Parlux (PARL) Holder Glenn Nussdorf Says Perry Ellis License Sale Not in Best Interest

UPDATE: 3:21PM ET - Nussdorf amended the letter

In an amended 13D filing on Parlux Fragrances Inc. (Nasdaq: PARL), Glenn H. Nussdorf disclosed a 10.5% stake (1.9 million shares). On September 26, 2006, Mr. Nussdorf sent a letter to the Board of Directors of Parlux indicating his position that the proposed sale of the company's Perry Ellis license to Victory International (USA) LLC is not in the best interests of the comapny and is such a significant sale of assets that shareholder approval may be required.

Recently, Glenn Nussdorf was granted approval to purchases of more than fifteen percent (15%) of PARL's outstanding shares.

Glenn Nussdorf with his brother Stephen Nussdorf own 37% of E Com Ventures, Inc. (Nasdaq: ECMV) and together with their sister Arlene Nussdorf, control Model Reorg, Inc.

A Copy of the Letter:

Members of the Board of Directors
Parlux Fragrances, Inc.
3725 S.W. 30th Avenue
Ft. Lauderdale, FL 33312

Gentlemen:

Dear Board Members:

As you know, Lillian Ruth Nussdorf and I are major shareholders of Parlux Fragrances, Inc. (“Parlux” or the “Company”) holding, at present, approximately 10.5% of the outstanding shares of the Company. As indicated in our Schedule 13D filing, we may seek to influence or serve on the Board of Directors of the Company or designate nominees for election to the Board. In view of the fact that we are actively considering these actions in the foreseeable future, we strongly urge the Board to act in a fully informed and deliberate manner and not take any action that is inconsistent with the interests of the Company's stockholders.

In its Form 8-K filing and August 16th press release, the Company announced that it has “entered into a letter of intent to sell its Perry Ellis fragrance rights to Victory International (USA) LLC (“Victory”) for a total of up to $140 million: $120 million for the fragrance rights and up to $20 million for inventory”. In my view, this proposed transaction is contrary to the best interests of the Company and its stockholders for several reasons:

1. I have investigated the available information regarding Victory’s financial wherewithal to consummate a transaction of this nature and to perform its obligations thereunder. As described in the Company’s press release, this transaction would require Victory to pay $20 million at the outset and then make subsequent payments totaling $24 million per year (in $2 million monthly installments) for the next five years. Based on the financial information that Victory has made available to the industry through credit reporting agencies, its sales, profits and net worth do not appear to support such a payment obligation, even with the additional income generated from the sale of Perry Ellis fragrances. Moreover, there is no indication in the Company’s disclosures as to whether Victory has obtained the financing necessary to fund its obligations to the Company.

It is likely that this transaction would transfer a significant and valuable asset of the Company without adequate assurances that its value would be realized, potentially resulting in a tie-up of the Perry Ellis brand while the Company attempts to retrieve the brand from Victory in the event of a failure by Victory to perform its financial obligations to the Company. In this connection, since Victory does not appear to have the means to fund this obligation, it is likely that it will have to manufacture inordinately large quantities of the Perry Ellis line and sell these quantities into mass and discount markets, and possibly to other wholesalers domestically and internationally, in order to fund this obligation. Such overproduction and non-department and specialty store sales will erode the value of the brand and strain relationships with the licensor, thereby resulting in a much less valuable asset coming back to Parlux in the event that Victory fails to meet its payment obligations to Parlux.

2. It is highly unlikely that the licensor of the Perry Ellis trademark would give their consent to a transaction such as this, especially since the proposed sale is to a non-affiliate and it constitutes, in effect, the sale of the entire Perry Ellis fragrance brand. Moreover, even if consent were to be contemplated, it is likely the licensor would demand a significant price for it, which would reduce the economic value of this transaction to the Company.

3. The proposed transaction constitutes a sale of the Company’s principal asset, since sales of the Perry Ellis line over the past several fiscal years have ranged from 81% to 41% of the Company’s total sales. In view of the significant contribution to sales and profitability of the Perry Ellis asset, I believe that its sale might well require approval of the Company's stockholders under Delaware General Corporation Law Section 271, which requires that stockholders vote on and approve a sale of all or substantially all of a company's property and assets. In any event, in view of our stated intentions, as well as the views of other large stockholders with whom we have spoken, it is contrary to the best interests of the Company, and also contravenes principles of responsible management and good corporate governance, to proceed hastily with a transaction which could adversely impact stockholder value and expose the Company to a myriad of issues and problems.We have retained as special counsel the firm of Skadden, Arps, Slate, Meagher & Flom LLP to advise us in connection with our investment in the Company and our available options relating thereto. I again urge the Board to proceed prudently, deliberately and in accordance with law in considering the proposed transaction. If the Board or management take any action that is detrimental to the Company or inconsistent with the best of interests of stockholders, we intend to take all actions necessary to hold each director or executive officer accountable and personally liable.

In view of the urgency of this matter, we are available to meet with members of the Board immediately and would like to do so as soon as possible, wherever and whenever is most convenient for the members of the Board.

I look forward to hearing from you promptly.

Very truly yours,

Glenn H. Nussdorf