<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
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 Section240.14a-11(c) or
Section240.14a-12
</TABLE>
<TABLE>
<S> <C>
DONNA KARAN INTERNATIONAL INC.
- ------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
[LOGO]
April 14, 2000
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders,
which will be held in the Haft Auditorium of the Fashion Institute of
Technology, located at 27th Street and Seventh Avenue, New York, New York, on
Thursday, May 25, 2000, at 10:00 a.m. (local time). Your Board of Directors and
management look forward to greeting personally those stockholders able to
attend.
The enclosed notice and proxy statement contains details concerning the
business to come before the meeting. You will note that the Board of Directors
recommends a vote FOR the election of two directors to serve until the 2003
Annual Meeting of Stockholders and FOR the ratification of auditors. Please sign
and return your proxy card in the enclosed envelope at your earliest convenience
to assure that your shares will be represented and voted at the meeting even if
you cannot attend.
On behalf of the Board of Directors, thank you for your cooperation and
continued support.
Sincerely,
<TABLE>
<S> <C>
[/S/ DONNA KARAN] [/S/ JOHN D. IDOL]
Donna Karan John D. Idol
Chairman of the Board and Chief Executive Officer
Chief Designer
</TABLE>
<PAGE>
[LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
The Annual Meeting of Stockholders of DONNA KARAN INTERNATIONAL INC. (the
"Company") will be held in the Haft Auditorium at the Fashion Institute of
Technology, 227 West 27th Street, New York, New York 10001 on Thursday, May 25,
2000, at 10:00 a.m. (local time), for the following purposes:
1. to elect two Class I directors to hold office for a three-year term;
2. to ratify the appointment of Ernst & Young LLP as the independent auditors
of the Company for the 2000 fiscal year; and
3. to transact any such other business as may properly come before the meeting
and at any adjournment thereof.
Holders of record of the Company's common stock as of the close of business
on March 31, 2000 are entitled to notice of and to vote at the Annual Meeting of
Stockholders and any adjournments or postponements thereof.
By order of the Board of Directors
[/S/ LYNN E. USDAN]
Lynn E. Usdan
SECRETARY
April 14, 2000
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING OF
STOCKHOLDERS IN PERSON, PLEASE COMPLETE, SIGN, AND DATE THE ENCLOSED
PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ADDRESSED,
STAMPED ENVELOPE.
<PAGE>
DONNA KARAN INTERNATIONAL INC.
550 SEVENTH AVENUE
NEW YORK, NEW YORK 10018
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished to the stockholders of Donna Karan
International Inc., a Delaware corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors for use at the annual
meeting of stockholders of the Company (the "Annual Meeting") to be held in the
Haft Auditorium at the Fashion Institute of Technology, 227 West 27(th) Street,
New York, New York on May 25, 2000, and at any adjournment or postponements
thereof. A copy of the notice of meeting accompanies this Proxy Statement. The
approximate date on which this Proxy Statement and form of proxy are first being
sent or given to stockholders is April 14, 2000.
Only stockholders of record at the close of business on March 31, 2000, the
record date for the Annual Meeting, are entitled to notice of and to vote at the
meeting. On the record date, the Company had outstanding 21,989,949 shares of
common stock, par value $.01 per share (the "common stock"), 18 shares of Class
A common stock, par value $.01 per share, and two shares of Class B common
stock, par value $.01 per share. These are the only securities of the Company
entitled to vote at the Annual Meeting. Each share of common stock and Class A
common stock is entitled to one vote on each matter properly brought before the
Annual Meeting and each share of Class B common stock is entitled to nine votes
on each matter properly brought before the Annual Meeting. The rights of holders
of the common stock, Class A common stock, and Class B common stock are
identical in all other respects.
Stockholders who execute proxies may revoke them by giving written notice to
the Secretary of the Company at any time before these proxies are voted.
Attendance at the Annual Meeting will not have the effect of revoking a proxy
unless the stockholder so attending shall, in writing, so notify the Secretary
of the Annual Meeting at any time prior to the voting of the proxy.
The presence, in person or by proxy, of the holders of at least a majority
of the shares of common stock outstanding on the record date is necessary to
have a quorum for the Annual Meeting. Abstentions and broker "non-votes" are
counted as present for purposes of determining a quorum. A broker "non-vote"
occurs when a nominee holding shares of common stock for a beneficial owner does
not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner.
All proxies received pursuant to this solicitation will be voted except as
to matters where authority to vote is specifically withheld and, where a choice
is specified as to the proposal, they will be voted in accordance with such
specification. If no instructions are given, the persons named in the proxy
solicited by the Board of Directors of the Company intend to vote FOR the
election of the nominees listed herein as Class I directors of the Company and
FOR the ratification of the appointment of Ernst & Young LLP as independent
auditors of the Company for the 2000 fiscal year. With regard to the election of
directors, votes cast may be withheld from each nominee; votes that are withheld
will be excluded entirely from the vote and will have no effect. Abstentions may
be specified on all proposals except the election of directors and will have the
same effect as a vote against a proposal. Broker "non-votes" have no effect on
the outcome of the election of directors or the ratification of appointment of
auditors.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The only persons known by the Company to be the beneficial owners of more
than five percent of the outstanding shares of common stock, as of March 15,
2000, are indicated below. AS DESCRIBED IN THE NOTES TO THE TABLE, CERTAIN OF
THE NAMED INDIVIDUALS EITHER ARE MARRIED AND/OR SHARE VOTING AND INVESTMENT
POWER WITH RESPECT TO CERTAIN SHARES OF COMMON STOCK. CONSEQUENTLY, SUCH SHARES
ARE SHOWN AS BENEFICIALLY OWNED BY MORE THAN ONE PERSON:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENTAGE
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- ------------------- ----------------------- ----------
<S> <C> <C>
Donna Karan................................................. 5,242,848(1) 23.8%
Stephan Weiss............................................... 5,242,848(1) 23.8%
Tomio Taki.................................................. 4,245,174(2) 19.3%
Frank R. Mori............................................... 4,059,448(2) 18.5%
Takihyo Inc................................................. 3,183,881(2) 14.5%
H.R.H. Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud...... 1,501,350(3) 6.8%
</TABLE>
- ------------------------
(1) The shares attributed to Ms. Karan include shares held of record by Mr.
Weiss (her husband), a trust for the benefit of the children of Ms. Karan
and Mr. Weiss (the "KW Trust"), and Gabrielle Studio, Inc., a corporation
wholly-owned by Ms. Karan, Mr. Weiss, and the KW Trust ("Gabrielle Studio").
The shares attributed to Mr. Weiss include shares held of record by Ms.
Karan, the KW Trust, and Gabrielle Studio. All of such shares are subject to
the stockholders agreement described herein. See "ELECTION OF
DIRECTORS--Certain Voting Arrangements." Ms. Karan has sole voting and
investment power with respect to the shares held of record by her, and Mr.
Weiss has sole voting and investment power with respect to the shares held
of record by him and the KW Trust. Ms. Karan and Mr. Weiss have shared
voting and investment power with respect to shares held of record by
Gabrielle Studio. Ms. Karan and Mr. Weiss each disclaim beneficial ownership
of the shares held of record by the other, the KW Trust, and Gabrielle
Studio. The total does not include the nine shares of Class A common stock
held by each of Ms. Karan and Mr. Weiss, which are subject to the voting
agreement described herein. The business address of Ms. Karan and Mr. Weiss
is 550 Seventh Avenue, New York, New York 10018.
(2) The shares attributed to Messrs. Taki and Mori include shares held of record
by Takihyo Inc. Each of Messrs. Taki and Mori has a pecuniary interest in
only a portion of such shares, and each disclaims beneficial ownership
except to the extent of such interest. All of such shares are subject to the
stockholders agreement described herein. See "ELECTION OF DIRECTORS--Certain
Voting Arrangements." Each of Messrs. Taki and Mori has sole voting and
investment power with respect to the shares held of record by him and share
voting and investment power with respect to the shares held of record by
Takihyo Inc. The total does not include the one share of Class B common
stock held by each of Messrs. Taki and Mori, which are subject to the voting
agreement described herein. The business address of Messrs. Taki and Mori
and Takihyo Inc. is 45 West 45th Street, New York, New York 10036.
(3) According to a Schedule 13D filed on September 29, 1997 by His Royal
Highness Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud ("HRH"), HRH is a
citizen of the Kingdom of Saudi Arabia and has sole voting power and
investment power with respect to the shares held of record by him. The
business address of HRH is P.O. Box 8653, Riyadh, 11492, Kingdom of Saudi
Arabia.
2
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors currently consists of three classes of directors, as
nearly equal in number as possible. Directors hold office for staggered terms of
three years (or less if they are filling a vacancy) and until their successors
are elected and qualified, or until their earlier resignation or removal. One of
the three classes, comprising approximately one-third of the directors, is
elected each year to succeed the directors whose terms are expiring. The Company
currently has seven directors, consisting of two Class I Directors, two Class II
Directors, and three Class III Directors. There is one vacancy in each of Class
I and Class II. The terms of the two current Class I Directors expire at the
Annual Meeting. The directors in Classes II and III are serving terms expiring
at the Company's annual meeting of stockholders in 2001 and 2002, respectively.
The Board of Directors has designated John D. Idol and John Eyler as the two
nominees for reelection as Class I directors for a term expiring at the annual
meeting of stockholders in 2003.
Each nominee has consented to being named as a nominee in this Proxy
Statement and to serve if elected. If either nominee should become unavailable
for any reason, which management does not anticipate, the proxy will be voted
for any substitute nominee or nominees who may be selected by the management
prior to or at the Annual Meeting, or, if no substitute is selected by
management prior to or at the Annual Meeting, for a motion to reduce the
membership of the Board to the number of nominees available. In no event will
any proxies be voted for a greater number of persons than the number of nominees
named below. Directors will be elected by a plurality of the votes cast. The
information concerning the nominees and each director continuing in office and
their security holdings has been furnished by them to the Company.
In accordance with the terms of John D. Idol's employment agreement, each of
the Karan/Weiss Group and the Takihyo Group (each, as hereinafter defined) has
agreed to vote the shares of common stock held by it in favor of Mr. Idol's
election to the Board of Directors. The Karan/Weiss Group and the Takihyo Group
hold an aggregate of 43.1% of the outstanding common stock. Accordingly, it is
likely that Mr. Idol will be reelected as a director of the Company.
THE BOARD RECOMMENDS A VOTE FOR EACH NOMINEE AS A DIRECTOR TO HOLD OFFICE
UNTIL THE 2003 ANNUAL MEETING. PROXIES RECEIVED BY THE COMPANY WILL BE SO VOTED
UNLESS STOCKHOLDERS SPECIFY IN THEIR PROXY A CONTRARY CHOICE.
NOMINEES FOR ELECTION AS DIRECTORS:
CLASS I NOMINEES FOR DIRECTORS WHOSE TERMS EXPIRE IN 2003
JOHN D. IDOL, 41, joined the Company in July 1997 and has served as Chief
Executive Officer and a director of the Company since August 1997. Prior to
joining the Company, Mr. Idol was employed by Polo Ralph Lauren Corporation, a
publicly-traded apparel company, from 1984 through July 1997, most recently as
Group President, Product Licensing, including Home Collection operations.
JOHN EYLER, 52, has served as a director of the Company since April 1999.
Since January 2000, Mr. Eyler has been President and Chief Executive Officer and
a director of Toys "R" Us, a worldwide retailer of children's products. From
June 1992 to January 2000, he was Chairman and Chief Executive Officer of F.A.O.
Schwarz, an upscale retailer of toys. From 1989 to 1992, Mr. Eyler was the Chief
Executive Officer of the retail subsidiary of Hartmarx Corporation, a men's
clothing manufacturer, and from 1983 to 1989 was Chairman/Chief Executive
Officer of MainStreet, a retail division of Federated Department Stores.
3
<PAGE>
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE:
CLASS II DIRECTORS WHOSE TERMS EXPIRE IN 2001
STEPHAN WEISS, 61, has served on the Board of Directors since April 1996 and
as Vice Chairman since July 1996. From 1985 to 1992, Mr. Weiss served as the
Operating Principal of the Company and from 1993 through 1995 as the Co-Chief
Executive Officer of the Company. During that time, Mr. Weiss served the Company
in various capacities, including having direct supervisory responsibility at
various times for the legal department, licensing, new business ventures, and
developing the Creative Services Department. Since July 1997, Mr. Weiss has
served the Company in an advisory capacity. Mr. Weiss is the husband of Ms.
Karan.
M. WILLIAM BENEDETTO, 58, a founder and principal of Benedetto, Gartland &
Company Inc., a New York-based private placement and investment banking firm,
has served as a director of the Company since July 1996. Before founding this
firm in 1988, Mr. Benedetto was a senior executive in the investment banking
industry.
CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 2002
DONNA KARAN, 51, founded the Company along with Stephan Weiss, Tomio Taki,
Frank R. Mori, and Takihyo Inc. in 1984 and has served as Chief Designer of the
Company from the date of its formation and Chief Executive Officer from the date
of the Company's formation until August 1997. Ms. Karan has served on the Board
of Directors of the Company since April 1996, and has served as Chairman of the
Board since July 1996. Immediately prior to the formation of the Company, Ms.
Karan was the head designer at Anne Klein & Company. Ms. Karan is a member of
the Board of Directors of the Council of Fashion Designers of America ("CFDA"),
the Design Industries Foundation for AIDS, and the Martha Graham Center of
Contemporary Dance. Ms. Karan also serves as a member of the Board of Governors
of the Parsons School of Design, a division of The New School. Ms. Karan was
honored as the CFDA's Designer of the Year in 1985 and 1990, as its Menswear
Designer of the Year in 1992, and as its Womenswear Designer of the Year in
1996. Ms. Karan is the wife of Mr. Stephan Weiss, Vice Chairman of the Company.
ANN MCLAUGHLIN, 58, has served as a director of the Company since January
1997. Ms. McLaughlin has been Chairman of The Aspen Institute, an international
non-profit, educational and public policy organization dedicated to serving
leaders throughout the world, since August 1996 and served as Vice Chairman of
this institute since August 1993. From May 1990 to September 1995, Ms.
McLaughlin served as President of the Federal City Council, Washington, D.C., a
non-profit, non-partisan organization. From 1987 to 1989, Ms. McLaughlin was the
United States Secretary of Labor. She also served as Chairman of the President's
Commission on Aviation Security and Terrorism from 1989 to 1990 and as Under
Secretary of the Department of the Interior from 1984 to 1987. Ms. McLaughlin is
a director of AMR Corporation and its subsidiary, American Airlines Inc.,
Microsoft Corporation, Fannie Mae, General Motors Corporation, Host Marriott
Corporation, Kellogg Company, Nordstrom, Vulcan Materials Company, and Harman
International Industries, Inc.
FRANK R. MORI, 59, has served as a director of the Company since January
2000 and founded the Company along with Donna Karan, Stephan Weiss, Tomio Taki,
and Takihyo Inc. in 1984. Since 1986, Mr. Mori has served as Co-Chief Executive
Officer and President of Takihyo Inc., which has been a financial holding
company since July 1999. Prior to that time, Takihyo Inc. owned the Anne Klein
group of companies, a women's apparel company, including Anne Klein & Company,
of which Mr. Mori was President and Chief Executive Officer from 1975 to July
1999. Mr. Mori also is a director of The Stride Rite Corporation.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The table below sets forth the beneficial ownership of the common stock as
of March 15, 2000 (i) by each current director, (ii) by each of the executive
officers named in the "Summary Compensation Table," and (iii) by all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
OF COMMON STOCK AS PERCENTAGE
NAME POSITION OF MARCH 15, 2000 OF CLASS
- ---- -------------------------------- -------------------- ----------
<S> <C> <C> <C>
Donna Karan.......................... Chairman of the Board and Chief 5,242,848(1) 23.8%
Designer
Stephan Weiss........................ Vice Chairman of the Board 5,242,848(1) 23.8%
John D. Idol......................... Chief Executive Officer and 449,783(2) 2.0%
Director
M. William Benedetto................. Director 12,000(3) *
John Eyler........................... Director 13,000(4) *
Ann McLaughlin....................... Director 11,500(5) *
Frank R. Mori........................ Director 4,059,448(6) 18.5%
Lee Goldenberg....................... Corporate Executive Vice 39,047(7) *
President, Worldwide Operations
Joseph B. Parsons.................... Corporate Executive Vice 49,496(7) *
President, Chief Financial and
Administrative Officer
Lynn E. Usdan........................ Corporate Senior Vice President, 5,879(7) *
General Counsel, and Secretary
All directors and executive officers
of the Company as a group (10
persons)........................... 9,883,001(8) 44.9%
</TABLE>
- ------------------------
* Less than one percent (1%).
(1) The shares attributed to Ms. Karan include shares held of record by Mr.
Weiss, the KW Trust, and Gabrielle Studio. The shares attributed to Mr.
Weiss include shares held of record by Ms. Karan, the KW Trust, and
Gabrielle Studio. All of such shares are subject to the stockholders
agreement described herein. See "Certain Voting Arrangements" below. Ms.
Karan has sole voting and investment power with respect to the shares held
of record by her and Mr. Weiss has sole voting and investment power with
respect to the shares held of record by him and the KW Trust. Ms. Karan and
Mr. Weiss have shared voting and investment power with respect to shares
held of record by Gabrielle Studio. Ms. Karan and Mr. Weiss each disclaim
beneficial ownership of the shares held of record by the other, the KW
Trust, and Gabrielle Studio. Does not include the nine shares of Class A
common stock held by each of Ms. Karan and Mr. Weiss, which are subject to
the voting agreement described herein.
(2) Represents shares subject to restricted stock awards.
(3) Includes 1,000 shares jointly owned with Mr. Benedetto's wife, 500 shares
subject to a restricted stock award, and 9,000 shares which may be acquired
upon the exercise of options which are presently exercisable or which will
become exercisable within 60 days of March 15, 2000. Does not include 8,286
stock units held in stock accounts under the Company's Director's Deferred
Compensation Plan, the value of which depends directly upon the market price
of the common stock.
(4) Includes 500 shares subject to a restricted stock award and 7,500 shares,
which may be acquired upon the exercise of options which are presently
exercisable or which will become exercisable within 60 days
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
5
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
of March 15, 2000. Does not include 3,161 stock units held in stock accounts
under the Company's Director's Deferred Compensation Plan, the value of
which depends directly upon the market price of the common stock.
(5) Includes 500 shares subject to a restricted stock award and 8,500 shares,
which may be acquired upon the exercise of options which are presently
exercisable or which will become exercisable within 60 days of March 15,
2000. Does not include 3,173 stock units held in stock accounts under the
Company's Director's Deferred Compensation Plan, the value of which depends
directly upon the market price of the common stock.
(6) The shares attributed to Mr. Mori include 3,183,881 shares held of record by
Takihyo Inc. Mr. Mori has a pecuniary interest in only a portion of such
shares, and disclaims beneficial ownership except to the extent of such
interest. All of such shares are subject to the stockholders agreement
described herein. See "Certain Voting Arrangements." Mr. Mori has sole
voting and investment power with respect to the shares held of record by him
and shares voting and investment power with respect to the shares held of
record by Takihyo Inc. The total does not include the one share of Class B
common stock held by Mr. Mori, which is subject to the voting agreement
described herein.
(7) Includes for Mr. Goldenberg, 38,947 shares subject to restricted stock
awards; represents for Mr. Parsons, 49,496 shares subject to restricted
stock awards; and includes for Ms. Usdan, 5,479 shares which may be acquired
upon the exercise of options which are presently exercisable or which will
become exercisable within 60 days of March 15, 2000.
(8) Includes or excludes (as the case may be) the shares described in footnotes
2, 3, 4, 5, 6, and 7 above.
CERTAIN VOTING ARRANGEMENTS
Pursuant to a stockholders agreement, Ms. Karan, Mr. Weiss, the KW Trust,
and Gabrielle Studio, a corporation wholly-owned by Ms. Karan, Mr. Weiss, and
the KW Trust (collectively, the "Karan/Weiss Group"), are entitled to designate
one member to the Board of Directors of the Company (in addition to Ms. Karan
and Mr. Weiss) as long as the combined ownership of the shares of common stock
held by members of the Karan/Weiss Group is not less than 20% of the then
outstanding common stock. Additionally, pursuant to such stockholders agreement,
Mr. Tomio Taki, Mr. Frank R. Mori, Takihyo Inc., and certain affiliates of
Messrs. Taki and Mori (collectively, the "Takihyo Group") are entitled to
designate (a) two members of the Board of Directors until such time as the
Takihyo Group sells any shares of common stock owned by it (other than shares
distributed to stockholders of Takihyo Inc.) and (b) thereafter, one member of
the Board of Directors as long as the Takihyo Group owns not less than 10% of
the then outstanding common stock, except that if either Mr. Taki or Mr. Mori is
otherwise able to serve, and is serving, as the one designee of the Takihyo
Group, then such person shall be entitled to continue to serve as a director as
long as the Takihyo Group continues to own not less than 5% of the then
outstanding common stock. The stockholders agreement provides that neither Mr.
Mori, Mr. Taki, nor any other affiliate of the Takihyo Group may serve as a
director as long as the Takihyo Group has an ownership interest in, or either of
such person is an officer or director of, Anne Klein & Company or any other
competitor of the Company. Pursuant to the stockholders agreement, the
Karan/Weiss Group, on the one hand, and the Takihyo Group, on the other hand,
have agreed to vote the shares of common stock owned by them for each other's
designees (and, in the case of the Takihyo Group, for Ms. Karan and Mr. Weiss)
as directors. The designee to the Board of Directors of the Karan/Weiss Group
and the designees of the Takihyo Group (other than Messrs. Taki or Mori) must be
reasonably satisfactory to the Company's Board of Directors. Mr. Mori currently
is serving on the Board as the designee of the Takihyo Group. Additionally, Ms.
Karan and Mr. Weiss, each of whom holds nine shares of Class A common stock, and
Messrs. Taki and Mori, each of whom holds one share of Class B common stock,
have agreed in writing that, if the holders of Class A common stock or Class B
common stock are entitled to vote separately as a
6
<PAGE>
class with respect to a matter, they will vote their respective shares of Class
A and Class B common stock as nearly as possible in the same manner as the
holders of a majority of the shares of common stock vote their shares with
respect to such matter.
DIRECTOR COMPENSATION
Directors who are employees of the Company receive no compensation, as such,
for service as members of the Board of Directors or its committees.
Each director who is not an employee or officer of the Company or a
subsidiary thereof ("Eligible Directors") receives an annual retainer of $25,000
and $1,000 for each Board and Committee meeting attended. The chairman of each
Committee receives an additional retainer fee of $2,500 per annum.
Each Eligible Director is eligible to receive options under the Company's
1996 Non-Employee Directors Stock Option Plan (the "Directors' Plan"). The
Directors' Plan provides that, on the date of initial election or appointment to
the Board, each Eligible Director is granted a non-qualified option to purchase
7,500 shares of common stock. Thereafter, other than with respect to the year in
which an Eligible Director receives an initial grant of options, as of the first
day of the month following the annual meeting of stockholders, each Eligible
Director is entitled to receive a non-qualified option to purchase 1,000 shares
of common stock. The options have an exercise price equal to the fair market
value of the common stock on the date of grant, vest on the first anniversary of
the date of grant, and have a 10-year term. In addition, options granted and not
previously exercisable will become vested and fully exercisable immediately upon
a change in control of the Company (as defined in the Directors' Plan). Neither
Ms. Karan, Mr. Weiss nor Mr. Mori (nor Mr. Taki, if he is serving as a director)
is eligible to receive options under the Directors' Plan. The Directors' Plan
authorizes the issuance of up to 100,000 shares of common stock, subject to
adjustments in certain circumstances.
Each Eligible Director also will receive a grant of a restricted stock award
under the Company's 1998 Non-Employee Director Restricted Stock Plan. Each
Eligible Director will receive an award of 500 shares of common stock as of the
first day of the month following the annual meeting of stockholders, which award
will vest on the first anniversary of the date of grant. In addition, the
restricted stock award will become fully vested upon a change in control of the
Company (as defined in the plan). Neither Ms. Karan, Mr. Weiss nor Mr. Mori (nor
Mr. Taki, if he is serving as a director) is eligible to receive restricted
stock awards under the Non-Employee Director Restricted Stock Plan.
Eligible Directors also will be eligible to participate in a Voluntary
Deferred Compensation Plan for Non-Employee Directors of the Company (the
"Deferred Compensation Plan"). Pursuant to the Deferred Compensation Plan, an
Eligible Director, upon his or her election, may defer payment of his or her
cash retainer and meeting fees for five years or until he or she ceases to be a
director. The deferred amounts, at the election of the director, during the
deferral period either (i) are credited with interest at prescribed rates or
(ii) are converted to the equivalent of that number of shares of the Company's
common stock (based on the market price at the time of the deferral) that could
be purchased with the deferred amounts. All payments under the Deferred
Compensation Plan are in the form of cash. The Deferred Compensation Plan
provides that lump-sum payments of all deferred compensation will be made as
soon as administratively feasible following the date that (i) the participating
director ceases to be a member of the Board of Directors or (ii) the Deferred
Compensation Plan is terminated. Neither Ms. Karan, Mr. Weiss nor Mr. Mori (nor
Mr. Taki, if he is serving as a director) is eligible to participate in the
Deferred Compensation Plan.
BOARD COMMITTEES AND MEMBERSHIP
The Company has an Audit Committee of the Board of Directors, consisting
entirely of outside directors, the current members of which are Mr. Benedetto,
Mr. Eyler, and Ms. McLaughlin. The Audit Committee held eight meetings in 1999.
The Audit Committee recommends annually to the Board of
7
<PAGE>
Directors the appointment of the independent auditors of the Company, and
reviews with the independent auditors the scope and results of the Company's
audits, the Company's internal accounting controls, and the professional
services furnished by the independent auditors to the Company.
The Company also has a Compensation Committee of the Board of Directors
consisting of Mr. Benedetto, Mr. Eyler and Ms. McLaughlin. The Compensation
Committee reviews and approves annual salaries and bonuses for all executive
officers and key members of the Company's design teams and management staff, and
reviews and approves the terms and conditions of all employee benefit plans or
changes thereto. The Compensation Committee has created an Incentive
Compensation Subcommittee to address all issues before the Compensation
Committee that require decisions by directors who qualify as outside directors
under Section 162(m) of the Internal Revenue Code of 1986, as amended, and as
non-employee directors under Section 16(b) of the Securities Exchange Act of
1934, as amended. The Incentive Compensation Subcommittee reviews and approves
grants of stock options and stock awards pursuant to the Company's 1996 Stock
Incentive Plan. Currently, the members of the Incentive Compensation
Subcommittee are identical to the Compensation Committee. In 1999, the
Compensation Committee and Incentive Compensation Subcommittee met five times.
The Company does not have a nominating committee. In 1999, the Board of
Directors held five meetings and committees of the Board held a total of 13
meetings. During 1999, all of the current directors attended at least 75% of the
aggregate of all meetings of the Board of Directors and the committees of the
Board of Directors on which such director served.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation earned for services rendered in all capacities for the 1999, 1998,
and 1997 fiscal years by the Chief Executive Officer and the four most highly
compensated executive officers of the Company (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
--------------------------------------- -----------------------------
SECURITIES
OTHER ANNUAL RESTRICTED STOCK UNDERLYING OTHER
NAME AND PRINCIPAL FISCAL BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
POSITION YEAR SALARY($) ($) ($)(3) ($) (#)(6) ($)(8)
- ------------------------------ -------- --------- -------- ------------ ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
DONNA KARAN (1)............... 1999 438,461(2) 326,603 -- -- -- --
Chairman of the Board and 1998 500,000 -- -- -- -- --
Chief Designer 1997 490,384 -- -- -- -- --
JOHN D. IDOL (1).............. 1999 900,000 750,000 -- 418,997(4) -- 5,000
Chief Executive Officer 1998 900,000 750,000 -- -- 200,000(7) 4,228
1997 362,971 535,000 -- 1,565,625(5) 400,000 --
LEE GOLDENBERG................ 1999 350,186 250,833 -- 75,421(4) 25,000 34,621(9)
Corporate Executive Vice 1998 350,000 175,000 -- -- 18,000(7) 30,920(9)
President, Worldwide 1997 312,321 -- -- -- 18,000 4,714
Operations
JOSEPH B. PARSONS............. 1999 348,654 350,000 -- 75,421(4) 35,000 40,054(9)
Corporate Executive Vice 1998 315,000 207,500 64,707 -- 18,000(7) 30,372(9)
President, Chief Financial 1997 308,531 -- -- -- 18,000 4,750
and Administrative Officer
LYNN E. USDAN................. 1999 294,230 165,000 -- 37,711(4) -- 27,961(9)
Corporate Senior Vice 1998 250,000 87,500 -- -- 3,000(7) 4,800
President, General Counsel, 1997 198,461 41,667 -- -- 2,500 4,750
and Secretary
</TABLE>
- ------------------------------
(1) Mr. Idol became Chief Executive Officer of the Company on August 11, 1997,
at which time Ms. Karan resigned as Chief Executive Officer.
(2) In connection with and in support of the restructuring announced by the
Company in November 1999, Ms. Karan agreed that for the balance of fiscal
1999 and for fiscal 2000 and fiscal 2001 her annual base salary will be
reduced to $100,000. See "Employment Arrangements" below.
(3) Except as indicated, the aggregate amount of perquisites and other personal
benefits awarded to, earned by, or paid to each Named Executive Officer was
less than either $50,000 or 10% of the total of annual salary and bonus for
that executive officer during each of these years. Includes for Mr. Parsons
in fiscal 1998 a one-time payment of $48,032 for reimbursement of relocation
expenses and an annual automobile allowance of $14,400.
(4) Under the Company's 1999 Equity Grant Program, a restricted stock award was
granted on March 24, 2000 to each Named Executive Officer (other than Ms.
Karan) as follows: Mr. Idol--56,332 shares; Mr. Goldenberg--10,140 shares;
Mr. Parsons--10,140 shares; and Ms. Usdan--5,070 shares. These shares vest
on the fifth anniversary of the date of grant or earlier in 20% increments
if the common stock trades at specified price levels. The amounts in the
table reflect the market value of such restricted stock awards (without
consideration of the restrictions), based on the closing price of the common
stock on the date of grant.
(5) Reflects the dollar value (without consideration of the restrictions) of a
restricted stock award of 150,000 shares granted to Mr. Idol pursuant to his
employment agreement, based on the closing price of the common stock on the
date of grant. These shares vest on the fifth anniversary of the date of
grant or earlier in 20% increments if the common stock trades at specified
price levels. Based on the closing price of the common stock at the end of
fiscal 1999, the market value of such shares (without consideration of the
restrictions) was $984,375.
(6) All of the options in the table (other than those held by Ms. Usdan) were
cancelled effective March 3, 2000, pursuant to each Named Executive
Officer's election under the 2000 Executive Officer Exchange Program. In
connection therewith, restricted stock awards were granted as follows:
299,783 shares for Mr. Idol, with a market value on the date of grant
(without consideration of the restrictions) of $2,229,636; 38,947 shares for
Mr. Goldenberg, with a market value on the date of grant (without
consideration of the restrictions) of $289,668; and 49,496 shares for Mr.
Parsons, with a market value on the date of grant (without consideration of
the restrictions) of $368,125. These shares vest on the third anniversary of
the date of grant or earlier in 20% increments if the common stock trades at
specified price levels.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
9
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(7) Reflects for Mr. Idol grants made to him in accordance with his employment
agreement, including a grant of stock options for 100,000 shares of common
stock made in March 1999 with respect to the Company's 1998 fiscal year.
Reflects for Mr. Goldenberg, Mr. Parsons, and Ms. Usdan the grant of stock
options made in March 1999 with respect to the Company's 1998 fiscal year.
See note (6) above with respect to the cancellation of certain of these
options.
(8) Unless otherwise noted, represents matching contributions under the
Company's 401(k) Plan, which contributions vest after six years of plan
service with the Company, as defined in the Plan.
(9) Includes contributions under the Company's deferred compensation plan, which
contributions vest after the fifth anniversary of participation in the plan,
in the following amounts: for the 1999 fiscal year, $30,051 for Mr.
Goldenberg; $34,933 for Mr. Parsons; and $22,962 for Ms. Usdan; and for the
1998 fiscal year, $26,125 for Mr. Goldenberg; $26,250 for Mr. Parsons; and
$16,875 for Ms. Usdan.
EMPLOYMENT ARRANGEMENTS
EMPLOYMENT AGREEMENT WITH MS. KARAN
The Company's employment agreement with Ms. Karan provides for her
employment as Chairman of the Board and Chief Designer and had an initial
three-year term through December 31, 1999. The agreement is automatically
renewable for successive three-year terms, unless otherwise terminated. The
employment agreement provides for an annual base salary of $500,000, as adjusted
annually for increases in the Consumer Price Index, and an annual bonus of up to
100% of base salary based on the adjusted pre-tax profits of the Company. In
connection with and in support of the restructuring announced by the Company in
November 1999, Ms. Karan agreed that for the balance of fiscal 1999 and for
fiscal 2000 and fiscal 2001 her annual base salary will be reduced to $100,000
(as adjusted for increases in the Consumer Price Index).
Ms. Karan may terminate her employment without reason with at least four
months' notice to the Company. The employment agreement also may be terminated
at any time by written notice by Ms. Karan for "good reason" if: (i) Ms. Karan
(without her prior written consent) is no longer Chairman of the Board and the
sole Chief Designer; (ii) Ms. Karan is assigned duties and responsibilities
inconsistent with the employment agreement (without her prior written consent);
(iii) the Company fails to pay Ms. Karan all amounts required under the
employment agreement; (iv) there is a material breach of the employment
agreement by the Company; (v) there is a change in control of the Company,
including as a result of certain changes in ownership of voting securities, an
acquisition by a third party of 30% of the voting securities of the Company,
mergers, sales of assets, and certain changes in the composition of the Board of
Directors; (vi) there are any fundamental changes to the business or operations
of the Company that are material (without her prior written consent); or (vii) a
physician of recognized skill confirms to the Board of Directors in writing that
Ms. Karan's continued employment with the Company would have a material adverse
impact on her health or have an adverse effect on her ability to perform her
duties to the Company. The employment agreement may be terminated by the Company
only for "cause."
If Ms. Karan terminates her employment with the Company for "good reason" or
upon termination as a result of Ms. Karan's death or disability, the Company
will pay to Ms. Karan (or her estate), a lump sum cash payment equal to the sum
of her current base salary and incentive bonus from the prior year for the
greater of one year and the remaining term of the employment agreement. The
employment agreement also provides that for a period of one year following the
termination of Ms. Karan's agreement, Ms. Karan will not participate or engage
in, either directly or indirectly, any business activity that is directly
competitive with the Company's then current principal product lines and price
points and could reasonably be expected to have a material adverse effect on the
Company. The employment agreement further provides that Ms. Karan will have no
obligation to mitigate the Company's financial obligations in the event of her
termination.
During the term of the employment agreement, Ms. Karan is obligated to
devote substantially all her business time and attention to the Company and,
except with regard to Gabrielle Studio, may not have an
10
<PAGE>
interest in or perform a service that is in direct competition with the
Company's principal product lines and price points, which activity could
reasonably be expected to have a material adverse effect on the Company. Subject
to the foregoing and provided there is no interference with Ms. Karan's primary
obligations to the Company, Ms. Karan may engage in certain activities for her
own personal benefit, such as personal endorsements and appearances; motion
pictures; television; writing; speaking and teaching engagements; photography;
the fine arts; designing for stage, film, and other media; architectural,
industrial, and interior design (exclusive of home furnishings) and sales of
limited edition products based on such designs; and consulting services in
connection with the foregoing.
EMPLOYMENT AGREEMENT WITH MR. WEISS
The Company's employment agreement with Mr. Weiss provides for his
employment as Vice Chairman of the Board of Directors. The agreement is
automatically renewable for successive one-year terms, unless otherwise
terminated. In 1997, Mr. Weiss' agreement was amended to provide for the
elimination of the duties and responsibilities of Mr. Weiss set forth in his
employment agreement and his compensation therefor, for so long as Mr. Idol
serves as Chief Executive Officer of the Company. Mr. Weiss' employment
agreement is in other material respects relating to termination and
non-competition similar to the employment agreement of Ms. Karan described
above.
EMPLOYMENT AGREEMENT WITH MR. IDOL
Mr. Idol's employment agreement with the Company provides for his employment
as Chief Executive Officer of the Company until June 30, 2002. The agreement
also provides for an automatic renewal for an indefinite term unless and until
either party gives the other party 12 months' notice of termination. Pursuant to
the employment agreement, Mr. Idol will be entitled to receive an annual base
salary of $900,000 for the 1998 and 1999 fiscal years; $950,000 for the 2000 and
2001 fiscal years; $475,000 for the period from the beginning of the 2002 fiscal
year through June 30, 2002 if the employment agreement is not renewed and
$950,000 for each fiscal year thereafter. Mr. Idol is also entitled to receive,
commencing with the 1998 fiscal year, a performance bonus (the "Performance
Bonus Award") of up to $750,000 per year based on certain performance criteria
and an incentive bonus (the "Incentive Bonus Award") of up to $2 million per
year based on the Company attaining certain performance goals.
The Performance Bonus Award is payable during each fiscal year during the
term of his employment agreement if: (i) the Company's net income before taxes
or extraordinary items ("Pre-Tax Income") increases by 10% or more over the
actual Pre-Tax Income for the prior fiscal year, or (ii) the Company licensing
revenues increase by 10% or more over the actual licensing revenues for the
prior fiscal year. Even if the foregoing performance targets are not attained,
Mr. Idol will be entitled to receive the Performance Bonus Award upon the
attainment of the following additional performance targets for: (i) the 1999
fiscal year, if Pre-Tax Income is at least $11.5 million or licensing revenues
are at least $8 million; (ii) the 2000 fiscal year, if Pre-Tax Income is at
least $13.25 million or licensing revenues are at least $9.25 million; and/or
(iii) the 2001 fiscal year, if Pre-Tax Income is at least $15.25 million or
licensing revenues are at least $10.25 million. The additional performance
targets for the 2002 fiscal year and years thereafter during the term of Mr.
Idol's employment agreement also will be based on Pre-Tax Income and licensing
revenues (as described in the prior sentence) with such targets increasing by
10% per year.
In addition, any amounts attained in excess of any performance target set
forth for any fiscal year under the Performance Bonus Award may be applied to
the applicable performance target for the next succeeding fiscal year or years.
Moreover, if a performance target is not attained in a particular fiscal year,
the attainment of such performance target in a subsequent fiscal year on a
cumulative basis will result in the performance bonus being deemed earned for
such prior and current fiscal years. There will be no partial payments if
performance targets are not attained.
11
<PAGE>
The maximum performance bonus payable under the Performance Bonus Award for
any fiscal year to Mr. Idol is $750,000 (prorated for partial years) plus any
amount not earned in prior years with regard to the award, provided that, in all
cases, the maximum amount payable for any fiscal year will not exceed $3
million.
Mr. Idol will be eligible to earn an Incentive Bonus Award calculated as a
percentage of Pre-Tax Income in excess of $30 million. For Pre-Tax Income of (i)
$30 million to $75 million, the Incentive Bonus Award will be 2% of Pre-Tax
Income; and (ii) $75 million to $100 million, the Incentive Bonus Award will be
$1.5 million plus 1.5% of Pre-Tax Income in excess of $75 million. For Pre-Tax
Income in excess of $100 million, the Incentive Bonus Award will be $1.875
million plus 1.0% of Pre-Tax Income in excess of $100 million. In no event will
the Incentive Bonus Award for any fiscal year exceed $2 million. There will be
no partial payments if the minimum performance targets are not met.
Each of the Performance Bonus Award and the Incentive Bonus Award was
approved by the Company's stockholders and is intended to comply with the
requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended.
In addition, Mr. Idol is entitled to receive $750,000, plus interest, upon
the earliest to occur of the third anniversary of his employment agreement,
termination of his employment, or a change in control of the Company (as
defined), which amount the Company agreed to pay Mr. Idol when he joined the
Company. Pursuant to this employment agreement upon commencement of Mr. Idol's
employment, he was granted options to purchase 400,000 shares of common stock
under the Company's 1996 Stock Incentive Plan. Pursuant to his agreement, Mr.
Idol received options to purchase 100,000 shares of common stock in each of
August 1998 and March 1999 and is entitled to receive options to purchase
100,000 shares of common stock on or about April 1, 2000 and 2001, provided that
the Company has recorded income before income taxes and extraordinary items in
the prior fiscal year. On January 24, 2000, the Incentive Compensation
Subcommittee approved the 2000 Executive Officer Exchange Program (the "2000
Exchange Program") in order to, among other things, provide the Company's
executive officers with more meaningful equity-based incentives and further the
mutuality of interests between the Company and the Named Executive Officers. The
2000 Exchange Program permitted the Company's Named Executive Officers to elect
to have the Company cancel all of their existing options and receive an award of
restricted shares intended to have the same economic value as the options,
determined on a Black-Scholes basis.
On March 3, 2000, Mr. Idol elected to have all of his vested and unvested
options (options to purchase an aggregate of 600,000 shares of common stock)
canceled and replaced with an award of 299,783 shares of restricted stock. The
restricted shares will vest on the third anniversary of the date of grant or
earlier in 20% increments if the common stock trades at price levels ranging
between $12 and $20 per share.
In addition, Mr. Idol agreed that the option grants to be made on or about
April 1, 2000 and 2001 will be made in accordance with the terms of the
Executive Officer Restricted Share Grant Program (the "Equity Grant Program").
The Equity Grant Program provides that in lieu of option grants, Mr. Idol will
be entitled to receive a grant of restricted shares intended to have the same
economic value as the options. The restricted shares will vest on the fifth
anniversary of the date of grant or earlier in 20% increments if the common
stock trades as specified price levels. On March 24, 2000, Mr. Idol received a
grant of 56,332 shares of restricted stock under the 1999 Equity Grant Program.
Under the 2000 Equity Grant Program, in no event will the number of restricted
shares to be granted for fiscal 2000 exceed 56,000 shares of common stock.
Pursuant to this employment agreement, in 1997 the Company also granted Mr.
Idol 150,000 shares of restricted common stock, which shares vest on the fifth
anniversary of date of grant or earlier in 20% increments if the common stock
trades at price levels ranging between $16 and $24 per share. Mr. Idol is
entitled to participate in the Company's benefit plans and the Company has
agreed to maintain a term life insurance policy on the life of Mr. Idol in the
amount of $5 million payable to his beneficiaries.
12
<PAGE>
The employment agreement with Mr. Idol requires 60 days' notice of intent to
terminate by Mr. Idol and three months' written notice of intent to terminate by
the Company if Mr. Idol is terminated "without cause" (as defined) (or for a
shorter period of time if terminated for "cause" (as defined)). Mr. Idol has
also agreed not to compete with the business of the Company for a period of
one-year following termination of his employment with the Company for any reason
other than "good reason" (as defined). If Mr. Idol is terminated by the Company
"without cause" or he terminates his employment for "good reason" prior to June
30, 2002, Mr. Idol will be entitled to receive the sum of 2.99 times his base
salary plus two times his total bonus compensation (including his performance
bonus and incentive bonus) for the immediately prior fiscal year plus accrued
obligations (as defined) payable 30 days after the date of termination and all
then unvested restricted stock and stock options will be fully vested.
If Mr. Idol is terminated "without cause" or he terminates his employment
for "good reason" during the 12-month period following a "change in control" of
the Company (as defined), Mr. Idol will be entitled to receive (i) the sum of
three times his base salary plus three times his total bonus compensation
(including his performance bonus and incentive bonus) for the immediately prior
fiscal year, (ii) continued health, disability, and life insurance at the level
then in effect for 18 months, and (iii) full vesting of all then unvested
restricted shares of common stock and stock options. Notwithstanding the
foregoing, if such payments and benefits are subject to an excise tax under the
Internal Revenue Code of 1986, as amended, as "golden parachute payments," then
such payments and benefits will be reduced to eliminate such excise tax if, and
only if, Mr. Idol would be in a better after-tax position as a result of such
reduction.
EMPLOYMENT AGREEMENT WITH MR. GOLDENBERG
The Company and Lee Goldenberg, Corporate Executive Vice President,
Worldwide Operations, are parties to an employment agreement, under which Mr.
Goldenberg receives an annual base salary of $350,000, subject to increase at
the discretion of the Company. This agreement has an initial term through
December 31, 2000 and is automatically renewable for successive one-year terms,
unless otherwise terminated. Pursuant to this agreement, Mr. Goldenberg is
entitled to a target bonus of between 50% and 100% of his base salary,
determined in accordance with the Company's Executive Incentive Plan (or
successor plan thereto). Additionally, Mr. Goldenberg is entitled to participate
in the Company's annual stock option program for executives (or successor plan
thereto) and is entitled to a contribution by the Company of 5% of his base
salary and bonus under the Company's deferred compensation program for
executives. Commencing for fiscal 1999, Mr. Goldenberg may elect to defer
between 10% and 100% of bonus to which he is entitled. Mr. Goldenberg may
terminate the employment agreement upon 60 days' written notice to the Company.
If the Company terminates the employment agreement without "cause," Mr.
Goldenberg will be entitled to his base salary for a one-year period provided
that he complies with certain confidentiality and non-solicitation covenants
during such period.
EMPLOYMENT AGREEMENT WITH MR. PARSONS
The Company and Joseph B. Parsons, Corporate Executive Vice President, Chief
Financial and Administrative Officer of the Company, are parties to an
employment agreement, under which Mr. Parsons receives an annual base salary of
$300,000, subject to increase at the discretion of the Company. Pursuant to his
agreement, Mr. Parsons also is entitled to a target bonus equal to 50% of his
base salary. The agreement further provides that in the event of Mr. Parsons'
disability, his termination by the Company "without reason," or his termination
of the agreement for "good reason" (each as defined in the agreement), the
Company will pay him or his estate an amount equal to his then current annual
salary plus the bonus he earned during the prior fiscal year. The agreement is
generally terminable by either party upon two months' notice.
13
<PAGE>
STOCK OPTIONS
The following tables set forth information with respect to options granted
to the Named Executive Officers of the Company during the fiscal year ended
January 2, 2000. No stock appreciation rights were granted to the Named
Executive Officers during the fiscal year ended January 2, 2000.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (5)
------------------------ --------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ----------- ------------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Donna Karan.......................... -- -- -- -- -- --
John D. Idol (2)..................... 100,000 24.7% 7.06 3/27/09 444,128 1,125,471
Lee Goldenberg (3)................... 25,000 6.2% 5.94 3/09/09 93,360 236,585
18,000 4.4% 7.06 3/27/09 79,943 202,585
Joseph B. Parsons (3)................ 35,000 8.6% 5.94 3/09/09 130,704 331,219
18,000 4.4% 7.06 3/27/09 79,943 202,585
Lynn E. Usdan (4).................... 3,000 .1% 7.06 3/27/09 13,324 33,764
</TABLE>
- ------------------------
(1) The options granted in fiscal 1999 were granted under the Company's 1996
Stock Incentive Plan. Under this plan, the exercise price may not be less
than 100% of the fair market value of the common stock on the date the
option is granted. All unexercisable stock options granted under the plan
become exercisable upon a change in control of the Company. The plan allows
shares of common stock to be used to satisfy any resulting Federal, state,
and local tax liabilities. Following termination of employment, option
holders have one year to exercise the portion of the stock option
exercisable upon the date of termination of employment.
(2) These options were cancelled effective March 3, 2000, pursuant to Mr. Idol's
election under the 2000 Exchange Program. These options had been granted
pursuant to the executive officer's employment agreement and would have
vested in equal installments over a four-year period.
(3) These options were cancelled effective March 3, 2000, pursuant to the Named
Executive Officer's election under the 2000 Exchange Program. These options
would have vested in equal installments over a three-year period. Options to
purchase 18,000 shares had been granted in March 1999 under the Company's
1998 stock option program and the options to purchase 25,000 and 35,000
shares, respectively, had been granted as special one-time grants in
recognition of additional responsibilities assumed by the Named Executive
Officers.
(4) These options vest in equal installments over a three-year period and were
granted in March 1999 under the Company's 1998 stock option program.
(5) In accordance with rules promulgated by the Securities and Exchange
Commission, the potential realizable value of these grants (on a pre-tax
basis) assumes that the common stock gains 5% or 10% in value per year,
compounded over the 10-year life of the options. These are assumed rates of
appreciation and are not intended to forecast future appreciation of the
Company's common stock.
14
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FISCAL 1999 OPTION VALUES (1)
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR-END IN-THE-MONEY OPTIONS
(#) AT FISCAL YEAR-END ($)(2)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Donna Karan................................... -- -- -- --
John D. Idol (3).............................. 125,000 475,000 -- --
Lee Goldenberg (3)............................ 23,250 52,750 -- 15,613
Joseph B. Parsons (3)......................... 34,500 66,500 -- 21,858
Lynn E. Usdan................................. 4,479 4,771 1,400 553
</TABLE>
- ------------------------
(1) No options were exercised in Fiscal 1999.
(2) The value of in-the-money options assumes the closing sales price of the
common stock underlying the options as of January 2, 2000 ($6.5625).
(3) These options were cancelled, effective March 3, 2000, pursuant to the Named
Executive Officer's election under the 2000 Exchange Program.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors and the Incentive Compensation
Subcommittee thereof. The Compensation Committee, consisting entirely of
non-employee directors, reviews annual salaries and bonuses for all executive
officers and key members of the Company's design teams and management staff, and
reviews and approves the terms and conditions of all employee benefit plans or
changes thereto. The Incentive Compensation Subcommittee reviews and approves
grants of stock options and restricted stock awards pursuant to the Company's
1996 Stock Incentive Plan.
COMPENSATION COMMITTEE PHILOSOPHY
The general philosophy of the Compensation Committee is to link overall
executive compensation with the performance of the Company and the individual
executive. The focus is on both annual and long-term incentives and is designed
to motivate the Named Executive Officers and other key employees of the Company
to achieve and exceed the Company's annual financial and strategic goals. By
providing a combination of incentives to the key employees of the Company, upon
whose efforts and commitment the success and growth of the Company depends, the
Compensation Committee not only rewards those efforts, but also provides a means
by which those employees can share in the growth.
The Company's compensation and benefit programs are designed to promote
desired financial and operational results and thereby create value for the
stockholders, by attracting, motivating and assisting in the retention of key
employees with outstanding ability. The programs also are designed to align the
interests of management with the interests of stockholders of the Company. In
addition, compensation programs are designed to promote teamwork and
resourcefulness on the part of key employees whose performance and
responsibilities directly affect Company profits. In particular, compensation of
a key employee generally is linked to the area in which such employee can have
the greatest impact, whether on a divisional or corporate basis.
ANNUAL COMPENSATION
Base Salary. The Named Executive Officers of the Company who have entered
into employment agreements are compensated in accordance with those agreements,
which were approved by the Board of
15
<PAGE>
Directors or the Compensation Committee. Base salary is reviewed annually.
Increases in base salary are determined primarily by individual performance
rather than Company performance and are based on subjective evaluations of key
qualitative factors that include personal accomplishments, strategic impact, and
contributions to the Company. It is the Company's practice to offer to
management and key employees a competitive salary so as to attract and retain a
group of talented executives.
Ms. Karan's compensation is set by the terms of her employment agreement
with the Company, which agreement was approved prior to the Company's initial
public offering by the then Board of Directors of the Company. The terms of this
agreement are discussed in detail above in the summary of her employment
agreement. In connection with and in support of the restructuring announced by
the Company in November 1999, Ms. Karan agreed that for the balance of fiscal
1999 and for fiscal 2000 and fiscal 2001 her annual base salary will be reduced
to $100,000 (as adjusted for increases in the Consumer Price Index).
Annual Bonus. Pursuant to her employment agreement, a bonus of $326,603 was
paid to Ms. Karan for fiscal 1999, which amount was based on the Company's
adjusted pre-tax profits as set forth in her employment agreement.
Eligible management and key employees, including the Named Executive
Officers (other than Ms. Karan and Mr. Idol), were eligible to participate in
the Company's Executive Incentive Plan (the "EIP"), pursuant to which annual
bonuses are paid if certain specified objectives are met. Under the 1999 Bonus
Program of the EIP, each participant was eligible to receive a bonus equal to a
designated percentage of such participant's base salary (which varied depending
upon the participant's position with the Company), if (i) pre-established
pre-tax net income targets of the Company were met; (ii) specified budget
targets of the participant's division were met; and/or (iii) individual
strategic initiatives in support of the Company's annual corporate goals were
achieved. The program provides that no payments will be made in any fiscal year
in which the Company is not profitable, regardless of divisional performance. In
fiscal 1999, the bonus award to the Named Executive Officers pursuant to the EIP
was based 40% on the attainment of the pre-tax income targets of the Company;
40% on the attainment of specified divisional budget targets; and 20% on the
attainment of specified individual strategic initiatives. The program provides
that the maximum bonus payable to the Named Executive Officers, as a percentage
of base salary, was 100% for the Corporate Executive Vice Presidents and 70% for
the Corporate Senior Vice President.
For fiscal 1999, bonuses paid to the Named Executive Officers under the EIP
reflected the attainment of divisional targets, attainment of the Company's
pre-tax net income goals, and attainment of individual strategic initiatives.
For fiscal 1999, a total of 63 employees received bonuses under the EIP.
In addition to the bonus under the EIP, the Committee awarded a
discretionary bonus to Mr. Parsons as a result of his extraordinary efforts in
fiscal 1999 in achieving a number of the Company's strategic initiatives.
LONG-TERM INCENTIVES
Stock Options and Restricted Stock. The Company adopted the 1996 Stock
Incentive Plan (the "Stock Plan") for the benefit of certain key employees and
consultants of the Company (other than Ms. Karan and Mr. Weiss who are not
entitled to participate in such plan). The purpose of the Stock Plan is to
create a long-term mutuality of interests between such persons and the
stockholders of the Company and to attract and retain executives and other key
employees who are important to the success and growth of the Company. Stock
options have value for an employee only if the price of the Company's stock
increases above its fair market value on the grant date and the employee remains
in the Company's employ for the period required for the stock option to be
exercisable. Restricted stock has value for an employee if the employee remains
in the Company's employ for the period required for the restricted stock award
to vest.
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Under the terms of her employment agreement, Ms. Karan is not entitled to
participate in the Stock Plan, but she is entitled to participate in any other
option plan approved by stockholders. Pursuant to her employment agreement,
under any such future plan, she will be entitled to benefits which are at least
equal to or greater than the benefits received by any other employee of the
Company.
On January 24, 2000, the Incentive Compensation Committee approved the 2000
Exchange Program in order to, among other things, provide the Company's
executive officers with more meaningful equity-based incentives and further the
mutuality of interests between the Company and the named Executive Officers. The
2000 Exchange Program permitted the Company's Named Executive Officers to elect
to have the Company cancel all of their existing vested and unvested options and
receive an award of restricted shares of common stock intended to have the same
economic value as the options, determined on a Black-Scholes basis. The
restricted shares will vest on the third anniversary of the date of grant or
earlier in 20% increments if the common stock trades at price levels ranging
between $12 and $20 per share. Mr. Goldenberg and Mr. Parsons each elected,
under the 2000 Exchange Program, to have all of his vested and unvested options
replaced with an award of restricted stock.
For fiscal 1999, the Company modified its equity award program from previous
years. In lieu of stock options, the Company granted to the Named Executive
Officers restricted shares intended to have the same economic value as the
options that would otherwise have been granted for fiscal 1999. Other than with
regard to grants made to the Chief Executive Officer, one-half of the grant will
be made if divisional targets are achieved and the other half is made regardless
of divisional performance. Under the 1999 Equity Grant Program, grants were made
on March 24, 2000 to the Named Executive Officers based on the achievement of
divisional goals. The restricted shares will vest on the fifth anniversary of
the date of grant or earlier in 20% increments if the common stock trades at
price levels ranging between $12 and $20 per share.
Additionally, in recognition of additional responsibilities assumed by
Mr. Goldenberg and Mr. Parsons, the Committee approved the grant in 1999 to
Mr. Goldenberg and Mr. Parsons of a special one-time option to purchase 25,000
and 35,000 shares, respectively. The options granted had a 10-year term, vested
over a three-year period commencing on the first anniversary of the date of
grant, and had an exercise price equal to the fair market value of the common
stock on the date of grant. These options were cancelled pursuant to the Named
Executive Officer's election under the 2000 Exchange Program.
Deferred Compensation Plan. The Company has adopted a deferred compensation
plan covering eligible management and key employees, including the Named
Executive Officers (other than Ms. Karan and Mr. Idol). In accordance with this
plan, the Company credits a contribution to each participant's plan account
equal to 5% of his or her annual cash compensation, including bonus, provided
the Company has been profitable for such year. Amounts credited to a
participant's account, together with amounts earned thereon, fully vest five
years after participation in the plan. Based on the Company's results for fiscal
1999, each of the Named Executive Officer's plan account was credited under this
plan.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Idol has an employment agreement with the Company which was approved by
the Compensation Committee and the Incentive Compensation Subcommittee. See
"Employment Arrangements" above for a summary of the terms of this agreement and
the bonus plans in effect during the term of his agreement.
For fiscal 1999, Mr. Idol was eligible to receive the Performance Bonus
Award and the Incentive Bonus Award based on the attainment of objective
criteria described in these plans (as described in more detail in the summary of
his employment agreement). For fiscal 1999, the bonus paid to Mr. Idol reflects
the attainment of goals established under the Performance Bonus Award. However,
no bonus was paid under the Incentive Bonus Award.
17
<PAGE>
For fiscal 1999, Mr. Idol was granted a restricted stock award in March 2000
in accordance with the terms of the Equity Grant Program, described above under
the section entitled "Employment Agreement with Mr. Idol." Mr. Idol also
elected, under the 2000 Exchange Program, to have all of his vested and unvested
options replaced with an award of restricted stock.
POLICY WITH RESPECT TO QUALIFYING COMPENSATION DEDUCTIBILITY
The Company's policy with respect to the deductibility limit of Section
162(m) of the Internal Revenue Code of 1986, as amended, generally is to
preserve the federal income tax deductibility of compensation paid when it is
appropriate and is in the best interest of the Company and its stockholders.
However, the Company reserves the right to authorize the payment of
non-deductible compensation if it deems that it is appropriate.
Amounts realized by the Named Executive Officers in connection with awards
of restricted shares under the 2000 Exchange Program and the Equity Grant
Program may be nondeductible under Section 162(m) of the Internal Revenue Code
of 1986, as amended, depending upon the surrounding facts and circumstances.
Nonetheless, the Company believes that the adoption of those programs was
necessary in order to increase stock ownership by the Named Executive Officers
and to further incentivize them.
MEMBERS OF THE COMPENSATION COMMITTEE
ANN MCLAUGHLIN, CHAIRMAN
M. WILLIAM BENEDETTO
JOHN EYLER
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LICENSE AGREEMENT FOR PRINCIPAL TRADEMARKS
Gabrielle Studio, a corporation wholly-owned by Ms. Karan, Mr. Weiss, and
the KW Trust, entered into a license agreement (the "License Agreement") with
the Company. The License Agreement provides for the grant of an exclusive
license throughout the world to use, and to sublicense the right to use, the
trademarks "Donna Karan," "Donna Karan New York," "DKNY," "DK," and all
variations thereof (collectively, the "Licensed Marks") and to use and to
sublicense the right to use the name, signature, and likeness of Ms. Karan (the
"Name") in connection with the design, manufacture, distribution, sale (both at
retail and at wholesale), advertising, marketing, and promotion of products of
any kind, nature, or description except for certain products and other matters,
such as food products, restaurants, toys, and games and in connection with the
provision of certain store services, all of which Gabrielle Studio has licensed
to Ms. Karan.
The License Agreement continues in perpetuity unless earlier terminated as
provided therein. The License Agreement provides that it may be terminated by
Gabrielle Studio upon the failure of the Company to pay any amount due within 60
days of receipt of notice of such failure, or if the Company violates the
quality control provisions of the License Agreement and fails to initiate and
thereafter pursue appropriate corrective action within 60 days after a final
unappealable determination by an arbitration tribunal or court of competent
jurisdiction that such violation has occurred. The License Agreement may be
terminated by Gabrielle Studio upon the occurrence of, among other events, a
change in control of the Company, which includes certain changes in the
ownership of voting securities, an acquisition by a third party of 30% of the
voting securities of the Company, mergers, sales of assets, and changes in the
composition of the Board of Directors. The Company is paying all costs in
connection with the transfer of record ownership of the Licensed Marks to
Gabrielle Studio and all costs associated with the registration, prosecution,
and infringement of the Licensed Marks.
18
<PAGE>
The License Agreement imposes certain obligations on the Company with
respect to the use of sales materials, protection of the Licensed Marks,
indemnification of Gabrielle Studio, the maintenance of public liability
insurance, and quality control of products bearing the Licensed Marks or the
Name. The License Agreement also limits the use of the Licensed Marks in certain
circumstances and in general prohibits any transfer or assignment of the rights
thereunder.
The License Agreement provides that the Company will pay to Gabrielle Studio
an annual royalty equal to 1.75% of the first $250 million of net sales (as
defined in the License Agreement, which includes products and store services)
for such year, plus 2.5% of the next $500 million of net sales for such year,
plus 3% of the next $750 million of net sales for such year, plus 3.5% of all
net sales for such year in excess of $1.5 billion. For purposes of computing the
annual royalty, "net sales" includes sales by the Company, its affiliates, its
subsidiaries, and its sublicensees of products bearing any of the Licensed Marks
or the Name. During fiscal 1999, the Company incurred royalty expense of $25.0
million to Gabrielle Studio pursuant to the License Agreement, of which amount
$10.6 million was accrued in fiscal 1999 but will be paid in fiscal 2000.
REGISTRATION RIGHTS AGREEMENT
In connection with the Company's initial public offering, the Company,
members of the Takihyo Group, Ms. Karan, Mr. Weiss, the KW Trust, and Gabrielle
Studio entered into a registration rights agreement, pursuant to which the
Company granted to members of the Takihyo Group and the Karan/ Weiss Group
certain demand and "piggyback" registration rights. In connection therewith, the
Company has agreed to pay certain expenses related to the registration of
securities under the registration rights agreement.
BOUTIQUE AGREEMENT
On October 29, 1998, the Company and Urban Zen LLC ("Urban Zen"), an entity
of which Ms. Donna Karan is the sole member, entered into a boutique license
agreement granting Urban Zen the right to open and operate a DONNA KARAN NEW
YORK flagship-store in New York City, which is scheduled to open in 2001. The
boutique agreement has an initial five-year term, with two renewal periods at
Urban Zen's option assuming certain conditions are met. The agreement further
provides that the Company will provide Urban Zen with certain management
services in connection with the operation of the store, in exchange for an
annual fee equal to the greater of 3% of sales and $150,000, and that Urban Zen
will be entitled to offer for sale certain non-Company products. In all other
material respects, the boutique license agreement is similar to the Company's
other boutique agreements for DONNA KARAN NEW YORK stores, including provisions
for the sale of Donna Karan merchandise to Urban Zen, minimum purchase
requirements and minimum advertising requirements. It is expected that Ms. Karan
will devote a portion of her time to the Collection Store. Since the boutique
was not open in fiscal 1999, no fees were incurred by Urban Zen under the
boutique agreement.
Additionally, in connection with lease for this store, the Company has
agreed to permit Gabrielle Studio to guarantee Urban Zen's obligations under the
lease.
OTHER AGREEMENTS AND TRANSACTIONS
For a discussion of the voting arrangement between the members of the
Karan/Weiss Group and members of the Takihyo Group, see "ELECTION OF
DIRECTOR--Certain Voting Arrangements."
In addition, in connection with the reorganization of the Company in
connection with its initial public offering the Company agreed to indemnify the
Karan/Weiss Group and the Takihyo Group for certain obligations arising prior to
or as a result of the reorganization.
19
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Mr. Benedetto, Mr. Eyler and Ms.
McLaughlin. Ms. Karan serves as an ex-officio member of such committee. Ms.
Karan is the Chairman of the Board and Chief Designer. Also see "Certain
Relationships and Related Transactions" above, for information with respect to
certain members of the Board of Directors.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on $100
invested on June 28, 1996 through January 2, 2000 (assuming reinvestment of
dividends), with the cumulative total return for the same period on the same
amount invested in the Standard & Poor's 500 Stock Index ("S&P 500") and the
Standard & Poor's Textile/Apparel Index ("S&P Textile Index"). Trading of the
Company's common stock commenced on June 28, 1996, on a when issued basis.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DONNA KARAN INTERNATIONAL INC. S&P 500 S&P TEXTILE-APPAREL ($)
<S> <C> <C> <C>
Jun-96 100 100 100
Dec-96 58.85 117.43 112.11
Dec-97 53.64 149.51 126.64
Dec-98 31.77 192.24 109.59
Dec-99 27.34 232.69 81.79
</TABLE>
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed Ernst & Young LLP, independent auditors, to audit the books and
records of the Company for the 2000 fiscal year.
One or more representatives of Ernst & Young LLP will be present at the
Annual Meeting, will be given an opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
Ratification of the appointment of the independent auditors requires the
affirmative vote of a majority of the votes cast by the holders of the common
stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE THEIR SHARES
FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT
AUDITORS FOR THE COMPANY FOR THE 2000 FISCAL YEAR. PROXIES RECEIVED BY THE
COMPANY WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY IN THEIR PROXY A CONTRARY
CHOICE.
20
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of such securities with the Securities and
Exchange Commission and the New York Stock Exchange. Officers, directors and
greater than ten-percent beneficial owners are required by applicable
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely upon a review of the copies of the forms furnished to the
Company, or written representations from certain reporting persons that no Forms
5 were required, the Company believes that all filing requirements applicable to
its executive officers and directors were complied with during the 1999 fiscal
year.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS AND NOMINATIONS
Any stockholder proposal intended for inclusion in the proxy statement and
form of proxy relating to the Company's 2001 annual meeting of stockholders must
be received by the Company not later than December 14, 2000, pursuant to the
proxy solicitation regulations of the Securities and Exchange Commission.
Pursuant to such rules, if a stockholder notifies the Company after March 1,
2001 of an intent to present a proposal at the Company's 2001 annual meeting of
stockholders, the Company will have the right to exercise its discretionary
voting authority with respect to such proposal, if presented at the meeting,
without including information regarding such proposal in its proxy materials. In
addition, the Company's Restated Certificate of Incorporation requires that
nominations for director may be made by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or by any stockholder of
record entitled to vote for the election of directors who has delivered timely
notice in writing to the Secretary of the Company. To be timely, a stockholder's
notice must be delivered to or mailed and received within the time periods
specified in Rule 14a-8(a)(3) (or any successor rule) of the Securities Exchange
Act of 1934, as amended.
The Company's By-laws further provide that no business may be brought before
an annual meeting except as specified in the Company's notice of meeting or as
otherwise brought before the meeting by or at the direction of the Board or by a
stockholder entitled to vote at such meeting who has given timely written notice
within the time limits noted above for a nomination for the election of a
director. Nothing herein shall be deemed to require the Company to include in
its proxy statement and form of proxy for such meeting any stockholder proposal
which does not meet the requirements of the Securities and Exchange Commission
in effect at the time.
A copy of the full text of the Company's Restated Certificate of
Incorporation and By-laws may be obtained upon written request to the Secretary
of the Company at the address provided above.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not know
of any other matters to be presented for action by the stockholders at the
Annual Meeting. If, however, any other matters not now known are properly
brought before the meeting, the persons named in the accompanying proxy will
vote such proxy in accordance with the determination of a majority of the Board
of Directors.
COST OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally or by telephone by
directors, officers, and employees of the Company, who will not be specially
compensated for such activities. Such solicitations may be made personally or by
mail, facsimile, telephone, or messenger. The Company also has retained
ChaseMellon Shareholder Services Proxy Solicitation to assist in the
solicitation of proxies, at an estimated cost of $4,500, plus reimbursement of
reasonable out-of-pocket expenses. The Company will request persons, firms, and
companies holding
21
<PAGE>
shares in their names or in the name of their nominees, which are beneficially
owned by others, to send proxy materials to and obtain proxies from such
beneficial owners. The Company will reimburse such persons for their reasonable
expenses incurred in that connection.
ADDITIONAL INFORMATION
The Company has filed an Annual Report on Form 10-K for the fiscal year
ended January 2, 2000 with the Securities and Exchange Commission. Stockholders
may obtain, without charge, a copy of the Form 10-K (without exhibits) by
writing to the Investor Relations Department at Donna Karan International Inc.,
550 Seventh Avenue, New York, New York 10018. The exhibits to the Form 10-K are
available upon payment of charges which approximate the Company's cost of
reproduction.
By Order of the Board of Directors,
[/S/ LYNN E. USDAN]
Lynn E. Usdan
SECRETARY
April 14, 2000
STOCKHOLDERS ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
IN THE ENCLOSED ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. YOUR PROMPT RESPONSE WILL BE HELPFUL AND YOUR COOPERATION WILL BE
APPRECIATED.
22
ds<PAGE>
DONNA KARAN INTERNATIONAL INC.
------------------------------
PROXY
The undersigned hereby appoints John D. Idol, Joseph B. Parsons and
Lynn E. Usdan, and each of them, with power of substitution, to represent and
to vote on behalf of the undersigned all of the shares of Donna Karan
International Inc. (the "Company"), which the undersigned is entitled to vote
at the Annual Meeting of Stockholders to be held in the Haft Auditorium at
the Fashion Institute of Technology, 227 West 27th Street, New York, New York
10001 on Thursday, May 25, 2000, at 10:00 a.m. (local time), and at any
adjournment or adjournments thereof, hereby revoking all proxies heretofore
given with respect to such stock, upon the following proposals more fully
described in the notice of and proxy statement for the meeting (receipt of
which is hereby acknowledged).
(TO BE SIGNED ON REVERSE SIDE)
-------------
SEE
REVERSE
SIDE
-------------
<PAGE>
Please mark your
/X/ votes as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (1) AND (2).
1. ELECTION OF DIRECTORS
FOR all nominees listed below (except as marked to the contrary) ( )
WITHHOLD AUTHORITY to vote for all nominees listed below ( )
Nominees: John D. Idol and John Eyler
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below).
---------------------
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE 2000 FISCAL YEAR.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. In their discretion upon such other matters as may properly come before
the meeting.
I will attend the meeting. ( ) I will not attend the meeting. ( )
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
__________________________________________ Date _____________________
Signature
__________________________________________ Date _____________________
Signature if held jointly
Please sign exactly as name appears hereon. Joint owners should each 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.
PLEASE RETURN PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
