Perfumania Holdings/Parlux Fragrances

On December 23, 2011, Perfumania Holdings, Inc. (Nasdaq: PERF) and Parlux Fragrances, Inc. (Nasdaq: PARL) signed a definitive merger agreement under which Perfumania would acquire all of the outstanding shares of Parlux in a transaction valued at approximately $170 million, based on Perfumania's closing stock price of $19.55 per share on December 22, 2011.

Based on that Perfumania stock price and depending on the stockholder elections described below, the merger agreement values a share of Parlux stock at between $7.91 and $8.55, assuming no adjustments under the merger agreement other than such elections.

Parlux stockholders will be entitled to elect between mixed stock and cash consideration and principally stock consideration under the merger agreement. The actual value of the per-share merger consideration payable to a stockholder will vary based upon the market price of Perfumania's stock when the merger closes, as well as the stockholders' elections and adjustments provided for in the merger agreement.

The definitive agreement was reached after extensive negotiations between special committees of independent Board members of both companies, which retained independent financial advisors. Under the merger agreement, Parlux stockholders may elect to receive, for each share of Parlux common stock that they own, either (i) $4.00 in cash plus 0.20 shares of Perfumania common stock or (ii) .53333 shares of Perfumania common stock, both of which are subject to certain adjustments in the merger agreement. The maximum amount of cash that will be paid as merger consideration is $61,895,288, and the maximum number of Perfumania shares issuable in the merger is 5,919,052, which amounts are subject to adjustments in certain circumstances as provided in the merger agreement. If Parlux stockholders elect, in the aggregate, to receive more Perfumania shares than the maximum, those who elected to receive all shares will receive a proportionate amount of the maximum available Perfumania shares plus cash for the shares elected but not received.

Financing for the cash portion of the merger consideration and transaction-related expenses is expected to be provided by a combination of additional borrowing of up to $43 million under Perfumania's senior secured credit facility and, on a subordinated basis, of $30 million from family trusts of the Nussdorf family.

Under the terms of the merger agreement, Parlux may solicit acquisition proposals from third parties for 30 days from the date of the merger agreement and may at any time respond to unsolicited proposals that the Parlux Board of Directors determines are reasonably likely to result in a superior proposal. The merger agreement provides Perfumania a customary right to match any superior proposal.

Following the merger, the Nussdorf family, members of which are the beneficial owners of approximately 82% of Perfumania's outstanding shares and 11% of Parlux's outstanding shares, are expected to continue to own a majority of Perfumania's outstanding shares.

Wells Fargo Securities acted as financial advisor to Perfumania's management, while Financo Securities, LLC acted as financial advisor to the special committee of Perfumania's Board of Directors. Edwards Wildman Palmer LLP and Carlton Fields are legal counsel to Perfumania and its special committee, respectively. Financial advisor to the special committee of Parlux's Board of Directors was Peter J. Solomon Company, and American Appraisal Associates, Inc. rendered a fairness opinion to the special committee. Squire Sanders & Dempsey (US) LLP is legal counsel to Parlux's special committee.

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