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<PAGE>
Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
LAZARE KAPLAN INTERNATIONAL INC.
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
<PAGE>
<PAGE>
LAZARE KAPLAN INTERNATIONAL INC.
529 FIFTH AVENUE
NEW YORK, NEW YORK 10017
[LOGO]
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, NOVEMBER 5, 1997
----------------------
The Annual Meeting of Stockholders of Lazare Kaplan International Inc. will
be held on Wednesday, November 5, 1997 at 10:00 A.M. at The Cornell Club, 6 East
44th Street, 5th Floor, Room AB, New York, New York 10017 for the following
purposes:
1. To elect directors for the ensuing year;
2. To approve the Lazare Kaplan International Inc. 1997 Long Term
Stock Incentive Plan;
3. To approve an amendment to the Company's Certificate of
Incorporation to increase the authorized number of shares of common
stock from 10,000,000 shares of common stock to 20,000,000 shares
of common stock;
4. To approve an amendment to the Company's Certificate of
Incorporation to authorize the Company to issue up to 5,000,000
shares of preferred stock for the purpose of permitting the Company
to put in place a Shareholder Rights Plan and for such other proper
corporate purposes as the Board of Directors may determine;
5. To ratify the appointment of Ernst & Young LLP, independent
certified public accountants, as auditors for the Company for the
fiscal year ending May 31, 1998; and
6. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on September 9, 1997
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting and at any adjournments thereof.
By Order of the Board of Directors,
LEON TEMPELSMAN,
President
New York, New York
September 19, 1997
IMPORTANT
MANAGEMENT INVITES YOU TO ATTEND THE MEETING IN PERSON, BUT IF YOU ARE
UNABLE TO BE PRESENT PERSONALLY, PLEASE DATE, SIGN AND RETURN THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE. NO POSTAGE IS REQUIRED IF THE PROXY IS
RETURNED IN THE ENCLOSED ENVELOPE AND MAILED IN THE UNITED STATES.
<PAGE>
<PAGE>
LAZARE KAPLAN INTERNATIONAL INC.
529 FIFTH AVENUE
NEW YORK, NEW YORK 10017
---------------------------------
PROXY STATEMENT
---------------------------------
1997 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished to stockholders of Lazare Kaplan
International Inc., a Delaware corporation (the 'Company'), in connection with
the solicitation of proxies by the Board of Directors of the Company (the 'Board
of Directors') for use at the Annual Meeting of Stockholders of the Company to
be held at 10:00 a.m. on Wednesday, November 5, 1997 at The Cornell Club, 6 East
44th Street, 5th Floor, Room AB, New York, New York, and any adjournment or
adjournments thereof (the 'Annual Meeting'). This Proxy Statement, the attached
Notice of Annual Meeting, the accompanying form of proxy and the Annual Report
to Stockholders of the Company for the fiscal year ended May 31, 1997 are first
being sent to stockholders of the Company on or about September 19, 1997.
The record date for stockholders of the Company entitled to notice of, and
to vote at, the Annual Meeting is the close of business on September 9, 1997
(the 'Record Date'). On the Record Date, there were issued and outstanding
8,509,466 shares of the Company's common stock, par value $1.00 per share (the
'Common Stock'). All of such shares are of one class, with equal voting rights,
and each holder thereof is entitled to one vote on all matters voted on at the
Annual Meeting for each share registered in such holder's name. Presence in
person or by proxy of holders of 4,254,734 shares of Common Stock will
constitute a quorum at the Annual Meeting. Assuming a quorum is present, (i) the
affirmative vote by the holders of a plurality of the shares represented at the
Annual Meeting and entitled to vote will be required to act on the election of
directors, and (ii) the affirmative vote by the holders of a majority of the
shares represented at the Annual Meeting and entitled to vote will be required
to (a) approve the Lazare Kaplan International Inc. 1997 Long Term Stock
Incentive Plan (the '1997 Plan'), (b) approve the amendments (the 'Charter
Amendments') to the Company's Certificate of Incorporation (x) to increase the
authorized number of shares of Common Stock from 10,000,000 shares of Common
Stock to 20,000,000 shares of Common Stock and (y) to authorize the issuance of
up to 5,000,000 shares of preferred stock, and (c) act on all other matters to
come before the Annual Meeting, including the ratification of the selection of
Ernst & Young LLP as independent auditors for the current fiscal year. In
accordance with applicable law, all stockholders of record on the Record Date
are entitled to receive notice of, and to vote at, the Annual Meeting. If a
stockholder, present in person or by proxy, abstains on any matter, the
stockholder's shares will not be voted on such matter. Thus, an abstention from
voting on a matter has the same legal effect as a vote 'against' the matter,
even though a stockholder may interpret such action differently. A proxy
submitted by a stockholder may indicate that all or a portion of the shares
represented by such proxy are not being voted by such stockholder with respect
to a particular matter. This could occur, for example, when a broker is not
permitted to vote shares of Common Stock held in street name on certain matters
in the absence of instructions from the beneficial owner of the shares. The
shares subject to any such
1
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<PAGE>
proxy which are not being voted with respect to a particular matter (the
'nonvoted shares') will be considered shares not present and not entitled to
vote on such matter, although such shares may be considered present and entitled
to vote for other purposes and will count for purposes of determining the
presence of a quorum. (Shares voted to abstain as to a particular matter will
not be considered nonvoted shares).
A proxy in the accompanying form, which is properly executed, duly returned
to the Company and not revoked will be voted in accordance with the instructions
contained thereon. If no specific instructions are indicated on the proxy, the
shares represented thereby will be voted FOR (i) the election of the persons
nominated herein as directors, (ii) the adoption of the 1997 Plan, (iii) the
approval of the Charter Amendments, and (iv) the ratification of the selection
of Ernst & Young LLP as the Company's independent auditors for the current
fiscal year; as well as in the discretion of the proxies with respect to such
other business as properly may come before the Annual Meeting.
Each proxy granted may be revoked by the person who granted it at any time
(i) by giving written notice to such effect to the Secretary of the Company,
(ii) by execution and delivery of a proxy bearing a later date, or (iii) by
attendance and voting in person at the Annual Meeting; except as to any matter
upon which, prior to such revocation, a vote shall have been cast at the Annual
Meeting pursuant to the authority conferred by such proxy. The mere presence at
the Annual Meeting of a person appointing a proxy does not revoke the
appointment.
1. ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
Eight directors are to be elected at the Annual Meeting, to hold office
until the next annual meeting of stockholders and until their successors are
elected and have qualified. The eight nominees for directors consist of persons
currently serving as directors of the Company.
2
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<PAGE>
Set forth below are the names, principal occupations and certain other
information concerning the nominees.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES WITH DIRECTOR
NAME COMPANY OR PRINCIPAL OCCUPATION SINCE AGE
- -------------------------------- --------------------------------------------------------- -------- ----
<S> <C> <C> <C>
Maurice Tempelsman.............. Chairman of the Board of the Company since April 1984;
General Partner of Leon Tempelsman & Son, an investment
limited partnership since January 1984 1984 68
Leon Tempelsman................. Vice Chairman of the Board of the Company since April
1984; President of the Company since April 1986;
General Partner of Leon Tempelsman & Son since January
1984 1984 41
George R. Kaplan................ Vice Chairman of the Board of the Company since April
1984 1972 79
Lucien Burstein................. Partner, Warshaw Burstein Cohen Schlesinger & Kuh, LLP,
Attorneys; Secretary of the Company since 1984 1984 75
Michael W. Butterwick........... Business Consultant 1982 70
Myer Feldman.................... Partner, Ginsburg, Feldman and Bress, Chartered
Attorneys; Director and Chairman of the Board of
Totalbank since 1986 1984 80
Robert Speisman................. Vice President -- Sales of the Company since January 1986 1989 44
Sheldon L. Ginsberg............. Executive Vice President since February 1996; Chief
Financial Officer of the Company since April 1991 1989 43
</TABLE>
Unless directed to the contrary, the persons named in the proxy will vote
the shares represented thereby FOR the election of the nominees listed above.
Management is informed that all of the nominees are willing to serve as
directors, but if any of them should decline or be unable to act as a director,
which is not anticipated, the persons named in the proxy will vote for the
election of such other person or persons as management may recommend.
The Company has standing Audit, Compensation and Stock Option Committees of
the Board of Directors. The current members of each committee hold office until
the next Annual Meeting of the Board of Directors and until their respective
successors have been elected and qualified. The Audit Committee consists of
Michael W. Butterwick, Lucien Burstein and Myer Feldman. The Compensation
Committee consists of Maurice Tempelsman, Michael W. Butterwick, Myer Feldman
and Lucien Burstein. The Stock Option Committee consists of Michael W.
Butterwick and Myer Feldman.
The Audit Committee is authorized to confer with the auditors and financial
officers of the Company, review reports submitted by the auditors, establish or
review, and monitor compliance with codes of conduct of the Company, inquire
about procedures for compliance with laws and regulations relating to the
management of the Company, and report and make recommendations to the Board of
Directors. The Compensation Committee is responsible for recommending to the
Board of Directors policies with respect to compensation and benefits of the
Chairman of the Board, Vice Chairmen of the Board and President of the Company,
for fixing the compensation and benefits of other officers and employees of the
Company and its subsidiaries whose
3
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<PAGE>
compensation is $75,000 per year or more. The Stock Option Committee, which was
formed in August 1996, is responsible for administering the Company's 1988 Stock
Option Incentive Plan (the '1988 Plan') and the 1997 Plan (collectively, the
'Plans'), including the designating of employees to be granted options,
prescribing the terms and conditions of options granted under the Plans,
interpreting the Plans and making all other determinations deemed necessary for
the administration of the Plans. Prior to August 1996, the functions of the
Stock Option Committee were performed by the Compensation Committee. The Board
of Directors does not have a Nominating Committee or a committee performing
similar functions.
During the fiscal year ended May 31, 1997, there were four meetings of the
Board of Directors, one meeting of the Audit Committee, one meeting of the
Compensation Committee and one meeting of the Stock Option Committee. In
addition, action was taken by unanimous written consent of the Executive
Committee of the Board of Directors. Each incumbent director attended at least
75% of the total number of meetings of the Board and all of the committees
thereof on which he served during the fiscal year. All outside directors receive
a fee equal to $1,250 per quarter. Mr. Lucien Burstein, an outside director,
credits his fee against legal fees of Warshaw Burstein Cohen Schlesinger & Kuh,
LLP incurred by the Company for each period for which a directors' fee is paid.
SECURITY OWNERSHIP
The following table sets forth information regarding the ownership of
shares of the Company's Common Stock as of September 9, 1997 by those persons
known by the Company to own beneficially more than 5% of the outstanding shares
of the Company's Common Stock. All information in the table is based upon
reports filed by such persons with the Securities and Exchange Commission and
upon responses to questionnaires submitted by such persons to the Company in
connection with the preparation of this proxy statement. Except as noted in the
footnotes, such persons have indicated that they have the sole power to vote and
to dispose of their respective shares of the Company's Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- -------------------------------------------------------------------------- ---------- --------
<S> <C> <C>
Maurice Tempelsman(1) .................................................... 3,438,825 40.4%
529 Fifth Avenue
New York, New York 10017
Leon Tempelsman(1)(2) .................................................... 1,786,546 20.8%
529 Fifth Avenue
New York, New York 10017
</TABLE>
- ------------
(1) Number and percentage of shares include the 1,528,416 shares owned by Leon
Tempelsman & Son, a New York limited partnership ('LTS') of which each of
Maurice Tempelsman and Leon Tempelsman, as the sole general partners, has
sole power to vote and dispose.
(2) Number and percentage of shares include 55,000 shares owned directly by Leon
Tempelsman, 2,240 shares held by the spouse of Leon Tempelsman, 26,816
shares owned by his sister, Rena Speisman, 32,025 shares owned by his
sister, Marcy Meiller, 34,641 shares owned by Rena
(footnotes continued on next page)
4
<PAGE>
<PAGE>
(footnotes continued from previous page)
Speisman as custodian for her children, and 1,600 shares held by his
brother-in-law, Scott Meiller, as to all of which shares Leon Tempelsman has
been granted a proxy. Number and percentage of shares also include 34,641
shares held by Leon Tempelsman as custodian for his children, 71,167 shares
which are the subject of currently exercisable options granted to
Mr. Tempelsman pursuant to the 1988 Plan and 1,528,416 shares owned by LTS,
of which each of Maurice and Leon Tempelsman, as the sole general partners,
has sole power to vote and dispose.
The following table reflects as of September 9, 1997 the beneficial
ownership of shares of Common Stock of the Company by each of the directors,
nominees and executive officers and by all directors and officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
NAME OWNERSHIP PERCENT OF CLASS
- -------------------------------------------------------- -------------------- ----------------
<S> <C> <C>
Maurice Tempelsman(1)(2)................................ 3,438,825 40.4%
Leon Tempelsman(1)(2)(3)................................ 1,786,546 20.8%
Myer Feldman............................................ 343,259 4.0%
Sheldon L. Ginsberg(4).................................. 44,805 0.5%
Robert Speisman(1)(5)................................... 46,777 0.5%
George R. Kaplan(6)..................................... 23,965 0.3%
Lucien Burstein......................................... 1,500 less than 0.1%
Michael W. Butterwick................................... 0 0.0%
All directors and officers as a group(1)-(6)............ 4,157,261 48.1%
</TABLE>
- ------------
(1) Maurice Tempelsman, the Chairman of the Board and a director of the Company,
is the father of Leon Tempelsman and the father-in-law of Robert Speisman,
Vice President-Sales of the Company. Each of Maurice Tempelsman, Leon
Tempelsman and Robert Speisman disclaims beneficial ownership of shares
beneficially owned by the others.
(2) Number and percentage of shares include the 1,528,416 shares owned by Leon
Tempelsman & Son, a New York limited partnership ('LTS') of which each of
Maurice Tempelsman and Leon Tempelsman, as the sole general partners, has
sole power to vote and dispose.
(3) Number and percentage of shares include 55,000 shares owned directly by Leon
Tempelsman, 2,240 shares held by the spouse of Leon Tempelsman, 26,816
shares owned by his sister, Rena Speisman, 32,025 shares owned by his
sister, Marcy Meiller, 34,641 shares owned by Rena Speisman as custodian for
her children, and 1,600 shares held by his brother-in-law, Scott Meiller, as
to all of which shares Leon Tempelsman has been granted a proxy. Number and
percentage of shares also include 34,641 shares held by Leon Tempelsman as
custodian for his children, 71,167 shares which are the subject of currently
exercisable options granted to Mr. Tempelsman pursuant to the 1988 Plan and
1,528,416 shares owned by LTS, of which each
(footnotes continued on next page)
5
<PAGE>
<PAGE>
(footnotes continued from previous page)
of Maurice and Leon Tempelsman, as the sole general partners, has sole power
to vote and dispose.
(4) Number and percentage include an aggregate of 14,800 shares which are the
subject of currently exercisable options granted to Sheldon L. Ginsberg
pursuant to the 1988 Plan and 30,005 shares owned by Mr. Ginsberg directly.
(5) Number and percentage of shares do not include the 1,528,416 shares owned by
LTS, of which Rena Speisman, the wife of Robert Speisman, is a limited
partner. Number and percentage of shares also do not include 61,457 shares
owned by Rena Speisman for herself and as custodian for the children of
Robert and Rena Speisman, as to all of which beneficial ownership is
disclaimed by Mr. Speisman. Number and percentage include an aggregate of
42,467 shares which are the subject of currently exercisable options granted
to Mr. Speisman pursuant to the 1988 Plan and 4,310 shares owned by Mr.
Speisman directly.
(6) Number and percentage of shares do not include 1,500 shares owned by the
spouse of George Kaplan, the beneficial ownership of which is disclaimed by
Mr. Kaplan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 filed with the Securities
and Exchange Commission and the Company under the Securities Exchange Act of
1934 (the 'Exchange Act') and a review of written representations received by
the Company, no person who at any time during the fiscal year ended May 31, 1997
was a director, executive officer or beneficial owner of more than 10% of the
outstanding shares of Common Stock failed to file, on a timely basis, reports
required by Section 16(a) of the Exchange Act.
EXECUTIVE COMPENSATION
The Company's executive compensation program (other than as it relates to
stock options) is administered by the Compensation Committee of the Board of
Directors, and the Plans are administered by the Stock Option Committee of the
Board of Directors. The Compensation Committee includes three non-employee
directors and one employee director. The Stock Option Committee, which was
formed in August 1996, is comprised of two non-employee directors, neither of
whom is eligible to participate in the Plans. The Compensation Committee
annually recommends the cash compensation and benefits for the Chairman, Vice
Chairmen, President and all employees of the Company earning more than $75,000.
Following Compensation Committee review and approval, all matters relating to
executive compensation (other than as it relates to stock options) are submitted
to the full Board for approval. In its administration of the Plans, the Stock
Option Committee, in its sole discretion, determines option recipients and the
number of shares subject to each option. Prior to August 1996, the functions of
the Stock Option Committee were performed by the Compensation Committee.
6
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<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES
During Fiscal 1997, the following policies were used by the Compensation
Committee to set a general framework within which specific compensation
decisions were made.
-- The Company's executive pay program is intended to attract and
retain top management talent and to motivate and reward
performance.
-- Incentive compensation varies with relative Company performance
and a given individual's contribution to that performance.
-- The 1997 Plan is designed to reinforce and encourage achievement
of the Company's short-term and long-term financial and strategic
goals by aligning the interests of certain key Company employees
and the Company's stockholders.
COMPONENTS OF COMPENSATION
BASE SALARY
The Compensation Committee determined base salary levels by evaluating
individual performance with specific input from the President (excluding input
for his own performance). Increases in base salary were based upon periodic
evaluations of such factors as demonstrated leadership ability, competitive
trends within the industry, level of responsibility, and overall perceived
future contribution to the Company.
CASH BONUS
Bonus payments were recommended to the Board by the Compensation Committee
for employees it felt performed exceptionally during the past year. This
component of the compensation package is designed to reward past performance and
encourage similarly exceptional future performance. Bonuses are paid after the
end of the calendar year to which they relate.
MATCHING 401(k) PLAN
The Company offers all full-time employees in the United States and Puerto
Rico the opportunity to participate in a matching 401(k) plan. Employees may
participate up to an annual maximum which is the lesser of 20% of the employee's
compensation or $9,500 (subject to adjustments by the U. S. Secretary of the
Treasury). The Company will match those contributions in an amount equal to $.50
for every pre-tax dollar contributed by the employee up to a maximum of 6% of
the first $20,000 of the employee's compensation, provided the Company's pre-tax
earnings exceed $3.5 million for the fiscal year ending within the calendar year
to which the matching contribution relates. For the year ended December 31,
1996, the Company made a matching contribution in the maximum amount permitted.
STOCK OPTION GRANTS
The Company periodically grants stock options in order to provide certain
of its key employees with a long-term incentive award as part of a competitive
total compensation package, and to reward them for their contribution to the
ongoing process of achieving the Company's long-term goals. These grants are
also intended to align the interests of the Company's key
7
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<PAGE>
employees with those of the stockholders, thereby encouraging these employees to
increase stockholder value.
During Fiscal 1997, options were granted under the 1997 Plan. All of such
options are subject to the approval of the 1997 Plan by the stockholders at the
Annual Meeting. During Fiscal 1997, the 1997 Plan was administered by the Stock
Option Committee consisting of two non-employee directors of the Company who
were not eligible to participate in the 1997 Plan. The Stock Option Committee,
in its sole discretion, determined option recipients and the number of shares
subject to each option. In determining the number of shares to be covered by
each option, the Stock Option Committee took into account the present and
potential contributions of the respective participants to the success of the
Company, the anticipated number of years of effective service remaining and such
other factors as the Stock Option Committee deemed relevant in connection with
accomplishing the purposes of the 1997 Plan.
Each option granted under the 1997 Plan expires ten years after the date of
grant and is exercisable at the fair market value of the shares subject to the
option on the date of grant; except that incentive stock options granted to any
person who, at the time the option is granted, owns stock possessing more than
10% of the combined voting power of all classes of the stock of the Company,
expire five years after the date of grant and are exercisable at 110% of the
fair market value of the shares subject to the option on the date of grant.
COMPENSATION OF THE PRESIDENT
In conjunction with an overall review of executive and employee
compensation, and in light of the overall contributions made by Leon Tempelsman
to the Company during the last fiscal year, in February 1997, Mr. Tempelsman's
salary was increased and he was granted a bonus. In addition, Mr. Tempelsman was
granted an aggregate of 40,000 options under the 1997 Plan. The Compensation
Committee maintains the belief that Mr. Tempelsman's salary still stands well
below the salaries of executives with similar responsibilities in companies of
similar size. Both the Compensation Committee and the Stock Option Committee
continue to recognize Mr. Tempelsman's contribution to the overall management of
the Company and the Company's retention and expansion of its strategic and
market positions in the world diamond market.
Compensation Committee:
Maurice Tempelsman
Lucien Burstein
Myer Feldman
Michael W. Butterwick
Stock Option Committee:
Myer Feldman
Michael W. Butterwick
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION IN FISCAL 1995, FISCAL 1996 AND FISCAL 1997
The following Summary Compensation Table sets forth information concerning
compensation for services in all capacities awarded to, earned by or paid to the
Company's chief executive officer
8
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<PAGE>
and the other most highly compensated executive officers of the Company earning
more than $100,000 during the fiscal years ended May 31, 1995, May 31, 1996 and
May 31, 1997.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------------- ------------
AWARDS
OTHER ------------
NAME AND FISCAL ANNUAL OPTIONS
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION (SHARES)
- ----------------------------------- ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Leon Tempelsman ................... 1997 $266,088(1) $30,000 0 40,000
Vice Chairman of the Board and 1996 200,000 0 0 48,500(6)
President 1995 50,000 0 0 10,000
Sheldon L. Ginsberg ............... 1997 218,200(2) 40,000 600(5) 20,000
Executive Vice President and 1996 188,000 40,000 0 16,500(7)
Chief Financial Officer 1995 170,000 30,000 0 6,000
1997 143,540(3) 20,000 600(5) 10,000
Robert Speisman ................... 1996 115,000 0 0 11,000(8)
Vice President -- Sales 1995 70,000 0 0 4,000
</TABLE>
- ------------
(1) Includes $7,755 of premiums paid by the Company on an individual life
insurance policy purchased by the Company on behalf of Mr. Tempelsman.
(2) Includes $3,200 of premiums paid by the Company on an individual life
insurance policy purchased by the Company on behalf of Mr. Ginsberg.
(3) Includes $3,540 of premiums paid by the Company on an individual life
insurance policy purchased by the Company on behalf of Mr. Speisman.
(4) Bonuses are determined by the Compensation Committee based on the
executive's performance. Bonus amounts are paid after the end of the fiscal
year to which they relate. See Compensation Committee Report, page 6.
(5) Represents a matching contribution made by the Company to the Company's
401(k) plan.
(6) Represents incentive stock options granted under the 1988 Plan on November
21, 1995 to purchase 48,500 shares of Common Stock at an exercise price of
$7.013 per share, in substitution for 10,000 canceled options previously
granted under the 1988 Plan on March 7, 1995 to purchase 10,000 shares of
Common Stock at an exercise price of $9.35 per share, and 38,500 canceled
options previously granted under the 1988 Plan on January 14, 1994 to
purchase 38,500 shares of Common Stock at an exercise price of $8.387 per
share.
(7) Represents incentive stock options granted under the 1988 Plan on November
21, 1995 to purchase 16,500 shares of Common Stock at an exercise price of
$6.375 per share, in substitution for 6,000 canceled options previously
granted under the 1988 Plan on March 7, 1995 to purchase 6,000 shares of
Common Stock at an exercise price of $8.50 per share, and 10,500 canceled
options previously granted under the 1988 Plan on January 14, 1994 to
purchase 10,500 shares of Common Stock at an exercise price of $7.625 per
share.
(8) Represents incentive stock options granted under the 1988 Plan on November
21, 1995 to purchase 11,000 shares of Common Stock at an exercise price of
$6.375 per share, in substitution for 4,000 canceled options previously
granted under the 1988 Plan on March 7, 1995 to purchase 4,000 shares of
Common Stock at an exercise price of $8.50 per share, and
(footnotes continued on next page)
9
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<PAGE>
(footnotes continued from previous page)
7,000 canceled options previously granted under the 1988 Plan on January 14,
1994 to purchase 7,000 shares of Common Stock at an exercise price of $7.625
per share.
STOCK OPTIONS GRANTED IN FISCAL 1997
The following table sets forth information concerning individual grants of
stock options made during Fiscal 1997 to each executive officer listed in the
Summary Compensation Table. All of such options are subject to approval of the
1997 Plan by the stockholders at the Annual Meeting. The Company did not grant
any stock appreciation rights during Fiscal 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1997
--------------------------------------------------------- POTENTIAL
% OF TOTAL REALIZABLE VALUE AT
NUMBER OF OPTIONS/ ASSUMED ANNUAL
SECURITIES SARs RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS/SARs EMPLOYEES EXERCISE OPTION TERM(5)
GRANTED IN FISCAL OR BASE PRICE EXPIRATION --------------------
NAME (SHARES) YEAR (PER SHARE) DATE 5% 10%
- --------------------------- ------------ ---------- ------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Leon Tempelsman............ 20,000(1)(4) 9% $16.225 4/7/02 $ 52,003 $150,600
20,000(2)(4) 9% $14.75 4/7/07 $185,524 $470,154
Sheldon L. Ginsberg........ 20,000(3)(4) 9% $14.75 4/7/07 $185,524 $470,154
Robert Speisman............ 10,000(3)(4) 4% $14.75 4/7/07 $ 92,762 $235,077
</TABLE>
- ------------
(1) All of such options are intended to be incentive stock options and become
exercisable as to one-third (1/3) of the shares included in the grant on
December 15 of each of 1999, 2000 and 2001.
(2) All of such options are non-qualified stock options and become exercisable
as to one-third (1/3) of the shares included in the grant on December 15 of
each of 1997, 1998 and 1999.
(3) All of such options are intended to be incentive stock options and become
exercisable as to one-third (1/3) of the shares included in the grant on
December 15 of each of 1997, 1998 and 1999.
(4) The right to purchase stock pursuant to all options outstanding is
cumulative, and the optionees may exercise the right to purchase stock at
any time and from time to time after the option has become exercisable and
prior to the expiration, termination or surrender of the option.
Each optionee who receives an option under the Plan agrees (a) to remain in
the employ of either of the Company or its subsidiaries for at least one
year from the date the option is granted but in no event later than the
optionee's 70th birthday and (b) to refrain from engaging in the cutting and
polishing of diamonds, directly or indirectly, for a period of two years
after his or her employment by the Company or a subsidiary terminates. If an
optionee fails to comply with either part of such an agreement, the Stock
Option Committee, in its discretion, may require the optionee to resell to
the Company all shares purchased pursuant to
(footnotes continued on next page)
10
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<PAGE>
(footnotes continued from previous page)
the option at the exercise price and to repay the Company any amounts paid
to the optionee upon the surrender of all or part of an option.
In the event of the termination of employment for any reason of an optionee,
unless the option agreement provides otherwise, the option may be exercised
or surrendered by the optionee or his or her legal representative within a
period not to exceed the earlier of the balance of the option term or three
months from the date of termination (one year in the case of a disabled
employee or in the event of death); provided that the Stock Option Committee
may, in its absolute discretion, authorize the purchase of such additional
shares subject to options as are not then exercisable.
(5) Based upon the per share market price on the date of grant, which was $14.75
on April 7, 1997, and an annual cumulative appreciation at the rate stated
of such market price through the expiration date of such options. Gains, if
any, are dependent upon the actual performance of the Common Stock, as well
as the continued employment of the executive officers through the vesting
period. The potential realizable values indicated have not taken into
account amounts required to be paid as income tax under the Internal Revenue
Code of 1986, as amended, and any applicable state laws.
STOCK OPTIONS HELD AT END OF FISCAL 1997
The following table indicates (a) the number of shares received by each
executive officer named in the Summary Compensation Table upon the exercise of
options, (b) the aggregate dollar value realized upon such exercise, and (c) the
total number and the value of exercisable and unexercisable stock options held
by each such executive officer as of May 31, 1997.
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND FISCAL 1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARs AT OPTIONS/SARs AT
ACQUIRED ON MAY 31, 1997 (#) MAY 31, 1997 ($)(1)
EXERCISE VALUE --------------------------- ---------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leon Tempelsman.............. 55,000 $606,375 166,717 105,666 $ 1,694,061 $ 379,159
Sheldon L. Ginsberg.......... 11,084 $121,500 44,800 31,000 $ 465,275 $ 138,625
Robert Speisman.............. -- -- 48,467 17,333 $ 517,862 $ 87,413
</TABLE>
- ------------
(1) Based upon the per share closing price of $16.25 of the Common Stock on May
30, 1997, the last day the Common Stock traded on the American Stock
Exchange in Fiscal 1997.
RETIREMENT BENEFIT PLAN
Effective June 1, 1997, the Company adopted separate Retirement Benefit
Plans (each a 'Retirement Plan' and collectively, the 'Retirement Plans') for
the benefit of each of Leon Tempelsman, Sheldon L. Ginsberg and Robert Speisman
(each an 'Executive' and collectively,
11
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<PAGE>
the 'Executives'). Pursuant to these Retirement Plans, the Company will pay each
Executive certain benefits upon his termination of employment depending upon the
reason for such termination (i.e., death, disability, retirement or termination
with or without cause) and his age at the time his employment terminates.
In this connection, the Company has purchased an individual whole life
insurance policy on the life of each Executive. Each Retirement Plan permits the
Company to borrow against the related life insurance policy to fund the
retirement benefits payable to the Executive, and the Company expects to effect
such borrowings. The amount an Executive will receive upon his death will be
determined by reference to the death benefit that would be payable under the
relevant life insurance policy if such policy had remained in full force and
effect and the Company had not borrowed against such policy beyond amounts
required to fund his retirement benefits. The retirement benefits to which an
Executive will be entitled under his Retirement Plan will be determined by
reference to the cash surrender value the relevant life insurance policy would
have at the time of his retirement if such policy had remained in full force and
effect and the Company had not borrowed against such policy. Each Retirement
Plan provides that if, at the time the Company becomes obligated to pay a
retirement benefit to an Executive, the insurer is unable, on account of
financial distress, to pay or lend the Company any amount with respect to the
relevant life insurance policy to which the Company may be entitled, the Company
nevertheless will be obligated to make such payment and subsequent payments to
the Executive determined by reference to the cash surrender value the relevant
life insurance policy would have had at the time such payment became due if such
policy had remained in full force and effect, the Company had not borrowed
against such policy, and the earnings rate on such policy had been the minimum
rate guaranteed by the insurer. The Company will pay each Executive an annual
bonus in an amount equal to the income tax payable by such Executive on the
value of the term insurance protection received by him in such calendar year.
Since the Retirement Plans did not become effective until June 1, 1997, during
Fiscal 1997 the Company did not incur any costs and the Executives did not
recognize any compensation on account of this program.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has no employment contract with any of Leon Tempelsman, Sheldon
L. Ginsberg or Robert Speisman. The incentive stock options granted to the
Executives provide that if their respective employments are terminated for any
reason other than retirement, the options must be exercised within the earlier
of the balance of the option period or three months from the date of termination
(one year in the case of termination as a result of death or disability). Other
than the Plans, the Company does not have any program providing compensation to
its executive officers which is intended to serve as an incentive for
performance to occur over a period longer than one fiscal year. Pursuant to the
Retirement Plans, in the event an Executive retires or his employment is
terminated within the two-year period following a change-in-control, the
Executive will be entitled to receive either (a) a lump sum payment in an amount
determined by reference to the cash surrender value the relevant life insurance
policy would have at the time his employment terminates if the policy had
remained in full force and effect and the Company had not borrowed against the
policy beyond amounts required to fund the Executive's retirement benefits, or
(b) the same benefits to which he would have been entitled had he continued in
the employ of the Company and retired upon attaining age sixty-five.
12
<PAGE>
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Maurice
Tempelsman, Myer Feldman, Michael W. Butterwick and Lucien Burstein. Messrs.
Feldman, Butterwick and Burstein are outside directors of the Company. Neither
Mr. Butterwick nor Mr. Feldman is an officer of the Company. Mr. Burstein is
Secretary of the Company. None of Messrs. Butterwick, Feldman or Burstein is
affiliated with any principal stockholder of the Company. Maurice Tempelsman is
the Chairman of the Board of the Company and the father of Leon Tempelsman, Vice
Chairman of the Board and President of the Company.
COMPARATIVE PERFORMANCE BY THE COMPANY
The following graph compares the market performance of the Company's Common
Stock for the previous five fiscal years to the American Stock Exchange Market
Value Index (the 'AMEX Index') and a peer group of companies in the fine jewelry
and accessories industry (the 'Peer Group').
TOTAL RETURN CHART
<TABLE>
<CAPTION>
DATE LAZARE KAPLAN INDUSTRY GROUP AMEX COMPOSITE
- ---- ------------- -------------- --------------
<S> <C> <C> <C>
1992 100.000 100.000 100.000
94.118 96.271 96.608
80.392 98.400 86.056
80.392 96.032 80.243
76.471 96.189 76.934
88.235 98.660 79.334
105.882 105.606 88.821
105.882 107.076 94.701
1993 88.235 110.982 91.586
88.235 107.890 78.908
98.039 111.778 82.739
104.902 109.755 76.133
100.000 113.735 82.447
92.157 114.415 89.832
111.765 116.160 83.977
109.804 122.065 83.959
93.137 124.357 80.611
98.039 127.976 88.178
105.882 122.548 86.099
109.804 125.877 89.441
1994 147.059 127.562 82.872
135.294 124.775 86.198
133.333 117.033 86.179
147.059 115.815 84.727
139.216 115.673 95.281
143.137 112.199 94.459
147.059 116.198 96.506
141.176 119.721 99.215
149.020 121.737 97.497
150.980 120.833 98.883
150.980 115.582 102.803
149.020 117.381 95.120
1995 137.255 120.538 77.055
139.216 124.451 82.333
131.373 126.183 80.366
123.529 129.238 86.228
117.647 132.884 84.192
117.647 136.023 85.794
109.314 143.116 94.294
115.686 146.816 102.676
111.765 149.792 103.012
109.804 144.043 101.950
103.922 148.286 117.749
124.510 151.023 114.383
1996 121.569 151.160 123.182
133.333 153.644 121.576
126.471 155.063 127.263
160.784 160.445 140.996
227.451 165.770 162.527
205.882 156.543 159.810
200.000 144.358 139.112
258.824 148.585 144.485
270.588 152.652 161.931
272.549 149.612 150.888
303.922 155.782 149.970
268.628 153.429 150.170
1997 278.431 156.998 153.667
290.196 159.854 144.347
239.216 152.026 153.226
213.726 147.544 158.335
254.902 162.375 184.437
</TABLE>
DATA PERIOD: MAY 29, 1992 THROUGH MAY 30, 1997
The Peer Group consists of the following companies: A.T. Cross Company,
Michael Anthony Jewelers, Inc., Jewelmasters Inc., Tiffany & Co., and Town &
Country Corporation. The Company's management is of the opinion that despite the
existence of some similarities between the group of companies comprising its
peer group and the Company, the Company is unique because of the product it
produces, the markets in which its products are sold, and in its position as the
only publicly traded diamond cutting and polishing company in the United States.
Thus, comparisons made between the Company and the peer group are not
necessarily accurate or reliable and do not necessarily reflect the relative
performance data for the Company's primary competition.
(1) The cumulative total return for the securities comprising the Peer
Group and the AMEX Index assumes the reinvestment of dividends. The
total return for the Company's Common Stock does not assume the
reinvestment of dividends, since no dividends were
13
<PAGE>
<PAGE>
declared on the Company's Common Stock during the measurement period.
The weighing of the securities comprising each index, according to
their market capitalization, has been calculated at the end of each
monthly period.
(2) The AMEX Index tracks the aggregate price performance of equity
securities of companies traded on the American Stock Exchange. The
Company's Common Stock is traded on the American Stock Exchange.
TRANSACTIONS WITH MANAGEMENT
The Company has entered into a sublease with Leon Tempelsman & Son, a New
York limited partnership of which Maurice Tempelsman and Leon Tempelsman are the
sole general partners ('LTS'), under which approximately 30% of the 20th Floor
at 529 Fifth Avenue, New York, New York is sublet to LTS. The sublease is
prorated to the same rental rate per square foot which the Company is paying to
the landlord under its lease for the 19th and 20th Floors at the same location.
Rental payments under the sublease amount to a base annual rent of $89,518
(excluding escalations).
The Company is a party to an agreement dated February 16, 1996 (the
'Agreement'), with GIA Gem Trade Laboratory, Inc. ('GTL'), a wholly owned
subsidiary of Gemological Institute of America, Inc., pursuant to which the
Company has granted a license to GTL to use a laser micro-inscription system
developed by the Company in connection with GTL's business of grading diamonds
and identifying gem stones. The Agreement has an initial term of ten years (the
'Initial License Term') commencing August 1, 1997 and, unless otherwise
terminated in accordance with its terms, such Initial License Term will be
extended for the full term of every patent which is subsequently issued to, or
otherwise acquired by, the Company or any of its affiliates on the laser
micro-inscription device. George R. Kaplan, Vice Chairman of the Board of the
Company, is a Board Member Emeritus of the Board of Governors of the Gemological
Institute of America. The Agreement, which requires GTL to pay to the Company
royalties based on fees charged by GTL for inscribing gem stones, was the result
of arms-length negotiations between the Company and GTL.
2. APPROVAL OF THE 1997 PLAN
(ITEM 2 ON THE PROXY CARD)
BACKGROUND
On April 10, 1997, the Board of Directors unanimously adopted, subject to
stockholder approval at the Annual Meeting, the Lazare Kaplan International Inc.
1997 Long Term Stock Incentive Plan (the '1997 Plan'). The text of the 1997 Plan
is set forth as Appendix A hereto, and reference is made to the 1997 Plan in its
entirety for a more complete description of its terms. The summary of the
principal features of the 1997 Plan which follows is qualified entirely by such
reference.
PURPOSE
The purpose of the 1997 Plan is to provide an incentive for selected
employees and consultants to remain in the Company's employ and to remain
dedicated to the Company's
14
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<PAGE>
interests by enabling them to acquire a proprietary interest in the Company, and
to provide comparable incentives to enable the Company to better attract,
compete for and retain highly qualified employees and advisors.
ADMINISTRATION AND ELIGIBILITY
The 1997 Plan is administered by the Stock Option Committee of the Board of
Directors (the 'Committee'). At all times, the Committee will include at least
two directors of the Company who are neither employees of nor consultants to the
Company or any of its affiliates. In general, any employee of or consultant to
the Company or an affiliate of the Company, including any officer or
officer-director of the Company may be selected by the Committee to receive any
type of Award (as defined below) under the 1997 Plan; provided, however, that
Other Stock-Based Awards (as defined below) may not be granted to directors or
executive officers. Any director of the Company who is not an employee of or a
consultant to the Company or any affiliate of the Company is ineligible to
participate in the 1997 Plan.
TERMS OF THE 1997 PLAN
The 1997 Plan permits the Committee to issue the following types of awards
(each an 'Award'): (i) options to purchase shares of Common Stock which may be
either (A) incentive stock options ('ISOs'), as defined in Section 422 of the
Internal Revenue Code of 1986, as amended, (the 'Code'), or options that do not
qualify as ISOs ('NQSOs'); (ii) shares of Common Stock or units denominated in
such shares that are not freely transferable and are subject to forfeiture for a
designated restricted period ('Restricted Stock' and 'Restricted Stock Units',
respectively); (iii) awards of the right to receive the excess of the fair
market value at the time of exercise of a share of Common Stock over a
designated price determined at the time of grant ('Stock Appreciation Rights' or
'SARs'); (iv) awards denominated, or which may be settled in, shares of Common
Stock, subject to satisfaction of designated performance criteria during a
designated performance period ('Performance Awards'), (v) the right to receive
the equivalent of dividends or other distributions upon Common Stock ('Dividend
Equivalents'), and (vi) other types of awards denominated or payable in shares
of Common Stock ('Other Stock-Based Awards'). The 1997 Plan also permits the
Committee to issue a combination of two or more of the foregoing types of
Awards. ISOs and NQSOs (collectively, 'Options') may, at the Committee's
discretion, include a so-called 'reload' feature. The reload feature enables the
awardee who uses currently-owned shares of Common Stock to pay the exercise
price with respect to all or part of an Option to receive automatically at the
time of exercise another Option entitling the awardee to acquire the same number
of shares of Common Stock the awardee used to exercise the original Option.
Four hundred thousand (400,000) shares of authorized but unissued shares of
Common Stock have been reserved for issuance upon the exercise of Awards under
the 1997 Plan.
Under the 1997 Plan, the Committee may determine that any or all of the
Options to be granted will be ISOs. Any such Options must meet the relevant
requirements for ISOs set forth under the Code as in effect on the date of
grant. Currently, these requirements provide, among other things, that (i) the
term of an ISO may not exceed ten years, or five years in the case of an ISO
that is granted to an individual who owns stock in the Company possessing more
than 10 percent of the total combined voting power of classes of stock of the
Company, and (ii) the
15
<PAGE>
<PAGE>
exercise price of the Option must not be less than the fair market value of a
share of Common Stock on the date of grant, or in the case of an individual who
owns stock in the Company possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company, the exercise price must not
be less than 110 percent of the fair market value of a share of Common Stock on
the date of grant. If an Option granted under the 1997 Plan fails to qualify as
an ISO, in whole or in part, whether at time of grant or subsequently, the
nonqualified portion of such Option will remain in full force and effect but
will be deemed to have been granted as a NQSO.
In addition, except as limited by the terms of any Award, the Committee
will have the discretion to settle any Award (other than Restricted Stock) (i)
in cash or shares of Common Stock; (ii) by the grant of another Award; or (iii)
in such other form of consideration as the Committee deems appropriate. The
Committee also will have discretion to settle any Award in installments, or to
defer settlement of any Award (other than Restricted Stock) as and to the extent
it deems appropriate, except as it may be limited by the terms of the Award, and
regardless of the terms of an Award, will be entitled at any time to cancel the
Award upon payment to the awardee of its value (as determined by the Committee)
in cash or any other form of consideration.
Subject to the provisions of the 1997 Plan, applicable law and the terms
and conditions of any Award, the Committee may determine, among other things,
(i) the expiration date, vesting schedule, and the per share exercise price of
any Option; (ii) the method and form of payment of the exercise price of any
Option (which may include payment in cash, delivery of shares of Common Stock
already held by the grantee valued at their fair market value or any combination
thereof); (iii) the grant price for any Stock Appreciation Right; (iv) the
restricted period for any grant of Restricted Stock or Restricted Stock Units;
(v) the performance criteria and performance period for any Performance Award;
and (vi) the effect of the termination of employment and/or consulting
relationships between the Company and a awardee who has received an Award.
If not provided otherwise in the related Award Agreement, an Option granted
to an awardee will expire upon the earlier of the expiration date set forth in
that Award Agreement or three months after the date on which the awardee's
employment or consulting relationship terminates (one year if the awardee's
employment or consulting relationship terminates as a result of death or
disability).
If a awardee's employment or consulting relationship terminates for any
reason other than death, disability or retirement on or after his or her normal
retirement date, then unless otherwise provided in the related Award Agreement,
all shares of Restricted Stock and all Restricted Stock Units owned by the
awardee that are still subject to restrictions will be canceled. If the
awardee's employment or consulting relationship terminates by reason of death or
disability, all shares of Restricted Stock and all Restricted Stock Units owned
by the awardee that are still subject to restrictions will vest. If the
awardee's employment or consulting relationship terminates by reason of
retirement on or after his or her normal retirement date, all shares of
Restricted Stock and all Restricted Stock Units owned by the awardee that are
still subject to restrictions will continue to vest as if his or her employment
or consulting relationship had not terminated.
The 1997 Plan provides that if an awardee has engaged in any activity
detrimental to the interest of the Company and his or her employment or
consulting arrangement with the Company is terminated as a result thereof, then
the Committee, in its sole discretion, may terminate or
16
<PAGE>
<PAGE>
cancel the nonvested or unexercised portion of any Award then held by the
awardee at any time following termination of his or her employment or consulting
relationship with the Company.
NEW PLAN BENEFITS TABLE
The following table sets forth summary information regarding the shares of
Common Stock underlying options granted under the 1997 Plan during Fiscal 1997
to (i) each executive officer named in the Summary Compensation Table, (ii) all
current executive officers of the Company, as a group (4 persons), and (iii) all
employees (other than executive officers) of the Company, as a group (21
persons). No options were granted to directors who are not executive officers.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($) OPTION SHARES (#)
- ------------------------------------------------------------ ---------------- ------------------
<S> <C> <C>
Leon Tempelsman ............................................ $ 619,500 40,000
President
Sheldon L. Ginsberg ........................................ $ 295,000 20,000
Executive Vice President and
Chief Financial Officer
Robert Speisman ............................................ $ 147,500 10,000
Vice President -- Sales
All current executive officers as a group................... $2,537,000 170,000
All employees (other than executive officers as a group..... $ 800,188 54,250
</TABLE>
FEDERAL INCOME TAX CONSIDERATIONS
The grant of an Option, whether or not an ISO, generally does not result in
any tax consequences to the Company or the awardee. The tax consequences of
exercising an Option or disposing of Common Stock received as a result of the
exercise of an Option ('Option Stock') depend upon whether the Option is an ISO
or a NQSO.
Nonqualified Stock Options. If an awardee exercises a NQSO, the awardee
must recognize an amount of ordinary income in his or her taxable year in which
the Option Stock becomes substantially vested equal to the excess of (i) the
fair market value of the Option Stock at the time it becomes substantially
vested, over (ii) the exercise price for the Option Stock. If an awardee
receives nonvested stock upon the exercise of an Option he or she may elect to
recognize ordinary income for the taxable year in which the Option is exercised
in an amount equal to the difference between (i) the fair market value of the
Option Stock determined on the exercise date as if the stock were substantially
vested, over (ii) the exercise price. Option Stock is considered substantially
vested for this purpose when it either is freely transferable by the awardee or
is not subject to a substantial risk of forfeiture.
If an awardee disposes of substantially vested Option Stock, the awardee
must include in gross income, as gain for the taxable year of the disposition,
an amount equal to the excess of the amount realized in the transaction over the
sum of the option price plus the amount of ordinary income the awardee
recognized as a result of the exercise of the Option. If, instead, the sum of
the option price plus the amount of compensation income recognized by the
awardee when the
17
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<PAGE>
Option Stock became substantially vested exceeds the amount realized by the
awardee in the disposition, the awardee is allowed to deduct an amount equal to
such excess as a loss for the taxable year of the disposition. Such gain (or
loss) is generally treated as capital gain (or loss), long-term or short-term,
depending upon the length of time elapsed between the time when the Option Stock
became substantially vested and the time of the disposition.
Incentive Stock Options. If an awardee exercises an ISO, the awardee does
not recognize income upon exercise, provided that the awardee was an employee of
the Company at all times during the period beginning on the date the Option was
granted and ending on the date that is three months before the exercise date.
However, the excess of (i) the fair market value at the time of exercise of
Common Stock acquired upon exercise of an ISO, over (ii) the exercise price
constitutes an item of tax preference for purposes of the alternative minimum
tax and may result in additional income tax to the awardee for the taxable year
that includes the date of exercise.
If an awardee exercises an ISO and fails to satisfy the requirement that
he/she has been an employee of the Company, as described above, the awardee must
include in gross income, as compensation for the taxable year of exercise, an
amount equal to the excess of the fair market value of the Option Stock at the
time of exercise over the option price.
If (i) an awardee disposes of Option Stock that was acquired pursuant to an
ISO more than one year prior to the disposition, (ii) such ISO was granted more
than two years prior to the disposition, and (iii) the amount realized in the
disposition exceeds the option price, then the awardee must include in gross
income, as capital gain for the taxable year of the disposition, an amount equal
to the excess of the amount realized in the disposition over the option price.
(If, instead, the option price exceeds the amount realized in the disposition,
the awardee is allowed to deduct an amount equal to such excess as a capital
loss for such year).
If (i) an awardee disposes of Option Stock within two years after the
related ISO is granted or within one year after the Option Stock was acquired,
and (ii) the amount realized in the disposition exceeds both the option price
and the fair market value of the Option Stock on the date of exercise, then the
awardee must include in gross income, as compensation for the taxable year of
the disposition, an amount equal to the excess of such fair market value over
the option price.
Exercise of Option With Previously Acquired Common Stock. The tax
consequences to an awardee where the awardee exercises an Option by surrendering
previously acquired Common Stock (whether purchased from a third party or
acquired by the awardee upon exercise of an Option) depend upon the type of
Option exercised and the nature of the Common Stock used to fund the purchase
price. For this reason, the Company urges the awardee to consult the awardee's
own tax advisor with respect to the tax consequences of such transactions.
Stock Appreciation Rights. The grant of an SAR will not result in taxable
income to the awardee. The awardee of an SAR must include in gross income, as
ordinary income for the taxable year in which the SAR is exercised, an amount
equal to the excess of (i) the sum of any money and the fair market value of any
property or shares of Common Stock received as a result of such exercise, over
(ii) the exercise price of the SAR, except to the extent that the shares of
Common Stock and/or property are transferred subject to restrictions involving a
substantial risk of forfeiture. (See discussion above under 'Non Qualified Stock
Options'.)
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<PAGE>
If an awardee disposes of any shares of Common Stock or property acquired
pursuant to the exercise of an SAR, the awardee's basis for determining taxable
gain (or loss) will be equal to the amount of any ordinary income recognized by
the awardee with respect to the exercise of the SAR and such gain (or loss) is
generally treated as capital gain (or loss), long-term or short-term, depending
upon the length of time elapsed between the time when the shares of Common Stock
or property became substantially vested and the time of the disposition.
Restricted Stock. The grant of Restricted Stock will not result in taxable
income to the awardee. The awardee must include in gross income, as ordinary
income for the taxable year in which the Restricted Stock ceases to be subject
to restrictions involving a substantial risk of forfeiture an amount equal to
the excess of the fair market value of the Restricted Stock at the time it
ceases to be subject to restrictions involving a substantial risk of forfeiture.
If the awardee disposes of any stock acquired pursuant to a Restricted
Stock award, the awardee's basis for determining the taxable gain (or loss) will
be equal to the amount of any related ordinary income recognized by the awardee,
and such gain (or loss) is generally treated as capital gain (or loss),
long-term or short-term, depending upon the length of time elapsed between the
time when the Restricted Stock ceased to be subject to restrictions involving a
substantial risk of forfeiture and the time of the disposition.
Tax Consequences to the Company. If an awardee includes an amount in gross
income as compensation for a taxable year under the foregoing rules, the Company
is generally entitled to a corresponding deduction for its taxable year that
includes the last day of the affected taxable year of the awardee.
Section 162(m) was added to the Code, which, in general, prohibits
deductibility of certain compensation in excess of $1,000,000 per year paid by a
publicly-held corporation to any individual named in the corporation's Summary
Compensation Table for the year.
Some types of compensation are excluded from Section 162(m)'s $1,000,000
deductibility limit, including certain 'performance-based' compensation.
Compensation associated with stock options or stock appreciation rights, or
their exercise, can qualify for a performance-based exclusion, as can other
forms of compensation based on objective performance criteria, provided certain
requirements are satisfied. However, based on the regulations, in general
Options, SARs, Restricted Stock and most other Awards granted under the 1997
Plan will not be considered eligible for exclusion from the $1,000,000
deductibility limit of Section 162(m), where such limit is applicable.
Consequently, it is possible that at some time or times in the future, Section
162(m) may preclude the Company from deducting compensation that otherwise would
be deductible by it in respect of awards under the 1997 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL
OF THE 1997 PLAN.
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3. APPROVAL OF THE AMENDMENT TO
THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
(ITEM 3 ON THE PROXY CARD)
BACKGROUND
On July 31, 1997, the Board of Directors unanimously adopted, subject to
stockholder approval at the Annual Meeting, an amendment (the 'Common Stock
Amendment') to the Company's Certificate of Incorporation (the 'Certificate')
which would increase the number of shares of Common Stock which the Company
would be authorized to issue.
The Company's Certificate currently authorizes the issuance of up to
10,000,000 shares of Common Stock. As of September 9, 1997, there were 8,509,466
shares of Common Stock outstanding and 429,376 shares of Common Stock reserved
for issuance upon exercise of stock options granted or available for grant
pursuant to the 1988 Plan. Assuming the approval of the 1997 Plan, an additional
400,000 shares of Common Stock will be reserved for issuance upon exercise of
stock options granted or available for grant pursuant to the 1997 Plan. As a
result, only 661,158 shares of Common Stock will be unreserved and available for
future issuance.
REASONS FOR THE PROPOSED COMMON STOCK AMENDMENT
The Board of Directors believes that approval of the Common Stock Amendment
to increase the number of authorized but unissued shares of Common Stock is in
the best interests of the Company and its stockholders, as it would enhance the
Company's flexibility in addressing future needs of the Company which may entail
the use of stock for such actions as equity financing, acquisition
opportunities, management incentive and employee benefit plans, or for other
corporate purposes. Other than in connection with the exercise of stock options
under the Plans, the Company has no present arrangements, agreements,
understandings or plans for the issuance or use of the additional shares of
Common Stock proposed to be authorized by the Common Stock Amendment.
The Board's discretion in issuing the additional authorized shares without
stockholder approval is subject to the applicable rules of the American Stock
Exchange or any stock exchange on which the Company's securities may then be
listed.
TERMS OF THE PROPOSED COMMON STOCK AMENDMENT
The Board of Directors of the Company is proposing to amend the Certificate
to increase the number of shares of Common Stock from 10,000,000 shares of
Common Stock to 20,000,000 shares of Common Stock. If the Common Stock Amendment
is approved by the stockholders, Article FOURTH of the Certificate would be
amended to read in its entirety substantially as follows:
'FOURTH: The aggregate number of shares which the Corporation shall
have authority to issue is twenty million (20,000,000) shares of common
stock, $1.00 par value.'
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EFFECTS OF THE PROPOSED COMMON STOCK AMENDMENT
Depending upon the circumstances in which additional shares of Common Stock
are issued, the overall effects of such issuance may be to render more difficult
or to discourage a merger, tender offer, proxy contest or the assumption of
control by a holder of a large block of Common Stock and the removal of
incumbent management. Management of the Company is not currently aware of any
possible takeover attempts of the Company, and the Common Stock Amendment is not
in response to any effort by any party to accumulate the Common Stock or to
obtain control of the Company by means of a merger, tender offer, solicitation
in opposition to management or otherwise.
Holders of Common Stock are not entitled to preemptive rights, and to the
extent that any additional shares of Common Stock or securities convertible into
Common Stock may be issued on other than on a pro rata basis to current
stockholders, the present ownership portion of current stockholders may be
diluted. Based on the Certificate and the Company's By-laws and the applicable
provisions of the Delaware General Corporation Law, stockholders will have no
dissenters' or similar rights with respect to the adoption of the Common Stock
Amendment or upon the issuance of any shares of Common Stock thereunder.
If the proposal set forth below under the caption 'Approval of the
Amendment to the Company's Certificate of Incorporation to Authorize Preferred
Stock' is also approved by the stockholders at the Annual Meeting, Article
FOURTH will be replaced by the text set forth below under such caption.
REQUIRED VOTE
The approval of the Common Stock Amendment requires the affirmative vote by
the holders of a majority of all outstanding shares of Common Stock entitled to
vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL
OF THE COMMON STOCK AMENDMENT.
4. APPROVAL OF THE AMENDMENT TO
THE COMPANY'S CERTIFICATE OF INCORPORATION
TO AUTHORIZE PREFERRED STOCK
(ITEM 4 ON THE PROXY CARD)
BACKGROUND
On July 31, 1997, the Board of Directors unanimously approved, subject to
stockholder approval at the Annual Meeting, an amendment to the Certificate (the
'Preferred Stock Amendment') which would authorize the Company to issue, from
time to time, as determined by the Board of Directors, up to 5,000,000 shares of
preferred stock, par value $.01 per share (the 'Preferred Stock'). The
Certificate currently does not authorize the issuance of shares of Preferred
Stock.
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REASONS FOR THE PROPOSED PREFERRED STOCK AMENDMENT
Also on July 31, 1997, the Board of Directors unanimously adopted a
Shareholder Rights Agreement (the 'Rights Agreement') under which preferred
stock purchase rights ('Rights') will be distributed, as a dividend, to
stockholders of record as of September 9, 1997 (the 'Rights Record Date'), as
soon as practicable after such date, at a rate of one Right for each share of
Common Stock held on the Rights Record Date. The Rights Agreement is not being
submitted to the stockholders for their consideration.
The Rights are designed to deal with the problem of a raider using what the
Board of Directors perceives to be coercive tactics to deprive the Company's
Board of Directors and stockholders of any real opportunity to determine the
destiny of the Company by forcing the raider to negotiate with the Company's
Board of Directors. The Rights may be redeemed by the Company at a redemption
price of $0.001 per Right, subject to adjustment, prior to the public
announcement that 15% or more of Common Stock has been accumulated by a single
acquiror or group. Thus, they should not interfere with any merger or other
business combination approved by the Board of Directors nor affect any
prospective offeror willing to negotiate in good faith with the Board of
Directors. The Rights Agreement does not inhibit any stockholder from utilizing
the Proxy mechanism to promote a change in the management or direction of the
Company. While the Board of Directors is not aware of any effort to acquire
control of the Company, it believes that the Rights Agreement represents a sound
and reasonable means of safeguarding the investment of stockholders in the
Company.
Distribution of the Rights will not in any way alter the financial strength
of the Company or interfere with its business plans. The distribution of the
Rights is not dilutive, does not affect reported earnings per share, is not
taxable either to the recipient or to the Company, and will not change the way
in which stockholders can currently trade shares of Common Stock. However, under
certain circumstances, particularly where the Rights are 'triggered' as the
result of certain potentially abusive tactics, exercise of the Rights may be
dilutive or affect reported earnings per share.
In addition to providing sufficient shares upon the exercise of Rights
under the Rights Agreement, the availability of the Preferred Stock will enable
the Board of Directors, without further action of the stockholders, to issue
shares of Preferred Stock from time to time for such other proper corporate
purposes as it shall deem advisable to the Company and its stockholders, such as
equity financing, acquisition opportunities, management incentive and employee
benefit plans. Other than in connection with the Rights Agreement, the Company
has no present arrangements, agreements, understandings or plans for the
issuance or use of the additional shares of Preferred Stock proposed to be
authorized by the Preferred Stock Amendment.
SUMMARY OF THE RIGHTS AGREEMENT
A dividend of one Right for each outstanding share of Common Stock of the
Company is payable to holders of Common Stock as of the Rights Records Date.
Each Right entitles the registered holder thereof to purchase from the Company
one one-hundredth ( 1/100) of a share of Series A Junior Participating Preferred
Stock (the 'Junior Preferred Stock') at an exercise price of $90 (the 'Exercise
Price'). The terms and conditions of the Rights are contained in the Rights
Agreement between the Company and ChaseMellon Shareholder Services, LLC, as
rights agent
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(the 'Rights Agent'), and the summary contained herein is qualified in its
entirety by the terms of the Rights Agreement.
The Rights are not exercisable and are not transferable apart from the
Common Stock until the tenth (10th) day after such time as a person or group
acquires beneficial ownership of 15% or more of the Common Stock or the tenth
(10th) business day (or such later time as the Board of Directors may determine)
after a person or group announces its intention to commence or commences a
tender or exchange offer the consummation of which would result in beneficial
ownership by person or group of 15% or more of the Common Stock. As soon as
practicable after the Rights become exercisable, separate certificates
representing the Rights will be issued and the Rights will become transferable
apart from the Common Stock.
The Exercise Price payable and the number of shares of Junior Preferred
Stock or other securities or property issuable upon the exercise of the Rights
are subject to certain anti-dilution adjustments.
If, after the Rights have been triggered, an acquiring company were to
merge or otherwise combine with the Company, or the Company were to sell 50% or
more or its assets or earning power, each Right then outstanding would 'flip
over' and thereby would become a Right to buy that number of shares of common
stock of the acquiring company which at the time of such transaction would have
a market value of two times the Exercise Price of the Rights.
In the event a person or group were to acquire a 15% or greater position in
the Company, each right then outstanding would 'flip in' and become a right to
buy that number of shares of Common Stock which at the time of the 15%
acquisition had a market value of two times the exercise price of the Rights.
The acquiror who triggered the Rights would be excluded from the 'flip-in'
because his Rights would have become null and void upon his triggering
acquisition. As described below, the amendment provision of the Rights Agreement
provides that the 15% threshold can be lowered to not less than 10%. The Board
can utilize this provision to provide additional protection against creeping
accumulations.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
Common Stock and before the acquisition by a person or group of 50% or more of
the outstanding Common Stock, the Board of Directors may exchange the Rights
(other than Rights owned by such person or group, which have become void), in
whole or in part, at an exchange ratio of one share of Common Stock (or one
one-hundredth (1/100) of a share of Junior Preferred Stock) per Right, subject
to adjustment.
The Rights Agreement provides that the acquisition of additional shares of
Common Stock by any stockholder currently having beneficial ownership of 15% or
more of the Common Stock will not trigger the Rights.
THE JUNIOR PREFERRED STOCK
The following description of the Junior Preferred Stock is qualified in its
entirety by the Designation of Rights, Privileges and Preferences of such
Preferred Stock.
The Junior Preferred Stock is non-redeemable and subordinate to any other
series of the Company's Preferred Stock which may at any time be issued. The
Company currently does not have any Preferred Stock authorized. The Junior
Preferred Stock may not be issued, except upon exercise of the Rights. Each
Right to be distributed to holders of Common Stock entitles each
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holder to purchase one one-hundredth (1/100) of a share of Junior Preferred
Stock. Each share of Junior Preferred Stock is entitled to receive, when, as,
and if declared, a dividend in an amount equal to the greater of (x) a quarterly
dividend in the amount of $1.00 per share of Junior Preferred Stock and (y) one
hundred times the cash dividend declared on each share of Common Stock. In
addition, each share of Junior Preferred Stock is entitled to receive one
hundred times any non-cash dividends declared with respect to each share of
Common Stock, in like kind, other than a dividend payable in shares of Common
Stock. In the event of liquidation, the holder of each share of Junior Preferred
Stock shall be entitled to receive a preferential liquidation payment of $100
per share and shall be entitled to receive, in the aggregate, a liquidation
payment equal to 100 times the liquidation payment made for each share of Common
Stock. Each share of Junior Preferred Stock has 100 votes, voting together with
the Common Stock and not as a separate class. In the event of any merger,
consolidation or other transaction in which shares of Common Stock are
exchanged, each share of Junior Preferred Stock is entitled to receive 100 times
the amount received per share of Common Stock.
AMENDMENT OF THE RIGHTS AGREEMENT
The Rights Agreement may be amended from time to time in any manner prior
to the acquisition by a person or group of affiliated or associated persons of
beneficial ownership of 15% or more of the outstanding Common Stock.
RESERVED SHARES
The Rights Agreement contemplates that the Company will reserve a
sufficient number of authorized but unissued shares of Preferred Stock to permit
the exercise in full of the Rights should the Rights become exercisable. If the
amendment to the Certificate of Incorporation to authorize the issuance of
5,000,000 shares of Preferred Stock is not approved by the stockholders, the
Company will not have sufficient shares for issuance upon the Rights becoming
exercisable. Consequently, in such event, the effectiveness of the Rights
Agreement would be impaired.
TERMS OF THE PROPOSED PREFERRED STOCK AMENDMENT
If the Preferred Stock Amendment is approved by stockholders, and the
Common Stock Amendment described above under 'Approval of the Amendment to the
Company's Certificate of Incorporation to Increase the Number of Authorized
Shares of Common Stock' is also so approved, Article FOURTH of the Certificate
would be amended to read in its entirety substantially as follows:
'FOURTH: (a) The aggregate number of shares which the Corporation
shall have the authority to issue is twenty-five million (25,000,000)
shares, which shall consist of twenty million (20,000,000) shares of common
stock, $1.00 par value ('Common Shares'), and five million (5,000,000)
shares of preferred stock, $.01 par value ('Preferred Shares'). Except as
otherwise provided in accordance with this Certificate of Incorporation,
the Common Shares shall have unlimited voting rights, with each Common
Share being entitled to one vote, and the right to receive the net assets
of the Corporation upon dissolution, with each Common Share participating
on a pro rata basis.
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(b) The Board of Directors is authorized, from time to time and without
stockholder action, to provide for the issuance of Preferred Shares in one or
more series not exceeding in the aggregate the number of Preferred Shares
authorized by this Certificate of Incorporation, as amended from time to time;
and to determine with respect to each such series the voting powers, if any
(which voting powers, if granted, may be full or limited), designations,
preferences and relative, participating, option or other special rights, and the
qualifications, limitations or restrictions relating thereto, including without
limiting the generality of the foregoing (i) the voting rights, if any, relating
to Preferred Shares of any series (which may be one or more votes per share or a
fraction of a vote per share or no vote per share, which may vary over time and
which may be applicable generally or only upon the happening and continuance of
stated events or conditions), (ii) the rate of dividend, if any, to which
holders of Preferred Shares of any series may be entitled (which may be
cumulative or noncumulative), (iii) the rights of holders of Preferred Shares of
any series in the event of liquidation, dissolution or winding up of the affairs
of the Corporation, (iv) the rights, if any, of holders of Preferred Shares of
any series to convert or exchange such Preferred Shares of such series for
shares of any other class or series of capital stock, or for any other
securities, property or assets, of the Corporation or any subsidiary (including
the determination of the price or prices or the rate or rates applicable to such
rights to convert or exchange and the adjustment thereof, and the time or times
during which a particular price or rate shall be applicable), (v) whether or not
the Preferred Shares of any series shall be redeemable and, if so, the terms and
conditions of such redemption, including the date or dates upon or after which
they shall be redeemable, and the amount per share payable in case of
redemptions, which amount may vary under different conditions and at different
dates, and (vi) whether any Preferred Shares of any series shall be redeemed
pursuant to a retirement or sinking fund or otherwise and the terms and
conditions of such obligation.
(c) Before the Corporation shall issue any Preferred Shares of any series,
a Certificate of Designations fixing the voting powers, designations,
preferences, the relative, participating, option or other rights, if any, and
the qualifications, limitations and restrictions, if any, relating to the
Preferred Shares of such series, and the number of Preferred Shares of such
series authorized by the Board of Directors to be issued shall be filed with the
Secretary of State of the State of Delaware in accordance with the Delaware
General Corporation Law and shall become effective without any stockholder
action. The Board of Directors is further authorized to increase or decrease
(but not below the number of Preferred Shares of any series then outstanding)
the number of shares of such series subsequent to the issuance of shares of such
series.'
In the event that the Preferred Stock Amendment is approved by stockholders
and the Common Stock Amendment described above under 'Approval of the Amendment
to the Company's Certificate of Incorporation to Increase the Number of
Authorized Shares of Common Stock' is not so approved, the following paragraph
(a) would be substituted for paragraph (a) of proposed Article FOURTH set forth
immediately above:
'(a) The aggregate number of shares which the Corporation shall have
the authority to issue is fifteen million (15,000,000) shares, which shall
consist of ten million (10,000,000) shares of common stock, $1.00 par value
('Common Shares'), and five million (5,000,000) shares of preferred stock,
$.01 par value ('Preferred Shares'). Except as otherwise provided in
accordance with this Certificate of Incorporation, the Common Shares shall
have unlimited voting rights, with each Common Share being entitled to one
vote, and the right to receive the
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net assets of the Corporation upon dissolution, with each Common Share
participating on a pro rata basis.'
EFFECTS OF THE PROPOSED PREFERRED STOCK AMENDMENT
The proposed Preferred Stock Amendment will give the Board of Directors the
express authority, without further action of the stockholders, to issue shares
of Preferred Stock from time to time in one or more series and to fix before
issuance with respect to each series (i) the designation and the number of
shares to constitute each series, (ii) the liquidation rights and preferences,
if any, (iii) the dividend rights (which could be senior to the Common Stock)
and interest rates, if any, (iv) the rights and terms of redemptions, (v)
whether the shares of Preferred Stock are to be convertible or exchangeable into
shares of Common Stock or other securities of the Company, and the rates
thereof, (vii) any limitation on the payment of dividends on the Common Stock
while any shares of Preferred Stock are outstanding, (viii) the voting power, if
any, of the shares of Preferred Stock in addition to the voting rights provided
by law, which voting power may be general or special, and (ix) such other
provisions as will not be inconsistent with the Certificate. All the shares of
any one series of Preferred Stock will be identical in all respects. Holders of
any series of Preferred Stock, when and if issued, may have priority claims to
dividends and to any distribution upon liquidation of the Company, and may have
other preferences over the Common Stock, including a preferential right to elect
directors in the event that Preferred Stock dividends (if the Preferred Stock
carries a dividend) are not paid for a specified period.
The specific terms of any Preferred Stock to be authorized pursuant to the
Preferred Stock Amendment (other than the Junior Preferred Stock, the terms of
which are described above) will depend primarily on market conditions, and other
factors existing at the time of issuance. The Company does not intend to issue
any Preferred Stock except on terms which it deems to be in the best interests
of the Company and its stockholders. The Board of Directors currently intends to
issue shares of Preferred Stock only in conjunction with the exercise of Rights
under the Rights Plan. However, the Board of Directors may, in its discretion,
determine to issue shares of Preferred Stock for other proper corporate purposes
as discussed above. The Board of Directors has considered the potential
disadvantages to the issuance of Preferred Stock (such as the negative impact a
Preferred Stock dividend may have on the Company's earnings per share, if any,
the liquidating preference the Preferred Stock would have over the Common Stock
and the potential dilution of any stockholders' equity to the extent that
Preferred Stock, when and if issued, may be redeemable or convertible into
Common Stock); however, the Board of Directors believes that the advantages of
future flexibility afforded by the ability to issue Preferred Stock outweigh the
disadvantages, and would be in the best interests of the Company and its
stockholders.
It is not possible to state the precise effects of the authorization of the
Preferred Stock upon the rights of the holders of Common Stock until the Board
of Directors determines to issue Preferred Stock and sets the respective
preferences, limitations and relative rights of the holders of each class or
series of Preferred Stock so issued. However, such effects might include (i)
reduction of the amount otherwise available for payment of dividends on the
Common Stock, to the extent dividends are payable on any issued Preferred Stock,
(ii) restrictions on dividends on the Common Stock, (iii) dilution of the voting
power of the Common Stock to the extent that the Preferred Stock has voting
rights, (iv) conversion of the Preferred Stock into Common Stock at such prices
as the Board determines, which could include issuance at or below the fair
market value or
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original issue price of the Common Stock, and (v) the holders of Common Stock
not being entitled to participate in the Company's assets upon liquidation until
satisfaction of any liquidation preference granted to holders of the Preferred
Stock.
Depending upon the circumstances in which shares of Preferred Stock are
issued, the overall effects of such issuance may be to render more difficult or
to discourage a merger, tender offer, proxy contest or the assumption of control
by a holder of a large block of Common Stock and the removal of incumbent
management. The Board of Directors, when it deems it in the best interests of
the Company and its stockholders, also could authorize holders of a series of
Preferred Stock to vote either separately as a class or with the holders of
Common Stock, on any merger, sale or exchange of assets by the Company or on any
other extraordinary corporate transaction. As stated above, the Board intends to
issue new shares to dilute the stock ownership of a person or entity seeking to
obtain control of the Company under circumstances which the Board of Directors
considers not to be in the best interests of the stockholders and the Company.
In addition, the mere existence of a class of authorized Preferred Stock could
have the effect of discouraging unsolicited takeover attempts. As stated above,
management of the Company is not currently aware of any possible takeover
attempts of the Company, and the Preferred Stock Amendment is not in response to
any effort by any party to obtain control of the Company by means of a merger,
tender offer, solicitation in opposition to management or otherwise. The
Preferred Stock Amendment is not part of a plan to recommend a series of similar
amendments to the stockholders and, except as set forth above under 'Approval of
the Amendment to the Company's Certificate of Incorporation to Increase the
Number of Authorized Shares of Common Stock', the Board of Directors does not
contemplate recommending the adoption of any other amendments to the Certificate
which could be construed to affect the ability of third parties to take over or
change the control of the Company.
Holders of Common Stock will not be entitled to preemptive rights with
respect to any issuance of shares of Preferred Stock. Based on the Certificate
and the Company's By-laws and the applicable provisions of the Delaware General
Corporation Law, stockholders will have no dissenters' or similar rights with
respect to the adoption of the Preferred Stock Amendment or upon the issuance of
shares of Preferred Stock thereunder.
REQUIRED VOTE
The approval of the Preferred Stock Amendment requires the affirmative vote
by the holders of a majority of all outstanding shares of Common Stock entitled
to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL
OF THE PREFERRED STOCK AMENDMENT.
5. RATIFICATION OF THE APPOINTMENT OF AUDITORS
(ITEM 5 ON THE PROXY CARD)
The Board of Directors has appointed the firm of Ernst & Young LLP,
independent certified public accountants, to be auditors for the Company and its
subsidiaries for the fiscal year ending May 31, 1998 and recommends that the
stockholders ratify that appointment. If a majority of the shares are not voted
in favor of ratification, the Board will consider the appointment of other
auditors for the ensuing fiscal year. The Board is advised that there is and has
been, no
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relationship between Ernst & Young LLP and the Company or any of its
subsidiaries other than the rendition of professional services. A representative
of Ernst & Young LLP is expected to be present at the Annual Meeting. The
representative will have an opportunity to make a statement and will be
available to respond to questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP.
6. OTHER BUSINESS
As of the date hereof, the Board of Directors does not know of any matter
which will come before the meeting other than the business specified in the
foregoing notice of meeting. If any other matter is presented at the meeting or
any adjournment thereof, it is intended that the persons named in the proxy will
vote in accordance with their best judgment.
SOLICITATION OF PROXIES
Solicitation of proxies is being made by the Board of Directors through the
mail, in person, and by telegraph and telephone. In addition, the Company will
request banks, brokers, and other custodians, nominees, and fiduciaries to
obtain voting instructions from the beneficial owners and will pay their
expenses for so doing. The cost of soliciting proxies will be borne by the
Company.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
Stockholders who wish to have proposals included in the proxy statement and
form of proxy to be furnished by the Board of Directors in connection with the
Company's 1998 Annual Meeting of Stockholders must submit such proposals so that
they are received by the Company no later than May 27, 1998. Please direct such
proposals to the attention of the Secretary of the Company.
By order of the Board of Directors,
LEON TEMPELSMAN,
President
New York, New York
September 19, 1997
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APPENDIX A
LAZARE KAPLAN INTERNATIONAL INC.
1997 LONG-TERM STOCK INCENTIVE PLAN
SECTION 1. Purposes
The general purposes of this 1997 Long-Term Stock Incentive Plan (the
'Plan') are to encourage selected employees and directors of and consultants to
LAZARE KAPLAN INTERNATIONAL INC. (the 'Company') and its Affiliates (as
hereinafter defined) to acquire a proprietary interest in the Company in order
to create an increased incentive to contribute to the Company's future success
and prosperity, and to enhance the ability of the Company and its Affiliates to
attract and retain exceptionally qualified individuals upon whom the sustained
progress, growth, and profitability of the Company depend, thus enhancing the
value of the Company for the benefit of its stockholders.
SECTION 2. Certain Additional Definitions
The following terms have the following respective meanings under the Plan:
'Affiliate' means any entity in which the Company directly or
indirectly has a significant equity interest under generally accepted
accounting principles and any other entity in which the Company has a
significant direct or indirect equity interest as determined by the
Committee.
'Award' means any Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit, Performance Award, Dividend Equivalent, or Other
Stock-Based Award granted under the Plan.
'Award Agreement' means a written agreement, contract, instrument or
document evidencing an Award.
'Board' means the Board of Directors of the Company.
'Code' means the Internal Revenue Code of 1986, as amended.
'Committee' means a committee of the Company's directors designated by
the Board to administer the Plan and composed of not less than two
directors, each of whom is a Non-Employee Director.
'Disability' means, with respect to a given Participant at a given
time, any medically determinable physical or mental impairment that the
Committee, on the basis of competent medical evidence, reasonably
determines has rendered or will render the Participant permanently and
totally disabled with the meaning of Section 422(c)(6) of the Code (or such
successor section as is in effect at the time).
'Dividend Equivalent' means a right granted under Section 6(e) of the
Plan.
'Exchange Act' means the Securities Exchange Act of 1934, as amended.
'Fair Market Value' means, with respect to a Share on a given date:
(a) if the Shares are listed for trading on a national securities exchange
(including, for this purpose, the Nasdaq
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National Market ['NNM'] of the National Association of Securities Dealers
Automated Quotation System ['Nasdaq']) on such date, the closing Share
price on such exchange (or, if there is more than one, the principal such
exchange), or, for the NNM, the last sale price, on the day immediately
preceding the date as of which Fair Market Value is being determined, or on
the next preceding day on which Shares were traded if no Shares were traded
on the immediately preceding day; (b) if the Shares are not listed for
trading on any securities exchange (including the NNM) on such date but are
reported by Nasdaq, and market information concerning the Shares is
published on a regular basis in The New York Times or The Wall Street
Journal, the average of the daily bid and asked prices of the Shares, as so
published, on the day nearest preceding the date in question for which such
prices were published; (c) if (a) is inapplicable and market information
concerning the Shares is not regularly published as described in (b), the
average of the high bid and low asked prices of the Shares in the
over-the-counter market on the day nearest preceding the date in question
as recorded by Nasdaq (or, if Nasdaq does not record such prices for the
Shares, another generally accepted reporting service); or (d) if none of
the foregoing are applicable, the fair market value of a Share as of the
date in question, as determined by the Committee.
'Family Member' means an individual who is the spouse, child
(including a legally adopted child), grandchild or parent of a Participant.
'Incentive Stock Option' means an Option that meets the requirements
of Section 422 of the Code (or any successor provision in effect at the
relevant time) and that is identified as intended to be an Incentive Stock
Option in the Award Agreement evidencing the Option.
'Non-Employee Director' means a director of the Company who comes
within the definition of 'non-employee director' under Rule 16b-3.
'Non-Qualified Stock Option' means an Option that is not an Incentive
Stock Option.
'Option' means an option to purchase Shares granted under Section 6(a)
of the Plan.
'Other Stock-Based Award' means a right granted under Section 6(f) of
the Plan.
'Participant' means an employee of or consultant to the Company or any
Affiliate designated to be granted any Award under the Plan.
'Performance Award' means a right granted under Section 6(d) of the
Plan.
'Restricted Period' means the period of time during which an Award of
Restricted Stock or Restricted Stock Unit is subject to transfer
restrictions and potential forfeiture.
'Restricted Stock' means a Share granted under Section 6(c) of the
Plan.
'Restricted Stock Unit' means a right granted under Section 6(c) of
the Plan that is denominated in Shares.
'Rule 16b-3' means Securities and Exchange Commission Rule 16b-3 (or
any successor rule or regulation), as applicable with respect to the
Company at a given time.
'Section 16' means Section 16 of the Exchange Act and the and
regulations thereunder, or any successor provision or regulation in effect
at a given time.
'Section 16 Reporting Person' means a person who is a director or
officer of the Company for purposes of Section 16.
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'Shares' means shares of the Company's common stock, par value $1.00
per share, or such other securities or property as may become the subject
of Awards, or become subject to Awards, pursuant to an adjustment made
under Section 4(b) of the Plan.
'Stock Appreciation Right' means a right granted under Section 6(b) of
the Plan.
SECTION 3. Administration
The Committee shall administer the Plan. Subject to the terms and
limitations set forth in the Plan (including, without limitation those set forth
in Section 6(a)), and to applicable law, the Committee's authority shall include
without limitation the power to:
(a) designate Participants;
(b) determine the types of Awards to be granted and the times at which
Awards will be granted;
(c) determine the number of Shares to be covered by Awards and any
payments, rights, or other matters to be calculated in connection
therewith;
(d) determine the terms and conditions of Awards and amend the terms
and conditions of outstanding Awards;
(e) determine how, whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
Awards, or other securities or property, or canceled, forfeited, or
suspended;
(f) determine how, whether, to what extent, and under what
circumstances cash, Shares, other Awards, other securities or property, or
other amounts payable with respect to an Award shall be deferred, whether
automatically or at the election of the holder thereof or of the Committee;
(g) determine the methods and procedures for establishing the value of
any property (including, without limitation, Shares or other securities)
transferred, exchanged, given, or received with respect to the Plan or any
Award;
(h) prescribe and amend the forms of Award Agreements and other
instruments required under or advisable with respect to the Plan;
(i) designate Options as Incentive Stock Options;
(j) interpret and administer the Plan, Award Agreements, Awards, and
any contract, document, instrument, or agreement relating thereto;
(k) establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the administration of
the Plan;
(l) decide all questions and settle all controversies and disputes
which may arise in connection with the Plan, Award Agreements, or Awards;
(m) make any other determination and take any other action that the
Committee deems necessary or desirable for the interpretation, application,
or administration of the Plan, Award Agreements, or Awards.
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All designations, determinations, interpretations, and other decisions
under or with respect to the Plan, Award Agreements, or any Award shall be
within the sole discretion of the Committee, may be made at any time, and shall
be final, conclusive, and binding.
SECTION 4. Shares Available for Awards
(a) Shares Available. Subject to adjustment as provided in Section 4(b):
(i) Initial Authorization. There shall be 400,000 Shares initially
available for issuance under the Plan.
(ii) Accounting for Awards. For purposes of this Section 4:
(A) if an Award (other than a Dividend Equivalent) is denominated
in Shares, the number of Shares covered by such Award, or to which such
Award relates, shall be counted on the date of grant of such Award
against the aggregate number of Shares available for granting Awards
under the Plan, to the extent determinable on such date, and, insofar as
the number of Shares is not then determinable, under procedures adopted
by the Committee consistent with the purposes of the Plan; and
(B) Dividend Equivalents and Awards not denominated in Shares shall
be counted against the aggregate number of Shares available for granting
Awards under the Plan in such amount and at such time as the Committee
shall determine under procedures adopted by the Committee consistent
with the purposes of the Plan;
provided, however, that Awards that operate in tandem with (whether granted
simultaneously with or at a different time from), or that are substituted
for, other Awards or restricted stock awards or stock options granted under
any other plan of the Company may be counted or not counted under procedures
adopted by the Committee in order to avoid double counting.
(iii) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized but
unissued Shares or of Shares reacquired by the Company, including but not
limited to Shares purchased on the open market.
(b) Adjustments. Upon the occurrence of any dividend or other distribution
(whether in the form of cash, Shares, other securities, or other property),
change in the capital or shares of capital stock, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or extraordinary transaction or event which affects
the Shares, then the Committee shall have the authority to make such adjustment,
if any, in such manner as it deems appropriate, in (i) the number and type of
Shares (or other securities or property) which thereafter may be made the
subject of Awards, (ii) outstanding Awards, including, without limitation, the
number and type of Shares (or other securities or property) subject thereto, and
(iii) the grant, purchase, or exercise price with respect to outstanding Awards,
and, if deemed appropriate, make provision for cash payments to the holder of
outstanding Awards; provided, however, that the number of Shares subject to any
Award denominated in Shares shall always be a whole number.
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SECTION 5. Eligibility
Any employee of or consultant to the Company or any Affiliate, including
any officer or officer-director of the Company, but excluding (i) any
Non-Employee Director of the Company and (ii) any consultant to the Company or
an Affiliate who is not rendering services pursuant to a written agreement with
the entity in question or who would not be considered an 'employee' under the
instructions to Securities and Exchange Commission Form S-8 (or such successor
form as may be in effect at the relevant time), as may be selected from time to
time by the Committee in its discretion is eligible to be designated a
Participant with respect to any Award, except that an Other Stock-Based Award
may not be granted to a Section 16 Reporting Person.
SECTION 6. Awards
(a) Options. The Committee is authorized to grant Options to eligible
Participants.
(i) Committee Determinations. Subject to the terms and limitations of
the Plan, the Committee shall determine:
(A) the number of Shares subject to each Option and the exercise
price per Share;
(B) the term of each Option;
(C) the time or times at which an Option may be exercised, in whole
or in part, the method or methods by which and the form or forms
(including, without limitation, cash, Shares, other Awards, or other
property, or any combination thereof, having a fair market value on the
exercise date equal to the relevant exercise price) in which payment of
the exercise price with respect thereto may be made or deemed to have
been made; and
(D) whether the Option is intended to be an Incentive Stock Option
or a Nonqualified Stock Option.
Any Option intended to be an Incentive Stock Option shall be so designated
in the Award Agreement evidencing such Option, and the terms and conditions
of any Option intended to be Incentive Stock Option shall be such as are
determined by the Committee, after consulting with Company counsel, to be
necessary, appropriate, or advisable to cause such Option to comply at the
time of grant in all respects with all applicable requirements of Section
422 of the Code [(or any successor thereto then in effect)] and any
regulations promulgated thereunder. The Committee may impose such additional
or other conditions or restrictions on any Option as it deems appropriate
and as are not inconsistent with the terms of the Plan.
(ii) Other Terms. Unless otherwise determined by the Committee:
(A) A Participant electing to exercise an Option shall give written
notice to the Company, as may be specified by the Committee, of exercise
of the Option and the number of Shares elected for exercise, such notice
to be accompanied by such instruments or documents as may be required by
the Committee, and shall tender the aggregate exercise price of the
Shares elected for exercise.
(B) At the time of exercise of an Option, payment in full in cash
shall be made for all Shares then being purchased.
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(C) If the employment of or consulting arrangement with a
Participant terminates for any reason (including termination by reason
of the fact that an entity is no longer an Affiliate) other than the
Participant's death, the Participant may thereafter exercise the Option
as provided below, except that the Committee may terminate the
unexercised portion of the Option concurrently with or at any time
following termination of the employment or consulting arrangement
(including termination of employment upon a change of status from
employee to consultant) if it shall determine, in its sole discretion,
that the Participant has engaged in any activity detrimental to the
interests of the Company or an Affiliate. If such termination is
voluntary on the part of the Participant (other than by reason of
retirement of an employee-Participant on or after normal retirement
date), the Option may be exercised within such period as may be provided
for in the Award Agreement but not to exceed the earlier of the balance
of the Option period or three months after the date of termination. If
such termination is involuntary on the part of the Participant, or if an
employee-Participant retires on or after normal retirement date, the
Option may be exercised within the period as may be provided in the
Award Agreement but not to exceed the earlier of the balance of the
Option period or three months after the date of termination or
retirement. If the Participant's employment or consulting relationship
is terminated by reason of Disability, the Option may be exercised
within the period as may be provided in the Award Agreement but not to
exceed the earlier of the balance of the Option period or one year after
the date of termination. For purposes of this subsection (C), a
Participant's employment or consulting arrangement shall not be
considered terminated (i) in the case of approved sick leave or other
bona fide leave of absence (not to exceed one year), (ii) in the case of
a transfer of employment or the consulting arrangement among the Company
and Affiliates, or (iii) by virtue of a change of status from employee
to consultant or from consultant to employee, except as provided above.
(D) If a Participant dies at a time when such Participant is
entitled to exercise an Option, then at any time or times within one
year after the death of such Participant such Option may be exercised,
as to all or any of the Shares which the Participant was entitled to
purchase immediately prior to death. The Company may decline to deliver
Shares to a designated beneficiary until it receives indemnity against
claims of third parties satisfactory to the Company. Except as so
exercised, such Option shall expire at the end of such period.
(E) An Option may be exercised only if and to the extent such
Option was exercisable at the date of termination of employment or the
consulting arrangement, and an Option may not be exercised at any time
when the Option would not have been exercisable had the Participant's
employment or consulting arrangement continued, provided that the
Committee may in its sole discretion authorize the purchase of such
additional Shares subject to the Option as are not exercisable.
(iii) Restoration Options. At the time of grant of an Option (for
purposes of this subsection, an 'original Option') that is not itself a
Restoration Option (as hereinafter defined), or at the time a Restoration
Option arises, or at any other time while the grantee continues to be
eligible for Awards and the original Option or a Restoration Option
(either, a 'predecessor Option') is outstanding, the Committee may provide
that the predecessor Option shall carry with it a right to receive an
Option (for purposes of this subsection, a
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'Restoration Option') if, while still eligible to be granted an Option, the
grantee exercises the predecessor Option (or a portion thereof) and pays
some or all of the applicable exercise price in Shares that have been owned
by the grantee for at least six months prior to exercise. In addition to
being subject to any other terms and conditions (including additional
limitations on exercisability) that the Committee deems appropriate, and
except to the extent the Committee otherwise provides with respect to a
given Restoration Option, each Restoration Option shall be subject to the
following:
(A) the number of Shares subject to the Restoration Option shall be
the lesser of: (x) the number of whole Shares delivered in exercise of
the predecessor Option, and (y) the number of Shares available for grant
under the Plan at the time the Restoration Option arises;
(B) the Restoration Option automatically shall arise and be granted
(if ever) at the time of payment of the exercise price in respect of the
predecessor Option;
(C) the per Share exercise price of the Restoration Option shall be
the Fair Market Value of a Share on the date the Restoration Option is
granted;
(D) the expiration date of the Restoration Option shall be the same
as that of the predecessor Option;
(E) the Restoration Option shall first become exercisable six
months after it is granted; and
(F) the Restoration Option shall be a Nonqualified Stock Option.
(b) Stock Appreciation Rights. The Committee is authorized to grant Stock
Appreciation Rights to eligible Participants. Subject to the terms of the Plan,
a Stock Appreciation Right granted under the Plan shall confer on the holder
thereof a right to receive, upon exercise thereof, the excess of (i) the Fair
Market Value of one Share on the date of exercise or, if the Committee shall so
determine in the case of any such right other than one related to any Incentive
Stock Option, at any time during a specified period before or after the date of
exercise over (ii) the grant price of the right as specified by the Committee.
Subject to the terms of the Plan, the Committee shall determine the grant price,
term, methods of exercise and settlement of such Stock Appreciation Right, the
effect thereon of termination of the Participant's employment and/or consulting
relationships, and any other terms of the Stock Appreciation Right the Committee
deems appropriate, and the Committee may impose such conditions or restrictions
on the exercise of any Stock Appreciation Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units.
(i) Grants. The Committee is authorized to grant to eligible
Participants Awards of Restricted Stock, which shall consist of Shares, and
Awards of Restricted Stock Units, which shall give the Participant the
right to receive cash, Shares, other securities, other Awards, or other
property, in each case subject to the termination of the Restricted Period
for such Award determined by the Committee.
(ii) Restrictions. The Restricted Period determined by the Committee
for Restricted Stock and Restricted Stock Units may differ among
Participants, and any Restricted Period may have different expiration dates
with respect to portions of Shares or Units covered by the same Award.
During the applicable Restriction Period, Restricted Stock Units and
Restricted
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Stock shall be nontransferable (except as provided in Section 6(g)(v) of
the Plan) and subject to forfeiture as provided in subsection (iv) of this
Section 6(c). Subject to the terms of the Plan, Awards of Restricted Stock
and Restricted Stock Units also shall be subject to such other restrictions
as the Committee may impose (including, without limitation, limitations on
the right to vote Restricted Stock or the right to receive any dividend or
other right or property), which restrictions may lapse separately or in
combination, at such time or times, in installments or otherwise, as the
Committee may determine. Unless the Committee shall otherwise determine,
any Shares or other securities distributed with respect to Restricted Stock
or which a Participant is otherwise entitled to receive by reason of such
Shares shall be subject to the restrictions contained in the applicable
Award Agreement. Subject to the afore-mentioned restrictions and the
provisions of the Plan, Participants shall have all of the rights of a
stockholder with respect to Shares of Restricted Stock.
(iii) Certificates. Any Shares granted as Restricted Stock shall be
evidenced by certificates bearing such restrictive transfer legends as the
Committee determines to be advisable in order to prevent impermissible
transfer of the Shares prior to the end of the applicable Restricted
Period, and such certificates shall be retained in the possession of the
Company until the Shares no longer are subject to forfeiture. EACH AWARD
AGREEMENT CONCERNING AN AWARD OF RESTRICTED STOCK SHALL INCLUDE THE
GRANTEE'S CONSENT TO TRANSFER TO THE COMPANY OF ANY FORFEITED RESTRICTED
STOCK WITHOUT THE NEED FOR ANY FURTHER CONSENT, DIRECTION, OR OTHER ACTION
BY THE GRANTEE.
(iv) Forfeiture. Except as otherwise determined by the Committee:
(A) If the employment of or consulting arrangement with a
Participant terminates for any reason (including termination by reason
of the fact that any entity is no longer an Affiliate), other than the
Participant's death or Disability or, in the case of an employee,
retirement on or after normal retirement date, all Shares of Restricted
Stock and all Restricted Stock Units theretofore awarded to the
Participant which are still subject to restrictions shall upon such
termination of employment or the consulting relationship be forfeited
and (in the case of Restricted Stock) transferred back to the Company.
For purposes of this subsection (A), a Participant's employment or
consulting arrangement shall not be considered terminated (i) in the
case of approved sick leave or other bona fide leave of absence (not to
exceed one year), (ii) in the case of a transfer of employment or the
consulting arrangement among the Company and Affiliates, or (iii) other
than as provided in subsection (D) of this Section 6(c)(iv), by virtue
of a change of status from employee to consultant or from consultant to
employee.
(B) If a Participant ceases to be employed or retained by the
Company or an Affiliate by reason of death or Disability, or if
following retirement a Participant continues to have rights under an
Award of Restricted Stock or Restricted Stock Units and thereafter dies,
the Award shall fully vest and no longer be subject to forfeiture.
(C) If an employee ceases to be employed by the Company or an
Affiliate by reason of retirement on or after normal retirement date,
the restrictions contained in the Award of Restricted Stock shall
continue to lapse in the same manner as though employment had not
terminated.
(D) However, notwithstanding the provisions of subsections (B) and
(C) above, if a Participant continues to hold an Award of Restricted
Stock or Restricted Stock Units
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following termination of his employment or consulting arrangement
(including retirement and termination of employment upon a change of
status from employee to consultant), the Restricted Stock or Restricted
Stock Units which remain subject to restrictions shall nonetheless be
forfeited, and (in the case of Restricted Stock) transferred back to the
Company, if the Committee at any time thereafter determines that the
Participant has engaged in any activity detrimental to the interests of
the Company or an Affiliate.
(E) At the expiration of the Restricted Period as to Shares covered
by an Award of Restricted Stock, or as to Restricted Stock Units to be
settled in Shares, the Company shall deliver the Shares as to which the
Restricted Period has expired, as follows:
(1) if an assignment to a trust has been made in accordance
with Section 6(g)-(v)(B)(2)(c), to such trust; or
(2) if the Restricted Period has expired by reason of death and
a beneficiary has been designated in form approved by the Company,
to the beneficiary so designated; or
(3) in all other cases, to the Participant or the legal
representative of the Participant's estate.
(d) Performance Awards. The Committee is authorized to grant Performance
Awards to eligible Participants. Subject to the terms of the Plan, a Performance
Award granted under the Plan (i) may be denominated or payable in cash, Shares
(including, without limitation, Restricted Stock), other securities, other
Awards, or other property and (ii) shall confer on the holder thereof rights
valued as determined by the Committee and payable to, or exercisable by, the
holder of the Performance Award, in whole or in part, upon the achievement of
such performance goals during such performance periods as the Committee shall
establish. Subject to the terms of the Plan, the performance goals to be
achieved during any performance period, the length of any performance period,
the amount of any Performance Award granted, the amount of any payment or
transfer to be made pursuant to any Performance Award and the other terms and
conditions of any Performance Award, including the effect upon such Award of
termination of the Participant's employment and/or consulting relationships,
shall be determined by the Committee.
(e) Dividend Equivalents. The Committee is authorized to grant to eligible
Participants Awards under which the holders thereof shall be entitled to receive
payments equivalent to dividends or interest with respect to a number of Shares
determined by the Committee, and the Committee may provide that such amounts (if
any) shall be deemed to have been reinvested in additional Shares or otherwise
reinvested. Subject to the terms of the Plan, such Awards may have such terms
and conditions as the Committee shall determine.
(f) Other Stock-Based Awards. The Committee is authorized to grant to
eligible Participants such other Awards that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or related to
Shares (including, without limitation, securities convertible into Shares), as
are deemed by the Committee to be consistent with the purposes of the Plan;
provided, however, that such grants may not be made to Section 16 Reporting
Persons. Subject to the terms of the Plan, the Committee shall determine the
terms and conditions of such Other Stock-Based Awards. Shares or other
securities delivered pursuant to a purchase right granted under this Section
6(f) shall be purchased for such consideration, which may be paid by such method
or methods and in such form or forms, including, without limitation, cash,
Shares, other
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securities, other Awards, other property, or any combination of the foregoing,
as the Committee shall determine.
(g) General.
(i) Effect of Incentive Stock Option Disqualification. If an Option
intended to be an Incentive Stock Option (or any portion of such Option)
for any reason does not qualify as an Incentive Stock Option under the
Code, whether at the time of grant or subsequently, such failure to qualify
shall not invalidate the Option (or Option portion), and instead the
nonqualified portion (or, if necessary, the entire Option) shall be deemed
to have been granted as a Nonqualified Stock Option irrespective of the
manner in which it is designated in the applicable Award Agreement.
(ii) No Cash Consideration for Awards. Awards may be granted for no
cash consideration or for such minimal cash consideration as may be
required by applicable law.
(iii) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with (or in substitution for) any other Award or any award granted
under any other plan of the Company or any Affiliate. Awards granted in
addition to or in tandem with other Awards or in addition to or in tandem
with awards granted under another plan of the Company or an Affiliate, may
be granted either at the same time as or at a different time from the grant
of such other Awards or awards.
(iv) Forms of Payment Under Awards. Subject to the terms of the Plan
and of any applicable Award Agreement, payments or transfers to be made by
the Company or an Affiliate upon the grant, exercise, or payment of an
award may be made in such form or forms as the Committee shall determine,
including, without limitation, cash, Shares, other securities, other
Awards, or other property, or any combination thereof, and may be made in a
single payment or transfer, in installments, or on a deferred basis, in
each case in accordance with rules and procedures established by the
Committee. Such rules and procedures may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents in respect of installment or deferred payments.
(v) Limits on Transfer of Awards.
(A) Except as the Committee may otherwise determine, no Award or
right under any Award may be sold, encumbered, pledged, alienated,
attached, assigned, or otherwise transferred in any manner, and any
attempt to do any of the foregoing shall be void and unenforceable
against the Company.
(B) Notwithstanding the provisions of paragraph (A) above, except
as provided in paragraph (C) below:
(1) An Option may be transferred:
(a) to a beneficiary designated by the Participant in
writing on a form approved by the Committee; or
(b) by will or the applicable laws of descent and
distribution to the personal representative, executor or
administrator of the Participant's estate; or
(c) to a Family Member, to a partnership of which the only
partners are Family Members, or a trust established solely for
the benefit of Family Members provided however, that such Option
is NOT an Incentive Stock Option;
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(2) A Participant may assign or transfer rights under an Award
of Restricted Stock or Restricted Stock Units:
(a) to a beneficiary designated by the Participant in
writing on a form approved by the Committee;
(b) by will or the applicable laws of descent and
distribution to the personal representative, executor or
administrator of the Participant's estate; or
(c) to a revocable grantor trust established by the
Participant for the sole benefit of the Participant during the
Participant's life, and under the terms of which the Participant
is and remains the sole trustee until death or physical or
mental incapacity. Such assignment shall be effected by a
written instrument in form and content satisfactory to the
Committee, and the Participant shall deliver to the Committee a
true copy of the agreement or other document evidencing such
trust. If in the judgment of the Committee the trust to which a
Participant may attempt to assign rights under such an Award
does not meet the criteria of a trust to which an assignment is
permitted by the terms hereof, or if, after assignment (whether
because of amendment, by operation of law, or for any other
reason) such trust no longer meets such criteria, such attempted
assignment shall be void and may be disregarded by the Committee
and the Company and all rights to any such Awards shall revert
to and remain solely in the Participant. Notwithstanding a
qualified assignment, the Participant, and not the trust to
which rights under such an Award may be assigned, for the
purpose of determining compensation arising by reason of the
Award shall continue to be considered an employee or consultant,
as the case may be, of the Company or an Affiliate, but such
trust and the Participant shall be bound by all of the terms and
conditions of the Award Agreement and this Plan. Shares issued
in the name of and delivered to such trust shall be conclusively
considered issuance and delivery to the Participant.
(3) The Committee shall not permit Section 16 Reporting Persons
to transfer or assign Awards except as and to the extent (if any)
permitted under Rule 16b-3.
(C) The Committee, the Company, and its officers, agents, and
employees may rely upon any beneficiary designation, assignment, or
other instrument of transfer, copies of trust agreements, and any other
documents delivered to any of them by or on behalf of a Participant,
which they believe genuine, and any action taken by any of them in
reliance thereon shall be conclusive and binding upon the Participant,
the personal representatives of the Participant's estate, and all
persons asserting a claim based on an Award to the Participant. The
delivery by a Participant of a beneficiary designation, or an assignment
of rights under an Award as permitted hereunder, shall constitute the
Participant's irrevocable undertaking to hold the Committee, the
Company, and its officers, agents, and employees harmless against
claims, including any cost or expense incurred in defending against
claims, of any person (including the Participant) which may be asserted
or alleged to be based on an Award subject to a beneficiary designation
or an assignment. In addition, the Company may decline to deliver Shares
to a beneficiary until it receives indemnity against claims of third
parties satisfactory to the Company.
(vi) Change in Control. (A) Notwithstanding any of the provisions of
this Plan or any Award Agreement, upon Change in Control of the Company (as
hereinafter defined) the
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vesting of all rights of Participants under outstanding Awards shall be
accelerated and all restrictions thereon shall terminate in order that
Participants may fully realize the benefits intended to be made available
under such Awards. Such acceleration shall include, without limitation, the
immediate exercisability in full of all Options and the termination of
restrictions on Restricted Stock and Restricted Stock Units. Further, upon
such Change in Control, in addition to the Committee's authority set forth
in Section 4(b), the Committee, as constituted before such Change in
control, is authorized and has sole discretion, as to any Award, to take
any one or more of the following actions: (i) cause any such Award then
outstanding to be assumed, or new rights substituted therefor, by the
acquiring or surviving entity or other person giving rise to such change in
Control; (ii) make such adjustment to any such Award then outstanding as
the Committee deems appropriate to reflect such Change in Control; and
(iii) provide for the purchase of any such Award, upon the Participant's
request, for an amount of cash equal to the amount that could have been
attained upon the exercise of such Award or realization of the
Participant's rights had such Award been currently exercisable or payable.
(B) A Change in Control shall occur if:
(1) any 'person' or 'group' (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act and the regulations thereunder),
other than pursuant to a transaction or agreement previously
approved by the Board, directly or indirectly purchases or otherwise
becomes the 'beneficial owner' (as defined in Rule 13d-3 under the
Exchange Act) of voting securities representing 30 percent or more
of the combined voting power of all outstanding voting securities of
the Company;
(2) during any period of two consecutive years, the individuals
who at the beginning of such period constitute the Board cease for
any reason to constitute at least a majority thereof, unless the
appointment or nomination for election by the Company's stockholders
of each new director during such period has been approved by a vote
of at least two-thirds of the directors then still in office who
were directors at the beginning of such period; or
(3) the stockholders of the Company approve (i) an agreement to
merge or consolidate the Company in a transaction in which the
Company is not the surviving entity, (ii) an agreement to sell or
dispose of substantially all of the Company's assets, or (iii) a
plan to liquidate the Company, unless, in the case of an event
described in (i), (ii), or (iii), the Board determines prior to the
occurrence of the event that the effects described in Section
6(g)(vi)(A) will not apply with respect to such event.
(vii) Cash Settlement. Notwithstanding any provision of this Plan or
of any Award Agreement to the contrary, any Award outstanding hereunder,
may at any time be canceled in the Committee's sole discretion upon payment
of the value of such Award to the holder thereof in cash or in another
Award hereunder, such value to be determined by the Committee at its sole
discretion.
(viii) Certain Securities Law Considerations. The Company intends, as
soon as possible, to register with the Securities and Exchange Commission
on Form S-8 the total number of Shares that may be acquired by Participants
under the Plan. Until such Form S-8 Registration Statement is filed and
effective, no Awards shall vest or be exercisable under the Plan.
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(ix) Award Agreements. Each Award shall be evidenced by an Award
Agreement in such form as the Committee shall prescribe.
SECTION 7. Amendment, Suspension, or Termination; Certain Other Matters
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments, Suspension, or Termination. The Board may amend,
suspend, or terminate the Plan or any portion thereof at any time, with or
without stockholder approval, and the Board or the Committee may amend any
outstanding Award; provided, however, that (i) no Plan amendment shall be
effective until approved by stockholders of the Company, insofar as
stockholder approval thereof is required in order for the Plan to continue
to satisfy the conditions of Rule 16b-3 or any applicable requirements of a
national securities exchange or the NNM or to permit the further grant of
Incentive Stock Options, and (ii) without the consent of an affected
Participant no amendment of the Plan or of any Award may impair the rights
of the Participant under any outstanding Award.
(b) Adjustments of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee shall be authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4 (b) hereof or a Change in
Control as defined in Section 6(g)(vi) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate, or
of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in
order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available to holders of outstanding Awards
under the Plan.
(c) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission, or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it
shall deem desirable to effectuate the Plan.
SECTION 8. Miscellaneous
(a) No Rights to Awards. Subject only to the express requirements of
the Plan, there is no obligation for uniformity of treatment of
Participants or holders or beneficiaries of Awards under the Plan, and no
Participant or other person shall have any claim to be granted any Award.
The terms and conditions of Awards of the same type, and the determination
of the Committee to grant a waiver or modification of the terms and
conditions of any Award, need not be the same with respect to each
Participant.
(b) Withholding. The Company or any Affiliate shall be authorized to
withhold from any Award granted or any payment due or transfer made under
any Award or under the Plan the amount (in cash, Shares, other securities,
other Awards or other property) of withholding taxes due in respect of an
Award, its exercise, or any payment or transfer under such Award or under
the Plan and to take such other action as may be necessary in the opinion
of the Company or Affiliate to satisfy all obligations for the payment of
such taxes.
(c) No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other or additional compensation arrangements,
including the grant of Options and other stock-based
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awards, and such arrangements may be either generally applicable or
applicable only in specific cases.
(d) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of
the Company or any Affiliate. Further, the Company or an Affiliate may at
any time dismiss a Participant from employment, free from any liability, or
any claim under the Plan, unless otherwise expressly provided in the Award
Agreement or another written agreement with the Participant.
(e) Governing Law. Except to the extent, if any, preempted by Federal
law, the validity, construction, and effect of the Plan, any rules and
regulations relating to the Plan established by the Committee, and any
Award Agreement shall be determined in accordance with the laws of the
State of New York.
(f) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any person or Award, or would disqualify the Plan or
any Award under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to applicable laws, or if
it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the intent of the Plan or the Award,
such provision shall be stricken as to such jurisdiction, person or Award,
and the remainder of the Plan and any such Award shall remain in full force
and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a
Participant or any other person. To the extent that any person acquires a
right to receive payments from the Company or any Affiliate pursuant to an
Award, such right shall be no greater than the right of any unsecured
general creditor of the Company or any Affiliate.
(h) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be paid
or transferred in lieu of any fractional Shares, or whether such fractional
Shares or any right thereto shall be canceled, terminated, or otherwise
eliminated.
(i) Stockholder Status. Neither the grantee of an Award, nor any other
person to whom the Award or the grantee's rights thereunder may pass, shall
be, or have any right or privileges of, a holder of Shares in respect of
any Shares issuable pursuant to or in settlement of such Award, unless and
until certificates representing such Shares have been issued in the name of
such grantee or other person.
(j) Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 9. Effectiveness and Duration
The Plan shall be effective as of the date of its approval by the Company's
stockholders and shall continue in effect thereafter until terminated by the
Board.
Adopted by the Board of Directors of the Company: April 10, 1997
Approved by the Stockholders of the Company: November , 1997
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LAZARE KAPLAN INTERNATIONAL INC.
[LOGO]
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<S> <C>
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN NOTICE OF
TO ATTEND THE MEETING, PLEASE DATE, MARK, AND SIGN ANNUAL MEETING
THE ENCLOSED PROXY CARD AND RETURN IT IN THE OF STOCKHOLDERS
ENVELOPE PROVIDED AND
PROXY STATEMENT
</TABLE>
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September 19, 1997
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APPENDIX 1-PROXY CARD
LAZARE KAPLAN INTERNATIONAL INC.
Proxy-Annual Meeting of Stockholders -- November 5, 1997
(Solicited on Behalf of the Board of Directors)
Know All Men By These Presents that the undersigned stockholder of Lazare
Kaplan International Inc. hereby constitutes and appoints Leon Tempelsman,
Lucien Burstein and Sheldon L. Ginsberg, and each and any of them, the attorneys
and proxies of the undersigned, with full power of substitution and revocation,
to vote for and in the name, place and stead of the undersigned, at the Annual
Meeting of Stockholders of said corporation, to be held on the 5th Floor, Room
AB, The Cornell Club, Six East 44th Street, New York, New York on November 5,
1997 at 10:00 A.M. and at any adjournments thereof, the number of votes the
undersigned would be entitled to cast if present:
NOTE: This proxy, properly filled in, dated and signed, should be
returned promptly in the enclosed postpaid envelope to Lazare
Kaplan International Inc., Midtown Station, P.O. Box 812, New
York, New York 10138-0832.
(Continued, to be dated and signed on reverse)
FOLD AND DETACH HERE
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<S> <C>
This Proxy when properly executed, will be voted in the manner Please mark
directed herein by the undersigned stockholder. IF NO DIRECTION your votes as [X]
IS MADE, THIS PROXY WILL BE VOTED FOR ALL THE BOARD'S NOMINEES indicated in
FOR DIRECTORS, FOR PROPOSALS 2 THROUGH 5 AND IN THE DISCRETION this example
OF THE PROXIES ON ALL OTHER MATTERS.
</TABLE>
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<S> <C> <C> <C>
(1) ELECTION OF DIRECTORS FOR WITHHOLD (2) Approval of the 1997
MAURICE TEMPELSMAN, LEON TEMPELSMAN, GEORGE R. KAPLAN, all nominees AUTHORITY Long-Term Stock
LUCIEN BURSTEIN, MYER FELDMAN, MICHAEL W. BUTTERWICK, listed to the left to vote for all Incentive Plan.
SHELDON L. GINSBERG AND ROBERT SPEISMAN (except as marked nominees listed
(INSTRUCTION: To withhold authority to vote for any to the contrary) to the left FOR AGAINST ABSTAIN
individual nominee, strike a line through the nominee's [ ] [ ] [ ]
name in the list above)
[ ] [ ]
(3) Approval of the amendment to (4) Approval of the amendment (5) Approval of Ernst & (6) In their discretion, upon
the Company's Certificate of to the Company's Young LLP as the such other matters as may
Incorporation to increase the Certificate of independent public properly come before the
number of authorized shares Incorporation to accountants for the meeting.
of common stock from 10,000,000 authorize the issuance fiscal year ending
shares of common stock to of up to 5,000,000 shares of May 31, 1998.
20,000,000 shares of common preferred stock.
stock.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ]
Any of such attorneys and proxies, or their substitute at Each of the foregoing matters
said meeting, or any adjournment thereof, may exercise has been proposed by the
all of the powers hereby given. Any Proxy heretofore Company and is not
given is hereby revoked. conditioned on the
approval of any other
Receipt is acknowledged of the Notice of Annual Meeting matter.
of Stockholders, the Proxy Statement accompanying such
Notice and the Annual Report to Stockholders for the
fiscal year ended May 31, 1997.
IN WITNESS WHEREOF, the undersigned has signed this proxy.
Dated:_______________________________________________________1997
___________________________________________________________
(Stockholder(s) signature(s)
___________________________________________________________
Signature(s) of stockholder(s) should correspond exactly with the
name(s) shown hereon. If shares are jointly held, both holders
should sign. Attorneys, executors, administrators, trustees,
guardians or others signing in a representative capacity should
give their full titles. Proxies executed in the name of a
corporation should be signed on behalf of the corporation by its
president or other authorized officer.
===================================================================================================================================
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FOLD AND DETACH HERE
ANNUAL MEETING
OF STOCKHOLDERS
LAZARE KAPLAN INTERNATIONAL INC.
WEDNESDAY, NOVEMBER 5, 1997
10:00 A.M.
THE CORNELL CLUB
SIX EAST 44th STREET
FIFTH FLOOR, ROOM AB
NEW YORK, NY 10017
______________________________________________________________
AGENDA:
ELECTION OF DIRECTORS
APPROVAL OF THE LAZARE KAPLAN INTERNATIONAL INC. 1997
LONG-TERM STOCK INCENTIVE PLAN
APPROVAL OF AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK
APPROVAL OF AMENDMENT TO AUTHORIZE THE COMPANY TO ISSUE
PREFERRED STOCK
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
OTHER BUSINESS
______________________________________________________________
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