<PAGE>
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 'SS'240.14a-11(c) or
'SS'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)(4)
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>
[LOGO] LAZARE KAPLAN INTERNATIONAL INC.
529 FIFTH AVENUE
NEW YORK, NEW YORK 10017
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, NOVEMBER 4, 1999
----------------------
The Annual Meeting of Stockholders of Lazare Kaplan International Inc. will
be held on Thursday, November 4, 1999 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 approve an amendment to the Company's 1997 Long Term Stock
Incentive Plan increasing the number of shares authorized for
issuance upon exercise of awards granted thereunder from 400,000 to
600,000;
3. To ratify the appointment of Ernst & Young LLP, independent
certified public accountants, as auditors for the Company for the
fiscal year ending May 31, 2000; and
4. 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 6, 1999
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 17, 1999
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>
LAZARE KAPLAN INTERNATIONAL INC.
529 FIFTH AVENUE
NEW YORK, NEW YORK 10017
---------------------------------
PROXY STATEMENT
---------------------------------
1999 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 Thursday, November 4, 1999 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, 1999 are first
being sent to stockholders of the Company on or about September 20, 1999.
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 6, 1999
(the 'Record Date'). On the Record Date, there were issued and outstanding
8,371,073 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 4,185,537 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 (a) to approve the amendment to the Lazare Kaplan International Inc.
1997 Long Term Stock Incentive Plan (the '1997 Plan') increasing the number of
shares authorized for issuance upon exercise of awards granted thereunder from
400,000 to 600,000 and (b) to ratify 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
1
<PAGE>
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) approval of the amendment to the 1997 Plan
and (iii) 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)
Six 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 six nominees for directors consist of persons currently
serving as directors of the Company. Mr. Michael Butterwick, a director since
1982, passed away in February 1999.
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 70
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 43
Lucien Burstein............. Partner, Warshaw Burstein Cohen Schlesinger &
Kuh, LLP, Attorneys; Secretary of the
Company since 1984 1984 77
Myer Feldman................ Attorney, self employed since December 1999;
Attorney, Partner, Ginsburg, Feldman and
Bress, Chartered Attorneys for more than
five years prior thereto; Director and
Chairman of the Board of Totalbank since
1986 1984 82
Robert Speisman............. Senior Vice President -- Sales of the Company
since January 1999; Vice President -- Sales
of the Company from January 1986 to January
1999 1989 46
Sheldon L. Ginsberg......... Executive Vice President since February 1996;
Chief Financial Officer of the Company
since April 1991 1989 45
</TABLE>
2
<PAGE>
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
Lucien Burstein and Myer Feldman. The Compensation Committee consists of Maurice
Tempelsman, Myer Feldman and Lucien Burstein. The full Board of Directors
currently is acting as the Stock Option Committee.
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 and the Vice Chairman of the Board and President of the
Company and 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 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. The Board of Directors does not
have a Nominating Committee or a committee performing similar functions.
During the fiscal year ended May 31, 1999, there were three 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. 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.
SECURITY OWNERSHIP
The following table sets forth information regarding the ownership of
shares of the Common Stock as of September 6, 1999 by those persons known by the
Company to own beneficially more than 5% of the outstanding shares of the 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
3
<PAGE>
that they have the sole power to vote and to dispose of their respective shares
of the 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) ...................................... 3,445,492 40.6%
529 Fifth Avenue
New York, New York 10017
Leon Tempelsman(2) ......................................... 1,834,768 21.4%
529 Fifth Avenue
New York, New York 10017
Charles M. Royce(3) ........................................ 867,400 10.2%
Royce & Associates, Inc.
1414 Avenue of the Americas
New York, New York 10017
Capital Research and Management Company(4) ................. 550,000 6.5%
SMALLCAP World Fund, Inc.
333 South Hope Street
Los Angeles, California 90071
Dimension Fund Advisors Inc.(5) ............................ 449,200 5.3%
1299 Ocean Avenue
Santa Monica, California 90401
</TABLE>
- ------------
(1) Consists of 1,910,409 shares owned directly by Maurice Tempelsman, 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, and 6,667 shares which
are the subject of currently exercisable options granted to Mr. Tempelsman
pursuant to the 1997 Plan.
(2) Consists of 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, 97,389 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 856,300 shares owned directly by Royce & Associates, Inc.
('Royce') and 11,100 shares owned directly by Royce Management Company
('RMC'). Mr. Charles Royce may be deemed to be a controlling person of Royce
and RMC, and as such may be deemed to beneficially own the shares owned by
Royce and RMC. Mr. Royce does not own any shares outside of Royce and RMC,
and disclaims beneficial ownership of the shares held by Royce and RMC. The
information contained herein is based solely on a Schedule 13G, dated
January 6, 1999, of Royce, RMC and Mr. Royce.
(footnotes continued on next page)
4
<PAGE>
(footnotes continued from previous page)
(4) 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 February 8, 1999, of CRMC and SWF.
(5) Consists of shares as to which Dimensional Fund Advisors Inc., a registered
investment advisor ('DFA'), exercises sole voting and dispositive power in
its role as investment advisor or investment manager to certain registered
investment companies and other investment vehicles. The information
contained herein is based solely on a Schedule 13G, dated February 11, 1999,
of DFA.
------------------------
The following table reflects as of September 6, 1999 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)..................... 3,445,492 40.6%
Leon Tempelsman(1)(3)........................ 1,834,768 21.4%
Myer Feldman................................. 336,259 4.0%
Sheldon L. Ginsberg(4)....................... 71,130 0.8%
Robert Speisman(1)(5)........................ 61,807 0.7%
Lucien Burstein.............................. 1,500 less than 0.1%
All directors and officers as a
group(1)-(5)............................... 4,215,873 48.5%
</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,
Senior 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) Consists of 1,910,409 shares owned directly by Maurice Tempelsman, 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, and 6,667 shares which
are the subject of currently exercisable options granted to Mr. Tempelsman
pursuant to the 1997 Plan.
(3) Consists of 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. Also includes 34,641 shares held
by Leon
(footnotes continued on next page)
5
<PAGE>
(footnotes continued from previous page)
Tempelsman as custodian for his children, 97,389 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) Consists of 41,125 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) Consists of 59,099 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. Does not include 1,528,416 shares owned by LTS, of
which Rena Speisman, the wife of Robert Speisman, is a limited partner,
61,457 shares owned by Rena Speisman for herself and as custodian for the
children of Robert and Rena Speisman and 22,222 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.
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, 1999 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 two outside directors
and one employee director. The Stock Option Committee currently is comprised of
all members of the Board of Directors. The Compensation Committee annually
recommends the cash compensation and benefits for the Chairman and the Vice
Chairman and President and fixes the cash compensation and benefits for other
officers and employees of the Company earning $75,000 per year or more.
Following Compensation Committee review and approval, all matters relating to
compensation for the Chairman and the Vice Chairman and President (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.
6
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES
During Fiscal 1999, 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 $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,
1998, the Company did not make a matching contribution.
7
<PAGE>
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. See 'Proposal to Amend the 1997 Long-Term Stock Incentive Plan.'
During Fiscal 1999, 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 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, Mr. Tempelsman's salary was
increased for fiscal year 2000 and he was granted a bonus. 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. In the past, Mr. Tempelsman has been granted a significant number of stock
options as long-term incentive to encourage him to continue his efforts to
increase shareholder value and to make his total compensation package more
competitive and appropriate in relation to his contribution to the Company.
However, due to the relatively small number of options available for grant under
the Plan, Mr. Tempelsman was not granted any stock options during Fiscal 1999.
The Compensation Committee continues 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
Stock Option Committee:
------------------------
Maurice Tempelsman
Leon Tempelsman
Lucien Burstein
Myer Feldman
Sheldon Ginsberg
Robert Speisman
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION IN FISCAL 1997, FISCAL 1998 AND FISCAL 1999
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, 1999.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- ------------
OTHER
NAME AND FISCAL ANNUAL OPTIONS
PRINCIPAL POSITION YEAR SALARY BONUS(4) COMPENSATION (SHARES)(9)
------------------ ---- ------ -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Maurice Tempelsman ............... 1999 $200,000 $ -- $-- --
Chairman of the Board 1998 133,336 100,000 -- 20,000
1997 28,750 -- -- 100,000
Leon Tempelsman .................. 1999 317,755(1) 3,036(5) -- --
Vice Chairman of the Board and 1998 294,442(1) 52,918(5) -- 40,000
President 1997 266,088(1) 30,000 -- 40,000
Sheldon L. Ginsberg .............. 1999 287,189(2) 52,322(6) -- --
Executive Vice President and 1998 252,595(2) 42,728(6) 600(8) 20,000
Chief Financial Officer 1997 218,200(2) 40,000 600(8) 20,000
Robert Speisman .................. 1999 176,384(3) 2,844(7) -- --
Senior Vice President-Sales 1998 162,935(3) 27,728(7) 600(8) 10,000
1997 143,540(3) 20,000 600(8) 10,000
</TABLE>
- ------------
(1) Includes $7,755 of premiums paid by the Company in each of Fiscal 1999,
Fiscal 1998 and Fiscal 1997 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 in each of Fiscal 1999,
Fiscal 1998 and Fiscal 1997 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 in each of Fiscal 1999,
Fiscal 1998 and Fiscal 1997 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 7.
(5) Includes a bonus in the amount of $3,036 in Fiscal 1999 and $2,918 in
Fiscal 1998 pursuant to the Retirement Benefit Plan. See 'Retirement
Benefit Plan.'
(6) Includes a bonus in the amount of $2,322 in Fiscal 1999 and $2,728 in
Fiscal 1998 pursuant to the Retirement Benefit Plan. See 'Retirement
Benefit Plan.'
(7) Includes a bonus in the amount of $2,844 in Fiscal 1999 and $2,728 in
Fiscal 1998 pursuant to the Retirement Benefit Plan. See 'Retirement
Benefit Plan.'
(8) Represents a matching contribution made by the Company to the Company's
401(k) plan.
(9) Consists of shares granted under the 1997 Plan.
9
<PAGE>
STOCK OPTIONS GRANTED IN FISCAL 1999
The Company did not grant any stock options or stock appreciation rights
during Fiscal 1999 to any of the executive officers listed in the Summary
Compensation Table.
STOCK OPTIONS HELD AT END OF FISCAL 1999
The following table indicates the total number and the value of exercisable
and unexercisable stock options held as of May 31, 1999, by each executive
officer named in the Summary Compensation Table. None of these executive
officers exercised any options during Fiscal 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1999
AND FISCAL 1999 YEAR-END OPTION VALUES
------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
MAY 31, 1999 (#) MAY 31, 1999 ($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Maurice Tempelsman............................ 6,667 13,333 $ 0 $ 0
Leon Tempelsman............................... 97,389 64,444 $120,620 $ 0
Sheldon L. Ginsberg........................... 41,125 24,675 $ 84,113 $ 0
Robert Speisman............................... 59,099 10,701 $186,625 $ 0
</TABLE>
- ------------
(1) Based upon the per share closing price of $9.50 of the Common Stock on
May 28, 1999, the last day the Common Stock traded on the American Stock
Exchange in Fiscal 1999.
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
10
<PAGE>
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.
During Fiscal 1999, the Company paid premiums of $42,030, $39,041 and $39,041 on
behalf of Messrs. Tempelsman, Ginsberg and Speisman, respectively, and
reimbursed such individuals in the amounts of $3,036, $2,322 and $2,844,
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 Maurice Tempelsman, 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, and Lucien Burstein. Mr. Feldman is not an officer or
employee of the Company. Mr. Burstein is Secretary of the Company and a partner
in the law firm of Warshaw Burstein Cohen Schlesinger & Kuh, LLP, which firm
serves as counsel to the Company. Mr. Burstein does not receive any compensation
for serving as a Secretary of the Company and credits his directors' fee against
legal fees of his firm incurred by the Company for each period for which a
directors' fee is paid. Neither of Messrs. 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. In addition, Michael
Butterwick served as a member of Compensation Committee until his death in
February 1999. Mr. Butterwick was not an officer or employee of the Company.
11
<PAGE>
COMPARATIVE PERFORMANCE BY THE COMPANY
The following graph compares the market performance of the 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
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
LAZARE AMEX INDUSTRY
DATE KAPLAN ($) COMPOSITE ($) GROUP ($)
- ---- ---------- ------------- ----------
<S> <C> <C> <C>
5/94 100 100 100
6/94 102.817 96.996 99.138
7/94 105.634 100.454 101.285
8/94 101.408 103.507 104.129
9/94 107.042 105.253 102.326
10/94 108.451 104.472 103.781
11/94 108.451 99.932 107.894
12/94 107.042 101.487 99.831
1/95 98.592 104.216 80.871
2/95 100 107.599 86.411
3/95 94.366 109.103 84.346
4/95 88.732 111.744 90.499
5/95 84.507 114.897 88.362
6/95 84.507 117.617 90.043
7/95 78.521 123.75 98.964
8/95 83.099 126.949 107.761
9/95 80.282 129.528 108.114
10/95 78.873 124.558 107
11/95 74.648 128.227 123.581
12/95 89.437 130.594 120.048
1/96 87.324 130.712 129.283
2/96 95.775 132.86 127.597
3/96 90.845 134.087 133.566
4/96 115.493 138.74 147.979
5/96 163.38 143.346 170.577
6/96 147.887 135.368 167.725
7/96 143.662 124.83 146.002
8/96 185.916 128.486 151.641
9/96 194.366 132.003 169.951
10/96 195.775 129.374 158.361
11/96 218.31 134.708 157.398
12/96 192.958 132.674 157.607
1/97 200 135.763 161.278
2/97 208.451 138.252 151.497
3/97 171.831 131.481 160.815
4/97 153.521 127.605 166.177
5/97 183.099 140.433 193.572
6/97 188.732 145.297 196.347
7/97 194.366 151.46 185.579
8/97 185.211 153.189 186.247
9/97 173.24 165.553 177.353
10/97 171.831 159.785 166.423
11/97 161.268 159.635 162.15
12/97 152.113 165.934 153.336
1/98 122.535 163.026 165.315
2/98 126.761 173.092 195.579
3/98 123.239 183.207 203.52
4/98 123.944 185.583 194.138
5/98 130.986 177.744 200.507
6/98 119.014 181.437 205.686
7/98 123.944 178.741 180.934
8/98 93.662 143.439 155.37
9/98 87.324 154.276 132.22
10/98 87.324 161.586 134.931
11/98 87.324 167.397 179.21
12/98 78.873 177.21 208.068
1/99 85.916 185.076 231.599
2/99 83.099 181.082 230.328
3/99 77.465 180.978 298.638
4/99 101.408 196.828 332.256
5/99 107.042 199.918 328.01
</TABLE>
DATA PERIOD: MAY 31, 1994 THROUGH MAY 28, 1999
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 Common Stock does not assume the reinvestment of
dividends, since no dividends were declared on the 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
Common Stock is traded on the American Stock Exchange.
12
<PAGE>
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).
2. PROPOSAL TO AMEND THE 1997 LONG-TERM STOCK INCENTIVE PLAN
(ITEM 2 ON THE PROXY CARD)
The 1997 Plan initially was adopted by the Board of Directors of the
Company on April 10, 1997 and approved by shareholders of the Company on
November 5, 1997. The 1997 Plan currently authorizes the issuance of awards
covering up to 400,000 shares of Common Stock (subject to adjustment in certain
circumstances) to directors, executive officers and other key employees of, and
consultants to, the Company. As of September 6, 1999, options to purchase an
aggregate of 399,800 shares of Common Stock granted under the 1997 Plan, at
exercise prices ranging from $7.375 to $16.225 per share, were outstanding. On
August 5, 1999, the Board of Directors, subject to shareholder approval, amended
the 1997 Plan to increase the number of shares of Common Stock authorized for
issuance upon exercise of awards granted under the Stock Option Plan from
400,000 shares to 600,000 shares. The increase in the number of shares will
enable the Company to continue to provide an incentive for selected employees
and consultants to remain in the Company's employ and to remain dedicated to the
Company's interests by enabling them to acquire a proprietary interest in the
Company, and to provide incentives comparable to those offered by other
companies to enable the Company to better attract, compete for and retain highly
qualified employees and consultants. If the amendment to the 1997 Plan is not
approved then, in the absence of forfeitures, the Company will have only 200
shares of Common Stock available for the grant of future awards.
The following is a description of the 1997 Plan, as it is proposed to be
amended.
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 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
consultants.
ADMINISTRATION AND ELIGIBILITY
The 1997 Plan is administered by the Stock Option Committee of the Board of
Directors (the 'Committee'), consisting of at least two directors of the Company
who are neither employees of nor consultants to the Company or any of its
affiliates, or in the absence of the Committee, by the entire Board of
Directors. As stated above, the Board of Directors currently is administering
the 1997 Plan. In general, any employee of or consultant to the Company or an
affiliate of the
13
<PAGE>
Company, including any officer or officer-director of the Company may be
selected 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 Company 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
Company to issue a combination of two or more of the foregoing types of Awards.
ISOs and NQSOs (collectively, 'Options') may, at the Company'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.
Six hundred thousand (600,000) 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 Company 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 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.
14
<PAGE>
In addition, except as limited by the terms of any Award, the Company 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 Company deems appropriate. The Company
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 Company) 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 Company 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 an 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 Company, in its sole discretion, may terminate or 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.
ISSUANCE AND EXERCISE OF AWARDS
The following table sets forth summary information regarding Options
granted under the 1997 Plan during Fiscal 1999 to all employees (other than
executive officers) of the Company, as a group (3 persons). During Fiscal 1999,
no options were granted to directors or executive officers and no awards other
than Options were granted to other employees.
15
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION OPTIONS GRANTED DURING FISCAL 1999
----------------- ----------------------------------
<S> <C>
All current employees (other than executive
officers), as a group.................... 6,500
</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 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
16
<PAGE>
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.') 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.
17
<PAGE>
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 AMENDMENT TO THE 1997 PLAN.
3. RATIFICATION OF THE APPOINTMENT OF AUDITORS
(ITEM 3 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, 2000 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.
18
<PAGE>
4. 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.
STOCKHOLDER PROPOSALS FOR THE 2000 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 2000 Annual Meeting of Stockholders must submit such proposals so that
they are received by the Company no later than May 27, 2000. 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 17, 1999
19
<PAGE>
[LOGO] LAZARE KAPLAN INTERNATIONAL INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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APPENDIX 1
PROXY CARD
LAZARE KAPLAN INTERNATIONAL INC.
Proxy - Annual Meeting of Shareholders - November 4, 1999
(Solicited on Behalf of the Board of Directors)
The undersigned stockholder of Lazare Kaplan International Inc. hereby
constitutes and appoints Leon Tempelsman, Lucien Burstein and Sheldon L.
Ginsberg, and each of them, the attorneys and proxies of the undersigned, with
full power of substitution and revocation, to represent and to vote on behalf of
the undersigned all of the shares of the Company's Common Stock which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
at the Cornell Club, Six East 44th Street, 5th Floor, New York, New York on
November 4, 1999, at 10:00 a.m., and at any adjournments thereof, upon the
following proposals which are more fully described in the notice of, and proxy
statement for, the Annual Meeting.
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
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF DIRECTORS AND EACH OF THE ABOVE PROPOSALS AND IN THE
DISCRETION OF THE PROXIES ON ALL OTHER MATTERS.
<TABLE>
<S> <C> <C>
(1) ELECTION OF DIRECTORS [ ] FOR [ ] WITHHOLD
Maurice Tempelsman, Leon Tempelsman, Lucien all nominees AUTHORITY
Burstein, Myer Feldman, Sheldon L. Ginsberg and listed to the left to vote for all
Robert Speisman (except as marked nominees listed
(INSTRUCTION: To withhold authority to vote for any to the contrary) to the left
individual nominee, strike a line write through that nominee's
name in the space provided above.)
(2) To approve an amendment to the Company's 1997 Long Term Stock [ ] FOR [ ] AGAINST [ ] ABSTAIN
Incentive Plan increasing the number of shares authorized for issuance
upon exercise of awards granted thereunder from 400,000 to 600,000.
(3) Proposal to ratify the appointment of Ernst & Young LLP, as the Company's [ ] FOR [ ] AGAINST [ ] ABSTAIN
independent accountants for the fiscal year ending May 31, 2000.
(4) In their discretion, upon such other matters as properly may come before the
Annual Meeting.
</TABLE>
(Continued and to be signed on reverse side.)
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Any of such attorneys and proxies, or their substitutes (or if only one, that
one) at said Annual Meeting, and any adjournments thereof, may exercise all of
the powers hereby given. Any proxy heretofore given is hereby revoked.
Receipt is acknowledged of the Notice of Annual Meeting of shareholders, the
Proxy Statement accompanying said Notice and the Annual Report to Stockholders
for the fiscal year ended May 31, 1999.
Each of the foregoing matters has been proposed by the Company and is not
conditioned on the approval of any other matter.
IN WITNESS WHEREOF, the undersigned has signed this proxy.
Dated: ______________________________, 1999
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Stockholder(s) signature
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Stockholder(s) signature
Signature(s) of stockholder should correspond exactly with
the name(s) shown hereon. If shares are held jointly, 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.
THURSDAY, NOVEMBER 4, 1999
10:00 A.M.
THE CORNELL CLUB
SIX EAST 44th STREET
FIFTH FLOOR
NEW YORK, NY 10017
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AGENDA:
ELECTION OF DIRECTORS
APPROVAL OF THE AMENDMENT TO THE
1997 LONG-TERM STOCK INCENTIVE PLAN
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
OTHER BUSINESS
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STATEMENT OF DIFFERENCES
The section symbol shall be expressed as..................................'SS'
