,680,000)
and Common Shares having a market value of approximately $95,000 (based on the
$.15625 closing sale price of the Company's common stock on the Pacific Stock
Exchange on December 31, 1995), together having a market value of approximately
$2,775,000, for Notes with a principal outstanding
11
<PAGE>
balance and accrued interest of $5,718,655 as of December 31, 1995. A debtor
generally realizes income for federal income tax purposes when its debt is
canceled in exchange for an amount less than the adjusted issue price of the
debt. The cancellation of debt resulting from the Proposed Exchange may
therefore be approximately $2,700,000. Under the Code, however, income will not
be recognized as a result of a cancellation of indebtedness to the extent the
amount of debt canceled does not exceed the amount by which the debtor is
insolvent. "Insolvency" is defined for this purpose as the excess of the
debtor's liabilities over the fair market value of its assets immediately before
the cancellation of indebtedness. It appears from the Company's December 31,1995
pro forma balance sheet that it is insolvent to the extent of approximately
$1,760,000 and that to this extent, the Company should be able to avoid
recognition of taxation income from the cancellation of indebtedness. The excess
$900,000 of cancellation of indebtedness income would likely be offset by the
Company's available net operating loss carryforward for purposes of the regular
income tax. The Company at present has available approximately $6,500,000 of net
operating loss carryovers for Federal income tax purposes. The Company's
remaining net operating loss carryforward would have to be reduced by an amount
equal to the amount of cancellation of indebtedness income not being recognized
because of the insolvency rule.
Tax Consequences to the Noteholders of the Proposed Exchange. The
Proposed Exchange is to be treated as a taxable exchange under Code Sec.
1001(a). As the Notes were issued with a maturity date of less than three years
they are not "securities" under the Code and the exchange does not qualify for
treatment as a tax-free recapitalization under Code Sec. 354. A Noteholder will
recognize gain or loss upon the exchange of Notes measured by the difference
between (i) the fair market value of the Preferred Shares and Common Shares
received and (ii) the Noteholder's tax basis in the Notes. Under the Proposed
Exchange the Company proposes to deliver two Preferred Shares and 2,300 Common
Shares for each $19,500 principal amount Note outstanding. Assuming that the
fair market value of each Preferred Share is $5,069 (the discounted present
value of the right to receive $5,600 one year from issuance) and of each Common
Share is $.15625 (the closing sale price of the Company's common stock on the
Pacific Stock Exchange on December 31, 1995), a holder of a $19,500 principal
amount Note will be receiving Preferred Shares and Common Shares having an
estimated aggregate market value of $10,497.
Any such gain or loss will generally be long-term capital gain or loss,
provided the Notes have been held for more than one year and were capital assets
in the hands of the Noteholder. No part of the property being received in
exchange should be treated as attributable to accrued but unpaid interest.
The Noteholders' tax bases in the Preferred Shares and Common Shares
received will be their respective fair market value, and the holding period will
begin, on the day the Notes are exchanged.
Consents and Approvals of Federal and State Regulatory Agencies.
There are no Federal or State regulatory requirements which must be
complied with nor is the approval of any such regulatory agency required to be
obtained in connection with the Asset Sale.
Absence of Appraisal Rights
Nevada law governs stockholders' rights in connection with the Asset
Sale. Under the applicable provisions of the Nevada General Corporation Law, the
Company's stockholders will have no right in connection with the Asset Sale to
dissent and seek appraisal of their shares of the Company's common stock.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of stockholders holding at least a majority of the
outstanding common stock is required for approval of the Asset Sale. Under
applicable law, for purposes of determining whether the proposal received the
requisite number of votes, abstentions and broker non-votes will not be counted
and will have the same effect as a vote against the proposal. The Company's
officers, directors and nominees for director, and Mr. Anthony Silverman, a
beneficial owner of more than 5% of the Company's outstanding common stock, have
indicated that they will vote all of the shares held by them in favor of the
Asset Sale. See the information set forth under the caption "Voting Securities."
The Board of Directors unanimously recommends that the stockholders
vote FOR approval of the Asset Sale.
12
<PAGE>
PROPOSAL II: SALE OF PARLUX STOCK
After completion of the Asset Sale, the Company intends to exercise the
registration rights granted to it by Parlux in accordance with the terms of the
Registration Rights Agreement executed in connection with the Asset Sale.
Pursuant to the terms of the Registration Rights Agreement, Parlux will pay all
costs, expenses and fees in connection with the registration of the Parlux
Stock. Brokerage commissions, if any, attributable to the sale of the Parlux
Stock will be borne by the Company.
The Company, from time to time, may effect sales of the Parlux Stock in
transactions (which may include block transactions) in the over-the-counter
market, in negotiated transactions, through the writing of options on the Parlux
Stock, or a combination of such methods of sale, at fixed prices which may be
changed, at market prices prevailing at the time of sale or at negotiated
prices. The Company may effect such transactions by selling the Parlux Stock
directly to purchasers or to or though broker-dealers which may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Company and/or the purchasers of
such securities for whom such broker-dealers may act as agents or to whom they
sell as principal, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). The Company may also elect to sell
the Parlux Stock pursuant to one or more exemptions from registration under the
Securities Act.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of stockholders holding at least a majority of the
outstanding common stock is required for approval of the proposed sale of the
Parlux Stock. Under applicable law, for purposes of determining whether the
proposal received the requisite number of votes, abstentions and broker
non-votes will not be counted and will have the same effect as a vote against
the proposal.
The Board of Directors unanimously recommends that the stockholders
vote FOR approval of the sale of the Parlux Stock.
PROPOSAL III: AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
Pursuant to the terms of the Asset Purchase Agreement, the Company has
agreed to change its name effective on, or as soon as practicable after, the
Closing Date to a new name which does not include the term "Richard Barrie
Fragrances" or any variation thereof or similar name and which otherwise is not
likely to be confused with the Company's present name, in order to make the
Company's present name available to Parlux. As a result, the Board of Directors
has unanimously declared it advisable and recommends that the Company's Articles
of Incorporation be amended to change the name of the Company, subject to and
contingent upon completion of the Asset Sale, from "Richard Barrie Fragrances,
Inc." to "FBR Capital Corporation."
If the proposed amendment to the Company's Articles of Incorporation is
approved by the stockholders and the Asset Sale is completed, such amendment
will become effective upon the filing with the Secretary of State of the State
of Nevada of an Amendment to the Articles of Incorporation.
Vote Required and Recommendation of the Board of Directors
The attendance at the meeting and the affirmative vote of stockholders
holding a majority of the Company's outstanding common stock is required for
adoption of this Proposal III. Under applicable law, abstentions and broker
non-votes will not be counted and will have the same effect as a vote against
the proposal.
The Board of Directors recommends that you vote FOR the proposal to
amend the Company's Articles of Incorporation to effect a change in the
Company's name to FBR Capital Corporation.
13
<PAGE>
PROPOSAL IV: ELECTION OF DIRECTORS
Immediately after the completion of the Asset Sale each of the
Company's current directors will resign their position and the Board of
Directors shall be reconstituted to consist of the two directors elected at the
meeting. At the meeting, two directors are to be elected to take office
immediately after the consummation of the Asset Sale and to serve as such until
the next Annual Meeting of Stockholders and until their respective successors
are elected and qualified. The proxies given pursuant to this solicitation will
be voted for the two nominees -- Stephen T. Meadow and Charles D. Snead, Jr. --
unless authority is withheld. Should a nominee become unavailable for any
reason, the proxies will be voted for an alternative nominee to be determined by
the persons named in the proxy. The Board of Directors has no reason to believe
that any nominee will be unavailable. Proxies cannot be voted for a greater
number of persons than the number of nominees named. Assuming the presence of a
quorum, the directors shall be elected by a plurality of the votes cast at the
meeting with respect to the election of directors. "Plurality" means that the
individuals who receive the largest number of votes cast "For" are elected as
directors up to the maximum number of directors to be elected. Consequently, any
shares not voted "For" a particular director (whether as a result of a direction
to withhold authority or a broker non-vote) will not be counted in such
director's favor.
Information Concerning Directors, Nominees for Director and Executive Officers
Nominees for Director and Proposed Executive Officer
Name Age Position
Stephen T. Meadow 68 Nominee for Director
Charles D. Snead, Jr. 63 Nominee for Director and
Proposed President and
Chief Executive Officer
Current Directors and Executive Officers
Name Age Position
Lynn Barrie 48 Director and Secretary
Richard Barrie 53 Director, President and
Chief Executive Officer
Arch Nadler 71 Director
Peter T. Pochna 54 Director
Joseph Buvel 34 Vice President - Finance,
Treasurer and Chief
Financial Officer
Leo Mahoney 48 Vice President - Operations
Ronald Stein 53 Vice President - Sales
Officers are elected annually by the Board of Directors and serve at the
discretion of the Board.
Stephen T. Meadow has been nominated for election as a director of the
Company at the Special Meeting to take office immediately after the completion
of the Asset Sale. Since 1962, Mr. Meadow has been an attorney in the private
practice of law specializing in the field of corporate and securities law.
Charles D. Snead, Jr. has been nominated for election as a director of the
Company at the Special Meeting to take office immediately after the completion
of the Asset Sale. Mr. Snead is an attorney and a business and mining
consultant. From October 1991 through June 1994, Mr. Snead was Chairman of the
Board of Siskon Gold Corporation.
14
<PAGE>
Since 1991, Mr. Snead has been, and continues to be, a director of Siskon Gold
Corporation. Prior to October 1991, Mr. Snead was President and Chief Executive
Officer of Callahan Mining Corporation.
Mrs. Barrie has served as Secretary and as a director of the Company since
its inception in 1988. From 1986 to 1988, Mrs. Barrie was a Vice President and
principal of Richard Barrie Enterprises, a consulting company specializing in
the cosmetics and toiletries industry and, since 1981, has been a homemaker.
Mrs. Barrie is the wife of Richard Barrie.
Mr. Barrie has served as President and chief executive officer and as a
director of the Company since its inception in 1988. From 1986 to 1988, Mr.
Barrie was President and a principal of Richard Barrie Enterprises, a consulting
company specializing in the cosmetics and toiletries industry. From 1984 to
1986, Mr. Barrie was employed or retained in a consultant capacity by Carme
International, Inc., a subsidiary of Carme, Inc., a manufacturer of natural
health and beauty aids and a distributor of natural food and cosmetic products.
From 1963 to 1984, Mr. Barrie was employed in various sales, marketing and
executive capacities by Faberge Incorporated, serving as Senior Executive Vice
President and Chief Operating Officer from 1980 to 1984, Executive Vice
President -- Marketing and Sales from 1970 to 1980, Vice President of Marketing
and Sales -- Retail and Salon Divisions from 1967 to 1970, Sales Manager --
Retail and Salon Divisions from 1966 to 1967, and in various sales positions
from 1963 to 1966. In addition, Mr. Barrie served as member of Faberge's Board
of Directors from 1970 to 1984. During Mr. Barrie's years at Faberge, he was
involved in the development (including formulations, packaging, pricing,
distribution and marketing) and introduction of many well known and successful
product lines, including the BABE fragrance line, which in its first year became
Faberge's largest selling women's fragrance worldwide. BABE received two awards
from the Fragrance Foundation for its 1976 launch: Most Successful Introduction
of a Women's Fragrance in Popular Distribution, and Best Advertising Campaign
for Women's Fragrance. Mr. Barrie also supervised Faberge's introduction of the
popular BRUT 33 toiletry line for Faberge. Mr. Barrie's role for this toiletry
line included obtaining Joe Namath's endorsement and promotional assistance. In
1977, Mr. Barrie signed Farrah Fawcett to a promotional contract with Faberge
for the Farrah Fawcett hair product and fragrance lines. Mr. Barrie also
supervised the expansion of the Faberge Organics Hair Care line from a beauty
salon line to a successful retail line. Mr. Barrie is the husband of Lynn
Barrie. Effective immediately after the consummation of the Asset Sale, Mr.
Barrie will resign from being a director, the President and Chief Executive
Officer of the Company.
Mr. Nadler became a director of the Company upon the completion of the
Company's initial public offering in March 1989. Mr. Nadler has managed his
private investments since retiring in December 1984 as Chairman of the Board and
Chief Executive Officer of Nadler & Larimer Advertising Agency, an advertising
agency with offices in New York and London, which he founded in 1962.
Mr. Pochna became a director of the Company upon the completion of the
Company's initial public offering in March 1989. Mr. Pochna has been a private
investor and financial consultant to small businesses during the past five
years.
Mr. Buvel became Vice President - Finance, Treasurer and Chief Financial
Officer of the Company in February 1994 after becoming employed by the Company
in December 1993 following completion of the Company's transaction with Muelhens
Inc., which manufactured and distributed fragrance, cosmetic and skin treatment
products. From 1984 to December 1993, Mr. Buvel was employed by Muelhens Inc. in
a variety of financial positions, the last two years serving as Chief Financial
Officer.
Mr. Mahoney became Vice President - Operations of the Company in February
1994 after becoming employed by the Company in December 1993 following
completion of the Company's transaction with Muelhens Inc. From April 1991 to
December 1993, Mr. Mahoney was Director of Operations of Muelhens Inc. From
January 1990 to April 1991, Mr. Mahoney was Director of Operations for Telrepco
Inc., which manufactured and repaired telephone equipment and personal
computers, and from 1983 to March 1989, Mr. Mahoney was General Manager of the
Repair Division of TIE Communications, Inc., which manufactured and distributed
telephone equipment.
Mr. Stein became Vice President - Sales of the Company in February 1994
after becoming employed by the Company in December 1993 following completion of
the Company's transaction with Muelhens Inc. Prior thereto, Mr.
15
<PAGE>
Stein was the President of Contemporary Sales, Inc., a company he founded in
1973 and which served as a manufacturer's sales representative in the retail
field.
During the fiscal year ended June 30, 1995, the Company's Board of
Directors held seven meetings. All directors were present for at least 75% of
such meetings. The Company does not have a standing Compensation, Nominating or
Audit Committee.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers, directors and persons who beneficially own more
than ten percent of the Company's common stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and the Pacific
Stock Exchange. These reporting persons also are required to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's knowledge,
based solely on its review of the copies of such forms furnished to it and
representations that no other reports were required, the Company believes that
all Section 16(a) reporting requirements were complied with during the fiscal
year ended June 30, 1995.
Executive Compensation
The following table sets forth information concerning compensation for
fiscal 1995, 1994 and 1993 earned by or paid to the Company's chief executive
officer and each other executive officer whose compensation exceeded $100,000 in
fiscal 1995:
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Annual Compensation
---------------------------------------------------------------
Other Annual
Name and Salary Bonus Compensation(1)
Principal Occupation Year ($) ($) ($)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1995 227,950 -0- 1,922(2)
Richard Barrie, 1994 198,125 16,000 66,500(2)
President and chief executive officer 1993 150,000 -0- 8,000(2)
- -----------------------------------------------------------------------------------------------------------------------------------
1995 92,250 -0- 17,500(3)
Ronald Stein, 1994 48,750 -0- -0-
Vice President-Sales 1993 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The named executives routinely receive other benefits from the Company,
the aggregate amounts of which during the years indicated did not exceed
10% of the salary and bonus set forth above.
(2) For fiscal 1995 represents the imputed economic benefit to the executive
of premiums paid for a "split dollar" insurance policy (discussed below)
insuring the life of the named executive officer. For fiscal 1994 and
1993, represents reimbursement for premiums paid on insurance policies
insuring the life of the named executive officer for the benefit of his
family. In fiscal 1994 also represents reimbursement of $58,500 in
personal relocation expenses.
(3) Represents reimbursement for personal relocation expenses.
</FN>
</TABLE>
16
<PAGE>
Compensation Arrangements
Chief Executive Officer. Through September 30, 1993, Richard Barrie was
employed pursuant to an employment agreement providing for an annual salary of
$150,000 and reimbursement (up to $8,000 per year) for the cost of private life
insurance maintained by Mr. Barrie for the benefit of his family. Effective
October 1, 1993, the Company entered into a new three-year employment agreement
with Mr. Barrie pursuant to which he would be paid an annual salary of $180,000
per year, which increased to $225,000 effective December 15, 1994, following the
Company's completion of its transaction with Muelhens Inc., with annual cost of
living adjustments based upon the consumer price index. The agreement also
provided for the Company to reimburse Mr. Barrie (up to $8,000 per year) for the
cost of private life insurance through June 30, 1994. In August 1994 the Company
purchased for Mr. Barrie a $6,000,000 "split dollar" insurance policy on his
life, which provides a $3,000,000 "key man" death benefit payable to the Company
and a $3,000,000 death benefit payable to Mr. Barrie's designated beneficiaries.
The policy is structured to provide for repayment of the premiums to the Company
upon the earlier of Mr. Barrie's death or attainment of the age of 67. The
policy is further structured to provide Mr. Barrie with a retirement benefit
from the cash surrender value of the policy.
Directors. In September 1993, the Company adopted the Non-Employee
Director Compensation Plan for all directors not employed by the Company.
Pursuant to this Compensation Plan, on September 20, 1993, the four then
non-employee directors of the Company -- Mrs. Barrie and Messrs. McEnany, Nadler
and Pochna -- were each granted ten-year options to purchase 15,000 shares of
common stock at an exercise price of $2.25 per share (the closing price of the
common stock on the Pacific Stock Exchange on the date of the grant). All of the
options are currently exercisable. On February 2, 1994, this Compensation Plan
was amended to provide for payment of $500 to each non-employee director of the
Company for each meeting attended. In February 1995, Patrick McEnany resigned
from the Company's Board of Directors after several years of service. In
consideration of his services to the Company, on February 21, 1995, the Company
was authorized to amend the terms of the September 20, 1993 Stock Option
Agreement with Mr. McEnany pursuant to which he was granted ten-year options to
purchase 15,000 shares of common stock at an exercise price of $2.25 per share.
Under the terms of the original agreement, such options were to expire
immediately upon his resignation (with respect to options not then exercisable)
or thirty days thereafter (with respect to options then exercisable). The
amendment modified such terms to eliminate such expiration provision. In
addition, the Company was authorized to grant "piggy-back" registration rights
with respect to the shares of common stock issuable upon exercise of such
options, such that these shares would be included in certain future registration
statements filed by the Company under the Securities Act of 1933 without cost to
Mr. McEnany. On April 17, 1995, the exercise price of the options held by Mrs.
Barrie and Messrs. Nadler and Pochna (Mr. McEnany having resigned from the Board
of Directors by that time) were reduced to $1.4375, the closing price of the
Company's common stock on the Pacific Stock Exchange on such date.
Option Grants to Executive Officers. On April 17, 1995, the Company
granted ten-year options to purchase 25,000 shares of common stock at an
exercise price of $1.4375 (the closing price of the common stock on the Pacific
Stock Exchange on the date of grant) to Mr. Barrie and similar options to
purchase 10,000 shares of common stock to each of Messrs. Buvel, Mahoney and
Stein, Vice Presidents of the Company. Such options were to become exercisable
as to 50% on each of the first and second anniversary dates of the grant. In
October 1995, all of these options were voluntarily relinquished by the
grantees.
Certain Relationships and Related Transactions.
Stephen T. Meadow, a nominee for director, owns $39,000 principal amount
of Notes. Mr. Meadow has advised the Company that he intends to consent to the
Asset Sale and to participate in the Proposed Exchange. If the Proposed Exchange
is completed, and if Mr. Meadow participates therein, Mr. Meadow would receive
four Preferred Shares and 4,600 Common Shares.
Charles D. Snead, Jr., a nominee for director, has been retained by the
Company as a consultant in connection with the Asset Sale. Upon completion of
the Asset Sale the Company proposes to retain Mr. Snead as its President and
Chief Executive Officer. For his services to the Company, Mr. Snead will receive
$3,000 per month.
17
<PAGE>
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the independent accounting
firm of Arthur Andersen LLP as the auditors of the Company for the fiscal year
ending June 30, 1996. A representative of Arthur Andersen LLP, the auditors of
the Company for the fiscal year ended June 30, 1995, is expected to be present
at the meeting. The representative will have the opportunity to make a statement
and will be available to respond to appropriate questions from stockholders.
1996 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1996 Annual Meeting of
Stockholders to be eligible for inclusion in the Company's Proxy Statement, they
must be received by the Company at its principal office in Orange, Connecticut
not later than August 30, 1996.
OTHER MATTERS
The Board of Directors knows of no matter which will be presented
for consideration at the meeting other than the matters referred to in this
Proxy Statement. Should any other matter properly come before the meeting, it is
the intention of the persons named in the accompanying proxy to vote such proxy
in accordance with their best judgment.
SOLICITATION OF PROXIES
Solicitation of proxies is being made by the Company through the
mail, in person and by telecommunications. The cost thereof will be borne by the
Company. The Company will also request brokers, dealers, banks and their
nominees to solicit proxies from their clients, where appropriate, and will
reimburse them for reasonable expenses related thereto.
Lynn Barrie, Secretary
Orange, Connecticut
March 22, 1996
18
<PAGE>
RICHARD BARRIE FRAGRANCES, INC. - PROXY
Solicited on Behalf of the Board Of Directors
PROXY
The undersigned hereby appoints LYNN BARRIE, RICHARD BARRIE and PETER
POCHNA (each with full power to act without the others and with power to appoint
his or her substitute) as the undersigned's proxies to vote all shares of Common
Stock of the undersigned in RICHARD BARRIE FRAGRANCES, INC. ("Company"), a
Nevada corporation, which the undersigned would be entitled to vote at the
Special Meeting of Stockholders of the Company to be held on Friday, May 3,
1996, at 11:00 a.m. and at any and all adjournments thereof as follows:
1. PROPOSAL TO APPROVE THE SALE OF VIRTUALLY ALL OF THE COMPANY'S ASSETS
TO PARLUX FRAGRANCES, INC.:
|_| FOR |_| AGAINST |_| ABSTAIN
2. PROPOSAL TO APPROVE THE SALE OF THE PARLUX STOCK:
|_| FOR |_| AGAINST |_| ABSTAIN
3. PROPOSAL TO CHANGE THE COMPANY'S NAME TO FBR CAPITAL CORPORATION:
|_| FOR |_| AGAINST |_| ABSTAIN
4. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to to vote for all nominees
the contrary below |_| listed below |_|
STEPHEN T. MEADOW, CHARLES D. SNEAD, JR.
(continued, and to be signed, on reverse side)
5. In their discretion upon such other business as may properly come
before the meeting and any and all adjournments thereof.
The shares of Common Stock represented by this proxy will be voted in
accordance with the foregoing Instructions. In the absence of any
instructions, such shares will be voted FOR the proposals in Items 1, 2
and 3 and FOR the election of the nominees listed in Item 4.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders to be held on May 3, 1996 and the Proxy
Statement furnished therewith.
The undersigned hereby revokes any proxy to vote shares of Common Stock
of the Company heretofore given by the undersigned.
Date _____________________________, 1996
----------------------------------------
Signature
Please date, sign exactly as name
appears on this proxy, and promptly
return in the enclosed envelope. When
signing as guardian, executor,
administrator, attorney, trustee,
custodian, or in any other similar
capacity, please give full title. If a
corporation, sign in full corporate name
by or other authorized officer, giving
title, and affix corporate seal. If a
partnership, sign in partnership name
by authorized person. In the case of
joint ownership, each joint owner must
sign.
<PAGE>
