FIRST AMENDMENT AND RATIFICATION OF LOAN AND SECURITY AGREEMENT AND OTHER LOAN DOCUMENTS

EXHIBIT 4.1

FIRST AMENDMENT AND RATIFICATION OF

LOAN AND SECURITY AGREEMENT AND OTHER LOAN DOCUMENTS

This FIRST AMENDMENT AND RATIFICATION OF LOAN AND SECURITY AGREEMENT AND OTHER LOAN DOCUMENTS (this “Agreement”) is made and entered into on March 9, 2009, by and between PARLUX FRAGRANCES, INC., a Delaware corporation and PARLUX LTD., a New York corporation (individually and/or collectively, the “Borrower”), and REGIONS BANK, an Alabama banking corporation (the “Lender”).

RECITALS

A.

Borrower requested, and Lender agreed to make a loan (the “Loan”) to Borrower, as evidenced by that certain Revolving Promissory Note dated as of July 22, 2008, executed by Borrower and made payable to the order of Lender in the original principal amount of $20,000,000.00 (as the same may be amended, restated, modified or replaced from time to time, the “Note”). The Note is secured, in part, by (i) that certain Loan and Security Agreement dated as of July 22, 2008 (the “Loan and Security Agreement”) and (ii) all other documents and instruments securing the Note.  

B.

The Borrower has violated the “Fixed Charge Coverage” covenant set forth in Section 10.1 of the Loan and Security Agreement and the “Funded Debt to EBITDA” covenant set forth in Section 10.2 of the Loan and Security Agreement and has asked the Lender to waive said violations and to modify the Loan, as evidenced by this Agreement.

C.

The Loan and Security Agreement, as modified by this Agreement, is hereinafter referred to as the “Loan and Security Agreement”.  The Note, the Loan and Security Agreement, and all other documents executed in connection therewith are hereinafter referred to collectively as the “Loan Documents”.

D.

Lender is willing to modify the Loan and waive the covenant violations subject to Borrower giving Lender the representa­tions, assurances and other agreements hereinafter set forth.

NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and the covenants and agreements hereafter set forth, the adequacy and receipt of which are hereby acknowledged, the parties do hereby agree as follows:

AGREEMENT

1.

The Recitals hereinabove contained are true and correct and are made a part hereof.

2.

The outstanding principal balance of the Note, as of March 9, 2009, is $0.00.

3.

Section 1.1 of the Loan and Security Agreement is hereby amended by deleting the definition of “Applicable Margin” and substituting the following in lieu thereof:

“ Applicable Margin ” shall mean a rate per annum, to be implemented and computed quarterly upon the Bank’s receipt of the Borrower’s financial statements required herein, and based on the Fixed Charge Coverage Ratio (as calculated pursuant to Section 10.1 below), as follows:

4.

Section 1.1 of the Loan and Security Agreement is hereby amended by deleting the definition of “Borrowing Base Amount” and substituting the following in lieu thereof:

“ Borrowing Base Amount ” shall, for all times prior to December 31, 2009, mean the lesser of:

(I) the sum of:

(a)

an amount equal to seventy-five percent (75%) of the net amount (after deduction of such Reserves and allowances as the Bank deems reasonably proper and necessary) of all Eligible Accounts, plus

(b)

an amount equal to the lesser of (i) $10,000,000.00 or (ii) twenty-five percent (25%) of the lower of cost or market value (after deduction of such Reserves and allowances as the Bank deems reasonably proper and necessary) of all Eligible Inventory.

or

(II) the product of:

(x)

two, and

(y)

the sum of (i) EBITDA measured from January 1, 2009 to the date of measurement, minus non-cash expenses related to the issuance of options and warrants, minus (ii) other non-cash expenses.

Notwithstanding the foregoing, in no event shall the amount derived in subsection (b) above exceed (i) $2,500,000.00 of Eligible Inventory consisting of Raw Materials, and (ii) fifty percent (50%) of the then current outstanding balance of all Revolving Loans.  

For all times after December 31, 2009, “ Borrowing Base Amount ” shall mean:

(a)

an amount equal to seventy-five percent (75%) of the net amount (after deduction of such Reserves and allowances as the Bank deems reasonably proper and necessary) of all Eligible Accounts, plus

(b)

an amount equal to the lesser of (i) $10,000,000.00 or (ii) twenty-five percent (25%) of the lower of cost or market value (after deduction of such Reserves and allowances as the Bank deems reasonably proper and necessary) of all Eligible Inventory.

Notwithstanding the foregoing, in no event shall the amount derived in subsection (b) above exceed (i) $2,500,000.00 of Eligible Inventory consisting of Raw Materials, and (ii) fifty percent (50%) of the then current outstanding balance of all Revolving Loans.  

5.

Section 1.1 of the Loan and Security Agreement is hereby amended by deleting the definition of “Eligible Account” and “Eligible Accounts” and substituting the following in lieu thereof:  

“ Eligible Account ” and “ Eligible Accounts ” shall mean each Account and all such Accounts (exclusive of sales, excise or other similar taxes) owing to the Borrower or any Subsidiary which meets each of the following requirements:

(a)

it is genuine in all respects and has arisen in the ordinary course of the Borrower’s business from (i) the performance of services by the Borrower or the applicable Subsidiary, which services have been fully performed, acknowledged and accepted by the account debtor or (ii) the sale, license, assignment, or lease of Goods by the Borrower, including C.O.D. sales, which Goods have been completed in accordance with the account debtor’s specifications (if any) and delivered to and accepted by the account debtor, and the Borrower or the applicable Subsidiary has possession of, or has delivered to the Bank at the Bank’s request, shipping and delivery receipts evidencing such delivery;

(b)

it is subject to a perfected, first priority Lien in favor of the Bank and is not subject to any other assignment, claim or Lien;

(c)

it is the valid, legally enforceable and unconditional obligation of the account debtor with respect thereto, and is not subject to the fulfillment of any condition whatsoever or any counterclaim, credit (except as provided in subsection (h) of this definition), trade or volume discount, allowance, discount, rebate or adjustment by the account debtor with respect thereto provided that any Account shall only be ineligible to the extent of such discount, allowance, rebate as adjustment, or to any claim by such account debtor denying liability thereunder in whole or in part and the account debtor has not refused to accept and/or has not returned or offered to return any of the Goods or services which are the subject of such Account;

(d)

the account debtor with respect thereto is a resident or citizen of, and is located within, the United States, Canada or Puerto

Rico, unless the sale of goods or services giving rise to such Account is on letter of credit, banker’s acceptance or other credit support terms reasonably satisfactory to the Bank;

(e)

it is not an Account arising from a “sale on approval”, “sale or return”, “consignment”, “guaranteed sale” or “bill and hold”, or are subject to any other repurchase or return agreement;

(f)

it is not an Account with respect to which possession and/or control of the goods sold giving rise thereto is held, maintained or retained by the Borrower or any Subsidiary (or by any agent or custodian of the Borrower or any Subsidiary) for the account of, or subject to, further and/or future direction from the account debtor with respect thereto;

(g)

it has not arisen out of contracts with the United States or any department, agency or instrumentality thereof, unless the Borrower has assigned its right to payment of such Account to the Bank pursuant to the Assignment of Claims Act of 1940, and evidence (satisfactory to the Bank) of such assignment has been delivered to the Bank, or any state, county, city or other governmental body, or any department, agency or instrumentality thereof;

(h)

if the Borrower maintains a credit limit for an account debtor, the aggregate dollar amount of Accounts due from such account debtor, including such Account, does not exceed such credit limit;

(i)

if the Account is evidenced by chattel paper or an instrument, the originals of such chattel paper or instrument shall have been endorsed and/or assigned and delivered to the Bank or, in the case of electronic chattel paper, shall be in the control of the Bank, in each case in a manner satisfactory to the Bank;

(j)

such Account is evidenced by an invoice delivered to the related account debtor and is not more than (i) sixty (60) days past the due date thereof, or (ii) ninety (90) days past the original invoice date thereof, in each case according to the original terms of sale;

(k)

it is not an Account with respect to an account debtor that is located in any jurisdiction which has adopted a statute or other requirement with respect to which any Person that obtains business from within such jurisdiction must file a notice of business activities report or make any other required filings in a timely manner in order to enforce its claims in such jurisdiction’s courts unless (i) such notice of business activities report has been duly and timely filed or the Borrower or the applicable Subsidiary is exempt from filing such report and has provided the Bank with satisfactory evidence of such exemption or (ii) the failure to make such filings may be cured retroactively by the Borrower or the applicable Subsidiary for a nominal fee;

(l)

the account debtor with respect thereto is not the Borrower or an Affiliate of the Borrower;

(m)

such Account does not arise