<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the commission only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
YORK RESEARCH CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11
1. Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5. Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1. Amount previously paid:
-----------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
3. Filing Party:
-----------------------------------------------------------------------
4. Date Filed:
-----------------------------------------------------------------------
<PAGE>
YORK RESEARCH CORPORATION
280 PARK AVENUE
SUITE 2700 WEST
NEW YORK, NEW YORK 10017
(212) 557-6200
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 21, 1999
The Annual Meeting of the Stockholders of York Research Corporation (a
Delaware corporation) will be held at The St. Regis Hotel, 2 East 55(th) Street,
New York, New York, on Wednesday, July 21, 1999 at 9:15 A.M., for the following
purposes:
1. to elect two Class B directors;
2. to ratify the adoption of the York Research Corporation 1999 Incentive
Stock Option Plan;
3. to ratify the appointment of Grant Thornton LLP as the independent
certified public accountants for the fiscal year ending February 28,
2000;
and to transact such other business as may properly come before the meeting or
adjournments thereof.
The Board of Directors has fixed the close of business on June 14, 1999 as
the time as of which stockholders of record of York Research Corporation who are
entitled to notice of and to vote at such meeting shall be determined.
By Order of the Board of Directors
/s/ MICHAEL TRACHTENBERG
- -------------------------------------------
Michael Trachtenberg
Michael Trachtenberg, Secretary
280 Park Avenue
New York, New York 10017
June 16, 1999
YOUR VOTE IS IMPORTANT
- WE ENCOURAGE YOU TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN YOUR PROXY
CARD IN THE ENCLOSED ENVELOPE, REGARDLESS OF WHETHER YOU PLAN TO ATTEND
THE MEETING.
- AS SET FORTH HEREIN, YOU MAY VOTE BY MAIL, BY PHONE, VIA THE INTERNET OR
IN PERSON.
<PAGE>
YORK RESEARCH CORPORATION
280 PARK AVENUE
SUITE 2700 WEST
NEW YORK, NEW YORK 10017
(212) 557-6200
PROXY STATEMENT FOR
1999 ANNUAL MEETING OF STOCKHOLDERS
The enclosed proxy is solicited by the Board of Directors (the "Board") of
York Research Corporation, a Delaware corporation (the "Company") for voting at
the 1999 Annual Meeting of Stockholders of the Company (the "Meeting"). The
Meeting will be held on Wednesday, July 21, 1999 at 9:15 A.M., at The St. Regis
Hotel, 2 East 55(th) Street, New York, New York, for the following purposes: (i)
to elect two Class B directors (Item 1); (ii) to ratify the adoption of the
Company's 1999 Incentive Stock Option Plan (Item 2); and (iii) to ratify the
selection of Grant Thornton LLP by the Board as independent certified public
accountants for the Company for the fiscal year ending February 28, 2000 (Item
3). As of June 16, 1999, the approximate date on which this Proxy Statement and
the accompanying proxy card will first be mailed to stockholders, the Board had
no knowledge of any other business to be presented to the Meeting, but if any
other business is properly brought before the Meeting, the persons named in the
enclosed form of proxy will vote according to their discretion.
The Company's Annual Report for its fiscal year ended February 28, 1999 is
enclosed herewith. Such report is not to be treated as part of these proxy
soliciting materials.
Stockholders of record at the close of business on June 14, 1999 (the
"Record Date") are entitled to notice of and to vote at the Meeting or any
adjournment thereof.
VOTING BY MAIL, ELECTRONICALLY OR BY TELEPHONE
Please complete, sign, date and return the accompanying Proxy Card promptly
in the enclosed addressed envelope, even if you plan to attend the Annual
Meeting. Postage need not be affixed to the envelope if mailed in the United
States.
Instead of submitting your proxy vote with the paper Proxy Card, you may be
able to vote electronically via the Internet or by telephone. See "Voting Via
the Internet or By Telephone" in the Proxy Statement for further details.
1
<PAGE>
NUMBER OF SHARES OUTSTANDING AND VOTING RIGHTS
The Company presently has authorized 50,000,000 shares of Common Stock, par
value $.01 per share ("Common Stock"), of which 14,914,045 shares were issued
and outstanding as of May 26, 1999. The Company also has authorized 10,000,000
shares of Class A Common Stock, par value $.01 per share ("Class A Stock"), and
6,000,000 shares of Preferred Stock, par value $.01 per share ("Preferred
Stock"). No shares of Class A Stock or of Preferred Stock were issued and
outstanding on the Record Date.
The holders of shares of Common Stock on the Record Date are entitled to one
vote per share on all matters. A quorum for the Meeting is a majority of the
shares of Common Stock outstanding on the Record Date. Approval by the holders
of a majority of the shares of Common Stock present in person or by proxy and
voting at the Meeting, provided a quorum is present, is required (i) for the
election of two Class B directors (Item 1); (ii) to ratify the adoption of the
Company's 1999 Incentive Stock Option Plan (Item 2); and (iii) to ratify the
selection of Grant Thornton LLP by the Board as independent certified public
accountants for the Company for the fiscal year ending February 28, 2000 (Item
3).
PROXIES
The proxy solicited by this Proxy Statement may be revoked by the
stockholder giving such proxy at any time before the proxy is exercised, and the
giving of such proxy will not affect the right of any stockholder to vote in
person should he or she find it convenient to attend the Meeting. The shares
represented by all properly executed proxies received in time for the Meeting
will be voted in accordance with the directions given. Regarding the election of
the two Class B directors (Item 1), stockholders may vote in favor of the
nominees or abstain. With respect to the ratification of the adoption of the
Company's 1999 Incentive Stock Option Plan (Item 2) and the ratification of the
appointment of Grant Thornton LLP as independent certified public accountants
(Item 3), stockholders may vote in favor of the proposal, against the proposal
or may abstain from voting. With respect to Items 1, 2 and 3, if the stockholder
abstains from voting, the shares are considered present at the meeting for such
item but, since they are not affirmative votes for the item, they will have the
same effect as votes against the item. With respect to broker non-votes on Items
1, 2 and 3, the shares are not considered present at the meeting for such items
and they are therefore not counted in respect of such items. Such broker
non-votes do have the practical effect of reducing the number of affirmative
votes required to achieve a majority for such item by reducing the total number
of shares from which the majority is calculated.
VOTING VIA THE INTERNET OR BY TELEPHONE
<TABLE>
<CAPTION>
BY TELEPHONE BY INTERNET
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Please call toll-free 1-800-PROXIES and follow the Please access the web page at www.voteproxy.com and
instructions. Have your control number and the proxy follow the on-screen instructions. Have your control
card available when you call. number available when you access the web page.
http://www.voteproxy.com/
</TABLE>
- ------------------------
- General Information for All Shares Voted Via the Internet or By Telephone.
Votes submitted via the Internet or by telephone must be received by 12:00
midnight, Eastern Standard Time, on July 20, 1999. Submitting your proxy
via the Internet or by telephone will not affect your right to vote in
person should you decide to attend the Annual Meeting.
The telephone and Internet voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their voting
instructions and to confirm that stockholders' instructions
2
<PAGE>
have been recorded properly. Stockholders voting via the Internet should
understand that there may be costs associated with electronic access, such as
usage charges from Internet access providers and telephone companies, that must
be borne by the stockholder.
ITEM 1.
ELECTION OF DIRECTORS
The Company's Board of Directors is classified into three classes of
directors: Class A, Class B and Class C. The directors in one class are elected
at each Annual Meeting of Stockholders to hold office for a three-year term and
until successors of such class are elected and have qualified. Two directors in
Class B are being nominated for election at the Meeting.
THE FOLLOWING PERSONS HAVE BEEN NOMINATED FOR ELECTION AS DIRECTORS OF THE
COMPANY IN THE CLASS INDICATED. EACH NOMINEE HAS CONSENTED TO HIS NOMINATION AND
HAS AGREED TO SERVE IF ELECTED. IF, HOWEVER, EITHER NOMINEE SHOULD NOT BE
AVAILABLE FOR ELECTION, THE PERSONS NAMED AS PROXIES MAY VOTE FOR OTHER PERSONS
IN THEIR DISCRETION. MANAGEMENT HAS NO REASON TO BELIEVE THAT EITHER NOMINEE
WILL BE UNAVAILABLE FOR ELECTION. THE COMPANY DOES NOT HAVE A NOMINATING
COMMITTEE.
A brief statement setting forth the age (at the Record Date), the principal
occupation during the past five years, the year in which first elected as a
director and other information concerning the nominees and the remaining
directors whose terms of office will continue beyond the Meeting, appears below:
MR. HOWARD F. SOMMER (Class B), 59, was elected to fill a vacancy on the
Board of Directors in September, 1997. In September 1995, Mr. Sommer was elected
the President and Chief Executive Officer of New York Community Investment
Company L.L.C., an equity fund created and funded by eleven major banks in New
York City. Beginning in 1973, as President of U.S. Capital Corporation and
Fundex Capital Corporation, he managed finance and investment company activities
that provided over $100 million in funding to small businesses. Prior to that
time, Mr. Sommer served in a management capacity for IBM and Xerox Corporation.
MR. HARVEY W. SCHULTZ (Class B), 58, was elected to the Board of Directors
in November, 1998. He currently is President of AMREP Solutions, Inc. From 1970
through 1990, Mr. Schultz held various positions with the City of New York,
including as director of the Economic Development Section of the New York City
Department of City Planning, the Director of the Brooklyn Office of City
Planning, the Director of Land Use Planning & Environmental Management for the
New York City Planning Department, Executive Assistant to the Brooklyn borough
President, and the Commissioner of the New York City Department of Environmental
Protection.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR THE NOMINEES NAMED ABOVE
THE TERM OF OFFICE OF THE FOLLOWING DIRECTORS WILL CONTINUE BEYOND THE MEETING:
MR. ROBERT M. BENINGSON (Class A), 70, was elected a director of the Company
in October 1981. In February 1982, Mr. Beningson was elected Chairman of the
Board, President and Chief Executive Officer of the Company. Mr. Beningson is
Chief Executive Officer and Chairman of the Board of each of the Company's
subsidiaries. Previously, Mr. Beningson was Chairman of the Board of Directors
of the Company between 1968 and 1979.
JUDGE FREDERIC S. BERMAN (Class A), 71, was elected to the Board of
Directors in December, 1998. Judge Berman served as a New York State Supreme
Court Judge from 1976 through 1997, and since 1998 has served as a Judicial
Hearing Officer supervising jury selections in Manhattan Supreme Court,
3
<PAGE>
Civil Division. He also serves as an arbitrator with the National Association of
Securities Dealers. Judge Berman served as a New York City Criminal Court judge
from 1973 to 1976, and prior to that held numerous government positions,
including New York State Senator and Commissioner of New York City's Department
of Rent and Housing Maintenance.
MR. STANLEY WEINSTEIN (Class C), 73, was elected to fill a vacancy on the
Board of Directors in May, 1995. Until 1991, Mr. Weinstein was a partner at
Deloitte and Touche, certified public accountants, and since such date, has been
an independent consultant, most recently as President of Resources for Corporate
Funding, Inc.
EXECUTIVE OFFICERS
The executive officers of the Company are:
<TABLE>
<CAPTION>
NAME POSITION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Robert M. Beningson Chairman of the Board, President and Chief Executive
Officer
Michael Trachtenberg Executive Vice President, Chief Financial and Accounting
Officer and Secretary
Robert C. Paladino Executive Vice President
Vito L. Elefante Vice President
</TABLE>
See the description under the heading "ELECTION OF DIRECTORS," above, for
background of Robert M. Beningson.
MICHAEL TRACHTENBERG, 50, a Certified Public Accountant, joined the Company
in January 1987 and was elected Vice President, Chief Financial Officer and
Secretary in March 1987 and Executive Vice President in April 1990. From
November 1985, until joining the Company Mr. Trachtenberg was a financial
consultant in private practice. Prior thereto, Mr. Trachtenberg was Vice
President-Finance and Chief Financial Officer of S&S Corrugated Paper Machinery
Co., Inc. From 1980 to 1984, Mr. Trachtenberg held various positions with Carter
Day Industries, Inc., an agricultural equipment manufacturer and energy and
environmental systems company, culminating in his appointments as Vice
President, Treasurer and Chief Financial Officer.
ROBERT C. PALADINO, 48, joined the Company in January 1987 and was elected
Executive Vice President in April 1990. From October 1980 until joining the
Company, Mr. Paladino was Senior Vice President and General Counsel of NPS
Technologies Group, Inc., an engineering and construction company serving the
electric utility industry. From 1974 to 1980, Mr. Paladino held various
positions with the Edison Electric Institute, the national organization for the
investor-owned electric utility industry, culminating in his appointment as
Director of Fossil Fuels and Assistant to the President.
MR. VITO L. ELEFANTE, 49, joined the Company in April 1998 and was then
elected Vice President. Prior to joining York, Mr. Elefante was Vice President
of Edison Mission Energy New York, Inc. and Executive Director of Brooklyn Navy
Yard Cogeneration Partners, L.P. Prior to that, Mr. Elefante worked at Long
Island Lighting Company for twenty years, where he was responsible for
independent power generation, purchasing and fuels.
There are no family relationships between or among any directors or
executive officers of the Company.
4
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD
The Board has three committees--the Compensation Committee, the Incentive
Stock Option Committee and the Audit Committee. The Compensation Committee
reviews the performance of employees of the Company and determines their
compensation. The Incentive Stock Option Committee administers the stock option
plans of the Company. The Audit Committee oversees the accounting, reporting and
audit practices established by management of the Company. Messrs. Weinstein and
Sommer are members of all three Committees. In addition to numerous informal
meetings of the Board of Directors during the year, during the fiscal year ended
February 28, 1999, the Board met six (6) times, the Compensation Committee met
three (3) times, the Incentive Stock Option Committee met one (1) time and the
Audit Committee met one (1) time. Each of the directors attended all of the
meetings of the Board and each Committee on which he sat during such year.
COMPENSATION OF DIRECTORS
Directors receive fees for attending Board or Committee meetings. In both
Fiscal 1999 and Fiscal 1998, Mr. Weinstein received $24,000. Mr. Sommer received
$24,000 in fiscal 1999 and $10,000 in Fiscal 1998. Mr. Schultz received $6,000
and Judge Berman received $4,000 in Fiscal 1999. In addition, in Fiscal 1999 and
1998 the Company granted each of Mr. Weinstein and Mr. Sommer warrants to
purchase 20,000 shares of the Company's common stock at $3.31 and $7.31,
respectively. During Fiscal 1999, the Company granted warrants to purchase
20,000 shares to Mr. Schultz at $3.81 per share, and 20,000 shares to Judge
Berman at $3.56 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The fees for outside Directors are set by the Board, of which Mr. Beningson
is a member.
5
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The members of the Compensation Committee (the "Compensation Committee") for
the fiscal year ended February 28, 1999 were Mr. Weinstein and Mr. Sommer.
The Compensation Committee reports as follows:
The Company's executive compensation is determined by the Compensation
Committee of the Board. The Compensation Committee meets during the year as may
be required.
The Compensation Committee believes that compensation of the Company's key
executives should be sufficient to attract and retain highly qualified and
productive personnel and also to provide meaningful incentives for enhanced
productivity and superior performance. It is the policy of the Company that the
three primary components of the Company's total compensation package (salary,
bonuses and grants of stock options) will be considered in the aggregate in
determining the amount of any one component. The Company seeks to reward
achievement of long and short-term individual performance goals, viewed in the
context of both individual projects and Company performance. However, given the
unique nature of each project (particularly considering the context of the
different legal, regulatory, financial, accounting, tax, political and cultural
systems, issues and structures found in various countries in which the Company
develops projects) and the resulting flexible adaptation required in the duties
and tasks performed by the Company's key executives, the Compensation
Committee's criteria for assessing executive performance in any year is
inherently subjective and not subject to specific enumeration of factors,
relative weighting or formulae calculations. The Compensation Committee did not
specifically use any companies in the energy industry as a basis for comparison
when establishing executive compensation.
During Fiscal 1999, the Company's executive compensation generally included
a base salary, cash bonus and long-term incentive compensation in the form of
stock options awarded under the Company's Stock Option Plan, all dependent on
subjective evaluations of performance as noted above. The cash bonus
compensation of executives is designed to compensate executives for the
Compensation Committee's assessment of superior performance and meritorious and
diligent individual efforts, and such assessments usually relate to individual
and unique projects and, in part, also recognize the individual executive's
level of commitment (demonstrated by subjective factors) to the Company's
long-term success. The long-term incentive option grants are intended to align
the interests of employees and stockholders and thereby to motivate executives
as equity owners to contribute at superior levels in the future and to allow
them to share in increased value developed for stockholders generally.
During Fiscal 1999, the Company entered into a multi-year-year employment
agreement with its Chairman and Chief Executive Officer, the terms of which are
described below under EXECUTIVE COMPENSATION--Employment Agreements.
In determining to enter into this Employment Agreement, the Compensation
Committee subjectively considered Mr. Beningson's significant contribution to
the management of the Company during the year, including the closing of the
innovative Portfolio Bond Financing, the development and construction of the Big
Spring and Trinidad Projects, the growth in the Company's natural gas marketing
business, and the Company's other promising project development activities.
Subsequent to fiscal-year end, the Company adopted, subject to stockholder
ratification, the York Research Corporation 1999 Incentive Stock Option Plan.
This plan will provide the Company with the flexibility to continue to grant
equity-based long term compensation, thereby aligning the interests of the
employees with the stockholders.
Sincerely,
Stanley Weinstein
Howard Sommer
6
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Beningson, the Chairman and Chief Executive Officer of the Company, is
President and a major shareholder of RRR'S Ventures, Ltd. ("RRR'S"), a
corporation in which the Chief Financial Officer of the Company is also a minor
shareholder. RRR'S is a 25% general partner in Warbasse-Cogeneration
Technologies Partners, L.P. ("WTCP"), a limited partner in RV Associates L.P.
("RVA") (which in turn is a minority partner in B-41 Associates, L.P.
("B-41LP")), and a 10% general partner in York Cogen Partners L.P. ("YCP"), a
limited partner in B-41LP. Mr. Beningson is also a 15% shareholder in North
America Energy Conservation, Inc. ("NAEC"), the Company's energy marketing
subsidiary.
In Fiscal 1999, 1998 and 1997, RVA was allocated approximately $547,000,
$568,000 and $322,000, respectively, of the interest income on a note issued by
WCTP to YCP. Also, in Fiscal 1999, 1998 and 1997, RRR'S received from WCTP
$490,600, $529,000 and $480,500, respectively, for general partner and
administrative fees. The Company's Chief Financial Officer received an aggregate
of $85,500, $72,000 and $72,000 in Fiscal 1999, 1998 and 1997, respectively,
from RRR'S and WCTP. In addition, since RRR'S has a 25% interest in WCTP, it has
the potential for substantial future distributions from WCTP after all senior
debt, including the notes payable to affiliates of Company, have been paid in
full.
At February 28, 1999, WCTP was indebted to the Company for approximately
$7,304,986 related to operations and maintenance services and other related
receivables, for approximately $4,343,975 for interest receivable from WCTP and
for professional services paid for on behalf of WCTP, for approximately
$57,331,000 related to the Warbasse Facility.
At February 28, 1998, Mr. Beningson was indebted to the Company for
$5,971,500 (related to the exercise of warrants and purchase of common shares in
prior years) and $0 on February 28, 1999. On May 31, 1998, he paid $275,000 of
this long-term note he owed to the Company. Also on May 31, 1998, an agreement
was reached to facilitate and maximize the Company's Portfolio Bond Financing.
The agreement was between the Company, YCP, and the minority interests in YCP
and B-41LP. Pursuant to this agreement, the minority interests have agreed to
assign and subordinate their interests in various cash flows from the Brooklyn
Navy Yard and Warbasse facilities to the bondholders.
In addition, the minority interests in B-41LP have agreed as of January 1,
1998 to forego completely their 25.3% interest in the royalty to be received
from the Brooklyn Navy Yard facility. This royalty will continue through
December 31, 2001 at a projected total amount of approximately $24 million,
which is approximately $6 million per year. In exchange, the Company transferred
the balance of the note due from the Chairman of $5,696,500 to the minority
interest.
At February 28, 1999, Mr. Trachtenberg is indebted to the Company for
$426,685 related to the exercise of options and certain advances. Mr. Paladino
is indebted to the Company for $380,000 related to the exercise of options and
certain advances. All these amounts are non-interest bearing and are payable on
demand.
The Company recognizes that potential conflicts of interest may arise by
reason of the fact that Mr. Beningson controls RRR'S, YCP and RVA, and is
President and Chief Executive Officer of the Company. Mr. Beningson has advised
the Company that in all transactions between or affecting any affiliated entity
and the Company he will act in the best interests of the stockholders of the
Company, as determined by the Board of Directors of the Company, excluding
himself.
7
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the change in the Company's cumulative total
shareholder return on its common shares with the Center for Research on Stock
Prices (CRSP) Index for NASDAQ Stock Market (U.S. and Foreign) and the CRSP
Index for NASDAQ Stocks (SIC 4900-4999 U.S. and Foreign).
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
LAST TRADING DAY IN FEBRUARY
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1999
----- --------- --------- --------- --------- ---------
York Research Corporation....................................... 100 131.5 139.7 202.7 169.9 98.6
NASDAQ Stock Market (US & Foreign).............................. 100 100.2 139.7 165.8 225.3 287.6
NASDAQ Stocks (SIC 4900-4999 US & Foreign)...................... 100 90.0 120.7 193.6 209.1 176.3
</TABLE>
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the Company's
Chief Executive Officer and the remaining most highly paid executive officers
for the three fiscal years ended February 28, 1999.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AWARDS PAYOUTS
----------- -------------
<CAPTION>
RESTR
OTHER STOCK LTIP OPTIONS/
COMPENSATION AWARDS PAYOUTS SAR'S
NAME YEAR SALARY ($) BONUS($) ($)(1) ($) ($) (#)(2)
- -------------------------------------- --------- ----------- --------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ROBERT M. BENINGSON................... 1999 404,848 0 0 0 0 0
Chairman, President & Chief 1998 400,681 0 0 0 0 0
Executive Officer 1997 400,681 0 0 0 0 0
MICHAEL TRACHTENBERG.................. 1999 231,346 125,000 0 0 0 0
Executive Vice 1998 210,000 0 0 0 0 0
President/Chief Financial and 1997 199,231 100,000 0 0 0 0
Accounting Officer
ROBERT C. PALADINO.................... 1999 226,153 100,000 30,000 0 0 0
Executive Vice President 1998 210,000 0 0 0 0 0
1997 193,846 100,000 0 0 0 0
VITO ELEFANTE(4)...................... 1999 178,461 0 0 0 0 0
Vice President
<CAPTION>
<S> <C>
ALL OTHER
COMPENSATION
NAME ($)(3)
- -------------------------------------- -------------
<S> <C>
ROBERT M. BENINGSON................... 23,211
Chairman, President & Chief 18,568
Executive Officer 18,875
MICHAEL TRACHTENBERG.................. 18,944
Executive Vice 20,044
President/Chief Financial and 23,418
Accounting Officer
ROBERT C. PALADINO.................... 18,944
Executive Vice President 20,044
23,418
VITO ELEFANTE(4)...................... 1,244
Vice President
</TABLE>
- ------------------------
(1) Forgiveness of indebtedness.
(2) The Company does not grant SAR's.
(3) Represents the value of the Company's contribution to the ESOP allocable to
executives' accounts for such year.
(4) Mr. Elefante joined the Company during the fiscal year ended February 28,
1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------------------
% OF TOTAL OPTIONS ALTERNATIVE
OPTIONS GRANTED TO EMPLOYEES EXERCISE GRANT DATE
GRANTED IN FISCAL PRICE EXPIRATION PRESENT
NAME (#) YEAR ($/SHARE) DATE VALUE ($)
- ----------------------------------------- --------- ----------------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
ROBERT M. BENINGSON...................... 625,000 49.2% 3.644 9/13/03 N/A
MICHAEL TRACHTENBERG..................... 50,000 3.9% 3.3125 9/13/08 N/A
ROBERT C. PALADINO....................... 50,000 3.9% 3.3125 9/13/08 N/A
VITO ELEFANTE............................ 50,000 3.9% 3.3125 9/13/08 N/A
</TABLE>
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth information on option exercises in Fiscal
1999 by the named executive officers and the value of such officers unexercised
options at February 28, 1999.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
OPTIONS
AT FISCAL
SHARES UNEXERCISED OPTIONS AT YEAR END
ACQUIRED ON FISCAL YEAR END (#) ($)(1)
EXERCISE VALUE REALIZED ------------------------- -----------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE
- -------------------------------------- ----------------- ------------------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
ROBERT M. BENINGSON................... 0 0 2,150,000 0 998,750
MICHAEL TRACHTENBERG.................. 0 0 245,000 45,000 60,938
ROBERT C. PALADINO.................... 0 0 197,000 45,000 74,688
VITO ELEFANTE......................... 0 0 5,000 45,000 5,938
<CAPTION>
NAME UNEXERCISABLE
- -------------------------------------- -------------
<S> <C>
ROBERT M. BENINGSON................... 0
MICHAEL TRACHTENBERG.................. 53,438
ROBERT C. PALADINO.................... 53,438
VITO ELEFANTE......................... 53,438
</TABLE>
- ------------------------
(1) Value calculated is the difference between closing price on the date of
exercise or fiscal year end, respectively, and the exercise price.
PENSION PLAN TABLE
The following table shows estimated annual retirement benefits payable to
executive officers and employees.
YEARS OF SERVICE(2)
<TABLE>
<CAPTION>
REMUNERATION(1) 10 15 20 25 30 35+
- ------------------------------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
50,000................................................. 3,200 4,125 5,200 6,250 7,500 8,750
100,000................................................ 8,200 11,625 15,200 18,250 21,675 24,175
150,000................................................ 13,200 19,125 25,200 30,750 36,675 40,425
200,000................................................ 18,200 26,625 35,200 43,250 51,675 56,675
250,000................................................ 23,200 34,125 45,200 55,750 66,675 72,925
</TABLE>
- ------------------------
(1) Based on highest five year average and includes annual salary and cash
bonus, if any. Benefits are not subject to deduction for social security.
(2) The years of credited service for individuals listed in the Summary
Compensation Table are 43 for Robert M. Beningson, 12 for Robert C.
Paladino, and 16 for Michael Trachtenberg. Vito Elefante is not yet vested.
IRS regulations limit the amount of compensation credited for Pension Plan
purposes to $160,000 per year, subject to cost of living increases.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on its review of Forms 3, 4 and 5 submitted to it by its Directors and
Executive Officers, the Company is not aware of any non-compliance with the
reporting provisions of Section 16 by its Directors or Executive Officers.
EMPLOYMENT AGREEMENT
In Fiscal 1999, the Company entered into an Employment Agreement with Mr.
Beningson, its Chairman and Chief Executive Officer. This Agreement has a term
of 6 years, and will be terminated upon Mr. Beningson's death, disability or
acts taken by Mr. Beningson constituting a felony under
10
<PAGE>
applicable law. The Agreement may be terminated by Mr. Beningson if he is
assigned duties inconsistent with his position, if Company fails to keep in
effect certain benefit plans or upon a change of control of the Company.
Under this Agreement, Mr. Beningson's base compensation is $425,000 per
year. In addition, Mr. Beningson is to be paid incentive compensation based on
the pre-tax earnings of Company as follows: 1% of pre-tax earnings between $4
million and $6 million, 1.5% of pre-tax earnings between $6 million and $10
million, 2% of pre-tax earnings between $10 million and $15 million, and 3% of
pre-tax earnings in excess of $15 million. In addition, upon Executive's
involuntary termination by the Company or by his death or disability, the
Company will pay Mr. Beningson's base salary for one year, and 50% of his base
salary for an additional 9 years, but in no event after Mr. Beningson has
reached age 80.
STOCK OPTION PLANS
The Company has proposed for ratification the adoption of the Company's 1999
Incentive Stock Option Plan. SEE Item 2 below.
The Company has a 1982 Incentive Stock Option Plan (the "1982 ISO Plan")
which is a "qualified" plan under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). All 1,400,000 qualified stock options authorized
under the 1982 ISO Plan have been granted. The Plan expired on April 26, 1992.
Options to purchase 408,535 shares remain outstanding under the Plan as of April
30, 1999.
The York Research Corporation 1993 Incentive Stock Option Plan (the "1993
ISO Plan") authorizes the granting from time to time of options to purchase
shares of the Company's Common Stock ("Options") to officers and employees of
and consultants to the Company and its subsidiaries ("Employees"), up to a
maximum of 3,000,000 shares of Common Stock in the aggregate. Non-employee
Directors of the Company are not eligible to receive options under the 1993 ISO
Plan. Options may either be "incentive stock options" ("ISO's") under Section
422 of the Internal Revenue Code of 1986, or may be non-qualified options. In
the case of ISO's granted under the ISO Plan, the exercise price of each ISO
must not be less than the fair market value of the Common Stock of the Company
on the date the ISO is granted, except that, in the case of an ISO granted to
any person whose stock ownership at the time of the grant exceeds 10% of the
combined voting power of all classes of stock of the Company or any subsidiary
("10% Holder"), the exercise price must be at least 110% of the fair market
value of the Common Stock on the date of grant. The term "fair market value" for
purposes of the 1993 ISO Plan is the closing price of a share of Common Stock of
the Company as reported by NASDAQ. With respect to non-qualified options, the
exercise price is set by the Incentive Stock Option Committee ("ISO Committee"),
but will not be less than the par value per share of the Company's common stock.
The 1993 ISO Plan provides that each option agreement shall specify a period
during which the Option is exercisable of not more than 10 years from the date
of grant except that Options granted to 10% Holders shall not be exercisable
after the expiration of five years from the date of grant. Options are
exercisable until the date of termination of employment unless the ISO Committee
agrees to extend the option period for up to three months beyond the employment
termination date. The ISO Committee also determines when each Option granted
under the 1993 ISO Plan will become exercisable. Payment for shares upon
exercise of Options may be in cash, an exchange of shares of the Company's
Common Stock if deemed acceptable to the ISO Committee, a promissory note for
such part of the purchase price as is deemed acceptable to the ISO Committee,
the terms of any such promissory note to be determined by the ISO Committee or
by any combination of the foregoing. Options to purchase 2,121,723 shares remain
outstanding under the 1993 ISO Plan as of April 30, 1999.
11
<PAGE>
EMPLOYEE STOCK OWNERSHIP PLAN
During 1988, the Company adopted an Employee Stock Ownership Plan ("ESOP").
The ESOP purchases shares of Common Stock from the Company and, occasionally, on
the open market. To purchase these shares the ESOP borrowed the funds from the
Company. The repayment of these loans is expected from future employer
contributions to the Plan and ESOP third party funding (including sales of
shares). The Company contributed approximately $678,000, $593,000 and $525,000
to the ESOP during Fiscal 1999, 1998, and 1997, respectively. Mr. Weinstein is
the Trustee of the ESOP. The shares that are held by the ESOP are allocated
annually to individual employees according to a formula set forth in the ESOP.
EMPLOYEE SAVINGS PLAN
In 1988, the Company adopted the York Research Corporation 401(k) Plan (the
"401(k) Plan"). The 401(k) Plan allows employees of the Company to defer a
portion of their earnings on a pre-tax basis through contributions to the 401(k)
Plan. The Company may at its discretion make a contribution to the 401(k) Plan.
To date, the Company has elected not to contribute to the 401(k) Plan.
DEFINED BENEFIT PLAN
The Company has a defined benefit pension plan covering substantially all
employees not covered by a collective bargaining agreement. The benefits are
based on years of service and the highest consecutive five years of the
employees' compensation. The Company's funding policy is to contribute annually
the amount necessary to satisfy the Internal Revenue Service's funding
standards. Contributions are intended to provide, not only for benefits
attributed to service to date, but also for those expected to be earned in the
future.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the information indicated as of February 28,
1999, as to all persons known by the Board of Directors to be the beneficial
owners of more than five percent of the Corporation's Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS(1)
- --------------------------------------------------------- ---------------------- -------------
<S> <C> <C>
Robert M. Beningson...................................... 4,063,020(2) 23.7
280 Park Avenue--Suite 2700 West
New York, New York 10017
Stanley Weinstein........................................ 877,575(3) 5.8
280 Park Avenue--Suite 2700 West
New York, New York 10017
York Research Corporation................................ 816,575 5.4
Employee Stock Ownership Plan
280 Park Avenue--Suite 2700 West
New York, New York 10017
</TABLE>
- ------------------------
(1) See note references below.
12
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the information indicated as of February 28,
1999 with respect to common stock of the Company beneficially owned by directors
and officers of the Company and by directors and officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS(1)
- ---------------------------------------------------------- ---------------------- -------------
<S> <C> <C>
Robert M. Beningson....................................... 4,063,020(2) 23.7
Stanley Weinstein......................................... 877,575(3) 5.8
Howard Sommer............................................. 40,000(4) (9)
Harvey Schultz............................................ 20,000(5) (9)
Frederic S. Berman........................................ 20,000(5) (9)
Michael Trachtenberg...................................... 326,000(6) 2.1
Robert C. Paladino........................................ 245,000(7) 1.6
Vito Elefante............................................. 50,000(8) (9)
Directors and officers as a group (6) persons............. 5,641,595 31.5
</TABLE>
- ------------------------
(1) The Percent of Class is based upon 15,018,526 issued shares of common stock
as of the February 28, 1999 plus the shares that underlie unexercised
warrants or options held by the individuals.
(2) Includes 760,000 shares owned directly, warrants to purchase 1,150,000
shares of common stock, options to purchase 1,000,000 shares of common stock
and 1,170,420 shares owned by RRR'S Ventures, Ltd., a corporation controlled
by Mr. Beningson.
(3) Includes 1,000 shares owned directly plus warrants to purchase 60,000 shares
of common stock, and 816,575 shares held by the ESOP of which Mr. Weinstein
is the trustee.
(4) Includes warrants to purchase 40,000 shares of common stock.
(5) Includes warrants to purchase 20,000 shares of common stock.
(6) Includes 36,000 shares owned directly by Mr. Trachtenberg and options to
purchase 290,000 shares of common stock.
(7) Includes 3,000 shares owned directly by Mr. Paladino and options to purchase
242,000 shares of common stock.
(8) Includes options to purchase 50,000 shares of common stock.
(9) Less than 1% ownership.
13
<PAGE>
ITEM 2.
RATIFICATION OF ADOPTION OF 1999 INCENTIVE
OPTION PLAN
The York Research Corporation 1999 Incentive Stock Option Plan (the "ISO
Plan") authorizes the granting from time to time of options to purchase shares
of the Company's Common Stock ("Options") to officers and employees of and
consultants to the Company and its subsidiaries ("Employees"), up to a maximum
of 2,500,000 shares of Common Stock in the aggregate under the ISO Plan.
Non-Employee Directors of the Company are not eligible to receive options under
the ISO Plan. Options may either be "incentive stock options" (ISO's") under
Section 422 of the Internal Revenue Code of 1986, or may be non-qualified
options. In the case of ISO's granted under the ISO Plan, the exercise price of
each ISO must not be less than the fair market value of the Common Stock of the
company on the date the ISO is granted, except that, in the case of an ISO
granted to any person whose stock ownership at the time of the grant exceeds 10%
of the combined voting power ownership at the time of the grant exceeds 10% of
the combined voting power of all classes of stock of the Company or any
subsidiary (10% Holder"), the exercise price must be at least 110% of the fair
market value of the Common Stock on the date of grant. The term "fair market
value" for purposes of the ISO Plan is the last sales price of a share of Common
Stock of the Company as reported by NASDAQ. With respect to non-qualified
options, the exercise price is set by the Incentive Stock Option Committee ("ISO
Committee"), but will not be less than the par value per share of the Company's
common stock. The ISO Plan provides that each option agreement shall specify a
period during which the Option is exercisable of not more than 10 years from the
date of grant except that Options granted to 10% Holders shall not be
exercisable after the expiration of five years from the date of grant. Options
are exercisable until the date of termination of employment unless the ISO
Committee agrees to extend the option period for up to three months beyond the
employment termination date. The ISO Committee also determines when each Option
granted under the ISO Plan will become exercisable. Payment for shares upon
exercise of Options may be in cash, an exchange of shares of the Company's
Common Stock if deemed acceptable to the ISO Committee, a promissory note to be
determined by the ISO Committee or by any combination of the foregoing.
The ISO Plan provides for proportionate changes in Options in the event of a
change in capitalization of the Company. In the event of a Change in Control (as
defined in the ISO Plan), all outstanding Options will immediately become
exercisable, and holders of Options will be entitled to receive a cash payment
equal to the excess, if any, of (x) (A) in the case of a non-qualified Option,
the greater of (1) the Fair Market Value (as defined in the ISO Plan), on the
date preceding the date of surrender, of the shares subject to the Option or
portion thereof surrendered or (2) the Adjusted Fair Market Value (as defined in
the ISO Plan) of the shares subject to the Option or portion thereof surrendered
or (B) in the case of an ISO, the Fair Market Value, on the date preceding the
date of surrender, of the shares subject to the Option or portion thereof
surrendered, over (y) the aggregate purchase price for such shares under the
Option or portion thereof surrendered.
Pursuant to the ISO Plan, the ISO Committee (which will initially consist of
Messrs. Weinstein and Sommer) selects the Employees and/or Consultants who shall
receive Options (collectively "Optionees") and the number of shares to be
subject to each Option and whether the Option is an ISO or a non-qualified
Option.
Under present Federal income tax laws and regulations, the holder of an ISO
Option granted under the ISO Plan will not be subject to any tax with respect to
the grant of the option, since such an option is non-transferable and has no
readily ascertainable value at grant.
The holder of an ISO will not realize income at the time the ISO is
exercised (although a positive adjustment equal to the excess of the fair market
value of the stock over the exercise price, will be
14
<PAGE>
made to the alternative minimum taxable income of the optionee for purposes of
the Alternative Minimum Tax and as a result the optionee could become subject to
such tax. For alternative minimum tax purposes the basis of stock acquired
through the exercise of an ISO equals the fair market value taken into account
in determining the amount of the adjustment). Any gain realized upon a
subsequent disposition of the stock received upon an exercise of an ISO will be
taxed on the disposition at capital gains rates unless the disposition is prior
to the completion of either of the ISO holding periods applicable to the ISO
Option or to such stock.
The Company will not be entitled to an income tax deduction at the time an
ISO is exercised but will be entitled to a deduction upon a subsequent
disposition of the underlying stock to the extent that the employee realizes
ordinary income as a result of a disqualifying disposition, subject to
satisfaction of any applicable withholding rules and subject to certain
provisions of the tax laws which may limit the deductibility of compensation to
certain executives if such compensation exceeds $1,000,000 for the subject
individual.
The holder of a non-qualified option will realize income at the time the
Option is exercised based on the difference between the exercise price and the
fair market value, and the Company will be entitled to a corresponding
deduction, subject to the satisfaction of any withholding requirement and
subject to certain provisions of the tax laws which may limit the deductibility
of compensation to certain executives if such compensation exceeds $1,000,000
for the subject individual.
Upon surrender of an ISO or a non-qualified Option, the holder will realize
ordinary income at the time of surrender of the Option to the extent of the cash
received on such surrender and the Company will be entitled to a deduction
subject to any applicable withholder rules and subject to certain provisions of
the tax laws which may limit the deductibility of compensation to certain
executives if such compensation exceeds $1,000,000 for the subject individual.
In the case of a surrender of an Option upon a Change of Control, a deduction
may be denied to the extent the payment is deemed to be a golden parachute
payment.
A copy of the 1999 ISO Plan is annexed hereto and the description of the
1999 ISO Plan is qualified by reference to the text of the 1999 ISO Plan.
The 1999 ISO Plan was adopted by the board, subject to stockholder approval,
on April 15, 1999. At the time, subject to shareholder ratification of the 1999
ISO Plan, ISO's were granted as follows:
<TABLE>
<CAPTION>
EXERCISE
NAME SHARES PRICE
- ---------------------------------------------------------------------- --------- -------
<S> <C> <C>
All executive officers as a Group..................................... 70,000 4 5/8
All employees as a group.............................................. 120,000 4 5/8
</TABLE>
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR RATIFICATION OF THE ADOPTION OF THE
1999 INCENTIVE STOCK OPTION PLAN
15
<PAGE>
ITEM 3.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board recommends that the stockholders ratify its selection of Grant
Thornton LLP, independent certified public accountants, to audit the accounts of
the Company for its fiscal year ending February 28, 2000. Grant Thornton LLP has
served as the independent certified public accountant for the Company since
November, 1991. A representative of Grant Thornton LLP will be present at the
Meeting, will have the opportunity to make a statement if he or she desires to
do so and will be available to respond to appropriate questions raised at the
Meeting.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR SUCH RATIFICATION
OTHER MATTERS
The Board does not intend to bring any other matters before the Meeting and,
at the time of filing this Proxy statement with the Securities and Exchange
Commission, is not aware that any other matters are to be presented for action
at the Meeting by others. If any other matters properly come before the Meeting,
it is intended that the shares represented by proxies will be voted with respect
thereto in accordance with the judgment of the person or persons voting the
proxies on such matters.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company, including
expenses in connection with preparing, assembling and mailing this Proxy
Statement and all papers which now accompany or may hereafter supplement it.
Such solicitation will be made by mail and may also be made by personal
solicitation by the Company's regular officers or employees, who will receive no
special compensation therefor. The Company has also retained D.F. King & Co.,
Inc. to solicit proxies with respect to Item 2, and will pay such firm $5,000.
The Company may reimburse brokers or persons holding stock in their names or in
the names of their nominees for their expenses in sending proxies and proxy
materials to beneficial owners.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
In order for stockholder proposals to be eligible for inclusion in the
Company's proxy material relating to its 2000 Annual Meeting of Stockholders,
they must be received by the Company no later than February 20, 2000.
By Order of the Board of Directors
/s/ ROBERT M. BENINGSON
- -------------------------------------------
Robert M. Beningson
Robert M. Beningson
President and Chairman of the Board
16
<PAGE>
YORK RESEARCH CORPORATION
1999 INCENTIVE STOCK OPTION PLAN
1. PURPOSE. The purpose of this Plan is to strengthen York Research
Corporation, a Delaware corporation (the "Company"), by providing an incentive
to its employees and consultants and thereby encouraging them to devote their
abilities and industry to the success of the Company's business enterprise. It
is intended that this purpose be achieved by extending to employees and
consultants of the Company an added long-term incentive for high levels of
performance and unusual efforts through the grant of options to purchase shares
of the Company's common stock under the York Research Corporation 1999 Incentive
Stock Option Plan.
2. DEFINITIONS. For purposes of the Plan:
2.1 "Adjusted Fair Market Value" means, in the event of a Change in
Control, the greater of (i) the highest price per Share paid to holders of
the Shares in any transaction (or series of transactions) constituting or
resulting in a Change in Control or (ii) the highest Fair Market Value of a
Share during the ninety (90) day period ending on the date of a Change in
Control.
2.2 "Agreement" means the written agreement between the Company and an
Optionee evidencing the grant of an Option and setting forth the terms and
conditions thereof.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Cause" means (i) intentional failure to perform reasonably assigned
duties, (ii) dishonesty or willful misconduct in the performance of an
Optionee's duties, or (iii) willful violation of any law, rule or regulation
in connection with the performance of an Optionee's duties (other than
traffic violations or similar offenses).
2.5 "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company, by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, spin-off, split-up,
issuance of warrants or rights or debentures, stock dividend, stock split or
reverse stock split, cash dividend, property dividend, combination or
exchange of shares, repurchase of shares, public offering, private
placement, change in corporate structure or otherwise.
2.6 "Change in Control" shall be deemed to have occurred when the first
of the following events occurs: (i) when the Company acquires actual
knowledge that any person or group (as such terms are used in Sections 13(d)
and 14(d)(2) of the Exchange Act), other than Robert Beningson and/or his
spouse or issue or one or more trusts for the benefit of any of the
foregoing or a partnership or other entity directly or indirectly controlled
by any of the foregoing or an employee benefit plan established or
maintained by the Company or any of its subsidiaries, is or becomes the
beneficial owner (as defined under Rule 13d-3 of the Exchange Act) directly
or indirectly, of securities of the Company representing more than fifty
percent (50%) of the combined voting power of the Company's then outstanding
securities (a "Control Person"), PROVIDED, HOWEVER, that no person or group
shall be considered a Control Person for the purpose of this proviso to the
definition of Change of Control if the acquisition, transaction or other
circumstance giving rise to the beneficial ownership by such person or group
of outstanding securities representing more than fifty percent (50%) of the
combined voting power of the Company (and any increase in the beneficial
ownership after the occurrence of such acquisition, transaction or other
circumstance by such person or group) was approved in advance by a vote of
at least two-thirds of the Continuing Directors (as hereinafter defined)
then in office; (ii) upon the approval by the Company's stockholders of (A)
a merger or consolidation of the Company with or into another Corporation
(other than a merger or consolidation in which the Company is the surviving
corporation and which does not result in any capital reorganization or
reclassification or other change in the Company's then outstanding shares of
common stock), (B) a sale or disposition of all or substantially all of the
Company's assets, or (C) a plan of liquidation or dissolution of the
<PAGE>
Company, PROVIDED, HOWEVER, that approval by the Company's stockholders of
any of the transactions described in this clause shall for the purpose of
this proviso to the definition of Change in Control not be considered a
Change in Control if, prior to the submission of the transaction to the
Company's stockholders, the transaction was approved by a vote of at least
two-thirds of the Continuing Directors then in office; or (iii) if, at any
time, two-thirds of the members of the Board are not Continuing Directors.
For purposes of this Section, "Continuing Directors" shall mean the members
of the Board immediately after approval by the stockholders of the Company
of this Plan, and any individual who becomes a member of the Board
thereafter if his or her election or nomination for election as a director
was approved by a vote of at least two-thirds of the Continuing Directors
then in office.
2.7 "Code" means the Internal Revenue Code of 1986, as amended.
2.8 "Committee" means a committee consisting of at least two (2)
Disinterested Directors appointed by the Board to administer the Plan and to
perform the functions set forth herein.
2.9 "Company" means York Research Corporation.
2.10 "Disability" means a physical or mental infirmity which impairs the
Optionee's ability to perform substantially his or her duties for a period
of one hundred eighty (180) consecutive days.
2.11 "Disinterested Director" means a director of the Company who is
"disinterested" within the meaning of Rule 16b-3 under the Exchange Act or
any successor rule or regulation.
2.12 "Eligible Employee" means any officer or other key employee of, or
any consultant (including a consultant which is a partnership, corporation
or other entity) to, the Company or a Subsidiary who (or which) is
designated by the Committee as eligible to receive Options subject to the
conditions set forth herein; provided, that no non-employee director of the
Company shall be an Eligible Employee.
2.13 "ERISA" means the Employee Retirement income Security Act, as
amended.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.15 "Fair Market Value" on any date means the last sale price of the
Shares on such date on the principal national securities exchange (including
in such term the NASDAQ National Market System) on which such Shares are
listed or admitted to trading, or if such Shares are not so listed or
admitted to trading. the arithmetic mean of the per Share closing bid price
and per Share closing asked price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System or such other
market in which such prices are regularly quoted, or, if there have been no
published bid or asked quotations with respect to Shares on such date, the
Fair Market Value shall be the value established by the Board in good faith
and in accordance with Section 422 of the Code.
2.16 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee as
an Incentive Stock Option.
2.17 "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
2.18 "Option" means an Option granted to an Eligible Employee pursuant
to Section 5. An Option may be an Incentive Stock Option or a Nonqualified
Stock Option.
2.19 "Optionee" means a person to whom an Option has been granted under
the Plan.
2.20 "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the
Company.
2.21 "Plan" means the York Research Corporation 1999 Incentive Stock
Option Plan.
2
<PAGE>
2.22 "Shares" means the common stock, par value $.01 per share, of the
Company.
2.23 "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with respect
to the Company.
2.24 "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of
the Code applies.
2.25 "Ten-Percent Stockholder" means an Eligible Employee, who, at the
time an Incentive Stock Option is to be granted to him or her, owns (within
the meaning of Section 422(b)(6) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company, or of a Parent or a Subsidiary.
3. ADMINISTRATION.
3.1 The Plan shall be administered by the Committee which shall hold
meetings at such times as may be necessary for the proper administration of
the Plan. The Committee shall keep minutes of its meetings. A quorum shall
consist of not less than two members of the Committee and a majority of a
quorum may authorize any action. Any decision or determination reduced to
writing and signed by a majority of all of the members shall be as fully
effective as if made by a majority vote at a meeting duly called and held.
Each member of the Committee shall be a Disinterested Director. No member of
the Committee shall be liable for any action, failure to act, determination
or interpretation made in good faith with respect to this Plan or any
transaction hereunder, except for liability arising from his or her own
willful misfeasance, gross negligence or reckless disregard of his or her
duties. The Company hereby agrees to indemnify each member of the Committee
for all costs and expenses and, to the extent permitted by applicable law,
any liability incurred in connection with defending against, responding to,
negotiating for the settlement of, or otherwise dealing with, any claim,
cause of action or dispute of any kind arising in connection with any action
or failure to act in administering this Plan or in authorizing or denying
authorization to any transaction hereunder.
3.2 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to determine those Eligible
Employees to whom Options shall be granted under the Plan and the number of
Incentive Stock Options and/or Nonqualified Stock Options to be granted to
each Eligible Employee and to prescribe the terms and conditions (which need
not be identical) of each Option, including the purchase price per Share
subject to each Option, and make any amendment or modification to any
Agreement consistent with the terms of the Plan; provided, however, that
notwithstanding anything to the contrary contained in this Plan, no
non-employee director of the Company shall be eligible to receive Options
under this Plan.
3.3 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time:
(a) to construe and interpret the Plan and the Options granted
thereunder and to establish, amend and revoke rules and regulations for
the administration of the Plan, including, but not limited to, correcting
any defect or supplying any omission, or reconciling any inconsistency in
the Plan or in any Agreement, in the manner and to the extent it shall
deem necessary or advisable to make the Plan fully effective, and all
decisions and determinations by the Committee in the exercise of this
power shall be final, binding and conclusive upon the Company, its
Subsidiaries, any Parent, the Optionees and all other persons having any
interest therein;
3
<PAGE>
(b) to determine the duration and purposes for leaves of absence
which may be granted to an Optionee on an individual basis without
constituting a termination of employment or service for purposes of the
Plan;
(c) to exercise its discretion with respect to the powers and rights
granted to it as set forth in the Plan; and
(d) generally, to exercise such powers and to perform such acts as
are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan.
4. STOCK SUBJECT TO PROGRAM
4.1 The maximum number of Shares that may be made the subject of Options
granted under the Plan is two million five hundred thousand (2,500,000)
Shares (or the number and kind of shares of stock or other securities to
which such Shares are adjusted upon a Change in Capitalization pursuant to
Section 7) and the Company shall reserve for the purposes of the Plan, out
of its authorized but unissued Shares or out of Shares held in the Company's
treasury, or partly out of each, such number of Shares as shall be
determined by the Board.
4.2 Whenever any outstanding Option or portion thereof expires, is
cancelled or is otherwise terminated for any reason (other than upon the
surrender of the Option pursuant to Section 6.6 hereof), the Shares
allocable to the cancelled or otherwise terminated Option or portion thereof
may again be the subject of Options granted hereunder.
5. OPTION GRANTS FOR ELIGIBLE EMPLOYEES.
5.1 AUTHORITY OF COMMITTEE. Subject to the provisions of the Plan, the
Committee shall have full and final authority to select those Eligible
Employees who will receive Options, the terms and conditions of which shall
be set forth in an Agreement; PROVIDED, HOWEVER, that no Eligible Employee
shall receive an Incentive Stock Option unless he is an employee of the
Company, a Parent or a Subsidiary at the time the Incentive Stock Option is
granted; and PROVIDED FURTHER HOWEVER, that in the case of or the grant of
an Incentive Stock Option, the aggregate Fair Market Value (determined on
the trading day immediately preceding the day on which such Option is
granted) of the Shares for which any Eligible Employee may be granted
Incentive Stock Options which first become exercisable in any calendar year
may not exceed $100,000 (or such other individual grant limit as may be in
effect under the Code on the date of grant) taking into account all
incentive stock option plans of the Company (but this proviso shall not
operate to extinguish any part of an Incentive Stock Option which exceeds
the limitation set forth in this proviso, and such part thereof which is so
in excess of the limitation shall to such extent constitute a Nonqualified
Stock Option).
5.2 PURCHASE PRICE. The purchase price or the manner in which the
purchase price is to be determined for Shares under each Option shall be
determined by the Committee and set forth in the Agreement evidencing the
Option, provided that (i) the purchase price per Share under each Option
which is intended to be an Incentive Stock Option shall be not less than
100% of the Fair Market Value of a Share on the date the Option is granted
(110% in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder), and (ii) the purchase price per Share under each Option which
is intended to be a Nonqualified Stock Option shall be not less than the par
value per share of the Company's common stock.
5.3 DURATION. Options granted hereunder shall be for such term as the
Committee shall determine, provided that no Option shall be exercisable
after the expiration of ten (10) years from the date it is granted (five (5)
years in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder). The Committee may, subsequent to the granting of any Option,
extend
4
<PAGE>
the term thereof but in no event shall the term as so extended exceed the
maximum term provided for in the preceding sentence.
5.4 VESTING. Subject to Section 6.6 hereof, each Option shall become
exercisable immediately or in such installments (which need not be equal)
and at such times as may be designated by the Committee and set forth in the
Agreement evidencing the Option. To the extent not otherwise provided by the
Committee, Options shall be exercisable in five (5) equal annual
installments, the first of which shall become exercisable on the first
anniversary of the date of grant of the Option. To the extent not exercised,
installments shall accumulate and be exercisable, in whole or in part, at
any time after becoming exercisable, but not later than the date the Option
expires. The Committee may accelerate the exercisability of any Option or
portion thereof at any time.
5.5 MODIFICATION OR SUBSTITUTION. The Committee may, in its
discretion, modify outstanding Options or accept the surrender of
outstanding Options (to the extent not exercised) and grant new Options in
substitution for them. Notwithstanding the foregoing, no modification of an
Option shall adversely alter or impair any rights or obligations under the
Option without the Optionee's consent.
6. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS.
6.1 NON-TRANSFERABILITY. No Option granted hereunder shall be
transferable by the Optionee to whom granted otherwise than by will or the
laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of ERISA or the rules
thereunder and an Option may be exercised during the lifetime of such
Optionee only by the Optionee or his or her guardian or legal
representative. The terms of each Option shall be final, binding and
conclusive upon the beneficiaries, executors; administrators, heirs and
successors of the Optionee.
6.2 METHOD OF EXERCISE. The exercise of an Option shall be made only
by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal executive office, specifying the number
of Shares to be purchased and accompanied by payment therefor and otherwise
in accordance with the Agreement pursuant to which the Option was granted.
The purchase price for any Shares purchased pursuant to the exercise of an
Option shall be paid in full upon such exercise by any one or a combination
of the following: (i) cash, (ii) by delivery of a promissory note for all or
such part of the purchase price as the Committee may deem acceptable at or
prior to the time of exercise, the terms of any such promissory note
(including without limitation whether or not it will bear interest and the
term thereof) to be determined by the Committee, or (iii) transferring
Shares to the Company upon such terms and conditions as determined by the
Committee, in each case as shall be approved by the Committee in its
discretion at or prior to the time of exercise. At the Optionee's request
and subject to the consent of the Committee, Shares to be acquired upon the
exercise of a portion of an Option will be applied automatically to pay the
purchase price in connection with the exercise of additional portions of the
Option then being exercised. The written notice pursuant to this Section 6.2
may also provide instructions from the Optionee to the Company that upon
receipt of the purchase price in cash from the Optionee's broker or dealer,
designated as such on the written notice, in payment for any Shares
purchased pursuant to the exercise of an Option, the Company shall issue
such Shares directly to the designated broker or dealer. Any Shares
transferred to the Company as payment of the purchase price under an Option
shall be valued at their Fair Market Value on the day preceding the date of
exercise of such Option. If requested by the Committee, the Optionee shall
deliver the Agreement evidencing the Option to the Secretary of the Company
who shall endorse thereon a notation of such exercise and return such
Agreement to the Optionee. No fractional Shares (or cash in lieu thereof)
shall be issued upon exercise of an Option and the
5
<PAGE>
number of Shares that may be purchased upon exercise shall be rounded to the
nearest number of whole Shares.
6.3 RIGHTS OF OPTIONEES. No Optionee shall be deemed for any purpose
to be the owner of any Shares subject to any Option unless and until (i) the
Option shall have been exercised pursuant to the terms thereof, (ii) the
Company shall have issued and delivered the Shares to the Optionee, and
(iii) the Optionee's name shall have been entered as a stockholder of record
on the books of the Company. Thereupon, the Optionee shall have full voting,
dividend and other ownership rights with respect to such Shares.
6.4 TERMINATION OF EMPLOYMENT. Unless otherwise provided in the
Agreement evidencing the Option, an Option (other than an Option granted to
a consultant) shall terminate upon an Optionee's termination of employment
with the Company and its Subsidiaries as follows:
(a) if an Optionee's employment terminates for any reason other than
death, Disability or Cause, the Optionee may at any time within three (3)
months after his or her termination of employment, exercise an Option to
the extent, and only to the extent, that the Option or portion thereof
was exercisable on the date of termination;
(b) in the event the Optionee's employment terminates as a result of
Disability, the Optionee may at any time within one (1) year after such
termination exercise such Option to the extent, and only to the extent,
the Option or portion thereof was exercisable at the date of such
termination;
(c) if an Optionee's employment terminates for Cause, the Option
shall terminate immediately and no rights thereunder may be exercised;
(d) if an Optionee dies while an employee of the Company or any
Subsidiary or within three months after termination as described in
clause (a) of this Section 6.4 or within one (1) year after termination
as a result of Disability as described in clause (b) of this Section 6.4,
the Option may be exercised at any time within one (1) year after the
Optionee's death by the person or persons to whom such rights under the
Option shall pass by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code
or Title I of ERISA or the rules thereunder; PROVIDED, HOWEVER, that an
Option may be exercised to the extent, and only to the extent, that the
Option or portion thereof was exercisable on the date of death or earlier
termination.
Notwithstanding the foregoing, in no event may any Option be exercised by
anyone after the expiration of the term of the Option.
6.5 TERMINATION OF CONSULTANT OPTIONS. Options granted to consultants
to the Company, any Parent or a Subsidiary shall terminate under such
circumstances as are provided in the Agreement evidencing the Option, but
unless otherwise expressly provided herein in no event may such an Option be
exercised by anyone after the expiration of the term of the Option.
6.6 EFFECT OF CHANGE IN CONTROL. Notwithstanding anything contained in
the Plan or an Agreement to the contrary, in the event of a Change in
Control, (i) all Options outstanding on the date of such Change in Control
shall become immediately and fully exercisable and (ii) an Optionee will be
permitted to surrender for cancellation within sixty (60) days after such
Change in Control, any Option or portion of an Option to the extent not yet
exercised and the Optionee will be entitled to receive a cash payment in an
amount equal to the excess, if any, of (x) (A) in the case of a Nonqualified
Stock Option, the greater of (1) the Fair Market Value, on the date
preceding the date of surrender, of the Shares subject to the Option or
portion thereof surrendered or (2) the Adjusted Fair Market Value of the
Shares subject to the Option or portion thereof surrendered, or (B) in the
case of an Incentive Stock Option, the Fair Market Value, on
6
<PAGE>
the date preceding the date of surrender, of the Shares subject to the
Option or portion thereof surrendered, over (y) the aggregate purchase price
for such Shares under the Option or portion thereof surrendered; PROVIDED,
HOWEVER, that in the case of an Option granted within six (6) months prior
to the Change in Control to any Optionee who may be subject to liability
under Section 16(b) of the Exchange Act, such Optionee shall be entitled to
surrender for cancellation his or her Option during the sixty (60) day
period commencing upon the expiration of six (6) months from the date of
grant of any such Option.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
7.1 Subject to Section 8, in the event of a Change in Capitalization,
the Committee shall conclusively determine the appropriate adjustments, if
any, to the maximum number and class of Shares or other stock or securities
with respect to which Options may be granted under the Plan, the number and
class of Shares or other stock or securities which are subject to
outstanding Options granted under the Plan, and the purchase price therefor,
if applicable.
7.2 Any such adjustment in the Shares or other stock or securities
subject to outstanding Incentive Stock Options (including any adjustments in
the purchase price) shall be made in such manner as not to constitute a
modification as defined by Section 424(h)(3) of the Code and only to the
extent otherwise permitted by Sections 422 and 424 of the Code.
7.3 If, by reason of a Change in Capitalization, an Optionee shall be
entitled to exercise an Option with respect to new, additional or different
shares of stock or securities, such new, additional or different shares
shall thereupon be subject to all of the conditions which were applicable to
the Shares subject to the Option, as the case may be, prior to such Change
in Capitalization.
8. EFFECT OF CERTAIN TRANSACTIONS.
Subject to Section 6.6, in the event of (i) the liquidation or dissolution
of the Company, or (ii) a merger or consolidation of the Company (a
"Transaction"), the Plan and the Options issued hereunder shall continue in
effect in accordance with their respective terms and each Optionee shall be
entitled to receive in respect of each Share subject to any outstanding Option,
as the case may be, upon exercise of any Option, the same number and kind of
stock, securities, cash, property, or other consideration that each holder of a
Share was entitled to receive in the Transaction in respect of a Share. In the
event that, after a Transaction, there occurs any change of a type described in
Section 2.5 hereof with respect to the shares of the surviving or resulting
corporation, then adjustments similar to, and subject to the same conditions as,
those in Section 7 hereof shall be made by the Committee.
9. TERMINATION AND AMENDMENT OF THE PROGRAM.
9.1 The Plan shall terminate on the day preceding the tenth anniversary
of the date of its adoption by the Board (which date is April 14, 1999) and
no Option may be granted thereafter. The Board may sooner terminate or amend
the Plan at any time and from time to time; PROVIDED, HOWEVER, that to the
extent necessary under Section 16(b) of the Exchange Act and the rules and
regulations promulgated thereunder or other applicable law, no amendment
shall be effective unless approved by the stockholders of the Company in
accordance with applicable law and regulations at an annual or special
meeting held within twelve (12) months after the date of adoption of such
amendment.
9.2 Except as provided in Sections 7 and 8 hereof, rights and
obligations under any Option granted before any amendment or termination of
the Plan shall not be adversely altered or impaired by such amendment or
termination, except with the consent of the Optionee, nor shall any
amendment or termination deprive any Optionee of any Shares which he may
have acquired through or as a result of the Plan.
7
<PAGE>
10. NON-EXCLUSIVITY OF THE PLAN. The adoption of the Plan by the Board
shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangement or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan, and such arrangements may be either applicable generally or only
in specific cases.
11. LIMITATION OF LIABILITY. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing in
the Plan shall be construed to:
(i) give any person any right to be granted an option other than at the
sole discretion of the Committee;
(ii) give any person any rights whatsoever with respect to Shares except
as specifically provided in the Plan;
(iii) limit in any way the right of the Company to terminate the
employment of any person at any time; or
(iv) be evidence of any agreement or understanding, expressed or
implied, that the Company will employ any person at any particular
rate of compensation or for any particular period of time.
12. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
12.1 This Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of New
York (without reference to conflict of laws principles).
12.2 The obligation of the Company to sell or deliver Shares with
respect to Options granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable federal and state
securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
12.3 The Plan is intended to comply with Rule 16b-3 promulgated under
the Exchange Act and the Committee shall interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith.
Any provisions inconsistent with such Rule shall be inoperative and shall
not affect the validity of the Plan. To the extent any provision of the Plan
or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
12.4 The Board may make such changes as may be necessary or appropriate
to comply with the rules and regulations of any government authority, or to
obtain for Eligible Employees granted Incentive Stock Options the tax
benefits under the applicable provisions of the Code and regulations
promulgated thereunder.
12.5 Each Option is subject to the requirement that, if at any time the
Committee determines, in its discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance
of Shares, no Options shall be granted or payment made or Shares issued, in
whole or in part, unless listing, registration, qualification, consent or
approval has been effected or obtained free of any conditions, except as
otherwise acceptable to the Committee.
12.6 Notwithstanding anything contained in the Plan to the contrary, in
the event that the disposition of Shares acquired pursuant to the Plan is
not covered by a then current registration statement under the Securities
Act of 1933, as amended, and is not otherwise exempt from such
8
<PAGE>
registration, such Shares shall be restricted against transfer to the extent
required by the Securities Act of 1933, as amended, and Rule 144 or other
regulations thereunder. The Committee may require any individual receiving
Shares pursuant to the Plan, as a condition precedent to receipt of such
Shares upon exercise of an Option, to represent and warrant to the Company
in writing that the Shares acquired by such individual are acquired without
a view to any distribution thereof and will not be sold or transferred other
than pursuant to an effective registration thereof under said Act or
pursuant to an exemption applicable under the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder. The
Certificates evidencing any of such Shares shall be appropriately legended
to reflect their status as restricted securities as aforesaid.
13. MISCELLANEOUS.
13.1 MULTIPLE AGREEMENTS. The terms of each Option may differ from
other Options granted under the Plan at the same time or at some other time.
The Committee may also grant more than one Option to a given Eligible
Employee during the term of the Plan, either in addition to, or in
substitution for, one or more Options previously granted to the Eligible
Employee.
13.2 WITHHOLDING OF TAXES.
(a) The Company shall have the right to deduct from any distribution
of cash to any Optionee, an amount equal to the federal, state and local
income taxes and other amounts as may be required by law to be withheld
(the "Withholding Taxes") with respect to any Option. If an Optionee is
entitled to receive Shares upon exercise of an Option, the Optionee shall
if the Company would be entitled to a deduction in respect of the Share
issuance or as otherwise provided by law and if required by the
Committee, pay Withholding Taxes to the Company prior to the issuance of
such Shares. In satisfaction of the Withholding Taxes to the Company
required by the Committee to be paid, the Optionee may make a written
election (the "Tax Election"), which may be accepted or rejected in the
discretion of the Committee, to have withheld a portion of the Shares
issuable to him or her upon exercise of the Option having an aggregate
Fair Market Value, on the date preceding the date of exercise, equal to
the Withholding Taxes, provided that in respect of an Optionee who may be
subject to liability under Section 16(b) of the Exchange Act either (i)
(A) the Optionee makes the Tax Election at least six (6) months after the
date the Option was granted, (B) the Option is exercised during the ten
day period beginning on the third business day and ending on the twelfth
business day following the release for publication of the Company's
quarterly or annual statements of earnings (a "Window Period") and (C)
the Tax Election is made during the Window Period in which the Option is
exercised or prior to such Window Period and subsequent to the
immediately preceding Window Period, or (ii) (A) the Tax Election is made
at least six months prior to the date the Option is exercised and (B) the
Tax Election is irrevocable with respect to the expiration of six months
following an election to revoke the Tax Election. Notwithstanding the
foregoing, the Committee may, by the adoption of rules or otherwise, (i)
modify the provisions in the preceding sentence or impose such other
restrictions or limitations on Tax Elections as may be necessary to
ensure that the Tax Elections will be exempt transactions under Section
16(b) of the Exchange Act or, if appropriate, the Company will be
entitled to a deduction under the Code or will otherwise be in compliance
with any tax withholding rules, and (ii) permit Tax Elections to be made
at such other times and subject to such other conditions as the Committee
determines will constitute exempt transactions under Section 16(b) of the
Exchange Act.
(b) If an Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any Share
or Shares issued to such Optionee pursuant to the exercise of an
Incentive Stock Option within the two-year period commencing on the day
after the date of the grant of such Option or within the one-year period
9
<PAGE>
commencing on the day after the date of transfer of such Share or Shares
to the Optionee pursuant to such exercise of such Option, the Optionee
shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal
executive office, and, if required by the Committee, immediately deliver
to the Company the amount of Withholding Taxes due thereon in order to
permit the Company to claim a deduction, comply with any tax withholding
rules or as may otherwise be required by law.
13.3 DESIGNATION OF BENEFICIARY. Each Optionee may designate a person
or persons to receive in the event of his or her death, any Option or any
amount payable pursuant thereto, to which he or she would then be entitled.
Such designation will be made upon forms supplied by and delivered to the
Company and may be revoked in writing. If an Optionee fails effectively to
designate a beneficiary, then his or her estate will be deemed to be the
beneficiary.
14. EFFECTIVE DATE. The effective date of the Plan shall be the date of
its adoption by the Board, subject only to the approval by the affirmative vote
of the holders of a majority of the securities of the Company present, or
represented, and entitled to vote at a meeting of stockholders duly held in
accordance with applicable laws within twelve (12) months of such adoption.
10
