<PAGE>
To: Date: 10/16/97
--------------------------------- -------------
From: Job Number: , FS]1
--------------------------------- -------
(Customer Service Representative)
Job Name: Golf-Technology
-------------------------------- (EDGAR-only NEW SET page)
Document: Schedule 14A Information
Proxy materials filed with the Securities and Exchange Commission must include a
cover page in the form indicated below is Schedule 14A and the appropriate box
on the cover page must be checked to indicate the type of filing. Please mark up
the complete below for your filing.
- --------------------------------------------------------------------------------
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:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Golf-Technology Holding, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--Enter Company Name Here--
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
GOLF-TECHNOLOGY HOLDING, INC.
13000 Sawgrass Village Circle, Suite 30
Ponte Vedra Beach, FL 32082
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December __, 1997
-------------------------
To Our Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of Golf-Technology Holding, Inc. (the "Company") will be held at The
Marriott at Sawgrass, 100 TPC Boulevard, Ponte Vedra Beach, Florida on ____ day
__________, 1997 at 2:00 p.m. for the following purposes:
(1) To elect the list of nominees for election as Directors of the
Company;
(2) To approve the Company's reincorporation from Idaho to Delaware;
(3) To approve an amendment to the Company's Certificate of Incorporation
to change the name of the Company to "Snake Eyes Golf Clubs, Inc.";
(4) To approve an amendment to the Company's Certificate of Incorporation
to change the automatic conversion date for the Series B Preferred
Stock;
(5) To approve the adoption of the Company's 1997 Stock Option and Long-
Term Incentive Plan;
(6) To ratify the appointment of the accounting firm of KPMG Peat Marwick
LLP as the Company's independent accountants; and
(7) To consider and act upon such other business as may properly come
before this meeting or any adjournment thereof.
The enclosed Proxy Statement includes information relating to these
proposals.
All shareholders of record of the Company's common stock and Series A
preferred stock at the close of business on October __, 1997 are entitled to
notice of and to vote at the Annual Meeting or any adjournment or postponement
thereof. At least a majority of the outstanding shares of common stock and the
Series A preferred stock of the Company is required for a quorum. Holders of
the Company's Series B preferred stock at the close of business on October __,
1997 are entitled to vote as a separate class on Proposal No. 4. The holders of
the Company's Series B preferred stock are not entitled to vote on any other
above proposal.
By Order of the Board of Directors
/s/ Harold E. Hutchins
Harold E. Hutchins
Secretary
November __, 1997
Ponte Vedra Beach, Florida
THE BOARD OF DIRECTORS APPRECIATES AND ENCOURAGES YOUR PARTICIPATION IN THE
COMPANY'S ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED. ACCORDINGLY, PLEASE SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
IF YOU ATTEND THE ANNUAL MEETING, YOU MAY WITHDRAW YOUR PROXY, IF YOU WISH, AND
VOTE IN PERSON. YOUR PROXY IS REVOCABLE IN ACCORDANCE WITH THE PROCEDURES SET
FORTH IN THE PROXY STATEMENT.
<PAGE>
Mailed to Shareholders
on or about November __, 1997
GOLF-TECHNOLOGY HOLDING, INC.
1300 Sawgrass Village Circle, Suite 30
Ponte Vedra Beach, Florida 32082
-----------------------
PROXY STATEMENT
-----------------------
General Information
This Proxy Statement is furnished to Shareholders of Golf-Technology
Holding, Inc., an Idaho corporation (the "Company"), in connection with the
solicitation by the board of directors (the "Board" or "Board of Directors") of
the Company of proxies in the accompanying form for use in voting at the Annual
Meeting of Shareholders of the Company (the "Annual Meeting") to be held on
December __, 1997 at 2:00 p.m., local time, at The Marriott at Sawgrass, 100 TPC
Boulevard, Ponte Vedra Beach, Florida, and any adjournment or postponement
thereof.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is exercised by delivering to the Company (to
the attention of Harold E. Hutchins, the Company's Secretary) a written notice
of revocation or a properly executed proxy bearing a later date, or by attending
the Annual Meeting and voting in person.
Solicitation and Voting Procedures
The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing and
mailing proxy materials for the Annual Meeting and reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's common stock, par value $.001 per share (the "Common Stock"),
beneficial owners of the Company's Series A Preferred Stock, par value $.001 per
share (the "Series A Preferred Stock")/1/, and beneficial owners of the
Company's Series B Preferred Stock, par value $.001 per share (the "Series B
Preferred Stock") The Company may use the services of Interstate Transfer
Company, 56 West 400 South, Suite 260, Salt Lake City, Utah 84101, in soliciting
proxies and, in such event, the Company expects to pay approximately
- -------------------------------
/1/ Dividends on the Series A Preferred Stock at an annual rate of 9%
per annum are payable quarterly on March 31, June 30, September 30 and
December 31 of each year commencing June 30, 1995, when, as and if declared
by the Board of Directors, before any dividends are declared or paid on any
class of Common Stock or any capital stock ranking junior to the Series A
Preferred Stock. Originally, holders of the Series A Preferred Stock did
not have voting rights, however, in accordance with the Certificate of
Designation for the Series A Preferred Stock, due to the Company's failure
to pay dividends on the Series A Preferred Stock on four dividend payment
dates holders of Series A Preferred Stock are entitled to vote on a share-
for-share basis together with the holders of Common Stock on all matters
submitted to a vote of Shareholders. To date, the Company has not paid
dividends on any of its capital stock and does not anticipate doing so for
the foreseeable future.
1
<PAGE>
$_______, plus out-of-pocket expenses, for such services. The Company may
conduct further solicitation personally, telephonically or by facsimile through
its officers, directors and regular employees, none of whom would receive
additional compensation for assisting with the solicitation.
The presence at the Annual Meeting of a majority of the outstanding shares
of Common Stock and Series A Preferred Stock of the Company, represented either
in person or by proxy, will constitute a quorum for the transaction of business
at the Annual Meeting. The close of business on October __, 1997 has been fixed
as the record date (the "Record Date") for determining the holders of shares of
Common Stock and Series A Preferred Stock (the "Shareholders") and the holders
of shares of Series B Preferred Stock entitled to notice of and to vote at the
Annual Meeting. Each share of Common Stock and Series A Preferred Stock
outstanding on the Record Date is entitled to one vote on all matters. Holders
of the Series B Preferred Stock are entitled to vote separately as a class on
Proposal No. 4. Proposal No. 4 must be approved by the affirmative vote of the
majority of the outstanding shares of Common Stock and Series A Preferred Stock
entitled to vote, voting together as one class, and Proposal No. 4 must be
approved by the affirmative vote of the majority of the outstanding shares of
Series B Preferred Stock entitled to vote, voting as a separate class. If
Proposal No. 4 does not receive the affirmative vote of a majority of the
outstanding shares of Series B Preferred Stock entitled to vote, even if
approved by the Shareholders, Proposal No. 4 is not approved. The holders of
the Series B Preferred Stock are not entitled to vote on any other proposal. As
of the Record Date, there were 5,363,808 shares of Common Stock outstanding,
372,600 shares of Series A Preferred Stock outstanding, and 8,481 shares of
Series B Preferred Stock outstanding.
Shareholder votes will be tabulated by the persons appointed by the Board
to act as inspectors of election for the Annual Meeting. Shares represented by
a properly executed and delivered proxy will be voted at the Annual Meeting and,
when instructions have been given by the Shareholder, will be voted in
accordance with those instructions. If no instructions are given, the shares
will be voted for the election of each of the seven nominees for director named
below and for proposals Nos. 2, 3, 4, 5 and 6.
Dissenters' Rights
Proposal No. 2 is a proposal asking the Shareholders to approve the
Company's reincorporation from Idaho to Delaware. The reincorporation will be
effected through the adoption of a plan of merger whereby the Company will merge
into a newly formed Delaware corporation. See Proposal No. 2 and Exhibits A, B
and C. Pursuant to Idaho law, in connection with such a merger, each Shareholder
is entitled to dissent from, and obtain payment of the fair value of his or her
shares of Common Stock, Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock. A Shareholder wishing to assert his, her or its
dissenters' rights must deliver to the Company before the Annual Meeting a
written notice of such Shareholder's intent to demand payment for his, her or
its shares of Common Stock, Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock if Proposal No. 2 is approved. A Shareholder is not
entitled to payment for his, her or its shares of Common Stock, Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock if such
Shareholder votes in favor of Proposal No. 2. If Proposal No. 2 is approved, the
Company will deliver within ten (10) days of the Annual Meeting a written
dissenters' notice to all Shareholders who have notified the Company of their
intention to exercise their dissenters' rights and have voted against Proposal
No. 2. Such notice will instruct each dissenting Shareholder on how to receive
payment. A Shareholder who does not demand payment pursuant to the written
dissenters' notice is not entitled to receive any such payment.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
A Board of seven Directors will be elected at the Annual Meeting by the
holders of Common Stock and Series A Preferred Stock, to hold office until the
next annual meeting of shareholders and until their successors have been elected
and qualified. However, if Proposal No. 2 is approved by the Shareholders, the
Board of Directors will be classified into three classes as nearly equal in
number as possible, whose terms of office expire in successive years. If
Proposal No. 2 is approved, Messrs. Vadersen and Movsovitz will comprise Class
I, whose terms expire at the annual meeting of shareholders in 1999, Messrs.
Hutchins, Moore and Simon will comprise Class II, whose terms expire at the
annual meeting of shareholders in 2000, and Messrs. Bernstein and Tewell will
comprise Class III, whose terms expire at the annual meeting of shareholders in
2001. It is intended that, unless authorization to do so is withheld, the
proxies will be voted "FOR" the election of the director nominees named below.
Each nominee has consented to be named in this Proxy Statement and to serve as a
director if elected. However, if any nominee shall become unable to stand for
election as a director at the Annual Meeting, an event not now anticipated by
the Board of Directors, the proxy will be voted for a substitute designated by
the Board.
The nominees are listed below with brief statements of their principal
occupation and other information. All of the nominees listed below currently
are directors.
<TABLE>
<CAPTION>
Name of Nominee Age Position
- --------------- --- --------
<S> <C> <C>
Ernest R. Vadersen 52 Chairman of the Board and Treasurer
Harold E. Hutchins 42 President, Chief Executive Officer, Chief
Financial Officer, Secretary and Director
Melvin Simon 70 Director
Jonathan A. Bernstein 50 Director
Kevin Moore 42 Director
Larry Movsovitz 58 Director
Doug Tewell 47 Director
</TABLE>
Ernest R. Vadersen has served as the Chairman of the Board and Treasurer of
Golf-Tec, Inc. since its formation in June 1993 and of the Company since
December 1994 and served as President and Chief Executive Officer from 1994
through August 1997. From August 1989 to May 1993, Mr. Vadersen was a self-
employed, independent consultant to Ben Hogan Golf Company, MacGregor Golf and
Yamaha International.
Harold E. Hutchins has served as President and Chief Executive Officer of
the Company since August 1997 and has served as Vice President, Chief Financial
Officer and Secretary of Golf-Tec, Inc. and the Company since August 1994 and
December 1994, respectively. From January 1990 to August 1994, Mr. Hutchins was
Comptroller of Holmes Lumber Company, a $60 million building material
3
<PAGE>
supplier. Prior thereto, Mr. Hutchins was a partner in the accounting firm of
Harper & Hutchins CPA, P.A.
Melvin Simon of Indianapolis, Indiana, has been the _________ of Simon
Properties, a ______, from __________ to ___________ and has been the _________
of Indiana Pacers, a ______, from __________ to ___________. Mr. Simon is also
a director of the Simon DeBartolo Group.
Jonathan A. Bernstein of New York, New York, is a partner in the law firm
of Pryor, Cashman, Sherman & Flynn, counsel to the Company.
Kevin Moore of New York, New York, has been a vice president and director
of Ninth Floor Corp., the corporate general partner of Clark Partners III, L.P.,
a New York limited partnership, from __________ to ___________. Mr. Moore is
also a director of Hiltox Corporation of America, Ducommun Inc. and Premium
Wear, Inc.
Larry Movsovitz of Jacksonville, Florida, has been the _________ of
Movsovitz and Sons Inc. (Albert Fisher Co.), a ______, from __________ to
___________. Mr. Movsovitz is also a director of Rosecliff Incorporated.
Doug Tewell of Edmond, Oklahoma, has been a member of the PGA Tour for more
than the past five years and is the ______ of the Golf Channel.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information, as of October __, 1997, with
respect to the beneficial ownership of Common Stock by (a) each person known by
the Company to be the beneficial owner of more than 5% of the Company's
outstanding Common Stock, (b) the directors and executive officers of the
Company, individually, and (c) directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Percentage of
Name/(1)/ Owned/(2)/ Voting Securities/(3)/
- --------------------------------- ----------------- ----------------------
<S> <C> <C>
Ernest R. Vadersen 1,605,000/(4)/ 26.26%
13000 Sawgrass Village
Circle, Suite 30
Ponte Vedra, FL 32082
Harold E. Hutchins 347,500/(5)/ 5.96%
13000 Sawgrass Village
Circle, #30
Ponte Vedra, FL 32082
Jonathan A. Bernstein 26,167/(6)/ *
410 Park Avenue
New York, NY 10022
Kevin Moore 17,834/(7)/ *
30 Wall Street
New York, NY 10005
Melvin Simon 140,000/(8)/ 2.55%
115 W. Washington Street
Indianapolis, IN 46204
Larry Movsovitz 313,000/(8)/ 5.69%
3100 Hilton Street
Jacksonville, FL 32203
Doug Tewell 17,500/(9)/ *
1705 Irvine Drive
Edmond, OK 73003
Clark Partners III, L.P. 1,250,000/(10)/ 18.57%
30 Wall Street
New York, NY 10005
All directors and executive 2,467,001 37.82%
officers as a group (7 persons)
</TABLE>
5
<PAGE>
- --------------
* Less than 1% unless otherwise indicated.
/(1)/ The directors are Messrs. Bernstein, Hutchins, Moore, Movsovitz, Simon,
Tewell and Vadersen, and the executive officers are Messrs. Vadersen and
Hutchins.
/(2)/ Unless otherwise noted, all shares are owned directly, with sole voting
and dispositive power.
/(3)/ Includes 394,600 shares of Series A Preferred Stock which became voting
stock in April 1996. The amounts shown represent Common Stock and Series
A Preferred Stock as a single class.
/(4)/ Includes 630,000 shares issuable upon exercise of stock options that are
immediately exercisable and 10,000 shares held by Mr. Vadersen as voting
trustee for the benefit of a friend, over which Mr. Vadersen has sole
voting and investment power.
/(5)/ Reflects 347,500 shares issuable upon exercise of stock options that are
immediately exercisable.
/(6)/ Includes 9,500 shares issuable upon exercise of stock options and
warrants that are immediately exercisable.
/(7)/ Includes 9,500 shares issuable upon exercise of stock options and
warrants that are immediately exercisable.
/(8)/ Includes 5,000 shares issuable upon exercise of stock options that are
immediately exercisable.
/(9)/ Includes 23,000 shares issuable upon exercise of stock options and
warrants that are immediately exercisable and 50,000 shares of the
Company's Series A Preferred Stock which is convertible on a one-for-one
basis into Common Stock.
/(10)/ Reflects 2,625 shares of the Company's Series C Preferred Stock and
assuming a stock price of $2.10 upon conversion would be convertible into
1,250,000 shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Jonathan A. Bernstein, a director of the Company, is a partner in the law
firm of Pryor, Cashman, Sherman & Flynn, counsel to the Company. Mr. Bernstein
owns warrants to purchase up to _______ shares of Common Stock in the aggregate.
In addition, the Company has previously issued 25,000 shares of its Common Stock
to Pryor, Cashman, Sherman & Flynn in connection with such firms representation
of the Company.
6
<PAGE>
EXECUTIVE COMPENSATION
The Company has five year employment agreements expiring in January 1999
with each of Messrs. Ernest R. Vadersen and Harold E. Hutchins. These agreements
provide for annual salaries of $100,000 and $72,000 to Mr. Vadersen and Mr.
Hutchins, respectively. These salaries are to be reviewed annually by the Board
of Directors and may be increased at such times. In this regard, in February,
1997, the Board of Directors approved an increase in the annual salary of Mr.
Vadersen to $140,000 per annum and an increase in the annual salary of Mr.
Hutchins to $100,000 per annum, effective January 1, 1997. Under his employment
agreement, Mr. Vadersen has received stock options to purchase 500,000 shares of
Common Stock at an exercise price of $1.65 per share of which 180,000 options
became exercisable on May 15, 1995, 80,000 options became exercisable on January
3, 1996, 80,000 options became exercisable on January 3, 1997, and the balance
will become exercisable ratably on each anniversary date thereof through January
3, 1999. Under his employment agreement, Mr. Hutchins has received stock options
to purchase 250,000 shares of Common Stock at an exercise price of $1.65 per
share of which 90,000 options became exercisable on May 15, 1995, 40,000 options
became exercisable on January 3, 1996, 40,000 options became exercisable on
January 3, 1997 and the balance will become exercisable ratably on each
anniversary date thereof through January 3, 1999. The above described options
granted to Messrs. Vadersen and Hutchins were assumed by the Company's 1995
Stock Option Plan, which is a substitute for the 1994 Stock Option Plan of the
Company's subsidiary, Golf-Tec.
The following table summarizes the compensation paid or accrued by the
Company to the Company's executive officers for services rendered during fiscal
years 1994, 1995 and 1996. The Company did not grant any restricted stock awards
or stock appreciation rights or make any long-term incentive plan payout during
fiscal 1996.
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
Long-Term
---------
Annual Compensation Awards
Name and Compensation/(1)/ Securities Underlying
Principal Position Year Salary Bonus Options/SAR's
------------------ ---- ------ ----- ---------------------
<S> <C> <C> <C> <C>
Ernest R. Vadersen/(2)/ 1996 $100,000 - -
Chairman of the Board 1995 $100,000 - -
and Treasurer 1994 $100,000 $ 7,087 500,000
Harold E. Hutchins 1996 $ 72,000 $25,000 -
President, Chief Executive 1995 $ 72,000 - 12,500
Officer, Chief Financial 1994 $ 72,000 $ 3,885 250,000
Officer, and Secretary
</TABLE>
- ---------------
/(1)/ The Company paid no compensation to its executive officers under any long
term compensation or retirement plans. The incremental cost of certain
incidental personal benefits does not exceed the lesser of $50,000 or 10%
of compensation for any named executive officer of the Company.
/(2)/ Mr. Vadersen served as President and Chief Executive Officer of the
Company until his resignation in August, 1997.
7
<PAGE>
The following table sets forth information concerning the value of
unexercised options as of December 31, 1996 held by the executives named in the
Summary Compensation Table above. No options were exercised during 1996.
FISCAL YEAR-END OPTION VALUES
-----------------------------
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal Year End Fiscal Year End
Acquired Value Exercisable (E)/ Exercisable (E)/
Name on Exercise Realized Unexercisable (U) Unexercisable (U)
-------------------- ------------ -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Ernest R. Vadersen - - 180,000 (E) 900,000 (E)
- - 320,000 (U) 1,600,000 (U)
Harold E. Hutchins - - 102,500 (E) 512,500 (E)
- - 160,000 (U) 800,000 (U)
</TABLE>
Meetings of Committees and the Board of Directors
There was one meeting of the Board of Directors during the fiscal year
ended December 31, 1996. Each director attended or participated in such meeting
of the Board of Directors.
The Board of Directors has three committees: the Audit Committee, the
Executive Committee and the Compensation Committee. No member of a committee
attended fewer than 75% of all of the meetings of the Committee of which he was
a member. The Board of Directors does not have a nominating committee or a
committee performing the functions of a nominating committee. Although there are
no formal procedures for shareholders to make recommendations for committee
appointments or recommendation for nominees to the Board of Directors, the Board
of Directors will consider recommendations from shareholders, which should be
addressed to Harold E. Hutchins, the Company's Secretary, at the Company's
address set forth on the first page of this Proxy Statement.
The Audit Committee consists of Larry Movsovitz, who serves as Chairman,
Melvin Simon and Kevin Moore. The Audit Committee makes recommendations
concerning the engagement of independent accountants, reviews with the
independent accountants the scope and results of the audit engagement, approves
professional services provided by the independent accountants, reviews the
independence of the independent accountants, considers the range of audit and
non-audit fees and reviews the adequacy of the Company's internal accounting
controls. The Audit Committee met once during 1996.
The Compensation Committee consists of Jonathan A. Bernstein, who serves as
Chairman, Larry Movsovitz and Kevin Moore. The Compensation Committee
establishes remuneration levels for executive officers of the Company and
implements incentive programs, including the Company's stock option plans (See
Proposal No. 5). The Compensation Committee met once during 1996.
8
<PAGE>
Compensation of Directors
Directors' Fees. Each director is paid an annual fee of $15,000, plus
$1,000 per board or committee meeting attended in person or via telephonic
participation. Each director is also reimbursed for up to $1,000 for expenses
incurred in attending director and committee meetings. For fiscal 1996, no fees
were paid to any of the directors. Each director is also entitled to an
equipment allowance of up to $2,000 per year.
Stock Options. Each director is granted a non-qualified option to purchase
5,000-10,000 shares of Common Stock per year under the Company's stock option
plan. The Board may amend, suspend or discontinue such grants of stock options
at any time except that certain specified amendments must be approved (at a
meeting held within 12 months before or after the date of such amendment) by the
holders of the majority of issued and outstanding shares of Common Stock and
Series A Preferred Stock of the Company entitled to vote.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who beneficially own more than 10% of the Company's Common
Stock to file initial reports of ownership and reports of changes of ownership
(Forms 3, 4 and 5) of the Common Stock with the SEC and the NASDAQ. Officers,
directors and greater than 10% holders are required by SEC regulations to
furnish the Company with copies of such forms that they file.
To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company, the Company believes that for
the fiscal 1996, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with
the exception of the following:
Ernest R. Vaderson, Chairman of the Board, Treasurer and principal
shareholder of the Company, made a charitable gift of 9,500 shares of Common
Stock in December 1996. Such gift should have been reported to the SEC on a
Form 4 no later than January 16, 1997, but through inadvertence was not filed
until January 20, 1997.
In November, 1996 the Board of Directors of the Company was expanded to
seven members. Pursuant to Section 16(a) of the Exchange Act this triggered a
requirement that the new directors file a Form 3 within 10 days of becoming
directors. However, the directors of the Company were unaware of this 10-day
filing requirement and Messrs. Bernstein, Moore, Movsovitz, Simon and Tewell
each filed one Form 3 late.
9
<PAGE>
PROPOSAL NO. 2
REINCORPORATION IN DELAWARE
Introduction
For the reasons set forth below, the Board of Directors believes that the
best interests of the Company and its shareholders will be served by changing
the state of incorporation of the Company from Idaho to Delaware (the
"Reincorporation Proposal" or the "Proposed Reincorporation"). SHAREHOLDERS ARE
URGED TO READ CAREFULLY THE FOLLOWING SECTIONS OF THIS PROXY STATEMENT,
INCLUDING THE RELATED EXHIBITS REFERENCED BELOW AND ATTACHED HERETO, BEFORE
VOTING ON THE REINCORPORATION PROPOSAL. Throughout the Proxy Statement, the term
the "Company" or "GOLF-Idaho" refers to the existing Idaho corporation and the
term "GOLF-Del" refers to Snake Eyes Golf Clubs, Inc. (See Proposal No. 3) a new
Delaware corporation, which is the proposed successor to GOLF-Idaho.
As discussed below, the principal reasons for the proposed reincorporation
are the greater flexibility of Delaware corporate law, the substantial body of
case law interpreting that law and increased ability of the Company to attract
and retain qualified directors and officers because of advantageous
indemnification provisions provided under Delaware Law. The Company believes
that its shareholders will benefit from the well established principles of
corporate governance that Delaware law affords. Additionally, Delaware law
provides the opportunity for the Board of Directors to adopt various mechanisms
which may enhance the Board's ability to negotiate favorable terms for the
shareholders in the event of an unsolicited takeover attempt. The
Reincorporation Proposal is not being proposed in order to prevent an
unsolicited takeover attempt, and the Board of Directors is not aware of any
present attempt to acquire control of the Company, obtain representation on the
Board of Directors or take significant action that affects the Company.
The Reincorporation Proposal will be effected by merging GOLF-Idaho into
GOLF-Del, a wholly owned subsidiary of GOLF-Idaho. Upon completion of the
merger, GOLF-Idaho will cease to exist and GOLF-Del will continue to operate the
business of the GOLF-Idaho under the same name, Golf-Technology Holding, Inc. or
under the new name Snake Eyes Golf Clubs, Inc. (See Proposal No. 3).
Pursuant to the Agreement and Plan of Merger, a copy of which is attached
hereto as Exhibit A (the "Merger Agreement"), (1) each outstanding share of
---------
GOLF-Idaho's Common Stock, $0.001 par value, will automatically be converted
into one share of GOLF-Del common stock, $0.001 par value, (2) each outstanding
share of GOLF-Idaho's Series A Preferred Stock, $0.001 par value, will
automatically be converted into one share of GOLF-Del Series A Preferred Stock,
$0.001 par value, (3) each outstanding share of GOLF-Idaho's Series B Preferred
Stock, $0.001 par value, will automatically be converted into one share of GOLF-
Del Series B Preferred Stock, $0.001 par value, and (4) each outstanding share
of GOLF-Idaho's Series C Preferred Stock, $0.001 par value, will automatically
be converted into one share of GOLF-Del Series C Preferred Stock upon the
effective date of the merger. Each stock certificate representing issued and
outstanding shares of GOLF-Idaho's Common Stock, Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock will continue to represent
the same number of shares of common stock, Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, respectively, of GOLF-Del. IT WILL
NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES
FOR STOCK CERTIFICATES OF GOLF-DEL. However, shareholders may exchange their
certificates if they so choose. The Common Stock of GOLF-Idaho is traded on the
NASDAQ SmallCap Market (the
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"NASDAQ SmallCap") and after the merger GOLF-Del's Common Stock will continue to
be traded on the NASDAQ SmallCap under the symbol "SNKE+".
Under Idaho law, the Board is required to give notice to all shareholders
of GOLF-Idaho (whether or not entitled to vote) of a meeting concerning the
Reincorporation Proposal and the affirmative vote of a majority of the
outstanding shares of GOLF-Idaho entitled to vote is required for approval of
the Merger Agreement and the other terms of the Proposed Reincorporation. See
"Vote Required for the Reincorporation Proposal". The Proposed Reincorporation
has been unanimously approved by the GOLF-Idaho's Board of Directors. If
approved by the Shareholders, it is anticipated that the merger will become
effective as soon as practicable (the "Effective Date") following the Annual
Meeting of Shareholders. However, pursuant to the Merger Agreement, the merger
may be abandoned or the Merger Agreement may be amended by the Board of
Directors (except that the principal terms may not be amended without
shareholder approval) either before or after Shareholder approval has been
obtained and prior to the Effective Date of the Proposed Reincorporation if, in
the opinion of the Board of Directors of the Company, circumstances arise which
make it inadvisable to proceed under the original terms of the Merger Agreement.
The discussion set forth below is qualified in its entirety by reference to
the Merger Agreement, the Certificate of Incorporation of GOLF-Del (the
"Certificate of Incorporation"), and the by-laws of GOLF-Del (the "By-laws"),
copies of which are attached hereto as Exhibits A, B, and C respectively.
APPROVAL BY SHAREHOLDERS OF THE PROPOSED REINCORPORATION WILL CONSTITUTE
APPROVAL OF THE MERGER AGREEMENT, THE CERTIFICATE OF INCORPORATION AND THE BY-
LAWS OF GOLF-DEL.
Vote Required for the Reincorporation Proposal
Approval of the Reincorporation Proposal, which will also constitute
approval of (i) the Merger Agreement, the Certificate of Incorporation and the
By-laws of GOLF-Del, (ii) the assumption of GOLF-Idaho Company's employee
benefit plans and stock option and employee stock purchase plans by GOLF-Del and
(iii) indemnification agreements with GOLF-Del's officers and directors to
afford such persons indemnification by GOLF-Del to the fullest extent permitted
by Delaware law, will require the affirmative vote of the holders of a majority
of the outstanding shares of Common Stock and Series A Preferred Stock of GOLF-
Idaho entitled to vote.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSED REINCORPORATION IN DELAWARE.
THE EFFECT OF AN ABSTENTION OR A BROKER NON-VOTE IS THE SAME AS THAT OF A VOTE
AGAINST THE REINCORPORATION PROPOSAL.
Principal Reasons for the Proposed Reincorporation
As the Company plans for the future, the Board of Directors and management
believe that it is essential to be able to draw upon well established principles
of corporate governance in making legal and business decisions. The prominence
and predictability of Delaware corporate law provide a reliable foundation on
which the Company's governance decisions can be based, and the Company believes
that shareholders will benefit from the responsiveness of Delaware corporate law
to their needs and to those of the corporation they own.
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Prominence, Predictability and Flexibility of Delaware Law
For many years Delaware has followed a policy of encouraging incorporation
in that state and, in furtherance of that policy, has been a leader in adopting,
construing and implementing comprehensive, flexible corporate laws responsive to
the legal and business needs of corporations organized under its laws. Many
corporations have chosen Delaware initially as a state of incorporation or have
subsequently changed corporate domicile to Delaware in a manner similar to that
proposed by the Company. Because of Delaware's prominence as the state of
incorporation for many major corporations, both the legislature and courts in
Delaware have demonstrated an ability and a willingness to act quickly and
effectively to meet changing business needs. The Delaware courts have developed
considerable expertise in dealing with corporate issues and a substantial body
of case law has developed construing Delaware law and establishing public
policies with respect to corporate legal affairs.
Increased Ability to Attract and Retain Qualified Directors and Officers
Both Idaho and Delaware law permit a corporation to include a provision in
its certificate of incorporation which reduces or limits the monetary liability
of directors for breaches of fiduciary duty in certain circumstances. The
Company believes that, in general, Delaware law provides greater protection to
directors than Idaho law and that Delaware case law regarding a corporation's
ability to limit director liability is more developed and provides more guidance
than Idaho law. The increasing frequency of claims and litigation directed
against directors and officers has greatly expanded the risks facing directors
and officers of corporations in exercising their respective duties. The amount
of time and money required to respond to such claims and to defend such
litigation can be substantial. It is the Company's desire to reduce these risks
to its directors and officers and to limit situations in which monetary damages
can be recovered against directors so that the Company may continue to attract
and retain qualified directors and officers who otherwise might be unwilling to
serve because of the risks involved.
Well Established Principles of Corporate Governance
There is substantial judicial precedent in the Delaware courts as to the
legal principles applicable to measures that may be taken by a corporation and
as to the conduct of the Board of Directors under the business judgment rule.
The Company believes that its shareholders will benefit from the well
established principles of corporate governance that Delaware law affords.
No Change in Board Members, Business, Management, Employee Benefit Plans or
Location of Principal Facilities of the Company, except as otherwise described.
The Reincorporation Proposal will effect only a change in the legal
domicile of the Company, and certain other changes of a legal nature, certain of
which are described in this Proxy Statement. The Proposed Reincorporation will
NOT result in any change in the business, management, corporate name (except as
described in Proposal No. 3), fiscal year, assets or liabilities (except to the
extent of legal and other costs of effecting the reincorporation) or location of
the principal facilities of the Company, except as otherwise described herein.
The seven directors who are elected at the Annual Meeting of Shareholders will
become the directors of GOLF-Del. All warrants, stock options and stock option
plans of GOLF-Idaho will be assumed and continued by GOLF-Del, and each warrant
or option issued pursuant to such plan will automatically be converted into a
warrant or option to purchase the same number of shares of GOLF-Del common
stock, at the same price per share, upon the same terms, and subject to the same
conditions. Shareholders should note that approval of the Reincorporation
Proposal will also constitute approval of the assumption of these plans by GOLF-
Del. Other employee benefit
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arrangements of GOLF-Idaho will also be continued by GOLF-Del upon the terms and
subject to the conditions currently in effect. As noted above, after the merger
the shares of Common Stock of GOLF-Del will continue to be traded under the
symbol "SNKE+" on the NASDAQ SmallCap.
Prior to the Effective Date of the merger, the Company will obtain any
requisite consents to such merger from parties with whom it may have material
contractual arrangements (the "Material Agreements"). As a result, GOLF-Idaho's
rights and obligations under such Material Agreements will continue and be
assumed by GOLF-Del.
Antitakeover Implications
Delaware, like many other states, permits a corporation to adopt a number
of measures through amendment of the corporate charter or bylaws or otherwise,
which measures are designed to reduce a corporation's vulnerability to
unsolicited takeover attempts. The Reincorporation Proposal is not being
proposed in order to prevent such a change in control, and the Board of
Directors is not aware of any present attempt to acquire control of the Company
or to obtain representation on the Board of Directors.
In the discharge of its fiduciary obligations to its shareholders, the
Board of Directors has evaluated the Company's vulnerability to potential
unsolicited bidders. In the course of such evaluation, the Board of Directors of
the Company has considered or may consider in the future certain defensive
strategies designed to enhance the Board's ability to negotiate with an
unsolicited bidder. These strategies include, but are not limited to, the
authorization of Preferred Stock, the rights and preferences of which may be
determined by the Board of Directors. These measures have been implemented by
GOLF-Idaho under Idaho law and will be assumed or a corresponding arrangement
will be provided for by GOLF-Del under Delaware law.
Certain effects of the Reincorporation Proposal may be considered to have
antitakeover implications. Section 203 of the Delaware General Corporation Law,
from which GOLF-Del does not intend to opt out, restricts certain "business
combinations" with "interested Shareholders" for three years following the date
that a person becomes an interested shareholder, unless the board of directors
approves the business combination. See "Significant Differences Between the
Corporation Laws of Idaho and Delaware -- Shareholder Approval of Certain
Business Combinations". Other measures permitted under Delaware law that the
Company is implementing as part of the Proposed Reincorporation include the
establishment of a staggered board of directors, the elimination of the right of
Shareholders controlling at least ten percent (10%) of the voting shares to call
a special meeting of Shareholders and elimination of the right to remove a
director other than for cause. It should also be noted that the establishment
of a classified board of directors also can be undertaken under Idaho law in
certain circumstances. For a detailed discussion of all of the changes which
will be implemented as part of the Proposed Reincorporation, see "The Charters
and Bylaws of GOLF-Idaho and GOLF-Del" and "Indemnification and Limitation of
Liability" below. For a discussion of these and other differences between the
laws of Idaho and Delaware, see "Significant Differences Between the Corporation
Laws of Idaho and Delaware" below.
The Board of Directors believes that unsolicited takeover attempts may be
unfair or disadvantageous to the Company and its shareholders because: (i) a
non-negotiated takeover bid may be timed to take advantage of temporarily
depressed stock prices; (ii) a non-negotiated takeover bid may be designed to
foreclose or minimize the possibility of more favorable competing bids or
alternative transactions; (iii) a non-negotiated takeover bid may involve the
acquisition of only a controlling interest in the corporation's stock, without
affording all shareholders the opportunity to receive the same economic
benefits; and (iv) [certain of the Company's Material Agreements provide that
they may not be
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assigned pursuant to a transaction which results in a "change of control" of the
Company without the prior written consent of the licensor or other contracting
party].
By contrast, in a transaction in which an acquiror must negotiate with an
independent board of directors, the board can and should take account of the
underlying and long-term values of Golf-Idaho's business, technology and other
assets, the possibilities for alternative transactions on more favorable terms,
possible advantages from a tax-free reorganization, anticipated favorable
developments in the Company's business not yet reflected in the stock price and
equality of treatment of all shareholders.
Despite the belief of the Board of Directors as to the benefits to
shareholders of the Reincorporation Proposal, it may be disadvantageous to the
extent that it has the effect of discouraging a future take over attempt which
is not approved by the Board of Directors, but which a majority of the
shareholders may deem to be in their best interests or in which shareholders may
receive a substantial premium for their shares over the then current market
value or over their costs basis in such shares. As a result of such effects of
the Reincorporation Proposal, shareholders who might wish to participate in a
tender offer may not have an opportunity to do so. In addition, to the extent
that such provisions enable the Board of Directors to resist a takeover or a
change in control of the Company, such provisions could make it more difficult
to change the existing Board of Directors and management.
The Charters and By-Laws of GOLF-Idaho and GOLF-Del
The provisions of the GOLF-Del Certificate of Incorporation and By-laws,
which are attached hereto as Exhibits B and C, respectively, are similar to
----------------
those of GOLF-Idaho articles of incorporation and by-laws in many respects.
However, the Reincorporation Proposal includes the implementation of certain
provisions in the GOLF-Del Certificate of Incorporation and By-laws which alter
the rights of shareholders and the powers of management. These provisions have
antitakeover implications and are described in detail below. Approval by
Shareholders of the Proposed Reincorporation will constitute an approval of the
inclusion in the GOLF-Del Certificate of Incorporation and By-laws of each of
the provisions described below. In addition, GOLF-Del could implement certain
other changes by amendment of its Certificate of Incorporation or By-laws,
although amendments to the certificate of Incorporation would be effective only
upon approval of the Shareholders in accordance with the requirements of the law
of the State of Delaware. For a discussion of such changes, see "Significant
Differences Between the Corporation Laws of Idaho and Delaware." This
discussion of the Certificate of Incorporation and By-laws of GOLF-Del is
qualified by reference to Exhibits B and C hereto, respectively.
The Articles of Incorporation of GOLF-Idaho currently authorize the Company
to issue up to twenty-five million (25,000,000) shares of Common Stock, one
tenth of one cent ($0.001) par value, and five million 5,000,000 shares of
Preferred Stock, one tenth of one cent ($0.001) par value. The Certificate of
Incorporation of GOLF-Del provides that such company will have twenty-five
million (25,000,000) authorized shares of common stock, one tenth of one cent
($0.001) par value, and five million (5,000,000) shares of preferred stock, one
tenth of one cent ($0.001) par value. Like GOLF-Idaho's Articles of
Incorporation, GOLF-Del's Certificate of Incorporation provides that the Board
of Directors is entitled to determine the powers, preferences and rights, and
the qualifications, limitations or restrictions, of the authorized and unissued
Preferred Stock. Although it has no present intention of doing so, the Board of
Directors, without Shareholder approval, could authorize the issuance of
Preferred Stock in the future upon terms or with any rights, preferences and
privileges which could have the effect of delaying or preventing a change in
control of the Company or modifying the effective rights of holders of the
Company's Common Stock under either Idaho or Delaware law. The Board of
Directors could also utilize such shares for future financings, possible
acquisitions and other uses.
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Monetary Liability of Directors
Unlike the articles of incorporation of GOLF-Idaho, the Certificate of
Incorporation of GOLF-Del provides for the elimination of personal monetary
liability of directors to the fullest extent permissible under law and
incorporates future amendments to Delaware law with respect to the elimination
of such liability. For a more detailed explanation of the foregoing, see
"Significant Differences Between the Corporation Laws of Idaho and Delaware --
Indemnification and Limitation of Liability."
Size of the Board of Directors
The By-laws of GOLF-Del provide for a Board of Directors ranging from three
(3) to fifteen (15) members, which will originally consist of seven (7)
directors. The By-laws of GOLF-Idaho provide for a Board of Directors ranging
from three (3) to fifteen (15) members, and as of the date of the Annual
Meeting, the exact number will be set at seven (7) directors. Under Idaho and
Delaware Law the number of directors which comprise the board of directors and
the manner in which such number is changed are established pursuant to the
manner prescribed in the by-laws or the certificate of incorporation. The by-
laws of GOLF-Del provide that the number of directors shall be determined by a
resolution of the board of directors. Following the proposed Reincorporation,
the board of directors of GOLF-Del could amend the By-laws to change the size of
the board of directors from seven directors without further Shareholder
approval. If the Reincorporation Proposal is approved, the seven directors for
GOLF-Idaho who are elected at the Annual Meeting will continue for the same term
as the seven directors of GOLF-Del after the Proposed Reincorporation is
consummated.
Voting for Directors
Under Idaho law, unless otherwise provided in the articles of
incorporation, directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present. Shareholders do not have the right to cumulate their votes for the
election of directors unless the articles of incorporation so provide.
Cumulative voting provides that each share of stock normally having one vote is
entitled to a number of votes equal to the number of directors to be elected. A
shareholder may then cast all such votes for a single candidate or may allocate
them among as many candidates as the shareholder may choose. In the absence of
cumulative voting, the holders of the majority of the shares present or
represented at a meeting in which directors are to be elected would have the
power to elect all the directors to be elected at such meeting, and no person
could be elected without the support of holders of the majority of shares
present or represented at such meeting. Under Delaware law, cumulative voting in
the election of directors is not mandatory, but is a permitted option. Neither
the Golf-Idaho nor the GOLF-Del Certificate of Incorporation provides for
cumulative voting rights.
Power to Call Special Shareholders' Meetings
Under Idaho law, a special meeting of shareholders may be called by the
board of directors, the holders of at least twenty percent (20%) of the shares
entitled to vote at such meeting, such smaller proportion or other persons as
described in the articles of incorporation or such additional persons as are
authorized by the articles of incorporation or the bylaws. Under Delaware law, a
special meeting of shareholders may be called by the board of directors or any
other person authorized to do so in the certificate of incorporation or the by-
laws. The by-laws of GOLF-Idaho currently authorize the Board of Directors, the
President and the holders of not less than sixty percent (60%) of the shares
entitled to vote to call a special meeting of shareholders. The By-laws of GOLF-
Del provide that a special meeting of shareholders can be called only by
resolution approved by a majority of the whole board of directors.
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Consequently, the circumstances under which a special meeting of shareholders
can be called shall be reduced if the Reincorporation Proposal is approved.
Filling Vacancies on the Board of Directors
Under Idaho law, unless the articles of incorporation provide otherwise,
any vacancy on the board of directors may be filled by the affirmative vote of a
majority of the remaining directors (even though less than a quorum). The by-
laws of GOLF-Idaho provide that shareholders can also provide for that
shareholders have the ability to elect a director to fill a vacancy created by
the resignation of a director. Under Delaware law, vacancies and newly created
directorships may be filled by a majority of the directors then in office (even
though less than a quorum) or by a sole remaining director, unless otherwise
provided in the certificate of incorporation or bylaws (or unless the
certificate of incorporation directs that a particular class of stock is to
elect such director(s), in which case a majority of the directors elected by
such class, or a sole remaining director so elected, shall fill such vacancy or
newly created directorship). The By-laws of GOLF-Del provide, that if authorized
by a resolution of the board of directors, directors may be elected to fill any
vacancy on the board, regardless of how such vacancy was created. Consequently,
the Board and not the shareholders will have the authority to fill any vacancy
on the board.
Loan to Officers and Employees
In accordance with both Idaho and Delaware law, GOLF-Idaho is, and GOLF-Del
will be, allowed to make loans to, guarantee the obligations of or otherwise
assist its officers or other employees and those of its subsidiaries (including
directors who are also officers or employees) when such action, in the judgment
of the directors, may reasonably be expected to benefit the corporation. The
Board of Directors currently has no plans to make such loans to, or guarantees
on behalf of, the Company's directors or officers.
Significant Differences Between the Corporation Laws of Idaho and Delaware
The corporation laws of Idaho and Delaware differ in many respects.
Although all the differences are not set forth in this Proxy Statement, certain
provisions, which could materially affect the rights of shareholders, are
summarized below. This summary does not purport to be a complete statement of
the differences between Idaho Business Corporation Act and the Delaware General
Corporation Law and related laws affecting shareholder's rights and this summary
is qualified in its entirety by reference to the provisions of these laws.
Shareholder Approval of Certain Business Combinations
In recent years, a number of states have adopted special laws designed to
make certain kinds of "unfriendly" corporate takeovers, or other transactions
involving a corporation and one or more or its significant shareholders, more
difficult. Under Section 203 of the Delaware General Corporation Law, certain
"business combinations" with "interested shareholders" of Delaware corporations
are subject to a three-year moratorium unless specified conditions are met.
Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested shareholder" for three years following the date
that such person or entity becomes an interested shareholder. With certain
exceptions, an interested shareholder is a person or entity who or which owns,
individually or with or through certain other persons or entities, fifteen
percent (15%) or more of the corporation's outstanding voting stock (including
any rights to acquire stock pursuant to an
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option, warrant, agreement, arrangement or understanding, or upon the exercise
of conversion or exchange rights, and stock with respect to which the person has
voting rights only), or is an affiliate or associate of the corporation and was
the owner, individually or with or through certain other persons or entities, of
fifteen percent (15%) or more of such voting stock at any time within the
pervious three years, or is an affiliate or associate of any of the foregoing.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested shareholders' sales
or other dispositions to the interested shareholder (except proportionately with
the corporation's other shareholders) of assets of the corporation or a direct
or indirect majority-owned subsidiary equal in aggregate market value to ten
percent (10%) or more of the aggregate market value of either the corporation's
consolidated assets or all of its outstanding stock; the issuance or transfer by
the corporation or a direct or indirect majority-owned subsidiary of stock of
the corporation or such subsidiary to the interested shareholder (except for
certain transfers in a conversion or exchange or a pro rata distribution or
certain other transactions, none of which increase the interested shareholder's
proportionate ownership of any class or series of the corporation's or such
subsidiary's stock or of the corporation's voting stock); or receipt by the
interested shareholder (except proportionately as a shareholder), directly or
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on business combinations of Section 203
does not apply if: (i) prior to the date on which such shareholder becomes an
interested shareholder the board of directors of the subject corporation
approves either the business combination or the transaction that resulted in the
person or entity becoming an interested shareholder; (ii) upon consummation of
the transaction that made him or her an interested shareholder, the interested
shareholder owns at least eighty-five percent (85%) of the corporation's voting
stock outstanding at the time the transaction commenced (excluding from the
eighty-five percent (85%) calculation shares owned by directors who are also
officers of the subject corporation and shares held by employee stock plans that
do not give employee participants the right to decide confidentially whether to
accept a tender or exchange offer); or (iii) on or after the date such person or
entity becomes an interested shareholder, the board approves the business
combination and it is also approved at a shareholder meeting by sixty-six and
two-thirds percent (66 2/3%) of the outstanding voting stock not owned by the
interested shareholder.
Section 203 only applies to certain publicly held corporations that have a
class of voting stock that is (i) listed on a national securities exchange, (ii)
quoted on an interdealer quotation system of a registered national securities
association such as the NASDAQ SmallCap or (iii) held of record by more than
2,000 Shareholders. Although a Delaware corporation to which Section 203
applies may elect not to be governed by Section 203, GOLF-Del does not intend to
so elect and thus will be governed by Section 203.
The Company believes that Section 203 will encourage any potential acquiror
to negotiate with the Company's Board of Directors. Section 203 also might have
the effect of limiting the ability of a potential acquiror to make a two-tiered
bid for GOLF-Del in which all shareholders would not be treated equally.
Shareholders should note, however, that the application of Section 203 to GOLF-
Del will confer upon the Company's Board of Directors the power to reject a
proposed business combination in certain circumstances, even though a potential
acquiror may be offering a substantial premium for GOLF-Del's shares over the
then-current market price. Section 203 would also discourage certain potential
acquirors unwilling to comply with its provisions. See "Shareholder Voting"
herein.
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Removal of Directors
Under Idaho law, any director or the entire board of directors may be
removed, with or without cause, with the approval of a majority of the
outstanding shares entitled to vote, unless the articles of incorporation
provide otherwise; however, if cumulative voting is authorized, no individual
director may be removed (unless the entire board is removed) if the number of
votes cast against such removal would be sufficient to elect the director under
cumulative voting. Under Delaware law, a director of a corporation that does not
have a classified board of directors or cumulative voting may be removed with or
without cause with the approval of a majority of the outstanding shares entitled
to vote at an election of directors. In the case of a Delaware corporation
having cumulative voting, if less than the entire board is to be removed, a
director may not be removed without cause if the number of shares voted against
such removal would be sufficient to elect the director under cumulative voting.
A director of a Delaware corporation with a classified board of directors may be
removed only for cause, unless the certificate of incorporation otherwise
provides. The Certificate of Incorporation of GOLF-Del provides for a classified
board of directors but does not provide for cumulative voting. As a result,
GOLF-Del directors may not be removed without cause. Additionally, the
Certificate of Incorporation of GOLF-Del provided that a director may only be
removed for cause and by the affirmative vote of a majority of voting security
holders.
Classified Board of Directors
A classified board is one on which a certain number, but not all, of the
directors are elected on a rotating basis each year. This method of electing
directors makes changes in the composition of the board of directors more
difficult, and thus a potential change in control of a corporation a lengthier
and more difficult process. Under Idaho law, a company with nine or more
directors may also provide for a classified board of directors by adopting
amendments to its certificate of incorporation. Delaware law permits, but does
not require, a classified board of directors, pursuant to which the directors
can be divided into as many as three classes with staggered terms of office,
with only one class of directors standing for election each year. The GOLF-Del
Certificate of Incorporation and By-laws provides for a classified board.
Indemnification and Limitation of Liability
Idaho and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. The laws of
both states also permit, with certain exceptions, a corporation to adopt charter
provisions eliminating the liability of a director to the corporation or its
shareholders for monetary damages for breach of the director's fiduciary duty.
There are nonetheless certain differences between the laws of the two states
respecting indemnification and limitation of liability.
Idaho law permits the Company to indemnify a present or former director,
officer, employee or agent of the Company for liabilities, including legal
expenses, arising by reason of service in such capacity if such person shall
have acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and in any criminal proceeding
if such person had no reasonable cause to believe his conduct was unlawful. In
the case of actions brought by or in the right of the corporation,
indemnification may be made if the person acted in good faith, and in a manner
that such person reasonably believed to be in, or not opposed to, the best
interest of the corporation; provided, however, that no indemnification may be
made for any claim, issue or manner as to which such person shall have been
adjudged to be liable for negligence or misconduct, unless, and only to the
extent that, the court in which the judgment was made or another court of
competent jurisdiction determines that such person is entitled to
indemnification.
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Neither the certificate of incorporation nor the by-laws of GOLF-Idaho
contain any provisions which prevent or prohibit the indemnification of the
GOLF-Idaho's directors or officers. However, in accordance with Idaho law and
the broad powers granted its directors and officers, GOLF-Idaho could provide
indemnification to its directors and officers.
The Certificate of Incorporation of GOLF-Del eliminates the liability of
directors to the corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director to the fullest extent permissible under Delaware
law, as such law exists currently or as it may be amended in the future. Under
Delaware law, such provision may not eliminate or limit director monetary
liability for breaches of the director's duty of loyalty to the corporation or
its shareholders and acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law. Such limitation of
liability provisions also may not limit a director's liability for violation of,
or otherwise relieve GOLF-Del or its directors from the necessity of complying
with federal or state securities laws, or affect the availability of non-
monetary remedies such as injunctive relief or rescission.
Delaware law and Idaho law generally permit indemnification of expenses,
including attorneys' fees, actually and reasonably incurred in the defense or
settlement of a derivative or third-party action, provided there is a
determination by a majority vote of a disinterested quorum of the directors, by
independent legal counsel or by a majority vote of a quorum of the Shareholders
that the person seeking indemnification acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation. Without court approval, however, no indemnification may be made in
respect of any derivative action in which such person is adjudged liable for
negligence or misconduct in the performance of his or her duty to the
corporation. Delaware law and Idaho law require indemnification of expenses
when the individual being indemnified has successfully defended any action,
claim, issue, or matter therein, on the merits or otherwise.
Expenses incurred by an officer or director in defending an action may be
paid in advance, under Delaware law and Idaho law, if such director or officer
undertakes to repay such amounts if it is ultimately determined that he or she
is not entitled to indemnification. In addition, the laws of both states
authorize a corporation's purchase of indemnity insurance for the benefit of its
officers, directors, employees and agents whether or not the corporation would
have the power to indemnify against the liability covered by the policy.
Delaware law also permits a Delaware corporation to provide indemnification
in excess of that provided by statute. Delaware law does not require
authorizing provisions in the certificate of incorporation and do not contain
express prohibitions on indemnification in certain circumstances; limitations on
indemnification may be imposed by a court, however, based on principles of
public policy.
A provision of Delaware law and Idaho law states that the indemnification
provided by statute shall not be deemed exclusive of any other rights under any
by-law, agreement, vote of shareholders or disinterested directors or otherwise.
If the Proposed Reincorporation is approved, GOLF-Del will enter into
indemnification agreements with the officers and directors substantially in the
form attached hereto as Exhibit D to provide for indemnification of officers and
---------
directors and advancement of expenses to the maximum extent permitted by
Delaware law, and a vote in favor of the Proposed Reincorporation will also
constitute approval of such indemnification agreements. Among other things, the
indemnification agreements will include within their purview future changes in
Delaware law that expand the permissible scope of indemnification of directors
and officers of Delaware corporations.
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Inspection of Shareholder List
Delaware law allows any shareholder to inspect the shareholder list for a
purpose reasonably related to such person's interest as a shareholder. Idaho
law permits such inspection but also requires that the shareholder have been a
holder of record for six (6) months prior to such request or own at least five
percent (5%) of outstanding shares. Delaware law provides for inspection rights
as to a list of shareholders entitled to vote at a meeting for any purpose
germane to the meeting. Similarly, Idaho law contains a provision which
provides for inspection rights as to a list of shareholders entitled to vote at
a meeting during the meeting for any purpose related to such meeting. The GOLF-
Idaho By-laws provide that the Company shall make its list of shareholders
available upon written demand of any shareholder for any purpose reasonably
related to such persons interests as a shareholder or at any time when required
by the demand of ten (10%) of the shares represented at any shareholders'
meeting. The GOLF-Del By-laws provide that the list of shareholders shall be
available to any shareholder for any purpose germane to the annual meeting for
at least ten (10) days prior to such meeting.
Distributions, Dividends and Repurchases of Shares
The concepts of par value, stated capital and surplus exist under both Idaho
and Delaware law. Like GOLF-Idaho, GOLF-Del's authorized common stock and
Preferred Stock will each have a $0.001 par value per share.
In general, Idaho law only permits distributions to be paid only if after
giving effect to the distributions, the corporation would be able to pay its
debts as they become due in the usual course of business and, also after giving
effect to the dividend, the corporation's total assets would be greater than the
sum of its total liabilities, plus, unless the articles of incorporation permit
otherwise, the amount that would be needed, if the corporation were to be
dissolved at the time of distribution, to satisfy the preferential rights upon
the dissolution of shareholders whose preferential rights are superior to those
receiving the distribution. Delaware law permits a corporation to declare and
pay dividends out of surplus or, if there is no surplus, out of net profits for
the fiscal year in which the dividend is declared and/or for the preceding
fiscal year as long as the amount of capital of the corporation following the
declaration and payment of the dividend is not less than the aggregate amount of
the capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets. The corporation may redeem
or repurchase its shares only if the capital of the corporation is not impaired
and such redemption or repurchase would not impair the capital of the
corporation. To date, GOLF-Idaho has not paid any cash dividends on its
outstanding shares and does not anticipate doing so for the foreseeable future.
Shareholder Voting
Both Idaho law and Delaware law generally require that a majority of the
shareholders of both acquiring and target corporations approve statutory
mergers. Delaware law does not require a shareholder vote of the surviving
corporation in a merger (unless the corporation provides otherwise in its
certificate of incorporation) if (a) the merger agreement does not amend the
existing certificate of incorporation, (b) each share of the stock of the
surviving corporation outstanding immediately before the effective date of the
merger is an identical outstanding or treasury share after the merger and (c)
either no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or the
treasury shares of common stock of the surviving corporation to be issued or
delivered under the plan of merger plus those initially issuable upon conversion
of any other shares, securities or obligations
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to be issued or delivered under such plan do not exceed twenty percent (20%) of
the shares of common stock of such constituent corporation outstanding
immediately prior to the effective date of the merger. Idaho law contains a
similar exception to its voting requirements for reorganizations.
Both Idaho law and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
all the votes entitled to be cast on the transaction.
Both Idaho law and Delaware law generally do not require class voting,
except in certain transactions involving an amendment to the certificate of
incorporation that adversely affects a specific class of shares.
Interested Director Transactions
Under both Idaho law and Delaware law, certain contracts or transactions in
which one or more of a corporation's directors has an interest are not void or
voidable because of such interest provided that certain conditions, such as
obtaining the required approval and fulfilling the requirements of good faith
and full disclosure, are met. With certain exceptions, the conditions are
similar under Idaho law and Delaware law. Under Idaho law and Delaware law, (a)
either the shareholders or the board of directors must approve any such contract
or transaction after full disclosure of the material facts, and, in the case of
board approval, the contract or transaction must also be "fair and reasonable"
(in Idaho, or "fair" (in Delaware) to the corporation or (b) the contract or
transaction must have been just and reasonable or fair as to the corporation at
the time it was approved. Under Idaho law, if shareholder approval is sought,
the interested director is not entitled to vote his shares at a shareholder
meeting with respect to any action regarding such contract or transaction. If
board approval is sought, the contract or transaction must be approved by a
majority vote of no fewer than two disinterested directors and directors having
no relationship to such director involved in the proposed transaction, without
counting the vote of any interested directors (except that interested directors
may be counted for purposes of establishing a quorum). Under Delaware law, if
board approval is sought, the contract or transaction must be approved by a
majority of the disinterested directors (even if the disinterested directors are
less than a quorum). Therefore, certain transactions that the Board of
Directors of GOLF-Idaho might not be able to approve because of the number of
interested directors, could be approved by a majority of the disinterested
directors of GOLF-Del, although less than a majority of a quorum. The Company
is not aware of any plans to propose any transaction involving directors of the
Company that could not be so approved under Idaho law but could be so approved
under Delaware law.
Shareholder Derivative Suits
Idaho law provides that any action brought by a shareholder bringing a
derivative action on behalf of a corporation must satisfy certain procedural
requirements. Under Delaware law, a shareholder may bring a derivative action
on behalf of the corporation only if the Shareholder was a shareholder of the
corporation at the time of the transaction in question or if his or her stock
thereafter devolved upon him or her by operation of law.
Appraisal and Dissenter's Rights
Under both Idaho law and Delaware law, a shareholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal rights pursuant to which such
shareholder may receive cash in the amount of the fair market value of his or
her shares in lieu of the consideration he or she would otherwise receive in the
transaction. Under both Delaware law and Idaho law, such fair market value is
determined exclusive of any element of value arising from the
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accomplishment or expectation of the merger or consolidation, and under Delaware
law such appraisal rights are not available (a) with respect to the sale, lease
or exchange of all or substantially all of the assets of the corporation, (b)
with respect to a merger or consolidation by a corporation the shares of which
are either listed on a national securities exchange or are held of record by
more than 2,000 holders if such Shareholders receive only shares of the
surviving corporation or shares of any other corporation that are either listed
on a national securities exchange or held of record by more than 2,000 holders,
plus cash in lieu of fractional shares of such corporations or (c) to
Shareholders of a corporation surviving a merger if no vote of the Shareholders
of the surviving corporation is required to approve the merger under certain
provisions of Delaware law. Under Idaho law appraisal rights are not available
to shareholders of the surviving company in a merger if a vote of the
shareholders of such corporation is not necessary to authorize such merger.
Submission of a merger to a vote of shareholders is not required if:
(i) The articles of incorporation of the surviving corporation do
not differ except in name from those of the corporation before the merger.
(ii) Each holder of shares of the surviving corporation which were
outstanding immediately before the effective date of the merger is to hold
the same number of shares with identical rights immediately after.
(iii) The number of voting shares outstanding immediately after the
merger, plus the number of voting shares issuable on conversion of other
securities issued by virtue of the terms of the merger and on exercise of
rights and warrants issued pursuant to the merger, will not exceed by more
than twenty percent (20%) the number of voting shares outstanding
immediately before the merger, and
(iv) The number of participating shares outstanding immediately after
the merger, plus the number of participating shares issuable on conversion
of other securities issued by virtue of the terms of the merger and on
exercise of rights and warrants so issued, will not exceed by more than
twenty percent (20%) the number of participating shares outstanding
immediately before the merger. Consequently, appraisal or dissenters' rights
are, therefore, available to shareholders of GOLF-Idaho with respect to the
Reincorporation Proposal.
Certain Federal Income Tax Consequences
The following is a discussion of certain federal income tax considerations
that may be relevant to holders of GOLF-Idaho Common Stock, Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock who receive GOLF-
Del Common Stock, respectively, Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock in exchange for their GOLF-Idaho Common
Stock, Series A Preferred Stock, Series B Preferred Stock, and Series C
Preferred Stock, as a result of the Proposed Reincorporation. This discussion
does not address all of the tax consequences of the Proposed Reincorporation
that may be relevant to particular shareholders, such as dealers in securities,
or those GOLF-Idaho shareholders who acquired their shares on the exercise of
stock options, nor does it address the tax consequences to holders of options to
acquire GOLF-Idaho Common Stock. Furthermore, no foreign, state, or local tax
considerations are addressed herein. IN VIEW OF THE VARYING NATURE OF SUCH TAX
CONSEQUENCES, EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS
TO THE SPECIFIC TAX CONSEQUENCES OF THE PROPOSED REINCORPORATION, INCLUDING THE
APPLICABILITY OF FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS.
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Subject to the limitations, qualifications and exceptions described herein,
and assuming the Proposed Reincorporation qualifies as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), the following tax consequences generally should result:
(a) No gain or loss should be recognized by holders of GOLF-Idaho
Common Stock, Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, respectively, upon receipt of GOLF-Del common stock, Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
respectively, pursuant to the Proposed Reincorporation:
(b) The aggregate tax basis of the GOLF-Del common stock, Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
received by each shareholder in the Proposed Reincorporation should be equal
to the aggregate tax basis of the GOLF-Idaho Common Stock, Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock,
respectively, surrendered in exchange therefore; and
(c) The holding period of the GOLF-Del common stock Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
received by each shareholder of GOLF-Idaho Common Stock, Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, respectively,
should include the period for which such shareholder held the GOLF-Idaho
Common Stock, Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock surrendered in exchange therefor, provided that such GOLF-
Idaho Common Stock, Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock was held by the shareholder as a capital asset at
the time of Proposed Reincorporation.
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PROPOSAL NO. 3
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
CHANGING THE NAME OF THE COMPANY
The Board of Directors has given consideration to a possible name change for
Golf-Technology Holding, Inc., primarily because the Company's present name does
not take advantage of the commercial recognition of the brand under which the
Company's products are marketed. After substantial review, the Board has
decided to recommend to the shareholders that the name of the Company be changed
to Snake Eyes Golf Clubs, Inc.
The Board of Directors has proposed and recommends to the Company's
Shareholders an amendment to Article "FIRST" of the Company's Certificate of
Incorporation to change the name of the company from Golf Technology Holding,
Inc. to Snake Eyes Golf Clubs, Inc. This proposed amendment to the Company's
Certificate of Incorporation is indicated on Exhibit D annexed hereto.
---------
Proposal No. 3 must be approved by the affirmative vote of the holders of a
majority of the Company's outstanding Common Stock and Series A Preferred Stock
entitled to vote on this matter at the Annual Meeting.
The Board of Directors recommends a vote FOR the approval of Proposal No. 3.
The Certificate of Incorporation and By-laws of GOLF-Del, as set forth in
Exhibit B and Exhibit C, respectively, have been drafted assuming the approval
of Proposal No. 3. If Proposal No. 2 is approved and Proposal No. 3 is not
approved, the Certificate of Incorporation and By-laws of Golf-Del will be
adjusted accordingly.
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PROPOSAL NO. 4
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
CHANGING THE AUTOMATIC CONVERSION DATE
FOR THE SERIES B PREFERRED STOCK
The Board of Directors has proposed and recommends to the Shareholders and
the holders of the Series B Preferred Stock an amendment to the Company's
Certificate of Incorporation which would change the automatic conversion date of
Article FOURTH, Paragraph D(c)(v) from December 31, 1997 to December 31, 1999.
This proposed amendment to the Company's Certificate of Incorporation is
indicated on Exhibit E annexed hereto.
---------
Proposal No. 4 must be approved by the affirmative vote of the majority of
the outstanding shares of Common Stock and Series A Preferred Stock entitled to
vote, voting together as one class, and Proposal No. 4 must be approved by the
affirmative vote of the majority of the outstanding shares of Series B Preferred
Stock entitled to vote, voting as a separate class. If Proposal No. 4 does not
receive the affirmative vote of a majority of the outstanding shares of Series B
Preferred Stock entitled to vote, even if approved by the Shareholders, Proposal
No. 4 is not approved.
The Board of Directors recommends a vote FOR approval Proposal No. 4
The Certificate of Incorporation and By-laws of GOLF-Del, as set forth in
Exhibit B and Exhibit C, respectively, have been drafted assuming the approval
of Proposal No. 4. If Proposal No. 2 is approved and Proposal No. 4 is not
approved, the Certificate of Incorporation and By-laws of Golf-Del will be
adjusted accordingly.
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PROPOSAL NO. 5
PROPOSAL TO APPROVE THE ADOPTION OF
THE GOLF-TECHNOLOGY HOLDING, INC.
1997 STOCK OPTION AND LONG-TERM INCENTIVE PLAN
Introduction
At the Annual Meeting there will be presented to Shareholders a proposal to
approve the adoption of the Golf-Technology Holding, Inc. 1997 Stock Option and
Long-Term Incentive Plan (the "1997 Plan"). The 1997 Plan was originally
adopted by the Board of Directors on October __, 1997. The 1997 Plan authorizes
the issuance of up to 1,250,000 shares of Common Stock pursuant to options to
purchase Common Stock ("Options") or through grants of restricted stock. The
1997 Plan provides for the issuance of both Incentive Stock Options and Non-
Qualified Options, as those terms are defined in the Internal Revenue Code of
1986, as amended (the "Code"). Pursuant to Code requirements, in order for
stock options to qualify as Incentive Stock Options, the plan pursuant to which
such options are issued must be approved by the Shareholders of the Company
within twelve months of the adoption of the 1997 Plan by the Board of Directors.
In addition, the 1997 Plan provides for the grant of shares of restricted stock.
Accordingly, if the 1997 Plan is not approved by the Shareholders, the 1997 Plan
will continue to be in effect, however only Non-Qualified Options and restricted
stock may be issuable thereunder.
The 1997 Plan is intended to promote the interests of Golf-Technology
Holding, Inc. and its shareholders by providing incentives to key employees,
directors and consultants of the Company and its subsidiaries, on whose
judgment, initiative, and efforts the successful conduct of the business of the
Company depends. Such employees, as well as directors of the Company and
consultants to the Company and its subsidiaries are responsible for the
management, growth, and protection of the business, and the 1997 Plan provides
such individuals with appropriate incentives and rewards to encourage them to
maximize their performance and efforts on behalf of the Company. As of October
__, 1997, no shares of Common Stock were available for grant under the Company's
existing stock option plan.
The full text of the 1997 Plan appears as Exhibit F to this Proxy
Statement. The principal features of the 1997 Plan are summarized below, but
such summary is qualified in its entirety by the full text of the 1997 Plan.
Administration of the 1997 Plan
The 1997 Plan shall be administered by the Board of Directors. The Board of
Directors may appoint the Compensation Committee or another committee of the
Board of Directors (the "Committee") of two or more of its members to administer
the 1997 Plan, provided, however, the Committee shall not take any action under
the 1997 Plan unless it is at all times composed solely of not less than two
"Non-Employee Directors" within the meaning of Rule 16b-3, as promulgated under
the Exchange Act.
Subject to the terms of the 1997 Plan, the Board of Directors or the
Committee may determine and designate those employees, directors and consultants
of the Company and its subsidiaries to whom options or restricted stock should
be granted and the nature and terms of the options and the conditions imposed on
the restricted stock to be granted. The Board of Directors or the Committee,
subject to the express provisions of the 1997 Plan, may at any time, or from
time to time, suspend or terminate the 1997 Plan in whole or in part, or amend
it in such respects as the Board of Directors or Committee deems appropriate;
provided, however, no amendment, suspension or termination of the Plan shall,
without the
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Participant's (as defined in the 1997 Plan) consent, alter or impair any of the
rights or obligations under any option or restricted stock award granted to a
Participant under the 1997 Plan.
Stock Subject to the 1997 Plan
The stock subject to Options (as defined in the 1997 Plan) under the 1997
Plan shall be authorized but unissued shares of Common Stock or shares of Common
Stock reacquired by the Company in any manner. The aggregate number of shares
which may be issued by the Board of Directors or the Committee in its sole and
absolute discretion pursuant to the 1997 Plan is one million two hundred fifty
thousand (1,250,000) shares, subject to adjustment upon certain occurrences as
provided in the 1997 Plan.
Grant of Options or Restricted Stock
Options or restricted stock may be granted by the Board of Directors or the
Committee pursuant to the 1997 Plan at any time on or after the adoption of the
1997 Plan by the Board, effective as of_________ __, 1997, and prior to ________
__, 2007.
The Board of Directors or the Committee shall have the right, with the
consent of the Participant, to convert an Incentive Stock Option granted under
the 1997 Plan to a Non-Qualified Option. Further, if this Proposal No. 5 is not
approved by the Shareholders all Options granted hereunder will be Non-Qualified
Options.
Exercise of Stock Options
The exercise price per share as specified in the grant agreement relating
to each Option granted under the 1997 Plan shall be determined by the Board of
Directors or the Committee, provided, however, that the exercise price per share
of each Incentive Stock Option granted under the 1997 Plan shall not be less
than the fair market value, as defined in the 1997 Plan, per share of Common
Stock on the date of such grant. The exercise price per share of each Non-
Qualified Option granted under the 1997 Plan may be less than or equal to the
fair market value, but not less than fifty percent (50%) of the fair market
value, on the date of such grant.
Subject to earlier termination upon termination of employment as provided
in the 1997 Plan and the Incentive Stock Option limitations as provided in the
1997 Plan, each Option shall expire on the date specified by the Board of
Directors or the Committee which shall be no later than ten years from the date
of grant.
The Option shall either be fully exercisable on the date of grant or shall
become exercisable thereafter in such installments as the Board of Directors or
the Committee may specify. In the absence of provisions in an individual grant
agreement or employment agreement to the contrary, Options shall vest ratably
over a five (5) year period.
If a Participant who has been granted an Option ceases to be employed by
the Company and all its subsidiaries other than for cause or by reason of
retirement, death or disability, no further installments of his or her Options
shall become exercisable, and his or her Options shall terminate after the
passage of ninety (90) days from the date of termination of his or her
employment, but in no event later than on their specified expiration dates.
Options granted to such Participant, to the extent they were not exercisable at
the time of such termination, shall expire at the close of business on the date
of such termination.
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If a Participant who has been granted an Option ceases to be employed by
the Company and all its subsidiaries for Cause (as defined in the 1997 Plan),
all outstanding Options granted to such Participant shall automatically expire
at the commencement of the business as of the date of such termination.
If a Participant who has been granted an Option ceases to be employed by
the Company and all subsidiaries by reason of Participant's death, disability or
retirement, Participant or Participant's personal representative, estate or
beneficiary who has acquired the Option by will or by the laws of decent and
distribution, shall have the right to exercise any Options held by the
participant on the date of termination of employment, to the extent of the
number of shares with respect to which the participant could have exercised on
that date, at any time prior to the specified expiration date of the Options.
Options granted to such Participant, to the extent they were not exercisable at
the time of such termination, shall expire at the close of business on the date
of such termination. The effect of exercising any Incentive Stock Option on a
day that is more than ninety (90) days after the date of termination (or, in the
case of a termination of employment on account of death or disability, on a day
that is more than one year after the date of such termination) will be to cause
such Incentive Stock Option to be treated as a Non-Qualified Option.
Vesting of Restricted Stock
At the time of grant of shares restricted stock, the Board of Directors or
the Committee may impose such restrictions or conditions, not inconsistent with
the provisions of the 1997 Plan, to the vesting of such shares as the Board of
Directors or the Committee, in its absolute discretion, deems appropriate.
In the event that the employment of a Participant with the Company shall
terminate for any reason other than cause prior to the vesting of shares of
restricted stock granted to such Participant, the shares of restricted stock
shall be forfeited on the date of such termination, provided however, that the
Committee may, in its sole and absolute discretion, vest the Participant in all
or any portion of shares of Restricted Stock which would otherwise be forfeited
pursuant to this provision.
In the event of the termination of a Participant's employment for cause,
all shares of restricted stock granted to such Participant which have not vested
as of the date of such termination shall immediately be forfeited.
Change in Control
Subject to any required action by the shareholders of the Company, if the
Company is to be consolidated with or acquired by another entity in a merger,
sale of all or substantially all of the Company's assets or otherwise, the
Committee or the board of directors of any entity assuming the obligations of
the Company hereunder, shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by substituting
immediately prior to such event (whether or not then exercisable) on an
equitable basis for the shares then subject to such Options the consideration
payable with respect to the outstanding shares of Common Stock in connection
with an Acquisition (as defined in the 1997 Plan); (ii) upon written notice to
the Participants, provide that all Options must be exercised, to the extent then
exercisable, within a specified number of days of the date of such notice, at
the end of which period the Options shall terminate; (iii) terminate all Options
in exchange for a cash payment equal to the excess of the fair market value of
the shares subject to such Options (to the extent then exercisable) over the
exercise price thereof; or (iv) any combination of (i), (ii) and (iii).
Subject to any required action by the shareholders of the Company, in the
event that the Company shall be the surviving corporation in any merger or
consolidation (except a merger or consolidation as a
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result of which the holders of shares of Common Stock receive securities of
another corporation), each Option outstanding on the date of such merger or
consolidation shall pertain to and apply to the securities which a holder of the
number of shares of Common Stock subject to such Option would have received in
such merger or consolidation.
In the event of a recapitalization or reorganization of the Company (other
than a transaction pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock, a
Participant upon exercising an Option shall be entitled to receive for the
purchase price paid upon such exercise the securities the Participant would have
received if the Participant had exercised the Participant's Option prior to such
recapitalization or reorganization.
Federal Income Tax Consequences
Incentive Stock Options granted under the 1997 Plan are intended to be
qualified incentive stock options in accordance with the provisions of Section
422 of the Code. All other options granted under the 1997 Plan are Non-
Qualified Options not entitled to special tax treatment under Section 422 of the
Code. Generally, the grant of an Incentive Stock Option will not result in
taxable income for regular income tax purposes to the recipient at the time of
the grant, and the Company will not be entitled to an income tax deduction at
such time. Generally, the grant of Non-Qualified Options will not result in
taxable income to the recipient at the time of the grant to the extent that it
is granted at not less than 100% of the fair market value of the Company's
Common Stock at such time. So long as such option does not result in taxable
income to the recipient at the time of the grant, the Company will not be
entitled to an income tax deduction.
Upon the exercise of an Incentive Stock Option granted under the 1997 Plan,
the recipient will not be treated as receiving any taxable income, and the
Company will not be entitled to an income tax deduction. Upon the exercise of a
Non-Qualified Option, a Participant will recognize ordinary income, in an amount
equal to the excess of the fair market value of the underlying shares of the
Company's Common Stock, at the time of exercise, over the exercise price. The
ordinary income recognized by an employee is subject to withholding and
employment taxes. The Company will receive an income tax deduction for the
amount of ordinary income recognized by the recipient at the time and in the
amount that the recipient recognizes such income to the extent permitted by
Section 162(m) of the Code.
Upon subsequent disposition of the shares received upon exercise of an
Option, any differences between the tax basis of the shares and the amount
realized on the disposition is generally treated as long-term or short-term
capital gain or loss, depending on the holding period of shares of Common Stock;
provided, that if the shares subject to an Incentive Stock Option are disposed
of prior to the expiration of two years from the date of grant and one year from
the date of exercise, the gain realized on the disposition will be treated as
ordinary income to the Participant and the Company will receive a corresponding
income tax deduction.
The recipient of a grant of restricted stock will be required to recognize
ordinary compensation income equal to the fair market value of the restricted
stock on the settlement date of such restricted stock. The Company will receive
an income tax deduction equal to the amount of ordinary income recognized by the
recipient to the extent permitted by Section 162(m) of the Code.
The foregoing statements are intended to summarize the general principles
of current federal income tax law applicable to options that may be granted
under the 1997 Plan. The tax consequences of awards made under the 1997 Plan are
complex, subject to change, and may vary depending on the taxpayer's particular
circumstances.
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Required Vote
The affirmative vote of a majority of the outstanding shares of Common
Stock and Series A Preferred Stock cast on this proposal in person or by proxy
at the Annual Meeting is required for the approval of the adoption of the 1997
Plan.
The Board of Directors recommends a vote FOR adoption of the 1997 Plan.
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PROPOSAL NO. 6
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP served as the Company's independent accountants for
the fiscal years ended December 31, 1995 and December 31, 1996 and has been
appointed by the Board of Directors to continue as the Company's independent
accountants for the fiscal year ending December 31, 1997. In the event that
ratification of this appointment of auditors is not approved by the affirmative
vote of a majority of votes cast on this matter, then the appointment of
independent accountants will be reconsidered by the Board of Directors. Unless
marked to the contrary, any proxy received will be voted for RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT ACCOUNTANTS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1997.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting. The representative will have an opportunity to make a statement
and will be able to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE YEAR
ENDING DECEMBER 31, 1997.
SHAREHOLDER PROPOSALS
To be considered for presentation at the annual meeting of the Company's
Shareholders to be held in 1999, a Shareholder proposal must be received by
Harold E. Hutchins, Secretary, Golf-Technology Holding, Inc., 13000 Sawgrass
Village Circle, Suite 30, Ponte Vedra Beach, Florida, 32082, no later than
December 31, 1998.
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OTHER MATTERS
The Board of Directors knows of no other business which will be presented to
the Annual Meeting. If any other business is properly brought before the Annual
Meeting, it is intended that proxies in the enclosed form will be voted in
respect thereof in accordance with the judgment of the persons voting the
proxies.
It is important that the proxies be returned promptly and that your shares
be represented. Shareholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
/s/ Harold E. Hutchins
Harold E. Hutchins
President, Chief Executive Officer,
Chief Financial Officer, Chief
Operating Officer and Secretary
Date: November __, 1997
Ponte Vedra Beach, Florida
32
<PAGE>
EXHIBIT A
PLAN AND AGREEMENT OF MERGER
BETWEEN
SNAKE EYES GOLF CLUBS, INC.
(A Delaware Corporation)
AND
GOLF-TECHNOLOGY HOLDING, INC.
(An Idaho Corporation)
This Plan and Agreement of Merger made and entered into on the ____ day of
_________, 1997, by and between Snake Eyes Golf Clubs, Inc. a Delaware
corporation ("GOLF-Del") and Golf-Technology Holding, Inc., an Idaho corporation
("GOLF-Idaho").
WITNESSETH:
WHEREAS, GOLF-Del is a corporation organized and existing under the laws of
the State of Delaware, its Certificate of Incorporation having been filed in the
Office of the Secretary of State of the State of Delaware on _____________,
1997; and
WHEREAS, GOLF-Idaho is a corporation organized and existing under the laws
of the State of Idaho; and
WHEREAS, the aggregate number of shares which GOLF-Idaho has authority to
issue is thirty million (30,000,000); and
WHEREAS, the board of directors of each of the constituent corporations
deems it advisable that GOLF-Idaho be merged into GOLF-Del, the Delaware
corporation, on the terms and conditions hereinafter set forth, in accordance
with the applicable provisions of the statutes of the States of Delaware and
Idaho respectively, which permit such merger;
NOW, THEREFORE, in consideration of the premises and of the agreements,
covenants and provisions hereinafter contained, GOLF-Del and GOLF-Idaho, by
their respective boards of directors, have agreed and do hereby agree, each with
the other as follows:
ARTICLE I
GOLF-Del and GOLF-Idaho shall be merged into a single corporation, in
accordance with applicable provisions of the laws of the State of Idaho and of
the State of Delaware, by GOLF-Idaho merging into GOLF-Del, the Delaware
corporation, which shall be the surviving corporation.
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ARTICLE II
Upon the merger becoming effective as provided in the applicable laws of the
State of Idaho and of the State of Delaware (the time when the merger shall so
become effective being sometimes herein referred to as the "Effective Date of
the Merger") the two constituent corporations shall become a single corporation,
which shall be GOLF-Del, the Delaware corporation, as the surviving corporation,
and the separate existence of GOLF-Idaho corporation shall cease except to the
extent provided by the laws of the State of Idaho.
ARTICLE III
The Certificate of Incorporation of GOLF-Del shall be the Certificate of
Incorporation of GOLF-Del which is attached hereto as Exhibit A.
ARTICLE IV
The manner of converting the outstanding shares of GOLF-Idaho into shares of
Golf-Del shall be as follows: (1) each outstanding share of GOLF-Idaho's common
stock, $0.001 par value, will automatically be converted into one share of GOLF-
Del common stock, $0.001 par value, (2) each outstanding share of GOLF-Idaho's
Series A Preferred Stock, $0.001 par value, will automatically be converted into
one share of GOLF-Del Series A Preferred Stock, $.001 par value, and (3) each
outstanding share of GOLF-Idaho's Series B Preferred Stock, $0.001 par value,
will automatically be converted into one share of GOLF-Del Series B Preferred
Stock, $0.001 par value and (4) each outstanding share of GOLF-Idaho's Series C
Preferred Stock, $0.001 par value, will automatically be converted into one
share of GOLF-Del's Series C Preferred Stock, $0.001 par value, upon the
effective date of the merger. Each stock certificate representing issued and
outstanding shares of GOLF-Idaho's common stock, Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock will continue to represent
the same number of shares of common stock, Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, respectively, of GOLF-Del. IT WILL
NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES
FOR STOCK CERTIFICATES OF GOLF-DEL. However, shareholders may exchange their
certificates if they so choose. The common stock of GOLF-Idaho is quoted on the
NASDAQ Small Cap Market (the "NASDAQ Small Cap") and the after the merger GOLF-
Del's common stock will continue to be traded on the NASDAQ Small Cap under the
symbol "SNKE+".
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<PAGE>
IN WITNESS WHEREOF, GOLF-Del and GOLF-Idaho, pursuant to the approval and
authority duly given by resolutions adopted by their respective boards of
directors have caused this Plan and Agreement of Merger to be executed by an
authorized officer of each party thereto.
SNAKE EYES GOLF CLUBS, INC.
(A Delaware Corporation)
By:
------------------------------
Harold E. Hutchins
GOLF-TECHNOLOGY HOLDING, INC.
(An Idaho Corporation)
By:
------------------------------
Harold E. Hutchins
A-3
<PAGE>
I, Harold E. Hutchins, Secretary of (1) Snake Eyes Golf Clubs, Inc. ("GOLF-
Del"), a corporation organized and existing under the laws of the State of
Delaware and (2) Golf-Technology Holding, Inc. ("GOLF-Idaho"), a corporation
organized and existing under the laws of the State of Idaho, hereby certify, as
Secretary of the said corporations, that the Plan and Agreement of Merger to
which this certificate is attached, after having been first duly signed on
behalf of said corporation by an authorized officer of Golf-Idaho. This Plan
and Agreement of Merger was duly approved by the sole shareholder of GOLF-Del
pursuant to a unanimous written consent of such sole shareholder and the
shareholders of GOLF-Idaho at the annual meeting of shareholders of GOLF-Idaho,
for the purpose of considering and taking action upon said Plan and Agreement of
Merger, that _______ shares of voting stock of GOLF-Idaho were on said date
issued and outstanding and that the holders of _______ shares of GOLF-Idaho
voted by ballot in favor of said Plan and Agreement of Merger and the holders of
_______ shares of GOLF-Idaho voted by ballot against same, the said affirmative
vote representing at least a majority of the total number of shares of the
outstanding capital stock of GOLF-Idaho, and that thereby the Plan and
Agreement of Merger was at said meeting duly adopted as the act of the
Shareholders of GOLF-Idaho, and the duly adopted agreement of said corporation.
WITNESS my hand on behalf of said _________________ on this ____ day of
___________, 1997.
--------------------------------
Harold E. Hutchins
Secretary
A-4
<PAGE>
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
SNAKE EYES GOLF CLUBS, INC.
FIRST: The name of the corporation is Snake Eyes Golf Clubs, Inc.
-----
(hereinafter referred to as the "Corporation"),
SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is, United Corporate Services, Inc., 15 East North Street,
Dover, Delaware, County of Kent, 19901. The name of the registered agent of the
Corporation at that address is United Corporate Services, Inc.;
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which a corporation may be organized under the Delaware General
Corporation Law.
FOURTH: A. The total number of shares of all classes of stock which the
------
Corporation shall have authority to issue is thirty million (30,000,000),
consisting of twenty-five million (25,000,000) shares of Common Stock, par value
one-tenth of one cent ($0.001) per share (the "Common Stock") and five million
(5,000,000) shares of Preferred Stock, par value one-tenth of one cent ($0.001)
per share (the "Preferred Stock").
B. The board of directors is authorized, subject to any
limitations prescribed by law, to provide for the issuance of shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware (such certificate being hereinafter
referred to as a "Preferred Stock Designation"), to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences, and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof. The number of
authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the Common Stock without a vote of the holders of a
majority of the Common Stock, without a vote of the holders of the Preferred
Stock, or of any series thereof, unless a vote of any such holders is required
pursuant to the terms of any Preferred Stock Designation.
C. Series A Preferred Stock. Four Hundred Thousand (400,000) of
-------------------------
the Five Million (5,000,000) authorized shares Preferred Stock of the
Corporation shall be designated Series A preferred stock (the "Series A
Preferred Stock") and shall possess the rights set forth below:
(a) Voting Rights. (i) Except as otherwise provided herein or as
-------------
required by law, the holders of shares of Series A Preferred Stock shall not be
entitled to vote on any matters that come before the shareholders.
(ii) In the event the Corporation shall fail to pay current
dividends on the Series A Preferred on four Dividend Payment Dates (as defined
herein), whether consecutive or non-
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<PAGE>
consecutive, the holders shall be entitled to vote, on a one-vote-per-share
of Series A Preferred Stock basis, with the holders of the Common Stock on
all matters submitted to the Company's shareholders. The holders shall
continue to be entitled to the foregoing right to vote, notwithstanding the
subsequent payment of any of or all such dividends.
(iii) On all matters on which the Series A Preferred Stock
is entitled to vote by law, the holders shall be entitled to one vote per
share of Series A Preferred Stock, voting separately as a single class.
(b) Dividend Rights. (i) Each issued and outstanding share of
---------------
Series A Preferred Stock shall entitle the holder of record thereof to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, dividends in cash at the annual rate of nine
percent (9%), as adjusted for stock splits, stock dividends,
recapitalization, reclassifications and similar events, payable quarterly
on March 31, June 30, September 30 and December 31, of each year,
commencing June 30, 1995 (each a "Dividend Payment Date"). Dividends and
distributions (other than those payable solely in Common Stock) may be
paid, or declared and set aside for payment, upon shares of Common Stock in
any calendar year only if dividends shall have been paid, or declared and
set apart for payment, on account of all shares of Series A Preferred Stock
then issued and outstanding, at the aforesaid rate for such calendar year.
(ii) The right to dividends upon the issued and outstanding
shares of Series A Preferred Stock shall be cumulative from the date of
issuance of such share of Preferred Stock to which the dividend relates so
that such rights shall be deemed to accrue, whether earned, or whether
there be funds legally available therefor, or whether said dividends shall
have been declared; and if such dividends shall not have been declared and
paid, the deficiency shall first be fully paid on the Series A Preferred
Stock, before any dividend or other distribution (other than those payable
solely in Common Stock) may be paid, or declared and set apart for payment,
to the holders of shares of Common Stock, and shall in any event be paid
upon conversion of the Series A Preferred Stock, in cash, or at the
election of the holders of shares of Series A Preferred Stock, partly in
cash and partly in shares of Common Stock, or all in shares of Common
Stock, at the fair market value of the Common Stock at the time of payment,
as determined in as set forth in paragraph (e) hereof. Any accumulation of
dividends on the shares of Series A Preferred Stock shall not bear
interest. The dividends payable upon the issued and outstanding shares of
Series A Preferred Stock shall be payable upon a pro rata basis.
(iii) The restrictions on dividends and distributions with
respect to shares of Common Stock and of Series A Preferred Stock set forth
in paragraph (b) hereof are in addition to, and not in derogation of, the
other restrictions on such dividends and distributions set forth herein.
(iv) The Holders shall be entitled to the voting rights set
forth in paragraph (a)(ii) in the event dividends are not paid on four
Dividend Payment Dates.
(c) Liquidation Rights. In the event of a voluntary or
------------------
involuntary liquidation, dissolution, or winding up of the Corporation, the
holders of record of shares of Series A Preferred Stock shall be entitled
to receive, out of the assets of the Corporation legally available
therefor, five Dollars ($5.00) per share of Series A Preferred Stock, plus
a further amount per share equal to dividends, if any (i) then declared and
unpaid on account of shares of Series A Preferred Stock and (ii) whether or
not declared, then accrued in accordance with the provisions of
subparagraph (b)(ii) hereof before any payment shall be made or any assets
distributed to the holders of shares of Common Stock. If, upon any
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<PAGE>
liquidation, dissolution, or winding up, whether voluntary or involuntary,
the assets thus distributed among the holders of the Series A Preferred
Stock shall be insufficient to permit payment to such holders of the full
preferential amounts aforesaid, then the entire assets of the Corporation
to be distributed shall be distributed ratably among the holders of the
Series A Preferred Stock shall be insufficient to permit payment to such
holders of the full preferential amounts aforesaid, then the entire asserts
of the Corporation to be distributed shall be distributed ratably among the
holders of Series A Preferred Stock.
(d) Conversion Rights. (i) Subject to the terms and conditions
-----------------
hereof, each holder of record of shares of Series A Preferred Stock may, at
any time, upon surrender to the Corporation of the certificates therefor at
the principal office of the Corporation or at such other place as the
Corporation shall designate, convert all or any part of such holder's
shares of Series A Preferred Stock into such number of fully paid and non-
assessable shares of Common Stock of the Corporation (as such Common Stock
shall then be constituted) equal to the product of (A) the number of shares
of Series A Preferred Stock which such holder shall then surrender to the
Corporation, multiplied by (B) the number determined by dividing Five
Dollars ($5.00) by the Conversion Price (as hereinafter defined) per share
for the Series A Preferred Stock in effect at the time of conversion.
(ii) For purposes of this Certificate of Designation:
"Additional Shares of Common Stock" shall mean all shares of
---------------------------------
Common Stock issued by the Corporation after the Issuance Date (as defined
herein) whether or not subsequently reacquired or retired by the
Corporation, other than (i) shares of Common Stock issued upon conversion
of the Series A Preferred Stock, (ii) any shares of the Company's Common
Stock issued pursuant to shares which are currently reserved for issuance
under the Golf-Technology Holding, Inc. Stock Option Plan (as such plan may
be reconstituted to purchase Common Stock of the Company) and (iii) up to
500,000 shares of Common Stock (which number may be proportionately
increased or decreased solely in the event of a subdivision or combination
of the Company's Common Stock or the payment of a dividend on all shares of
the Company's Common Stock payable in Common Stock of the Company) issued
pursuant to options, other rights and convertible securities having
exercise or conversion prices below the Conversion Price in effect which
options, rights or securities are issued as incentive compensation to
employees of the Company or its affiliates or to independent contractors
who act as agents for the Company or its affiliates in connection with the
Company's product sales.
"Conversion Price" shall mean the price at which shares of the
----------------
Common Stock shall be deliverable upon conversion of the Series A Preferred
Stock. The Conversion Price shall initially be Five Dollars ($5.00). The
Conversion Price shall be subject to adjustment as provided below:
"Convertible Securities" shall mean any evidences of indebtedness,
----------------------
shares or securities convertible into, exercisable for or exchangeable for
Additional Shares of Common Stock.
"Issuance Date" shall mean the date the first share of Series A
-------------
Preferred Stock is issued.
"Options" shall mean rights, options or warrants to subscribe for,
-------
purchase or otherwise acquire Common Stock or Convertible Securities.
(iii) Adjustments to Conversion Price for Diluting Issues
---------------------------------------------------
(A) In the event the Corporation at any time or from time to time
shall declare or pay any dividend on the Common Stock payable in Common
Stock, or effect a subdivision of the outstanding
B-3
<PAGE>
shares of Common Stock into a greater number of shares of Common Stock (by
reclassification, stock split or otherwise than by payment of a dividend in
Common Stock), then and in any such event, the Conversion Price in effect
shall be proportionately decreased:
(i) in the case of any such dividend, immediately after the
close of business on the record date for the determination of holders of
any class of securities entitled to receive such dividend, or
(ii) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which such
subdivision becomes effective.
(B) In the event the outstanding shares of Common Stock shall be
combined or consolidated, by the reclassification or otherwise, into a
lesser number of shares of Common Stock, the Conversion Price in effect
immediately prior to such combination or consolidation shall, concurrently
with the effectiveness of such combination or consolidation, be
proportionately increased.
(C) In case of any consolidation or merger of the Corporation
with or into another corporation or the conveyance of all or substantially
all of the assets of the Corporation to another corporation, each share of
Series A Preferred Stock shall thereafter be convertible into the number of
shares of stock or other securities or property to which a holder of the
number of shares of Common Stock of the Corporation deliverable upon
conversion of such Series A Preferred Stock would have been entitled upon
such consolidation, merger or conveyance; and, in any such case,
appropriate adjustment (as determined by the Board of Directors) shall be
made in the application of the provisions herein set forth with respect to
the rights and interest thereafter of the holders of the Series A Preferred
Stock, to the end that the provisions set forth herein (including
provisions with respect to changes in and other adjustments of the
Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be possible, in relation to any, shares of stock or other property
thereafter deliverable upon the conversation of the Series A Preferred
Stock.
(D) If the Common Stock issuable upon the conversion of the
Series A Preferred Stock shall be changed into the same or a different
number of shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for above), the Conversion Price then in
effect shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted such that the Series A
Preferred Stock shall be convertible into, in lieu of the number of shares
of Common Stock which the holder would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock into
which the Common Stock issuable upon conversion of the Series A Preferred
Stock immediately prior to such effectiveness would have been changed.
(E) If and whenever, after the Issuance Date, the Corporation
shall issue or sell, or is, in accordance with subparagraphs E(1) through
E(6), deemed to have issued or sold, any Additional Shares of Common Stock
for a consideration per share less than the Conversion Price in effect for
the Series A Preferred Stock, immediately prior to the time of such issue
or sale, then, forthwith upon such issue or sale, such Conversion Price
shall be reduced as of the opening of business on the date of such issue or
sale, to a price determined by multiplying the Conversion Price for the
Series A Preferred Stock by a fraction (a) the numerator of which shall be
(A) the number of shares of Common Stock outstanding immediately prior to
such issue or sale plus (B) the number of shares of Common Stock which the
aggregate consideration received (or by express provision hereof deemed to
have been received) by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at
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<PAGE>
such Conversation Price for the Series A Preferred Stock and (b) the
denominator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date of such issue after giving
effect to such issue of Additional Shares of Common Stock.
For purposes of this subparagraph E, the following subparagraphs
(1) to (6) shall also be applicable:
(E)(1) Issuance of Options. In case at any time after the
-------------------
Issuance Date the Corporation shall in any manner grant (whether directly
or by assumption in a merger or otherwise) any Options for the purchase of
Common Stock or any stock or Convertible Securities whether or not such
Options or the right to convert or exchange any such Convertible Securities
are immediately exercisable, and the price per share for which Additional
Shares of Common Stock are issuable upon the exercise of such Options or
upon the conversion or exchange of such Convertible Securities (determined
by dividing (i) the total amount, if any, received or receivable by the
Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the
Corporation upon the exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the conversation or exchange
thereof, by (ii) the total maximum number of Additional Shares of Common
Stock issuable upon the exercise of all such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise
of such Options) shall be less than the Conversion Price in effect for the
Series A Preferred Stock immediately prior to the time of the granting of
such Options, then the total maximum number of Additional Shares of Common
Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall be deemed to have been
issued for such price per share as of the date of granting of such Options
or the issuance of such Convertible Securities and thereafter shall be
deemed to be outstanding. Except as otherwise provided in subparagraph
E(3), no adjustment of either Conversion Price shall be made upon the
actual issue of such Additional Shares of Common Stock or of such
Convertible Securities upon exercise of such Options or upon the actual
issue of such Additional shares of Common Stock upon conversion or exchange
of such Convertible Securities.
(E)(2) Issuance of Convertible Securities. In case the
----------------------------------
Corporation at any time after the Issuance Date shall in any manner issue
(whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert
any such Convertible Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or
receivable by the Corporation as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of
Additional Shares of Common Stock issuable upon the conversion or exchange
of all such Convertible Securities) shall be less than the Conversion Price
in effect for the Series A Preferred Stock, immediately prior to the time
of such issue or sale, then the total maximum number of Additional Shares
of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued for such
price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided that
(a) except as otherwise provided in subparagraph (E)(3), no adjustment of
the Conversion Price shall be made upon the actual issue of such Additional
Shares of Common Stock upon conversion or exchange of such Convertible
Securities and (b) if any such issue or sale of such Convertible
Securities is made upon exercise of any Options to purchase any such
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<PAGE>
Convertible Securities for which adjustments of the Conversion Price have
been or are to be made pursuant to other provisions of this subparagraph
(E)(1), no further adjustment of such Conversion Price shall be made by
reason of such issue or sale.
(E)(3) Change in Option Price or Conversion Rate. Upon the
-----------------------------------------
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph (E)(1), the
additional consideration, if any, payable upon the conversion or exchange
of any Convertible Securities referred to in subparagraph (E)(1) or (E)(2),
or the rate at which Convertible Securities referred to in subparagraph
(E)(1) or (E)(2) are convertible into or exchangeable for Common Stock
shall change at any time (including, but not limited to, changes under or
by reason of provisions designed to protect against dilution), the
Conversion Price in effect for the Series A Preferred Stock, at the time of
such event shall forthwith be readjusted to the Conversion Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold, but only if as a result of such
adjustment the Conversion Price then in effect hereunder is thereby
reduced; and on the expiration of any Option the issuance of which has
reduced the Conversion Price or the termination of any such right to
convert or exchange Convertible Securities the issuance of which has
reduced the Conversion Price, the Conversion Price them in effect hereunder
shall forthwith be increased to the Conversion Price which would have been
in effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
(E)(4) Consideration for Stock. In case any shares of Common
-----------------------
Stock, Options or Convertible Securities shall be issued or sold for cash,
the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of any
expenses incurred on any underwriting commissions or concessions paid or
allowed by the Corporation in connection therewith. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for
a consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be deemed to be the fair value of
such consideration as determined in good faith by the Board of Directors of
the Corporation, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case any Options shall be issued in connection
with the issue and sale of other securities of the Corporation, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for such consideration as determined in good
faith by the Board of Directors of the Corporation.
(E)(5) Record Date. In case the Corporation shall take a record
-----------
of the holders of its Common Stock for the purpose of entitling them to
subscribe for or purchase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of the issue or sale
of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the
case may be.
(E)(6) Treasury Shares. The disposition of any shares of Common
---------------
Stock owned or held by or for the account of the Corporation shall be
considered an issue or sale of Additional Shares of Common Stock for the
purpose of this subparagraph E.
(iv) Whenever the Conversion Price or the amount of Common Stock
or other securities deliverable upon the conversion of Series A Preferred
Stock shall be adjusted pursuant to the
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<PAGE>
provisions hereof, the Corporation shall forthwith file, at its principal
executive office and with any transfer agent or agents for its Series A
Preferred Stock and Common Stock, a statement, signed by the Chairman of
the Board, President, or one of the Vice Presidents of the Corporation, and
by its Chief Financial Officer or one of its Assistant Treasurers, stating
the newly adjusted Conversion Price and adjusted amount of its Common Stock
or other securities deliverable per share of Series A Preferred Stock
calculated to the nearest one one-hundredth and setting forth in reasonable
detail the method of calculation and the facts requiring such adjustment
and upon which such calculation is based. A copy of such statement shall be
sent to each holder of Series A Preferred Stock. Each adjustment shall
remain in effect until a subsequent adjustment hereunder is required.
(v) The Corporation shall at all times reserve and keep
available out of its authorized but unissued Common Stock the full number
of shares of Common Stock deliverable upon the conversion of all the then
outstanding shares of Series A Preferred Stock and shall take all such
action and obtain all such permits or orders as may be necessary to enable
the Corporation lawfully to issue such Common Stock upon the conversion of
Series A Preferred Stock.
(vi) No fraction of shares of Common Stock shall be issued
upon conversion, but in lieu thereof the Corporation shall pay cash equal
to such fraction multiplied by the fair market value of a share of Common
Stock as determined pursuant to paragraph (e) hereof.
(vii) The Corporation will not, but amendment to this
Certificate of Designation or by amendment of its Certificate of
Incorporation (the "Charter") or through any reorganization, transfer of
assets, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in the carrying out of all the
provisions of this paragraph (d) and in the taking of all such action as
may be necessary or appropriate in order to protect the conversion rights
of the holders of the Series A Preferred Stock against impairment.
(e) Redemption. (i) The Corporation may, at its option, redeem
----------
the Series A Preferred Stock, in whole and not in part, out of funds
legally available therefor, by action of the Board of Directors, at any
time on or after six months from the date of issuance of the last share of
Preferred Stock pursuant to the Corporation's Confidential Private
Placement Memorandum dated January 19, 1995 at a redemption price of $5.00
per share, plus all accrued and unpaid dividends on a share of Series A
Preferred Stock, upon notice and in the manner set forth in, and subject to
the conditions of, this paragraph (e); provided, the current market price
--------
of the Common Stock (the closing sale price as reported by the Nasdaq
National Market or, if not traded thereon, the closing bid price as
reported by Nasdaq or, if not quoted thereon, the closing bid price in the
National Quotation Bureau sheet listing for the Common Stock) equals or
exceeds $7.50 per share (as may be adjusted proportionately upward or
downward solely in the event of a subdivision or combination of the
Company's Common Stock or the payment of a dividend on all of the Company's
Common Stock payable in Common Stock of the Company) for 20 consecutive
trading days ending no more than 10 days prior to the date of notice of
redemption.
(ii) Redemption Notice. If the Corporation elects to
-----------------
redeem the Preferred Stock, the Corporation shall mail, postage prepaid,
not less than 30 days nor more than 60 days prior to the business day
designated in such notice for the closing of such redemption (the
"Redemption Date"), written notice thereof (the "Redemption Notice"), to
each holder of record of the Series A Preferred Stock, at his post office
address last shown on the records of the Corporation. Each such Redemption
Notice shall state:
B-7
<PAGE>
(A) The number of shares of Series A Preferred Stock held
by the holder that the Corporation shall redeem;
(B) The Redemption Date and Redemption Price;
(C) The date upon which the holder's conversion rights (as
set forth in paragraph (d) above) as to such shares terminate which
termination shall be five days before the Redemption Date; and
(D) That the holder is to surrender to the Corporation, in
its manner and at the place designated, his certificate or certificates
representing the shares of Series A Preferred Stock to be redeemed.
(iii) Surrender of Certificates; Payment. On or before the
----------------------------------
Redemption Date, each holder of shares of Series A Preferred Stock, unless
such holder has exercised his right to convert the shares as provided in
paragraph (d) hereof, shall surrender the certificate or certificates
representing such shares to the Corporation, in the manner and at the place
designated in the Redemption Notice, and thereupon the Redemption Price for
such share shall be payable to the order of the person whose name appears
on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired.
(iv) Rights Subsequent to Redemption. If the Redemption
-------------------------------
Notice shall have been duly given, and if on the Redemption Date the
Redemption Price therefor is either paid or made available for payment
through the deposit arrangement specified in subparagraph (vii) below, then
notwithstanding that the certificates evidencing any of the shares of
Series A Preferred Stock so called for redemption shall not have been
surrendered, the dividends with respect to such shares shall cease to
accrue after the Redemption Date and all rights with respect to such shares
shall forthwith terminate after the Redemption Date, except only the right
of the holders to receive the Redemption Price without interest upon
surrender of their certificate or certificates therefor.
(v) Deposit of Funds. On or prior to the Redemption Date,
----------------
the Corporation shall deposit with any bank or trust company, having a
capital and surplus of at least $100,000,000 as a trust fund, a sum equal
to the aggregate Redemption Price of all shares of Series A Preferred Stock
called for redemption on such Redemption Date and not yet converted, with
irrevocable instructions and authority to the bank or trust company to pay,
on and after each such Redemption Date, the Redemption Price to the
respective holders upon the surrender of their share certificates. From and
after the date of such deposit (but not prior to the Redemption Date), the
Series A Preferred Stock shall be redeemed. The deposit shall constitute
full payment of the shares of their holders, and from and after the
Redemption Date the Series A Preferred Stock shall be deemed to be no
longer outstanding, and the holders thereof shall cease to be shareholders
with respect to such shares and shall have no rights with respect thereto
except the rights to receive, from the bank or trust company, payment of
the Redemption Price of the shares, without interest, upon surrender of
their certificates therefor. Any funds so deposited and unclaimed at the
first anniversary of the Redemption Date shall be released or repaid to the
Corporation, after which the holders of shares called for redemption shall
be entitled to receive payment of the Redemption Price only from the
Corporation.
(f) Protective Provisions. So long as any shares of Series A
---------------------
Preferred Stock are outstanding, the Corporation shall not, without the
affirmative vote of the holders of record of sixty-six and two-thirds
percent (66 2/3%) of the outstanding shares of Series A Preferred Stock
voting as a class:
B-8
<PAGE>
(i) Amend, repeal or modify any provision of, or add any
provision to, the Corporation's Charter or By-laws or this Certificate of
Designation if such action would alter or change the rights, preferences,
privileges or powers of, or the restrictions provided for the benefit of, the
Series A Preferred Stock so as to affect the Series A Preferred Stock adversely;
or
(ii) Reclassify the shares of Common Stock or any other
shares of stock hereafter created junior to the Series A Preferred Stock as to
dividends or assets into shares of Series A Preferred Stock or into shares
having any preference or priority as to dividends or assets superior to or on a
parity with that of the Series A Preferred Stock.
D. Series B Preferred Stock. Ten Thousand (10,000) of
------------------------
the Five Million (5,000,000) authorized shares of Preferred Stock of the
Corporation shall be designated Series B Preferred Stock (the "Series B
Preferred Stock") and shall possess the rights and privileges set forth below:
(a) Dividends (i) The holder of each issued and outstanding
---------
share of Series B Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors of the Corporation, out of the assets at
the time legally available for such purpose, dividends at a rate of $32.50,
payable annually in arrears. No dividends shall be declared and paid on the
Series B Preferred Stock (other than a dividend payable solely in shares of
Series B Preferred Stock) unless all accrued but unpaid dividends on the
Corporation's existing class of Series A Preferred Stock have been declared
and paid in cash. Such dividends shall not be cumulative and no right to
such dividends shall accrue to holders of Series B Preferred Stock unless
declared by the Corporation's Board of Directors; provided, however, that
if all shares of Series B Preferred Stock have not been converted into
common stock by April 30, 1997 such dividends shall begin to accumulate on
all shares of Series B Preferred Stock which remain outstanding at such
time and shall be payable, subject to clause (ii) below, on April 30, 1997
and each April 30 thereafter. At the Corporation's election, such dividends
may be declared in cash, or in additional shares of Series B Preferred
Stock in an amount equal to the number of shares of Series B Preferred
Stock which on such date would be convertible into that number of shares of
common stock, par value $.001 per share (the "Common Stock") which shall be
determined as follows: the amount of the dividend divided by the closing
bid price of the Common Stock on April 30th (or the first following
business day if such date should fall on a weekend or holiday). No
dividends shall be declared or paid with respect to the Corporation's
Common Stock (other than a dividend payable solely in Common Stock of the
Corporation), or upon any other class of Preferred Stock of the Corporation
with a dividend preference subordinate to the dividend preference of the
Series B Preferred Stock, unless all accrued but unpaid dividends on the
Series B Preferred Stock has been declared and paid and a dividend of equal
or greater amount per share (on an as-if-converted to Common Stock basis)
is first declared and paid with respect to the Series B Preferred Stock.
(ii) No dividends shall be paid on the Series B Preferred
Stock at such time as:
(A) such payment would violate Idaho law; or
(B) such payment would impair the net capital or other
financial requirements applicable to the Corporation established by the National
Association of Securities Dealers, Inc., the Securities and Exchange Commission,
or any other state of federal securities authority or agency, any state or
federal commodities authority or agency, or any commodities or securities
exchange.
B-9
<PAGE>
(b) Liquidation Preference (i) In the event of any liquidation,
----------------------
dissolution or winding-up of the Corporation, either voluntary or
involuntary (a "Liquidation"), the holders of shares of the Series B
Preferred Stock then issued and outstanding shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
shareholders, whether from capital, surplus or earnings, before any payment
shall be made to the holders of shares of the Common Stock or upon any
other series of Preferred Stock of the Corporation with a liquidation
preference subordinate to the liquidation preference of the Series B
Preferred Stock, an amount equal to one thousand dollars ($1,000) per
share. The liquidation preference of the Series B Preferred Stock shall be
junior in right of payment to the liquidation preference of the
Corporation's existing class of Series A Preferred Stock. If, upon any
Liquidation of the Corporation, the assets of the Corporation available for
distribution to its shareholders shall be insufficient to pay the holders
of shares of the Series B Preferred Stock, and the holders of any other
series of Preferred Stock with a liquidation preference equal to the
liquidation preference of the Series B Preferred Stock the full amounts to
which they shall respectively be entitled, the holders of shares of the
Series B Preferred Stock, holders of shares of the Series B Preferred
Stock, and the holders of any other series of Preferred Stock with
liquidation preference equal to the liquidation preference of the Series B
Preferred Stock and Series B Preferred Stock shall receive all of the
assets of the Corporation available for distribution and each such holder
of shares of the Series B Preferred Stock, holders of share of the Series B
Preferred Stock, and the holders of any other series of Preferred Stock
with a liquidation preference equal to the liquidation preference of the
Series B Preferred Stock shall share ratably in any distribution in
accordance with the amounts due such shareholders. After payment shall
have been made to the holders of shares of the Series B Preferred Stock of
the full amount to which they shall be entitled, as aforesaid, the holders
of shares of the Series B Preferred Stock shall be entitled to no further
distributions thereon and the holders of shares of the Common Stock and of
shares of any other series of stock of the Corporation shall be entitled to
share, according to their respective rights and preferences, in all
remaining assets of the Corporation available for distribution to its
shareholders.
(ii) A merger or consolidation of the Corporation with or into
any other corporation, or a sale, lease, exchange, or transfer of all or any
part of the assets of the Corporation which shall not in fact result in the
liquidation (in whole or in part) of the Corporation and the distribution of its
assets to its shareholders shall not be deemed to be a voluntary or involuntary
liquidation (in whole or in part), dissolution, or winding-up of the
Corporation.
(c) Conversion of Series B Preferred Stock The holders of Series B
--------------------------------------
Preferred Stock shall have the following conversion rights:
(i) Right to Convert. Each share of Series B Preferred Stock
----------------
shall be convertible, on the Conversion Dates and at the Conversion
Prices set forth below, into fully paid and nonassessable shares of
Common Stock.
(ii) Mechanics of Conversion. Each holder of Series B Preferred
-----------------------
Stock who desires to convert the same into shares of Common Stock
shall provide notice ("Conversion Notice") via telecopy to the
Corporation. The original Conversion Notice and the certificate or
certificates representing the Series B Preferred Stock for which
conversion is elected, shall be delivered to the Corporation by
international courier, duly
B-10
<PAGE>
endorsed. The date upon which a Conversion Notice is properly received
by the Corporation shall be a "Notice Date."
The Corporation shall use all reasonable efforts to issue and deliver
within three (3) business days after the Notice Date, to such holder of Series B
Preferred Stock at the address of the holder on the stock books of the
Corporation, a certificate or certificates for the number of shares of Common
Stock to which the holder shall be entitled as aforesaid; provided that the
original shares of Series B Preferred Stock to be converted are received by the
transfer agent or the Corporation within three business days after the Notice
Date and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date. If the original
shares of Series B Preferred Stock to be converted are not received by the
transfer agent or the Corporation within three business days after the Notice
Date, the Conversion Notice shall become null and void.
(iii) Conversion Dates. The Series B Preferred Stock shall
----------------
become convertible into shares of Common Stock at any time commencing forty-five
(45) days after the last day on which there is an original issuance of the
Series B Preferred Stock (the "Conversion Date").
(iv) Conversion Price. Each share of Series B Preferred Stock
----------------
shall be convertible into the number of shares of Common Stock according to the
following formula:
N x 1,000
- ---------
Conversion Price
where:
N = the number of shares of the Series B Preferred Stock for which
conversion is being elected:
and
Conversion
Price = the lesser of (x) the closing bid price or the Corporation's
Common Stock on the date of the original issuance of the
Series B Preferred Stock, or (y) the average closing bid
price of the Corporation's Common Stock for the five (5)
trading days immediately preceding the Notice Date;
provided, however, in no event shall the Conversion Price
be less than $4.00 nor greater than $6.05; provided,
further, however, that the aforesaid $4.00 minimum
Conversion Price shall be applicable on and after the first
to occur of (i) January 1, 1997, (ii) August 15, 1996, if
the Corporation's Common Stock has not been listed on the
NASDAQ Small Cap Market on or prior to such date, or (iii)
October 1, 1996, if the Company's unaudited financial
statements for the quarter ended June 30, 1996 (as set
forth in its Form 10-QSB filed with the Securities and
Exchange Commission) reflected less than $350,000 of net
income before income taxes.
(v) Automatic Conversion. Each share of Series B Preferred
--------------------
Stock outstanding on December 31, 1997 automatically shall be converted into
Common Stock on such date at
B-11
<PAGE>
the Conversion Price then in effect, and December 31, 1997 shall be deemed to be
the Notice Date with respect to such conversion.
(vi) Fractional Shares. No fractional share shall be issued
-----------------
upon the conversion of any shares, share or fractional share of Series B
Preferred Stock. All shares of Common Stock (including fractions thereof)
issuable upon conversion of shares (or fractions thereof) of Series B Preferred
Stock by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall, in
lieu of issuing any fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the closing bid price of the Corporation's
Common Stock on the Notice Date multiplied by such fraction.
(vii) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common stock, solely for the purpose of effecting the
conversion of the shares of the Series B Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all then outstanding shares of the Series B Preferred Stock; and
if at any time the number of authorized but unissued shares of Common stock
shall not be sufficient to effect the conversion of all then outstanding shares
of the Series B Preferred Stock, the Corporation will take such corporate action
as may be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(viii) Adjustment to Conversion Price.
------------------------------
(A) If, prior to the conversion of all shares of Series B
Preferred Stock, the number of outstanding shares or Common Stock is increased
by a stock split, stock dividend, or other similar event, the Conversion Price
shall be proportionately reduced, or if the number of outstanding shares of
Common Stock is decreased by a combination or reclassification of shares, or
other similar event, the Conversion Price shall be proportionately increased.
(B) If prior to the conversion of all shares of Series B
Preferred Stock, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock or the Corporation shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities of the Corporation or another entity, then the holders of Series B
Preferred Stock shall thereafter have the right to purchase and receive upon
conversion of shares of Series B Preferred Stock, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such share of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of shares of Series B Preferred Stock held by
such holders had such merger, consolidation, exchange of shares,
recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interest of
the holders of the Series B Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the
Conversion Price and of the number of shares issuable upon conversion of the
Series B Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof. The Corporation shall not effect any
transaction described in this subsection unless the resulting successor or
B-12
<PAGE>
acquiring entity (if not the Corporation) assumes by written instrument the
obligation to deliver to the holders of the Series B Preferred Stock such shares
of stock and/or securities as, in accordance with the foregoing provisions, the
holders of the Series B Preferred Stock may be entitled to purchase.
(C) If any adjustment under this subsection would create a
fractional share of Common Stock or a right to acquire a fractional share if
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon conversion shall be the next higher number
of shares.
(d) Voting. Except as otherwise provided by the Idaho Business Corporation
------
Act, the holders of the Series B Preferred Stock shall have no voting power
whatsoever, and no holder of Series B Preferred Stock shall vote or otherwise
participate in any proceeding in which actions shall be taken by the Corporation
or the shareholders thereof or be entitled to notification as to any meeting of
the Board of Directors or the shareholders.
(e) Protective Provisions. So long as shares of Series B Preferred Stock
---------------------
are outstanding, the Corporation shall not without first obtaining the approval
(by vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock:
(i) alter or change the rights, preferences or privileges of the
shares of Series B Preferred Stock so as to affect adversely the Series C
preferred Stock;
(ii) create any new class or series of stock being on a parity with
or having a preference over the Series C Preferred Stock with respect to
dividends, to payments upon Liquidation (as provided for in Section B of this
Designation) or to redemption; or
(iii) do any act or thing not authorized or contemplated by this
Designation which would result in taxation of the holders of shares of the
Series B Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
(f) Status of Converted Stock. In the event any shares of Series B
-------------------------
Preferred Stock shall be converted as contemplated by this Designation, the
shares so converted shall be canceled, shall return to the status of authorized
but unissued Preferred Stock of no designated class of series, and shall not be
issuable by the Corporation as Series B Preferred Stock.
E. Series C Preferred Stock. Five Thousand (5,000) of the Five
------------------------
Million (5,000,000) authorized shares of Preferred Stock of the Company shall be
designated Series C Preferred Stock (the "Series C Preferred Stock"). The Series
C Preferred Stock shall be pari passu with the Company's Series B Preferred
Stock and shall possess the rights and privileges set forth below:
(a) Dividends (i) The holder of each issued and outstanding share of
---------
Series C Preferred Stock shall be entitled to receive, when and as declared by
the Board of Directors of the Company, out of the assets at the time legally
available for such purpose, dividends at a rate of $33.30, payable annually in
arrears. No dividends shall be declared and paid on the Series C Preferred
Stock (other than a dividend payable solely in shares of Series C Preferred
Stock) unless all accrued but unpaid dividends on the Company's existing class
of Series A Preferred Stock have
B-13
<PAGE>
been declared and paid in cash. Such dividends shall not be cumulative and
no right to such dividends shall accrue to holders of Series C Preferred
Stock unless declared by the Company's Board of Directors; provided,
however, that if all shares of Series C Preferred Stock have not been
converted into common stock by December 31, 1997 such dividends shall begin
to accumulate on all shares of Series C Preferred Stock which remain
outstanding at such time and shall be payable, subject to clause (ii)
below, on December 31, 1997 and each December 31 thereafter. At the
Company's election, such dividends may be declared in cash, or in
additional shares of Series C Preferred Stock in an amount equal to the
number of shares of Series C Preferred Stock which on such date would be
convertible into that number of shares of common stock, par value $.001 per
share (the "Common Stock") which shall be determined as follows: the amount
of the dividend divided by the closing bid price of the Common Stock on
December 31st (or the first following business day if such date should fall
on a weekend or holiday). No dividends shall be declared or paid with
respect to the Company's Common Stock (other than a dividend payable solely
in Common Stock of the Company), or upon any other class of Preferred Stock
of the Company with a dividend preference subordinate to the dividend
preference of the Series C Preferred Stock, unless all accrued but unpaid
dividends on the Series C Preferred Stock has been declared and paid and a
dividend of equal or greater amount per share (on an as-if-converted to
Common Stock basis) is first declared and paid with respect to the Series C
Preferred Stock and Series B Preferred Stock on a pari passu basis.
(ii) No dividends shall be paid on the Series C Preferred Stock
at such time as:
(A) such payment would violate Idaho law; or
(B) such payment would impair the net capital or other
financial requirements applicable to the Company established by the National
Association of Securities Dealers, Inc., the Securities and Exchange Commission,
or any other state of federal securities authority or agency, any state or
federal commodities authority or agency, or any commodities or securities
exchange.
(b) Liquidation Preference (i) In the event of any liquidation,
----------------------
dissolution or winding-up of the Company, either voluntary or involuntary
(a "Liquidation"), the holders of shares of the Series C Preferred Stock
then issued and outstanding shall be entitled to be paid out of the assets
of the Company available for distribution to its shareholders, whether from
capital, surplus or earnings, before any payment shall be made to the
holders of shares of the Common Stock or upon any other series of Preferred
Stock of the Company with a liquidation preference subordinate to the
liquidation preference of the Series C Preferred Stock, an amount equal to
one thousand dollars ($1,000) per share. The liquidation preference of the
Series C Preferred Stock shall be junior in right of payment to the
liquidation preference of the Company's existing class of Series A
Preferred Stock and shall be on a pari passu basis with the right of
payment to the liquidation preference of the Company's existing class of
Series B Preferred Stock. If, upon any Liquidation of the Company, the
assets of the Company available for distribution to its shareholders shall
be insufficient to pay the holders of shares of the Series C Preferred
Stock, holders of shares of the Series B Preferred Stock, and the holders
of any other series of Preferred Stock with a liquidation preference equal
to the liquidation preference of the Series C Preferred Stock the full
amounts to which they shall respectively be entitled, the holders of shares
of the Series C Preferred Stock, holders of shares of the Series B
Preferred Stock, and the holders of any other series of Preferred Stock
with liquidation preference equal to the liquidation preference of the
Series C Preferred Stock and Series B Preferred Stock shall receive all of
the assets of the
B-14
<PAGE>
Company available for distribution and each such holder of shares of the
Series C Preferred Stock, holders of share of the Series B Preferred Stock,
and the holders of any other series of Preferred Stock with a liquidation
preference equal to the liquidation preference of the Series C Preferred
Stock shall share ratably in any distribution in accordance with the
amounts due such shareholders. After payment shall have been made to the
holders of shares of the Series C Preferred Stock of the full amount to
which they shall be entitled, as aforesaid, the holders of shares of the
Series C Preferred Stock shall be entitled to no further distributions
thereon and the holders of shares of the Common Stock and of shares of any
other series of stock of the Company shall be entitled to share, according
to their respective rights and preferences, in all remaining assets of the
Company available for distribution to its shareholders.
(ii) A merger or consolidation of the Company with or into any
other corporation, or a sale, lease, exchange, or transfer of all or any part of
the assets of the Company which shall not in fact result in the liquidation (in
whole or in part) of the Company and the distribution of its assets to its
shareholders shall not be deemed to be a voluntary or involuntary liquidation
(in whole or in part), dissolution, or winding-up of the Company.
(c) Conversion of Series C Preferred Stock The holders of Series C
--------------------------------------
Preferred Stock shall have the following conversion rights:
(i) Right to Convert. Each share of Series C Preferred Stock
----------------
shall be convertible, on the Conversion Dates and at the Conversion Prices set
forth below, into fully paid and nonassessable shares of Common Stock.
(ii) Mechanics of Conversion. Each holder of Series C
-----------------------
Preferred Stock who desires to convert the same into shares of Common Stock
shall provide notice in the form of the Notice of Conversion or Exercise
attached to the subscription agreement pursuant to which the Series C Preferred
Stock was issued (a "Conversion Notice") via telecopy to the Company. The
original Conversion Notice and the certificate or certificates representing the
Series C Preferred Stock for which conversion is elected, shall be delivered to
the Company by international courier, duly endorsed. The date upon which a
Conversion Notice is properly received by the Company shall be a "Notice Date."
The Company shall use all reasonable efforts to issue and deliver within
three (3) business days after the Notice Date, to such holder of Series C
Preferred Stock at the address of the holder on the stock books of the Company,
a certificate or certificates for the number of shares of Common Stock to which
the holder shall be entitled as aforesaid; provided that the original shares of
Series C Preferred Stock to be converted are received by the transfer agent or
the Company within three business days after the Notice Date and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date. If the original shares of Series C
Preferred Stock to be converted are not received by the transfer agent or the
Company within three business days after the Notice Date, the Conversion Notice
shall become null and void.
(iii) Conversion Dates. The Series C Preferred Stock shall
----------------
become convertible into shares of Common Stock at any time commencing forty-five
(45) days after the last day on which there is an original issuance of the
Series C Preferred Stock (the "Conversion Date").
B-15
<PAGE>
(iv) Conversion Price. Each share of Series C Preferred Stock
----------------
shall be convertible into the number of shares of Common Stock according to the
following formula:
N x 1,000
- ---------
Conversion Price
where:
N = the number of shares of the Series C Preferred Stock for
which conversion is being elected:
and
Conversion
Price = the lesser of (i) $2.25 per share or (ii) the average
closing bid price on the NASDAQ SmallCap Market on the five
trading days immediately preceding the holder's delivery of
a Conversion Notice to the Company.
(v) Automatic Conversion. Each share of Series C Preferred
--------------------
Stock outstanding on June 30, 2002 automatically shall be converted into Common
Stock on such date at the Conversion Price then in effect, and June 30, 2002
shall be deemed to be the Notice Date with respect to such conversion.
(vi) Fractional Shares. No fractional share shall be issued
-----------------
upon the conversion of any shares, share or fractional share of Series C
Preferred Stock. All shares of Common Stock (including fractions thereof)
issuable upon conversion of shares (or fractions thereof) of Series C Preferred
Stock by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Company shall, in lieu of
issuing any fractional share, pay the holder otherwise entitled to such fraction
a sum in cash equal to the closing bid price of the Company's Common Stock on
the Notice Date multiplied by such fraction.
(vii) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common stock, solely for the purpose of effecting the
conversion of the shares of the Series C Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all then outstanding shares of the Series C Preferred Stock; and
if at any time the number of authorized but unissued shares of Common stock
shall not be sufficient to effect the conversion of all then outstanding shares
of the Series C Preferred Stock, the Company will take such corporate action as
may be necessary to increase its authorized but unissued shares of Common Stock
to such number of shares as shall be sufficient for such purpose.
(viii) Adjustment to Conversion Price.
------------------------------
(A) If, prior to the conversion of all shares of Series C
Preferred Stock, the number of outstanding shares or Common Stock is increased
by a stock split, stock dividend, or other similar event, the Conversion Price
shall be proportionately reduced, or if the number of outstanding
B-16
<PAGE>
shares of Common Stock is decreased by a combination or reclassification of
shares, or other similar event, the Conversion Price shall be proportionately
increased.
(B) If prior to the conversion of all shares of Series C
Preferred Stock, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock or the Company shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities of the Company or another entity, then the holders of Series C
Preferred Stock shall thereafter have the right to purchase and receive upon
conversion of shares of Series C Preferred Stock, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such share of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of shares of Series C Preferred Stock held by
such holders had such merger, consolidation, exchange of shares,
recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interest of
the holders of the Series C Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the
Conversion Price and of the number of shares issuable upon conversion of the
Series C Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof. The Company shall not effect any
transaction described in this subsection unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the holders of the Series C Preferred Stock such shares
of stock and/or securities as, in accordance with the foregoing provisions, the
holders of the Series C Preferred Stock may be entitled to purchase.
(C) If any adjustment under this subsection would create a
fractional share of Common Stock or a right to acquire a fractional share if
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon conversion shall be the next higher number
of shares.
(d) Voting. Except as otherwise provided by the Idaho Business
------
Corporation Act, the holders of the Series C Preferred Stock shall have no
voting power whatsoever, and no holder of Series C Preferred Stock shall vote or
otherwise participate in any proceeding in which actions shall be taken by the
Company or the shareholders thereof or be entitled to notification as to any
meeting of the Board of Directors or the shareholders.
(e) Protective Provisions. So long as shares of Series C Preferred
---------------------
Stock are outstanding, the Company shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least a majority of the then outstanding shares of Series C Preferred Stock:
(i) alter or change the rights, preferences or privileges of
the shares of Series C Preferred Stock so as to affect adversely the Series C
preferred Stock;
(ii) create any new class or series of stock being on a parity
with or having a preference over the Series C preferred Stock with respect to
dividends, to payments upon Liquidation (as provided for in Section B of this
Certificate Designation) or to redemption; or
B-17
<PAGE>
(iii) do any act or thing not authorized or contemplated by this
Designation which would result in taxation of the holders of shares of the
Series C Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
(f) Status of converted Stock. In the event any shares of Series C
-------------------------
Preferred stock shall be converted as contemplated by this Certificate of
Designation, the shares so converted shall be canceled, shall return to the
status of authorized but unissued Preferred Stock of no designated class of
series, and shall not be issuable by the Company as Series C Preferred Stock.
FIFTH: The following provisions are inserted for the management of the
-----
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The business and affairs of the Corporation shall be
managed by or under the direction of the board of directors. In addition to the
powers and authority expressly conferred upon them by statute or by this
Certificate of Incorporation or the by-laws of the Corporation, the directors
are hereby empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by
written ballot unless the by-laws so provide.
C. Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders.
D. Special meetings of stockholders of the corporation may be
called only by the Chairman of the Board or the President or by the board of
directors acting pursuant to a resolution adopted by a majority of the Whole
Board. For purposes of this Certificate of Incorporation, the term "Whole Board"
shall mean the total number of authorized directors whether or not there exist
any vacancies in previously authorized directorships.
SIXTH: A. Subject to the rights of the holders of any series of
-----
Preferred Stock to elect additional directors under specified circumstances, the
number of directors shall be fixed from time to time exclusively by the board of
directors pursuant to a resolution adopted by a majority of the Whole Board.
The directors, other than those who may be elected by the holders of any series
of Preferred Stock under specified circumstances, shall be divided into three
classes, with the term of office of the first class to expire at the
Corporation's first annual meeting of stockholders, the term of office of the
second class to expire at the Corporation's second annual meeting of
stockholders and the term of office of the third class to expire at the
Corporation's third annual meeting of stockholders. At each annual meeting of
stockholders, directors shall be elected to succeed those directors whose terms
expire shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders after their election.
B. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the board of
directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause shall, unless otherwise provided by law or by
resolution of the board
B-18
<PAGE>
of directors, be filled only by a majority vote of the directors then in office,
though less than a quorum, and directors so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been chosen expires. No decrease in the authorized
number of directors shall shorten the term of any incumbent director.
C. Advance notice of stockholder nominations for the election
of directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
by-laws of the Corporation.
D. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any directors, or the entire board of
directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least sixty-six and two-thirds
percent (66.67%) of the voting power of all of the then-outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
SEVENTH: The board of directors is expressly empowered to adopt,
-------
amend or repeal the by-laws of the Corporation. Any adoption, amendment or
repeal of the by-laws of the Corporation by the board of directors shall
require the approval of a majority of the Whole Board. The stockholders
shall also have power to adopt, amend or repeal the by-laws of the
Corporation; provided, however, that, in addition to any vote of the
holders of any class or series of stock of the Corporation required by law
or by this Certificate of Incorporation, the affirmative vote of the
holders of at least fifty percent (50%) of the voting power of all of the
then-outstanding shares of the capital stock of the Corporation entitled to
vote generally in the election of directors, voting together as a single
class, shall be requested to adopt, amend or repeal any provision of the
by-laws of the Corporation.
EIGHTH: A director of the Corporation shall not be personally
------
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any
breach of director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section
174 of the Delaware General Corporation Law or (iv) for any transaction for
which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the Delaware General Corporation Law, as
so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
NINTH: The Corporation reserves the right to amend or repeal any
-----
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware and all rights conferred
upon stockholders are granted subject to this reservation; provided,
however, that, notwithstanding any other provision of this Certificate of
Incorporation or any provision of law that might otherwise permit a lesser
vote or no vote, but in addition to any vote of the holders of any class or
series of the stock of this Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders of at
least sixty-six and two-
B-19
<PAGE>
thirds percent (66.67%) of the voting power of all the then-outstanding
shares of the capital stock of the Corporation entitled to vote generally
in the election of Directors, voting together as a single class, shall be
required to amend or repeal this Article NINTH, Sections C or D of Article
FIFTH, Article SIXTH, Article SEVENTH, or Article EIGHTH.
TENTH: The incorporator is [Ray A. Bar,] whose mailing address is
-----
[United Corporate Services, Inc., 10 Bank Street, White Plains, New York
10606.]
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming
a corporation under the laws of the State of Delaware do make, file and
record this Certificate of Incorporation, do certify that the facts herein
stated are true, and, accordingly, have hereto set my hand and seal this
_______________ day of ________________, 1997.
_____________________ (SEAL)
B-20
<PAGE>
EXHIBIT C
SNAKE EYES GOLF CLUBS, INC.
BY-LAWS
ARTICLE I - STOCKHOLDERS
--------- ------------
Section 1. Annual Meeting.
--------- --------------
(1) An annual meeting of the stockholders, for the election of directors
to succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such place,
on such date, and at such time as the board of directors (the "Board of
Directors" or "Board") of Snake Eyes Golf Clubs, Inc. (the "Corporation") shall
each year fix, which date shall be within thirteen (13) months of the last
annual meeting of stockholders. The annual meetings of stockholders will be held
in May of each year or such other date as the Board shall fix. The annual
meeting of stockholders held in December 1997 shall be deemed to be the annual
meeting for 1997 and 1998 and the next annual meeting of stockholders shall be
held in May 1999 or such other date as the Board shall fix.
(2) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (a) pursuant to the
Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of the notice provided for in these By-laws, who
procedures set fourth in these By-laws.
(3) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (2) of these
By-laws, the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principle executive offices of the Corporation
not less than one hundred twenty (120) days or more than one hundred fifty (150)
days prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than thirty (30) days or delayed by more than sixty (60) days
from such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the later of the sixtieth
(60th) day prior to such annual meeting or the tenth (10) day following the day
on which the public announcement of such meeting is first made by the
Corporation. Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the
C-1
<PAGE>
nomination or proposal is made (i) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner and (ii)
the class and number of shares of the Corporation which are owned beneficially
and of record by such stockholder and such beneficial owner.
(4) Notwithstanding anything in the second sentence of paragraph (3) of
these By-laws to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least
seventy (70) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by these By-laws shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth (10) day following the day on which such public
announcement is first made by the Corporation.
(5) Only such persons who are nominated in accordance with the procedures
set forth in these By-laws shall be eligible to serve as directors and only such
business shall be conducted at an annual meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
these By-laws. The chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in these By-laws.
The chairman of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to brought before the meeting was made in
accordance with the procedures set forth in these By-laws and, if any proposed
nomination or business is not in compliance with these By-laws, to declare that
such defective proposed business or nomination shall be disregarded.
(6) For purposes of these By-laws, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14, or 15 (d) of the Exchange Act.
(7) Notwithstanding the foregoing provisions of these By-laws, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in these By-laws. Nothing in these By-laws shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 2. Special Meetings: Notice
--------- -------------------------
Special meetings of the stockholders, other than those required by statute,
may be called at any time by the Board of Directors pursuant to a resolution
approved by a majority of the whole Board of Directors. Notice of every special
meeting, stating the time, place and purpose, shall be given by mailing, postage
prepaid, at least ten (10) but not more than sixty (60) days before each such
meeting, a copy of such notice addressed to each stockholder of the Corporation
at his/her/its post office address as recorded on the books of the Corporation.
The Board of Directors may postpone or reschedule any previously scheduled
special meeting.
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting.
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<PAGE>
Section 3. Notice of Meetings.
--------- ------------------
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
--------- ------
At any meeting of the stockholders, the holders of a majority of all
of the shares of the stock entitled to vote at the meeting, present in person or
by proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law. Where a
separate vote by a class or classes is required, a majority of the shares of
such class or classes present in person or represented by proxy shall constitute
a quorum entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting may adjourn the meeting to another place, date, or time.
Section 5. Organization.
--------- ------------
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board or, in his or her absence,
the Chief Executive Officer of the Corporation or, in his or her absence, such
person as may be chosen by the holders of a majority of the shares entitled to
vote who are present, in person or by proxy, shall call to order any meeting of
the stockholders and act as chairman of the meeting. In the absence of the
Secretary of the Corporation, the secretary of the meeting shall be such person
as the chairman appoints.
Section 6. Conduct of Business.
--------- -------------------
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
The chairman shall have the power to adjourn the meeting to another place, date
and time. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be announced
at the meeting.
C-3
<PAGE>
Section 7. Proxies and Voting.
--------- ------------------
At any meeting of the stockholders, every stockholder entitled to
vote may vote in person or by proxy authorized by an instrument in writing or by
a transmission permitted by law in accordance with the procedure established for
the meeting. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this paragraph
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
All voting, including on the election of directors but excepting
where otherwise required by law, may be by a voice vote; provided, however, that
upon demand therefore by stockholder entitled to vote or by his or her proxy, a
stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
The Corporation may, and to the extent required by law, shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting may, and to the extent required by law,
shall, appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. Every vote taken by ballots shall
be counted by a duly appointed inspector or inspectors.
All elections shall be determined by a plurality of the votes cast,
and except as otherwise required by law, all other matters shall be determined
by a majority of the votes cast affirmatively or negatively.
Section 8. Stock List.
--------- ----------
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
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<PAGE>
ARTICLE II - BOARD OF DIRECTORS
---------- ------------------
Section 1. Number, Election and Term of Directors.
---------- ---------------------------------------
Subject to the rights of the holders of any series of Preferred Stock
to elect directors under specified circumstances, the number of directors shall
be fixed from time to time exclusively by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors which the
Corporation would have if there were no vacancies. The directors, other than
those who may be elected by the holders of any series of Preferred Stock under
specified circumstances, shall be divided, with respect to the time for which
they severally hold office, into three classes with the term of office of the
first class to expire at the Corporation's first annual meeting of stockholders,
the term of office of the second class to expire at the Corporation's second
annual meeting of stockholders and the term of office of the third class to
expire at the Corporation's third annual meeting of stockholders, commencing
with the first annual meeting, (i) directors elected to succeed those directors
whose terms then expire shall be elected for a term of office to expire at the
third succeeding annual meeting of stockholders after their election, with each
director to hold office until his or her successor shall have been duly elected
and qualified, and (ii) if authorized by a resolution of the Board of Directors,
directors may be elected to fill any vacancy on the Board of Directors,
regarding less of how such vacancy shall have been created.
Section 2. Newly Created Directorships and Vacancies.
---------- ------------------------------------------
Subject to applicable law and to the rights of the holders of any
series of Preferred Stock with respect to such series of Preferred Stock, and
unless the Board of Directors otherwise determines, newly created directorships
resulting form any increase in the authorized number of directors or any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
only by a majority vote of the directors then in office, though less than a
quorum, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires and until such director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
directors constituting the entire Board of Directors shall shorten the term of
any incumbent director.
Section 3. Regular Meetings.
---------- -----------------
Regular meetings of the Board of Directors shall be held at such
place or places, on such date or dates, and at such time or times as shall have
been established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
---------- -----------------
Special meetings of the Board of Directors may be called by the
President or by two or more directors then in office and shall be held at such
place, on such date, and at such time as they or he or she shall fix. Notice of
the place, date, and time of each such special meeting shall be given each
director by whom it is not waived by mailing written notice not less than five
(5) days before the meeting or by telephone or by telegraphing or telexing or by
facsimile transmission of the same not less than twenty-four (24) hours before
the meeting. Unless otherwise indicated in the notice thereof, any and all
business may be transacted at a special meeting.
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<PAGE>
Section 5. Quorum.
---------- -------
At any meeting of the Board of Directors, a majority of the total
number of the whole Board shall constitute a quorum for all purposes. If quorum
shall fail to attend any meeting, a majority of those present may adjourn the
meeting to another place, date, or time, without further notice or waiver
thereof.
Section 6. Participation in Meetings By Conference Telephone.
---------- --------------------------------------------------
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of the Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
--------- -------------------
At any meeting of the Board of Directors, business shall be
transacted in such order and manner as the Board may from time to time
determine, and all matters shall be determined by the vote of majority of the
directors present, except as otherwise provided herein or required by law.
Action may be taken by the Board of Directors without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board of Directors.
Section 8. Powers.
--------- ------
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance
with law;
(2) To purchase or otherwise acquire any property, rights
or privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or
without cause, and from time to time to devolve the powers and duties of any
officer upon any other person for the time being;
(5) To confer upon any officer of the Corporation the power
to appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock option, stock
purchase, bonus or other compensation plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine;
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<PAGE>
(7) To adopt from time to time such insurance, retirement,
and other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent
with these By-laws, for the management of the Corporation's business and
affairs.
Section 9. Compensation of Directors.
--------- -------------------------
Unless otherwise restricted by the certificate of incorporation, the
Board of Directors shall have the authority to fix the compensation of the
directors. The directors may be paid their expenses, if any, of attendance at
each meting of the Board of Directors and may be paid a fixed sum for attendance
at each meeting of the Board of Directors or paid a stated salary or paid other
compensation as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
ARTICLE III - COMMITTEES
------------ ----------
Section 1. Committees of the Board of Directors.
--------- -------------------------------------
The Board of Directors, by a vote of a majority of the whole Board,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member of members, designating, if
it desires, other directors as alternate members who may replace any absent or
disqualified member at any meting of the committee. In the absence or
disqualification of any member of any committee and any alternate member in his
or her place, the member or members of the committee present at the meeting and
not disqualified from voting, whether or not he or she or they constitute a
quorum, may by unanimous vote appoint another member of the Board of Directors
to act at the meeting in the place of the absent or disqualified member.
Section 2. Conduct of Business.
--------- -------------------
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
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<PAGE>
ARTICLE IV - OFFICERS
---------- --------
Section 1. Generally.
--------- ---------
The officers of the Corporation shall consist of a President, one or
more Vice Presidents, a Secretary, a Treasure and such other officers as may
from time to time be appointed by the Board of Directors. Officers shall be
elected by the Board of Directors, which shall consider that subject at its
first meeting after every annual meeting of stockholders. Each officer shall
hold office until his or her successor is elected and qualified or until his or
her earlier resignation or removal. Any number of offices may be held by the
same person. The salaries of officers elected by the Board of Directors shall be
fixed from time to time by the Board of Directors or by such officers as may be
designated by resolution of the Board.
Section 2. President.
--------- ---------
The President shall be the Chief Executive Officer of the
Corporation. Subject to the provisions of these By-laws and to the direction of
the Board of Directors, he or she shall have the responsibility for the general
management and control of the business and affairs of the Corporation and shall
perform all duties and have all powers which are commonly incident to the office
of chief executive or which are delegated to him or her by the Board of
Directors. He or she shall power to sign all stock certificates, contracts and
other instruments of the Corporation which are authorized and shall have general
supervision and direction of all of the other offices, employees and agents of
the Corporation.
Section 3. Vice President.
--------- --------------
Each Vice President shall have such powers and duties as may be
delegated to him or her by the Board of Directors. One (1) Vice President shall
be designated by the Board to perform the duties and exercise the powers of the
President in the event of the President's absence or disability.
Section 4. Treasurer.
--------- ---------
The Treasurer shall have the responsibility for maintaining the financial
records of the Corporation. He or she shall make such disbursements of the funds
of the Corporation as are authorized and shall render from time to time an
account of all such transactions and of the financial condition of the
Corporation. The Treasurer shall also perform such other duties as the Board of
Directors may from time to time prescribe.
Section 5. Secretary.
--------- ---------
The Secretary shall issue all authorized notices for, and shall keep
minutes of all meetings of the stockholders and the Board of Directors. He or
she shall have charge of the Corporate books and shall perform such other duties
as the Board of Directors may from time to time prescribe.
Section 6. Delegation of Authority.
--------- -----------------------
The Board of Directors may from time to time delegate the powers or
duties of any officer to any other officers or agents, notwithstanding any
provision hereof.
C-8
<PAGE>
Section 7. Removal.
--------- -------
Any officer of the Corporation may be removed at any time, with or
without cause, by the Board of Directors.
Section 8. Action with Respect to Securities of Other Corporations.
--------- -------------------------------------------------------
Unless otherwise directed by the Board of Directors, the President or
any officer or any officer of the Corporation authorized by the President shall
have power to vote and otherwise act on behalf of the Corporation, in person or
by proxy, at any meeting of stockholders of or with respect to any action of
stockholders of any other Corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this
Corporation may possess by reason of its ownership of securities in such other
Corporation.
ARTICLE V - STOCK
--------- -----
Section 1. Certificate of Stock.
--------- --------------------
Each stockholder shall be entitled to a certificate signed by, or in
the name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasure,
certifying the number of shares owned by him or her. Any or all of the
signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
--------- ------------------
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these By-
laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
--------- -----------
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may, except as
otherwise required by law, fix a record date, which record date shall not
precede the date on which the resolution fixing the record date is adopted and
which record date shall not be more than sixty (60) nor less than ten (10) days
before the date of any meeting of stockholders, nor more than sixty (60) days
prior to the time for such other action as herein before described; provided,
however, that if no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held, and, for
determining stockholders entitled to receive payment of any dividend or other
distribution or allotment of rights or to exercise any rights of change,
conversion or exchange of stock or for any
C-9
<PAGE>
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
--------- ---------------------------------------
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5. Regulations.
--------- -----------
Except as otherwise specifically provided herein or required by law,
all notices required to be given to any stockholder, director, officer, employee
or agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, recognized overnight delivery service or by sending such notice by
facsimile, receipt acknowledged, or by prepaid telegram or mailgram. Any such
notice shall be addressed to such stockholder, director, officer, employee or
agent at his or her last know address as the same appears on the books of the
Corporation. The time when such notice is received, if hand delivered, or
dispatched, if delivered through the mails or by telegram or mailgram, shall be
the time of the giving of the notice.
Section 2. Waivers.
--------- -------
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before of after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, director, officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
Attendance at any meeting shall constitute waiver of notice except attendance
for the sole purpose of objecting to the timeliness of notice.
ARTICLE VII - MISCELLANEOUS
----------- -------------
Section 1. Facsimile Signatures.
---------- --------------------
In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these By-laws, facsimile signatures of any
officer or officers of the Corporation may be used whenever and as authorized by
the Board of Directors or a committee thereof.
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<PAGE>
Section 2. Corporate Seal.
--------- --------------
The Board of Directors may provide a suitable seal, containing the
name of the Corporation, which seal shall be in the charge of the Secretary. If
and when so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the Treasurer or by an Assistant
Secretary or Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
--------- -----------------------------------------
Each director, each member of any committee designated by the Board
of Directors, and each officer of the Corporation shall, in the performance of
his or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
---------- -----------
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
---------- ------------
In applying any provision of these By-laws which requires that an act
be done or not be done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE VIII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
------------ -----------------------------------------
Section 1. Right to Indemnification.
--------- ------------------------
Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director or an officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith; provided, however, that, except as provided
in Section 3 of this ARTICLE VIII with respect to proceedings to
C-11
<PAGE>
enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof ) was authorized by the
Board of Directors of the Corporation.
Section 2. Right to Advancement of Expense.
--------- -------------------------------
The right to indemnification conferred in Section 1 of this ARTICLE
VIII shall include the right to be paid by the Corporation the expenses
(including attorney's fees) incurred in defending any such proceeding in advance
of its final disposition (hereinafter an "advancement of expenses"); provided,
however, that, if the Delaware General Corporation Law requires, an advancement
of expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section 2 or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Sections 1 and 2 of this ARTICLE VIII
shall be contract rights and such rights shall continue as to an indemnitee who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
Section 3. Right of Indemnitee to Bring Suit.
--------- ---------------------------------
If a claim under Section 1 or 2 of this ARTICLE VIII is not paid in
full by the Corporation within sixty (60) days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty (20) days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the Corporation shall be entitled to recover such
expenses upon a final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of providing that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
ARTICLE VIII or otherwise shall be on the Corporation.
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<PAGE>
Section 4. Non-Exclusivity of Rights.
--------- -------------------------
The rights to indemnification and to the advancement of expenses
conferred in this ARTICLE VIII shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, By-laws, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 5. Insurance.
--------- ---------
The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
Section 6. Indemnification of Employees and Agents of the Corporation.
--------- ----------------------------------------------------------
The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the advancement
of expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of the Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
ARTICLE IX - AMENDMENTS
---------- ----------
In furtherance and not in limitation of the powers conferred by law,
the Board of Directors is expressly authorized to make, alter, amend and repeal
these By-laws subject to the power of the holders of capital stock of the
Corporation to alter, amend or repeal the By-laws; provided, however, that with
respect to the powers of holders of capital stock to make, alter, amend and
repeal By-Laws of the Corporation, notwithstanding any other provision of these
By-Laws or any provision of law which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law, these
By-Laws or any Preferred Stock, the affirmative vote of the holders of at least
two-thirds (66.67%) of the voting power of all of the then-outstanding shares
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to make, alter, amend or repeal any provision of
these By-Laws.
C-13
<PAGE>
EXHIBIT D
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
CHANGING THE NAME OF THE COMPANY
The following sets forth the changes to Article "FIRST" of the Company's
Certificate of Incorporation if Proposal No. 3 is approved:
"FIRST: The name of the corporation is SNAKE EYES GOLF CLUBS, INC.
D-1
<PAGE>
EXHIBIT E
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
CHANGING THE AUTOMATIC CONVERSION DATE
OF THE SERIES B PREFERRED STOCK
The following sets forth the changes to the Article FOURTH, Paragraph
D(c)(v) of the Company's Certificate of Incorporation if Proposal No. 4 is
approved by the Shareholders and the holders of the Series B Preferred Stock:
"Automatic Conversion. Each share of Series B Preferred Stock
--------------------
outstanding on December 31, 1999 automatically shall be converted into
Common Stock on such date at the Conversion Price then in effect, and
December 31, 1999 shall be deemed to be the Notice Date with respect to
such conversion."
E-1
<PAGE>
EXHIBIT F
GOLF-TECHNOLOGY HOLDING, INC.
1997 STOCK OPTION AND LONG-TERM INCENTIVE PLAN
Adopted and Effective as of_______ ___, 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
- -----------------
<S> <C>
1. Purpose...................................................................5
-------
2. Definitions...............................................................5
-----------
(a) Board...............................................................5
(b) Cause...............................................................5
(c) Code................................................................6
(d) Committee.............................................................6
(e) Company.............................................................6
(f) Common Stock........................................................6
(g) Disability..........................................................6
(h) Exchange Act..........................................................6
(i) Incentive Award.....................................................6
(j) Incentive Stock Option..............................................6
(k) Issue Date..........................................................6
(l) Non-Qualified Stock Option............................................7
(m) Option..............................................................7
(n) Participant.........................................................7
(o) Plan................................................................7
(p) Restricted Stock......................................................7
(q) Retirement............................................................7
(r) Securities Act......................................................7
(s) Vesting Date........................................................7
3. Administration of the Plan................................................8
--------------------------
(a) Board or Committee Administration.....................................8
(b) Committee Actions.....................................................9
(c) Grant of Options to Directors.........................................9
4. Eligible Employees and Others............................................10
-----------------------------
5. Stock....................................................................10
-----
6. Granting of Options or Restricted Stock..................................10
---------------------------------------
(a) Plan Awards..........................................................10
(b) Individual Awards....................................................11
7. Option Price.............................................................11
------------
(a) Price................................................................11
(b) Determination or Fair Market Value...................................11
8. Option Duration..........................................................11
---------------
9. Exercise or Option.......................................................12
------------------
10. Termination of Employment...............................................12
-------------------------
</TABLE>
F-2
<PAGE>
<TABLE>
<S> <C>
(a) Termination other than for Cause, Retirement, Death or Disability....12
(b) Termination for Cause................................................13
(c) Death/Disability/Retirement..........................................13
11. Assignability/Transfers.................................................13
-----------------------
(a) Assignability........................................................13
(b) Upon Death...........................................................13
12. Means of Exercising Options.............................................14
---------------------------
(a) Notice and Payment of Exercise Price.................................14
(b) Certificates.........................................................14
(c) Fractional Shares....................................................14
13. Incentive Stock Option Limitations......................................14
----------------------------------
(a) $100,000 Annual Limitation on Incentive Stock Options................14
(b) Ten (10%) Owners.....................................................15
(c) Employee Status/Price................................................15
(d) Notice to Company of Disqualifying' Position.........................15
14. Grant Agreement/Terms and Conditions of Options.........................15
-----------------------------------------------
15. Restricted Stock........................................................16
----------------
(a) Issue Date and Vesting Date........................................16
(b) Conditions to Vesting..............................................16
(c) Restrictions on Transfer Prior to Vesting...........................16
(d) Issuance of Certificates...........................................17
(e) Consequences Upon Vesting..........................................17
(f) Effect of Termination of Employment..................................17
16. Adjustments.............................................................18
-----------
(a) Options - Stock Dividends and Stock Splits...........................18
(b) Options - Consolidations, Mergers, Sale, Dissolution or Liquidation..18
(c) Options - Recapitalization or Reorganization.........................19
(d) Modification of Incentive Stock Options..............................19
(e) Outstanding Restricted Stock.........................................19
(f) Issuance of Securities...............................................19
(g) Adjustments..........................................................19
17. Term and Amendment of Plan..............................................20
--------------------------
18. Conversion/Termination of Incentive Stock Options.......................20
-------------------------------------------------
19. Expenses/Application of Funds...........................................21
-----------------------------
20. Governmental Regulation.................................................21
-----------------------
21. Withholding of Additional Income Taxes..................................22
--------------------------------------
(a) Cash Remittance....................................................22
</TABLE>
F-3
<PAGE>
<TABLE>
<S> <C>
(b) Stock Remittance...................................................22
(c) Stock Withholding..................................................22
22. Rights Under the Plan...................................................23
---------------------
(a) No Rights as a Stockholder...........................................23
(b) Accrual of Dividends.................................................23
(c) No Special Employment Rights.........................................23
(c) No Rights to Options.................................................23
(d) No Obligation to Exercise............................................23
23. Failure to Comply.......................................................24
-----------------
24. Governing Law; Construction.............................................24
---------------------------
</TABLE>
F-4
<PAGE>
GOLF-TECHNOLOGY HOLDING, INC.
1997 STOCK OPTION AND LONG-TERM INCENTIVE PLAN
1. Purpose.
-------
This Golf-Technology Holding, Inc. 1997 Stock Option and Long-Term
Incentive Plan is intended to promote the interests of Golf-Technology Holding,
Inc. and its shareholders by providing key employees of the Company and its
subsidiaries, on whose judgment, initiative, and efforts the successful conduct
of the business of the Company depends, and who are responsible for the
management, growth, and protection of the business, as well as directors of the
Company and consultants to the Company and its subsidiaries with appropriate
incentives and rewards to encourage employees to continue in the employ of the
Company and to maximize their performance and to encourage directors and
consultants to maximize their efforts on behalf of the Company.
2. Definitions.
-----------
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) Board
"Board" shall mean the Board of Directors of the Company.
(b) Cause
"Cause" shall mean, when used in connection with the termination of a
Participant's employment, the termination of the Participant's employment on
account of: (i) the willful and continued failure by the Participant
substantially to perform his or her duties and obligations to the Company (other
than any such failure resulting from incapacity due to physical or mental
illness), (ii) the willful violation by the Participant of (A) any federal or
state law or (B) any rule of the Company, which violation would materially
reflect on the Participant's character, competence, or integrity, (iii) a breach
by a Participant of the Participant's duty of loyalty to the Company such as
Participant's solicitation of customers or employees of the Company on behalf of
any other person, (iv) the Participant's unauthorized removal from the Company's
premises of any document (in any medium or form) relating to the Company, its
business, or its customers, provided, however, that no such removal shall be
deemed "unauthorized" if it is in furtherance of an individual's duties and
obligations to the Company and such removal is a common practice at the Company,
(v) the Participant's unauthorized disclosure to any person of any confidential
information regarding the Company, (vi) the willful engaging by the Participant
in any other misconduct which is materially injurious to the Company or (vii)
any event that constitutes "cause" (or any similar term that constitutes the
basis on which the Company may terminate the employee's employment with the
Company) for purposes of an employment agreement between the Participant and the
Company. For purposes of this Paragraph 2(b) no act, or failure to act, on a
Participant's part shall be considered "willful" unless done, or omitted to be
done, by the Participant in bad faith and without reasonable belief that the
action or omission was in the best interests of the Company. Any rights the
Company may have hereunder in respect of the events giving rise to Cause shall
be in addition to the rights the Company may
F-5
<PAGE>
have under any other agreement with the Participant or at law or in equity. If,
subsequent to the termination of a Participant's employment without Cause, it is
determined by the Board that the Participant's employment could have been
terminated for Cause, such Participant's employment shall, at the election of
the Committee in its sole discretion, be deemed to have been terminated for
Cause.
(c) Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) Committee
"Committee" shall mean the Option Committee of the Board as provided
in Paragraph 3.
(e) Company
"Company" shall mean Golf-Technology Holding, Inc., an Idaho
corporation.
(f) Common Stock
"Common Stock" shall mean the common stock, par value $.001 per share,
of the Company.
(g) Disability
"Disability" shall mean any physical or mental condition as a result
of which a Participant is disabled as described in Section 422(c)(6) of the
Code.
(h) Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) Incentive Award
"Incentive Award" shall mean an Option or a Restricted Stock award
granted pursuant to the terms of the Plan.
(j) Incentive Stock Option
"Incentive Stock Option" shall mean an Option that is an "incentive
stock option" within the meaning of Section 422 of the Code and that is
identified as an Incentive Stock Option in the grant agreement by which it is
evidenced.
(k) Issue Date
"Issue Date" shall mean the date established by the Committee on which
certificates representing shares of Restricted Stock shall be issued by the
Company pursuant to the terms of Paragraph 15(d) hereof.
F-6
<PAGE>
(l) Non-Qualified Stock Option
"Non-Qualified Stock Option" shall mean an Option that is not an
Incentive Stock Option.
(m) Option
"Option" shall mean an option to purchase shares of Common Stock
granted pursuant to Paragraph 6 hereof. Each Option, or portion thereof, shall
be identified as either an Incentive Stock Option or a Non-Qualified Stock
Option in the grant agreement by which such Option is evidenced.
(n) Participant
"Participant" shall mean an employee, officer, director or outside
director of the Company or any subsidiary of the Company or a consultant to the
Company or any subsidiary of the Company selected to participate in the Plan and
to whom an Incentive Award is granted pursuant to the Plan, and, upon his or her
death, that person's successors, heirs, executors, and administrators, as the
case may be.
(o) Plan
"Plan" shall mean this Golf-Technology Holding, Inc. 1997 Stock Option
and Long-Term Incentive Plan, as it may be amended from time to time.
(p) Restricted Stock
"Restricted Stock" shall mean a share of Common Stock that is granted
pursuant to the terms of Paragraph 15 hereof and that is subject to the
restrictions set forth in Paragraph 15(c) hereof for as long as such
restrictions continue to apply to such share.
(q) Retirement
"Retirement" shall mean a Participant's termination of employment
(other than by reason of death or Disability and other than a termination that
is (or is deemed to have been) for Cause) on or after the later of (i) the date
the Participant attains age 65 and (ii) the date the Participant has completed
five years of service with the Company.
(r) Securities Act
"Securities Act" shall mean the Securities Act of 1933, as amended.
(s) Vesting Date
"Vesting Date" shall mean the date and/or dates established by the
Committee on which Restricted Stock may vest.
F-7
<PAGE>
3. Administration of the Plan.
--------------------------
(a) Board or Committee Administration.
The Plan shall be administered by the Board. The Board may appoint an
Option Committee (the "Committee") of two or more of its members to administer
this Plan, provided, however, the Committee shall not take any action under the
Plan unless it is at all times composed solely of not less than two "Non-
Employee Directors" within the meaning of Rule 16b-3, as promulgated under the
Exchange Act. Hereinafter, all references in this Plan to the "Committee" shall
mean the Board if the Committee is not composed of two Non-Employee Directors
when the Company is subject to the Securities Act, or, if the Committee is
unable to act or no Committee has been appointed and the Board shall take any
and all actions required or permitted to be taken by the Committee under the
Plan and shall serve as the Committee.
Subject to ratification of the grant or authorization of each
Incentive Award by the Board (if so required by applicable state law), and
subject to the terms of the Plan, the Committee shall have the authority to:
(i) designate the employees, officers, directors or outside
directors of the Company or any subsidiary or consultants
to the Company or any subsidiary to whom Incentive Awards
may be granted and the amount and type of such Incentive
Awards;
(ii) determine the time or times at which Incentive Awards may
be granted;
(iii) determine the price of shares subject to each Option,
which price shall not be less than the minimum prices
specified in Paragraphs 7 and 13 with respect to Non-
Qualified and Incentive Stock Options;
(iv) determine whether each Option granted shall be an
Incentive Stock Option or a Non-Qualified Stock Option;
(v) determine, subject to Paragraph 8, the time or times when
each Option shall become exercisable and the duration of
the exercise period;
(vi) determine whether restrictions such as repurchase options
are to be imposed on shares subject to Options, and the
nature of such restrictions, if any;
(vi) in its absolute discretion and without amendment to the
Plan, (i) accelerate the date on which any Option granted
under the Plan becomes exercisable, (ii) accelerate the
Issue Date or Vesting Date of any share of Restricted
Stock issued under the Plan or waive any condition imposed
thereunder, or (iii) otherwise adjust any of the terms of
any Incentive Award (except that no such adjustment shall,
without the consent of a Participant, reduce the
Participant's rights under any previously granted and
outstanding Incentive Award);
F-8
<PAGE>
(vii) grant, in its absolute discretion and without amendment to
the Plan, Incentive Awards on the condition that such
Participants surrender to the Committee for cancellation
such other Incentive Awards (including without limitation,
Options with higher exercise prices and values) as the
Committee specifies. Notwithstanding Paragraph 5 herein,
prior to the surrender of such other Incentive Awards,
Incentive Awards granted pursuant to the preceding
sentence of this Paragraph 3(a) shall not count against
the limit set forth in such Paragraph 5; and
(viii) interpret and construe any provision of the Plan and
prescribe and rescind rules and regulations for
administering the Plan as it may deem necessary or
appropriate.
The interpretation and construction by the Committee of any provisions of the
Plan or of any Incentive Award granted under it shall be final and binding on
all parties.
(b) Committee Actions.
The Committee may select one of its members as its chairman, and shall
hold meetings at such time and places as it may determine. Acts by a majority
of the Committee, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee. From time
to time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company (and any affiliate that may
adopt the Plan), jointly and severally, shall indemnify and hold harmless each
member of the Committee and each other director or employee of the Company (or
affiliate) to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination unless such action, omission or determination was taken or made by
such member, director or employee in bad faith and without reasonable belief
that it was in the best interests of the Company and its affiliates, as the case
may be.
(c) Grant of Options to Directors.
All grants of Options to directors shall in all respects be made in
accordance with the provisions of this Plan applicable to other eligible
persons. Directors who are either (i) eligible for Options pursuant to the Plan
or (ii) have been granted Options may vote on any matters affecting the
administration of the Plan or the grant of any Options pursuant to the Plan,
except that no such director shall act upon the granting to himself of Options,
but any such member may be counted in determining the existence of a quorum at
any meeting of the Board during which action is taken with respect to the
granting to him of Options.
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<PAGE>
4. Eligible Employees and Others.
-----------------------------
The persons who shall be eligible to receive Incentive Awards pursuant to
the Plan shall be those employees, officers, directors and outside directors of
the Company or consultants to the Company who are responsible for the
management, growth, and protection of the business of the Company; provided,
however, that Incentive Stock Options may only be granted to employees of the
Company or its subsidiaries. Those officers and directors of the Company who
are not employees may not be granted Incentive Stock Options under the Plan.
Non-qualified Stock Options or Restricted Stock may be granted to any employee,
officer or director (whether or not also an employee) or consultant of the
Company or its subsidiaries. The Committee may take into consideration a
recipient's individual circumstances in determining whether to grant an
Incentive Stock Option, Non-Qualified Stock Option or Restricted Stock.
Granting of any Incentive Award to any individual or entity shall neither
entitle that individual or entity to, nor disqualify him from, participation in
any other grant of Incentive Awards.
5. Stock.
-----
The stock subject to Incentive Awards shall be authorized but unissued
shares of Common Stock or shares of Common Stock reacquired by the Company in
any manner. The aggregate number or shares which may be issued by the Committee
in its sole and absolute discretion pursuant to which Incentive Awards may be
granted under the Plan is one million two hundred and fifty thousand (1,250,000)
shares. The aggregate number or shares which may be issued pursuant to this Plan
may be adjusted as provided in Paragraph 16. If any Incentive Award granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part, the underlying shares covered by such Incentive Awards shall again be
available for future grants of Incentive Awards under the Plan.
6. Granting of Options or Restricted Stock.
---------------------------------------
(a) Plan Awards.
Under the Plan, the Committee may, in its sole and absolute
discretion, grant either or both of the following types of Incentive Awards to a
Participant: an Option or Restricted Stock.
Incentive Awards may be granted by the Committee pursuant to the Plan
at any time on or after the adoption of the Plan by the Board, effective as of
_________ ___, 1997, and prior to _______________, 2007; provided, however, that
any Incentive Stock Options granted hereunder shall be subject to the
ratification and approval of the Plan by the consent of the shareholders within
twelve (12) months of the effective date; further provided, that failure to
obtain shareholder approval shall not affect the validity of this Plan and the
Incentive Awards granted hereunder except that all previous grants of Incentive
Stock Options shall automatically become grants of Non-Qualified Stock Options
and no further Incentive Stock Options shall be granted under the Plan.
The date of grant of an Incentive Award under the Plan will be the
date specified by the Committee at the time it grants the Incentive Award;
provided, however, that such date shall not be prior
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<PAGE>
to the date on which the Committee acts to approve the Incentive Award. The
Committee shall have the right, with the consent of the Participant, to convert
an Incentive Stock Option granted under the Plan to a Non-Qualified Stock Option
pursuant to Paragraph 18.
(b) Individual Awards.
Incentive Awards granted under the Plan may be made up entirely of one
type of Incentive Award or any combination of both Options and Restricted Stock,
in the Committee's sole discretion.
7. Option Price
------------
(a) Price.
The exercise price per share as specified in the grant agreement
relating to each Option granted under the Plan shall be determined by the
Committee, provided, however, that the exercise price per share of each
Incentive Stock Option granted under the Plan shall not be less than the
exercise prices set forth in Paragraph 13 hereof. The exercise price per share
of each Non-Qualified Stock Option granted under the Plan may be less than or
equal to the fair market value on the date of such grant but not less than fifty
(50%) percent of fair market value on the date of such grant.
(b) Determination or Fair Market Value.
If, at the time an Option is granted under the Plan, the Company's
Common Stock is publicly traded, "fair market value" shall be determined as of
the last business day for which the prices or quotes discussed in this sentence
are available prior to the date such Option is granted and shall mean (i) the
closing selling price per share on that date of the Common Stock on the
principal national securities exchange on which the Common Stock is traded, if
the Common Stock is then traded on a national securities exchange; or (ii) the
closing selling price per share on that date of the Common Stock on the NASDAQ
National Market List, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price per share last quoted on
that date by an established quotation service for over-the-counter securities,
if the Common Stock is not reported on the NASDAQ National Market List.
However, if the Common Stock is not publicly traded at the time an Option is
granted under the Plan, "fair market value" shall be deemed to be the fair value
of the Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
8. Option Duration.
---------------
Subject to earlier termination as provided in Paragraph 10 and the
Incentive Stock Option limitations as provided in Paragraph 13, each Option
shall expire on the date specified by the Committee which shall be no later than
ten years from the date of grant.
F-11
<PAGE>
9. Exercise or Option.
------------------
Subject to the provisions of Paragraph 10, each Option granted under the
Plan shall be exercisable as follows:
(i) Vesting. The Option shall either be fully exercisable on the
-------
date of grant or shall become exercisable thereafter in such installments as the
Committee may specify. In the absence of provisions is an individual grant
agreement or employment agreement to the contrary, Options shall vest ratably
over a five (5) year period commencing on the first anniversary of the date of
grant.
(ii) Full Vesting or Installments. Once an installment becomes
----------------------------
exercisable it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
(iii) Partial Exercise. Each Option or installment may be exercised
----------------
at any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable. Upon partial
exercise of an Option, the grant agreement evidencing such Option, marked with
such notations as the Committee may deem appropriate to evidence such partial
exercise, shall be returned to the Participant exercising such Option together
with the delivery of the certificates described in Paragraph 12 hereof.
(iv) Acceleration of Vesting. The Committee shall have the right to
-----------------------
accelerate the date of exercise of any installment of any Option; provided that
the Committee shall not, without the consent of a Participant, accelerate the
exercise date of any installment of any Option granted to any employee as an
Incentive Stock Option (and not previously converted into a Non-Qualified Option
pursuant to Paragraph 18) if such acceleration would violate the annual vesting
limitation contained in Section 422 of the Code, as described in Paragraph 13.
10. Termination of Employment.
-------------------------
Unless otherwise provided in the Participant's grant agreement or
employment agreement, the following provisions shall apply upon the termination
of a Participant's employment:
(a) Termination other than for Cause, Retirement, Death or
Disability
If a Participant who has been granted an Option ceases to be employed
by the Company and all its subsidiaries other than for Cause or by reason of
Retirement, death or Disability, no further installments of his Options shall
become exercisable, and his Options shall terminate after the passage of ninety
(90) days from the date of termination of his employment, but in no event later
than on their specified expiration dates. Options granted to such Participant,
to the extent they were not exercisable at the time of such termination, shall
expire at the close of business on the date of such termination.
Employment shall be considered as continuing uninterrupted during any
bona fide leave of absence (such as those attributable to illness, military
obligations or governmental service) provided that the period of such leave does
not exceed ninety (90) days or, if longer, any period during which such
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<PAGE>
Participant 's right to reemployment is guaranteed by statute. A bona fide
leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Company or any subsidiary to
continue the employee of the Participant after the approved period of absence.
Incentive Stock Options granted under the Plan shall not be affected by any
change of employment within or among the Company and its subsidiaries, so long
as the Participant continues to be an employee of the Company or any subsidiary.
(b) Termination for Cause
If a Participant who has been granted an Option ceases to employed by
the Company and all its subsidiaries for Cause, all outstanding Options granted
to such Participant shall automatically expire at the commencement of the
business as of the date of such termination.
(c) Death / Disability / Retirement.
If a Participant who has been granted an Option ceases to be employed
by the Company and all subsidiaries by reason of his death, Disability or
Retirement, he or his personal representative or estate or beneficiary who has
acquired the Option by will or by the laws of decent and distribution, shall
have the right to exercise any Options held by him on the date of termination of
employment, to the extent of the number of shares with respect to which he could
have exercised it on that date, at any time prior to the specified expiration
date of the Option. Options granted to such Participant, to the extent they were
not exercisable at the time of such termination, shall expire at the close of
business on the date of such termination. The effect of exercising any
Incentive Stock Option on a day that is more than ninety (90) days after the
date of termination (or, in the case of a termination of employment on account
of death or Disability, on a day that is more than one year after the date of
such termination) will be to cause such Incentive Stock Option to be treated as
a Non-Qualified Stock Option.
11. Assignability/ Transfers.
------------------------
(a) Assignability
No Option shall be assignable or transferable by the Participant
except by will or by the laws of descent and distribution and during the
lifetime of the Participant each Option shall be exercisable only by the
Participant.
(b) Upon Death.
Upon the death of a Participant, outstanding Options granted to such
Participant may be exercised only by the executors or administrators of the
Participant's estate or by any person or persons who shall have acquired such
right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Option, or the
right to exercise any Option, shall be effective to bind the Company unless the
Committee shall have been furnished with (a) written notice thereof and with a
copy of the will and/or such evidence as the Committee may deem necessary to
establish the validity of the transfer and (b) an agreement by the transferee to
comply with all the terms and conditions of the Options that are or would have
been applicable to the Participant and to be bound by the acknowledgments made
by the Participant in connection with the grant of the Option.
F-13
<PAGE>
12. Means of Exercising Options.
---------------------------
(a) Notice and Payment of Exercise Price
An Option (or any part or installment thereof) shall be exercised by
giving written notice to the Company at its principal office to the attention of
its Secretary. Such notice shall identify the Option being exercised and
specify the number of shares as to which such Option is being exercised, shall
be signed by the Participant and shall be accompanied by the grant agreement(s)
evidencing the Option. Such written request shall be accompanied by full
payment of the purchase price therefore either (a) in United States dollars in
cash or by certified check, bank cashier's check or wire transfer; (b) subject
to the approval of the Committee, through delivery of shares of Common Stock
having a fair market value equal as of the date of the exercise to the cash
exercise price of the Option; (c) subject to the approval of the Committee, by
delivery of the Participant's personal recourse note bearing interest payable
not less than annually at no less than one hundred percent (100%) of the lowest
applicable Federal rate, as defined in Section 1274(d) of the Code, or (d)
subject to the approval of the Committee, pursuant to procedures adopted by the
Committee whereby the Participant, by a properly written notice, directs (x) an
immediate market sale or margin loan respecting all or a part of the share of
Common Stock to which the Participant is entitled upon exercise pursuant to an
extension of credit by the Company to the Participant of the exercise price, (y)
the delivery of the shares of Common Stock from the Company directly to the
brokerage firm, and (z) the delivery of the exercise price form the sale or
margin loan proceeds from the brokerage directly to the Company; or (e) subject
to the approval of the Committee, by any combination of (a), (b), (c) and (d)
above or such other method as the Committee may approve from time to time.
Any payment in shares of Common Stock shall be effected by the
delivery of such shares to the Secretary of the Company, duly endorsed in blank
or accompanied by stock powers duly executed in blank, together with any other
documents and evidences as the Secretary of the Company shall require from time
to time.
(b) Certificates
Certificates for shares of Common Stock purchased upon the exercise of
an Option shall be issued in the name of the Participant or his or her
beneficiary, as the case may be, and delivered to the Participant or his or her
beneficiary, as the case may be, as soon as practicable following the date on
which the Option is exercised.
(c) Fractional Shares
No fractional shares shall be issued under the Plan and the
Participant shall receive from the Company cash in lieu of such fractional
shares.
13. Incentive Stock Option Limitations.
----------------------------------
(a) $100,000 Annual Limitation on Incentive Stock Options.
Each eligible employee may be granted Incentive Stock Options only to
the extent that, in the aggregate under this Plan and all Incentive Stock Option
plans of the Company and any subsidiary, such Incentive Stock Options do not
become exercisable for the first time by such employee during any
F-14
<PAGE>
calendar year in a manner which would entitle the employee to purchase more than
$100,000 in fair market value (determined at the time the Incentive Stock
Options were granted) of Common Stock in that year. Any Options granted to an
employee in excess of such amount will be granted as Non-Qualified Stock
Options.
(b) Ten (10%) Owners
In the case of an Incentive Stock Option to be granted to an employee
owning stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or its subsidiaries, the price per
share specified in the agreement relating to such Incentive Stock Option shall
not be less than one hundred ten percent (110%) of the fair market value per
share of Common Stock on the date of grant and the Incentive Stock Option shall
expire five years from the date of grant.
(c) Employee Status / Price
No Incentive Stock Option may be granted to an individual if, at the
time of the proposed grant, such individual is not an employee of the Company.
In addition all Incentive Stock Options shall be granted at no less than 100% of
fair market value.
(d) Notice to Company of Disqualifying' Position.
Each employee who receives an Incentive Stock Option must agree to
notify the Company in writing immediately after the employee makes a
Disqualifying Disposition of' any Common Stock acquired pursuant to the exercise
of an Incentive Stock Option. A Disqualifying Disposition is any disposition
(including any sale) of such Common Stock before the later of (a) two years
after the date the employee was granted the Incentive Stock Option, or (b) one
year after the date the employee acquired Common Stock by exercising the
Incentive Stock Option. If the employee has died before such stock is sold,
these holding period requirements do not apply and no Disqualifying Disposition
can occur thereafter.
(e)
In the event an Incentive Stock Option granted hereunder does not meet
the requirements set forth in this Paragraph 13, such Incentive Stock Option
shall automatically be deemed to be a Non-Qualified Stock Option, but all other
terms and provisions of such Incentive Stock Option shall remain unchanged.
14. Grant Agreement / Terms and Conditions of Options.
-------------------------------------------------
Options shall be evidenced by grant agreements (which need not be
identical) in such form as the Committee may from time to time approve. Such
grant agreements shall conform to the terms and conditions set forth in
Paragraphs 6 through 13 hereof and may contain such other provisions as the
Committee deems advisable. In granting any Non-Qualified Stock Option, the
Committee may specify that such Non-Qualified Stock Option shall be subject to
the restrictions set forth herein with respect to Incentive Stock Options, or to
such other termination and cancellation provisions as the Committee may
determine. The Committee may from time to time confer authority and
responsibility on one or more of its own members and/or one or more officers of
the Company to execute and deliver such instruments.
F-15
<PAGE>
The proper officers of the Company are authorized and directed to take any and
all action necessary or advisable from time to time to carry out the terms of
such instruments.
In the event of any conflict between the terms of the Plan, and a grant
agreement pursuant to which Options have been granted hereunder or the terms of
an employment agreement pursuant to which an employee of the Company who is a
Participant has been granted Options hereunder, the terms of the applicable
employment agreement or related grant agreement shall control. Notwithstanding
the foregoing, no change in any employment agreement or grant agreement shall
cause any Incentive Stock Option granted hereunder to be considered a Non-
Qualified Stock Option.
15. Restricted Stock.
----------------
The Committee may grant shares of Restricted Stock pursuant to the Plan.
Each grant of shares of Restricted Stock shall be evidenced by an agreement in
such form as the Committee shall from time to time approve. Each grant of
shares of Restricted Stock shall comply with and be subject to the following
terms and conditions:
(a) Issue Date and Vesting Date.
At the time of the grant of shares of Restricted Stock, the Committee
shall establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates
with respect to such shares. The Committee may divide such shares into classes
and assign a different Issue Date and/or Vesting Date for each class. Except as
provided in Paragraphs 15(c) and 15(f) hereof, upon the occurrence of the Issue
Date with respect to a share of Restricted Stock, a share of Restricted Stock
shall be issued in accordance with the provisions of Paragraph 15(d) hereof.
Provided that all conditions to the vesting of a share of Restricted Stock
imposed pursuant to Paragraph 15(b) hereof are satisfied, and except as provided
in Paragraphs 15(c) and 15(f) hereof, upon the occurrence of the Vesting Date
with respect to a share of Restricted Stock, such share shall vest and the
restrictions of Paragraph 15(c) hereof shall cease to apply to such share.
(b) Conditions to Vesting.
At the time of the grant of shares of Restricted Stock, the Committee
may impose such restrictions or conditions, not inconsistent with the provisions
hereof, to the vesting of such shares as it, in its absolute discretion, deems
appropriate. By way of example and not by way of limitation, the Committee may
require, as a condition to the vesting of any shares of Restricted Stock, that
the Participant or the Company achieve such performance criteria as the
Committee may specify at the time of the grant of such shares.
(c) Restrictions on Transfer Prior to Vesting.
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights to such share, whether voluntary or involuntary, by
operation of law or otherwise, shall vest the transferee with any interest, or
right in, or with respect to, such share, but immediately upon any attempt to
transfer such rights, such share, and all the rights related thereto, shall be
forfeited by the Participant and the transfer shall be of no force or effect.
F-16
<PAGE>
(d) Issuance of Certificates.
(i) Except as provided in Paragraphs 15(c) or 15(f) hereof,
reasonably promptly after the Issue Date with respect to shares of Restricted
Stock, the Company shall cause to be issued a stock certificate, registered in
the name of the Participant to whom such shares were granted, evidencing such
shares, provided, that the Company shall not cause to be issued such stock
certificate unless it has received a stock power duly endorsed in blank with
respect to such shares. Each such stock certificate shall bear the following
legend:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED
HEREBY ARE SUBJECT TO THE RESTRICTIONS, TERMS, AND CONDITIONS (INCLUDING
FORFEITURE PROVISIONS AND RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE
GOLF-TECHNOLOGIES HOLDING, INC. 1997 STOCK OPTION AND LONG-TERM INCENTIVE
PLAN AND RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN THE
REGISTERED OWNER OF SUCH SHARES AND GOLF-TECHNOLOGY HOLDING, INC. A COPY OF
THE PLAN AND AGREEMENT IS ON FILE IN THE OFFICE OF THE SECRETARY OF GOLF-
TECHNOLOGY HOLDING, INC. C/O GOLF-TECHNOLOGY, INC., 13000 SAWGRASS VILLAGE
CIRCLE, SUITE 30, PONTE VEDRA BEACH, FLORIDA 32082.
Such legend shall not be removed from the certificate evidencing such shares
until such shares vest pursuant to the terms hereof.
(ii) Each certificate issued pursuant to Paragraph 15(d)(i) hereof,
together with the stock powers relating to the shares of Restricted Stock
evidenced by such certificate, shall be deposited by the Company with a
custodian designated by the Company. The Company shall cause such custodian to
issue to the Participant a receipt evidencing the certificates held by it which
are registered in the name of the Participant.
(e) Consequences Upon Vesting.
Upon the vesting of a share of Restricted Stock pursuant to the terms
hereof, the restrictions of Paragraph 15(c) hereof shall cease to apply to such
share. Reasonably promptly after a share of Restricted Stock vests pursuant to
the terms hereof, the Company shall cause to be issued and delivered to the
Participant to whom such shares were granted, a certificate evidencing such
share, free of the legend set forth in Paragraph 15(d)(i) hereof, together with
any other property of the Participant held by the custodian pursuant to
Paragraph 15(d)(ii) hereof.
(f) Effect of Termination of Employment.
(i) In the event that the employment of a Participant with the
Company shall terminate for any reason other than Cause prior to the vesting of
shares of Restricted Stock granted to such Participant, the shares of Restricted
Stock shall be forfeited on the date of such termination, provided however, that
the Committee may, in its sole and absolute discretion, vest the Participant in
all or any
F-17
<PAGE>
portion of shares of Restricted Stock which would otherwise be forfeited
pursuant to the provisions of this Paragraph.
(ii) In the event of the termination of a Participant's employment for
Cause, all shares of Restricted Stock granted to such Participant which have not
vested as of the date of such termination shall immediately be forfeited.
16. Adjustments.
-----------
Upon the occurrence of any of the following events, a Participant's rights
with respect to Incentive Awards granted to him hereunder shall be adjusted as
hereinafter provided, unless otherwise specifically provided in the grant
agreement between the Participant and the Company relating to such Incentive
Award:
(a) Options - Stock Dividends and Stock Splits.
Subject to any required action by the shareholders of the Company, if
the shares of Common Stock shall be subdivided or combined into a greater or
smaller number of shares or if the Company shall issue any shares of Common
Stock as a stock dividend on its outstanding Common Stock or there shall be any
other increase or decrease in the number of such shares effected without receipt
of consideration by the Company, the number of shares of Common Stock
deliverable upon the exercise of Options shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
exercise price per share to reflect such subdivision, combination or stock
dividend.
(b) Options - Consolidations, Mergers, Sale, Dissolution or
Liquidation.
Subject to any required action by the shareholders of the Company, if
the Company is to be consolidated with or acquired by another entity in a
merger, sale of all or substantially all of the Company's assets or otherwise
(an "Acquisition"), dissolution or liquidation of the Company, the Committee
shall, as to outstanding Options, either (i) make appropriate provision for the
continuation of such Options by substituting immediately prior to such event
(whether or not then exercisable) on an equitable basis for the shares then
subject to such Options the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Acquisition; (ii) upon
written notice to the Participants, provide that all Options must be exercised,
to the extent then exercisable, within a specified number of days of the date of
such notice, at the end of which period the Options shall terminate; (iii)
terminate all Options in exchange for a cash payment equal to the excess of the
fair market value of the shares subject to such Options (to the extent then
exercisable) over the exercise price thereof; or (iv) any combination of (i),
(ii) and (iii).
Subject to any required action by the shareholders of the Company, in
the event that the Company shall be the surviving corporation in any merger or
consolidation (except a merger or consolidation as a result of which the holders
of shares of Common Stock receive securities of another corporation), each
Option outstanding on the date of such merger or consolidation shall pertain to
and apply to the securities which a holder of the number of shares of Common
Stock subject to such Option would have received in such merger or
consolidation.
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<PAGE>
(c) Options - Recapitalization or Reorganization.
In the event of a recapitalization or reorganization of the Company
(other than a transaction described in subparagraph (b) above) pursuant to which
securities of the Company or of another corporation are issued with respect to
the outstanding shares of Common Stock, a Participant upon exercising an Option
shall be entitled to receive for the purchase price paid upon such exercise the
new securities of equivalent value as he would have received if he had exercised
his Option prior to such recapitalization or reorganization.
(d) Modification of Incentive Stock Options.
Notwithstanding the foregoing, any adjustments made pursuant to
subparagraphs (a), (b) or (c) with respect to Incentive Stock Options shall be
made only after the Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
Incentive Stock Options (as that term is defined in Paragraph 424 of the Code)
or would cause any adverse tax consequences for the holders of such Incentive
Stock Options. If the Committee determines that such adjustments made with
respect to Incentive Stock Options would constitute a modification of such
Incentive Stock Options, it may refrain from making such adjustments.
(e) Outstanding Restricted Stock.
Unless the Committee in its absolute discretion otherwise determines,
any securities or other property (including dividends paid in cash) received by
a Participant with respect to a share of Restricted Stock, the Issue Date with
respect to which occurs prior to such event, but which has not vested as of the
date of such event, as a result of any dividend, stock split, reverse stock
split, recapitalization, merger, consolidation, combination, exchange of shares
or similar corporate exchange will not vest until such share of Restricted Stock
vests and shall be promptly deposited with the custodian designated pursuant to
Paragraph 15(d)(ii) hereof.
The Committee may, in its absolute discretion, adjust any grant of
shares of Restricted Stock, the Issue Date with respect to which has not
occurred as of the date of the occurrence of any of the following events, to
reflect any dividend, stock split, reverse stock split, recapitalization,
merger, consolidation, combination, exchange of shares or similar corporate
change as the Committee may deem appropriate to prevent the enlargement or
dilution of rights of Participants under the grant.
(f) Issuance of Securities.
Except as expressly provided herein, no issuance by the Company of
shares or stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Incentive Awards. No
adjustments shall be made to Options for dividends paid in cash or in property
other than securities of the Company.
(g) Adjustments.
Upon the happening of any of the events described in subparagraphs
(a), (b) or (c) above, the class and aggregate number of shares set forth in
Paragraph 5 hereof that are subject to Options
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<PAGE>
which previously have been or subsequently may be granted under the Plan shall
also be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee shall determine the specific adjustments to be
made under this Paragraph 16 and its determination shall be conclusive.
If any person or entity owning restricted Common Stock obtained by
exercise of an Option made hereunder receives shares or securities or cash in
connection with a corporate transaction described in subparagraphs (a), (b) or
(c) above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash were issued, unless otherwise determined by the Committee.
17. Term and Amendment of Plan.
--------------------------
This Plan was adopted by the Board on _______, 1997, subject to the
approval by the shareholders of the Company of the Plan. The Plan shall expire
at the end of the day on ________, 2007 (except as to Options outstanding on
that date). Subject to the provisions of Paragraph 6 above, Incentive Awards
may be granted under the Plan prior to the date of stockholder approval of the
Plan.
The Board may at any time, or from time to time, suspend or terminate the
Plan in whole or in part, or amend it in such respects as the Board may deem
appropriate. No amendment, suspension or termination of the Plan shall, without
the Participant's consent, alter or impair any of the rights or obligations
under any Option granted to an Participant under the Plan. The Board may amend
the Plan, subject to the limitations cited above, in such manner as it deems
necessary to permit the granting of Incentive Awards meeting the requirements of
future amendments or issued regulations, if any, to the Code or to the Exchange
Act. If the Plan becomes qualified under Section 16b-3 of the Exchange Act, an
amendment would require shareholder approval under such Rule 16b-3 to retain the
Plan's qualification, then such amendment shall be presented to shareholders for
ratification, provided however, that the failure to obtain shareholder
ratification shall not affect the validity of the Plan if so amended and the
Incentive Awards granted hereunder. In addition, if the rules of NASDAQ or such
other exchange on which the securities of the Company are traded would require
shareholder approval of any amendment to the Plan, the amendment shall be
presented to shareholders for ratification.
18. Conversion / Termination of Incentive Stock Options.
---------------------------------------------------
The Committee, at the written request of any Participant may in its
discretion take such actions as may be necessary to convert such Participant's
Incentive Stock Options (or any installments or portions or installments
thereof) that have not been exercised on the date of conversion into Non-
Qualified Stock Options at any time prior to the expiration of such Incentive
Stock Options, regardless of whether the Participant is an employee of the
Company or a subsidiary at the time of such conversion. Such actions may
include, but not be limited to, extending the exercise period or reducing the
exercise price of the appropriate installments of such Incentive Stock Options.
At the time of such conversion, the Committee (with the consent of the
Participant) may impose such conditions on the exercise of the resulting Non-
Qualified Stock Options as the Committee in its discretion may determine,
provided that such conditions shall not be inconsistent with this Plan. Nothing
in the Plan shall be deemed to give any Participant the right to have such
Participant's Incentive Stock Options converted into Non-Qualified Stock
Options, and no such conversion shall occur until and unless the Committee takes
appropriate action. The Committee,
F-20
<PAGE>
with the consent of the Participant, may also terminate any portion of any
Incentive Stock Option that has not been exercised at the time of such
termination.
19. Expenses/Application of Funds.
-----------------------------
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company from the sale of shares pursuant to Options granted
under the Plan shall be used for general corporate purposes.
20. Governmental Regulation.
-----------------------
The Company's obligation to sell and deliver shares of the Common Stock
under this Plan is subject to the approval of any governmental authority
required in connection with the authorization, issuance or sale of such shares.
The Company shall be under no obligation to effect the registration pursuant to
the Securities Act of any interests in the Plan or any shares of Common Stock to
be issued hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates evidencing shares
of Common Stock pursuant to the Plan unless and until the Company is advised by
its counsel that the issuance and delivery of such certificates is in compliance
with all applicable laws, regulations of governmental authority, and the
requirements of NASDAQ and any other securities exchange on which shares of
Common Stock are traded. The Committee may require, as a condition of the
issuance and delivery of certificates evidencing shares of Common Stock pursuant
to the terms hereof, that the recipient of such shares make such covenants,
agreements, and representations, and that such certificates bear such legends,
as the Committee, in its sole discretion, deems necessary or desirable.
The exercise of any Option granted hereunder shall be effective only at
such time as counsel to the Company shall have determined that the issuance and
delivery of shares of Common Stock pursuant to such exercise is in compliance
with all applicable laws, regulations of governmental authority, and the
requirements of NASDAQ and any other securities exchange on which shares of
Common Stock are traded. The Committee may, in its sole discretion, defer the
effectiveness of any exercise of an Option granted hereunder in order to allow
the issuance of shares of Common Stock pursuant thereto to be made pursuant to
registration or an exemption from registration or other methods for compliance
available under federal or state securities laws. The Committee shall inform the
Participant in writing of its decision to defer the effectiveness of the
exercise of an Option granted hereunder. During the period that the
effectiveness of the exercise of an Option has been deferred, the Participant
may, by written notice, withdraw such exercise and obtain a refund of any amount
paid with respect thereto.
All Common Stock issued pursuant to the terms of the Plan shall constitute
"restricted securities," as that term is defined in Rule 144 promulgated
pursuant to the Securities Act, and may not be transferred except in compliance
with the registration requirements of the Securities Act or an exemption
therefrom.
Certificates for shares of Common Stock, when issued, may have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
F-21
<PAGE>
AMENDED, OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL THE HOLDER
HEREOF PROVIDES EVIDENCE STATISFACTORY TO THE ISSUER (WHICH, IN THE
DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER) THAT SUCH OFFER SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION
WILL NOT VIOLATE APPLICATE FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Common Stock issued pursuant to
an effective registration statement under the Securities Act and in accordance
with applicable state securities laws.
21. Withholding of Additional Income Taxes.
--------------------------------------
(a) Cash Remittance.
Whenever shares of Common Stock are to be issued upon the exercise of
an Option, the occurrence of the Issue Date or the Vesting Date with respect to
a share of Restricted Stock, the Company shall have the right to require the
Participant to remit to the Company in cash an amount sufficient to satisfy
federal, state, and local withholding tax requirements, if any, attributable to
such exercise, occurrence or payment prior to the delivery of any certificate or
certificates for such shares.
(b) Stock Remittance.
Subject to Paragraph 21(c) hereof, at the election of the Participant,
subject to the approval of the Committee, when shares of Common Stock are to be
issued upon the exercise of an Option, the occurrence of the Issue Date or the
Vesting Date with respect to a share of Restricted Stock, in lieu of the
remittance required by Paragraph 21(a) hereof, the Participant may tender to the
Company a number of shares of Common Stock determined by such Participant, the
fair market value of which at the tender date the Committee determines to be
sufficient to satisfy the minimum federal, state and local withholding tax
requirements, if any, attributable to such exercise, occurrence or grant and not
greater than the Participant's estimated total federal, state and local tax
obligations associated with such exercise, occurrence or grant.
(c) Stock Withholding.
The Company shall have the right, when shares of Common Stock are to
be issued upon the exercise of an Option, the occurrence of the Issue Date or
the Vesting Date with respect to a share of Restricted Stock, in lieu of
requiring the remittance required by Paragraph 21(a) hereof, to withhold a
number of such shares, the fair market value of which at the exercise date the
Committee determines to be sufficient to satisfy the federal, state and local
withholding tax requirements, if any, attributable to such exercise, occurrence
or grant and is not greater than the Participant's estimated total, federal,
state and local tax obligations associated with such exercise, occurrence or
grant.
F-22
<PAGE>
22. Rights Under the Plan.
---------------------
(a) No Rights as a Stockholder.
No person shall have any rights as a stockholder with respect to any
shares of Common Stock covered by or relating to any Incentive Award granted
pursuant to the Plan until the date the person becomes the owner of record with
respect to such shares. Except as otherwise expressly provided in Paragraph 16
hereof, no adjustment to any Incentive Award shall be made for dividends or
other rights for which the record date occurs prior to the date such stock
certificate is issued.
(b) Accrual of Dividends
Whenever Restricted Stock is paid to a Participant or beneficiary
under the Plan, such Participant or beneficiary shall also be entitled to
receive, with respect to each share of Restricted Stock paid, an amount equal to
any cash dividends, and number of shares of Common Stock equal to any stock
dividends, declared and paid with respect to a share of Common Stock between the
date the relevant Restricted Stock was granted and the date the shares of
Restricted Stock are being distributed. At the discretion of the Committee,
interest may be paid on the amount of cash dividends withheld, including cash
dividends on stock dividends, at a rate and subject to such terms as determined
by the Committee.
(c) No Special Employment Rights.
Nothing contained in the Plan or any grant agreement shall confer upon
any Participant any right with respect to the continuation of his or her
employment by or service with the Company or any subsidiary of the Company or
interfere in any way with the right of the Company, subject to the terms of any
separate employment or consulting agreement to the contrary, at any time to
terminate such employment or service or to increase or decrease the compensation
of the Participant from the rate in existence at the time of the grant of an
Incentive Award.
(c) No Rights to Options.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to such
Participant or any other Participant or other person at any time nor preclude
the Committee from making subsequent grants to such Participant or any other
Participant or other person.
(d) No Obligation to Exercise.
The grant to a Participant of an Option shall impose no obligation
upon such Participant to exercise such Option.
F-23
<PAGE>
23. Failure to Comply.
-----------------
In addition to the remedies of the Company elsewhere provided for herein, a
failure by a Participant (or beneficiary) to comply with any of the terms and
conditions of the Plan or the agreement executed by such Participant (or
beneficiary) evidencing an Incentive Award, unless such failure is remedied by
such Participant (or beneficiary) within ten (10) days after having been
notified of such failure by the Committee, shall be grounds for the cancellation
and forfeiture of such Incentive Award, in whole or in part, as the Committee,
in its absolute discretion may determine.
24. Governing Law; Construction.
---------------------------
The validity and construction of the Plan and the instruments evidencing
Options shall be governed by the laws of the State of [Florida], or the laws of
any jurisdiction in which the Company or its successors in interest maybe
organized. In construing this Plan, the singular shall include the plural, and
the masculine gender shall include the feminine and neuter, unless the context
otherwise requires.
F-24
<PAGE>
REVOCABLE PROXY
GOLF-TECHNOLOGY HOLDING, INC.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Harold E. Hutchins and Ernest R. Vadersen, or
either of them, lawful attorneys and proxies of the undersigned with full power
of substitution, for and in the name, place and stead of the undersigned to
attend the Annual Meeting of Shareholders of Golf-Technology Holding, Inc. to be
held at The Marriott at Sawgrass, 100 TPC Boulevard, Ponte Vedra Beach, Florida
on ______, December __, 1997 at 2:00 p.m., local time, and any adjournment(s) or
postponement(s) thereof, with all powers the undersigned would possess if
personally present and to vote the number of votes the undersigned would be
entitled to vote if personally present. The Board of Directors recommends a vote
"FOR" the proposals set forth hereon.
PROPOSAL NO. 1. To elect the following list of nominees as directors of the
Company:
Ernest R. Vadersen, Harold E. Hutchins, Melvin Simon, Jonathan A. Bernstein,
Kevin Moore, Larry Movsovitz and Doug Tewell
[_] For [_] Withhold [_] For All Except
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
PROPOSAL NO. 2. To approve the Company's reincorporation from Idaho to Delaware.
[_] For [_] Against [_] Abstain
PROPOSAL NO. 3. To approve the amendment to the Company's Certificate of
Incorporation to change the name of the Company to "Snake Eyes Golf Clubs, Inc."
[_] For [_] Against [_] Abstain
PROPOSAL NO. 4. To approve the amendment to the Company's Certificate of
Incorporation to change the automatic conversion date for the Series B Preferred
Stock.
[_] For [_] Against [_] Abstain
PROPOSAL NO. 5. Proposal to approve the adoption of the 1997 Stock Option and
Long-Term Incentive Plan of the Company.
<PAGE>
[_] For [_] Against [_] Abstain
PROPOSAL NO. 6. Proposal to ratify the appointment of the accounting firm of
KPMG Peat Marwick LLP as the Company's Independent Accountants.
[_] For [_] Against [_] Abstain
In accordance with their discretion, said Attorneys and Proxies are
authorized to vote upon such other matters or proposals not known at the time of
solicitation of this proxy which may properly come before the meeting. This
proxy when properly executed will be voted in the manner described herein by the
undersigned shareholder. If no direction is made, this proxy will be voted for
each of the Proposals set forth herein. Any prior proxy is hereby revoked.
Please be sure to sign and date this Proxy in the box below.
- --------------------------------------
Date
- --------------------------------------
Shareholder sign above
- --------------------------------------
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
GOLF-TECHNOLOGY HOLDING, INC.
Please sign exactly as your name appears on this proxy card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or corporation, please sign in full corporate name by
president or other authorized person. If a partnership, please sign in
partnership name by authorized person.
PLEASE ACT PROMPTLY: SIGN, DATE & MAIL YOUR PROXY CARD TODAY
