-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F4+RnmlcGPjfOxyEbgn6L3exBy8BxThD/h55JfLwtMpFGLw5WyWcM0YeLTQGomQG 8reqSr+p0ewrtefg0nmSlQ== 0001019056-06-001130.txt : 20061201 0001019056-06-001130.hdr.sgml : 20061201 20061201104201 ACCESSION NUMBER: 0001019056-06-001130 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20061130 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061201 DATE AS OF CHANGE: 20061201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELEMENT 21 GOLF CO CENTRAL INDEX KEY: 0000797662 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 880218411 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15260 FILM NUMBER: 061249876 BUSINESS ADDRESS: STREET 1: 340 GRANITE STREET STREET 2: SUITE 200 CITY: MANCHESTER STATE: NH ZIP: 03102-4004 BUSINESS PHONE: 416-362-2121 MAIL ADDRESS: STREET 1: 200 QUEENS QUAY EAST STREET 2: UNIT 1 CITY: TORONTO, STATE: A6 ZIP: M5A 4K9 FORMER COMPANY: FORMER CONFORMED NAME: BRL HOLDINGS INC DATE OF NAME CHANGE: 20011212 FORMER COMPANY: FORMER CONFORMED NAME: BIORELEASE CORP DATE OF NAME CHANGE: 19930809 FORMER COMPANY: FORMER CONFORMED NAME: OIA INC DATE OF NAME CHANGE: 19920703 8-K 1 element_8k.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 30, 2006 Element 21 Golf Company ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 000-15260 88-0218411 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 200 Queens Quay East, Unit #1 Toronto, Ontario, Canada, M5A 4K9 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 800-710-2021 ------------------------ Not Applicable ------------------------------------------------------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry into a Material Definitive Agreement As reported on a Form 8-K filed by Element 21 Golf Company (the "Company") on August 3, 2006, the Company consummated a $4 million equity financing on July 31, 2006 (the "Initial Closing Date") by entering into separate Series B Convertible Preferred Stock Subscription Agreements (each a "Subscription Agreement" and collectively the "Subscription Agreements") with Clearline Capital, LLC and Vladimir Goryunov (each a "Purchaser" and collectively, the "Purchasers"). On November 30, 2006, the Company consummated the second and final closing of the transactions contemplated by the Subscription Agreements and received an additional $2 million in investment proceeds from the Purchasers. Each Subscription Agreement provided for the sale by the Company to the applicable Purchaser of 117,648 shares of the Company's Series B Convertible Preferred Stock, par value $0.10 per share (the "Series B Preferred Stock"), and warrants to purchase an aggregate of 17,647,059 shares of the Company's Common Stock, $0.01 par value per share (the "Common Stock"), in exchange for and in consideration of an aggregate investment by each Purchaser of $2 million in cash, which amount was to be invested by each Purchaser in two equal $1 million installments, the first of which occurred on the Initial Closing Date and the second of which occurred on November 30, 2006 (the "Subsequent Closing" and the date of such Subsequent Closing, the "Subsequent Closing Date"). In exchange for each Purchaser's second $1 million installment which was received by the Company on the Subsequent Closing Date, the Company issued to each Purchaser an additional 58,824 shares of Series B Preferred Stock and (i) one additional warrant to purchase 3,750,000 shares of Common Stock at an exercise price of $0.22 per share in the event the warrant is exercised on or prior to July 31, 2007, which increases to $0.28 per share in the event the warrant is exercised on or after August 1, 2007, and (ii) one additional warrant to purchase 5,073,530 shares of Common Stock at an exercise price of $0.28 per share (each a "Subsequent Warrant", collectively, the "Subsequent Warrants" and collectively with the warrants issued to the Purchasers as of the Initial Closing Date, the "Warrants"). The Warrants expire on January 31, 2009. The exercise prices of the Warrants are subject to adjustment in the event of certain dilutive issuances, stock dividends, stock splits, share combinations or other similar recapitalization events. The Warrants may only be exercised by the payment of the applicable exercise price to the Company in cash, no cashless exercise is permitted. The terms of the Subsequent Warrants are identical to the terms of the warrants issued by the Company to the Purchasers as of the Initial Closing Date. Forms of each of the two Subsequent Warrants are attached hereto as Exhibits 4.1 and 4.2 respectively. On November 30, 2006, the Company issued a press release to announce the consummation of the second and final closing of the Series B Preferred Stock equity financing. A copy of the press release issued by the Company is attached hereto as Exhibit 99.1. Item 3.02 Unregistered Sales of Equity Securities As described above, on the Subsequent Closing Date, the Company sold an aggregate of 117,648 shares of Series B Preferred Stock and issued warrants to purchase an aggregate of 17,647,060 shares of Common Stock for an aggregate purchase price of $2,000,000. The Company paid commissions in the aggregate amount of $600,000 in connection with its issuance of shares of Series B Preferred Stock and the accompanying warrants at the Initial Closing Date and the Subsequent Closing Date. The shares of Series B Preferred Stock are convertible into shares of Common Stock at the election of the Purchasers. Each share of Series B Preferred Stock is initially convertible into 100 shares of Common Stock, with such conversion ratio subject to adjustment in the event of dilutive issuances, stock splits, combinations, certain dividends and 2 distributions, and mergers, reorganizations or other similar recapitalization events. The warrants may be exercised in whole or in part for shares of Common Stock by payment by the Purchasers of the applicable exercise price in cash prior to the expiration of the warrants on January 31, 2009. Neither the shares of Series B Preferred Stock, the warrants, or the shares of Common Stock issuable upon conversion of the shares of Series B Preferred Stock or upon the exercise of the warrants were registered under the Securities Act of 1933, as amended ("Securities Act"). The offer and sale of the shares Series B Preferred Stock and warrants to the Purchasers on the Subsequent Closing Date was (and we anticipate that the issuance of shares of Common Stock upon conversion of the Series B Preferred Stock and upon exercise of the warrants, will be) exempt from the registration requirements of Section 5 of the Securities Act pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder. The Company relied on the following facts in determining that the offer and sale of the shares of Series B Preferred Stock on the Subsequent Closing Date and accompanying warrants qualified for the exemption provided by Rule 506: o The offer and sale satisfied the terms and conditions of Rule 501 and 502 under the Securities Act; and o Pursuant to Rule 506 under the Securities Act, no more than 35 purchasers purchased the Series B Preferred Stock and warrants, as determined in accordance with Rule 501(e) under the Securities Act. Item 9.01 Financial Statements and Exhibits. Exhibits Exhibit Number Description - -------------- ----------- 3(i)* Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock, Par Value $0.10 Per Share 4.1 Form of Warrant for Purchase of 3,750,000 Shares of Common Stock dated November 30, 2006 4.2 Form of Warrant for Purchase of 5,073,530 Shares of Common Stock dated November 30, 2006 10.1* Form of Subscription Agreement for Shares of Series B Convertible Preferred Stock dated as of July 31, 2006 99.1 Press Release issued by the Company on November 30, 2006 * Incorporated by reference to the Company's Form 8-K filed on August 3, 2006. 3 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: November 30, 2006 ELEMENT 21 GOLF COMPANY By: /s/ NATALIYA HEARN ------------------------------------- Name: Nataliya Hearn Title: President 4 Exhibit Index Exhibit Number Description - -------------- ----------- 3(i)* Certificate of the Powers, Designations, Preferences and Rights of the Series B Convertible Preferred Stock, Par Value $0.10 Per Share 4.1 Form of Warrant for Purchase of 3,750,000 Shares of Common Stock dated November 30, 2006 4.2 Form of Warrant for Purchase of 5,073,530 Shares of Common Stock dated November 30, 2006 10.1* Form of Subscription Agreement for Shares of Series B Convertible Preferred Stock dated as of July 31, 2006 99.1 Press Release issued by the Company on November 30, 2006 * Incorporated by reference to the Company's Form 8-K filed on August 3, 2006. 5 EX-4.1 2 ex4_1.txt EXHIBIT 4.1 EXHIBIT 4.1 NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. ELEMENT 21 GOLF COMPANY COMMON STOCK PURCHASE WARRANT Element 21 Golf Company, a Delaware corporation (the "Company"), hereby certifies that, for value received, _______________, or any transferee or assignee of this Warrant (the "Warrantholder"), is entitled, subject to the terms set forth below, to purchase from the Company at any time or from time to time before 5:00 p.m. Eastern time, on the Expiration Date (as hereinafter defined), that number of fully paid and nonassessable shares of common stock, $.01 par value per share, of the Company (the "Warrant Shares") as is equal to the Warrant Number (as hereinafter defined), at a purchase price per share as shall be equal to the Purchase Price (as hereinafter defined) in effect at the time of the exercise of this Warrant. The Warrant Number and the Purchase Price are subject to adjustment as provided in this Warrant. As used herein the following terms, unless the context otherwise requires, have the following respective meanings: (a) The term "Company" shall include Element 21 Golf Company and any corporation that shall succeed to or assume the obligations of Element 21 Golf Company hereunder. (b) The term "Expiration Date" mean January 31, 2009. (c) The term "Purchase Price" shall mean $0.22 in the event the Warrant is exercised on or prior to July 31, 2007 and $0.28, in the event the Warrant is exercised on or after August 1, 2007. In each case, the Purchase Price is subject to adjustment pursuant to Section 6 below. (d) The term "Warrant Number" shall mean 3,750,000, subject to adjustment pursuant to Section 6 below. (e) The term "Warrant Shares" includes the Company's common stock, $.01 par value per share and any other securities or property of the Company or of any other person (corporate or otherwise) which the Warrantholder at any time shall be entitled to receive on the exercise hereof in lieu of or in addition to such Common Stock, or which at any time shall be issuable in exchange for or in replacement of such Common Stock. 1. Expiration. This Warrant may be exercised at any time or from time to time until 5:00 p.m., Eastern time, on the Expiration Date. 2. Exercise of Warrant. ------------------- (a) This Warrant may be exercised in whole or in part by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto (the "Purchase Form") duly executed and accompanied by payment of the Purchase Price for the number of shares of Common Stock specified in such form. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Warrantholder hereof to purchase the balance of the shares of Common Stock purchasable hereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Warrantholder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Warrantholder. (b) For any partial exercise or redemption pursuant to Section 2(a) hereof, the Warrantholder shall designate in the Purchase Form the number of shares of Common Stock that it wishes to purchase. On any such partial exercise, the Company at its expense shall forthwith issue and deliver to the Warrantholder a new warrant of like tenor, in the name of the Warrantholder, which shall be exercisable for such number of shares of Common Stock represented by this Warrant which have not been purchased upon such exercise. 3. Effectiveness of Exercise. The exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the business day on which this Warrant is surrendered to the Company as provided in Section 2. 4. Delivery on Exercise. As soon as practicable after the exercise of this Warrant in full or in part pursuant to Section 2, as the case may be, and in any event within five (5) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes but excluding the payment of taxes to which the Warrantholder is subject as a result of the conduct of its business activity) will cause to be issued in the name of and delivered to the Warrantholder, or as such Warrantholder may direct, a certificate or certificates for the number of fully paid and nonassessable full Warrant Shares to which such holder shall be entitled on such exercise, together with cash, in lieu of any fraction of a share, equal to such fraction of the then fair market value of one full share as determined in good faith by the Board of Directors of the Company. 5. Adjustment for Reorganization, Consolidation, Merger, etc. --------------------------------------------------------- (a) General. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company (each of the foregoing, a "Business Combination"), and such Business Combination shall be effected in such a way that holders of shares of the Company's Common Stock (or any shares of stock or other securities at the time issuable upon exercise of this Warrant ) shall be entitled to receive stock, securities or assets, with respect to or in exchange for such shares, then, in each such case, the holder of this Warrant, on the exercise hereof as provided in Section 2 at any time after the consummation of such Business Combination or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Warrant Shares issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 6. (b) Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered to the Warrantholder the stock and other securities and property (including cash, where applicable) receivable by the Warrantholder after the effective date of such dissolution pursuant to this Section 5 provided, however, 2 that the Warrantholder may request that such securities or property be delivered to a trustee for the holder or holders of the Warrants and the Company shall bear reasonable expenses for such delivery. (c) Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 5, this Warrant, to the extent not yet exercised in full, shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant. 6. Adjustment of Purchase Price and Number of Shares. The number of the Warrant Shares issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) and the purchase price therefor, are subject to adjustment upon the occurrence of the following events: (a) Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The exercise price of this Warrant and the number of Shares issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be appropriately adjusted to reflect any stock dividend, stock split, combination of shares, reclassification, recapitalization or other similar event affecting the number of outstanding shares of Common Stock (or other stock or securities if the Warrantholder is then entitled to receive such stock or securities upon exercise of this Warrant). For example, if there should be a 2-for-1 stock split of the Common Stock, the exercise price would be divided by two and such number of shares would be doubled. (b) Adjustment for Other Dividends and Distributions. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution after the date hereof with respect to the Warrant Shares (or any shares of stock or other securities at the time issuable upon exercise of the Warrant) payable in (i) securities of the Company (other than shares of Stock) or (ii) assets (excluding cash dividends paid or payable solely out of current or retained earnings), then, in each case, the holder of this Warrant on exercise hereof at any time after the consummation or record date of such event (provided the event is later consummated), shall receive, in addition to the Warrant Shares (or such other stock or securities) issuable on such exercise prior to such date, the securities or such other assets of the Company to which such holder would have been entitled upon such date if such holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant). (c) Anti-Dilution Protection. ------------------------ (i) General. If the Company shall at any time or from time to time, issue, sell or otherwise dispose of any additional shares of Common Stock (including shares owned or held by or for the account of the Company), however designated (other than shares of Common Stock excepted from the provisions of this Section 6(c) by subsection (iv) or otherwise covered by Sections 6(a) and (b)) without consideration or for a net consideration per share less than the Purchase Price in effect immediately prior to such issuance, then, and in each such case: (a) the Purchase Price shall be lowered to the price (but in no event below $.01 per share) determined by dividing (i) an amount equal to the sum of (a) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the then existing Purchase Price, and (b) the consideration, if any, received by the Corporation upon such issue or sale, by (ii) the sum of the total number of shares of Common Stock outstanding immediately prior to such issue or sale plus the number of shares of Common Stock so issued and sold; and (b) the holder of this Warrant shall thereafter, on the exercise hereof, be entitled to receive the Warrant Number determined by multiplying the Warrant Number which would be issuable on such exercise immediately prior to such issuance by the fraction of which (i) the 3 numerator is the Purchase Price in effect immediately prior to such issuance and (ii) the denominator is the Purchase Price in effect on the date of such exercise. (ii) Definitions, etc. For purposes of this Section 6: The issuance of any warrants, options or other subscription or purchase rights with respect to shares of Common Stock and the issuance of any securities convertible into or exchangeable for such shares of Common Stock (or the issuance of any warrants, options or any rights with respect to such convertible or exchangeable securities) shall be deemed an issuance at such time of such Common Stock if the Net Consideration Per Share which may be received by the Company for such Common Stock (as hereinafter determined) shall be less than the Purchase Price at the time of such issuance and, except as hereinafter provided, an adjustment in the Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be made upon each such issuance in the manner provided in subsection (i). Any obligation, agreement or undertaking to issue warrants, options, or other subscription or purchase rights at any time in the future shall be deemed to be an issuance at the time such obligation, agreement or undertaking is made or arises. Except as otherwise provided herein, no adjustment of the Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be made under subsection (i) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise of any warrants, options or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any convertible securities if any adjustment shall previously have been made upon the issuance of any such warrants, options or other rights or upon the issuance of any convertible securities (or upon the issuance of any warrants, options or any rights therefor) as above provided. Any adjustment of the Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant with respect to this subsection (ii) which relates to warrants, options or other subscription or purchase rights with respect to shares of Common Stock shall be disregarded if, as, and when the respective warrant, option or other subscription or purchase rights expire or are cancelled without being exercised, so that the Purchase Price effective immediately upon such cancellation or expiration shall be equal to the Purchase Price in effect at the time of the issuance of the expired or cancelled warrants, options or other subscriptions or purchase rights, with such additional adjustments as would have been made to that Purchase Price had the expired or cancelled warrants, options or other subscriptions or purchase rights not been issued. For purposes of this subsection (ii), the "Net Consideration Per Share" which may be received by the Company shall be determined as follows: (A) The "Net Consideration Per Share" shall mean the amount equal to the total amount of consideration, if any, received by the Company for the issuance of such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities, plus the minimum amount of consideration, if any, payable to the Company upon exercise or conversion thereof, divided by the aggregate number of shares of Common Stock that would be issued if all such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities were exercised, exchanged or converted. (B) If the "Net Consideration Per Share" which may be received by the Company shall change (other than under or by reason of provisions designed to protect against dilution), the Purchase Price in effect at the time of such event shall forthwith be readjusted to the Purchase Price which would have been in effect at such time had such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities provided for such changed "Net Consideration Per Share" at the time initially granted, issued or sold, but only if as a result of such adjustment the Purchase Price then in effect hereunder is thereby reduced. If the "Net Consideration Per Share" shall be reduced at any time under or by reason of provisions designed to protect against dilution, then in case of the delivery of Common Stock upon the exercise or conversion of any such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities, the Purchase Price then in effect hereunder shall forthwith be adjusted to such amount as would have obtained had such warrant, option, subscription, or other purchase right or convertible or exchangeable security never been issued as to such Common Stock and had adjustments been made upon the issuance of the Common Stock delivered as aforesaid, but only if as a result of such adjustment the Purchase Price then in effect hereunder is thereby reduced. 4 For purposes of this Section 6(c), if a part or all of the consideration received by the Company in connection with the issuance of shares of the Common Stock or the issuance of any of the securities described in this Section 6(c), consists of property other than cash, such consideration shall be deemed to have the same value as shall be determined in good faith by the board of directors of the Company, without deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. This subsection (ii) shall not apply under any of the circumstances described in Sections 6(a) or 6(b). (iii) Dilution in Case of Other Securities. In case any securities other than shares of stock of the Company shall be issued or sold, or shall become subject to issue upon the conversion or exchange of any shares of stock of the Company (or any other person referred to in Section 5) or subscription, purchase or other acquisition pursuant to any rights or options granted by the Company (or such other person), for a consideration per share such as to dilute the purchase rights evidenced by this Warrant, the computations, adjustments and readjustments provided for in this Section (c) with respect to the Purchase Price and the number of shares of Common stock issuable upon exercise of this Warrant shall be made as nearly as possible in the manner so provided and applied to determine the amount of other securities from time to time receivable on the exercise of the Warrants, so as to protect the holders of the Warrants against the effect of such dilution. (iv) Certain Issues of Common Stock. Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment of the Purchase Price in the case of: a. the issuance of any shares of Common Stock as a stock dividend to holders of shares of the Company's capital stock or upon any subdivision or combination of shares of the Company's capital stock; b. the issuance of any shares of Common Stock upon conversion of shares of Series B Convertible Preferred Stock or any other shares of convertible preferred stock outstanding as of the date hereof; c. the issuance of up to 20,000,000 shares of Common Stock or options with respect thereto (subject in either case to appropriate adjustment for stock splits, stock dividends, recapitalizations and similar events occurring after the date of this Agreement), issued or issuable to employees, directors or officers of, or consultants to, the Company or any subsidiary of the Company pursuant to any plan, agreement or arrangement approved by the Board of Directors of the Company (it being understood that any shares subject to options that expire or terminate unexercised or any restricted stock repurchased by the Company shall not be counted towards the maximum number set forth in this clause c. unless and until regranted or reissued pursuant to any such plan, agreement or arrangement); d. the issuance of shares of Common Stock upon the exercise of any warrant to purchase shares of Common Stock outstanding as of the date hereof or any warrant issued to a purchaser of shares of the Company's Series B Preferred Stock in connection with the Company's Series B Preferred Stock equity financing; e. the issuance of securities solely in consideration for the acquisition (whether by merger or otherwise) by the Company or any subsidiary of the Company of 5 all or substantially all of the stock or assets of any other entity; f. the issuance of shares of Common Stock by the Company in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act; or g. the issuance of shares of Common Stock, or the grant of options or warrants therefor, in connection with (i) any present or future borrowing, line of credit, leasing or similar financing arrangement approved by the Board of Directors of the Company, or (ii) sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Company. (d) Certificate as to Adjustments. In case of any adjustment or readjustment in the price or kind of securities issuable on the exercise of this Warrant, the Company will promptly give written notice thereof to the holder of this Warrant in the form of a certificate, certified and confirmed by the President of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based. 7. No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. Without limiting the generality of the foregoing the Company (a) will not increase the par value of any shares of stock receivable on the exercise of this Warrant above the amount payable therefore on such exercise, (b) will at all times reserve and keep available a number of its authorized shares of Common Stock, free from all preemptive rights therein, which will be sufficient to permit the exercise of this Warrant by the Warrantholder, and (c) shall take all such action as may be necessary or appropriate in order that all Warrant Shares as may be issued pursuant to the exercise of this Warrant will, upon issuance in accordance with the terms hereof, be duly and validly issued, fully paid and nonassessable and free from all liens and charges with respect to the issue thereof. 8. Notices of Record Date, etc. In the event of ---------------------------- (a) any taking by the Company of a record of the holders of Common Stock (or shares of stock or other securities at the time issuable upon exercise of this Warrant) for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or (b) any reclassification or recapitalization of the Common Stock (or shares of stock or other securities at the time issuable upon exercise of this Warrant), or any transfer of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other person, or (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, then and in each such event the Company will mail to the holder hereof a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, and (ii) the date on which any such reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or any shares of stock or other securities at the time issuable upon the exercise of this Warrant) shall be entitled to exchange their shares for securities or other 6 property deliverable on such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice shall be mailed at least 10 days prior to the date therein specified. 9. Replacement of Warrant. On receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 10. Investment Intent. Unless a current registration statement under the Securities Act of 1933, as amended, shall be in effect with respect to the issuance of the securities to be issued upon exercise of this Warrant, the holder thereof, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, and at the time of any proposed transfer of securities acquired upon exercise hereof, such holder will deliver to the Company a written statement that the securities acquired by the holder upon exercise hereof are for the own account of the holder for investment and are not acquired with a view to, or for sale in connection with, any distribution thereof (or any portion thereof) and with no present intention (at any such time) of offering and distributing such securities (or any person thereof). 11. Transfer. Subject to compliance with applicable federal and state securities laws, this Warrant may be transferred by the Warrantholder with respect to any or all of the shares purchasable hereunder. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed, for transfer of this Warrant as an entirety by the Warrantholder, the Company shall issue a new warrant of the same denomination to the assignee. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed, by the Warrantholder for transfer with respect to a portion of the shares of Common Stock purchasable hereunder, the Company shall issue a new warrant to the assignee, in such denomination as shall be requested by the Warrantholder, and shall issue to such Warrantholder a new warrant covering the number of shares in respect of which this Warrant shall not have been transferred. 12. No Rights or Liability as a Stockholder. This Warrant does not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company. No provisions hereof, in the absence of affirmative action by the Warrantholder to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Warrantholder shall give rise to any liability of such Warrantholder as a stockholder of the Company. 13. Damages. The Company recognizes and agrees that the Warrantholder will not have an adequate remedy if the Company fails to comply with the terms of this Warrant and that damages will not be readily ascertainable, and the Company expressly agrees that, in the event of such failure, it shall not oppose an application by the holder of this Warrant or any other person entitled to the benefits of this Warrant requiring specific performance of any and all provisions hereof or enjoining the Company from continuing to commit any such breach on the terms hereof. 14. Notices. All notices referred to in this Warrant shall be in writing and shall be delivered personally or by certified or registered mail, return receipt requested, postage prepaid and will be deemed to have been given when so delivered or mailed (i) to the Company, at its principal executive offices and (ii) to the Warrantholder, at such Warrantholder's address as it appears in the records of the Company (unless otherwise indicated in accordance with the provisions of this Section 15 by such holder). 15. Payment of Taxes. All Warrant Shares issued upon the exercise of this Warrant in accordance with its terms shall be validly issued, fully paid and nonassessable, and the Company shall pay taxes and other governmental charges that may be imposed in respect to the issue or delivery thereof, excluding taxes to which the Warrantholder and/or any other person receiving the Warrant Shares is subject as a result of the conduct of its business activity. 7 16. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Warrantholder and the Company. This Warrant shall be governed by and construed and enforced in accordance with the law of the State of Delaware. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. Dated as of November 30, 2006 ELEMENT 21 GOLF COMPANY Date: By: _____________________________________ Name: Title 8 PURCHASE FORM ------------- Dated: , 20 The undersigned hereby irrevocably elects to exercise the within Warrant to the extent of purchasing shares of Common Stock and hereby makes payment of $_______ in payment of the actual exercise price thereof. ____________________ INSTRUCTIONS FOR REGISTRATION OF STOCK Name _____________________________________________ (Please typewrite or print in block letters) Signature ___________________________________________________ Social Security or Employer Identification No. ___________________________________________________ ASSIGNMENT FORM --------------- FOR VALUE RECEIVED, hereby sells, assigns and transfer unto Name ______________________________________________ (Please typewrite or print in block letters) Address ___________________________________________________ Social Security or Employer Identification No. ___________________________________________________ The right to purchase Common Stock represented by this Warrant to the extent of _______ shares as to which such right is exercisable and does hereby irrevocably constitute and appoint attorney to transfer the same on the books of the Company with full power of substitution. Dated: , 20 Signature 9 EX-4.2 3 ex4_2.txt EXHIBIT 4.2 EXHIBIT 4.2 NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. ELEMENT 21 GOLF COMPANY COMMON STOCK PURCHASE WARRANT Element 21 Golf Company, a Delaware corporation (the "Company"), hereby certifies that, for value received, ___________, or any transferee or assignee of this Warrant (the "Warrantholder"), is entitled, subject to the terms set forth below, to purchase from the Company at any time or from time to time before 5:00 p.m. Eastern time, on the Expiration Date (as hereinafter defined), that number of fully paid and nonassessable shares of common stock, $.01 par value per share, of the Company (the "Warrant Shares") as is equal to the Warrant Number (as hereinafter defined), at a purchase price per share as shall be equal to the Purchase Price (as hereinafter defined) in effect at the time of the exercise of this Warrant. The Warrant Number and the Purchase Price are subject to adjustment as provided in this Warrant. As used herein the following terms, unless the context otherwise requires, have the following respective meanings: (a) The term "Company" shall include Element 21 Golf Company and any corporation that shall succeed to or assume the obligations of Element 21 Golf Company hereunder. (b) The term "Expiration Date" mean January 31, 2009. (c) The term "Purchase Price" shall mean $0.28, subject to adjustment pursuant to Section 6 below. (d) The term "Warrant Number" shall mean 5,073,530, subject to adjustment pursuant to Section 6 below. (e) The term "Warrant Shares" includes the Company's common stock, $.01 par value per share and any other securities or property of the Company or of any other person (corporate or otherwise) which the Warrantholder at any time shall be entitled to receive on the exercise hereof in lieu of or in addition to such Common Stock, or which at any time shall be issuable in exchange for or in replacement of such Common Stock. 1. Expiration. This Warrant may be exercised at any time or from time to time until 5:00 p.m., Eastern time, on the Expiration Date. 2. Exercise of Warrant. ------------------- (a) This Warrant may be exercised in whole or in part by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto (the "Purchase Form") duly executed and accompanied by payment of the Purchase Price for the number of shares of Common Stock specified in such form. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Warrantholder hereof to purchase the balance of the shares of Common Stock purchasable hereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Warrantholder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Warrantholder. (b) For any partial exercise or redemption pursuant to Section 2(a) hereof, the Warrantholder shall designate in the Purchase Form the number of shares of Common Stock that it wishes to purchase. On any such partial exercise, the Company at its expense shall forthwith issue and deliver to the Warrantholder a new warrant of like tenor, in the name of the Warrantholder, which shall be exercisable for such number of shares of Common Stock represented by this Warrant which have not been purchased upon such exercise. 3. Effectiveness of Exercise. The exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the business day on which this Warrant is surrendered to the Company as provided in Section 2. 4. Delivery on Exercise. As soon as practicable after the exercise of this Warrant in full or in part pursuant to Section 2, as the case may be, and in any event within five (5) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes but excluding the payment of taxes to which the Warrantholder is subject as a result of the conduct of its business activity) will cause to be issued in the name of and delivered to the Warrantholder, or as such Warrantholder may direct, a certificate or certificates for the number of fully paid and nonassessable full Warrant Shares to which such holder shall be entitled on such exercise, together with cash, in lieu of any fraction of a share, equal to such fraction of the then fair market value of one full share as determined in good faith by the Board of Directors of the Company. 5. Adjustment for Reorganization, Consolidation, Merger, etc. --------------------------------------------------------- (a) General. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company (each of the foregoing, a "Business Combination"), and such Business Combination shall be effected in such a way that holders of shares of the Company's Common Stock (or any shares of stock or other securities at the time issuable upon exercise of this Warrant ) shall be entitled to receive stock, securities or assets, with respect to or in exchange for such shares, then, in each such case, the holder of this Warrant, on the exercise hereof as provided in Section 2 at any time after the consummation of such Business Combination or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Warrant Shares issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 6. (b) Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered to the Warrantholder the stock and other securities and property (including cash, where applicable) receivable by the Warrantholder after the effective date of such dissolution pursuant to this Section 5 provided, however, that the Warrantholder may request that such securities or property be delivered to a trustee for the holder or holders of the Warrants and the Company shall bear reasonable expenses for such delivery. 2 (c) Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 5, this Warrant, to the extent not yet exercised in full, shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant. 6. Adjustment of Purchase Price and Number of Shares. The number of the Warrant Shares issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) and the purchase price therefor, are subject to adjustment upon the occurrence of the following events: (a) Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The exercise price of this Warrant and the number of Shares issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be appropriately adjusted to reflect any stock dividend, stock split, combination of shares, reclassification, recapitalization or other similar event affecting the number of outstanding shares of Common Stock (or other stock or securities if the Warrantholder is then entitled to receive such stock or securities upon exercise of this Warrant). For example, if there should be a 2-for-1 stock split of the Common Stock, the exercise price would be divided by two and such number of shares would be doubled. (b) Adjustment for Other Dividends and Distributions. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution after the date hereof with respect to the Warrant Shares (or any shares of stock or other securities at the time issuable upon exercise of the Warrant) payable in (i) securities of the Company (other than shares of Stock) or (ii) assets (excluding cash dividends paid or payable solely out of current or retained earnings), then, in each case, the holder of this Warrant on exercise hereof at any time after the consummation or record date of such event (provided the event is later consummated), shall receive, in addition to the Warrant Shares (or such other stock or securities) issuable on such exercise prior to such date, the securities or such other assets of the Company to which such holder would have been entitled upon such date if such holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant). (c) Anti-Dilution Protection. ------------------------ (i) General. If the Company shall at any time or from time to time, issue, sell or otherwise dispose of any additional shares of Common Stock (including shares owned or held by or for the account of the Company), however designated (other than shares of Common Stock excepted from the provisions of this Section 6(c) by subsection (iv) or otherwise covered by Sections 6(a) and (b)) without consideration or for a net consideration per share less than the Purchase Price in effect immediately prior to such issuance, then, and in each such case: (a) the Purchase Price shall be lowered to the price (but in no event below $.01 per share) determined by dividing (i) an amount equal to the sum of (a) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the then existing Purchase Price, and (b) the consideration, if any, received by the Corporation upon such issue or sale, by (ii) the sum of the total number of shares of Common Stock outstanding immediately prior to such issue or sale plus the number of shares of Common Stock so issued and sold; and (b) the holder of this Warrant shall thereafter, on the exercise hereof, be entitled to receive the Warrant Number determined by multiplying the Warrant Number which would be issuable on such exercise immediately prior to such issuance by the fraction of which (i) the numerator is the Purchase Price in effect immediately prior to such issuance and (ii) the denominator is the Purchase Price in effect on the date of such exercise. 3 (ii) Definitions, etc. For purposes of this Section 6: The issuance of any warrants, options or other subscription or purchase rights with respect to shares of Common Stock and the issuance of any securities convertible into or exchangeable for such shares of Common Stock (or the issuance of any warrants, options or any rights with respect to such convertible or exchangeable securities) shall be deemed an issuance at such time of such Common Stock if the Net Consideration Per Share which may be received by the Company for such Common Stock (as hereinafter determined) shall be less than the Purchase Price at the time of such issuance and, except as hereinafter provided, an adjustment in the Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be made upon each such issuance in the manner provided in subsection (i). Any obligation, agreement or undertaking to issue warrants, options, or other subscription or purchase rights at any time in the future shall be deemed to be an issuance at the time such obligation, agreement or undertaking is made or arises. Except as otherwise provided herein, no adjustment of the Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be made under subsection (i) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise of any warrants, options or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any convertible securities if any adjustment shall previously have been made upon the issuance of any such warrants, options or other rights or upon the issuance of any convertible securities (or upon the issuance of any warrants, options or any rights therefor) as above provided. Any adjustment of the Purchase Price and the number of shares of Common Stock issuable upon exercise of this Warrant with respect to this subsection (ii) which relates to warrants, options or other subscription or purchase rights with respect to shares of Common Stock shall be disregarded if, as, and when the respective warrant, option or other subscription or purchase rights expire or are cancelled without being exercised, so that the Purchase Price effective immediately upon such cancellation or expiration shall be equal to the Purchase Price in effect at the time of the issuance of the expired or cancelled warrants, options or other subscriptions or purchase rights, with such additional adjustments as would have been made to that Purchase Price had the expired or cancelled warrants, options or other subscriptions or purchase rights not been issued. For purposes of this subsection (ii), the "Net Consideration Per Share" which may be received by the Company shall be determined as follows: (A) The "Net Consideration Per Share" shall mean the amount equal to the total amount of consideration, if any, received by the Company for the issuance of such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities, plus the minimum amount of consideration, if any, payable to the Company upon exercise or conversion thereof, divided by the aggregate number of shares of Common Stock that would be issued if all such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities were exercised, exchanged or converted. (B) If the "Net Consideration Per Share" which may be received by the Company shall change (other than under or by reason of provisions designed to protect against dilution), the Purchase Price in effect at the time of such event shall forthwith be readjusted to the Purchase Price which would have been in effect at such time had such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities provided for such changed "Net Consideration Per Share" at the time initially granted, issued or sold, but only if as a result of such adjustment the Purchase Price then in effect hereunder is thereby reduced. If the "Net Consideration Per Share" shall be reduced at any time under or by reason of provisions designed to protect against dilution, then in case of the delivery of Common Stock upon the exercise or conversion of any such warrants, options, subscriptions, or other purchase rights or convertible or exchangeable securities, the Purchase Price then in effect hereunder shall forthwith be adjusted to such amount as would have obtained had such warrant, option, subscription, or other purchase right or convertible or exchangeable security never been issued as to such Common Stock and had adjustments been made upon the issuance of the Common Stock delivered as aforesaid, but only if as a result of such adjustment the Purchase Price then in effect hereunder is thereby reduced. For purposes of this Section 6(c), if a part or all of the consideration received by the Company in connection with the issuance of shares of the Common Stock or the issuance of any of the securities described in this Section 6(c), 4 consists of property other than cash, such consideration shall be deemed to have the same value as shall be determined in good faith by the board of directors of the Company, without deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. This subsection (ii) shall not apply under any of the circumstances described in Sections 6(a) or 6(b). (iii) Dilution in Case of Other Securities. In case any securities other than shares of stock of the Company shall be issued or sold, or shall become subject to issue upon the conversion or exchange of any shares of stock of the Company (or any other person referred to in Section 5) or subscription, purchase or other acquisition pursuant to any rights or options granted by the Company (or such other person), for a consideration per share such as to dilute the purchase rights evidenced by this Warrant, the computations, adjustments and readjustments provided for in this Section (c) with respect to the Purchase Price and the number of shares of Common stock issuable upon exercise of this Warrant shall be made as nearly as possible in the manner so provided and applied to determine the amount of other securities from time to time receivable on the exercise of the Warrants, so as to protect the holders of the Warrants against the effect of such dilution. (iv) Certain Issues of Common Stock. Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment of the Purchase Price in the case of: a. the issuance of any shares of Common Stock as a stock dividend to holders of shares of the Company's capital stock or upon any subdivision or combination of shares of the Company's capital stock; b. the issuance of any shares of Common Stock upon conversion of shares of Series B Convertible Preferred Stock or any other shares of convertible preferred stock outstanding as of the date hereof; c. the issuance of up to 20,000,000 shares of Common Stock or options with respect thereto (subject in either case to appropriate adjustment for stock splits, stock dividends, recapitalizations and similar events occurring after the date of this Agreement), issued or issuable to employees, directors or officers of, or consultants to, the Company or any subsidiary of the Company pursuant to any plan, agreement or arrangement approved by the Board of Directors of the Company (it being understood that any shares subject to options that expire or terminate unexercised or any restricted stock repurchased by the Company shall not be counted towards the maximum number set forth in this clause c. unless and until regranted or reissued pursuant to any such plan, agreement or arrangement); d. the issuance of shares of Common Stock upon the exercise of any warrant to purchase shares of Common Stock outstanding as of the date hereof or any warrant issued to a purchaser of shares of the Company's Series B Preferred Stock in connection with the Company's Series B Preferred Stock equity financing; e. the issuance of securities solely in consideration for the acquisition (whether by merger or otherwise) by the Company or any subsidiary of the Company of all or substantially all of the stock or assets of any other entity; 5 f. the issuance of shares of Common Stock by the Company in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act; or g. the issuance of shares of Common Stock, or the grant of options or warrants therefor, in connection with (i) any present or future borrowing, line of credit, leasing or similar financing arrangement approved by the Board of Directors of the Company, or (ii) sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Company. (d) Certificate as to Adjustments. In case of any adjustment or readjustment in the price or kind of securities issuable on the exercise of this Warrant, the Company will promptly give written notice thereof to the holder of this Warrant in the form of a certificate, certified and confirmed by the President of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based. 7. No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. Without limiting the generality of the foregoing the Company (a) will not increase the par value of any shares of stock receivable on the exercise of this Warrant above the amount payable therefore on such exercise, (b) will at all times reserve and keep available a number of its authorized shares of Common Stock, free from all preemptive rights therein, which will be sufficient to permit the exercise of this Warrant by the Warrantholder, and (c) shall take all such action as may be necessary or appropriate in order that all Warrant Shares as may be issued pursuant to the exercise of this Warrant will, upon issuance in accordance with the terms hereof, be duly and validly issued, fully paid and nonassessable and free from all liens and charges with respect to the issue thereof. 8. Notices of Record Date, etc. In the event of ---------------------------- (a) any taking by the Company of a record of the holders of Common Stock (or shares of stock or other securities at the time issuable upon exercise of this Warrant) for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or (b) any reclassification or recapitalization of the Common Stock (or shares of stock or other securities at the time issuable upon exercise of this Warrant), or any transfer of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other person, or (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, then and in each such event the Company will mail to the holder hereof a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, and (ii) the date on which any such reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or any shares of stock or other securities at the time issuable upon the exercise of this Warrant) shall be entitled to exchange their shares for securities or other property deliverable on such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up. Such notice shall be mailed at least 10 days prior to the date therein specified. 6 9. Replacement of Warrant. On receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 10. Investment Intent. Unless a current registration statement under the Securities Act of 1933, as amended, shall be in effect with respect to the issuance of the securities to be issued upon exercise of this Warrant, the holder thereof, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, and at the time of any proposed transfer of securities acquired upon exercise hereof, such holder will deliver to the Company a written statement that the securities acquired by the holder upon exercise hereof are for the own account of the holder for investment and are not acquired with a view to, or for sale in connection with, any distribution thereof (or any portion thereof) and with no present intention (at any such time) of offering and distributing such securities (or any person thereof). 11. Transfer. Subject to compliance with applicable federal and state securities laws, this Warrant may be transferred by the Warrantholder with respect to any or all of the shares purchasable hereunder. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed, for transfer of this Warrant as an entirety by the Warrantholder, the Company shall issue a new warrant of the same denomination to the assignee. Upon surrender of this Warrant to the Company, together with the assignment hereof properly endorsed, by the Warrantholder for transfer with respect to a portion of the shares of Common Stock purchasable hereunder, the Company shall issue a new warrant to the assignee, in such denomination as shall be requested by the Warrantholder, and shall issue to such Warrantholder a new warrant covering the number of shares in respect of which this Warrant shall not have been transferred. 12. No Rights or Liability as a Stockholder. This Warrant does not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company. No provisions hereof, in the absence of affirmative action by the Warrantholder to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Warrantholder shall give rise to any liability of such Warrantholder as a stockholder of the Company. 13. Damages. The Company recognizes and agrees that the Warrantholder will not have an adequate remedy if the Company fails to comply with the terms of this Warrant and that damages will not be readily ascertainable, and the Company expressly agrees that, in the event of such failure, it shall not oppose an application by the holder of this Warrant or any other person entitled to the benefits of this Warrant requiring specific performance of any and all provisions hereof or enjoining the Company from continuing to commit any such breach on the terms hereof. 14. Notices. All notices referred to in this Warrant shall be in writing and shall be delivered personally or by certified or registered mail, return receipt requested, postage prepaid and will be deemed to have been given when so delivered or mailed (i) to the Company, at its principal executive offices and (ii) to the Warrantholder, at such Warrantholder's address as it appears in the records of the Company (unless otherwise indicated in accordance with the provisions of this Section 15 by such holder). 15. Payment of Taxes. All Warrant Shares issued upon the exercise of this Warrant in accordance with its terms shall be validly issued, fully paid and nonassessable, and the Company shall pay taxes and other governmental charges that may be imposed in respect to the issue or delivery thereof, excluding taxes to which the Warrantholder and/or any other person receiving the Warrant Shares is subject as a result of the conduct of its business activity. 16. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Warrantholder and the Company. This Warrant shall be governed by and construed and enforced in accordance with the law of the State of Delaware. The headings 7 in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. Dated as of November 30, 2006 ELEMENT 21 GOLF COMPANY By: _____________________________________ Name: Title 8 PURCHASE FORM ------------- Dated: , 20 The undersigned hereby irrevocably elects to exercise the within Warrant to the extent of purchasing shares of Common Stock and hereby makes payment of $_______ in payment of the actual exercise price thereof. _________________________ INSTRUCTIONS FOR REGISTRATION OF STOCK Name ___________________________________________________ (Please typewrite or print in block letters) Signature ___________________________________________________ Social Security or Employer Identification No. ___________________________________________________ ASSIGNMENT FORM --------------- FOR VALUE RECEIVED, hereby sells, assigns and transfer unto Name ___________________________________________________ (Please typewrite or print in block letters) Address ___________________________________________________ Social Security or Employer Identification No. ___________________________________________________ The right to purchase Common Stock represented by this Warrant to the extent of _______ shares as to which such right is exercisable and does hereby irrevocably constitute and appoint attorney to transfer the same on the books of the Company with full power of substitution. Dated: , 20 Signature ________________________________________ 9 EX-99.1 4 ex99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 ELEMENT 21 GOLF COMPANY FINALIZES PRIVATE EQUITY INVESTMENT WITH RECEIPT OF ADDITIONAL $2 MILLION TORONTO--(MARKET WIRE)--November 30, 2006 -- Element 21 Golf Company ("E21" or the "Company") (OTC BB), a manufacturer of high-strength scandium alloy golf equipment, announced today that it has received the final $2 million of its $4 million private equity investment first announced by the Company on July 31, 2006. "We are extremely pleased to have consummated the second and final closing of our Series B Preferred Stock financing transaction and to have secured an additional $2 million in equity capital for the Company. We look forward to successfully deploying this additional capital to carry out our business plan and further the growth of the Company," remarked Dr. Nataliya Hearn, President and Chief Executive Officer of the Company. At an initial closing held on July 31, 2006, E21 issued 117,648 shares of its newly designated Series B Convertible Preferred Stock at a per share price of $17.00 and warrants to purchase an aggregate of 17,647,059 shares of E21's Common Stock to two private investors in exchange for a $2 million investment in the Company. At the subsequent closing held on November 30, 2006, the Company issued an additional 117,648 shares of Series B Convertible Preferred Stock at a per share price of $17.00 and additional warrants to purchase an aggregate of 17,647,059 shares of E21's Common Stock to the two private investors that participated in the initial closing, in exchange for an additional $2 million investment in the Company. Each share of Series B Convertible Preferred Stock is initially convertible into 100 shares of E21's Common Stock, resulting in a Common Stock price per share to the investors of $0.17. At the subsequent closing, each investor received two additional warrants, one warrant to purchase 3,750,000 shares of E21's Common Stock at an exercise price of $0.22 per share if the warrant is exercised on or before July 31, 2007, and $0.28 per share if the warrant is exercised on or after August 1, 2007, and one warrant to purchase 5,073,530 shares of E21's Common Stock at an exercise price of $0.28 per share. All of the warrants issued by the Company in the financing are exercisable at anytime prior to January 31, 2009 and may only be exercised through a cash payment to the Company. The exercise of the warrants issued at the initial closing and the subsequent closing in full will result in an additional $9,000,000 equity investment in the Company. The Company intends to use the proceeds of the financing to further the execution of its business plan, the critical elements of which include expanding the Company's retail sales reach and marketing efforts, purchasing additional inventory, developing new products and increasing the Company's PGA, LPGA, Nation Wide and Champion tour presence. The shares of preferred stock and warrants sold in the Company's Series B Preferred Stock financing transaction have not been registered under the Securities Act of 1933, as amended, or state securities laws and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission or an applicable exemption from the registration requirements. This news release is not an offer to sell or the solicitation of an offer to buy shares of preferred stock, common stock or warrants or any other securities of the Company. About Element 21 Golf Company: E21 holds the exclusive right to manufacture golf products using proprietary E21 Alloys. Through a sophisticated multi-technology production path E21 manufactures shafts, drivers, and other clubs with marked improvements in distance, accuracy and feel over competing products. In recent months a number of high profile golf professionals have switched to or began testing E21's Eagle One shafts. E21 Alloys are 55% lighter and offer 25% strength to weight advantage over Titanium alloys, the current standard in the golf equipment industry. The advanced dynamics of E21 Alloys and the material economics offer a performance-enhanced alternative to manufacturing driver clubs with Titanium, the largest segment of the annual $4 billion golf equipment marketplace. E21 recently concluded its "Golf Shot Around the World Mission" in celebration of the 35th anniversary of Alan B. Shepard Jr.'s historic Apollo 14 Mission. Just about every single record for distance in the golf industry was shattered on November 22, 2006 when an astronaut hit a golf ball into orbit around the earth from the International Space Station using an E21 golf club. It is only natural that this event took place on the International Space Statement, considering that E21 Alloys are also used on the International Space Station in high strength, fatigue resistant applications. E21 Golf - The Evolution is Inevitable! Forward-Looking Statements. Statements in this release, other than statements of historical fact, may be regarded, in certain instances, as "forward-looking statements" pursuant to Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934, respectively. "Forward-looking statements" are based on expectations, estimates and projections at the time the statements are made, and involve risks and uncertainties which could cause actual results or events to differ materially from those currently anticipated, including but not limited to market acceptance of its products, delays or difficulties in manufacturing and/or bringing its products to market, changed strategies, or unanticipated factors or circumstances affecting E21 and its business and its ability to successfully implement its business plan. A number of these risks and uncertainties are described in E21's periodic reports filed with Securities and Exchange Commission. There can be no assurance that such forward-looking statements will ever prove to be accurate and readers should not place undue reliance on any such forward-looking statements contained herein, which speak only as of the date hereof. E21 undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Company Contacts: - ---------------- Investor Relations Element 21 Golf Company (416) 362-2121 investors@e21golf.com http://www.E21Golf.com Sales Element 21 Golf Company 888 365-2121 sales@e21golf.com http://www.E21Golf.com Media members interested in testing shafts or other E21 products for an editorial review or receiving further information please contact: The Media Group Joe Wieczorek or Bart Henyan (847) 956-9090 joe@themediagroupinc.com barthenyan@hotmail.com Source: Element 21 Golf Company -----END PRIVACY-ENHANCED MESSAGE-----