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Contingencies
3 Months Ended
Apr. 28, 2012
CONTINGENCIES [Abstract]  
Contingencies Disclosure [Text Block]
CONTINGENCIES
Following the announcement of the Company's merger agreement with Parlux on January 5, 2012, a putative class action complaint, captioned as Shirley Anderson v. Parlux Fragrances, Inc., et al., was filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida on behalf of a purported stockholder of Parlux. The case was transferred to the Complex Business Division No. 7 and assigned case number 12-000344-CA-07. The named defendants included Parlux, the individual members of the Parlux board of directors and the Company. The complaint alleged, among other things, that the members of the Parlux board breached their fiduciary duties in negotiating and approving the Merger Agreement, that the merger consideration negotiated in the merger agreement was inadequate, that certain of the defendants had improper conflicts of interest by reason of the existing relationships between Parlux and the Company, and that the terms of the Merger Agreement failed to provide the Parlux stockholders with certain procedural protections and imposed improper deal protection devices that would preclude competing offers. The complaint further alleged that Parlux and the Company aided and abetted the members of the Parlux board in their alleged breaches of fiduciary duties. The plaintiff sought a determination that the lawsuit was a proper class action and that the plaintiff was a proper class representative, orders enjoining the defendants and their agents from consummating the proposed transaction unless and until Parlux adopted and implemented a procedure to obtain a merger agreement that provided the best possible terms for the Parlux stockholders, rescinding any terms of the proposed transaction already implemented, and awarding damages, costs and attorneys' fees. On February 7, 2012, the Anderson plaintiff filed an Amended Complaint in which the claims and defendants remained the same, but, among other additions, plaintiff added allegations concerning the independent committee of the Parlux board of directors that she alleged raised questions as to that committee's impartiality.
On February 9, 2012, another class action complaint, captioned as Arthur Weill v. Esther Egozi Choukroun, et al., (Case Number 2012-CV-3508-07) was filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida on behalf of a purported stockholder of Parlux. The Weill action alleged the same claims and operative facts as the Anderson action and the Dias action (discussed below) and requested similar relief. On February 24, 2012, the Court consolidated the Anderson and Weill actions. On February 29, 2012, the Court also granted the defendants' motion to stay the consolidated actions in light of the Dias action in Delaware. On May 29, 2012, plaintiffs in the consolidated Anderson and Weill action filed a Notice of Voluntary Dismissal, dismissing the consolidated lawsuits with prejudice.
On January 31, 2012, an additional putative class complaint, captioned as Jose Dias v. Fredrick E. Purches, et al., (Case Number 7199 VCG) was filed in the Court of Chancery for the State of Delaware on behalf of a purported stockholder of Parlux. The Dias action alleges the same claims and operative facts as the Anderson action and requests similar relief. The Dias plaintiff, joined by the plaintiff in the Anderson action, filed a motion for a preliminary injunction seeking to enjoin the merger based on alleged breaches of fiduciary duty by the Parlux board in negotiating and approving the merger agreement, the alleged inadequacy of the merger consideration and Parlux's alleged failure to make material disclosures relating to the merger. On April 5, 2012, the Court granted the motion in part and denied it in part. The Court ordered Parlux and the Company to file with the SEC certain additional information about the process followed by the financial advisors to Parlux's board of directors, which both companies did on April 6, 2012. The Court did not enjoin the stockholder meeting scheduled for April 17, 2012, on the condition the additional information be filed, did not enjoin the consummation of the merger, and did not grant any relief other than that noted above. Discovery in the Dias litigation continues. On April 19, 2012, the defendants moved to dismiss this action. On May 1, 2012, the plaintiff filed notices of non-opposition to the defendants' motions to dismiss. Currently being briefed before the Court are the defendants' motions to dismiss, the Parlux defendants' motion for sanctions and attorneys' fees, and the plaintiff's motion for attorney's fees, in which the plaintiff is seeking an award of $500,000 in attorneys' fees.
On March 5, 2012, the plaintiff in the Anderson action in Florida, which has been stayed by order of the Florida Court, filed a new action in the Court of Chancery for the State of Delaware a captioned as Shirley Anderson v. Parlux Fragrances, Inc., et al. (Case Number 7305-VCP), alleging the same facts and claims as were in her Florida action. Plaintiff has not served this action on the Company. As noted above, however, the plaintiff in this action joined in the motion for a preliminary injunction filed in the Dias action described above and dismissed her action in Florida.
The Company is involved in various legal proceedings in the ordinary course of business. Management cannot presently predict the outcome of these or any of the above matters, although management believes, based in part on the advice of counsel, that the ultimate resolution of these matters will not have a materially adverse effect on the Company's consolidated financial position, results of operations or cash flows.