Schedule 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Candie's, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date Filed:
CANDIE'S, INC.
400 Columbus Avenue
Valhalla, New York 10595-1335
July 7, 2003
Dear Fellow Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
which will be held on Wednesday, August 13, 2003, at 10:00 A.M., at the New York
City offices of the Company, 215 West 40th Street, New York, New York 10018.
The Notice of Annual Meeting and Proxy Statement, which follow, describe
the business to be conducted at the meeting.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the enclosed Notice of
Annual Meeting and Proxy Statement, please complete, sign, date and return your
proxy card in the envelope provided. If the address on the accompanying material
is incorrect, please advise our Transfer Agent, Continental Stock Transfer &
Trust Company, in writing, at 17 Battery Place, New York, New York 10004.
Your vote is very important, and we will appreciate a prompt return of your
signed proxy card. We hope to see you at the meeting.
Cordially,
Neil Cole
Chairman of the Board,
President and
Chief Executive Officer
CANDIE'S, INC.
400 Columbus Avenue
Valhalla, New York 10595-1335
--------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 13, 2003
--------------------------------------------------------------------------------
To the Stockholders of CANDIE'S, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Candie's,
Inc. (the "Company") will be held on Wednesday, August 13, 2003, at 10:00 A.M.
at the Company's New York City offices at 215 West 40th Street, New York, New
York 10018, for the following purposes:
1. To elect five directors to hold office until the next Annual Meeting
of Stockholders and until their respective successors have been duly
elected and qualified;
2. To ratify the appointment of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year ending January 31, 2004; and
3. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on June 16, 2003 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By Order of the Board of Directors,
Neil Cole
Chairman of the Board, President
and Chief Executive Officer
July 7, 2003
--------------------------------------------------------------------------------
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING:
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE
PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
PROXY STATEMENT
CANDIE'S, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 13, 2003
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of CANDIE'S, INC. (the "Company") for use at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held on August
13, 2003, including any adjournment or adjournments thereof, for the purposes
set forth in the accompanying Notice of Meeting.
Management intends to mail this proxy statement and the accompanying form
of proxy to stockholders on or about July 9, 2003.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Annual Meeting.
Any proxy given pursuant to such solicitation may be revoked by the stockholder
at any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the meeting and voting in person.
The address and telephone number of the principal executive offices of the
Company are:
400 Columbus Avenue
Valhalla, New York 10595-1335
Telephone No.: (914) 769-8600
OUTSTANDING STOCK AND VOTING RIGHTS
Only stockholders of record at the close of business on June 16, 2003 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were issued and outstanding 25,027,138 shares of the
Company's common stock, $.001 par value per share (the "Common Stock"), the
Company's only class of voting securities. Each share of Common Stock entitles
the holder to one vote on each matter submitted to a vote at the Annual Meeting.
VOTING PROCEDURES
The directors will be elected by the affirmative vote of the holders of a
plurality of the shares of Common Stock present in person or represented by
proxy at the Annual Meeting, provided a quorum is present. All other matters at
the Annual Meeting, including ratification of the appointment of BDO Seidman,
LLP as the Company's independent auditors for its fiscal year ending January 31,
2004, will be decided by the affirmative vote of the holders of a majority of
the shares of Common Stock present in person or represented by proxy at the
Annual Meeting and entitled to vote on the matter, provided a quorum is present.
A quorum is present if at least a majority of the shares of Common Stock
outstanding as of the Record Date are present in person or represented by proxy
at the Annual Meeting. Votes will be counted and certified by one or more
Inspectors of Election who are expected to be employees of the Company. In
accordance with Delaware law, abstentions and "broker non-votes" (i.e., proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other person entitled to vote shares
as to a matter with respect to which the brokers or nominees do not have
discretionary power to vote) will be treated as present for purposes of
determining the presence of a quorum. For purposes of determining approval of a
matter presented at the meeting, abstentions will be deemed present and entitled
to vote and will, therefore, have the same legal effect as a vote "against" a
matter presented at the meeting. Broker non-votes will be deemed not entitled to
vote on the subject matter as to which the non-vote is indicated and will,
therefore, have no legal effect on the vote on that particular matter.
Proxies will be voted in accordance with the instructions thereon. Unless
otherwise stated, all shares represented by a proxy will be voted as instructed.
Proxies may be revoked as noted above.
ELECTION OF DIRECTORS
At the Annual Meeting, five (5) directors will be elected to hold office
for a term expiring at the Annual Meeting of Stockholders to be held in 2004.
Each director will be elected to serve until a successor is elected and
qualified or until the director's earlier resignation or removal.
At the Annual Meeting, proxies granted by stockholders will be voted
individually for the election, as directors of the Company, of the persons
listed below, unless a proxy specifies that it is not to be voted in favor of a
nominee for director. In the event any of the nominees listed below is unable to
serve, it is intended that the proxy will be voted for such other nominees as
are designated by the Board of Directors. Each of the persons named below, who
are presently members of the Company's Board of Directors, has indicated to the
Board of Directors of the Company that he or she will be available to serve.
Name Age Position
---- --- --------
Neil Cole 46 Chairman of the Board,
President and Chief Executive Officer
Barry Emanuel 61 Director
Steven Mendelow 60 Director
Ann Iverson 59 Director
Hubert Guez 50 Director
2
Neil Cole has been Chairman of the Board, President and Chief Executive
Officer of the Company since February 23, 1993. Mr. Cole founded the Company in
1992. From February through April 1992, Mr. Cole served as a director and as
acting President of the Company. Mr. Cole also served as Chairman of the Board,
President, Treasurer and a director of New Retail Concepts, Inc. ("NRC"), from
its inception in 1986 until it was merged with and into the Company in August
1998. Mr. Cole is an attorney who graduated from Hofstra law school in 1982. In
April 2003, Mr. Cole, without admitting or denying the allegations of the
Securities and Exchange Commission ("SEC"), consented to the entry by the SEC of
an administrative order in which Mr. Cole was ordered to cease and desist from
violating or causing any violations or future violation of certain books and
records and periodic reporting provisions and the anti-fraud provisions of the
Securities Exchange Act of 1934. In addition, Mr. Cole also paid a $75,000 civil
monetary fine.
Barry Emanuel has been a director of the Company since May 1993. For more
than the past five years, Mr. Emanuel has served as President of Copen
Associates, Inc., a textile manufacturer located in New York, New York.
Steven Mendelow has been a director of the Company since December 1999 and
has been a principal with the accounting firm of Konigsberg Wolf & Co. and its
predecessor, which is located in New York, New York, since 1972. Mr. Mendelow
was a director of NRC from April 1, 1992 until NRC merged into the Company in
August 1998. Mr. Mendelow also serves as the head of the Audit Committee of
Urecoats Industries, Inc., a company listed on the American Stock Exchange.
Ann Iverson has been a director of the Company since March 2001. Since
1998, she has been the President and Chief Executive Officer of International
Link, Inc., a consulting company providing consulting services to corporations
in making strategic decisions. From June 1995 until forming International Link,
Ms. Iverson worked as the Group Chief Executive of Laura Ashley in the United
Kingdom. Prior to that she was the President and Chief Executive Officer of
KayBee Toy Stores and Chief Executive Officer of Mothercare UK, Ltd. based in
England. In addition to being a member of the Company's board, Ms. Iverson
currently sits on the board of directors of Owens Corning, Inc., a leader in the
building materials systems and composites systems industry, and serves as a
member of its Audit Committee. Ms. Iverson is also Chairman of the Board at
Brooks Sports, Inc., an athletic footwear company, Chairman of Portico Bed &
Bath, Inc., a home decorating and accessories company and a member of the Board
of Trustees of Thunderbird, The American Graduate School of International
Management. Ms. Iverson, who brings to the Board over 40 years of experience in
the fashion and retail industry, has been the recipient of numerous industry
awards, including the Ellis Island Medal of Honor and Retailer of the Year in
the United Kingdom.
Hubert Guez has been a director of the Company since April 2002, and has
been involved in the apparel industry for over 25 years. Mr. Guez is a managing
member of Sweet Sportswear, LLC, the current manager of the Company's
Subsidiary, Unzipped Apparel, LLC ("Unzipped") and the entity from which the
Company acquired the remaining 50% interest in Unzipped in April 2002. From
October 1998 through May 2002, Mr. Guez was the Vice-Chairman, CEO, and Manager
of Unzipped Apparel, LLC, the licensee for the Bongo brand apparel. From 1996 to
1998, Mr. Guez served as President of Commerce Clothing Company, LLC, the
3
licensee for CK Kids apparel. In September 1991, Mr. Guez founded Azteca
Production International, Inc., where he continues to serve as the Chief
Executive Officer and President. From 1985 through 1991, he was employed with FX
Systems, Inc. a software company that he founded specializing in operating
systems for the apparel industry. Between 1981 and 1985, Mr. Guez served as
President of Sasson Jeans LA, the licensee for Sasson women's jeans. Mr. Guez
was appointed by Sweet as a member of the Company's Board of Directors in
accordance with the provisions of the acquisition by the Company of the
remaining 50% interest in Unzipped from Sweet in April 2002.
All directors hold office until the next annual meeting of stockholders or
until their successors are elected and qualified.
In connection with the acquisition by the Company of the remaining 50%
interest in Unzipped from Sweet in April 2002, the Company agreed that, until
the later of (a) the expiration or termination of Sweet's management agreement
for the management of Unzipped, (b) the payment by the Company in full of the 8%
senior subordinated note in the principal amount of $11 million it issued in
favor of Sweet in connection with the acquisition, or (c) the date on which
Sweet or its permitted transferees cease to own all of the 3 million shares of
the Company's Common Stock issued to Sweet in connection with the acquisition,
the Company will recommend and include Hubert Guez on the slate of nominees for
members of the Board of Directors in connection with the annual meeting of
stockholders for election of directors. The agreement further provides that in
the event that the Company objects to the continuation of Mr. Guez as a director
during such period, Sweet has the right to designate a replacement nominee for
director acceptable to the Company.
Board Of Directors and Committee Meetings
During the fiscal year ended January 31, 2003 ("Fiscal 2003"), the Board of
Directors held 12 meetings. In addition, the Board took action by unanimous
written consent in lieu of meetings.
The Company has a nominating/governance committee of the Board of Directors
consisting of Ann Iverson, Steve Mendelow and Barry Emanuel. The
nominating/governance committee, among other things, assists the Board in
identifying individuals qualified to become Board members and develops and
recommends to the Board a set of corporate governance guidelines applicable to
the Company. The nominating/corporate governance committee, which was formed on
January 14, 2003, held no meetings in Fiscal 2003.
The Company has an audit committee of the Board of Directors ("Audit
Committee") consisting of Messrs. Emanuel and Mendelow and Ms. Iverson. Each
member of the Audit Committee is an "independent director" under the rules of
the National Association of Securities Dealers, Inc. The Audit Committee, among
other things, selects the firm to be appointed, subject to stockholder
ratification, as independent accountants to audit the Company's financial
statements, reviews significant accounting and reporting issues and
4
developments, reviews and discusses the scope and results of each audit with the
independent accountants, reviews with management and the independent accountants
the Company's interim and year-end operating results and considers the adequacy
of the internal accounting controls and audit procedures of the Company. The
Audit Committee may also conduct inquiries into the Company's operations,
including, without limitation, inquiries to ensure compliance with applicable
laws, securities rules and regulations and accounting standards. The Audit
Committee held seven meetings during Fiscal 2003. The Audit Committee has
adopted a written charter which is attached hereto as Appendix A.
As discussed below, the Company has a compensation committee of the Board
of Directors ("Compensation Committee") which held seven meetings during Fiscal
2003.
Compensation Committee Interlocks and Insider Participation
The Board has a Compensation Committee, consisting of Ms. Iverson and
Messrs. Mendelow and Emanuel. Prior to forming the Compensation Committee,
decisions as to executive compensation were made by the Company's Board of
Directors, primarily upon the recommendation of Mr. Cole. During Fiscal 2003,
Mr. Cole, the Company's Chief Executive Officer, in his capacity as a director,
also engaged in the deliberations of the Compensation Committee regarding the
determination of executive officer compensation. During Fiscal 2003, none of the
executive officers of the Company served on the board of directors or the
compensation committee of any other entity, any of whose officers serves on the
Company's Board of Directors or Compensation Committee.
Compliance with Section 16(a) of Securities Exchange Act of 1934
Section 16(a) of Securities Exchange Act of 1934 requires the Company
officers and directors, and persons who beneficially own more than 10 percent of
a registered class of the Company equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and greater
than 10 percent owners are required by certain SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms received
by it, the Company believes that during Fiscal 2003 there was compliance with
the filing requirements applicable to its officers, directors and 10%
stockholders except for Hubert Guez, who filed a late Form 4 to report a grant
to him by the Company of 3,185 shares of Common Stock.
5
EXECUTIVE OFFICERS
The executive officers of the Company (Mr. Cole, Mr. Danderline and Ms.
Sorell Stehr) their positions with the Company and certain other information, as
of the Record Date, are set forth below:
Name Age Position
---- --- --------
Neil Cole 46 Chairman of the Board,
President and Chief Executive Officer
Richard Danderline 49 Executive Vice President - Finance and Operations
Deborah Sorell Stehr 40 Senior Vice President,
Secretary and General Counsel
Richard Danderline joined the Company as Executive Vice President - Finance
and Operations in June 2000. For the 13 years prior to joining the Company, he
served as Vice President, Treasurer and Chief Financial Officer of AeroGroup
International, Inc ("AeroGroup"), a privately held footwear company. Prior to
joining AeroGroup, he served as Vice President and Chief Financial Officer of
Kenneth Cole Productions, Inc., where he was part of a management-led buyout of
its What's What division, which later became AeroGroup. Mr. Danderline's
experience also includes serving as Vice President and Controller of Energy
Asserts International, Inc. and as Vice President and Controller of XOIL Energy
Resources, Inc. Mr. Danderline is a certified public accountant who began his
career with Touche Ross & Co., the predecessor of Deloitte & Touche LLP.
Deborah Sorell Stehr joined the Company in December 1998 as Vice President
and General Counsel, and was promoted to Senior Vice President in November 1999.
She has served as Secretary of the Company since June 1999. From September 1996
to December 1998, Ms. Sorell Stehr was Associate General Counsel with Nine West
Group Inc. ("Nine West"), a women's' footwear corporation with sales
approximating $2.0 billion, where Ms. Sorell Stehr was primarily responsible for
overseeing legal affairs relating to domestic and international contracts,
intellectual property, licensing, general corporate matters, litigation and
claims. Prior to joining Nine West, Ms. Sorell Stehr practiced law for nine
years at private law firms in New York City and Chicago in the areas of
corporate law and commercial litigation.
All officers serve at the discretion of the Company's Board of Directors.
6
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or accrued by the
Company for Fiscal 2003, 2002 and 2001, to or for the Chief Executive Officer
and for the other persons that served as executive officers of the Company
during Fiscal 2003 whose salaries for Fiscal 2003 exceeded $100,000 and for John
J. McPhee who was a key employee until April 4, 2003, but not an executive
officer of the Company (collectively, the "Named Persons"):
Summary Compensation Table
-------------------------------------------------------------------------------
Long-Term
Compensation
Annual Compensation Awards
----------------------------- --------------
Other Securities
Fiscal Annual Com- Underlying All Other
Name & Principal Positions Year Salary Bonus(1) pensation (2) Options Compensations
--------------------------------------------------------------------------------------------------------------------------
Neil Cole 2003 $ 487,500 $ - $ - 615,000 $ 31,503(5)
Chairman, President & 2002 500,000 - - 350,000 -
Chief Executive Officer 2001 500,000 - 10,000 617,250 -
Deborah Sorell Stehr 2003 215,625 - - - -
Senior Vice President & 2002 180,000 25,000 - 40,000 -
General Counsel 2001 166,667 25,000 - 80,000 -
Richard Danderline 2003 219,375 50,000 - - -
Executive Vice President - 2002 214,968 50,000 - - -
Finance & Operations 2001 120,513 (3) 25,000 - 160,000 -
John McPhee 2003 316,875 - - - -
President of Wholesale 2002 275,000 - - 140,000 -
Sales(4) 2001 228,642 25,000 - 110,000 -
(1) Represents bonuses accrued under employment agreements.
(2) Represents amounts earned as director's fees. Except as set forth in
the table, the table does not reflect certain perquisites granted to
the Named Persons that as to each such person in any year do not
exceed the lesser of 10% of their respective salaries or $50,000.
(3) For the period from June 26, 2000 through January 31, 2001.
(4) Mr. McPhee resigned as the President of Wholesales Sales and became a
part-time employee of the Company on April 4, 2003.
(5) Represents Company paid premiums on a life insurance for the benefit
of the beneficiaries of Mr. Cole.
Option Grants in Fiscal 2003 Year
The following table provides information with respect to individual
stock options granted during Fiscal 2003 to each of the Named Persons who
received options during Fiscal 2003:
7
Shares % of Total Potential Realizable Value
Underlying Options Granted at Assumed Annual Rates
Options to Employees Exercise Expiration of Stock Price Appreciation
Name Granted (#)(1) in Fiscal Year Price($/share) Date for Option Term (2)
-----------------------------------------------------------------------------------------------------------------------------------
5% ($) 10% ($)
---------------- --------------
Neil Cole 600,000 57.6% 2.750 04/23/12 1,037,676 2,629,675
15,000 1.4 4.410 05/22/12 41,601 105,426
Deborah Sorell Stehr - - - - - -
Richard Danderline - - - - - -
John McPhee - - - - - -
(1) Mr. Cole's 600,000 options vest as to one-third on each of February 1,
2003, 2004 and 2005, and 15,000 options vested fully at May 22, 2002.
(2) The potential realizable value columns of the table illustrate values
that might be realized upon exercise of the options immediately prior
to their expiration, assuming the Company's Common Stock appreciates
at the compounded rates specified over the term of the options. These
amounts do not take into account provisions of options providing for
termination of the option following termination of employment or
non-transferability of the options and do not make any provision for
taxes associated with exercise. Because actual gains will depend upon,
among other things, future performance of the Common Stock, there can
be no assurance that the amounts reflected in this table will be
achieved.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information as of January 31, 2003, with
respect to exercised and unexercised stock options held by the Named Persons.
Ms. Sorell Stehr and Mr. McPhee exercised 10,000 and 45,000 options,
respectively, during Fiscal 2003. No options were exercised by any other Named
Persons during Fiscal 2003. 10,000 and 400,000 options owned by Neil Cole
expired on June 30, 2002 and January 31, 2003, respectively.
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Shares Options at January 31, 2003(#) Options at January 31, 2003($)(1)
Acquired on Value ------------------------------ ---------------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---------------------- -------------- ----------- ------------- --------------- ------------- ------------------
Neil Cole - - 2,695,875 600,000 3,280 -
Deborah Sorell Stehr 10,000 31,625 176,666 13,334 7,000 -
Richard Danderline - - 85,000 75,000 4,125 -
John McPhee 45,000 153,013 241,666 13,334 3,750 -
---------------------------------------------------------------------------------------------------------------------
(1) An option is "in-the-money" if the year-end closing market price per
share of the Company's Common Stock exceeds the exercise price of such
options. The closing market price on January 31, 2003 was $1.10.
8
Employment Contracts and Termination and Change-in-Control Arrangements
The Company has entered into an employment agreement with Neil Cole to
serve as President and Chief Executive Officer for a term expiring on December
31, 2005, at an annual base salary of $500,000. In November 2002 Mr. Cole agreed
to a reduction in his annual base salary to $450,000 which reduction was in
effect until June 1, 2003. Under the employment agreement, if the Company meets
at least 66 2/3% of its net income target (as determined by the Board) for a
fiscal year, the Company will pay to Mr. Cole a bonus in an amount equal to his
base salary multiplied by a fraction, the numerator of which is the actual net
income for such fiscal year and the denominator of which is the target net
income for such fiscal year. Mr. Cole is also entitled to customary benefits,
including participation in management incentive and benefit plans, reimbursement
for automobile expenses, reasonable travel and entertainment expenses and a life
insurance policy to benefit Mr. Cole's designated beneficiaries in the amount of
$3,000,000, $4,000,000, and $5,000,000, respectively, for each year in the term.
The employment agreement provides that Mr. Cole will receive an amount equal to
three times his annual compensation, plus accelerated vesting or payment of
deferred compensation, options, stock appreciation rights or any other benefits
payable to Mr. Cole in the event that within twelve months of a "Change in
Control", as defined in the agreement, Mr. Cole is terminated by the Company
without "Cause" or if Mr. Cole terminates his agreement for "Good Reason", as
such terms are defined in his employment agreement. If the Company is sold, Mr.
Cole will receive a payment equal to 5% of the sale price in the event that sale
price is at least $5 per share or equivalent with respect to an asset sale. In
connection with his employment agreement, Mr. Cole was granted under one of the
Company's stock option plans, options to purchase 600,000 shares of Common Stock
at $2.75 per share, which options vest over a three year period.
The Company has entered into an employment agreement with Deborah Sorell
Stehr that expires on January 31, 2004 and provides for her to receive a base
salary of $225,000 for the first year and $235,000 for the last year of the
agreement. In November 2002 Ms. Sorell Stehr agreed to a reduction in her base
salary to $202,500 which was raised to $212,500 on January 31, 2003. These
reductions were in effect until June 1, 2003. Ms. Sorell Stehr is also eligible
for a bonus pursuant to the Company's executive bonus program and to customary
benefits, including participation in management incentive and benefit plans,
reimbursement for automobile expenses, reasonable travel and entertainment
expenses and a life insurance policy. The agreement provides that Ms. Sorell
Stehr will receive an amount equal to $100 less than three times her annual
compensation, plus accelerated vesting or payment of deferred compensation,
options, stock appreciation rights or any other benefits payable to Ms. Sorell
Stehr in the event that within twelve months of a "Change in Control", Ms.
Sorell Stehr is terminated by the Company without "Cause" or Ms. Sorell Stehr
terminates her agreement for "Good Reason", as such terms are defined in her
employment agreement.
The Company has entered into a two year employment agreement with Richard
Danderline, which expires on June 26, 2004. Under the agreement, Mr. Danderline
was to receive an annual base salary of $225,000, which was reduced to $202,500
in November 2002 and which reduction was in effect until June 1, 2003. Mr.
Danderline is entitled to receive a bonus under the Company's executive bonus
plan. In connection with his employment in 2000, Mr. Danderline received a grant
of 150,000 options, vesting over a period of five years. Mr. Danderline is also
entitled to customary benefits, including participation in management incentive
and benefit plans, reimbursement for automobile expenses, reasonable travel and
entertainment expenses and a life insurance policy. In the event of a "change in
control", defined as the cessation of Neil Cole being the Chairman of the Board,
or a sale or merger of the Company with a non-affiliate, Mr. Danderline `s
options vest immediately.
9
Compensation of Directors
During Fiscal 2003, Messrs. Emanuel and Mendelow and Ms. Iverson (each an
"Outside Director") each received a grant of Common Stock from the Company under
the Company's Non-Employee Director Stock Incentive Plan having a value of
$20,000 in compensation for attending board meetings. Each Outside Director also
received $500 for each Committee meeting that he or she attended. During Fiscal
2004, each Outside Director is entitled to an additional grant of Common Stock
under the Company's Non-Employee Director Stock Inventive Plan having a value of
$20,000 plus $1,000 for each committee meeting. In addition the chair of each of
the Company's Audit, Compensation and Governance Committees received a fee of
$5,000 per year.
Under the Company's 2002 Stock Option Plan (the "2002 Plan"), 2001 Stock
Option Plan ("2001 Plan"), 2000 Stock Option Plan (the "2000 Plan") and 1997
Stock Option Plan (the "1997 Plan"), non-employee directors are eligible to be
granted non-qualified stock options.
The Company's Board of Directors, or the Stock Option Committee of the 2002
Plan, 2001 Plan, 2000 Plan or the 1997 Plan, if one is appointed, has discretion
to determine the number of shares subject to each non-qualified option (subject
to the number of shares available for grant under the 2002 Plan, 2001 Plan, 2000
Plan or the 1997 Plan, as applicable), the exercise price thereof (provided such
price is not less than the par value of the underlying shares of the Company's
Common Stock under the 2000 Plan or not less than the fair value of Common Stock
under the 1997 Plan, 2001 Plan and 2002 Plan), the term thereof (but not in
excess of 10 years from the date of grant, subject to earlier termination in
certain circumstances), and the manner in which the option becomes exercisable
(amounts, intervals and other conditions). No non-qualified options were granted
to non-employee directors under the 2002 Plan, 2001 Plan, 2000 Plan or the 1997
Plan during Fiscal 2003.
Report on Executive Compensation
Compensation of the Company's executive officers is determined by the Board
of Directors pursuant to recommendations made by the Compensation Committee and
in accordance with the terms of the respective employment agreements of certain
executive officers in effect prior to the formation of the Compensation
Committee. There is no formal compensation policy for the Company's executive
officers, other than the employment agreements described above. Compensation for
executive officers consists of base salary, bonus and stock option awards.
Base Salary. The base salary of the Company's executives are fixed pursuant
to the terms of their respective employment agreements with the Company and,
when a contract is up for review, upon a comprehensive review of salaries for
executives in the market place for comparable positions and abilities,
experience and, where applicable, performance of the executive. The Compensation
Committee reviews the salaries of executive officers for reasonableness based on
10
job responsibilities and a review of compensation practices for comparable
positions at corporations which compete with the Company in its business or are
of comparable size and scope of operations. The Committee's recommendations to
the Board of Directors are based primarily on informal judgments reasonably
believed to be in the best interests of the Company. In determining the base
salaries of certain of the Company's executives whose employment agreements were
up for renewal, the Committee considered the Company's performance and growth
plans.
Bonuses. Under the Company's executive bonus plan, the Committee determines
bonuses based on the Company's overall performance, profitability, working
capital management and other qualitative and quantitative measurements,
including individual performance goals based upon the Company's budget and
financial objectives. In determining the amount of bonuses awarded, the
Committee considers the Company's revenues and profitability for the applicable
period and each executive's contribution to the success of the Company. The
Company's executive officers received bonuses which were deemed appropriate
based upon existing employment agreements and the Company's operating results
during the fiscal year.
Stock Options. Stock option awards are intended to attract, retain and
motivate personnel by affording them an opportunity to receive additional
compensation based upon the performance of the Company's Common Stock. The size
and grant of actual awards is determined by the Committee on an individual
basis, taking into account the individual's role in the Company and standard
principals of reward, retention and recognition to which option grants are
geared. The Committee's determination as to the size of actual awards to
individual executives is subjective, after taking into account the relative
responsibilities and contributions of the individual employee.
The Compensation Committee:
Ann Iverson
Barry Emanuel
Steven Mendelow
11
Stock Performance Graph
The following line graph compares from February 1, 1998 to January 31, 2003
the cumulative total stockholder return on the Company's Common stock with the
cumulative total return on stocks of companies comprising the NASDAQ Market
Index and a peer group assuming $100 was invested on February 1, 1998 in the
Company's Common Stock and in each of the foregoing indices and assumes
reinvestment of all dividends, if any, paid on such securities. The Company has
not paid any cash dividends and, therefore, the cumulative total return
calculation for the Company is based solely upon stock price appreciation and
not upon reinvestment of cash dividends. The peer group consists of Brown Shoe
Co. Inc., the Company, K-Swiss Inc., Kenneth Cole Productions, Inc., Maxwell
Shoe Co., Phoenix Footwear Group, Inc., R.G. Barry Corp., Steven Madden Ltd.,
Stride Rite Corp., Timberland Co., Wellco Enterprises Inc., Weyco Group Inc. and
Wolverine World Wide Inc., which is based upon companies classified under the
Footwear, Except Rubber, Standard Industrial Classification number. Historical
stock price is not necessarily indicative of future stock price performance.
[STOCK PERFORMANCE GRAPH APPEARS HERE]
-------------------------------FISCAL YEAR ENDING----------------------------------
1/31/1998 1/31/1999 1/31/2000 1/31/2001 1/31/2002 1/31/2003
Candie's, Inc. $100.00 $ 69.62 $ 20.25 $ 22.16 $ 41.72 $ 22.46
SIC Code Index $100.00 $ 74.72 $ 72.78 $153.32 $124.48 $127.24
NASDAQ Market Index $100.00 $156.07 $233.47 $167.16 $117.76 $ 81.29
------------------------------------------------------------------------------------------------------------------------
12
VOTING SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date,
based on information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding shares of
Common Stock; (ii) each of the Named Persons; (iii) each of the Company's
directors; and (iv) all executive officers and directors as a group:
Amount and
Nature of Percentage of
Name and Address of Beneficial Beneficial
Beneficial Owner (1) Ownership (2) Ownership
-------------------------------------------------- ----------------------------------------- --------------------------
Neil Cole 3,478,000(3) 12.5%
Michael Caruso 1,886,597(4) 7.9%
Claudio Trust dated February 2, 1990
2925 Mountain Maple Lane
Jackson, WY 83001
Barry Emanuel 142,538(5) *
Steven Mendelow 188,538(6) *
Deborah Sorell Stehr 176,666(7) *
Richard Danderline 85,000(8) *
John McPhee 259,216(9) 1.0%
Ann Iverson 147,538(10) *
Sweet Sportswear, LLC 3,151,757(11) 12.6%
Hubert Guez
All executive officers and directors as a 7,370,037 (3) (5) (6) (7) 25.8%
group (seven persons) (8) (10) (11)
-------------------------------------------------- ----------------------------------------- --------------------------
* Less than 1%
(1) Unless otherwise indicated, each beneficial owner has an address at 400
Columbus Avenue, Valhalla, New York 10595-1335.
(2) A person is deemed to have beneficial ownership of securities that can be
acquired by such person within 60 days of the Record Date, upon exercise of
warrants or options. Consequently, each beneficial owner's percentage
ownership is determined by assuming that warrants or options held by such
person (but not those held by any other person) and which are exercisable
within 60 days from the Record Date have been exercised. Unless otherwise
noted, the Company believes that all persons referred to in the table have
sole voting and investment power with respect to all shares of Common Stock
reflected as beneficially owned by them.
(3) Includes 2,895,875 shares of Common Stock issuable upon exercise of
options, 100,000 shares of Common Stock owned by Mr. Neil Cole, and 20,000
shares of Common Stock owned by Mr. Cole's children. Also includes 462,925
shares of Common Stock owned by Mr. Cole's former wife over which Mr. Cole
has certain voting rights but no rights to dispose of or pecuniary
interest. Does not include 400,000 shares of Common Stock underlying
non-exercisable options and 15,194 shares held in Mr. Cole's account under
the Company's 401(k) savings plan for which Mr. Cole has no current voting
or dispositive powers. Does not give effect to voting rights that may be
held by Mr. Cole pursuant to the proxy described in greater detail in
footnote (11) below.
(4) Represents 1,886,597 shares held by Claudio Trust dated February 2, 1990,
of which Mr. Caruso is the trustee.
(5) Includes 110,000 shares of Common Stock issuable upon exercise of options.
13
(6) Includes 95,250 shares of Common Stock issuable upon exercise of options,
and 60,750 shares of Common Stock owned by C&P Associates, of which Mr.
Mendelow and his wife are affiliated.
(7) Represents shares of Common Stock issuable upon exercise of options. Does
not include 9,985 shares held in Ms. Sorell Stehr's account under the
Company's 401(k) savings plan for which Ms. Sorell Stehr has no current
voting or dispositive powers.
(8) Represents shares of Common Stock issuable upon exercise of options. Does
not include 1,889 shares held in Mr. Danderline's account under the
Company's 401(k) savings plan for which Mr. Danderline has no current
voting or dispositive powers.
(9) Includes 241,666 shares of Common Stock issuable upon exercise of options.
Does not include 12,906 shares held in Mr. McPhee's account under the
Company's 401(k) savings plan for which Mr. McPhee has no current voting or
dispositive powers. On April 4, 2003, Mr. McPhee resigned as the President
of Wholesales Sales and became a part-time employee of the Company.
(10) Includes 125,000 shares of Common Stock issuable upon exercise of options.
(11) Represents 3,000,000 shares of Common Stock held by Sweet Sportswear, LLC,
and 151,757 shares of Common Stock owned by Mr. Guez. Mr. Guez, an
appointed member of the Company's Board of Directors, is a managing member
of Sweet Sportswear, LLC. Sweet has granted an irrevocable proxy with
respect to all 3 million shares in favor of Messrs. Cole, Guez and/or such
other members of the Company's Board designated from time to time by a
majority of the Board, to vote at any meeting of the Company's stockholders
or provide consent in lieu of a meeting, as the case may be, but only in
favor of a matter approved by the Board or otherwise at the direction of
the Board. The proxy expires on April 23, 2012 provided, however, that the
proxy will expire earlier with respect to any shares up to an aggregate of
2 million shares subject to the proxy, to the extent such shares are
transferred by Sweet after April 23, 2003 to persons other than (i) an
officer or member of Sweet, (ii) any affiliate of Sweet or its officer or
member or (iii) any family member of such persons (collectively referred to
as "Restricted Transferee"). Moreover, the proxy will expire with respect
to any of the other 1 million shares subject to the proxy, to the extent
that such shares are transferred by Sweet after April 23, 2004 to a
transferee that is not a Restricted Transferee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 1, 2003, the Company granted Kenneth Cole Productions, Inc. the
exclusive worldwide license to design, manufacture, sell, distribute and market
footwear under the BONGO brand. The CEO and Chairman of Kenneth Cole
Productions, Inc. is Kenneth Cole, who is the brother of Neil Cole, the CEO and
President of the Company.
During Fiscal 2002, Neil Cole, Chairman of the Board, President and CEO of
Candie's, Inc. founded the Candie's Foundation ("the Foundation"), a charitable
foundation whose purpose is to raise national awareness concerning to the
problems of teenage pregnancy. During Fiscal 2002, the Company advanced
$1,058,000 to the Foundation on which interest was charged at a rate per annum
that was equal to the prime rate, and at January 31, 2002 the Company had a
balance of $699,000 due from the Foundation. The Company had originally recorded
$350,000 reserve against its receivable in Fiscal 2002. During Fiscal 2003, the
Foundation paid the Company $470,000, and the Company reversed the reserve of
$350,000 recorded in Fiscal 2002. At January 31, 2003, the Company had a balance
of $230,000 due from the Foundation. The Company believes that the amount due
will be recovered in full although the Foundation's operating history in fund
raising activities is limited.
The Company has a license for Bongo branded bags and small leather/PVC
goods with Innovo Group, Inc. ("Innovo"), a company in which Hubert Guez, a
director of the Company and principal of Sweet, Manager of Unzipped, is a
principal shareholder. Under this license, which expires March 31, 2007, the
Company recorded $214,000 and $58,000 in royalty income for the years ended
January 31, 2003 and 2002, respectively, and royalties receivable from Innovo
were $179,000 and $49,000 at January 31, 2003 and 2002, respectively.
14
Unzipped has a supply agreement with Azteca for the development,
manufacturing, and supply of certain products bearing the Bongo trademark for
the exclusive use by Unzipped. Hubert Guez is the Chief Executive Officer and
President of Azteca. As consideration for the development of the products,
Unzipped pays Azteca pursuant to a separate pricing schedule. For the year ended
January 31, 2003, Unzipped purchased $49.9 million of products from Azteca.
Azteca also allocates expenses to Unzipped for Unzipped's use of a portion of
Azteca's office space, design and production team and support personnel. For the
year ended January 31, 2003, Unzipped incurred $440,000 of such allocated
expenses.
In connection with the Company's acquisition of the remaining 50% interest
in Unzipped from Sweet, the Company has entered into a management agreement with
Sweet for a term ending January 31, 2005, which provides for Sweet to manage the
operations of Unzipped in return for a management fee based upon certain
specified percentages of net income that Unzipped achieves during the three-year
term. The fee does not commence until Fiscal 2004. Hubert Guez is a managing
member of Sweet.
Unzipped has a distribution agreement with Apparel Distribution Services
("ADS"), an entity that shares common ownership with Sweet, for a term ending
January 31, 2005. The agreement provides for a per unit fee for warehousing and
distribution functions and per unit fee for processing and invoicing orders. For
the year ended January 31, 2003, Unzipped incurred $2.6 million for such
services. The agreement also provides for reimbursement for certain operating
costs incurred by ADS and charges by ADS for special handling fees at hourly
rates approved by management.
Unzipped occupies office space in a building rented by ADS and Commerce
Clothing Company, LLC, a related party to Azteca.
At January 31, 2003, the total amounts due from the Company to Azteca and
ADS were $5.8 million and $335,000 respectively.
15
AUDIT COMMITTEE REPORT
In January 2003, the Audit Committee met with management and
representatives of BDO Seidman, LLP to review and discuss the audit and the
procedures and timing of the audit. In April 2003, the Audit Committee met with
management and representatives of BDO Seidman, LLP to review and discuss the
audited financial statements. The Audit Committee also conducted discussions
with the Company's independent auditors, BDO Seidman, LLP, regarding the matters
required by the Statement on Auditing Standards No. 61. As required by
Independence Standards Board Standard No. 1, "Independence Discussion with Audit
Committees," the Audit Committee has discussed with and received the required
written disclosures and confirming letter from BDO Seidman, LLP regarding its
independence and has discussed with BDO Seidman, LLP its independence. Based
upon the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended January
31, 2003.
The Audit Committee -
Barry Emanuel, Ann Iverson, Steven Mendelow
PROPOSAL I
RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT AUDITORS
BDO Seidman, LLP has audited and reported upon the financial statements of
the Company for Fiscal 2003. The Audit Committee of the Board of Directors has
re-appointed BDO Seidman, LLP as the Company's independent accountants for the
Company's fiscal year ending January 31, 2004. Although stockholder approval of
the appointment of BDO Seidman, LLP is not required by law, the Audit Committee
and the Board of Directors believe that it is advisable to give stockholders an
opportunity to ratify this appointment. Furthermore, although the appointment of
BDO Seidman, LLP is being submitted for stockholder ratification, the Audit
Committee reserves the right, even after ratification by stockholders, to change
the appointment of BDO Seidman, LLP as auditors, at any time during the 2004
fiscal year, if it deems such change to be in the best interests of the Company.
A representative of BDO Seidman, LLP is expected to be present at the Annual
Meeting with the opportunity to make a statement if he or she desires to do so
and is expected to be available to respond to appropriate questions.
In addition to retaining BDO Seidman, LLP to audit the Company's financial
statements, the Company engages BDO Seidman, LLP from time to time to perform
other services. The following sets forth the aggregate fees billed by BDO
Seidman, LLP to the Company in connection with services rendered during Fiscal
2002 and Fiscal 2003.
Fee Type Fiscal 2002 Fiscal 2003
-------- ----------- -----------
Audit Fees $234,000 $344,500
Audit Related Fees (1) 10,000 121,000
Tax Fees (2) 336,000 290,200
All other fees - -
----------- -----------
$580,000 $755,700
=========== ===========
(1) Includes fees in 2003 of $79,000 relating to the acquisition of Unzipped
and $24,000 relating to an SEC investigation.
(2) Includes fees relating to the preparation of corporate tax returns, state
tax matters and advisory services.
16
The Audit Committee has considered whether the provision of services
covered in the preceding two paragraphs is compatible with maintaining BDO
Seidman, LLP's independence.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF BDO SEIDMAN, LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING JANUARY 31, 2004.
STOCKHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
Stockholders who wish to present proposals appropriate for consideration at
the Company's annual meeting of stockholders to be held in the year 2004 must
submit the proposal in proper form to the Company at its address set forth on
the first page of this proxy statement and in accordance with applicable
regulations of the SEC not later than March 9, 2004 in order for the proposition
to be considered for inclusion in the Company's proxy statement and form of
proxy relating to such annual meeting. Any such proposals, as well as any
questions related thereto, should be directed to the Secretary of the Company.
After the March 9, 2004 deadline, a stockholder may present a proposal at
the Company's annual meeting to be held in 2004 if it is submitted to the
Company's Secretary at the address set forth above no later than May 25, 2004.
If timely submitted, in proper form, the stockholder may present the proposal at
the 2004 annual meeting, but the Company is not obligated to include the matter
in its proxy statement.
OTHER INFORMATION
Proxies for the Annual Meeting will be solicited by mail and through
brokerage institutions and all expenses involved, including printing and
postage, will be paid by the Company.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED JANUARY 31,
2003 ON FORM 10-K IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS
OF THE CLOSE OF BUSINESS ON JUNE 16, 2003. ADDITIONAL COPIES OF SUCH ANNUAL
REPORT WILL BE PROVIDED FOR A NOMINAL CHARGE UPON WRITTEN REQUEST TO:
CANDIE'S, INC.
400 COLUMBUS AVENUE
VALHALLA, NEW YORK 10595-1335
ATTENTION: DEBORAH SORELL STEHR
17
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board of Directors,
Neil Cole,
Chairman of the Board,
President and Chief Executive Officer
July 7, 2003
18
APPENDIX A
AUDIT COMMITTEE CHARTER
This Audit Committee Charter has been approved by the Board of Directors (the
"Board") of Candie's, Inc. (the "Company").
Composition
The Audit Committee shall have at least three (3) members, comprised solely of
independent directors, as such term is defined under the applicable rules of the
National Association of Securities Dealers ("NASD") relating to the listing of
securities on the Nasdaq Stock Market and under applicable rules of the U.S.
Securities and Exchange Commission ("SEC").
Each member of the Audit Committee shall be able to read and understand
fundamental financial statements, including the Company's balance sheet, income
statement and cash flow statement. In addition, at least one member of the Audit
Committee shall be a financial expert, as specified in Section 407 of the
Sarbanes-Oxley Act of 2002 (the "Act") and Item 309 of Regulation S-K of the
SEC.
The Board shall appoint (i) the members of the Audit Committee and (ii) one
member of the Audit Committee as a Chairperson who will have the authority to
act on behalf of the Audit Committee between meetings of the Audit Committee. If
the Chairperson is not present at a meeting, the members of the Audit Committee
may designate an acting Chairperson by a majority vote of the full Audit
Committee.
The Audit Committee shall meet at least four times annually and more frequently
as circumstances require, one of which shall be an Annual Meeting.
The Audit Committee shall keep written minutes of its meetings, which minutes
shall be maintained with the books and records of the Company.
The members of the Audit Committee shall serve until their resignation,
retirement or removal by the Board of until their successors shall be appointed
and qualify. No member of the Audit Committee shall be removed except by a
majority vote of the full Board.
A member of the Audit Committee shall promptly notify the Audit Committee and
the Board if the member is no longer an independent director and such member
shall be removed from the Audit Committee unless the Board determines that an
exception to the independent director requirement is available under the
applicable NASD rules with respect to such member's continued membership and
that an exceptions should be made.
A-1
Responsibilities
The responsibilities of the Audit Committee are as follows:
o appoint, compensate and oversee the work of the outside
auditor, including resolution of disagreements between
management and the outside auditor regarding financial
reporting, for the purpose of preparing or issuing an audit
report or related work.
o Monitor compliance of the outside auditor of the Company with
the audit partner rotation requirements of the Act and with
the conflicts of interest provisions of the Act.
o Pre-approve all auditing services and permissible non-audit
services provided by the outside auditor to the Company;
provided that, the Audit Committee may delegate to one or more
designated members of the Audit Committee the authority to
grant the foregoing pre-approvals. The decisions of any member
of the Audit Committee to whom the authority to grant
pre-approvals has been delegated shall be presented to the
full Audit Committee at each of its scheduled meetings.
o Engage in a dialogue with the outside auditor with respect to
any disclosed relationships or services that may impact the
objectivity and independence of the outside auditor and be
responsible for taking, or recommending that the Board takes,
appropriate action to oversee the independence of the outside
auditor.
o Obtain from the outside auditors a formal written statement
delineating all relationships between the outside auditor and
the Company consistent with Independence Standards Board
Standard 1.
o Prepare annually the report of the Audit Committee required to
be contained in the Company's proxy statements relating to the
election of directors filed with the SEC.
o Review and discuss with the outside auditors for the Company
the following:
1. all critical accounting policies and practices to be used
utilized in connection with the preparation of the Company's
financial statements;
2. all alternative treatments of financial information within
generally accepted accounting principles that have been
discussed with the management of the Company, ramifications
of the use of such alternative disclosures and treatments,
and the treatment preferred by the outside auditors; and
3. all material written communications between the outside
auditors and the management of the Company, such as any
management letter or schedule of unadjusted differences.
A-2
o Review and discuss with the Chief Executive Officer and the
Chief Financial Officer of the Company making certifications
in each of the Company's annual and quarterly reports filed
with the SEC the following:
1. any significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize, and report financial
data, as well as any material weaknesses in the Company's
internal controls; and
2. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Company's internal controls.
o Establish procedures for (i) the receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls, or auditing matters
and (ii) the confidential, anonymous submission by employees
of the Company of concerns regarding questionable accounting
or auditing matters.
o Review reports submitted to the Audit Committee pursuant to
(i) the reporting provisions of the Code of Ethics of the
Company alleging actual or suspected violations of federal,
state or local laws or regulations, including anonymous
reports of questionable accounting or auditing matters, and
(ii) provisions of the Act requiring the Company's counsel to
report evidence of a material violation of securities law or
breach of fiduciary duty or similar violation by the Company
or any agent of the Company, including the Company's directors
and officers.
o Approve all related party transactions to be entered into by
the Company.
o Review with the outside auditor, the Company's internal
auditor, and financial and accounting personnel, the adequacy
and effectiveness of the accounting and financial controls of
the Company, and elicit any recommendations for the
improvement of such internal control procedures or particular
areas where new or more detailed controls or procedures are
desirable.
o Obtain advice and assistance from internal or external legal,
accounting or other advisors as required for the performance
of its duties.
o Consider, in consultation with the outside auditor and
management of the Company, the audit scope and procedures.
o Review senior financial and accounting personnel succession
planning within the Company.
o Review the Company's Forms 10-Q and 10-K prior to filing with
the SEC.
o Review and discuss with management the Company's earnings
press releases, including the use of "pro forma" or "adjusted"
non-GAAP information, as well as financial information and
earnings guidance provided to analysts and ratings agencies.
Such discussion may be done generally (consisting of
discussing the types of information to be disclosed and the
types of presentations to be made.
A-3
o Discuss policies with respect to risk assessment and risk
management.
o Meet with the internal auditor, outside auditor or the
management privately to discuss any matters that the Audit
Committee, the internal auditor, the outside auditor or the
management believe should be discussed privately with the
Audit Committee.
o Review and reassess the adequacy of the Audit Committee's
charter annually.
o Make such other recommendations to the Board on such matters,
within the scope of its functions, as may come to its
attention and which in its discretion warrant consideration by
the Board.
Authority to Engage Advisors and Determine Their Compensation
The Audit Committee will have the authority to:
o Engage independent counsel and other advisors as it determines
necessary to carry out its duties.
o Determine the compensation of (i) the outside auditor employed
by the Company for the purpose of rendering or issuing an
audit report and (ii) any advisors employed by the Audit
Committee.
Limitations
The Audit Committee is responsible for the duties set forth in this charter but
is not responsible for either the preparation of the financial statements or the
auditing of the financial statements. Management has the responsibility for
preparing the financial statements and implementing internal controls and the
independent accountants have the responsibility for auditing the financial
statements and monitoring the effectiveness of the internal controls. The review
of the financial statements by the Audit Committee is not of the same quality as
the audit performed by the independent accountants. In carrying out its
responsibilities, the Audit Committee believes its policies and procedures
should remain flexible in order to best react to a changing environment.
A-4
CANDIE'S, INC.
400 Columbus Avenue
Valhalla, New York 10595-1335
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AUGUST 13, 2003.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints NEIL COLE and RICHARD DANDERLINE, and each
of them, Proxies, with full power of substitution in each of them, in the name,
place and stead of the undersigned, to vote at the Annual Meeting of
Stockholders of Candie's, Inc. (the "Company") on Wednesday, August 13, 2003, at
the New York City offices of the Company, 215 West 40th Street, New York , NY
10018 or at any adjournment or adjournments thereof, according to the number of
votes that the undersigned would be entitled to vote if personally present, upon
the following matters:
1. ELECTION OF DIRECTORS:
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY
(except as marked to the contrary below). to vote for all nominees listed below.
Neil Cole, Barry Emanuel, Steven Mendelow, Ann Iverson and Hubert Guez.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name in the space below.)
-----------------------------------------------------------------------------------------------------------------------
(Continued and to be signed on reverse side)
2. Ratification of the appointment of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year ending January 31, 2004.
|_| FOR |_| AGAINST |_| ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THOSE NOMINEES AND THE
PROPOSALS LISTED ABOVE.
DATED: ________________________________, 2003
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney,executor,administrator,
trustee or guardian, please
give full title as such. If a
corporation, please sign in
full corporate name by President
or other authorized officer. If
a partnership, please sign in
partnership name by authorized
person.
--------------------------------
Signature
--------------------------------
Signature if held jointly
Please mark, sign, date and return this proxy card promptly using the
enclosed envelope.