The chief executive of Parlux Fragrances Inc., maker of Paris Hilton Perfume, has resigned as part of the company's settlement of a dispute with a major shareholder seeking to replace the company's board. The company's stock surged on the news.
Chief Executive Ilia Lekach will be replaced on an interim basis by Neil Katz, who was also appointed to the company's board. He had been nominated to the board by shareholder Glenn H. Nussdorf, who owns 12 percent of the company's stock.
Katz previously served as president and CEO of Gemini Cosmetics Inc.
Under the agreement, Nussdorf ended his campaign to replace the board, while Parlux dismissed with prejudice its lawsuit against Nussdorf, his nominees and certain Nussdorf-controlled companies.
Lekach will continue to serve as a consultant to the company and will assist with fragrance brand licenses and international distribution of Parlux products for four years. He has agreed not to compete with Parlux in the fragrance business for four years.
Lekach will receive $1.2 million in severance and an additional $1.2 million for consulting services and non-competition covenants.
The board will conduct a search for a permanent CEO.
The settlement agreement also calls for equal representation on the board by independent directors and Nussdorf's nominees. Independent director Jaya Kader Zebede and Chief Operating Officer and Chief Financial Officer Frank A. Buttacavoli will resign from the board as part of the settlement, but Buttacavoli will remain as CFO and COO. Along with Katz, two other Nussdorf nominees, Anthony D'Agostino and Robert Mitzman, will immediately join the board.
Nussdorf and his affiliates agreed not to make any bids to buy the company for two years, unless an offer is made to buy the business for no less than $11 per share.
Shares of Parlux gained 79 cents, or 12.6 percent, to $7.06 in afternoon trading on the Nasdaq Stock Market.