SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check
the appropriate box:
[X][ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ][X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Kenilworth Systems Corporation
-----------------------------
(Name of Registrant as Specified in Its Charter)
Kenilworth Systems Corporation
-----------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:_____________________________________________________
(2) Aggregate number of securities to which transaction applies:
_____________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: ________________
(4) Proposed maximum aggregate value of transaction:
_____________________________________________________________
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
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the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount previously paid:______________________________________
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KENILWORTH SYSTEMS CORPORATION
54 KENILWORTH ROAD
MINEOLA, NEW YORK 11501
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNEAUGUST 13, 2001
----------------------------------------
TO THE STOCKHOLDERS
Notice is given that the Annual Meeting of the stockholders of Kenilworth
Systems Corporation will be held on JuneAugust 13, 2001 at 10:00 a.m. at Marriot
Marquis, 1535 Broadway, New York, New York 10036 (at 46th Street). The meeting
is called for the following purposes:
ELECTION OF DIRECTORS
To elect three directors for the term continuing through the next annual meeting
of Kenilworth and until their successors are duly elected.
RATIFICATION OF ADOPTION OF PERFORMANCE AND EQUITY INCENTIVE PLAN
To ratify the adoption of Kenilworth's Performance and Equity Incentive Plan.
AUTHORIZATION AND RATIFICATION OF A CERTIFICATE OF AMENDMENT TO
KENILWORTH'S CERTIFICATE OF INCORPORATION FILED ON DECEMBER 7, 1998 AND
OF ALL SHARES ISSUED SINCE SUCH FILING IN EXCESS OF THE PREVIOUSLY AUTHORIZED 15,000,00060,000,000
SHARES.
To authorize and ratify the Certificate of Amendment of Kenilworth filed on
December 7, 1998 which increased the authorized number of shares of common stock
$.01 par value ("Common Stock") which Kenilworth had the authority to issue
from
15,000,000 to 100,000,000 and to ratify the issuance of 4,932,502 shares of Common Stock
of Kenilworth issued, since December 7, 1998, in excess of the previously authorized 15,000,00060,000,000 shares.
AUTHORIZATION OF AN AMENDMENT TO KENILWORTH'S CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON
STOCK TO 200,000,000
To authorize an amendment to Kenilworth's Certificate of Incorporation to
increase the authorized number of shares of Common Stock which Kenilworth may
issue to 200,000,000.
AUTHORIZATION OF AN AMENDMENT TO KENILWORTH'S CERTIFICATE OF
INCORPORATION TO AUTHORIZE PREFERRED STOCK
To authorize an amendment to Kenilworth's Certificate of Incorporation to
authorize a class of Preferred Stock consisting of 2,000,000 shares that may
be issuable having such rights and restrictions as may be determined by the
Board of Directors of Kenilworth.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
To ratify the appointment of Peter C. Cosmas Co., Certified Public
Accountants, as independent auditors.
TRANSACTION OF OTHER BUSINESS
To transact such other business as may properly come before the meeting or any
adjournments thereof.
Only stockholders of record at the close of business on May 7,June 21, 2001 are
entitled to receive notice of, and to vote at, this meeting or any adjournment
thereof.
HERBERT LINDO
President
DATED: May 7,June 28, 2001
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, WE URGE YOU TO
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF
DIRECTORS OF KENILWORTH SYSTEMS CORPORATION AND RETURN IT IN THE PRE- ADDRESSED
ENVELOPE PROVIDED FOR THAT PURPOSE. A STOCKHOLDER MAY REVOKE HIS PROXY AT ANY
TIME BEFORE THE MEETING BY WRITTEN NOTICE TO SUCH EFFECT BY SUBMITTING A
SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
THANK YOU FOR ACTING PROMPTLY
KENILWORTH SYSTEMS CORPORATION
54 KENILWORTH ROAD
MINEOLA, NEW YORK 11501
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNEAUGUST 13, 2001
INFORMATION CONCERNING SOLICITATION AND VOTING
----------------------------------
GENERAL
The enclosed proxy mailed to stockholders commencing approximately on May 10,June 28,
2001 is solicited by the Board of Directors of Kenilworth Systems Corporation
in connection with the annual meeting of stockholders to be held JuneAugust 13,
2001, at 10:00 a.m. at Marriot Marquis, 1535 Broadway, New York, New York
10036 (at 46th Street). Proxies will be voted in accordance with directions
specified or otherwise in accordance with the judgment of the persons
designated as proxies. Any proxy on which no direction is specified will be
voted in favor of the action described in this proxy statement.
RECORD DATE, OUTSTANDING SHARES
Only stockholders of record at the close of business on May 7,June 21, 2001 (the
"Record Date") are entitled to receive notice of and to vote at the meeting.
The outstanding voting securities of Kenilworth as of such date consisted of
64,932,49264,932,502 shares of Common Stock $.01 par value.
REVOCABILITY OF PROXIES
The enclosed proxy may be revoked at any time before its use by delivering to us
a subsequently dated proxy or by giving written notice to Kenilworth.
Stockholders who attend the meeting may withdraw their proxies at any time
before their shares are voted by voting their shares in person.
VOTING AND SOLICITATION
The expense of the solicitation of proxies for the meeting will be paid by
Kenilworth. In addition to the mailing of the proxy material, solicitation may
be made in person or by telephone by directors, officers or regular employees of
Kenilworth. It is estimated our cost of proxy solicitations by Kenilworth will
not exceed $5,000.$10,000.
We are aware of no other matters to be presented for action at this meeting not
specified in the notice of meeting. Proxies received without specified
instructions will be voted FOR the nominees named in the Proxy to Kenilworth's
Board of Directors and FOR each of the other items. In the event that any other
matter should come before the Annual Meeting or any nominee is not available for
election, the persons named in the enclosed Proxy will have discretionary
authority to vote all Proxies not marked to the contrary with respect to such
matters in accordance with their best judgment.
Under SEC rules, boxes and a designated blank space are provided on the proxy
card for stockholders to mark if they wish to abstain on one or more of the
proposals or to withhold authority to vote for one or more nominees for
director.
QUORUM, ABSTENTIONS, BROKER NON-VOTES
Our voting securities consist solely of Common Stock. A majority of our
outstanding shares are required to be present in person or by proxy for a quorum
to be present at the meeting. Each share of Common Stock entitles the holder to
one (1) vote on each matter to be voted upon. Abstentions and broker non-votes
will be counted for determining the presence or absence of a quorum for the
transaction of business. Abstentions are counted as present in the tabulation of
votes on each of the proposals presented to the
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stockholders. Broker non-votes will not be counted for the purpose of
determining whether a particular proposal has been approved. Each of the
Proposals require the approval of a majority of the Common Stock present in
person or represented by proxy, with the exception of the proposals with
regard to amending the Certificate of Incorporation which requires approval
of a majority of the outstanding shares of Common Stock. Assuming a quorum is
present at the Annual Meeting, abstentions will have the effect of a negative
vote while broker non-votes will have no effect, except they will have a
negative effect with regards to amending the Certificate of Incorporation.
Reference is made to the discussion in Proposal 3 regarding the inclusion of
4,932,492 shares in the total number of shares outstanding for quorum and
voting purposes.
PROPOSAL 1
ELECTION OF DIRECTORS
Our bylaws provide that there will be not less than three nor more than fifteen
directors. The present size of the Board is fixed at three directors.
NOMINEES FOR DIRECTOR
Our Board of Directors has unanimously nominated and designated the following
individuals for election as directors for a term continuing through Kenilworth's
next annual meeting and until their successors are elected and take their
places:
Name Age Position Director Since
- ---- --- -------- --------------
Herbert Lindo 75 Director, Chairman of the Board, 1972
President and Treasurer,
Chief Executive Officer and
Chief Financial Officer
Director
Kit Y. Wong 71 Director 1999
Joyce D. Clark 65 Director, Financial Officer 1998
(Vice-President)
Herbert Lindo has been president and chief executive officer of Kenilworth
since 1972. Since emergingKenilworth's emergence from bankruptcy, he has served as
chief executive officer and chief financial officer of Kenilworth.
Joyce D. Clark has served as a director of Kenilworth since 1998. Since 1991 she
has served as controller of Long Island Wholesalers Inc., a wholesale door
manufacturer. She is also the sister of Betty S. Svandrlik, secretary of
Kenilworth.Kenilworth, who is engaged in business as a medical transcriber.
Kit Y. Wong has served as a director of Kenilworth since 1999. SheHe owns and
operates several Chinese restaurants in the newNew York metropolitan area.
Proxies in the enclosed form will be voted for the nominees named above.
Authority may be withheld for any nominee. In addition, stockholders may
nominate additional nominees as candidates for the position as director.
Although the Board of Directors does not anticipate that any nominee will be
unavailable for election, in the event of such occurrence, the proxy will be
4
voted for such substitute, if any, as the Board of Directors may designate.
Proxies will not vote for a greater number of persons than the number of
nominees named.
RECOMMENDATION AND REQUIRED VOTE
Directors will be elected by the vote of a plurality of the votes cast.
Abstentions and broker non-votes are not counted as votes cast. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE NAMED NOMINEES.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 7,June 21, 2001, the number of shares of
Common Stock beneficially owned by each of the present directors of
Kenilworth, together with certain information with respect to each:
Number of
Shares
Director Beneficially Percent
Name Since Owned(1) (1)
- ---- ----- ----------- -------
Herbert Lindo(2) 1972 10,333,00010,333,465 15.9
54 Kenilworth Road
Mineola, New York 11501
Kit Y. Wong 1999 -- *
54 Kenilworth Road
Mineola, New York 11501
Joyce D. Clark 1998 100,000 *
54 Kenilworth Road
Mineola, New York 11501
ALL CURRENT 10,483,465 16.1
OFFICERS AND
DIRECTORS AS
A GROUP (4 PERSONS)
- ----------
* Less than 1%
(1) Beneficial ownership is determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934.
(2) Herbert Lindo is the only person known to own beneficially more than 5%
of Kenilworth's Common Stock.
AsBetty Sue Svandrlik, 62, sister of May 7, 2001, the directors and executive officersJoyce D. Clark has served as
secretary of Kenilworth four
persons, ownedsince 1998. She is the beneficial owner of
record and beneficially a total of 10,483,000 shares
representing 16.1% of the issued and outstanding Common Stock of Kenilworth.50,000 shares.
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES THEREOF
Five meetings of the Board of Directors were held during the fiscal year ending
December 31, 2000. The Board of Directors has not established any committees at
this time.
AUDIT COMMITTEE AND CHARTER
We will endeavor to establish at a future date an audit committee which will
consist of at least three independent directors. We have endeavored to locate
and appoint three independent directors to the Board but have had difficulty
in interesting prospective independent directors. Kit Y. Wong is considered
an independent director. We believe that the approval of the Performance and
Equity Incentive Plan will assist us in interesting other independent
directors. The following charterCharter annexed hereto as Appendix A has
5
been adopted by the
Board of Directors which will govern the audit committee as independent
directors become available to Kenilworth:
CHARTER
Responsibilities
The Audit Committee of the Board of Directors (the "Audit Committee") shall have
the responsibility to assist the Board of Directors in fulfilling its fiduciary
and other obligations with respect to accounting and financial matters.
Specifically, and without limiting the generality of the foregoing, the Audit
Committee shall:
1 Review the adequacy and effectiveness of the Company's system
of internal financial controls and accounting practices to
achieve reliability and integrity in the Company's financial
statements, and initiate such examinations of such controls
and practices as the Audit Committee deems advisable.
2 Review the qualification, performance and independence of the
Company's independent auditors and recommend independent
auditors for appointment annually by the Board of Directors.
3 Prior to the commencement of the Company's annual external
audit, review with the Company's independent auditors the
scope of their audit function and estimated audit fees.
4 Subsequent to the completion of the Company's annual external
audit, review the report and recommendations of the
independent auditors with the independent auditors and the
Company's management.Kenilworth.
5
Review the annual and quarterly consolidated financial
statements of the company and other financial disclosures of
the Company and the accounting principles being applied in
such statements and disclosures.
6 Review the authority and duties of the Company's chief
financial officer and chief accounting officer and the
performance by each of them of their respective duties.
7 Review the insurance programs fo the Company including
professional malpractice, general liability, director and
officer liability and property insurance, and the insurers
carrying the Company's insurance.
8 Oversee the establishment and thereafter periodically review a
corporate code of conduct and the Company's policies on
ethical business practices.
6
9 Prior to public release, review with management and the
independent accountants, the financial results for the prior
year including the Company's annual report on Form 10-K.
10 Review the committee's charter annually and revise as
appropriate.
11 Meet with the chief financial officer and the independent
accountants, in separate executive sessions, to discuss any
matters that the committee or these groups believe should be
considered privately.
12 Take such other actions concerning the Company's accounting
and financial functions as the Committee deems appropriate
with respect to the matters described above.
Meeting Frequency
The Audit Committee will meet as necessary. Generally, meetings will be held
immediately prior to each regular meeting of the Board of Directors, or as
called by the Chief Executive Officer, the Chairman of the Audit Committee or
any two members of the Audit Committee.
Governance
The Audit Committee will maintain complete records of its proceedings. At least
fifty percent (50%) of the members of the Audit Committee shall be necessary to
constitute a quorum for the conduct of business. The affirmative vote of a
majority of a quorum will be necessary to approve any action. As permitted by
applicable law, the Audit Committee may hold meetings by conference call. The
Audit Committee may approve actions by written consent if all of the members of
the Audit Committee execute the consent. The Chairman of the Audit Committee
will be appointed by the Board of Directors. Notice of meetings of the Audit
Committee will be in accordance with the notice provision of the bylaws with
respect to meetings of the Board of Directors of Kenilworth.
Membership
1 The Audit Committee will be comprised of at least three independent
directors.
2 Only independent directors may serve as members of the Committee.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation of the CEO and each
executive officer of Kenilworth whose total salary and bonus exceeds $100,000.
Summary Compensation Table
Annual Compensation Long term compensation
76
------------------------ --------------------------------------
Awards Payout
------------------ -----------------
Other Securities All
Name and annual Restricted underlying LTIP other
principal Salary Bonus compel- stock options/ payouts compen-
position Year ($) ($) sation($) award(s)($) SARS (#) ($) sation($)
- -------- ---- ------ ----- ---------- --------- ---------- ------ --------
Herbert
Lindo 2000 0 0 0 0 0 0 0
1999 0 0 0 0 0 0 0
1998 0 0 0 0 0 0 0
Herbert Lindo received no compensation during the past three fiscal years and no
executive officer received any compensation during the past three fiscal years.
STOCK OPTIONS
The following table sets forth the grant of options and SARs during the fiscal
year ended December 31, 2000.
Option/SAR Grants and Exercises in Last Fiscal Year
Option/SAR Grants in Last Fiscal Year
Individual Grants
Number of Percent of Potential realizable value
securities total options/ at assumed annual rates
underlying SARS granted Exercise of stock price apprecia-
Options/SARs to employees or base Expiration tion for option term
Name granted (#) In fiscal year price($/Sh) Date 5% 10%
- ---- -------------- -------------- ------------ ----------- ---- ----
- ---- ---- ---- ---- ---- ---- ----
No options or SARs were granted during the last fiscal year.
The following table sets forth the exercise of options and SARs during
the fiscal year ended December 31, 2000.
Aggregated Option/SAR Exercises in Last Fiscal Year
And FY-End Option/SAR Values
Number of
securities un- Value of
derlying unex- unexercised in-
ercised options/ the-money options
Shares SARS at FY-end (#) SARS at FY-end($)
acquired on Value exercisable / exercisable /exercisable/ exercisable/
Name exercise (#) realized ($) unexercisable unexercisable
- ----- -------------- -------------- ------------- ----------------
- ---- ---- ---- ---- ----
87
No options or SARs were exercised during the year ended December 31, 2000.
Kenilworth has no outstanding options or SARs.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 193416(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Kenilworth's
executive officers and directors, and persons who beneficially own more than ten
percent of our Common Stock, to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission. Executive
officers, directors and greater than ten percent beneficial owners are required
by SEC regulations to furnish us with copies of all Section 16(a) forms they
file.
Based solely on representations from our executive officers and directors, we
believe that during the fiscal year ended December 31, 2000, all Section
16(a) filing requirements applicable to our executive officers, directors and
greater than ten percent beneficial owners were complied with, with the
exception that Form 3's for Kit Y. Wong, Joyce D. Clark and Betty Sue
Svandrilik were not filed until March 2001. The forms were due at such time
as each became a director.director or officer. The delays in filing were inadvertent.
STOCK PERFORMANCE GRAPH
The following chart comparesEach of the cumulative total shareholder return on
Kenilworth's Common Stock withnamed individuals failed to file only the NASDAQ US Index. Kenilworth believes there isone Form 3 and engaged
in no other comparitive index to utilize. The comparison assumes $100 was invested
on October 5, 1998 in Kenilworth's Common Stock and the NASDAQ US Index and
assumes reinvestment of dividends in the NASDAQ Index. Kenilworth has paid no
dividends and its stock did not trade during 1996 to October 4, 1998.
TOTAL RETURN TO SHAREHOLDER'S
(DIVIDENDS REINVESTED MONTHLY)
ANNUAL RETURN PERCENTAGE
YEARS ENDING
COMPANY/INDEX DEC98 DEC99 DEC00
- --------------------------------------------------------------------------------
KENILWORTH SYSTEMS CORP 212.50 -50.40 390.32
NASDAQ US INDEX 43.35 85.85 -39.82
INDEXED RETURNS
YEARS ENDING
BASE
PERIOD
COMPANY/INDEX 5OCT98 DEC98 DEC99 DEC00
- --------------------------------------------------------------------------------
KENILWORTH SYSTEMS CORP 100 312.50 155.00 760.00
NASDAQ US INDEX 100 143.35 266.40 160.32
9reportable transactions after becoming a director or officer.
8
REPORT OF THE COMPENSATION COMMITTEE TO THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
Since no compensation was paid during the past fiscal year, no report was
submitted. Further, there are no employment agreements with any of Kenilworth's
officers or directors
PROPOSAL 2
PERFORMANCE AND EQUITY INCENTIVE PLAN
Kenilworth's Board of Directors adopted the Performance and Equity Incentive
Plan (subject to stockholder approval thereof) (the "Plan") on December 18,
2000,
2000. The purpose of the Plan is to provide equity ownership opportunities
and performance based incentives to attract and retain the services of key
employees, directors and non-employee consultants for Kenilworth and to
motivate such individuals to put forth maximum efforts on behalf of
Kenilworth.
The following summary provides a description of the significant provisions of
the Plan. However, such summary is qualified in its entirety by reference to the
full text of the Plan a copy of which is annexed hereto.hereto on Appendix B.
SHARES RESERVED FOR DISTRIBUTION PURSUANT TO AWARDS UNDER THE PLAN
The number of shares of Common Stock reserved for distribution pursuant to stock
options or other awards under the Plan is 10,000,000, subject to adjustment in
the event of any merger, reorganization, consolidation, recapitalization, stock
dividend, stock split or other changes in corporate structure affecting the
Common Stock. All of the Common Stock which may be awarded under the Plan may be
subject to delivery through Incentive Stock Options.
ADMINISTRATION
The Plan is to be administered by the Board of Directors or a Committee thereof
composed of two or more members who are non-employee directors (the
"Committee"). Grants of awards under the Plan to non-employee directors require
the approval of the Board of Directors.
The Board or the Committee may amend, suspend or discontinue the Plan or any
portion thereof at any time, but no amendment, suspension or discontinuation
shall be made which would impair the right of any holder without the holder's
consent. Subject to the foregoing, the Board or the Committee has the authority
to amend the Plan to take into account changes in law and tax and accounting
rules, as well as other developments. The Board or the Committee may institute
loan programs to assist participants in financing the exercise of options
through full recourse interest bearing notes not to exceed the cash
consideration plus applicable taxes in connection with the acquisition of
shares.
NATURE OF OPTIONS
109
Stock options granted under the Plan may be of two types, those intended to
qualify as incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended ("Incentive Stock Options") and those not so intended
to qualify ("Non-Qualified Stock Options"). To the extent that a stock option
does not qualify as an Incentive Stock Option, it shall constitute a
Non-Qualified Stock Option. Non-employee directors and non- employee consultants
may only be granted Non-Qualified Stock Options.
OPTION PRICE AND DURATION OF OPTIONS
Incentive Stock Options granted under the Plan shall be exercisable at fair
market value at the date of grant, generally the closing price as reported or
such higher price as shall be determined by the Board or the Committee, and
shall be exercisable no more than 10 years after the date of grant. Non-
Qualified Stock Options shall be exercisable at such price as is determined by
the Board or the Committee and shall be exercisable no more than 10 years and 1
month. Stock options are exercisable at such times and under such terms and
conditions as shall be determined by the Board or the Committee. Incentive Stock
Options shall not be granted to any owner of 10% or more of the combined voting
power of Kenilworth, unless the exercise price is at least 110% of the fair
market value on the date of grant, and the option states that it is not
exercisable after the expiration of 5 years from the date of grant. The
aggregate fair market value (determined on the date the option is granted) of
shares subject to an Incentive Stock Option granted to an optionee in any
calendar year shall not exceed $100,000.
RELOAD FEATURE
The Board or the Committee may grant options with a reload feature. A reload
feature shall only apply when the option price is paid by delivery of Common
Shares. The agreement for options containing the reload feature shall provide
that the option holder shall receive, contemporaneously with the payment of the
option price in Common Stock, a reload option to purchase that number of shares
of Common Stock equal to the number of shares of Common Stock used to exercise
the option, and, to the extent authorized by the Board of the Committee, the
number of shares of Common Stock used to satisfy any tax withholding requirement
incident to the underlying Stock Option. The exercise price of the reload
options shall be equal to the fair market value of the Common Stock on the date
of grant of the reload option and each reload option shall be fully exercisable
six months from the effective date of the grant of such reload option. The term
on the reload option shall be equal to the remaining term of the option which
gave rise to the reload option. No additional reload options shall be granted to
optionees when Stock Options are exercised following the termination of the
optionee's employment. Subject to the foregoing, the terms of the Plan
applicable to the option shall be equally applicable to the reload option.
STOCK APPRECIATION RIGHTS
Stock Appreciations Rights may be granted in conjunction with all or part of any
stock option granted under the Plan or independent of a stock option grant.
Stock Appreciation Rights shall be subject to such terms and
1110
conditions as shall be determined by the Board or the Committee. Upon the
exercise of a Stock Appreciation Right, a holder shall be entitled to receive an
amount in cash, Common Stock, or both, equal in value to the excess of the fair
market value over the option exercise price per shares of Common Stock.
RESTRICTED STOCK
Shares of Restricted Stock may also be issued either alone or in addition to
other amounts granted under the Plan. The Board or the Committee shall
determine the officers, key employees and non-employee consultants to whom
and the time or times at which grants of Restricted Stock will be made, the
number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture and any other terms and conditions of the award.
See also the further discussion in Federal Income Tax Consequences regarding
Restricted Stock.
LONG TERM PERFORMANCE AWARDS
Long Term Performance Awards may be awarded either alone or in addition to
other awards granted under the Plan. The Board or the Committee shall
determine the nature, length, and starting date of the performance period
which shall be at least two years. The maximum award for any individual with
respect to any one year of any applicable performance period shall be 200,000
shares of Common Stock. Such awards are, in general, bonuses paid in stock
rather than grants of shares or options to acquire shares with respect to
which any appreciation in the shares is a significant feature of the
compensation.
EFFECT OF CHANGE IN CONTROL ON AWARDS UNDER THE PLAN
Upon a Change in Control as defined in the Plan (see Section 10.2 of the Plan
for a definition, which is generally a change in control of Kenilworth
required to be reported in response to item 1(a) of Form 8k under the
Exchange Act, including a change of ownership of 20% or more of the voting
stock of Kenilworth or change of a majority of the directors over 24 months,
but only to the extent determined by the Board or the Committee,Committee), Stock
Options, Stock Appreciation Rights and Long Term Performance Awards (the
"Award") will vest, provided thatvest. However, no award granted to an employee of Kenilworth
shall vest or be exercisable unless the employee's employment is terminated
within 24 months from the date of the Change in Control, unless the employee
is terminated for Cause, as defined by the Plan, or if the employee resigns
his employment without Good Reason, as defined by the Plan. Otherwise,(See Section
10.1(a)(v) of the Award shall not vestPlan for the definitions of Cause and be exercisable upon
a Change in Control, unless otherwise determined.Good Reason.) The
employee shall have 30 days from after his employment is terminated due to a
Change in Control to exercise all unexercised Awards. However, in the event
of the death or disability of the employee, all unexercised Awards must be
exercised within twelve (12) months after the death or disability of the
employee. The foregoing provisions have been inserted to generally authorize
the vesting of awards earlier than specified in the award if an employees
employment is terminated following a change in control. The award shall not
vest for 2 years if the employee is not terminated except if he resigns for
Good Reason or he or she is terminated for Cause. The purpose of the forgoing
is not to allow vesting if the employee retains his employment, upon a Change
in Control.
ELIGIBILITY
We estimate that approximately three employees and executive officers and two
non-employee Directorssix (6) individuals are eligible at the
present time to participate in the Plan. No options, shares of Common Stock
or awards to date have been granted under the Plan. There are no current plans,
proposals or understandings to confer awards under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the Plan may be either Incentive Stock Options which
satisfy the requirements of Section 422 of the Internal Revenue Code or Non-
1211
Qualified Stock Options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options are as follows:
INCENTIVE STOCK OPTIONS. No taxable income is recognized by the optionee at the
time of the option grant, and no regular taxable income is generally recognized
at the time the option is exercised. The optionee will, however, recognize
taxable income in the year in which the purchased shares are sold or otherwise
made the subject of a taxable disposition. For Federal tax purposes,
dispositions are divided into two categories: (i) qualifying and (ii)
disqualifying. A qualifying disposition occurs if the sale or other disposition
is made after the optionee has not disposed of the shares for more than 2 years
after the option grant date and has held the shares for more than 1 year after
the exercise date. If either of these two holding periods is not satisfied, then
a disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for those shares. If there is a disqualifying
disposition of the shares, then, in general, the excess of (i) the fair market
value of the shares on the exercise date over (ii) the exercise price paid for
those shares will be taxable as ordinary income to the optionee. However, if the
net proceeds of the disposition are less, then only the net proceeds, if any,
will be taxable as ordinary income to the optionee. Any additional gain or loss
recognized upon the disposition will be taxable as a capital gain or loss.
If the optionee makes a disqualifying disposition of the purchased shares, then
Kenilworth will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the excess of (i) the fair market value
of such shares on the option exercise date over (ii) the exercise price paid for
the shares. In no other instance will Kenilworth be allowed a deduction with
respect to the optionee's disposition of the purchased shares.
NON-QUALIFIED STOCK OPTIONS. No taxable income is recognized by an optionee upon
the grant of a Non-Qualified Stock Option. The optionee will in general
recognize ordinary income, in the year in which the option is exercised, equal
to the excess of the fair market value of the purchased shares on the exercise
date over the exercise price paid for the shares, and the optionee will be
required to satisfy the tax withholding requirements applicable to such income.
STOCK APPRECIATION RIGHTS. No taxable income is recognized upon the receipt of a
stock appreciation right. The holder will recognize ordinary income, in the year
in which the right is exercised, equal to the excess of the fair market value of
the underlying shares of Common Stock on the exercise date over the base price
in effect for the exercised right, and the holder will be required to satisfy
the tax withholding requirements applicable to such income. Kenilworth will be
entitled to an income tax deduction equal to the amount of ordinary income
recognized by the holder in connection with the
1312
exercise of the stock appreciation right. The deduction will be allowed for the
taxable year of Kenilworth in which such ordinary income is recognized.
LONG TERM PERFORMANCE AWARDS. Awards under Long Term Performance Plans will
usually be contingent on the attainment by Kenilworth of certain performance
goals. Such grant, which by its terms will be contingent upon the attainment
of a specified future financial goal, is generally not taxable to the
recipient, even if the financial goal (such as earnings) is met prior to the
award date. The performance goals will not be considered met until the
performance period actually ends since, conceivably, the goals may fail to be
realized because of subsequent events. As such, these awards will differ from
options or restricted stock awards. When the amount under the performance is
BOTH earned AND paid or made available to the participant, it will be treated
as ordinary income. A corporate deduction is available at the end of the year
corresponding with the year of the participant's inclusion of the award.
Performance units are subject to accounting treatment as variable awards, so
that the expected cost of each award must be estimated and accrued as an
expense over the performance period.
RESTRICTED STOCK. Restricted stock is usually subject to forfeiture conditions
and is non-transferable until a specified period of time has elapsed.such conditions, generally related to continued
service are satisfied. Typically, forfeiture of the shares will occur if the
employee's employment is terminated prior to the completion of the restricted
period. The term Restricted Stock is intended to be under Section 83 of the
Tax Code which determines the time and amount of income subject to Tax and
not under Rule 144 of the Securities Act of 1933 which affects the ability to
sell shares in the public marketplace. Transferability and Terms will be
limited to the restrictions as established by the award. Unless the employee
makes an election to be taxed in the current year, the employee must include
in gross income the excess of the fair market value of the restricted shares
over the amount paid for such shares at the time the shares become
transferable or are no longer subject to a substantial risk of forfeiture. In
general, Kenilworth will obtain a deduction in the tax year in which the
employee includes the value of the award in his or her income in the same
amount as the income.
RECOMMENDATION AND REQUIRED VOTE
The affirmative vote of the holders of a majority of the outstanding Common
Stock of Kenilworth present at the Meeting in person or by proxy is required
for approval of this proposal. The approval of this Proposal is dependent
upon approval of either Proposal 3 or 4 to assure that there is sufficient
authorized shares of common stock available under the Plan and should both
proposals not be approved then Kenilworth will not have any authorized shares
available under the Plan. Reference is made to the discussion in Proposal 3
regarding the inclusion of 4,932,492 shares in the total number outstanding
for quorum and voting purposes. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR RATIFICATION OF THE ADOPTION OF THE PERFORMANCE AND EQUITY
INCENTIVE PLAN.
PROPOSAL 3
AUTHORIZATION AND RATIFICATION OF A CERTIFICATE OF AMENDMENT
TO KENILWORTH'S CERTIFICATE OF INCORPORATION FILED ON DECEMBER
7, 1998 AND OF ALL SHARES ISSUED, SINCE SUCH FILING, IN EXCESS OF THE PREVIOUSLY
AUTHORIZED 15,000,00060,000,000 SHARES
On December 7, 1998 Kenilworth filed a Certificate of Amendment to its
Certificate of Incorporation by which the authorized number of shares of Common
Stock which Kenilworth was authorized to issue was increased from 15,000,00060,000,000
shares to 100,000,000 shares at $.01 par value. The amendment was filed with the
authorization of the Board and the consent of a majority of the outstanding
shares of Kenilworth. However, Section 803 of the Business
14
Corporation Law of
the State of New York requires the approval by the Board followed by a vote of
the holders of a majority of all shares entitled to vote thereon at a meeting of
the shareholders. The amendment was approved by our Board and a majority of our
shareholders without a meeting of the shareholders and without any Information
Statement or Proxy Statement to any of Kenilworth's shareholders. Thereafter,
49,932,4924,932,492 shares of Common Stock have been issued in excess of the previously
authorized 15,000,00060,000,000 shares increasing the number of shares of Common Stockstock
presently outstanding to 64,932,492 which is the amount now outstanding. This proposalIt
should be noted that filings with the State of New York prior to December 7,
1998 merely indicate an authorized capitalization of 15,000,000 shares of $.01
par value Common Stock. In July, 1988 the shareholders of Kenilworth approved an
amendment to Kenilworth's certificate of incorporation authorizing 60,000,000
shares of $.01 par value Common Stock.
For purposes of this Proxy Statement, it is beingassumed that the amendment
increasing the authorized capitalization to 100,000,000 shares on December 7,
1998 was not filed in conformity with New York State Law because there was no
shareholders meeting to approve the amendment and it was not submitted in
advance of a shareholders meeting in conformity with Regulation 14C of the
Federal Securities Law which requires an information or proxy statement to be
submitted to the shareholders prior to the shareholders meeting. However, New
York State did accept the amendment to the certificate of incorporation which
increased the capitalization to 100,000,000 shares. In Section 203 of the
Business Corporation Law of the State of New York, it is stated that no act of a
corporation, otherwise lawful, shall be invalid because the corporation was
without capacity or power to do such act. As a result, management believes that
the 4,932,492 shares issued in excess of the previously authorized 60,000,000
shares should be deemed validly
issued and outstanding with the same rights as any other shares
outstanding.
As a result of the foregoing, management believes that the votes of the
4,932,492 shares in excess of the 60,000,000 should be included and all of
the outstanding 64,932,492 shares should be counted for quorum purposes and
voting purposes of all proposals but this Proposal 3. Therefore 32,466,247
shares will be required to obtain a quorum and to approve Proposals 4 and 5
where a majority vote of the outstanding shares is required. A mojority vote
of all of the 64,932,492 shares present will be required for the approval of
Proposals 1, 2 and 6. Regarding Proposal 3, the vote will not count the
4,932,492 excess shares and approval of this Proposal will require the
approval of 30,000,001 of the remaining shares.
Management also relies upon dicta in RUNCIE v. CORN EXCHANGE BANK TRUST CO.,
6 N.Y.S.2d 616, 622 (1938) that the act of issuing shares in excess of
60,000,000 was an ulta vires act which can be ratified by the shareholders of
Kenilworth soat the meeting. If this proposal is not ratified, then the shares
issued in excess of 60,000,000 might be deemed not validly issued, if an
action is successfully pursued against Kenilworth. Then the recipients of
such shares may be able to commence action against Kenilworth and/or its
directors for damages and shareholders of Kenilworth may seek action against
the Company and its directors for such damages that the shareholders of the
Company have sustained, if any, by reason of the issuance of the excess
shares.
As of February 10, 1991 477,352 shares in excess of 60,000,000 had been issued
pursuant to private placements by Kenilworth prior to December 31, 1990. The
precise details of the issuance of these shares more than 10 years ago is not
available to Kenilworth at this time. During fiscal 2000, 1,699,456 shares were
issued for services valued at $26,624 and 944, 028 shares were issued for
conversion of debt in the amount of $120,667. During fiscal 1999, 477,666 shares
were issued for conversion of debt valued at $15,194, 734,000 shares were issued
for services valued at $7,340 and 200,000 shares were issued for no credited
consideration. During 1998, 400,000 shares were issued for $6,000. Reference is
made to the Statement of Stockholders Equity (Deficit) for the years ended
December 31, 2000, 1999 and 1998 contained in the Form 10-K for December 31,
2000 for the accounting treatment of the excess shares issued during such
periods. The shares issued for services include 1,200,000 shares issued to two
accounting firms for consulting services rendered in connection with the
Company's bankruptcy, 734,000 shares to attorneys for legal services rendered in
connection with the Company's bankruptcy, 100,000 shares to an attorney for
patent services 100,000 shares issued for consulting services and 100,000 shares
issued as a finders fee. A total of 1,421,694 shares were issued for conversion
of debt valued at $135,861 which includes 937,778 shares issued to one party who
loaned $100,000 and 381,750 shares to two parties who loaned $22,500.
Upon best information, less than 25 persons were involved in the foregoing and
none of the recipients of these shares were prior shareholders. None of the
acquirers of the shares in excess of 60,000,000 included any officer or director
of Kenilworth. To the best of Kenilworth's knowledge, the recipients of shares
issued in excess of 60,000,000 were not prior shareholders of Kenilworth. When
purchasers are aggregated for family relationships only approximately 15 persons
acquired shares. All shares issued in excess of 60,000,000 were legended and
acquired pursuant to Regulation D and/or a Section 4(2) exemption under the
Securities Act of 1933 as amended. There was no public offering of such
securities.
Kenilworth believes that since less than 10% of the outstanding securities were
issued in excess of the 60,000,000 previously authorized, the issuance of these
shares is not material to the total number now outstanding and because the total
equity of Kenilworth as of both December 31, 2000 and December 31, 1999 were
each less than $20,000. Further, the shares were all issued for valid corporate
purposes which provided monetary benefit to Kenilworth and under the belief that
the shares were properly authorized. The failure to approve the issuance of such
shares at this meeting by the shareholders could be disruptive to Kenilworth and
not in its best interests. Accordingly, management recommends that the issuance
of the 4,932,502 shares in excess of 60,000,000 be authorized and that there is properly authorized andbe
ratified at the meetingfiling of the shareholders the above Certificatecertificate of Amendment to Kenilworth's Certificate of
Incorporation which wasamendment filed on December 7, 1998 and of all shares issued since
such filing. The purpose1998.
Ratification by the stockholders is expected to eliminate any of the
foregoing Certificate of Amendment was the same
as described in Proposal 4 below.uncertainties that might otherwise exist.
RECOMMENDATION AND REQUIRED VOTE
The affirmative vote by a majority of the issued and outstanding shares of
Common Stock is required to adopt this amendment at a meeting of the
shareholders. However, for the purposes of this Proposal the excess 4,932,492
shares will not be included and a majority of the remaining 60,000,000 shares
will be required to approve this Proposal. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR THE RATIFICATION AND ADOPTION OF THE FOREGOING CERTIFICATE OF AMENDMENT.THIS PROPOSAL.
PROPOSAL 4
AUTHORIZATION OF AN AMENDMENT TO KENILWORTH'S
CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK TO
200,000,000
Subject to the approval of Proposal 3 above and prior to the approval of
Proposal 5 below Kenilworth has outstanding 100,000,000 shares of Common
Stock $.01 par value all of which are of one class. The Board of Directors,
by the unanimous approval of its existing directors, proposes an amendment to
the Certificate of Incorporation to increase the authorized capitalization
from 100,000,000 shares of Common Stock $.01 par value to 200,000,000 shares
of Common Stock $.01 par value. The purpose of this proposal is to eliminate
possible future delays associated with our need for a shareholder approval,
in the event the Board of Directors authorizes acquisitions (none of which
are presently contemplated), stock dividends or stock split-ups in the form
of a stock dividend or the issuance of additional shares, stock options, or
other valid corporate purposes.purposes including the issuance of shares to raise
further capital. At the present time and subject to the approval of Proposal
3, we have only 35,067,50835,067,498 authorized shares which are unissued. Upon
approval of this proposal Kenilworth will have 200,000,000 shares authorized
butand 135,067,498 unissued, of which 10,000,000 will be reserved for stock
options that may be issued subject to the approval of the Performance and
Equity Incentive Plan described in Proposal 2 above. It is not the intention
of our Board of Directors, in proposing to increase our capitalization, to
dilute any shareholder's stock ownership in Kenilworth, without a proper purpose
considered to be in the best interests of the shareholders such as to meet
Kenilworth's needs for additional financing and to procure necessary working
capital, or to frustrate any shareholder's ability to gain control of
Kenilworth.
Our charter and by-laws and New York State law does not provide for cumulative
voting. Shareholders do not have preemptive rights. If approved,
1514
Article FOURTH of the Certificate of Incorporation of Kenilworth will read as
follows:
"The total number of shares that may be issued by the Company
is 200,000,000, all of which are to be of one class and are to
be $.01 par value."
We have no knowledge of any existing or proposed merger, tender offer,
solicitation in opposition to management or similar transactions. We do not
believe that Kenilworth's charter and by-laws contains any provisions having an
anti-takeover effect. It should, however, be noted that the proposal to increase
Kenilworth's capitalization could be used to dilute a shareholder's stock
ownership in Kenilworth or to frustrate his ability to gain control of
Kenilworth in the future should the additional stock be issued to parties
friendly to incumbent management. This might be deemed an advantage to incumbent
management and a disadvantage to our shareholders in the future because of its
effect in possibly discouraging an unfriendly tender offer or other solicitation
in opposition to management.
If the proposal, set forth in Proposal 5 to authorize Preferred Stock is
approved at the Meeting, Article FOURTH of the Certificate of Incorporation will
be replaced by the text set forth in Proposal 5 below.
RECOMMENDATION AND REQUIRED VOTE
The affirmative vote by a majority of the issued and outstanding shares of
Common Stock is required to adopt this Amendment. The Board of Directors is
of the opinion that the proposed Amendment, if adopted, will provide usour
Company with a proper capitalization and a sufficient number of shares of
Common Stock to give us flexibility to meet future financing needs deemed to
be in Kenilworth's best interest. Reference is made to the discussion in
Proposal 3 regarding the inclusion of 4,932,492 shares in the total number of
shares outstanding for quorum and voting purposes. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT TO KENILWORTH'S CERTIFICATE
OF INCORPORATION.
PROPOSAL 5
AUTHORIZATION OF AN AMENDMENT TO KENILWORTH'S
CERTIFICATE OF INCORPORATION TO AUTHORIZE
PREFERRED STOCK
Our Certificate of Incorporation presently provides that we are authorized to
issue only one class of stock, being the Common Stock. The Board of Directors of
Kenilworth is seeking shareholder approval for an amendment to our Certificate
of Incorporation to authorize an additional class of stock consisting of
2,000,000 shares of Preferred Stock par value $.01 per share.
EFFECT OF AMENDMENT
The proposed amendment will give our Board of Directors the express authority,
without further action of our stockholders, to issue shares of Preferred Stock
from time to time in one or more series and to fix before issuance with respect
to each series: (a) the designation and the number of
1615
shares to constitute each series, (b) the liquidation rights, if any, (c) the
dividend rights and rates, if any, (d) the rights and terms of redemption, if
any, (e) whether the shares will be subject to the operation of a sinking or
retirement fund, if any, (f) whether the shares are to be convertible to
exchangeable into other securities of Kenilworth, and the rates thereof, if any,
(g) any limitation on the payment of dividends on the Common Stock while any
such series is outstanding, if any, (h) the voting power, if any, in addition to
the voting rights provided by law, of the shares, which voting powers may be
general or special, and (i) such other provisions as shall not be inconsistent
with the certificate of incorporation. All the shares of any one series of the
Preferred Stock shall be identical in all respects.
It is likely that the holders of any series of Preferred Stock, when and if
issued, will have priority claims to dividends and to any distribution upon
liquidations of Kenilworth, and may have other preferences over the Common
Stock, including a preferential right to elect directors in the event preferred
dividends, if any, are not paid for a specified period.
Although we currently have no reason to believe that a takeover attempt is
likely to occur, the authorization of a class of Preferred Stock may provide
Kenilworth with a means of discouraging any such attempt, since the holders of
Preferred Stock could be given the power to approve any corporate reorganization
or business combination. Such stock could be privately placed directly by
Kenilworth with persons sympathetic to present management and such private
placement would tend to entrench current management. In addition, the voting
strength of persons seeking to obtain control of Kenilworth could be diluted by
the issuance of shares of Preferred Stock, if the two classes were to vote
together.
The purpose of the proposed amendment is to give us the flexibility to issue
shares of Preferred Stock for financing or acquisition purposes without the
delay of having to obtain stockholder approval at the time of any proposed
issuance. At present Kenilworth has no agreements or understandings to issue any
of the shares of Preferred Stock which would be authorized by the proposed
amendment. Once the shares of Preferred Stock have been authorized, they would
be subject to issuance, except in the case of certain acquisitions.
THE PROPOSED AMENDMENT
If the foregoing proposal is approved at the Meeting, it is proposed that
Article FOURTH of the Certificate of Incorporation, as set forth in Proposal 4
of this Proxy Statement, be revised and amended to read in pertinent part in
substantially the following form:
The Company is authorized to issue two classes of stock to be
designated respectively "Common Stock" and "Preferred Stock."
The total number of shares of stock which the Company shall
have authority to issue is 202,000,000. The total number of
shares of Common stock which the Company shall have authority
to issue is Two Hundred Million (200,000,000), $.01 par value
per share.
1716
The total number of shares of Preferred Stock which the Company
shall have the authority to issue is TenTwo Million (20,000,000)(2,000,000),
$.01 par value per share. The shares of Preferred Stock may be
issued from time to time in one or more series. The Board of
Directors of the Company is authorized to determine or alter
any or all of the designations, powers, preferences and rights
and the qualifications, limitations or restrictions thereof,
in respect of the wholly unissued class of Preferred Stock or
any wholly unissued series of Preferred Stock, and to fix or
alter the number of shares comprising any series of Preferred
Stock (but not below the number of shares of any such series
then outstanding).
The executive officers of Kenilworth shall be authorized to effectuate such
technical modifications to the foregoing in order to cause the filing of the
Amendment by the department of State of the State of New York.
It should be noted that preferred shares might be issued with provisions that
fluctuate with the market price of Kenilworth's common stock or provide a
discount relative to the market price. This would be adverse to the interests
of existing shareholders by being dilutive and could diminish the voting
strength of existing shareholders. There are no present plans to issue any
preferred shares.
RECOMMENDATION AND REQUIRED VOTE
The adoption of the amendment of the Certificate of Incorporation to
authorize a class of Preferred Stock requires the affirmative vote of a
majority of the issued and outstanding shares of Common Stock. The BoardReference is
made to the discussion in Proposal 3 regarding the inclusion of 4,932,492
shares in the total number of shares outstanding for quorum and voting
purposes. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
AMENDMENT OF KENILWORTH'S CERTIFICATE OF INCORPORATION.
PROPOSAL 6
RATIFY APPOINTMENT OF INDEPENDENT AUDITORS
The affirmative vote of the holders of a majority of the shares of Common Stock
represented at the Annual Meeting will be required for approval of the auditors.
In accordance with New York State law, abstentions are not counted in
determining the votes cast in connection with the selection of auditors. If such
approval is not obtained, selection of independent auditors will be reconsidered
by the Board of Directors.
Representatives of Peter C. Cosmas Co. are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do
so, and shall be available to respond to appropriate questions.
AUDIT FEES
For fiscal 2000, Peter C. Cosmas Co. billed $10,000 as their fees for
professional services to audit Kenilworth financial statements and to review
its Form 10-Q's.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES AND ALL OTHER FEES
There were no other fees billed for services by Peter C. Cosmas Co. to
Kenilworth during fiscal 2000.
RECOMMENDATION AND REQUIRED VOTE
The adoption of this proposal requires the affirmative vote of the holders of
a majority of the outstanding Common Stock of Kenilworth present at the
meeting in person or by proxy. Reference is made to the discussion in
Proposal 3 regarding the inclusion of 4,932,492 shares in the total number of
shares outstanding for quorum and voting purposes. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF PETER C.
COSMAS CO. AS ITS INDEPENDENT AUDITORS.
PROCEDURE FOR SUBMISSION OF 20012002 STOCKHOLDER PROPOSALS
Proposals by stockholders for inclusion in the 20012002 annual meeting proxy
statement must be received by Kenilworth Systems Corporation at 54 Kenilworth
Road, Mineola, New York 11501, Attention: Betty Sue Svandrlik, Secretary,
prior to January 20,March 10, 2002. All such proposals are subject to the applicable
rules and requirements of the Securities and Exchange Commission. Failure to
submit a proposal by the aforesaid date will result in the exclusion of any
such proposal, and such proposal will not be considered or voted on at the
annual meeting.
17
OTHER MATTERS
18
So far as our Board of Directors is aware, only the aforementioned matters will
be acted upon at the meeting. If any other matters properly come before the
meeting, it is intended that the accompanying proxy may be voted for such other
matters in accordance with the best judgment of the person or persons voting the
proxy.
By order of the Board of Directors.
Dated: May 7,June 28, 2001
HERBERT LINDO
President
1918
AnnexAPPENDIX A
CHARTER
The following has been adopted as a charter by Kenilworth, but Keneilworth
does not yet have an audit committee because of the lack of Independent
Directors at this time. See the discussion under Proposal 1 referring to the
difficulty of Kenilworth in interesting prospective Independent Directors.
Responsibilities
The Audit Committee of the Board of Directors (the "Audit Committee") shall have
the responsibility to assist the Board of Directors in fulfilling its fiduciary
and other obligations with respect to accounting and financial matters.
Specifically, and without limiting the generality of the foregoing, the Audit
Committee shall:
1 Review the adequacy and effectiveness of the Company's system
of internal financial controls and accounting practices to
achieve reliability and integrity in the Company's financial
statements, and initiate such examinations of such controls
and practices as the Audit Committee deems advisable.
2 Review the qualification, performance and independence of the
Company's independent auditors and recommend independent
auditors for appointment annually by the Board of Directors.
3 Prior to the commencement of the Company's annual external
audit, review with the Company's independent auditors the
scope of their audit function and estimated audit fees.
4 Subsequent to the completion of the Company's annual external
audit, review the report and recommendations of the
independent auditors with the independent auditors and the
Company's management.
5 Review the annual and quarterly consolidated financial
statements of the company and other financial disclosures of
the Company and the accounting principles being applied in
such statements and disclosures.
6 Review the authority and duties of the Company's chief
financial officer and chief accounting officer and the
performance by each of them of their respective duties.
7 Review the insurance programs fo the Company including
professional malpractice, general liability, director and
officer liability and property insurance, and the insurers
carrying the Company's insurance.
8 Oversee the establishment and thereafter periodically review a
corporate code of conduct and the Company's policies on
ethical business practices.
A-1
9 Prior to public release, review with management and the
independent accountants, the financial results for the prior
year including the Company's annual report on Form 10-K.
10 Review the committee's charter annually and revise as
appropriate.
11 Meet with the chief financial officer and the independent
accountants, in separate executive sessions, to discuss any
matters that the committee or these groups believe should be
considered privately.
12 Take such other actions concerning the Company's accounting
and financial functions as the Committee deems appropriate
with respect to the matters described above.
Meeting Frequency
The Audit Committee will meet as necessary. Generally, meetings will be held
immediately prior to each regular meeting of the Board of Directors, or as
called by the Chief Executive Officer, the Chairman of the Audit Committee or
any two members of the Audit Committee.
Governance
The Audit Committee will maintain complete records of its proceedings. At least
fifty percent (50%) of the members of the Audit Committee shall be necessary to
constitute a quorum for the conduct of business. The affirmative vote of a
majority of a quorum will be necessary to approve any action. As permitted by
applicable law, the Audit Committee may hold meetings by conference call. The
Audit Committee may approve actions by written consent if all of the members of
the Audit Committee execute the consent. The Chairman of the Audit Committee
will be appointed by the Board of Directors. Notice of meetings of the Audit
Committee will be in accordance with the notice provision of the bylaws with
respect to meetings of the Board of Directors of Kenilworth.
Membership
1 The Audit Committee will be comprised of at least three independent
directors.
2 Only independent directors may serve as members of the Committee.
A-2
APPENDIX B
KENILWORTH SYSTEMS CORPORATION
PERFORMANCE AND EQUITY INCENTIVE PLAN
ARTICLE 1
NAME AND PURPOSE
1.1 Name The name of this Plan is the "Kenilworth Systems Corporation
Performance and Equity Incentive Plan".
1.2 Purpose The purpose of the Plan is to enhance the profitability and value
of the Company for the benefit of its shareholders by providing equity
ownership opportunities and performance based incentives to attract and
retain the services of key employees, directors and non-employee
consultants of the Company and its Subsidiaries and to motivate such
individuals to put forth maximum efforts on behalf of the Company.
ARTICLE II
DEFINITION OF TERMS AND RULES OF CONSTRUCTION
2.1 General Definitions The following words and phrases when used in the Plan,
unless otherwise specifically defined or unless the context clearly
otherwise requires, shall have the following respective meanings:
(a) "Board" means the Board of Directors of the Company.
(b) "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 10.2 and 10.3, respectively.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(d) "Commission" means the Securities and Exchange Commission or any
successor agency.
(e) "Committee" means the Committee referred to in Section 4.1, or the
Board.
(f) "Company" means Kenilworth Systems Corporation, a corporation
organized under the laws of the State of New York, or any successor
corporation.
(g) "Disability" means permanent and total disability as determined
under procedures established by the Committee
A-1B-1
for purposes of the Plan.
(h) "Early Retirement" means retirement, with the consent, for purposes
of the Plan, of the Committee or such officer of the Company as may
be designated from time to time by the Committee, from active
employment with the Company or a Subsidiary prior to Normal
Retirement.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
(j) "Fair Market Value" means the closing price of a share of Stock, as
of any given date, on any Exchange or in the over-the-counter market
on such date (or, if there is no reported sale on such date, on the
last preceding date on which any reported sale occurred), or if no
such reported sales prices are available, the fair market value of
the Stock as established by a good faith determination of the
Committee.
(k) "Holder" means an Optionee or a Transferee, as defined in this
Section 2.1 (p) and (y), respectively and shall include any person
to whom a Stock Option has been transferred by will or the laws of
descent and distribution.
(l) "Incentive Stock Option" means any Stock option intended to qualify
as an "incentive stock option" within the meaning of Section 422 of
the Code.
(m) "Long Term Performance Award" or "Long Term Award" means an award
under Article IX.
(n) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(o) "Normal Retirement" means retirement from active employment with the
Company or a Subsidiary at or after the retirement age determined by
the Board.
(p) "Optionee" means a person who is granted a Stock Option under
Article VI.
(q) "Plan" means the Kenilworth Systems Corporation Performance and
Equity Incentive Plan, as set forth herein and as hereinafter
amended from time to time.
(r) "Restricted Stock" means an award under Article VIII.
(s) "Retirement" means Normal or Early Retirement.
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(t) "Rule 16b-3" means Rule 16b-3 as promulgated by the Commission under
Section 16(b) of the Exchange Act as amended from time to time.
(u) "Stock" means the Common Stock, $.01 par value, of the Company.
(v) "Stock Appreciation Right" means a right granted under Article VII.
(w) "Stock Option" or "Option" means an option granted under Article VI.
(x) "Subsidiary" means any business entity in which the Company,
directly or indirectly, owns 50 percent or more of the total
combined voting power of all classes of stock or other equity
interest.
(y) "Transferee" means a member of an Optionee's Immediate Family, a
partnership or a trust to whom or which any Option is transferred as
provided in Section 6.5(c).
2.2 Other DefinitionsOTHER DEFINITIONS. In addition to the above definitions, certain words and
phrases used in the Plan and any agreement may be defined in other
portions of the Plan or in such agreement.
2.3 Conflicts in PlanCONFLICTS IN PLAN. In the case of any conflict in the terms of the Plan,
or between the Plan and an agreement, relating to a benefit, the
provisions in the Article of the Plan which specifically grants such
benefit shall control.
ARTICLE III
STOCK SUBJECT TO PLAN
3.1 Number of SharesNUMBER OF SHARES. The number of shares of Stock reserved for distribution
pursuant to Stock Options or other awards under the Plan shall be equal to
10,000,000 shares. Such shares may consist, in whole or in part, of
authorized and unissued shares or issued shares heretofore or hereafter
acquired and held as treasury shares.
3.2 ReusageREUSAGE. If an outstanding Stock Option or Stock Appreciation Right shall
expire or terminate without having been exercised in full, or if any
Restricted Stock award or Long Term Performance Award is not earned or is
forfeited in whole or in part, the shares subject to the unexercised or
forfeited portion of such award shall again be available for distribution
in connection with awards under the Plan. In the event that a Stock Option
is exercised by tendering shares to
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the Company as full or partial payment of the option exercise price, only
the number of shares issued net of the shares tendered shall be deemed
delivered under the Plan. Further, shares tendered or withheld for the
payment of taxes in connection with any award shall again be available for
distribution in connection with awards under the Plan.
3.3 AdjustmentsADJUSTMENTS. In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split (including reverse stock
splits), or other change in corporate structure affecting the Stock such
substitution or adjustments shall be made in the aggregate number of
shares reserved for issuance under the Plan, in the number and option
price of shares subject to outstanding Stock Options, in the determination
of the amount payable upon exercise of outstanding Stock Appreciation
Rights and in the number of shares subject to other outstanding awards
granted under the Plan as may be determined by the Committee, in its sole
discretion, to be equitable to prevent substantial dilution or enlargement
of the rights granted to participants hereunder, provided, however, that
the number of shares subject to any award will always be a whole number.
The Committee shall give notice to each participant of any adjustment made
pursuant to this paragraph, and upon such notice, such adjustment shall be
effective and binding for all purposes of the Plan.
3.4 Settlement of AwardsSETTLEMENT OF AWARDS. Shares issued under the Plan as the result of the
settlement or assumption of, or substitution of awards under the Plan for,
any awards or obligations to grant future awards of any entity acquired by
or merging with the Company shall not reduce the number of shares
available for delivery under the Plan.
3.5 Maximum Number of Shares for Incentive Stock Options and AwardsMAXIMUM NUMBER OF SHARES FOR INCENTIVE STOCK OPTIONS AND AWARDS. The
maximum number of shares available for delivery under the Plan through
Incentive Stock Options shall be 5,000,000 shares.
ARTICLE IV
ADMINISTRATION
4.1 CommitteeCOMMITTEE. The Plan shall be administered by the Committee composed of two
or more members who are who are non-employee directors as defined under
Rule 16b-3 or the Board. With respect to grants to non-employee directors,
the grants shall be subject to Board approval.
4.2 Authorization of CommitteeAUTHORIZATION OF COMMITTEE. Except as limited by the express provisions of
the Plan, the Committee shall have the sole and complete authority:
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(a) to select the employees, employee and non-employee directors, and
non-employee consultants to whom Stock Options, Stock, Appreciation
Rights, Restricted Stock and Long Term Performance Awards may from
time to time be granted;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Long Term Performance Awards, or any combination thereof are
to be granted, hereunder, provided that Incentive Stock Options may
only be granted to employees.
(c) to determine the number of shares to be covered by each award
granted hereunder;
(d) to determine the terms and conditions of any award granted hereunder
(including, but not limited to, the share price, any restriction or
limitation, any vesting acceleration or any forfeiture waiver
regarding any Stock Option or other award and the shares of Stock
relating thereto), based on such factors as the Committee shall
determine; provided, however, that the Committee shall not after
awards in a manner that results in variable accounting for awards
for financial statement purposes that were not initially granted
which were subject to fixed accounting without approval by the
Board;
(e) to adjust the performance goal and measurements applicable to
performance-based awards pursuant to the terms of the Plan; and
(f) to determine to what extent and under what circumstances Stock and
other amounts payable with respect to an award shall be deferred;
4.3 Administrative RulesADMINISTRATIVE RULES. The Committee shall have the authority to adopt,
alter, and repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable, to
interpret the terms and provisions of the Plan and any award issued under
the Plan (and any agreement relating thereto), and otherwise to supervise
the administration of the Plan. The Committee may act only by a majority
of its members then in office, except that the members thereof may
authorize any one or more of their number or any officer of the Company to
execute and deliver documents on behalf of the Committee. Any
determination made by the Committee pursuant to the provisions of the Plan
with respect to any award shall be made in its sole discretion at the time
of the grant of the award or,
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unless in contravention of any express term of the Plan, at any time
thereafter. Whenever the Committee has the power, or right under this Plan
to adjust, alter, amend, award, consent, deem advisable, deem appropriate,
deem desirable, deem necessary, determined, determine conditions,
determine criteria, determine factors, determine terms, elect, exercise
authority, exercise discretion, grant, interpret, make a decision,
provide, set, specify, supervise, use criteria, use factors or any similar
power or right, the Committee shall have the sole, absolute and
uncontrolled discretion in doing so. The Committee's determinations under
the Plan (including, without limitation, of the persons to receive grants
or awards and the terms thereof) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, grants
or awards under the Plan, whether or not such persons are similarly
situated.
ARTICLE V
ELIGIBILITY
5.1 EligibilityELIGIBILITY. All employees, employee and non-employee directors, and
non-employee consultants to the Company and its Subsidiaries who in the
opinion of the Committee are responsible for, or contribute to, the
management, growth, and profitability of the business of the Company or
its Subsidiaries are eligible to be granted awards under the Plan, as
hereinafter provided.
ARTICLE VI
STOCK OPTIONS
6.1 GrantsGRANTS. Stock Options may be granted alone or in addition to other awards
granted under the Plan and may be of two types: Incentive Stock Options
and Non-Qualified Stock Options. Any Stock Option granted under the Plan
shall be in such form as the Committee may from time to time approve. The
Committee shall have the authority to grant any Optionee Incentive Stock
Options, Non-Qualified Stock Options, or both types of Stock Options (in
each case with or without Stock Appreciation Rights); provided, however,
that the Committee shall not have the authority to grant Incentive Stock
Options to any non-employee consultant or non-employee director. For this
purposes of this Agreement, an employee means an individual who is treated
as an employee by the Company for Federal employment tax purposes without
regard to such individual's classification under the common law
definition. To the extent that any Stock Option does not qualify as an
Incentive Stock Option, it shall constitute a separate Non-Qualified Stock
Option.
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6.2 Option AgreementsOPTION AGREEMENTS. Stock Options shall be evidenced by option agreements,
the terms and provisions of which may differ. An option agreement shall
indicate on its face whether it is an agreement for Incentive Stock
Options or Non-Qualified Stock Options. The grant of a Stock Option shall
occur on the date the Committee by resolution selects an employee as a
participant in any grant of Stock Options, determines the number of Stock
Options to be granted to such employee, and specifies the terms and
provisions of the option agreement; provided, however, that the Committee
may designate in such resolution a later date as the date of grant of any
or all of the Stock Options covered thereby. The Company shall notify a
participant of any grant of Stock Options, and a written option agreement
or agreement shall be duly executed between the Company and the
participant.
6.3 No DisqualificationsNO DISQUALIFICATIONS. Under Section 422 of the Code Anything in the Plan
to the contrary notwithstanding, no term of the Plan relating to Incentive
Stock Options shall be interpreted, amended, or altered nor shall any
discretion or authority granted under the Plan be exercised so as to
disqualify the Plan under Section 422 of the Code or, without the consent
of the Optionee affected, to disqualify any Incentive Stock Option under
such Section 422.
6.4 Terms and Conditions of Option GrantsTERMS AND CONDITIONS OF OPTION GRANTS. Options granted under the Plan
shall be subject to the following terms and conditions and shall contain
such additional terms and conditions as the Committee shall deem
desirable:
(a) Option Price. The option price per share of Stock purchasable under
an Incentive Stock Option shall be equal to the Fair Market Value of
the Stock on the date of grant or such higher price as shall be
determined by the Committee at grant. The option price per share of
Stock for all other Options shall be as determined by the Committee.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more
than 10 years after the date of grant of the Option, and no
Non-Qualified Stock Option shall be exercisable more than 10 years
and one month after the date of grant of the Option.
(c) Transferability of Options.
(i) No Stock Option shall be transferable by the Optionee other
than by will, by the laws of descent and distribution or in
accordance with the provisions of Section 6.4(c) (ii).
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(ii) Subject to applicable securities laws, the Committee may
determine that a Non-Qualified Stock Option may be transferred
by the Optionee to one or more members of the Optionee's
Immediate Family, as defined in Section 6.4(c) (iii), to a
partnership of which the only partners are members of the
Optionee's Immediate Family, or to a trust established by the
Optionee for the benefit of one or more members of the
Optionee's Immediate Family. No Transferee to whom or which a
Non-Qualified Stock Option is transferred may further transfer
such Stock Option. A Non-Qualified Stock Option transferred
pursuant to this Section shall remain subject to the
provisions of the Plan, including, but not limited to, the
provisions of this Section 6 relating to the exercise of the
Stock Option upon the death, Disability, Retirement or other
termination of employment of the Optionee, and shall be
subject to such other rules as the Committee shall determine.
(iii) For purposes of this Article VI, "Immediate Family" of the
Optionee means the Optionee's spouse, parents, children and
grandchildren.
(d) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be
determined by the Committee. If the Committee provides that any
Stock Option is exercisable only in installments, the Committee may
at any time waive such installment exercise provisions, in whole or
in part based on such factors as the Committee may determine.
(e) Notwithstanding the foregoing, Incentive Stock Options shall not be
granted to any owner of 10% or more of the combined voting power of
the Company, unless the exercise price is at least 110% of the Fair
Market Value on the date of grant and the option states that it is
not exercisable after the expiration of five years from the date of
grant.
(f) The aggregate fair market value (determined on the date the option
is granted) of shares subject to an Incentive Stock Option granted
to an Optionee in any calendar year shall not exceed $100,000.
(g) Termination by Death. Subject to Section 6.4(d), if an Optionee's
employment or service on the Board terminates by reason of death,
any Stock Option held by such Optionee or any Transferee of such
Optionee may
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thereafter be exercised, to the extent then exercisable or on such
accelerated basis as the Committee may determine, for a period of
two years from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter;
provided, however, that if the expiration of the stated term of any
such Stock Option is less than one year following the death of the
Optionee, the Stock Option shall be exercisable for a period of one
year from the date of such death.
(h) Termination by Reason of Disability. Subject to Section 6.4(d), if
an Optionee's employment or service on the Board terminates by
reason of Disability, any Stock Option held by such Optionee or any
Transferee of such Optionee may thereafter be exercised by the
Holder, to the extent it was exercisable at the time of termination
or on such accelerated basis as the Committee may determine, for a
period of two years from the date of such termination of employment
or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that, if the
Holder dies while any such Stock Option remains exercisable, any
unexercised Stock Option held by such Holder at death shall continue
to be exercisable to the extent to which it was exercisable at the
time of the Holder's death for a period of 12 months from the date
of such death. In the event of termination of employment by reason
of Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of
Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(i) Termination by Reason of Retirement. Subject to Section 6.4(d), if
an Optionee's employment or service on the Board terminates by
reason of Retirement, any Stock Option held by such Optionee or any
Transferee of such Optionee may thereafter be exercised by the
Holder, to the extent it was exercisable at the time of Retirement
or on such accelerated basis as the Committee may determine, for a
period of three years from the date of such termination of
employment or until the expiration of the stated term of such Stock
Option, whichever period is the shorter; provided, however that, if
the Holder dies within such three-year period, any unexercised Stock
Option held by such Holder shall, notwithstanding the expiration of
such three-year period, continue to be exercisable to the extent to
which it was exercisable at the time of death for a period of 12
months from the date of such death. In the event of termination of
employment
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by reason of Retirement, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes
of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(j) Other Termination. Subject to Section 6.4(d), if an Optionee's
employment terminates for any reason other than death, Disability,
Retirement, or Cause (as hereinafter defined in Section 10.1(v)),
any Stock Option held by such Optionee or any Transferee of such
Optionee may thereafter be exercised by the Holder, to the extent it
was exercisable at the time of termination, for a period of three
months from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period
is the shorter; provided, however, that if the Holder dies within
such three-month period, any unexercised Stock Options held by such
Holder shall, notwithstanding the expiration of such three-month
period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of 12 months from the
date of such death. If an Optionee's employment is terminated for
Cause (as determined pursuant to section 10.1 (a) (v)), all rights
under any Stock Option held by such Optionee or any Transferee of
such Optionee shall expire immediately upon the giving to the
Optionee of notice of such termination, unless otherwise determined
by the Committee. Notwithstanding anything to the contrary contained
in this plan, non-qualified options, at the determination of the
Committee, may be exercised after an Optionee's employment
terminates.
(k) Method of Exercise. Stock Options shall be exercisable (i) during
the Holder's lifetime, only by the Holder or by the guardian or
legal representative of the Holder, and (ii) following the death of
the Holder, only by the person to whom they are transferred by will
or the laws of descent and distribution. For purposes of this
Section 6.4(k) only, the term "Holder" shall include any person to
whom a Stock Option is transferred by will or the laws of descent
and distribution. Subject to the provisions of this Article VI,
Stock Options may be exercised, in whole or in part, at any time
during the option term by giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price in
cash (including check, bank draft, money order, or such other
instrument as the Company may accept) . Unless otherwise determined
by the Committee at any time or from time to time, payment in full
or in part
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may also be made (i) by delivering a duly executed notice of
exercise together with irrevocable instructions from the Holder to a
broker to deliver promptly to the Company sufficient proceeds from a
sale or loan of the shares subject to the Stock Option to pay the
purchase price, or (ii) in the form of Stock which is not Restricted
Stock already owned by the Holder or, in the case of the exercise of
a Non-Qualified Stock Option, Restricted Stock subject to an award
hereunder (based, in each case, on the Fair Market Value of the
Stock on the date the Stock Option is exercised) . If payment of the
option exercise price of a Non-Qualified Stock Option is made in
whole or in part in the form of Restricted Stock, such Restricted
Stock (and any replacement shares relating thereto) shall remain
restricted in accordance with the original terms of the Restricted
Stock award in question, and any additional Stock received upon the
exercise shall be subject to the same forfeiture restrictions,
unless otherwise determined by the Committee.
Notwithstanding the foregoing, no shares of Stock shall be issued until
full payment therefor has been made. Subject to any forfeiture restrictions that
may apply if a Stock Option is exercised using Restricted Stock, a Holder shall
have all of the rights of a stockholder of the Company, including the right to
vote the shares and the right to receive dividends, with respect to shares
subject to the Stock Option when the Holder has given written notice of
exercise, has paid in full for such shares, and, if requested, has given the
representation described in Section 14.1.
Shares issued upon exercise of a Stock Option shall be issued in the name
of the Holder or, at the request of the Holder, in the names of such Holder and
the Holder's spouse with right of survivorship as community property, community
property with right of survivorship or joint tenants.
(l) Cashing Out of Options. In any case when a Stock Option is exercised
after the death of a Holder, the Committee may elect to cash out all
or any part of the Stock Option by paying the person to whom the
Stock Option has been transferred by reason of the death of the
Holder an amount, in cash or shares of Stock, equal in value to the
excess of the Fair Market Value of the Stock over the option price
on the effective date of such cash out.
(m) Substitute Options. Stock Options or Stock Appreciation Rights may
be granted under the Plan from time to time in substitution for
stock options or stock appreciation rights held by employees of any
corporation who, as the result of a merger, consolidation, or
combination of such
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other corporation with, or the acquisition of all or substantially
all of the assets or stock of such other corporation by, the Company
or a Subsidiary, become employees of the Company or a Subsidiary.
The terms and conditions of any substitute Stock Options or Stock
Appreciation Rights so granted may vary from the terms and
conditions set forth in the Plan to such extent as the Committee at
the time of grant may deem appropriate to conform, in whole or in
part, to the provisions of the stock options or stock appreciation
rights in substitution for which they are granted; provided,
however, that in the event a stock option for which a substitute
Stock Option is being granted is an incentive stock option, no such
variation shall be permitted the effect of which would be to
adversely affect the status of any such substitute Stock Options as
an Incentive Stock Option.
(n) Deferral of Option Gains. An Optionee may elect to defer to a future
date receipt of the shares of Stock to be acquired upon exercise of
a Stock Option. Such election shall be made by delivering to the
Company not later than six months prior to the exercise of the Stock
Option a written notice of the election specifying the future date
(the "Deferral Date") for receipt of the shares. At any time, and
from time to time, prior to the delivery to the Optionee of shares
the receipt of which has been deferred as provided in this section,
the Optionee may designate by written notice to the Company a new
date, which date shall be later than the Deferral Date, and such new
date shall thereafter be the Deferral Date with respect to such
shares.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1 (a) Grant of Stock Appreciation RightGRANT OF STOCK APPRECIATION RIGHT. A Stock Appreciation Right may be
granted in conjunction with all or part of any Stock Option granted
under the Plan. In the case of a Non-Qualified Stock Option, such
Right may be granted only at the time of grant of such Stock Option.
A Stock Appreciation Right independent of a Stock Option grant may
also be awarded by the Committee, in which event the provisions of
this Article VII shall be applied for purposes of determining the
operation of such Stock Appreciation Right as if a Non-Qualified
Stock Option had been granted on the date of the grant of and in
conjunction with such independent Stock Appreciation Right.
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(b) A Stock Appreciation right granted with respect to a given Stock
Option shall terminate and no longer be exercisable to the extent of
the shares with respect to which the related Stock Option is
exercised or terminates. A Stock Appreciation Right may be exercised
by a Holder in accordance with the provisions of this Article VII by
surrendering the applicable portion of the related Stock Option in
accordance with procedures established by the Committee. Upon such
exercise and surrender, the Holder shall be entitled to receive an
amount determined in the manner prescribed in Section 7.2. The Stock
Option which has been so surrendered shall no longer be exercisable
to the extent the related Stock Appreciation Right has been
exercised.
(c) Stock Appreciation Rights shall be subject to such terms and
conditions as shall be determined by the Committee, including, but
not limited to, the following:
(i) Exercisability. A Stock Appreciation Right shall be
exercisable only at such time or times and to the extent that
the Stock Option to which it relates is exercisable in
accordance with the provisions of Article VI and this Article
VII; provided, however, that a Stock Appreciation Right shall
not be exercisable during the first six months of its term by
an Optionee who is actually or potentially subject to Section
16(b) of the Exchange Act, unless otherwise determined by the
Committee in the event of death or Disability of the Optionee
prior to the expiration of the six-month period.
7.2 Payment Upon Exercise.PAYMENT UPON EXERCISE. Upon the exercise of a Stock Appreciation Right, a
Holder shall be entitled to receive an amount in cash, shares of Stock, or
both equal in value to the excess of the Fair Market Value on the date of
exercise of one share of Stock over the option exercise prior per share
specified in the related Stock Option multiplied by the number of shares
in respect of which the Stock Appreciation Right shall have been
exercised. The Committee shall have the right to determine the form of
payment in each case.
In the case of a Stock Appreciation Right held by an Optionee who is
actually or potentially subject to Section 16 of the Exchange Act, the
Committee may require that such Stock Appreciation Right be exercised only
in accordance with the applicable provisions of Rule 16b-3.
7.3 Non-transferability.NON-TRANSFERABILITY. A Stock Appreciation Right shall be transferable only
when and to the extent that the related
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Stock Option would be transferable under Section 6.4(c).
7.4 Effect of Change in Control.EFFECT OF CHANGE IN CONTROL. The Committee may provide, at the time of
grant, that a Stock Appreciation Right can be exercised only in the event
of a Change in Control, subject to such terms and conditions as the
Committee may specify at grant. The Committee may also provide that, in
the event of a Change in Control, the amount to be paid upon the exercise
of a Stock Appreciation Right shall be based on the Change in Control
price, subject to such terms and conditions as the Committee may specify
at grant.
ARTICLE VIII
RESTRICTED STOCK
8.1 Administration.ADMINISTRATION. Shares of Restricted Stock may be issued either alone or
in addition to other awards granted under the Plan. The Committee shall
determine the officers, employee and non-employee directors and
non-employee consultants to whom and the time or times at which grants of
Restricted Stock will be made, the number of shares to be awarded the time
or times within which such awards may be subject to forfeiture, and any
other terms and conditions of the awards, in addition to those contained
in Section 8.3. The Committee may condition the grant of Restricted Stock
upon the attainment of specified performance goals or such other factors
or criteria as the Committee shall determine. The provisions of Restricted
Stock awards need not be the same with respect to each recipient.
8.2 Awards and Certificates.AWARDS AND CERTIFICATES. Each participant receiving a Restricted Stock
award shall be issued a certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the name of such
participant and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially in
the following form or such other form as authorized by the Committee:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) of the Kenilworth Systems Corporation
Performance and Equity Incentive Plan and a Restricted Stock
Agreement. Copies of such Plan and Agreement are on file at the
offices of Kenilworth Systems Corporation, 54 Kenilworth Road,
Mineola, New York 11501."
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The Committee may require that the certificates evidencing such shares be
held in custody by the Company until the restrictions thereon shall have
lapsed and that, as a condition of any Restricted Stock award, the
participant shall have delivered a stock power, endorsed in blank,
relating to the Stock covered by such award.
8.3 Terms and Conditions.TERMS AND CONDITIONS. Shares of Restricted Stock shall be subject to the
following terms and conditions:
(i) Subject to the provisions of the Plan and the Restricted Stock
Agreement referred to in Section 8.3(vi), during such period
commencing with the date of such award as shall be set by the
Committee (the "Restriction Period"), the participant shall
not be permitted to sell, assign, transfer, pledge, or
otherwise encumber shares of Restricted Stock. Within these
limits, the Committee may provide for the lapse of such
restrictions in installments and may accelerate or waive such
restrictions, in whole or in part, based on service,
performance, and such other facts or criteria as the Committee
may determine.
(ii) Except as provided in Section 8.3(i), the participant shall
have, with respect to the shares of Restricted Stock, all of
the rights of a stockholder of the Company, including the
right to vote the shares and the right to receive any cash
dividends thereon; provided, however, that the Committee may
provide at the time of an award that cash dividends shall be
automatically deferred and reinvested in additional Restricted
Stock. Dividends on Restricted Stock which are payable in
Stock shall be paid in the form of additional shares of
Restricted Stock.
(iii) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement and Sections 8.3(i) and (iv), upon
termination of a participant's employment for any reason
during the Restriction Period, all shares still subject to
restriction shall be forfeited by the participant.
(iv) In the event of the death of a participant during the
Restriction Period without a prior forfeiture of the
Restricted Stock subject to such Restriction Period,
unlegended certificates for such shares shall be delivered to
the participant, except as otherwise may be necessary with
respect to any applicable securities laws.
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(v) If and when the Restriction period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction
Period, unlegended certificates for such shares shall be
delivered to the participant, except as otherwise may be
necessary with respect to any applicable securities laws.
(vi) Each award shall be confirmed by, and be subject to the terms
of, a Restricted Stock Agreement which shall be executed by
the Company and the recipient of the Restricted Stock.
ARTICLE IX
LONG TERM PERFORMANCE AWARDS
9.1 Awards and Administration.AWARDS AND ADMINISTRATION. Long Term Performance awards may be awarded
either alone or in addition to other awards granted under the Plan. The
Committee shall determine the nature, length, and starting date of the
performance period (the "Performance Period") for each Long Term
Performance Award, which shall be at least two years (subject to Article
X), and shall determine the performance objectives to be used in valuing
Long Term Performance awards and determining the extent to which such Long
Term Performance Awards have been earned. The maximum award for any
individual with respect to any one year of any Performance Period shall be
200,000 shares of Stock. Performance objectives may vary from participant
to participant and between groups of participants and shall be based upon
one or more of the following Company, Subsidiary, business unit, or
individual performance factors or criteria (on a pre- or post-tax basis
and on an aggregate or per share basis) as the Committee may deem
appropriate; earnings, sales, Stock price, return on equity, assets or
capital, economic value added, cash flow, total shareholder return, costs,
margins, market share, any combination of the foregoing. Performance
Periods may overlap and participants may participate simultaneously with
respect to Long Term performance Awards that are subject to different
Performance Periods and different performance factors and criteria. Long
Term Performance Awards shall be confirmed by, and be subject to the terms
of, a Long Term Performance Award Agreement. The terms of such awards need
not be the same with respect to each participant.
(a) Adjustment of Awards. The Committee may adjust the performance goals
and measurements applicable to Long Term Performance Awards to take
into account changes in law and accounting and tax rules and to make
such adjustments as the Committee deems necessary or appropriate to
reflect the inclusion or exclusion of the
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impact of extraordinary or unusual items, events, or circumstances
in order to avoid windfalls or hardships.
(b) Termination of Employment. Subject to Article X and unless otherwise
provided in the applicable Long Term Performance Award Agreement, if
a participant terminates employment during a Performance Period
because of death, Disability, or Retirement, such participant shall
be entitled to a payment with respect to each outstanding Long Term
Performance Award at the end of the applicable Performance Period;
(i) based, to the extent relevant under the terms of the award,
upon the participant's performance of the portion of such
Performance Period ending on the date of termination and the
performance of the Company or any applicable business unit for
the entire Performance Period, and
(ii) prorated for the portion of the Performance Period during
which the participant was employed by the Company or a
Subsidiary, all as determined by the Committee. The Committee
may provide for an earlier payment in settlement of such award
in such amount and under such terms and conditions as the
Committee deems appropriate. Subject to Article X and except
as otherwise provided in the applicable Long Term Performance
Award Agreement, if a participant terminates employment during
a Performance Period for any other reason, then such
participant shall not be entitled to any payment with respect
to the Long Term Performance Awards subject to such
Performance Period, unless the Committee shall otherwise
determine.
(c) Form of Payment. The earned portion of a Long Term Performance Award
may be paid currently or on a deferred basis and may provide for
such interest or earnings equivalent as the Committee may determine.
Payment shall be made in the form of cash or whole shares of Stock,
including Restricted Stock, or a combination thereof, either in a
lump sum payment or in annual installments, all as the Committee
shall determine.
ARTICLE X
CHANGE IN CONTROL PROVISIONS
10.1 Impact of Event.IMPACT OF EVENT. In the event of:
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(a) a "Change in Control" as defined in Section 10.2, but only if and to
the extent so determined by the Committee, the following
acceleration and valuation provisions shall apply:
(i) Stock Options and Stock Appreciation Rights outstanding as of
the date such Change in Control is determined to have occurred
and not then exercisable and vested shall become fully
exercisable and vested as provided in Section 10.1(a)(v)
below, unless the terms of the award provide otherwise;
provided, however, that, in the case of Stock Appreciation
rights held by an Optionee who is actually subject to Section
16(b) of the Exchange Act, such Stock Appreciation Rights
shall not become exercisable and vested unless they shall have
been outstanding for at least six months at the date such
Change in Control is determined to have occurred.
(ii) The restrictions and forfeiture provisions applicable to any
restricted Stock shall lapse, and such Restricted Stock shall
become fully vested, unless the terms of the award provide
otherwise.
(iii) The value of all outstanding Stock Options, Stock Appreciation
Rights, and Restricted Stock shall, unless otherwise
determined by the Committee at or after grant, if cashed out
shall be on the basis of the "Change in Control Price", as
defined in Section 10.3, as of the date such change in Control
is determined to have occurred or such other date as the
Committee may determine prior to the Change in Control.
(iv) Any outstanding Long Term Performance Awards shall, unless the
Committee otherwise determines, be vested and paid out based
on the prorated target results for the Performance Periods in
question, unless the Committee provides prior to the Change in
Control event for a different payment.
(v) Each Option, Stock Appreciation Right, Long Term Performance
Award or restricted stock award granted to an employee of the
Company shall vest or be exercisable upon termination of the
employee's employment within twenty-four (24) months from the
date of the Change in Control, unless the employee is
terminated for Cause or the employee resigns his employment
without Good Reason. Except for death or disability, in which
event the Option, Stock
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Appreciation Right, Long Term Performance Award or restricted
stock award must be exercised within twelve (12) months
thereafter, the Employee shall have 30 days from after his
employment is terminated, after a Change in Control, to
exercise all unexercised Options, Stock Appreciation Rights,
Long Term Performance Awards, or restricted stock awards.
"Cause" is defined herein as the failure of the employee to
properly perform his duties on behalf of the Company, as
reasonably determined by the Committee in its sole discretion
or as provided in the Agreement making the grant. "Good
Reason" shall be the assignment to the Employee of duties
inconsistent with his or her duties prior to the Change in
Control, or any other action (but not a change in title) that
results in a diminution of the Employee's duties or
responsibilities, other than an isolated, insubstantial or
inadvertent action which is remedied by the Company. In the
event that the employee is offered a position after a Change
in Control that has a salary and bonus level at least equal to
that in effect prior to the Change in Control, it shall be
presumed that the employee did not have Good Reason.
10.2 Definition of "Change in Control"DEFINITION OF "CHANGE IN CONTROL". For purposes of Section 10.1(a), a
"Change in Control" means a change in control of the Company of a nature
that would be required to be reported in response to Item 1(a) of the
Current Report on Form 8-K, as in effect on the effective date of the
Plan, pursuant to Section 13 or 15(d) of the Exchange Act; provided that,
without limitation, such a "Change in Control" shall be deemed to have
occurred if:
(a) A third person, including a "group" as such term is used in Section
13(d)(3) of the Exchange Act, other than the trustee of a Company
employee benefit plan, becomes the beneficial owner, directly or
indirectly of 20 percent or more of the combined voting power of the
company's outstanding voting securities ordinarily having the right
to vote for the election of the Board;
(b) During any period of 24 consecutive months individuals who, at the
beginning of such consecutive 24-month period, constitute the Board
of Directors of the Company (the "Board" generally and as of the
effective date of the Plan the "Incumbent Board") cease for any
reason (other than Retirement upon reaching Normal Retirement age,
Disability, or death) to constitute at least a majority of the
Board; provided that any person becoming a director subsequent to
the effective date of the Plan
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whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least three-quarters of
the Directors comprising the Incumbent Board (other than an election
or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating
to the election of the Directors of the Company, as such terms are
used in Rule 14a-ll of Regulation 14A promulgated under the Exchange
Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or
(i) The Company shall cease to be a publicly owned corporation.
10.3 Change in Control Price.CHANGE IN CONTROL PRICE. For purposes of this Section 10, "Change in
Control Price" means the highest price per share paid or offered in any
bona fide transaction related to an actual Change in Control of the
Company at any time during the preceding 60-day period as determined by
the Committee, except that, in the case of Incentive Stock Options and
Stock Appreciation Rights relating to Incentive Stock Options, such price
shall be based only on transactions reported for the date on which the
Committee decides to cash out such Stock Options.
ARTICLE XI
RELOAD OPTIONS
11.1 Authorization of Reload OptionsAUTHORIZATION OF RELOAD OPTIONS. Concurrently with an award of Stock
Options, the Committee may authorize reload options ("Reload Options") to
purchase a number of shares of Stock. The number of Reload Options shall
equal to the extent authorized by the committee:
(a) the number of shares of Stock used to exercise the underlying Stock
Options and
(b) the number of shares of Stock used to satisfy any tax withholding
requirement incident to the exercise of the underlying Stock
Options.
The grant of a Reload Option will become effective upon the exercise of
underlying Stock Options through the use of shares of Stock held by the
Optionee for at least six months. Notwithstanding the fact that the
underlying option may be an Incentive Stock Option, a Reload Option is not
intended to qualify as an Incentive Stock Option.
11.2 Reload Option AmendmentRELOAD OPTION AMENDMENT. Each option agreement shall state
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whether the Committee has authorized Reload Options with respect to the
underlying Stock Options. Upon the exercise of an underlying Stock Option,
the Reload Option will be evidenced by an amendment to the underlying
stock option agreement.
11.3 Reload Option Price The option price per share of Stock deliverable upon
the exercise of a Reload Option shall be the Fair Market Value of a share
of Stock on the date the grant of the Reload Option becomes effective.
11.4 Term and Exercise Each Reload Option is fully exercisable six months from
the effective date of grant. The term of each Reload Option shall be equal
to the remaining option term of the underlying Stock Option.
11.5 Termination of Employment No additional Reload Options shall be granted to
Optionees when Stock Options are exercised pursuant to the terms of this
Plan following termination of the Optionee's employment.
ARTICLE XII
AMENDMENTS
12.1 Amendments to PlanAMENDMENTS TO PLAN. The Board may amend, suspend, or discontinue the Plan
or any portion thereof at any time, but no amendment, suspension, or
discontinuation shall be made which would impair the rights of a Holder
under a Stock Option or a recipient of a Stock Appreciation Right,
restricted stock award, or Long Term Performance Award theretofore granted
without the Holder's or recipient's consent or which without the approval
of the Company's stockholders, would:
(a) except as expressly Provided in the Plan, increase the total number
of shares reserved for the purpose of the Plan;
(b) decrease the option price of any Stock Option to less than the Fair
Market Value on the date of grant;
(c) change the class of employees eligible to participate in the Plan;
or
(d) extend the maximum option periods under Section 6.4.
12.2 Amendments to Stock Options or AmountsAMENDMENTS TO STOCK OPTIONS OR AMOUNTS. The Committee may amend the terms
of any Stock Option or other award theretofore
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granted, prospectively or retroactively, but no such amendment shall
impair the right of any holder without the holder's consent. Subject to
the above provisions, the Board shall have authority to amend the Plan to
take into account changes in law and tax and accounting rules, as well as
other developments.
ARTICLE XIII
UNFUNDED STATUS OF PLAN
13.1 It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Stock or make payments; provided, however, that,
unless the Committee otherwise determines, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
ARTICLE XIV
GENERAL PROVISIONS
14.1 CertificatesCERTIFICATES. All certificates for shares of Stock or other securities
delivered under the Plan shall be subject to such transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Commission, any stock exchange
upon which the Stock is then listed, and any applicable Federal or state
securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such
restrictions. The Committee may require any Optionee purchasing shares
pursuant to a Stock Option to represent to and agree with the Company in
writing that the Optionee is acquiring the shares without a view to the
distribution thereof.
14.2 Compensation ArrangementsCOMPENSATION ARRANGEMENTS. Nothing contained in this Plan shall prevent
the Company or a Subsidiary from adoption of other or additional
compensation arrangements for its employees.
14.3 No Rights to Continued EmploymentNO RIGHTS TO CONTINUED EMPLOYMENT. Neither the adoption of the Plan nor
the granting of any Stock Option, Stock Appreciation Right, Restricted
Stock or Long Term Award shall confer upon any employee any right to
continued employment or constitute an agreement or understanding that
the Company will retain a
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director or consultant for any period of time or at any particular rate of
compensation, nor shall the same interfere in any way with the right of
the Company or a Subsidiary to terminate the employment of any employee or
the service of any director or consultant at any time.
14.4 Withholding and EmploymentWITHHOLDING AND EMPLOYMENT. Taxes No later than the date on which the
Company is required to withhold federal or state income taxes or
employment taxes in respect of an award, the participant shall pay to the
Company, or make arrangements satisfactory to the Company regarding the
payment of, any Federal, state, local, or other taxes of any kind required
by law to be withheld with respect to such award or any payment or
distribution made in connection therewith. Unless otherwise determined by
the Committee, withholding or employment tax obligations may be settled
with Stock, including Stock that is part of the award that gives rise to
the withholding or employment tax requirements; provided, however, that in
the case of any Optionee who is actually subject to Section 16(b) of the
Exchange Act, any such settlement shall comply with the applicable
requirements of Rule 16(b)-3. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements, and the Company
and its Subsidiaries shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment otherwise due to the
participant.
14.5 Reinvestment of DividendsREINVESTMENT OF DIVIDENDS. The reinvestment of dividends in additional
Restricted Stock at the time of any dividend payment shall be permissible
only if sufficient shares of Stock are available under Article III for
such reinvestment (taking into account then outstanding Stock Options and
other Plan awards)
14.6 Beneficiaries DesignationBENEFICIARIES DESIGNATION. The Committee shall establish such procedures
as it deems appropriate for a participant to designate a beneficiary to
whom any amounts payable with respect to outstanding awards under the
Plan in the event of the participant's death are to be paid.
14.7 Loan ProgramLOAN PROGRAM. The Board may institute a loan program to assist one or more
participants in financing the exercise of outstanding options through
full-recourse interest bearing promissory notes. However, the maximum
amount of financing provided any optionee may not exceed the cash
consideration payable for the issued shares plus all applicable taxes
incurred in connection with the acquisition of the shares.
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14.8 Governing LawGOVERNING LAW. The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
State of New York.
14.9 RuleRULE 16b-3 RequirementREQUIREMENT. Notwithstanding anything in this Plan to the
contrary, if the Committee determines that the Plan or grant or award
cannot satisfy the requirements of Rule 16b-3, then it shall have the
authority to waive or modify those provisions of the Plan or grant or
award so as to enable compliance with Rule 16b-3.
ARTICLE XV
EFFECTIVE DATE OF PLAN; SHAREHOLDER APPROVAL
15.1 The Plan shall be effective as of December 18, 2000, subject however to
the approval of the Plan by the holders of at least a majority of the
outstanding shares of Stock of the Company present or represented and
entitled to vote at a meeting of shareholders of the Company. Awards may
be made under the Plan on and after its effective date; provided, however,
that any such awards shall be null and void if shareholder approval of the
Plan is not obtained within 12 months of the adoption of the Plan by the
Board.
ARTICLE XVI
TERM OF PLAN
16.1 No Stock Option, Stock Appreciation Right, restricted stock award, or Long
Term Performance award shall be granted on or after the tenth anniversary
of the effective date of the Plan, but awards granted prior to such tenth
anniversary (including, without limitation, Long Term Performance Awards
for Performance Periods commencing prior to such tenth anniversary) may
extend beyond that date.
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KENILWORTH SYSTEMS CORPORATION
54 Kenilworth Road
Mineola, New York 11501
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
JuneAugust 13, 2001
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints HERBERT LINDO and BETTY SUE SVANDRILIK and
each or either of them (with power of substitution) as proxies for the
undersigned, to vote all shares of Common Stock of record on May 7,June 21, 2001,
of KENILWORTH SYSTEMS CORPORATION which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders to be held
on June 7,August 13, 2001, at 10:00 A.M. local time, or at any adjournment thereof,
upon the matters set forth in the Notice of Annual Meeting of Stockholders
and Proxy Statement for said Meeting, copies of which have been received by
the undersigned, and, in their discretion, upon all other matters which may
properly come before said meeting. Without otherwise limiting the generality
of the foregoing said proxies are directed to vote as follows:
NO. 1: ELECTION OF DIRECTORS
To serve for the term continuing through the next Annual Meeting and
the qualification of their respective successors.
Herbert Lindo, Joyce Clark and Kit Wong
[ ] FOR all nominees listed above (except as withheld in the
space below.)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
(Instruction: To withhold authority to vote for any individual nominee
write that nominee's name in the space provided below.)
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NO. 2: PROPOSAL TO RATIFY THE ADOPTION OF THE PERFORMANCE AND EQUITY
INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NO. 3: PROPOSAL TO AUTHORIZE THE RATIFICATION OF THE CERTIFICATE OF
AMENDMENT TO KENILWORTH'S CERTIFICATE OF INCORPORATION FILED
ON
DECEMBER 7, 1998 AND OF ALL SHARES OF COMMON STOCK ISSUED
SINCE SUCH FILING.IN EXCESS OF 60,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NO. 4: PROPOSAL TO AUTHORIZE AN AMENDMENT TO KENILWORTH'S CERTIFICATE
OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES
OF COMMON STOCK TO 200,000,000
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NO. 5: PROPOSAL TO AUTHORIZE AN AMENDMENT TO KENILWORTH'S CERTIFICATE
OF INCORPORATION TO AUTHORIZE 10,000,000 SHARES2,000,000 OF PREFERRED STOCK
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NO. 6: PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED.
IF NO CONTRARY DIRECTION IS GIVEN ABOVE, AND THIS PROXY IS PROPERLY SIGNED, THE
SHARES WILL BE VOTED FOR THE PROPOSALS LISTED ABOVE.
Your proxy is important to assure a quorum at the meeting whether or not you
plan to attend in person. You may revoke this proxy at any time, and the giving
of it will not affect your right to attend the meeting and vote in person.
Dated _________________________, 2001
---------------------------------------
Signature
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Signature, if held jointly
---------------------------------------
Number of Shares as of _________,June 21, 2001
This proxy must be signed exactly as name appears. When shares are held by joint
tenants, both must sign. When signing as attorney or as trustee, executor or
guardian, please give full title as such. If a corporation, please sign the full
corporate name by the president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.