o
Confidential,
for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
x
Definitive
Proxy
Statement
o
Definitive
Additional
Materials
o
Soliciting
Material under ss.
240.14a-12
Element
21 Golf Company
(Name
of
Registrant as Specified in Its Charter)
Not
Applicable
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x
No
fee required.
o
Fee
computed on table below per Exchange
Act Rules 14a-6(i)(1) and 0-11.
1.
Title
of each class of securities to which transaction applies:
2.
Aggregate
number of securities to which transaction applies:
3.
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
4.
Proposed
maximum aggregate value of transaction:
5.
Total
fee paid:
o
Fee
paid previously with preliminary
materials.
o
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.
Notice
is
hereby given that a Special Meeting of Stockholders (“Special Meeting”) of
Element 21 Golf Company, a Delaware corporation (the “Company”), will be held on
May 8, 2006, at 10:30 a.m. (local time) at the Radisson Admiral Hotel-Toronto
Harbourfront, 249 Queen's Quay West, Toronto, Ontario, Canada, for the following
purposes:
1.
To
consider and vote upon a proposal to amend our Certificate of
Incorporation to increase the number of authorized shares of our
common
stock from 100 million to 300million
shares;
2.
To
consider and vote upon a proposed recommendation by the Board of
Directors
to authorize the Board of Directors, in its discretion, to amend
our
Certificate of Incorporation to effect a reverse stock split of our
outstanding shares of common stock;
3.
To
approve the Element 21 Golf Company 2006 Equity Incentive Plan and
to
authorize 20,000,000 shares of the Company’s common stock for issuance
thereunder; and
4.
To
transact such other business as properly may be brought before the
Special
Meeting or any adjournment thereof.
The
close
of business on March 20, 2006 has been fixed as the record date for the
determination of stockholders entitled to notice of, and to vote at, the Special
Meeting and any adjournment thereof. Whether or not you expect to be present
at
the Special Meeting, please mark, date, sign and return the enclosed form of
proxy in the enclosed, postage prepaid, addressed envelope. No additional
postage is required if mailed in the United States. The giving of a proxy will
not affect your right to vote in person if you attend the Special Meeting;
if
you desire to vote your shares in person at the meeting, your proxy will not
be
voted.
This
Proxy Statement (“Proxy Statement”) is being furnished by Element 21 Golf
Company (“Company”) in connection with the solicitation by the Company’s Board
of Directors (“Board of Directors”) of proxies from holders of the Company’s
stock to be voted at a Special Meeting of Stockholders of the Company (“Special
Meeting”), to be held on May 8,
2006, at
10:30 a.m. (local time) at the Radisson Admiral Hotel-Toronto Harbourfront,
249
Queen's Quay West, Toronto, Ontario, Canada, and at any adjournment thereof.
The
approximate date on which we plan to mail this Proxy Statement and form of
proxy
to the Company’s stockholders is on or about April 11, 2006.
Any
person signing and mailing the enclosed proxy may revoke it at any time before
it is voted by giving written notice of the revocation to the Company’s
corporate secretary, or by electing to vote in person at the Special Meeting
prior to the taking of a vote. Unless
revoked, your proxy will be voted in accordance with your
instructions.If
you do not specify a choice, your proxy will be voted in favor of the matters
set forth in the foregoing Notice of Meeting.
If any
other matters are properly presented for consideration at the Special Meeting,
including, among other things, consideration of a motion to adjourn the meeting
to another time or place in order to solicit additional proxies in favor of
the
recommendations of the Board, the person named as proxy will have discretion
to
vote on those matters according to her best judgment to the same extent as
the
person delivering the proxy would be entitled to vote. At the date this Proxy
Statement went to press, we did not anticipate that any other matters would
be
raised at the Special Meeting.
The
cost
of soliciting proxies, including the cost of preparing, assembling and mailing
this Proxy Statement and form of proxy to the Company’s stockholders, will be
borne by the Company. Solicitations will be made only by use of the mails,
except that, if necessary, officers of the Company may make solicitations of
proxies by telephone or telegraph or by personal calls. Brokerage houses,
custodians, nominees and fiduciaries will be requested to forward these proxy
soliciting materials to the beneficial owners of the Company’s shares held of
record by such persons, and the Company will reimburse them for their charges
and expenses in connection therewith.
The
presences in person or by proxy of stockholders of the Company holding a
majority of stock of the Company entitled to vote at the Special Meeting shall
constitute a quorum for the transaction of business at the Special Meeting.
Shares of stock present in person or represented by proxy, including
abstentions, shares which do not vote with respect to one or more of the matters
presented for stockholder approval, and broker “non-votes,” are counted as
present and entitled to vote for purposes of determining whether a quorum exists
at the Special Meeting. A broker “non-vote” occurs when a nominee holding shares
for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item
and
has not received voting instructions from the beneficial owner. If your shares
are held in the name of a bank, broker or other nominee, you must obtain a
proxy, executed in your favor, from the holder of record, to be able to vote
at
the Special Meeting.
2
Only
stockholders of record at the close of business on March 20, 2006 (“Record
Date”) are entitled to notice of and to vote at the Special Meeting or any
adjournment thereof. As of the Record Date, the Company had outstanding
99,630,554 shares of common stock; additionally, the Company had outstanding
2,113,556 shares of Series A Convertible Preferred Stock, par value $0.001
per
share (“Series A Preferred Stock”). Each share of common stock is entitled to
one vote on any matter, and each share of Series A Preferred Stock is entitled
to fifty (50) votes on any matter. As a result of the super-voting provisions
applicable to the shares of Series A Preferred Stock, the outstanding shares
of
Series A Preferred stock will be entitled to an aggregate of 105,677,800 votes
on each matter before the Special Meeting.
The
approval of amendment to the Company’s Certificate of Incorporation to increase
the authorized number of shares of common stock requires the approval of the
holders of a majority of the outstanding shares of common stock and a majority
of the outstanding shares of Series A Preferred Stock, each voting as a separate
class. The authorization
of the Board of Directors to amend the Certificate of Incorporation to effect
a
reverse stock split of our outstanding shares of common stock and the approval
of the Element 21 Golf Company 2006 Equity Incentive Plan each require only
that
the votes cast in favor of such matter exceed the votes cast against the matter,
with shares of common stock and shares of Series A Preferred Stock voting
together as a single class.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As
of
March 20, 2006 there were 99,630,554 shares of common stock outstanding. The
following sets forth, as of March 20, 2006, the ownership of our common stock
held by each person who beneficially owns more than 5% of our common stock,
each
of our directors, each Named Executive Officer, and all of our directors and
Named Executive Officers as a group. Except as otherwise indicated, all shares
are owned directly and the named person possesses sole voting and sole
investment power with respect to all such shares. Shares not outstanding but
deemed beneficially owned because a person or a member of a group has a right
to
acquire them within sixty (60) days after March 20, 2006 are treated as
outstanding only when determining the amount and percentage owned by such person
or such group.
Total
owned by Directors, Executive Officers and 5% or greater
stockholders:
12,642,263
12.17%
____________________
*
Less than 1%.
(1)
Except
as indicated in the footnotes below, each person has sole voting
and
dispositive power over the shares indicated.
(2)
Percentages
are based on an aggregate of 99,630,554 shares
issued and outstanding as of March 20, 2006.For
holders of Series A Preferred Stock which may be converted to common
stock
within 60 days after March 20, 2006, the number of shares that may
be
obtained through such conversion by each holder has been added to
the
denominator for purposes of calculating such holder’s percentage
ownership.
(3)
Includes
490,196 shares of Common Stock which are issuable upon conversion
of the
125,000 shares of Series A Preferred Stock held by Mr.
Enloe.
(4)
Includes
3,811,411 shares of Common Stock which are issuable upon conversion
of the
971,910 shares of Series A Preferred Stock held by Ms.
Hearn.
(5)
Includes
490,196 shares of Common Stock which are issuable upon conversion
of the
125,000 shares of Series A Preferred Stock held by Mr.
Morin.
To
the
Company’s knowledge, there are no other beneficial holders of more than five
percent (5%) of the Company’s Common Stock other than those persons listed in
the foregoing table.
EXECUTIVE
COMPENSATION
The
following table sets forth in summary form the compensation of the Company’s
Chief Executive Officer and each other executive officer that received total
salary and bonus exceeding $100,000 since its inception (“Named Executive
Officers”).
4
Summary
Compensation Table
The
following table sets forth the aggregate executive compensation paid by our
Company for services rendered during the periods to our Named Executive
Officers.
SUMMARY
COMPENSATION TABLE
Long-Term
Compensation
Annual
Compensation
Awards
Payouts
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Name
and Principal
Position
Years
of
Periods
Ended
$
Salary
$
Bonus
Other
Annual Compensation
Restricted
Stock
Awards
$
Option/
SAR’s
#
LTIP
Payouts
$
All
Other Compensation
Nataliya
Hearn, PhD, President, CEO and Director (1)
06/30/05
0
0
0
0
0
0
0
06/30/04
0
0
0
0
0
0
0
06/30/03
0
0
0
0
0
0
0
(1)
Ms.
Hearn began serving as an executive officer of the Company on October4,2002. From October 4, 2002, until December 31, 2006, Ms. Hearn served
as
the Company’s President and Chief Executive Officer without compensation.
No executive officer of the Company received a total annual salary
and
bonus in excess of $100,000.
Except
as
indicated above, no cash compensation, deferred compensation or long-term
incentive plan awards were issued or granted to our Company’s management during
the last fiscal year. Further, except as indicated above, no member of our
Company’s management has been granted any option or stock appreciation right.
Accordingly, no tables relating to deferred compensation, long-term incentive
plans or other such items of compensation have been included within this Item.
Compensation
of Directors
There
are
no standard arrangements pursuant to which our Company’s directors are
compensated for any services provided as director, although the Company’s Board
of Directors retains the discretion to establish such compensation arrangements
from time to time as appropriate. No additional amounts are payable to our
Company’s directors for committee participation or special
assignments.
Our
Certificate of Incorporation, as amended, provides for mandatory indemnification
of directors and officers to the fullest extent permitted by Delaware law.
In
addition, our Certificate of Incorporation, as amended, provides that a director
of the Company will not be liable to the Company or its stockholders for
monetary damages for the breach of fiduciary duty as a director.
5
Employment
Contracts and Termination of Employment and Change-in-Control
Arrangements
There
are
no employment contacts between the Company and any Named Executive Officer.
The
Company has no employees. There are no compensatory plans or arrangements,
including payments to be received from our Company, with respect to any person
named in the Summary Compensation Table set out above which would in any way
result in payments to any such person because of his or her resignation,
retirement or other termination of such person’s employment with our Company or
our subsidiaries, or any change in control of our Company, or a change in the
person’s responsibilities following a change in control of our
Company.
Compensation
Committee Interlocks and Insider Participation in Compensation
Decisions
The
Company does not have a Compensation Committee. Currently, the Company operates
solely through strategic consultants, has no employees and the Company’s
executive officers serve the Company without compensation. Accordingly, no
Named
Executive Officer or other executive officer was compensated for services in
the
last completed fiscal year. The Board of Directors serves all functions of
a
Compensation Committee to the extent that any such functions are required.
Decisions affecting compensation of strategic consultants generally are handled
by the Company’s management subject to the oversight of the Board of Directors.
In
the
last completed fiscal year, no Named Executive Officer or other executive
officer: (i) served as a member of the compensation committee (or other board
committee performing equivalent functions or, in the absence of any such
committee, the entire board of directors) of another entity, one of whose
executive officers served on the Board of Directors of the Company; (ii) served
as a director of another entity, one of whose executive officers served on
the
Board of Directors of the Company; or (iii) served as a member of the
compensation committee (or other board committee performing equivalent functions
or, in the absence of any such committee, the entire board of directors) of
another entity, one of whose executive officers served as a director of the
Company. No director served as an executive officer of another entity during
the
last completed fiscal year. No Named Executive Officer or other executive
officer was a party to any relationship, related transaction or transaction
with
a promoter that requires disclosure.
Securities
Authorized for Issuance Under Equity Compensation Plans
The
Company does not currently maintain any equity compensation plans. Accordingly,
tables relating to securities authorized for issuance under equity compensation
plans have been omitted.
Changes
in Control
The
Company knows of no arrangement the operation of which may at a date subsequent
result in a change of control of the Company.
6
Financial
and Other Information
In
accordance with the instructions to Item 13 of Schedule 14A, the information
required pursuant to Item 13 of Schedule 14A has been omitted as a result of
the
Company’s determination that such financial information is not material for the
exercise of prudent judgment in regard to the authorization of additional shares
of the Company’s common stock given that such shares are not being issued in an
exchange, merger, consolidation, acquisition or similar
transaction.
NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK OF THE COMPANY
Background
Under
Delaware law, we may issue shares of our stock only to the extent that those
shares have been authorized for issuance under our Certificate of Incorporation.
Our Certificate of Incorporation currently authorizes the issuance of 100
million shares of common stock, par value $0.01 per share, and 5 million shares
of Series A Preferred Stock, par value $0.10 per share. As of March 20, 2006,
99,630,554 shares of common stock were issued and outstanding and 2,113,556
shares of Series A Preferred Stock were issued and outstanding.
Because
less than 1,000,000 shares of the Company’s stock remain authorized but
unissued, our Board of Directors has unanimously approved, subject to
stockholder approval, an amendment to our Certificate of Incorporation to
increase the number of authorized shares of our common stock from 100 million
shares to 300 million shares.
Section
242(b) of the General Corporation Law of the State of Delaware provides that
every amendment to the Certificate of Incorporation shall first be adopted
by
the resolution of the Board of Directors and then be subject to the approval
of
persons owning a majority of the securities outstanding that are entitled to
vote on any such amendment, provided, however, that Section 242(b) further
provides that the number of authorized shares of a class of outstanding
securities may only be increased with the approval of the majority of the then
outstanding shares of such class, unless a corporation’s certificate of
incorporation provides otherwise. Accordingly, Proposal 1 will require the
affirmative vote of both a majority of the outstanding shares of common stock
and a majority of the outstanding shares of Series A Preferred Stock. This
resolution to adopt an amendment to the Company’s Certificate of Incorporation
in the form attached hereto as Annex
A
is
presented to the stockholders for approval at the Special Meeting.
Purpose
and Effect of the Amendment
The
purpose of the proposed amendment to the Certificate of Incorporation is to
authorize additional shares of common stock which would thereafter be available
for future issuance in the event the Board of Directors determines that it
is
necessary or appropriate to issue such shares. The Board of Directors believes
that the authorized number of shares of common stock should be increased to
provide sufficient shares for such corporate purposes as may be determined
by
the Board of Directors to be necessary or desirable. The Board may elect to
issue the additional authorized shares pursuant to an equity financing
transaction necessary to meet the Company’s continuing capital needs, to acquire
another company or its assets, to establish strategic relationships with
corporate partners, to declare stock dividends, to issue options to purchase
shares of the Company’s capital stock pursuant to the Company’s 2006 Equity
Incentive Plan to be adopted upon the passage of Proposal 3, to enable the
conversion of the Series A Preferred Stock, which cannot presently be converted
into shares of common stock due to the lack of authorized but unissued shares
of
common stock, to enable the exercise of certain warrants to purchase shares
of
the Company’s common stock issued pursuant to the Company’s recent bridge
financing transaction (collectively, the “Bridge Warrants”), which cannot
presently be exercised due to the lack of authorized but unissued shares of
common stock, or to issue or reserve shares of common stock for other corporate
purposes. The Company’s ability to issue shares of common stock in each of the
foregoing instances is of critical importance to the Company’s ability to
succeed in the future. The availability of additional authorized but unissued
shares of common stock will be particularly important in the event that the
Board of Directors needs to undertake any of the foregoing actions on an
expedited basis. In the case of such an event, the Board might not be able
to
accomplish its objective as a result of the time and delay entailed in obtaining
stockholder approval for the authorization and issuance of additional shares
of
common stock necessary to proceed with the transaction. Although the Board
of
Directors is currently evaluating the equity financing alternatives available
to
the Company, with the exception of the issuance of shares of common stock under
the 2006 Equity Incentive Plan of the Company, the conversion of the shares
of
Series A Preferred Stock and the issuance of shares of common stock upon
exercise of the Bridge Warrants, the Board of Directors has no present
agreement, arrangement or commitment to issue any of the shares of common stock
for which approval is sought.
8
The
increase in the number of authorized shares of common stock will not have any
immediate effect on the rights of existing stockholders. However, the Board
of
Directors will have the authority to issue all authorized and unissued shares
common stock without requiring future stockholder approval of such issuances,
except as may be required by applicable law. To the extent that additional
authorized shares of common stock are issued in the future, they will decrease
the then current stockholders’ percentage equity ownership and, depending on the
price at which they are issued, could be dilutive to the existing stockholders.
If
approved by stockholders, after the amendment is filed with the Secretary of
State of Delaware, the Board of Directors will be authorized to issue additional
shares of common stock at such times, to such persons and for such consideration
as it may determine in its discretion, subject to limitations imposed by
applicable law or the rules of any exchange on which the common stock may be
listed.
There
exists no provision in our Certificate of Incorporation or our bylaws that
would
delay, defer or prevent a change in control of the Company. However, one result
of an increase in the number of shares of authorized common stock may be to
help
the Board of Directors discourage or render more difficult a change in control.
For example, the additional shares of common stock could be issued to dilute
the
voting power of, create voting impediments for, or otherwise frustrate the
efforts of, persons seeking to effect a takeover or gain control of the Company,
regardless of whether the change of control is favored by a majority of
unaffiliated stockholders. We could also privately place shares with purchasers
who might side with the Board of Directors in opposing a hostile takeover bid.
We are not adopting this amendment with the intention of using the additional
shares for anti-takeover purposes, although we could theoretically use the
additional shares to make it more difficult or to discourage an attempt to
acquire control of the Company. We are not aware of any proposed or contemplated
transaction of this type.
9
The
terms
of any additional shares of common stock that are issued in the future will
be
identical to those of the currently outstanding shares of common stock. This
amendment, if approved, and the resulting creation of additional shares of
authorized common stock will not alter the current number of issued shares
nor
affect the legal rights of the holders of the existing shares of common stock.
The relative rights (including voting rights) and limitations of the shares
of
common stock would remain unchanged as a result of this amendment, if it is
approved.
Under
our
Certificate of Incorporation, holders of our common stock do not have preemptive
rights. Accordingly, the issuance of any additional shares of common stock
would
have the effect of diluting the equity interests of existing stockholders and
the earnings per share of existing shares of common stock. Such dilution may
be
substantial, depending upon the amount of shares issued.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR”
NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK OF THE COMPANY.
10
PROPOSAL
2.
AUTHORIZE
THE BOARD OF DIRECTORS TO AMEND OUR CERTIFICATE
OF
INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
Although
our Board of Directors has not reached a conclusion regarding the issue, we
believe that it is possible that at some time in the future, a reverse stock
split may be beneficial to the Company so as to reduce the larger number of
outstanding shares of our common stock outstanding. As of March 20, 2006, there
were 99,630,504 shares of common stock outstanding and, if the stockholders
approve Proposal 1 which is described above, we may have a significantly larger
number of shares outstanding in the near future. We believe that the low trading
price of our common stock may impair the efficiency of the trading market for
our common stock and that brokerage commissions on the purchase or sale of
a
relatively lower priced stock generally tend to represent a higher percentage
of
the sales price than the commission on a relatively higher priced stock. We
believe that a reverse stock split could improve these factors and could inure
to the benefit of our stockholders, of the Company and of the market for shares
of our common stock. As a result, our Board of Directors has unanimously adopted
a resolution approving, declaring advisable, and recommending to the
stockholders for their approval, a proposal to approve a series of nineteen
separate amendments to the Company’s Certificate of Incorporation in order to
effect a reverse stock split of the outstanding shares of the Company’s Common
Stock at each ratio of a minimum of 1 for 2, a maximum of 1 for 20, and at
a
ratio equal to 1 for each whole number between 2 and 20. By voting in favor
of
proposal two, stockholders will be approving nineteen separate and distinct
amendments to the Company’s Certificate of Incorporation in order to effect a
reverse stock split of the outstanding shares of the Company’s Common Stock in a
minimum ratio of 1 for 2, a maximum ratio of 1 for 20, and at each ratio of
1
for each whole number between 2 and 20. After the approval of each of these
amendments, the Board of Directors will thereafter unilaterally decide which
amendment to give effect to and in so doing will abandon each other amendment
without further action by the stockholders of the Company. The effect of the
foregoing is to give the Board of Directors of the Company the discretion to
determine an appropriate stock split ratio within a range of 1 for 2 and 1
for
20 and to give effect to the amendment of the Company’s Certificate of
Incorporation which effects such stock split and to abandon each other amendment
adopted relating to the reverse stock split without further action of the
stockholders in accordance with Section 242(c) of the Delaware General
Corporation Law.
If
the
reverse split is approved by the Company's stockholders and the Board of
Directors has determined to effect the reverse split, the Company will promptly
file a Certificate of Amendment to the Company's Certificate of
Incorporation with the Secretary of State of the State of Delaware.
The reverse split will become effective on the date of the filing of the
Certificate of Amendment, which is referred to as the “effective date.”
Beginning on the effective date, each certificate representing pre-reverse
split
shares will be deemed for all corporate purposes to evidence ownership of
post-reverse split shares. It will not be necessary for a stockholder to
exchange certificates representing stock issued prior to the reverse stock
split
for certificates representing shares resulting after the reverse stock split.
The text of the proposed amendment to the Certificate of Incorporation is set
forth in Annex
B
to this
proxy statement; provided, however, that the text of the Certificate of
Amendment is subject to modification to include such changes as may be required
by the Secretary of State of the State of Delaware and as the Board deems
necessary and advisable to effect the reverse split, including the applicable
ratio for the reverse split.
11
If
the
reverse stock split were effected, we would have fewer shares outstanding.
A
reduction in the number of shares outstanding would increase the book value
per
share as well as the earnings (or loss) per share. These increases could make
the common stock more attractive to larger brokerage houses, thereby possibly
expanding the group of brokers interested in making a market for the common
stock. Nevertheless, we cannot predict what effect the reverse stock split
would
have on the market price of the common stock.
If
the
reverse stock split is effected, we will not issue certificates for fractional
shares. Instead, persons who are stockholders at the effective time of the
reverse stock split and who otherwise would be entitled to a fractional share
would receive one additional share of common stock in lieu of any such
fractional share. All shares of common stock held by a record holder will be
aggregated for purposes of computing the number of shares of common stock
subject to the reverse stock split. The proposed reverse stock split is not
being proposed in anticipation of, and is not part of a plan or contemplated
transaction the objective of which is, taking the Company private or otherwise
eliminating a public trading market for shares of the Company’s Common
Stock.
We
have
not sought and do not intend to seek an opinion of counsel or a ruling from
the
Internal Revenue Service regarding the federal income tax consequences of a
reverse stock split. Based on consultation with counsel, we believe that a
stockholder who does not receive cash in connection with a reverse stock split
would not recognize any gain or loss on the exchange and we would not recognize
any gain or loss as a result of a reverse stock split. However, our view
regarding the tax consequences of the reverse stock split is not binding on
the
Internal Revenue Service or the courts. ACCORDINGLY,
EACH SHAREOWNER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR WITH RESPECT
TO
ALL OF THE POTENTIAL TAX CONSEQUENCES TO HIM OR HER OF THE REVERSE STOCK
SPLIT.
Section
242(b) of the General Corporation Law of the State of Delaware provides that
every amendment to the Certificate of Incorporation of a corporation shall
first
be adopted by the resolution of the Board of Directors and then be subject
to
the approval of persons owning a majority of the securities outstanding that
are
entitled to vote on any such amendment. Holders of shares of common stock and
holders of shares of Series A Preferred Stock will vote together as a single
class for purposes of approving the reverse stock split.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR”
THE
AUTHORIZATION OF THE BOARD OF DIRECTORS TO DETERMINE WHETHER
TO
EFFECT A REVERSE STOCK SPLIT OF OUR OUTSTANDING COMMON STOCK.
12
PROPOSAL
3.
APPROVAL
OF 2006 EQUITY INCENTIVE PLAN
On
March7, 2006, the Company’s Board of Directors approved, subject to stockholder
approval, the Company's 2006 Equity Incentive Plan (the “2006 Plan”) to
provide that the Company may grant (i) incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended
(the
“Code”), (ii) options that are not qualified as incentive stock options
(“nonqualified stock options”), (iii) restricted shares of common stock
(“restricted stock”), (iv) restricted stock units, (v) stock appreciation rights
either in tandem with an option or alone and unrelated to an option (“SARs”),
(vi) shares of common stock awarded based on achieving certain performance
goals
(“performance shares”), (vii) awards of common stock, including shares of common
stock awarded without payment therefor (“award shares”), and (viii) common stock
and other rights granted as units that are valued whole or in part by reference
to the value of the common stock (“stock awards”).
The
2006
Plan is designed to provide the Company with additional incentives to attract
and retain qualified and competent employees and directors.
Description
of the 2006 Plan.
Purpose.
The
2006
Plan was approved by the Company’s Board of Directors on March 7, 2006. The
purposes of the 2006 Plan are to enable the Company to attract and retain
employees and directors to provide an incentive for them to assist the Company
in achieving long-range performance goals, and to enable them to participate
in
the long-term growth of the Company. The text of the 2006 Plan is attached
to
this proxy statement as Annex
C.
The
following is a summary of the 2006 Plan and should be read together with the
full 2006 Plan text.
Awards
Under the Plan.
Under
the
2006 Plan, the Company will be permitted to grant (i) incentive stock options
intended to qualify under Section 422 of the Code, (ii) nonqualified stock
options, (iii) restricted stock, (iv) restricted stock units, (v) stock
appreciation rights either in tandem with an option or alone and unrelated
to an
option, or SARs, (vi) performance shares, (vii) award shares, or (viii) stock
awards.
Eligible
Participants.
All
employees, and in the case of awards other than incentive stock options,
directors of the Company or any affiliate (as that term is defined in the 2006
Plan) capable of contributing significantly to the successful performance of
the
Company, other than a person who has irrevocably elected not to be eligible,
are
eligible to participate in the 2006 Plan.
13
Administration.
The
2006
Plan will be administered by the Company’s Board of Directors unless later
delegated to a committee of the Board of Directors. The Board of Directors
of
the Company will have the authority to adopt, alter and repeal administrative
rules, guidelines and practices governing the operation of the 2006 Plan and
to
interpret provisions of the Plan.
Securities
to be Offered.
The
maximum aggregate number of shares of common stock available for issuance under
the 2006 Plan is 20,000,000 shares. The
shares of common stock available for issuance under the 2006 Plan are subject
to
adjustment for any stock dividend, recapitalization, stock split, stock
combination or certain other corporate reorganizations. Unless the authorized
but unissued number of shares of common stock is increased pursuant to Proposal
1, or if the number of outstanding shares of common stock is reduced pursuant
to
Proposal 2, despite the number of shares available for issuance under the 2006
Plan, the Company will have the authority to issue less than 1,00,000 shares
of
common stock pursuant to the 2006 Plan.
Shares
issued may consist in whole or in part of authorized but unissued shares or
treasury shares. Shares subject to an award that expires
or is terminated unexercised or is forfeited for any reason or settled in a
manner that results in fewer shares outstanding than were initially awarded
will
again be available for award under the 2006 Plan. The maximum number of shares
which may be granted to an individual in a fiscal year is limited to 10,000,000
shares.
Nonqualified
and Incentive Stock Options.
Subject
to the provisions of the 2006 Plan, the Board may award incentive stock options
and nonqualified stock options and determine the number of shares to be covered
by each option, the option price therefore and the conditions and limitations
applicable to the exercise of the option. Each option shall be exercisable
at
such times and subject to such terms and conditions as the Board may specify
in
the applicable award or thereafter. The Board may provide for the automatic
award of an option upon the delivery of shares to the Company in payment of
an
option for up to the number of shares so delivered.
The
terms
and conditions of incentive stock options shall be subject to and comply with
Section 422 of the Code and any regulations thereunder. No incentive stock
option granted under the 2006 Plan may be granted more than ten years after
the
effective date of the 2006 Plan and no such grant may be exercisable more than
ten years from the date of grant (five years after the date of grant for
incentive stock options granted to holders of more than ten percent of the
common stock). Incentive stock options shall be granted only to employees of
the
Company and shall be transferable by the optionee only by the laws of descent
and distribution, and shall be exercisable only by the employee during his
or
her lifetime.
The
exercise price of options granted under the 2006 Plan may not be less than
the
fair market value of the common stock on the date of grant. Incentive stock
options may be granted to holders of more than 10% of the Company’s outstanding
voting capital stock only at an exercise price of at least 110% of the fair
market value of such stock on the date of grant.
14
Restricted
Stock.
Subject
to provisions of the 2006 Plan, the Board of Directors may grant shares of
restricted stock to participants, with such restricted periods and other
conditions as the Board may determine and for no cash consideration or such
minimum consideration as may be required by applicable law. During the
restricted period, unless otherwise determined by the Board, stock certificates
evidencing the restricted shares will be held by the Company and may not be
sold, assigned, transferred, pledged or otherwise encumbered, except as
permitted by the Board. At the expiration of the restricted period, the Company
will deliver such certificates to the participant or, if the participant has
died, to the beneficiary designed by the participant.
Restricted
Stock Units.
Subject
to the provisions of the 2006 Plan, the Board of Directors
may grant restricted stock unit awards.
A
restricted stock unit is a contractual promise to issue shares at a specified
future date, subject to fulfillment of vesting conditions specified by the
Board. A restricted stock unit award carries no voting or dividend rights or
other rights associated with stock ownership. A restricted stock unit award
may
be settled in common stock, cash, or in any combination of common stock and/or
cash; provided, however, that a determination to settle a restricted stock
unit
award in whole or in part in cash shall be made by the Board of Directors in
its
sole discretion.
Stock
Appreciation Rights.
Subject
to the provisions of the 2006 Plan, the Board of Directors may award SARs in
tandem with an option (at or after the award of the option) or alone and
unrelated to an option. A SAR entitles the holder to receive from the Company
an
amount equal to the excess, if any, of the fair market value of the common
stock
over the reference price. SARs granted in tandem with an option will terminate
to the extent that the related option is exercised, and the related option
will
terminate to the extent that the tandem SARs are exercised.
Performance
Shares.
Subject
to the provisions of the 2006 Plan, the Board of Directors may grant performance
shares to participants in the form of grants of shares of common stock.
Performance shares are earned over a period of time (a performance cycle)
selected by the Board from time to time. There may be more than one performance
cycle in existence at any one time and the duration of the performance cycles
may differ from each other. Unless otherwise determined by the Board of
Directors, the payment value of the performance shares will be equal to the
fair
market value of the common stock on the date the performance shares are earned
or on the date the Board determines that the performance shares have been
earned. The Board shall establish performance goals for each cycle for the
purpose of determining the extent to which performance shares awarded for such
cycle are earned. As soon as practicable after the end of a performance cycle,
the Board shall determine the number of performance shares which have been
earned on the basis of performance in relation to the established performance
goals. Payment values of earned performance shares are distributed to the
participant or, if the participant has died, to the beneficiary designated
by
the participant.
15
Stock
Awards.
Subject
to the provisions of the 2006 Plan, the Board of Directors may award stock
awards, which may be designated as award shares by the Board, subject to such
terms, restrictions, conditions, performance criteria, vesting requirements
and
payment needs, if any, as the Board shall determine. Shares of common stock
or
other rights awarded in connection with a stock award shall be issued for no
cash consideration or such minimum consideration as may be required by
law.
General
Provisions.
Each
award shall be evidenced by a written document delivered to the participant
specifying the terms and conditions thereof and containing such other terms
and
conditions not inconsistent with the provisions of the 2006 Plan as the Board
considers necessary or advisable. Each type of award may be made alone, in
addition to, or in relation to any other type of award. The terms of each type
of award need not be identical and the Board need not treat participants
uniformly. The Board may amend, modify or terminate any outstanding award,
including substituting therefor another award, changing the date of exercise
or
realization and converting an incentive stock option to a nonqualified stock
option, provided that the participant’s consent to such action shall be required
unless the Board determines that the action would not materially and adversely
affect the participant.
The
Board
of Directors will determine whether awards granted pursuant to the 2006 Plan
are
settled in whole or in part in cash, common stock, other securities of the
Company, other property or such other methods as the Board of Directors may
deem
appropriate. In the Board’s discretion, tax obligations required to be withheld
in respect of an award may be paid in whole or in part in shares of common
stock, including shares retained from such award. The Board will determine
the
effect on an award of the death, disability, retirement or other termination
of
employment of a participant and the extent to which and period during which
the
participant’s legal representative, guardian or designated beneficiary may
receive payment of an award or exercise rights thereunder. Except as otherwise
provided by the Board, awards under the 2006 Plan will not be transferable
other
than as designated by the participant by will or by the laws of descent and
distribution.
The
Board
in its discretion may take certain actions in order to preserve a participant’s
rights under an award in the event of a change in control of the Company,
including (i) providing for the acceleration of any time period relating to
the
exercise or realization of the award, (ii) providing for the purchase of the
award for an amount of cash or other property that could have been received
upon
the exercise or realization of the award had the award been currently
exercisable or payable, (iii) adjusting the terms of the award in order to
reflect the change in control, (iv) causing the award to be assumed, or new
rights substituted therefor, by another entity, or (v) making such other
provision as the Board may consider equitable and in the best interest of the
Company, provided that, in the case of an action taken with respect to an
outstanding award, the participant’s consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the participant.
16
The
Board
of Directors of the Company may amend, suspend or terminate the 2006 Plan or
any
portion thereof at any time after its adoption; provided that no amendment
shall
be made without stockholder approval if such approval is necessary to comply
with any applicable law, rules or regulations.
United
States Federal Income Tax Consequences
The
following general discussion of the Federal income tax consequences of the
issuance and exercise of options granted under the 2006 Plan is based upon
the
provisions of the Code as in effect on the date hereof, current regulations
thereunder and existing administrative rulings of the Internal Revenue Service.
This discussion is not intended to be a complete discussion of all of the
Federal income tax consequences of the 2006 Plan or of all of the requirements
that must be met in order to qualify for the tax treatment described herein.
Changes in the law and regulations may modify the discussion, and in some cases
the changes may be retroactive. No information is provided as to state tax
laws.
In addition, because tax consequences may vary, and certain exceptions to the
general rules discussed herein may be applicable, depending upon the personal
circumstances of individual holders of securities, each holder of an award
should consider his personal situation and consult with his tax advisor with
respect to the specific tax consequences applicable to him. The 2006 Plan is
not
qualified under Section 401 of the Code, nor is it subject to the provisions
of
the Employee Retirement Income Security Act of 1974, as amended. The tax
treatment of each kind of award under the 2006 Plan is as follows:
Incentive
Stock Options.
Incentive stock options to be granted under the 2006 Plan are intended to
qualify as incentive stock options under Section 422 of the Code.
A
participant generally will not recognize taxable income upon the grant or
exercise of an incentive stock option. Under certain circumstances, however,
there may be alternative minimum tax or other tax consequences, as described
below. If an option holder does not make a “disqualifying disposition” (as
defined below), then the option holder will not recognize any taxable income
until shares are sold or exchanged, and any gain recognized upon disposition
of
shares will be taxable as long-term capital gain. A “disqualifying disposition”
means any disposition of shares acquired on the exercise of an incentive stock
option where such disposition occurs within two years of the date the option
was
granted or within one year of the date the shares were transferred to the option
holder. The use of the shares acquired pursuant to the exercise of an incentive
stock option to pay the option exercise price under another stock option is
treated as a disposition for this purpose.
In
general, if the option holder makes a disqualifying disposition, then the excess
of (a) the lesser of (i) the fair market value of the shares on the date of
exercise or (ii) the amount realized upon disposition of the shares over (b)
the
option exercise price will be taxable to the option holder as ordinary income.
In the case of a gift or certain other transfers, the amount of taxable ordinary
income is not limited to the gain that would have resulted from a sale. Instead,
it is equal to the excess of the fair market value of the shares on the date
of
exercise over the option exercise price. In the case of a disqualifying
disposition, if the amount realized on disposition of the shares exceeds the
fair market value of the shares on the date of exercise, the excess will be
taxed as either long-term or short-term capital gain depending on the option
holder’s holding period for the shares. The holding period for the shares
generally would begin on the date the shares were acquired and would not include
the period of time during which the option was held.
17
Certain
option holders will be subject to Section 16(b) of the Securities Exchange
Act
of 1934 upon their sale of shares of common stock. If an option holder is
subject to Section 16(b), the date on which the fair market value of the shares
is determined may similarly be postponed. The Treasury regulations have not
yet
been amended to conform with the most recent revision to Section 16(b). However,
it is generally anticipated that the date on which the fair market value of
the
shares is determined will be the earlier of (i) the date six months after the
date the stock option was granted, or, (ii) the first day on which the sale
of
the shares would not subject the individual to liability under Section 16(b).
It
is possible that the six-month period will instead run from the option holder’s
most recent grant or purchase of common stock prior to his or her exercise
of
the stock option. On the determination date, the option holder will generally
recognize ordinary taxable income in an amount equal to the excess of the fair
market value of the shares of common stock at that time over the option exercise
price.
Despite
the general rule, in the case of a substantial risk of forfeiture, or in the
case of recipients subject to Section 16(b) (if the determination date is after
the date of exercise), the option holder may make an election pursuant to
Section 83(b) of the Code, in which case the option holder will recognize
ordinary taxable income at the time the stock option is exercised and not on
the
later date. In order to be effective, the Section 83(b) election must be made
and filed with the IRS within 30 days after exercise.
In
general, the fair market value of the shares on the date of exercise, less
the
exercise price, will be included in the option holder’s alternative minimum
taxable income in the year the option is exercised. However, if in the same
year, the shares are disposed of at a lower price, then alternative minimum
taxable income is calculated using this lower price instead of the shares’ fair
market value on the date of exercise. The application of the alternative minimum
tax rules for option holders subject to Section 16(b) or who receive shares
that
are not “substantially vested” is more complex and may depend upon whether such
holders are entitled to and make a Section 83(b) election. Because of the many
adjustments that apply to the computation of the alternative minimum tax, it
is
not possible to predict the application of such tax to any particular option
holder. An option holder may owe alternative minimum tax even though he has
not
disposed of the shares or otherwise received any cash with which to pay the
tax.
The alternative minimum tax rate is higher than the rate applicable to long-term
capital gains.
The
Company will not be entitled to any deduction with respect to the grant or
exercise of incentive stock options. In addition, no deduction will be allowed
to the Company upon the disposition of stock acquired upon the exercise of
an
incentive stock option, unless the disposition is a disqualifying disposition.
In the case of a disqualifying disposition, the Company generally will be
entitled to a deduction equal to the amount of compensation income that is
recognized by the employee as a result of the disqualifying disposition.
Nonqualified
Stock Options.
A
recipient of a nonqualified stock option generally will not recognize any income
for federal tax purposes with respect to the option until the option is
exercised. At that time, subject to certain limited exceptions, the recipient
will recognize ordinary income in an amount equal to the excess of the fair
market value of the shares on the date acquired over the option exercise price.
18
The
application of the tax rules to an option holder who receives shares that are
subject to a substantial risk of forfeiture (for example, if the shares must
be
returned to the Company if the recipient does not work for the Company for
a
period of time, if any, specified in the award) are more complex. In that case,
the recipient generally will not recognize income until the date the shares
are
no longer subject to the substantial risk of forfeiture, unless a Section 83(b)
election (described below) is made.
Certain
option holders will be subject to Section 16(b) of the Securities Exchange
Act
of 1934 upon their sale of shares of common stock. If an option holder is
subject to Section 16(b), the date on which the fair market value of the shares
is determined may similarly be postponed. The Treasury regulations have not
yet
been amended to conform with the most recent revision to Section 16(b). However,
it is generally anticipated that the date on which the fair market value of
the
shares is determined will be the earlier of (i) the date six months after the
date the stock option was granted, or (ii) the first day on which the sale
of
the shares would not subject the individual to liability under Section 16(b).
It
is possible that the six month period will instead run from the option holder’s
most recent grant or purchase of common stock prior to his or her exercise
of
the stock option. On the determination date, the option holder will generally
recognize ordinary taxable income in an amount equal to the excess of the fair
market value of the shares of common stock at that time over the option exercise
price.
Despite
the general rule, in the case of a substantial risk of forfeiture, or in the
case of recipients subject to Section 16(b) (if the determination date is after
the date of exercise), the option holder may make an election pursuant to
Section 83(b) of the Code, in which case the option holder will recognize
ordinary taxable income at the time the stock option is exercised and not on
the
later date. In order to be effective, the Section 83(b) election must be made
and filed with the IRS within 30 days after exercise.
When
an
option recipient recognizes income, the Company will generally be entitled
to a
compensation deduction for federal income tax purposes in an amount equal to
the
taxable income recognized by the recipient, provided that the Company reports
the income on a timely provided and filed Form W-2 or 1099, whichever is
applicable.
Upon
a
subsequent sale of shares acquired by the exercise of a nonqualified stock
option, a recipient generally will recognize capital gain (or loss) equal to
the
amount by which the selling price of the shares exceeds (or is exceeded by)
their fair market value on the date of exercise. The capital gain or loss will
be short-term or long-term depending upon how long the shares were held. Any
capital gain or loss would be long-term if the holding period for the shares
was
more than twelve months. The holding period for the shares generally would
begin
on the date the shares were acquired, and would not include the period of time
during which the option was held.
19
Stock
Appreciation Rights.
A
recipient of a SAR will not be considered to receive any income at the time
a
SAR is granted, nor will the Company be entitled to a deduction at that time.
Upon the exercise of a SAR, the holder will have ordinary income equal to the
cash received upon the exercise. At that time, the Company will be entitled
to a
tax deduction equal to the amount of ordinary income realized by the
holder.
Restricted
Stock and Performance Shares.
The
recipient of restricted stock or performance shares will be treated in the
same
manner as a person who has exercised a nonqualified stock option, as described
above, for which the Company has imposed restrictions on the shares received,
and for which the exercise price is either zero or a nominal amount. In general,
this means that the holder may either wait until the restrictions have elapsed
(or the performance goals have been met), and then pay tax at ordinary income
tax rates, based upon the fair market value of the shares at that time, or
he or
she can file a Section 83(b) election, and pay tax based on the fair market
value of the shares at the time they are received. Again, the Company will
get a
deduction that corresponds to the income recognized by the recipient.
Restricted
Stock Unit Awards.
The
grant of a restricted stock unit award will not result in income for the grantee
or in a deduction for the Company. Upon the lapse of the restrictions of a
restricted stock unit, the grantee will recognize ordinary income and the
Company will be entitled to a deduction measured by the fair market value of
the
shares plus any cash received.
Stock
Awards.
A
person
who receives a stock award that includes common stock will be treated, with
regard to such common stock, in the same manner as a person who has exercised
a
nonqualified stock option, as described above. In general, this means that
the
holder will have taxable income at the time the shares are received if they
are
not subject to restrictions, or as described in the preceding paragraph for
restricted stock, if they are subject to restrictions. The tax treatment of
a
stock award that consists of other rights will depend on the provisions of
the
award. It may be immediately taxable if there are no restrictions on the receipt
of the cash or other property that the stock award represents, or the tax
consequences may be deferred if the receipt of cash or other property for the
stock award is restricted, or subject to vesting or performance goals. In those
situations in which a participant receives property subject to restrictions,
the
participant may wish to make a Section 83(b) election, as described above.
At
the time that the holder of the stock award has ordinary income, the Company
will be entitled to a tax deduction equal to the amount of ordinary income
realized by the holder.
20
Deductibility
of Awards.
Section
162(m) of the Code places a $1 million annual limit on the compensation
deductible by the Company paid to certain of its executives. The limit, however,
does not apply to performance-based compensation. The Company believes that
awards under the 2006 Plan will qualify for the performance-based compensation
exception to the deductibility limit.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR”
THE
APPROVAL OF THE ELEMENT 21 GOLF COMPANY 2006 EQUITY INCENTIVE
PLAN.
21
VOTING
PROCEDURES
If
a
quorum is present, unless a different number of votes is required by statute
or
our Certificate of Incorporation, an affirmative vote of a majority of the
votes
at the Special Meeting entitled to be cast, with shares of common stock and
Series A Preferred Stock voting as a single class, is required for the approval
the items submitted to stockholders for their consideration, except for the
amendment of the Certificate of Incorporation, which requires the approval
of
each of the holders of a majority of shares of common stock outstanding and
the
holders of a majority of shares of Series A Preferred Stock outstanding, each
voting as a separate class. Abstentions by those present at the Special Meeting
are tabulated separately from affirmative and negative votes and do not
constitute affirmative votes. If a stockholder returns his or her proxy card
and
withholds authority to vote on any matter, the votes represented by the proxy
card will be deemed to be present at the meeting for purposes of determining
the
presence of a quorum but will not be counted as affirmative votes. Shares in
the
names of brokers that are not voted are treated as not present.
OTHER
MATTERS
As
of the
date of this Proxy Statement, the Board of Directors knows of no other matters
to be voted upon at the Special Meeting. If any other matters properly come
before the Special Meeting, it is the intent of the person named in the enclosed
proxy to vote the proxy in accordance with her judgment on such matter or
matters.
Proxy
Solicited on Behalf of the Board of Directors
The
undersigned hereby appoints Nataliya Hearn, Ph.D. as proxy with full power
of
substitution to vote all the shares of the undersigned with all the powers
which
the undersigned would possess if personally present at the Special Meeting
of
Stockholders of Element 21 Golf Company (the “Company”) to be held at 10:30 a.m.
(local time) on May 8, 2006, at the Radisson Admiral Hotel-Toronto Harbourfront,
249 Queen's Quay West, Toronto, Ontario, Canada, or any adjournments thereof,
on
the following matters:
Please
mark votes as in this example. x
1.
Proposal
to amend our Certificate of Incorporation to increase the number
of
authorized shares of our common stock from 100 million to 300 million
shares.
o
FOR
o
AGAINST
o
ABSTAIN
2.
Proposal
to authorize the Board of Directors to amend our Certificate of
Incorporation to effect a reverse stock split of our outstanding
shares of
common stock as more fully described in Proposal 2 in the Proxy
Statement.
o
FOR
o
AGAINST
o
ABSTAIN
3.
Proposal
to approve the Element 21 Golf Company 2006 Equity Incentive Plan
and to
authorize 20,000,000 shares of the Company’s common stock for issuance
under such plan.
o
FOR
o
AGAINST
o
ABSTAIN
4.
In
her discretion, the proxy is authorized to vote upon an adjournment
or
postponement of the
meeting.
o
YES
o
NO
o
ABSTAIN
5.
In
her discretion, the proxy is authorized to vote upon such other business
as may properly come before the
meeting.
o
YES
o
NO
o
ABSTAIN
MARK
HERE
FOR ADDRESS CHANGE AND NOTE BELOW o
23
Unless
contrary instructions are given, the shares represented by this proxy will
be
voted in favor of Items 1, 2, 3, 4 and 5. This proxy is solicited on behalf
of
the Board of Directors of Element 21 Golf Company.
Dated:
____________________________________
Signature:
____________________________________
Signature:
____________________________________
Joint
holder’s signature required if held
jointly.
(Please
sign exactly as shown on your stock certificate and on the envelope in which
this proxy was mailed.
When
signing as partner, corporate officer, attorney, executor, administrator,
trustee, guardian, etc.
give
full title as such and sign your own name as well. If stock is held jointly,
each joint owner should sign.)
24
ANNEX
A
CERTIFICATE
OF AMENDMENT
TO
CERTIFICATE
OF INCORPORATION
OF
ELEMENT
21 GOLF COMPANY
Element
21 Golf Company, a Delaware corporation (the “Corporation”), does hereby certify
that:
SECOND:
The terms and provisions of this Certificate of Amendment have been duly adopted
in accordance with Sections 228 and 242 of the General Corporation Law of
the State of Delaware.
THIRD:
Article 4 of the Certificate of Incorporation is hereby amended and
restated to read in its entirety as follows:
“FOURTH:
The total number of shares of all classes of stock which the Corporation has
the
authority to issue is Three Hundred and Five Million (305,000,000) shares,
consisting of two classes: Three Hundred Million (300,000,000) shares of Common
Stock, $.01 par value per share, and Five Million (5,000,000) shares of
Preferred Stock, $0.10 par value per share.
The
designations and powers, preferences and rights, and the qualifications or
restrictions thereof are as follows:
The
preferred shares shall be issued from time to time in one or more series, with
such distinctive serial designations as shall be stated and expressed in the
resolution or resolutions providing for the issue of such shares as adopted
by
the Board of Directors; the Board of Directors is expressly authorized to fix
the annual rate or rates of dividends for the particular series issued prior
to
the record date for the first dividend payment date shall be cumulative, the
redemption price or prices for the particular series, the voting powers for
the
particular series, the rights, if any, of holders of the shares of the
particular series to convert the same into shares of any other series or class
or other securities of the Corporation, with any provisions for the subsequent
adjustment of such conversion rights, the rights, if any, of the particular
series to participate in distributions or payments upon liquidation, dissolution
or winding up of the Corporation, and to classify or reclassify any unissued
preferred shares by fixing or altering from time to time any of the foregoing
rights, privileges and qualifications.
All
the
Preferred shares of any one series shall be identical with each other in all
respects, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereon shall be cumulative; and
all
Preferred shares shall be of equal rank, regardless of series, and shall be
identical in all respects except as to the particulars fixed by the Board as
hereinabove provided or as fixed herein.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to
be
signed by its officers thereunto duly authorized this _____ day of ___________,
200_.
By:
Name:
Nataliya Hearn
Title:
President
and Chief Executive Officer
ANNEX
B
CERTIFICATE
OF AMENDMENT
TOCERTIFICATE
OF INCORPORATIONOFELEMENT
21 GOLF COMPANY
Element
21 Golf Company, a Delaware corporation (the “Corporation”), does hereby certify
that:
SECOND:
The terms and provisions of this Certificate of Amendment have been duly adopted
in accordance with Sections 228 and 242 of the General Corporation Law of
the State of Delaware.
THIRD:
Article 4 of the Certificate of Incorporation is hereby amended and
restated to read in its entirety as follows:
“FOURTH:
The total number of shares of all classes of stock which the Corporation has
the
authority to issue is 300,000,000_________ (_______) shares, consisting of
two
classes: _________(_______) shares of Common Stock, $.01 par value per share,
and Five Million (5,000,000) shares of Preferred Stock, $0.10 par value per
share. Upon the filing of this Certificate of Amendment, every [2
through and including 20]
(____) shares of Common Stock outstanding shall be combined into one (1) share
of Common Stock; provided, however, that the Corporation shall issue no
fractional shares of Common Stock, but shall instead round up any fractional
share to the nearest whole share.
The
designations and powers, preferences and rights, and the qualifications or
restrictions thereof are as follows:
The
preferred shares shall be issued from time to time in one or more series, with
such distinctive serial designations as shall be stated and expressed in the
resolution or resolutions providing for the issue of such shares as adopted
by
the Board of Directors; the Board of Directors is expressly authorized to fix
the annual rate or rates of dividends for the particular series issued prior
to
the record date for the first dividend payment date shall be cumulative, the
redemption price or prices for the particular series, the voting powers for
the
particular series, the rights, if any, of holders of the shares of the
particular series to convert the same into shares of any other series or class
or other securities of the Corporation, with any provisions for the subsequent
adjustment of such conversion rights, the rights, if any, of the particular
series to participate in distributions or payments upon liquidation, dissolution
or winding up of the Corporation, and to classify or reclassify any unissued
preferred shares by fixing or altering from time to time any of the foregoing
rights, privileges and qualifications.
All
the
Preferred shares of any one series shall be identical with each other in all
respects, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereon shall be cumulative; and
all
Preferred shares shall be of equal rank, regardless of series, and shall be
identical in all respects except as to the particulars fixed by the Board as
hereinabove provided or as fixed herein.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to
be
signed by its officers thereunto duly authorized this _____ day of ___________,
200_.
By:
Name:
Nataliya Hearn
Title:
President
and Chief Executive Officer
Annex
C
THE
ELEMENT 21 GOLF COMPANY 2006 EQUITY INCENTIVE PLAN
1.Purpose
and Eligibility.
The
purpose of this 2006 Equity Incentive Plan (the “Plan”)
of
Element 21 Golf Company, a Delawarecorporation
(the “Company”)
is to
provide stock options, stock issuances and other equity interests in the
Company
(each, an “Award”)
to (a)
employees, officers, directors, consultants and advisors of the Company and
its
Parents and Subsidiaries, and (b) any other Person who is determined by the
Board to have made (or is expected to make) contributions to the Company.
Any
person to whom an Award has been granted under the Plan is called a
“Participant.”
Additional definitions are contained in Section
10.
2.Administration.
a.Administration
by Board of Directors.
The
Plan will be administered by the Board of Directors of the Company (the
“Board”).
The
Board, in its sole discretion, shall have the authority to grant and amend
Awards, to adopt, amend and repeal rules relating to the Plan and to interpret
and correct the provisions of the Plan and any Award. The Board shall have
authority, subject to the express limitations of the Plan, (i) to construe
and determine the respective Stock Option Agreement, Awards and the Plan,
(ii) to prescribe, amend and rescind rules and regulations relating to the
Plan and any Awards, (iii) to determine the terms and provisions of the
respective Stock Option Agreements and Awards, which need not be identical,
(iv)
to initiate an Option Exchange Program, and (v) to make all other
determinations in the judgment of the Board of Directors necessary or desirable
for the administration and interpretation of the Plan. The Board may correct
any
defect or supply any omission or reconcile any inconsistency in the Plan
or in
any Stock Option Agreement or Award in the manner and to the extent it shall
deem expedient to carry the Plan, any Stock Option Agreement or Award into
effect and it shall be the sole and final judge of such expediency. All
decisions by the Board shall be final and binding on all interested persons.
Neither the Company nor any member of the Board shall be liable for any action
or determination relating to the Plan.
b.Appointment
of Committee.
To the
extent permitted by applicable law, the Board may delegate any or all of
its
powers under the Plan to one or more committees or subcommittees of the Board
(a
“Committee”).
All
references in the Plan to the “Board”
shall
mean such Committee or the Board.
c.Delegation
to Executive Officers.
To the
extent permitted by applicable law, the Board may delegate to one or more
executive officers of the Company the power to grant Awards and exercise
such
other powers under the Plan as the Board may determine, provided that the
Board
shall fix the maximum number of Awards to be granted and the maximum number
of
shares issuable to any one Participant pursuant to Awards granted by such
executive officers.
d.Applicability
of Section Rule 16b-3.
Notwithstanding anything to the contrary in the foregoing if, or at such
time
as, the Common Stock is or becomes registered under Section
12
of the
Exchange Act of 1934, as amended (the “Exchange
Act”),
or
any successor statute, the Plan shall be administered in a manner consistent
with Rule 16b-3 promulgated thereunder, as it may be amended from time to
time,
or any successor rules (“Rule
16b-3”),
such
that all subsequent grants of Awards hereunder to Reporting Persons, as
hereinafter defined, shall be exempt under such rule. Those provisions of
the
Plan which make express reference to Rule 16b-3 or which are required in
order
for certain option transactions to qualify for exemption under Rule 16b-3
shall
apply only to such persons as are required to file reports under Section
16 (a)
of the Exchange Act (a “Reporting
Person”).
1
e.Applicability
of Section 162 (m).
Those
provisions of the Plan which are required by or make express reference to
Section 162 (m) of the Code or any regulations thereunder, or any successor
section of the Code or regulations thereunder (“Section
162 (m)”)
shall
apply only upon the Company's becoming a company that is subject to Section
162
(m). Notwithstanding any provisions in this Plan to the contrary, whenever
the
Board is authorized to exercise its discretion in the administration or
amendment of this Plan or any Award hereunder or otherwise, the Board may
not
exercise such discretion in a manner that would cause any outstanding Award
that
would otherwise qualify as performance-based compensation under Section 162
(m)
to fail to so qualify under Section 162 (m).
3.Stock
Available for Awards.
a.Number
of Shares.
Subject
to adjustment under Section
3(c),
the
aggregate number of shares of Common Stock of the Company (the “Common
Stock”)
that
may be issued pursuant to the Plan is the Available Shares (as defined on
the
last page). If any Award expires, or is terminated, surrendered or forfeited,
in
whole or in part, the unissued Common Stock covered by such Award shall again
be
available for the grant of Awards under the Plan. If an Award granted under
the
Plan shall expire or terminate for any reason without having been exercised
in
full, the unpurchased shares subject to such Award shall again be available
for
subsequent Awards under the Plan, and if shares of Common Stock issued pursuant
to the Plan are repurchased by, or are surrendered or forfeited to, the Company
at no more than the price paid for such shares, such shares of Common Stock
shall again be available for the grant of Awards under the Plan. Shares issued
under the Plan may consist in whole or in part of authorized but unissued
shares
or treasury shares.
b.Per-Participant
Limit.
Subject
to adjustment under Section
3(c),
no
Participant may be granted Awards during any one fiscal year to purchase
more
than 10,000,000 shares of Common Stock.
c.Adjustment
to Common Stock.
Subject
to Section
7,
in the
event of any stock split, reverse stock split stock dividend, extraordinary
cash
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off, split-up, or other similar change
in
capitalization or similar event, (i) the number and class of securities
available for Awards under the Plan and the per-Participant share limit,
(ii)
the number and class of securities, vesting schedule and exercise price per
share subject to each outstanding Option, (iii) the repurchase price per
security subject to repurchase, and (iv) the terms of each other outstanding
Award shall be adjusted by the Company (or substituted Awards may be made
if
applicable) to the extent the Board shall determine, in good faith, that
such an
adjustment (or substitution) is appropriate.
2
4.Stock
Options.
a.General.
The
Board may grant options to purchase Common Stock (each, an “Option”)
and
determine the number of shares of Common Stock to be covered by each Option,
the
exercise price of each Option and the conditions and limitations applicable
to
the exercise of each Option and the shares of Common Stock issued upon the
exercise of each Option, including, but not limited to, vesting provisions,
repurchase provisions and restrictions relating to applicable federal or
state
securities laws. Each Option will be evidenced by a Stock Option Agreement,
consisting of a Notice of Stock Option Award and a Stock Option Award Agreement
(collectively, a “Stock
Option Agreement”).
b.Incentive
Stock Options.
An
Option that the Board intends to be an incentive stock option (an “Incentive
Stock Option”)
as
defined in Section 422 of the Code, as amended, or any successor statute
(“Section
422”),
shall
be granted only to an employee of the Company and shall be subject to and
shall
be construed consistently with the requirements of Section 422 and regulations
thereunder. The Board and the Company shall have no liability if an Option
or
any part thereof that is intended to be an Incentive Stock Option does not
qualify as such. An Option or any part thereof that does not qualify as an
Incentive Stock Option is referred to herein as a “Nonstatutory
Stock Option”
or
“Nonqualified
Stock Option.”
c.Dollar
Limitation.
For so
long as the Code shall so provide, Options granted to any employee under
the
Plan (and any other incentive stock option plans of the Company) which are
intended to qualify as Incentive Stock Options shall not qualify as Incentive
Stock Options to the extent that such Options, in the aggregate, become
exercisable for the first time in any one calendar year for shares of Common
Stock with an aggregate fair market value (determined as of the respective
date
or dates of grant) of more than $100,000. The amount of Incentive Stock Options
which exceed such $100,000 limitation shall be deemed to be Nonqualified
Stock
Options. For the purpose of this limitation, unless otherwise required by
the
Code or regulations of the Internal Revenue Service or determined by the
Board,
Options shall be taken into account in the order granted, and the Board may
designate that portion of any Incentive Stock Option that shall be treated
as
Nonqualified Option in the event that the provisions of this paragraph apply
to
a portion of any Option. The designation described in the preceding sentence
may
be made at such time as the Committee considers appropriate, including after
the
issuance of the Option or at the time of its exercise.
d.Exercise
Price.
The
Board shall establish the exercise price (or determine the method by which
the
exercise price shall be determined) at the time each Option is granted and
specify the exercise price in the applicable Stock Option Agreement, provided,
however, in no event may the per share exercise price be less than the Fair
Market Value (as defined below) of the Common Stock. In the case of an Incentive
Stock Option granted to a Participant who, at the time of grant of such Option,
owns stock representing more than ten percent (10%) of the voting power of
all
classes of stock of the Company or any parent or subsidiary, then the exercise
price shall be no less than 110% of the fair market value of the Common Stock
on
the date of grant. In the case of a grant of an Incentive Stock Option to
any
other Participant, the exercise price shall be no less than 100% of the fair
market value of the Common Stock on the date of grant.
3
e.Duration
of Options.
Each
Option shall be exercisable at such times and subject to such terms and
conditions as the Board may specify in the applicable Stock Option Agreement;
provided, that the term of any Incentive Stock Option may not be more than
ten
(10) years from the date of grant. In the case of an Incentive Stock Option
granted to a Participant who, at the time of grant of such Option, owns stock
representing more than ten percent (10%) of the voting power of all classes
of
stock of the Company or any parent or subsidiary, the term of the Option
shall
be no longer than five (5) years from the date of grant.
f.Exercise
of Option.
Options
may be exercised only by delivery to the Company of a written notice of exercise
signed by the proper person together with payment in full as specified in
Section
4(g)
and the
Stock Option Agreement for the number of shares for which the Option is
exercised.
g.Payment
Upon Exercise.
Common
Stock purchased upon the exercise of an Option shall be paid for by one or
any
combination of the following forms of payment as permitted by the Board in
its
sole and absolute discretion:
ii. only
if
the Common Stock is then publicly traded, by delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to
the
Company sufficient funds to pay the exercise price, or delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company
cash or
a check sufficient to pay the exercise price;
iii. to
the
extent explicitly provided in the applicable Stock Option Agreement, by delivery
of shares of Common Stock owned by the Participant valued at fair market
value
(as determined by the Board or as determined pursuant to the applicable Stock
Option Agreement); or
iv. payment
of such other lawful consideration as the Board may determine.
Except
as
otherwise expressly set forth in a Stock Option Agreement, the Board shall
have
no obligation to accept consideration other than cash and in particular,
unless
the Board so expressly provides, in no event will the Company accept the
delivery of shares of Common Stock that have not been owned by the Participant
at least six months prior to the exercise. The fair market value of any shares
of the Company's Common Stock or other non-cash consideration which may be
delivered upon exercise of an Option shall be determined in such manner as
may
be prescribed by the Board.
h.Acceleration,
Extension, Etc.
The
Board may, in its sole discretion, and in all instances subject to any relevant
tax and accounting considerations which may adversely impact or impair the
Company, (i) accelerate the date or dates on which all or any particular
Options
or Awards granted under the Plan may be exercised, or (ii) extend the dates
during which all or any particular Options or Awards granted under the Plan
may
be exercised or vest.
4
i.Determination
of Fair Market Value.
If, at
the time an Option is granted under the Plan, the Company's Common Stock
is
publicly traded under the Exchange Act, “fair
marketvalue”
shall
mean (i) if the Common Stock is listed on any established stock exchange
or a
national market system, including without limitation the Nasdaq National
Market
or The Nasdaq Small Cap Market of The Nasdaq Stock Market, its fair market
value
shall be the last reported sales price for such stock (on that date) or the
closing bid, if no sales were reported as quoted on such exchange or system
as
reported in The
Wall Street Journal
or such
other source as the Board deems reliable; or (ii) the twenty trading day
trailing average of the closing bid and asked prices last quoted (on that
date)
by an established quotation service for over-the-counter securities, if the
Common Stock is not reported on a national market system. In the absence
of an
established market for the Common Stock, the fair market value thereof shall
be
determined in good faith by the Board after taking into consideration all
factors which it deems appropriate.
5.Restricted
Stock.
a.Grants.
The
Board may grant Awards entitling recipients to acquire shares of Common Stock,
subject to (i) delivery to the Company by the Participant of a check in an
amount at least equal to the par value of the shares purchased, and (ii)
the
right of the Company to repurchase all or part of such shares at their issue
price or other stated or formula price from the Participant in the event
that
conditions specified by the Board in the applicable Award are not satisfied
prior to the end of the applicable restriction period or periods established
by
the Board for such Award (each, a “Restricted
Stock Award”).
b.Terms
and Conditions.
The
Board shall determine the terms and conditions of any such Restricted Stock
Award. Any stock certificates issued in respect of a Restricted Stock Award
shall be registered in the name of the Participant and, unless otherwise
determined by the Board, deposited by the Participant, together with a stock
power endorsed in blank, with the Company (or its designee). After the
expiration of the applicable restriction periods, the Company (or such designee)
shall deliver the certificates no longer subject to such restrictions to
the
Participant or, if the Participant has died, to the beneficiary designated
by a
Participant, in a manner determined by the Board, to receive amounts due
or
exercise rights of the Participant in the event of the Participant's death
(the
“Designated
Beneficiary”).
In
the absence of an effective designation by a Participant, Designated Beneficiary
shall mean the Participant's estate.
6.Other
Stock-Based Awards.
The
Board shall have the right to grant other Awards based upon the Common Stock
having such terms and conditions as the Board may determine, including, without
limitation, the grant of shares based upon certain conditions, the grant
of
securities convertible into Common Stock and the grant of stock appreciation
rights, phantom stock awards or stock units.
7.General
Provisions Applicable to Awards.
a.Transferability
of Awards.
Except
as the Board may otherwise determine or provide in an Award, Awards shall
not be
sold, assigned, transferred, pledged or otherwise encumbered by the person
to
whom they are granted, either voluntarily or by operation of law, except
by will
or the laws of descent and distribution, and, during the life of the
Participant, shall be exercisable only by the Participant; provided, however,
except as the Board may otherwise determine or provide in an Award, that
Nonstatutory Options and Restricted Stock Awards may be transferred pursuant
to
a qualified domestic relations order (as defined in Employee Retirement Income
Security Act of 1974, as amended) or to a grantor-retained annuity trust
or a
similar estate-planning vehicle in which the trust is bound by all provisions
of
the Stock Option Agreement and Restricted Stock Award, which are applicable
to
the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
5
b.Documentation.
Each
Award under the Plan shall be evidenced by a written instrument in such form
as
the Board shall determine or as executed by an officer of the Company pursuant
to authority delegated by the Board. Each Award may contain terms and conditions
in addition to those set forth in the Plan, provided that such terms and
conditions do not contravene the provisions of the Plan or applicable
law.
c.Board
Discretion.
The
terms of each type of Award need not be identical, and the Board need not
treat
Participants uniformly.
d.Additional
Award Provisions.
The
Board may, in its sole discretion, include additional provisions in any Stock
Option Agreement, Restricted Stock Award or other Award granted under the
Plan,
including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, to make, arrange for or guaranty loans or
to
transfer other property to Participants upon exercise of Awards, or transfer
other property to Participants upon exercise of Awards, or such other provisions
as shall be determined by the Board; provided that such additional provisions
shall not be inconsistent with any other term or condition of the Plan or
applicable law.
e.Termination
of Status.
The
Board shall determine the effect on an Award of the disability (as defined
in
Code Section 22(e)(3)), death, retirement, authorized leave of absence or
other
change in the employment or other status of a Participant and the extent
to
which, and the period during which, the Participant, or the Participant's
legal
representative, conservator, guardian or Designated Beneficiary, may exercise
rights under the Award, subject to applicable law and the provisions of the
Code
related to Incentive Stock Options.
i. Unless
otherwise expressly provided in the applicable Stock Option Agreement or
Restricted Stock Award or other Award, in connection with the occurrence
of a
Change in Control (as defined below), the Board shall, in its sole discretion
as
to any outstanding Award (including any portion thereof; on the same basis
or on
different bases, as the Board shall specify), take one or any combination
of the
following actions:
A. make
appropriate provision for the continuation of such Award by the Company or
the
assumption of such Award by the surviving or acquiring entity and by
substituting on an equitable basis for the shares then subject to such Award
either (x) the consideration payable with respect to the outstanding shares
of
Common Stock in connection with the Change of Control, (y) shares of stock
of
the surviving or acquiring corporation or (z) such other securities as the
Board
deems appropriate, the fair market value of which (as determined by the Board
in
its sole discretion) shall not materially differ from the fair market value
of
the shares of Common Stock subject to such Award immediately preceding the
Change of Control;
6
B. accelerate
the date of exercise or vesting of such Award;
C. permit
the exchange of such Award for the right to participate in any stock option
or
other employee benefit plan of any successor corporation; or
D. provide
for the repurchase of the Award for an amount equal to the difference of
(i) the
consideration received per share for the securities underlying the Award
in the
Change of Control minus (ii) the per share exercise price of such securities.
Such amount shall be payable in cash or the property payable in respect of
such
securities in connection with the Change of Control. The value of any such
property shall be determined by the Board in its discretion.
E. provide
for the termination of such Award immediately prior to the consummation of
the
Change of Control; provided that no such termination will be effective if
the
Change of Control is not consummated.
F. For
the
purpose of this Agreement, a “Change
of Control”
shall
mean:
(a) The
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“ExchangeAct”))
of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the
Exchange Act) of 50% or more of the then outstanding shares of voting stock
of
the Company (the “VotingStock”);
provided, however, that any acquisition by the Company or its subsidiaries,
or
any employee benefit plan (or related trust) of the Company or its subsidiaries
of 50% or more of Voting Stock shall not constitute a Change in Control;
and
provided, further, that any acquisition by a corporation with respect to
which,
following such acquisition, more than 50% of the then outstanding shares
of
common stock of such corporation, is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
were
the beneficial owners of the Voting Stock immediately prior to such acquisition
in substantially the same proportion as their ownership, immediately prior
to
such acquisition, of the Voting Stock, shall not constitute a Change in Control;
or
(b) Individuals
who, as of the Effective Date, constitute the Board (the “Incumbent
Directors”)
cease
for any reason to constitute a majority of the members of this Board; provided
that any individual who becomes a director after the Effective Date whose
election or nomination for election by the Company’s Shareholders was approved
by a majority of the members of the Incumbent Directors (other than an election
or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened “election contest” relating to the
election of the Directors of the Company (as such terms are used in Rule
14a-11
under the Exchange Act), “tender
offer”
(as
such term is used in Section 14(d) of the Exchange Act) or a proposed Merger
(as
defined below) shall be deemed to be members of the Incumbent Directors;
or
7
(c) The
consummation of (i) a reorganization, merger or consolidation (any of the
foregoing, a “Merger”),
in
each case, with respect to which all or substantially all of the individuals
and
entities who were the beneficial owners of the Voting Stock immediately prior
to
such Merger do not, following such Merger, beneficially own, directly or
indirectly, more than 50% of the then outstanding shares of common stock
of the
corporation resulting from Merger, (ii) a complete liquidation or dissolution
of
the Company or (iii) the sale or other disposition of all or substantially
all
of the assets of the Company, excluding a sale or other disposition of assets
to
a subsidiary of the Company.
g.Dissolution
or Liquidation.
In the
event of the proposed dissolution or liquidation of the Company, the Board
shall
notify each Participant as soon as practicable prior to the effective date
of
such proposed transaction. The Board in its sole discretion may provide for
a
Participant to have the right to exercise his or her Award until fifteen
(15)
days prior to such transaction as to all of the shares of Common Stock covered
by the Option or Award, including shares as to which the Option or Award
would
not otherwise be exercisable, which exercise may in the sole discretion of
the
Board, be made subject to and conditioned upon the consummation of such proposed
transaction. In addition, the Board may provide that any Company repurchase
option applicable to any shares of Common Stock purchased upon exercise of
an
Option or Award shall lapse as to all such shares of Common Stock, provided
the
proposed dissolution and liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Award
will
terminate upon the consummation of such proposed action.
h.Assumption
of Options Upon Certain Events.
In
connection with a merger or consolidation of an entity with the Company or
the
acquisition by the Company of property or stock of an entity, the Board may
grant Awards under the Plan in substitution for stock and stock-based awards
issued by such entity or an affiliate thereof.
i. The
substitute Awards shall be granted on such terms and conditions as the Board
considers appropriate in the circumstances.
8
j.Parachute
Payments and Parachute Awards.
Notwithstanding the provisions of Section
7(f),
if, in
connection with a Change of Control described therein, a tax under
Section4999
of
the Code would be imposed on the Participant (after taking into account the
exceptions set forth in Sections 280G(b)(4) and 280G(b)(5) of the Code),
then
the number of Awards which shall become exercisable, realizable or vested
as
provided in such Section shall be reduced (or delayed), to the minimum extent
necessary, so that no such tax would be imposed on the Participant (the Awards
not becoming so accelerated, realizable or vested, the “Parachute
Awards”);
provided, however, that if the “aggregate present value” of the Parachute Awards
would exceed the tax that, but for this sentence, would be imposed on the
Participant under Section 4999 of the Code in connection with the Change
of
Control, then the Awards shall become immediately exercisable, realizable
and
vested without regard to the provisions of this sentence. For purposes of
the
preceding sentence, the “aggregate present value” of an Award shall be
calculated on an after-tax basis (other than taxes imposed by Section 4999
of
the Code) and shall be based on economic principles rather than the principles
set forth under Section 280G of the Code and the regulations promulgated
thereunder. All determinations required to be made under this Section
7(j)
shall be
made by the Company.
k.Amendment
of Awards.
The
Board may amend, modify or terminate any outstanding Award including, but
not
limited to, substituting therefor another Award of the same or a different
type,
changing the date of exercise or realization, and converting an Incentive
Stock
Option to a Nonstatutory Stock Option, provided that the Participant's consent
to such action shall be required unless the Board determines that the action,
taking into account any related action, would not materially and adversely
affect the Participant.
l.Conditions
on Delivery of Stock.
The
Company will not be obligated to deliver any shares of Common Stock pursuant
to
the Plan or to remove restrictions from shares previously delivered under
the
Plan until (i) all conditions of the Award have been met or removed to the
satisfaction of the Company, (ii) in the opinion of the Company's counsel,
all
other legal matters in connection with the issuance and delivery of such
shares
have been satisfied, including any applicable securities laws and any applicable
stock exchange or stock market rules and regulations, and (iii) the Participant
has executed and delivered to the Company such representations or agreements
as
the Company may consider appropriate to satisfy the requirements of any
applicable laws, rules or regulations.
m.Acceleration.
The
Board may at any time provide that any Options shall become immediately
exercisable in full or in part, that any Restricted Stock Awards shall be
free
of some or all restrictions, or that any other stock-based Awards may become
exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be,
despite the fact that the foregoing actions may (i) cause the application
of
Sections 280G and 4999 of the Code if a change in control of the Company
occurs,
or (ii) disqualify all or part of the Option as an Incentive Stock
Option.
8.Withholding.
The
Company shall have the right to deduct from payments of any kind otherwise
due
to the optionee or recipient of an Award any federal, state or local taxes
of
any kind required by law to be withheld with respect to any shares issued
upon
exercise of Options under the Plan or the purchase of shares subject to the
Award. Subject to the prior approval of the Company, which may be withheld
by
the Company in its sole discretion, the optionee or recipient of an Award
may
elect to satisfy such obligation, in whole or in part, (a) by causing the
Company to withhold shares of Common Stock otherwise issuable pursuant to
the
exercise of an Option or the purchase of shares subject to an Award or (b)
by
delivering to the Company shares of Common Stock already owned by the optionee
or Award recipient of an Award. The shares so delivered or withheld shall
have a
fair market value of the shares used to satisfy such withholding obligation
as
shall be determined by the Company as of the date that the amount of tax
to be
withheld is to be determined. An optionee or recipient of an Award who has
made
an election pursuant to this Section may only satisfy his or her withholding
obligation with shares of Common Stock which are not subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements.
9
9.No
Exercise of Option if Engagement or Employment Terminated for
Cause.
If the
employment or engagement of any Participant is terminated “for Cause”, the Award
may terminate, upon a determination of the Board, on the date of such
termination and the Option shall thereupon not be exercisable to any extent
whatsoever and the Company shall have the right to repurchase any shares
of
Common Stock subject to a Restricted Stock Award whether or not such shares
have
vested. For purposes of this Section
9,
“for
Cause”
shall
be defined as follows: (i) if the Participant has executed an employment
agreement, the definition of “cause” contained therein, if any, shall govern, or
(ii) conduct, as determined by the Board of Directors, involving one or more
of
the following: (a) gross misconduct or inadequate performance by the Participant
which is injurious to the Company; or (b) the commission of an act of
embezzlement, fraud or theft, which results in economic loss, damage or injury
to the Company; or (c) the unauthorized disclosure of any trade secret or
confidential information of the Company (or any client, customer, supplier
or
other third party who has a business relationship with the Company) or the
violation of any noncompetition or nonsolicitation covenant or assignment
of
inventions obligation with the Company; or (d) the commission of an act which
constitutes unfair competition with the Company or which induces any customer
or
prospective customer of the Company to breach a contract with the Company
or to
decline to do business with the Company; or (e) the indictment of the
Participant for a felony or serious misdemeanor offense, either in connection
with the performance of his or her obligations to the Company or which shall
adversely affect the Participant's ability to perform such obligations; or
(f)
the commission of an act of fraud or breach of fiduciary duty which results
in
loss, damage or injury to the Company; or (g) the failure of the Participant
to
perform in a material respect his or her employment, consulting or advisory
obligations without proper cause. In making such determination, the Board
shall
act fairly and in utmost good faith. The Board may in its discretion waive
or
modify the provisions of this Section at a meeting of the Board with respect
to
any individual Participant with regard to the facts and circumstances of
any
particular situation involving a determination under this Section.
10.Miscellaneous.
a.Definitions.
i. “Company”,
for
purposes of eligibility under the Plan, shall include any present or future
subsidiary corporations of Element 21 Golf Company, as defined in Section
424(f)
of the Code (a “Subsidiary”),
and
any present or future parent corporation of Element 21 Golf Company, as defined
in Section 424(e) of the Code. For purposes of Awards other than Incentive
Stock
Options, the term “Company” shall include any other business venture in which
the Company has a direct or indirect significant interest, as determined
by the
Board in its sole discretion.
10
ii. “Code”
means
the Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder.
iii. “Effective
Date”
means
the date the Plan is adopted by the Company’s Board of Directors.
iv.“Employee”
for
purposes of eligibility under the Plan shall include a person to whom an
offer
of employment has been extended by the Company.
v. “Option
Exchange Program”
means
a
program whereby outstanding options are exchanged for options with a lower
exercise price.
b.No
Right To Employment or Other Status.
No
person shall have any claim or right to be granted an Award, and the grant
of an
Award shall not be construed as giving a Participant the right to continued
employment or any other relationship with the Company. The Company expressly
reserves the right at any time to dismiss or otherwise terminate its
relationship with a Participant free from any liability or claim under the
Plan.
c.No
Rights As Stockholder.
Subject
to the provisions of the applicable Award, no Participant or Designated
Beneficiary shall have any rights as a stockholder with respect to any shares
of
Common Stock to be distributed with respect to an Award until becoming the
record holder thereof.
d.Effective
Date and Term of Plan.
The
Plan shall become effective on the date on which it is adopted by the Board.
No
Awards shall be granted under the Plan after the completion of ten years
from
the date on which the Plan was adopted by the Board, but Awards previously
granted may extend beyond that date.
e.Amendment
of Plan.
The
Board may amend, suspend or terminate the Plan or any portion thereof at
any
time.
f.Governing
Law.
The
provisions of the Plan and all Awards made hereunder shall be governed by
and
interpreted in accordance with the laws of the state of Delaware, without
regard
to any applicable conflicts of law.
