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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
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 (S) 240.14a-11(c) or (S) 240.14a-12
COLE KENNETH PRODUCTIONS 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)(4) 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:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
Kenneth Cole
New York
Kenneth Cole Productions, Inc.
152 West 57th Street
New York, NY 10019
April 25, 2000
To our Shareholders:
On behalf of the Board of Directors and management of Kenneth Cole
Productions, Inc., I cordially invite you to attend the Annual Meeting of
Shareholders on Thursday, May 25, 2000 at 10:00 A.M. at the Company's
administrative offices, 2 Emerson Lane, Secaucus, NJ 07094.
The principal matters of business will be the election of six members of the
Board of Directors, to approve the amendment to the certificate of
incorporation to increase the number of authorized shares of Class B Common
stock in order to effectuate the Company's three-for-two stock split, to
approve the Kenneth Cole Productions, Inc. Employee Stock Purchase Plan, and
the ratification of Ernst & Young LLP as the Company's independent auditors.
Additional details about the meeting are contained in the accompanying Notice
of Annual Meeting and Proxy Statement. Certain directors and executive
officers of the Company will be present at the meeting to respond to any
questions that you may have. Accompanying the proxy materials is the Company's
Annual Report to Shareholders for the year ended December 31, 1999. This
report describes certain financial and operational aspects of the Company.
It is important that your shares be represented whether or not you are able to
be present at the Annual Meeting. We are gratified by our shareholder's
continued interest in Kenneth Cole Productions, Inc. and urge you to complete,
sign and date the enclosed proxy card and return it promptly.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Kenneth D. Cole
Kenneth D. Cole
Chairman of the Board of Directors,
President and Chief Executive
Officer
<PAGE>
KENNETH COLE PRODUCTIONS, INC.
152 West 57th Street
New York, NY 10019
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------
May 25, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Kenneth Cole
Productions, Inc. (the "Company"), a New York corporation, will be held on
Thursday, May 25, 2000 at 10:00 A.M. at the Company's administrative offices,
2 Emerson Lane, Secaucus, NJ 07094 for the following purposes:
1. To elect six directors, to serve for a term of one year;
2. To approve the amendment to the certificate of incorporation to increase
the number of authorized shares of Class B Common Stock in order to
effectuate the Company's three-for-two stock split;
3. To approve the Kenneth Cole Productions, Inc. Employee Stock Purchase Plan;
4. To ratify the appointment of Ernst & Young LLP as independent auditors of
the Company to serve for the 2000 fiscal year; and
5. To transact such other business as may properly be brought before the
meeting in connection with the foregoing or otherwise.
The Board of Directors set April 14, 2000, as the record date for the meeting.
This means that shareholders of record at the close of business on that date
are the only shareholders entitled to notice of and to vote at the meeting.
To assure your representation at the meeting, you are requested to fill in,
date and sign the enclosed proxy, which is solicited by the Company's Board of
Directors, and to mail it promptly in the envelope provided. Any shareholder
attending the meeting may vote in person even if he or she previously returned
a proxy.
By Order of the Board of Directors,
New York, New York Stanley A. Mayer
April 25, 2000 Secretary
IMPORTANT
A self-addressed envelope is enclosed for your convenience. No postage is
required if mailed within the United States.
<PAGE>
KENNETH COLE PRODUCTIONS, INC.
152 West 57th Street
New York, NY 10019
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
----------------
May 25, 2000
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Kenneth Cole Productions, Inc., a New York corporation
(the "Company"), of proxies to be used at the Annual Meeting of Shareholders
(the "Annual Meeting"), to be held at the Company's administrative offices, 2
Emerson Lane, Secaucus, NJ 07094, on Thursday, May 25, 2000 at 10:00 A.M. and
at any adjournment or postponement thereof. The approximate date on which this
proxy statement, the foregoing notice and the enclosed proxy were first mailed
or given to shareholders was April 25, 2000.
The principal executive offices of the Company are located at 152 West 57th
Street, New York, New York 10019.
Shareholders who execute proxies retain the right to revoke them at any time
by notice in writing to the Secretary of the Company, by revocation in person
at the Annual Meeting or by presenting a later dated proxy. Unless so revoked,
shares represented by proxies received by the Company, where the shareholder
has specified a choice with respect to the election of directors or the other
proposals described in this proxy statement, will be voted in accordance with
the specification(s) so made. In the absence of such specification(s), the
shares will be voted FOR the election of all six nominees for the Board of
Directors, FOR the amendment to the certificate of incorporation to increase
the number of authorized shares of Class B Common Stock, FOR the approval of
the Kenneth Cole Productions, Inc. Employee Stock Purchase Plan and FOR
ratification of the selection by the Board of Directors of Ernst & Young LLP
as the Company's auditors for the current year. Abstentions and broker non-
votes will not be included in vote totals and will not affect the outcome of
the vote.
The expenses of the solicitation of proxies for the Annual Meeting,
including the cost of preparing, assembling and mailing the enclosed form of
proxy and this proxy statement, will be paid by the Company. Such solicitation
may be made in person or by telephone by officers and employees of the
Company. In addition, the Company has retained Corporate Investor
Communications, Inc. to assist in the search for, and the distribution of
proxies to, beneficial owners of the Company's Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), held in street name or by other
nominees, and will pay such firm a fee of $850, plus reimbursement of direct,
out-of-pocket expenses incurred by such firm in such activity. Upon request,
the Company will reimburse brokers, dealers, banks and trustees, or their
nominees, for reasonable expenses incurred by them in forwarding material to
beneficial owners of shares of Class A Common Stock.
VOTING
On April 14, 2000 the Company had outstanding 12,067,816 shares of Class A
Common Stock, par value $.01 (the "Class A Common Stock") and 5,785,398 shares
of Class B Common Stock, par value $.01 per share (the "Class B Common Stock")
and 28,927 Series A Junior Convertible Participating Preferred Shares, (the
"Series A Convertible Preferred Shares"). Only holders of record of the Class
A Common Stock, the Company's Class B Common Stock and the Series A
Convertible Preferred Shares at the close of business on that date are
entitled to notice of, and to vote at, the Annual Meeting. All of the Class B
Common Stock and the Series A Convertible Preferred Shares are owned directly
or indirectly by Kenneth D. Cole, President and Chief Executive Officer of the
Company.
1
<PAGE>
Under New York law and the Company's By-Laws, the presence in person or by
proxy of a majority of the outstanding shares of the Class A Common Stock, the
Class B Common Stock and the Series A Convertible Preferred Shares, in the
aggregate, is necessary to constitute a quorum at the Annual Meeting. For
these purposes, shares which are present or represented by proxy at the Annual
Meeting will be counted regardless of whether the holder of the shares or the
proxy fails to vote on a proposal ("abstentions") or whether a broker with
authority fails to exercise its authority with respect thereto (a "broker non-
vote"). Abstentions and broker non-votes will not be included, however, in the
tabulation of votes cast on proposals presented to shareholders. With regard
to the election of directors, votes may be cast in favor of or withheld from
each nominee; votes that are withheld (i.e., abstentions and broker non-votes)
will have no effect, as directors are elected by a plurality of votes cast.
Except as otherwise provided in the Company's Restated Certificate of
Incorporation or by law, the holders of the Class A Common Stock, the Class B
Common Stock and the Series A Convertible Preferred Shares vote together as a
single class on all matters to be voted upon at the Annual Meeting and any
adjournment thereof, with each record holder of Class A Common Stock entitled
to one vote per share of Class A Common Stock, and each record holder of Class
B Common Stock entitled to ten votes per share of Class B Common Stock. Each
share of Series A Convertible Preferred Stock entitles the holder thereof to
1000 votes on all matters submitted to a vote of the shareholders of the
Company. The Company's Restated Certificate of Incorporation provides that the
holders of the Class A Common Stock vote separately as a class to elect 25%
(not less than two directors) of the Company's Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 14, 2000 with
respect to the beneficial ownership of the Class A Common Stock and Class B
Common Stock, by (i) each beneficial holder of more than five percent of any
class of the Company's voting securities, (ii) each director and nominee for
director of the Company who owns shares of any class of the Company's voting
securities, (iii) the Company's Chief Executive Officer, and each of the
Company's four most highly compensated executive officers, other than the
Chief Executive Officer and (iv) all directors and executive officers of the
Company as a group. Except as otherwise indicated, each person listed has sole
voting power with respect to the shares beneficially owned by such person. The
Series A Convertible Preferred Shares are convertible into shares of Class B
Common Stock and are included in the table as though converted.
2
<PAGE>
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
-------------------------- -------------------------
Name of Number of Number of
Beneficial Owner Shares Percent Shares Percent
- ---------------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
Kenneth D. Cole (1)...... 9,045,597(3) 41.6% 8,678,098(2) 100.0%
Paul Blum (1)............ 417,903(4) 3.2
Stanley A. Mayer (1)..... 244,500(5) 1.9
Denis F. Kelly........... 133,875(6) 1.0
Robert C. Grayson........ 36,875(7) *
Jeffrey G. Lynn.......... 35,001(8) *
Susan Q. Hudson (1)...... 15,000(9) *
Harry M. Kubetz (1)...... 11,250(10) *
Philip B. Miller......... (11) *
Liz Claiborne, Inc. ..... 1,500,000(12) 11.5
Baron Capital Group...... 1,047,750(13) 8.0
FMR Corp................. 901,950(14) 6.9
Lord Abbett & Co. ....... 834,600(15) 6.4
Nicholas Applegate....... 569,250(16) 4.4
All directors, nominees
for director and execu-
tive officers as a group
(9 persons)............. 9,940,001 45.7% 8,678,098 100.0%
</TABLE>
- --------
* Less than 1.0%
(1) The beneficial owner's address is c/o Kenneth Cole Productions, Inc., 152
West 57th Street, New York, NY 10019.
(2) Includes 28,927 Series A Convertible Preferred Shares held by Mr. Cole,
which have the same rights as 2,892,700 shares of Class B Common Stock and
which will be automatically converted into 2,892,700 shares of Class B
Common Stock upon the approval by the shareholders of Proposal Two and the
increase in the number of shares of Class B Common Stock authorized for
issuance under the Company's Restated Certificate of Incorporation,
(3) Includes (a) 8,471,097 shares which Mr. Cole has the right to acquire
within 60 days upon the conversion of 8,471,097 shares of Class B Common
Stock and (b) 187,500 shares held by KMC Partners of which Mr. Cole is the
living partner with 95% ownership, (b) 150,000 shares held by The Kenneth
Cole 1994 Charitable Remainder Trust, of which Mr. Cole is the sole
trustee, (c) 75,000 shares held by the Kenneth Cole Foundation of which
Mr. Cole is a co-trustee with his wife(d) 19,500 shares held by the Cole
Family Foundation of which Mr. Cole is sole trustee and(e) 142,500 shares
which Mr. Cole has the right to acquire within 60 days upon the exercise
of options granted to him under the Company's 1994 Stock Option Plan.
(4) Includes 171,000 shares which Mr. Blum has the right to acquire within 60
days upon the exercise of options granted to him under the Company's 1994
Stock Option Plan.
(5) Includes (a) 64,500 shares which Mr. Mayer has the right to acquire within
60 days upon the exercise of options granted to him under the Company's
1994 Stock Option Plan and (b) an aggregate of 180,000 shares which Mr.
Mayer has the right to acquire within 60 days upon the exercise of options
granted to him pursuant to certain stock option agreements with the
Company.
(6) Includes 63,750 shares which Mr. Kelly has the right to acquire within 60
days upon the exercise of options granted to him under the Company's 1994
Stock Option Plan. Mr. Kelly's address is c/o Prudential Securities
Incorporated, One New York Plaza, New York, NY 10292.
(7) Includes 21,875 shares which Mr. Grayson has the right to acquire within
60 days upon the exercise of options granted to him under the Company's
1994 stock option plan. Mr. Grayson's address is Robert C. Grayson &
Associates, Inc., 1 Lafayette Place, Greenwich, CT 06830.
3
<PAGE>
(8) Includes 35,001 shares which Mr. Lynn has the right to acquire within 60
days upon the exercise of options granted to him under the Company's 1994
Stock Option Plan. Mr. Lynn's Address is c/o Dunham's Athleisure Corp.,
5000 Dixie Highway, Waterford, Michigan 48329.
(9) Includes 15,000 shares which Ms. Hudson has the right to acquire within 60
days upon the exercise of options granted to her under the Company's 1994
Stock Option Plan.
(10) Includes 11,250 shares which Mr. Kubetz has the right to acquire within
60 days upon the exercise of options granted to him under the Company's
1994 Stock Option Plan.
(11) Mr. Miller's address is Saks Fifth Avenue, 12 East 49th Street, New York,
NY 10017, 19th Floor.
(12) As reported on Schedule 13(g) as filed with the Securities and Exchange
Commission on August 2, 1999.
(13) As reported on Schedule 13(g) as filed with the Securities and Exchange
Commission on February 16, 2000.
(14) As reported on Schedule 13(g) as filed with the Securities and Exchange
Commission on February 14, 2000.
(15) As reported on Schedule 13(g) as filed with the Securities and Exchange
Commission on February 19, 2000.
(16) As reported on Schedule 13(g) as filed with the Securities and Exchange
Commission on February 14, 2000.
PROPOSAL ONE: ELECTION OF DIRECTORS
Six Directors are to be elected at the Annual Meeting to serve for a term of
one year and until their respective successors have been elected and shall
qualify. Each proxy received will be voted FOR the election of the nominees
named below unless otherwise specified in the proxy. If any nominee shall,
prior to the Meeting, become unavailable for election as a director, the
persons named in the accompanying form of proxy will vote in their discretion
for a nominee, if any, that may be recommended by the Board of Directors, or
the Board of Directors may reduce the number of directors to eliminate the
vacancy. At this time, the Board of Directors of the Company knows of no
reason why any nominee might be unable to serve. There are no arrangements or
understandings between any director or nominee and any other person pursuant
to which such person was selected as a director or nominee.
Nominees for Director
The Company's Board of Director has nominated six directors to be elected to
the Board of Directors at the Annual Meeting, Kenneth D. Cole, Paul Blum,
Stanley A. Mayer, Robert C. Grayson, Denis F. Kelly and Philip B. Miller.
Denis F. Kelly and Robert Grayson are the nominees for director for election
by the holders of the Class A Common Stock. The other nominees for director
will be elected by the vote of the holders of the Class A Common Stock and the
holders of the Class B Common Stock and Series A Convertible Preferred Stock
voting together as a single class. Mr. Lynn who has been a Director of the
Company since 1995 is not standing for reelection.
4
<PAGE>
Certain information concerning the nominees is set forth below:
<TABLE>
<CAPTION>
Year Became
Name Age Principal Occupation a Director
---- --- -------------------- -----------
<S> <C> <C> <C>
Kenneth D. Cole......... 46 President and Chief Executive Officer 1982
Paul Blum............... 40 Executive Vice President, Chief Operating Officer 1994
Stanley A. Mayer........ 52 Executive Vice President, Chief Financial Officer, 1994
Treasurer and Secretary
Robert C. Grayson....... 55 Management Consultant 1996
Denis F. Kelly.......... 50 Managing Director, Prudential Securities Inc. 1994
Philip B. Miller........ 62 Chairman, Saks Fifth Avenue 2000
</TABLE>
Kenneth D. Cole has served as the Company's President and Chief Executive
Officer since its inception in 1982. From 1976 through 1982, Mr. Cole was a
senior executive of El Greco, Inc., a shoe manufacturing and design company
which manufactured Candie's women's shoes. Mr. Cole is on the Boards of
Directors of the American Foundation for AIDS Research ("AmFAR") and H.E.L.P.,
a New York agency that provides temporary housing for the homeless. In
addition, Mr. Cole is a Director and President of each of the wholly-owned
subsidiaries of the Company.
Paul Blum has served as Chief Operating Officer since February 1998. He also
has served as Executive Vice President of the Company since May 1996 and as
Senior Vice President from August 1992 until May 1996. Mr. Blum joined the
Company in 1990. From 1982 until 1990, Mr. Blum served as Vice President and
was a principal shareholder of The Blum Co., a fashion accessory firm, certain
assets of which were purchased in 1990 by the Company.
Stanley A. Mayer has served as Executive Vice President, Chief Financial
Officer, Treasurer and Secretary of the Company since March 1988. From 1986
until joining the Company, Mr. Mayer held the position of Vice President-
Finance and Administration of Swatch Watch USA, Inc. Mr. Mayer was the
Controller of the Ralph Lauren and Karl Lagerfeld womenswear divisions of
Bidermann Industries, USA, Inc. from 1979 until 1986. In addition, Mr. Mayer
is the Vice President and Secretary of each of the wholly-owned subsidiaries
of the Company.
Robert C. Grayson, is President of Robert C. Grayson & Associates, Inc. and
Vice Chairman of Berglass-Grayson, consulting firms. From 1992-1996, Mr.
Grayson served initially as an outside consultant to Tommy Hilfiger Corp., a
wholesaler and retailer of men's sportswear and boyswear, and later accepted
titles of Chairman of Tommy Hilfiger Retail, Inc. and Vice Chairman of Tommy
Hilfiger Corp. From 1970 to 1992, Mr. Grayson served in various capacities for
Limited Inc., including President and CEO of Lerner New York from 1985 to
1992, and President and CEO of Limited Stores from 1983 to 1985.
Denis F. Kelly is a Managing Director and the head of the Mergers and
Acquisitions Department at Prudential Securities Incorporated since July 1993.
From 1991 until 1993, Mr. Kelly was President of Denbrook Capital Corp., a
merchant banking firm. Mr. Kelly was at Merrill Lynch from 1980 to 1991, where
he served as Managing Director, Mergers & Acquisitions from 1984 to 1986, and
then as a Managing Director, Merchant Banking, from 1986 to 1991. Mr. Kelly is
a director of MSC Industrial Direct, Inc.
Philip B. Miller is Chairman of Saks Fifth Avenue, an upscale specialty
retailer, and serves as Co-Chairman of Saks Direct, a subsidiary comprising e-
commerce and direct mail businesses. Mr. Miller served as Chairman and Chief
Executive Officer at Saks Fifth Avenue from 1993 to January 2000. Mr. Miller
was formerly Chairman
5
<PAGE>
and Chief Executive Officer at Marshall Fields, joining that company in 1983
from Neiman Marcus, where he had been President since 1977. Prior to that he
served as Vice Chairman at Lord & Taylor and as Vice President and Merchandise
Manager at Bloomingdales. Mr. Miller serves as Senior Vice Chairman of the
Board of Directors of The Lighthouse and also serves on the Board of Directors
of Saks Incorporated, the Metropolitan Opera Guild of New York and the New
York Botanical Gardens.
There are no family relationships among any directors or executive officers
of the Company.
The Board of Directors recommends a vote "FOR" all nominees.
Named Executive Officers
Kenneth D. Cole, Stanley A. Mayer, Paul Blum, Harry Kubetz and Susan Q.
Hudson are the named executive officers of the Company. Mr. Blum and Ms.
Hudson have entered into employment agreements with the Company as described
under the caption "Executive Compensation--Employment Contracts".
Certain information regarding the named executive officers of the Company,
other than Mr. Kubetz and Ms. Hudson, is set forth above.
Harry Kubetz, age 47, has served as Senior Vice President of Operations
since joining the Company in April 1996. Prior to joining the Company, Mr.
Kubetz was President of "No Fear" Footwear, Inc. from 1994 until 1996. From
1992 until 1994 Mr. Kubetz was Executive Vice President of Asco General
Supplies, a Hong Kong company.
Susan Q. Hudson, age 40, has served as Senior Vice President--Wholesale
since February 1998. Ms. Hudson had served as Divisional President--Men's
Footwear since 1996 and as Vice President in charge of men's footwear since
1990. Prior to joining the Company, Ms. Hudson was at LA Gear, where she
served as Regional Sales Manager.
Governance of the Company
In accordance with applicable New York law, the business of the Company is
managed under the direction of its Board of Directors, which establishes the
overall policies and standards for the Company and reviews performance of
management. The directors are kept informed of the Company's operations at
meetings of the Board of Directors and committees of the Board and through
reports, analyses and discussions with management.
The Board of Directors meets quarterly. In addition, significant
communications between the directors and the Company occur apart from the
regularly scheduled meetings of the Board of Directors and its Committees.
During 1999 there were four regularly scheduled meetings of the Board of
Directors. All of the directors attended at least 75% of the aggregate number
of meetings of the Board of Directors.
Committees of the Board of Directors
The Board of Directors of the Company has standing Audit and Compensation
Committees; it does not have a standing Nominating Committee.
The Audit Committee, composed of Mr. Kelly, Mr. Lynn and Mr. Grayson,
represents the Board of Directors in discharging its responsibilities relating
to the accounting, reporting, financial and internal control practices of the
Company. The Committee has general responsibility for reviewing with
management the
6
<PAGE>
financial and internal controls and the accounting, audit, and reporting
activities of the Company. The Committee annually reviews the qualifications
and objectivity of the Company's independent auditors, makes recommendations
to the Board as to their selection, reviews the scope, fees and results of
their audit and is informed of their significant audit findings and
management's responses thereto. During 1999, the Audit Committee met two
times.
The Compensation Committee, composed of Mr. Kelly, Mr. Lynn and Mr. Grayson,
none of whom are current or former employees of the Company, is responsible
for approving salaries, bonuses and other compensation for the Company's Chief
Executive Officer and named executive officers, reviewing management
recommendations relating to new incentive compensation plans and changes to
existing incentive compensation plans, and for administering the Company's
1994 Stock Option Plan, including granting options and setting the terms
thereof pursuant to such plan (all subject to approval by the Board of
Directors). The Committee conducts an annual review of the performance of the
Company's Chief Executive Officer. The Committee is authorized to consult with
independent compensation advisors. During 1999, the Compensation Committee met
two times.
Director Compensation
Directors who are also employees of the Company are not paid any fees or
other remuneration, as such, for service on the Board or any of its
Committees.
Effective May 25, 2000, each non-employee director will receive a retainer
of $4,500 per quarter, a $1,500 increase over prior quarters. In addition,
non-employee directors receive $1,000 for each regularly scheduled quarterly
Board meeting they attend. The Company's 1994 Stock Option Plan provides that
non-employee directors each receive (i) a grant of an option to purchase 5,000
shares of Class A Common Stock upon agreeing to serve as a director, pro rated
based upon the number of months remaining until the next annual meeting of
shareholders and (ii) an annual grant of an option to purchase 5,000 shares of
Class A Common Stock to be made at the first meeting of the Company's Board of
Directors following each annual meeting of shareholders. All options granted
to non-employee directors have a per share exercise price equal to 100% of the
fair market value of one share of Class A Common Stock on the date of grant.
The options granted to the non-employee directors expire ten years from the
date of grant and vest in 50% increments on the first and second anniversaries
of the grant. In addition, non-employee directors are reimbursed by the
Company for all expenses related to meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of the filings furnished to the Company pursuant to Rule
16a-3(e) promulgated under the Securities Exchange Act of 1934 (the "Act") and
on written representations from its executive officers, directors and persons
who beneficially own more than 10% of the Class A Common Stock, the Company
believes that all filing requirements of Section 16(a) of the Act were
complied with during the year ended December 31, 1999.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the aggregate compensation awarded to, earned
by or paid to the Company's Chief Executive Officer and to each of the
Company's four most highly compensated executive officers, other than the
Chief Executive Officer, who were serving as executive officers at December
31, 1999 (together, the "Named Executive Officers"), for services rendered in
all capacities to the Company and its subsidiaries for the years ended
December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
---------------- ----------------------------
Securities
Name and Underlying All
Principal Position Year Salary Bonus Options (2) Compensation (1)
- ------------------ ---- -------- ------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Kenneth D. Cole.............. 1999 $700,000 950,000 112,500
President and Chief 1998 700,000 504,000 112,500
Executive 1997 600,000 245,000 75,000
Paul Blum.................... 1999 450,000 450,000 15,000 8,800
Executive Vice 1998 400,000 240,000 60,000 7,866
President & COO 1997 300,000 140,000 30,000 692
Stanley A. Mayer............. 1999 270,000 190,000 15,000 1,600
Executive Vice 1998 250,000 120,000 30,000 1,600
President & CFO 1997 215,000 93,000 15,000 1,600
Susan Q. Hudson.............. 1999 250,000 125,000 7,500 1,600
Senior Vice President 1998 225,000 67,000 15,000 1,600
1997 175,000 40,000 7,500 1,600
Harry Kubetz................. 1999 240,000 100,000 7,500 1,600
Senior Vice President 1998 220,000 66,000 15,000 654
1997 200,000 20,000 15,000 633
</TABLE>
No stock appreciation rights, long-term incentive plan payouts or restricted
stock awards, as defined in the applicable regulations of the Securities and
Exchange Commission, were awarded to, earned by or paid to any of the Named
Executive Officers during any of the last three years.
- --------
(1) Amounts represent the Company's matching contribution to the 401(k) plan
and for Mr. Blum, it includes a car allowance of $7,200 in 1999 and 1998.
(2) All share amounts have been adjusted to give effect to the Company's
three-for-two stock split on March 6, 2000.
8
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning options to
purchase Class A Common Stock ("Options") granted during 1999 to the Named
Executive Officers (3):
<TABLE>
<CAPTION>
Individual Grants (1)
- ------------------------------------------------------------ Potential Realizable
Percent of Value at Assumed
Total Annual
Number of Options Rates of Stock Price
Securities Granted to Appreciation for
Underlying Employees Exercise Option Term (2)
Options in Fiscal Price Expiration ---------------------
Name Granted Year ($/Share) Date 5% 10%
- ---- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth D. Cole 112,500 26.1% $16.66 3-31-09 $1,179,177 $2,988,267
Paul Blum 15,000 3.5% $18.58 7-1-09 $ 175,304 $ 444,256
Stanley A. Mayer 15,000 3.5% $18.58 7-1-09 $ 175,304 $ 444,256
Harry Kubetz 7,500 1.7% $18.58 7-1-09 $ 87,652 $ 222,128
Susan Q. Hudson 7,500 1.7% $18.58 7-1-09 $ 87,652 $ 222,128
</TABLE>
- --------
(1) All options have a term of 10 years and were granted at a per share price
equal to the fair market value of the Class A Common Stock on the date of
grant. Option grants of 5,000 or greater are exercisable as to 10%, 30%,
50%, 70%, and 100% of the shares underlying the options on the first,
second, third, fourth and fifth anniversaries of the date of grant,
respectively.
(2) The dollar amounts in these columns are the result of calculations at the
five and ten percent rates set by the Securities and Exchange Commission
and are not intended to forecast future appreciation of the Class A Common
Stock.
(3) All share and per share data have been adjusted to give effect to the
Company's three-for-two stock split on March 6, 2000.
Aggregated Option Exercises in Last Year and Fisal Year-End Option Values
The following table sets forth the number and value of unexercised options
held by the Named Executive Officers as of December 31, 1999. None of the
Named Executive Officers exercised any options during 1999.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Year FY End In-The-Money
(#) At FY End ($) (1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Kenneth D. Cole 93,750 281,250 $1,821,563 $4,664,063
Paul Blum 72,000 189,000 1,657,500 3,851,250
Stanley A. Mayer 231,000 66,000 6,516,750 1,145,000
Harry M. Kubetz 6,750 38,250 131,625 674,000
Susan Q. Hudson 11,000 23,500 246,825 394,363
</TABLE>
- --------
(1) The value of unexercised, in-the-money options, is the difference between
the exercise price of the options and the fair market value of the Class A
Common Stock at December 31, 1999 ($30.50).
9
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Company's Board of Directors approves compensation decisions recommended
by the Compensation Committee. Kenneth D. Cole, Paul Blum and Stanley A.
Mayer, each of whom are executive officers and directors of the Company,
participated in the Board's deliberations regarding certain executive
compensation. Mr. Blum received salary and bonus for 1999 pursuant to his
employment agreement with the Company. See "Employment Agreements."
Employment Agreements
The Company presently does not have an employment agreement with Mr. Cole.
However, the Compensation Committee has established Mr. Cole's annual salary
for 2000 at $1,000,000. In addition, Mr. Cole is eligible to receive an annual
incentive bonus in accordance with the Kenneth Cole Productions, Inc. 1999
Bonus Plan. See "Compensation Committee Report on Executive Compensation."
In June 1998, the Company amended its employment agreement with Mr. Blum.
The employment agreement provides for his employment as the Company's Chief
Operations Officer through December 31, 2000. Pursuant to this agreement, Mr.
Blum received an annual base salary in 1999 in the amount of $450,000. In
addition, Mr. Blum is eligible to receive an annual bonus based on the
Company's attainment of varying levels of pre-tax earnings. For the year ended
December 31, 1999, Mr. Blum earned a bonus in the amount of $450,000.
In the event Mr. Blum's employment is terminated by the Company without
"cause," or by him for "Good Reason," (each as defined in the employment
agreement), he will be entitled to receive (i) his base salary through the end
of the term of the agreement, and (ii) an amount equal to one year's bonus
payable in 12 monthly installments. In addition, all outstanding options held
by Mr. Blum will immediately vest. In the event such termination occurs after
a "Change in Control" of the Company (as defined in the employment agreement),
he will receive an additional one year's salary and bonus. These payments are
subject to reduction, at the discretion of the Board, if necessary to ensure
that no portion of such compensation will not be deductible for tax purposes
by reason of Section 280G of the Internal Revenue Code.
Pursuant to an employment agreement, Ms. Hudson is eligible to receive an
annual salary adjustment and bonus incentive in accordance with the criteria
established by the Compensation Committee. The employment agreement contains
non-compete provisions and also provides for severance payments to Ms. Hudson
in the event that the Company terminates Ms. Hudson's employment during the
employment period for any reason other than cause, equal to 12 months salary.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, is responsible for
reviewing and approving the Company's compensation policies and the
compensation paid to the executive officers of the company. No member of the
Committee is an employee of the Company or participant in any of its executive
compensation programs. The Committee obtains input from the full Board and may
consider data provided by independent compensation consultants before taking
action on executive officer compensation.
The Company's compensation and benefit programs are designed to attract,
retain and motivate highly qualified executives and to align executive officer
compensation with the performance of the Company and the
10
<PAGE>
interests of its shareholders. The Company's executive compensation philosophy
also seeks to recognize individual initiative and achievements.
Compensation for the executive officers, including the Named Executive
Officers, consists of base salary, performance based annual incentive cash
bonuses, long term incentive awards in the form of stock options granted under
the 1994 employee stock option plan and other benefits typically offered to
corporate executives.
SECTION 162 (M) OF THE INTERNAL REVENUE CODE OF 1986
It is the Committee's policy to seek to qualify executive compensation for
deductibility under Section 162(m) of the Internal Revenue Code of 1986. The
Committee has reviewed the company's executive compensation structure in light
of the current tax law. The Committee believes that compensation resulting
from grants made under the Kenneth Cole 1994 Employee Stock Option Plan will
be fully deductible when an option is exercised. The Committee also believes
that payments under the Annual Incentive Bonus Plan will be fully deductible.
Withdrawals under the Company's deferred compensation plan may not be fully
deductible to the extent that compensation related to base salary for a
particular executive exceeds the $1 million limit in any tax year.
Executive Officers' 1999 Compensation
Salary
Base salaries for executive officers are initially determined by competitive
requirements to recruit the executive. Base salaries are then reviewed
annually with increases at competitive levels depending upon performance, time
in job, level of pay, participation in other long-term compensation programs
and other factors. Increases in base pay are determined by individual
performance rather than Company performance, and are based on subjective
evaluations.
Annual Incentive Bonus
The Company's Annual Incentive Bonus Plan is designed to allow management to
share in the Company's success based on the company's attainment of varying
levels of pre-tax earnings. At the beginning of each year, the Committee
determines the incentive awards payable at varying levels of pre-tax earnings
achieved by the company. Such awards are expressed as a percentage of year-end
base salary and are payable in cash bonuses after year-end pursuant to this
formula. Potential awards range from 0% to 200% of executive officers base
salaries, based on the actual level of pre-tax earnings achieved each year
relative to the targeted goal, as well as the position of the executive
officer. The performance based component of the award may range from 75% to
100% of the total award, as determined by the Committee at the beginning of
each year.
For 1999 the Company paid annual incentive awards pursuant to this formula
to eight employees, including the named executives, under an award structure
designed to preserve the Company's tax deductions under the $1.0 million
dollar limitation. The plan provided for awards to executive officers other
than the CEO that, at the targeted pre-tax earnings goal, ranged from 20% to
50% of base salary, with an ability to double the awards based upon actual
company performance as defined as income before income taxes. The targeted
award for the CEO is 100% of base salary. The formula determined the 1999
maximum bonus amount and was 100% performance based. However, the Committee
was granted a discretionary component enabling the Committee to reduce the
maximum bonus amount by an amount up to 25%. In no event could the Committee
award a discretionary amount in excess of the performance based maximum
amount. During 1999 the Company exceeded its targeted pre-tax earnings goal,
resulting in a range of executive bonuses from 37% to 135% of base salaries.
11
<PAGE>
Stock Options
Long-term incentive compensation of the Company's executive officers
generally takes the form of stock option grants. The objective of such grants
is to align the financial interests of the executive officers with those of
its shareholders by providing incentives that focus management's attention on
the successful long-term strategic management of the business and appreciation
in shareholder value. All stock option awards are granted with an exercise
price that is the fair value of the Company's Class A Common Stock on the date
of grant. These awards provide value to the executive officers only when and
to the extent that the value of the Company's common stock appreciates over
the value of the date of grant. All employee stock option awards made in 1999
to executive officers have a term of ten years and vest annually over a five
year period.
Compensation of the Chief Executive Officer for 1999
Kenneth D. Cole is the President and Chief Executive Officer of the Company.
Mr. Cole's base salary did not increase in 1999 and remained at $700,000. The
annual incentive bonus portion of Mr. Cole's compensation was based on a
formula comprising the Company's achievement of targeted pre-tax earnings, as
established by the Committee. For 1999, the Company achieved a 55% increase in
pre tax income, well above its targeted pre-tax earnings goal of 25%,
resulting in a bonus for Mr. Cole of $950,000, which equaled 135% of his base
salary. During 1999, Mr. Cole received 112,500 options with an exercise price
of $16.66, the market price of the Class A Common Stock on the date of grant.
The equity grant made to Mr. Cole was based primarily on his past and expected
future contributions to the achievement of the Company's continued growth,
profitability and strategic objectives. Mr. Cole's 2000 performance-based
compensation will be determined in accordance with the Kenneth Cole 1999 Bonus
Plan, which was adopted by the Company and approved by the Company's
Shareholders at the 1999 Annual Meeting of Shareholders.
The Committee believes that the total fiscal year 1999 compensation payable
to Mr. Cole is consistent with the Company's executive compensation philosophy
described above. The Committee also noted that, as depicted by the graph that
follows this report, the cumulative total return achieved by the Company's
shareholders since the Company's initial public offering exceeds the return
for the general and industry-specific indices.
Compensation Committee
Robert C. Grayson
Denis F. Kelly
Jeffrey G. Lynn
12
<PAGE>
Stock Performance Graph
The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Class A Common Stock during the period
beginning on December 31, 1994 and ending on December 31, 1999 with the
cumulative total return on the Standard & Poor's 500 Composite Index and the
Standard & Poor's Footwear Index. The comparison assumes that $100 was
invested on December 31, 1994 in the Class A Common Stock in the foregoing
indices and assumes the reinvestment of dividends.
COMPARISON OF 55 MONTH CUMULATIVE TOTAL RETURN*
AMONG KENNETH COLE PRODUCTIONS, INC., THE S & P 500 INDEX
AND THE S & P FOOTWEAR INDEX
[LINE GRAPH]
Dec-94 100 100 100
Mar-95 121.43 109.74 97.37
Jun-95 158.93 120.21 101.1
Sep-95 167.26 129.77 121.88
Dec-95 178.57 137.58 135.59
Mar-96 170.24 144.97 153.9
Jun-96 188.1 151.47 192.18
Sep-96 179.76 156.16 223.08
Dec-96 147.62 169.17 225.39
Mar-97 200 173.71 237.61
Jun-97 155.36 204.03 226.31
Sep-97 155.36 219.32 210.69
Dec-97 152.98 225.61 151.89
Mar-98 191.67 257.08 170.34
Jun-98 246.43 265.57 183.96
Sep-98 170.83 239.16 134.59
Dec-98 178.57 290.09 148.67
Mar-99 251.19 304.54 208.29
Jun-99 265.48 326.01 229.83
Sep-99 355.95 305.65 202.75
Dec-99 435.71 351.13 176.32
* $100 INVESTED ON 6/3/94 IN STOCK OR ON 5/31/94
IN INDEX, INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
<TABLE>
<CAPTION>
Cumulative
Total Return
------------
<S> <C>
Kenneth Cole Productions, Inc. Class A Common Stock................ $435.71
S & P 500 Composite Index.......................................... $351.13
S & P Footwear Index............................................... $176.32
</TABLE>
13
<PAGE>
CERTAIN RELATIONSHIPS AND OTHER TRANSACTIONS
During 1999, the Company made payments of approximately $112,000 to a
company in connection with the hire and use of an aircraft owned by Cole
Aeronatics, Inc., whereby Kenneth D. Cole is the sole shareholder. All
transactions were made on similar terms and conditions that could have been
obtained with unrelated third parties.
During 1999, the Company made payments of approximately $145,000 for
consulting fees to a Company that Mr. Robert Grayson provides services to as a
contractor...All transactions were made on similar terms and conditions that
could have been obtained with unrelated third parties.
In December 1999, the Board authorized a $500,000 contribution payable to
the Kenneth Cole Foundation, of which Mr. Cole is co-trustee with his wife
Maria Cuomo Cole. The Kenneth Cole Foundation, a not for profit organization,
fosters programs to aid primarily in the fields of education, medical
research, and arts and culture. For many years the Kenneth Cole Foundation has
strived to contribute to the Company's goodwill, and management believes it
continues to serve similar interests to that of the Company.
PROPOSAL TWO
PROPOSAL: AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF CLASS B COMMON STOCK
Reasons for the Increase in Authorized Common Stock
The Certificate of Incorporation currently authorizes the Company to issue
6,000,000 shares of Class B Common Stock. The amendment to the Certificate of
Incorporation will authorize the Company to issue 9,000,000 shares of Class B
Common Stock. As of March 6, 2000, 5,785,398 shares of Class B Common Stock
were outstanding, with 214,602 shares of authorized but unissued Class B
Common Stock remaining available for future issuance. On February 23, 2000,
the Board of Directors declared a three-for-two stock split on the Class A
Common Stock and the Class B Common Stock to be effected in the form of a
stock dividend (the "Stock Spilt"). In order to have effectuated the Stock
Split for the shares of outstanding Class B Common Stock, 2,892,700 shares of
Class B Common Stock would have been required to be issued. As a result of the
insufficient number of authorized shares of Class B Common Stock, on March 27,
2000, the Company issued 28,927 shares of its Series A Convertible Preferred
Shares to the holders of Class B Common Stock in lieu of shares of Class B
Common Stock. Each Series A Convertible Preferred Share is automatically
convertible into 100 shares of Class B Common Stock upon the due authorization
of a sufficient number of Class B Common Stock to permit such conversion.
Accordingly, the Board of Directors has approved a resolution to increase the
number of shares of Class B Common Stock from 6,000,000 to 9,000,000 to permit
the conversion of the Series A Convertible Preferred Shares into shares of
Class B Common Stock, thereby providing the holders of the Class B Common
Stock with the shares of Class B Common Stock that should have been issued to
them pursuant to the Stock Split.
Recommendation and Vote
Approval of this Proposal requires the affirmative vote of a majority of the
votes cast, in person or by proxy, at the Annual Meeting, by the holders of
shares entitled to vote thereon.
The Board of Directors unanimously recommends a vote FOR Proposal Two.
14
<PAGE>
PROPOSAL THREE: APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
PROPOSAL:THE STOCK PURCHASE PLAN PROPOSAL
Subject to the requisite affirmative stockholder vote at the Annual Meeting,
the Board has adopted the Kenneth Cole Productions, Inc. Employee Stock
Purchase Plan (the "Stock Purchase Plan"), under which 150,000 shares of
Common Stock are reserved for issuance.
Purpose and Eligibility
The Stock Purchase Plan, which is intended to qualify under Section 423 of
the Code, is designed to encourage stock ownership by employees of the Company
and the Company's subsidiaries which have been designated by the Board (each,
a "Designated Subsidiary"). The Stock Purchase Plan is also drafted broadly
enough to allow for the inclusion of any future subsidiaries. The following
summary of the Stock Purchase Plan is qualified in its entirety by express
reference to the text of the Stock Purchase Plan, a copy of which is attached
to this Proxy Statement as Appendix A. Generally, individuals who have been
employed by the Company or a Designated Subsidiary for at least six
consecutive months on the Enrollment Date (as defined below) with respect to
an Offering Period (as defined below) and who timely file a subscription
agreement with the Company are eligible to participate in the Stock Purchase
Plan for that Offering Period. No person is eligible to participate who, after
the grant of options under the Stock Purchase Plan, owns (including all shares
which may be purchased under any outstanding options) 5% or more of the total
combined voting power or value of all classes of shares of the Company or of
any parent or subsidiary company. Currently, approximately 500 individuals are
eligible to participate in the Stock Purchase Plan.
Administration
The Stock Purchase Plan is administered by the Compensation Committee of the
Board or such other committee as may be appointed by the Board (the
"Committee"). The Committee has full and exclusive discretionary authority to
construe, interpret and apply the terms of the Stock Purchase Plan, to
determine eligibility, and to adjudicate all disputed claims filed under the
Stock Purchase Plan.
Participation
Each eligible employee electing to participate in the Stock Purchase Plan
must execute and deliver to the Company a subscription agreement which
indicates the amount to be deducted from the participant's paychecks. Such
deduction may not be greater than 10% of the participant's compensation (which
includes wages, salary, overtime, bonus and commissions). Deductions are
accumulated for each calendar quarter ("Offering Periods") which begins on the
first business day after January 1, April 1, July 1 and October 1 of each year
(each, an "Enrollment Date"), respectively, and end on the last business day
which falls on or prior to March 31, June 30, September 30 and December 31 of
each year (each, an "Exercise Date"), respectively. The first Offering Period
began on April 1, 2000.
Purchase of Common Stock
For each Offering Period, on the Enrollment Date the Company will grant to
each participant an option to purchase on the Exercise Date at a price
determined as described below (the "Purchase Price") that number of full and
fractional shares of Common Stock which his or her accumulated payroll
deductions on the Exercise Date will purchase at the Purchase Price. The
Purchase Price for each Offering Period will be the lesser of (i) 85% of the
Fair Market Value (as defined in the Purchase Plan) of the Common Stock on the
Enrollment Date,
15
<PAGE>
or (ii) 85% of the Fair Market Value of the Common Stock on the Exercise Date.
As promptly as practicable after each Exercise Date, the full and fractional
shares of Common Stock purchased for a participant will generally be held by
the Company or deposited by the Company at a brokerage house designated by the
Committee and held for the benefit of the participant until such time as the
participant requests delivery of such shares or requests that any shares be
sold and the proceeds therefrom be distributed to the participant. The closing
price of the Common Stock on the NYSE on April 14, 2000 was $38.125per share.
Withdrawal
A Participant may withdraw all but not less than all of the payroll
deductions credited to his Account and not yet used to exercise his option
under the Plan by giving written notice to the Company at least 30 calendar
days prior to the Exercise Date of an Offering Period. Once a Participant
withdraws from the Plan during an Offering Period, he may not resume
participation until the next Offering Period. Such Participant may resume
participation by delivering to the Company a new Subscription Agreement. Upon
a Participant's ceasing to be an employee of the Company for any reason, he
will be deemed to have elected to withdraw from the Plan, all unused payroll
deductions credited to his Account will be returned to the Participant or, in
the case of his death, his designated beneficiary, and his options will be
automatically terminated.
Limitation
No person shall be granted options which permit his or her right to purchase
Common Stock under the Stock Purchase Plan and any other similar stock
purchase plans of the Company to accrue at a rate which exceeds $25,000 worth
of Common Stock (determined at the Fair Market Value of such stock at date of
grant) for each calendar year in which such options are at any time
outstanding.
Amendment and Termination
The Stock Purchase Plan can be amended or terminated by the Board at any
time, but no such termination may adversely affect rights previously granted.
The Board must seek stockholder approval for amendments to the Stock Purchase
Plan which require such approval pursuant to Section 423 of the Code.
Federal Tax Consequences
The following is a brief discussion of the Federal income tax consequences
of transactions under the Stock Purchase Plan based on the Code. The Stock
Purchase Plan is not qualified under Section 401(a) of the Code, which
provides certain protections to participants in qualified retirement plans.
This discussion does not address all aspects of Federal income taxation and
does not describe state or local tax consequences. Participants in the Stock
Purchase Plan should consult their own tax advisors.
The Stock Purchase Plan is intended to qualify under Section 423(a) of the
Code, which would entitle participants to certain benefits with respect to
transfers of Common Stock under Section 421(a) of the Code. Under Section
421(a), a participant will not be required to recognize income on an
Enrollment Date or on an Exercise Date. Section 423(c) of the Code requires
that, provided the holding periods described below are met, when the shares of
Common Stock acquired during an Offering Period pursuant to the Stock Purchase
Plan are sold or otherwise disposed of in a taxable transaction (or in the
event of the death of the participant while owning such shares whether or not
the holding period requirements are met), the participant will recognize
income subject to Federal income tax as "ordinary income", for the taxable
year in which disposition or death occurs, in an amount equal to the lesser of
(i) the excess of the fair market value of the Common Stock at the time of
16
<PAGE>
such disposition or death over the amount paid for such shares, and (ii) the
excess of the fair market value of the Common Stock on the Enrollment Date of
the applicable Offering Period over the option price, determined on the
Enrollment Date. Such recognition of income upon disposition shall have the
effect of increasing the taxable basis of the shares in the participant's
possession by an amount equal to the income subject to Federal income tax. Any
additional gain or loss resulting from the disposition (provided it is not a
disqualifying disposition), measured by the difference between the amount paid
for the shares and the amount realized (less the amount recognized as income
as described above), will be recognized by the participant as long-term
capital gain or loss. No portion of the amount received pursuant to such a
disposition will be subject to withholding for federal income taxes or be
subject to FICA or FUTA taxes.
The Company will not be entitled to any deduction in the determination of
its taxable income with respect to the Stock Purchase Plan, except in
connection with a disqualifying disposition as discussed below.
In order for a participant to receive the favorable tax treatment provided
in Section 421(a) of the Code, Section 423(a) requires that the participant
make no disposition of the shares acquired during an Offering Period within
two years from the Enrollment Date nor within one year from the Exercise Date
of the Offering Period.
If a Participant disposes of Common Stock acquired pursuant to the Stock
Purchase Plan before the expiration of the holding period requirements set
forth above (a "disqualifying disposition"), the participant will realize, at
the time of the disposition, "ordinary income" to the extent the Fair Market
Value of the Common Stock on the Exercise Date exceeds the amount paid for the
shares. The difference between the fair market value of the Common Stock on
the Exercise Date and the amount realized on disposition is treated as long-
term or short-term capital gain or loss, depending on the participant's
holding period in the Common Stock. The amount treated as "ordinary income"
may be subject to the income tax withholding requirements of the Code and FICA
withholding requirements. At the time of such disqualifying disposition, the
Company will be entitled to deduct an amount in the determination of its
taxable income equal to the amount taken into "ordinary income" by the
participant.
New Plan Benefits
The number of shares of Common Stock purchased under the Stock Purchase Plan
is entirely dependent on each participant's contribution to the Stock Purchase
Plan and the value of Common Stock on the Exercise Date. The Company cannot
forecast the number of shares that will be purchased in the future by any
individual. Therefore, the Company has omitted the tabular disclosure of the
benefits or amounts allocated under the Stock Purchase Plan. Information with
respect to compensation paid and other benefits, including Options, granted
with respect to the 1999 fiscal year to the named executive officers is set
forth in the Summary Compensation Table.
Recommendation and Vote
Approval of this Proposal requires the affirmative vote of a majority of the
votes cast, in person or by proxy, at the Annual Meeting by the holders of
shares entitled to vote thereon.
The Board of Directors unanimously recommends a vote FOR the approval of the
Stock Purchase Plan Proposal.
17
<PAGE>
PROPOSAL FOUR: SELECTION OF AUDITORS
Ernst & Young LLP has been selected by the Board of Directors as the
independent auditors for the current year. Although shareholder ratification
of the Board of Directors' selection is not required, the Board of Directors
considers it desirable for the shareholders to pass upon the selection and, if
the shareholders disapprove of the selection, to consider the selection of
other independent certified public accountants for future years, since it
would be impracticable to replace the Company's independent auditors so late
in the current year.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting and will have the opportunity to make a statement if he desires
to do so and will be available to respond to appropriate questions from
shareholders.
The Board of Directors unanimously recommends a vote FOR the ratification of
the appointment of Ernst & Young as independent auditors.
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Proposals of shareholders intended to be presented at the Annual Meeting of
Shareholders in 2001 must be received by December 1, 2000 in order to be
considered for inclusion in the Company's proxy statement and form of proxy
relating to that meeting. Shareholder proposals should be directed to the
Secretary of the Company, at the address of the Company set forth on the first
page of this proxy statement.
OTHER MATTERS
The Board of Directors does not intend to bring any matter before the Annual
Meeting except as specifically indicated in the notice, nor does the Board of
Directors know of any matters which anyone else proposes to present for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, however, the persons named in the enclosed proxy, will
vote or otherwise act thereon in accordance with their judgment on such
matters.
Copies of the 1999 Annual Report to Shareholders are being mailed
simultaneously with this Proxy Statement. The Company will provide to each
shareholder, without charge and upon written request, a copy of the Company's
Annual Report on Form 10-K. Any such written request should be directed to
Kenneth Cole Productions, Inc., 2 Emerson Lane, Secaucus, New Jersey 07094,
Attn: Investor Relations.
By Order of the Board of Directors,
Stanley A. Mayer
Secretary
18
<PAGE>
KENNETH COLE PRODUCTIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the Company
-------
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Code. The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Committee" shall mean the Compensation Committee of the Board, or
---------
such other committee as may be appointed by the Board, which shall be the
administrative committee for the Plan.
(d) "Common Stock" shall mean the Class A Common Stock of the Company,
------------
$0.01 par value per share.
(e) "Company" shall mean Kenneth Cole Productions, Inc., a New York
-------
corporation.
(f) "Compensation" shall mean all wages, salary, overtime, bonuses,
------------
and commissions.
(g) "Designated Subsidiaries" shall mean the Subsidiaries which have
-----------------------
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(h) "Employee" shall mean any individual who is an employee of the
--------
Company or a Designated Subsidiary for purposes of tax withholding under the
Code whose customary employment with the Company or any Designated Subsidiary is
at least twenty (20) hours per week and who has been employed by the Company or
any Designated Subsidiary for a period of at least six consecutive months. For
purposes of the Plan, the employment relationship shall be treated as continuing
intact while the individual is on sick leave or other leave of absence approved
by the Company. Where the period of leave exceeds 90 days and the individual's
right to reemployment is not guaranteed either by statute or by contract, the
employment relationship will be deemed to have terminated on the 91st day of
such leave.
<PAGE>
(i) "Enrollment Date" shall mean the first Trading Day of each
---------------
Offering Period.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(k) "Exercise Date" shall mean the last Trading Day of each Offering
-------------
Period.
(l) "Fair Market Value" shall mean, as of any date, the value of
-----------------
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ"), its Fair Market Value shall be the closing sale
price for the Common Stock (or the average of the closing bid and asked prices,
if no sales were reported), as quoted on such exchange (or the exchange with the
greatest volume of trading in Common Stock) or system on the date of such
determination, if such date is a Trading Day, or if such date is not a Trading
Day, then on the Trading Day immediately preceding such date, as reported in The
Wall Street Journal or such other source as the Board deems reliable; or
(2) If the Common Stock is quoted on NASDAQ (but not on the
National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the average of the closing bid and asked prices for the Common Stock on
the date of such determination, if such date is a Trading Day, or if such date
is not a Trading Day, then on the Trading Day immediately preceding such date,
as reported in The Wall Street Journal or such other source as the Board deems
reliable; or
(3) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board.
(m) "Offering Period" shall mean, subject to the second sentence of
---------------
Section 4 hereof, each fiscal quarter commencing on the first Trading Day on or
after January 1, April 1, July 1, and October 1 and ending on or prior to the
last calendar day of each such quarter; provided, however that, unless otherwise
determined by the Committee, the first Offering Period shall commence on April
1, 2000 and shall end on June 30, 2000.
(n) "Parent" shall mean a corporation which is a "parent corporation"
------
of the Company within the meaning of section 424(e) of the Code.
2
<PAGE>
(o) "Plan" shall mean this Kenneth Cole Productions, Inc. Employee
----
Stock Purchase Plan.
(p) "Purchase Price" shall mean an amount equal to 85% of the Fair
--------------
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(q) "Reserves" shall mean the number of shares of Common Stock covered
--------
by each option under the Plan which have not yet been exercised and the number
of shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(r) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange
----------
Act or any successor provision.
(s) "Subsidiary" shall mean a corporation which is a "subsidiary
----------
corporation" of the Company within the meaning of section 424(f) of the Code.
(t) "Trading Day" shall mean a day on which national stock exchanges
-----------
and NASDAQ are open for trading.
3. Eligibility.
-----------
(a) Each person who is an Employee, on a given Enrollment Date, shall
be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee would own Common Stock (together with stock owned by any
other person or entity that would be attributed to such Employee pursuant to
section 424(d) of the Code) of the Company (including, for this purpose, all
shares of stock subject to any outstanding options to purchase such stock,
whether or not currently exercisable and irrespective of whether such options
are subject to the favorable tax treatment of section 421(a) of the Code)
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Parent or Subsidiary, or (ii)
which permits his or her rights to purchase stock under all employee stock
purchase plans (within the meaning of section 423 of the Code) of the Company
and its Parents and Subsidiaries to accrue at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) worth of Common Stock (determined at the Fair Market
Value of the Common Stock at the time such option is granted) for each calendar
year in which such option is outstanding at any time. The limitation described
in clause (ii) of the preceding sentence shall be applied in a manner consistent
with Section 423(b)(8) of the Code.
4. Offering Periods. The Plan shall be implemented by consecutive Offering
----------------
Periods continuing from the first Offering Period until terminated in accordance
with Section 19 hereof.
3
<PAGE>
The Board shall have the power to change the duration of Offering Periods
(including the commencement dates thereof) with respect to future offerings
without stockholder approval if such change is announced at least fifteen (15)
days prior to the scheduled beginning of the first Offering Period to be
affected thereafter.
5. Participation.
-------------
(a) An Employee may become a participant in the Plan for an Offering
Period by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Committee no later
than the 20th day of the month immediately prior to the applicable Enrollment
Date, unless a later time for filing the subscription agreement is set by the
Board for all Employees with respect to a given Offering Period.
(b) Payroll deductions for a participant shall commence on the first
payroll date on or following the Enrollment Date and shall end on the last
payroll date in the Offering Period to which such authorization is applicable,
unless sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount (expressed as a whole number percentage) not
exceeding ten percent (10%) of the Compensation which he or she receives on each
pay day during the Offering Period; provided, however, that the maximum number
of shares and fractions thereof which may be purchased by any participant during
any Offering Period is the number of shares and fractions thereof equal to
$25,000 minus the Fair Market Value of the number of shares of Common Stock and
fractions thereof previously purchased during such calendar year, such Fair
Market Value determined as of each such prior Enrollment Date during the
calendar year with respect to which the shares were previously purchased,
divided by the Fair Market Value of the Common Stock on the Enrollment Date for
the current Offering Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and will be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
with respect to any Offering Period, as provided in Section 10 hereof, within 30
calendar days prior to the Exercise Date for such Offering Period. Once an
Offering Period has commenced, a participant may not increase or decrease the
rate of his or her payroll deductions for that Offering Period, but may, during
that Offering Period, increase or
4
<PAGE>
decrease the rate of his or her payroll deductions for the next succeeding
Offering Period, by completing or filing with the Committee a new subscription
agreement, no later than the 20th day of the month immediately prior to the end
of that Offering Period, authorizing a change in payroll deduction rate. A
participant's subscription agreement shall remain in effect for successive
Offering Periods unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, a participant's payroll deductions
may be decreased to 0% (i) at any time, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, and (ii) for each
Offering Period, at such time during such Offering Period that the aggregate
Fair Market Value of the shares of Common Stock and fractions thereof (measured
as of the date of each respective Enrollment Date) previously purchased when
added to the Fair Market Value of the shares of Common Stock and fractions
thereof to be purchased with respect to such then current Offering Period equals
or would exceed $25,000 in such calendar year. Subject to the preceding
sentence, payroll deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the next succeeding
Offering Period, unless terminated by the participant as provided in Section 10
hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Common Stock issued under the Plan is disposed of,
the participant must make adequate provisions for the Company's federal, state,
or other tax withholding obligations, if any, which arise upon the exercise of
the option or the disposition of the Common Stock. At any time, the Company may,
but will not be obligated to, withhold from the participant's compensation the
amount necessary for the Company to meet applicable withholding obligations,
including any withholding required to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of Common Stock
by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
---------------
Employee participating in such Offering Period shall be granted an option to
purchase on the Exercise Date of such Offering Period (at the applicable
Purchase Price) up to a number of shares of the Company's Common Stock and
fractions thereof determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the participant's
account as of the Exercise Date by the applicable Purchase Price; provided,
--------
however, that the maximum number of shares and fractions thereof which may be
- -------
purchased by any participant during any Offering Period is the number of shares
equal to $25,000 minus the Fair Market Value of the number of shares of Common
Stock and fractions thereof previously purchased during such calendar year, such
Fair Market Value determined as of each such prior Enrollment Date during the
calendar year with respect to which the shares were previously
5
<PAGE>
purchased, divided by the Fair Market Value of the Common Stock on the
Enrollment Date for the current Offering Period, and provided, further, that
-------- -------
such purchase shall be subject to the limitations set forth in Sections 3(b) and
12 hereof. Exercise of the option shall occur as provided in Section 8 hereof,
unless the participant has withdrawn pursuant to Section 10 hereof, and shall
expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in Section 10 hereof, his or her option for the purchase of shares and
fractions thereof will be exercised automatically on the Exercise Date, and,
subject to the limitations set forth in Sections 3(b), 7 and 12 hereof, the
maximum number of full and fractional shares subject to option shall be
purchased for such participant at the applicable Purchase Price with the
accumulated payroll deductions in his or her account. During a participant's
lifetime, a participant's option to purchase shares and fractions thereof
hereunder is exercisable only by the participant.
9. Crediting of Shares and Delivery or Sale of Shares. As promptly as
--------------------------------------------------
practicable after each Exercise Date on which a purchase of shares and fractions
thereof occurs, the Company shall arrange for the full and fractional shares of
Common Stock to be held by the Company on behalf of the participant or deposited
or credited in the brokerage account of each participant at a brokerage house
designated by the Committee. The shares and fractional shares shall be held by
the Company or in such brokerage account until such time as the participant, or
his or her designated beneficiary or estate in the event of a participant's
death, requests delivery of a stock certificate representing any full shares of
Common Stock or requests that any shares be sold and the proceeds therefrom be
distributed to such participant. Upon the request of a participant, or his or
her designated beneficiary or estate in the event of a participant's death, any
fractional shares of Common Stock will be distributed in cash in the form of a
check having a value equal to the value of such fractional shares.
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan by giving written notice to the Committee in the form
of Exhibit B to this Plan at least 30 calendar days prior to the Exercise Date
of an Offering Period. All of the participant's payroll deductions credited to
his or her account will be paid to such participant promptly after receipt of
notice of withdrawal and such participant's option for the Offering Period will
be automatically terminated, and no further payroll deductions for the purchase
of shares will be made during the Offering Period. If a participant withdraws
from the Plan during an Offering Period, he or she may not resume participation
until the next
6
<PAGE>
Offering Period. He or she may resume participation for any other Offering
Period by delivering to the Company a new subscription agreement no later than
the 20th day of the month immediately prior to the Enrollment Date for such
Offering Period.
(b) Upon a participant's ceasing to be an Employee, for any reason, he
or she will be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option will be distributed to such participant or,
in the case of his or her death, to the person or persons entitled thereto under
Section 14 hereof, and such participant's option will be automatically
terminated. Withdrawal on account of a termination of employment shall be
effected as soon as practicable following such termination. Any shares of Common
Stock and fractions thereof held by the Company or in the brokerage account of
such participant shall remain in such account until such participant or, in the
case of his or her death, the person or persons designated under Section 14
hereof, request that a certificate representing the full shares be distributed
and the fractional shares cashed-out or that such shares be sold and the
proceeds from the sale distributed to the participant, or such other person.
(c) A participant's withdrawal from an Offering Period will not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company.
11. Interest.
--------
No interest or other increment shall accrue or be payable with respect
to any of the payroll deductions of a participant in the Plan.
12. Stock.
-----
(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan shall be 150,000 shares, subject to adjustment
upon changes in capitalization of the Company as provided in Section 18 hereof.
Such shares may be shares to be newly issued by the Company, shares acquired on
the open market solely for the purpose of satisfying the exercise of options
hereunder or treasury shares reacquired and held by the Company. If on a given
Exercise Date the number of shares with respect to which options are to be
exercised exceeds the number of shares then available under the Plan, the
Committee shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) No participant will have an interest or voting right in shares
covered by his option until such option has been
7
<PAGE>
exercised. All full shares of Common Stock held by the Company or in a
participant's brokerage account on behalf of a participant shall be voted by
such participant. Dividends accruing on shares of Common Stock, if any, held by
the Company or in a participant's brokerage account shall be paid to such
participant in the normal course as if such participant held the shares. There
shall be no voting or dividend rights with respect to fractional shares.
(c) Shares of Common Stock and fractions thereof held by the Company
or to be deposited into a participant's brokerage account under the Plan will be
registered in the name of the participant.
13. Administration.
--------------
(a) Administrative Body. The Plan shall be administered by the
-------------------
Committee. The Committee shall have full and exclusive discretionary authority
to construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. The Committee shall
also have authority to develop, amend and terminate rules governing the
operation of the Plan in conformity with the terms of the Plan. Every finding,
decision and determination made by the Committee shall, to the full extent
permitted by law, be final and binding upon all parties.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
----------------------
Subsection (a) of this Section 13, in the event that Rule 16b-3 provides
specific requirements for the administrators of plans of this type, the Plan
shall be only administered by such a body and in such a manner as shall comply
with the applicable requirements of Rule 16b-3.
14. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive the rights to any shares of Common Stock and fractions thereof
held by the Company or in the participant's brokerage account under the Plan in
the event of such participant's death subsequent to an Exercise Date on which
the option is exercised but prior to distribution of such shares to such
participant. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under the
Plan.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the executor or administrator of the
estate of the participant shall have all the rights to the cash and or shares of
Common Stock and fractions thereof attributable
8
<PAGE>
to such participant or his or her brokerage account under the Plan.
15. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares or fractions thereof under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other than by will,
the laws of descent and distribution or as provided in Section 14 hereof) by the
participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds from an Offering Period in accordance with
Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees at
least annually, within such time as the Committee may reasonably determine,
which statements will set forth the amounts of payroll deductions, the Purchase
Price, the number of shares and fractions thereof purchased and held in the
participant's brokerage account.
18. Adjustments Upon Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for (i) any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company or (ii) in
the event of any change in applicable laws or any change in circumstances which
results in or would result in any substantial dilution or enlargement of the
rights granted to, or available for, participants in the Plan, or which
otherwise warrants equitable adjustment because it interferes with the intended
operation of the Plan; provided, however, that conversion of any convertible
-------- -------
securities of the Company shall not be deemed to have been "effected without
receipt of consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
9
<PAGE>
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Board shortens the Offering
Period then in progress in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify each participant in writing, at
least thirty-five (35) calendar days prior to the New Exercise Date, that the
Exercise Date for his option has been changed to the new Exercise Date and that
his or her option will be exercised automatically on the new Exercise Date,
unless prior to such date he or she has withdrawn from the Offering Period as
provided in Section 10 hereof. For purposes of this paragraph, an option granted
under the Plan shall be deemed to be assumed if, following the sale of assets or
merger, the option confers the right to purchase, for each share of Common Stock
subject to the option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property) received in
the sale of assets or merger by holders of Common Stock for each share of Common
Stock held on the effective date of the transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided,
--------
however, that if such consideration received in the sale of assets or merger was
- -------
not solely common stock of the successor corporation or its parent (as defined
in Section 424(e) of the Code), the Board may, with the consent of the successor
corporation and the participant, provide for the consideration to be received
upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in Fair Market Value to the per share
consideration received by holders of Common Stock in the sale of assets or
merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
10
<PAGE>
19. Amendment or Termination.
------------------------
(a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 18 hereof, no such termination may
adversely affect options previously granted; provided, that an Offering Period
may be terminated by the Board on any Exercise Date if the Board determines that
the termination of the Plan is in the best interests of the Company and its
stockholders. Except as provided in Section 18 hereof, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law or regulation),
the Company shall obtain stockholder approval in such a manner and to such a
degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or the Committee) shall be entitled to change the Offering Periods, limit
the frequency or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods or accounting and crediting procedures
to ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's
Compensation, and establish such other limitations or procedures as the Board
(or the Committee) finds, in its sole discretion, advisable and consistent with
the Plan.
20. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder and the requirements of any stock exchange upon which the
shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to
11
<PAGE>
represent and warrant at the time of any such exercise that the shares are being
purchased only for investment and without any present intention to sell or
distribute such shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned applicable provisions of
law.
22. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board or its approval by the stockholders of the
Company. It shall continue in effect for a term of ten (10) years thereafter
unless sooner terminated under Section 19 hereof.
23. Governing Law. The Plan shall be governed by and construed in
-------------
accordance with the internal laws of the State of New York applicable to
contracts made and performed within such state, without regard to the principles
of conflicts of law thereof, except as such laws may be supplanted by the
federal laws of the United States of America, which laws shall then govern its
effect and its construction to the extent they supplant New York law.
12
<PAGE>
EXHIBIT A
---------
KENNETH COLE PRODUCTIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
___ Original Application Enrollment Date:
___ Change in Payroll Deduction Rate
___ Change of Beneficiary(ies)
1. ______________________________________________ hereby elects to participate
in the Kenneth Cole Productions, Inc. Employee Stock Purchase Plan (the
"Stock Purchase Plan") and subscribes to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
_____% (a whole number not to exceed 10%) of my Compensation on each payday
during the Offering Period in accordance with the Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions will be accumulated for the
purchase of shares of Common Stock and fractions thereof at the applicable
Purchase Price determined in accordance with the Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option on the Exercise Date.
4. I have received a complete copy of the Stock Purchase Plan. I understand
that my participation in the Stock Purchase Plan is in all respects subject
to its terms.
5. Shares and fractions thereof purchased for me under the Stock Purchase Plan
should be issued in the name of (Employee Only): __________________________
___________________________________________________________________________.
I understand that shares and fractions thereof purchased by me under the
Stock Purchase Plan will be held in an account for me by the Company or in
an account maintained by a brokerage house designated by the Committee until
I request delivery of such shares and cash-out of the fractional shares.
6. I understand that, under current Federal income tax law, if I dispose of any
shares received by me pursuant to the Stock Purchase Plan within two years
after the Enrollment Date (i.e., within two years after the first day of the
Offering
1
<PAGE>
Period during which I purchased such shares), I will be treated for Federal
income tax purposes as having made a disqualifying disposition, and as
having received ordinary income at the time of such disposition in an amount
equal to the excess of the Fair Market Value of the shares at the time such
shares were delivered to me over the price which I paid for the shares. The
remainder of the gain, if any, recognized on such disqualifying disposition
will be taxed as capital gain. I hereby agree to notify the Company in
writing within 30 days after the date of any disqualifying disposition of my
shares and I will make adequate provision for federal, state or other tax
withholding obligations, if any, which arise upon such disqualifying
disposition. The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or disqualifying
disposition of Common Stock by me.
7. I hereby agree to be bound by the terms of the Stock Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Stock
Purchase Plan:
Name: (Please Print)
________________________________________________________________________________
(Last) (First) (Middle)
______________________ ________________________________________________
Relationship
________________________________________________
(Address)
2
<PAGE>
Name: (Please Print)
________________________________________________________________________________
(Last) (First) (Middle)
______________________ ________________________________________________
Relationship
________________________________________________
(Address)
Employee's Social
Security Number: ________________________________________________
Employee's Address: ________________________________________________
________________________________________________
________________________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ____________________ ________________________________________________
Signature of Employee
3
<PAGE>
EXHIBIT B
---------
KENNETH COLE PRODUCTIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Kenneth Cole
Productions, Inc. Employee Stock Purchase Plan (the "Plan") which began on
________________________, _________ (the "Enrollment Date") hereby notifies
the Company that he or she hereby withdraws from the Offering Period. The
undersigned hereby directs the Company to pay to the undersigned as promptly as
practicable all the payroll deductions credited to his or her account with
respect to such Offering Period. The undersigned understands and agrees that his
or her option for such Offering Period will be automatically terminated. The
undersigned understands further that no further payroll deductions will be made
for the purchase of shares in the current Offering Period and the undersigned
shall thereafter be eligible to participate in succeeding Offering Periods only
by delivering to the Company a new Subscription Agreement within the time period
set forth in Section 10 of the Plan.
Name and Address of Participant
_____________________________________________
_____________________________________________
_____________________________________________
Signature:
_____________________________________________
Date: _______________________________________
1
<PAGE>
3318
1. Election of FOR all nominees WITHHOLD AUTHORITY *EXCEPTIONS
Directors listed below to vote for all
nominees listed
below.
Nominees: Paul Blum, Kenneth D. Cole, Robert C. Grayson, Denis F. Kelly, Stanley
A. Mayer, Phillip B. Miller
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below.)
*Exceptions____________________________________________________________________
2. To approve the amendment to the certificate of incorporation to increase the
number of authorized shares of Class B Common Stock in order to effectuate
the Company's three-for-two stock split.
FOR AGAINST ABSTAIN
3. To approve the Kenneth Cole Productions, Inc. Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN
4. To ratify the selection by the Board of Directors of Ernst & Young LLP as
independent public accountants for the Company for the fiscal year ending
December 31, 2000.
FOR AGAINST ABSTAIN
Change of Address or
Comments Mark Here
Please sign exactly as the 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 and affix corporate seal. If
a partnership, please sign in partnership name
by general partner.
Dated:____________________________________, 2000
________________________________________________
Signatures
________________________________________________
Signatures
Votes must be indicated
[x] in Black or Blue Ink. X
(Please sign, date and return this proxy in the enclosed postage paid envelope.)
<PAGE>
KENNETH COLE PRODUCTIONS, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2000
Solicited on Behalf of the Board of Directors
The undersigned hereby authorizes Kenneth D. Cole and Stanley A. Nayer,
and each of them individually, with power of substitution, to vote and otherwise
represent all of the shares of Class A Common Stock of Kenneth Cole Productions,
Inc., (the "Company"), held of record by the undersigned, at the Annual Meeting
of Shareholders of the Company to be held at the Company's administrative
offices, 2 Emerson Lane, Secaucus, N.J. 07094, on Thursday, May 25, 2000 at
10:00 a.m. local time, and any adjournment(s) thereof, as indicated on the
reverse side hereof.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement dated in each case, April 25, 2000. All other
proxies heretofore given by the undersigned to vote shares of the Company's
Class A Common Stock are expressly revoked.
The shares represented by this proxy will be voted as described on the
reverse hereof by the Shareholder. If not otherwise directed, this proxy will be
voted FOR the election as directors of all nominees nominated in Item 1 and FOR
proposals 2, 3 and 4.
(Continued and to be dated and signed on the reverse side.)
KENNETH COLE PRODUCTIONS, INC.
P.O. BOX 11397
NEW YORK, N.Y. 10203-0397
