SCHEDULE 14A INFORMATION
Amendment No. 1
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] 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
JLM Couture, Inc.
(Name of Registrant as Specified In Its Charter)
RICHARD S. KALIN
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
<PAGE>
PROXY
JLM COUTURE, INC.
225 West 37th Street, 5th Floor
New York, NY 10018
This Proxy is solicited on behalf of the Board of Directors.
The undersigned, revoking all previous proxies, hereby
appoints Joseph L. Murphy, Daniel M. Sullivan and Joseph E.
O'Grady, and each of them, proxies with power of substitution to
each, for and in the name of the undersigned to vote all shares of
Common Stock of JLM Couture, Inc. (the "Company") which the
undersigned would be entitled to vote if present at the Annual
Meeting of Shareholders of the Company to be held on October 30,
1998, at 10:00 A.M. at the offices of Kalin & Associates, P.C.
located at One Penn Plaza, Suite 1425, New York, NY, and any
adjournments thereof, upon the matters set forth in the Notice of
Annual Meeting.
The undersigned acknowledges receipt of the Notice of Annual
Meeting, Proxy Statement and the Company's 1997 Annual Report.
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD Authority to
below (except as marked vote for all nominees
to the contrary below) listed below
(INSTRUCTION: To withhold authority to vote for an individual
nominee, strike a line through such nominee's name in the list
below.)
JOSEPH L. MURPHY, DANIEL M. SULLIVAN AND
JOSEPH E. O'GRADY
2. AMENDMENT OF THE COMPANY'S 1996 STOCK OPTION PLAN (THE
"1996 PLAN") INCREASING THE NUMBER OF SHARES OF COMMON STOCK OF THE
COMPANY FOR WHICH OPTIONS ARE AUTHORIZED TO BE GRANTED UNDER THE
1996 PLAN FROM 100,000 TO 250,000 SHARES, PAR VALUE $.0002 PER
SHARE.
FOR _______________ AGAINST _______________
3. IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING.
FOR _______________ AGAINST _______________
PLEASE SIGN ON THE NEXT PAGE AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
and when properly executed will be voted as directed herein. If no
direction is given, this Proxy will be voted FOR proposals 1, 2 and
3.
DATED: , 1998
(Signature)
(Signature, if held jointly)
Where stock is registered in the
names of two or more persons ALL
should sign. Signature(s) should
correspond exactly with the name(s)
as shown above. Please sign, date
and return promptly in the enclosed
envelope. No postage need be affixed
if mailed in the United States.
Requests for copies of proxy statements, the Company's Annual
Report for its fiscal year ended October 31, 1997 or the Company's
Annual Report for its fiscal year ended October 31, 1997 on Form
10-KSB should be addressed to Shareholder Relations, JLM Couture,
Inc., 225 West 37th Street, New York, NY 10018. This material will
be furnished without charge to any shareholder requesting it.
<PAGE>
JLM COUTURE, INC.
(a Delaware Corporation)
Notice of 1998 Annual Meeting
of Shareholders to be held
at 10:00 A.M. on October 30, 1998
To the Shareholders of
JLM COUTURE, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of
Shareholders (the "Meeting") of JLM COUTURE, INC. (the "Company")
will be held on October 30, 1998 at 10:00 A.M. at the offices of
Kalin & Associates, P.C. located at One Penn Plaza, Suite 1425, New
York, NY, to consider and vote on the following matters described
under the corresponding numbers in the attached Proxy Statement:
1. Election of three directors;
2. Amendment of the Company's 1996 Stock Option Plan (the
"1996 Plan") increasing the number of shares of Common Stock of the
Company for which options are authorized to be granted under the
1996 Plan from 100,000 to 250,000 shares, par value $.0002 per
share (the "Amendment to the Plan"); and
3. Such other matters as may be properly come before the
Meeting.
The Board of Directors has fixed September 18, 1998, at the
close of business, as the record date for the determination of
shareholders entitled to vote at the Meeting, and only holders of
shares of Common Stock of the Company of record at the close of
business on that day will be entitled to vote. The stock transfer
books of the Company will not be closed.
A complete list of shareholders entitled to vote at the
Meeting shall be available for examination by any shareholder, for
any purpose germane to the Meeting, during ordinary business hours
from September 30, 1998 until the Meeting at the offices of the
Company. The list will also be available at the Meeting.
Whether or not you expect to be present at the Meeting, please
fill in, date, sign, and return the enclosed Proxy, which is
solicited by management. The Proxy is revocable and will not
affect your vote in person in the event you attend the Meeting.
By Order of the Board of Directors
Joseph E. O'Grady, Secretary
Date: September 28, 1998
Request for additional copies of proxy material and the
Company's Annual Report for its fiscal year ended October 31, 1997
should be addressed to Shareholder Relations, JLM Couture, Inc.,
225 West 37th Street, New York, NY 10018. This material will be
furnished without charge to any shareholder requesting it.
JLM COUTURE, INC.
225 West 37th Street
New York, NY 10018
Proxy Statement
The enclosed proxy is solicited by the management of JLM
Couture, Inc. (the "Company") in connection with the 1998 Annual
Meeting of Shareholders (the "Meeting") to be held on October 30,
1998 at 10:00 A.M. at the offices of Kalin & Associates, P.C., One
Penn Plaza, Suite 1425, New York, NY and any adjournment thereof.
The Board of Directors has set September 18, 1998 as the record
date for the determination of shareholders entitled to vote at the
Meeting. A shareholder executing and returning a proxy has the
power to revoke it at any time before it is exercised by filing a
later proxy with, or other communication to, the Secretary of the
Company or by attending the Meeting and voting in person.
The proxy will be voted in accordance with your directions as
to:
(1) The election of the persons listed herein as directors of
the Company;
(2) Amendment of the Company's 1996 Stock Option Plan (the
"1996 Plan") increasing the number of shares of Common Stock of the
Company for which options are authorized to be granted under the
1996 Plan from 100,000 to 250,000 shares, par value $.0002 per
share, (the "Amendment to the Plan"); and
(3) Such other matters as may properly come before the
Meeting.
In the absence of direction, the proxy will be voted in favor
of management's proposals.
The entire cost of soliciting proxies will be borne by the
Company. The costs of solicitation, which represent an amount
believed to be normally expended for a solicitation relating to an
uncontested election of directors, will include the costs of
supplying necessary additional copies of the solicitation materials
and the Company's Annual Report to Shareholders for its fiscal year
ended October 31, 1997 ("Fiscal 1997")(the "Annual Report") to
beneficial owners of shares held of record by brokers, dealers,
banks, trustees, and their nominees, including the reasonable
expenses of such recordholders for completing the mailing of such
materials and Annual Reports to such beneficial owners.
Only shareholders of record of the Company's 1,871,681 shares
of Common Stock (the "Common Stock") outstanding at the close of
business on September 18, 1998 will be entitled to vote. Each
share of Common Stock is entitled to one vote. Holders of a
majority of the outstanding shares of Common Stock must be
represented in person or by proxy in order to achieve a quorum.
The proxy statement, the attached notice of meeting, the enclosed
form of proxy and the Annual Report are being mailed to
shareholders on or about September 30, 1998.
1. ELECTION OF DIRECTORS
Three directors are to be elected by a majority of the votes
cast at the Meeting, each to hold office until the next Annual
Meeting of Shareholders and until his respective successor is
elected and qualifies. The persons named in the accompanying proxy
have advised management that it is their intention to vote for the
election of the following nominees as directors unless authority is
withheld:
Joseph L. Murphy
Daniel M. Sullivan
Joseph E. O'Grady
Management has no reason to believe that any nominee will be
unable to serve. In the event that any nominee becomes
unavailable, the proxies may be voted for the election of such
person or persons who may be designated by the Board of Directors.
The following table sets forth certain information as to the
persons nominated for election as directors of the Company at the
Meeting, all of whom are presently directors of the Company:
Position with Director
Name Age the Company Since
Joseph L. Murphy 43 Chief Executive April 1986
and Financial Officer,
Director
Daniel M. Sullivan 73 Chairman of the September 1986
Board of Directors
Joseph E. O'Grady 76 Secretary and Director February 1991
Joseph L. Murphy, a founder of the Company, has been a
director of the Company since its inception. During Fiscal 1992,
Mr. Murphy was appointed President. In February 1993, Mr. Murphy
was appointed Chief Executive Officer. Mr. Murphy is the brother
of Mark Murphy, the Company's Vice President - Operations.
Daniel M. Sullivan became a director in September 1986 and was
elected Chairman of the Board in 1989. In 1989, Mr. Sullivan
retired as President and Chief Executive Officer of Frost &
Sullivan, Inc., a publicly-traded publisher of market research
studies, a position he had held for more than five years prior to
his retirement.
Joseph E. O'Grady was appointed to the Board of Directors in
February 1991. In December 1992, Mr. O'Grady was appointed
Secretary. For more than the past five years, Mr. O'Grady has been
the President of JOG Associates, Inc., a privately-held financial
consulting firm based in Hicksville, New York. JOG Associates,
Inc. arranges business financing and provides financial consulting
services for closely-held companies.
Directors serve until the next annual meeting of stockholders
and until their respective successors are elected and qualify.
During Fiscal 1997, the Board of Directors met only
informally. It acted 4 times by unanimous written consent.
OTHER EXECUTIVE OFFICERS
Position with Position
Name Age the Company Held Since
Mark Murphy 34 Vice President - May 1993
Operations
Mark Murphy, 34, was appointed Vice President - Operations in
May 1993. Mr. Mark Murphy joined the Company in January 1993.
Prior to his joining the Company, Mr. Mark Murphy was employed as
a manager by Accurate Testing Co., a metals testing company based
in California, a position he had held since 1988. Mr. Mark Murphy
is the brother of Joseph L. Murphy, the Company's President.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Based solely on its
review of the copies of such forms received by it, the Company
believes that during Fiscal 1997 all executive officers and
directors of the Company complied with all applicable filing
requirements.
AUDIT AND COMPENSATION COMMITTEE
During Fiscal 1997, the Audit and Compensation Committee (the
"Audit Committee") consisting of Messrs. O'Grady and Sullivan did
not meet or act by unanimous written consent.
EXECUTIVE COMPENSATION
The following table sets forth information relating to the
cash compensation received during the Company's last three fiscal
years by the Company's President. None of the Company's other
officers had cash compensation in Fiscal 1997 of more than $100,000
per year:
SUMMARY COMPENSATION TABLE
Name and Annual Com- Other Long Term Other
Principal Fiscal pensation Annual Com- Compensation Compen-
Position Year Salary ($) pensation ($) Options sation($)
Joseph L. 1997 150,000 76,102 100,000 10,639
Murphy, 1996 150,000 47,262 50,000 14,708
President 1995 104,000 - 50,000 20,864
EMPLOYMENT AGREEMENT
On May 19, 1998, Mr. Joseph L. Murphy entered into an amended
employment agreement (the "Agreement") with the Company. The Agreement
terminates May 19, 2003, unless terminated earlier. The base salary
commences at $200,000 per annum. As additional compensation, Mr. Murphy
receives five percent (5%) of the Company's annual, fiscal year pre-tax
profits. As additional compensation, Mr. Murphy was granted a five year
option to purchase 200,000 shares of Common Stock of the Company
exercisable at a rate of 50,000 Common Shares immediately and 50,000
Common Shares on each yearly anniversary date thereof at an exercise
price of $2.5625 per share, that being the fair market value on the date
of grant.
STOCK OPTION PLANS
On November 17, 1986, the Company adopted an Incentive Stock
Option Plan (the "Plan") pursuant to which options to purchase up
to an aggregate of 100,000 shares of Common Stock could be granted.
Such options are intended to qualify as "incentive stock options"
within the meaning of Section 422A of the Code ("Incentive
Options").
In November 1994, the Board adopted and a majority of the
Company's shareholders approved a 1 for 3 reverse stock split,
which automatically decreased the authorized shares of Common Stock
under the Plan to 33,333. The Plan was amended in February 1996 to
increase the number of shares for which options could be granted to
100,000. A majority of the Company's stockholders approved the
Plan, as amended, in March 1996. During Fiscal 1996, options to
purchase an aggregate of 100,000 shares of Common Stock were
granted to 10 employees of the Company. These options expire four
and three years from the date of issuance and are exercisable at
prices ranging from $.87 and $2.125 per share.
The Plan is administered by the Board of Directors which has
the authority to determine the persons to whom Incentive Options
may be granted, the number of shares of Common Stock to be covered
by each Incentive Option, the time or times at which the Incentive
Options may be granted or exercised and, for the most part, the
terms and provisions of the Incentive Options. The exercise price
of Incentive Options granted under the Plan may not be less than
the fair market value of the shares of Common Stock on the date of
grant.
On August 26, 1996, the Company adopted a Stock Option Plan
(the "1996 Plan"). The 1996 Plan provides for the issuance of
incentive and non statutory stock options to employees, consultants
advisors and/or directors for a total of up to 100,000 shares of
Common Stock. The 1996 Plan was amended by the Board of Directors
(subject to shareholder approval) in September 1998 to increase the
authorized number of sharesthereunder from 100,000 to 250,000 shares.
The exercise price of options granted may not be less than the fair
market of the shares on the date of grant (110% of such fair market
value for a holder of more than 10% of the Company's Common Stock).
The 1996 Plan will terminate on August 26, 2006.
During Fiscal 1997, Mr. Joseph L. Murphy, received non-
incentive stock options for 100,000 shares of Common Stock,
exercisable at $4.625 per share.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END (FYE) OPTION VALUES
Value of
Unexercised
Number In-the-Money
Of Unexercised Options
Options At FYE End
Shares At FYE Acquired ($)
Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized(1) Unexercisable Unexercisable (1)
Joseph L.
Murphy - - 100,000/0 137,500/0
Mark
Murphy - - 38,333/0 178,248/0
Joseph E.
O'Grady - - 10,000/0 51,300/0
________________
(1) Represents fair market value of Common Stock at October 31,
1997 of $6.00 as reported by NASDAQ, less the exercise price.
COMPENSATION OF DIRECTORS
Directors not employed by the Company are compensated as
consultants for the time spent on Company matters, including
attendance at directors' and other meetings. During Fiscal 1997,
Mr. Sullivan received $30,000 and Mr. O'Grady received $55,655 as
consultant fees. Mr. O'Grady's renumeration is also reported in
the Summary Compensation Table above. See "Stock Option Plans"
above.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of September 17, 1998, the
number of shares of Common Stock held of record or beneficially (i)
by each person who held of record, or was known by the Company to
own beneficially, more than five percent of the outstanding shares
of Common Stock, (ii) by each director and (iii) by all officers
and directors as a group:
Number of Percent of
Names and Address Shares Owned (1) Outstanding Shares
Joseph L. Murphy 283,633(2) 15.2%
225 West 37th Street
New York, NY 10123
Daniel M. Sullivan 102,599(2) 5.5%
225 West 37th Street
New York, NY 10123
Harvest Capital 78,740 4.2%
Corporation
225 West 37th Street
New York, NY 10123
Joseph E. O'Grady 24,666(2) 1.3%
Carl Seaman 281,666(4) 15.0%
12 The Poplars
Roslyn, NY 11576
All Directors and
officers as a
group (4 persons) 527,971(2)(5) 28.2%
_________________
(1) Unless otherwise indicated, all shares of Common Stock are
owned directly.
(2) Includes 150,000, 10,000, 10,000 and 208,333 shares for
Messrs. J. L. Murphy, Sullivan, O'Grady and all officers and
directors as a group, respectively, that are issuable upon
exercise of presently exercisable options at an average
exercise price of approximately $1.53 per share.
(4) Based on information on Schedule 13D dated June 1, 1995 filed
with the Company on behalf of Mr. Seaman.
(5) Pursuant to the Securities Exchange Act of 1934, in addition
to the ownership of Common Stock set forth above, Mr. Joseph
L. Murphy, by virtue of his position with (President and a
director) and ownership of 22.1% of the outstanding Common
Stock of Harvest Capital Corporation ("Harvest") and Mr.
Sullivan, by virtue of his position with Harvest (Secretary
and a director), are considered to be the beneficial owners of
the shares of Common Stock owned by Harvest.
The Company is unaware of any arrangement, the operation of
which, at a subsequent date, may result in a change of control of
the Company.
CERTAIN TRANSACTIONS
On February 2, 1996, the Company entered into a loan agreement
with CBC of New York Inc., trading as Continental Business Credit
("CBC"), to obtain a credit line up to $1,500,000 (the "CBC Loan").
The CBC Loan, which bears a minimum interest rate of prime plus 1%
per annum (which may be increased due to any fluctuation of the
prime rate announced from time to time by Chemical Bank) is payable
through the direct deposits to CBC Bank of the Company's
receivables. The CBC Loan was increased to $1,700,000 in July
1996. CBC also has a first lien on all of the Company's accounts
receivable. As additional security, Messrs. Joseph L. Murphy and
Joseph E. O'Grady, directors of the Company, personally guaranteed
repayment of the CBC Loan.
2. APPROVAL OF THE AMENDMENT TO
THE 1996 PLAN
The affirmative vote of the holders of at least a majority of
the shares of Common Stock present and entitled to vote at the
Meeting is required to approve the amendment to the 1996 Plan to
increase by 150,000 the number of shares of Common Stock for which
options may be granted under the 1996 Plan. Under the 1996 Plan as
currently in effect, options to purchase 100,000 shares of Common
Stock were subject to grant, of which all have been granted. The
Board of Directors recommends that the stockholders vote their
shares for the proposal to amend the 1996 Plan. In the absence of
instructions to the contrary, the shares of Common Stock
represented by a proxy delivered to the Board of Directors will be
voted FOR the amendment 1996 Plan.
The Plan
In August, 1998, the Board of Directors of the Company (the
"Board") approved (subject to stockholder approval) the amendment
to the 1996 Plan. The 1996 Plan is a stock plan providing for the
grant of incentive stock options and nonqualified stock options to
key employees and consultants of the Company and its subsidiaries.
The Company estimates that approximately 69 employees are
eligible to participate in the 1996 Plan. The following
description of the Plan is a summary and is qualified in its
entirety by reference to the 1996 Plan, a copy of which has been
filed as Exhibit 4.1 to the Company's Form S-8 as filed with the
Securities and Exchange Commission on March 23, 1998.
Duration. No option may be granted under the plan after
August 26, 2006 (the "Termination Date"). Options granted prior to
the Termination Date, however, may extend beyond such date and the
provisions of the Plan will continue to apply thereto.
Purpose. The purpose of the Plan is to attract and retain
eligible participants of outstanding competence and to encourage
their best efforts on behalf of the Company. The Board of
Directors believes that stock options provide performance
incentives to eligible participants to the benefit of the Company
and its shareholders, and recommends approval of the amendment to
the Plan by stockholders.
Administration. The Plan is administered by the Board, which
determines the key employees and consultants eligible to receive
options and the terms thereof, all in a manner consistent with the
1996 Plan. The Board has full and final authority to determine the
persons to whom, and the time or times at which, options are
granted, the number of shares subject to each option, the number of
options which shall be treated as incentive stock options, the
duration of each option, appropriate vesting requirements, and
other terms and provisions of each option. The Committee also has
the authority to accelerate the vesting of a stock option. In
determining persons who are to receive options, and the number of
shares to be covered by each option, the Board considers, among
other things, the person's position, responsibilities, service,
accomplishments, and such person's present and future value to the
Company.
Shares Subject to Options. The Plan currently provides that
the total number of shares of Common Stock subject to the grant of
options is 100,000 shares, subject to adjustment under certain
circumstances. Options which terminate or expire unexercised are
available for subsequent grants. There are presently no shares of
Common Stock available for the grant of options. The purpose of
the proposed amendment to the 1996 Plan is to make available for
the grant of options a new pool of 150,000 shares of Common Stock.
Options. The 1996 Plan provides for the grant of incentive
stock options and nonqualified stock options to key employees and
consultants, as determined by the Board. The exercise price of
incentive stock options granted under the 1996 Plan shall be at
least 100% of the fair market value of the Common Stock on the date
of grant and the exercise price of nonqualified stock options shall
be at least equal to the par value of the Common Stock. The
Committee may provide that options will be exercisable in full at
any time or from time to time during the option term or provide for
the exercise thereof in such installments at such times as the
Board may determine. Nonqualified stock options shall be
exercisable for not more than ten years, and incentive stock
options may be exercisable for up to ten years except as otherwise
provided. An option may be exercised only during the optionee's
employment, provided, however, that if employment terminates as a
result of death, disability or retirement, then options may be
exercised for a period of up to one year, and if employment is
terminated by the Company without cause, then options may be
exercised for a period of up to 90 days, in each case subject to
the earlier expiration of the option in accordance with the terms
of its grant. The Board may provide that an optionee may pay for
shares upon exercise of an option (i) in cash, (ii) in already-
owned shares of Common Stock, or (iii) by such other medium or by
any combination of (i) or (ii), as authorized by the Board.
Grants to Date. A total of 100,000 options have been granted
under the 1996 Plan. On September 18, 1998, the closing price of
the Common Stock as reported by Nasdaq was $2.375 and the total
value all of the Shares of Common Stock which could be issued
pursuant to options granted under the 1996 Plan would be $593,750
as of September 18, 1998.
Adjustments and Amendments of the Plan. Adjustments to the
1996 Plan and to outstanding options will be made to reflect stock
dividends, recapitalizations and similar events. The Committee has
the right to amend, suspend, or terminate the 1996 Plan at any
time; provided, however, that, unless otherwise required by law or
specifically provided in the 1996 Plan, the rights of a participant
with respect to options granted prior to such amendment, suspension
or termination, may not be materially impaired without the consent
of such participant and provided further that without the approval
of the stockholders of the Company entitled to vote, no amendment
may be made which would (i) increase the aggregate number of shares
of Common Stock that may be issued under the 1996 Plan (except to
reflect stock dividend, recapitalizations, and similar events),
(ii) decrease the minimum purchase price of any option or (iii)
extend the maximum option period. The 1996 Plan is not subject to
any of the requirements of the Employee Retirement Income Security
Act of 1974, as amended. The 1996 Plan is not, nor is it intended
to be, qualified under Section 401(a) of the Code.
Non-Assignability of Options. No option may be assignable or
transferable by the recipient, except by will or by the laws of
descent and distribution. During the lifetime of a recipient,
options may be exercisable only by him or his personal
representative or guardian. No option or interest therein may be
pledged, attached or otherwise encumbered other than in favor of
the Company.
Certain Federal Income Tax Consequences. The rules concerning
the Federal income tax consequences with respect to stock options
granted pursuant to the 1996 Plan are quite technical. Moreover,
the applicable statutory provisions are subject to change, as are
their interpretations and applications which may vary in individual
circumstances. Therefore, the following discussion of tax
consequences is designed to provide a general understanding thereof
as of the date hereof.
Under current federal income tax laws, the grant of an
incentive stock option generally has no income tax consequences for
the optionee or the Company. No taxable income results to the
optionee upon the grant or exercise of an incentive stock option.
However, the amount by which the fair market value of the stock
acquired pursuant to the incentive stock option exceeds the
exercise price is an adjustment item for purposes of Alternative
Minimum Tax. If no disposition of the shares is made within either
two years from the date the incentive stock option was granted or
one year from the date of exercise of the incentive stock option,
any gain or loss realized upon disposition of the shares will be
treated as a long-term capital gain or loss to the optionee. If
the Common Stock is held for more than eighteen months after the
date of exercise, the optionee will be taxed at the lowest rate
applicable to capital gains for such optionee. The Company will not
be entitled to a tax deduction upon such exercise of an incentive
stock option, nor upon a subsequent disposition of the shares
unless such disposition occurs prior to the expiration of the
holding period described above. In general, if the optionee does
not satisfy the foregoing holding periods, any gain equal to the
difference between the exercise price and the fair market value of
the stock a exercise (or, if a lesser amount, the amount realized
on disposition over the exercise price) will constitute ordinary
income. In the event of such a disposition before the expiration
of the holding period described above, the Company is entitled to
a deduction at that time equal to the amount of ordinary income
recognized by the optionee. Any gain in excess of the amount
recognized by the optionee as ordinary income would be taxed to the
optionee as short-term or long-term capital gain (depending on the
applicable holding period).
An optionee will realize no taxable income upon the grant of
a nonqualified option and the Company will not receive a deduction
at the time of such grant. Upon exercise of a nonqualified stock
option an optionee generally will recognize ordinary income in an
amount equal to the excess of the fair market value of the stock on
the date of exercise over the exercise price. Upon a subsequent
sale of the stock by the optionee, the optionee will recognize
short-term or long-term capital gain or loss depending upon his or
her holding period for the stock. If the Common Stock is held for
more than eighteen months after the date of exercise, the optionee
will be taxed at the lowest rate applicable to capital gains for
such optionee. The Company will generally be allowed a deduction
equal to the amount recognized by the optionee as ordinary income.
In addition: (i) any officers and directors of the Company
subject to Section 16(b) of the Securities Exchange Act of 1934 may
be subject to special tax rules regarding the income tax
consequences concerning their options; (ii) any entitlement to a
tax deduction on the part of the Company is subject to the
applicable Federal tax rules, including, without limitation,
Section 162(m); and (iii) in the event that the exercisability of
an option is accelerated because of a change in control, payments
relating to the options, either alone or together with certain
other payments may constitute parachute payments under Internal
Revenue Code Section 280G, which excess amounts may be subject to
excise tax.
3. OTHER MATTERS
The Board of Directors has no knowledge of any other matters
which may come before the Meeting and does not intend to present
any other matters. However, if any other matters shall properly
come before the Meeting or any adjournment thereof, the persons
named as proxies will have discretionary authority to vote the
shares of Common Stock represented by the accompanying proxy in
accordance with their best judgment.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP,
independent certified public accountants, auditors of its Fiscal
1997 financial statements, as the auditors of the financial
statements of the Company for its current fiscal year ending
October 31, 1998. A member of such firm is expected to be at the
Meeting and will be given the opportunity to make a statement and
to answer questions any shareholders may have.
SHAREHOLDERS' PROPOSALS
Any shareholder of the Company who wishes to present a
proposal to be considered at the next annual meeting of
shareholders of the Company and who wishes to have such proposal
presented in the Company's Proxy Statement for such meeting must
deliver such proposal in writing to the Company at 225 West 37th <PAGE>
Street, Fifth Floor, New York, New York 10018 on or before January
10, 1999.
By Order of the Board of Directors
Joseph E. O'Grady,
Secretary
Dated: September 28, 1998
N:\RSKLAW\HJELM\PXY.98
<PAGE>
JIM HJELM'S PRIVATE COLLECTION, LTD.
1996 STOCK OPTION PLAN
1. General Plan Information. The purpose of this Stock
Option Plan (the "Plan") is to advance the interests of Jim Hjelm's
Private Collection, Ltd. (the "Company") by enhancing the ability
of the Company to attract and retain selected employees, officers,
consultants, advisors to the Board of Directors and qualified
directors (collectively the "Participants") by creating for such
Participants incentives and rewards for their contributions to the
success of the Company, and by encouraging such Participants to
become owners of shares of the Company's common stock, par value
$0.0002 per share, as the title or par value may be amended (the
"Shares").
Options granted pursuant to the Plan may be incentive stock
options ("Incentive Options") as defined in the Internal Revenue
Code of 1986, as amended (the "Code") or non-qualified options, or
both. The proceeds received from the sale of Shares pursuant to
the Plan shall be used for general corporate purposes.
2. Effective Date of Plan. The Plan will become effective
upon approval by the Board of Directors (the "Board"), and shall be
subject to the approval by the holders of at least a majority of
all Shares present in person and by proxy and entitled to vote
thereon at a meeting of stockholders of the Company prior thereto
or within 12 months thereafter.
3. Administration of the Plan. The Plan will be administered
by the Board of the Company. The Board will have authority, not
inconsistent with the express provisions of the Plan, to take all
action necessary or appropriate thereunder, to interpret its
provisions, and to decide all questions and resolve all disputes
which may arise in connection therewith. Such determinations of
the Board shall be conclusive and shall bind all parties.
The Board may, in its discretion, delegate its powers with
respect to the Plan to an employee benefit plan committee or any
other committee (the "Committee"), in which event all references to
the Board hereunder, including without limitation the references in
Section 10, shall be deemed to refer to the Committee. The
Committee shall consist of not fewer than three members. Each of
the members must be a "disinterested person" as that term is
defined in Rule 16b-3 adopted pursuant to the Securities Exchange
Act of 1934 (the "Exchange Act"). A majority of the members of the
Committee shall constitute a quorum, and all determinations of the
Committee shall be made by the majority of its members present at
a meeting. Any determination of the Committee under the Plan may
be made without notice or meeting of the Committee by a writing
signed by all of the Committee members.
A-1
The Board and the Committee, if any, shall have the authority
to determine eligibility, the number of options granted and the
exercise price of options.
4. Eligibility. The Participants in the Plan shall be all
employees, officers, consultants, advisors to the Board of
Directors and qualified directors of the Company or any of its
present or future subsidiaries (as defined in Section 9) whether or
not they are also officers of the Company. Members of the
Committee are eligible only if they do not exercise any discretion
in: (i) selecting Participants who receive grants of options; (ii)
determining the number of Shares to be granted to any Participant;
or (iii) determining the exercise price of any options, or as
counsel to the Company may otherwise advise the Committee that the
taking of any such action does not impair the status of such
eligible Committee members as "disinterested persons" within the
meaning of Exchange Act Rule 16b-3.
5. Grant of Options.
(a) The Board shall grant options to Participants that
it, in its sole discretion, selects. Options shall be granted on
such terms as the Board shall determine except that Incentive
Options shall be granted on terms that comply with the Code and
regulations thereunder.
(b) No options shall be granted after August 26, 2006
but options previously granted may extend beyond that date.
6. Option Agreements.
(a) Each option under the Plan shall be evidenced by an
option agreement, which shall be signed by an officer of the
Company and by the optionee and which shall contain such provisions
as may be approved by the Board.
(b) The option agreements shall constitute binding
contracts between the Company and the optionee. Every optionee,
upon acceptance of such option agreement, shall be bound by the
terms and restrictions of this Plan and of the option agreement.
(c) The terms of the option agreement shall be in
accordance with this Plan, but may include additional provisions
and restrictions, provided that the same are not inconsistent with
the Plan.
7. Terms and Conditions of Options.
(a) Exercise Price. Except as provided in Section 5(b)
of this Plan, the purchase price per share for Shares issuable upon
exercise of options shall be a minimum of 100% of fair market value
on the date of grant and shall be determined by the Board. For
this purpose, "fair market value" will be determined as set forth
A-2
in Section 9. Notwithstanding the foregoing, if any person to whom
an option is to be granted owns in excess of ten percent of the
outstanding capital stock of the Company, then no option may be
granted to such person for less than 110% of the fair market value
on the date of grant as determined by the Board.
(b) Annual Limit on Grant and Exercise. Incentive
Options shall not be granted to any individual pursuant to this
Plan, the effect of which would be to permit such person to first
exercise options, in any calendar year, for the purchase of Shares
having a fair market value in excess of $100,000 (determined at the
time of the grant of the options). An optionee hereunder may
exercise options for the purchase of Shares valued in excess of
$100,000 (determined at the time of the grant of the options) in a
calendar year, but only if the right to exercise such options shall
have first become available in prior calendar years.
(c) Payment for Delivery of Shares. Shares which are
subject to options shall be issued only upon receipt by the Company
of full payment of the purchase price for the Shares as to which
the option is exercised. The purchase price shall be payable by
the Participant to the Company either (i) in cash, certified
check, bank draft or money order payable to the order of the
Company; or (ii) through the delivery of Shares owned by the
Participant for a period of not less than six months and for which
the Participant has good title (free and clear of any liens and
encumbrances) having a fair market value equal to the purchase
price; or (iii) by a combination of cash and Shares as provided in
(i) and (ii) above.
The Company shall not be obligated to deliver any Shares
unless and until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been
complied with, nor, if the outstanding common stock is at the time
not listed on any securities exchange, unless and until the Shares
to be delivered have been listed (or authorized to be added to the
list upon official notice of issuance) upon such exchange, nor
unless or until all other legal matters in connection with the
issuance and delivery of Shares have been approved by the Company's
counsel. Without limiting the generality of the foregoing, the
Company may require from the person exercising an option such
investment representation or such agreement, if any, as counsel for
the Company may consider necessary in order to comply with the
Securities Act of 1933, as amended and applicable state securities
laws.
A Participant shall have the rights of a shareholder only as
to Shares actually acquired by him under the Plan.
(d) Vesting. Except for options granted pursuant to
Section 5(b) of this Plan, the Board may impose such vesting
restrictions as it sees fit at the time of grant.
A-3
(e) Non-Transferability of Options. Options may not be
sold, assigned or otherwise transferred or disposed of in any
manner whatsoever except as provided in Section 7(g).
(f) Forfeiture of Options upon Termination of
Relationship. All options which have not vested shall terminate
and be forfeited automatically upon the termination for any reasons
whatsoever of a Participant's status as an employee, consultant or
advisor to the Board. Unexercised options shall terminate and be
forfeited upon (i) the Participants voluntary termination of his
employment or (ii) the expiration of three months after the
Participant's employment is terminated by the Company. Except as
provided in Section 7(g) below, unexercised options granted to
directors shall not terminate or be forfeited in the event such
person is no longer a director of the Company.
(g) Death. If a Participant dies at a time when he is
entitled to exercise an option, then at any time or times within
one year after his death (or such further period as the Board may
allow) such options may be exercised, as to all or any of the
Shares which the Participant was entitled to purchase immediately
prior to his death, by his personal representative or the person or
persons to whom the options are transferred by the will or the
applicable laws of descent and distribution, and except as so
exercised such options will expire at the end of such period.
(h) Loans to Exercise Options. If requested by any
Participant to whom a grant of non-qualified options has been made,
the Company or any subsidiary may loan such person the amount of
money necessary to pay the federal income taxes incurred as a
result of the exercise of any options (or guarantee a bank loan for
such purpose), assuming that the Participant is in the maximum
federal income tax bracket six months from the time of exercise and
assuming that the Participant has no deductions which would reduce
the amount of such tax owed. The loan shall be made on or after
April 15th of the year following the year in which the amount of
tax is determined as may be requested by the Participant and shall
be made on such terms as the Company or lending bank determines.
(i) Withholding Taxes. To the extent that the Company
is required to withhold taxes for federal income tax purposes in
connection with the exercise of any options, the Company shall have
the right to assist the Participant to satisfy such withholding
requirement by (i) the Participant paying the amount of the
required withholding tax to the Company, (ii) the Participant
delivering to the Company Shares of its common stock previously
owned by the Participant or (iii) the Participant having the
Company retain a portion of the Shares covered by the option
exercise. The number of Shares to be delivered to or withheld by
the Company times the fair market value as defined by Section 8 of
this Plan shall equal the cash required to be withheld. To the
extent that the Company elects to allow the Participant either to
deliver or have withheld Shares of the Company's common stock, the
A-4
Board or the Committee may require him to make such election only
during certain periods of time as may be necessary to comply with
appropriate exemptive procedures regarding the "short-swing" profit
provisions of Section 16(b) of the Exchange Act or to meet certain
Code requirements.
8. Shares Subject to Plan.
(a) Number of Shares and Stock to be Delivered. Shares
delivered pursuant to this Plan shall, in the discretion of the
Board, be authorized but unissued Shares of common stock or
previously issued Shares acquired by the Company. Subject to
adjustments as described below, the aggregate number of Shares
which may be delivered under this Plan shall not exceed 100,000
Shares of common stock of the Company.
(b) Changes in Stock. In the event of a stock dividend,
stock split or combination of Shares, recapitalization, merger in
which the Company is the surviving corporation or other change in
the Company's capital stock, the number and kind of Shares of stock
or securities of the Company to be subject to the Plan and to
options then outstanding or to be granted thereunder, the maximum
number of Shares or securities which may be delivered under the
Plan, the option price and other relevant provisions, shall be
appropriately adjusted by the Board whose determination shall be
binding on all persons. In the event of a consolidation or merger
in which the Company is not the surviving corporation or which
results in the acquisition of substantially all the Company's
outstanding stock by a single person or entity, or in the event of
the sale or transfer of substantially all the Company's assets, all
outstanding options shall thereupon terminate.
The Board may also adjust the number of Shares subject to
outstanding options, the exercise price of outstanding options and
the terms of outstanding options to take into consideration
material changes in accounting practices or principles,
consolidations or mergers (except those in which the Company is not
the surviving Corporation as described in the immediately preceding
paragraph), acquisitions or dispositions of stock or property or
any other event if it is determined by the Board that such
adjustment is appropriate to avoid distortion in the operation of
the Plan.
9. Definitions.
(a) For purposes of the Plan, a subsidiary is any
corporation (i) in which the Company owns, directly or indirectly,
stock possessing 50 percent or more of the total combined voting
power of all classes of stock or (ii) over which the Company has
effective operating control.
(b) The fair market value of the Shares of common stock
shall be deemed to be:
A-5
(i) the closing price of the Company's common stock
appearing on a national securities exchange if the Company's common
stock is listed on such an exchange, or if not listed, the average
closing bid price appearing on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ");
(ii) if the Shares of common stock are not listed
on NASDAQ, then the average bid price for the Company's stock as
listed in the National Quotation Bureau's pink sheets;
(iii) if there are no listed bid prices published
in the pink sheets, then the market value shall be based upon the
average closing bid price as determined following a polling of all
dealers making a market in the Company's Shares.
10. Indemnification of Board. In addition to and without
affecting such other rights of indemnification as they may have as
members of the Board or otherwise, each member of the Board shall
be indemnified by the Company to the extent legally possible
against reasonable expenses, including attorney's fees, actually
and reasonably incurred in connection with any appeal therein, to
which he may be a party by reason of any action taken or failure to
act under or in connection with the Plan, or any option granted
thereunder, and against all judgments, fines and amounts paid by
him in settlement thereof; provided that such payment of amounts so
indemnified is first approved by a majority of the members of the
Board who are not parties to such action, suit or proceeding, or by
independent legal counsel selected by the Company, in either case
on the basis of a determination that such member acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company; and except that no
indemnification shall be made in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such
Board member is liable for a breach of the duty of loyalty, bad
faith or intentional misconduct in his duties; and provided
further, that the Board member shall, in writing, offer the Company
the opportunity, at its own expense, to handle and defend same.
11. Amendments. The Board may at any time discontinue
granting options under the Plan. The Board may at any time or
times amend the Plan or amend any outstanding option or options for
the purpose of satisfying the requirements of any changes in
applicable laws or regulations or for any other purpose which may
at the time be permitted by law, provided that (except to the
extent explicitly required or permitted herein above) no such
amendment will, without the approval of the stockholders of the
Company, (a) increase the maximum number of Shares available under
the Plan, (b) reduce the option price of outstanding options or
reduce the price at which options may be granted, (c) extend the
time within which options may be granted, (d) amend the provisions
of this Section 11 of the Plan, (e) adversely affect the rights of
any Participant (without his consent) under any options theretofore
granted or (f) be effective if stockholder approval is required by
applicable statute, rule or regulation.
Date Approved by Board of Directors: August 26, 1996
Date Approved by Shareholders: June 25, 1997
A-6
