UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement
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14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Materials Pursuant to ss. 240.14a-12
E COM VENTURES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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E COM VENTURES, INC.
251 INTERNATIONAL PARKWAY
SUNRISE, FLORIDA 33325
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 14, 2004
To our Shareholders:
The Annual Meeting of Shareholders of E Com Ventures, Inc. will be held at
11:00 a.m. on, December 14, 2004, at the E Com Ventures, Inc. Corporate Office,
251 International Parkway, Sunrise, Florida 33325, for the purpose of
considering and acting upon the following:
1. Election of five members to our Board of Directors to hold office
until our 2005 Annual Meeting of Shareholders or until their
successors are duly elected and qualified;
2. Ratification of the appointment of Deloitte & Touche LLP as our
independent public accountants; and
3. Any other matters that properly come before the Annual Meeting.
The Board of Directors is not aware of any other business scheduled for
the Annual Meeting. Any action may be taken on the foregoing proposals at the
Annual Meeting on the date specified above, or on any date or dates to which the
Annual Meeting may be adjourned.
Shareholders of record at the close of business on November 11, 2004 are
entitled to notice of, and to vote at, the Annual Meeting or at any
postponements or adjournments of the Annual Meeting.
By Order of the Board of Directors,
/s/ A. Mark Young
-----------------------------------
A. Mark Young
Chief Financial Officer
Sunrise, Florida
November 17, 2004
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YOUR VOTE IS IMPORTANT
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
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2
TABLE OF CONTENTS
PAGE
----
About the Meeting.............................................................1
What is the purpose of the annual meeting?...........................1
Who is entitled to vote at the meeting?..............................1
Who can attend the meeting?..........................................1
What constitutes a quorum?...........................................1
How do I vote?.......................................................2
Can I vote by telephone or electronically?...........................2
Can I change my vote after I return my proxy card?...................2
What are the Board's recommendations?................................2
What vote is required to approve each proposal?......................2
Who pays for the preparation of the proxy?...........................3
Proposal 1 - Election of Directors............................................4
Directors Standing for Election......................................4
Security Ownership of Certain Beneficial Owners and Management................7
Board of Directors Committees.................................................9
Compensation of Executive Officers and Directors.............................11
Report on Executive Compensation.............................................16
Report of the Audit Committee................................................17
Certain Relationships and Related Transactions...............................19
Section 16(a) Beneficial Ownership Reporting Compliance......................21
Proposal 2 - Ratification of the Appointment of Independent Auditors.........21
Other Business...............................................................23
Shareholder Proposals for the 2005 Annual Meeting............................23
Charter of the Audit Committee...............................................24
-i-
E COM VENTURES, INC.
ANNUAL MEETING OF SHAREHOLDERS
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PROXY STATEMENT
------------------------------
This Proxy Statement contains information related to our Annual Meeting of
Shareholders to be held on, Tuesday, December 14, 2004, beginning at 11:00 a.m.,
at the E Com Ventures, Inc. Corporate Office, 251 International Parkway,
Sunrise, Florida 33325, and at any adjournments or postponements thereof. The
approximate date that this Proxy Statement, the accompanying Notice of Annual
Meeting and the enclosed Form of Proxy are first being sent to shareholders is
November 17, 2004. You should review this information in conjunction with our
2003 Annual Report to Shareholders, which accompanies this Proxy Statement.
ABOUT THE ANNUAL MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Annual Meeting, shareholders will vote on the election of Directors
and ratification of the appointment of our independent public accountants. In
addition, we will report on our performance and respond to questions from our
shareholders.
WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING?
Only shareholders of record at the close of business on the record date,
November 11, 2004, are entitled to receive notice of the Annual Meeting and to
vote shares of our common stock that they held on the record date, or any
postponements or adjournments of the Annual Meeting. Each outstanding share of
common stock entitles its holder to cast one vote on each matter to be voted
upon.
WHO CAN ATTEND THE ANNUAL MEETING?
All shareholders as of the record date, or their duly appointed proxies,
may attend. If your shares are held in the name of your broker or bank, you will
need to bring evidence of your stock ownership, such as your most recent
brokerage statement, and valid picture identification.
WHAT CONSTITUTES A QUORUM?
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of all of the shares of common stock outstanding on the record
date will constitute a quorum, permitting the Annual Meeting to conduct its
business. As of the record date, 2,900,349 shares of our common stock were
outstanding. Proxies received but marked as abstentions and broker non-votes
will be included in the calculation of the number of shares considered to be
present at the Annual Meeting for purposes of a quorum, but will not be counted
as votes cast "for" or "against" any given matter.
If less than a majority of outstanding shares entitled to vote are
represented at the Annual Meeting, a majority of the shares present at the
Annual Meeting may adjourn the Annual Meeting to another date, time or place,
and notice need not be given of the new date, time or place if the new date,
time or place is announced at the Annual Meeting before an adjournment is taken.
-1-
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return
it to us, it will be voted as you direct. If you are a registered shareholder
and you attend the Annual Meeting, you may deliver your completed proxy card in
person. "Street name" shareholders who wish to vote at the Annual Meeting will
need to obtain a proxy from the institution that holds their shares.
CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
If your shares are held in "street name," please check your proxy card or
contact your broker or nominee to determine whether you will be able to vote by
telephone or electronically.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with our Secretary either a
notice of revocation or a duly executed proxy bearing a later date. You may also
change your vote by attending the Annual Meeting in person and voting. The
powers of the proxy holders will be suspended if you attend the Annual Meeting
in person and vote, although attendance at the Annual Meeting will not by itself
revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named
as proxy holders on the proxy card will vote in accordance with the
recommendations of our Board of Directors. The recommendation of the Board of
Directors is set forth with the description of each proposal in this Proxy
Statement. In summary, the Board of Directors recommends a vote:
o FOR the election of the nominated slate of Directors;
o FOR the ratification of the appointment of Deloitte & Touche LLP, as
our independent public accountants.
The Board of Directors does not know of any other matters that may be
brought before the Annual Meeting, nor does it foresee or have reason to believe
that the proxy holders will have to vote for substitute or alternate Board of
Directors nominees. In the event that any other matter should properly come
before the Annual Meeting or any Board of Directors nominee is not available for
election, the proxy holders will vote as recommended by the Board of Directors
or, if no recommendation is given, in accordance with their best judgment.
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
ELECTION OF DIRECTORS. The affirmative vote (either in person or by proxy)
of a plurality of the votes cast at the Annual Meeting is required for the
election of Directors. This means that candidates who receive the highest number
of votes are elected. Abstentions and broker non-votes are not votes cast and
are not counted in determining whether a nominee is elected. A properly executed
proxy marked to "Withhold Authority" with respect to the election of one or more
Directors will not be voted with respect to the Director or Directors indicated,
although it will be counted for purposes of determining whether there is a
quorum. Shareholders do not have the right to cumulate their votes for
Directors.
OTHER PROPOSALS. The affirmative vote (either in person or by proxy) of a
majority of the votes cast at the Annual Meeting is required for approval of the
ratification of the appointment of Deloitte & Touche LLP. Abstentions and broker
non-votes are treated as shares present or represented and entitled to vote on
such matters, and thus have the same effect as negative votes. A properly marked
"ABSTAIN" with respect to any such matter will not be voted, although it will be
counted for purposes of determining whether there is a quorum.
-2-
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. Thus, if you do
not give your broker or nominee specific instructions, your shares may not be
voted on those matters and will not be counted in determining the number of
shares necessary for approval. Shares represented by such "broker non-votes"
will, however, be counted in determining whether there is a quorum.
WHO PAYS FOR THE PREPARATION OF THE PROXY?
We will pay the cost of preparing, assembling and mailing the Proxy
Statement, Notice of Annual Meeting and enclosed proxy card. In addition to the
use of mail, our employees may solicit proxies personally and by telephone. Our
employees will receive no compensation for soliciting proxies other than their
regular salaries. We may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to the beneficial owners
of our common stock and to request authority for the execution of proxies, and
we may reimburse such persons for their expenses incurred in connection with
these activities.
Our principal executive offices are located at 251 International Parkway,
Sunrise, Florida 33325, and our telephone number is (954) 335-9100. A list of
shareholders entitled to vote at the Annual Meeting will be available at our
offices for a period of ten days prior to the Annual Meeting and at the Annual
Meeting itself for examination by any shareholder.
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PROPOSAL 1 - ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
At the Annual Meeting, the shareholders will elect five Directors, each of
whom will serve for a term expiring at the 2005 Annual Meeting of Shareholders,
or until his or her successor has been duly elected and qualified.
The Board of Directors has no reason to believe that any nominee will
refuse or be unable to serve if elected. However, if any of them should become
unavailable to serve as Director, the Board of Directors may designate a
substitute nominee or the number of Directors may be reduced in accordance with
our bylaws. If the Board of Directors designates a substitute nominee, the
persons named as proxies will vote for the substitute nominee designated by the
Board of Directors.
The Directors standing for election are:
o Stephen Nussdorf
o Michael W. Katz
o Carole Ann Taylor
o Joseph Bouhadana
o Paul Garfinkle
All of our Director nominees are currently serving as our Directors.
EXECUTIVE OFFICERS AND DIRECTORS
The following are our executive officers and Directors:
NAME AGE POSITION
---------------------------- --- ------------------------------------------------------------
Stephen Nussdorf 53 Chairman of the Board of Directors
Michael W. Katz 55 Chief Executive Officer, President and Director
A. Mark Young 43 Chief Financial Officer
Donovan Chin 38 Chief Financial Officer of Perfumania, Inc. and Secretary
Leon Geller 49 Vice President of Purchasing, Perfumania, Inc.
Alan Grobman 34 Vice President of Logistics and Distribution, Perfumania, Inc.
Joel Lancaster 45 Vice President of Stores, Perfumania, Inc.
Carole Ann Taylor(1)(2)(3) 58 Director
Joseph Bouhadana(1)(2)(3) 34 Director
Paul Garfinkle(1) 63 Director
(1) Member of Audit Committee. Mr. Garfinkle serves as Chairman of the Audit
Committee.
(2) Member of Compensation Committee.
(3) Member of Stock Option Committee.
-4-
o STEPHEN NUSSDORF -- was appointed our Chairman of the Board in
February 2004. Mr. Nussdorf is one of the principal shareholders in,
and an executive officer of Quality King Distributors, Inc. (Quality
King"). Quality King is a privately held promotional wholesaler of
pharmaceuticals, health and beauty care products, and fragrances
with annual sales approximating $2.5 billion. Mr. Nussdorf joined
Quality King in 1972 and has served Quality King in various
capacities in all divisions of its business.
o MICHAEL W. KATZ -- joined us in February 2004 as our Chief Executive
Officer and President. He was also appointed a Director. Mr. Katz
has served in various capacities at Quality King and its affiliated
companies; primarily responsible for overseeing administration,
finance, mergers and acquisitions. Mr. Katz has participated in the
design and implementation of the business strategy that has fostered
the growth of Quality King and its affiliated companies. From 1994
until 1996 he was Senior Vice President of Quality King. Since 1996
he has served as Executive Vice President of Quality King and in the
Office of the Chief Executive and as a Director of Model Reorg.,
Inc., an affiliate of Quality King which sells designer fragrances
at wholesale and retail. Mr. Katz became Executive Vice President,
Chief Financial Officer and Treasurer of QK Healthcare, Inc., a
wholly owned subsidiary of Quality King in 2000. Mr. Katz is a
Certified Public Accountant.
o A. MARK YOUNG -- joined us in February 2000 and became our Chief
Financial Officer in May 2000. He served as one of our Directors
from April 2001 until his resignation as a Director in September
2002. Prior to February 2000, Mr. Young was employed in the Business
Assurance practice of the Middle Market Group of
PricewaterhouseCoopers LLP. Mr. Young is a Certified Public
Accountant.
o DONOVAN CHIN -- serves as the Chief Financial Officer of Perfumania,
Inc., our wholly owned subsidiary ("Perfumania"). He was appointed
Corporate Secretary in February 1999, Director in March 1999
(through February 2004), and Chief Financial Officer of Perfumania
in May 2000. He has also served as our Chief Financial Officer from
February 1999 to May 2000. From May 1995 to February 1999, Mr. Chin
was our Corporate Controller, and from May 1993 to May 1995 he was
Assistant Corporate Controller. Previously, Mr. Chin was employed by
Pricewaterhouse LLP in its Miami audit practice. Mr. Chin is a
Certified Public Accountant.
o LEON GELLER -- Leon Geller joined us in March 2001 as Vice President
of Purchasing of Perfumania. Prior to joining us, Mr. Geller was the
Executive Director of a textile distributor in Peru.
o ALAN GROBMAN -- has served as the Vice President of Logistics and
Distribution for Perfumania since February 2003. He also served as
our Director of Fulfillment from November 2000 to February 2003.
From March 1999 to October 2000, Mr. Grobman was Plant Manager of a
Peruvian manufacturer of food and specialty packaging.
o JOEL LANCASTER -- has served as the Vice President of Stores for
Perfumania since July 2000. He also served as our Director of Stores
from August 1997 to July 2000, and as a District Supervisor from
October 1995 to August 1997. Previously, Mr. Lancaster was employed
by Lillie Rubin, Inc. as its National Director of Stores for four
years.
o CAROLE ANN TAYLOR -- has been a Director since June 1993. She is the
owner of Little Havana to Go, Little Havana's official souvenir
store in historic Little Havana, Miami, Florida, specializing in
art, music, Cuban memorabilia, cigars and clothing. She is also the
owner of Miami To Go, a retail and wholesale Miami souvenir company
and a partner in Miami Airport Duty Free Joint Venture, owners of
the 12 duty free stores at Miami International Airport. Ms. Taylor
is also a board member for the Performing Arts Center Trust of
Miami, the City of Miami International Trade Board, the World Trade
Center, the Academy of Travel and Tourism, the Omni Advisory Board,
the Greater Miami Host Committee, the Visitor Industry Council and
the Miami Dade Community College School of Aviation & Visitor
Services Advisory Committee. She is a member of the Executive
Committee of the Greater Miami Convention & Visitors Bureau. Ms.
Taylor is a member of our Audit, Compensation and Stock Option
Committees.
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o JOSEPH BOUHADANA -- was appointed a Director in September 2002. Mr.
Bouhadana has served as Vice President of Information Technology of
Tutopia.com, a privately owned Internet service provider with a
presence in nine countries in Latin America, since September 2000.
Previously, Mr. Bouhadana was the Director of Information Technology
of Hotelworks.com or Parker Reorder, a publicly traded company
specializing in hospitality business to business procurement,
distribution and logistics systems. Mr. Bouhadana is a member of our
Audit, Compensation and Stock Option Committees.
o PAUL GARFINKLE -- joined us in February 2004. Mr. Garfinkle retired
from the public accounting firm of BDO Seidman, LLP, in June 2000
after a thirty-six year career. While at BDO Seidman, LLP, Mr.
Garfinkle was an audit partner and client service director for many
of the firm's most significant clients. He also served for many
years as a member of the firm's Board of Directors and, during his
last six years at the firm, as national director of Real Estate. Mr.
Garfinkle is the Chairman of the Audit Committee.
Our officers are elected annually by our Board of Directors and serve at
the discretion of the Board. Our Directors hold office until the next annual
meeting of shareholders and until their successors have been duly elected and
qualified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL NOMINEES
NAMED ABOVE TO THE BOARD OF DIRECTORS.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the amount of common stock beneficially owned as
of November 11, 2004 by: (a) each of our Directors and nominees for Director,
(b) each of our executive officers named in the Executive Compensation Table, as
described below, (c) all of our Directors and executive officers as a group and
(d) each person known by us to beneficially own more than 5% of our outstanding
common stock. Unless otherwise provided, the address of each holder is c/o E Com
Ventures, Inc., 251 International Parkway, Sunrise, Florida, 33325.
Common Stock Beneficially Owned
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Name and Address Total Number of Shares Percent of Shares
of Beneficial Owner Beneficially Owned Outstanding
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Glenn and Stephen Nussdorf 1,128,144 (1)(2)(8) 38.9%
Ilia Lekach 380,000 (1)(3)(4) 13.1%
A. Mark Young 51,925 (1)(5) 1.8%
Joel Lancaster 32,954 (1)(5) 1.1%
Donovan Chin 27,250 (1)(5) *
Leon Geller 25,000 (1)(5) *
Alan Grobman 19,000 (1)(5) *
Carole A. Taylor 7,000 (1)(5) *
Joseph Bouhadana 1,000 (1)(5) *
Paul Garfinkle 0 (1)(8) *
Michael Katz 0 (1)(8) *
Parlux Fragrances, Inc 378,102 (6) 13.1%
All directors and executive
officers as a group
(10 persons) 1,292,773 (7) 42.2%
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* Less than 1%.
(1) For purposes of this table, beneficial ownership is computed pursuant
to Rule 13d-3 under the Securities Exchange Act of 1934 (the "Exchange Act");
the inclusion of shares as beneficially owned should not be construed as an
admission that such shares are beneficially owned for purposes of the Exchange
Act. Under the rules of the Securities and Exchange Commission, a person is
deemed to be a "beneficial owner" of a security he or she has or shares the
power to vote or direct the voting of such security or the power to dispose of
or direct the disposition of such security. Accordingly, more than one person
may be deemed to be a beneficial owner of the same security.
(2) The principal business address of Messrs. Glenn and Stephen Nussdorf
is 2060 Ninth Avenue, Ronkonkoma, New York 11779.
(3) The address of Ilia Lekach is 3725 SW 30th Avenue, Ft. Lauderdale,
Florida 33154. Includes 80,000 shares owned by IZJD Corporation, a corporation
wholly owned by Mr. Lekach.
(4) Ilia Lekach jointly owns with his spouse the shares set forth opposite
his respective name.
(5) With respect to the specified beneficial owner, includes shares of
common stock issuable upon the exercise of stock options currently exercisable
or exercisable within 60 days of November 11, 2004 in the following amounts: A.
Mark Young (50,000); Donovan Chin (27,250); Leon Geller (25,000); Alan Grobman
(19,000); Joel Lancaster (32,504); Carole A. Taylor (7,000); and Joseph
Bouhadana (1,000).
(6) The address of Parlux Fragrances, Inc. is 3725 SW 30th Avenue, Ft.
Lauderdale, Florida 33154. Ilia Lekach, our former Chairman and Chief Executive
Officer, is the Chairman of the Board of Parlux Fragrances, Inc.
-7-
(7) Includes shares of common stock issuable upon the exercise of stock
options currently exercisable or exercisable within 60 days of November 11,
2004, as set forth in Note 5 above.
(8) Does not include shares issuable upon the exercise of stock options
that are provided for under the Company's 2000 Directors Stock Option Plan as a
result of their appointment to the Board but not yet granted to each of Michael
Katz, Paul Garfinkle and Stephen Nussdorf. Each of these directors, who are not
employees of the Company, may be granted options to acquire 500 shares.
CHANGE OF CONTROL
Effective January 30, 2004, Ilia Lekach, our former Chairman of the Board
and Chief Executive Officer, IZJD Corp. and Pacific Investment Group, Inc., each
of which are wholly-owned by Mr. Lekach, and Deborah Lekach, Mr. Lekach's wife
(collectively, "Lekach"), entered into an option agreement (the "Nussdorf Option
Agreement"), with Stephen Nussdorf and Glenn Nussdorf (the "Nussdorfs"),
pursuant to which the Nussdorfs were granted options to acquire up to an
aggregate 720,954 shares of the Company's common stock beneficially owned by
Lekach, for a purchase price of $12.70 per share in the installments indicated
on or after the dates set forth in the table below:
Date Number of Shares
---- ----------------
January 30, 2004 433,070
March 15, 2004 162,884
April 23, 2004 125,000
The purchase price for the shares to be acquired by the Nussdorfs under
the Nussdorf Option Agreement was payable in cash; provided that the Nussdorfs
may have elected to pay a portion of the purchase price for the shares that were
subject to the option installment that first became exercisable in April 2004,
by offsetting the principal and accrued interest then owed under a $1,000,000
demand note, dated December 8, 2003, made by Mr. Lekach and payable to the order
of Stephen Nussdorf.
Of the 720,954 shares subject to the Nussdorf Option Agreement, an
aggregate 443,750 shares were issuable upon exercise of certain stock options
owned of record by Ilia Lekach. At a special meeting of our shareholders held on
April 29, 2004, our shareholders approved an amendment to our 2000 Stock Option
Plan, pursuant to which we were able to grant Mr. Lekach 125,000 of such options
issuable to him upon the change of control. To date, Mr. Lekach has exercised
options to acquire all 443,750 of those shares and the Nussdorfs have acquired
all 720,954 shares pursuant to the Nussdorf Option Agreement.
The Nussdorfs now own an aggregate 1,128,144 shares of the Company's
common stock or approximately 39% of the total number of shares of the Company
common stock currently outstanding.
On February 6, 2004, Miles Raper, Donovan Chin and Daniel Bengio resigned
as members of the Company's Board of Directors, and Stephen Nussdorf, Paul
Garfinkle and Michael W. Katz were elected to the Company's Board of Directors.
Effective February 10, 2004, Mr. Lekach's employment with the Company was
terminated and Mr. Lekach ceased serving as an employee and officer of the
Company. In addition, on February 10, 2004, Stephen L. Nussdorf was appointed
the Company's Chairman of the Board and Michael W. Katz was appointed the
Company's Chief Executive Officer and President.
-8-
BOARD OF DIRECTORS COMMITTEES
The Board of Directors has determined that the following three individuals
of the five members of the Board of Directors are independent as defined by
Nasdaq Marketplace Rules: Carole Ann Taylor, Joseph Bouhadana and Paul Garfinkle
(the "Independent Board Members"). Our Board of Directors has a standing Audit
Committee, Compensation Committee and Stock Option Committee.
We do not have a nominating or similar committee. The Independent Board
Members perform the functions of a nominating committee including reviewing and
recommending candidates for directors. If a shareholder wishes to recommend a
nominee for director, written notice should be sent to the Corporate Secretary
in accordance with the instructions set forth later in this proxy statement
under "Shareholder Proposals for the 2005 Annual Meeting." All recommendations
should be accompanied by a complete statement of such person's qualifications
(including education, work experience, knowledge of the Company's industry,
membership on the Board of Directors of another corporation, and civic activity)
and an indication of the person's willingness to serve. The Independent Board
Members will evaluate the suitability of potential candidates nominated by
shareholders in the same manner as other candidates identified to the
Independent Board Members. In making its nominations, the Independent Board
Members identify candidates who meet the current challenges and needs of the
Board of Directors. In making such decisions, the Independent Board Members
consider, among other things, an individual's business experience, industry
experience, financial background and experiences and whether the individual
meets the independence requirements of the Nasdaq Stock Market. The Independent
Board Members use multiple sources for identifying and evaluating nominees for
directors including referrals from current directors, recommendations by
stockholders and input from third party executive search firms.
For the fiscal year ended January 31, 2004, Carole Ann Taylor, Joseph
Bouhadana and Miles Raper were the members of our Audit Committee. Miles Raper
resigned from the Board and the Audit Committee in February 2004. Carole Ann
Taylor, Joseph Bouhadana and Paul Garfinkle are the current members of our Audit
Committee. The Audit Committee is governed by a written charter adopted by the
Board of Directors, a copy of which is attached hereto as Annex A. Each of the
members of the Audit Committee is independent as defined in the Marketplace
Rules of The Nasdaq Stock Market. The duties and responsibilities of the Audit
Committee include: (a) assisting our Board in its oversight of the integrity of
our financial statements, (b) the selection and retention of our auditors and
any termination of engagement, (c) reviewing the scope and results of audits and
other services provided by our auditors, (d) reviewing our significant
accounting policies and internal controls and (e) having general responsibility
for all related auditing matters. The Board of Directors designated Paul
Garfinkle the "audit committee financial expert" as defined by SEC rules. The
Audit Committee held 4 meetings during the fiscal year ended January 31, 2004.
For the fiscal year ended January 31, 2004, Carole Ann Taylor and Joseph
Bouhadana were the members of our Compensation Committee. The Compensation
Committee reviews and approves the compensation of our executive officers,
including salaries, bonuses and benefit plans. The Compensation Committee met
once during the fiscal year ended January 31, 2004.
For the fiscal year ended January 31, 2004, Carole Ann Taylor and Joseph
Bouhadana were the members of the Stock Option Committee. The Stock Option
Committee administers our 2000 Stock Option Plan and the 2000 Directors Stock
Option Plan. The Stock Option Committee held one meeting during the fiscal year
ended January 31, 2004.
-9-
During the fiscal year ended January 31, 2004, our Board of Directors took
certain actions by unanimous written consent and held six meetings. During the
last fiscal year, no Director attended fewer than 75 percent of (i) the meetings
of our Board of Directors held during the period they served on the Board, and
(ii) the meetings of committees of our Board of Directors held during the period
they served on such committees.
-10-
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
The following tables set forth certain information concerning compensation
for the fiscal years ended January 31, 2004 (Fiscal 2003), February 1, 2003
(Fiscal 2002) and February 2, 2002 (Fiscal 2001) of the Chief Executive Officer
and the most four highly compensated executive officers who were serving as
executive officers at the end of the last fiscal year whose total annual salary
and bonus exceeded $100,000 for Fiscal 2003 (collectively, the "Named Executive
Officers").
-11-
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
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AWARDS PAYOUTS
-------------------------------------------------------------------------------------------
Other Annual Restricted All Other
Fiscal Compensation Stock Options LTIP Compensation
Name and Principal Position Year Salary($) Bonus($) ($)(1) Awards($) (#)(2) Payouts($) ($)
------------------------------------------------------------------------------------------------------------------------------------
Ilia Lekach 2003 509,101 1,012,521 -- 125,000 -- --
Formerly Chairman of the Board 2002 441,000 -- -- -- -- -- --
And Chief Executive Officer 2001 438,577 250,000 -- -- 125,000 -- --
A. Mark Young 2003 217,640 469,183 -- 25,000 -- --
Chief Financial Officer 2002 196,153 -- -- -- -- -- --
2001 166,152 -- -- -- 12,500 -- --
Jeffrey Geller (3) 2003 220,256 472,072 -- 25,000 -- --
President and Chief Operating Officer 2002 192,561 -- -- -- -- -- --
Perfumania, Inc. 2001 162,197 -- -- 10,000
Leon Geller 2003 181,209 183,899 -- 12,500 -- --
Vice President of Purchasing, 2002 173,166 -- -- -- -- -- --
Perfumania, Inc. 2001 159,341 -- -- -- 12,500 -- --
Joel Lancaster 2003 149,371 -- 145,167 -- 16,252 -- --
Vice President of Purchasing, 2002 131,945 -- -- -- -- -- --
Perfumania, Inc. 2001 123,171 -- -- -- 3,752 -- --
(1) Amounts included represent payments made to the persons indicated pursuant
to the terms of their employment agreements as a result of the change of
control, described below. These payments were made as a consequence of the
determination on February 3, 2004 by the disinterested and independent
members of the Board of Directors that a change of control had occurred
under the terms of such employment agreements, and the subsequent
authorization on such date of such payments by Ilia Lekach, the Company's
then Chairman and Chief Executive Officer. The column for "Other Annual
Compensation" does not include any amounts for executive perquisites and
any other personal benefits, such as the cost of automobiles, life
insurance and disability insurance because the aggregate dollar amount per
executive does not exceed the lesser of $50,000 or 10% of his annual
salary and bonus.
(2) Our Board of Directors authorized a one-for-four reverse stock-split of
our outstanding shares of common stock for shareholders of record on March
2, 2002. Accordingly, all share and per share data shown in this
information statement have been retroactively adjusted to reflect this
reverse stock-split. Options issued in Fiscal 2003 represent those options
issued as a consequence of a change of control pursuant to the Company's
contractual obligations under existing employment agreements.
(3) Jeffrey Geller's employment was terminated June 21, 2004.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
stock options made during Fiscal 2003 to the Named Executive Officers.
-12-
INDIVIDUAL OPTION GRANTS IN FISCAL YEAR 2003
------------------------------------------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
OPTIONS AT ASSUMED ANNUAL RATE
GRANTED OF STOCK PRICE APPRECIATION
NUMBER TO EMPLOYEES FOR OPTION TERM
OF OPTIONS IN FISCAL EXERCISE PRICE EXPIRATION -----------------------------
NAME GRANTED YEAR 2003(1) PER SHARE DATE 5%(2) 10%(2)
---------------- ---------- ------------- -------------- ---------- -----------------------------
Ilia Lekach 125,000 49% $ 4.00 2013 $2,350,566 $4,039,049
A. Mark Young 12,500 5% $ 7.76 2013 $ 188,057 $ 356,905
12,500 5% $ 3.52 2013 $ 241,057 $ 409,905
Jeffrey Geller 15,000 6% $11.24 2013 $ 173,468 $ 376,086
10,000 4% $ 3.52 2013 $ 192,845 $ 327,924
Leon Geller 12,500 5% $ 3.52 2013 $ 241,057 $ 409,905
Joel Lancaster 5,000 2% $13.00 2013 $ 49,023 $ 116,562
7,500 3% $ 8.24 2013 $ 109,234 $ 210,543
3,752 1% $ 3.52 2013 $ 72,356 $ 123,037
----------
(1) Total stock option grants during Fiscal 2003 were 254,252.
(2) In accordance with the rules of the Securities and Exchange
Commission, the potential realizable values for such options shown
in the table presented above are based on assumed rates of stock
price appreciation of 5% and 10% compounded annually from the date
the options were granted to their expiration date. These assumed
rates of appreciation do not represent our estimate or projection of
the appreciation of shares of our common stock.
OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding option
exercises by the Named Executive Officers during Fiscal 2003, and options held
by such executive officers on January 31, 2004:
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NUMBER OF AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)(2)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED UNEXERCISABLE (1) UNEXERCISABLE
--------------- ----------- -------------- --------------------- ---------------------------
Ilia Lekach -- -- 443,750/0 $4,861,000/0
A. Mark Young -- -- 50,000/0 $418,000/0
Jeffrey Geller -- -- 50,000/0 $292,400/0
Leon Geller -- -- 25,000/0 $262,000/0
Joel Lancaster -- -- 32,504/0 $175,042/0
(1) Includes options issued to such persons as a result of the change of control
discussed herein.
-13-
Assumes all outstanding options are currently exercisable based on the change of
control.
(2) Based on the spread between the exercise price of the options and the
closing price of $14.00 per share on January 30, 2004.
EQUITY COMPENSATION PLAN INFORMATION
This table summarizes share and exercise price information about our equity
compensation plans as of January 31, 2004.
WEIGHTED AVERAGE NUMBER OF SECURITIES
EXERCISE PRICE OF AVAILABLE FOR FUTURE
NUMBER OF SECURITIES OUTSTANDING OPTIONS, ISSUANCE UNDER EQUITY
PLAN CATEGORY TO BE ISSUED WARRANTS AND RIGHTS COMPENSATION PLANS
----------------------------------- -------------------- -------------------- ---------------------------
Equity compensation plans approved
by security holders 666,501 $5.32 236,473
Equity compensation plans not
approved by security holders -- -- --
------- ----- -------
TOTAL 666,501 $5.32 236,473
======= ===== =======
EMPLOYMENT AND SEVERANCE AGREEMENTS
Effective February 1, 2002, we entered into a 3-year employment agreement
with Ilia Lekach. Mr. Lekach's employment agreement was terminated effective as
of February 10, 2004. Pursuant to the terms of the employment agreement, Mr.
Lekach was to receive an annual salary of $460,000, subject to cost-of-living
increases or 5% if higher. The employment agreement provided that Mr. Lekach
would continue to receive his annual salary until the expiration of the term of
the agreement if his employment was terminated by us for any reason other than
death, disability or cause (as defined in the employment agreement). The
employment agreement contained a performance bonus plan, which provided for
additional compensation and grant of stock options, if we met certain specified
net income levels. The employment agreement prohibited Mr. Lekach from directly
or indirectly competing with us during the term of his employment and for one
year after termination of employment except in the case of our termination of
employment without cause. Pursuant to the terms of the employment agreement, Mr.
Lekach received a signing bonus of $250,000 and was granted 125,000 options to
purchase our common stock at an exercise price of $4.00 per share (the closing
market price of our common stock on January 31, 2002).
On February 10, 2004, our Board of Directors terminated without cause Ilia
Lekach's employment with the Company as Chairman of the Board and Chief
Executive Officer. In addition, as a consequence of the Nussdorf Option
Agreement described herein, the Board of Directors determined that a change of
control occurred under the Company's employment agreement with Mr. Lekach, and
that the terms of the employment agreement required the Company to issue Mr.
Lekach 125,000 options. Upon termination of the employment agreement, and as a
consequence of the change of control, Mr. Lekach was paid approximately
$1,012,000 (two times the remaining compensation under the Agreement).
Effective January 31, 2003, we entered into 3-year employment agreements
subject to termination in accordance with the agreements, with A. Mark Young and
Jeffrey Geller providing for annual salaries of $210,000, subject to specified
increases. In addition, effective May 16, 2002, we entered into 2-year
employment agreements with Leon Geller and Joel Lancaster, subject to
termination in accordance with the agreements, providing for annual salaries of
$175,142 and $138,225, respectively, subject to specified increases. As a
consequence of the change of control described below, Mr. Young, Mr. Jeffrey
Geller, Mr. Leon Geller, Mr. Lancaster and Mr. Alan Grobman received
approximately $469,000, $472,000, $184,000, $125,000 and $145,000, respectively,
under the terms of their employment agreements with the Company. These payments
were made as a consequence of the determination on February 3, 2004 by the
disinterested and independent members of the Board of Directors that a change of
control had occurred under the terms of such employment agreements, and the
subsequent authorization on such date of such payments by Ilia Lekach, the
Company's then Chairman and Chief Executive Officer.
-14-
DIRECTOR COMPENSATION
We pay each non-employee Director a $10,000 annual retainer, and reimburse
their expenses in connection with their activities as Directors. In addition,
non-employee Directors are eligible to receive stock options under the 2000
Directors Stock Option Plan.
The 2000 Directors Stock Option Plan currently provides for an automatic
grant of an option to purchase 500 shares of our common stock upon a person's
election as Director, and an automatic grant of options to purchase 1,000 shares
of our common stock upon re-election to the Board, in both instances at an
exercise price equal to the fair market value of the common stock on the date of
the option grant.
-15-
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and approves the compensation of our
executive officers, including salaries, bonuses and benefit plans. The
Compensation Committee met once during the fiscal year ended January 31, 2004.
The policy of the Board of Directors is to maintain executive compensation
at levels that will permit us to attract, motivate and retain individuals with
superior managerial abilities. The levels of compensation are intended to reward
individual initiative and achievement, while motivating our executives to
increase shareholder value by improving our performance and profitability.
The base salaries of our Chief Executive Officer and all Named Executive
Officers have been fixed in accordance with the terms of their respective
employment agreements, which salaries have been reviewed by the Compensation
Committee. In reviewing base salaries, the Compensation Committee considers
factors such as the responsibilities of the position, corporate progress toward
achieving objectives and individual performance, experience and expertise. In
determining our executives' overall compensation, the Compensation Committee
also reviews certain compensation levels at other companies because the
Compensation Committee believes that we compete for executive talent with
companies in addition to those in our peer group. Additional criteria reviewed
by the Compensation Committee in determining appropriate compensation levels
include subjective factors related to corporate and individual performance.
Our Stock Option Committee reviews and approves the grant of options
pursuant to our 2000 Stock Option Plan. In furtherance of our executive
compensation policies, stock options are considered an integral part of our
executives' overall compensation. The Compensation Committee believes that as an
executive's level of responsibility increases, a greater portion of the total
compensation opportunity should be based upon share ownership and other
incentives and less upon base salary. Our executives' compensation pursuant to a
stock option grant generally increases only to the extent the value of common
stock underlying the stock options increases, therefore aligning the interest of
our executive officers with our shareholders by tying long-term compensation
with our growth and appreciation of shares.
Except for the issuance of options issued pursuant to the Company's
contractual obligations under existing employment agreements, we did not grant
any stock options to any Named Executive Officer during the fiscal year ended
January 31, 2004.
The Compensation Committee
JOSEPH BOUHADANA
CAROLE ANN TAYLOR
-16-
REPORT OF THE AUDIT COMMITTEE
The following report concerns the Audit Committee's activities regarding
oversight of our accounting, auditing and financial reporting process.
The Audit Committee is comprised of three independent Directors, as
defined in the Marketplace Rules of The Nasdaq Stock Market. It operates under a
written charter adopted by the Board of Directors. The composition of the Audit
Committee, the qualifications of its members and the responsibilities of the
Committee, as reflected in its charter, are intended to be in accordance with
applicable requirements for corporate audit committees. The Committee reviews
and assesses the adequacy of its charter on an annual basis.
As described more fully in its charter, the purpose of the Audit Committee
is to assist the Board of Directors in its general oversight of our internal
control, accounting, auditing and financial reporting functions. Management is
responsible for the preparation, presentation and integrity of our financial
statements, accounting and financial reporting principles and internal controls
and procedures designed to ensure compliance with accounting standards,
applicable laws and regulations. Deloitte & Touche LLP, our independent auditing
firm, is responsible for performing an independent audit of our consolidated
financial statements in accordance with generally accepted auditing standards.
The Audit Committee members are not professional accountants or auditors,
and their functions are not intended to duplicate or to certify the activities
of management and the independent auditor, nor can the Audit Committee certify
that the independent auditor is "independent" under applicable rules. The
Committee serves a board-level oversight role, in which it provides advice,
counsel and direction to management and the auditors on the basis of the
information it receives, discussions with management and the auditors and the
experience of the Committee's members in business, financial and accounting
matters.
Among other matters, and in accordance with the Sarbanes-Oxley Act of
2002, the Audit Committee monitors the activities and performance of our
external auditors, including the audit scope, external audit fees, auditor
independence matters and the extent to which the independent auditor may be
retained to perform non-audit services. The Audit Committee has ultimate
authority and responsibility to select, evaluate and, when appropriate, replace
our independent auditor. The Audit Committee also reviews the results of the
external audit work with regard to the adequacy and appropriateness of our
financial, accounting and internal controls. Management and independent auditor
presentations to and discussions with the Audit Committee also cover various
topics and events that may have significant financial impact or are the subject
of discussions between management and the independent auditor. In addition, the
Audit Committee generally oversees our internal compliance programs.
In fulfilling its oversight responsibilities, the Committee has reviewed
and discussed the audited consolidated financial statements with management and
the independent auditor. Management represented to the Committee that our
consolidated financial statements were prepared in accordance with generally
accepted accounting principles, and the independent auditor represented that its
presentations included the matters required to be discussed with the independent
auditor by Statement on Auditing Standards No. 61, as amended, "Communication
with Audit Committees." Our independent auditor also provided the Committee with
the written disclosures required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and the Audit Committee
discussed with the independent auditor that firm's independence.
-17-
Following the Audit Committee's discussions with management and the
independent auditor, the Committee recommended that the Board of Directors
include the audited consolidated financial statements in our annual report on
Form 10-K for the fiscal year ended January 31, 2004.
The Audit Committee
PAUL GARFINKLE, CHAIRMAN
JOSEPH BOUHADANA
CAROLE ANN TAYLOR
-18-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Notes receivable from Ilia Lekach, our former Chairman of the Board of
Directors and Chief Executive Officer, were $327,311 and $311,604 as of January
31, 2004 and February 1, 2003, respectively. The notes were unsecured, mature in
five years and bear interest at prime plus 1% per annum. Principal and interest
were payable in full at maturity. Total interest income recognized during fiscal
years 2003, 2002, and 2001 was approximately $16,000, $174,000 and $264,000,
respectively. Accrued interest receivable was approximately $27,000 and $12,000
as of January 31, 2004 and February 1, 2003. The notes and all accrued interest
were fully repaid in March 2004.
Ilia Lekach was also Chairman and interim CEO of Nimbus Group, Inc.
("Nimbus"), formerly known as TakeToAuction.com ("TTA"), a public company
previously committed to the development of a private jet air taxi network. TTA
initially sold consumer products on Internet auction sites. From fiscal year
2000 through fiscal year 2002, we acquired approximately 1,003,000 shares of
Nimbus common stock. The investment in Nimbus was shown on our balance sheets as
investments available for sale. During fiscal year 2003 we disposed of our
holding in Nimbus in open market transactions at a loss of approximately
$172,000.
Purchases of products from Parlux Fragrances, Inc. ("Parlux"), whose
Chairman of the Board of Directors and Chief Executive Officer is Ilia Lekach,
amounted to approximately $27,701,000, $11,613,000 and $19,598,000 in fiscal
years 2003, 2002 and 2001, representing approximately 23%, 10% and 17%,
respectively, of the Company's total purchases. The amount due to Parlux on
January 31, 2004 and February 1, 2003 was approximately $14,506,000 and
$10,739,000, respectively, of which both amounts include a $250,000 and a
$100,000 subordinated interest bearing secured note payable as of January 31,
2004 and February 1, 2003, respectively. Accounts payable due to Parlux are
non-interest bearing. The amount due to Parlux, exclusive of the secured note
payable, are included in the accounts payable affiliates in our consolidated
balance sheets.
On June 30, 2003 and September 30, 2002, Perfumania signed a $5,000,000
and a $3,000,000 subordinated note agreement with Parlux. The notes were in
consideration for the reduction of $5,000,000 and $3,000,000 in trade payables
due to Parlux in the respective years. The notes were due on February 29, 2004
and March 31, 2003, respectively, with various periodic principal payments, bore
interest at prime plus 1% and were subordinated to all bank related
indebtedness. As of January 31, 2004 and February 1, 2003 the outstanding
principal balance due on the notes was $250,000 and $100,000, respectively. The
notes were repaid in full in February 2004 and April 2003, respectively, and in
accordance with their terms.
We purchased approximately $6,368,000 and $10,562,000 of merchandise in
fiscal years 2003 and 2002, respectively, from a company owned by Zalman Lekach,
a former director of ours, and a brother of Ilia Lekach. The amount due to
Zalman Lekach's company at January 31, 2004 and February 1, 2003 was
approximately $1,617,000 and $1,383,000, respectively, and are included in
accounts payable affiliates in our consolidated balance sheets.
We purchased approximately $4,305,000 and $6,021,000 of merchandise in
fiscal years 2003 and 2002, respectively, from a company owned by another
brother of Ilia Lekach. The amount due to this company was approximately
$771,000 and $1,310,000, respectively, at January 31, 2004 and February 1, 2003,
and are included in accounts payable affiliates in our consolidated balance
sheets.
As described above, effective January 30, 2004, Ilia Lekach, our then
Chairman of the Board and Chief Executive Officer and several other parties
controlled by Lekach, entered into the Nussdorf Option Agreement with the
Nussdorfs, pursuant to which the Nussdorfs were granted options to acquire up to
an aggregate 720,954 shares of our common stock beneficially owned by Lekach,
for a purchase price of $12.70 per share in specified installments.
-19-
In addition, pursuant to and in accordance with the terms of the Nussdorf
Option Agreement, the Nussdorfs were granted an irrevocable proxy for the term
set forth in the Nussdorf Option Agreement to vote any shares owned by Lekach
that were the subject of the Nussdorf Option Agreement.
Mr. Lekach has exercised options to acquire 443,750 of those shares and
the Nussdorfs have acquired 720,954 shares pursuant to the Nussdorf Option
Agreement. The Nussdorfs own an aggregate of 1,128,144 shares of our common
stock or approximately 39% of the total number of shares of our common stock
outstanding.
As a consequence of the change in control provisions set forth in the
employment agreements of Mr. Lekach, various executive officers and a
consultant, we issued a total of 244,252 options for our common stock in January
2004. Since the various exercise prices of the options were less than the market
price of our common stock on the grant date, we incurred a non-cash charge of
approximately $2,286,000. In addition, pursuant to the same employment and
consulting agreements, we accrued approximately $2,645,000 in January 2004,
representing amounts subsequently paid to said persons as a result of the change
of control. These charges totaling approximately $4,931,000 are included in
"Change of control expenses" on our consolidated statement of operations for the
year ended January 31, 2004.
The Nussdorfs are officers and principals of Quality King Distributors,
Inc. ("Quality King"). During fiscal year 2003, we purchased approximately
$5,960,000 of merchandise from Quality King and sold approximately $11,366,000
of different merchandise to Quality King. In fiscal year 2002, there were
approximately $944,000 of purchases from Quality King and approximately
$1,000,000 of merchandise sold to Quality King. The amounts due to Quality King
at January 31, 2004 and February 1, 2003 were approximately $797,000 and $15,000
respectively.
PERFORMANCE GRAPH
The following graph indicates the total return to our shareholders for the
five fiscal years ending January 31, 2004, as compared to the returns for the
NASDAQ (US Companies) Stock Index and the NASDAQ Retail Trade Stock Index. The
information contained in this graph is based on historical data and is not
necessarily indicative of future performance.
[LINE CHART OMITTED]
-----------------------------------------------------------------------------------------
January-99 January-00 January-01 February-02 February-03 January-04
-----------------------------------------------------------------------------------------
E Com Ventures, Inc. 100.00 44.38 11.23 8.98 33.15 125.79
NASDAQ US Stock Market Index 100.00 154.01 104.98 75.96 52.98 82.46
NASDAQ Reail Trade Stocks 100.00 80.14 61.62 73.42 59.72 87.56
-20-
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our Directors and executive officers and beneficial holders of more than 10% of
any class of our equity securities to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
such equity securities. Based solely upon a review of such forms furnished to
us, filing deficiencies under Section 16(a) during the fiscal year ended January
31, 2004, included one late report filed by Leon Geller reflecting a stock
purchase and the following individuals were not timely in meeting the filing
requirements with respect to options issued under our 2000 Stock Option Plan and
filed one late report each: A. Mark Young, Leon Geller, Alan Grobman and Joel
Lancaster.
PROPOSAL 2 - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has selected Deloitte & Touche LLP as our independent
certified public accountants for the fiscal year ended January 29, 2005.
Deloitte & Touche LLP has served as our independent certified public accountants
since fiscal year 2000. One or more representatives of Deloitte & Touche LLP are
expected to be present at the Annual Meeting. Such representatives will have the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions from shareholders.
The aggregate fees billed by Deloitte & Touche LLP ("Deloitte") for fiscal years
2003 and 2002 are as follows:
FEES FISCAL 2003 FISCAL 2002
-------------------------------- ----------- -----------
Audit Fees (1) $295,000 $237,000
Tax Fees (2) Total Fees 14,000 15,000
-------- --------
$309,000 $252,000
-------- --------
(1) "Audit Fees" consist of fees billed for professional services rendered in
connection with the audit of our consolidated annual financial statements
and the review of our interim consolidated financial statements included
in quarterly reports.
(2) "Tax Fees" consist of fees billed for professional services rendered for
tax compliance and tax service.
The Audit Committee has considered and has agreed that the provision of
services as described above are compatible with maintaining Deloitte's
independence.
-21-
The Audit Committee pre-approves the engagement of Deloitte for all
professional services. The pre-approval process generally involves the full
Audit Committee evaluating and approving the particular engagement prior to the
commencement of services.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY THE
APPOINTMENT OF DELOITTE & TOUCHE LLP, AS OUR INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING JANUARY 29, 2005.
-22-
OTHER BUSINESS
We know of no other business to be brought before the Annual Meeting. If,
however, any other business should properly come before the Annual Meeting, the
persons named in the accompanying proxy will vote proxies as in their discretion
they may deem appropriate, unless they are directed by a proxy to do otherwise.
CONTACTING THE BOARD OF DIRECTORS
Shareholders who wish to communicate with the Board of Directors may do so
by writing to Board of Directors, E Com Ventures, Inc., 251 International
Parkway, Sunrise, Florida 33325. Such communications will be reviewed by the
Secretary of the Company, who shall remove communications relating to
solicitations, junk mail, or other correspondence relating to customer service
issues. All other communications shall be forwarded to the Board of Directors or
specific members of the Board, as appropriate or as requested in the shareholder
communication. The Company encourages, but does not require, that all members of
the Board of Directors attend annual meetings of the Company and all members
attended last year's annual meeting.
SHAREHOLDER PROPOSALS FOR THE 2005 ANNUAL MEETING
Shareholder proposals intended to be presented at our 2005 Annual Meeting
of Shareholders pursuant to the provisions of Rule 14a-8 of the Securities and
Exchange Commission promulgated under the Securities Exchange Act of 1934, as
amended, must be received by our Corporate Secretary at the address below by
July 15, 2005 for inclusion in our Proxy Statement and form of proxy relating to
such Annual Meeting. Any Shareholder proposal submitted other than for inclusion
in our proxy materials for that meeting must be delivered to us no later than
September 28, 2005, or such proposal will be considered untimely. If a
shareholder proposal is received after September 28, 2005, we may vote in our
discretion as to the proposal all of the shares for which we have received
proxies for the 2005 Annual Meeting of Shareholders.
Send all proposals or nominations to Donovan Chin, Secretary, E Com
Ventures, Inc., 251 International Parkway, Sunrise, Florida 33325.
-23-
ANNEX A
CHARTER OF THE AUDIT COMMITTEE OF
E COM VENTURES, INC.
PURPOSE AND SCOPE
This Charter governs the operations of the Audit Committee (the
"Committee") of the Board of Directors (the "Board") of E Com Ventures, Inc., a
Florida corporation (the "Company"). The purpose of the Committee is to assist
the Board in fulfilling its responsibilities to oversee:
o the financial reports and other financial information provided by
the Company to any governmental or regulatory body, the public, or
any other user of such financial statements;
o the Company's systems of internal accounting and financial controls;
o the independence and performance of the Company's outside auditors;
and
o compliance by the Company with any legal compliance and ethics
programs as may be established by the Board and the Company's
management from time-to-time.
In fulfilling its obligations, the Committee shall maintain free and open
communications between the Committee and the Company's:
o independent auditors,
o internal accounting staff, and
o management.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities, and personnel of the Company. The Committee is authorized
to retain outside or special counsel, auditors, accounting or other consultants,
experts, and professionals (collectively, "Advisors") for this purpose. The
Company shall provide funding, as determined by the Committee, for payment of
(i) compensation to the independent auditors, (ii) compensation to any Advisors
employed by the Committee and (iii) ordinary administrative expenses of the
Committee that are necessary or appropriate in carrying out its duties.
The Committee may request any officer or employee of the Company or the
Company's outside counsel or independent auditors to attend a meeting of the
Committee or to meet with any members of, or consultants or advisors to, the
Committee.
The Committee shall review and reassess the adequacy of this Charter
annually and recommend any proposed changes to the Board for approval. This
Charter shall be published as an appendix to the Company's Proxy Statement for
the Company's annual meeting of shareholders to the extent required by the rules
and regulations of the Securities and Exchange Commission (the "SEC").
MEMBERS OF THE COMMITTEE
The Audit Committee shall be composed of at least three directors each of
whom must: o meet all "independence" and qualification requirements of the rules
and regulations of the Nasdaq Stock Market, as such rules and regulations may be
amended or supplemented from time-to-time, or the rules and regulations of such
other exchange or inter-dealer quotation system on which the Company's common
stock is then traded;
-24-
o meet the criteria for independence set forth in Rule 10A-3(b)(1)
under the Securities Exchange Act of 1934, as amended ("Exchange
Act");
o not have participated in the preparation of the financial statements
of the Company or any current subsidiary of the Company at any time
during the past three years; and
o be able to read and understand fundamental financial statements,
including a company's balance sheet, income statement, and cash flow
statement.
In addition, at least one member of the Committee must have past
employment experience in finance or accounting, professional certification in
accounting, or other comparable experience or background that results in such
individual's financial sophistication including, but not limited to, being or
having been a chief executive officer, chief financial officer, or other senior
officer with financial oversight responsibilities, or who otherwise qualifies as
an "audit committee financial expert" under SEC rules and regulations. No member
of the Committee may accept any consulting, advisory, or other compensatory fee
from the Company other than for board service, and no member of the Committee
may be an affiliated person (as defined in SEC rules) of the Company.
Under exceptional and limited circumstances, however, one director who (i)
is not independent as defined in the rules and regulations of the Nasdaq Stock
Market, (ii) meets the criteria set forth under Section 10A(m)(3) of the
Exchange Act, and (iii) is not a current officer or employee or a family member
of an officer or employee of the Company may serve as a member of the Committee
for no longer than two years (but may not chair the Committee), provided that:
o the Board determines that membership by the individual on the
Committee is required by the best interests of the Company and its
shareholders; and
o the Board discloses, in the annual proxy statement after such
determination, the nature of the relationship and the reasons for
the determination.
KEY RESPONSIBILITIES AND PROCESSES
The primary responsibility of the Committee is to oversee the accounting
and financial reporting process of the Company and the audits of the financial
statements of the Company on behalf of the Board and to report the results of
the Committee's activities to the Board. The Committee recognizes that
management shall be responsible for preparing the Company's financial statements
and the independent certified public accountants shall be responsible for
auditing those financial statements. The functions set forth below shall be the
principal recurring activities of the Committee in carrying out its oversight
function. In carrying out its responsibilities, however, the Committee shall
remain flexible in order to best react to changing conditions and circumstances.
The following functions are set forth as a guide with the understanding
that the Committee may deviate from this guide and supplement these functions,
as the Committee deems appropriate under the circumstances.
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1. The Committee shall have a clear understanding with management and the
independent certified public accountants that the independent certified public
accountants are ultimately accountable to the Committee, as representatives of
the Company's shareholders. The Committee shall appoint, compensate, retain and
oversee the work of the independent auditors. The independent auditors shall
report directly to the Audit Committee, and the Audit Committee shall resolve
any disagreements between management and the independent auditors regarding
financial reporting.
2. The Committee shall approve, in advance, all auditing services,
internal control-related services and permitted non-audit services (including
the terms thereof) to be performed for the Company by its independent auditors,
subject to the de minimus exceptions for non-audit services described in Section
10A(i)(1)(B) of the Exchange Act which are approved by the Committee prior to
the completion of the audit. The Committee may form and delegate authority to a
subcommittee consisting of one or more members when appropriate, including the
authority to grant pre-approvals of audit and permitted non-audit services,
provided that the decision of such subcommittee to grant pre-approvals shall be
presented to the full Committee at its next scheduled meeting.
3. The Committee shall discuss with management and the independent
auditors the overall scope and plans for the audit, including the adequacy of
staffing and the compensation to be paid to the independent auditors. The
Committee also shall discuss with management and the independent auditors the
adequacy and effectiveness of the Company's internal accounting and financial
controls, including the Company's system to monitor and manage business risk, as
well as legal and ethical compliance programs. To the extent the Committee deems
it to be necessary, the Committee shall meet separately with the internal
accounting staff and the independent auditors, with or without management
present, as well as the Company's Chief Financial Officer and other management
personnel, to discuss the results of the Committee's examinations.
4. The Committee shall:
o ensure that the independent auditors submit annually a formal
written statement delineating all relationships between the
independent auditors and the Company, consistent with Independence
Standards Board Standard No. 1, as such standard may be amended or
supplemented from time to time;
o discuss with the independent auditors any such relationships or
services provided by the independent auditors and their impact on
the objectivity and independence of the independent auditors; and
o take, or recommend that the Board take, appropriate action to
oversee the independence of the independent auditors.
5. The Committee shall review with management and the independent auditors
(i) the financial statements to be included in the Company's Annual Report on
Form 10-K (or the Annual Report to Shareholders if distributed prior to the
filing of the Form 10-K), including the auditors' judgment about the quality,
not just acceptability, of the Company's accounting principles, the consistency
of the Company's accounting policies and their application, and the clarity and
completeness of the Company's financial statements and related disclosures,
including the disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Critical Accounting Policies
and "Controls and Procedures." The Committee also shall discuss the results of
the annual audit and any other matters required to be communicated to the
Committee by the independent auditors under generally accepted auditing
standards, including SAS No. 61, as such might be amended or supplemented. The
Committee shall recommend to the Board whether the audited financial statements
should be included in the Form 10-K.
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6. Once the Company is subject to Section 404 of the Sarbanes-Oxley Act of
2002, the Committee shall review and discuss with management and the independent
auditor the Company's internal controls report and the independent auditor's
attestation of the report prior to filing of the Company's Annual Report on Form
10-K.
7. Prior to the filing of the Company's Quarterly Report on Form 10-Q the
Committee (as a whole or acting through the Committee chair) shall:
o review the interim financial statements and the related disclosures
under "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Critical Accounting Policies" and
"Controls and Procedures" to be included in the Form 10-Q with
management and the independent auditors; and
o discuss the results of the quarterly review and any other matters
required to be communicated to the Committee by the independent
auditors under generally accepted auditing standards, including
Statement of Auditing Standards ("SAS") No. 71, as such may be
amended or supplemented from time to time.
8. Review and discuss quarterly reports from the independent auditor on:
o all critical accounting policies and practices to be used;
o all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditor; and
o other material written communications between the independent
auditor and management, such as any management letter or schedule of
unadjusted differences;
9. The Committee shall prepare the report required by the rules of the
Securities and Exchange Commission to be included in the Company's Proxy
Statement to be delivered to shareholders in connection with the Company's
annual meeting of shareholders.
10. The Committee shall review with the independent auditors any problems
or difficulties the auditors may have encountered and any management letter
provided by the independent auditors and the Company's response to that letter.
Such review should include:
o any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information; and
o any changes required in the planned scope of the audit.
11. The Committee shall meet periodically with management to review the
Company's major financial risk exposures and the steps management has taken to
monitor and control such exposures.
-27-
12. The Committee shall review with the Company's general counsel any
legal matters that may have a material impact on the financial statements, the
Company's compliance policies, and any material reports or inquiries received
from regulators or governmental agencies.
13. The Committee shall review and discuss with management and the
independent auditor any major issues as to the adequacy of the Company's
internal controls, any special steps adopted in light of material control
deficiencies and the adequacy of disclosures about changes in internal control
over financial reporting.
14. The Committee shall establish procedures for: (i) the receipt,
retention and treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters and (ii) the
confidential, anonymous submission by employees of the Company of concerns
regarding questionable accounting or auditing matters.
With respect to the foregoing responsibilities and processes, the
Committee recognizes that the Company's financial management, including its
internal audit staff, if any, as well as the independent auditors, have more
time, knowledge, and more detailed information regarding the Company than do
Committee members. Consequently, in discharging its oversight responsibilities,
the Committee will not provide or be deemed to provide any expertise or special
assurance as to the Company's financial statements or any professional
certification as to the independent auditors' work. While the Committee has the
responsibilities and powers set forth in this Charter, it is not the duty of the
Committee to plan or conduct audits or to determine that the Company's financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles. This is the responsibility of management and the
independent auditors. Nor is it the duty of the Committee to assure compliance
with laws and regulations and the Company's internal policies and procedures.
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E COM VENTURES, INC.
251 INTERNATIONAL PARKWAY
SUNRISE, FLORIDA 33325
PROXY FOR 2004 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned holder of common stock of E Com Ventures, Inc., a Florida
corporation (the "Company"), hereby appoints A. Mark Young and Donovan Chin, and
each of them, as proxies for the undersigned, each with full power of
substitution, for and in the name of the undersigned to act for the undersigned
and to vote, as designated on the reverse side of this proxy card, all of the
shares of stock of the Company held of record by the undersigned at the close of
business on November 11, 2004 at the Company's 2004 Annual Meeting of
Shareholders, to be held on Tuesday, December 14, 2004, at 11:00 a.m. at the E
Com Ventures, Inc. Corporate Office, 251 International Parkway, Sunrise, Florida
33325, and at any adjournments or postponements thereof.
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
|X| PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. Election of Directors.
Vote for all Nominees Listed Below (except as written below)
|_|
Vote Withheld from all Nominees
|_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE DIRECTOR
NOMINEES LISTED IN THIS PROPOSAL NO. 1.
NOMINEES: Stephen Nussdorf
Michael W. Katz
Carole Ann Taylor
Joseph Bouhadana
Paul Garfinkle
(Instruction: To withhold authority for an individual nominee, write that
nominee's name on the line provided below.)
______________________________________
2. Ratification of the appointment of Deloitte & Touche LLP as our independent
public accountants.
|_| For |_| Against |_| Abstain
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3. In their discretion, upon such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF ALL DIRECTOR NOMINEES LISTED HEREIN, AND FOR THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT
PUBLIC ACCOUNTANTS.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED.
DATE ______________________________________
SIGNATURE _________________________________
SIGNATURE (If held jointly) _____________________________________
Note: Please sign exactly as your name appears hereon and mail it promptly even
though you may plan to attend the Annual Meeting. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If
partnership, please sign in the partnership name by authorized person.