SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Information to be Included in Statements Filed Pursuant
to Rule 13d-1(a) and Amendments Thereto Filed Pursuant to
Rule 13d-2(a)
(Amendment No. 8)
E COM VENTURES, INC.
(Name of Issuer)
Common Stock, $.01 Par Value
(Title of class of securities)
26830k 20 5
(CUSIP Number)
Geoffrey Etherington, Esq.
Edwards & Angell, LLP
750 Lexington Avenue
New York, NY 10022
(212) 756-0237
(Name, Address, and Telephone Number of person
authorized to receive notices and communications)
February 2, 2004
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1 (b)(3) or (4), check the following box: [__].
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 (the "Exchange Act") or otherwise subject to the liabilities of that
section of the Exchange Act but shall be subject to all other provisions of the
Exchange Act (however, see the Notes).
1. Name of Reporting Person / I.R.S. Identification No. of Above Person
Glenn H. Nussdorf
2. Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
3. SEC Use Only
4. Source of Funds
PF
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) [ ]
6. Citizenship or Place of Organization
United States citizen
Number of 7. Sole Voting Power 285,590
Shares
Beneficially
Owned By 8. Shared Voting Power 720,954(1)(2)
Each
Reporting
Person With 9. Sole Dispositive Power 285,590
10. Shared Dispositive Power 720,954(1)(2)
11. Aggregate Amount Beneficially Owned by Each Reporting Person
1,006,544(1)(2)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) [ ]
13. Percent of Class Represented by Amount in Row (11)
34.98% (1)(2)
14. Type of Reporting Person
IN
(1) Responses to Rows 8, 10, 11 and 13 above include 720,954 shares of the
Issuer's Common Stock that may be acquired by Stephen Nussdorf and Glenn
Nussdorf pursuant to an Option Agreement dated as of January 30, 2004 among Ilia
Lekach, IZJD Crop, Pacific Investment Group, Inc., Deborah Lekach, Stephen
Nussdorf and Glenn Nussdorf executed on February 2, 2004 (the "Option
Agreement"). Pursuant to the Option Agreement, Stephen Nussdorf and Glenn
Nussdorf (the "Nussdorfs") have been granted a proxy to vote 720,954 shares of
the Issuer's Common Stock.
(2) The total number of shares outstanding for purposes of the response to Row
13 and the shares referenced in the responses to Row 8, 10 and 11 are deemed to
include 443,750 shares issuable to Mr. Lekach upon exercise of options granted
to him by the Issuer.
1. Name of Reporting Person / I.R.S. Identification No. of Above Person
Stephen L. Nussdorf
2. Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
3. SEC Use Only
4. Source of Funds
PF
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) [ ]
6. Citizenship or Place of Organization
United States citizen
Number of 7. Sole Voting Power 121,600
Shares
Beneficially
Owned By 8. Shared Voting Power 720,954(3)(4)
Each
Reporting
Person With 9. Sole Dispositive Power 121,600
10. Shared Dispositive Power 720,954(3)(4)
11. Aggregate Amount Beneficially Owned by Each Reporting Person
842,554 (3)(4)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) [ ]
13. Percent of Class Represented by Amount in Row (11)
29.28% (3) (4)
14. Type of Reporting Person
IN
(3) Responses to Rows 8, 10, 11 and 13 above include 720,954 shares of the
Issuer's Common Stock that may be acquired by Stephen Nussdorf and Glenn
Nussdorf pursuant to an Option Agreement dated as of January 30, 2004 among Ilia
Lekach, IZJD Crop, Pacific Investment Group, Inc., Deborah Lekach, Stephen
Nussdorf and Glenn Nussdorf executed on February 2, 2004 (the "Option
Agreement"). Pursuant to the Option Agreement, Stephen Nussdorf and Glenn
Nussdorf (the "Nussdorfs") have been granted a proxy to vote 720,954 shares of
the Issuer's Common Stock.
(4) The total number of shares outstanding for purposes of the response to Row
13 and the shares referenced in the responses to Row 8, 10 and 11 are deemed to
include 443,750 shares issuable to Mr. Lekach upon exercise of options granted
to him by the Issuer.
This Amendment No. 8 to Schedule 13D relates to the Common Stock, par value
$0.01 per share, of E Com Ventures, Inc. (the "Issuer"). The Issuer's principal
executive offices are located at 11701 NW 101st Road, Miami, FL 33178.
This Amendment relates to the Schedule 13D originally filed June 19, 2003 by
Glenn H. Nussdorf, as amended July 7, 2003, July 9, 2003, July 11, 2003, August
11, 2003, August 19, 2003, September 19, 2003 and December 12, 2003 by Glenn H.
Nussdorf and Stephen L. Nussdorf (as amended, the "Initial Schedule 13D"). Item
4 of the Initial Schedule 13D is being amended to indicate that Stephen L.
Nussdorf and Glenn H. Nussdorf (collectively, the "Nussdorfs"), on February 2,
2004, entered into an Option Agreement dated as of January 30, 2004 (the "Option
Agreement") with Ilia Lekach, IZJD Crop, Pacific Investment Group, Inc. and
Deborah Lekach (collectively, the "Lekach Entities") pursuant to which the
Nussdorfs were granted an option by the Lekach Entities to acquire 720,954
shares of the Issuer's Common Stock for a price of $12.70 per share and that on
February 2, 2004, Glenn Nussdorf notified the Lekach Entities of the exercise of
options to acquire 134,540 shares and Stephen Nussdorf notified the Lekach
Entitites of the exercise of options to acquire 298,530 shares under such Option
Agreement (the "Initial Exercise"). Mr. Ilia Lekach is the CEO and a director of
the Issuer.
Item 5 has been amended to reflect the execution of the Option Agreement and the
Initial Exercise.
Item 6 has been amended to reflect the Option Agreement, including the
irrevocable proxy granted to the Nussdorfs to vote the shares of the Lekach
Entities subject to the Option Agreement, and to indicate that the Nussdorfs
will make a secured demand loan to Perfumania, Inc., a wholly-owned subsidiary
of the Issuer ("Perfumania"), upon the acquisition of the Issuer's shares
pursuant to the Initial Exercise.
Item 7 has been amended to include as Exhibits, copies of (i) the Option
Agreement, (ii) an Escrow Agreement among the Lekach Entities, the Nussdorfs,
Perfumania and Edwards & Angell, LLP, as escrow agent, (iii) a form of
$5,000,000 Subordinated Secured Demand Note of Perfumania and (iv) a form of
Security Agreement among Perfumania and the Nussdorfs.
Glenn H. Nussdorf and Stephen L. Nussdorf may be considered a "group" within the
meaning of Rule 13d-5 under the Securities Exchange Act of 1934, as amended,
although each disclaims beneficial ownership of the securities owned by the
other. Except as provided herein, the Amendment does not modify any of the
information previously reported on the Schedule 13D.
Item 4. Purpose of the Transaction
Item 4 is hereby supplemented as follows:
On February 2, 2004 Stephen L. Nussdorf and Glenn H. Nussdorf (the "Nussdorfs")
entered into an Option Agreement dated as of January 30, 2004(the "Option
Agreement") with Ilia Lekach, IZJD Crop, Pacific Investment Group, Inc. and
Deborah Lekach (collectively, the "Lekach Entities") pursuant to which the
Nussdorfs were granted options to acquire an aggregate of up to 720,954 shares
of Common Stock for a price of $12.70 per share in the installments indicated on
or after the dates set forth in the table below:
Date Number of Shares
---- ----------------
January 30, 2004 433,070
March 15, 2004 162,884
April 23, 2004 125,000
The purchase price for the shares acquired by the Nussdorfs under the Option
Agreement is payable in cash; provided that the Purchasers may elect to pay a
portion of the price by forgiveness of principal and accrued interest under a
$1,000,000 Demand Note dated December 10, 2003 of Mr. Lekach payable to the
order of Stephen Nussdorf.
On February 2, 2004, the Nussdorfs exercised the first option installment
pursuant to the Option Agreement to acquire 433,070 shares of the Issuer's
Common Stock under the Option Agreement: 298,530 shares by Stephen Nussdorf and
134,540 shares by Glenn Nussdorf (the "Initial Exercise"). The aggregate
exercise price for the Initial Exercise will be payable in cash. A portion of
the aggregate exercise price payable under the Initial Exercise will be
deposited into escrow pursuant to an Escrow Agreement dated as of January 30,
2004 among the Lekach Entities, the Nussdorfs, Perfumania, Inc., a wholly-owned
subsidiary of the Issuer ("Perfumania"), and Edwards & Angell, LLP, as escrow
agent (the "Escrow Agreement"). The Escrow Agreement was entered into on
February 2, 2004.
The Lekach entities own 277,204 shares of the Issuer's Common Stock that are
subject to the Option Agreement and Mr. Lekach holds options to acquire 443,750
shares of the Issuer's Common Stock issuable pursuant to the Issuer's stock
option plans (the "Lekach Options") that are subject to the Option Agreement.
Item 5. Interest in Securities of the Issuer
Item 5 is hereby amended as follows:
Item 5(a). The aggregate percentage of shares of Issuer's Common Stock reported
owned by both filing persons is based upon 2,433,384 shares outstanding on
December 12, 2003, which is the total number of shares of common stock
outstanding as reported in the Issuer's Form 10-Q for the quarterly period ended
dated November 1, 2003. 443,750 of the shares of Issuer's Common Stock that are
subject to the Option Agreement have not been issued but are issuable under the
Lekach Options. If all of the Lekach Options had been exercised as of December
12, 2003 the total outstanding shares of the Issuer's Common Stock would have
been 2,877,134 shares. As noted below in the response to Item 5(b), the
aggregate percentage reported is based upon a number of shares including shares
issuable upon exercise of all of the Lekach Options.
Item 5(b). As of the close of business on February 2, 2004, assuming he had
acquired all 720,954 shares of the Issuer's Common Stock subject to the Option
Agreement and that Mr. Lekach had exercised Lekach Options to acquire 443,750
shares of the Issuer's Common Stock, Glenn H. Nussdorf beneficially owned
1,006,544 shares of Issuer's Common Stock, constituting approximately 34.98% of
the 2,877,134 shares that would have been outstanding and had sole voting and
dispositive power with respect to 285,590 shares and shared voting and
dispositive power with respect to the remaining 720,954 with Stephen Nussdorf.
As of the close of business on the same day, assuming instead that Stephen L.
Nussdorf had acquired such 720,954 shares subject to the Option Agreement and
that such Lekach Options had been exercised by Mr. Lekach, Stephen L. Nussdorf
beneficially owned 842,554 shares of Issuer's Common Stock, constituting
approximately 29.28% of the 2,877,134 shares that would have been outstanding,
and held 121,600 of these shares in a joint account with his wife and shared
voting and dispositive power with respect to the remaining 720,954 with Glenn
Nussdorf. As noted in Item 4, on February 2, 2004, the Nussdorfs exercised an
option to acquire 433,070 shares of the Issuer's Common Stock: 298,530 shares by
Stephen Nussdorf and 134,540 shares by Glenn Nussdorf.
Pursuant to the Option Agreement, the Nussdorfs have been granted an irrevocable
proxy to vote any shares of Issuer's Common Stock held by the Lekach Entities
that are the subject of the Option Agreement.
443,750 of the shares of Issuer's Common Stock that are subject to the Option
Agreement from Mr. Lekach are issuable under the Lekach Options. Therefore, if
the Nussdorfs acquire all of the Issuer's Common Stock subject to the Option
Agreement and Mr. Lekach exercises all of the Lekach Options, based on the
shares outstanding as of December 12, 2004, there will be 2,877,134 shares of
Issuer's Common Stock outstanding and the Nussdorfs would on a pro forma basis
collectively own 1,128,144 (or 39.21% of the outstanding shares of Issuer's
Common Stock.
Item 5(c). The Nussdorfs effected the following transactions in Issuer's common
stock since the last amendment to the Initial Schedule 13D:
As of February 2, 2004, the Nussdorf obtained the right to acquire from the
Lekach Entities up to 720,954 shares of the Issuer's Common Stock pursuant to
the Option Agreement. As of February 2, 2004, the Nussdorfs elected to make the
Initial Exercise to acquire 433,070 shares: 298,530 shares by Stephen Nussdorf
and 134,540 shares by Glenn Nussdorf. The shares to be transferred pursuant to
the Initial Exercise have not yet been acquired by the Nussdorfs.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to
Securities of the Issuer.
The Nussdorfs will make a $5,000,000 secured demand loan to Perfumania, upon the
acquisition of the 433,070 shares of the Issuer's Common Stock pursuant to the
Initial Exercise. Such loan will be evidenced by a Subordinated Secured Demand
Note of Perfumania (the "Note"). The demand loan will be secured by a security
interest in Perfumania' assets pursuant to a Security Agreement among Perfumania
and the Nussdorfs (the "Security Agreement"). The Note and the Security
Agreement will be executed by Perfumania and delivered to the Nussdorfs prior to
the funding of the demand loan. The Nussdorfs have deposited $5,000,000 to fund
the demand loan into escrow pursuant to the Escrow Agreement.
Pursuant to the Option Agreement, the Nussdorfs have been granted an irrevocable
proxy to vote any shares of Issuer's Common Stock held by the Lekach Entities
that are the subject of the Option Agreement.
Item 7. Material to be Filed as Exhibits.
Item 7 is hereby supplemented as follows:
The following additional exhibit is attached to this Schedule 13D:
Exhibit F Option Agreement
Exhibit G Escrow Agreement
Exhibit H Note
Exhibit I Security Agreement
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
Date: February 4, 2004
/s/ Alfred R. Paliani, attorney-in-fact
--------------------------------------------------
Glenn H. Nussdorf
By: Alfred R. Paliani, attorney-in -fact
/s/ Alfred R. Paliani, attorney-in-fact
-----------------------------------------------
Stephen L. Nussdorf
By: Alfred R. Paliani, attorney-in -fact
Exhibit F
OPTION AGREEMENT
THIS AGREEMENT made as of this 30th day of January, 2004 between ILIA
LEKACH ("Lekach"), IZJD CORP., PACIFIC INVESTMENT GROUP, INC. and DEBORAH LEKACH
(collectively, the "Stockholders"), all with an address at 137 Golden Beach
Road, Golden Beach, Florida 33160, and STEPHEN NUSSDORF and GLENN NUSSDORF or
their respective assignees or designees, with an address at 2060 Ninth Avenue,
Ronkonkoma, New York 11779 (collectively, "Purchasers").
WHEREAS, each of the Stockholders solely, or jointly with another of
the Stockholders, directly owns shares of stock of E Com Ventures, Inc., a
Florida corporation (the "Company"), totaling, in the aggregate, at least
277,204 shares of the Company, and Lekach has options to acquire at least an
additional 318,750 shares of stock of the Company and, subject to change of
control provisions in Lekach's Employment Agreement with the Company dated
February 1, 2002 (the "Employment Agreement"), another 125,000 options (the
"Lekach Options") all as set forth on Exhibit A hereto; and
WHEREAS, Stockholders desire to grant to Purchasers an option to
acquire shares of stock of the Company owned by Stockholders or for which any of
the Stockholders have options or other rights to acquire.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Grant of Option. Each Stockholder hereby grants to Purchasers an option
(the "Option") to acquire all of the shares of capital stock of the Company that
are listed on the schedule set forth on Exhibit A hereto and made a part hereof
(the "Schedule") that are owned by any and all of the Stockholders, beneficially
or otherwise, or which Stockholders may now or at a later date have the right to
acquire, pursuant to any options, warrants, convertible securities or other
rights to acquire capital stock of the Company (collectively, the "Securities").
2. Exercise and Closing of Option. (a) Exercise. Purchasers shall have the
right to exercise the Option in one or more installments and purchase any or all
of the Securities from and after the dates (each referred to individually as a
"Closing Date") and in the quantities set forth in the Schedule, for a price of
$12.70 per share (the "Share Price") by written notice ("Notice") to Lekach no
fewer than ten (10) business days prior to the applicable Closing Date, subject
to delay by Purchasers or Lekach as provided below. The Notice with respect to
the first installment shall be deemed delivered upon the execution hereof. Each
Notice shall specify the allocation among the Purchasers or their designees of
Securities to be acquired (and shall be accompanied by a certificate of any
designee certifying that the representation and warranties in subsections 5(b)
and 5(c) hereof are true and correct as to such designee).
(b) Stockholders' Deliveries. On each Closing Date for the Securities for
which Purchasers have given a Notice, Stockholders shall deliver to Purchasers:
certificates for all of the Securities to be acquired by the Purchasers as of
such Closing Date, in the applicable denominations and registered in the name of
the applicable Purchaser or his designee. Each such certificate shall bear a
legend substantially to the following effect:
The shares of stock represented by this Certificate have been acquired,
for investment only, directly or indirectly from the issuer or an
affiliate of the issuer without being registered under the Securities Act
of 1933, as amended ("Act"), or the securities laws of any state or other
jurisdiction, and are restricted securities as that term is defined under
Rule 144 promulgated under the Act. These shares may not be sold,
transferred, pledged, hypothecated or otherwise disposed of (a
"Transfer") unless they are registered under such Act and the securities
laws of any applicable states and other jurisdictions or unless such
Transfer is exempt from such registration.
(c) Purchasers' Deliveries. (i) On each Closing Date for the Securities
for which Purchasers have given a Notice, Purchasers shall deliver to Lekach (or
to such of the Stockholders as Lekach shall designate by prior written notice to
Purchasers) on behalf of the Stockholders, by wire transfer of immediately
available funds, an amount equal to the product of the Share Price and the
number of shares to be sold by the Stockholder to Purchasers on such Closing
Date (the "Option Exercise Payment"), less any advances made pursuant to
subsection (g) below.
(ii) On the effective date of the Escrow Agreement, Purchasers shall
deposit $5,000,000 with the Escrow Agent to fund a loan ("Loan") to Perfumania,
Inc., pursuant to the terms of the Note and Security Agreement annexed hereto as
Exhibit B.
(d) Offset of Demand Note. Lekach acknowledges and agrees that he is
presently indebted to Stephen Nussdorf in the amount of $1,000,000 plus interest
as set forth in that certain Demand Note dated December 8, 2003 made by Lekach
(the "Note") and guaranteed by Deborah Lekach. Notwithstanding Subparagraph 2(c)
above and any other provisions of this Agreement or the Note, Purchasers shall
have the right to pay any applicable portion of the Option Exercise Payment for
the Securities that are subject to the Option installment that becomes
exercisable in April 2004 by offset against all or the maximum applicable
portion of the amount then owed under the Note. Upon any such offset, the
balance if any then due under the Note shall be adjusted accordingly. Prior to
the earlier of (i) the Closing Date for the Option installment that becomes
exercisable in April 2004; (ii) a material default hereunder by any Stockholder;
(iii) September 15, 2004; or (iv) the Expiry Date, as defined below, or earlier
termination of this Option Agreement pursuant to its terms (any of the
foregoing, a "Demand Date"), Purchasers and their permitted assigns shall make
no payment, conversion or other similar demand relating to the Note, and the
interest rate applicable under the Note shall remain at five (5) percent per
annum. After the Demand Date Purchasers and their permitted assigns may make any
applicable payment, conversion or other similar demand permitted pursuant to the
Note, provided, however, that any conversion demand shall only be valid with
respect to the shares of capital stock of the Company, if any, that are held by
Lekach at the time of such demand or that he can promptly acquire pursuant to
options that are then immediately exercisable and as to which shares are then
reserved, registered and duly authorized for issuance by the Company. Any shares
delivered pursuant to a conversion pursuant to the Note shall cease to be
subject to the Option and the share amounts, if any, then subject to the Option
shall be reduced thereby.
(e) Delay of Closing. By written notice given by Purchasers to Lekach, or
by Lekach to Purchasers, on or before the business day preceding a Closing Date
(other than in connection with the Option installment first exercisable in
January 2004), Purchasers or Lekach may delay the closing of the acquisition of
Securities pursuant to an exercise of the Option for not more than thirty (30)
days to a later date which shall be specified in such notice and such later date
shall be deemed the "Closing Date" for purposes of that transaction.
(f) Expiry of Option. The Option shall expire and all right, claim or
interest of Purchasers or their designees shall terminate as to any and all
applicable Securities which have not been purchased on or before the earlier of
December 31, 2005 or demand for payment of the Note (other than a demand
following a material default by any Stockholder hereunder) (the "Expiry Date");
provided that, if Stockholders shall fail to transfer to Purchasers any
Securities with respect to which the Option shall have been exercised, by reason
of a default of the Stockholders, the Expiry Date shall be extended until
Stockholders shall deliver such Securities.
(g) Advances.
(i) Merrill Lynch & Company, Inc. In connection with the exercise
by Purchasers of the Option installment that becomes exercisable in
January 2004, Stockholders may request from Purchasers an advance of a
portion of the applicable Option Exercise Payment to repay indebtedness
of Stockholders due to Merrill Lynch & Company, Inc. (the "Pledgee")
secured by Securities to be delivered in connection with such exercise,
by delivery of a written advance request to Purchasers within two (2)
business days of receipt by Stockholders of the applicable Notice;
provided that:
(A) Stockholders shall deliver to Purchasers a pay-off
letter executed by the Pledgee in form and substance to the reasonable
satisfaction of Purchasers in all material respects;
(B) Any such advance shall be limited to the amount due to
the Pledgee as set forth in such pay-off letter and shall be paid
directly to the Pledgee; and
(C) Such pay-off letter shall include an acknowledgment and
undertaking by the Pledgee that it has been instructed to issue such
pledged Securities to Stockholders. Upon receipt of the amount
specified in such pay-off letter and written direction by Lekach,
which direction Lekach hereby agrees to give contemporaneously with
the payment to Escrow Agent, as defined below, of the balance (net of
any advances made under Sections 2(g)(i) and 2(g) (ii) hereunder) of
the Option Exercise Payment for such Option installment. Lekach will
instruct the Company's transfer agent to transfer such Securities into
the name of Purchasers as provided in the applicable Notice and to
deliver certificates evidencing such Securities in the name of
Purchasers to Edwards & Angell, LLP.
(D) Such opinion or opinions of the Company's counsel shall
be rendered to the Pledgee, the Company and/or the Company's transfer
agent as shall be necessary to effect the transfer of such Securities
to Purchasers contemplated by the applicable Notice.
(ii) Exercise Price. In the event Lekach intends to exercise any
Lekach Options to acquire Securities to be delivered in connection with
the exercise of any Option installment, Lekach may request from
Purchasers an advance of a portion of the applicable Option Exercise
Payment to fund the exercise price of such Lekach Options and any
applicable income tax withholdings by delivery of a written advance
request to Purchasers within two (2) business days of receipt by
Stockholders of the applicable Notice; provided that:
(A) Lekach shall deliver to Purchasers (I)
executed copies of all instruments required to exercise such
Lekach Options, (II) executed stock powers endorsed to the
Nussdorfs as to the Securities issued upon exercise of such
Lekach Options, and (III) any other documents relating to such
Lekach Options and the exercise thereof and the transfer of such
Securities to Purchasers, as Purchasers shall reasonably
request;
(B) Any such advance shall be limited to the
amount of the exercise price of the Lekach Options plus
applicable withholding and shall be paid directly to the
Company, and
(C) Such opinion or opinions of the Company's
counsel shall be rendered to the Company and/or the Company's
transfer agent as shall be necessary to effect the transfer of
such Securities to Purchasers contemplated by the applicable
Notice.
(h) Upon execution of this Agreement, that portion of the $5,499,989
Option Exercise Payment to be paid by Purchasers for the 433,070 shares of the
capital stock of the Company that will be the subject of Purchasers' exercise of
the Option simultaneously with the date of execution of this Agreement, and that
is not to be advanced to Pledgee or paid to the Company pursuant to Sections
2(g) (i) and 2(g) (ii) above, shall be delivered to Edwards & Angell, LLP, as
escrow agent ("Escrow Agent"), to be deposited and held in escrow in accordance
with the terms and conditions of that certain Escrow Agreement of even date
herewith among Escrow Agent, Stockholders and Purchasers.
3. Covenants and Acknowledgements.
(a) Exercise of Options for, and Recovery of, Pledged Securities. From
time to time, prior to the Expiry Date, each of the Stockholders shall use
commercially reasonable efforts to:
(i) exercise any and all of such options, warrants,
convertible securities and other rights to acquire the Securities then
exercisable, including without limitation the Lekach Options, as shall
be necessary to ensure that each of the Stockholders beneficially owns
sufficient Securities to enable the Stockholders to deliver all
Securities that Purchasers then have the right to acquire pursuant to
the Option.
(ii) assist Purchasers' efforts, if any, to cause Securities
that Purchasers shall acquire pursuant to the Option to be registered
(at Purchasers' expense) under the Act and/or the securities laws of
any applicable states and other jurisdictions.
(b) No Sale or Transfer of Securities. Except as provided herein, no
Stockholder shall sell, transfer or assign or grant any option, warrant or other
right to acquire, all or any portion of its interest in the Securities.
(c) Exercise, Approval and Registration Conditions. Lekach agrees that
he shall not exercise any of the Lekach Options to acquire 125,000 shares of the
Company's common stock granted to him pursuant to Section 7.p. of Lekach's
Employment Agreement with the Company dated February 1, 2002 (the "Employment
Agreement") as the result of the change of control referred to above (the
"Doubled Options") until the earlier to occur of: (i) the receipt of the
requisite approval of the stockholders of the Company, as may be required by
NASDAQ listing requirements, of the amendment of the 2000 Stock Option Plan of
the Company (the "Plan"), or (ii) April 23, 2004. Purchasers agree that if
Lekach is unable to exercise the Doubled Options on or after April 23, 2004, he
shall not be in breach of any provision of the Agreement and Purchasers agree
not to assert or support any position or view inconsistent with any claim, suit
or proceeding by Lekach relating to or arising from his inability to exercise
the Doubled Options. Purchasers further agree that notwithstanding any other
provision hereof Lekach shall have no obligation to exercise any stock options
or to sell any Securities pursuant to the Option unless at the time such
Securities are to be sold pursuant to the applicable Notice a registration
statement on Form S-8 is then currently effective with respect to the applicable
Securities.
(d) Further Assurances. Each party hereto agrees to take all actions
reasonably requested by any other party hereto to effect the transactions
contemplated hereby.
4. Representations and Warranties of Stockholders. The following
representations and warranties made by Stockholders shall be true and correct in
all material respects when made and as of each Closing Date:
(a) As of the date of this Agreement, each Stockholder solely, or
jointly with another of the Stockholders, owns shares of stock of the Company
totaling, in the aggregate, at least 277,204 shares, and, after giving effect to
the execution hereof, Lekach has options to acquire at least an additional
318,750 shares of stock of the Company which are currently exercisable and an
additional 125,000 shares subject to the change of control provisions in the
Employment Agreement, and are or shall be the sole owners of the shares of the
Securities set forth in Exhibit A as of the dates indicated; provided, however,
that the Stockholders have assumed for purposes of this paragraph (but make no
representation or warranty) that the number of Lekach Options shall increase by
125,000 (to a total of 443,750) as the result of the terms and provisions of the
Employment Agreement and the execution hereof.
(b) Neither the Company nor the Stockholders has issued or granted to
any person (other than Purchasers) any proxy or right to vote any of the
Securities or any option, warrant, convertible security or other right to
acquire any of the Securities.
(c) Except as otherwise provided herein there are and will be no
contractual restrictions on the transfer of the Securities to Purchasers upon
each exercise of an installment of the Option and, upon transfer to Purchasers,
the Securities will be free of any restrictions other than as provided for under
Subparagraph 2(b) above.
(d) All of the Securities are, or will be, fully paid and
nonassessable.
(e) The execution and delivery of this Agreement and the performance of
Stockholders' obligations hereunder will not (i) result in the violation of any
law, statute, rule, regulation or ordinance, order, judgment, injunction or
decree binding on it, nor (ii) result in or cause a conflict with, breach of,
default under or permit the termination of (or in the creation of an
encumbrance) under any document, instrument or agreement by which Stockholders
are bound.
5. Representations and Warranties of Purchasers. The following
representations and warranties made by Purchasers shall be true and correct in
all material respects when made and as of each Closing Date:
(a) The execution and delivery of this Agreement and the performance of
Purchasers' obligations hereunder will not (i) result in the violation of any
law, statute, rule, regulation, or ordinance, order, judgment, injunction or
decree binding on it, nor (ii) result in or cause a conflict with, breach of,
default under or permit the termination of (or the creation of an encumbrance
under), any document, instrument or agreement by which either Purchaser is
bound.
(b) Purchasers are purchasing the Securities for their own accounts,
for investment purposes and not with a present view to any distribution thereof
in violation of any applicable securities laws. It is understood that the
disposition of each Purchaser's property shall at all times be within such
Purchaser's control. If Purchasers should in the future decide to dispose of any
of the Securities, it is understood that they may do so but only in compliance
with the Act and applicable securities laws. Purchasers are as of the date
hereof and will be as of the Closing Date "accredited investors" as defined in
Rule 501(a) under the Act.
(c) Purchasers are experienced in evaluating and investing in companies
such as the Company, are familiar with the risks associated with the business
and operations of such companies, have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of their investment, and have the ability to bear the economic risks of
their investment. Purchasers have had, during the course of the transaction and
prior to their acquisition of the Securities, a reasonable opportunity to obtain
and receive information concerning the Company and its assets, business and
operations.
6. Proxy. Each of the Stockholders hereby irrevocably appoints each of the
Purchasers as his, her or its proxy with respect to the Securities with full
power and authority to attend all shareholder meetings and exercise all rights
of a voting shareholder of the Company from and after the first Closing Date,
including, without limitation, the payment in full on or before such date of the
Option Exercise Payment for the shares subject to the Option installment that
becomes exercisable in January 2004. Each Stockholder and each such owner will
not revoke or withdraw the appointment of Purchasers as his, her or its proxies
without the written consent of Purchasers. Stockholders hereby acknowledge that
said proxy is irrevocable and coupled with an interest. The appointment and
proxy set forth in this Section 6 shall expire and be of no further force or
effect on and after April 15, 2004 in the event the sale of the Securities that
are subject to the Option installment that becomes exercisable in March 2004 has
not been consummated in full, other than as a result of a default by any
Stockholder hereunder, the inability of any Stockholder to deliver certificates
for such Securities registered in the name of the applicable Purchaser or his
designee or the failure of a Stockholder to make any other delivery pursuant to
Section 2(b) with respect to the sale of such Securities.
7. Survival of Covenants, Agreements, Representations and Warranties. All
covenants, agreements, representations and warranties made herein or in any
other document referred to herein or delivered to any party pursuant hereto
shall be deemed to have been relied on by each such party, notwithstanding any
investigation made by such party or on his behalf.
8. No Brokers or Finders. No Stockholders or Purchaser has contracted for
or otherwise arranged for the services of any person who has, or as a result of
the transactions contemplated herein will have, any right or valid claim against
the Company, Stockholders or Purchasers for any commission, finders fee or other
similar payment.
9. Miscellaneous.
(a) Notices. Any notice or other communication by any party to the other
hereunder shall be made or given by personal delivery, facsimile, telex, first
class mail or overnight delivery service to the other party's address set forth
above and shall be deemed given upon the earlier of actual receipt thereof or
deposit thereof in the mail or with an overnight delivery service.
(b) Governing Law. This agreement shall be governed by and construed
under the laws of the State of Florida.
(c) Consent to Jurisdiction. Each party hereto hereby consents to the
jurisdiction of the Courts of the State of Florida and the United States
District Court for the Southern District of Florida in any action brought in
connection herewith.
(d) Liability. The obligations and liabilities hereunder of each of the
persons comprising the Stockholders and Purchasers, respectively, are and shall
be joint and several.
(e) Counterparts. This Agreement may be executed in multiple counterparts
each of which shall constitute an original hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
/s/Ilia Lekach
----------------------------------------------
ILIA LEKACH
IZJD CORP.
By: /s/ Ilia Lekach
-------------------------------------------
Name: Ilia Lekach
--------------------------------------
Title: CEO
--------------------------------------
PACIFIC INVESTMENT GROUP, INC.
By: /s/ Ilia Lekach
------------------------------------------
Name: Ilia Lekach
-------------------------------------
Title: CEO
-------------------------------------
/s/ Deborah Lekach
-----------------------------------------
DEBORAH LEKACH
/s/ Stephen Nussdorf
------------------------------------------
STEPHEN NUSSDORF
/s/ Glenn Nussdorf
------------------------------------------
GLENN NUSSDORF
Exhibit A
1. Ownership of Securities
a. Ownership of Shares
Ilia Lekach 115,750
1ZJD Corp. 131,004
Pacific Investment Group, Inc. 28,450
Ilia and Debbie Lekach 2,000
Total
b. Ownership of Options
Ilia Lekach 318,7501
_________________
1 As the result of the terms and provisions of the Employment Agreement, upon
the execution hereof the parties anticipate that the number of Lekach
Options shall increase by 125,000 to 443,750.
Exhibit A (cont'd)
2. Dates of Option Exercise and Number of Shares of Stock to be Purchased by
Purchasers
Date Total # of Shares Shares Owned Lekach Options
------------------ --------------------- -------------------- ------------------
1/30/04 433,070 277,204 155,866
3/15/04 162,884 - 162,884
4/23/04 125,000 - 125,000
Total 720,954 277,204 443,750
Price $12.70/share
Notes:
1. Numbers shown with respect to Options Held assume doubling of certain options
pursuant to the Employment Agreement upon giving effect to a change of control
of the Company.
2. The Closing Date with respect to the Securities that are subject to the
Option installment that becomes exercisable in April 2004 shall be delayed to
the extent the provisions of Section 3(c) hereof so require.
Exhibit B
[Omitted]
Exhibit G
ESCROW AGREEMENT
This Escrow Agreement is entered into as of January 30 2004, by and
between ILIA LEKACH ("Lekach"), IZJD CORP., PACIFIC INVESTMENT GROUP, INC. and
DEBORAH LEKACH (collectively, the "Stockholders"), all with an address at 137
Golden Beach Road, Golden Beach, Florida 33160, STEPHEN NUSSDORF and GLENN
NUSSDORF or their respective assignees or designees (the "Purchasers"), with an
address at 2060 Ninth Avenue, Ronkonkoma, New York 11779, PERFUMANIA, INC., a
Florida corporation, (the "Company") and EDWARDS & ANGELL, LLP ("Escrow Agent"),
a Massachusetts limited liability partnership, with an address at 750 Lexington
Avenue, New York, New York 10022.
RECITALS
A. The Stockholders and Purchasers are parties to that certain Option
Agreement, dated as of January 30, 2004 (the "Option Agreement"), whereby
Stockholders have granted to Purchasers an option to purchase certain shares of
the common stock of E Com Ventures, Inc., a Florida corporation, that are either
owned by Stockholders or which Stockholders have a right to acquire (the "E Com
Stock") and Purchasers and the Company are parties to that certain Subordinated
Secured Demand Note (the "Note") and that certain Security Agreement (the
"Security Agreement") (all as attached to the Option Agreement as Exhibit B
thereto);
B. Pursuant to the Option Agreement, upon the first exercise of the
option granted thereunder, which is required to occur upon the execution of the
Option Agreement, Purchasers will be purchasing a total of 433,070 shares of E
Com Stock (the "First Stock Purchase") for the total price of $5,499,989, some
portion of which may be advanced directly to Merrill Lynch in accordance with
paragraph 2(g)(i) of the Option Agreement, and some portion of which may be
advanced directly to E Com Ventures, Inc. under paragraph 2(g)(ii) of the Option
Agreement as an advance to enable Mr. Lekach to exercise certain stock options
to acquire shares of E Com Stock; and pursuant to the Note and Security
Agreement, the Purchasers will be loaning to the Company $5,000,000.00;
C. Any balance (the "First Stock Purchase Balance") of the $5,499,989
purchase price for the First Stock Purchase not advanced to Merrill Lynch or E
Com Ventures, Inc. under paragraph 2(g)(i) and (ii) is to be paid, pursuant to
paragraph 2(c) of the Option Agreement, to Stockholders at the Closing Date for
the First Stock Purchase;
D. To secure Stockholders for the timely payment of the First Stock
Purchase Balance at the Closing Date for the First Stock Purchase, upon
execution of this Agreement, the parties have agreed to deposit sums equal to
the First Stock Purchase Balance into escrow upon the execution of the Option
Agreement, pursuant to this Escrow Agreement (the "Purchase Fund"), and the
Purchasers have agreed to deposit the principal for the loan in the Note and
Security Agreement (the "Loan Fund") (collectively, the Purchase Funds and the
Loan Funds and any accrued interest are referred to as the "Escrow Fund");
E. The Escrow Agent has agreed to hold the Escrow Fund pursuant to the
terms of this Escrow Agreement; and
F. Capitalized terms used herein shall have the meaning ascribed to
such terms in the Option Agreement, unless otherwise defined herein.
NOW, THEREFORE, in consideration of entering into the Option Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Deposit. As security for the payment in accordance with the Option
Agreement of the First Stock Purchase Balance upon execution of this Agreement,
the Purchasers are herewith depositing with the Escrow Agent the aggregate sum
of eight million three hundred and ninety-seven thousand five hundred and twenty
two and ninety-seven one-hundredths U.S. dollars (USD$8,397,522.97),
representing a sum equal to the First Stock Purchase Balance and the Loan Fund.
In order to make such deposit, Purchasers shall effect a wire transfer for such
amount to such account as the Escrow Agent shall direct as of the date of
execution of this Agreement. Upon receipt of such amount, the Escrow Agent will
issue a receipt to Purchasers (with a copy to Stockholders) indicating that such
funds have been received and are being held in escrow pursuant to the terms of
this Escrow Agreement.
2. Deposit of Escrow Fund. The Escrow Agent shall hold the Escrow Fund
in its interest bearing trust account specifically identified in the accounting
and banking records of the Escrow Agent with this Escrow Agreement and subject
to the terms of this Escrow Agreement. Interest earned and accrued on the Escrow
Fund shall be payable to Purchasers after all other disbursements required under
this Escrow Agreement have been made.
3. Disposition of Escrow Fund.
A. Purchase Fund. At the expiration of three (3) business days
(the "Disbursement Period") following receipt by the Escrow Agent of a written
notice (a "Disbursement Notice") from Stockholders, a copy of which Stockholders
shall simultaneously provide to Purchasers and which shall bear on its face
evidence that a copy of such written notice has been sent to Purchasers,
advising Escrow Agent (i) that the Closing Date of the First Stock Purchase has
occurred, and (ii) that upon such Closing Date, Stockholders caused to be
delivered to Purchasers stock certificates evidencing 433,070 shares of E Com
Stock to be acquired by Purchasers under the Option Agreement at the Closing
Date of the First Stock Purchase, which certificates are registered in the name
of Stephen Nussdorf or his designee, and bear a legend substantially as follows:
The shares of stock represented by this Certificate have been
acquired, for investment only, directly or indirectly from the issuer
or an affiliate of the issuer without being registered under the
Securities Act of 1933, as amended ("Act"), or the securities laws of
any state or other jurisdiction, and are restricted securities as that
term is defined under Rule 144 promulgated under the Act. These shares
may not be sold, transferred, pledged, hypothecated or otherwise
disposed of (a "Transfer") unless they are registered under such Act
and the securities laws of any applicable states and other
jurisdictions or unless such Transfer is exempt from such
registration",
the Escrow Agent shall pay to Stockholders the amount of the Purchase Fund in
cash or other certifiable funds. Such payment by the Escrow Agent may be made
prior to the expiration of the Disbursement Period in the event that a joint
instruction to such effect is made to Escrow Agent in a writing signed by both
Stockholders and Purchasers. In the event that a Disbursement Notice is sent to
the Escrow Agent, and Purchasers dispute under the terms of the Option Agreement
the validity of such notice or the amount or portion of the Purchase Fund that
Stockholders have requested the Escrow Agent to disburse, Purchasers shall,
prior to the expiration of the Disbursement Period, assert a claim (the "Escrow
Claim") by delivering a written notice (the "Escrow Claim Notice") to the Escrow
Agent with a copy to Stockholders, stating the basis for the claim and the
dollar amount thereof. If any Stockholder receiving an Escrow Claim Notice
disputes such Escrow Claim, it may respond to such Escrow Claim Notice by
delivering a response thereto (the "Dispute Notice") to the Escrow Agent (with a
copy to Purchasers) within five (5) days from the date such Stockholder received
the Escrow Claim Notice (the "Response Period"). At the expiration of the
Disbursement Period, the Escrow Agent shall deliver to Stockholders in cash or
immediately available funds, that portion of the Purchase Fund that is not the
subject of an Escrow Claim. If none of the Stockholders responds to an Escrow
Claim Notice with a Dispute Notice within the Response Period, the Escrow Agent,
within five (5) business days following the expiration of the Response Period,
shall pay to Purchasers the amount of such Escrow Claim in cash or immediately
available funds from the Escrow Fund. If Stockholders and Purchasers shall not
reach agreement as to any disputed amount of an Escrow Claim, any of the parties
hereto may submit to binding arbitration in accordance with Section 7 below for
a determination of the parties' respective rights or obligations with respect to
such disputed amount. Thereafter, the Escrow Agent shall only disburse any or
all of the Escrow Fund as directed in writing upon the occurrence of one of the
following events: (i) the Escrow Agent shall have been directed in accordance
with joint instructions of Stockholders and Purchasers; or (ii) the Escrow Agent
shall have received a certified copy of the decision of the arbitrator(s) in
accordance with Section 7 hereof with respect to the Escrow Claim or Escrow
Claims set forth in the Escrow Claim Notice, in which case the Escrow Agent
shall pay, in cash or other certifiable funds, the party or parties in
accordance with such decision. The Escrow Agent shall not dispose of the Escrow
Fund other than as provided in this Escrow Agreement.
B. Loan Fund. Upon (i) disbursement of the Purchase Fund, as
provided in Section 3A above, and (ii) delivery to Purchasers of the Note and
Security Agreement duly executed by the Company together with a certified copy
of a resolution of the board of directors of the Company approving the loan
transaction, the Escrow Agent will disburse the funds held in the Loan Fund to
the Company in cash or other certifiable funds.
4. No Release of Claims. The acceptance by any party of any amounts
from the Escrow Fund on account of an Escrow Claim shall not constitute a
release of any of any such party's rights against the other parties under the
Option Agreement or otherwise, nor shall any such acceptance by any party in any
way limit the rights of such party to assert a claim against the other parties
for the balance of any Escrow Claim which remains unsatisfied after such party
has accepted such payment.
5. Liability. Stockholders and Purchasers understand and agree that the
Escrow Agent's liability hereunder is solely that of a stakeholder and that the
Escrow Agent is only required to act as expressly set forth in this Escrow
Agreement. No legal relationship exists between the parties hereto and the
Escrow Agent other than that specified in these instructions.
The parties hereto further agree that:
(a) Other than as provided in this Escrow Agreement, the
Escrow Agent is not a party to, and is not bound by or charged with notice of,
any agreement, document, instruction or certificate out of which this Escrow
Agreement may arise or relating hereto.
(b) The Escrow Agent may act upon any written notice, request,
waiver, consent, certificate, receipt, authorization, power of attorney or other
paper or document that the Escrow Agent in good faith believes to be genuine and
what it purports to be.
(c) The Escrow Agent shall not be liable for anything that it
may do or refrain from doing in good faith in connection herewith, except for
its own gross negligence, recklessness or willful misconduct.
(d) The Escrow Agent shall have no duties or responsibilities
other than the duties and responsibilities expressly set forth in this Escrow
Agreement. After release of the Escrow Fund, the Escrow Agent's duties,
responsibilities and liabilities of every kind and character under this Escrow
Agreement shall cease and terminate.
(e) This Escrow Agreement may not be modified or amended
except by written instruction, executed by each of the Stockholders and
Purchasers and a duly authorized officer of each of the corporate parties and
the Escrow Agent. Any such modification or amendment shall be effective only
upon receipt by the Escrow Agent.
(f) The term "Escrow Agent" used herein shall include Edwards
& Angell, LLP, a Massachusetts limited liability partnership, and its partners,
agents, officers, employees, successors and assigns.
6. Compensation of the Escrow Agent. Any fees, costs or expenses of the
Escrow Agent shall be paid immediately upon demand, one half by Stockholders and
one half by Purchasers, but in no event shall the Escrow Agent's fee exceed
three thousand U.S. dollars (USD$3,000).
7. Arbitration. Any controversy or claim arising out of or relating to
this Escrow Agreement, or any breach thereof, shall be settled by arbitration in
Miami, Florida before a single arbitrator pursuant to the Commercial Rules of
the American Arbitration Association. The arbitration may be commenced by any
party hereto by giving written notice to each other party to a dispute that such
dispute has been referred to arbitration under this Section 7. The arbitrator
shall be selected by the joint agreement of the parties to the dispute, but if
they do not so agree within twenty (20) days after the date of the notice
referred to above, the selection shall be made pursuant to the Commercial Rules
of the American Arbitration Association from the panels or arbitrators
maintained by such Association. Any award rendered by the arbitrator shall be
conclusive, final and binding upon the parties hereto and specifically
enforceable by the parties; provided, however, that any such award shall only be
final and binding if accompanied by a written opinion of the arbitrator giving
the reasons for the award.
8. Expenses. Each party shall bear its own expenses incurred in
connection with this Escrow Agreement, other than the Escrow Agent, which shall
be compensated for its time and expenses, subject to the conditions set forth in
Section 6 above.
9. Notices. All notices required or permitted to be given hereunder
shall be in writing and shall be delivered both by overnight courier (UPS,
Federal Express, Airborne, or DHL) and by facsimile as set forth below:
If to Stockholders: Ilia Lekach
c/o Mark Young
Perfumania, Inc.
251 International Parkway
Sunrise, FL 33325
Fax No: 954-335-9179
Steel Hector & Davis, LLP
200 South Biscayne Boulevard
Miami, FL 33131-2398
If to Purchasers: Stephen Nussdorf
c/o Michael Katz
Quality King Distributors, Inc.
2060 9th Avenue
Ronkonkoma, N.Y. 11779
Fax No: 631-439-2333
Edwards & Angell, LLP
750 Lexington Avenue
New York, New York 10022
Attention: Geoffrey Etherington, Esq.
If to Escrow Agent, at address set forth above.
10. Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of New York. exclusive of its
choice of law provisions and regardless of the laws that might otherwise govern
under applicable principles of conflict of laws.
11. Counterparts. This Escrow Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument. This Escrow Agreement may
be effectively delivered via facsimile transmission.
12. Attorney's Fees. In the event that an action is brought for the
enforcement or interpretation of this Escrow Agreement, the prevailing party
shall be entitled to recover reasonable attorney's fees and costs in said
action, including enforcement and collection of any judgment or award rendered
therein. Said costs and attorney's fees shall be included as a part of the
judgment in any such action.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed and delivered on the date first above written.
PERFUMANIA, INC.
By: s/ A. Mark Young
---------------------
Name: A. Mark Young
-----------------
Title: CFO
-----------------
IZJD CORP. PACIFIC INVESTMENT GROUP, INC.
By: /s/ Ilia Lekach By: /s/ Ilia Lekach
-------------------- ------------------------------
Name: Ilia Lekach Name: Ilia Lekach
----------------- --------------------------
Title: CEO Title: CEO
----------------- --------------------------
/s/ Ilia Lekach /s/ Stephen Nussdorf
------------------------- ---------------------------------
ILIA LEKACH STEPHEN NUSSDORF
s/ Deborah Lekach /s/ Glenn Nussdorf
------------------------- ----------------------------------
DEBORAH LEKACH GLENN NUSSDORF
EDWARDS & ANGELL, LLP, a Massachusetts
limited liability partnership
By: /s/ Patricia L. Kantor
------------------------------
Name: Patricia L. Kantor
---------------------------
Title: Partner
---------------------------
Exhibit H
PERFUMANIA, INC.
SUBORDINATED SECURED DEMAND NOTE
$5,000,000 __________________, 2004
FOR VALUE RECEIVED, Perfumania, Inc., a Florida corporation (the
"Company"), hereby unconditionally promises to pay ON DEMAND to the order of
Stephen Nussdorf and Glenn Nussdorf (collectively, the "Holder"), in immediately
available funds, the principal amount of Five Million Dollars ($5,000,000), and
to pay interest on the unpaid principal amount hereof at the rate set forth in
Section 4. All amounts owed hereunder shall be paid in lawful money of the
United States of America.
This Note is subject to the following terms and conditions:
1. Security. This Note and the amounts payable hereunder, including
principal and accrued interest, is secured by that Security Agreement between
the Holder and the Company dated as of the date hereof ("Security Agreement").
2. Subordination. This Note and the amounts payable hereunder,
including principal and accrued interest shall be subordinate and junior to the
Senior Bank Loans. For the purpose of this Note, "Senior Bank Loans" shall mean
any and all obligations, liabilities and indebtedness of the Company to GMAC
Commercial Credit LLC (the "Senior Lender"), all obligations, liabilities and
indebtedness in connection with the refinancing of the indebtedness to the
Senior Lender.
3. Prepayment. The outstanding principal balance of this Note may be
prepaid by the Company at any time and from time to time, without premium or
penalty of any kind or nature whatsoever.
4. Payments of Interest. The Company shall pay or cause to be paid to
Holder interest on the unpaid principal amount hereof from time to time
outstanding at a rate per annum equal to the then current Prime Rate plus one
percent quarterly in arrears on the last day of each calendar quarter commencing
on March 31, 2004 until this Note shall be paid in full. As used herein, the
term "Prime Rate" shall mean for each calendar month the prime rate listed in
the Wall Street Journal in the "Money Rates" column published on the date which
is one Business Day (as defined below) prior to the beginning of such calendar
month for such calendar month. If the Prime Rate cannot be determined in
accordance with the preceding sentence, then the Company will notify Holder and
instead determine the Prime Rate by using the rates offered to prime banks by
Citibank, N.A. (but in all other respects in accordance with the preceding
sentence). Interest shall be calculated on the basis a 360 day year based on the
actual number of days elapsed.
5. Payments. Any payment hereunder which is stated to be due on a day
which is not a Business Day shall be made on the next succeeding Business Day
(and interest shall accrue for such extension of time). "Business Day" shall
mean any day other than a Saturday or Sunday or a day on which banks in New York
are authorized or required by law to be closed.
6. Default. The occurrence of any one or more of the following events
shall constitute an event of default (each an "Event of Default") hereunder:
(i) if the Company becomes insolvent or makes an assignment for the
benefit of creditors;
(ii) if there shall be filed by or against the Company any petition for
any relief under the bankruptcy laws of the United States now or hereafter in
effect or any proceeding shall be commenced with respect to the Company under
any insolvency, readjustment of debt, reorganization, dissolution, liquidation
or similar law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity), provided that in the case of any involuntary
filing or the commencement of any involuntary proceeding against the Company
such proceeding or petition shall have continued undismissed and unvacated for
30 days; or
(iii) if any petition or application to any court or tribunal, at law
or in equity, shall be filed by or against the Company for the appointment of
any receiver or Company for the Company or any material part of the property of
the Company, provided that in the case of any involuntary filing against the
Company, such proceeding or appointment shall have continued undismissed and
unvacated for 30 days; or
(iv) if the Company shall fail for any reason to make any payment of
principal and/or interest hereunder within 10 business days after such payment
is due; or
(v) if the Company shall fail for any reason to make any payment of
principal and interest under any Senior Bank Loan, within 30 days after such
payment is due.
Remedies Upon Default; Default Interest.
(i) If any Event of Default shall occur for any reason, then and in any
such event, in addition to all rights and remedies of the Holder under
applicable law or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively and concurrently, the
Holder may, at its option, declare any or all amounts owing under this Note to
be due and payable, whereupon the then unpaid balance hereof, together with all
accrued and unpaid interest thereon, shall forthwith become due and payable.
(ii) Upon the occurrence of an Event of Default, or upon the maturity
hereof (by demand, acceleration or otherwise), the principal and any accrued but
unpaid interest owing on said principal sum (the "Obligations") shall bear
interest from the date of occurrence of such Event of Default or such maturity
until collection (including any period of time occurring after judgment), at the
"Default Rate," being the lower of (A) the highest rate allowed by applicable
law, or (B) a simple interest rate per annum equal to 3% above the Prime Rate in
effect on the date of maturity (acceleration or otherwise). All default interest
charges (X) shall be in addition to, and not in lieu of, any other remedy
available to Holder; (Y) shall be added to the Obligations and secured by the
Security Agreement, and (Z) shall not be construed as an agreement or privilege
to extend the date of the payment of the Obligations, nor as a waiver of any
other right or remedy accruing to Holder by reason of the occurrence of any
Event of Default.
7. Lost, Stolen, Mutilated or Destroyed Note. If this Note shall be
mutilated, lost, stolen, or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated Note, or in
lieu of or in substitution for a lost, stolen, or destroyed Note, a new Note for
the principal amount of this Note so mutilated, lost, stolen, or destroyed but
only upon receipt of evidence (which may consist of a signed affidavit of the
Holder) of such loss, theft, or destruction of such Note, and of the ownership
thereof, and indemnity all reasonably satisfactory to the Company.
8. Other Matters
(a) Sale of Note; Assignment. This Note is negotiable, and this Note
may be sold, assigned, transferred or conveyed, by pledge or otherwise, without
the prior written consent of the Company.
(b) Modification; Waiver. This Note may be amended, modified,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the Company and the Holder. Any waiver by
the Company or the Holder of a breach of any provision of this Note shall not
operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Note. The failure of the Company
or the Holder to insist upon strict adherence to any term of this Note on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Note. No delay on the part of any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof or hereof, nor shall
any waiver on the part of any party of any right, power or privilege hereunder
preclude any other or further exercise hereof or the exercise of any other
right, power or privilege hereunder. Any waiver must be in writing. The rights
and remedies provided herein are cumulative and are not exclusive of any rights
or remedies which any party may otherwise have at law or in equity.
(c) Notices. Any notice required or permitted to be given hereunder
("Notices") shall be in writing and delivered personally or mailed by registered
or certified mail, postage prepaid and return receipt requested, or by fax, as
follows: (i) if to the Company: 251 International Parkway, Sunrise, Florida
33325, Attn: A Mark Young, fax no. (954) 335-9179, with a copy to: Akerman
Senterfitt, One Southeast Third Avenue, 28th Floor, Miami, Florida 33131-1714.
Attn: Alan Aronson, fax no. 305 374 5095; and (ii) if to the Holder: 2090 Ninth
Avenue, Ronkonkoma, New York 11779, Attn: Michael Katz, fax no. 631-439-2262,
with copy to Edwards & Angell, LLP, 750 Lexington Avenue, New York, New York,
10022 Attn: Patricia Kantor, fax no. (212) 408-4844, or such other address as
the either party hereto may designate by Notice to the other.
(d) Severability. If any provision of this Note is invalid, illegal, or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. The rate of interest
on this Note is subject to any limitations imposed by applicable usury laws.
(e) Headings. The headings in this Note are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Note.
(f) Governing Law. This Note shall be governed by and construed in all
respects under the laws of the State of Florida, without reference to its
conflict of laws, rules or principles.
(g) Saving Clause. This Note is subject to the express condition that
at no time shall the Company be obligated or required to pay interest on the
principal balance due hereunder at a rate which could subject Holder to either
civil or criminal liability as a result of being in excess of the maximum
interest rate which the Company is permitted by law to contract or agree to pay.
If by the terms of this Note, the Company is at any time required or obligated
to pay interest on the principal balance due hereunder, at a rate in excess of
such maximum rate, the interest rate shall be deemed to be immediately reduced
to such maximum rate and all previous payments in excess of the maximum rate
shall be deemed to have been payments in reduction of principal and not on
account of the interest due hereunder notwithstanding the other provisions
hereof.
IN WITNESS WHEREOF, the Company has caused this Note to be executed on
its behalf by the undersigned officer thereunto duly authorized.
PERFUMANIA, INC.
By: /s/ A. Mark Young
--------------------------------
A. Mark Young
Chief Financial Officer
Exhibit I
SECURITY AGREEMENT
SECURITY AGREEMENT (the "Agreement") made and entered into as of
_______________, 2004, by and between Perfumania, Inc., a Florida corporation
("Debtor"), and Stephen Nussdorf and Glenn Nussdorf (collectively "Secured
Party").
R E C I T A L S
A. Debtor has executed a Subordinated Secured Demand Note of
even date herewith, payable to the order of the Secured
Party.
B. As a condition precedent to Secured Party's acceptance of
the Note, Grantor grants the security interests and
undertakes the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce Secured
Party to accept the Note in partial satisfaction of certain obligations owing by
Debtor to Secured Party, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Grantor hereby agrees
with Secured Party as follows:
1. Grant of Security Interest. As security for the payment and
performance when due of the Obligations, Debtor does hereby assign and transfer
unto Secured Party, and does hereby grant to Secured Party a continuing security
interest in, all of Debtor's right, title and interest in, to and under all of
the following, whether now existing or hereafter acquired: all of Debtor's
assets and properties, whether tangible or intangible, including without
limitation, Debtor's Accounts, Inventory, Goods, General Intangibles, Chattel
Paper, Documents and Instruments, and all Proceeds and products of any and all
of the foregoing (collectively, the "Collateral").
2. Representations, Warranties and Covenants of Debtor. Debtor
represents, warrants and covenants as follows:
(a) No Liens. Debtor is, and as to Collateral acquired by it after the
date hereof will be, the owner of such Collateral free from any Liens, other
than Permitted Liens, and Debtor shall defend the Collateral against all claims
and demands of all persons at any time claiming the same of any interest therein
adverse to Secured Party. Debtor will, at its own expense, take such action as
may be necessary duly to discharge any such Lien if the same shall arise at any
time.
(b) Chief Executive Office; Records. The chief executive office of
Debtor is located at 251 International Parkway, Sunrise, Florida. The originals
or copies of all documents evidencing the Collateral and the account and records
of Debtor relating thereto are, and will continue to be, maintained at, and
controlled and directed from, such chief executive office or at such new
locations as Debtor may establish in accordance with this Section 2(b). Debtor
shall not establish a new location for such chief executive office until it has
given to Secured Party not less than thirty (30) days' prior written notice of
its intention so to do, describing such new location and providing such other
information in connection therewith as Secured Party may reasonably request.
(c) Further Actions. Upon written request from Secured Party, Debtor
will provide Secured Party with copies of such lists of and reports with respect
to the Collateral as Debtor furnishes from time to time to the holder(s) of any
Senior Lien. In addition, Debtor will, upon the request of Secured Party,
execute and/or deliver to Secured Party from time to time such instruments, and
take such further steps relating to the Collateral and the property or rights
covered by the security interest hereby granted, which Secured Party may
reasonable request to establish and maintain a valid, enforceable security
interest in the Collateral as provided herein or to perfect, preserve or protect
its security interest in the Collateral, all in accordance with the Uniform
Commercial Code or any other relevant law. Debtor authorizes Secured Party to
file any such financing statements without the signature of Debtor.
3. Remedies Upon Occurrence of Event of Default.
(d) Remedies: Obtaining the Collateral Upon Default. Subject to the
rights of the holder(s) of any Senior Lien, Debtor agrees that, if any Event of
Default shall have occurred and be continuing, then and in every such case,
subject to any mandatory requirements of applicable law then in effect, Secured
Party, in addition to any rights now or hereafter existing under applicable law,
shall have all rights as a secured creditor under the Uniform Commercial Code
and may: (i) personally, or by agents or attorneys, take possession of the
Collateral or any part thereof, from Debtor or any other person who then has
possession of any part thereof with or without notice or process of law, and for
that purpose may enter upon Debtor's premises where any of the Collateral is
located and remove the same; and (ii) instruct the obligor or obligors on any
instrument or other obligation constituting the Collateral to make any payment
required by the terms of such instrument directly to Secured Party; and (iii)
sell, assign or otherwise liquidate, or direct Debtor to sell, assign or
otherwise liquidate, any or all of the Collateral or any part thereof, and take
possession of the proceeds of any such sale or liquidation.
(e) Remedies; Disposition of Collateral. Subject to the rights of the
holder(s) of any Senior Lien, any Collateral repossessed by Secured Party
pursuant to Section 3(a), and any other Collateral whether or not so repossessed
by Secured Party, may be sold, assigned, leased or otherwise disposed of under
one or more contracts or as an entirety, and without the necessity of gathering
at the place of sale the property to be sold, and in general in such manner, at
such time or times, at such place or places and on such terms as Secured Party
may, in compliance with any mandatory requirements of applicable law, determine
to be commercially reasonable. Any such disposition which shall be a private
sale or other private proceeding permitted by such requirements shall be made
upon not less than 10 days' written notice to Debtor specifying the time at
which such disposition is to be made. Any such disposition which shall be a
public sale permitted by such requirements shall be made upon not less than 10
days' written notice to Debtor specifying the time and place of such sale and,
in the absence of applicable requirements of law, shall be by public auction
after publication of notice of such action not less than 10 days prior thereto
in accordance with applicable law.
(f) Application of Proceeds. Subject to the rights of the holder(s) of
any Senior Lien, the proceeds of any Collateral disposed of by Secured Party
pursuant to Section 3(b) shall be applied as follows: first, to the payment of
any and all expenses and fees (including reasonable attorneys' fees) incurred by
Secured Party in obtaining, taking possession of, removing, insuring, repairing,
storing and disposing of Collateral; next, to the payment of the Obligations in
the following order of priority: (i) all interest accrued and unpaid; (ii) the
principal amount owing on the Note; and (iii) all other Obligations then owing;
and any surplus then remaining shall be paid to Debtor, subject, however, to the
rights of the holder of any then existing Lien of which Secured Party has actual
notice.
(g) Remedies Cumulative. No failure or delay on the part of Secured
Party in exercising any right, power or privilege hereunder and no course of
dealing between Debtor and Secured Party or the holder of the Note shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder or thereunder. The
rights, powers and remedies herein expressly provided are cumulative and not
exclusive of any rights, powers or remedies which Secured Party would otherwise
have.
(h) Power of Attorney. Debtor hereby constitutes and appoints Secured
Party its true and lawful attorney, with full power after the occurrence of an
Event of Default and for so long as the same shall be continuing (in the name of
Debtor or otherwise), to act, require, demand, receive, compound and give
acquittance for any and all monies and claims for monies due or to become due to
Debtor under or arising out of the Collateral, to endorse any checks or other
instruments or orders in connection therewith and to file any claims or take any
action or institute any proceedings which Secured Party may deem to be necessary
or advisable in the premises, which appointment as attorney is coupled with an
interest.
4. Indemnity. Debtor agrees to indemnify, reimburse and hold Secured
Party harmless from any and all losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses or disbursements (including reasonable
attorneys' fees and expenses) which may be imposed on, asserted against or
incurred by Secured Party in connection with the creation, preservation or
protection of Secured Party's Liens on, and security interest in, the
Collateral, including, without limitation, in connection with the recording or
filing of instruments and documents in public offices, payment or discharge of
any taxes or Liens upon or in respect of the Collateral, premiums for insurance
with respect to the Collateral and all other fees, costs and expenses in
connection with protecting, maintaining or preserving the Collateral and Secured
Party's interest therein, whether through judicial proceedings or otherwise. The
indemnity obligations of Debtor contained in this Section 4 shall constitute
Obligations secured by the Collateral and shall continue in full force and
effect notwithstanding the full payment of the Note and all of the other
Obligations.
5. Definitions. The following terms shall have the meaning herein
specified unless the context otherwise requires. Such definitions shall be
equally applicable to the singular and plural forms of the terms defined.
"Accounts," "Chattel Paper," "Documents," "Goods," "General
Intangibles," "Instruments," "Inventory" and "Proceeds" shall have the meanings
assigned to such terms in the Uniform Commercial Code.
"Event of Default" shall mean the occurrence of any of the following
events: (a) a "Default" (as such term is defined in the Note) shall have
occurred and be continuing, (b) any representation or warranty made by Debtor
herein shall prove to have been false or incorrect in any material respect at
the time made; or (c) Debtor shall fail to perform or observe any other covenant
or agreement to be performed or observed by it hereunder and such failure shall
continue unremedied for a period of thirty (30) days after written notice
thereof from Secured Party to Debtor.
"Lien" shall mean any mortgage, pledge, lien, charge, encumbrance,
lease, exercise of rights, security interest or claim of any nature whatsoever.
"Note" shall mean the Subordinated Secured Note of Debtor to Secured
Party dated the date hereof, in the original principal amount of Five Million
Dollars ($5,000,000).
"Obligations" shall mean: (a) the indebtedness of Debtor to Secured
Party pursuant to the Note; (b) all sums advanced by Secured Party to preserve
the Collateral or its security interest in the Collateral; and (c) in the event
of any proceeding for the collection or enforcement of the Note or this
Agreement after an Event of Default shall have occurred and be continuing, the
reasonable expenses of retaking, holding, preparing for sale or lease, selling
or otherwise disposing or realizing on the Collateral, or of any exercise by
Secured Party of its rights hereunder.
"Permitted Liens" shall mean (i) the Lien created hereby in favor of
Secured Party, (ii) the first priority security interest in favor of any Senior
Lender and a second priority security interest in favor of Parlux Fragrances,
Inc. (collectively, "Senior Liens"), (iii) Liens for taxes either not yet due or
being contested in good faith (and for the payment of which adequate reserves
have been provided) by appropriate proceedings diligently pursued and (iv)
materialmen's, mechanics', workmen's, landlord's, employees' or other like Liens
arising in the ordinary course of business for amounts the payment of which is
either not yet delinquent or is being contested in good faith (and for the
payment of which adequate reserves have been provided) by appropriate
proceedings diligently pursued.
"Senior Lender" shall mean GMAC Commercial Finance LLC and any other
bank or lending institution that extends credit to Debtor on or after the date
hereof in connection with the refinancing of Debtor's indebtedness to GMAC
Commercial Finance LLC or any other Senior Lender.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of Florida and in any other applicable
jurisdiction.
6. Miscellaneous.
(i) Governing Law. This Agreement and its validity, construction and
performance shall be governed in all respects by the internal laws of the State
of Florida (without reference to the conflict of laws provisions or principles
thereof).
(j) Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; but neither this Agreement nor any of the rights, benefits or
obligations hereunder shall be assigned, by operation of law or otherwise, by
either party hereto without the prior written consent of the other party.
Nothing in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective permitted successors
and assigns, any rights, benefits or obligations hereunder.
(k) Amendment; Waiver. This Agreement shall not be changed, modified or
amended in any respect except by the mutual written agreement of the parties
hereto. Any provision of this Agreement may be waived in writing by the party
which is entitled to the benefits thereof. No waiver of any provision of this
Agreement shall be deemed to or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall any such waiver constitute a
continuing waiver.
(l) Notices. Any notice required or permitted to be given hereunder
("Notices") shall be in writing and delivered personally or mailed by registered
or certified mail, postage prepaid and return receipt requested, or by fax, as
follows: (i) if to the Company: 251 International Parkway, Sunrise, Florida
33325, Attn: Chief Financial Officer, fax no. (954) 335-9166, with a copy to:
Akerman Senterfitt, One Southeast Third Avenue, 28th Floor, Miami, Florida
33131-1714. Attn: Alan Aronson, fax no. 305 374 5095; and (ii) if to the Secured
Party: 2090 Ninth Avenue, Ronkonkoma, New York 11779, Attn: Michael Katz, fax
no. 631-439-2262, with copy to Edwards & Angell, LLP, 750 Lexington Avenue, New
York, New York, 10022 Attn: Patricia Kantor, fax no. (212) 408-4844, or such
other address as the either party hereto may designate by Notice to the other.
(m) Obligations Absolute. The obligations of Debtor hereunder shall be
absolute and unconditional and shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by, any circumstance or occurrence whatsoever, including,
without limitation: any renewal, extension, amendment or modification of, or
addition or supplement to or deletion from, the Note, or any assignment or
transfer thereof; any waiver, consent, extension, indulgence or other action or
inaction under or in respect of the Note or this Agreement or any exercise or
non-exercise of any right, remedy, power or privilege under or in respect hereof
or the Note; the furnishing of additional security to Secured Party or any
acceptance thereof or the sale, exchange, release, surrender or realization of
or upon any security by Secured Party; or any invalidity, irregularity or
unenforceability of all or part of the Obligations or of any security therefor.
(n) Debtor's Duties. It is expressly agreed, anything herein contained
to the contrary notwithstanding, that Debtor shall remain liable to perform all
of the obligations assumed by it with respect to the Collateral and Secured
Party shall not have any obligations or liabilities with respect to any
Collateral by reason of or arising out of this Agreement, nor shall Secured
Party be required or obligated in any manner to perform or fulfill any of the
obligations of Debtor under or with respect to any Collateral.
(o) Severability. Any term or provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction
only, be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
(p) Headings. The captions, headings and titles herein are for
convenience of reference only and shall not effect the construction, meaning or
interpretation of this Agreement or any term or provision hereof.
(q) Counterparts. This Agreement may be executed through the use of one
or more counterparts, each of which shall be deemed an original and all of which
shall be considered one and the same agreement, notwithstanding that all parties
are not signatories to the same counterpart.
(r) Entire Agreement. This Agreement merges and supersedes any and all
prior agreements, understandings, discussions, assurances, promises,
representations or warranties among the parties with respect to the subject
matter hereof, and contains the entire agreement among the parties with respect
to the subject matter hereof.
(s) Termination; Release. When all Obligations have been paid in full,
this Agreement shall terminate, and Secured Party, at the request and expense of
Debtor, will execute and deliver to Debtor the proper instruments (including
Uniform Commercial Code termination statements on form UCC-3) acknowledging the
termination of this Agreement, and will duly assign, transfer and deliver to
Debtor (without recourse and without any representation or warranty) such of the
Collateral as may be in possession of Secured Party and has not theretofore been
sold or otherwise applied or released pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers all as of the day and year first
written above.
PERFUMANIA, INC.
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
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Stephen Nussdorf
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Glenn Nussdorf