<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
D.G. JEWELRY 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)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / 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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(A)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / 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:
___________________________________________________________________________
<PAGE>
D.G. JEWELRY INC.
1001 Petrolia Road
Toronto, Canada M3J 2X7
-------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 10, 2000
TO THE SHAREHOLDERS OF D.G. JEWELRY INC.:
NOTICE IS HEREBY GIVEN, that the Annual Meeting of Shareholders of D.G.
Jewelry Inc. (the "Meeting") will be held at 10:00 a.m. on August 10, 2000 at
the offices of D.G. Jewelry Inc. (the "Company"), at 1001 Petrolia Road,
Toronto, Ontario M3J 2X7, for the following purposes:
1. To elect the Board of Directors of D.G. Jewelry Inc. for the
ensuing year;
2. To approve the amendment of the Company's Articles of
Incorporation to authorize 5,000,000 preferred shares;
3. To ratify the appointment of Schwartz, Levitsky, Feldman, llp,
Chartered Accountants, as the Company's independent chartered
accountants for the ensuing year; and
4. To transact such other business as may properly come before the
Meeting and any continuations and adjournments thereof.
Shareholders of record at the close of business on June 22, 2000 are
entitled to notice of and to vote at the Meeting.
In order to ensure a quorum, it is important that Shareholders
representing a majority of the total number of shares issued and outstanding and
entitled to vote, be present in person or represented by their proxies.
Therefore, whether you expect to attend the meeting in person or not, please
sign, fill out, date and return the enclosed proxy in the self-addressed,
postage-paid envelope also enclosed. If you attend the Meeting and prefer to
vote in person, you can revoke your proxy.
In addition, please note that abstentions are included in the
determination of the number of shares present and voting, for purposes of
determining the presence or absence of a quorum for the transaction of business.
Abstentions are not counted as voted either for or against a proposal.
By Order of the Board of Directors,
/s/ S. Berkovits
------------------------------------------------
Samuel Jacob "Jack" Berkovits
Chairman, Chief Executive Officer and President
July 5, 2000
<PAGE>
D.G. JEWELRY INC.
1001 PETROLIA ROAD
TORONTO, CANADA M3J 2X7
-------------------------------
PROXY STATEMENT
-------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 10, 2000
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of D.G. Jewelry Inc. (the "Company"), for
use at the Annual Meeting of Shareholders of the Company (the "Meeting") to be
held on August 10, 2000 at 10:00 a.m. at the Company's offices at 1001 Petrolia
Road, Toronto, Canada M3J 2X7, and at any continuation and adjournment thereof.
Anyone giving a proxy may revoke it at any time before it is exercised by giving
the Chairman of the Board of Directors of the Company written notice of the
revocation, by submitting a proxy bearing a later date or by attending the
Meeting and voting. This statement, the accompanying Notice of Meeting and form
of proxy have been first sent to the Shareholders on or about July 7, 2000.
In addition, please note that abstentions are included in the
determination of the number of shares present and voting, for purposes of
determining the presence or absence of a quorum for the transaction of business.
Abstentions are not counted as voted either for or against a proposal.
All properly executed proxies on the enclosed form, which are not
revoked and which are received in time will be voted in accordance with the
Shareholder's directions, and unless contrary directions are given, will be
voted for the proposals described below.
OWNERSHIP OF SECURITIES
Only Shareholders of record at the close of business on June 22, 2000,
the date fixed by the Board of Directors in accordance with the Company's
By-Laws, are entitled to vote at the Meeting. As of June 21, 2000, the Company
had 6,649,655 Common Shares issued and outstanding.
Each outstanding Common Share is entitled to one vote on all matters
properly coming before the Meeting. A majority of the outstanding Common Shares
is necessary to constitute a quorum for the Meeting.
1
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth as of June 21, 2000, the names and
beneficial ownership of the Company's common shares beneficially owned, directly
or indirectly, by (i) each person who is a director and/or executive officer of
the Company, (ii) all directors and executive officers of the Company as a
group, and (iii) all holders of five percent (5%) or more of the outstanding
common shares of the Company.
<TABLE>
<CAPTION>
Names and Address of Amount and Nature of Percentage of Shares
Beneficial Owner(1) Beneficial Ownership(2) Outstanding
------------------- ----------------------- -----------
<S> <C> <C>
Jack Berkovits............................. 3,231,900(3) 48.1%
The Berkovits Family Trust................. 426,000 6.4%
Sheba Berkovits............................ 816,000(4) 12.3%
Gary Davis................................. 25,400(5) *
Leonard Fasullo............................ 30,000(5) *
Theodore Bonsignore........................ 15,000(6) *
Myer Feiler................................ 65,000(7) *
Ronald Rutman.............................. 5,000(8) *
Jay M. Kaplowitz (9)....................... 0 0%
Saul M. Muskat (9)......................... 0 0%
Steven Reichmann (9)....................... 0 0%
All directors and executive officers 3,372,300 49.6%
as a group, nine persons.................
</TABLE>
* Less than one percent (1%).
(1) Except as set forth above, the address of each individual is 1001
Petrolia Road, Toronto, Ontario, Canada M3J 2X7.
2
<PAGE>
(2) Based upon information furnished to the Company by either the directors
and executive officers or obtained from the stock transfer books of the
Company. The Company has been advised that these persons hold the sole
voting and dispositive power with respect to the Common Shares except as
noted herein. For purposes of computing 'beneficial ownership' and the
percentage of outstanding Common Shares held by each person or group of
persons named above as of the date of this Proxy Statement, any security
which such person or group of persons has the right to acquire within
sixty days after such date is deemed to be outstanding for the purpose
of computing beneficial ownership and the percentage ownership of such
person or persons, but is not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person. As of June
21, 2000, the Company had 6,649,655 Common Shares outstanding.
(3) Includes (i) 426,000 Common Shares owned by the Berkovits Family Trust
of which Mr. Berkovits and his wife are co-trustees; (ii) 390,000 Common
Shares owned by his wife individually and (iii) 71,500 shares issuable
upon options that are currently exercisable or exercisable within the
next sixty days. Does not include an aggregate of 397,500 Common Shares
owned by two of Mr. Berkovits' sons who are independent of their father.
(4) Includes 426,000 Common Shares owned by the Berkovits Family Trust of
which Ms. Berkovits is a co-trustee. Ms. Berkovits is the wife of Jack
Berkovits.
(5) Includes 5,000 Common Shares issuable upon the exercise of options which
are currently exercisable or exercisable within the next sixty days.
(6) Includes 15,000 Common Shares issuable upon the exercise of options
which are currently exercisable or exercisable within the next sixty
days.
(7) Includes 50,000 Common Shares issuable upon the exercise of options
which are currently exercisable or exercisable within the next sixty
days.
(8) Includes 5,000 Common Shares issuable upon the exercise of options which
are currently exercisable or exercisable within the next sixty days. Mr.
Rutman, a current director of the Company, has requested not to be
nominated for re-election due to other commitments.
(9) Director Nominee.
3
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PROPOSAL 1
ELECTION OF DIRECTORS
Six directors are to be elected at the Meeting to hold office until
the next meeting of Shareholders or until their successors have been duly
elected and qualified. The election of directors requires the affirmative vote
of at least the majority of Common Shares present or represented at a meeting at
which a quorum is present or represented.
The By-Laws of the Company provide that the authorized number of
directors shall be as set by the Board of Directors but shall not be less than
one or more than ten. The By-Laws require that a majority of the Company's
directors be Canadian residents. The directors hold office until the next annual
meeting of Shareholders and until their successors have been elected and
qualified. There are no agreements with respect to the election of directors.
The Company has not to date paid directors fees for service on the Board of
Directors or any committee thereof.
Shareholder Vote Required
The election of the directors will require the affirmative vote of the
majority of the shares present in person or represented by proxy at the Meeting
and entitled to vote on the election of directors.
The Board of Directors recommends a vote for election to the Board of Directors
of the Company of each of the following Director Nominees.
<TABLE>
<CAPTION>
Position with the Position Held
Name Age Company Since
<S> <C> <C>
Samuel J. Berkovits..................... 48 Chairman of the Board, 1979
CEO and President
Meyer Feiler............................ 47 Director 1998
Theodore L. Bonsignore.................. 53 General Manager - 1998
Diamonair, Director
Jay M. Kaplowitz........................ 53 Director Nominee N/A
Steven Reichmann ....................... 39 Director Nominee N/A
Saul M. Muskat.......................... 53 Director Nominee N/A
</TABLE>
--------------------------------------------------------------------------------
Samuel Jacob "Jack" Berkovits has served as President and a director of
the Company since 1979. He is a founding member of the Jeweler's Vigilance
Committee (Canadian Jeweler's Association) and is active in community affairs.
Mr. Berkovits became a member of the Canadian
4
<PAGE>
Institute of Chartered Accountants in 1976. He practiced as an accountant in
Montreal from 1972 to 1977 when he joined the Company.
Theodore L. Bonsignore has served as General Manager of Diamonair since
May 1998 and as a director since July 1998. Mr. Bonsignore works for the Company
an average of between fifteen to twenty hours a week and also operates T.L.
Bonsignore Management and Advisory Services, a consulting firm specializing in
the jewelry industry. From 1975 to 1997, Mr. Bonsignore was employed by Krementz
& CO., a jewelry manufacturer, serving as President since 1990. Mr. Bonsignore
has been a director of the Jewelers Board of Trade since 1990 and served as its
Chairman from 1998 until February 2000. Mr. Bonsignore is a certified public
accountant. Mr. Bonsignore will be nominated to serve as a director at the
Company's annual meeting.
Meyer Feiler has been a director of the Company since July 1998. Mr.
Feiler has served as President of Carmen Incorporated, one of the largest
jewelry companies in Canada since 1993. Mr. Feiler has worked at Carmen
Incorporated since 1979.
Jay M. Kaplowitz is a founding partner of the law firm Gersten, Savage
& Kaplowitz, LLP, the Company's Securities Counsel in the United States. Mr.
Kaplowitz has more than twenty-five years experience in corporate, banking and
securities law. He has negotiated and structured numerous financial and business
transactions and has extensive expertise in public and private equity and debt
offerings. He received a JD from Boston University, and a BA from the Brooklyn
College, City University of New York.
Steven Reichmann is the founder and Executive Vice President of Everest
Broadband Networks Canada Ltd. ("EBN"). EBN provides telecommunications
services, primarily high-speed inter-net applications and telephone and video
services to occupants of multi-tenant office and residential buildings, and
hotel properties. Mr. Reichmann is a member of EBN's Real Estate Advisory Board.
Prior to his founding of EBN, Mr. Reichmann was the Vice President of Corporate
Expansion and Acquisition of Olympia Tile International, a family-owned
business, where his objective was the increase business operations throughout
North America. He received an MBA from York University, Toronto in 1988.
Saul M. Muskat founded the Toronto office of Schwartz, Levitsky &
Feldman, llp, where he was the managing partner from its founding in 1977 until
2000. Mr. Muskat's practice areas included Corporate Finance, Mergers and
Acquisitions, Merchant Banking, Initial Public Offerings, Corporate
Reorganizations, and Management Consulting. Mr. Muskat is currently engaged as a
management consultant. Prior to founding the Toronto office of Schwartz,
Levitsky & Feldman, llp, he articled and practiced at the Toronto office of
Price Waterhouse from 1973 to 1977. He is a member of the Canadian Institute of
Chartered Accountants and a member of the Ontario Institute of Chartered
Accountants. He received a diploma in Polymer Chemistry from Ryerson
Polytechnical Institute, Toronto, and an honors BBA degree from York University,
Ontario.
There is no family relationship between any of the above named officers
or directors.
The term of office for directors is one year.
Audit and Compensation Committees
During Fiscal 1999, the Audit Committee consisted of Messrs. Berkovits,
Feiler and Ronald Rutman. Mr. Rutman, a current director of the Company, has
requested not to be nominated for re-election due to other commitments. The
responsibilities of the Audit Committee include recommending to the board of
directors the firm of independent auditors to serve the Company,
5
<PAGE>
reviewing the independent auditors reports, services and results of audit, and
reviewing the scope, results and adequacy of the Company's internal control
procedures. The Compensation Committee also consisted of Messrs. Berkovits,
Feiler and Rutman. The Compensation Committee is expected to periodically review
and evaluate officers' compensation and administers the Company's stock option
plans. Upon his election as a director of the Company, Mr. Saul Muskat will be
appointed to replace Mr. Rutman on the Compensation and Audit Committees. See
"Stock Option Plans."
It is not expected that any director or committee member will receive
any compensation for acting in such capacity. The Company will reimburse
directors and committee members for all ordinary and necessary expenses incurred
in attending any meeting of the board or any committee thereof.
During the fiscal year ended December 31, 1999, the Company's Board of
Directors met three times on April 14, 1999, July 20,1999 and November 17, 1999,
at which all of the Directors were present, and acted by written consent six
times on March 22, 1999, April 23, 1999, May 3, 1999, June 1, 1999, July 20,
1999 and November 17, 1999, the Audit Committee met on April 14, 1999 and the
Compensation Committee did not meet.
6
<PAGE>
Executive Compensation
Summary Compensation Table
The following table sets forth all cash compensation for services
rendered in all capacities to the Company, for the fiscal years ended December
31, 1999, December 31, 1998, December 31, 1997 paid to the Company's Chief
Executive Officer, and the other most highly compensated executive officers (the
"Named Executive Officers") at the end of the above fiscal years whose total
annual salary plus bonus exceeded $100,000 per annum.
Executive Compensation
The Summary Compensation Table below sets forth compensation paid by
the Company and its subsidiaries for the last three fiscal year for services in
all capacities for its CEO and any other Named Executive Officer who received a
total annual salary and bonus from the Company which exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Year/ Restrict
Principal Period Annual ed Options/ Other
Position Ended Compensation Bonus Stock Awards SARs Compensation
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jack Berkovits, Chief 1999 $247,645 $0 0 10,000 $12,000(1)
Executive Officer 1998 $216,951 $125,000 0 266,000 $12,000(1)
and Chairman.............. 1997 $197,242 $187,798 0 377,500 $12,000(1)
Gadi Beer, Vice 1999 $167,724 $0 0 0 $7,710(3)
President 1998 $196,755 $0 0 10,000 $7,710(3)
of Sales and 1997(2) $109,375 $0 0 0 $0
Marketing
Aviv......................
</TABLE>
(1) Represents monthly auto allowance.
(2) Mr. Beer's employment with the Company commenced on June 1, 1997, after
the Company's acquisition of Aviv.
(3) Represents car allowance of $5,628 and health insurance of $2,082.
7
<PAGE>
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
Jack Berkovits and the Company entered into a three year employment
agreement commencing April 17, 1997 for Mr. Berkovits to serve as Chief
Executive Officer and President at an annual salary of $250,000 with yearly
increases of no less than $10,000 (the "Employment Agreement"). The Employment
Agreement was renewed on the same terms and conditions for an additional term of
one year terminating on April 17, 2001. The Employment Agreement provides that
should Mr. Berkovits die during the term of the Employment Agreement, his estate
or designee shall receive, upon his death, a dollar amount equal to two years
full salary. In the event of disability, Mr. Berkovits is to receive 70% of his
salary for the remainder of the term of the Employment Agreement. The Employment
Agreement also provides for the Company to maintain approximately $2,000,000 in
key-man insurance on the life of Mr. Berkovits. Currently, the Company is
beneficiary of two "key-man" term policies with a total death benefit of
$840,000. The $700,000 policy has been assigned to secure the Company's
financing facilities with The Bank of Nova Scotia. The Company maintains a third
policy with a death benefit of $1.1 million for which Mr. Berkovits' family is
the beneficiary.
Based upon any wrongful termination, which includes changes in
control of the Company through an acquiring person (any person who has acquired
or announces a tender offer or exchange for 25% of the Company), a sale of
substantially all of the assets or merger, acquisition of the Company or its
consolidation with another, or certain types of board changes, the Company shall
pay Mr. Berkovits a lump sum payment, based upon his then compensation,
including benefits and other perquisites, from such termination. Such payment
shall be the balance of his compensation for the remainder of the term or
compensation for one year whichever is less; provided however, if the payment is
in excess of $100,000, then such excess shall be payable in equal quarterly
payments with interest at the then legal rate. The Employment Agreement also
contains a one-year non-competition provision within a 200 mile radius of the
Company's primary operation in Canada or anywhere in the United States.
The Company entered into an employment agreement with Gadi Beer,
the Vice- President of Sales and Marketing of Aviv for a term of one year
terminating on February 9, 2000, which was renewed on the same terms and
conditions for an additional term of one year terminating on February 10, 2001.
Mr. Beer earns an annual base salary of $120,000 and is entitled to receive 0.8%
of the total sales of Aviv. Mr. Beer has agreed to a covenant not to compete
with the Company for a period of three years from the date of termination of the
agreement. The agreement is renewable for additional successive one year terms
upon the consent of both parties.
No other officer has an employment agreement with the Company.
8
<PAGE>
Compensation of Directors
There are no standard arrangements for the payment of any fees to
directors of the Company for acting in such capacity. Directors are reimbursed
for expenses for attending meetings.
The Company has adopted a 1999 Stock Option Plan and a 1998 Stock
Option Plan pursuant to which options have been granted to officers, directors,
consultants, key employees, advisors and similar parties who provide their
skills and expertise to the Company. See "Options to Named Executive Officers"
and "Stock Option Plans" below.
Options to Named Executive Officers
The following tables set forth certain information with respect to
all outstanding stock options granted during 1999 to the Company's Named
Executive Officers.
Option Grants
<TABLE>
<CAPTION>
Number Potential Realizable
of Value at Assumed
Securities % of Total Annual Rates of
Underly- Options Stock Price
ing Granted Exercise Expira- Appreciation for
Options to Employees Price tion Option Term
Name of Holder Granted in Fiscal Year ($/Share) Date 5%($) 10%($)
-------------- ------- -------------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack Berkovits 10,000 22.5% $4.125 7/19/09 25,950 65,750
Gadi Beer -0- -0-
</TABLE>
Option Exercises in Last Fiscal Year and Fiscal Year End Values (1)
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options Options
Shares at FY-End at FY-End
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable
---- ------------ -------- ------------- -------------
<S> <C> <C> <C> <C>
Jack Berkovits 362,125 965,013.75 148,375/133,000 185,026.25/63,840
Gadi Beer -0- -0- 5,000/5,000 2,400/2,400
</TABLE>
(1) The closing bid price of a share of the Company's Common Shares at
December 31, 1999 was $3.25.
9
<PAGE>
Stock Option Plans
1996 Stock Option Plan
In December 1996, the board of directors and shareholders adopted the
1996 D.G. Jewelry Stock Option Plan (the "1996 Plan"), pursuant to which 500,000
common shares are provided for issuance. As of the date of this Proxy Statement,
all of such options have been granted.
In February 1997, the Board granted 172,500 options under the 1996 Plan
to 20 persons, including officers, directors and key employees. The options were
to be exercisable at $4.50 per share for five years expiring February 9, 2002.
On August 22, 1997, the Compensation Committee lowered the exercise price to
$1.38, which was the Company's share price on such date. On August 22, 1997, the
Company granted an additional 327,500 options exercisable at $1.38 per share to
Jack Berkovits. All options granted vest at the rate of twenty five percent
(25%) every six months so that the options are fully vested two years from their
issuance date. The table below reflects the options under the 1996 Plan granted
to the present officers and directors of the Company and the percentage of
Options issued to such persons.
<TABLE>
<CAPTION>
Officer and/or Director Expiration Date Options Percent Exercise Price
----------------------- --------------- ------- ------- --------------
<S> <C> <C> <C> <C>
Jack Berkovits................... (1) 377,500 75.5% $1.38
Gary Davis....................... 02/09/02 15,000 3.0% $1.38
Leonard Fasullo.................. 02/09/02 15,000 3.0% $1.38
</TABLE>
--------
(1) 327,500 of such options expire on August 21, 2002 and 50,000 expire on
February 9, 2002.
1998 Stock Option Plan
In July 1998, the Board granted 500,000 options to 34 persons including
officers, directors, consultants and key employees. The options were exercisable
at the following prices; $2.77 (410,000 options); $3.25 (40,000 options); and
$4.00 (50,000 options). The 500,000 options issued represent all of the options
authorized for issuance under the 1998 Stock Option Plan. All such options vest
at the rate of twenty five percent (25%) every six months so that the options
are fully vested two years from their issuance date. In 1999, a total of 4,250
options were forfeited to the Company by two employees who ended their
employment with the Company. Pursuant to the 1998 Stock Option Plan, the 4,250
options may be reissued at the discretion of the Board of Directors.
10
<PAGE>
The table below reflects the Options under the 1998 Stock Option Plan
granted to the present officers and directors of the Company and the percentage
of Options issued to such persons.
<TABLE>
<CAPTION>
Officer and/or Director Expiration Date Options Percent Exercise Price
----------------------- --------------- ------- ------- --------------
<S> <C> <C> <C> <C>
Jack Berkovits........................ 07/14/03 266,000 53.2% $2.77
Gary Davis............................ 07/14/03 20,000 4.0% $2.77
Leonard Fasullo....................... 07/14/03 20,000 4.0% $2.77
Theodore L. Bonsignore................ 07/14/03 10,000 2.0% $2.77
Myer Feiler........................... 07/14/03 60,000 12.0% $ (1)
</TABLE>
------------
(1) 10,000 of such options are exercisable at $2.77 and the remaining 50,000
are at $4.00 per share.
1999 Stock Option Plan
In July 1999, the board of directors and shareholders adopted the 1999
Stock Option Plan (the "1999 Plan"). The 1999 Plan will be administered by the
compensation committee or our board of directors, who will determine among other
things, those individuals who shall receive options, the time period during
which the options may be partially or fully exercised, the number of common
shares issuable upon the exercise of the options and the option exercise price.
The options may be granted as either of the following: (a) incentive stock
options, or (b) non-qualified stock options. 500,000 shares may be issued under
the 1999 Plan. As of the date of this Proxy Statement, 44,500 options have been
granted under the 1999 Plan.
In connection with the 1999 Plan, the exercise price of each incentive
stock option may not be less than one hundred (100%) of the fair market value of
the Company's common shares on the date of grant or one hundred ten percent
(110%) of fair market value in the case of an employee holding ten percent (10%)
or more of the Company's outstanding common shares. The aggregate fair market
value of the common shares for which incentive stock options granted to any
employee are exercisable for the first time by such employee during any calendar
year, pursuant to all of the Company's, or any related corporation's, stock
option plan, may not exceed $100,000. Non-qualified stock options may be granted
at a price determined by the Company's
11
<PAGE>
compensation committee, but not at less than eighty five percent (85%) of the
fair market value of the Company's common shares. Stock options granted pursuant
to the Company's 1999 Plan will expire not more than ten years from the date of
grant.
The 1999 Plan is effective for a period of ten years, expiring in 2009.
Options may be granted to officers, directors, consultants, key employees,
advisors and similar parties who provide their skills and expertise to the
Company. The 1999 Plan is designed to enable the Company's management to attract
and retain qualified and competent directors, employees, consultants and
independent contractors. Options granted under the 1999 Plan may be exercised
for up to ten years, and shall be at an exercise price all as determined by the
Company's board of directors. Options are non-transferable except by the laws of
descent and distribution or a change in control of us, as defined in the 1999
Plan, and are exercisable only by the participant during his or her lifetime.
Change in control includes (a) the sale of substantially all of the Company's
assets and the Company's merger or consolidation with another company, or (b) a
majority of the board of directors changes other than by election by the
Shareholders pursuant to board solicitation or by vacancies filled by the board
caused by death or resignation of such person.
If a participant ceases affiliation with the Company by reason of
death, permanent disability or retirement at or after age seventy, the option
remains exercisable for one year from such occurrence but not beyond the
option's expiration date. Other types of termination allow the participant three
months to exercise, except for termination for cause which results in immediate
termination of the option.
Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by the Company become available again for
issuance under the 1999 Plan.
The 1999 Plan may be terminated or amended at any time by the Company's
board of directors, except that the number of common shares reserved for
issuance upon the exercise of options granted under the 1999 Plan may not be
increased without the consent of the Company's Shareholders.
Indemnification of Officers and Directors
The Company shall, to the fullest extent permitted by the laws of the
Province of Ontario, as the same may be amended and supplemented, indemnify its
officers and directors pursuant to said section from and against any and all
expenses, liabilities or other matters referred in or covered by said section,
and the indemnification provided for herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any by-law,
agreement, vote of Shareholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office, shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person. The Company will have the
power to purchase and maintain officers' and directors' liability insurance in
order to insure against the liabilities for which such officers and directors
are indemnified pursuant to Article 6.
12
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, it may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the United States
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933, as amended, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933, as amended, and will be governed by the
final adjudication of such issue.
Executive Compensation Policy
The Company's executive compensation policy is designed to attract,
motivate, reward and retain the key executive talent necessary to achieve the
Company's business objectives and contribute to the long-term success of the
Company. In order to meet these goals, the Company's compensation policy for its
executive officers focuses primarily on determining appropriate salary levels
and providing long-term stock-based incentives. To a lesser extent, the
Company's compensation policy also contemplates performance-based cash bonuses.
Cash Compensation. In determining its recommendations for adjustments
to officers' base salaries, the Company focuses primarily on the scope of each
officer's responsibilities, each officer's contributions to the Company's
success in moving toward its long-term goals during the fiscal year, the
accomplishment of goals set by the officer and approved by the Board for that
year, the Company's assessment of the quality of services rendered by the
officer, comparison with compensation for officers of comparable companies and
an appraisal of the Company's financial position. In certain situations,
relating primarily to the completion of important transactions or developments,
the Company may also pay cash bonuses, the amount of which will be determined
based on the contribution of the officer and the benefit to the Company of the
transaction or development.
Equity Compensation. The grant of stock options to executive officers
constitutes an important element of long-term compensation for the executive
officers. The grant of stock options increases management's equity ownership in
the Company with the goal of ensuring that the interests of management remain
closely aligned with those of the Company's Shareholders. The Board believes
that stock options in the Company provide a direct link between executive
compensation and Shareholder value. By attaching vesting requirements, stock
options also create an incentive for executive officers to remain with the
Company for the long term. See "Stock Option Plans."
13
<PAGE>
CORPORATE PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total Shareholder
return from April 18, 1997 through December 31, 1999 for the Company, the Nasdaq
Stock Market - U.S. Index ("Nasdaq U.S.") and the Nasdaq Non-Financial Index
("Nasdaq Non-Financial").
Graphic Omitted
<TABLE>
<CAPTION>
Nasdaq
DG Jewelry Nasdaq U.S. Non-Financial
---------- ----------- -------------
<S> <C> <C> <C> <C>
April 18, 1997 100 100 100
December 31, 1997 29 130 126
December 31, 1998 92 183 185
December 31, 1999 54 339 365
</TABLE>
The graph assumes that the value of the investment in the Company's
Common Shares, the Nasdaq U.S. and the Nasdaq Non-Financial was $100 on April
18, 1997 and that all dividends were reinvested. No dividends have been declared
or paid on the Company's Common Shares.
14
<PAGE>
CERTAIN TRANSACTIONS
In February 1995, the Company entered into a ten year lease consisting
of 23,000 square feet for its executive offices and manufacturing operations in
North York, Ontario. The lease is with 1001 Petrolia Road Limited Partnership
("Petrolia L.P."), the general partner being 1013418 Ontario Inc. Jack
Berkovits, Chairman, CEO and President of the Company, is the sole owner,
officer and director of that general partner. Current rent is $110,886 and
increases each year by the greater of $.37 a square foot or the percentage
increase in the Consumer Price Index for the Municipality of Metropolitan
Toronto. Additionally, the Company is paying real estate taxes, utilities and
insurance aggregating $97,000 per year for this facility. Management is of the
opinion that the lease is on terms as favorable as would be obtainable from
unaffiliated third parties.
Petrolia L.P. through 1013418 Ontario, Inc., the general partner, of
which Mr. Berkovits is the sole shareholder, officer and director, had obtained
a five year, $660,000 mortgage on the property, which was renewed in October
1998. On December 31, 1999, the principal amount outstanding was $566,064. The
Company is a guarantor of this mortgage.
Jack Berkovits loaned the Company monies from time to time for
operations and working capital which sums at December 31, 1999 aggregated
approximately $1.9 million with an interest rate of eleven and six-tenths
percent (11.6%). In 1997, the Company repaid $1.2 million of such loans,
including payments to a third party, Laurbrad Holdings Limited, who had loaned
funds to Mr. Berkovits. Mr. Berkovits loaned the funds to the Company on the
same terms, which included an eleven and six-tenths percent (11.6%) annual
interest rate.
Diamante is a Canadian company operating under the name Oromart which
has five retail jewelry stores. Diamante is owned by a Vice President of the
Company, Leonard Fasullo, who is also Diamante's President (since 1998). The
inventory provided to Diamante, consists primarily of manufacturing surplus,
returns or refurbished jewelry, and on occasion gold chains and watches
purchased by the Company for resale to Diamante. The inventory is secured by a
registered security agreement covering the assets of Diamante, which security
agreement has been assigned to The Bank of Nova Scotia which holds a substantial
security interest in the assets of the Company. Diamante has guaranteed the
Company's bank financing and provided the bank with a direct security interest
in its assets. The Company consolidated, for financial reporting purposes, with
Diamante until February 7, 1997, the termination date of the agreement with
Diamante reflecting the Company's control over that retail operation. The
Company performs certain administrative functions for Diamante.
Diamante leases each facility for its five stores, of which one lease
is guaranteed by the Company. This lease is terminable by Diamante on ninety
days written notice, and is for five years, is a net, net lease, with renewal
options for a rental rate of approximately $17,000 per year plus taxes,
maintenance, insurance and utilities.
In connection with the purchase of Aviv, the Company agreed to issue
the former owners of Aviv an amount of shares having a value of $325,000 based
on the average closing price in April
15
<PAGE>
1999 in settlement of a note in that amount. Based on such closing prices, the
Company issued an aggregate of 45,145 shares. All of the former owners of Aviv
are presently employees of the Company.
The Company has entered into a supply agreement with NetJewels.com,
Inc. ("NetJewels"), which is a newly formed company owned fifty percent (50%) by
the Company and fifty percent (50%) by two sons of Jack Berkovits. The agreement
provides that NetJewels will purchase jewelry from the Company on the best terms
offered to the Company's other customers. In turn, NetJewels will sell such
jewelry to or through certain Internet companies who have previously entered
into arrangements with the Company. In June 1999, the Company transferred
certain Internet contracts to NetJewels for an aggregate purchase price of
$1,800,000. As of December 31, 1999, the Company has advanced approximately
$587,982 to NetJewels, primarily to finance its start-up costs. NetJewels has
agreed to repay these amounts to the Company at a rate of twenty percent (20%)
per year over the next five years.
The Company provides general corporate services to NetJewels at a price
of $5,000 per month plus actual expenses. These services include maintenance of
insurance, property and casualty, medical, dental and life, payroll processing,
including the withholding of taxes, employment insurance and Canada pension plan
payments, preparation and filing of tax returns, benefits and administration and
telecommunications.
The Company entered into an agreement to sublet 3,000 square feet of
its office space to NetJewels at an annual rent of $6,000. The sublease has a
term of two years and three months and expires on December 31, 2001, with an
option for an additional five years.
During the year ended December 31, 1999, the Company paid Theodore L.
Bonsignore $73,000 in consulting fees. Mr. Bonsignore is a director of the
Company and the General Manager of its Diamonair subsidiary. Mr. Bonsignore was
paid for his work as a consultant to both the Company and Diamonair.
All transactions between the Company, its officers, directors,
principal shareholders or affiliates are, in the opinion of management, except
for the interest rate charges on a portion of Mr. Berkovits' loans which are
above the market rate, on terms no less favorable to the Company then may be
obtained from unaffiliated third parties. All future transactions and loans
between itself and its officers, directors and five percent (5%) shareholders to
be on terms no less favorable than could be obtained from independent,
unaffiliated parties and will be approved by a majority of the independent,
disinterested directors of the Company.
16
<PAGE>
PROPOSAL 2
TO APPROVE THE AMENDMENT OF THE COMPANY'S ARTICLES OF
INCORPORATION TO AUTHORIZE 5,000,000 PREFERRED SHARES
The Board of Directors believes that it is in the best interest of the
Company to amend the Company's Articles of Incorporation to authorize 5,000,000
preferred shares, without par value ("Preferred Shares"). In connection
therewith, the Shareholders of the Company pursuant to Section 168 (5) of the
Ontario Business Corporations Act (the "Ontario Act") are required to adopt a
special resolution authorizing the amendment of the Company's Articles of
Incorporation to authorize 5,000,000 Preferred Shares. The terms of the
Preferred Shares, including, the division of the Preferred Shares into one or
more series, dividend or interest rates, conversion prices, voting rights,
redemption prices, maturity dates, as well as other related issues with respect
to the Preferred Shares will be determined by the Board of Directors, except
that pursuant to Section 25 (3) of the Ontario Act there shall be no priority of
any shares of the Preferred Shares with respect to distribution rights upon the
liquidation, dissolution or winding up of the Company, and dividend declarations
and issuances. The form of the special resolution to be adopted by the
Shareholders is attached hereto as Exhibit A.
The Board further believes that it advisable to authorize such
Preferred Shares to have them available for, among other things, possible
issuance in connection with future acquisitions or financing activities. The
Preferred Shares would be available for any proper corporate purpose including,
without limitation, the issuance in private or public sales as a means of
raising working capital, as consideration to be paid by the Company for the
acquisition of other businesses and properties, the issuance of stock splits or
dividends and the implementation of employee benefit plans.
The Preferred Shares that would be available for issuance if the
proposed amendment is approved, could be issued for any proper corporate purpose
by the Board at any time without further Shareholder approval, subject to
applicable law and to the rules of the National Association of Securities
Dealers, Inc. Nasdaq Stock Market, Inc. Except as described above, further
authorization from the Company's Shareholders will not be solicited prior to the
issuance of Preferred Shares. The voting and equity ownership rights of the
Company's Shareholders may be diluted by such issuances. Shareholders will not
have preemptive rights to subscribe for Preferred Shares, unless the Company
grants such rights at the time of issue. Other than described above, the Company
currently has no plans or proposals to issue any of the Preferred Shares.
The Board of Directors is required to make any determination to issue
Preferred Shares based on its judgment as to the best interests of the Company.
Although the Board has no present intention of doing so, it could issue
Preferred Shares (within the limits imposed by applicable laws and the Nasdaq
rules as described above) that could, depending on the circumstances, make more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or otherwise. When in the judgment of the
Board of Directors such use would be in the best interest of the Company, such
shares could be used to create voting or other impediments or to
17
<PAGE>
discourage persons seeking to gain control of the Company. Such shares could be
privately placed with purchasers favorable to the Board in opposing such action.
The issuance of Preferred Shares also could be used to dilute the share
ownership of a person or entity seeking to obtain control of the Company should
the Board consider the action of such entity or person not to be in the best
interest of the Company. Any such issuance could also have the effect of
diluting the earnings per share, book value per share and/or voting power of the
Common Shares.
The approval of the proposed Amendment to the Articles of Incorporation
to authorize 5,000,000 Preferred Shares will require the affirmative vote of
two-thirds of the shares present in person or represented by proxy at the
Meeting.
The Board of Directors believes that the proposed amendment to the Company's
Articles of Incorporation is in the best interest of the Company and unanimously
recommends a vote for its approval.
18
<PAGE>
PROPOSAL 3
RATIFICATION OF SCHWARTZ, LEVITSKY, FELDMAN, llp, CHARTERED ACCOUNTANTS, AS THE
COMPANY'S INDEPENDENT CHARTERED PUBLIC ACCOUNTANTS FOR THE ENSUING YEAR
The Board of Directors has unanimously approved and unanimously
recommends that the Shareholders approve the appointment of Schwartz, Levitsky,
Feldman, llp, Chartered Accountants as the Company's independent chartered
accountants for the ensuing year. A member of Schwartz, Levitsky, Feldman, llp,
Chartered Accountants will be available to answer questions and will have the
opportunity to make a statement if he or she so desires at the Meeting.
Shareholder Vote Required
Ratification of the appointment of Schwartz, Levitsky, Feldman, llp,
Chartered Accountants as the Company's independent chartered accountants for the
ensuing year will require the affirmative vote of the majority of the shares
present in person or represented by proxy at the Meeting.
The Board of Directors recommends a vote for the ratification of the
appointment of Schwartz, Levitsky, Feldman, llp, Chartered Accountants as the
Company's independent chartered accountants for the ensuing year.
19
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any matters other than those
referred to in the Notice of Meeting which will be presented for consideration
at the meeting. However, it is possible that certain proposals may be raised at
the meeting by one or more Shareholders. In such case, or if any other matter
should properly come before the meeting, it is the intention of the person named
in the accompanying proxy to vote such proxy in accordance with his or her best
judgement.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company.
Solicitations may be made by mail, personal interview, telephone, and telegram
by directors, officers and employees of the Company. The Company will reimburse
banks, brokerage firms, other custodians, nominees and fiduciaries for
reasonable expenses incurred in sending proxy material to beneficial owners of
the Company's capital stock.
SHAREHOLDER PROPOSALS
In order to be included in the materials for the Company's next Annual
Meeting of Shareholders, Shareholder proposals must be received by the Company
on or before March 31, 2001.
20
<PAGE>
CERTAIN INFORMATION INCORPORATED BY REFERENCE
The information required to be furnished pursuant to Item 13(a) of
Schedule 14A is hereby incorporated by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999 (the "Form 10-K"), as
filed with the Securities and Exchange Commission.
ANNUAL AND QUARTERLY REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION
The Form 10-K will be made available to Shareholders free of charge by
writing to 1001 Petrolia Road, Toronto, Ontario M3J 2X7, Attention: Corporate
Secretary.
By Order of the Board of Directors,
/s/ S. Berkovits
-----------------------------------------------
Samuel Jacob "Jack" Berkovits
Chairman, President and Chief Executive Officer
July 5, 2000
21
<PAGE>
EXHIBIT A
S P E C I A L R E S O L U T I O N S
O F
D. G. JEWELRY INC.
WHEREAS the authorized capital of the Corporation consists of an
unlimited number of Common Shares;
THEREFORE BE IT RESOLVED THAT:
A. The Articles of the Corporation be amended to increase the authorized capital
by the creation of Five Million (5,000,000) Class A Preference Shares, issuable
in series, in addition to existing authorized capital of the Corporation. The
rights, privileges, restrictions and conditions attaching to the Class A
Preference Shares, as a class, are as follows:
1. DIRECTORS' AUTHORITY TO ISSUE ONE OR MORE SERIES
1.01 The board of directors of the Corporation may issue the Class A
Preference Shares at any time and from time to time in one or more
series. Before the first shares of a particular series are issued, the
board of directors of the Corporation shall fix the number of shares in
such series and shall determine, subject to the limitations set out in
the articles, the designation, rights, privileges, restrictions and
conditions to attach to the shares of such series including, without
limiting the generality of the foregoing, the rate or rates, amount or
method or methods of calculation of preferential dividends, whether
cumulative or non-cumulative or partially cumulative, and whether such
rate(s), amount or method(s) of calculation shall be subject to change
or adjustment in the future, the currency or currencies of payment, the
date or dates and place or places of payment thereof and the date or
dates from which such preferential dividends shall accrue, the
redemption price and terms and conditions of redemption (if any), the
rights of retraction (if any), and the prices and other terms and
conditions of any rights of retraction and whether any additional
rights of retraction may be vested in such holders in the future,
voting rights and conversion or exchange rights (if any) and any
sinking fund, purchase fund or other provisions attaching thereto.
Before the issue of the first shares of a series, the board of
directors of the Corporation shall send to the Director (as defined in
the Business Corporations Act) articles of amendment in the prescribed
form containing a description of such series including the designation,
rights, privileges, restrictions and conditions determined by the
directors.
2. RANKING OF CLASS A PREFERENCE SHARES
2.01 No rights, privileges, restrictions or conditions attaching to a series
of Class A Preference Shares shall confer upon a series a priority in
respect of dividends or return of capital in the event of the
<PAGE>
2
liquidation, dissolution or winding-up of the Corporation over any
other series of Class A Preference Shares. The Class A Preference
Shares of each series shall rank on a parity with the Class A
Preference Shares of every other series with respect to priority in the
payment of dividends and the return of capital and the distribution of
assets of the Corporation in the event of the liquidation, dissolution
or winding-up of the Corporation, whether voluntary or involuntary, or
any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs.
2.02 The Class A Preference Shares shall be entitled to priority over the
common shares of the Corporation and over any other shares of any other
class of the Corporation ranking junior to the Class A Preference
Shares with respect to priority in the payment of dividends and the
return of capital and the distribution of assets in the event of the
liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or any other distribution of the assets of
the Corporation among its shareholders for the purpose of winding up
its affairs.
2.03 If any amount of cumulative dividends, whether or not declared, or
declared non-cumulative dividends or amount payable on a return capital
in the event of the liquidation, dissolution or winding-up of the
Corporation in respect of a series of Class A Preference Shares is not
paid in full, the Class A Preference Shares of all series shall
participate rateably in respect of all accumulated dividends, whether
or not declared, and all declared non-cumulative dividends in
accordance with the sums that would be payable on such shares if all
such dividends were declared and paid in full, and in respect of
amounts payable on return of capital in the event of the liquidation,
dissolution or winding-up of the Corporation in accordance with the
sums that would be payable on such repayment of capital if all sums so
payable were paid in full; provided, however, that in the event of
there being insufficient assets to satisfy in full all such claims as
aforesaid, the claims of the holders of the Class A Preference Shares
with respect to the amounts payable on return of capital shall first be
paid and satisfied and any assets remaining thereafter shall be applied
towards the payment and satisfaction of claims in respect of dividends.
2.04 The Class A Preference Shares of any series may also be given such
other preferences not inconsistent with the provisions hereof over the
common shares and over any other shares ranking junior to the Class A
Preference Shares as may be determined in the case of such series of
Class A Preference Shares.
2.05 In the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other
distribution of the assets of the Corporation among its shareholders
for the purpose of winding up its affairs, the holders of each series
of Class A Preference Shares shall, before any amount shall be paid to
or any property or assets of the Corporation distributed among the
holders of the common shares of the Corporation or any other shares of
the Corporation ranking junior to the Class A Preference Shares, be
entitled to receive (i) an amount equal to the stated capital
attributed to each series of Class A Preference Shares, respectively,
<PAGE>
3
together with, in the case of a series of Class A Preference Shares
entitled to cumulative dividends thereon, all unpaid accumulated
cumulative dividends, whether or not declared (which for such purpose
shall be calculated as if such cumulative dividends were accruing from
day to day for the period from the expiration of the last period for
which such cumulative dividends were paid up to but excluding the date
of distribution) and, in the case of a series of Class A Preference
Shares entitled to non-cumulative dividends, all declared and unpaid
non-cumulative dividends thereon, and (ii) if such liquidation,
dissolution, winding-up or distribution shall be voluntary, an
additional amount, if any, equal to any premium which would have been
payable on the redemption of any series of Class A Preference Shares
had they been called for redemption by the Corporation effective the
date of distribution and, if any series of Class A Preference Shares
could not be redeemed on such date, then an additional amount equal to
the greatest premium, if any, which would have been payable on the
redemption of any other series of Class A Preference Shares.
3. RESTRICTIONS ON DIVIDENDS AND REDEMPTIONS, ETC.
3.01 Except with the approval of all the holders of the Class A Preference
Shares, no dividends shall at any time be declared or paid or set apart
for payment on the common shares or any other shares of the Corporation
ranking junior to the Class A Preference Shares unless all dividends up
to and including the dividend payable for the last completed period for
which such dividends shall be payable on each series of Class A
Preference Shares then issued and outstanding shall have been declared
and paid or set apart for payment at the date of such declaration or
payment or setting apart for payment on the common shares or such other
shares of the Corporation ranking junior to the Class A Preference
Shares; nor shall the Corporation call for redemption, redeem, purchase
for cancellation, acquire for value or reduce or otherwise pay off any
of the Class A Preference Shares (less than the total amount then
outstanding) or any common shares or any other shares of the
Corporation ranking junior to the Class A Preference Shares unless and
until all dividends up to and including the dividends payable for the
last completed period for which such dividends shall be payable on each
series of Class A Preference Shares then issued and outstanding shall
have been declared and paid or set apart for payment at the date of
such call for redemption, purchase, acquisition, reduction or other
payment.
4. VOTING RIGHTS
4.01 Except as hereinafter referred to or as otherwise provided by law or in
accordance with any voting rights which may from time to time be
attached to any series of Class A Preference Shares, the holders of the
Class A Preference Shares as a class shall not be entitled as such to
receive notice of, to attend or to vote at any meeting of the
shareholders of the Corporation.
5. APPROVAL OF THE HOLDERS OF THE CLASS A PREFERENCE SHARES
5.01 The approval of the holders of the Class A Preference Shares with
respect to any and all matters hereinbefore referred to may be given by
at least two-thirds of the votes cast at a meeting of the holders of
the Class A Preference Shares duly called for that purpose and held
upon at least 21 days' notice at which the holders of a majority of the
<PAGE>
4
outstanding Class A Preference Shares are present or represented by
proxy. If at any such meeting the holders of a majority of the
outstanding Class A Preference Shares are not present or represented by
proxy within one-half hour after the time appointed for such meeting,
then the meeting shall be adjourned to such date being not less than 30
days later and to such time and place as may be appointed by the
chairman and not less than 21 days' notice shall be given of such
adjourned meeting. At such adjourned meeting the holders of the Class A
Preference Shares present are represented by proxy may transact the
business for which the meeting was originally called and a resolution
passed thereat by not less than two-thirds of the votes cast for such
adjourned meeting shall constitute the approval of the holders of the
Class A Preference Shares referred to above. The formalities to be
observed with respect to the giving of notice of any such meeting or
adjourned meeting and the conduct thereof shall be those from time to
time prescribed by the Business Corporations Act (Ontario) and the
by-laws of the Corporation with respect to meetings of shareholders. On
every poll taken at every such meeting or adjourned meeting every
holder of Class Preference Shares shall be entitled to 1 vote in
respect of each Class A Preference Share held.
6. SHAREHOLDER DISSENT
6.01 The holders of the shares of a class or of a series are not entitled
to dissent upon a proposal to amend the articles to:
(1) increase or decrease any maximum number of authorized shares
of such class or series, or increase any maximum number of
authorized shares of a class or series having rights or
privileges equal or superior to the shares of such class or
series;
(2) effect an exchange, reclassification or cancellation of the
shares of such class or series; or
(3) create a new class or series of shares equal or superior to
the shares of such class or series except in the case of a
series under Section 25 of the Business Corporations Act
(Ontario).
B. Any director or officer of the Corporation be and he is hereby authorized and
directed on behalf of the Corporation to deliver articles of amendment, in
duplicate, to the Minister of Consumer and Commercial Relations and to sign and
execute all documents and to do all things necessary or advisable in connection
with the foregoing.
<PAGE>
GENERAL PROXY - 2000 ANNUAL MEETING OF SHAREHOLDERS OF D.G. JEWELRY INC.
The undersigned hereby appoints Samuel Jacob Berkovits, with
full power of substitution, proxy to vote all of the shares of Common Stock of
the undersigned and with all of the powers the undersigned would possess if
personally present, at the Annual Meeting of Stockholders of D.G. Jewelry Inc.,
to be held at 1001 Petrolia Road, Toronto, Ontario, M3J 2X7 on August 10, 2000
at 10:00 a.m. and at all adjournments thereof, upon the matters specified below,
all as more fully described in the Proxy Statement dated July 5, 2000 and with
the discretionary powers upon all other matters which come before the meeting or
any adjournment thereof.
This Proxy is solicited on behalf of the Board of Directors of D.G. Jewelry Inc.
1. To elect five directors to hold office for a term of one year.
o FOR ALL NOMINEES o WITHHELD FOR ALL NOMINEES
INSTRUCTION: To withhold authority to vote for any individual, write
that nominee's name in the space provided below:
--------------------------------------------------------------------------------
2. To approve the amendment of D.G. Jewelry Inc.'s Articles of
Incorporation to authorize 5,000,000 preferred shares.
o FOR o AGAINST o ABSTAIN
3. To ratify the appointment of Schwartz, Levitsky, Feldman, llp, as
the Company's chartered accountants.
o FOR o AGAINST o ABSTAIN
4. In their discretion, upon such other matter or matters that may
properly come before the meeting, or any adjournments thereof.
--------------------------------------------------------------------------------
(Continued and to be signed on the other side)
<PAGE>
(Continued from other side)
Every properly signed proxy will be voted in accordance with the specifications
made thereon. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS
1, 2 AND 3.
The undersigned hereby acknowledges receipt of a copy of the accompanying Notice
of Meeting and Proxy Statement and hereby revokes any proxy or proxies
heretofore given.
Please mark, date, sign and mail your proxy promptly in the envelope provided.
Date: , 2000
-----------------------------------------
-----------------------------------------------
(Print name of Stockholder)
-----------------------------------------------
(Print name of Stockholder)
-----------------------------------------------
Signature
-----------------------------------------------
Signature
Number of Shares
------------------------------------
Note: Please sign exactly as name appears in the
Company's records. Joint owners should each
sign. When signing as attorney, executor or
trustee, please give title as such.
