SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 28, 1996
FBR Capital Corporation
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of Incorporation)
1-10320 13-3465289
(Commission File Number) (IRS Employer
Identification No.)
14988 N. 78th Way, Suite 203, Scottsdale, AZ 85260
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 922-5213
--------------
Formerly: Richard Barrie Fragrances, Inc.
15 Executive Boulevard, Orange, CT 06477
(Former name or former address, if changed since last report)
Exhibit Index on Page 9
Page 1 of 29 Total Pages
<PAGE>
Item 2. Acquisition or Disposition of Assets
On June 28, 1996, effective for accounting purposes as of June
30, 1996, Richard Barrie Fragrances, Inc. ("Company") sold to Parlux Fragrances,
Inc. ("Parlux"), pursuant to the Asset Purchase Agreement dated January 31, 1996
between the Company and Parlux, virtually all of the assets, properties and
rights owned by the Company in connection with its business in consideration for
(i) $750,000 in cash, (ii) 370,000 shares of the Common Stock of Parlux, and
(iii) the assumption by Parlux of (a) liabilities under certain leases for
periods from and after the closing date, (b) liabilities of the Company set
forth on the Company's balance sheet dated September 30, 1995 (but expressly
excluding any liability with respect to the Company's 10% Convertible
Subordinated Promissory Notes due January 15, 1996 ("Notes")) to the extent such
liabilities existed on the closing date, (c) additional liabilities of the
Company of the types reflected on the balance sheet as the same arose in the
ordinary course of the business between September 30, 1995 and the closing date
and which are reflected on the Company's closing date balance sheet, and (d) all
obligations under contracts, customer orders, purchase orders, and other
agreements and commitments that were included in the assets acquired by Parlux.
Parlux did not assume the following liabilities of the Company: (i) liabilities
and obligations to the Company's employees, (ii) legal, accounting and other
fees, taxes and other expenses incurred in connection with the sale of assets,
(iii) taxes (other than income taxes) for periods prior to the closing date and
income taxes for all periods, (iv) liabilities and obligations with respect to
assets not acquired and (v) liabilities and obligations arising from pending or
threatened litigation or claims against the Company. Pursuant to the Asset
Purchase Agreement, the Company agreed to indemnify Parlux with respect to any
claims caused by or arising from (i) any misrepresentation, breach of warranty
or breach of any term or provision of the Asset Purchase Agreement by the
Company to a maximum amount of $3,700,000, provided such claim is made in
writing within two years after the closing, (ii) any liabilities not assumed by
Parlux or (iii) liabilities (other than assumed liabilities) arising from the
operation of the Company's business prior to the closing. Conversely, Parlux
agreed to indemnify the Company with respect to claims caused by or arising from
(i) any misrepresentation, breach of warranty or breach of any term or provision
of the Asset Purchase Agreement by Parlux, provided such claim is made in
writing within two years after the closing, (ii) any liabilities assumed by
Parlux, or (iii) any liability arising from the operation of the business of the
Company by Parlux after the closing. No indemnification rights are enforceable
until the aggregate amounts of claims subject to such rights in favor of a party
exceeds $10,000.
In connection with the transaction, Parlux entered into a
Registration Rights Agreement in favor of the Company pursuant to which Parlux
agreed to use its best efforts to register the shares of Parlux stock sold to
the Company under the Securities Act of 1933, as amended, on demand and at any
time Parlux proposes to register any of its equity securities under the
Securities Act, without cost to the Company. The Company has made a demand on
Parlux to register the Parlux stock.
Parlux has agreed to permit, and has directed, Richard Barrie
and Joseph Buvel (formerly the President and chief executive officer of the
Company and the Vice President-Finance and chief financial and accounting
officer of the Company, respectively) to provide certain services to the Company
subsequent to the closing (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 Securities
and Exchange Act of 1934, as amended.
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In connection with the sale of assets, all employees of the
Company were terminated, although many of the employees were then hired by
Parlux, including Messrs. Barrie and Buvel, as well as Leo Mahoney and Ronald
Stein, formerly Vice President-Operations and Vice President- Sales of the
Company.
Prior to the closing and since fiscal 1994, the Company had
performed certain production and filling services for Parlux. For the fiscal
years ended June 30, 1994 and 1995 the total amounts billed to Parlux for such
production and filling services were $35,573 and $221,821, respectively. On
January 4, 1996, the Company entered into a Warehousing and Distribution
Agreement ("W&D Agreement") with Parlux, pursuant to which the Company provided
certain warehousing and distribution services to Parlux with respect to Parlux
products located at the Company's former facilities in Orange, Connecticut. The
Company also provided 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 use
of its facilities, the Company received 3% of the gross sales of Parlux products
shipped from the Company's facilities.
Item 5. Other Events
Completion of Exchange Offer
Simultaneously with the closing of the sale of assets, the
Company completed an exchange offer with the holders of the Company's 10%
Convertible Subordinated Promissory Notes due January 15, 1996 ("Notes"),
pursuant to which the holders holding $5,040,750 aggregate principal amount
(97.7% of the principal amount outstanding) tendered their Notes in exchange for
an aggregate of 594,550 shares of the Company's Common Stock, par value $.005
per share, and 517 shares of the Company's newly-authorized Series A Preferred
Stock, at an exchange ratio of 2,300 shares of the Company's Common Stock and
two shares of Series A Preferred Stock for each $19,500 principal amount Note.
The total amount of debt (including principal and unpaid but accrued interest)
relinquished pursuant to the exchange amounted to $5,970,472.
The Series A Preferred Stock has a liquidation preference of
$5,600 per share, or $2,895,200 in the aggregate. The Company is obligated to
redeem the Series A Preferred Stock one year from the date of issuance. If the
Company does not effect a mandatory redemption within such one year period, the
holders of a majority of the Series A Preferred Stock will have the right to
demand liquidation of the Company and receive their liquidation preference. The
Company has the right to call the Series A Preferred Stock for redemption at any
time at the redemption price. Holders of the Series A Preferred Stock 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 of the sales of the Company's assets, unless all of the
net proceeds of such sale are applied to the payment of the redemption price of
the Series A Preferred Stock; (ii) any amendments to the Company's Articles of
Incorporation; and (iii) the issuance of any shares of the Company's capital
stock (other than any issuance pursuant to outstanding rights or options) unless
the Series A Preferred Stock 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 the Series A Preferred Stock are entitled to vote as a class, the
affirmative vote of holders holding a majority of the Series A Preferred Stock
outstanding is required for approval of such matter. The Series A Preferred
Stock has no right to dividends.
3
<PAGE>
Change in Management
In connection with the completion of the exchange offer, all
of the officers and directors of the Company resigned and Charles D. Snead, Jr.
and Stephen T. Meadow assumed their positions as directors of the Company, for
which they were elected at the Special Meeting of Stockholders of the Company
held on May 31, 1996 discussed below. Simultaneously with the closing of the
exchange offer, Mr. Snead was appointed President and Treasurer (and chief
executive, accounting and financial officer) and Mr. Meadow was appointed
secretary of the Company.
Contribution to Capital
In connection with the completion of the exchange offer,
Richard Barrie, formerly President and a director of the Company, contributed to
the capital of the Company 377,400 shares of the Company's Common Stock owned by
him. These shares resumed the status of authorized, but unissued shares of the
Company's Common Stock and were re-issued in the exchange offer to Noteholders.
Shares Outstanding
Following the completion of the exchange offer, the Company
had issued and outstanding an aggregate of 4,636,698 shares of Common Stock and
517 shares of Series A Preferred Stock.
Change in Name
On July 1, 1996, the Company filed a Certificate of Amendment
to its Articles of Incorporation to change its name from "Richard Barrie
Fragrances, Inc." to "FBR Capital Corporation" as authorized by the stockholders
of the Company at the Special Meeting of Stockholders held on May 31, 1996
discussed below.
Special Meeting of Stockholders
On May 31, 1996, the Company held a Special Meeting of
Stockholders for the following purposes:
(i) to authorize the sale of assets to Parlux;
(ii) to authorize the Company's subsequent sale of Parlux
Common Stock received by the Company in connection
with the sale of assets;
(iii) to authorize the amendment to the Company's Articles
of Incorporation to change the Company's name after
completion of the sale of assets to Parlux; and
(iv) to elect two directors (Charles D. Snead, Jr. and
Stephen T. Meadow) to take office after completion
of the sale of assets to Parlux.
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The votes with respect to the proposals were as follows:
For Against Abstain Non-Votes
(i) 2,329,627 42,668 1,101 1,413,693
(ii) 2,338,876 46,799 8,600 1,392,814
(iii) 2,362,830 45,105 8,234 1,370,920
For Authority Withheld
(iv) Snead - 3,744,322 42,767
Meadow - 3,746,822 40,267
Item 7. Financial Statements, Pro Forma Financial Information and E
xhibits
(a) Financial Statements of Business Acquired.
Not Applicable
(b) Pro Forma Financial Information.
Pro Forma Balance Sheet at March 31, 1996
Notes to Pro Forma Balance Sheet
(c) Exhibits
3.1.4 Certificate of Designation of
Series A Preferred Stock, filed
June 27, 1996.
3.1.5 Amendment to Articles of
Incorporation, filed July 1, 1996.
10.17 Asset Purchase Agreement between
the Company and Parlux Fragrances,
Inc., dated January 31, 1996.
[Incorporated by reference to
Exhibit 10.17 to the Company's
Quarterly Report on Form 10-QSB
for the Fiscal Quarter ended
December 31, 1996.]
10.18 Registration Rights Agreement
between the Company and Parlux
Fragrances, Inc., dated June 28,
1996.
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Item 7(b). Pro Forma Financial Information
Pro Forma Balance Sheet at March 31, 1996
The following table sets forth the Company's unaudited balance sheet at
March 31, 1996, pro forma to reflect the sale of assets to Parlux, and as
further adjusted to reflect the completion of the exchange offer and
contribution to capital discussed in Item 5.
<TABLE>
<CAPTION>
March 31, 1996
(unaudited)
As
Actual Pro Forma(1) Adjusted(2)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 495,269 $ 750,000 $ 750,000
Accounts Receivable 1,119,546 -- --
Inventory and Promotional Merchandise 2,487,697 -- --
Other Current Assets 298,072 -- --
Investment in Marketable Securities(3) -- 4,578,750 4,578,750
--------- --------- ---------
Total Current Assets 4,400,584 5,328,750 5,328,750
Fixed Assets, Net 963,555 -- --
--------- --------- ----------
Total Assets $5,364,139 $5,328,750 $5,328,750
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current Liabilities:
Convertible Notes Payable $5,157,750 $5,157,750 $ 117,000
Accounts Payable(4) 385,248 121,789 121,789
Accrued Expenses(5) 2,178,116 852,704 114,094
--------- --------- ---------
Total Liabilities 7,701,114 6,132,243 352,883
--------- --------- ---------
Preferred Stock:
$0.01 par value, 10,000,000 shares
authorized, 517 shares outstanding as
Series A Preferred Stock, subject to
mandatory redemption(6) -- -- 2,895,200
--------- --------- ---------
Stockholders' Equity (Deficit:
Common Stock, $0.005 par value, 16,666,667
shares authorized, 4,419,548 (actual and
pro forma) and 4,636,698 (as adjusted)
issued and outstanding 22,097 22,097 23,183
Additional Paid-In Capital 6,982,738 6,982,738 7,167,449
Accumulated Deficit (9,341,810) (7,808,328) (5,109,965)
--------- ----------- ---------
Total Stockholders' Equity (Deficit) (2,336,975) (803,493) 2,080,667
----------- ----------- ----------
Total Liabilities and Stockholders'
Equity (Deficit) $5,364,139 $5,328,750 $5,328,750
========== ========== ==========
The accompanying notes are an integral part of this balance sheet.
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<FN>
Notes to Pro Forma Balance Sheet at March 31, 1996
(1) 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 $12.375 per share, the
per share market price on the Nasdaq National Market of the Parlux
common stock on March 31, 1996) and $750,000 in cash.
(2) As adjusted to reflect the issuance of 517 shares of Series A Preferred
Stock and 594,550 shares of Common Stock to the Noteholders in payment
of $3,080,997 of principal and interest due (of which $2,895,200 is
attributable to the Series A Preferred Stock and $185,797 is
attributable to the Common Stock) and in settlement and extinguishment
of the remaining $2,832,507 principal and interest due at March 31,
1996. 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. The closing price of the Company's Common Stock on the Pacific
Stock Exchange on March 31, 1996 was $0.3125.
(3) Represents Parlux Common Stock on a pro forma and as adjusted basis.
(4) Pro forma and as adjusted accrual for expenses of the transaction and
other costs.
(5) Includes accrued interest at March 31, 1996 on Notes of $755,754 actual
and for pro formal purposes and $17,144 on an as adjusted basis.
(6) As adjusted for the issuance of the Series A Preferred Stock having a
mandatory redemption feature.
</FN>
</TABLE>
7
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
July 15, 1996 FBR Capital Corporation
(Registrant)
/s/ Charles D. Snead, Jr.
Charles D. Snead, Jr., President, (Chief
Executive, Financial and Accounting
Officer)
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EXHIBIT INDEX
Exhibit Number Description Page
3.1.4 Certificate of Designation of Series A
Preferred Stock, filed June 27, 1996. 10
3.1.5 Amendment to Articles of Incorporation,
filed July 1, 1996. 13
10.17 Asset Purchase Agreement between the Company
and Parlux Fragrances, Inc., dated January 31,
1996. [Incorporated by reference to Exhibit
10.17 to the Company's Quarterly Report on
Form 10-QSB for the Fiscal Quarter ended
December 31, 1996.]
10.18 Registration Rights Agreement between the
Company and Parlux Fragrances, Inc., dated
June 28, 1996. 15
9
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Exhibit 3.1.4
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND
RIGHTS OF SERIES A PREFERRED STOCK
OF
RICHARD BARRIE FRAGRANCES, INC.
------------------------------------------------------
Pursuant to Section 78.195 of the General Corporation
Law of the State of Nevada
------------------------------------------------------
RICHARD BARRIE FRAGRANCES, INC., a Nevada corporation (the
"Corporation"), hereby certifies that, pursuant to the authority vested in the
Board of Directors of the Corporation under ARTICLE FOURTH of the Corporation's
Articles of Incorporation and in accordance with Section 78.195 of the Nevada
General Corporation Law, the Board of Directors has adopted the following
resolution creating the Corporation's Series A Preferred Stock, par value $.01
per share:
RESOLVED, that a series of the Preferred Stock, $.01 par
value, of the Corporation be hereby created and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof be as follows:
(1) Designation. A Series of Preferred Stock shall be
designated and known as the Series A Preferred Stock (hereinafter called, the
"Preferred Stock").
(2) Number of Shares. The number of shares of Preferred Stock
authorized for issuance hereby shall initially be 529 shares, which number may
be increased or decreased (but not decreased below the number of shares of the
series then outstanding), from time to time by the Board of Directors. Shares of
Preferred Stock redeemed or purchased by the Corporation shall be cancelled and
shall revert to authorized but unissued shares of the Corporation's preferred
stock without designation as to series.
(3) Dividends. Preferred Stock shall have no right to any
dividends.
(4) Liquidation Preference.
10
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(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, then,
before any distribution or payment shall be made to the holders of any of the
Corporation's common stock, the holders of Preferred Stock shall be entitled to
be paid the amount of $5,600 per share. The merger or consolidation of the
Corporation with or into one or more other entities or the sale, lease or
conveyance of all or a part of its assets shall not be deemed to be a
liquidation, dissolution or winding up of the affairs of the Corporation within
the meaning of the foregoing provisions of this subdivision (4).
(b) If the Corporation fails to pay the mandatory
redemption price in accordance with subdivision (5)(b) hereof, the holders of a
majority of the outstanding shares of Preferred Stock shall be entitled to
compel the liquidation of the Corporation and to obtain their liquidating
preference from the proceeds thereof.
(5) Redemption.
(a) Preferred Stock may be called for redemption, in
whole and not in part, at the option of the Corporation, by resolution of its
Board of Directors at any time prior to the first anniversary of the date of
issuance thereof for a redemption price of $5,600 per share.
(b) If not sooner redeemed pursuant to subdivision (5)(a)
hereof, Preferred Stock shall be redeemed by the Corporation on the first
anniversary of the date of its issuance for a redemption price of $5,600 per
share.
(c) Notice of redemption of shares of Preferred Stock
shall be mailed by first class mail, postage prepaid, addressed to the holders
of record of the Preferred Stock at their respective last addresses as they
shall appear on the stock books of the Corporation. Such mailing shall be made
at least 30 days and not more than 60 days prior to the date fixed for
redemption. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the shareholder
receives such notice, and failure to give such notice by mail, or any defect in
such notice, to any holder of shares of Preferred Stock shall not affect the
validity of the proceedings for the redemption of any other shares of Preferred
Stock.
(d) If notice of redemption shall have been duly mailed,
then, from and after the date of redemption so designated, notwithstanding that
any certificate for shares of Preferred Stock shall not have been surrendered
for cancellation, the shares represented thereby shall no longer be deemed
outstanding and all rights with respect to such shares of Preferred Stock shall
forthwith on the redemption date cease and terminate, except only the right of
the holders thereof to receive payment of the redemption price.
(e) The Corporation shall not establish, and the holders
of Preferred Stock shall not be entitled to the benefits of, any sinking or
retirement fund with respect to the shares of Preferred Stock.
(7) Voting Rights. The holders of the Preferred Stock shall
have no voting power on any matters of the Corporation, except the right to vote
as a class with respect to (i) any sale the Corporation's assets having a fair
market value of $250,000 or more, alone or in the aggregate with all other sales
of Corporation assets, unless all of the net proceeds of such sale are applied
to the payment of the redemption price of the Preferred Stock; (ii) any
amendments to the Corporation's Articles of Incorporation; and (iii) the
issuance of any shares of the Company's capital stock (other than any issuance
of shares pursuant to currently outstanding rights or options) unless the
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Preferred Stock 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 Stock are entitled to vote as a class, the affirmative vote of holders
holding a majority of the Preferred Stock outstanding shall be required for the
approval of such matter.
(8) Preemptive Rights. The holders of shares of Preferred
Stock shall have no preemptive right to purchase or otherwise acquire shares of
any class of stock or other securities of the Corporation now or hereafter
authorized.
IN WITNESS WHEREOF, we have executed this Certificate of
Designation this 27th day of June, 1996.
RICHARD BARRIE FRAGRANCES, INC.
By: /s/ Richard Barrie
Richard Barrie, President
By: /s/ Joseph Buvel
Joseph Buvel, Assistant Secretary
STATE OF CONNECTICUT )
ss.:
COUNTY OF NEW HAVEN )
On June 25, 1996, personally appeared before me, a Notary
Public for the State and County aforesaid, Richard Barrie, as President of
Richard Barrie Fragrances, Inc., and Joseph Buvel, as Assistant Secretary of
Richard Barrie Fragrances, who acknowledged that they executed the above
instrument.
/s/
Notary Public
[Affix Notarial Seal]
12
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Exhibit 3.1.5
CERTIFICATE OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
RICHARD BARRIE FRAGRANCES, INC.
---------------------------------------
Pursuant to Section 78.390 of the General
Corporation Law of the State of Nevada
---------------------------------------
The undersigned, President and Assistant Secretary of Richard
Barrie Fragrances, Inc., a Nevada corporation ("Corporation"), hereby certify:
1. The name of the Corporation is Richard Barrie
Fragrances, Inc.
2. The total number of outstanding shares of the Corporation
having voting power is 4,419,548 and the total number of votes entitled to be
cast by the holders of all said outstanding shares is 4,419,548.
3. The amendment set forth below was adopted, pursuant to
Section 78.390 of the General Corporation Law of the State of Nevada, by the
affirmative of stockholders owning at least a majority of the outstanding shares
entitled to vote therein, or specifically, owning 3,787,089 shares, given at a
special meeting of stockholders.
4. Article FIRST of the Articles of Incorporation is hereby
amended to read as follows:
"FOURTH: The name of the Corporation is FBR Capital
Corporation."
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<PAGE>
IN WITNESS WHEREOF, we have executed this Certificate of
Amendment to the Articles of incorporation this __th day of June, 1996.
RICHARD BARRIE FRAGRANCES, INC.
By: /s/ Richard Barrie
Richard Barrie, President
By: /s/ Joseph Buvel
Joseph Buvel, Assistant Secretary
STATE OF CONNECTICUT )
ss.:
COUNTY OF NEW HAVEN )
On June 25, 1996, personally appeared before me, a Notary
Public, for the State and County aforesaid, Richard Barrie, President of Richard
Barrie Fragrances Inc., and Joseph Buvel, Assistant Secretary of Richard Barrie
Fragrances, Inc., who acknowledged that they executed the above instrument.
/s/
Notary Public
[Affix Notarial Seal]
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<PAGE>
Exhibit 10.18
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of June 28, 1996, is among
Parlux Fragrances, Inc., a Delaware corporation (the "Company"), and Richard
Barrie Fragrances, Inc., a Nevada corporation (the "Stockholder").
W I T N E S S E T H:
WHEREAS, as of the date hereof and after giving effect to the
transactions contemplated by the Asset Purchase Agreement (the "Asset Purchase
Agreement"), dated January 31, 1996, between the Company and the Stockholder,
the Stockholder will beneficially own shares of Common Stock, par value $.01
(the "Common Stock"), of the Company;
WHEREAS, the parties hereto desire to provide the Stockholder with
certain registration rights with respect to the Common Stock and certain other
rights and obligations as hereinafter provided;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
Affiliate shall mean with respect to any Person, (a) any Person which
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, or (b) any Person
who is a director or executive officer (i) of such Person, (ii) of any
Subsidiary of such Person, or (iii) of any Person described in clause (a) above,
or with respect to the Stockholder, the Company; provided, that any Affiliate of
a corporation shall be deemed an Affiliate of such corporation's stockholders.
For purposes of this definition, "control" of a Person shall mean the power,
direct or indirect, (i) to vote or direct the voting of more than 5% of the
outstanding shares of voting stock of such Person, or (ii) to direct or cause
the direction of the management and policies of such Person, whether by contract
or otherwise.
Agreement shall mean this Agreement as in effect on the date hereof and
as hereafter from time to time amended, modified or supplemented in accordance
with the terms hereof.
Asset Purchase Agreement shall have the meaning set forth in the first
recital.
Common Stock shall mean the Common Stock, par value $.01 per share, of
the Company.
Closing Date shall mean the date on which the transactions contemplated
by the Asset Purchase Agreement shall be consummated.
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<PAGE>
Commission shall mean the Securities and Exchange Commission and any
successor commission or agency having similar powers.
Exchange Act shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute then in effect, and a reference to a
particular section thereof shall include a reference to the comparable section,
if any, of such similar Federal statute.
GAAP shall mean the generally accepted accounting principles in the
United States of America in effect from time to time, applied on a consistent
basis both as to classification of items and amounts.
Holder shall mean any holder of outstanding Registrable Securities or
anyone who holds outstanding Registrable Securities to whom the registration
rights conferred by this Agreement have been transferred in compliance with this
Agreement.
Person shall mean an individual or a corporation, association,
partnership, joint venture, organization, business, trust, or any other entity
or organization, including a government or any subdivision or agency thereof.
Registrable Securities shall mean the following:
(a) all shares of Common Stock outstanding on the date hereof and
owned of record by the Stockholder as of the date hereof; and
(b) any shares of capital stock issued or issuable by the Company in
respect of any shares of Common Stock referred to in the foregoing clause (a) by
way of a stock dividend or stock split or in connection with a combination or
subdivision of shares, reclassification, recapitalization, merger, consolidation
or other reorganization of the Company.
As to any particular Registrable Securities that have been issued, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of under such registration statement, (ii) they shall have been distributed to
the public pursuant to Rule 144, (iii) they shall have been otherwise
transferred or disposed of, and new certificates therefor not bearing a legend
restricting further transfer shall have been delivered by the Company, and
subsequent transfer or disposition of them shall not require their registration
or qualification under the Securities Act or any similar state law then in
force, or (iv) they shall have ceased to be outstanding.
Registration Expenses shall mean any and all out-of-pocket expenses
incident to the Company's performance of or compliance with Article III hereof,
including, without limitation, all Commission, stock exchange or National
Association of Securities Dealers, Inc. ("NASD") registration and filing fees,
all fees and expenses of complying with securities and blue sky laws (including
the reasonable fees and disbursements of underwriters' counsel in connection
with blue sky qualifications and NASD filings), all fees and expenses of the
transfer agent and registrar for the Registrable Securities, all printing
expenses, the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits
and/or "cold comfort" letters required by or incident to such performance and
compliance, and one firm of counsel (other than in-house counsel) retained by
the Company, but excluding underwriting discounts and commissions and applicable
transfer and documentary stamp taxes, if any, and fees
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<PAGE>
and expenses of any counsel retained by the seller of the securities, which
shall be borne by the seller of the securities in all cases.
Securities Act shall mean, as of any date, the Securities Act of 1933,
as amended, or any similar Federal statute then in effect, and in reference to a
particular section thereof shall include a reference to the comparable section,
if any, of any such similar Federal statute and the rules and regulations
thereunder.
Stockholder shall mean Richard Barrie Fragrances, Inc., and any
successor or permitted assigns of such company.
Subsidiary shall mean as to any Person a corporation of which
outstanding shares of stock having ordinary voting power (other than stock
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors of such corporation are at the time owned,
directly or indirectly through one or more intermediaries, or both, by such
Person.
ARTICLE II
RESTRICTIONS ON TRANSFERABILITY
Section 2.1 Endorsement of Certificates.
(a) Upon the execution of this Agreement, in addition to any other
legend which the Company may deem advisable under the Securities Act and certain
state securities laws, all certificates representing shares of Registrable
Securities shall be endorsed at all times prior to the registration of such
shares under the Securities Act.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS, AND THEY MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM
REGISTRATION, UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS AGAINST TRANSFER CONTAINED IN
A REGISTRATION RIGHTS AGREEMENT. A COPY OF SAID REGISTRATION
RIGHTS AGREEMENT IS AVAILABLE FOR INSPECTION AT THE OFFICES OF
THE COMPANY.
(b) The obligations of each party hereto shall be binding upon each
transferee to whom shares of Registrable Securities are transferred by any party
hereto.
Section 2.2 Transfers of Registrable Securities.
(a) The Registrable Securities may not be sold, assigned, transferred
or pledged except upon the conditions specified in this Agreement, which
conditions are intended to ensure
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compliance with the provision of the Securities Act. Each Holder will cause any
proposed purchaser, assignee, transferee or pledgee of Registrable Securities
held by a Holder to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.
(b) Each Holder agrees not to make any disposition of all or a portion
of any Registrable Securities unless and until:
(i) There is in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) Such Holder shall have notified the Company of the
proposed disposition, including a proposed disposition pursuant to Rule
144, and shall have furnished the Company with a detailed statement of
the circumstances surrounding such disposition, including, if
reasonably requested by the Company, a supporting opinion of counsel
that such disposition shall not require registration of such shares
under the Securities Act.
ARTICLE III
REGISTRATION RIGHTS
Section 3.1 Demand Registration.
(a) Provided that the Company shall receive from the Holders a written
request that the Company effect a registration with respect to all of the issued
and outstanding Registrable Securities held by the Holders, the Company shall,
as soon as practicable after the filing by the Company of a periodic report with
the Commission reflecting the consummation of the transactions contemplated by
the Asset Purchase Agreement, use its best efforts to register all Registrable
Securities which the Holders request to be registered within forty-five (45)
days after receipt of such written notice from the Holders; provided, that the
Company shall not be obligated to file a registration statement pursuant to this
Section 3.1:
(i) in any particular state in which the Company
would be required to execute a general consent to service of
process in effecting such registration;
(ii) within 120 days following the effective date of
any registered offering of the Company's securities to the
general public in which the Holders of Registrable Securities
shall have been able effectively to register all Registrable
Securities as to which registration shall have been requested;
or
(iii) after the Company has effected one such
registration pursuant to this Section 3.1 and such
registration statement has been declared or ordered effective.
Subject to the foregoing clauses (i) through (iii), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered and shall use reasonable best efforts to have such registration
statement promptly declared effective by the Commission; provided, however, that
if the Company shall furnish to such Holders a certificate signed by the Chief
Executive Officer of the Company stating that in the good-faith judgment of the
Board of Directors
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it would be seriously detrimental to the Company and its shareholders for such
registration statement to be filed within such forty-five (45) day period, the
Company may postpone for a reasonable period of time, not to exceed ninety (90)
days, the initial forty-five (45) day period within which to file such
registration statement; provided, that during such time the Company may not file
a registration statement for securities to be issued and sold for its own
account.
(b) If the Holders intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request, and if so requested in writing by the
Company, the Holders shall negotiate with an underwriter selected by the Company
with regard to the underwriting of such requested registration; provided,
however, that if a majority in interest of the Holders have not agreed with such
underwriter as to the terms and conditions of such underwriting within twenty
(20) days following commencement of such negotiations, a majority in interest of
the Holders may select an underwriter of their choice. The right of any Holder
to registration pursuant to this Section 3.1 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Holders and such Holder) to the extent provided
herein. The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 3.1, if the
managing underwriter advises the Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, the Company
shall so advise all Holders, and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated
among all Holders thereof in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders; provided,
however, that securities to be included in such registration statement as a
result of piggyback registration rights as well as any securities to be offered
by the Company, its officers and employees shall be excluded from the
registration statement prior to the exclusion of any Registrable Securities held
by the Holders. If any Holder disapproves of the terms of the underwriting, such
Holder may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the Holders. If, by the withdrawal of such Registrable
Securities, a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the limit imposed by the underwriters)
the Company shall offer to all Holders who have included Registrable Securities
in the registration the right to include additional Registrable Securities in
the same proportion used in determining the limitation as set forth above. Any
Registrable Securities which are excluded from the underwriting by reason of the
underwriter's marketing limitation or withdrawn from such underwriting shall be
withdrawn from such registration.
(c) The Registration Expenses incurred in connection with a
registration of Registrable Securities requested pursuant to this Section 3.1
shall be paid by the Company.
Section 3.2 Piggyback Registrations.
(a) If the Company at any time proposes to register any of its equity
securities under the Securities Act (other than a registration on Form S-4 or
S-8 or any successor or similar forms thereto), whether or not for sale for its
own account, on a form and in a manner that would permit registration of
Registrable Securities for sale to the public under the Securities Act, it will
give written notice as soon as practicable to all the Holders of Registrable
Securities of its intention to do so, describing such securities and specifying
the form and manner and the other relevant facts involved in such proposed
registration (including, without limitation, (x) whether or not such
registration will be in connection with an underwritten offering of Registrable
Securities and, if so,
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the identity of the managing underwriter and whether such offering will be
pursuant to a "best efforts" or "firm commitment" underwriting and (y) the price
(net of any underwriting commissions, discounts and the like) at which the
Registrable Securities are reasonably expected to be sold). Upon the written
request of any such holder delivered to the Company within 15 calendar days
after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of disposition thereof), the Company will use best efforts to
effect the registration under the Securities Act of all of the Registrable
Securities that the Company has been so requested to register; provided,
however, that:
(i) If, at any time after giving such written notice of its
intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such
securities, the Company may, at its election, give written notice of
such determination to each Holder of Registrable Securities who made a
request as hereinabove provided and thereupon the Company shall be
relieved of its obligation to register any Registrable Securities in
connection with such registration.
(ii) If such registration involves an underwritten offering,
all Holders of Registrable Securities requesting to be included in the
Company's registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions
as apply to the Company.
(b) The Company shall not be obligated to effect any registration of
Registrable Securities under this Section 3.2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
dividend reinvestment plans or stock option or other employee benefit plans.
(c) The Registration Expenses incurred in connection with each
registration of Registrable Securities requested pursuant to this Section 3.2
shall be paid by the Company.
(d) If a registration pursuant to this Section 3.2 involves an
underwritten offering, the right of any Holder to registration pursuant to this
Section 3.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. Notwithstanding any other provision
of this Section 3.2, if the managing underwriter of such underwritten offering
advises the Company that, in its opinion, the number of securities proposed to
be included in such registration should be limited due to market conditions,
then the Company will include in such registration (i) first, the securities the
Company proposes to sell and (ii) second, the number of Registrable Securities
requested by Holders thereof to be included in such registration and any other
securities proposed to be registered by holders exercising registration rights
that, in the opinion of such managing underwriter, can be sold, such amount to
be allocated among all such Holders of Registrable Securities and the holders of
such other securities pro rata on the basis of the respective number of
Registrable Securities and other securities each such holder has requested to be
included in such registration.
(e) In connection with any underwritten offering with respect to which
holders of Registrable Securities shall have requested registration pursuant to
this Section 3.2, the Company shall have the right to select the managing
underwriter with respect to the offering.
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Section 3.3 Procedures.
(a) If and whenever the Company is required to effect or cause the
registration of any Registrable Securities under the Securities Act as provided
in Section 3.1 or Section 3.2, the Company will, as expeditiously as possible:
(i) Use its best efforts to cause such registration statement
to become and remain effective; provided, that in the case of a
registration provided for in Section 3.1, before filing a registration
statement or prospectus or any amendments or supplements thereof, the
Company will furnish to the counsel selected by the Stockholder copies
of all such documents proposed to be filed, which documents will be
subject to the review of such counsel; and, provided, further, that the
Company may discontinue any registration of its securities that is
being effected pursuant to Section 3.2 at any time prior to the
effective date of the registration statement relating thereto.
(ii) Prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period not exceeding two years (unless the Company does not qualify for
use of Form S-3, in which case the Company shall only be obligated to
keep such registration statement effective for a period not exceeding
nine months), and to comply with the provisions of the Securities Act
with respect to the disposition of all Common Stock covered by such
registration statement during such period in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement.
(iii) Furnish to each holder of Registrable Securities covered
by the registration statement and to each underwriter, if any, of such
Registrable Securities, such number of copies of a prospectus and
preliminary prospectus for delivery in conformity with the requirements
of the Securities Act, and such other documents, as such Person may
reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities.
(iv) Subject to Section 3.1(a)(i), use its best efforts to
register or qualify such Registrable Securities covered by such
registration statement under such other securities or blue sky laws of
such jurisdictions as each seller shall reasonably request, and do any
and all other acts and things which may be reasonably necessary or
advisable to enable such seller to consummate the disposition of the
Registrable Securities owned by such seller, in such jurisdictions,
except that the Company shall not for any such purpose be required (A)
to qualify to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this Section 3.3(a), it is not then
so qualified, or (B) to subject itself to taxation in any such
jurisdiction, or (C) to take any action which would subject it to
general or unlimited service of process in any such jurisdiction where
it is then so subject.
(v) Use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities.
(vi) Immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be
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delivered under the Securities Act within the appropriate period
mentioned in Section 3.3(a)(ii), if the Company becomes aware that the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing, and, at the request of any such seller, deliver a
reasonable number of copies of an amended or supplemental prospectus as
may be necessary so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its security holders, in each case as soon as practicable,
but not later than 60 calendar days after the close of the period
covered thereby (120 calendar days in case the period covered
corresponds to a fiscal year of the Company), an earnings statement of
the Company which will satisfy the provisions of Section 11(a) of the
Securities Act.
(viii) In the event the offering is an underwritten offering,
use its best efforts to obtain a "cold comfort" letter from the
independent public accountants for the Company in customary form and
covering such matters of the type customarily covered by such letters
as the sellers of a majority of any class of such Registrable
Securities reasonably request.
(ix) Execute and deliver all customary instruments and
documents (including in an underwritten offering an underwriting
agreement in customary form) and take such other actions and obtain
such certificates and opinions as sellers of a majority of any class of
such Registrable Securities reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
(b) Each Holder of Registrable Securities will, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3.3(a)(vi), forthwith discontinue disposition of the Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.3(a)(vi).
(c) If a registration pursuant to Section 3.1 or Section 3.2 involves
an underwritten offering, each Holder of Registrable Securities agrees, whether
or not such Holder's Registrable Securities are included in such registration,
not to effect any public sale or distribution (except for any sale pursuant to
Rule 144 under the Securities Act) of any Registrable Securities, or of any
security convertible into or exchangeable or exercisable for any Registrable
Securities (other than as part of such underwritten offering), without the
consent of the managing underwriter, during a period commencing seven calendar
days before and ending 90 calendar days (or such lesser number as the managing
underwriter shall designate) after the effective date of such registration.
(d) If a registration pursuant to Section 3.1 or Section 3.2 involves
an underwritten offering, the Company agrees, if so required by the managing
underwriter, not to effect any public sale or distribution of any of its equity
or debt securities, as the case may be, or securities convertible into or
exchangeable or exercisable for any of such equity or debt securities, as the
case may be, during a period commencing seven calendar days before and ending 90
calendar days after the effective date of such registration, except for such
underwritten offering or except in
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connection with a stock option plan, stock purchase plan, savings or similar
plan, or an acquisition, merger or exchange offer.
(e) If a registration pursuant to Section 3.1 or Section 3.2 involves
an underwritten offering, any Holder of Registrable Securities requesting to be
included in such registration may elect, in writing, prior to the effective date
of the registration statement filed in connection with such registration, not to
register such securities in connection with such registration, unless such
Holder has agreed with the Company or the managing underwriter to limit its
rights under this Section 3.3.
(f) It is understood that in any underwritten offering in addition to
any shares of Common Stock (the "initial shares") the underwriters have
committed to purchase, the underwriting agreement may grant the underwriters an
option to purchase up to a number of additional shares of authorized but
unissued shares of Common Stock (the "option shares") equal to 15% of the
initial shares (or such other maximum amount as the NASD may then permit),
solely to cover over-allotments. Shares of Common Stock proposed to be sold by
the Company and the other sellers shall be allocated between initial shares and
option shares as agreed or, in the absence of agreement, pursuant to Section
3.2(d). The number of initial shares and option shares to be sold by requesting
Holders shall be allocated pro rata among all such Holders on the basis of the
relative number of shares of Registrable Securities each such Holder has
requested to be included in such registration.
Section 3.4 Indemnification.
(a) In the event of any registration of any securities of the Company
under the Securities Act pursuant to Section 3.1 or Section 3.2, the Company
will, and it hereby agrees to, indemnify and hold harmless, to the extent
permitted by law, each seller of any Registrable Securities covered by such
registration statement, its directors and officers or general and limited
partners, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls such
seller or any such underwriter within the meaning of the Securities Act, as
follows:
(i) against any and all loss, liability, claim, damage or
expense whatsoever arising out of or based upon an untrue statement or
alleged untrue statement of a material fact contained in any
registration statement (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or arising out of an untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or
prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to
make the statements therein not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense reasonably incurred by them
in connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by
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any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) above;
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such seller or underwriter expressly for use in the preparation of
any registration statement (or any amendment thereto) or any preliminary
prospectus or prospectus (or any amendment or supplement thereto); and provided,
further, that the Company will not be liable to any Person who participates as
an underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, under the indemnity agreement in this Section 3.4(a) with
respect to any preliminary prospectus or final prospectus or final prospectus as
amended or supplemented, as the case may be, to the extent that any such loss,
claim, damage or liability of such underwriter or controlling Person results
from the fact that such underwriter sold Registrable Securities to a Person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the final prospectus or of the final prospectus as then
amended or supplemented, whichever is most recent, if the Company has previously
furnished copies thereof to such underwriter. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such seller or any such director, officer, general or limited partner,
investment advisor or agent, underwriter or controlling Person and shall survive
the transfer of such securities by such seller.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 3.1 or Section 3.2 that the Company shall have received an undertaking
reasonably satisfactory to it from the prospective seller of such Registrable
Securities or any underwriter, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 3.4(a)) the Company with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such seller or underwriter specifically stating that it is for use in the
preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company
or any such director, officer or controlling Person and shall survive the
transfer of such securities by such seller. In that event, the obligations of
the Company and such sellers pursuant to this Section 3.4 are to be several and
not joint; provided, however, that with respect to each claim pursuant to this
Section, the Company shall be liable for the full amount of such claim, and each
such seller's liability under this Section 3.4 shall be limited to an amount
equal to the net proceeds (after deducting the underwriting discount and
expenses) received by such seller from the sale of Registrable Securities held
by such seller pursuant to this Agreement.
(c) Promptly after receipt by an indemnified party hereunder of written
notice of the commencement of any action or proceeding involving a claim
referred to in this Section 3.4, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to such indemnifying party of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 3.4, except to the extent (not including any
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such notice of an underwriter) that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim (in which case the indemnifying party
shall not be liable for the fees and expenses of more than one firm of counsel
for a majority of the sellers of Registrable Securities and one firm of counsel
selected by the Stockholder or more than one firm of counsel for the
underwriters in connection with any one action or separate but similar or
related actions), the indemnifying party will be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party similar
notified, to the extent that it may wish with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by such indemnifying party in connection
with the defense thereof.
(d) The Company and each seller of Registrable Securities shall provide
for the foregoing indemnity (with appropriate modifications) in any underwriting
agreement with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority.
Section 3.5 Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by Section
3.4 is for any reason not available, the parties required to indemnify by the
terms thereof shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, any seller of Registrable Securities and one or more of
the underwriters, except to the extent that contribution is not permitted under
Section 11(f) of the Securities Act. In determining the amounts which the
respective parties shall contribute, there shall be considered the relative
benefits received by each party from the offering of the Registrable Securities
(taking into account the portion of the proceeds of the offering realized by
each), the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to correct
and prevent any statement or omission and any other equitable considerations
appropriate under the circumstances. The Company and each Person selling
securities agree with each other that no seller of Registrable Securities shall
be required to contribute any amount in excess of the amount such seller would
have been required to pay to an indemnified party if the indemnity under Section
3.4(b) were available. The Company and each such seller agree with each other
and the underwriters of the Registrable Securities, if requested by such
underwriters, that it would not be equitable if the amount of such contribution
were determined by pro rata or per capita allocation (even if the underwriters
were treated as one entity for such purpose) or for the underwriters' portion of
such contribution to exceed the percentage that the underwriting discount bears
to the initial public offering price of the Registrable Securities. For purposes
of this Section 3.5, each Person, if any, who controls an underwriter within the
meaning of Section 15 of the Securities Act shall have the same rights to
contribution as such underwriter, and each director and each officer of the
Company who signed the registration statement, and each Person, if any, who
controls the Company or a seller of Registrable Securities within the meaning of
Section 15 of the Securities Act shall have the same rights to contribution as
the Company or a seller of Registrable Securities, as the case may be.
Section 3.6 Rule 144. The Company covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, it will, upon the request of any
Holder of Registrable Securities, make publicly available other information),
and it
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will take such further action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell shares of Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (ii)
any similar rule or regulation hereafter adopted by the Commission. Upon the
request of any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.
ARTICLE IV
TERMINATION
This Agreement shall terminate with respect to the Stockholder when the
Stockholder no longer owns any Common Stock.
ARTICLE V
MISCELLANEOUS
Section 5.1 Other Covenants.
For so long as the Stockholder holds 2.5% or more of the Common Stock
then outstanding, the Stockholder may upon reasonable prior notice visit and
inspect the properties of the Company and each Subsidiary of the Company and
examine and copy (at their own expense) the books of record and account of the
Company or Subsidiary, and discuss the affairs of the Company or Subsidiary,
finances and accounts of the Company or Subsidiary with the officers and the
current and prior independent public accountants of the Company or Subsidiary
all at such reasonable times as the Stockholder may desire. All materials and
information obtained pursuant to this Section 5.1(a) shall be kept confidential
by the Stockholder and shall not be disclosed to any third party (other than to
their Affiliates) unless expressly agreed to by the Company or as required
pursuant to applicable law, in connection with judicial or arbitral proceedings
or upon request of any governmental or regulatory authority.
Section 5.2 Public Information.
(a) For so long as the Stockholder holds any Common Stock the Company
agrees to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and Exchange Act; and
(iii) furnish to the Stockholder upon request a copy of the
most recent annual or quarterly report of the Company and such other
reports and documents filed by the Company as the Stockholder may
reasonably request in availing itself of any rule or regulation of the
Commission.
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Section 5.3 Successors and Assigns. Subject to Section 2 hereof and
except as otherwise provided herein, all of the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors and assigns of the parties hereto. The
Company may not assign any of its rights hereunder to any Person other than an
Affiliate of the Company. If any transferee of the Stockholder shall acquire any
Common Stock, in any manner, whether by operation of law or otherwise, such
shares shall be held subject to all of the terms of this Agreement, and by
taking and holding such shares such Person shall be entitled to receive the
benefits of and be conclusively deemed to have agreed to be bound by and to
comply with all of the terms and provisions of this Agreement.
Section 5.4 Amendment and Modification; Waiver of Compliance;
Conflicts.
(a) This Agreement may be amended only by a written instrument duly
executed by the Company and the Holders of no less than 50% of the Registrable
Securities.
(b) Except as otherwise provided in this Agreement, any failure of any
of the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
(c) In the event of any conflict between the provisions of this
Agreement and the provisions of any other agreement, the provisions of this
Agreement shall govern and prevail.
Section 5.5 Notices. Any notice, request, claim, demand, document and
other communication hereunder to any party shall be effective upon receipt (or
refusal of receipt) and shall be in writing and delivered personally or sent by
telex or telecopy (with such telex or telecopy confirmed promptly in writing
sent by first class mail), or first class mail, or other similar means of
communication, as follows:
(i) If to the Company:
Parlux Fragrances, Inc.,
3725 S.W. 30th Avenue,
Ft. Lauderdale, Florida 33312,
Attention: Ilia Lekach, Chief Executive Officer,
(with a copy to: Barry P. Biggar, Esq.,
Mayer, Brown & Platt, 1675 Broadway,
New York, New York 10019); or
(ii) If to the Stockholder, to the address of the
Stockholder set forth in the stock records of
the Company.
or, in each case, to such other address or telex or telecopy number as such
party may designate in writing to the Stockholder and the Company by written
notice given in the manner specified herein.
All such communications shall be deemed to have been given, delivered
or made when so delivered by hand or sent by telex (answer back received) or
telecopy, or five business days after being so mailed.
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Section 5.6 Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties hereto with respect to the subject
transactions contemplated hereby and supersede all prior oral and written
agreements and memoranda and undertakings among the parties hereto with regard
to this subject matter.
Section 5.7 Headings. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 5.8 Recapitalizations, Exchanges, Etc., Affecting the Common
Stock; New Issuances. The provisions of this Agreement shall apply, to the full
extent set forth herein with respect to the Common Stock and to any and all
equity or debt securities of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets, or otherwise) which
may be issued in respect of, in exchange for, or in substitution of, such equity
or debt securities and shall be appropriately adjusted for any stock dividends,
splits, reverse splits, combinations, reclassifications, recapitalizations,
reorganizations and the like occurring after the date hereof.
Section 5.9 LITIGATION. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED,
APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH
OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IN THE EVENT OF ANY BREACH OF
THIS AGREEMENT, THE NON-BREACHING PARTY WOULD BE IRREPARABLY HARMED AND COULD
NOT BE MADE WHOLE BY MONETARY DAMAGES, AND THAT, IN ADDITION TO ANY OTHER REMEDY
TO WHICH THEY MAY BE ENTITLED AT LAW OR IN EQUITY, THE PARTIES SHALL BE ENTITLED
TO SUCH EQUITABLE OR INJUNCTIVE RELIEF AS MAY BE APPROPRIATE. EACH PARTY AGREES
THAT JURISDICTION AND VENUE WILL BE PROPER IN THE SOUTHERN DISTRICT OF NEW YORK
AND WAIVES ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. EACH PARTY WAIVES
PERSONAL SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING
AN ACTION OR PROCEEDING SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE PARTY AT THE
ADDRESS SET FORTH IN THIS AGREEMENT, OR AS OTHERWISE PROVIDED BY THE LAWS OF THE
STATE OF NEW YORK OR THE UNITED STATES. THE CHOICE OF FORUM SET FORTH IN THIS
SECTION 5.11 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN ANY OTHER FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
Section 5.10 ARBITRATION. THE STOCKHOLDER WAIVES ITS RIGHTS, IF ANY, TO
JURY TRIAL IN RESPECT TO ANY DISPUTE OR CLAIMS BETWEEN OR AMONG THE PARTIES TO
THIS AGREEMENT RELATING TO OR IN RESPECT OF THIS AGREEMENT, ITS NEGOTIATION,
EXECUTION, PERFORMANCE, SUBJECT MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR
ACTIONS UNDER OR IN RESPECT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION ANY
CLAIM UNDER THE SECURITIES ACT, THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
ANY OTHER STATE OR FEDERAL LAW RELATING TO SECURITIES OR FRAUD OR BOTH, THE
RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR FEDERAL OR
STATE COMMON LAW, AND ANY SUCH DISPUTE OR CLAIMS SHALL BE SUBMITTED TO, AND
RESOLVED EXCLUSIVELY PURSUANT TO, ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
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ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION
SHALL TAKE PLACE IN NEW YORK, NEW YORK, AND SHALL BE SUBJECT TO THE SUBSTANTIVE
LAW OF THE STATE OF NEW YORK. DECISIONS AS TO FINDINGS OF FACT AND CONCLUSIONS
OF LAW PURSUANT TO SUCH ARBITRATION SHALL BE FINAL, CONCLUSIVE AND BINDING ON
THE PARTIES, SUBJECT TO CONFIRMATION, MODIFICATION OR CHALLENGE PURSUANT TO 9
U.S.C. ss.ss. 1 ET SEQ. ANY FINAL AWARD SHALL BE ENFORCEABLE AS A JUDGMENT OF A
COURT OF RECORD.
Section 5.11 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any person.
Section 5.12 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
PARLUX FRAGRANCES, INC.
By: /s/ Frank A. Buttacavoli
Name: Frank A. Buttacavoli
Title: Vice President/Chief Financial Officer
RICHARD BARRIE FRAGRANCES, INC.
By: /s/ Richard Barrie
Name: Richard Barrie
Title: President
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