0000950117-01-501309.txt : 20011009
0000950117-01-501309.hdr.sgml : 20011009
ACCESSION NUMBER: 0000950117-01-501309
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20011108
FILED AS OF DATE: 20010928
FILER:
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: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-07848
FILM NUMBER: 1748074
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
DEF 14A
1
a31339.txt
LAZARE KAPLAN INTERNATIONAL INC.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant
[ ] check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 'SS'240.14a-11(c) or 'SS'240.14a-12
Lazare Kaplan International Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount previously paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------------------
4) Date Filed:
-----------------------------------------------------------------------
[LOGO] LAZARE KAPLAN INTERNATIONAL INC.
529 FIFTH AVENUE
NEW YORK, NEW YORK 10017
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, NOVEMBER 8, 2001
------------------
The Annual Meeting of Stockholders of Lazare Kaplan International Inc. will
be held on Thursday, November 8, 2001 at 10:00 A.M. at The Cornell Club, 6 East
44th Street, 3rd Floor, New York, New York 10017 for the following purposes:
1. To elect directors for the ensuing year;
2. To approve an amendment to the Company's Certificate of Incorporation
reducing the number of authorized shares of common stock and
preferred stock from 20,000,000 and 5,000,000 shares to 12,000,000
and 1,500,000 shares, respectively;
3. To approve the Company's Amended and Restated 1997 Long Term Stock
Incentive Plan increasing the number of shares authorized for
issuance upon exercise of options granted thereunder from 600,000 to
1,350,000;
4. To ratify the appointment of Ernst & Young LLP, independent auditors,
as auditors for the Company for the fiscal year ending May 31, 2002;
and
5. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on September 12, 2001
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting and at any adjournments thereof.
By Order of the Board of Directors,
LEON TEMPELSMAN,
President
New York, New York
September 28, 2001
IMPORTANT
MANAGEMENT INVITES YOU TO ATTEND THE MEETING IN PERSON, BUT IF YOU ARE
UNABLE TO BE PRESENT PERSONALLY, PLEASE DATE, SIGN AND RETURN THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE. NO POSTAGE IS REQUIRED IF THE PROXY IS
RETURNED IN THE ENCLOSED ENVELOPE AND MAILED IN THE UNITED STATES.
LAZARE KAPLAN INTERNATIONAL INC.
529 FIFTH AVENUE
NEW YORK, NEW YORK 10017
--------------------------
PROXY STATEMENT
--------------------------
2001 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished to stockholders of Lazare Kaplan
International Inc., a Delaware corporation (the 'Company'), in connection with
the solicitation of proxies by the Board of Directors of the Company (the 'Board
of Directors') for use at the Annual Meeting of Stockholders of the Company to
be held at 10:00 a.m. on Thursday, November 8, 2001 at The Cornell Club, 6 East
44th Street, 3rd Floor, New York, New York, and any adjournment or adjournments
thereof (the 'Annual Meeting'). This Proxy Statement, the attached Notice of
Annual Meeting, the accompanying form of proxy and the Annual Report to
Stockholders of the Company for the fiscal year ended May 31, 2001 are first
being sent to stockholders of the Company on or about October 5, 2001.
The record date for stockholders of the Company entitled to notice of, and
to vote at, the Annual Meeting is the close of business on September 12, 2001
(the 'Record Date'). On the Record Date, there were issued and outstanding
7,367,691 shares of the Company's common stock, par value $1.00 per share (the
'Common Stock'). All of such shares are of one class, with equal voting rights,
and each holder thereof is entitled to one vote on all matters voted on at the
Annual Meeting for each share registered in such holder's name.
Presence in person or by proxy of holders of 3,683,846 shares of Common
Stock will constitute a quorum at the Annual Meeting. Assuming a quorum is
present, (i) the affirmative vote by the holders of a plurality of the shares
represented at the Annual Meeting and entitled to vote will be required to act
on the election of directors, (ii) the affirmative vote by the holders of a
majority of all outstanding shares entitled to vote at the Annual Meeting will
be required to approve the amendment to the Company's Certificate of
Incorporation reducing the number of authorized shares of common and preferred
stock from 20,000,000 and 5,000,000 shares to 12,000,000 and 1,500,000 shares,
respectively (the 'Authorized Share Amendment') and to approve the Company's
1997 Long Term Stock Incentive Plan (as so amended, the '1997 Plan'), increasing
the number of shares authorized for issuance upon exercise of options granted
thereunder from 600,000 to 1,350,000 (the 'Option Plan Amendment'), and (iii)
the affirmative vote by the holders of a majority of the shares represented at
the Annual Meeting and entitled to vote will be required to act on all other
matters to come before the Annual Meeting, including to ratify the selection of
Ernst & Young LLP as independent auditors for the current fiscal year.
In accordance with applicable law, all stockholders of record on the Record
Date are entitled to receive notice of, and to vote at, the Annual Meeting. If a
stockholder, present in person or by proxy, abstains on any matter, the
stockholder's shares will not be voted on such matter. Thus, an
1
abstention from voting on a matter has the same legal effect as a vote 'against'
the matter, even though a stockholder may interpret such action differently.
A proxy submitted by a stockholder may also indicate that all or a portion
of the shares represented by such proxy are not being voted by such stockholder
with respect to a particular matter. This could occur, for example, when a
broker is not permitted to vote shares of Common Stock held in street name on
certain matters in the absence of instructions from the beneficial owner of the
shares. Brokers who hold shares in street name have the authority to vote on
certain routine matters on which they have not received instructions from their
beneficial owners. Brokers holding shares in street name, who do not receive
instructions, are entitled to vote on the election of directors, the approval of
the Authorized Share Amendment and ratification of the appointment of the
independent accountants, since such matters are considered to be routine. Under
the applicable rules, the proposal to approve the Option Plan Amendment should
not be considered routine as it involves an additional allocation of more than
5% of the outstanding Common Stock for issuance upon exercise of options granted
and to be granted under the 1997 Plan. The shares subject to any such proxy
which are not being voted with respect to a particular matter (the 'nonvoted
shares') will be considered shares not present and not entitled to vote on such
matter, although such shares may be considered present and entitled to vote for
other purposes and will count for purposes of determining the presence of a
quorum. (Shares voted to abstain as to a particular matter will not be
considered nonvoted shares).
A proxy in the accompanying form, which is properly executed, duly returned
to the Company and not revoked will be voted in accordance with the instructions
contained thereon. If no specific instructions are indicated on the proxy, the
shares represented thereby will be voted FOR (i) the election of the persons
nominated herein as directors, (ii) the approval of the Authorized Share
Amendment, (iii) the approval of the Option Plan Amendment, and (iv) the
ratification of the selection of Ernst & Young LLP as the Company's independent
auditors for the current fiscal year; as well as in the discretion of the
proxies with respect to such other business as properly may come before the
Annual Meeting.
Each proxy granted may be revoked by the person who granted it at any time
(i) by giving written notice to such effect to the Secretary of the Company,
(ii) by execution and delivery of a proxy bearing a later date, or (iii) by
attendance and voting in person at the Annual Meeting; except as to any matter
upon which, prior to such revocation, a vote shall have been cast at the Annual
Meeting pursuant to the authority conferred by such proxy. The mere presence at
the Annual Meeting of a person appointing a proxy does not revoke the
appointment.
1. ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
Five directors are to be elected at the Annual Meeting, to hold office until
the next annual meeting of stockholders and until their successors are elected
and have qualified. The five nominees for directors consist of persons currently
serving as directors of the Company.
Robert Speisman, a Director and Senior Vice President -- Sales of the
Company died in the crash of American Airlines Flight 77 on September 11, 2001.
Following his untimely death, the Board of Directors reduced the number of
Directors of the Company from six to five.
2
Set forth below are the names, principal occupations and certain other
information concerning the nominees.
POSITIONS AND OFFICES WITH DIRECTOR
NAME COMPANY OR PRINCIPAL OCCUPATION SINCE AGE
---- ------------------------------- ----- ---
Maurice Tempelsman.......... Chairman of the Board of the Company since
April 1984; General Partner of Leon
Tempelsman & Son, an investment limited
partnership, since January 1984 1984 72
Leon Tempelsman............. Vice Chairman of the Board of the Company
since April 1984; President of the Company
since April 1986; General Partner of Leon
Tempelsman & Son since January 1984 1984 45
Lucien Burstein............. Partner, Warshaw Burstein Cohen Schlesinger &
Kuh, LLP, Attorneys; Secretary of the
Company since 1984 1984 79
Myer Feldman................ Attorney, self employed since December 1999;
Attorney, Partner, Ginsburg, Feldman and
Bress, Chartered Attorneys for more than
five years prior thereto; Director and
Chairman of the Board of Totalbank since
1986 1984 84
Robert A. Del Genio......... Member and Co-Founder, Conway Del Genio,
Gries & Co., Financial Advisors, since
April 1998; Partner, Ernst & Young, LLP,
Certified Public Accountants and
Consultants, for more than five years prior
thereto 2001 43
Unless directed to the contrary, the persons named in the proxy will vote
the shares represented thereby FOR the election of the nominees listed above.
Management is informed that all of the nominees are willing to serve as
directors, but if any of them should decline or be unable to act as a director,
which is not anticipated, the persons named in the proxy will vote for the
election of such other person or persons as management may recommend.
The Company has standing Audit, Compensation and Stock Option Committees of
the Board of Directors. The current members of each committee hold office until
the next annual meeting of the Board of Directors and until their respective
successors have been elected and qualified. The Audit Committee consists of
Robert A. Del Genio, Lucien Burstein and Myer Feldman. The Compensation
Committee consists of Maurice Tempelsman, Myer Feldman and Lucien Burstein. The
Stock Option Committee currently is comprised of all the members of the Board of
Directors. The Board of Directors does not have a Nominating Committee or a
committee performing such functions.
The Audit Committee confers with the independent auditors and financial
officers of the Company, oversees the Company's internal controls, audits,
financial reporting and compliance programs, recommends to the Board of
Directors the independent auditors to be selected to audit the Company's annual
financial statements and oversees the activities of the auditors, reviews
reports submitted by the auditors, establishes or reviews and monitors
compliance with codes of conduct of the Company, inquires about procedures for
compliance with laws and regulations
3
relating to the management of the Company, approves any special assignments
given to the independent auditors and reports and makes recommendations to the
Board of Directors. The Board of Directors adopted a written charter for the
Audit Committee in June, 2000, a copy of which is attached to this Proxy
Statement as Appendix A. Messrs. Del Genio and Feldman are independent as
defined by the applicable listing standards of the American Stock Exchange.
While Mr. Burstein is not an independent director, as defined by such standards
(due to his relationship to a law firm that represents the Company), the Board
has determined that Mr. Burstein's membership on the Audit Committee is required
by the best interests of the Company and its stockholders, because Mr. Burstein
has served on the Audit Committee of the Company for many years, and, as a
result, he is very familiar with the work and responsibilities of the Committee,
and the financial analysis that is required. That determination was also based
on the Board's belief that Mr. Burstein's extensive prior professional
experience would enhance the Committee's effectiveness in fulfilling its
responsibilities.
The Compensation Committee is responsible for recommending to the Board of
Directors policies with respect to compensation and benefits of the Chairman of
the Board and the Vice Chairman of the Board and President of the Company and
for fixing the compensation and benefits of the other executive officers of the
Company.
The Stock Option Committee is responsible for administering the Company's
1988 Stock Option Incentive Plan (the '1988 Plan') (the 1997 Plan with the 1988
Plan, collectively, the 'Plans'), including the designation of employees to be
granted options, prescribing the terms and conditions of options granted under
the Plans, interpreting the Plans and making all other determinations deemed
necessary for the administration of the Plans.
During the fiscal year ended May 31, 2001, there were two meetings of the
Board of Directors, and four meetings of the Audit Committee. Each incumbent
director attended at least 75% of the total number of meetings of the Board and
all of the committees thereof on which he served during the fiscal year. All
outside directors receive a fee equal to $1,250 per quarter.
SECURITY OWNERSHIP
The following table sets forth information regarding the ownership of shares
of the Common Stock as of September 12, 2001 by those persons known by the
Company to own beneficially more than 5% of the outstanding shares of the Common
Stock. All information in the table is based upon reports filed by such persons
with the Securities and Exchange Commission and upon responses to questionnaires
submitted by such persons to the Company in connection with the preparation of
this proxy statement. Except as noted in the footnotes, such persons have
indicated that they have the sole power to vote and to dispose of their
respective shares of the Common Stock.
4
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- --------- --------
Maurice Tempelsman(1) ...................................... 3,458,825 46.9%
529 Fifth Avenue
New York, New York 10017
Leon Tempelsman(2) ......................................... 1,844,045 25.0%
529 Fifth Avenue
New York, New York 10017
Charles M. Royce(3) ........................................ 716,200 9.7%
Royce & Associates, Inc.
1414 Avenue of the Americas
New York, New York 10017
Dimension Fund Advisors Inc.(4) ............................ 602,900 8.2%
1299 Ocean Avenue
Santa Monica, California 90401
---------
(1) Consists of 1,910,409 shares owned directly by Maurice Tempelsman, 1,528,416
shares owned by Leon Tempelsman & Son, a New York limited partnership
('LTS') of which each of Maurice Tempelsman and Leon Tempelsman, as the sole
general partners, has sole power to vote and dispose, and 20,000 shares
which are the subject of currently exercisable options granted to
Mr. Tempelsman pursuant to the 1997 Plan.
(2) Consists of 77,000 shares owned directly by Leon Tempelsman, 2,240 shares
held by the spouse of Leon Tempelsman, 26,816 shares owned by his sister,
Rena Speisman, 32,025 shares owned by his sister, Marcy Meiller, 34,641
shares owned by Rena Speisman as custodian for her children, and 1,600
shares held by his brother-in-law, Scott Meiller, as to all of which shares
Leon Tempelsman has been granted a proxy. Number and percentage of shares
also include 34,641 shares held by Leon Tempelsman as custodian for his
children, 106,666 which are the subject of currently exercisable options
granted to Mr. Tempelsman pursuant to the Plans and 1,528,416 shares owned
by LTS, of which each of Maurice and Leon Tempelsman, as the sole general
partners, has sole power to vote and dispose.
(3) Consists of 709,200 shares owned directly by Royce & Associates, Inc.
('Royce') and 7,000 shares owned directly by Royce Management Company
('RMC'). Mr. Charles Royce may be deemed to be a controlling person of Royce
and RMC, and as such may be deemed to beneficially own the shares owned by
Royce and RMC. Mr. Royce does not own any shares outside of Royce and RMC,
and disclaims beneficial ownership of the shares held by Royce and RMC. The
information contained herein is based solely on a Schedule 13G, dated
February 6, 2001, of Royce, RMC and Mr. Royce.
(4) Consists of shares as to which Dimensional Fund Advisors Inc., a registered
investment advisor ('DFA'), exercises sole voting and dispositive power in
its role as investment advisor or investment manager to certain registered
investment companies and other investment vehicles. The information
contained herein is based solely on a Schedule 13G, dated February 2, 2001,
of DFA.
5
The following table reflects as of September 12, 2001 the beneficial
ownership of shares of Common Stock of the Company by each of the directors,
nominees and executive officers and by all directors and officers as a group
(seven persons).
AMOUNT AND
NATURE OF
NAME BENEFICIAL OWNERSHIP PERCENT OF CLASS
---- -------------------- ----------------
Maurice Tempelsman(1)(2)..................... 3,458,825 46.9%
Leon Tempelsman(1)(3)........................ 1,844,045 25.0%
Myer Feldman................................. 271,159 3.7%
Robert A. Del Genio.......................... 1,000 less than 0.1%
Robert Speisman(1)(4)........................ 75,841 1.0%
Lucien Burstein.............................. 1,500 less than 0.1%
William H. Moryto(5)......................... 3,333 less than 0.1%
All directors and officers as a
group(1)-(5)............................... 4,144,887 56.3%
---------
(1) Maurice Tempelsman, the Chairman of the Board and a director of the Company,
is the father of Leon Tempelsman and was the father-in-law of Robert
Speisman, former Senior Vice President - Sales of the Company. Each of
Maurice Tempelsman, Leon Tempelsman and the estate of Robert Speisman
disclaims beneficial ownership of shares beneficially owned by the others.
(2) Consists of 1,910,409 shares owned directly by Maurice Tempelsman, 1,528,416
shares owned by Leon Tempelsman & Son, a New York limited partnership
('LTS') of which each of Maurice Tempelsman and Leon Tempelsman, as the sole
general partners, has sole power to vote and dispose, and 20,000 shares
which are the subject of currently exercisable options granted to
Mr. Tempelsman pursuant to the 1997 Plan.
(3) Consists of 77,000 shares owned directly by Leon Tempelsman, 2,240 shares
held by the spouse of Leon Tempelsman, 26,816 shares owned by his sister,
Rena Speisman, 32,025 shares owned by his sister, Marcy Meiller, 34,641
shares owned by Rena Speisman as custodian for her children, and 1,600
shares held by his brother-in-law, Scott Meiller, as to all of which shares
Leon Tempelsman has been granted a proxy. Also includes 34,641 shares held
by Leon Tempelsman as custodian for his children, 106,666 shares which are
the subject of currently exercisable options granted to Mr. Tempelsman
pursuant to the Plans and 1,528,416 shares owned by LTS, of which each of
Maurice and Leon Tempelsman, as the sole general partners, has sole power to
vote and dispose.
(4) Consists of 73,133 shares which are the subject of currently exercisable
options granted to Mr. Speisman pursuant to the Plans and 2,708 shares owned
by Mr. Speisman's estate directly. Does not include 1,528,416 shares owned
by LTS, of which Rena Speisman, the wife of Robert Speisman, is a limited
partner, 61,457 shares owned by Rena Speisman for herself and as custodian
for the children of Robert and Rena Speisman and 33,334 shares which are the
subject of currently exercisable options gifted to her by Maurice
Tempelsman, as to all of which beneficial ownership is disclaimed by the
estate of Mr. Speisman.
(5) Consists of 3,333 shares which are the subject to currently exercisable
options granted to Mr. Moryto pursuant to the 1997 Plan.
6
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 filed with the Securities and
Exchange Commission and the Company under the Exchange Act and a review of
written representations received by the Company, no person who at any time
during the fiscal year ended May 31, 2001 was a director, executive officer or
beneficial owner of more than 10% of the outstanding shares of Common Stock
failed to file, on a timely basis, reports required by Section 16(a) of the
Exchange Act., except that Myer Feldman, a director of the Company,
inadvertently filed late (a) an amended Form 4 for August 2000 correcting a
mathematical error made in computing the number of shares of common stock
beneficially owned and (b) filed a Form 5 for the fiscal year ending May 31,
2001 reporting one transaction involving the disposition of common stock which
was made prior to the commencement of the fiscal year ending May 31, 2001, which
he had inadvertently failed to report previously.
EXECUTIVE COMPENSATION
The Company's executive compensation program (other than as it relates to
stock options) is administered by the Compensation Committee of the Board of
Directors, and the Plans are administered by the Stock Option Committee of the
Board of Directors. The Compensation Committee includes two outside directors
and one employee director. The Stock Option Committee currently is comprised of
all members of the Board of Directors. The Compensation Committee annually
recommends the cash compensation and benefits for the Chairman and the Vice
Chairman and President and fixes the cash compensation and benefits for the
other executive officers of the Company. Following Compensation Committee review
and approval, all matters relating to compensation for the Chairman and the Vice
Chairman and President (other than as it relates to stock options) are submitted
to the full Board for approval. In its administration of the Plans, the Stock
Option Committee, in its sole discretion, determines option recipients and the
number of shares subject to each option.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES
During Fiscal 2001, the following policies were used by the Compensation
Committee to set a general framework within which specific compensation
decisions were made.
The Company's executive pay program is intended to attract and retain top
management talent and to motivate and reward performance.
Incentive compensation varies with relative Company performance and a given
individual's contribution to that performance.
The 1997 Plan is designed to reinforce and encourage achievement of the
Company's short-term and long-term financial and strategic goals by
aligning the interests of certain key Company employees and the Company's
stockholders.
COMPONENTS OF COMPENSATION
BASE SALARY
The Compensation Committee determined base salary levels by evaluating
individual performance with specific input from the President (excluding input
for his own performance).
7
Increases in base salary were based upon periodic evaluations of such factors as
demonstrated leadership ability, competitive trends within the industry, level
of responsibility, and overall perceived future contribution to the Company.
CASH BONUS
Bonus payments were recommended to the Board by the Compensation Committee
for employees it felt performed exceptionally during the past year. This
component of the compensation package is designed to reward past performance and
encourage similarly exceptional future performance. Bonuses are paid after the
end of the calendar year to which they relate.
MATCHING 401(k) PLAN
The Company offers all full-time employees in the United States and Puerto
Rico the opportunity to participate in a matching 401(k) plan. U.S. employees
may participate up to an annual maximum which is the lesser of 20% of the
employee's compensation or $10,500 (subject to adjustments by the U.S. Secretary
of the Treasury). Puerto Rico employees may participate up to an annual maximum
which is the lesser of 10% of the employee's compensation or $7,000. The Company
will match those contributions in an amount equal to $.50 for every pre-tax
dollar contributed by the employee up to a maximum of 6% of the first $20,000 of
the employee's compensation, provided the Company's pre-tax earnings exceed $3.5
million for the fiscal year ending within the calendar year to which the
matching contribution relates. For the year ended December 31, 2000, the Company
did not make a matching contribution.
STOCK OPTION GRANTS
The Company periodically grants stock options in order to provide certain of
its key employees with a long-term incentive award as part of a competitive
total compensation package, and to reward them for their contribution to the
ongoing process of achieving the Company's long-term goals. These grants are
also intended to align the interests of the Company's key employees with those
of the stockholders, thereby encouraging these employees to increase stockholder
value.
During Fiscal 2001, 101,800 options were granted under the 1997 Plan. The
Stock Option Committee, in its sole discretion, determines option recipients and
the number of shares subject to each option. In determining the number of shares
to be covered by each option, the Stock Option Committee took into account the
present and potential contributions of the respective participants to the
success of the Company, the anticipated number of years of effective service
remaining and such other factors as the Stock Option Committee deemed relevant
in connection with accomplishing the purposes of the 1997 Plan.
Each option granted under the 1997 Plan expires ten years after the date of
grant and is exercisable at the fair market value of the shares subject to the
option on the date of grant; except that incentive stock options granted to any
person who, at the time the option is granted, owns stock possessing more than
10% of the combined voting power of all classes of the stock of the Company,
expire five years after the date of grant and are exercisable at 110% of the
fair market value of the shares subject to the option on the date of grant.
8
COMPENSATION OF THE PRESIDENT
In conjunction with an overall review of executive and employee
compensation, and in light of the overall contributions made by Leon Tempelsman
to the Company during the last fiscal year, effective in February 2001, Mr.
Tempelsman's salary was increased to $450,000 and he was awarded a $75,000
bonus. In addition, Mr. Tempelsman was granted an aggregate of 50,000 options
under the 1997 Plan effective as of August 9, 2001. The Compensation Committee
maintains the belief that Mr. Tempelsman's salary still stands below the
salaries of executives with similar responsibilities in companies of similar
size. The Compensation Committee continues to recognize Mr. Tempelsman's
contribution to the overall management of the Company and the Company's
retention and expansion of its strategic and market positions in the world
diamond market.
Compensation Committee:
-----------------------
Maurice Tempelsman
Lucien Burstein
Myer Feldman
Stock Option Committee:
-----------------------
Maurice Tempelsman
Leon Tempelsman
Lucien Burstein
Myer Feldman
Robert A. Del Genio
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION IN FISCAL 1999, FISCAL 2000 AND FISCAL 2001
The following Summary Compensation Table sets forth information concerning
compensation for services in all capacities awarded to, earned by or paid to the
Company's chief executive officer and the other most highly compensated
executive officers of the Company earning more than $100,000 during the fiscal
year ended May 31, 2001.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- ------------
OTHER
NAME AND FISCAL ANNUAL OPTIONS
PRINCIPAL POSITION YEAR SALARY BONUS(3) COMPENSATION (SHARES)(6)
------------------ ---- ------ -------- ------------ -----------
Maurice Tempelsman ............... 2001 $242,000 $ 75,000 -- --
Chairman of the Board 2000 210,000 -- -- 15,000
1999 200,000 -- -- --
Leon Tempelsman .................. 2001 $424,347(1) $ 78,338(4) -- --
Vice Chairman of the Board and 2000 386,325(1) 3,190(4) -- 40,000
President 1999 317,755(1) 3,036(4) -- --
William H. Moryto ................ 2001 $284,087 $ 40,000 -- 10,000
Vice President and Chief 2000 11,458 -- -- 10,000
Financial Officer 1999 NA NA NA NA
Robert Speisman .................. 2001 $235,206(2) $ 43,018(5) -- 17,350
Senior Vice President-Sales 2000 211,462(2) 42,922(5) -- 10,000
1999 176,384(2) 2,844(5) -- --
(footnotes on next page)
9
(footnotes from previous page)
(1) Includes premiums paid by the Company on an individual life insurance policy
purchased by the Company on behalf of Mr. Tempelsman in the amount of $7,680
in Fiscal 2001, $11,325 in Fiscal 2000 and $7,755 in Fiscal 1999.
(2) Includes premiums paid by the Company on an individual life insurance policy
purchased by the Company on behalf of Mr. Speisman in the amount of $3,540
in each of Fiscal 2001, Fiscal 2000 and Fiscal 1999.
(3) Bonuses are determined by the Compensation Committee based on the
executive's performance. See Compensation Committee Report, beginning on
page 7.
(4) Includes a bonus in the amount of $3,338 in Fiscal 2001, $3,190 in Fiscal
2000 and $3,036 in Fiscal 1999 pursuant to the Retirement Benefit Plan. See
'Retirement Benefit Plan.'
(5) Includes a bonus in the amount of $3,018 in Fiscal 2001, $2,922 in Fiscal
2000 and $2,844 in Fiscal 1999 pursuant to the Retirement Benefit Plan. See
'Retirement Benefit Plan.'
(6) Consists of shares issuable on exercise of options granted under the 1997
Plan.
STOCK OPTIONS GRANTED IN FISCAL 2001
The following table sets forth information concerning individual grants of
stock options made during Fiscal 2001 to each executive officer listed in the
Summary Compensation Table. The Company did not grant any stock appreciation
rights during Fiscal 2001.
OPTION GRANTS IN FISCAL 2001 POTENTIAL
---------------------------------------------------------- REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL
SECURITIES % OF TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS/SARS APPRECIATION FOR
OPTIONS/SARS GRANTED TO EXERCISE OPTION TERM(3)
GRANTED EMPLOYEES OR BASE PRICE EXPIRATION -----------------------------
NAME (SHARES) IN FISCAL YEAR (PER SHARE) DATE 5% 10%
---- -------- -------------- ----------- ---- -- ---
Maurice Tempelsman... -- -- -- -- -- --
Leon Tempelsman...... -- -- -- -- -- --
William H. Moryto.... 10,000(1)(2) 10% $5.00 12/27/11 $31,445 $ 79,687
Robert Speisman...... 17,500(1)(2) 17% $5.00 12/27/11 $54,557 $138,257
---------
(1) All of such options are intended to be incentive stock options and become
exercisable as to one-third ( 1/3) of the shares included in the grant on
December 15 of each of 2001, 2002 and 2003.
(2) The right to purchase stock pursuant to all options outstanding is
cumulative, and the optionees may exercise the right to purchase stock at
any time and from time to time after the option has become exercisable and
prior to the expiration, termination or surrender of the option.
Each optionee who receives an option under the 1997 Plan agrees (a) to
remain in the employ of either of the Company or its subsidiaries for at
least one year from the date the option is granted but in no event later
than the optionee's 70th birthday and (b) to refrain from
(footnotes continued on next page)
10
(footnotes continued from previous page)
engaging in the cutting and polishing of diamonds, directly or indirectly,
for a period of two years after his or her employment by the Company or a
subsidiary terminates. If an optionee fails to comply with either part of
such an agreement, the Stock Option Committee, in its discretion, may
require the optionee to resell to the Company all shares purchased pursuant
to the option at the exercise price and to repay the Company any amounts
paid to the optionee upon the surrender of all or part of an option.
In the event of the termination of employment of an optionee for any reason
except for cause, unless the option agreement provides otherwise, the option
may be exercised or surrendered by the optionee or his or her legal
representative within a period not to exceed the earlier of the balance of
the option term or three months from the date of termination (one year in
the case of a disabled employee or in the event of death or retirement after
ten years of employment); provided that the Stock Option Committee may, in
its absolute discretion, authorize the purchase of such additional shares
subject to options as are not then exercisable. No option shall be
exercisable by a participant after termination of employment or association
for cause.
(3) Based upon the per share market price on the date of grant, which was $5.00
on December 27, 2000, and an annual cumulative appreciation at the rate
stated of such market price through the expiration date of such options.
Gains, if any, are dependent upon the actual performance of the Common
Stock, as well as the continued employment of the executive officers through
the vesting period. The potential realizable values indicated have not taken
into account amounts required to be paid as income tax under the Internal
Revenue Code of 1986, as amended, and any applicable state laws.
STOCK OPTIONS HELD AT END OF FISCAL 2001
The following table indicates the total number and the value of exercisable
and unexercisable stock options held as of May 31, 2001 by each executive
officer named in the Summary Compensation Table. None of these executive
officers exercised any options during Fiscal 2001.
AGGREGATED OPTION EXERCISES IN FISCAL 2001
AND FISCAL 2001 YEAR-END OPTION VALUES
------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
MAY 31, 2001 (#) MAY 31, 2001 ($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Maurice Tempelsman....................... 20,000 15,000 $ 0 $ 0
Leon Tempelsman.......................... 106,666 46,667 $ 0 $ 0
William H. Moryto........................ 3,333 16,667 $ 0 $ 6,500
Robert Speisman.......................... 73,133 24,017 $9,870 $11,278
---------
(1) Based upon the per share closing price of $5.65 of the Common Stock on
May 31, 2001.
11
RETIREMENT BENEFIT PLAN
Effective June 1, 1997, the Company adopted separate Retirement Benefit
Plans (each a 'Retirement Plan' and collectively, the 'Retirement Plans') for
the benefit of each of Leon Tempelsman and Robert Speisman (each an 'Executive'
and collectively, the 'Executives'). Pursuant to these Retirement Plans, the
Company will pay each Executive certain benefits upon his termination of
employment depending upon the reason for such termination (i.e., death,
disability, retirement or termination with or without cause) and his age at the
time his employment terminates.
In this connection, the Company has purchased an individual whole life
insurance policy on the life of each Executive. Each Retirement Plan permits the
Company to borrow against the related life insurance policy to fund the
retirement benefits payable to the Executive, and the Company expects to effect
such borrowings. The amount an Executive will receive upon his death will be
determined by reference to the death benefit that would be payable under the
relevant life insurance policy if such policy had remained in full force and
effect and the Company had not borrowed against such policy beyond amounts
required to fund his retirement benefits. The retirement benefits to which an
Executive will be entitled under his Retirement Plan will be determined by
reference to the cash surrender value the relevant life insurance policy would
have at the time of his retirement if such policy had remained in full force and
effect and the Company had not borrowed against such policy. Each Retirement
Plan provides that if, at the time the Company becomes obligated to pay a
retirement benefit to an Executive, the insurer is unable, on account of
financial distress, to pay or lend the Company any amount with respect to the
relevant life insurance policy to which the Company may be entitled, the Company
nevertheless will be obligated to make such payment and subsequent payments to
the Executive determined by reference to the cash surrender value the relevant
life insurance policy would have had at the time such payment became due if such
policy had remained in full force and effect, the Company had not borrowed
against such policy, and the earnings rate on such policy had been the minimum
rate guaranteed by the insurer. The Company will pay each Executive an annual
bonus in an amount equal to the income tax payable by such Executive on the
value of the term insurance protection received by him in such calendar year.
During Fiscal 2001, the Company paid premiums of $43,030 and $39,041 on behalf
of Messrs. Tempelsman and Speisman, respectively, and reimbursed such
individuals in the amounts of $1,669 and $1,531, respectively, for the income
tax costs of such Executives. See 'Transactions with Management.'
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has no employment contract with any of its executive officers
named in the Summary Compensation Table, except for an employment letter dated
as of May 15, 2000 between Mr. Moryto and the Company setting forth the terms of
his employment relationship, which is at will. Mr. Moryto and the Company have
also entered into a non-competition agreement effective as of May 15, 2000
pursuant to which he has agreed not to compete with the business of the Company
or engage in the other activities referred to therein for a period of nine
months following the termination of his employment. In consideration of his
entering into such agreement, the Company has agreed to make payments equivalent
to nine months of his then current compensation and to continue to provide
insurance benefits in the event of the termination of his employment by the
Company other than for cause, such amount to be paid in accordance with the
Company's normal payroll practices.
12
The incentive stock options granted by the Company to its executive officers
provide that if employment with the Company is terminated for any reason other
than retirement, the options must be exercised within the earlier of the balance
of the option period or three months from the date of termination (one year in
the case of termination as a result of death, disability or retirement following
ten years of employment) unless otherwise extended by the Stock Option
Committee. No option shall be exercisable by a participant after termination of
employment or association for cause. Other than the Plans, the Company does not
have any program providing compensation to its executive officers which is
intended to serve as an incentive for performance to occur over a period longer
than one fiscal year. Pursuant to the Retirement Plans, in the event an
Executive retires or his employment is terminated within the two-year period
following a change-in-control, the Executive will be entitled to receive either
(a) a lump sum payment in an amount determined by reference to the cash
surrender value the relevant life insurance policy would have at the time his
employment terminates if the policy had remained in full force and effect and
the Company had not borrowed against the policy beyond amounts required to fund
the Executive's retirement benefits, or (b) the same benefits to which he would
have been entitled had he continued in the employ of the Company and retired
upon attaining age 65.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Maurice
Tempelsman, Myer Feldman, and Lucien Burstein. Mr. Feldman is not an officer or
employee of the Company. Mr. Burstein is Secretary of the Company and of counsel
to the law firm of Warshaw Burstein Cohen Schlesinger & Kuh, LLP, which firm
serves as counsel to the Company. Mr. Burstein does not receive any compensation
for serving as a Secretary of the Company and credits his directors' fee against
legal fees of his firm incurred by the Company for each period for which a
directors' fee is paid. Neither of Messrs. Feldman or Burstein is affiliated
with any principal stockholder of the Company. Maurice Tempelsman is the
Chairman of the Board of the Company and the father of Leon Tempelsman, Vice
Chairman of the Board and President of the Company. See 'Transactions with
Management.'
13
COMPARATIVE PERFORMANCE BY THE COMPANY
The following graph compares the market performance of the Common Stock for
the previous five fiscal years to the American Stock Exchange Market Value Index
(the 'AMEX Index') and a peer group of companies in the fine jewelry and
accessories industry (the 'Peer Group').
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE REPORT FOR
LAZARE KAPLAN INTERNATIONAL, INC.
100 100 100
90.517 94.452 98.328
87.931 87.086 85.593
113.793 89.608 88.899
118.966 92.076 99.633
119.828 90.252 92.838
133.621 94.016 92.274
118.103 92.547 92.397
122.414 94.762 94.549
127.586 96.520 88.814
105.172 91.824 94.277
93.966 89.115 97.421
112.069 98.072 113.481
115.517 101.506 115.108
118.966 105.828 108.795
113.362 107.042 109.187
106.035 115.660 103.973
105.172 111.662 97.565
98.707 111.584 95.060
93.103 115.978 89.893
75.000 113.955 96.915
77.586 120.983 114.657
75.431 128.058 119.313
75.862 129.727 113.813
80.172 124.182 117.546
72.845 127.461 120.582
75.862 125.654 106.072
57.328 100.840 91.085
53.448 108.409 77.514
53.448 113.522 79.103
53.448 117.615 105.062
48.276 124.468 121.979
52.586 129.958 135.774
50.862 127.135 135.029
47.414 127.394 175.076
62.069 137.990 194.784
65.517 139.612 192.295
69.828 143.514 222.357
66.379 141.110 230.981
56.897 137.740 245.130
55.603 139.730 273.046
58.621 140.988 271.442
58.621 140.988 271.442
53.448 150.886 352.599
56.035 163.631 404.627
60.776 158.835 336.743
51.724 174.983 292.221
48.276 180.642 380.924
62.931 166.427 331.491
60.345 163.510 279.547
56.035 169.561 308.293
53.879 167.988 312.708
43.103 176.579 379.080
43.966 173.060 352.076
42.241 164.550 388.392
35.345 148.454 312.571
34.914 153.407 289.061
40.690 162.604 342.547
41.724 151.270 287.155
40.000 144.041 252.829
36.897 155.899 299.267
38.966 156.733 318.585
The Peer Group consists of the following companies: A.T. Cross Company,
Michael Anthony Jewelers, Inc., Tiffany & Co., and Town & Country Corporation
(until June 1998). The Company's management is of the opinion that despite the
existence of some similarities between the group of companies comprising its
peer group and the Company, the Company is unique because of the product it
produces, the markets in which its products are sold, and in its position as the
only publicly traded diamond cutting and polishing company in the United States.
Thus, comparisons made between the Company and the peer group are not
necessarily accurate or reliable and do not necessarily reflect the relative
performance data for the Company's primary competition.
(1) The cumulative total return for the securities comprising the Peer Group
and the AMEX Index assumes the reinvestment of dividends. The total
return for the Common Stock does not assume the reinvestment of
dividends, since no dividends were declared on the Common Stock during
the measurement period. The weighing of the securities comprising each
index, according to their market capitalization, has been calculated at
the end of each monthly period.
(2) The AMEX Index tracks the aggregate price performance of equity
securities of companies traded on the American Stock Exchange. The
Common Stock is traded on the American Stock Exchange.
14
TRANSACTIONS WITH MANAGEMENT
The Company has entered into a sublease with Leon Tempelsman & Son, a New
York limited partnership of which Maurice Tempelsman and Leon Tempelsman are the
sole general partners ('LTS'), under which approximately 30% of the 20th Floor
at 529 Fifth Avenue, New York, New York is sublet to LTS. The sublease is
prorated to the same rental rate per square foot which the Company is paying to
the landlord under its lease for the 19th and 20th Floors at the same location.
Rental payments under the sublease amount to a base annual rent of $61,488
(excluding escalations).
2. PROPOSAL TO AMEND THE CORPORATION'S CERTIFICATE OF INCORPORATION
TO REDUCE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(ITEM 2 ON THE PROXY CARD)
On September 14, 2001, the Board of Directors unanimously approved a
proposal, subject to stockholder approval, to amend Article Fourth of the
Company's Certificate of Incorporation to reduce the authorized number of shares
of common stock, $1.00 par value per share ('Common Stock') from 20,000,000 to
12,000,000 shares and to reduce the authorized number of preferred shares, $.01
par value per share ('Preferred Stock') from 5,000,000 shares to 1,500,000
shares. If the Authorized Share Amendment is approved, paragraph (a) of Article
Fourth of the Certificate of Incorporation would read as follows:
'FOURTH: (a) The aggregate number of shares which the Corporation shall
have the authority to issue is 13.5 million (13,500,000) shares, which shall
consist of twelve million (12,000,000) shares of common stock, $1.00 par
value ('Common Shares'), and 1.5 million (1,500,000) shares of preferred
stock, $.01 par value ('Preferred Shares'). Except as otherwise provided in
this Certificate of Incorporation, the Common Shares shall have unlimited
voting rights, with each Common Share being entitled to one vote, and the
right to receive the net assets of the Corporation upon dissolution, with
each Common Share participating on a pro rata basis.
The proposed amendment would not change the par value of the shares of the
Company's Common Stock or Preferred Stock or affect the legal rights of holders
of existing shares of Common Stock.
PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT
As of the Record Date, the Company had 20,000,000 authorized shares of
Common Stock, of which 8,549,441 shares of Common Stock (which included
1,181,750 treasury shares) were issued and 5,000,000 authorized shares of
Preferred Stock, of which no shares of Preferred Stock were issued. Common Stock
shares reserved for future issuance pursuant to the Corporation's equity based
incentive plans and other obligations amounted to 1,488,524 shares, resulting in
an aggregate of 9,962,035 shares remaining available for issuance by the
Corporation. The Board of Directors of the Company believes that it is in the
best interests of the Company and its stockholders to decrease the number of
authorized but unissued shares of the Common Stock and Preferred Stock. The
Board of Directors believes that the reduction in the number of authorized
shares of Common Stock and Preferred Stock will permit the Company to save
approximately $50,000 annually in Delaware franchise taxes, while still
maintaining a sufficient number of
15
authorized shares to permit the Company to act promptly with respect to possible
future financing, possible acquisitions, additional issuances and for other
corporate purposes including implementation of the Company's Stockholders Rights
Plan adopted in 1997, if necessary.
STOCKHOLDER VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock is required for approval of the proposed
amendment to the Certificate of Incorporation. If this proposal is approved, the
proposed Amendment will become effective upon filing a certificate of amendment
to the Certificate of Incorporation with the Secretary of State of Delaware,
which filing is expected to take place shortly after such shareholder approval.
Should such stockholder approval not be obtained, then the number of authorized
shares will remain the same.
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE 'FOR' APPROVAL OF THE
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO REDUCE THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK AND PREFERRED STOCK.
3. APPROVAL OF THE OPTION PLAN AMENDMENT
(ITEM 3 ON THE PROXY CARD)
The 1997 Plan initially was adopted by the Board of Directors of the Company
on April 10, 1997 and approved by stockholders of the Company on November 5,
1997. The 1997 Plan currently authorizes the issuance of options covering up to
600,000 shares of Common Stock (subject to adjustment in certain circumstances)
to directors, executive officers and other key employees of, and consultants to
the Company. As of May 31, 2001, no options for an aggregate of 600,000 shares
of Common Stock granted under the 1997 Plan had been exercised, and options for
600,000 shares of Common Stock, at exercise prices ranging from $5.00 to $14.75
per share, were outstanding. If the Option Plan Amendment is not approved,
options to purchase up to 90,000 shares of Common Stock, which were granted
subject to stockholder approval, will be canceled, and, in the absence of
forfeitures, the Company will not have any shares of Common Stock available for
the grant of future options.
On May 16, 2001, the Board of Directors, subject to stockholder approval,
adopted the Amended and Restated 1997 Long Term Incentive Plan, which increased
the number of shares of Common Stock authorized for issuance upon exercise of
options granted under the 1997 Plan from 600,000 shares to 1,350,000 shares, and
made a number of other changes to the 1997 Plan that are summarized below. The
increase in the number of shares will enable the Company to continue to provide
an incentive to continued employment or association of key employees and other
persons.
The following is a description of the 1997 Plan, as amended and restated.
A copy of the 1997 Plan, as amended and restated, is annexed as Appendix B.
GENERAL
The 1997 Plan provides for the grant of options to directors, executive
officers and other key employees of the Company and consultants to the Company
and is intended to provide an
16
incentive to continued employment or association by enabling such persons to
acquire a proprietary interest in the Company and by offering comparable
incentives to enable the Company better to attract, compete for and retain
highly qualified individuals, as well as to associate the interests of such
persons with those of the Company and its shareholders. The 1997 Plan permits
the grant of options that are either 'Incentive Stock Options' within the
meaning of Section 422 of the Internal Revenue Code of 1986 (the 'Code') or
options which do not qualify as Incentive Stock Options ('Non-Qualified Stock
Options').
The Board of Directors has the power to amend the 1997 Plan from time to
time and may terminate the 1997 Plan. However, stockholder approval is necessary
if such amendment (a) materially increases the benefits accruing to participants
under the 1997 Plan, (b) increases the aggregate number of shares of Common
Stock as to which options may be granted under the 1997 Plan, or (c) materially
modifies the requirements as to eligibility for participation in the 1997 Plan.
The 1997 Plan may not be amended in a manner which adversely affects the rights
of an optionee, without the consent of the optionee.
The 1997 Plan will terminate on April 10, 2007, though options granted prior
thereto may expire after such date.
The 1997 Plan is not subject to any provisions of the Employee Retirement
Income Security Act of 1974 and is not intended to be qualified under
Section 401(a) of the Code.
NUMBER OF SHARES SUBJECT TO THE STOCK OPTION PLAN
The maximum number of shares of Common Stock with respect to which options
may be issued under the 1997 Plan is 1,350,000, assuming stockholder approval of
the Option Plan Amendment. This number is subject to adjustment under certain
circumstances as provided in the 1997 Plan. Shares subject to an option which,
for any reason, expires or is terminated without being fully exercised may again
be subject to an option granted under the 1997 Plan.
ELIGIBLE PARTICIPANTS
Each of the Company's employees, as well as any person who renders services
as a director, consultant or advisor to the Company is eligible to be granted
options under the 1997 Plan, without regard to length of employment or
association, except that only employees may be granted Incentive Stock Options.
The Compensation Committee anticipates granting options only to those employees
who have contributed or are expected to contribute to the growth of the Company.
The granting of an option does not confer upon the optionee any right to
continue in the services of the Company or in any way affect any right or power
of the Company to terminate the services of the optionee at any time.
ISSUANCE AND EXERCISE OF OPTIONS
The 1997 Plan is administered by the Stock Option Committee of the Board of
Directors, which currently consists of the entire Board of Directors. The Stock
Option Committee has the exclusive authority to determine the persons eligible
to participate and to determine the amount and the terms and conditions of the
awards made to each participant, within the parameters of the 1997 Plan,
including the number of shares subject to each grant, the vesting schedule and
expiration date of each option and the exercise price of the option and whether
such option is an
17
Incentive Stock Option or Non-Qualified Stock Option. The Stock Option Committee
may make awards based on the nature of the services rendered by the participant,
the capacity of the participant to contribute to the success of the Company and
other factors (not inconsistent with the provisions of the 1997 Plan) that the
Stock Option Committee may deem relevant.
Incentive Stock Options may be granted only to employees of the Company. An
Incentive Stock Option must expire within ten years from the date it is granted
(five years in the case of such options granted to a holder of more than 10% of
the outstanding Common Stock). Incentive Stock Options are first exercisable not
earlier than one year from the date of grant. The exercise price of an Incentive
Stock Option must be at least equal to the fair market value of the Common Stock
on the date such Incentive Stock Option is granted (or 110% of the fair market
value of the Common Stock in the case of such options granted to a holder of
more than 10% of the outstanding Common Stock). To the extent that the aggregate
fair market value of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by an optionee during any calendar
year exceeds $100,000, such options will be treated as Non-Qualified Stock
Options.
The Company may issue Non-Qualified Stock Options under the 1997 Plan to
directors, executive officers and key employees of the Company and advisors and
consultants to the Company. The exercise price of a Non-Qualified Stock Option
must be at least equal to the fair market value of the Common Stock on the date
such option is granted and will have such expiration date and vesting schedule
as determined by the Stock Option Committee at the time of grant.
Each optionee who receives an option under the 1997 Plan agrees (a) to
remain in the employ of either of the Company or its subsidiaries for at least
one year from the date the option is granted but in no event later than the
optionee's 70th birthday and (b) to refrain from engaging in the cutting and
polishing of diamonds, directly or indirectly, for a period of two years after
his or her employment by the Company or a subsidiary terminates. If an optionee
fails to comply with either part of such an agreement, the Stock Option
Committee, in its discretion, may require the optionee to resell to the Company
all shares purchased pursuant to the option at the exercise price and to repay
the Company any amounts paid to the optionee upon the surrender of all or part
of an option.
Upon exercise of an option issued under the 1997 Plan, payment is required
to be made in cash, or if permitted by the applicable option agreement, by
delivery of shares of Common Stock, currently exercisable options to acquire
Common Stock or other property valued at its then fair market value. Options are
not transferable by the optionee, other than by will or applicable laws of
descent and distribution. In the event of termination of the optionee's
relationship with the Company other than for cause, the optionee's options will
expire on the earlier of stated expiration or three months after the date of
termination (except in the case of death, disability or retirement after ten
years of employment, in which event the period is extended to 12 months). Upon a
change in control of the Company (as defined in the 1997 Plan), all options
outstanding become immediately exercisable in full.
The following table sets forth information concerning options granted under
the 1997 Plan to (a) each of the Company's executive officers named in the
Summary Compensation Table who received a grant of stock options, (b) all
current executive officers of the Company, as a group four persons, two of whom
were granted options during Fiscal 2001 on held options at August 31, 2001,
18
(c) all current directors of the Company (who are not executive officers), as a
group three persons, none of whom were granted options during Fiscal 2001 or
held options at August 31, 2001), and (d) all current employees of the Company
(other than executive officers), as a group 201 persons, 23 of whom were granted
options during Fiscal 2001 and 37 of whom held options at August 31, 2001).
SHARES TOTAL NUMBER
UNDERLYING OUTSTANDING % OF TOTAL
OPTIONS OPTIONS OWNED OPTIONS
GRANTED DURING AT OUTSTANDING AT
NAME AND POSITION FISCAL 2001 AUGUST 31, 2001 AUGUST 31, 2001
----------------- ----------- --------------- ---------------
Maurice Tempelsman,
Chairman of the Board and Director......... 0 75,000 9%
Leon Tempelsman,
Vice Chairman of the Board of Directors and
Director................................... 0 203,333 25%
William H. Moryto
Vice President and Chief Financial
Officer.................................... 10,000 20,000 2%
Robert Speisman
Senior Vice President-Sales and Director... 17,350 97,150 12%
All executive officers, as a group........... 27,350 395,483 48%
All directors (who are not executive
officers), as a group...................... 0 0 0%
All current employees (other than executive
officers), as a group...................... 74,450 433,041 52%
FEDERAL INCOME TAX CONSEQUENCES
The grant of an option under the 1997 Plan does not result in any tax
consequences to the Company or the optionee. The tax consequences of exercising
an option or disposing of the Common Stock purchased by an optionee upon
exercise of an option ('option stock') depend on whether the option is an
Incentive Stock Option or a Non-Qualified Stock Option.
If an optionee exercises a Non-Qualified Stock Option, the optionee
generally must include in gross income, as compensation for the taxable year in
which the option stock becomes substantially vested, an amount equal to the
excess of the fair market value at the time it becomes substantially vested over
the exercise price for the option stock, and the Company will be entitled to a
tax deduction in the same amount. At disposition, appreciation (or depreciation)
of the option stock, after the date of exercise, generally is treated as capital
gain (or loss), long-term or short-term, depending upon the length of time
elapsed between the time when the option stock became substantially vested and
the time of disposition.
If an optionee exercises an Incentive Stock Option, the optionee does not
recognize income upon exercise, provided that the optionee was an employee of
the Company at all times from the date when the option was granted until not
less than three months before exercise (or one year if the optionee's employment
terminates as a result a permanent and total disability or death). However, the
excess of the fair market value at the time of exercise of the option stock over
the exercise price generally constitutes an item of tax preference and, thus,
must be added to the optionee's taxable income for purposes of determining the
optionee's alternative minimum tax liability for the taxable year of the
exercise. If an optionee exercises an Incentive Stock Option
19
and fails to satisfy the three-month (or one-year) employment period
requirement, the option is generally treated as a Non-Qualified Stock Option.
If (a) an optionee disposes of option stock acquired pursuant to an
Incentive Stock Option less than one year after the date the option stock was
acquired or less than two years after the date the option was granted, and
(b) the amount realized in the disposition exceeds the exercise price, then the
optionee must include in the optionee's gross income, as compensation for the
year of the disposition, an amount equal to the excess of the fair market value
of the option stock at the time the option is exercised over the exercise price
of the option. This compensation income will be treated as an addition to the
optionee's tax basis of the option stock. The optionee also must include in
gross income, as capital gain for the taxable year of the disposition, an amount
equal to the difference between the amount realized in the disposition over the
tax basis of the option stock. The Company is not entitled to any deduction with
respect to the capital gain recognized by the optionee. If the amount realized
by the optionee would result in the realization of a capital loss by the
optionee upon application of the foregoing rules, then the amount of
compensation income that the optionee will recognize is the excess, if any, of
the amount realized on the sale of the option stock over the exercise price of
the option. If the disposition of the option stock occurs in the taxable year in
which the option is exercised, the optionee must include in income for
alternative minimum tax purposes the gain on the disposition of the option
stock. Should the disposition occur in a later year, the gain on the disposition
will not be included in income for alternative minimum tax purposes. The basis
of the option stock for determining gain or loss for alternative minimum tax
purposes will be the exercise price increased by the amount, if any, by which
the optionee's alternative minimum tax income was increased as a result of the
earlier exercise of the option.
If (a) an optionee disposes of option stock acquired pursuant to an
Incentive Stock Option more than one year after the date the option stock was
acquired, and (b) the amount realized in the disposition exceeds both the
exercise price and the fair market value of the option stock on the date of
exercise, then the optionee must include in gross income, as compensation for
the taxable year of the disposition, an amount equal to the excess of such fair
market value over the exercise price, and must include in gross income, as gain,
an amount equal to the excess of the amount realized in the disposition over
such fair market value, and the Company is entitled to a deduction of such
amounts. Such gain is generally treated as capital gain, long-term or
short-term, depending upon the length of time elapsed between the time when the
option stock was acquired and the time of disposition. If, instead, the amount
realized in the disposition exceeds the exercise price, but is less than the
fair market value of the option stock on the date of exercise, the optionee must
include in gross income, as compensation for the taxable year of the
disposition, an amount equal to the excess of amount realized over the exercise
price, and the Company is entitled to a deduction of this amount. If the
exercise price exceeds the amount realized in the disposition, the optionee is
allowed to deduct an amount equal to such excess as a loss for the taxable year
of the disposition. This loss generally is treated as capital loss, long-term or
short-term, depending upon the length of time elapsed between the time when the
option stock was acquired and the time of disposition.
REQUIRED VOTE
The approval of the Option Plan Amendment requires the affirmative vote by
the holders of a majority of all outstanding shares entitled to vote at the
Annual Meeting.
20
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE OPTION PLAN AMENDMENT.
4. RATIFICATION OF THE APPOINTMENT OF AUDITORS
(ITEM 4 ON THE PROXY CARD)
The Board of Directors has appointed the firm of Ernst & Young LLP,
independent auditors, to be auditors for the Company and its subsidiaries for
the fiscal year ending May 31, 2002 and recommends that the stockholders ratify
that appointment. If a majority of the shares are not voted in favor of
ratification, the Board will consider the appointment of other auditors for the
ensuing fiscal year. The Board is advised that there is and has been no
relationship between Ernst & Young LLP and the Company or any of its
subsidiaries other than the rendition of professional services. A representative
of Ernst & Young LLP is expected to be present at the Annual Meeting. The
representative will have an opportunity to make a statement and will be
available to respond to questions.
AUDIT FEES
The aggregate fees, including expenses reimbursed, billed by Ernst & Young
LLP, for professional services rendered for the audit of the consolidated
financial statements of the Company and its subsidiaries for 2001 and the
reviews of the Company's quarterly financial statements during 2001 were
$251,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no services performed or fees billed by Ernst & Young LLP for
information technology services relating to financial information systems design
and implementation for 2001.
ALL OTHER FEES
The aggregate fees, including expenses reimbursed, billed by Ernst & Young
for services rendered to the Company and its subsidiaries, other than the
services described above, for 2001 were $68,000. These fees include employee
benefit plan audit services in the amount of $15,000, and $53,000 for tax
related services.
The Company's audit committee has considered whether the provision of
non-audit services provided by Ernst & Young LLP to the Company is compatible
with maintaining Ernst & Young's independence.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP.
5. OTHER BUSINESS
As of the date hereof, the Board of Directors does not know of any matter
which will come before the meeting other than the business specified in the
foregoing notice of meeting. However, the enclosed proxy gives discretionary
authority if any other matters are presented at the meeting or any adjournment
thereof and it is intended that the persons named in the proxy will vote in
accordance with their best judgment.
21
SOLICITATION OF PROXIES
Solicitation of proxies is being made by the Board of Directors through the
mail, in person, and by telegraph and telephone. In addition, the Company will
request banks, brokers, and other custodians, nominees, and fiduciaries to
obtain voting instructions from the beneficial owners and will pay their
expenses for so doing. The cost of soliciting proxies will be borne by the
Company.
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING OF STOCKHOLDERS
Stockholders who wish to have proposals included in the proxy statement and
form of proxy to be furnished by the Board of Directors in connection with the
Company's 2002 Annual Meeting of Stockholders must submit such proposals so that
they are received by the Company no later than May 22, 2002. Please direct such
proposals to the attention of the Secretary of the Company.
By order of the Board of Directors,
LEON TEMPELSMAN,
President
New York, New York
October 5, 2001
22
APPENDIX A TO PROXY
STATEMENT FOR 2001
ANNUAL MEETING OF
STOCKHOLDERS
LAZARE KAPLAN INTERNATIONAL INC.
AUDIT COMMITTEE CHARTER
The Audit Committee (the 'Committee'), of the Board of Directors (the
'Board') of Lazare Kaplan International Inc. (the 'Company'), will have the
oversight responsibility, authority and specific duties as described below.
COMPOSITION
The Committee will be comprised of three or more directors as determined by
the Board. The members of the Committee will meet the independence and
experience requirements of The American Stock Exchange, LLC ('AMEX'). The
members of the Committee will be elected annually at the organizational meeting
of the Board typically held immediately following the annual meeting of
shareholders and will be listed in the annual report to shareholders. One of the
members of the Committee will be elected Chairman by the Committee.
STATEMENT OF POLICY
The Committee shall provide assistance to the Board in fulfilling their
oversight responsibilities to shareholders, potential shareholders, the
investment community and others relating to the Company's financial statements
and the financial reporting process, the systems of internal accounting and
financial controls, the annual independent audit of the Company's financial
statements and the legal compliance and ethics programs as established by
management and the Board.
RESPONSIBILITY
The Committee is a committee of the Board. Its primary function is to assist
the Board in fulfilling its oversight responsibilities with respect to (i) the
annual financial information to be provided to shareholders and the Securities
and Exchange Commission ('SEC'); (ii) the system of internal controls that
management has established; and (iii) the internal and external audit process.
The Committee provides an avenue for communication among the Company's
independent auditors, internal management and the Board. The Committee will
develop a clear understanding with the independent auditors that they must
maintain an open and transparent relationship with the Committee, and that the
ultimate accountability of the independent auditors is to the Board and the
Committee.
The Committee will make regular reports to the Board concerning its
activities.
While the Committee has the responsibilities and authority set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate and
are in accordance with generally accepted accounting
A-1
principles. This is the responsibility of management and the independent
auditors. Nor is it the duty of the Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent auditors
or to assure compliance with laws and regulations and the Company's business
conduct guidelines.
BASIC AUTHORITY
The Committee has been granted by the Board the authority to investigate any
matter or activity involving financial accounting and financial reporting, as
well as the internal controls of the Company. In that regard, the Committee will
have the authority to approve the retention of external professionals to render
advice and counsel in such matters. All employees will be directed to cooperate
with respect thereto as requested by members of the Committee.
MEETINGS
The Committee is to meet at least three times annually and as many
additional times as the Committee deems necessary. Content of the agenda for
each meeting should be cleared by the Committee Chairman. The Committee is to
meet in separate executive sessions with the chief financial officer and the
independent auditors at least once each year and at other times when considered
appropriate.
ATTENDANCE
Committee members will strive to be present at all meetings. As necessary or
desirable, the Committee Chairman may request that Company counsel, members of
management and representatives of the independent auditors be present at
Committee meetings.
SPECIFIC DUTIES
In carrying out its oversight responsibilities, the Committee will:
2. Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for ratification. This should be done
in compliance with applicable AMEX Audit Committee Requirements.
3. Review with the Company's management and independent auditors the
Company's accounting and financial reporting controls, and obtain
annually in writing from the independent auditors their letter as to the
adequacy of such controls.
4. Review with the Company's management and independent auditors
significant accounting and reporting principles, practices and
procedures applied by the Company in preparing its financial statements.
Discuss with the independent auditors proposed significant accounting
and reporting principles and the timing of their implementation. Discuss
with the independent auditors their judgments about the quality, not
just the acceptability, of the Company's accounting principles used in
financial reporting.
5. Review the scope and general extent of the independent auditors' annual
audit. The Committee's review should include an explanation from the
independent auditors of the factors considered by the auditors in
determining the audit scope, including the major risk factors. The
independent auditors should confirm to the Committee that no limitations
A-2
have been placed on the scope or nature of their audit procedures. The
Committee will review annually with management the fee arrangement with
the independent auditors and proposed changes thereto.
6. Inquire as to the independence of the independent auditors and obtain
from the independent auditors, at least annually, a formal written
statement delineating all relationships between the independent auditors
and the Company as contemplated by Independence Standards Board Standard
No. 1, 'Independence Discussions with Audit Committees.'
7. Review the interim quarterly financial statements with management and
the independent auditors prior to the earlier of the filing of the Form
10-Q or issuance of the related press release. The Chairman may
represent the entire Committee for the purpose of this review. The
Committee should have a predetermined arrangement with the independent
auditors that the independent auditors will advise the Committee through
its Chairman and management of the Company of any matters identified
through procedures followed for interim quarterly financial statements
and which they determine appropriate to disclose to the Committee and
management of the Company.
8. At the completion of the annual audit, review with management and the
independent auditors the following:
The annual financial statements and related footnotes and financial
information to be included in the Company's annual report to
shareholders and on Form 10-K.
Results of the audit of the financial statements and the related report
thereon and, if applicable, a report on changes during the year in
accounting principles and their application.
Significant changes to the audit plan, if any, and any serious disputes
or difficulties with management encountered during the audit. Inquire
as to the cooperation received by the independent auditors during their
audit, including access to all requested records, data and information.
Inquire of the independent auditors as to whether there have been any
disagreements with management which, if not satisfactorily resolved,
would have caused them to issue a non-standard report on the Company's
financial statements.
Other communications as required to be communicated by the independent
auditors by Statement of Auditing Standards ('SAS') 61 (as amended by
SAS 90) relating to the conduct of the audit. Further, receive
communications from the independent auditors concerning their judgment
about the quality of the Company's accounting principles, as outlined
in SAS 61 (as amended by SAS 90).
If deemed appropriate after such review and discussion, recommend to the
Board that the financial statements be included in the Company's annual
report on Form 10-K.
9. After preparation by management and review by the independent auditors,
approve any report required under SEC rules to be included in the
Company's annual meeting proxy statement. The Charter is to be published
as an appendix to such proxy statement every three years.
A-3
10. Discuss with the independent auditors the quality of the Company's
financial and accounting personnel. Also, elicit the comments of
management regarding the responsiveness of the independent auditors to
the Company's needs.
11. Meet with management and the independent auditors to discuss any
relevant significant recommendations that the independent auditors may
have, particularly those characterized as a 'material weakness' or
'reportable condition'. Typically, such recommendations will be
presented by the independent auditors in the form of a Letter of
Comments and Recommendations. The Committee should review responses of
management to such Letter of Comments and Recommendations and receive
follow-up reports from management on action taken concerning the
aforementioned recommendations.
12. Recommend to the Board the selection, retention or termination of the
Company's independent auditors.
13. Review the appointment and replacement of the Company's Chief Financial
Officer.
14. Review with management, and the independent auditors the methods used to
establish and monitor the Company's policies with respect to unethical
or illegal activities by Company employees that may have a material
impact on the financial statements.
15. Review with management and outside counsel, as necessary, legal and
regulatory matters that may have a material impact on the financial
statements.
16. As the Committee may deem appropriate, obtain, weigh and consider expert
advice as to audit committee related AMEX rules, Statements on Auditing
Standards and other accounting, legal and regulatory provisions.
A-4
APPENDIX B TO PROXY
STATEMENT FOR 2001
ANNUAL MEETING OF
STOCKHOLDERS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LAZARE KAPLAN INTERNATIONAL INC.
AMENDED AND RESTATED
1997 LONG-TERM STOCK INCENTIVE PLAN
EFFECTIVE NOVEMBER 5, 1997
AS AMENDED THROUGH OCTOBER 5, 2001
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ARTICLE I
PURPOSE
Lazare Kaplan International Inc., a Delaware corporation (the 'Company'),
established this 1997 Long-Term Stock Incentive Plan (the 'Plan') in order to
encourage the acquisition of a proprietary interest in the Company by certain
key employees and directors of the Company and its affiliates, and by certain
consultants, advisors and other persons who provide services to the Company and
its affiliates. The Company believes that such a proprietary interest in the
Company will provide such persons with a direct stake in the future welfare of
the Company and will strengthen their commitment to remain employed by or
associated with the Company and its affiliates. It is also expected that this
Plan will encourage qualified persons to seek and accept employment by or
association with the Company and its affiliates. To accomplish the foregoing,
this Plan contemplates the grant of Incentive Stock Options and Nonqualified
Stock Options (all as hereinafter defined) to such persons. The Plan is being
amended and restated in its entirety to increase the number of shares reserved
for issuance, which amendment will be presented for approval by the stockholders
of the Company at the annual stockholders meeting scheduled to be held in
November 2001.
ARTICLE II
DEFINITIONS
SECTION 2.1 Definitions. Whenever used in this Plan, the following terms
shall have the respective meanings set forth in this Section 2.1.
'Affiliate' means a corporation which is a parent corporation or a
subsidiary corporation (within the meaning of Section 424 of the Code) with
respect to the Company.
'Associate' means a person who is associated with the Company as a Director,
or as a consultant, advisor or other service provider, but who is not an
Employee.
'Board' means the board of directors of the Company.
'Business Day' means any day on which banks within the State of New York are
required to be opened for business.
'Code' means the Internal Revenue Code of 1986, as amended.
'Committee' means the Board; provided, however, that if a committee has been
delegated authority pursuant to Section 3.1 to manage and administer this Plan,
then Committee means such committee.
'Common Stock' means the Company's common stock, par value $1.00 per share.
'Director' means a member of the Board.
B-1
'Disability' means, with respect to a Participant, any medically
determinable physical or mental impairment that the Committee, on the basis of
competent medical evidence, reasonably determines has rendered or will render
the Participant permanently and totally disabled within the meaning of Section
422(c)(6) of the Code.
'Employee' means a person who performs services as an employee (within the
meaning of Section 3401(c)(6) of the Code) of the Company or of an Affiliate.
'Exchange Act' means the Securities Exchange Act of 1934, as amended, or any
corresponding provisions of any subsequent Federal securities law.
'Exercise Period' means, with respect to an Option, the period during which
such Option may be exercised, as determined pursuant to Section 6.2.
'Fair Market Value' means, with respect to Shares subject to an Option, on
any given date, the value of the Shares or Options as determined pursuant to
Section 6.6.
'Incentive Stock Option' means an option granted pursuant to this Plan that
is intended to satisfy the requirements of Section 422(b) of the Code.
'Non-Employee Director' means a Director who comes within the definition of
'non-employee director' in accordance with Rule 16b-3(b)(3) under the Exchange
Act or any rule substituted therefor.
'Nonqualified Stock Option' means an option granted pursuant to this Plan,
other than an Incentive Stock Option.
'Option' means an Incentive Stock Option or a Nonqualified Stock Option, as
the case may be.
'Option Agreement' means, with respect to any person who has been granted an
Option, a written agreement (including any amendment or supplement thereto)
between the Company and such person.
'Option Price' means, with respect to an Option, the price determined
pursuant to Section 6.1 at which Shares subject to such Option may be purchased.
'Option Value' means, with respect to an Option, on any given date the
amount by which the aggregate Fair Market Value of the Shares subject to such
Option on such date exceeds the product obtained by multiplying the number of
Shares subject to such Option by the Option Price.
'Participant' means an Employee or an Associate who receives an Option.
'Plan' means this Plan, as set forth herein and as may be amended from time
to time.
'Principal Securities Market' means the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., or The Nasdaq Stock Market, Inc., or any
successor thereto on which the Shares are then listed or traded.
B-2
'Retirement' means, if applicable, the termination of employment or
association due to retirement after either ten years of employment or
association with the Company or an Affiliate, or under a retirement plan of the
Company or an Affiliate, in each instance with the consent of the Committee.
'Securities Act' means the Securities Act of 1933, as amended, or any
corresponding provisions of any subsequent Federal securities law.
'Share' means a share of the Common Stock.
'Ten-Percent Shareholder' means, at any time an Option is granted, an
individual who owns (or is considered to own under the attribution rules
contained in Section 424(d) of the Code) securities possessing more than ten
percent of the total combined voting power of all classes of securities of the
Company or of any Affiliate.
'Termination Date' means, with respect to a Participant, the date on which
such Participant's status as an Employee or Associate terminates for any reason.
SECTION 2.2 Rules of Construction. Unless the context otherwise requires or
unless otherwise defined herein, (i) a term shall have the meaning assigned to
it in Section 2.1, (ii) all references to section numbers shall be to sections
of this Plan, (iii) all references to the 'Company' shall include any successor
thereto, (iv) all references to 'employment' or 'association' of a Participant
shall be to his status as an 'Employee' or 'Associate,' respectively, of one or
more of the Company and its Affiliates, (v) 'or' shall not be exclusive, (vi)
words in the singular shall include the plural, and vice-versa, and (vii) words
in the masculine gender shall include the feminine and neuter, and vice-versa.
ARTICLE III
ADMINISTRATION
SECTION 3.1 Administration. This Plan shall be administered by the Board or,
if designated by the Board, by the Committee, which may be the Compensation
Committee of the Board or such other committee of the Board, comprised only of
Non-Employee Directors and consisting of at least three Directors to which the
Board may delegate the authority to administer this Plan.
SECTION 3.2 Committee Action. In administering this Plan, the Committee
shall follow any general guidelines not inconsistent with this Plan established
by the Board and may adopt rules and regulations for carrying out this Plan. The
Committee may consult with counsel, who may be counsel to the Company, and shall
not incur any liability for any action taken in good faith in reliance upon the
advice of counsel. The interpretation and decision made by the Committee with
regard to any question arising under this Plan or under any Option Agreement
entered into in connection with this Plan shall be final and conclusive on all
persons participating or eligible to participate in this Plan.
SECTION 3.3 Responsibilities of Committee. Subject to the terms and
conditions of this Plan and such limitations as the Board from time to time may
impose, the Committee shall be
B-3
responsible for the overall management and administration of this Plan and shall
have such authority as shall be necessary or appropriate in order to carry out
its responsibilities, including, without limitation, the authority to (i) grant
Options to such persons at such times as it deems advisable, (ii) determine the
terms of such Options to be included in grants and the number of Options, (iii)
prescribe the terms of the Option Agreements evidencing such Options, and (iv)
adopt rules and regulations, and prescribe forms, for the operation and
administration of this Plan.
SECTION 3.4 Compliance with Section 16 of the Exchange Act. It is the intent
of the Company that this Plan and any Options granted hereunder be interpreted
in a manner so that this Plan and any Options granted hereunder to Participants
satisfy the applicable requirements of Rule 16b-3 promulgated under the Exchange
Act, so that each Participant, to the maximum extent practicable and to the
extent relevant, will be entitled to the benefits of Rule 16b-3 or other
exemptions provided pursuant to the rules adopted under Section 16 of the
Exchange Act, and will not be subjected to the 'short-swing' liability
provisions of Section 16 of the Exchange Act. If any provision of this Plan or
of any Option granted hereunder would otherwise frustrate or conflict with the
intent expressed in this Section 3.4, that provision to the extent possible
shall be interpreted and deemed amended so as to avoid such conflict. To the
extent of any remaining irreconcilable conflict with such intent, such provision
shall be deemed void as applicable to such persons.
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
Employees and Associates are eligible to participate in this Plan, without
regard to length of employment or association; provided, however, that an
Associate shall not be eligible to receive Incentive Stock Options. The
Committee shall determine whether and when an Employee or Associate shall become
a Participant and shall determine the numbers of Shares for which Options shall
be granted to such person; provided, however, that if such person is a Director
and the Committee does not consist of the Board, then the Board shall ratify
such grant and the terms thereof in order for such grant to be effective. An
Employee or Associate shall be a Participant with respect to any Shares subject
to an Option only if he or she executes an Option Agreement with respect to such
Shares in such form as the Committee may prescribe.
ARTICLE V
STOCK SUBJECT TO PLAN; OPTION AGREEMENTS
SECTION 5.1 Stock Subject to Plan. The stock to be offered and delivered
under this Plan, pursuant to the exercise of an Option, shall be shares of the
authorized Common Stock and may be unissued shares or reacquired shares, as the
Committee from time to time may determine. The aggregate number of Shares to be
reserved under this Plan shall not exceed 1,350,000, subject to adjustment as
set forth in Article VIII. If, during the term of this Plan, an Option expires
or terminates for any reason prior to the exercise thereof in full, the Shares
subject to such Option, but not delivered, shall thereafter be available for
grants under this Plan. The Shares subject to an
B-4
Option that is exercised shall be charged against the aggregate number of Shares
available under this Plan.
SECTION 5.2 Option Agreements. The grant of each Option shall be evidenced
by a written Option Agreement executed by the Company and the Participant which
shall, among other things (i) designate such Option as either an Incentive Stock
Option or a Nonqualified Stock Option, (ii) specify the number of Shares subject
to such Option, (iii) specify the Option Price for the Shares subject to such
Option and the period during which such Option may be exercised, (iv) set forth
specifically or incorporate by reference the applicable provisions of this Plan,
and (v) contain such other terms and conditions not inconsistent with this Plan
as the Committee may prescribe.
ARTICLE VI
TERMS OF OPTIONS
SECTION 6.1 Option Price. The Option Price of Shares subject to an Option
that may be purchased upon exercise of an Option shall be such amount as may be
determined by the Committee at the time the Option is granted; provided,
however, that the Option Price of any Option shall not be less than the Fair
Market Value of such Shares on the date such Option is granted, or less than one
hundred and ten percent of the Fair Market Value of such Shares in the case of
an Incentive Stock Option granted to a Ten-Percent Shareholder.
SECTION 6.2 Exercise Period. Except as otherwise provided in Sections 6.3
and 6.4, an Option shall vest and be exercisable during such Exercise Period as
may be determined by the Committee in its sole discretion on the date the Option
is granted. Notwithstanding anything to the contrary contained in this Plan, the
Exercise Period for an Incentive Stock Option shall not exceed ten years from
the date such Option is granted, or five years from the date such option is
granted in the case of an Incentive Stock Option granted to a Ten-Percent
Shareholder.
SECTION 6.3 Exercise Upon Change in Control. An Option shall automatically
become vested and shall be immediately exercisable in full upon the occurrence
of any of the following events:
(i) any person (within the meaning of Section 13(d) of the Exchange Act)
other than the Company or an Affiliate shall, after the Effective Date,
become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company representing thirty percent or
more of the combined voting power of the Company's then outstanding voting
securities as a result of a tender or exchange offer or open market
purchases (privately negotiated or otherwise), unless such ownership by such
person has been approved by the Board immediately prior to the acquisition
of such securities by such person;
(ii) the merger or consolidation of the Company with or into another
entity pursuant to which the Company is not the survivor, (B) the sale or
other disposition of all or substantially all of the Company's assets, or
(C) the liquidation of the Company; provided, however, that the Board may
determine prior to the consummation of any such transaction that Options
shall not so automatically vest; or
B-5
(iii) at any time during a period of two consecutive years (not
including any period prior to the adoption of this Plan), if individuals who
at the beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election or the
nomination for election by the Company's shareholders of each new Director
during such two-year period is approved by a vote of at least two-thirds of
the directors then still in office who were Directors at the beginning of
such period.
SECTION 6.4 Exercise Upon Termination. If a Participant's employment or
association with the Company or an Affiliate terminates for any reason other
than for cause, Options granted to such Participant that are exercisable on his
Termination Date shall remain exercisable (i) until the expiration of three
months (or such other time as shall be determined by the Committee in its sole
discretion on the date the Option is granted) from such Termination Date, if
such termination occurs for a reason other than the Participant's death,
Disability or Retirement, or (ii) the expiration of twelve months (or such other
time as shall be determined by the Committee in its sole discretion on the date
the Option is granted) from such Termination Date, if such termination occurs on
account of the Participant's death, Disability or Retirement. No Option shall be
exercisable by a Participant after termination of employment or association for
cause. This Section 6.4 shall not apply to a Participant who continues to be an
Employee or Associate of the Company or any Affiliate. Notwithstanding anything
to the contrary contained in this Section 6.4, no Option shall be exercisable in
whole or in part after the expiration date of the Option or more than ten years
after the date of grant of such Option.
SECTION 6.5 Limitations on Incentive Stock Options. Except as otherwise
provided under the Code, to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of Shares with respect to which
Incentive Stock Options are exercisable for the first time by a Participant
during a calendar year (under all stock option plans of the Company and its
Affiliates) exceeds $100,000, such Options shall be treated as Nonqualified
Stock Options. Incentive Stock Options shall not be issued to any person who is
not an Employee.
SECTION 6.6 Fair Market Value. The Fair Market Value on any given date of
Shares subject to an Option shall be the last sales price (during regular
trading hours) of the Shares as reported by the Principal Securities Market on
the day immediately preceding the date as of which Fair Market Value is being
determined, or on the next preceding date on which the Shares are traded if no
Shares were traded on such immediately preceding day. If the Shares are not
traded on a Principal Securities Market, the Fair Market Value shall be
determined in good faith by the Board or the Committee. In no event shall Fair
Market Value be less than the par value of the Shares.
SECTION 6.7 Whole or Partial Exercise. Except as otherwise provided in
Article VII or as specifically stated in an Option Agreement, an Option may be
exercised in whole or from time to time in part at any time during the Exercise
Period.
ARTICLE VII
EXERCISE OF OPTIONS
SECTION 7.1 Payment for Shares. Upon the exercise of an Option by a
Participant, the Company shall cause the purchased Shares to be issued only when
it shall have received the full
B-6
Option Price therefor paid in cash or, if then permitted by applicable law and
set forth in the applicable Option Agreement, with Shares, or by surrender of
currently exercisable Options, or such other property (not inconsistent with the
terms of this Plan) or a combination of cash, Shares and Options to be valued at
the Fair Market Value thereof on the date of exercise, and such other property
at its fair market value as determined by the Committee. If payment is made by
delivery to the Company of Shares owned by the Participant, any Shares so
delivered shall have been beneficially owned by the Participant for a period of
not less than six months prior to the date of exercise and such Shares shall be
in proper form for transfer and accompanied by all requisite stock transfer tax
stamps or cash in lieu thereof. If payment is made by surrender to the Company
of Options owned by the Participant, such Options shall have a Fair Market Value
equal to the Option Value of the Shares as to which the Option is being
exercised.
SECTION 7.2 Nontransferability. Any Option granted under this Plan shall be
nontransferable except by will or by the laws of descent and distribution. In
the event of any such transfer, the entire Option shall be transferred to the
same person or entity. During the lifetime of a Participant, any Option granted
to such Participant may be exercised only by the Participant. No right or
interest of a Participant in any Option shall be subject to any lien, obligation
or liability whatsoever.
SECTION 7.3 Fractional Shares. In no event shall an Option be exercisable
for or with respect to a fractional Share.
SECTION 7.4 Lock-Up Agreement. Each Participant agrees that, during the
period of duration (not to exceed 365 days) specified by the Company and an
underwriter of Common Stock or other securities of the Company, in connection
with any public offering of Common Stock under the Securities Act, the
Participant shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any Shares held by the Participant or any permitted transferee at any
time during such period; provided, however, that each officer and director of
the Company enters into a similar agreement (a 'Lock-Up Agreement') for at least
the same period. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Shares until the end of
such period and the Participant agrees, if requested by the Company, to enter
into a written agreement in form substantially similar to the Lock-Up Agreement.
ARTICLE VIII
ADJUSTMENTS FOR CHANGES IN CAPITALIZATION, ETC.
In the event of any change in the outstanding Shares through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
split-up, split-off, spin-off, combination or exchange of Shares or other like
change in the capital structure of the Company, an adjustment shall be made to
each outstanding Option granted under this Plan, such that each such Option
shall thereafter be exercisable for such securities, cash and/or other property
as would have been received in respect of the Shares subject to such Option had
it been exercised in full immediately
B-7
prior to such change; and such adjustment shall be made successively each time
any such change shall occur. The term 'Shares' after any such change shall refer
to the securities, cash and/or property then receivable upon exercise of an
Option. In addition, in the event of any such change, the Committee shall make
any further adjustment as may be appropriate to the maximum number of Shares
subject to this Plan, and the number of Shares and Option Price of Shares
subject to outstanding Options, as shall be equitable to prevent dilution or
enlargement of rights under any Option. Notwithstanding the foregoing provisions
of this Article VIII, (i) each such adjustment with respect to an Incentive
Stock Option shall comply with the rules of Section 424(a) of the Code, and (ii)
in no event shall any adjustment be made which would render any Incentive Stock
Option granted hereunder other than an 'incentive stock option' within the
meaning of Section 422 of the Code.
ARTICLE IX
COMPLIANCE WITH LAW
No Option shall be exercisable, no Shares shall be delivered, and no payment
shall be made under this Plan except in compliance with all applicable Federal
and state laws and regulations (including, without limitation, withholding tax
requirements and federal and state securities laws and regulations) and rules of
all securities exchanges or self-regulatory organizations on which the Shares
may be listed or traded. The Company shall have the right to rely on an opinion
of counsel as to such compliance. Any certificate issued to evidence Shares for
which an Option is exercised may bear such legends and statements as the
Committee, upon advice of counsel may deem advisable to assure compliance with
Federal and state laws and regulations. No Option shall be exercisable, nor
shall Shares nor certificates therefor be issued, under this Plan until the
Company has obtained such consent or approval as the Committee may deem
advisable from any regulatory bodies having jurisdiction over such matters.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Effect on Employment. Neither the adoption of this Plan or its
operation, nor any documents describing or referring to this Plan (or any part
hereof) shall confer upon any person any right to continue as an Employee or
Associate of the Company or any Affiliate or in any way affect any right or
power of the Company or any Affiliate to terminate the employment of any
Employee or the association of any Associate at any time without assigning a
reason therefor.
SECTION 10.2 Unfunded Plan. This Plan, insofar as it provides for grants,
shall be unfunded, and the Company shall not be required to segregate any assets
that may at any time be represented by grants under this Plan. Any liability of
the Company to any person with respect to any grant under this Plan shall be
based solely upon any contractual obligations that may be created pursuant to
this Plan. No such obligation of the Company shall be deemed to be secured by
any pledge of, or other encumbrance on, any property of the Company.
B-8
SECTION 10.3 Use of Proceeds. The proceeds received by the Company from the
sale of Shares pursuant to this Plan shall be used for general corporate
purposes.
SECTION 10.4 Rights as a Shareholder. A Participant shall have no rights
with respect to any Share until the Participant shall have become a holder of
record of such Share, and the Participant shall not be entitled to any dividends
or distributions or other rights in respect of such Share for which the record
date is prior to the date on which the Participant shall have become the holder
of record therefor, except as otherwise provided in Article VIII.
SECTION 10.5 Construction. Headings are given to the articles and sections
of this Plan solely as a convenience to facilitate reference and shall not in
any way affect the meaning of this Plan.
SECTION 10.6 Applicable Law. This Plan shall be governed and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Delaware.
ARTICLE XI
AMENDMENT; TERMINATION; EFFECTIVE DATE
SECTION 11.1 Amendment and Termination. The Board may amend or terminate
this Plan at any time or from time to time; provided, however, that no amendment
shall without all required approvals with respect thereto (i) increase (except
as provided by Article VIII) the maximum number of shares as to which Options
may be granted under this Plan, or (ii) materially modify the requirements in
Article IV as to eligibility for participation in this Plan. Any provision of
this Plan to the contrary notwithstanding, no termination or amendment of this
Plan may, without the consent of the individual to whom an Option shall have
been previously granted, adversely affect the rights conferred by such Option.
The Board may amend the terms of any Option at any time or from time to time
with the consent of the holder of such Option; provided, however, that no Option
may be amended to reduce the Option Price thereof.
SECTION 11.2 Duration of this Plan. Unless terminated earlier pursuant to
Section 11.1, this Plan shall terminate upon the expiration of ten years from
the earlier of the date of its adoption by the Board or the date on which this
Plan is approved by the shareholders of the Company. No Option shall be granted
after termination of this Plan.
SECTION 11.3 Effective Date. This Plan shall become effective upon its
adoption by the Board, subject to the approval by the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock of the Company
present, in person, or by proxy, at a shareholders meeting duly held within one
year following adoption of this Plan by the Board. All options granted prior to
the date of such shareholder approval shall be subject to such approval and no
Option shall be exercisable and no Shares shall be delivered until such approval
shall have been received.
* * * * * * * * * * * * * *
The Plan was adopted by the Board on April 10, 1997 and approved by the
stockholders of the Company on November 5, 1997. The Plan was subsequently
amended by the Board on August 5,
B-9
1999, which amendment was approved by the stockholders of the Company on
November 4, 1999. The Plan was further amended by the Board on May 16, 2001 to
increase the number of shares reserved for issuance, which amendment is subject
to approval by the stockholders of the Company on November 8, 2001.
LAZARE KAPLAN INTERNATIONAL INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of , 200 , between LAZARE KAPLAN
INTERNATIONAL INC., a Delaware corporation (the 'Company'), and
('Participant'), is made pursuant and subject to the provisions of the
Company's 1997 Long-Term Stock Incentive Plan (the 'Plan'), a copy of which is
annexed hereto as Exhibit A. All capitalized terms used herein and not otherwise
defined herein shall have the meaning herein as given them in the Plan.
1. Grant of Option. Pursuant to the Plan, the Compensation Committee of the
Board of Directors of the Company (the 'Committee'), on , 200 , (the
'Date of Grant'), granted to Participant, subject to the terms and conditions of
the Plan and to the terms and conditions herein set forth, the right and option
to purchase from the Company all or any part of an aggregate of shares of
common stock, par value $1.00 per share (the 'Common Stock') at the Option Price
of $ per share.(1) This Option is [a Nonqualified Stock Option] [an
Incentive Stock Option]
2. Terms and Conditions. This Option is subject to the following terms and
conditions:
(a) Expiration Date. This Option shall expire on the date which is the
anniversary of the Date of Grant (the 'Expiration Date').(2)
(b) Exercise of Option. Except as otherwise provided herein, [this
Option shall become [fully exercisable on the date which is months
from the date hereof.] [exercisable in substantially equal
installments, the first such instalment to become exercisable on the first
anniversary of the Date of Grant and the remaining installments to become
exercisable on each subsequent anniversary thereof until all the shares
subject to this Option have become exercisable].
(c) Method of Exercising and Payment for Shares. This Option is
exercisable by written notice, accompanied by payment in full of the Option
Price, delivered to the attention of the Company's Secretary at the
Company's principal office. The Date of Exercise shall be the later of the
date of the aforesaid notice and the date the Option Price is received by
the Company. The Option Price shall be paid in cash[, or with shares of
Common Stock, or by
---------
(1) The Option Price of an Option can not be less than Fair Market Value of the
Shares on the Date of Grant (or 110% of Fair Market Value in the case of a
grant of an Incentive Stock Option to a Ten Percent Shareholder).
(2) Expiration date for an Incentive Stock Option may not exceed ten years (five
years in the case of a grant of an Incentive Stock Option to a Ten Percent
Shareholder).
B-10
surrender of currently exercisable Options, [or by (insert other means
approved by the Committee)] or a combination thereof.](3)
3. Fractional Share. In no event shall this Option be exercisable for or
with respect to a fractional share of Common Stock.
4. Governing Law. This Agreement is to be governed by the laws of the State
of Delaware, without regard to the conflict of law provisions thereof.
5. Conflicts. In the event of any conflict between the provisions of the
Plan as in effect on the date hereof and the provisions of this Agreement, the
provisions of the Plan are to govern. All references to the Plan are intended to
mean the Plan as in effect on the date hereof and as the same hereafter may be
amended from time to time in accordance with the provisions of the Plan.
6. Participant Bound by Plan. Participant acknowledges receipt of a copy of
the Plan and agrees to be bound by all the terms and provisions thereof.
7. Binding Effect. Subject to the limitations stated above and in the Plan,
this Agreement is to be binding upon and inure to the benefit of the legatees,
distributees and personal representatives of Participant and the successors of
the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by a
duly authorized officer, and Participant has affixed his or her signature
hereto.
LAZARE KAPLAN INTERNATIONAL INC.
By:
.............................
Participant
---------
(3) Insert any other means of payment authorized by the Committee.
B-11
[LOGO] LAZARE KAPLAN INTERNATIONAL INC.
================================================================================
YOUR VOTE IS IMPORTANT, WHETHER OR NOT YOU PLAN NOTICE OF
TO ATTEND THE MEETING, PLEASE DATE, MARK AND SIGN ANNUAL MEETING
THE ENCLOSED PROXY CARD AND RETURN IT IN THE OF STOCKHOLDERS
ENVELOPE PROVIDED AND
PROXY STATEMENT
--------------------------------------------------------------------------------
Appendix I
LAZARE KAPLAN INTERNATIONAL INC.
Proxy - Annual Meeting of Shareholders - November 8, 2001
(Solicited on Behalf of the Board of Directors)
The undersigned stockholder of Lazare Kaplan International Inc. hereby
constitutes and appoints Leon Tempelsman, Lucien Burstein and William H. Moryto,
and each of them, the attorneys and proxies of the undersigned, with full power
of substitution and revocation, to represent and to vote on behalf of the
undersigned all of the shares of the Company's Common Stock which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
at the Cornell Club, Six East 44th Street, 3rd Floor, New York, New York on
November 8, 2001, at 10:00 a.m., and at any adjournments thereof, upon the
following proposals which are more fully described in the notice of, and proxy
statement for, the Annual Meeting.
NOTE: This proxy, properly filled in, dated and signed, should be returned
promptly in the enclosed postpaid envelope. To Lazare Kaplan International Inc.,
Midtown Station, P.O. Box 812, New York, New York 10138-0832
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF DIRECTORS AND EACH OF THE ABOVE PROPOSALS AND IN THE
DISCRETION OF THE PROXIES ON ALL OTHER MATTERS.
(1) ELECTION OF DIRECTORS [ ] FOR [ ] WITHHOLD
Maurice Tempelsman, Leon Tempelsman, Lucien all nominees AUTHORITY
Burstein, Myer Feldman, Robert A. Del Genio listed to the left to vote for all
(except as marked nominees listed
(INSTRUCTION: To withhold authority to vote for any to the contrary) to the left
individual nominee, strike a line write through that nominee's
name in the space provided above)
(2) Proposal to approve an amendment to the Company's Certificate of [ ] FOR [ ] AGAINST [ ] ABSTAIN
Incorporation reducing the number of Authorized Shares of common
stock and preferred stock from 20,000,000 and 5,000,000 shares to
12,000,000 and 1,5000,000 shares, respectively
(3) Proposal to approve an amendment to the Company's Amended [ ] FOR [ ] AGAINST [ ] ABSTAIN
and Restated 1997 Stock Incentive Plan increasing the number of
shares authorized for issuance upon exercise of options granted
thereunder from 600,000 to 1,350,000
(4) Proposal to ratify the appointment of Ernst & Young LLP, as the Company's [ ] FOR [ ] AGAINST [ ] ABSTAIN
independent auditors for the fiscal year ending May 31, 2002.
(5) In their discretion, upon such other matters as properly may come before
the Annual Meeting.
(Continued and to be signed on reverse side.)
Any of such attorneys and proxies, or their substitutes (or if only one, that
one) at said Annual Meeting, and any adjournments thereof, may exercise all of
the powers hereby given. Any proxy heretofore given is hereby revoked.
Receipt is acknowledged of the Notice of Annual Meeting of shareholders, the
Proxy Statement accompanying said Notice and the Annual Report to Stockholders
for the fiscal year ended May 31, 2001.
Each of the foregoing matters has been proposed by the Company and is not
conditioned on the approval of any other matter.
IN WITNESS WHEREOF, the undersigned has signed this proxy.
Dated: , 2001
-----------------------------
-------------------------------------
Stockholder(s) signature
-------------------------------------
Stockholder(s) signature
Signature(s) of stockholder should correspond exactly with
the name(s) shown hereon. If shares are held jointly, both
holders should sign. Attorneys, executors, administrators,
trustees, guardians or others signing in a representative
capacity should give their full titles. Proxies executed
in the name of a corporation should be signed on behalf
of the corporation by its president or other authorized
officer.
FOLD AND DETACH HERE
ANNUAL MEETING OF STOCKHOLDERS
LAZARE KAPLAN INTERNATIONAL INC.
THURSDAY, NOVEMBER 8, 2001
10:00 A.M.
THE CORNELL CLUB
SIX EAST 44th STREET
THIRD FLOOR
NEW YORK, NY 10017
--------------------------------------------------------------------------------
AGENDA:
ELECTION OF DIRECTORS
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION RE REDUCTION
OF NUMBER OF AUTHORIZED SHARES
APPROVAL OF AMENDED AND RESTATED STOCK OPTION PLAN
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
OTHER BUSINESS
--------------------------------------------------------------------------------
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as ............................. 'SS'