UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
JLM Couture, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
JLM COUTURE, INC.
(a Delaware Corporation)
Notice of 2003 Annual Meeting
of Shareholders to be held
at 10:00 A.M. on October 28, 2003
To the Shareholders of
JLM COUTURE, INC.:
NOTICE IS HEREBY GIVEN that the 2003 Annual Meeting of Shareholders
(the "Meeting") of JLM COUTURE, INC. (the "Company") will be held on
October 28, 2003 at 10:00 A.M. at the Company's offices, located at 525
Seventh Avenue, Suite 1703, New York, NY 10018, to consider and vote on
the following matters described under the corresponding numbers in the
attached Proxy Statement:
1. To elect two Class II Directors to hold office for three years
and until the 2006 Annual Meeting of Shareholders at which their term
expires or until their successors have been duly elected and qualify;
2. To approve the adoption of the 2003 Stock Incentive Plan;
3. To ratify the appointment of Goldstein Golub Kessler LLP as
the Company's independent auditors for its fiscal year ending October 30,
2003; and
4. To transact such other business as may properly come before
the Meeting.
The Board of Directors has fixed August 22, 2003, at the close of
business, as the record date for the determination of shareholders
entitled to vote at the Meeting, and only holders of shares of Common
Stock of the Company of record at the close of business on that day will
be entitled to vote. The stock transfer books of the Company will not
be closed.
A complete list of shareholders entitled to vote at the Meeting
shall be available for examination by any shareholder, for any purpose
germane to the Meeting, during ordinary business hours from October 14,
2003 until the Meeting at the offices of the Company. The list will also
be available at the Meeting.
Whether or not you expect to be present at the Meeting, please fill
in, date, sign, and return the enclosed Proxy, which is solicited by
management. The Proxy is revocable and will not affect your vote in
person in the event you attend the Meeting.
By Order of the Board of Directors
/s/Joseph E. O'Grady
Joseph E. O'Grady, Secretary
Date: September 2, 2003
Requests for additional copies of proxy material and the Company's
Annual Report for its fiscal year ended October 31, 2002 should be
addressed to Shareholder Relations, JLM Couture, Inc., 525 Seventh
Avenue, Suite 1703, New York, NY 10018. This material will be furnished
without charge to any shareholder requesting it.
JLM COUTURE, INC.
525 Seventh Avenue, Suite 1703
New York, NY 10018
Proxy Statement
The enclosed proxy is solicited by the management of JLM
Couture, Inc. (the "Company") in connection with the 2003 Annual
Meeting of Shareholders (the "Meeting") to be held on October 28,
2003 at 10:00 A.M. at the Company's offices located at 525 Seventh
Avenue, Suite 1703, New York, NY 10018 and any adjournment thereof.
The Board of Directors (the "Board") has set August 22, 2003 as the
record date for the determination of shareholders entitled to vote
at the Meeting. A shareholder executing and returning a proxy has
the power to revoke it at any time before it is exercised by filing
a later proxy with, or other communication to, the Secretary of the
Company or by attending the Meeting and voting in person.
The proxy will be voted in accordance with your directions as
to:
(1) The election of two Class II Directors to hold office for
three years and until the 2006 Annual Meeting of Shareholders at
which their term expires or until their successors have been duly
elected and qualify;
(2) The approval of the adoption of the 2003 Stock Incentive
Plan;
(3) The ratification of the appointment of Goldstein Golub
Kessler LLP ("GGK") as the Company's independent auditors for its
fiscal year ending October 30, 2003; and
(4) The transaction of such other business as may properly
come before the Meeting.
In the absence of direction, the proxy will be voted in favor
of management's proposals.
The entire cost of soliciting proxies will be borne by the
Company. The costs of solicitation, which represent an amount
believed to be normally expended for a solicitation relating to an
uncontested election of directors, will include the costs of
supplying necessary additional copies of the solicitation materials
and the Company's Annual Report to Shareholders for its fiscal year
ended October 31, 2002 ("Fiscal 2002")(the "Annual Report") to
beneficial owners of shares held of record by brokers, dealers,
banks, trustees, and their nominees, including the reasonable
expenses of such recordholders for completing the mailing of such
materials and Annual Reports to such beneficial owners.
Only shareholders of record of the Company's 1,903,360 shares
of Common Stock (the "Common Stock") outstanding at the close of
business on August 22, 2003 will be entitled to vote. Each share
of Common Stock is entitled to one vote. Holders of a majority of
the outstanding shares of Common Stock must be represented in
person or by proxy in order to achieve a quorum. All shares of our
Common Stock represented in person or by proxy (including shares
which abstain or do not vote for any reason with respect to one or
more of the matters presented for stockholder approval) will be
counted for purposes of determining whether a quorum is present at
the Annual Meeting. Abstentions will be treated as shares that are
present and entitled to vote for purposes of determining the number
of shares present and entitled to vote with respect to any
particular matter, but will not be counted as a vote in favor of
such matter. Accordingly, an abstention from voting on a matter
has the same legal effect as a vote against the matter. If a
broker or nominee holding stock in "street name" indicates on the
proxy that it does not have discretionary authority to vote as to
a particular matter ("broker non-votes"), those shares will not be
considered as present and entitled to vote with respect to such
matter. Accordingly, a broker non-vote on a matter has no effect
on the voting on such matter. The proxy statement, the attached
notice of meeting, the enclosed form of proxy and the Annual Report
are being mailed to shareholders on or about September 2, 2003. The
mailing address of the Company's principal executive offices is 525
Seventh Avenue, Suite 1703, New York, NY 10018.
PROPOSAL ONE. ELECTION OF CLASS II DIRECTORS
The Company's By-laws require the Company to have five or less
directors. The number of directors is set by the Board and was
increased from three to four on August 12, 2003. The Board is
divided into three classes of directors. Each class currently
consists of one director. Class II, whose term expires at the
Meeting, consists of Daniel M. Sullivan; Class I, whose term
expires in 2005, consists of Joseph E. O'Grady; and Class III,
whose term expires in 2004, consists of Joseph L. Murphy. At the
Meeting, due to the increase of the size of the Board, two
directors will be elected to fill the term of the Class II
directors. Mr. Sullivan who is running for reelection, and Mr.
Keith Cannon are the nominees for election at the Meeting. If
elected, Messrs. Sullivan and Cannon will serve for terms expiring
at the 2006 Annual Meeting of Shareholders.
The persons named in the accompanying proxy have advised
management that it is their intention to vote for the election of
Messrs. Sullivan and Cannon as Class II Directors unless
indication is made on your proxy card that your vote should be
withheld from either or both of the nominees.
The Board of Directors unanimously recommends a vote FOR the
election of these nominees as Directors.
The following table sets forth certain information as to the
persons nominated for election as a director of the Company and for
those directors whose terms of office will continue after the
Meeting:
Nominees For Directors Whose Terms Expire in 2006:
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Position with Director
Name Age the Company Since
---- --- ------------- -------
Keith Cannon 63 - -
Daniel M. Sullivan 79 Chairman of the September 1986
Board of Directors
Keith A. Cannon, a nominee for election as a director of the
Company, is currently a registered representative for Wilson-Davis &
Co., Inc., a broker-dealer based in Salt Lake City, Utah. For the
past ten years, he has acted in this capacity and resided in
Oceanside, California. Mr. Cannon also serves as member of the Board
of Directors and Audit Committee of the following public companies:
Elamex S.A. de C.V., Global e-Point, Inc., M.B.A. Holdings, Inc. and
Montgomery Realty Group, Inc. He has been engaged in various
capacities in the investments business for the past 35 years.
Daniel M. Sullivan became a director in September 1986 and was
elected Chairman of the Board in 1989. In 1989, Mr. Sullivan retired
as President and Chief Executive Officer of Frost & Sullivan, Inc.,
a publicly-traded publisher of market research studies, a position he
had held for more than five years prior to his retirement.
Directors Whose Terms Continue After the Meeting:
------------------------------------------------
Position with Director
Name Age the Company Since
---- --- ------------- --------
Joseph E. O'Grady 81 Secretary and Director February 1991
Joseph L. Murphy 48 Chief Executive April 1986
and Financial Officer,
Director
Joseph E. O'Grady was appointed to the Board of Directors in
February 1991. In December 1992, Mr. O'Grady was appointed
Secretary of the Company. For more than the past five years, Mr.
O'Grady has been President of JOG Associates, Inc., a privately-
held financial consulting firm based in Hicksville, NY. JOG
Associates, Inc. arranges business financing and provides financial
consulting services for closely-held companies.
Joseph L. Murphy, a founder of the Company, has been a
director of the Company since its inception. During Fiscal 1992,
Mr. Murphy was appointed President. In February 1993, Mr. Murphy
was appointed Chief Executive Officer. Mr. Murphy is the brother
of Mark Murphy, the Company's Vice President - Operations.
During Fiscal 2002, the Board met informally. It acted three
times by unanimous written consent.
OTHER EXECUTIVE OFFICERS
Position with Position
Name Age the Company Held Since
---- --- ------------- ----------
Mark Murphy 38 Vice President- May 1993
Operations
Jerrold Walkenfeld 46 Principal Accounting June 2002
Officer
Mark Murphy was appointed Vice President - Operations in May
1993. Mr. Mark Murphy joined the Company in January 1993. Prior
to his joining the Company, Mr. Mark Murphy was employed as a
manager by Accurate Testing Co., a metals testing company based in
California, a position he had held since 1988. Mr. Mark Murphy is
the brother of Joseph L. Murphy, the Company's President.
Jerrold Walkenfeld, Principal Accounting Officer, commenced
employment with the Company in June 2002. Since 1995 until his
employment by the Company in June 2002, he was engaged by the
Company as an outside consultant to render financial and accounting
services for the Company. For more than the past five years, Mr.
Walkenfeld has maintained an independent accounting practice. Mr.
Walkenfeld is a certified public accountant.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934.
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Based solely on its
review of the copies of such forms received by it, the Company
believes that during Fiscal 2002, Mr. Walkenfeld failed to file an
Initial Report of Beneficial Ownership on Form 3 on a timely basis.
Such Form 3 has since been filed with the SEC.
AUDIT AND COMPENSATION COMMITTEE
During Fiscal 2002, the Audit and Compensation Committee (the
"Audit Committee") consisting of Messrs. O'Grady and Sullivan met
once.
AUDIT COMMITTEE REPORT
The Audit Committee consists of a majority of independent
directors all of whom meet the independence and experience
requirements of Nasdaq Marketplace Rule 4200(a)(14). The Audit
Committee's responsibilities are as described in a written charter
adopted by the Board, which is attached as Appendix A to this Proxy
Statement.
The Audit Committee has reviewed and discussed the Company's
audited financial statements for Fiscal 2002 with management and
with the Company's independent auditors, Goldstein Golub Kessler
LLP ("GGK"). The Audit Committee has discussed with GGK the
matters required to be discussed by the Statement on Auditing
Standards No. 61 relating to the conduct of the audit. The Audit
Committee has received the written disclosures and the letter from
GGK required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and has discussed
with GGK its independence. Based on the Audit Committee's review
of the audited financial statements and the review and discussions
described in this paragraph, the Audit Committee recommended to the
Board that the audited financial statements for Fiscal 2002 be
included in the Company's Annual Report on Form 10-KSB for Fiscal
2002 for filing with the Securities and Exchange Commission.
Submitted by the members of the Audit Committee:
Joseph E. O'Grady
Daniel M. Sullivan
AUDIT FEES; FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION
FEES; ALL OTHER FEES
Audit fees billed to the Company by GGK during Fiscal 2002 for
review of the Company's annual financial statements and those
financial statements included in the Company's quarterly reports on
Form 10-QSB totaled $67,000. The Company did not engage GGK to
provide advice to the Company regarding financial information
systems design and implementation during Fiscal 2002. The Company
did not engage GGK during Fiscal 2002 for any other non-audit
services.
EXECUTIVE COMPENSATION
The following table sets forth the compensation the Company
paid for its fiscal years ended October 31, 2002, 2001 and 2000 to
its Chief Executive Officer and to each of its other executive
officers whose compensation exceeded $100,000 on an annual basis.
SUMMARY COMPENSATION TABLE
--------------------------
Name and Annual Com- Other Long Term Other
Principal Fiscal pensation Annual Com- Compensation/ Compen-
Position Year Salary ($) pensation ($) Options ation($)
--------- ------ ----------- ------------- ------------- --------
Joseph L. 2002 325,000 202,807 100,000 37,009
Murphy, 2001 325,000 57,640 - 9,526
President 2000 302,083 65,430 - 8,616
and Chief
Executive
Officer
Mark Murphy, 2002 97,243 5,000 12,000 -
Vice President
Operations
Jerrold 2002 90,921 13,920 - -
Walkenfeld,
Principal
Accounting
Officer
EMPLOYMENT AGREEMENT
Mr. Joseph L. Murphy has an employment agreement (the
"Agreement") with the Company which provides for a base salary of
$325,000 per year. As additional compensation, Mr. Murphy receives
five percent (5%) of the Company's annual pre-tax profits. On
August 14, 2001, the Board amended the Agreement to extend the term
of Mr. Murphy's employment until May 19, 2006 and to award Mr.
Murphy 200,000 restricted shares of Common Stock as additional
compensation for services rendered and to be rendered pursuant to
the Agreement. During Fiscal 2002, the Company also granted Mr.
Murphy a one-time bonus of $100,000 to compensate him for taxes
incurred due to the stock bonus referred to above.
STOCK OPTION PLAN
On August 26, 1996, the Company adopted a stock option plan
(the "1996 Plan"). The 1996 Plan provides for the issuance of
incentive and non-statutory stock options to employees, consultants
advisors and/or directors for a total of up to 100,000 shares of
Common Stock. The 1996 Plan was amended by the Board of Directors
in September 1998 to increase the authorized number of shares
thereunder from 100,000 to 250,000 shares. A majority of the
Company's shareholders approved the amendment to the 1996 Plan in
October 1998. The exercise price of options granted may not be
less than the fair market of the shares on the date of grant (110%
of such fair market value for a holder of more than 10% of the
Company's Common Stock). The 1996 Plan will terminate on August
26, 2006.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END (FYE) OPTION VALUES
Value of
Unexercised
Number In-the-Money
Of Unexercised Options
Options At FYE
Shares At FYE Acquired ($)
Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized(1) Unexercisable Unexercisable (1)
---- ----------- ----------- ------------- -----------------
Joseph L. - - 200,000(2)/100,000 51,500(2)/72,000
Murphy
Mark - - 0/12,000 0/8,640
Murphy
Joseph E. - - 5,000/22,000 5,350/19,340
O'Grady
Daniel M. - - 5,000/22,000 5,350/19,340
Sullivan
___________________
(1) Represents fair market value of Common Stock at October 31,
2002 of $2.82 as reported by Nasdaq, less the exercise price.
(2) Subsequent to FYE, on February 24, 2003, the Company and Mr.
Murphy agreed to cancel 200,000 of Mr. Murphy's exercisable
options upon payment of $200,000 to Mr. Murphy. On that date,
this payment represented an imputed discount of approximately
16% from the closing price of the Common Stock as reported by
NASDAQ minus the exercise price of such options.
COMPENSATION OF DIRECTORS
Directors not employed by the Company are compensated as
consultants for the time spent on Company matters, including
attendance at directors' and other meetings. During Fiscal 2002,
Mr. Sullivan received $30,000 and Mr. O'Grady received $44,356 as
director fees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of August 14, 2003, the
number of shares of Common Stock held of record or beneficially (i)
by each person who held of record, or was known by the Company to
own beneficially, more than five percent of the outstanding shares
of Common Stock, (ii) by each director and (iii) by all officers
and directors as a group:
Number of Percent of
Names and Address Shares Owned (1) Outstanding Shares
----------------- ---------------- ------------------
Joseph L. Murphy 704,858(2)(3) 36.55%
225 West 37th Street
New York, NY 10018
Daniel M. Sullivan 90,599(2) 4.74%
225 West 37th Street
New York, NY 10018
Joseph E. O'Grady 22,666(2) 1.19%
225 West 37th Street
New York, NY 10018
FMR Corp. 197,100(4) 10.24%
82 Devonshire Street
Boston, MA 02109
Carl Seaman 281,666(5) 14.80%
12 The Poplars
Roslyn, NY 11576
All directors and
officers as a
group (5 persons) 845,180(2) 42.93%
_______________
(1) Unless otherwise indicated, all shares of Common Stock are
owned directly.
(2) Includes 25,000, 8,000, 8,000 and 44,000 shares for Messrs.
Murphy, Sullivan, O'Grady and all officers and directors as a
group, respectively, that are issuable upon exercise of
presently exercisable options at an average exercise price of
approximately $1.97 per share.
(3) 148,331 of these shares are pledged to a bank to secure a
personal loan.
(4) Based on information furnished to the Company on Schedule
13G/A dated February 14, 2002.
(5) Based on information furnished to the Company on Schedule 13D
dated June 1, 1995 filed with the Company on behalf of Mr.
Seaman.
The Company is unaware of any arrangement, the operation of
which, at a subsequent date, may result in a change of control of
the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 22, 1998, Mr. Joseph L. Murphy purchased from the
Company 200,000 shares of Common Stock at a price of $2.25 per
share, the market value of such shares on such date. The purchase
was financed by Mr. Murphy executing a ten year promissory note due
to the Company in the principal amount of $450,000. The promissory
note bears interest at 5% per annum and requires annual principal
payments of $45,000 with accrued interest. The purchase was
approved by the unanimous consent of the Board. The Company sold
these shares to Mr. Murphy because it was deemed to be in the best
interests of the Company for him to increase his equity ownership
in the Company to better align his interest with that of the other
shareholders of the Company. $270,000 of this note currently
remains unpaid. Interest is current through February 22, 2003 and
the annual principal payment of $45,000 due on December 22, 2002
was paid. On October 16, 2000, the Company lent $29,000 to Mr.
Joseph L. Murphy for personal reasons. Interest on this second
loan was payable monthly at a rate of 7% per annum and principal
payments were to be made in accordance with the terms of a
promissory note between Mr. Murphy and the Company. This note was
repaid in full by Mr. Murphy in August 2002.
Subsequent to FYE, on February 24, 2003, the Company and Mr.
Murphy agreed to cancel 200,000 of Mr. Murphy's exercisable options
upon payment of $200,000 to Mr. Murphy. On that date, this payment
represented an imputed discount of approximately 16% from the
closing price of the Common Stock as reported by NASDAQ minus their
exercise price of such options.
PROPOSAL 2
ADOPTION OF 2003 STOCK INCENTIVE PLAN
BACKGROUND
In light of the recent adoption of new rules for companies
registered for trading on the Nasdaq Stock Market for the granting
of options to purchase shares of Common Stock or the issuance of
shares of Common Stock as incentives or compensation for
performance, our Board of Directors approved the adoption of the
2003 Stock Incentive Plan (the "Plan") effective August 12, 2003,
in substantially the form attached hereto as Appendix B subject to
the approval of the Plan by the shareholders at the 2003 Annual
Meeting of Shareholders. Awards may be granted under the Plan on
and after its effective date (August 12, 2003), provided the
shareholders approve the Plan by no later than August 12, 2013. The
discussion that follows is qualified in its entirety by reference
to the Plan.
The maximum number of shares that may be issued pursuant to awards
granted under the Plan may not exceed the sum of (a) 500,000
shares, plus (b) any shares of Common Stock (1) remaining available
for issuance as of the effective date of the Plan under the
Company's 1996 Stock Option Plan and any other stock incentive
plans maintained by the Company (collectively, the "Prior Plans"),
and/or (2) subject to an award granted under a Prior Plan, which
awards are forfeited, cancelled, terminated, expire or lapse for
any reason, and the Board has reserved such number of shares for
this purpose. Of that amount, the maximum number of shares of
Common Stock that may be issued under the Plan pursuant to the
grant of incentive stock options (described below) is 500,000, and
no participant may be granted awards in any 12-month period for
more than 100,000 shares of Common Stock (or the equivalent value
thereof based on the fair market value per share of the common
stock on the date of grant of award). The following will not be
included in calculating the share limitations set forth above: (a)
dividends, including dividends paid in shares, or dividend
equivalents paid in cash in connection with outstanding awards, (b)
awards which by their terms are settled in cash, (c) shares and any
awards that are granted through the assumption of, or in
substitution for, outstanding awards previously granted as the
result of a merger, consolidation, or acquisition of the employing
company (or an affiliate) pursuant to which it is merged with the
Company or becomes a related entity of the Company, (d) any shares
subject to an award under the Plan or Prior Plan, which award is
forfeited, cancelled, terminated, expires or lapses for any reason,
and (e) any shares surrendered by a participant or withheld by the
Company to pay the option price for an option or used to satisfy
any tax withholding requirement in connection with the exercise,
vesting or earning of an award if, in accordance with the terms of
the Plan, a participant pays such option price or satisfies such
tax withholding by either tendering previously owned shares or
having the Company withhold shares.
One employee of the Company, Lazaro Perez, has received a grant of
49,950 restricted shares pursuant to his employment agreement with
the Company, which will be issued subject to adoption of the Plan
by the shareholders.
The number of shares reserved for issuance under the Plan and the
terms of awards may be adjusted in the event of an adjustment in
the capital stock structure of the Company or a related entity (due
to a merger, stock split, stock dividend or similar event). On
August 12, 2003, the closing sales price of the Common Stock as
reported on The Nasdaq SmallCap Market was $4.98 per share.
PURPOSE AND ELIGIBILITY
The purpose of the Plan is to encourage and enable selected
employees, directors and independent contractors of the Company and
related entities to acquire or increase their holdings of Common
Stock and other proprietary interests in the Company in order to
promote a closer identification of their interests with those of
the Company and its shareholders, thereby further stimulating their
efforts to enhance the Company's efficiency, soundness,
profitability, growth and shareholder value. At this time,
approximately 73 employees and three directors are eligible to
participate in the Plan.
The purpose will be carried out by the granting of benefits
("awards") to selected participants. Awards which may be granted
under the Plan include incentive stock options ("incentive
options") and nonqualified stock options ("nonqualified options")
(collectively, "options"); stock appreciation rights ("SARs");
restricted awards ("restricted awards") in the form of restricted
stock awards ("restricted stock awards") and restricted stock units
("restricted stock units"); and performance awards ("performance
awards") in the form of performance shares ("performance shares")
and performance units ("performance units"). The material terms of
each type of award are discussed below. See "Awards."
ADMINISTRATION; AMENDMENT AND TERMINATION
The Plan will be administered by the Board of Directors, or upon
its delegation, by the Audit and Compensation Committee of the
Board. The Board of Directors and the Audit and Compensation
Committee are referred to in this discussion collectively as the
"Administrator." Under the terms of the Plan, the Administrator has
full and final authority to take any action with respect to the
Plan, including, without limitation, the authority to: (a)
determine all matters relating to awards, including selection of
individuals to be granted awards, the types of awards, the number
of shares, if any, of Common Stock subject to an award, and the
terms, conditions, restrictions and limitations of an award; (b)
prescribe the form or forms of agreements related to awards granted
under the Plan; (c) establish, amend and rescind rules and
regulations for the administration of the Plan; and (d) construe
and interpret the Plan, awards and award agreements made under the
Plan, establish and interpret rules and regulations for
administering the Plan and make all other determinations deemed
necessary or advisable for administering the Plan.
In certain circumstances, the Administrator may delegate to one or
more officers of the Company the authority to grant awards, and to
make any or all of the determinations reserved for the
Administrator in the Plan with respect to such awards (subject to
any restrictions imposed by applicable laws, rules and regulations
and such terms and conditions as may be established by the
Administrator).
The Plan and awards may be amended or terminated at any time by the
Board of Directors, subject to the following: (a) shareholder
approval is required of any Plan amendment if such approval is
required by applicable law, rule or regulation; and (b) an
amendment or termination of an award may not materially adversely
affect the rights of an award participant without the participant's
consent. Notwithstanding clause (a) of the preceding sentence,
except for anti-dilution adjustments made under the Plan, the
option price for any outstanding option or base price of any
outstanding SAR granted under the Plan may not be decreased after
the date of grant, nor may any outstanding option or SAR granted
under the Plan be surrendered to the Company as consideration for
the grant of a new option or SAR with a lower exercise or base
price than the original option or SAR, as the case may be, without
shareholder approval of any such action.
The Administrator has the authority to make adjustments of awards
upon the occurrence of certain unusual or nonrecurring events, if
the Administrator determines that such adjustments are appropriate
in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or
necessary or appropriate to comply with applicable laws, rules or
regulations. The Administrator may cause any award granted under
the Plan to be canceled in consideration of an alternative award or
cash payment of an equivalent cash value made to the holder of such
canceled award.
AWARDS
As noted above, the Plan authorizes the grant of incentive options,
nonqualified options, SARs, restricted awards and performance
awards. A summary of the material terms of each type of award is
provided below.
OPTIONS. The Plan authorizes the grant of both incentive
options and nonqualified options, both of which are exercisable for
shares of Common Stock (although incentive options may only be
granted to employees of the Company or a related corporation). The
option price at which an option may be exercised will be determined
by the Administrator at the time of grant and must be at least 100%
of the fair market value per share of the Common Stock on the date
of grant (or 110% of the fair market value with respect to
incentive options granted to an employee who owns stock possessing
more than 10% of the total voting power of all classes of stock of
the Company or a related corporation). Unless an individual award
agreement provides otherwise, the option price may be paid in the
form of cash or cash equivalent; in addition, where permitted by
the Administrator and applicable laws, rules and regulations,
payment may also be made: (a) by delivery (by either actual
delivery or attestation) of shares of Common Stock owned by the
participant at the time of exercise for a period of at least six
months and otherwise acceptable to the Administrator; (b) by shares
of Common Stock withheld upon exercise; (c) by delivery of written
notice of exercise to the Company and delivery to a broker of
written notice of exercise and irrevocable instructions to promptly
deliver to the Company the amount of sale or loan proceeds to pay
the option price; (d) by such other payment methods as may be
approved by the Administrator and which are acceptable under
applicable law; or (e) by any combination of these methods. The
term of an option and the period or periods during which, and
conditions pursuant to which, an option may be exercised will be
determined by the Administrator at the time of option grant and, in
the case of incentive options, the option term may not exceed 10
years (or five years with respect to an employee who owns stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a related corporation). Options
are also subject to certain restrictions on exercise if the
participant terminates employment. The Administrator also has
authority to establish other terms and conditions related to
options.
STOCK APPRECIATION RIGHTS. Under the terms of the Plan, SARs
may be granted to the holder of an option (a "related option") with
respect to all or a portion of the shares of common stock subject
to the related option (a "tandem SAR") or may be granted separately
(a "freestanding SAR"). The consideration to be received by the
holder of an SAR may be paid in cash, shares of common stock
(valued at fair market value on the date of the SAR exercise), or
a combination of cash and shares of common stock, as determined by
the Administrator. The holder of an SAR is entitled to receive from
the Company, for each share of Common Stock with respect to which
the SAR is being exercised, consideration equal in value to the
excess of the fair market value of a share of Common Stock on the
date of exercise over the base price per share of such SAR. The
base price may be no less than the fair market value per share of
the Common Stock on the date the SAR is granted. The consideration
paid by the Company upon exercise of an SAR may be paid currently
or on a deferred basis.
SARs are exercisable according to the terms established by the
Administrator and stated in the applicable award agreement. Upon
the exercise of a tandem SAR, the related option is deemed to be
surrendered to the extent of the number of shares of Common Stock
for which the tandem SAR is exercised. No SAR may be exercised more
than 10 years after it was granted, or such shorter period as may
apply to related options in the case of tandem SARs. Each award
agreement will set forth the extent to which the holder of an SAR
will have the right to exercise an SAR following termination of the
holder's employment or service with the Company. SARs are subject
to certain restrictions on exercise if the participant terminates
employment.
RESTRICTED AWARDS. Subject to the limitations of the Plan, the
Administrator may in its sole discretion grant restricted awards to
such eligible individuals in such numbers, upon such terms and at
such times as the Administrator shall determine. Restricted awards
may be in the form of restricted stock awards and/or restricted
stock units that are subject to certain conditions, which
conditions must be met in order for the restricted award to vest
and be earned (in whole or in part) and no longer subject to
forfeiture. Restricted awards may be payable in cash or whole
shares of Common Stock (including restricted stock), or partly in
cash and partly in whole shares of common stock, in accordance with
the terms of the Plan and the discretion of the Administrator.
The Administrator has authority to determine the nature, length and
starting date of the period during which the restricted award may
be earned (the "restriction period") for each restricted award, and
will determine the conditions that must be met in order for a
restricted award to be granted or to vest or be earned (in whole or
in part). These conditions may include (but are not limited to)
attainment of performance objectives, continued service or
employment for a certain period of time (or a combination of
attainment of performance objectives and continued service),
retirement, displacement, disability, death or any combination of
conditions. In the case of restricted awards based upon performance
criteria, or a combination of performance criteria and continued
service, the Administrator will determine the performance
objectives to be used in valuing restricted awards, which
performance objectives may vary from participant to participant and
between groups of participants and will be based upon those
company, business unit or division and/or individual performance
factors and criteria as the Administrator in its sole discretion
may deem appropriate; provided, however, that, with respect to
restricted awards payable to covered employees which are intended
to be eligible for the compensation deduction limitation exception
available under Section 162(m) of the Internal Revenue Code (the
"Code") and related regulations, such performance factors shall be
limited to one or more of the following: sales goals, earnings per
share, return on equity, return on assets and total return to
shareholders, as determined by the Administrator.
The Administrator has authority to determine whether and to what
degree restricted awards have vested and been earned and are
payable, as well as to determine the forms and terms of payment of
restricted awards. If a participant's employment or service is
terminated for any reason and all or any part of a restricted award
has not vested or been earned pursuant to the terms of the Plan and
the individual award agreement, the award will be forfeited (unless
the Administrator determines otherwise).
PERFORMANCE AWARDS. Subject to the limitations of the Plan, the
Administrator may in its sole discretion grant performance awards
to participants upon such terms and conditions and at such times as
the Administrator shall determine. Performance awards confer upon
a participant the right to receive shares of common stock or the
cash value thereof (or a combination thereof) based on the
attainment of certain performance or other objectives during
specified award periods. Performance awards may be in the form of
performance shares and/or performance units. An award of a
performance share is a grant of a right to receive shares of Common
Stock or the cash value thereof (or a combination thereof) which is
contingent upon the achievement of performance or other objectives
during a specified period and which has a value on the date of
grant equal to the fair market value (as determined in accordance
with the Plan) of a share of common stock. An award of a
performance unit is a grant of a right to receive shares of Common
Stock or a designated dollar value amount of Common Stock which is
contingent upon the achievement of performance or other objectives
during a specified period, and which has an initial value
established by the Administrator at the time of grant.
The Administrator has authority to determine the nature, length and
starting date of the period during which a performance award may be
earned (the "performance period"), and will determine the
conditions which must be met in order for a performance award to be
granted or to vest or be earned (in whole or in part). These
conditions may include (but are not limited to) specific
performance objectives, continued service or employment for a
certain period of time, or a combination of such conditions. In the
case of performance awards based upon specified performance
objectives, the Administrator will determine the performance
objectives to be used in valuing performance awards, which
performance objectives may vary from participant to participant and
between groups of participants and will be based upon those
company, business unit or division and/or individual performance
factors and criteria as the Administrator in its sole discretion
may deem appropriate; provided, however, that, with respect to
performance awards payable to covered employees which are intended
to be eligible for the compensation deduction limitation exception
available under Section 162(m) of the Code and related regulations,
such performance factors shall be limited to one or more of the
following: sales goals, earnings per share, return on equity,
return on assets and total return to shareholders, as determined by
the Administrator.
The Administrator has authority to determine whether and to what
degree performance awards have vested and been earned and are
payable, as well as to determine the forms and terms of payment of
performance awards. If a participant's employment or service is
terminated for any reason and all or any part of a performance
award has not been earned pursuant to the terms of the Plan and the
individual award agreement, the award will be forfeited (unless the
Administrator determines otherwise).
CHANGE OF CONTROL
Upon a change of control (as defined in the Plan), and unless an
individual award agreement provides otherwise, the Plan provides
that: (a) all options and SARs outstanding as of the date of the
change of control will become fully exercisable, whether or not
then otherwise exercisable; and (b) any restrictions applicable to
any restricted award and any performance award will be deemed to
have been met, and awards will become fully vested, earned and
payable to the fullest extent of the original award. However, the
Plan authorizes the Administrator, in the event of a merger, share
exchange, reorganization or other business combination affecting
the Company or a related entity, to determine that any or all
awards will not vest or become exercisable on an accelerated basis,
if the Company or the surviving or acquiring corporation takes such
action (including but not limited to the assumption of Plan awards
or the grant of substitute awards) which, in the opinion of the
Administrator, is equitable or appropriate to protect the rights
and interest of participants under the Plan.
TRANSFERABILITY
Incentive options are not transferable other than by will or the
laws of intestate succession. Nonqualified options and SARs are not
transferable other than by will or the laws of intestate
succession, except as permitted by the Administrator in a manner
consistent with the registration provisions of the Securities Act.
Restricted awards that have not vested and performance awards which
have not been earned are not transferable (including by sale,
assignment, pledge or hypothecation) other than by will or the laws
of intestate succession, and participants may not sell, transfer,
assign, pledge or otherwise encumber shares subject to such awards
until the restriction period and/or performance period has expired
and until all conditions to vesting and/or earning the award have
been met.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary generally describes the principal federal
(and not state and local) income tax consequences of awards granted
under the Plan as of this time. The summary is general in nature
and is not intended to cover all tax consequences that may apply to
a particular employee or to the Company. The provisions of the Code
and regulations thereunder relating to these matters are
complicated and their impact in any one case may depend upon the
particular circumstances.
INCENTIVE OPTIONS. Incentive options granted under the Plan are
intended to qualify as incentive stock options under Section 422 of
the Code. Pursuant to Section 422 of the Code, the grant and
exercise of an incentive stock option will generally not result in
taxable income to the participant (with the possible exception of
alternative minimum tax liability) if the participant does not
dispose of shares received upon exercise of such option less than
one year after the date of exercise and two years after the date of
grant, and if the participant has continuously been a Company
employee from the date of grant to three months before the date of
exercise (or 12 months in the event of death or disability).
However, the excess of the fair market value of the shares received
upon exercise of the incentive option over the option price for
such shares generally will constitute an item of adjustment in
computing the participant's alternative minimum taxable income for
the year of exercise. Thus, certain participants may increase their
federal income tax liability as a result of the exercise of an
incentive option under the alternative minimum tax rules of the
Code.
The Company generally will not be entitled to a deduction for
income tax purposes in connection with the exercise of an incentive
option. Upon the disposition of shares acquired upon exercise of an
incentive option, the participant will be taxed on the amount by
which the amount realized upon such disposition exceeds the option
price, and such amount will be treated as capital gain or loss.
If the holding period requirements for incentive option treatment
described above are not met, the participant will be taxed as if he
received compensation in the year of the disposition. The
participant must treat gain realized in the premature disposition
as ordinary income to the extent of the lesser of: (a) the fair
market value of the stock on the date of exercise minus the option
price or (b) the amount realized on disposition of the stock minus
the option price. Any gain in excess of these amounts may be
treated as capital gain. The Company generally is entitled to
deduct, as compensation paid, the amount of ordinary income
realized by the participant.
Pursuant to the Code and the terms of the Plan, in no event can
there first become exercisable by a participant in any one calendar
year incentive options granted by the Company with respect to
shares having an aggregate fair market value (determined at the
time an option is granted) greater than $100,000. To the extent an
incentive option granted under the Plan exceeds this limitation, it
will be treated as a nonqualified option. In addition, no incentive
option may be granted to an individual who owns, immediately before
the time that the option is granted, stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Company, unless the option price is equal to or
exceeds 110% of the fair market value of the stock and the option
period does not exceed five years.
NONQUALIFIED OPTIONS. If a participant receives a nonqualified
option, the difference between the fair market value of the stock
on the date of exercise and the option price will constitute
taxable ordinary income to the participant on the date of exercise.
The Company generally will be entitled to a deduction in the same
year in an amount equal to the income taxable to the participant.
The participant's basis in shares of Common Stock acquired upon
exercise of an option will equal the option price plus the amount
of income taxable at the time of exercise. Any subsequent
disposition of the stock by the participant will be taxed as a
capital gain or loss to the participant, and will be long-term
capital gain or loss if the participant has held the stock for more
than one year at the time of sale.
STOCK APPRECIATION RIGHTS. For federal income tax purposes, the
grant of an SAR will not result in taxable income to a participant
or a tax deduction to the Company. At the time of exercise of an
SAR, a participant will forfeit the right to benefit from any
future appreciation of the stock subject to the SAR. Accordingly,
taxable income to the participant is deferred until the SAR is
exercised. Upon exercise, the amount of cash and fair market value
of shares received by the participant, less cash or other
consideration paid (if any), is taxed to the participant as
ordinary income and the Company will receive a corresponding income
tax deduction to the extent the amount represents reasonable
compensation and an ordinary and necessary business expense,
subject to any required income tax withholding.
RESTRICTED STOCK SUBJECT TO RESTRICTED AWARDS. Similar to SARs,
awards for restricted stock will not result in taxable income to
the participant or a tax deduction to the Company for federal
income tax purposes, unless the restrictions on the stock do not
present a substantial risk of forfeiture as defined under Section
83 of the Code. In the year that the restricted stock is no longer
subject to a substantial risk of forfeiture, the fair market value
of such shares at such date and any cash amount awarded, less cash
or other consideration paid (if any), will be included in the
participant's ordinary income as compensation, except that, in the
case of restricted stock issued at the beginning of the restriction
period, the participant may elect to include in his ordinary income
as compensation at the time the restricted stock is awarded, the
fair market value of such shares at such time, less any amount paid
therefor. The Company will be entitled to a corresponding income
tax deduction to the extent that the amount represents reasonable
compensation and an ordinary and necessary business expense,
subject to any required income tax reporting.
RESTRICTED UNITS. The federal income tax consequences of the award
of restricted units will depend on the conditions of the award.
Generally, the transfer of cash or property will result in ordinary
income to the participant and a tax deduction to the Company. If
the property transferred is subject to a substantial risk of
forfeiture, as defined under Section 83 of the Code (for example,
because receipt of the property is conditioned upon the performance
of substantial future services), the taxable event is deferred
until the substantial risk of forfeiture lapses. However, the
participant may generally elect to accelerate the taxable event to
the date of transfer, even if the property is subject to a
substantial risk of forfeiture. If this election is made,
subsequent appreciation is not taxed until the property is sold or
exchanged (and the lapse of the forfeiture restriction does not
create a taxable event). Generally, any deduction to the Company
occurs only when ordinary income in respect of an award is
recognized by the participant (and then the deduction is subject to
reasonable compensation and reporting requirements). Because such
awards will be subject to such conditions as may be determined by
the Administrator, the federal income tax consequences to the
participant and to the Company will depend on the specific
conditions of the award.
PERFORMANCE SHARE AWARDS, PERFORMANCE UNIT AWARDS AND DIVIDEND
EQUIVALENTS. The grant of a performance share award, performance
unit award or a dividend equivalent award does not result in
taxable income to the participant or a tax deduction to the Company
for federal income tax purposes. However, the participant will
recognize income on account of the settlement of a performance
share award, performance unit award or dividend equivalent award.
The income recognized by the participant at that time will be equal
to any cash that is received and the fair market value of any
common stock (determined as of the date that the shares are not
subject to a substantial risk of forfeiture) that is received in
settlement of the award. The Company is entitled to a federal
income tax deduction upon the settlement of a performance share
award, performance unit award or dividend equivalent award equal to
the ordinary income recognized by the participant to the extent
that the amount represents reasonable compensation and an ordinary
and necessary business expense.
PERFORMANCE-BASED COMPENSATION -- SECTION 162(M) REQUIREMENTS
The Plan is structured to comply with the requirements imposed by
Section 162(m) of the Code and related regulations in order to
preserve, to the extent practicable, the Company's tax deduction
for awards made under the Plan to covered employees. Section 162(m)
of the Code generally denies an employer a deduction for
compensation paid to covered employees (generally, the Named
Executives) of a publicly held corporation in excess of $1,000,000
unless the compensation is exempt from the $1,000,000 limitation
because it is performance-based compensation.
In order to qualify as performance-based compensation, the
compensation paid under the Plan to covered employees must be paid
under pre-established objective performance goals determined and
certified by a committee comprised of outside directors. In
addition to other requirements for the performance-based exception,
shareholders must be advised of, and must approve, the material
terms (or changes in material terms) of the performance goal(s)
under which compensation is to be paid. Material terms include the
individuals eligible to receive compensation, a description of the
business criteria on which the performance goal is based, and
either the maximum amount of the compensation to be paid or the
formula used to calculate the amount of compensation if the
performance goal is met.
As proposed, the Plan limits the maximum amount of awards that may
be granted to any employee. In particular, the Plan provides that
(subject to capital adjustments), no participant may be granted
awards in any 12-month period for more than 100,000 shares of the
common stock (or the equivalent value thereof based on the fair
market value per share of the common stock on the date of grant of
an award). Further, with respect to performance-based restricted
awards and performance awards payable to covered employees which
are intended to be eligible for the compensation limitation
exception available under Section 162(m) and related regulations,
the Plan limits performance objectives to one or more of the
following: sales goals, earnings per share, return on equity,
return on assets and total return to shareholders, as determined by
the Administrator. See "Awards - Restricted Awards" and "Awards -
Performance Awards," above.
The selection of individuals who will receive awards under the
Plan, if it is approved by the shareholders, and the amount of any
such awards is not yet determinable due to vesting, performance and
other requirements. Therefore, it is not possible to predict the
benefits or amounts that will be received by, or allocated to,
particular individuals or groups of employees in current or future
fiscal years of the Company. The number of shares of Common Stock
subject to options and restricted stock awards granted in Fiscal
2002 to certain named executives are set forth under the headings
"Executive Compensation - Summary Compensation Table" and "Stock
Options - Option Grants in Last Fiscal Year."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
PROPOSAL TO ADOPT THE 2003 STOCK INCENTIVE PLAN IN SUBSTANTIALLY
THE FORM ATTACHED HERETO AS APPENDIX B.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has reappointed GGK to audit the consolidated
financial statements of the Company for Fiscal 2003. GGK has served
as our independent auditors since Fiscal 2002. A representative
from GGK is expected to be present at the Meeting with the
opportunity to make a statement if he or she desires to do so and
to be available to respond to appropriate questions.
Although shareholder ratification of the appointment is not
required by law, the Company desires to solicit such ratification.
If the appointment of GGK is not approved by a majority of the
shares represented at the Annual Meeting, the Company will consider
the appointment of other independent auditors for Fiscal 2003.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF GGK AS THE COMPANY'S INDEPENDENT
AUDITORS FOR FISCAL 2003.
INDEPENDENT AUDITOR FEE INFORMATION
The following table shows the fees that the Company paid or accrued
for the audit and other services provided by GGK for Fiscal 2002.
Type of Service Amount of Fee for Fiscal 2002
--------------- ------------------------------
Audit Fees $67,000
Audit-Related Fees -
Tax Fees -
All Other Fees -
------
Total $67,000
======
AUDIT FEES. This category includes fees for the audits of the
Company's annual financial statements, review of financial
statements included in the Company's Form 10-QSB Quarterly Reports
and services that are normally provided by the independent auditors
in connection with statutory and regulatory filings or engagements
for the relevant fiscal years.
AUDIT-RELATED FEES. This category consists of due diligence in
connection with acquisitions, various accounting consultations, and
benefit plan audits.
TAX FEES. This category consists of professional services rendered
for tax compliance, tax planning and tax advice. The services for
the fees disclosed under this category include tax return
preparation, research and technical tax advice.
ALL OTHER FEES. There were no other fees paid or accrued to GGK in
Fiscal 2002.
GGK has a continuing relationship with American Express Tax and
Business Services Inc. ("TBS") from which it leases auditing staff
who are full time, permanent employees of TBS and through which its
partners provide non-audit services. As a result of this
arrangement, GGK has no full time employees and therefore, none of
the audit services performed were provided by permanent full time
employees of GGK. GGK manages and supervises the audit and audit
staff, and is exclusively responsible for the opinion rendered in
connection with its examination.
OTHER MATTERS
The Board of Directors has no knowledge of any other matters
which may come before the Meeting and does not intend to present
any other matters. However, if any other matters shall properly
come before the Meeting or any adjournment thereof, the persons
named as proxies will have discretionary authority to vote the
shares of Common Stock represented by the accompanying proxy in
accordance with their best judgment.
SHAREHOLDERS' PROPOSALS
Any shareholder of the Company who wishes to present a
proposal to be considered at the next annual meeting of
shareholders of the Company and who wishes to have such proposal
presented in the Company's Proxy Statement for such meeting must
deliver such proposal in writing to the Company at 525 Seventh
Avenue, Suite 1703, New York, New York 10018 on or before May 31,
2004.
By Order of the Board of Directors
/s/Joseph E. O'Grady
Joseph E. O'Grady
Secretary
Dated: September 2, 2003
APPENDIX A
JLM COUTURE, INC.
AUDIT COMMITTEE CHARTER
Purpose of Committee
The purpose of the Audit Committee (the "Committee") of the
Board of Directors (the "Board") of JLM Couture, Inc. (the
"Company") is to:
(a) assist the Board in its oversight of (i) the
integrity of the Company's financial statements, (ii) the
Company's compliance with legal and regulatory
requirements, (iii) the independent auditors'
qualifications and independence, (iv) the performance of
the Company's internal audit function and independent
auditors, and (v) the Company's management of market,
credit, liquidity and other financial and operational
risks; and
(b) prepare the report required to be prepared by the
Committee pursuant to the rules of the Securities and
Exchange Commission (the "SEC") for inclusion in the
Company's annual proxy statement.
Committee Membership
The Committee shall consist of no fewer than two members of the
Board. The members of the Committee shall each have been determined
by the Board to be "independent", as applicable, under the
Sarbanes-Oxley Act of 2002 (the "2002 Act"). The Board shall also
determine that each member is "financially literate" and shall
endeavor to have at least one member who has "accounting or related
financial management expertise," in each case as such
qualifications are defined by, to the extent required by, the
applicable SEC rules, that at least one member of the Committee is
an "audit committee financial expert" as defined by the SEC (or if
no member is an "audit committee financial expert", explaining the
reason for not having an audit committee financial expert on the
Committee). No director may serve as a member of the Committee if
such director serves on the audit committees of more than two other
public companies unless the Board determines that such simultaneous
service would not impair the ability of such director to serve
effectively on the Committee, and discloses this determination in
the Company's annual proxy statement. No member of the Committee
may receive any compensation from the Company other than
(i) director's fees, which may be received in cash, common stock,
equity-based awards or other in-kind consideration ordinarily
available to directors; (ii) a pension or other deferred
compensation for prior service that is not contingent on future
service; and (iii) any other regular benefits that other directors
receive.
Members shall be appointed by the Board and shall serve at the
pleasure of the Board and for such term or terms as the Board may
determine.
Committee Structure and Operations
The Board shall designate one member of the Committee as its
chairperson. The Committee shall meet at least once during each
fiscal quarter, with further meetings to occur, or actions to be
taken by unanimous written consent, when deemed necessary or
desirable by the Committee or its chairperson.
The Committee may invite such members of management and other
persons to its meetings as it may deem desirable or appropriate.
The Committee shall report regularly to the Board summarizing the
Committee's actions and any significant issues considered by the
Committee.
Committee Duties and Responsibilities
The following are the duties and responsibilities of the
Committee:
1. To meet with the independent auditors and the Company's
management and such other personnel as it deems appropriate and
discuss such matters as it considers appropriate, including the
matters referred to below. The Committee should meet separately
with the independent auditors and the Company's management,
periodically.
2. To decide whether to appoint, retain or terminate the
Company's independent auditors, including sole authority to approve
all audit engagement fees and terms and to pre-approve all audit
and non-audit services to be provided by the independent auditors.
The Committee shall monitor and evaluate the auditors'
qualifications, performance and independence on an ongoing basis,
and shall be directly responsible for overseeing the work of the
independent auditors (including resolving disagreements between
management and the auditors regarding financial reporting). In
conducting such evaluations, the Committee shall:
At least annually, obtain and review a report by the
independent auditors describing: the auditors' internal
quality-control procedures; any material issues raised by the
most recent internal quality-control review or peer review of
the auditors, or by any inquiry or investigation by
governmental or professional authorities, within the preceding
five years, respecting one or more independent audits carried
out by the auditors, and any steps taken to deal with any such
issues; and (to assess the auditors' independence) all
relationships between the independent auditors and the Company
(including information the Company determines is required to
be disclosed in the Company's proxy statement as to services
for audit and non-audit services provided to the Company and
those disclosures required by Independence Standards Board
Standard No. 1, as it may be modified or supplemented).
Discuss with the independent auditors any disclosed
relationships or services that may impact the objectivity or
independence of the independent auditors.
Take into account the opinions of management.
The Committee shall present its conclusions with respect to the
independent auditors to the Board for its information at least
annually.
3. To obtain from management in connection with any audit a
timely report relating to the Company's annual audited financial
statements describing all critical accounting policies and
practices to be used, which report will be reviewed and concurred
with by the independent auditors, and to obtain from the
independent auditors any material written communications between
the independent auditors and management, such as any "management"
letter or schedule of unadjusted differences.
4. To discuss with management and the independent auditors the
Company's annual audited financial statements and quarterly
financial statements, including the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," and to discuss with the Company's Chief
Executive Officer and Chief Financial Officer their certifications
to be provided pursuant to Sections 302 and 906 of the 2002 Act,
including whether the financial statements fairly present, in all
material respects, the financial condition, results of operations
and cash flows of the Company as of and for the periods presented
and whether any significant deficiencies exist in the design or
operation of internal controls that could adversely affect the
Company's ability to record, process, summarize and report
financial data, any material weaknesses exist in internal controls,
or any fraud has occurred, whether or not material, that involves
management or other employees who have a significant role in the
Company's internal controls. The Committee shall discuss, as
applicable: (a) major issues regarding accounting principles and
financial statement presentations, including any significant
changes in the Company's selection or application of accounting
principles, and major issues as to the adequacy of the Company's
internal controls and any special audit steps adopted in light of
material control deficiencies; (b) analyses prepared by management
and/or the independent auditors setting forth significant financial
reporting issues and judgments made in connection with the
preparation of the financial statements; and (c) the effect of
regulatory and accounting initiatives, as well as off-balance sheet
structures, on the financial statements of the Company.
5. To discuss with the independent auditors on at least an annual
basis the matters required to be discussed by Statement of
Accounting Standards No. 61, as it may be modified or supplemented,
as well as any problems or difficulties the auditors encountered in
the course of the audit work, including any restrictions on the
scope of the independent auditors' activities or access to
requested information, and any significant disagreements with
management. Among the items the Committee will consider discussing
with the independent auditors are: any accounting adjustments that
were noted or proposed by the independent auditors but were
"passed" (as immaterial or otherwise); and any "management" or
"internal control" letter issued, or proposed to be issued, by the
independent auditors to the Company.
6. To discuss with management and, as appropriate, the
independent auditors periodically, normally on at least an annual
basis:
The independent auditors' annual audit scope, risk assessment
and plan.
The form of independent auditors' report on the annual
financial statements and matters related to the conduct of the
audit under generally accepted auditing standards.
Comments by the independent auditors on internal controls and
significant findings and recommendations resulting from the
audit.
7. To establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters, and
for the confidential, anonymous submission by Company employees of
concerns regarding questionable accounting or auditing matters.
8. To discuss with management periodically, normally on at least
an annual basis, management's assessment of the Company's market,
credit, liquidity and other financial and operational risks, and
the guidelines, policies and processes for managing such risks.
9. To discuss with the Company's management and Company's lawyer,
if it so desires, any significant legal, compliance or regulatory
matters that may have a material impact on the Company's business,
financial statements or compliance policies.
10. To obtain assurance from the independent auditors that the
audit of the Company's financial statements was conducted in a
manner consistent with Section 10A of the Securities Exchange Act
of 1934, as amended, which sets forth certain procedures to be
followed in any audit of financial statements required under that
Act.
11. To produce the reports described under "Committee Reports"
below.
12. To discharge any other duties or responsibilities delegated to
the Committee by the Board from time to time.
Committee Reports
The Committee shall produce the following reports and provide
them to the Board:
1. Any report, including any recommendation, or other disclosures
required to be prepared by the Committee pursuant to the rules of
the SEC for inclusion in the Company's annual proxy statement.
2. An annual performance evaluation of the Committee, which
evaluation shall compare the performance of the Committee with the
requirements of this charter. The performance evaluation shall also
include a review of the adequacy of this charter and shall
recommend to the Board any revisions the Committee deems necessary
or desirable, although the Board shall have the sole authority to
amend this charter. The performance evaluation shall be conducted
in such manner as the Committee deems appropriate.
Delegation to Subcommittee
The Committee may, in its discretion, delegate all or a portion
of its duties and responsibilities to a subcommittee of the
Committee. The Committee may, in its discretion, delegate to one or
more of its members the authority to pre-approve any audit or non-
audit services to be performed by the independent auditors,
provided that any such approvals are presented to the Committee at
its next scheduled meeting.
Resources and Authority of the Committee
The Committee shall have the resources and authority
appropriate to discharge its duties and responsibilities, including
the authority to select, retain, terminate, and approve the fees
and other retention terms of special or independent counsel,
accountants or other experts, as it deems appropriate, without
seeking approval of the Board or management.
APPENDIX B
2003 STOCK INCENTIVE PLAN
OF
JLM COUTURE, INC.
1. PURPOSE
The purpose of the 2003 Stock Incentive Plan of JLM Couture, Inc.
(the "PLAN") is to encourage and enable selected employees,
directors and independent contractors of JLM Couture, Inc. (JLM
Couture, Inc., together with any successor corporation thereto,
being referred to herein as the "CORPORATION") and its related
entities to acquire or to increase their holdings of common stock
of the Corporation (the "COMMON STOCK") and other proprietary
interests in the Corporation in order to promote a closer
identification of their interests with those of the Corporation and
its shareholders, thereby further stimulating their efforts to
enhance the efficiency, soundness, profitability, growth and
shareholder value of the Corporation. This purpose will be carried
out through the granting of benefits (collectively referred to
herein as "AWARDS") to selected employees, independent contractors
and directors, including the granting to selected participants of
incentive stock options ("INCENTIVE OPTIONS") intended to qualify
under Section 422 of the Internal Revenue Code of 1986, as amended
(the "CODE"), nonqualified stock options ("NONQUALIFIED OPTIONS"),
stock appreciation rights ("SARS"), restricted awards in the form
of restricted stock awards ("RESTRICTED STOCK AWARDS") and
restricted stock units ("RESTRICTED STOCK UNITS"), and performance
awards in the form of performance shares ("PERFORMANCE shares") and
performance units ("PERFORMANCE UNITS"). Incentive options and
nonqualified options shall be referred to herein collectively as
"OPTIONS." Restricted stock awards and restricted stock units shall
be referred to herein collectively as "RESTRICTED AWARDS."
Performance shares and performance units shall be referred to
herein collectively as "PERFORMANCE AWARDS."
2. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board of Directors of the
Corporation (the "BOARD" or the "BOARD OF Directors") or, upon its
delegation, by the Audit and Compensation Committee of the Board of
Directors (the "COMMITTEE"). Unless the Board determines otherwise,
the Committee shall be comprised solely of two or more "NON-
EMPLOYEE DIRECTORS," as such term is defined in Rule 16b-3 under
the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), or as may otherwise be permitted under Rule 16b-3. Further,
to the extent required by Section 162(m) of the Code and related
regulations, the Plan shall be administered by a committee
comprised of two or more "OUTSIDE DIRECTORS" (as such term is
defined in Section 162(m) or related regulations) or as may
otherwise be permitted under Section 162(m) and related
regulations. For the purposes herein, the term "ADMINISTRATOR"
shall refer to the Board and, upon its delegation to the Committee
of all or part of its authority to administer the Plan, to the
Committee.
(b) In addition to action by meeting in accordance with applicable
laws, any action of the Administrator with respect to the Plan may
be taken by a written instrument signed by all of the members of
the Board or Committee, as appropriate, and any such action so
taken by written consent shall be as fully effective as if it had
been taken by a majority of the members at a meeting duly held and
called. Subject to the provisions of the Plan, the Administrator
shall have full and final authority in its discretion to take any
action with respect to the Plan including, without limitation, the
authority (i) to determine all matters relating to awards,
including selection of individuals to be granted awards, the types
of awards, the number of shares of the Common Stock, if any,
subject to an award, and all terms, conditions, restrictions and
limitations of an award; (ii) to prescribe the form or forms of the
agreements evidencing any awards granted under the Plan; (iii) to
establish, amend and rescind rules and regulations for the
administration of the Plan; and (iv) to construe and interpret the
Plan, awards and award agreements made under the Plan, to interpret
rules and regulations for administering the Plan and to make all
other determinations deemed necessary or advisable for
administering the Plan. The Administrator shall also have
authority, in its sole discretion, to accelerate the date that any
award which was not otherwise exercisable, vested or earned shall
become exercisable, vested or earned in whole or in part without
any obligation to accelerate such date with respect to any other
award granted to any recipient. In addition, the Administrator
shall have the authority and discretion to establish terms and
conditions of awards (including but not limited to the
establishment of subplans) as the Administrator determines to be
necessary or appropriate to conform to the applicable requirements
or practices of jurisdictions outside of the United States. No
member of the Board or Committee, as applicable, shall be liable
while acting as Administrator for any action or determination made
in good faith with respect to the Plan, an award or an award
agreement. The members of the Board or Committee, as applicable,
shall be entitled to indemnification and reimbursement in the
manner provided in the Corporation's articles of incorporation.
(c) Notwithstanding the other provisions of Section 2, the
Administrator may delegate to one or more officers of the
Corporation the authority to grant awards, and to make any or all
of the determinations reserved for the Administrator in the Plan
and summarized in Section 2(b) herein with respect to such awards
(subject to any restrictions imposed by applicable laws, rules and
regulations and such terms and conditions as may be established by
the Administrator); provided, however, that, to the extent required
by Section 16 of the Exchange Act or Section 162(m) of the Code,
the participant, at the time of said grant or other determination,
(i) is not deemed to be an officer or director of the Corporation
within the meaning of Section 16 of the Exchange Act; and (ii) is
not deemed to be a "covered employee" as defined under Section
162(m) of the Code and related regulations. To the extent that the
Administrator has delegated authority to grant awards pursuant to
this Section 2(c) to one or more officers of the Corporation,
references to the Administrator shall include references to such
officer or officers, subject, however, to the requirements of the
Plan, Rule 16b-3, Section 162(m) of the Code and other applicable
laws, rules and regulations.
3. EFFECTIVE DATE
The effective date of the Plan shall be August 12, 2003 (the
"EFFECTIVE DATE"). Awards may be granted under the Plan on and
after the Effective Date, but no awards will be granted after
August 11, 2013. Awards which are outstanding on August 11, 2013
(or such earlier termination date as may be established by the
Board pursuant to Section 16(a) herein) shall continue in
accordance with their terms, unless otherwise provided in the Plan
or an award agreement.
4. SHARES OF STOCK SUBJECT TO THE PLAN; AWARD LIMITATIONS
(a) Shares Available for Awards: Subject to adjustments as provided
in this Section 4(c), the aggregate number of shares of Common
Stock that may be issued pursuant to awards granted under the Plan
shall not exceed the sum of (i) 500,000 shares, plus (ii) any
shares of Common Stock (A) remaining available for issuance as of
the Effective Date of the Plan under the Corporation's 1996 Stock
Option Plan and any other stock incentive plans maintained by the
Corporation (collectively, the "PRIOR PLANS"), and/or (B) subject
to an award granted under a Prior Plan, which award is forfeited,
cancelled, terminated, expires or lapses for any reason. Shares
delivered under the Plan shall be authorized but unissued shares or
shares purchased on the open market or by private purchase. The
Corporation hereby reserves sufficient authorized shares of Common
Stock to meet the grant of awards hereunder. Notwithstanding any
provision herein to the contrary, the following limitations shall
apply to awards granted under the Plan, in each case subject to
adjustment pursuant to Section 4(c):
(i) The maximum number of shares of Common Stock that may
be issued under the Plan shall not exceed 500,000 shares; and
(ii) No participant may be granted awards in any 12-month
period for more than 100,000 shares of Common Stock (or the
equivalent value thereof based on the fair market value per share
of the Common Stock on the date of grant of an award).
(b) Shares not subject to limitations: The following will not be
applied to the share limitations of Section 4(a) above: (i)
dividends, including dividends paid in shares, or dividend
equivalents paid in cash in connection with outstanding awards,
(ii) awards which by their terms are settled in cash, (iii) shares
and any awards that are granted through the assumption of, or in
substitution for, outstanding awards previously granted as the
result of a merger, consolidation, or acquisition of the employing
company (or an affiliate) pursuant to which it is merged with the
Corporation or becomes a related entity of the Corporation, (iv)
any shares subject to an award under the Plan or Prior Plan which
award is forfeited, cancelled, terminated, expires or lapses for
any reason, and (v) any shares surrendered by a participant or
withheld by the Corporation to pay the option price for an option
or used to satisfy any tax withholding requirement in connection
with the exercise, vesting or earning of an award if, in accordance
with the terms of the Plan, a participant pays such option price or
satisfies such tax withholding by either tendering previously owned
shares or having the Corporation withhold shares.
(c) Adjustments: If there is any change in the outstanding shares
of Common Stock because of a merger, consolidation or
reorganization involving the Corporation or a related entity, or if
the Board of Directors of the Corporation declares a stock
dividend, stock split distributable in shares of Common Stock,
reverse stock split, combination or reclassification of the Common
Stock, or if there is a similar change in the capital stock
structure of the Corporation or a related entity affecting the
Common Stock, the number of shares of Common Stock reserved for
issuance under the Plan shall be correspondingly adjusted, and the
Administrator shall make such adjustments to awards and to any
provisions of this Plan as the Administrator deems equitable to
prevent dilution or enlargement of awards or as may be otherwise
advisable.
5. ELIGIBILITY
An award may be granted only to an individual who satisfies the
following eligibility requirements on the date the award is
granted:
(a) The individual is either (i) an employee of the Corporation or
a related entity, (ii) a director of the Corporation or a related
entity, or (iii) an independent contractor, consultant or advisor
(collectively, "INDEPENDENT CONTRACTORS") providing services to the
Corporation or a related entity. For this purpose, an individual
shall be considered to be an "EMPLOYEE" only if there exists
between the individual and the Corporation or a related entity the
legal and bona fide relationship of employer and employee.
(b) With respect to the grant of incentive options, the individual
does not own, immediately before the time that the incentive option
is granted, stock possessing more than 10% of the total combined
voting power of all classes of stock of the Corporation or a
related corporation. Notwithstanding the foregoing, an individual
who owns more than 10% of the total combined voting power of the
Corporation or a related corporation may be granted an incentive
option if the option price is at least 110% of the fair market
value of the Common Stock (as defined in Section 6(c)(ii) herein),
and the option period (as defined in Section 6(d)(i) herein) does
not exceed five years. For this purpose, an individual will be
deemed to own stock which is attributable to him under Section
424(d) of the Code.
(c) With respect to the grant of substitute awards or assumption of
awards in connection with a merger, consolidation, acquisition,
reorganization or similar business combination involving the
Corporation or a related entity, the recipient is otherwise
eligible to receive the award and the terms of the award are
consistent with the Plan and applicable laws, rules and regulations
(including, to the extent necessary, the federal securities laws
registration provisions and Section 424(a) of the Code).
(d) The individual, being otherwise eligible under this Section 5,
is selected by the Administrator as an individual to whom an award
shall be granted (a "PARTICIPANT").
6. OPTIONS
(a) Grant of Options: Subject to the limitations of the Plan, the
Administrator may in its sole and absolute discretion grant options
to such eligible individuals in such numbers, subject to such terms
and conditions, and at such times as the Administrator shall
determine. Both incentive options and nonqualified options may be
granted under the Plan, as determined by the Administrator;
provided, however, that incentive options may only be granted to
employees of the Corporation or a related corporation. To the
extent that an option is designated as an incentive option but does
not qualify as such under Section 422 of the Code, the option (or
portion thereof) shall be treated as a nonqualified option.
(b) Option Price: The price per share at which an option may be
exercised (the "OPTION PRICE") shall be established by the
Administrator and stated in the award agreement evidencing the
grant of the option; provided, that (i) the option price of an
option shall be no less than the fair market value per share of the
Common Stock, as determined in accordance with Section 6(c)(ii) on
the date the option is granted (or 110% of the fair market value
with respect to incentive options granted to an employee who owns
stock possessing more than 10% of the total voting power of all
classes of stock of the Corporation or a related corporation, as
provided in Section 5(b) herein); and (ii) in no event shall the
option price per share of any option be less than the par value per
share, if any, of the Common Stock.
(c) Date of Grant; Fair Market Value:
(i) An incentive option shall be considered to be granted
on the date that the Administrator acts to grant the option, or on
any later date specified by the Administrator as the effective date
of the option. A nonqualified option shall be considered to be
granted on the date the Administrator acts to grant the option or
any other date specified by the Administrator as the date of grant
of the option.
(ii) For the purposes of the Plan, the fair market value
per share of the Common Stock shall be established in good faith by
the Administrator and, except as may otherwise be determined by the
Administrator, the fair market value shall be determined in
accordance with the following provisions: (A) if the shares of
Common Stock are listed for trading on the New York Stock Exchange
or the American Stock Exchange, the fair market value shall be the
closing sales price per share of the shares on the New York Stock
Exchange or the American Stock Exchange (as applicable) on the date
immediately preceding the date the option is granted or other
determination is made (each, a "VALUATION DATE"), or, if there is
no transaction on such date, then on the trading date nearest
preceding the valuation date for which closing price information is
available, and, provided further, if the shares are quoted on the
Nasdaq National Market or the Nasdaq SmallCap Market of the Nasdaq
Stock Market but are not listed for trading on the New York Stock
Exchange or the American Stock Exchange, the fair market value
shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system on the
date immediately or nearest preceding the valuation date for which
such information is available; or (B) if the shares of Common Stock
are not listed or reported in any of the foregoing, then the fair
market value shall be determined by the Administrator in accordance
with the applicable provisions of Section 20.2031-2 of the Federal
Estate Tax Regulations, or in any other manner consistent with the
Code and accompanying regulations.
(iii) In no event shall there first become exercisable by an
employee in any one calendar year incentive options granted by the
Corporation or any related corporation with respect to shares
having an aggregate fair market value (determined at the time an
incentive option is granted) greater than $100,000.
(d) Option Period and Limitations on the Right to Exercise Options:
(i) The term of an option (the "OPTION PERIOD") shall be
determined by the Administrator at the time the option is granted
and shall be stated in the individual award agreement. With respect
to incentive options, the option period shall not extend more than
10 years from the date on which the option is granted (or five
years with respect to incentive options granted to an employee who
owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Corporation or a related
corporation, as provided in Section 5(b) herein). Any option or
portion thereof not exercised before expiration of the option
period shall terminate. The period or periods during which, and
conditions pursuant to which, an option may become exercisable
shall be determined by the Administrator in its discretion, subject
to the terms of the Plan.
(ii) An option may be exercised by giving written notice to
the Corporation in form acceptable to the Administrator at such
place and subject to such conditions as may be established by the
Administrator or its designee. Such notice shall specify the number
of shares to be purchased pursuant to an option and the aggregate
purchase price to be paid therefor and shall be accompanied by
payment of such purchase price. Unless an individual award
agreement provides otherwise, such payment shall be in the form of
cash or cash equivalent; provided that, where permitted by the
Administrator and applicable laws, rules and regulations (including
but not limited to Section 402 of the Sarbanes-Oxley Act of 2002),
payment may also be made:
(A) By delivery (by either actual delivery or
attestation) of shares of Common Stock owned by the participant at
the time of exercise for a period of at least six months and
otherwise acceptable to the Administrator;
(B) By shares of Common Stock withheld upon
exercise;
(C) By delivery of written notice of exercise to the
Corporation and delivery to a broker of written notice of exercise
and irrevocable instructions to promptly deliver to the Corporation
the amount of sale or loan proceeds to pay the option price;
(D) By such other payment methods as may be approved
by the Administrator and which are acceptable under applicable law;
or
(E) By any combination of the foregoing methods.
Shares tendered or withheld in payment of the exercise of an option
shall be valued at their fair market value on the date of exercise,
as determined by the Administrator by applying the provisions of
Section 6(c)(ii).
(iii) Unless the Administrator determines otherwise, no
option granted to a participant who was an employee at the time of
grant shall be exercised unless the participant is, at the time of
exercise, an employee as described in Section 5(a), and has been an
employee continuously since the date the option was granted,
subject to the following:
(A) An option shall not be affected by any change
in the terms, conditions or status of the participant's
employment, provided that the participant continues to be an
employee of the Corporation or a related entity.
(B) The employment relationship of a participant
shall be treated as continuing intact for any period that the
participant is on military or sick leave or other bona fide leave
of absence, provided that the period of such leave does not exceed
90 days, or, if longer, as long as the participant's right to
reemployment is guaranteed either by statute or by contract. The
employment relationship of a participant shall also be treated as
continuing intact while the participant is not in active service
because of disability. The Administrator shall have sole authority
to determine whether a participant is disabled and, if applicable,
the date of a participant's termination of employment or service
for any reason (the "TERMINATION DATE").
(C) Unless the Administrator determines otherwise,
if the employment of a participant is terminated because of
disability or death, the option may be exercised only to the extent
exercisable on the participant's termination date, except that the
Administrator may in its discretion accelerate the date for
exercising all or any part of the option which was not otherwise
exercisable on the termination date. The option must be exercised,
if at all, prior to the first to occur of the following, whichever
shall be applicable: (X) the close of the period of 12 months next
succeeding the termination date (or such other period stated in the
applicable award agreement); or (Y) the close of the option
period. In the event of the participant's death, such option shall
be exercisable by such person or persons as shall have acquired the
right to exercise the option by will or by the laws of intestate
succession.
(D) Unless the Administrator determines otherwise,
if the employment of the participant is terminated for any reason
other than disability, death or for "cause," his option may be
exercised to the extent exercisable on his termination date, except
that the Administrator may in its discretion accelerate the date
for exercising all or any part of the option which was not
otherwise exercisable on the termination date. The option must be
exercised, if at all, prior to the first to occur of the following,
whichever shall be applicable: (X) the close of the period of 90
days next succeeding the termination date (or such other period
stated in the applicable award agreement); or (Y) the close of the
option period. If the participant dies following such termination
of employment and prior to the earlier of the dates specified in
(X) or (Y) of this subparagraph (D), the participant shall be
treated as having died while employed under subparagraph (C)
immediately preceding (treating for this purpose the participant's
date of termination of employment as the termination date). In the
event of the participant's death, such option shall be exercisable
by such person or persons as shall have acquired the right to
exercise the option by will or by the laws of intestate succession.
(E) Unless the Administrator determines otherwise, if the
employment of the participant is terminated for "CAUSE," his option
shall lapse and no longer be exercisable as of his termination
date, as determined by the Administrator. For purposes of the Plan,
unless the Administrator determines otherwise, a participant's
termination shall be for "cause" if such termination results from
the participant's (X) termination for "cause" under the
participant's employment, consulting or other agreement with the
Corporation or a related entity, if any, or (Y) if the participant
has not entered into any such employment, consulting or other
agreement, then the participant's termination shall be for "cause"
if termination results due to the participant's (i) dishonesty;
(ii) refusal to perform his duties for the Corporation; or (iii)
engaging in conduct that could be materially damaging to the
Corporation without a reasonable good faith belief that such
conduct was in the best interest of the Corporation. The
determination of "cause" shall be made by the Administrator and its
determination shall be final and conclusive.
(F) Notwithstanding the foregoing, the Administrator
may, in its discretion, accelerate the date for exercising all or
any part of an option which was not otherwise exercisable on the
termination date, extend the period during which an option may be
exercised, modify the terms and conditions to exercise, or any
combination of the foregoing.
(iv) Unless the Administrator determines otherwise, an option
granted to a participant who was a non-employee director of the
Corporation or a related entity at the time of grant may be
exercised only to the extent exercisable on the date of the
participant's termination of service to the Corporation or a
related entity (unless the termination was for cause), and must be
exercised, if at all, prior to the first to occur of the following,
as applicable: (X) the close of the period of 24 months next
succeeding the termination date (or such other period stated in the
applicable award agreement); or (Y) the close of the option period.
If the services of such a participant are terminated for cause (as
defined in Section 6(a)(iii)(E) herein), his option shall lapse and
no longer be exercisable as of his termination date, as determined
by the Administrator. Notwithstanding the foregoing, the
Administrator may in its discretion accelerate the date for
exercising all or any part of an option which was not otherwise
exercisable on the termination date, extend the period during which
an option may be exercised, modify the other terms and conditions
to exercise, or any combination of the foregoing.
(v) Unless the Administrator determines otherwise, an
option granted to a participant who was an independent contractor
of the Corporation or a related entity at the time of grant (and
who does not thereafter become an employee, in which case he shall
be subject to the provisions of Section 6(d)(iii) herein) may be
exercised only to the extent exercisable on the date of the
participant's termination of service to the Corporation or a
related entity (unless the termination was for cause), and must be
exercised, if at all, prior to the first to occur of the following,
as applicable: (X) the close of the period of 90 days next
succeeding the termination date (or such other period stated in the
applicable award agreement); or (Y) the close of the option period.
If the services of such a participant are terminated for cause (as
defined in Section 6(d)(iii)(E) herein), his option shall lapse and
no longer be exercisable as of his termination date, as determined
by the Administrator. Notwithstanding the foregoing, the
Administrator may in its discretion accelerate the date for
exercising all or any part of an option which was not otherwise
exercisable on the termination date, extend the period during which
an option may be exercised, modify the other terms and conditions
to exercise, or any combination of the foregoing.
(vi) A participant or his legal representative, legatees or
distributees shall not be deemed to be the holder of any shares
subject to an option and shall not have any rights of a shareholder
unless and until certificates for such shares have been issued and
delivered to him or them under the Plan. A certificate or
certificates for shares of Common Stock acquired upon exercise of
an option shall be issued in the name of the participant (or his
beneficiary) and distributed to the participant (or his
beneficiary) as soon as practicable following receipt of notice of
exercise and payment of the purchase price (except as may otherwise
be determined by the Corporation in the event of payment of the
option price pursuant to Section 6(d)(ii)(C) herein).
(vii) If shares of Common Stock acquired upon exercise of an
incentive option are disposed of within two years following the
date of grant or one year following the transfer of such shares to
a participant upon exercise, the participant shall, promptly
following such disposition, notify the Corporation in writing of
the date and terms of such disposition and provide such other
information regarding the disposition as the Administrator may
reasonably require. In addition the Corporation shall have the
right to include a legend on certificates representing shares of
Common Stock requiring the participants to furnish this information
to the Corporation before being allowed to transfer shares of
Common Stock represented by any such certificates.
(e) Nontransferability of Options: Incentive options shall not
be transferable (including by sale, assignment, pledge or
hypothecation) other than by will or the laws of intestate
succession. Nonqualified options shall not be transferable
(including by sale, assignment, pledge or hypothecation) other than
by will or the laws of intestate succession, except as may be
permitted by the Administrator in a manner consistent with the
registration provisions of the Securities Act of 1933, as amended
(the "SECURITIES Act"). Except as may be permitted by the preceding
sentence, an option shall be exercisable during the participant's
lifetime only by him or by his guardian or legal representative.
The designation of a beneficiary does not constitute a transfer.
7. STOCK APPRECIATION RIGHTS
(a) Grant of SARs: Subject to the limitations of the Plan, the
Administrator may in its sole and absolute discretion grant SARs to
such eligible individuals, in such numbers, upon such terms and at
such times as the Administrator shall determine. SARs may be
granted to the holder of an option (hereinafter called a "RELATED
OPTION") with respect to all or a portion of the shares of Common
Stock subject to the related option (a "TANDEM SAR") or may be
granted separately to an eligible individual (a "FREESTANDING
SAR"). Subject to the limitations of the Plan, upon the exercise of
an SAR, a participant shall be entitled to receive from the
Corporation, for each share of Common Stock with respect to which
the SAR is being exercised, consideration equal in value to the
excess of the fair market value of a share of Common Stock on the
date of exercise over the base price per share of such SAR. The
base price per share of an SAR shall be no less than the fair
market value per share of the Common Stock (as determined in
accordance with Section 6(c)(ii)) on the date the SAR is granted.
(b) Tandem SARs: A tandem SAR may be granted either concurrently
with the grant of the related option or (if the related option is
a nonqualified option) at any time thereafter prior to the complete
exercise, termination, expiration or cancellation of such related
option. Tandem SARs shall be exercisable only at the time and to
the extent that the related option is exercisable (and may be
subject to such additional limitations on exercisability as the
Administrator may provide in the agreement), and in no event after
the complete termination or full exercise of the related option.
For purposes of determining the number of shares of Common Stock
that remain subject to such related option and for purposes of
determining the number of shares of Common Stock in respect of
which other awards may be granted, a related option shall be
considered to have been surrendered upon the exercise of a tandem
SAR to the extent of the number of shares of Common Stock with
respect to which such tandem SAR is exercised. Upon the exercise or
termination of a related option, the tandem SARs with respect
thereto shall be canceled automatically to the extent of the number
of shares of Common Stock with respect to which the related option
was so exercised or terminated.
(c) Freestanding SARs: An SAR may be granted without relationship
to an option (as defined above, a "freestanding SAR") and, in such
case, will be exercisable upon such terms and subject to such
conditions as may be determined by the Administrator, subject to
the terms of the Plan.
(d) Exercise of SARs:
(i) Subject to the terms of the Plan, SARs shall be
exercisable in whole or in part upon such terms and conditions as
may be established by the Administrator and stated in the
applicable award agreement. The period during which an SAR may be
exercisable shall not exceed 10 years from the date of grant or, in
the case of tandem SARs, such shorter option period as may apply to
the related option. Any SAR or portion thereof not exercised before
expiration of the exercise period established by the Administrator
shall terminate.
(ii) SARs may be exercised by giving written notice to the
Corporation in form acceptable to the Administrator at such place
and subject to such terms and conditions as may be established by
the Administrator or its designee. The date of exercise of an SAR
shall mean the date on which the Corporation shall have received
proper notice from the participant of the exercise of such SAR.
(iii) Each participant's award agreement shall set forth the
extent to which the participant shall have the right to exercise an
SAR following termination of the participant's employment or
service with the Corporation. Such provisions shall be determined
in the sole discretion of the Administrator, shall be included in
the award agreement entered into with a participant, need not be
uniform among all SARs issued pursuant to this Section 7, and may
reflect distinctions based on the reasons for termination of
employment. Notwithstanding the foregoing, unless the Administrator
determines otherwise, no SAR may be exercised unless the
participant is, at the time of exercise, an eligible participant,
as described in Section 5, and has been a participant continuously
since the date the SAR was granted, subject to the provisions of
Sections 6(d)(iii), (iv) and (v) herein.
(e) Consideration: The consideration to be received upon the
exercise of the SAR by the participant shall be paid in cash,
shares of Common Stock (valued at fair market value on the date of
exercise of such SAR in accordance with Section 6(c)(ii) herein) or
a combination of cash and shares of Common Stock, as elected by the
Administrator. The Corporation's obligation arising upon the
exercise of the SAR may be paid currently or on a deferred basis
with such interest or earnings equivalent, if any, as the
Administrator may determine. A certificate or certificates for
shares of Common Stock acquired upon exercise of an SAR for shares
shall be issued in the name of the participant (or his beneficiary)
and distributed to the participant (or his beneficiary) as soon as
practicable following receipt of notice of exercise. A participant
or his legal representative, legatees or distributees shall not be
deemed to be the holder of any shares subject to an SAR and shall
not have any rights as a shareholder unless and until certificates
for such shares have been issued and delivered to him or them under
the Plan. No fractional shares of Common Stock will be issuable
upon exercise of the SAR and, unless otherwise provided in the
applicable award agreement, the participant will receive cash in
lieu of fractional shares.
(f) Limitations: The applicable award agreement shall contain such
terms, conditions and limitations consistent with the Plan as may
be specified by the Administrator. Unless otherwise provided in the
applicable award agreement or the Plan, any such terms, conditions
or limitations relating to a tandem SAR shall not restrict the
exercisability of the related option.
(g) Nontransferability: Unless the Administrator determines
otherwise, SARs shall not be transferable (including by sale,
assignment, pledge or hypothecation) other than by will or the laws
of intestate succession, and SARs may be exercised during the
participant's lifetime only by him or by his guardian or legal
representative. The designation of a beneficiary does not
constitute a transfer.
8. RESTRICTED AWARDS
(a) Grant of Restricted Awards: Subject to the limitations of the
Plan, the Administrator may in its sole and absolute discretion
grant restricted awards to such individuals in such numbers, upon
such terms and at such times as the Administrator shall determine.
Such restricted awards may be in the form of restricted stock
awards and/or restricted stock units that are subject to certain
conditions, which conditions must be met in order for the
restricted award to vest and be earned (in whole or in part) and no
longer subject to forfeiture. Restricted awards shall be payable in
cash or whole shares of Common Stock (including restricted stock),
or partly in cash and partly in whole shares of Common Stock, in
accordance with the terms of the Plan and the sole and absolute
discretion of the Administrator. The Administrator shall determine
the nature, length and starting date of the period, if any, during
which a restricted award may be earned (the "RESTRICTION PERIOD"),
and shall determine the conditions which must be met in order for
a restricted award to be granted or to vest or be earned (in whole
or in part), which conditions may include, but are not limited to,
attainment of performance objectives, continued service or
employment for a certain period of time (or a combination of
attainment of performance objectives and continued service),
retirement, displacement, disability, death, or any combination of
such conditions. In the case of restricted awards based upon
performance criteria, or a combination of performance criteria and
continued service, the Administrator shall determine the
performance objectives to be used in valuing restricted awards,
which performance objectives may vary from participant to
participant and between groups of participants and shall be based
upon such corporate, business unit or division and/or individual
performance factors and criteria as the Administrator in its sole
discretion may deem appropriate; provided, however, that, with
respect to restricted awards payable to covered employees which are
intended to be eligible for the compensation deduction limitation
exception available under Section 162(m) of the Code and related
regulations, such performance factors shall be limited to one or
more of the following (as determined by the Administrator in its
discretion): sales goals, earnings per share, return on equity,
return on assets and total return to shareholders. The
Administrator shall have sole authority to determine whether and to
what degree restricted awards have vested and been earned and are
payable and to establish and interpret the terms and conditions of
restricted awards and the provisions herein. The Administrator
shall also determine the form and terms of payment of restricted
awards. The Administrator, in its sole and absolute discretion, may
accelerate the date that any restricted award granted to the
participant shall be deemed to be vested or earned in whole or in
part, without any obligation to accelerate such date with respect
to other restricted awards granted to any participant.
(b) Forfeiture of Restricted Awards: Unless the Administrator
determines otherwise, if the employment or service of a participant
shall be terminated for any reason and all or any part of a
restricted award has not vested or been earned pursuant to the
terms of the Plan and the individual award agreement, such award,
to the extent not then vested or earned, shall be forfeited
immediately upon such termination and the participant shall have no
further rights with respect thereto.
(c) Dividend and Voting Rights; Share Certificates: The
Administrator shall have sole discretion to determine whether a
participant shall have dividend rights, voting rights or other
rights as a shareholder with respect to shares subject to a
restricted award which has not yet vested or been earned. Unless
the Administrator determines otherwise, a certificate or
certificates for shares of Common Stock subject to a restricted
award shall be issued in the name of the participant (or his
beneficiary) and distributed to the participant (or his
beneficiary) as soon as practicable after the shares subject to the
award (or portion thereof) have vested and been earned.
Notwithstanding the foregoing, the Administrator shall have the
right to retain custody of certificates evidencing the shares
subject to a restricted award and to require the participant to
deliver to the Corporation a stock power, endorsed in blank, with
respect to such award, until such time as the restricted award
vests (or is forfeited).
(d) Nontransferability: Unless the Administrator determines
otherwise, restricted awards that have not vested shall not be
transferable (including by sale, assignment, pledge or
hypothecation) other than by will or the laws of intestate
succession, and the recipient of a restricted award shall not sell,
transfer, assign, pledge or otherwise encumber shares subject to
the award until the restriction period has expired and until all
conditions to vesting have been met.
9. PERFORMANCE AWARDS
(a) Grant of Performance Awards: Subject to the terms of the Plan,
performance awards may be granted to participants upon such terms
and conditions and at such times as shall be determined by the
Administrator. Such performance awards may be in the form of
performance shares and/or performance units. An award of a
performance share is a grant of a right to receive shares of Common
Stock or the cash value thereof (or a combination thereof) which is
contingent upon the achievement of performance or other objectives
during a specified period and which has a value on the date of
grant equal to the fair market value (as determined in accordance
with Section 6(c)(iii) herein) of a share of Common Stock. An award
of a performance unit is a grant of a right to receive shares of
Common Stock or a designated dollar value amount of Common Stock
which is contingent upon the achievement of performance or other
objectives during a specified period, and which has an initial
value established by the Administrator at the time of grant.
Subject to Section 4(a), above, the Administrator shall have
complete discretion in determining the number of performance units
and/or performance shares granted to any participant. The
Administrator shall determine the nature, length and starting date
of the period during which a performance award may be earned (the
"PERFORMANCE PERIOD"), and shall determine the conditions which
must be met in order for a performance award to be granted or to
vest or be earned (in whole or in part), which conditions may
include but are not limited to specified performance objectives,
continued service or employment for a certain period of time, or a
combination of such conditions. The Administrator shall determine
the performance objectives to be used in valuing performance
awards, which performance objectives may vary from participant to
participant and between groups of participants and shall be based
on such corporate, business unit or division and/or individual
performance factors and criteria as the Administrator in its sole
discretion may deem appropriate; provided, however, that, with
respect to performance awards payable to covered employees which
are intended to be eligible for the compensation deduction
limitation exception available under Section 162(m) of the Code and
related regulations, such performance factors shall be limited to
one or more of the following (as determined by the Administrator in
its discretion): sales goals, earnings per share, return on equity,
return on assets and total return to shareholders. The
Administrator shall have sole authority to determine whether and to
what degree performance awards have been earned and are payable and
to interpret the terms and conditions of performance awards and the
provisions herein. The Administrator also shall determine the form
and terms of payment of performance awards. The Administrator, in
its sole and absolute discretion, may accelerate the date that any
performance award granted to a participant shall be deemed to be
earned in whole or in part, without any obligation to accelerate
such date with respect to other awards granted to any participant.
(b) Form of Payment: Payment of the amount to which a participant
shall be entitled upon earning a performance award shall be made in
cash, shares of Common Stock, or a combination of cash and shares
of Common Stock, as determined by the Administrator in its sole
discretion. Payment may be made in a lump sum or in installments
upon such terms as may be established by the Administrator.
(c) Forfeiture of Performance Awards: Unless the Administrator
determines otherwise, if the employment or service of a participant
shall terminate for any reason and the participant has not earned
all or part of a performance award pursuant to the terms of the
Plan and individual award agreement, such award, to the extent not
then earned, shall be forfeited immediately upon such termination
and the participant shall have no further rights with respect
thereto.
(d) Dividend and Voting Rights; Share Certificates: The
Administrator shall have sole discretion to determine whether a
participant shall have dividend rights, voting rights, or other
rights as a shareholder with respect to shares, if any, which are
subject to a performance award prior to the time the performance
award has been earned. Unless the Administrator determines
otherwise, a certificate or certificates for shares of Common
Stock, if any, subject to a performance award shall be issued in
the name of the participant (or his beneficiary) and distributed to
the participant (or his beneficiary) as soon as practicable after
the award has been earned. Notwithstanding the foregoing, the
Administrator shall have the right to retain custody of
certificates evidencing the shares subject to a performance award
and the right to require the participant to deliver to the
Corporation a stock power, endorsed in blank, with respect to such
award, until such time as the award is earned (or forfeited).
(e) Nontransferability: Unless the Administrator determines
otherwise, performance awards which have not been earned shall not
be transferable (including by sale, assignment, pledge or
hypothecation) other than by will or the laws of intestate
succession, and the recipient of a performance award shall not
sell, transfer, assign, pledge or otherwise encumber any shares
subject to the award until the performance period has expired and
until the conditions to earning the award have been met.
10. WITHHOLDING
The Corporation shall withhold all required local, state, federal,
foreign and other taxes from any amount payable in cash with
respect to an award. Prior to the delivery or transfer of any
certificate for shares or any other benefit conferred under the
Plan, the Corporation shall require any recipient of an award to
pay to the Corporation in cash the amount of any tax or other
amount required by any governmental authority to be withheld and
paid over by the Corporation to such authority for the account of
such recipient. Notwithstanding the foregoing, the Administrator
may establish procedures to permit a recipient to satisfy such
obligation in whole or in part, and any local, state, federal,
foreign or other income tax obligations relating to such an award,
by electing (the "ELECTION") to have the Corporation withhold
shares of Common Stock from the shares to which the recipient is
entitled. The number of shares to be withheld shall have a fair
market value as of the date that the amount of tax to be withheld
is determined as nearly equal as possible to (but not exceeding)
the amount of such obligations being satisfied. Each election must
be made in writing to the Administrator in accordance with election
procedures established by the Administrator.
11. DIVIDENDS AND DIVIDEND EQUIVALENTS
The Administrator may, in its sole discretion, provide that the
awards granted under the Plan earn dividends or dividend
equivalents. Such dividends or dividend equivalents may be paid
currently or may be credited to a participant's account. Any
crediting of dividends or dividend equivalents may be subject to
such restrictions and conditions as the Administrator may
establish, including reinvestment in additional shares of Common
Stock or share equivalents.
12. SECTION 16(B) COMPLIANCE
To the extent that any participants in the Plan are subject to
Section 16(b) of the Exchange Act, it is the general intention of
the Corporation that transactions under the Plan shall comply with
Rule 16b-3 under the Exchange Act and that the Plan shall be
construed in favor of the Plan transactions meeting the
requirements of Rule 16b-3 or any successor rules thereto.
Notwithstanding anything in the Plan to the contrary, the
Administrator, in its sole and absolute discretion, may bifurcate
the Plan so as to restrict, limit or condition the use of any
provision of the Plan to participants who are officers or directors
subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other
participants.
13. CODE SECTION 162(M) PERFORMANCE-BASED COMPENSATION
To the extent to which Section 162(m) of the Code is applicable,
the Corporation intends that compensation paid under the Plan to
covered employees (as such term is defined in Section 162(m) and
related regulations) will, to the extent practicable, constitute
qualified "performance-based compensation" within the meaning of
Section 162(m) and related regulations, unless otherwise determined
by the Administrator. Accordingly, the provisions of the Plan shall
be administered and interpreted in a manner consistent with Section
162(m) and related regulations to the extent practicable to do so.
14. NO RIGHT OR OBLIGATION OF CONTINUED EMPLOYMENT OR SERVICE
Nothing in the Plan shall confer upon the participant any right to
continue in the service of the Corporation or a related entity as
an employee, director or independent contractor or to interfere in
any way with the right of the Corporation or a related entity to
terminate the participant's employment or service at any time.
Except as otherwise provided in the Plan or an award agreement,
awards granted under the Plan to employees of the Corporation or a
related entity shall not be affected by any change in the duties or
position of the participant, as long as such individual remains an
employee of, or in service to, the Corporation or a related entity.
15. UNFUNDED PLAN; RETIREMENT PLANS
(a) Neither a participant nor any other person shall, by reason of
the Plan, acquire any right in or title to any assets, funds or
property of the Corporation or any related entity, including,
without limitation, any specific funds, assets or other property
which the Corporation or any related entity, in their discretion,
may set aside in anticipation of a liability under the Plan. A
participant shall have only a contractual right to the Common Stock
or amounts, if any, payable under the Plan, unsecured by any assets
of the Corporation or any related entity. Nothing contained in the
Plan shall constitute a guarantee that the assets of such
corporations shall be sufficient to pay any benefits to any person.
(b) The amount of any compensation deemed to be received by a
participant pursuant to an award shall not constitute compensation
with respect to which any other employee benefits of such
participant are determined, including, without limitation, benefits
under any bonus, pension, profit sharing, life insurance or salary
continuation plan, except as otherwise specifically provided by the
terms of such plan or as may be determined by the Administrator.
(c) The adoption of the Plan shall not affect any other stock
incentive or other compensation plans in effect for the Corporation
or any related entity, nor shall the Plan preclude the Corporation
from establishing any other forms of stock incentive or other
compensation for employees or service providers of the Corporation
or any related entity.
16. AMENDMENT AND TERMINATION OF THE PLAN
(a) General: The Plan and any award granted under the Plan may be
amended or terminated at any time by the Board of Directors of the
Corporation; provided, that (i) approval of an amendment to the
Plan by the shareholders of the Corporation shall be required to
the extent, if any, that shareholder approval of such amendment is
required by applicable law, rule or regulation; and (ii) amendment
or termination of an award shall not, without the consent of a
recipient of an award, materially adversely affect the rights of
the recipient with respect to an outstanding award. Notwithstanding
clause (i) of the preceding sentence, except for adjustments made
pursuant to Section 4(c), the option price for any outstanding
option or base price of any outstanding SAR granted under the Plan
may not be decreased after the date of grant, nor may any
outstanding option or SAR granted under the Plan be surrendered to
the Corporation as consideration for the grant of a new option or
SAR with a lower exercise or base price than the original option or
SAR, as the case may be, without shareholder approval of any such
action.
(b) Adjustment of Awards upon the Occurrence of Certain Unusual or
Nonrecurring Events: The Administrator shall have authority to make
adjustments to the terms and conditions of awards in recognition of
unusual or nonrecurring events affecting the Corporation or any
related entity, or the financial statements of the Corporation or
any related entity, or of changes in applicable laws, regulations
or accounting principles, if the Administrator determines that such
adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be
made available under the Plan or necessary or appropriate to comply
with applicable laws, rules or regulations.
(c) Cash Settlement: Notwithstanding any provision of the Plan, an
award or an award agreement to the contrary, the Administrator may
cause any award granted under the Plan to be canceled in
consideration of an alternative award or cash payment of an
equivalent cash value, as determined by the Administrator, made to
the holder of such canceled award.
17. RESTRICTIONS ON AWARDS AND SHARES
The Corporation may impose such restrictions on awards and shares
representing awards hereunder as it may deem advisable, including
without limitation restrictions under the federal securities laws,
the requirements of any stock exchange or similar organization and
any blue sky or state securities laws applicable to such
securities. Notwithstanding any other Plan provision to the
contrary, the Corporation shall not be obligated to issue, deliver
or transfer shares of Common Stock under the Plan, make any other
distribution of benefits under the Plan, or take any other action,
unless such delivery, distribution or action is in compliance with
all applicable laws, rules and regulations (including but not
limited to the requirements of the Securities Act). The Corporation
may cause a restrictive legend to be placed on any certificate
issued pursuant to an award hereunder in such form as may be
prescribed from time to time by applicable laws and regulations or
as may be advised by legal counsel.
18. CHANGE OF CONTROL
(a) Notwithstanding any other provision of the Plan to the
contrary, and unless an individual award agreement provides
otherwise, in the event of a change of control (as defined in
Section 18(c) herein):
(i) All options and SARs outstanding as of the date of
such change of control shall become fully exercisable, whether or
not then otherwise exercisable.
(ii) Any restrictions including but not limited to the
restriction period, performance period and/or performance criteria
applicable to any restricted award and any performance award shall
be deemed to have been met, and such awards shall become fully
vested, earned and payable to the fullest extent of the original
grant of the applicable award.
(b) Notwithstanding the foregoing, in the event of a merger, share
exchange, reorganization or other business combination affecting
the Corporation or a related entity, the Administrator may, in its
sole and absolute discretion, determine that any or all awards
granted pursuant to the Plan shall not vest or become exercisable
on an accelerated basis, if the Corporation or the surviving or
acquiring corporation, as the case may be, shall have taken such
action, including but not limited to the assumption of awards
granted under the Plan or the grant of substitute awards (in either
case, with substantially similar terms or equivalent economic
benefits as awards granted under the Plan), as in the opinion of
the Administrator is equitable or appropriate to protect the rights
and interests of participants under the Plan. For the purposes
herein, if the Committee is acting as the Administrator authorized
to make the determinations provided for in this Section 18(b), the
Committee shall be appointed by the Board of Directors, two-thirds
of the members of which shall have been directors of the
Corporation prior to the merger, share exchange, reorganization or
other business combinations affecting the Corporation or a related
entity.
(c) For the purposes herein, a "CHANGE OF CONTROL" shall be deemed
to have occurred on the earliest of the following dates:
(i) The date any entity or person shall have become the
beneficial owner of, or shall have obtained voting control over,
fifty-one percent (51%) or more of the outstanding Common Stock of
the Corporation;
(ii) The date the shareholders of the Corporation approve
a definitive agreement (A) to merge or consolidate the Corporation
with or into another corporation or other business entity (each, a
"corporation"), in which the Corporation is not the continuing or
surviving corporation or pursuant to which any shares of Common
Stock of the Corporation would be converted into cash, securities
or other property of another corporation, other than a merger or
consolidation of the Corporation in which holders of Common Stock
immediately prior to the merger or consolidation have the same
proportionate ownership of Common Stock of the surviving
corporation immediately after the merger as immediately before, or
(B) to sell or otherwise dispose of all or substantially all the
assets of the Corporation; or
(iii) The date there shall have been a change in a majority
of the Board of Directors of the Corporation within a 12-month
period unless the nomination for election by the Corporation's
shareholders of each new director was approved by the vote of two-
thirds of the directors then still in office who were in office at
the beginning of the 12-month period.
(For purposes herein, the term "PERSON" shall mean any individual,
corporation, partnership, group, association or other person, as
such term is defined in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act, other than the Corporation, a subsidiary of the
Corporation or any employee benefit plan(s) sponsored or maintained
by the Corporation or any subsidiary thereof, and the term
"BENEFICIAL OWNER" shall have the meaning given the term in Rule
13d-3 under the Exchange Act.)
19. APPLICABLE LAW
The Plan shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the conflict of
laws provisions of any state.
20. SHAREHOLDER APPROVAL
The Plan is subject to approval by the shareholders of the
Corporation. Awards granted prior to such shareholder approval
shall be conditioned upon and shall be effective only upon approval
of the Plan by such shareholders on or before such date.
21. DEFERRALS
The Administrator may permit or require a participant to defer
receipt of the delivery of shares of Common Stock or other benefit
that would otherwise be due pursuant to the exercise, vesting or
earning of an award. If any such deferral is required or permitted,
the Administrator shall, in its discretion, establish rules and
procedures for such deferrals.
22. BENEFICIARY DESIGNATION
The Administrator may permit a participant to designate in writing
a person or persons as beneficiary, which beneficiary shall be
entitled to receive settlement of awards (if any) to which the
participant is otherwise entitled in the event of death. In the
absence of such designation by a participant, and in the event of
the participant's death, the estate of the participant shall be
treated as beneficiary for purposes of the Plan, unless the
Administrator determines otherwise. The Administrator shall have
sole discretion to approve and interpret the form or forms of such
beneficiary designation.
23. GENDER AND NUMBER
Where the context admits, words in any gender shall include any
other gender, words in the singular shall include the plural and
the plural shall include the singular.
24. SUCCESSORS AND ASSIGNS
The Plan shall be binding upon the Corporation, its successors and
assigns, and participants, their executors, administrators and
permitted transferees and beneficiaries.
25. SEVERABILITY
If any provision of the Plan shall be held illegal or invalid for
any reason, such illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been
included.
26. CERTAIN DEFINITIONS
In addition to other terms defined in the Plan, the following terms
shall have the meaning indicated:
(a) "AWARD AGREEMENT" means any written agreement or
agreements between the Corporation and the recipient of an award
pursuant to the Plan relating to the terms, conditions and
restrictions of an award conferred herein. Such award agreement may
also state such other terms, conditions and restrictions, including
but not limited to terms, conditions and restrictions applicable to
shares subject to an award, as may be established by the
Administrator.
(b) "COVERED EMPLOYEE" shall have the meaning given the
term in Section 162(m) of the Code and the regulations thereunder.
(c) "DISABILITY" shall have the meaning ascribed to the
term in any employment agreement, consulting agreement or other
similar agreement, if any, to which the participant is a party, or,
if no such agreement applies, "disability" shall mean the inability
to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death, or which has lasted or can be expected
to last for a continuous period of not less than 12 months.
(d) "DISPLACEMENT" shall have the meaning ascribed to the
term in any employment agreement, consulting agreement or other
similar agreement, if any, to which the participant is a party, or,
if no such agreement applies, "displacement" shall mean the
termination of the participant's employment or service due to the
elimination of the participant's job or position without fault on
the part of the participant.
(e) "PARENT" or "PARENT CORPORATION" shall mean any
corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation if each corporation other
than the Corporation owns stock possessing 50% or more of the total
combined voting power of all classes of stock in another
corporation in the chain.
(f) "PREDECESSOR" or "PREDECESSOR CORPORATION" means a
corporation which was a party to a transaction described in Section
424(a) of the Code (or which would be so described if a
substitution or assumption under Section 424(a) had occurred) with
the Corporation, or a corporation which is a parent or subsidiary
of the Corporation, or a predecessor of any such corporation.
(g) "RELATED CORPORATION" means any parent, subsidiary or
predecessor of the Corporation, and "related entity" means any
related corporation or any other business entity which is an
affiliate controlled by the Corporation; provided, however, that
the term "related entity" shall be construed in a manner in
accordance with the registration provisions under applicable
federal securities laws.
(h) "RESTRICTED STOCK" shall mean shares of Common Stock
which are subject to restricted awards payable in shares, the
vesting of which is subject to restrictions set forth in the Plan
and the applicable award agreement.
(i) "RETIREMENT" shall have the meaning ascribed in any
employment agreement, consulting agreement or other similar
agreement, if any, to which the participant is a party, or, if no
such agreement applies, "retirement" shall mean retirement in
accordance with the retirement policies and procedures established
by the Corporation.
(j) "SUBSIDIARY" or "SUBSIDIARY CORPORATION" means any
corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation if each corporation
other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all
classes of stock in another corporation in the chain.
APPENDIX C
JLM COUTURE, INC.
PROXY
Proxy for 2003 Annual Meeting of Shareholders.
The undersigned hereby appoints Joseph L. Murphy and Joseph
E. O'Grady proxies of the undersigned, with full power of
substitution, to vote shares of Common Stock of the Company which
the undersigned would be entitled to vote if present at the 2003
Annual Meeting of Shareholders of the Company to be held on October
28, 2003 at 10:00 A.M. at the Company's offices located at 525
Seventh Avenue, Suite 1703, New York, NY 10018 and any adjournments
thereof, upon the matters set forth in the Notice of Annual Meeting
as follows:
The undersigned acknowledges receipt of the Notice of Annual
Meeting, Proxy Statement and the Company's 2002 Annual Report.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
and when properly executed will be voted as directed herein. If no
direction is given, this Proxy will be voted FOR Proposals 1, 2 and 3.
A. ELECTION OF CLASS II DIRECTORS:
1. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR all Class II Director
nominees
For Withhold
--- --------
01-Daniel M. Sullivan [ ] [ ]
02-Keith Cannon [ ] [ ]
B. ISSUES
2. APPROVAL OF THE ADOPTION OF THE 2003 STOCK INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF GOLDSTEIN GOLUB KESSLER
LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE COMPANY'S
FISCAL YEAR ENDING OCTOBER 31, 2003.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon
other matters properly coming before the meeting or any adjournment
thereof.
DATED: , 2003
---------------------
-------------------------------------
(Signature)
-------------------------------------
(Signature, if held jointly)
Where stock is registered in the
names of two or more persons ALL
should sign. Signature(s) should
correspond exactly with the name(s)
as shown above. Please sign, date
and return promptly in the enclosed
envelope. No postage need be affixed
if mailed in the United States.
Requests for copies of proxy statements, the Company's Annual
Report for Fiscal 2002, or the Company's Annual Report for Fiscal
2002 on Form 10-KSB should be addressed to Shareholder Relations,
JLM Couture, Inc., 525 Seventh Avenue, Suite 1703, New York, NY
10018. This material will be furnished without charge to any
shareholder requesting it.