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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 4, 1998
----------------------
The Annual Meeting of Stockholders of Lazare Kaplan International Inc. will
be held on Wednesday, November 4, 1998 at 10:00 A.M. at The Cornell Club, 6 East
44th Street, 5th Floor, New York, New York 10017 for the following purposes:
1. To elect directors for the ensuing year;
2. To ratify the appointment of Ernst & Young LLP, independent
certified public accountants, as auditors for the Company for the
fiscal year ending May 31, 1999; and
3. 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 8, 1998
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 18, 1998
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
---------------------------------
1998 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 4, 1998 at The Cornell Club, 6 East
44th Street, 5th Floor, 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, 1998 are first
being sent to stockholders of the Company on or about September 18, 1998.
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 8, 1998
(the 'Record Date'). On the Record Date, there were issued and outstanding
8,532,549 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 4,266,275 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 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 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).
1
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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 and (ii) 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)
Seven 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 seven nominees for directors consist of persons
currently serving as directors of the Company. Mr. George Kaplan, Vice Chairman
of the Board since 1984 and a director since 1972 retired from the Board of
Directors on April 9, 1998. Accordingly, the Board reduced the number of
directors to seven.
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 69
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 42
Lucien Burstein................. Partner, Warshaw Burstein Cohen Schlesinger & Kuh, LLP,
Attorneys; Secretary of the Company since 1984 1984 76
Michael W. Butterwick........... Business Consultant 1982 71
Myer Feldman.................... Partner, Ginsburg, Feldman and Bress, Chartered
Attorneys; Director and Chairman of the Board of
Totalbank since 1986 1984 81
Robert Speisman................. Vice President -- Sales of the Company since January 1986 1989 45
Sheldon L. Ginsberg............. Executive Vice President since February 1996; Chief
Financial Officer of the Company since April 1991 1989 44
</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
2
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<PAGE>
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 compensation is $75,000 per year or more. The
Stock Option Committee is responsible for administering the Company's 1988 Stock
Option Incentive Plan (the '1988 Plan') and 1997 Long Term Stock Incentive Plan
(the '1997 Plan' and, 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. The Board
of Directors does not have a Nominating Committee or a committee performing
similar functions.
During the fiscal year ended May 31, 1998, 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 8, 1998 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
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<PAGE>
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 40.3%
529 Fifth Avenue
New York, New York 10017
Leon Tempelsman(1)(2) .............................................................. 1,787,491 20.8%
529 Fifth Avenue
New York, New York 10017
Capital Research and Management Company (3) ........................................ 550,000 6.5%
SMALLCAP World Fund, Inc.
333 South Hope Street
Los Angeles, California 90071
Royce & Associates, Inc.(4) ........................................................ 540,000 6.3%
1414 Avenue of the Americas
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 77,000 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, 50,112 shares which are the subject of currently
exercisable options granted to Mr. Tempelsman pursuant to the Plans 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.
(3) Consists of shares as to which SmallCap World Fund Inc., a registered
investment company ('SWF'), exercises sole voting power and as to which
Capital Research and Management Company, a registered investment advisor
('CRMC'), exercises sole dispositive power as a result of acting as
investment advisor to SWF. The information contained herein is based solely
on a Schedule 13G, dated July 9, 1998, of CRMC and SWF.
(4) All such shares are owned directly by Royce & Associates, Inc. ('Royce').
Mr. Charles Royce may be deemed to be a controlling person of Royce and as
such may be deemed to beneficially own the shares owned by Royce. Mr. Royce
does not own any shares outside of Royce and disclaims beneficial ownership
of the shares held by Royce. The information contained herein is based
solely on a Schedule 13G, dated February 4, 1998, of Royce and Mr. Royce.
4
<PAGE>
<PAGE>
The following table reflects as of September 8, 1998 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
NAME BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -------------------------------------------------------- -------------------- ----------------
<S> <C> <C>
Maurice Tempelsman(1)(2)................................ 3,438,825 40.3%
Leon Tempelsman(1)(2)(3)................................ 1,787,491 20.8
Myer Feldman............................................ 343,259 4.0
Sheldon L. Ginsberg(4).................................. 54,634 0.6
Robert Speisman(1)(5)................................... 52,174 0.6
Lucien Burstein......................................... 1,500 less than 0.1
Michael W. Butterwick................................... 0 0.0
All directors and officers as a group(1)-(5)............ 4,149,467 47.9%
</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 77,000 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, 50,112 shares which are the subject of currently
exercisable options granted to Mr. Tempelsman pursuant to the Plans 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.
(4) Number and percentage include an aggregate of 24,629 shares which are the
subject of currently exercisable options granted to Sheldon L. Ginsberg
pursuant to the Plans 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 and 11,111 shares which are the subject of
currently exercisable options gifted to her by Maurice Tempelsman, as to all
of which beneficial ownership is disclaimed by Mr. Speisman. Number and
percentage include an aggregate of
(footnotes continued on next page)
5
<PAGE>
<PAGE>
(footnotes continued from previous page)
49,466 shares which are the subject of currently exercisable options granted
to Mr. Speisman pursuant to the Plans and 2,708 shares owned by Mr. Speisman
directly.
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 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, 1998 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 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.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES
During Fiscal 1998, 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.
6
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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 $10,000 (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,
1997, 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 employees with those
of the stockholders, thereby encouraging these employees to increase stockholder
value.
During Fiscal 1998, options were granted under the 1997 Plan. The Stock
Option Committee, in its sole discretion, determines 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
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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 1998, 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 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
8
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EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION IN FISCAL 1996, FISCAL 1997 AND FISCAL 1998
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 and the other most highly compensated
executive officers of the Company earning more than $100,000 during the fiscal
year ended May 31, 1998.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------- AWARDS
OTHER ------------
NAME AND FISCAL ANNUAL OPTIONS
PRINCIPAL POSITION YEAR SALARY BONUS(4) COMPENSATION (SHARES)(11)
- ------------------------------------------- ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Maurice Tempelsman ........................ 1998 $133,336 $100,000 0 20,000
Chairman of the Board 1997 28,750 0 0 100,000
1996 5,000 0 0 0
Leon Tempelsman ........................... 1998 294,442(1) 52,918(5) 0 40,000
Vice Chairman of the 1997 266,088(1) 30,000 0 40,000
Board and President 1996 200,000 0 0 48,500(8)
Sheldon L. Ginsberg ....................... 1998 252,595(2) 42,728(6) $600(7) 20,000
Executive Vice President and 1997 218,200(2) 40,000 600(7) 20,000
Chief Financial Officer 1996 188,000 40,000 0 16,500(9)
Robert Speisman ........................... 1998 162,935(3) 27,728(6) 600(7) 10,000
Vice President-Sales 1997 143,540(3) 20,000 600(7) 10,000
1996 115,000 0 0 11,000(10)
</TABLE>
- ------------
(1) Includes $7,755 and $7,755 of premiums paid in Fiscal 1998 and 1997,
respectively, by the Company on an individual life insurance policy
purchased by the Company on behalf of Mr. Tempelsman.
(2) Includes $3,200 and $3,200 of premiums paid in Fiscal 1998 and 1997,
respectively, by the Company on an individual life insurance policy
purchased by the Company on behalf of Mr. Ginsberg.
(3) Includes $3,540 and $3,540 of premiums paid in Fiscal 1998 and 1997,
respectively, 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. See Compensation Committee Report, page 6.
(5) Includes a bonus in the amount of $2,918 pursuant to the Retirement Benefit
Plan. See 'Retirement Benefit Plan.'
(6) Includes a bonus in the amount of $2,728 pursuant to the Retirement Benefit
Plan. See 'Retirement Benefit Plan.'
(7) Represents a matching contribution made by the Company to the Company's
401(k) plan.
(footnotes continued on next page)
9
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<PAGE>
(footnotes continued from previous page)
(8) 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.
(9) 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.
(10) 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 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.
(11) Unless otherwise noted, consists of shares granted under the 1997 Plan.
STOCK OPTIONS GRANTED IN FISCAL 1998
The following table sets forth information concerning individual grants of
stock options made during Fiscal 1998 to each executive officer listed in the
Summary Compensation Table. The Company did not grant any stock appreciation
rights during Fiscal 1998.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1998 POTENTIAL
----------------------------------------------------------- REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS/ RATES OF STOCK
SECURITIES SARS PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS/SARS EMPLOYEES EXERCISE OPTION TERM(6)
GRANTED IN FISCAL OR BASE PRICE EXPIRATION -------------------
NAME (SHARES) YEAR (PER SHARE) DATE 5% 10%
- -------------------------- ------------ ---------- ------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Maurice Tempelsman........ 20,000(1)(5) 12% $11.412 1/15/03 $ 36,578 $105,931
Leon Tempelsman........... 40,000(2)(5) 24% $10.375 1/15/08 $260,991 $661,403
Sheldon L. Ginsberg....... 20,000(3)(5) 12% $10.375 1/15/08 $130,496 $330,702
Robert Speisman........... 10,000(4)(5) 6% $10.375 1/15/08 $ 65,248 $165,351
</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 1998, 1999 and 2000.
(footnotes continued on next page)
10
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<PAGE>
(footnotes continued from previous page)
(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 1998, 1999 and 2000.
(3) 17,100 of such options are non-qualified stock options and become
exercisable as to 6,667, 6,667 and 3,766 of the shares included in the grant
on December 15 of each of 1998, 1999 and 2000, respectively. The remaining
2,900 of such options are intended to be incentive stock options and become
exercisable on December 15, 2000.
(4) All of such options are intended to be incentive stock options and become
exercisable as to 2,633, 4,033, 3,334 of the shares included in the grant on
December 15 of each of 1998, 1999 and 2000.
(5) 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 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.
(6) Based upon the per share market price on the date of grant, which was
$10.375 on January 15, 1998, and an annual cumulative appreciation at the
rate stated of such market price through the expiration date of such
options. Gains, if any, are dependent upon the actual performance of the
Common Stock, as well as the continued employment of the executive officers
through the vesting period. The potential realizable values indicated have
not taken into account amounts required to be paid as income tax under the
Internal Revenue Code of 1986, as amended, and any applicable state laws.
STOCK OPTIONS HELD AT END OF FISCAL 1998
The following table indicates (a) the number of shares received by each
executive officer named in the Summary Compensation Table upon the exercise of
options, (b) the aggregate dollar
11
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value realized upon such exercise, and (c) the total number and the value of
exercisable and unexercisable stock options held by each such executive officer
as of May 31, 1998.
AGGREGATED OPTION EXERCISES IN FISCAL 1998
AND FISCAL 1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT MAY 31, 1998(#) AT MAY 31, 1998($)(1)
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- --------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Maurice Tempelsman........... 0 $ 0 0 20,000 $ 0 $ 4,260
Leon Tempelsman.............. 150,550 1,399,349 50,112 111,721 149,124 124,558
Sheldon L. Ginsberg.......... 30,000 353,138 24,629 41,171 110,063 53,875
Robert Speisman.............. 6,000 75,000 49,466 20,334 273,198 31,752
</TABLE>
- ------------
(1) Based upon the per share closing price of $11.625 of the Common Stock on
May 29, 1998, the last day the Common Stock traded on the American Stock
Exchange in Fiscal 1998.
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, 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
12
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<PAGE>
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. During
Fiscal 1998, the Company paid premiums of $43,030, $39,041 and $39,041 on behalf
of Messrs. Tempelsman, Ginsberg and Speisman, respectively, and reimbursed such
individuals in the amounts of $2,918, $2,728 and $2,728, respectively, for the
income tax costs of such Executives.
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.
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').
13
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<PAGE>
TOTAL RETURN CHART
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
05/28/93 05/31/94 05/31/95 05/31/96 05/30/97 05/29/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Lazare Kaplan 100.0 139.2 117.6 227.5 254.9 182.4
Amex Composite 100.0 101.7 116.8 145.8 142.8 184.4
Industry Group 100.0 115.6 102.1 197.1 223.7 231.7
</TABLE>
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 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).
14
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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 and a
director of the Company until April 1998, is a Chairman and 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. RATIFICATION OF THE APPOINTMENT OF AUDITORS
(ITEM 2 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, 1999 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 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.
3. 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. However, the enclosed proxy gives discretionary
authority if any other matters are presented at the meeting or any adjournment
thereof and 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.
15
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STOCKHOLDER PROPOSALS FOR THE 1999 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 1999 Annual Meeting of Stockholders must submit such proposals so that
they are received by the Company no later than May 27, 1999. 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 18, 1998
16
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LAZARE KAPLAN INTERNATIONAL INC.
[LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<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>
- --------------------------------------------------------------------------------
September 18, 1998
<PAGE>
<PAGE>
APPENDIX 1-PROXY CARD
LAZARE KAPLAN INTERNATIONAL INC.
Proxy-Annual Meeting of Stockholders -- November 4, 1998
(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, The
Cornell Club, Six East 44th Street, New York, New York on November 4, 1998 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
<PAGE>
<PAGE>
<TABLE>
<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 PROPOSAL 2 AND IN THE DISCRETION OF THE this example
PROXIES ON ALL OTHER MATTERS.
</TABLE>
<TABLE>
<S> <C> <C> <C>
(1) ELECTION OF DIRECTORS FOR WITHHOLD (2) Approval of Ernst &
MAURICE TEMPELSMAN, LEON TEMPELSMAN, LUCIEN all nominees AUTHORITY Young LLP as the
BURSTEIN, MYER FELDMAN, MICHAEL W. BUTTERWICK, listed to the left to vote for all independent public
SHELDON L. GINSBERG AND ROBERT SPEISMAN (except as marked nominees listed accountants for the
(INSTRUCTION: To withhold authority to vote for any to the contrary) to the left fiscal year ending
individual nominee, strike a line through the nominee's May 31, 1999.
name in the list above)
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(3) In their discretion, upon such other matters as may
properly come before the meeting.
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, 1998.
IN WITNESS WHEREOF, the undersigned has signed this proxy.
Dated:_______________________________________________________1998
___________________________________________________________
(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.
===================================================================================================================================
</TABLE>
FOLD AND DETACH HERE
ANNUAL MEETING
OF STOCKHOLDERS
LAZARE KAPLAN INTERNATIONAL INC.
WEDNESDAY, NOVEMBER 4, 1998
10:00 A.M.
THE CORNELL CLUB
SIX EAST 44th STREET
FIFTH FLOOR
NEW YORK, NY 10017
______________________________________________________________
AGENDA:
ELECTION OF DIRECTORS
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
OTHER BUSINESS
______________________________________________________________
