<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
PERFUMANIA, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PERFUMANIA, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on December 16, 1998
To the Shareholders
of Perfumania, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders of
Perfumania, Inc., a Florida corporation (the "Company"), will be held at 10:00
a.m., local time, on Wednesday, December 16, 1998, at The Radisson Mart Plaza
Hotel, 711 N.W. 72nd Avenue, Miami, Florida 33126, for the following purposes:
(1) To elect six members to the Company's Board of Directors to hold
office until the 1999 Annual Meeting or until their successors are
duly elected and qualified.
(2) To transact such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on November 11,
1998 as the record date for determining those shareholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournments or postponements
thereof.
Whether or not you expect to be present, please sign, date and return
the enclosed proxy card in the enclosed pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors
/s/ Ilia Lekach
----------------------------------
Ilia Lekach
Chairman of the Board and
Chief Executive Officer
Miami, Florida
November 16, 1998
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. THOSE SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE.
SHAREHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
<PAGE> 3
1998 ANNUAL MEETING OF SHAREHOLDERS
OF
PERFUMANIA, INC.
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
DATE, TIME AND PLACE
OF
ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Perfumania, Inc., a Florida corporation
("Perfumania" or the "Company"), of proxies from the holders of the Company's
Common Stock, par value $.01 per share (the "Common Stock"), for use at the 1998
Annual Meeting of Shareholders of the Company to be held on Wednesday, December
16, 1998 at the Radisson Mart Plaza Hotel, 711 N.W. 72nd Avenue, Miami, Florida
33126, or at any adjournment(s) or postponement(s) thereof (the "Annual
Meeting"), pursuant to the enclosed Notice of Annual Meeting. The approximate
date that this Proxy Statement and the enclosed form of proxy are first being
sent to holders of Common Stock is November 16, 1998. Shareholders should review
the information provided herein in conjunction with the Company's 1997 Annual
Report to Shareholders which accompanies this Proxy Statement but does not form
a part hereof. The Company's principal executive offices are located at 11701
N.W. 101st Road, Miami, Florida 33178, and its telephone number is (305)
889-1600.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective unless
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies, and will reimburse such
persons for their expenses in so doing.
<PAGE> 4
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and
vote upon the following matters:
(1) The election of six members to the Company's Board of Directors to
serve until the next Annual Meeting of Shareholders or until their
successors are duly elected and qualified;
(2) Such other business as may properly come before the Annual Meeting,
including any adjournments or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted in favor of all proposals described in the Notice of Annual
Meeting. In the event a shareholder specifies a different choice by means of the
enclosed proxy, his shares will be voted in accordance with the specification so
made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on November 11,
1998 as the record date (the "Record Date") for determining shareholders of the
Company entitled to notice of and to vote at the Annual Meeting. As of the
Record Date, there were 6,519,440 shares of Common Stock issued and outstanding.
Each share of Common Stock is entitled to one vote on all matters to be acted
upon at the Annual Meeting and neither the Company's Articles of Incorporation
nor Bylaws provides for cumulative voting rights.
The attendance, in person or by proxy, of the holders of a majority of
the shares of Common Stock entitled to vote at the Annual Meeting is necessary
to constitute a quorum. To be elected, nominees for Director must receive a
plurality of the votes cast by holders of shares of Common Stock present or
represented at the Annual Meeting. Abstentions are considered as shares present
and entitled to vote for purposes of determining the presence of a quorum and
for purposes of determining the outcome of any matter submitted to the
shareholders for a vote, but are not counted as votes "for" or "against" any
matter. The inspector of elections will treat shares referred to as "broker or
nominee non-votes" (shares held by brokers or nominees as to which instructions
have not been received from the beneficial owners or persons entitled to vote
and the broker or nominee does not have discretionary voting power on a
particular matter) as shares that are present and entitled to vote for purposes
of determining the presence of a quorum. For purposes of determining the outcome
of any matter as to which the proxies reflect broker or nominee non-votes,
shares represented by such proxies will be treated as not present and not
entitled to vote on that subject matter and therefore would not be considered by
the inspectors when counting votes cast on the matter (even though those shares
are considered entitled to vote for quorum purposes and may be entitled to vote
on others matters). If less than a majority of the outstanding shares of Common
Stock are represented at the Annual Meeting, a majority of the shares so
represented may adjourn the Annual Meeting from time to time without further
notice.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 31, 1998, information
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each Named Executive Officer, and (iv) all directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED
-----------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER (1) SHARES PERCENT
- ---------------------------------------- ------ -------
<S> <C> <C>
Ilia Lekach 1,621,775(2)(3)(4)(5) 24.9%
Simon Falic 943,050(2)(3)(5) 14.5%
Rachmil Lekach 675,125(2)(5) 10.4%
Jerome Falic 718,730(3)(5) 11.0%
Ron A. Friedman 396,725(5) 6.1%
Marc Finer 60,000(5) *
Leon Falic 695,000(2)(5) 10.7%
Robert Pliskin 20,000(5) *
Carole A. Taylor 18,000(5) *
All directors and executive officers as a group 4,056,680 62.2%
(6 persons)
</TABLE>
*Less than 1%.
(1) The address of each of the beneficial owners identified is 11701 NW 101st
Road, Miami, Florida 33178.
(2) Ilia Lekach, Simon Falic, Rachmil Lekach and Leon Falic jointly own with
their spouses the shares set forth opposite their respective names.
(3) Ilia Lekach has granted options to purchase 224,550 shares and 337,230
shares of Common Stock to Simon Falic and Jerome Falic, respectively,
exercisable through December 31, 1999 at an exercise price of $1.13 per
share. The share ownership set forth in the table above for Simon Falic
and Jerome Falic included the shares of Common Stock subject to such
options. If such options were exercised, Ilia Lekach would own 1,059,995
shares of Common Stock.
(4) Includes 12,300 shares of Common Stock owned by Pacific Investment Group,
a corporation wholly owned by Mr. Lekach.
(5) Includes shares of Common Stock issuable upon the exercise of stock
options in the following amounts: Ilia Lekach (375,000); Rachmil Lekach
(150,000); Simon Falic (100,000); Jerome Falic (100,000); Ron A. Friedman
(375,000); Robert Pliskin (20,000); Marc Finer (60,000); Leon Falic
(195,000); and Carole A. Taylor (18,000).
(6) Includes shares of Common Stock issuable upon exercise of stock options in
the following amounts: Ilia Lekach (375,000); Simon Falic (100,000);
Jerome Falic (100,000); Robert Pliskin (20,000); Marc Finer (60,000); and
Carole A. Taylor (18,000).
3
<PAGE> 6
ELECTION OF DIRECTORS; MANAGEMENT
INFORMATION CONCERNING THE NOMINEES
The Company's Articles of Incorporation provide that the number of
directors constituting the Company's Board of Directors shall be determined by
the Company's Bylaws. The Company's Bylaws provide that the number of directors
shall be fixed from time to time by the Board of Directors. The Board of
Directors has fixed at six the number of directors that will constitute the
Board for the ensuing year. Each director elected at the Annual Meeting will
serve for a term expiring at the 1999 Annual Meeting of Shareholders or until
his successor has been duly elected and qualified.
Ilia Lekach, Simon Falic, Jerome Falic, Marc Finer, Robert Pliskin and
Carole Ann Taylor, each of whom is an incumbent director, have been nominated
for election as directors at the Annual Meeting, and the enclosed proxies will
be voted for such persons absent contrary instructions. The Board of Directors
has no reason to believe that any nominee will refuse to act or be unable to
accept election; however, in the event that a nominee for a directorship is
unable to accept election or if any other unforeseen contingencies should arise,
it is intended that proxies will be voted for the remaining nominees, if any,
and for such other person as may be designated by the Board of Directors.
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Ilia Lekach 50 Chairman of the Board and Chief Executive Officer
Jerome Falic 34 President and Vice Chairman of the Board
Simon Falic 38 Chief Financial Officer, Chief Operating Officer,
Treasurer, Secretary and Director
Marc Finer 37 President of the Retail Division and Director
Claire Fair 39 Vice President of Human Resources
Robert Pliskin 75 Director
Carole Ann Taylor 53 Director
</TABLE>
ILIA LEKACH is a co-founder of the Company and was the Company's Chief
Executive Officer and Chairman of the Board since its incorporation in 1988
until his resignation in April 1994. Mr. Lekach was re-appointed the Company's
Chief Executive Officer and Chairman of the Board on October 28, 1998. Mr.
Lekach is also Chairman of the Board and Chief Executive Officer of Parlux
Fragrances, Inc. ("Parlux"), a publicly traded manufacturer of fragrance and
related products. See "Certain Relationships and Related Transactions."
JEROME FALIC was appointed President on October 28, 1998. Mr. Falic has
been a Vice President of the Company since the Company's inception and a
Director of the Company since August 1994. Mr. Falic was appointed the Company's
Vice Chairman of the Board in September 1994. His principal responsibilities
include purchases of all of the Company's inventory needs and sales for the
Company's wholesale division. Mr. Falic is the brother of Simon Falic, the
Company's Chief Financial Officer, Chief Operating Officer, Treasurer and
Secretary.
4
<PAGE> 7
SIMON FALIC is a co-founder of the Company and has been a Director of
the Company since its inception in February 1988. Mr. Falic was the Company's
Chief Executive Officer and Chairman of the Board from May 2, 1994 to October
28, 1998, and was also President of the Company from February 1988 to April
1997. Mr. Falic was appointed the Company's Chief Financial Officer, Chief
Operating Officer, Treasurer and Secretary on October 28, 1998. Mr. Falic is a
member of the Company's Stock Option Committee.
MARC FINER has been the President of the Company's Retail Division
since March 1994 and a Director since August 1994. Mr. Finer was the President
of Parfums Expresso, Inc. and Parfums D'Arte, wholesale distributors of
fragrances in Puerto Rico, from their inception in August 1986 until March 1994.
CLAIRE FAIR was appointed Vice President of Human Resources in August
1996. From November 1993 to August 1996, she served as the Company's Director of
Human Resources. Previously, Ms. Fair was the Director of Employee Relations
with Sterling, Inc.
ROBERT PLISKIN was appointed a Director of the Company in October 1991.
Mr. Pliskin served as President of Longines Wittnauer Watch Company from 1971 to
1980 when he became President of the Seiko Time Corporation, a position he held
until 1987. In 1987 Mr. Pliskin became the President of Hattori Corporation of
America, a distributor of watches and clocks, until his retirement in 1990. Mr.
Pliskin is a member of the Company's Audit Committee and Compensation Committee.
CAROLE ANN TAYLOR was appointed a Director of the Company in June 1993.
From 1987 to present, Ms. Taylor has been the owner and president of the Bayside
Company Store, a retail souvenir and logo store at Bayside Marketplace in Miami,
Florida. During this time she has also been a partner of the Jardin Bresilien
Restaurant also located at the Bayside Marketplace. Currently, Ms. Taylor is
also the president of C.A. Taylor Enterprises, a public affairs and marketing
consulting firm. Ms. Taylor serves as director of the Miami-Dade Chamber of
Commerce, the Greater Miami Convention & Visitors Bureau and the Miami Film
Festival. Ms. Taylor is a member of the Company's Audit, Compensation and Stock
Option Committees.
The Company's officers are elected annually by the Board of Directors
and serve at the discretion of the Board. The Company's directors hold office
until the next annual meeting of shareholders and until their successors have
been duly elected and qualified.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended January 31, 1998 ("fiscal year 1997") the
Company's Board of Directors took certain actions by unanimous written consent
and held two meetings. During fiscal year 1997, no director attended fewer than
75 percent of the aggregate and (i) the number of meetings of the Board of
Directors held during the period he served on the Board, and (ii) the number of
meetings of committees of the Board of Directors held during the period he
served on such committee.
The Board of Directors has three standing committees: the Audit
Committee, the Compensation Committee and the Stock Option Committee. The Board
does not have a Nominating Committee.
Ms. Taylor and Mr. Pliskin are members of the Audit Committee, which
held one meeting during fiscal year 1997. The duties and responsibilities of the
Audit Committee include (a) recommending to the full Board the appointment of
the Company's auditors and any termination of engagement, (b) reviewing the plan
and scope of audits, (c) reviewing the Company's significant accounting policies
and internal controls, (d) having general responsibility for all related
auditing matters, and (e) reporting its recommendations and findings to the full
Board of Directors.
Ms. Taylor and Mr. Simon Falic are members of the Board's Stock Option
Committee, which held one meeting during fiscal year 1997. The Stock Option
Committee administers the Company's 1991 Stock Option and Directors Stock Option
Plans, and grants stock options to employees and directors.
5
<PAGE> 8
Ms. Taylor and Mr. Pliskin are members of the Board's Compensation
Committee which held one meeting during fiscal year 1997. The Compensation
Committee administers the Company's executive compensation program.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation awarded to, earned by or
paid to the Company's Chief Executive Officer and the Company's four most highly
compensated executive officers other than the Chief Executive Officer whose
compensation exceeded $100,000 in fiscal 1997, for services rendered to the
Company during fiscal year 1997, 1996 and 1995. The Chief Executive Officer and
such other executive officers are sometimes hereafter collectively referred to
as the "Named Executive Officers".
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------------
OTHER
NAME AND FISCAL ANNUAL
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Simon Falic (2) 1997 $304,813 $ 0 $ 0
Chairman of the Board and 1996 $287,163 $ 75,000 $ 0
Chief Executive Officer 1995 $283,120 $ 55,000 $ 0
Ron A. Friedman (2) 1997 $246,700 $ 0 $ 0
President, Chief Financial 1996 $236,250 $ 61,000 $ 0
Officer, Chief Operating 1995 $232,261 $ 45,000 $ 0
Officer, Treasurer and
Secretary
Jerome Falic (2) 1997 $246,700 $ 0 $ 0
Vice President and 1996 $236,250 $ 61,000 $ 0
Vice Chairman of the 1995 $232,261 $ 45,000 $ 0
Board
Jose Retelny (3) 1997 $226,383 $ 0 $ 0
Chief Information Officer 1996 $183,383 $ 0 $ 0
1995 $162,742 $ 0 $ 0
Marc Finer 1997 $183,912 $ 0 $ 0
President, Retail 1996 $169,962 $ 22,500 $ 0
Division 1995 $147,646 $ 0 $ 0
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------
AWARDS PAYOUTS
--------------------------- ----------
RESTRICTED
NAME AND STOCK LTIP ALL OTHER
PRINCIPAL POSITION AWARDS OPTIONS(#) PAYOUTS($) COMPENSATION($)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Simon Falic (2) $ 0 0 $ 0 $ 0
Chairman of the Board and $ 0 0 $ 0 $ 0
Chief Executive Officer $ 0 0 $ 0 $ 0
Ron A. Friedman (2) $ 0 0 $ 0 $ 0
President, Chief Financial $ 0 100,000 $ 0 $ 0
Officer, Chief Operating $ 0 0 $ 0 $ 0
Officer, Treasurer and
Secretary
Jerome Falic (2) $ 0 0 $ 0 $ 0
Vice President and $ 0 0 $ 0 $ 0
Vice Chairman of the $ 0 0 $ 0 $ 0
Board
Jose Retelny (3) $ 0 0 $ 0 $ 0
Chief Information Officer $ 0 0 $ 0 $ 0
$ 0 0 $ 0 $ 0
Marc Finer $ 0 50,000 $ 0 $ 0
President, Retail $ 0 0 $ 0 $ 0
Division $ 0 0 $ 0 $ 0
</TABLE>
(1) The column for "Other Annual Compensation" does not include any amounts for
executive perquisites and any other personal benefits, such as the cost of
automobiles, life insurance and disability insurance because the aggregate
dollar amount per executive is less than 10% of his annual salary and
bonus.
(2) Mr. Friedman resigned on October 28, 1998. Mr. Simon Falic was appointed
Chief Financial Officer, Chief Operating Officer, Treasurer and Secretary.
Mr. Jerome Falic was appointed President.
(3) Mr. Retelny's employment was terminated in November 1997.
6
<PAGE> 9
OPTION GRANTS DURING FISCAL YEAR 1997
The following table sets forth certain information concerning grants of stock
options made during fiscal year 1997 to the Named Officer.
<TABLE>
<CAPTION>
INDIVIDUAL OPTION GRANTS IN FISCAL YEAR 1997
--------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF
GRANTED TO STOCK PRICE APPRECIATION
NUMBER OF EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL PRICE PER EXPIRATION ------------------------------
NAME GRANTED (1) 1997 SHARE DATE 5% 10%
----- -------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Marc Finer 50,000 15.0% $3.38 2007 $106,000 $269,000
</TABLE>
(1) Each option is a non-qualified stock option granted pursuant to the
Company's 1991 Stock Option Plan, has an exercise price equal to the market
price of a share of Common Stock on the date of grant, and vested on the date of
grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
The following table sets forth certain information concerning option
exercises in fiscal year 1997 and the number of unexercised stock options held
by the Named Executive Officers as of January 31, 1998.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL OPTIONS AT FISCAL
ACQUIRED YEAR-END(#) YEAR-END($)
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- --------------------- ---------------- -------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Simon Falic - - 100,000/0 $12,500/N/A
Ron A. Friedman - - 375,000/0 $22,750/N/A
Jerome Falic - - 100,000/0 $12,500/N/A
Marc Finer - - 60,000/0 $ 0/N/A
</TABLE>
LONG-TERM INCENTIVE AND PENSION PLANS
The Company does not have any long-term incentive or pension plans.
7
<PAGE> 10
DIRECTOR COMPENSATION
The Company pays each nonemployee director a $6,500 annual retainer and
reimburses such persons for their expenses in connection with their activities
as directors of the Company. In addition, nonemployee directors are eligible to
receive stock options under the Directors Stock Option Plan.
The Directors Stock Option Plan currently provides for an automatic
grant of an option to purchase 2,000 shares of Common Stock upon a person's
election as a director of the Company and an automatic grant of options to
purchase 4,000 shares of Common Stock upon such persons re-election as a
director of the Company, in both instances at an exercise price equal to the
fair market value of the Common Stock on the date of grant.
EMPLOYMENT AGREEMENT
Effective August 1996, the Company entered into a 3-year employment
agreement with Marc Finer, pursuant to which he will receive an annual salary of
$175,000, subject to cost-of-living increases, or 5% if higher. The employment
agreement provides that Mr. Finer will continue to receive his salary until the
expiration of the term of the employment agreement if his employment is
terminated by the Company for any reason other than death, disability or cause
(as defined in the employment agreement). The agreement contains a performance
bonus plan which provides for additional compensation and grant of stock
options, if the Company meets certain net income levels. The employment
agreement also prohibits the employee from directly or indirectly competing with
the Company during the term of his employment and for one year after termination
of employment except in the case of the Company's termination of employment
without cause. None of the Named Executive Officers are currently covered by an
employment agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Simon Falic, the Company's Chairman of the Board and Chief Executive
Officer, is a member of the Company's Stock Option Committee. Mr. Falic does not
participate in deliberations, if any, concerning stock option grants for his
benefit.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. Each member of the
Compensation Committee is an independent outside director. The Company's
executive compensation program is structured to achieve the Company's goals as
they relate to maximizing corporate performance and stockholder return. The
Compensation Committee seeks to attract, motivate and retain executive talent
necessary to improve the Company's performance and therefore increase
shareholder returns. In general, executive compensation is made up of annual
salaries, performance bonuses and option grants; the Company's bonuses and
option grants are intended to help align executive and stockholder interests.
Salary ranges for the CEO and other executives have been based on the underlying
responsibilities of the respective position. These salary ranges are reviewed
annually and are compared periodically to the salary ranges of other specialty
retailers of similar size and characteristics as selected by the Compensation
Committee. The Company's performance is assessed with respect to such
consideration as sales growth, including comparable sales growth, new store
openings and the sales performance of new stores against plan; gross profit and
margin; net income and earnings per share growth; and return on shareholders'
equity.
8
<PAGE> 11
Marc Finer has entered into a three-year employment agreement with the
Company on terms and conditions approved by the Compensation Committee. See
"Employment Agreement" above. Based on the Company's performance during fiscal
year 1997, Mr. Finer did not receive a bonus pursuant to the terms of his
employment agreement. In determining base salaries for other executives of the
Company, the Compensation Committee defines key executive positions in terms of
scope, responsibilities, job complexity, knowledge and experience required.
Salary ranges are determined using comparable companies and based on prior year
performance. Individual salary increases are based in part on an individual's
contribution to Company performance.
The Company's Stock Option Committee reviews and approves the grant of
options pursuant to the Company's 1991 Stock Option Plan. The Stock Option
Committee currently is made up of Mr. Simon Falic and Ms. Taylor. Pursuant to
the Company's executive compensation policies, stock options are considered as
part of an executive's overall compensation. An executive's compensation
pursuant to a stock option grant generally increases only to the extent the
value of Common Stock underlying the stock options increases, therefore aligning
the interest of the executive officers with its stockholders by tying long-term
compensation with growth of Company and appreciation of shares. During fiscal
year 1997, the Company granted 50,000 stock options to Mr. Finer.
In addition to base salaries and option grants, the Compensation
Committee may elect to award incentive bonuses as part of total compensation to
executive officers who have rendered services during the year that substantially
exceed those normally required or anticipated. These bonuses are intended to
reflect the Compensation Committee's determination to reward any executive who,
through extraordinary effort, has substantially benefited the Company and its
stockholders during the year. No incentive bonuses were awarded during fiscal
year 1997.
The Compensation Committee believes that the Company's compensation
programs are competitive with those of other specialty retailers of similar
size.
Robert Pliskin
Carole Ann Taylor
9
<PAGE> 12
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
shareholder return on the Company's Common Stock with the cumulative total
return of companies on the NASDAQ (US Companies) Stock Index and the NASDAQ
Retail Trade Stock Index for the five fiscal years ended January 31, 1998. This
graph assumes the investment of $100 in the Company's Common Stock, the NASDAQ
(US Companies) Stock Index and the NASDAQ Retail Trade Stock Index on January
31, 1993 and assumes dividends are reinvested. Measurement points are on the
last trading day of each fiscal year.
[GRAPH]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1/30/93 1/29/94 1/28/95 2/3/96 2/1/97 1/31/98
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Perfumania, Inc. 8.75 100 52.86 37.14 51.43 38.57 32.86
- ----------------------------------------------------------------------------------------------------------------------------
NASDAQ Stock Market 224.066 100 115.00 109.71 155.05 203.37 239.99
- ----------------------------------------------------------------------------------------------------------------------------
NASDAQ Retail Trade Stocks 232.644 100 107.28 94.58 106.90 131.45 153.39
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock. Officers, directors and greater than 10 percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended January 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH PARLUX. Parlux Fragrances, Inc. ("Parlux") is a
public company engaged in the manufacture of fragrances. Ilia Lekach, the
Company's Chairman of the Board and Chief Executive Officer, and one of the
Company's principal shareholders, is the Chairman of the Board of Parlux. During
fiscal year 1997, the Company purchased approximately $21.4 million of
merchandise from Parlux, representing approximately 26% of the Company's total
purchases. The Company believes that its purchases of merchandise from Parlux,
were, except for credit terms, on terms no less favorable to the Company than
could reasonably be obtained in arm's length transactions with independent third
parties.
RELATIONSHIP WITH L. LURIA & SON, INC. L. Luria & Son, Inc, ("Luria's")
is a public company that was a specialty discount retailer selling a broad line
of products. Ilia Lekach, the Company's Chairman of the Board and Chief
Executive Officer, and one of the Company's principal shareholders, was the
Chairman of the Board of Luria's. During fiscal year 1997, the Company sold
approximately $2.0 million of merchandise to Luria's, representing approximately
1% of the Company's total sales. The Company believes that its sales of
merchandise to Luria's, were, except for credit terms, on terms no less
favorable to the Company than could reasonably be obtained in arm's length
transactions with independent third parties. During August 1997, Luria's filed
for relief under Chapter 11 of the United States Bankruptcy Code. The Company is
an unsecured creditor of Luria's and in fiscal year 1997 the Company wrote off
receivables from Luria's in the amount of $1.2 million. The Company has been
characterized as an insider in the liquidating plan of reorganization filed on
April 6, 1998 by Luria's in the United States Bankruptcy Court, Southern
District of Florida. In August 1998, the committee of unsecured creditors in
Luria's bankruptcy proceedings filed a complaint with the United States
Bankruptcy Court, Southern District of Florida, to recover substantial funds
from the Company. The complaint alleges that Luria's made preference payments,
as defined by the Bankruptcy Court, to the Company and seeks recovery of said
preference payments, as well as disallowing any and all claims of the Company
against Luria's until full payment of the preference payments have been made.
Management cannot presently predict the outcome of these matters, although
management believes, upon the advice of legal counsel, that the Company would
have meritorious defenses and that the ultimate resolution of these matters
should not have a materially adverse effect on the Company's financial position
or result of operations.
11
<PAGE> 14
RELATED PARTY INDEBTEDNESS. From time to time the Company has borrowed
money for working capital purposes from its principal shareholders and executive
officers and members of their immediate families. The highest aggregate amounts
of the Company's indebtedness to such persons during fiscal year 1997, amount
outstanding at January 31, 1998, the maturity date of such indebtedness and the
interest rate payable by the Company at January 31, 1998, were as set forth in
the following table:
<TABLE>
<CAPTION>
HIGHEST AMOUNT AMOUNT ANNUAL
OUTSTANDING OUTSTANDING AT MATURITY INTEREST
DURING FISCAL YEAR JANUARY 31, 1998 DATE RATE
-------------------- -------------------- ------------------ --------------
<S> <C> <C> <C> <C>
Israel Friedman (1) $786,483 $304,483 Payable on demand Prime plus 2%
</TABLE>
(1) Father of Ron A. Friedman, the Company's Chief Financial Officer, Chief
Operating Officer and Secretary.
As of January 31, 1998, Ilia Lekach was indebted to the Company pursuant to an
unsecured note, in the amount of $457,243 issued in connection with his purchase
of a condominium from the Company in October 1991. The note accrues interest at
the rate of 9.5% and matures on December 31, 2000.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP, independent public accountants,
served as the Company's independent public accountants for the fiscal year ended
January 31, 1998. The Board of Directors, on the recommendation of the Company's
Audit Committee, has selected PricewaterhouseCoopers LLP as the Company's
independent public accountants for the 1998 fiscal year. One or more
representatives of PricewaterhouseCoopers LLP are expected to be present at the
Annual Meeting. Such representatives will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions from shareholders.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, any other business should properly come before the Annual
Meeting, the persons named in the accompanying proxy will vote proxies as in
their discretion they may deem appropriate, unless they are directed by a proxy
to do otherwise.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a shareholder intending to present a proposal to be presented at the
1999 Annual Meeting to Shareholders must deliver a proposal in writing to the
Company's principal executive offices on or before July 16, 1999.
By Order of the Board of Directors
/s/ Ilia Lekach
----------------------------------
Ilia Lekach
Chairman of the Board and
Chief Executive Officer
Miami, Florida
November 16, 1998
12
<PAGE> 15
APPENDIX A
PERFUMANIA, INC.
PROXY FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of shares of Common Stock of PERFUMANIA, INC., a
Florida corporation (the "Company"), hereby appoints Ilia Lekach and Jerome
Falic, and each or either of them, the proxy or proxies of the undersigned, with
full power of substitution to such proxy and substitute, to vote all shares of
Common Stock of the Company which the undersigned is entitled to vote at the
1998 Annual Meeting of Shareholders of the Company to be held at The Radisson
Mart Plaza Hotel, 711 N.W. 72nd Avenue, Miami, Florida 33126 at 10:00 A.M.,
local time, on December 16, 1998, and at any and all adjournments thereof with
authority to vote said Common Stock on the matters set forth below:
The shares of Common Stock represented by this Proxy will be voted in the
manner directed herein by the undersigned shareholder, who shall be entitled to
one vote for each share of Common Stock held. If no direction is made, this
Proxy will be voted for each item listed below.
The Board of Directors recommend a vote FOR each proposal.
(1) ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as marked to the contrary below).
<TABLE>
<S> <C> <C> <C> <C>
Ilia Lekach Jerome Falic Robert Pliskin
Simon Falic Marc Finer Carole Ann Taylor
</TABLE>
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
INSTRUCTION: To withhold authority for an individual nominee, strike a line
through the nominee's name above
(2) In their discretion, the proxies are authorized to vote upon such other
business as may be properly brought before the meeting and each adjournment
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE MATTERS
MENTIONED.
Dated: , 1998
- --------------------------------------------------------------------------------
------------------------------
(Signature)
------------------------------
(Signature)
PLEASE SIGN YOUR NAME EXACTLY
AS IT APPEARS ON THE LEFT.
EXECUTORS, ADMINISTRATORS,
TRUSTEES, GUARDIANS, ATTORNEYS
AND AGENTS SHOULD GIVE THEIR
FULL TITLES AND SUBMIT
EVIDENCE OF APPOINTMENT UNLESS
PREVIOUSLY FURNISHED TO THE
COMPANY OR ITS TRANSFER AGENT.
ALL JOINT OWNERS SHOULD SIGN.
PLEASE MARK, DATE, SIGN AND RETURN USING THE ENCLOSED ENVELOPE.
YOUR PROMPT ATTENTION WILL BE APPRECIATED.
