SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): April 23, 2002
--------------
CANDIE'S, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-10593 11-2481903
- ------------------------------------------- -------------- --------------------
(State or other jurisdiction Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
400 Columbus Avenue, Valhalla, New York 10595
- ------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914)769-8600
-------------
- ----------------------------------------------------------------
Former name or former address, if changed since last report
Item 2. Acquisition or Disposition of Assets.
On April 23, 2002 Candie's, Inc. (the "Registrant"), acquired from Sweet
Sportswear, LLC ("Sweet"), Sweet's 50% interest in Unzipped Apparel, LLC
("Unzipped") (the "Acquisition"), pursuant to a binding term sheet, dated as of
April 23, 2002 (the "Purchase Agreement"), by and among the Registrant, the
Registrant's wholly-owned subsidiary, Michael Caruso & Co., Inc. ("Caruso") and
Sweet. The Registrant and Sweet had formed Unzipped in October 1998 for the
purpose of marketing and distributing apparel under the BONGO (R) trademark
which trademark is owned by the Registrant.
Prior to the Acquisition, Caruso and Sweet each owned a 50% interest in
Unzipped and the operations of Unzipped were governed by the terms of a Limited
Liability Operating Agreement by and among Caruso, Sweet and Unzipped (the
"Operating Agreement").
As consideration for the Acquisition, the Registrant agreed to issue to
Sweet, 3,000,000 shares of the Registrant's common stock and $11.0 million of 8%
senior preferred stock. The Registrant will be required to redeem the preferred
stock in 2012. In addition, the Registrant agreed to enter into a three-year
management agreement with Sweet or its designee that provides for Sweet or its
designee to manage the operations of Unzipped in return for a management fee
which is based upon certain specified percentages of net income that Unzipped
achieves during the three-year term.
The consideration paid by the Registrant for Sweet's interest in Unzipped
was determined by negotiations among the representatives of the Registrant,
Caruso and Unzipped, after taking into account the obligation the Registrant
would have had under Section 12.1 of the Operating Agreement to purchase Sweet's
interest in Unzipped during 2003.
In conjunction with the Acquisition:
The Registrant agreed to file a registration statement with respect to the
3,000,000 shares of its common stock being issued to Sweet within 60 days from
the date of the Purchase Agreement and Sweet agreed to vote the shares at the
direction of the Registrant's Board of Directors. Sweet also agreed to certain
restrictions on its ability to sell the 3,000,000 shares.
The Registrant agreed to cause Unzipped to renew its supply agreement with
Azteca Production International, Inc. ("Azteca"), for a three-year period.
The Registrant agreed to cause Unzipped to renew its distribution agreement
with Apparel Distribution Services ("ADS")for a three-year period.
The Registrant agreed to appoint Hubert Guez, to the Registrant's Board of
Directors. Mr. Guez is a 50% beneficial owner and manager of Sweet and a 50%
beneficial owner of and the Chairman and Chief Executive Officer of ADS. The
remaining 50% interest in Sweet and ADS is owned by Mr. Guez' brother. Mr. Guez
is also the Chief Executive Officer and President of Azteca.
The Registrant agreed that on or before February 1, 2003, it will pay
Azteca for all receivables due from Unzipped for purchases of product that are
more than 30 days past due and pay the commercial loan note between Unzipped and
Azteca, which had an unpaid principal balance of approximately $7.0 million on
April 23, 2002. In addition, the Registrant agreed to release Mr. Guez, Azteca
and each of their affiliates from any obligation, including obligations as a
guarantor with respect to Unzipped's line of credit with Congressional
Financial.
In connection with the transaction, the Registrant also agreed to issue
warrants for the benefit of Sweet on terms acceptable to Sweet and the
Registrant.
The descriptions of the terms of the Purchase Agreement and other
agreements described herein are qualified in their entirety by reference to the
copy of the Purchase Agreement and the other agreements which are filed as
exhibits to this Report and which are incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
A. Financial Statements of the Business Acquired.
It is impractical to provide the required financial information of Unzipped
at this time. The required financial information for Unzipped will be filed
within 60 days of the date this Form 8-K was required to be filed.
B. Pro Forma Financial Information and Exhibits.
It is impracticable to provide the required pro forma financial information
at this time. The required pro forma financial information will be filed within
60 days of the date this Form 8-K was required to be filed.
C. Exhibits
Exhibit 2.1 - Term Sheet, dated as of April 23, 2002, by and among the
Registrant, Caruso and Sweet.
Exhibit 99.1 - Limited Liability Operating Agreement of Unzipped.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CANDIE'S, INC.
By:/s/Neil Cole
------------------------------------
Neil Cole, President
Date: May 8, 2002