-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HBjkgdGEBLHEarLP8S1ztbWuO9gZwgknOubyxfpMY2OKQLTWhs8M/8GEzc5whuwB VyDSgdcy8SPFf5LTFwtwfw== 0000910680-02-000054.txt : 20020414 0000910680-02-000054.hdr.sgml : 20020414 ACCESSION NUMBER: 0000910680-02-000054 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20020125 GROUP MEMBERS: FIFTH AVENUE GROUP LLC GROUP MEMBERS: MATTHEW FORTGANG GROUP MEMBERS: REVOCABLE TRUST FOR THE BENEFIT OF SUSAN FORTGANG DATED MAY FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FIFTH AVENUE GROUP LLC CENTRAL INDEX KEY: 0001164850 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: ONE ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10020 MAIL ADDRESS: STREET 1: ONE ROCKEFELLER PLAZA CITY: NEW YORK STATE: NY ZIP: 10020 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: LAZARE KAPLAN INTERNATIONAL INC CENTRAL INDEX KEY: 0000202375 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-JEWELRY, WATCHES, PRECIOUS STONES & METALS [5094] IRS NUMBER: 132728690 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-03935 FILM NUMBER: 02517765 BUSINESS ADDRESS: STREET 1: 529 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2129729700 MAIL ADDRESS: STREET 1: 529 FIFTH AVE STREET 2: 529 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10017 SC 13D/A 1 d775052_2.txt DATE OF EVENT 01/18/02 (DOC #775052_2) SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D/A UNDER THE SECURITIES EXCHANGE ACT OF 1934 (INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13D-2(a)) (AMENDMENT NO. 1) Lazare Kaplan International Inc. ------------------------------------- (Name of Issuer) Common Stock, par value $1.00 per share -------------------------------------- (Title of Class of Securities) 521078105 ----------- (CUSIP Number) Michael J. Shef Jenkens & Gilchrist Parker Chapin LLP The Chrysler Building 405 Lexington Avenue New York, New York 10174 212-704-6140 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) January 18, 2002 --------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [ ] Page 1 of 7 1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Fifth Avenue Group, LLC - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds: AF - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization United States of America - -------------------------------------------------------------------------------- Number of 7. Sole Voting Power -0- Shares Bene- ------------------------------------------------------ ficially Owned 8. Shared Voting Power 671,100 By Each ------------------------------------------------------ Reporting 9. Sole Dispositive Power -0- Person With ------------------------------------------------------ 10. Shared Dispositive Power 1,851,100 - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 1,851,100 - -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 21.3% - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) OO - -------------------------------------------------------------------------------- Page 2 of 7 1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Matthew Fortgang - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds: AF - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization United States of America - -------------------------------------------------------------------------------- Number of 7. Sole Voting Power -0- Shares Bene- ------------------------------------------------------ ficially Owned 8. Shared Voting Power 671,000 By Each ------------------------------------------------------ Reporting 9. Sole Dispositive Power -0- Person With ------------------------------------------------------ 10. Shared Dispositive Power 1,851,100 - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 1,851,100 - -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 21.3% - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN - -------------------------------------------------------------------------------- Page 3 of 7 1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Revocable Trust for the Benefit of Susan Fortgang dated May 23, 1996 - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds: AF - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization United States of America - -------------------------------------------------------------------------------- Number of 7. Sole Voting Power -0- Shares Bene- ------------------------------------------------------ ficially Owned 8. Shared Voting Power 671,100 By Each ------------------------------------------------------ Reporting 9. Sole Dispositive Power -0- Person With ------------------------------------------------------ 10. Shared Dispositive Power 1,851,100 - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 1,851,100 - -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 21.3% - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN - -------------------------------------------------------------------------------- Page 4 of 7 Except as to Items 3,5,6 and 7 no changes have occurred to the answer of any Items of this Schedule 13D from the information last reported by Fifth Avenue Group in respect of such Items. Defined terms used in this Amendment and not defined herein shall have the meanings ascribed to them in the Schedule 13D filed by the reporting persons on January 14, 2002. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Item 3 is amended to add the following: Fifth Avenue Group has entered into a Stock Purchase Agreement, dated January 18, 2002, with the Company to purchase 1,180,000 shares of the Company's Common Stock issued and held in the Company's treasury and 125,000 shares from the Company's authorized but unissued shares of Common Stock. Fifth Avenue Group expects to obtain funds from financial sources or obtain demand loans from an affiliate to purchase the 1,305,000 shares of Common Stock (the "Purchase"). Upon consummation of the Purchase, Fifth Avenue Group will beneficially own 1,851,100 shares of the Company's Common Stock (the "Shares"). ITEM 5. INTEREST IN SECURITIES OF THE ISSUER Items 5(a) and (b) are amended as follows: (a) Fifth Avenue Group ------------------ Fifth Avenue Group is the beneficial owner of the Shares. The Shares represent 21.3% of the Common Stock issued and outstanding. Matthew Fortgang ---------------- Matthew Fortgang, as a member of Fifth Avenue Group, may be deemed a beneficial owner of the Shares. The Shares represent 21.3% of the Common Stock issued and outstanding. Trust ----- The Trust, as a member of Fifth Avenue Group, may be deemed a beneficial owner of the Shares. The Shares represent 21.3% of the Common Stock issued and outstanding. (b) Fifth Avenue Group, Matthew Fortgang and the Trust may be deemed to share the power to vote 671,100 Shares and dispose of 1,851,000 Shares. Item 5(c) is amended to add the following: Page 5 of 7 (c) Fifth Avenue Group ------------------ The following is a list of transactions in the Common Stock that were effected in the past 60 days and were not previously reported:
Number of Shares ---------------- Date of Transaction Acquired Disposed of Price Nature of Transaction - ------------------- -------- ----------------- --------------------- January 3, 2002 14,500 $6.80 Open Market Purchase January 10, 2002 31,200 $7.57 Open Market Purchase January 16, 2002 13,500 $7.48 Open Market Purchase January 17, 2002 21,200 $8.17 Open Market Purchase January 18, 2002 23,100 $8.25 Open Market Purchase January 18, 2002 1,305,000 $9.00 Private Purchase (1)
- --------------- (1) Shares are to be purchased pursuant to a Stock Purchase Agreement by and between Fifth Avenue Group and the Company, dated January 18, 2002. Matthew Fortgang and the Trust have not effected any transactions in the Common Stock during the past 60 days. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER Item 6 is amended to add the following: Fifth Avenue Group has entered into a Stock Purchase Agreement with the Company, dated January 18, 2002. This agreement provides that Fifth Avenue Group shall purchase 1,305,000 shares of the Company's Common Stock at $9.00 per share on February 11, 2002, and that Fifth Avenue Group shall be subject to a Standstill Period (as defined in the Stock Purchase Agreement). Fifth Avenue Group has entered into a Shareholders Agreement with Maurice Tempelsman and Leon Tempelsman (the "Tempelsmans"), dated January 18, 2002 (the "Shareholders Agreement"). The Shareholders Agreement provides that Fifth Avenue Group will give the Tempelsmans an irrevocable proxy which will enable them, subject to certain conditions, to vote 1,180,000 of the 1,305,000 Shares to be purchased under the Stock Purchase Agreement. In addition, the Shareholders Agreement provides for certain Tag Along and Drag Along Rights (as defined in the Shareholders Agreement). ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Item 7 is amended to add the following: Exhibit 1. Stock Purchase Agreement by and between Fifth Avenue Group, LLC and Lazare Kaplan International Inc., dated January 18, 2002. Exhibit 2. Shareholders Agreement by and among Fifth Avenue Group, LLC, Maurice Tempelsman and Leon Tempelsman, dated January 18, 2002. Page 6 of 7 SIGNATURES After reasonable inquiry and to the best of the undersigned's knowledge and belief, the undersigned certifies that the information set forth in this statement with respect to the undersigned, is true, complete and correct. Dated: January 25, 2002 FIFTH AVENUE GROUP, LLC By: /s/ Matthew Fortgang ------------------------------------- Name: Matthew Fortgang Title: Manager Revocable Trust for the Benefit of Susan Fortgang dated May 23, 1996 By: /s/ Matthew Fortgang ------------------------------------- Name: Matthew Fortgang Title: Co-Trustee /s/ Matthew Fortgang ------------------------------------- Matthew Fortgang Page 7 of 7 EX-99.1 3 d776028.txt STOCK PURCHASE AGREEMENT ================================================================================ STOCK PURCHASE AGREEMENT By and between FIFTH AVENUE GROUP, LLC A New York limited liability company and LAZARE KAPLAN INTERNATIONAL INC. A Delaware corporation Dated: as of January 18, 2002 ================================================================================ STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "AGREEMENT") is made and entered into on and as of this 18th day of January 2002, by and between FIFTH AVENUE GROUP, LLC, a New York limited liability company ("PURCHASER"), and LAZARE KAPLAN INTERNATIONAL INC., a Delaware corporation ("SELLER"). RECITALS: WHEREAS, Seller is a corporation, the Common Stock of which is registered under the Securities Exchange Act of 1934 (the "EXCHANGE ACT") and admitted for trading on the American Stock Exchange (the "AMEX"); and WHEREAS, Purchaser wishes to purchase and Seller wishes to sell 1,180,000 shares of Common Stock issued and held in Seller's treasury (the "TREASURY SHARES") on the terms set forth in this Agreement; and WHEREAS, Purchaser also wishes to purchase and Seller also wishes to sell an additional 125,000 authorized but unissued shares of Common Stock (the "ADDITIONAL SHARES") on the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Purchaser and Seller hereby agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION Section 1.1 Defined Terms Certain. capitalized terms used herein shall have the meaning assigned to such terms in this Section 1.1. "ACCREDITED INVESTOR" has the meaning assigned to such term in Rule 501(a) promulgated under the Securities Act. "ACQUIRING PERSON" has the meaning assigned to such term in the Rights Agreement, as amended by the Rights Agreement Amendment, whether or not the Rights Agreement or the Rights issued pursuant thereto have expired or otherwise ceased to be in full force and effect. "ADDITIONAL SHARES" has the meaning set forth in the Recitals to this Agreement. "AFFILIATE" means an "affiliate" as such term is defined in Rule 12b-2 promulgated under the Exchange Act. "AGREEMENT" has the meaning assigned to such term in the Introduction to this Agreement. "AMEX" has the meaning set forth in the Recitals to this Agreement. "BENEFICIAL OWNER" means a "beneficial owner" within the meaning of Rule 13d-3 promulgated under the Exchange Act. "BENEFICIAL OWNERSHIP" means the interest of a Beneficial Owner in Common Stock. "BLOCK" means a number of shares of Common Stock equal to or greater than 5% of the number of shares of Common Stock outstanding at the time the size of the Block is being determined. "BOARD OF DIRECTORS" means the Board of Directors of Seller. "BUSINESS DAY" means any day other than a day on which banks in New York City are required or authorized by Law to be closed. "CLOSING" has the meaning assigned to such term in Section 3.1 hereof. "CLOSING DATE" has the meaning assigned to such term in Section 2.1 hereof. "COMMON STOCK" means the Common Stock, par value $1.00 per share, of Seller. "EQUITY SECURITIES" means any (i) Common Stock, (ii) securities of Seller convertible or exchangeable for Common Stock and (iii) options, rights, warrants and similar securities issued by Seller to acquire Common Stock. "EXCHANGE ACT" has the meaning set forth in the Recitals to this Agreement. "FIRST INSTALLMENT PERCENTAGE" has the meaning set forth in Section 6.4(b) hereof. "GAAP" mean United States generally accepted accounting principles, as currently in effect. "LAW" means any national, federal, state, municipal, local, foreign or other statute, law, ordinance, regulation, rule, code, order, injunction, judgment, decree, ruling or other requirements or rule of law. "MAXIMUM ALLOCATION" has the meaning assigned to such term in Section 6.3 hereof. "NOTICES" has the meaning assigned to such term in Section 8.1 hereof. "OTHER SHARES" means any Equity Securities, other than the Treasury Shares, of which Purchaser is the Beneficial Owner. "PARTIES" shall mean, collectively, Purchaser and Seller, and each individually a "PARTY." "PER SHARE PURCHASE PRICE" has the meaning assigned to such term in Section 2.2 hereof. "PERSON" means any individual, partnership, firm, corporation, limited liability company, joint venture, trust, unincorporated organization or association or other entity. -2- "PURCHASED SHARES" means the Treasury Shares and the Additional Shares. "PURCHASE PRICE" has the meaning assigned to such term in Section 2.2 hereof. "PURCHASER" has the meaning assigned to such term in the Introduction to this Agreement. "PURCHASER BLOCK SALE NOTICE" has the meaning assigned to such term in Section 6.4(a) hereof. "PURCHASER INTEREST" means the number or percentage (depending upon the context) of outstanding Common Stock that is controlled directly or indirectly by Purchaser, including the Treasury Shares subject to the Purchaser Proxy. "PURCHASER PROXY" means the irrevocable proxy to be dated the Closing Date and delivered by Purchaser pursuant to the Shareholders Agreement. "RESTRICTED SECURITIES" has the meaning assigned to such term in Rule 144(a)(3) promulgated under the Securities Act. "RIGHTS AGENT" means ChaseMellon Shareholder Services, LLC, in the case of the Rights Agreement and Mellon Investor Services LLC, in the case of the Rights Agreement Amendment. "RIGHTS AGREEMENT" means the Rights Agreement dated as of July 31, 1997 between Seller and the Rights Agent. "RIGHTS AGREEMENT AMENDMENT" means the Amendment to Rights Agreement dated as January 17, 2002 between Seller and the Rights Agent, which, among other things, amends the definition of "Acquiring Person" in the Rights Agreement, as it applies only to Purchaser, by changing "15%" wherever it appears in such definition to "24.9%". "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933. "SELLER" has the meaning assigned to such term in the Introduction to this Agreement. "SELLER BLOCK SALE RESPONSE" has the meaning assigned to such term in Section 6.4(b) hereof. "SELLER'S BY-LAWS" means the By-laws, as amended, of Seller in the form filed by Seller under the Exchange Act. "SELLER'S CERTIFICATE OF INCORPORATION" means the Certificate of Incorporation, as amended, of Seller in the form filed by Seller under the Exchange Act. "SELLER'S FINANCIAL STATEMENTS" means the consolidated balance sheets (including the related notes and schedules) of Seller as of May 31 and November 30, 2001, and the consolidated statements of income and of cash flows for the periods then ended (including the -3- related notes and schedules) included in Seller's Form 10-K and Form 10-Q filed under the Exchange Act for the periods then ended. "SHAREHOLDERS AGREEMENT" means the Shareholders Agreement dated the date of this Agreement among Purchaser, Leon Tempelsman and Maurice Tempelsman. "STANDSTILL PERIOD" means the period of time commencing on the Closing Date and terminating on the ten year anniversary of such date. "TEMPELSMAN INTEREST" means the number or percentage (depending upon the context) of outstanding Common Stock that is controlled directly or indirectly by Leon Tempelsman or Maurice Tempelsman other than any shares of Common Stock included in the Purchaser Interest. "TRANSACTION" has the meaning assigned to such term in Section 2.1 hereof. "TRANSACTION DOCUMENTS" means this Agreement, the Shareholders Agreement, the Purchaser Proxy, the Rights Agreement Amendment and each other certificate, instrument or document contemplated hereby or delivered hereunder. "TREASURY SHARES" has the meaning set forth in the Recitals to this Agreement. Section 1.2 Singular and Plural; Gender. Whenever appropriate in the context, terms used in the Transaction Documents in the singular also include the plural, and vice versa, and each masculine, feminine or neuter pronoun shall also include the other genders. Section 1.3 Meaning of "INCLUDING". As used herein, the word "INCLUDING" shall be deemed to mean "including, without limitation," unless otherwise expressly provided in any instance. Section 1.4 Headings. The article, section and other headings in the Transaction Documents are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions of the Transaction Documents. Section 1.5 Drafting. The Parties have participated jointly in the negotiation and drafting of the Transaction Documents, and they agree that any ambiguity or question of intent or interpretation that may arise shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of the Transaction Documents. ARTICLE II PURCHASE AND SALE OF THE PURCHASED SHARES Section 2.1 Purchase and Sale of the Purchased Shares. On February 11, 2002 (the "CLOSING DATE"), Seller shall sell, convey, assign, transfer and deliver to Purchaser, and -4- Purchaser shall purchase, acquire and accept from Seller, the Purchased Shares (the "TRANSACTION"). Section 2.2 Purchase Price of the Purchased Shares. The purchase price for each of the Purchased Shares (the "PER SHARE PURCHASE PRICE") shall be $9.00, and the aggregate purchase price for the Purchased Shares (the "PURCHASE PRICE") shall be the Per Share Purchase Price multiplied by the number of Purchased Shares being purchased and sold pursuant to Section 2.1 hereof, for an aggregate Purchase Price of $11,745,000. Section 2.3 Nature of the Obligation to Purchase and Sell the Purchased Shares. The obligations of Purchaser to purchase and Seller to sell the Purchased Shares on the Closing Date at the Purchase Price shall be irrevocable and shall be subject only to the respective conditions precedent set forth in Article VII hereof and no other conditions precedent of any kind or character, including any changes or absence of changes in the financial condition, results of operations or prospects of any Party, the price at which Seller's Common Stock trades on the Amex or any force majeure or terrorist event. Notwithstanding the foregoing, the Closing Date shall be postponed during the continuation of any bank holiday in New York City that prevents the Purchase Price from being paid by wire transfer. ARTICLE III CLOSING Section 3.1 Closing. The Closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Warshaw Burstein Cohen Schlesinger & Kuh, LLP, 555 Fifth Avenue, New York, NY 10017 commencing at 10:00 a.m. local time on the Closing Date. Section 3.2 Deliveries of Seller. At the Closing, Seller shall deliver or cause to be delivered to Purchaser: (a) two stock certificates evidencing the Treasury Shares and the Additional Shares, respectively, in each case registered in the name of Purchaser and bearing the legends referred to in Section 5.3 hereof; and (b) a copy of resolutions duly adopted by the Board of Directors authorizing and approving the execution and delivery of the Transaction Documents to which it is a party, and the performance of the transactions contemplated hereby and thereby, certified by the Secretary or other appropriate officer of Seller as correct and complete and in full force and effect as of the Closing. Section 3.3 Deliveries of Purchaser. At the Closing, Purchaser shall deliver or cause to be delivered to Seller: -5- (a) the Purchase Price by wire transfer pursuant to the instructions annexed hereto as Annex A; (b) a copy of resolutions duly adopted by the members of Purchaser authorizing and approving the execution and delivery of the Transaction Documents, and the performance of the transactions contemplated thereby, certified by a member or by the Secretary or other appropriate officer of Purchaser as correct and complete and in full force and effect as of the Closing; (c) a copy of Purchaser's operating agreement and any and all amendments thereto, certified by a member or by the Secretary or other appropriate officer of Purchaser as correct and complete and in full force and effect as of the Closing; and (d) a receipt for the Treasury Shares and the Additional Shares. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER As an inducement for Purchaser to enter into the Transaction Documents, Seller represents and warrants to Purchaser as follows: Section 4.1 Organization, Good Standing, Power. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified to do business as a foreign corporation and is in good standing in the State of New York. Section 4.2 Treasury Shares. All of the Treasury Shares have been validly issued and are fully paid and non-assessable. Section 4.3 Additional Shares. Upon payment therefor at the Closing, all of the Additional Shares will be validly issued, fully paid and non-assessable. Section 4.4 Seller's By-laws and Certificate of Incorporation. The copies of Seller's By-laws and Seller's Certificate of Incorporation delivered by Seller to Purchaser are correct and complete and in full force and effect. Section 4.5 Authorization, Execution and Delivery of Transaction Documents. Seller has all requisite corporate power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder. Seller has taken all necessary corporate action to authorize the execution, delivery and performance of the Transaction Documents that are to be executed by it and the consummation of the transactions contemplated thereby. The Transaction Documents to which Seller is a party have been duly and validly executed and delivered by Seller and, assuming the due authorization, execution and delivery by Purchaser, constitute the valid and binding obligation of Seller, enforceable in accordance with their terms except as such enforcement may be limited by bankruptcy, insolvency, moratorium or other similar Laws presently or hereafter in effect affecting the enforcement of creditors' rights generally and general equitable principles. Seller's execution and delivery of the Transaction -6- Documents to which it is a party do not, and Seller's performance of the transactions contemplated thereby, will not violate or conflict with any provision of applicable Law, Seller's By-laws, Seller's Certificate of Incorporation or any agreement to which Seller is a party or by which Seller's property is bound. Section 4.6 Seller's Financial Statements. Each of the consolidated balance sheets included in Seller's Financial Statements fairly presented, in all material respects, the consolidated financial position of Seller as of the dates set forth in those consolidated balance sheets. Each of the consolidated statements of income and of cash flows included in Seller's Financial Statements, fairly presented, in all material respects, the consolidated results of operations and cash flows, as the case may be, of Seller for the periods set forth in those consolidated statements of income and of cash flows (except for, in the case of unaudited quarterly statements, the omission of certain notes, and normal year-end audit adjustments that in the opinion of Seller's management were not, at the time, material in amount or effect to the financial statements taken as a whole), in each case prepared in conformity with GAAP (except, in the case of unaudited quarterly statements, as permitted by Form 10-Q of the SEC) consistently applied throughout the periods indicated. Section 4.7 No Brokers or Finders. No agent, broker, finder or investment or commercial banker, or other Person engaged by or acting on behalf of Seller in connection with the negotiation, execution or performance of this Agreement or the Transaction, is or will be entitled to any broker's or finder's or similar fee or other commission as a result of this Agreement or the Transaction. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER As an inducement for Seller to enter into the Transaction Documents to which it is a party, Purchaser represents and warrants to Seller as follows: Section 5.1 Organization, Good Standing, Power. Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the State of New York. Section 5.2 Authorization, Execution and Delivery of the Transaction Documents. Purchaser has all requisite power and authority to execute and deliver the Transaction Documents and to perform its obligations thereunder. Purchaser has taken all necessary action to authorize the execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby. The Transaction Documents have been duly and validly executed and delivered by Purchaser and, assuming the due authorization, execution and delivery by Seller of the Transaction documents to which it is a party, constitute the valid and binding obligation of Purchaser, enforceable in accordance with their terms except as such enforcement may be limited by bankruptcy, insolvency, moratorium or other similar Laws presently or hereafter in effect affecting the enforcement of creditors' rights generally and general equitable principles. Purchaser's execution and delivery of the Transaction Documents do not, and Purchaser's performance of the transactions contemplated thereby will not, violate or -7- conflict with any provision of applicable Law, Purchaser's operating agreement, as amended, or any agreement to which Purchaser is a party or by which Purchaser's property is bound. Section 5.3 Purchased Shares and Other Matters. Purchaser acknowledges and agrees that (i) Seller has made no representations or warranties concerning the Purchased Shares or Seller except as expressly set forth in Article IV hereof; (ii) the Purchased Shares are Restricted Securities and will not be transferable absent registration under the Securities Act or exemption therefrom; (iii) the stock certificates to be issued to Purchaser pursuant to Section 3.2(a) hereof will include legends to reflect the fact that the Purchased Shares are Restricted Securities and are subject to restrictions contained in this Agreement and the Shareholders Agreement; (iv) except as set forth in Section 6.3 hereof, Seller does not have any obligation to register the Purchased Shares under the Securities Act or any other federal or state securities law or to make available any exemption from such registration; (v) Purchaser has been given the opportunity to discuss with officers of Seller the business, prospects, affairs and condition of Seller; (vi) Purchaser has knowledge and experience in financial business matters and is familiar with the business of Seller; (vii) Purchaser is an Accredited Investor capable of evaluating the merits and risks of its purchase and ownership of the Purchased Shares; (viii) Purchaser is purchasing the Purchased Shares for its own account, for investment, and not with a view to the resale or distribution thereof; and (ix) Purchaser has been furnished with copies of the Rights Agreement and the Rights Agreement Amendment. Section 5.4 Liquidity. On the Closing Date Purchaser will have available to it immediately available funds in an aggregate amount not less than the Purchase Price. Section 5.5 Schedule 13D. The Schedule 13D filed with the SEC by Purchaser on January 14, 2002 with respect to its Beneficial Ownership of Common Stock does not, and the amendment to such Schedule 13D to be filed by Purchaser to reflect the transactions contemplated by the Transaction Documents will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. Section 5.6 No Brokers or Finders. No agent, broker, finder or investment or commercial banker, or other Person engaged by or acting on behalf of Purchaser in connection with the negotiation, execution or performance of this Agreement or the Transaction, is or will be entitled to any broker's or finder's or similar fee or other commission as a result of this Agreement or the Transaction. ARTICLE VI COVENANTS OF PURCHASER AND SELLER Section 6.1 Limitation on Beneficial Ownership of Common Stock and Other Matters. (a) During the Standstill Period, Purchaser shall not directly or indirectly, purchase or otherwise acquire, or propose or offer to purchase or otherwise acquire, any Equity Securities, whether by tender offer, market purchase, privately negotiated purchase or otherwise, if, after such purchase or acquisition, Purchaser would become an Acquiring Person after giving -8- effect to such purchase or acquisition. During the Standstill Period, Purchaser and its Affiliates shall not make any public announcement with respect to the transactions prohibited by this Section 6.1(a). (b) During the Standstill Period, all Common Stock beneficially owned by Purchaser and its Affiliates shall be owned of record by Purchaser; (c) During the Standstill Period, Purchaser shall not sell or transfer any of the Treasury Shares to any Person, including without limitation, the financial institution referred to in Section 6.1(d) hereof, unless such Person agrees in writing to be bound by all of the terms and provisions of the Transaction Documents to the same extent as Purchaser is bound; provided, however, Treasury Shares may be sold pursuant to Rule 144 promulgated under the Securities Act or pursuant to Section 6.3 hereof without requiring the purchaser of such Treasury Shares to be bound by the Transaction Documents; provided, further, however, that Purchaser shall not sell any Treasury Shares pursuant to the previous proviso until it has first sold all of its Other Shares; (d) During the Standstill Period, Purchaser shall not pledge or encumber any of the Treasury Shares to any Person other than, if required, a financial institution consented to by Seller (such consent not to be unreasonable withheld) in connection with financing that portion of the Purchase Price allocable to the Treasury Shares; (e) During the Standstill Period, Purchaser and its Affiliates shall not seek to advise, encourage or influence any Person with respect to the voting of any Equity Securities, initiate, propose or otherwise solicit stockholders of Seller for the approval of one or more stockholder proposals or induce or attempt to induce any other Person to initiate any stockholder proposal; (f) During the Standstill Period, Purchaser and its Affiliates shall not, other than as a consequence of the Shareholders Agreement, deposit any Treasury Shares into a voting trust or subject any Treasury Shares to any arrangement or agreement with respect to the voting of such securities or form, join or in any way participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any Equity Securities; (g) During the Standstill Period, Purchaser shall not permit its members to grant to any Person other than a member of Purchaser any voting rights with respect to any membership interest in Purchaser; (h) During the Standstill Period, Purchaser and its Affiliates shall not sell or transfer any of the membership interests in Purchaser, except to a family member (by blood, marriage or adoption) of an existing member of Purchaser or to a trust for the benefit of such a family member; (i) During the Standstill Period, Purchaser shall not merge or consolidate with any Person other than on the following terms and conditions, all of which terms and conditions shall continue in their entirety during the Standstill Period: (A) the surviving entity to such merger or consolidation shall be, and shall continue to be, controlled by one or more existing members of Purchaser; (B) not less than 85% of the economic and voting interests in such surviving entity shall be owned both of record and beneficially by one or more existing members -9- of Purchaser and/or by a family member (by blood, marriage or adoption) of one or more existing members of Purchaser or a trust for the benefit of such a family member; and (C) no such merger or consolidation shall become effective unless the surviving entity to such merger or consolidation agrees in writing to be bound by all of the terms and provisions of the Transaction Documents to the same extent as Purchaser is bound; and (j) During the Standstill Period, Purchaser shall not liquidate and distribute its assets to any Person other than a member or members of Purchaser. Section 6.2. Seller's Fiduciary Duties. The Board of Directors will discharge its fiduciary duties to the stockholders of Seller by considering, in good faith, when and under what circumstances to waive the limitations on Purchaser and its Affiliates set forth in Section 6.1 hereof. Section 6.3 Piggyback Registration. During the Standstill Period, if any shares of Common Stock included in the Tempelsman Interest are included in a registration statement (other than on Form S-8) filed by Seller under the Securities Act, Seller will give Purchaser the opportunity to include its shares of Common Stock in such registration statement on the same terms and conditions as the shares of Common Stock included in the Tempelsman Interest are included, subject to the following conditions: (i) the maximum number of shares to be included in such registration statement from the Tempelsman Interest and the Purchaser Interest shall first be determined by Seller (the "MAXIMUM ALLOCATION"); and then (ii) the maximum number of shares to be included from the Purchaser Interest shall be determined by multiplying the Maximum Allocation by a fraction, the numerator of which shall be the then current Purchaser Interest and the denominator of which shall be the sum of the then current Purchaser Interest and the then current Tempelsman Interest; provided, however, that such fraction, expressed as a percentage, shall never exceed 50%. Section 6.4 Proposed Block Sales by Purchaser. (a) During the Standstill Period, if Purchaser proposes to sell in a single transaction or in a series of related transactions a Block of Other Shares, before consummating the proposed sale, Purchaser shall deliver to Seller a written notice (a "PURCHASER BLOCK SALE NOTICE") setting forth with respect to the proposed Block sale: (i) the number of shares of Common Stock; (ii) the price per share of Common Stock; (iii) the payment and other terms of the proposed Block sale; (iv) the identity of the proposed purchaser in sufficient detail to permit Seller to know the ultimate beneficial owner of the proposed purchaser; and (v) whether Purchaser has previously sold or transferred any shares of Common Stock to the proposed purchaser, and, if so, the dates, amounts and prices at which such shares were previously sold or transferred to the proposed purchaser. (b) Within seven Business Days of receiving a Purchaser Block Sale Notice, Seller shall deliver to Purchaser a written notice (a "SELLER BLOCK SALE RESPONSE") as follows: (i) if Seller has a good business reason for the proposed purchaser not to purchase the Block, Seller shall set forth in reasonable detail its good business reason, in which event, Purchaser shall not sell the Block to such proposed purchaser; (ii) if Seller has no objection to the proposed purchaser and no interest in acquiring the Block, it shall so state, in which event Purchaser shall -10- be free to consummate the Block sale to the proposed purchaser at the price per share and on the other terms and conditions set forth in the Purchaser Block Sale Notice but only during the 20 Business Days following Purchaser's receipt of the Seller Block Sale Response; (iii) if Seller wishes to purchase the Block at the same price per share set forth in the Purchaser Block Sale Notice, it shall irrevocably agree to purchase the Block and shall agree either: (A) to accept the payment terms described in the Purchaser Block Sale Notice; or (B) (1) to wire transfer to Purchaser pursuant to the wire transfer instructions set forth in Annex B annexed hereto, at least 25% of the aggregate purchase price (the "FIRST INSTALLMENT PERCENTAGE") for the Block, against receipt of a certificate for the First Installment Percentage of the Block, endorsed in blank or accompanied by a stock power endorsed in blank, and (2) to wire transfer to Purchaser pursuant to such wire transfer instructions, within 45 calendar days of the date of the Seller Block Sale Response, any portion of such aggregate purchase price not included in the First Installment Percentage, against receipt of a certificate for the remainder of the Block, endorsed in blank or accompanied by a stock power endorsed in blank, in which event Purchaser shall sell the Block to Seller on the payment terms elected by Seller. (c) If the proposed purchaser of any Block changes the terms of its proposed purchase after Purchaser has delivered its Purchaser Block Sale Notice to Seller but before Seller has delivered its Seller Block Sale Response to Purchaser, Purchaser shall deliver to Seller a revised Purchaser Block Sale Notice that describes the revised terms. In such event, Seller shall have seven Business Days from its receipt of the revised Purchaser Block Sale Notice to deliver its Seller Block Sale Response to Purchaser and otherwise comply with the provisions of Section 6.4(b) hereof, and the other time provisions set forth in this Section 6.4 shall be correspondingly extended. (d) If Seller fails to deliver a Seller Block Sale Response to Purchaser within seven Business Days of Seller's receipt of a Purchaser Block Sale Notice, Purchaser may conclusively presume that Seller has no objection to the proposed purchaser and no interest in acquiring the Block, in which event Purchaser shall be free to consummate the Block sale to the proposed purchaser at the price per share and on the other terms and conditions set forth in the Purchaser Block Sale Notice but only during the 20 Business Days following the expiration of such seven Business Days. (e) If Seller fails to consummate the purchase of a Block within 45 calendar days of the date of the Seller Block Sale Response, Purchaser shall be free to sell the portion of the Block not paid for by Seller, but only during the 20 Business Days following the expiration of such 45 calendar day period. If, on a per share basis, Purchaser receives less than the price per share of Common Stock set forth in the applicable Purchaser Block Sale Notice, Seller shall promptly reimburse Purchaser for an amount equal to the difference between (i) the proceeds received by Purchaser from the sale during such 20 Business Day period of any of the Block shares not purchased by Seller and (ii) the proceeds Purchaser would have received from Seller for such portion of the Block had Seller consummated the purchase thereof within such 45 calendar day period. -11- ARTICLE VII CONDITIONS TO CLOSING Section 7.1 Conditions to Obligation of Purchaser. The obligation of Purchaser to consummate the Transaction is subject to satisfaction of the following conditions at the Closing, unless waived by Purchaser: (a) there shall not be any Law in effect preventing consummation of the Transaction; (b) the Rights Agreement Amendment shall be in effect; and (c) the representations and warranties of Seller set forth in Article IV hereof shall be true and correct on and as of the Closing Date. Section 7.2 Conditions to Obligation of Seller. The obligation of Seller to consummate the Transaction is subject to satisfaction of the following conditions at the Closing, unless waived by Seller: (a) there shall not be any Law in effect preventing consummation of the Transaction; (b) the representations and warranties of Purchaser set forth in Article V hereof shall be true and correct on and as of the Closing Date; and (c) Purchaser shall have delivered the duly executed and notarized Purchaser Proxy at the Closing pursuant to the Shareholders Agreement. ARTICLE VIII MISCELLANEOUS Section 8.1 Notices. All notices, requests, claims, demands and other communications ("NOTICES") given under this Agreement shall be effective if in writing and sent to the Party to whom notice is intended to be given at the address(es) specified on the signature page hereto (or at such other address as a Party may hereafter designate by notice to the other Party as provided herein) by: (i) United States registered or certified mail, return receipt requested; (ii) a nationally recognized overnight courier service; (iii) hand delivery; or (iv) facsimile transmission confirmed by U.S. mail. Notice given by mail shall be effective on the date of delivery or refused delivery indicated on the return receipt. Notice given by overnight courier shall be effective on the next Business Day after delivery thereof to an authorized representative of the courier service in a properly addressed and prepaid enclosure marked for next day delivery. Notice given by hand delivery shall be effective when delivered to the Party to whom it is addressed or to an actual or apparent officer, director, employee or agent of such party at the address set forth above. Notice given by facsimile transmission shall be effective when received, and if not during a Business Day, the next Business Day after receipt, at the facsimile machine at the fax number specified on the signature page hereto (or at such other fax number as a Party may hereafter designate by notice to the other Party as provided herein), as evidenced by the -12- sender's failure to receive an electronic error message on the sending facsimile machine that the facsimile was not received. Section 8.2 Amendment; Termination; Waiver. The Transaction Documents may not be amended, terminated, changed, modified or discharged, in whole or in part, nor may any of their provisions be waived, except by a written instrument that expressly refers to the Transaction Documents and that is executed by all of the parties thereto and express third party beneficiaries thereof. Any waiver by any Party of a breach of any provision of the Transaction Documents shall not operate as, or be construed to be a waiver of, any other breach of such provision or of any breach of any other provision of the Transaction Documents. The failure of any Party to assert any of its rights under the Transaction Documents shall not constitute a waiver of any of such rights. Section 8.3 Entire Agreement. The Transaction Documents contain the entire agreement between the Parties with respect to the subject matter hereof and the Transaction, and all prior negotiations, agreements and undertakings, both written and oral, with respect thereto are merged into the Transaction Documents. Each Party expressly acknowledges that in executing and delivering the Transaction Documents to which it is a party, it is not relying upon any warranties, representations, promises or statements, except to the extent that the same are expressly set forth in the Transaction Documents. Any confidentiality agreement between any of the Parties or their Affiliates that may now exist shall remain in effect in accordance with its terms and shall not be superseded or merged into this Agreement. Section 8.4 Successors and Assigns. The Transaction Documents shall inure to the benefit of and be binding upon the Parties hereto, and their respective successors and permitted assigns. Nothing in the Transaction Documents, express or implied, shall be deemed to confer upon any Person or entity, other than the parties thereto and their respective successors and permitted assigns any right, benefit or remedy of any nature whatsoever under or by reason of the Transaction Documents, including, without limitation, the right to insist upon or enforce against any Party the performance of such Party's obligations under the Transaction Documents. For purposes of this Agreement, Leon Tempelsman and Maurice Tempelsman shall be deemed to be express third party beneficiaries of the Purchaser Proxy. Section 8.5 Governing Law and Jurisdiction. The Transaction Documents are entered into in the State of New York and shall be construed in accordance with the laws of New York applicable to contracts entered into and to be wholly performed therein without regard to conflict of law principles. The Parties agree that any action, suit or proceeding based upon any matter, claim or controversy arising hereunder or relating hereto shall be brought solely in the State Courts of or the Federal Court in the State and County of New York, and each Party represents and warrants that such Party shall submit to the personal jurisdiction of any such court or tribunal and agrees that legal process may be served on such Party by delivery or mail in the same matter as Notices hereunder. Section 8.6 Severability. Any provision of the Transaction Documents which may be determined by competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of the Transaction Documents, and any such prohibition or -13- unenforceability in such jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Moreover, if any one or more provisions contained in the Transaction Documents shall for any reason be held by any court of competent jurisdiction to be excessively broad as to duration, activity or subject, it shall be construed, by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable Law as it shall then appear. Section 8.7 Survival. The representations, warranties and covenants of the Parties contained in the Transaction Documents, and all statements contained in the Transaction Documents, shall be deemed to be material and to have been relied upon by the parties thereto notwithstanding any investigation or due diligence performed in connection with the Transaction Documents and shall survive the Closing Date. Section 8.8 Fees and Expenses. All costs and expenses (including legal and financial advisory fees and expenses) incurred in connection with, or in anticipation of, the Transaction Documents and the Transaction shall be paid by the Party incurring such expenses. Section 8.9 Counterparts. The Transaction Documents may be executed in any number of counterparts, each of which shall be deemed to be an original instrument and all of which together shall constitute a single agreement. Section 8.10 Waiver of Trial by Jury. EACH OF THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION BASED ON THE TRANSACTION DOCUMENTS, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THE TRANSACTION DOCUMENTS OR THE TRANSACTION, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY TO THE TRANSACTION DOCUMENTS. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF THE PARTIES ENTERING INTO THE TRANSACTION DOCUMENTS. Section 8.11 Specific Performance. Each Party recognizes and agrees that a breach by such Party of any of the covenants set forth in this Agreement could cause irreparable harm to one or more other Parties, that such other Party's or Parties' remedies at law in the event of such breach would be inadequate, and that, accordingly, in the event of such breach a restraining order or injunction or both may be issued against such Party, in addition to any other rights and remedies which are available to such other Party or Parties. If this Section 8.11 is more restrictive than permitted by the laws of the State of New York, this Section 8.11 will be limited to the extent required to permit enforcement under the laws of the State of New York. Section 8.12 Public Announcement. No Party to the Transaction Documents shall make, or cause to be made, any press release or other public announcement or communication in respect of the Transaction Documents or the Transaction without the prior written consent of the other Party, which consent shall not be unreasonably withheld. Upon execution and delivery of this Agreement, Seller shall promptly issue a press release after consultation with Purchaser concerning its contents. -14- Section 8.13 Attorneys' Fees. Notwithstanding Section 8.8, in the event of any action for breach of this Agreement or any other claim arising out of the Transaction Documents or the Transaction, the prevailing party shall be entitled to reasonable attorneys' fees, costs and expenses incurred in such action. Attorneys' fees incurred in enforcing any judgment in respect of the Transaction Documents are recoverable as a separate item. The provisions of this Section 8.13 are intended to be severable from the other provisions of this Agreement and to survive any judgment and, to the maximum extent permitted by Law, shall not be deemed merged into any such judgment. IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first stated above. FIFTH AVENUE GROUP, LLC LAZARE KAPLAN INTERNATIONAL INC. By: /s/ Matthew Fortgang By: /s/ Leon Tempelsman -------------------- ------------------- Name: Matthew Fortgang Name: Leon Tempelsman Title: Member Title: President Address: 1 Rockefeller Plaza Address: 525 Fifth Avenue New York, New York 10020 New York, New York Fax Number: (212) 582-6866 Fax Number (212) 697-3197 -15- ANNEX A Wire Transfer Instructions to Seller FLEET BANK 592 FIFTH AVENUE NEW YORK, NEW YORK 10036 U.S.A. FOR CREDIT TO THE ACCOUNT OF LAZARE KAPLAN ACCT. NO. 2538006163 ABA #021200339 -16- ANNEX B Wire Transfer Instructions to Purchaser -17- EX-99.1 4 d776029.txt SHAREHOLDERS AGREEMENT ================================================================================ SHAREHOLDERS AGREEMENT By and among FIFTH AVENUE GROUP, LLC A New York limited liability company MAURICE TEMPELSMAN and LEON TEMPELSMAN Dated: as of January 18, 2002 ================================================================================ SHAREHOLDERS AGREEMENT This Shareholders Agreement (this "AGREEMENT") is made and entered into on and as of this 18th day of January 2002, by and among FIFTH AVENUE GROUP, LLC, a New York limited liability company (the "GROUP"), MAURICE TEMPELSMAN ("MT") and LEON TEMPELSMAN ("LT"). RECITALS: WHEREAS, the parties to this Agreement (collectively, the "PARTIES") are all beneficial owners of the Common Stock of Lazare Kaplan International Inc., a Delaware corporation ("LKI"); and WHEREAS, MT and LT (collectively, the "TEMPELSMAN PARTIES"), on the one hand, and the Group, on the other hand, wish to enter into this Agreement for the purpose of receiving the rights and undertaking the obligations herein provided for; and WHEREAS, the Parties wish this Agreement to become effective on and as of its date as to all provisions except Article II hereof; and WHEREAS, the Parties wish that Article II of this Agreement shall not become effective unless and until the consummation of the closing of the transactions described in Article III of this Agreement (the "CLOSING"); NOW, THEREFORE, in consideration of the mutual promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION Section 1.1 Defined Terms. Certain capitalized terms used herein shall have the meaning assigned to such terms in this Section 1.1. "AGREEMENT" has the meaning assigned to such term in the Introduction to this Agreement. "BUSINESS DAY" means any day other than a day on which banks in New York City are required or authorized by Law to be closed. "COMMON STOCK" means the Common Stock, par value $1.00 per share, of LKI. "CLOSING" has the meaning assigned to such term in the Recitals to this Agreement. "DRAG ALONG RIGHTS" has the meaning assigned to such term in Section 2.2(b) hereof. "GROUP" has the meaning assigned to such term in the Introduction to this Agreement. "GROUP INTEREST" means the number or percentage (depending upon the context) of outstanding Common Stock that is controlled directly or indirectly by the Group, including the shares of Common Stock subject to the Group Proxy. "GROUP PROXY" has the meaning assigned to such term in Section 3.2 hereof. "LKI" has the meaning assigned to such term in the Recitals to this Agreement. "LT" has the meaning assigned to such term in the Introduction to this Agreement. "MT" has the meaning assigned to such term in the Introduction to this Agreement. "NOTICES" has the meaning assigned to such term in Section 4.1 hereof. "PARTIES" has the meaning assigned to such term in the Recitals to this Agreement. "PERSON" means any individual, partnership, firm, corporation, limited liability company, joint venture, trust, unincorporated organization or association or other entity. "RELATED TEMPELSMAN PERSON" means any Person who is related to either of the Tempelsman Parties by blood, marriage or adoption or which is wholly-owned and controlled by either or both of the Tempelsman Parties. "STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement, dated as of the date of this Agreement, between the Group and LKI. "TAG ALONG RIGHTS" has the meaning assigned to such term in Section 2.1(b) hereof. "TEMPELSMAN INTEREST" means the number or percentage (depending upon the context) of outstanding Common Stock that is controlled directly or indirectly by LT and/or MT other than any shares of Common Stock included in the Group Interest. "TEMPELSMAN PARTIES" has the meaning assigned to such term in the Recitals to this Agreement. Section 1.2 Singular and Plural; Gender. Whenever appropriate in the context, terms used in the Transaction Documents in the singular also include the plural, and vice versa, and each masculine, feminine or neuter pronoun shall also include the other genders. Section 1.3 Meaning of "INCLUDING". As used herein, the word "INCLUDING" shall be deemed to mean "including, without limitation," unless otherwise expressly provided in any instance. -2- ARTICLE II DRAG ALONG/TAG ALONG RIGHTS Section 2.1 Tag Along Rights. If the Tempelsman Parties propose to sell any of their shares of Common Stock in a private transaction to any Person, then the following provisions shall apply to such proposed sale: (a) Until such time as the Group Interest is equal to or greater than the Tempelsman Interest, the Group shall have no Tag Along Rights. (b) From and after such time as the Group Interest is equal to or greater than the Tempelsman Interest, and so long as the Group Interest remains equal to or greater than the Tempelsman Interest, as a condition to the closing of the proposed sale of shares of Common Stock by the Tempelsman Parties, the Tempelsman Parties shall cause the proposed purchaser to offer to purchase from the Group the same number of shares of Common Stock as the number of shares of Common Stock proposed to be purchased by such purchaser from the Tempelsman Parties, such purchase to be made on the same terms, conditions and price, and at the same time, as the proposed purchase from the Tempelsman Parties; provided, however, that the Group need not make any representations or warranties about LKI. If the Group wishes to sell any of its shares of Common Stock to the proposed purchaser of the Tempelsman Parties' shares of Common Stock, it shall, within three Business Days of its receipt of the written terms of the purchase and sale, notify the proposed purchaser and the Tempelsman Parties in writing of its irrevocable commitment to sell the same number of shares of Common Stock to the proposed purchaser as the Tempelsman Parties are selling to the proposed purchaser. The rights provided to the Group in this Section 2.1(b) are herein referred to as the "TAG ALONG RIGHTS". Section 2.2 Drag Along Rights. (a) If the Tempelsman Parties propose to sell all of their shares of Common Stock to any Person other than a Related Tempelsman Person, upon demand by the Tempelsman Parties, the Group shall sell all of its shares of Common Stock to the proposed purchaser, such sale to be made on the same terms, conditions and price, and at the same time, as the proposed sale by the Tempelsman Parties; provided, however, that the Group need not make any representations or warranties about LKI. (b) If the Tempelsman Parties propose to sell less than all of their shares of Common Stock to any Person, upon demand by the Tempelsman Parties, the Group shall sell the same percentage of its shares of Common Stock as the Tempelsman Parties are proposing to sell, such sale to be made on the same terms, conditions and price, and at the same time, as the proposed sale by the Tempelsman Parties provided, however, that the Group need not make any representations or warranties about LKI. The rights provided to the Tempelsman Parties in this Section 2.2 are herein referred to as the "DRAG ALONG RIGHTS". -3- ARTICLE III CLOSING; GROUP PROXY Section 3.1 Closing. The Closing shall take place at the offices of Warshaw Burstein Cohen Schlesinger & Kuh, LLP, 555 Fifth Avenue, New York, NY 10017 commencing at 10:00 a.m. local time on February 11, 2002, immediately following the closing of the Stock Purchase Agreement. Section 3.2 Group Proxy. At the Closing, the Group shall deliver to LT and MT a fully executed and notarized irrevocable proxy in the form of Annex A hereto (the "GROUP PROXY"). LT or MT shall promptly notify the Group in writing after each use of the Group Proxy, such notice to include the matters with respect to which the Group Proxy was voted (including action taken by consent), and whether such vote or consent was affirmative or negative. ARTICLE IV MISCELLANEOUS Section 4.1 Notices All notices, requests, claims, demands and other communications ("NOTICES") given under this Agreement shall be effective if in writing and sent to the Party to whom notice is intended to be given at the address(es) specified on the signature page hereto (or at such other address as a Party may hereafter designate by notice to the other Party as provided herein) by: (i) United States registered or certified mail, return receipt requested; (ii) a nationally recognized overnight courier service; (iii) hand delivery; or (iv) facsimile transmission confirmed by U.S. mail. Notice given by mail shall be effective on the date of delivery or refused delivery indicated on the return receipt. Notice given by overnight courier shall be effective on the next business day after delivery thereof to an authorized representative of the courier service in a properly addressed and prepaid enclosure marked for next day delivery. Notice given by hand delivery shall be effective when delivered to the Party to whom it is addressed or to an actual or apparent officer, director, employee or agent of such party at the address set forth above. Notice given by facsimile transmission shall be effective when received, and if not during a business day, the next business day after receipt, at the facsimile machine at the fax number specified on the signature page hereof (or at such other fax number as a Party may hereafter designate by notice to the other Parties as provided herein), as evidenced by the sender's failure to receive an electronic error message on the sending facsimile machine that the facsimile was not received. Section 4.2 Specific Performance. Each Party recognizes and agrees that a breach by such Party of any of the covenants set forth in this Agreement could cause irreparable harm to one or more other Parties, that such other Party's or Parties' remedies at law in the event of such breach would be inadequate, and that, accordingly, in the event of such breach a restraining order or injunction or both may be issued against such Party, in addition to any other rights and remedies which are available to such other Party or Parties. If this Section 4.2 is more restrictive -4- than permitted by the laws of the State of New York, this Section 4.2 will be limited to the extent required to permit enforcement under the laws of the State of New York. Section 4.3 Attorneys' Fees. In the event of any action for breach of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and expenses incurred in such action. The provisions of this Section 4.3 are intended to be severable from the other provisions of this Agreement and to survive any judgment and, to the maximum extent permitted by Law, shall not be deemed merged into any such judgment. Section 4.4 Incorporation of Certain Sections of the Stock Purchase Agreement. MT and LT hereby agree to be bound by the provisions of Sections 8.2, 8.3, 8.4, 8.5, 8.6, 8.8, 8.9, 8.10 and 8.12 as if they were a Party to the Stock Purchase Agreement Section 4.5 Effectiveness. All provisions of this Agreement other than Article II hereof shall become effective on and as of the date of this Agreement. Article II hereof shall become effective upon consummation of the closing under the Stock Purchase Agreement and the delivery of the Group Proxy to LT and MT pursuant to Section 3.2 hereof. IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first stated above. FIFTH AVENUE GROUP, LLC By: /s/ Matthew Fortgang Name: Matthew Fortgang Title: Member Address:1 Rockefeller Plaza New York, New York 10020 Fax Number: (212) 582-6866 /s/ Leon Tempelsman - -------------------- Leon Tempelsman Address: 529 Fifth Avenue New York, New York 10017 Fax Number:(212) 697-3197 /s/ Maurice Tempelsman - ---------------------- Maurice Tempelsman Address: 529 Fifth Avenue New York, New York 10017 Fax Number:(212) 697-3179 -5- ANNEX A IRREVOCABLE PROXY The undersigned, Fifth Avenue Group, LLC, a New York limited liability company (the "Undersigned"), hereby irrevocably appoints Leon Tempelsman and Maurice Tempelsman, or either of them, each with the power to instruct another individual how to vote this proxy, proxy for the Undersigned (the "PROXY HOLDER"), to appear and vote 1,180,000 shares of common stock, par value $1.00 per share ("COMMON STOCK"), of Lazare Kaplan International Inc., a Delaware corporation ("LKI"), to be purchased directly from LKI on February 11, 2002 pursuant to a Stock Purchase Agreement, dated as of January 18, 2002, between the Undersigned and LKI, together with any other shares of any class of LKI that may be received as a stock dividend thereon or that may result from a stock split or combination affecting the Common Stock of LKI, to the same extent which the Undersigned would be entitled to vote if personally present, at any Special Meeting or Annual Meeting of Stockholders of LKI, and at any adjournments thereof and including any action taken by written consent of stockholders. This proxy is an irrevocable proxy coupled with an interest and shall also constitute a power of attorney with respect to the execution of any documentation in connection with a vote, consent or approval of the holders of common stock of the LKI. The Undersigned covenants and agrees to execute all such further documents and instruments, including without limitation, specific written consents of stockholders and replacements renewing this proxy, throughout the term of this power at the request of LKI. This proxy shall expressly be binding upon the successors and assigns of the Undersigned. This proxy shall be effective until the earlier of (i) the eight year anniversary of the date of this proxy or (ii) the date on which neither Leon Tempelsman ("LT") nor Maurice Tempelsman ("MT") shall be the chief executive officer or the President or the Chairman of LKI possessing managerial control over the operations of LKI, subject to the direction of the Board of Directors of LKI or (iii) the date on which the aggregate number of shares of common stock of LKI of which LT and/or MT is the Beneficial Owner (exclusive of the shares covered by this proxy) shall be less than the aggregate number of shares of common stock of which the Undersigned is the Beneficial Owner. As used in the immediately preceding paragraph, the term "BENEFICIAL OWNER" means a "beneficial owner" within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934. An executive officer of LKI other than LT or MT shall determine the number of shares of common stock of LKI of which each of the Undersigned, LT and MT is the Beneficial Owner based on ownership reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (subject to the exclusion contained in the immediately preceding paragraph), and such determination, in the absence of manifest error, shall be final and binding on the Undersigned, LT and MT. -6- IN WITNESS WHEREOF, the undersigned has executed this, proxy and power of attorney the ____ day of February 2002. FIFTH AVENUE GROUP, LLC By: --------------------- Name: Matthew Fortgang Title: Member STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of February, 2002, before me, the undersigned, personally appeared Matthew Fortgang, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. ------------------------ Notary Public -7- -----END PRIVACY-ENHANCED MESSAGE-----