SUBSCRIPTION AGREEMENT July __, 2006
EXHIBIT
10.1
Name
of
Investor:
July
__,
2006
Element
21 Golf Company
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1. Investment.
The
undersigned (“Investor”) hereby agrees to invest an aggregate of $2,000,000 (the
“Investment Amount”) in Element 21 Golf Company, a Delaware corporation (the
“Company”) in exchange for (i) 117,647 shares of Series B Convertible Preferred
Stock, $.10 par value per share (the “Preferred Stock”), and (ii) warrants to
purchase
17,647,059
shares
of the
Company’s Common Stock, $.01 par value per share (the “Common Stock”), a form of
which is attached hereto as Exhibit
A
(the
“Warrants”), on the terms and conditions described herein. The Preferred Stock
shall have the rights preferences and privileges set forth in the Series B
Certificate of Designations attached hereto as Exhibit
B
(the
“Certificate of Designations”). The Preferred Stock, the Warrants, the shares of
Common Stock issuable upon conversion of the Preferred Stock and the shares
of
Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”) are
collectively referred to herein as the “Securities”.
2. Payment
and Issuance of Securities.
(a) Prior
to
July 31, 2006, the Investor will deliver to the Company (i) one manually
executed copy of the Investor’s Accredited Investor Questionnaire which is
attached hereto as Annex A, (ii) one manually executed copy of the Investor’s
stock certificate questionnaire which is attached hereto as Annex B, and (iii)
one manually executed copy of the Investor’s Registration Statement
Questionnaire which is attached hereto as Annex C. On July 31, 2006, the
Investor will tender to the Company $1,000,000, an amount equal to 50% percent
of the Investment Amount, and in exchange therefor, the Company will deliver
to
the Investor a certificate for 58,824 shares of Preferred Stock and two Warrants
to purchase an aggregate of 8,823,529 shares of Common Stock.
(b) The
Investor irrevocably agrees to tender $1,000,000, the remaining portion of
the
Investment Amount (the “Remaining Investment Amount”), on or prior to November
30, 2006, subject only to the fulfillment or waiver by the Investor of the
condition referred to in Section 4(i) hereof relating to the conversion of
outstanding promissory notes. In exchange for the Remaining Investment Amount,
the Company shall deliver to the Investor a certificate for 58,824 shares of
Preferred Stock and three Warrants to purchase an aggregate of 8,823,530 shares
of Common Stock.
The
Investor fully understands that the Company has a limited operating history
and
that his, her or its investment in the Company involves a high degree of risk
of
loss of his, her or its entire investment. The Investor fully understands the
nature of the risks of an investment in the Company and is qualified by his,
her
or its knowledge and experience to evaluate investments of this type. The
Investor has carefully considered the potential risks relating to the Company
and an investment in the Company and has, in particular, reviewed each of the
risks set forth in Annex
D
attached
hereto and the Securities and Exchange Commission (“SEC”) filings described in
Annex
E
attached
hereto (collectively, the “SEC Filings”) which may be obtained at ▇▇▇.▇▇▇.▇▇▇.
Both
the Investor and his, her or its advisors have had the opportunity to ask
questions of and receive answers from representatives of the Company or persons
acting on its behalf concerning the Company and the terms and conditions of
a
proposed investment in the Company and have also have had the opportunity to
obtain additional information necessary to verify the accuracy of information
furnished about the Company. Accordingly, the Investor has independently
evaluated the risks of making an investment in the Company.
3. Investor
Representations and Warranties.
The
Investor acknowledges, represents and warrants to, and agrees with, the Company
as follows:
(a) The
Investor is aware that his, her or its investment involves a high degree of
risk, certain of which risks are disclosed in the Risk Factors attached hereto
as Annex
D.
The
Investor is aware that the Company commenced its present business in October
2002, has incurred significant losses during each fiscal year thereafter and
needs additional financing.
(b) The
Investor acknowledges and is aware that there is no assurance as to the future
performance of the Company.
(c) The
Investor acknowledges that there may be certain adverse tax consequences
resulting from an investment in the Securities and the Company has advised
the
Investor to seek the advice of experts in such areas prior to making this
investment.
(d) The
Investor is making the investment in the Securities for his, her or its own
account for investment purposes only and not with a view to or in connection
with the distribution of the Securities nor with any present intention of
selling or otherwise disposing of all or any part of the Securities. The
Investor agrees that he, she or it must bear the economic risk of the investment
for an indefinite period of time because, among other reasons, none of the
Securities have been registered under the Securities Act or under the securities
laws of any state and, therefore, cannot be resold, pledged, assigned or
otherwise disposed of unless they are subsequently registered under the
Securities Act and under applicable securities laws of certain states or an
exemption from such registration is available. The Investor hereby authorizes
the Company to place a legend denoting the foregoing restrictions on any of
the
Securities.
(e) The
Investor is not a member of the National Association of Securities Dealers,
Inc.
(“NASD”); The Investor is not and has not, for a period of 12 months prior to
the date of this Subscription Agreement, been affiliated or associated with
any
company, firm, or other entity which is a member of the NASD; and the Investor
does not own any stock or other interest in any member of the NASD (other than
interests acquired in open market purchases).
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(f) The
Investor recognizes that the Securities, as an investment, involve a high degree
of risk including, but not limited to, the risk of economic losses from
operations of the Company and the total loss of the Investor’s investment. The
Investor believes that an investment in the Securities is suitable based upon
his, her or its investment objectives and financial needs, and the Investor
has
adequate means for providing for his, her or its current financial needs and
contingencies and has no need for liquidity with respect to his, her or its
investment in the Securities.
(g) The
Investor has been given access to full and complete information regarding the
Company and the Securities and has utilized such access to his, her or its
satisfaction for the purpose of obtaining information, and the Investor has
either met with or been given reasonable opportunity to meet with officers
of
the Company for the purpose of asking questions and receiving answers from,
such
officers concerning the terms and conditions of the issuance of the Securities
and the business and operations of the Company and to obtain any additional
information, to the extent reasonably available.
(h) The
Investor has such knowledge and experience in financial and business matters
as
to be capable of evaluating the merits and risks of making the loan, and thereby
investing in the Securities and has obtained, in his, her or its judgment,
sufficient information from the Company to evaluate the merits and risks of
an
investment in the Securities. The Investor has not utilized any person as a
purchaser representative as defined in Regulation D promulgated by the SEC
pursuant to the Securities Act in connection with evaluating such merits and
risks.
(i) The
Investor has relied solely upon his, her or its own investigation in making
a
decision to invest in the Securities.
(j) The
Investor has received no representation or warranty from the Company or any
of
its respective officers, directors, employees, consultants or agents in respect
of his, her or its investment in the Securities and the Investor has received
no
information (written or otherwise) from them relating to the Company or its
business other than as contained in the Series B Preferred Stock Investment
Booklet and the SEC Filings. The Investor is not participating in the offer
as a
result of or subsequent to: (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio or (ii) any seminar or meeting whose attendees have
been invited by any general solicitation or general advertising.
(k) The
Investor has had full opportunity to ask questions and to receive satisfactory
answers concerning the offering and other matters pertaining to his, her or
its
investment in the Securities and all such questions have been answered to the
Investor’s full satisfaction.
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(l) The
Investor has been provided an opportunity to obtain any additional information
concerning the Securities and the Company and all other information to the
extent the Company possesses such information or can acquire it without
unreasonable effort or expense.
(m) The
Investor is an “accredited investor” as defined in Section 2(15) of the
Securities Act and in Rule 501 promulgated thereunder.
(n) The
Investor understands that (i) the Securities have not been registered under
the
Securities Act, or the securities laws of any state in reliance on specific
exemptions from registration, (ii) no securities administrator of any state
or
the federal government has recommended or endorsed the offering of Securities
or
made any finding or determination relating to the fairness of an investment
in
the Company and (iii) the Company is relying on the Investor’s representations
and agreements for the purpose of determining whether this transaction meets
the
requirements of the exemptions afforded by the Securities Act and certain state
securities laws.
(o) The
Investor understands that since neither the offer nor sale of the Securities
has
been registered under the Securities Act or the securities laws of any state,
the Securities may not be sold, assigned, pledged or otherwise disposed of
unless they are so registered or an exemption from such registration is
available.
(p) The
Investor has been urged to seek independent advice from professional advisors
relating to the suitability of an investment in the Securities in view of the
Investor’s overall financial needs and with respect to the legal and tax
implications of such investment.
(q) If
the
undersigned is a corporation, company, trust, employee benefit plan, individual
retirement account, ▇▇▇▇▇ Plan, or other tax-exempt entity, it is authorized
and
qualified to become an investor in the Company and the person signing this
Subscription Agreement on behalf of such entity has been duly authorized by
such
entity to do so.
(r) The
information contained in the Accredited Investor Questionnaire, as well as
any
information which the Investor has furnished to the Company with respect to
the
Investor’s financial position and business experience, is correct and complete
as of the date of this Subscription Agreement and, if there should be any
material change in such information prior to the consummation of the
transactions contemplated hereby, the Investor will furnish such revised or
corrected information to the Company.
(s) The
Investor hereby acknowledges and is aware that except for any rescission rights
that may be provided under applicable laws, the Investor is not entitled to
cancel, terminate or revoke this subscription. If the Investor is an individual,
and any agreements made in connection herewith shall survive the Investor’s
death or disability.
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4. Company
Representations, Warranties and Covenants.
The
Company hereby represents and warrants to, and covenants with, the Investor
as
follows:
(a) The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and the Company is qualified
to
do business as a foreign corporation in each jurisdiction in which qualification
is required, except where failure to so qualify would not reasonably be expected
to have a Material Adverse Effect
(as
defined herein). The Company has no subsidiaries. For purposes of this
Agreement, the term “Material Adverse Effect” shall mean a material adverse
effect upon the business, financial condition, properties or results of
operations of the Company.
(b) The
authorized capital stock of the Company consists of 300,000,000 shares of Common
Stock, $.01 par value per share, 99,630,554 of which are issued and outstanding
as of the date hereof, and 5,000,000 shares of Preferred Stock, 2,200,000 shares
of which have been designated as Series A Convertible Preferred Stock, $.10
par
value per share, 2,113,556 of
which
are issued and outstanding as of the date hereof, and 350,000 shares of which
have been designated as Series B Convertible Preferred Stock, $.10 par value
per
share, none of
which
are issued and outstanding as of the date hereof.
(c) The
Securities have been duly authorized and, when issued, delivered and paid for
in
the manner set forth in this Agreement, the Warrants and the Certificate of
Designations will be duly authorized, validly issued, fully paid and
nonassessable and free and clear of all pledges, liens, restrictions and
encumbrances (other than restrictions on transfer under state and/or federal
securities laws). The Company has reserved from its duly authorized shares
of
capital stock the maximum number of shares of Common Stock issuable upon the
exercise of the Warrants and conversion of the Preferred Stock. No further
approval or authority of the stockholders or the Board of Directors of the
Company will be required for the issuance and sale of the Securities as
contemplated herein.
(d) The
Company has full legal right, corporate power and authority to enter into this
Agreement and perform the transactions contemplated hereby. This Agreement
has
been duly authorized, executed and delivered by the Company. The execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions herein contemplated will not violate any provision of the
certificate of incorporation or bylaws of the Company or conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any lien upon any
of
the properties or assets of the Company, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company debt or otherwise) or other understanding
to
which the Company is a party or by which any property or asset of the Company
is
bound or affected, or conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company is subject. No consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required for the execution
and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement, except for compliance with the blue sky laws
and
federal securities laws applicable to the offering of the Securities. Upon
the
execution and delivery of this Agreement, and assuming the valid execution
thereof by the Investor, this Agreement will constitute a valid and binding
obligation of the Company, enforceable in accordance with its terms, except
as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered
in
a proceeding in equity or at law) and except as the indemnification agreements
herein may be limited by federal or state securities laws or the public policy
underlying such laws.
5
(e) The
Company is subject to the reporting requirements of the Securities and Exchange
Act of 1934, as amended (the “Exchange Act”).
(f) The
Company shall use the proceeds from the sale of the Securities for general
corporate purposes but in no event for the repayment of the Promissory Notes
referred to in Section 4(i) hereof.
(g) Except
as
may be required by applicable law or regulation, the Company shall not use
the
Investor’s name or the name of any of its affiliates in any advertisement,
announcement, press release or other similar public communication unless it
has
received the prior written consent of the Investor for the specific use
contemplated or as otherwise required by applicable law or
regulation.
(h) The
financial statements of the Company and the related notes contained in the
SEC
Filings present fairly, in accordance with generally accepted accounting
principles, the financial position of the Company as of the dates indicated,
and
the results of their operations, cash flows and the changes in stockholders'
equity for the periods therein specified, subject, in the case of unaudited
financial statements for interim periods, to normal year-end audit adjustments.
Such financial statements (including the related notes) have been prepared
in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods therein specified, except that unaudited financial
statements may not contain all footnotes required by generally accepted
accounting principles.
(i) The
Company will not use any of the proceeds of the Investor’s investment in the
Securities to pay off any outstanding indebtedness of the Company evidenced
by
those certain convertible promissory notes of the Company issued between
February 2006 and the date hereof (the “Promissory Notes”). The Company will use
its commercially reasonable efforts to cause the holders off each of the
Promissory Notes to elect to convert such Promissory Notes into shares of Common
Stock. The Investor shall be under to no obligation to advance the Remaining
Investment Amount if the Company shall fail to convert at least 80% of aggregate
outstanding principal amount of the Promissory Notes into Common Stock prior
to
November 30, 2006.
(j) Preemptive
Rights.
6
(i) The
Company shall not issue, sell or exchange, agree or obligate itself to issue,
sell or exchange, or reserve or set aside for issuance, sale or exchange,
(i) any shares of Common Stock, (ii) any other equity security of the
Company, (iii) any debt security of the Company (other than debt with no
equity feature) including without limitation, any debt security which by its
terms is convertible into or exchangeable, directly or indirectly, for any
equity security of the Company, (iv) any security of the Company that is a
combination of debt and equity, or (v) any option, warrant or other right
to subscribe for, purchase or otherwise acquire any such equity security or
any
such debt security of the Company (the securities described in (i)-(v) being
referred to herein as the “Offered Securities”), unless in each case the Company
shall have first offered to sell a portion of such Offered Securities to the
Investor and each other purchaser of shares of Series B Preferred Stock (each
an
“Offeree” and collectively the “Offerees”) as follows: The Company shall deliver
to each Offeree a written notice (the “Offer”) specifying the Company’s
intention to issue, sell or exchange, or reserve or set aside for issuance,
sale
or exchange, Offered Securities, setting forth the number of Offered Securities
it intends to issue, sell or exchange, or reserve or set aside for issuance,
sale or exchange, and each material term and condition pursuant to which it
intends to dispose of such Offered Securities. Each of the Offerees shall have
the right to purchase that portion of the Offered Securities as shall be equal
to the total number of Offered Securities proposed to be sold by the Company
multiplied by a fraction, the numerator of which shall equal the number of
shares of Common Stock (after giving effect to the conversion of all shares
of
Series B Preferred Stock held by such Offeree) then held by the Offeree and
the
denominator of which shall equal the total number of shares of capital stock
of
the Company on a fully-diluted basis (assuming full conversion and exercise
of
all convertible or exercisable securities of the Company then issued and
outstanding), at a price and on such other terms as shall have been specified
by
the Company in the Offer (all Offered Securities which an Offeree is eligible
to
purchase according to this Section 4(j(i) being referred to herein collectively
as the “Eligible Securities”). The Offer, will by its terms, remain open and
irrevocable for a period of 10 days (the “Offer Period”) from receipt of the
Offer.
(ii) Notice
of
the Offeree’s intention to accept, in whole or in part, any Offer made pursuant
to Section 4(j)(i) shall be evidenced by a writing signed by the Offeree
and delivered to the Company prior to the end of the Offer Period, setting
forth
the number of Eligible Securities such Offeree elects to purchase (each a
“Notice of Acceptance”).
(iii) Assuming
the Company complies with the provisions of Section 4(j) with respect to each
Offeree, the Company shall have 90 days
from
the date of its delivery of the Offer to close the sale of all or any part
of
such Offered Securities (including the Eligible Securities, which shall be
sold
at a closing held simultaneously with the closing of the sale of any other
Offered Securities) upon terms and conditions which are not materially more
favorable, in the aggregate, to the person purchasing such Offered Securities
or
materially less favorable to the Company than those set forth in the Offer.
(iv) If
the
Company ultimately proposes to sell less than all the securities originally
to
be offered for sale as set forth in the Offer, then the Offeree may, at its
sole
option and in its sole discretion, reduce the number of Offered Securities
specified in its Notice of Acceptance to an amount which shall be not less
than
the amount of the Offered Securities which the Offeree elected to purchase
pursuant to its Notice of Acceptance multiplied by a fraction, (i) the
numerator of which shall be the amount of Offered Securities which the Company
actually proposes to sell, and (ii) the denominator of which shall be the
amount of all Offered Securities originally proposed to be sold by the Company
as set forth in the Offer.
7
(v) Upon
the
closing of the sale of the Offered Securities, the Company shall sell to each
Offeree the number of Offered Securities specified in its Notice of Acceptance,
as reduced pursuant to Section 4(j)(iv) if applicable, upon the terms and
conditions specified in the Offer. The purchase by an Offeree of any Eligible
Securities is subject in all cases to the preparation, execution and delivery
by
the Company and the Offeree of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the Offeree and
its
counsel.
(vi) The
rights of the Investor as an Offeree under this Section 4(j) shall terminate
on
the date that is 30 months following the date hereof.
(vii) The
rights of the Investor under this Section 4(j) shall not apply to:
8
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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;
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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;
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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);
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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 the Investor or any other purchaser of Series B
Preferred Stock in connection with the Company’s Series B Preferred Stock
equity financing;
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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;
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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
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g.
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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.
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9
5. Registration;
Compliance with the Securities Act.
(a) If,
at
any time prior to the one year anniversary of the date hereof, the Company
proposes to register any shares of its Common Stock under the Securities Act
of
1933 in connection with the public offering of such securities for its own
account or for the accounts of other shareholders of the Company, solely for
cash on a form that would also permit the registration of the shares of Common
Stock issuable upon conversion of the Preferred Stock and upon exercise of
the
Warrants (collectively, the “Registrable Securities”), the Company shall, each
such time, promptly give the Investor written notice of such determination.
Upon
the written request of the Investor given within twenty (20) days after mailing
of any such notice by the Company, the Company shall use its best efforts to
cause to be registered under the Securities Act of 1933 all of the Registrable
Securities that the Investor has requested be registered. The foregoing
notwithstanding, the Company may, in its discretion, withdraw any registration
statement referred to in this Section 5(a) prior to the effectiveness
thereof.
In
connection with any offering to which this Section 5(a) applies and involving
an
underwriting of shares being issued by the Company, the Company shall not be
required under this Section 5(a) to include any of the Investor’s
Registrable Securities in such underwriting unless they accept the terms of
the
underwriting as agreed upon between the Company and the underwriters selected
by
it. If the total amount of securities that all holders of Registrable Securities
request to be included in an underwritten offering exceeds the amount of
securities that the underwriters reasonably believe compatible with the success
of the offering, the Company shall only be required to include in the offering
so many of the securities of the Investor as the underwriters reasonably believe
will not jeopardize the success of the offering (the securities so included
to
be apportioned pro rata among each of the holders of Registrable Securities,
or
in such other proportions as shall mutually be agreed to by such selling
holders); provided,
however,
that no
such reduction shall be made with respect to any securities offered by the
Company for its own account.
(b) The
Company shall (i) no later than 305 days following the date hereof (the “Filing
Date”), prepare and file with the SEC a Registration Statement on Form SB-2 (the
“Registration Statement”) relating to all of the Warrant Shares then held by, or
issuable to, the Investor and the other purchasers purchasing shares of Series
B
Preferred Stock from the Company; and (ii) use its commercially reasonable
efforts, subject to receipt of necessary information from the Investor, to
cause
the SEC to declare the Registration Statement effective within 60 days after
the
date the Registration Statement is filed with the SEC (such date, the “Required
Effective Date”). However, so long as the Company filed the Registration
Statement by the Filing Date, if the Registration Statement receives SEC review,
then the Required Effective Date will be the one hundred and twentieth (120)
calendar day after the date the Registration Statement is filed with the
SEC.
10
(c) The
Company shall use its commercially reasonable efforts to (i) promptly prepare
and file with the SEC such amendments and supplements to the Registration
Statement and the prospectus used in connection therewith as may be necessary
to
keep the Registration Statement effective until the earliest of (i) two years
after the effective date of the Registration Statement, or (ii) such time as
all
of the Warrant Shares become eligible for resale by non-affiliates pursuant
to
Rule 144(k) under the Securities Act of 1933; and (ii) furnish to the Investor
with respect to the Registrable Securities registered under the Registration
Statement (and to each underwriter, if any, of such Registrable Securities)
such
number of copies of prospectuses and such other documents as the Investor may
reasonably request, in order to facilitate the public sale or other disposition
of all or any of the Registrable Securities by the Investor.
(d)
In
connection with the filing of any registration statement pursuant to this
Section 5, the Company shall use its commercially reasonable efforts to file
documents required of the Company for normal “Blue Sky” clearance in states
specified in writing by the Investor; provided, however, that the Company shall
not be required to qualify to do business or consent to service of process
in
any jurisdiction in which it is not now so qualified or has not so
consented.
(e) The
Company shall bear all expenses in connection with the procedures in paragraphs
(a) through (d) of this Section 5 and the registration of the Registrable
Securities pursuant to the Registration Statement or any other registration
statement filed by the Company pursuant to Section 5(a) (the Registration
Statement and any other such registration statements filed pursuant to Section
5(a) are each referred to herein as a “Registration” and collectively as the
“Registrations”), other than fees and expenses, if any, of counsel or other
advisers to the Investor (or any other investors in the shares of Preferred
Stock, if any), or underwriting discounts, brokerage fees and commissions
incurred by the Investor (or any other investors in the shares of Preferred
Stock, if any). A questionnaire related to the Registration Statement to be
completed by the Investor is attached hereto as Annex
C.
The
Investor agrees that it will promptly notify the Company of any changes in
the
information set forth in the Registration Statement regarding the Investor
or
its plan of distribution.
(f) For
the
purpose of this Section 5(f), the term “Investor/Affiliate” shall mean any
affiliates of the Investor and any person who controls the Investor or any
affiliate of the Investor within the meaning of Section 15 of the Securities
Act
or Section 20 of the Exchange Act; and the term “Registrations” shall include
any preliminary prospectus, final prospectus, exhibit, supplement or amendment
included in or relating to, and any document incorporated by reference in any
such Registration.
11
(i) The
Company agrees to indemnify and hold harmless the Investor and each
Investor/Affiliate against any losses, claims, damages, liabilities or expenses,
joint or several, to which the Investor or such Investor/Affiliates may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including
in
settlement of any litigation, if such settlement is effected with the prior
written consent of the Company), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration, including any prospectus,
financial statements and schedules, and all other documents filed as a part
thereof, as amended at the time of effectiveness of any Registration, including
any information deemed to be a part thereof as of the time of effectiveness
pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434, of the rules
and regulations of the SEC (the “Rules and Regulations”), or the prospectus, in
the form first filed with the SEC pursuant to Rule 424(b) of the Rules and
Regulations, or filed as part of any Registration at the time of effectiveness
if no Rule 424(b) filing is required (the “Prospectus”), or any subsequent
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state in any of them a material fact required to be
stated therein or necessary to make the statements in the Registration or any
amendment or supplement thereto not misleading or in the Prospectus or any
amendment or supplement thereto not misleading, in light of the circumstances
under which they were made, or arise out of or are based in whole or in part
on
any inaccuracy in the representations and warranties of the Company contained
in
this Subscription Agreement, or any failure of the Company to perform its
obligations hereunder or under law, and will reimburse the Investor and each
such Investor/Affiliate for any legal and other expenses as such expenses are
reasonably incurred by the Investor or such Investor/Affiliate in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the Company
will not be liable for amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company, which consent shall not be unreasonably withheld, and the
Company will not be liable in any such case to the extent, but only to the
extent, that any such loss, claim, damage, liability or expense arises out
of or
is based upon (i) an untrue statement or alleged untrue statement or omission
or
alleged omission made in the Registration, the Prospectus or any amendment
or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Investor expressly for use
therein, or (ii) the failure of the Investor to comply with the covenants and
agreements contained herein with respect to the sale of the Securities or (iii)
the inaccuracy of any representation or warranty made by the Investor herein
or
(iv) any statement or omission in any Prospectus that is corrected in any
subsequent Prospectus that was delivered to the Investor prior to the pertinent
sale or sales by the Investor.
(ii) The
Investor will severally indemnify and hold harmless the Company, each of its
directors, each of its executive officers, including such officers who signed
the Registration, and each person, if any, who controls the Company within
the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
against any losses, claims, damages, liabilities or expenses to which the
Company, each of its directors, each of its officers who signed the Registration
or controlling person may become subject, under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common
law
or otherwise (including in settlement of any litigation, if such settlement
is
effected with the written consent of the Investor) insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon (i) any failure to comply
with the covenants and agreements contained herein with respect to the sale
of
the Securities, or (ii) the inaccuracy of any representation or warranty made
by
the Investor herein, or (iii) any untrue or alleged untrue statement of any
material fact contained in the Registration, the Prospectus, or any amendment
or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements in the Registration or any amendment or
supplement thereto not misleading or in the Prospectus or any amendment or
supplement thereto not misleading in the light of the circumstances under which
they were made, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was
made in the Registration, the Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Investor expressly for use therein, and
will reimburse the Company, each of its directors, each of its officers who
signed the Registration or controlling person for any legal and other expense
reasonably incurred by the Company, each of its directors, each of its officers
who signed the Registration or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the Investor’s
aggregate liability under this Section 5(f) with respect to a particular
Registration shall not exceed the amount of proceeds received by the Investor
on
the sale of the Registrable Securities pursuant to such Registration.
12
(iii) Promptly
after receipt by an indemnified party under this Section 5(f) of notice of
the
threat or commencement of any action, such indemnified party will, if a claim
in
respect thereof is to be made against an indemnifying party under this Section
5(f), promptly notify the indemnifying party in writing thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party for contribution or
otherwise under the indemnity agreement contained in this Section 5(f) to the
extent it is not prejudiced as a result of such failure. In case any such action
is brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it may wish, jointly
with all other indemnifying parties similarly notified, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party based
upon the advice of such indemnified party's counsel shall have reasonably
concluded, based on an opinion of counsel reasonably satisfactory to the
indemnifying party, that there may be a conflict of interest between the
positions of the indemnifying party and the indemnified party in conducting
the
defense of any such action or that there may be legal defenses available to
it
and/or other indemnified parties which are different from or additional to
those
available to the indemnifying party, the indemnified party or parties shall
have
the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party
to such indemnified party of its election to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party will
not be liable to such indemnified party under this Section 5(f) for any legal
or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
such counsel in connection with the assumption of legal defenses in accordance
with the proviso to the preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel, reasonably satisfactory to such indemnifying party,
representing the indemnified parties who are parties to such action, plus local
counsel, if appropriate) or (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of
action, in each of which cases the reasonable fees and expenses of counsel
shall
be at the expense of the indemnifying party. The indemnifying party shall not
be
liable for any settlement of any action without its written consent.
13
(iv) If
the
indemnification provided for in this Section 5(f) is required by its terms
but
is for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party under this Section 5(f) in respect to any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable
by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Investor from
the
private placement of the Securities hereunder or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion
as is
appropriate to reflect not only the relative benefits referred to in clause
(i)
above but the relative fault of the Company and the Investor in connection
with
the statements or omissions or inaccuracies in the representations and
warranties in this Subscription Agreement and/or the Registration Statement
which resulted in such losses, claims, damages, liabilities or expenses, as
well
as any other relevant equitable considerations. The respective relative benefits
received by the Company on the one hand and the Investor on the other shall
be
deemed to be in the same proportion as the amount paid by the Investor to the
Company pursuant to this Subscription Agreement for the Securities purchased
by
the Investor that were sold pursuant to the Registration Statement bears to
the
difference (the “Difference”) between the amount the Investor paid for the
Securities that were sold pursuant to the Registration Statement and the amount
received by the Investor from such sale. The relative fault of the Company,
on
the one hand, and the Investor on the other shall be determined by reference
to,
among other things, whether the untrue or alleged statement of a material fact
or the omission or alleged omission to state a material fact or the inaccurate
or the alleged inaccurate representation and/or warranty relates to information
supplied by the Company or by the Investor and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of
the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in this Section 5(f),
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim. The provisions
set forth in paragraph (iii) of this Section 5(f) with respect to the notice
of
the threat or commencement of any threat or action shall apply if a claim for
contribution is to be made under this paragraph (iv); provided, however, that
no
additional notice shall be required with respect to any threat or action for
which notice has been given under paragraph (iii) for purposes of
indemnification. The Company and the Investor agree that it would not be just
and equitable if contribution pursuant to this Section 5(f) were determined
solely by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 5(f), the Investor shall be
required to contribute any amount in excess of the amount by which the
Difference exceeds the amount of any damages that the Investor has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
14
(g) So
long
as a Registration covering the resale of Registrable Securities owned by the
Investor is effective, the Company will furnish to the Investor upon the
reasonable request of the Investor, a reasonable number of copies of the
Prospectuses, and any supplements thereto, to supply to any other party
requiring such Prospectuses; and the Company, upon the reasonable request of
the
Investor and with prior notice, will be available to the Investor or a
representative thereof at the Company's headquarters to discuss information
relevant for disclosure in the Registration covering the Registrable Securities
and will otherwise cooperate with the Investor conducting an investigation
for
the purpose of reducing or eliminating the Investor’s exposure to liability
under the Securities Act, including the reasonable production of information
at
the Company's headquarters, subject to appropriate confidentiality
limitations.
6. Severability.
In the
event any parts of this Subscription Agreement are found to be void, the
remaining provisions of this Subscription Agreement shall nevertheless be
binding with the same effect as though the void parts were deleted.
7. Choice
of Law and Jurisdiction; Arbitration.
This
Subscription Agreement will be deemed to have been made and delivered in the
state of the Investor’s residence as set forth on the signature page hereto and
will be governed as to validity, interpretation, construction, effect and in
all
other respects by the internal laws of the State of Delaware.
8. Counterparts.
This
Subscription Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute
one
and the same instrument. The execution of this Subscription Agreement may be
by
actual or facsimile signature.
9. Benefit.
This
Subscription Agreement shall be binding upon and inure to the benefit of the
parties hereto.
10. Notices
and Addresses.
All
notices, offers, acceptance and any other acts under this Subscription Agreement
(except payment) shall be in writing, and shall be sufficiently given if
delivered to the addresses in person, by Federal Express or similar courier
delivery, or, if mailed, postage prepaid, by certified mail, return receipt
requested, as follows:
| Investor: | At the address designated on the signature page of this Subscription Agreement. | |
| the Company: | Element 21 Golf Company | |
| ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇ | ||
| ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ | ||
| Tel: (▇▇▇) ▇▇▇-▇▇▇▇ | ||
or
to
such other address as any of them, by notice to the others may designate from
time to time. The transmission confirmation receipt from the sender's facsimile
machine shall be conclusive evidence of successful facsimile delivery.
15
11. Oral
Evidence.
This
Subscription Agreement constitutes the entire agreement between the parties
with
respect to the subject matter hereof and supersedes all prior oral and written
agreements between the parties hereto with respect to the subject matter hereof.
This Subscription Agreement may not be changed, waived, discharged, or
terminated orally but, rather, only by a statement in writing signed by the
party or parties against which enforcement or the change, waiver, discharge
or
termination is sought.
12. Section
Headings.
Section
headings herein have been inserted for reference only and shall not be deemed
to
limit or otherwise affect, in any matter, or be deemed to interpret in whole
or
in part, any of the terms or provisions of this Subscription
Agreement.
13. Survival
of Representations, Warranties and
Agreements.
The
representations, warranties and agreements contained herein shall survive the
delivery of, and the payment for, the Securities.
14. Acceptance
of Purchase.
The
Company may accept this Subscription Agreement by executing a copy hereof as
provided and notifying me within a reasonable time thereafter.
RESIDENTS
OF ALL STATES:
THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED
AND
SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT
AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID
ACT
AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD
BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE
SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR
THE
ACCURACY OR ADEQUACY OF THIS SUBSCRIPTION AGREEMENT. ANY REPRESENTATION TO
THE
CONTRARY IS UNLAWFUL.
16
RETURN
THIS SIGNATURE PAGE VIA FAX TO:
▇▇▇▇▇
▇. ▇▇▇▇▇, ESQ.
▇▇▇▇▇
▇▇▇▇▇▇▇ BERLACK ISRAELS LLP
FAX
NUMBER ▇▇▇-▇▇▇-▇▇▇▇
Dated:
June __, 2006
Manner
in Which Title to the Securities is to be Held.
(check
one)
___
Individual Ownership
___
Community Property
___
Joint
Tenant with Right of Survivorship (both parties must sign)
___
Partnership
___
Tenants in common
___
Corporation
___
Trust
___
Other
(Please indicate)
AGGREGATE
INVESTMENT AMOUNT: $ 1,000,000 US
| INDIVIDUAL INVESTORS: | ENTITY INVESTORS: | |||
| By: | ||||
| Signature (Individual) |
Name:
|
|||
|
Title:
|
||||
| Signature (Joint) | ||||
| (all record holders must sign) | ||||
| Name(s) Typed or Printed | ||||
| Address to Which Correspondence | Address to Which Correspondence | |||
| Should be Directed | Should be Directed | |||
| Tax Identification or | Tax Identification or | |||
| Social Security Number | Social Security Number | |||
The
foregoing subscription is accepted and the Company hereby agrees to be bound
by
its terms.
| ELEMENT 21 GOLF COMPANY | ||
| |
|
|
| Dated: July __, 2006 | By: | |
|
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ |
||
| Title:President & CEO | ||
17
ANNEX
A
ACCREDITED
INVESTOR QUESTIONNAIRE
ACCREDITED
INVESTOR QUESTIONNAIRE
Purpose
of this Questionnaire
The
Securities being offered by Element 21 Golf Company, a Delaware corporation
(the
“Company”) pursuant to the Subscription Agreement to which this Accredited
Investor Questionnaire is annexed, are being offered without registration under
the Securities Act of 1933, as amended (the “1933 Act”), or the securities
laws of any state, in reliance on the exemptions contained in Sections 4(2)
and 4(6) of the 1933 Act and on similar exemptions under applicable state
laws. Under Sections 4(2) and 4(6) and/or certain state laws, the Company may
be
required to determine that an individual or an individual together with a
“purchaser representative” or each individual equity owner of an investing
entity meets certain suitability requirements before selling the Securities
to
such individual or entity. THE COMPANY MAY, AT ITS ELECTION, NOT SELL ANY
SECURITIES TO A SUBSCRIBER WHO HAS NOT THOROUGHLY FILLED OUT A QUESTIONNAIRE.
IN
THE CASE OF AN INVESTOR THAT IS A PARTNERSHIP, TRUST, OR CORPORATION, EACH
EQUITY OWNER MUST COMPLETE A QUESTIONNAIRE. This Questionnaire does not
constitute an offer to sell or a solicitation of an offer to buy the Securities
or any other security.
Instructions
One
(1) copy of this Questionnaire should be completed, signed, dated, and delivered
to:
▇▇▇▇▇
▇.
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Israels LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Please
feel free to contact ▇▇. ▇▇▇▇▇ directly at (▇▇▇) ▇▇▇-▇▇▇▇ if you have any
questions with respect to the Questionnaire.
Please
Answer All Questions
If
the
appropriate answer is “None” or “Not Applicable,” so state. Please print or type
your answers to all questions. Attach additional sheets if necessary to complete
your answers to any item.
Your
answers will be kept strictly confidential at all times; however, the Company
may present this Questionnaire to such parties as it deems appropriate,
including its counsel, in order to assure itself that the offer and sale of
the
Securities will not result in a violation of the registration provisions of
the
1933 Act or a violation of the securities laws of any state.
1. Please
provide the following personal information:
Name: Age:
Residence
Address
(including
zip code): ____________________________________________
Telephone
Numbers:
Residence:________________________
Business:
________________________
2. I
am an
accredited investor (as defined in Rule 501(a) of Reg. D) because (check each
appropriate description):
|
_________
|
I
am a natural person whose individual net worth, or joint net worth
with my
spouse, exceeds $1,000,000.
|
|
_________
|
I
am a natural person who had individual income exceeding $200,000
in each
of the two most recent years or joint income with my spouse exceeding
$300,000 in each of those years and I have a reasonable expectation
of
reaching the same income level in the current
year.
|
|
_________
|
I
am a broker-dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934.
|
|
_________
|
I
am an organization described in Section 501(c)(3) of the Internal
Revenue
Code, not formed for the specific purpose of acquiring the Securities,
with total assets exceeding
$5,000,000.
|
|
_________
|
I
am a corporation, Massachusetts or similar business trust or partnership,
not formed for the specific purpose of acquiring the Securities,
with
total assets exceeding $5,000,000.
|
|
_________
|
I
am a trust, not formed for the specific purpose of acquiring the
Securities, with total assets exceeding $5,000,000 and whose purchase
is
directed by a “sophisticated person,” as defined in Rule 506(b)(2)(ii) of
Reg. D.
|
|
(For
the purposes of this questionnaire, a “sophisticated person” means any
person who has such knowledge and experience in financial and business
matters that he or she is capable of evaluating the merits and risks
of
the prospective investment.)
|
|
_________
|
I
am an employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974 and (i) investment decisions for such
plan are
made by a plan fiduciary, as defined in Section 3(21) of such Act,
which
is a bank, savings and loan association, insurance company or registered
investment advisor or (ii) such plan has total assets exceeding $5,000,000
or (iii) if a self -directed plan, investment decisions are made
solely by
accredited investors.
|
|
_________
|
I
am an entity in which all of the equity owners are accredited investors.
|
|
_________
|
I
am an accredited investor for the following
reasons:
|
3. Check,
if
appropriate:
|
________
|
I
hereby represent and warrant that I have such knowledge and experience
in
financial and business matters that I am capable of evaluating the
merits
and risks of any prospective investment in the Company.
|
4 If
you
did not check the box to Question 3, please answer the following additional
questions:
4.1 Please
describe any pre-existing personal or business relationship that you have with
the Company or any of its officers and directors.
4.2 Please
describe any business or financial experience that you have had that would
allow
the Company to reasonably conclude that you are capable of protecting your
interests in connection with your prospective investment in the Company. If
none, so state.
4.3 If
your
answer to Question 4.2 above was “None,” in order to evaluate the merits
and risks of the investment, will you be relying upon the advice of any other
person(s) who will be acting as your purchaser representative(s)?
Yes
_____
No
_____
If
“yes,”
please identify each such person and indicate his business address and telephone
number in the space below (each such person must complete, and you must review
and acknowledge, a separate purchaser representative questionnaire which will
be
supplied at your request and which must be returned to the Company prior to
the
sale of any Securities to you).
5. By
signing this Questionnaire, I hereby confirm the following statements:
I
am
aware that the offering of the Securities pursuant to the accompanying
Subscription Agreement which I hereby acknowledge as received and reviewed,
will
involve an investment in securities for which no market currently exists in
the
case of the Preferred Stock, and a limited market exists (subject to compliance
with applicable state and federal securities laws) for the shares of Common
Stock issuable upon the conversion of the shares of Preferred Stock and upon
exercise of the Warrants, thereby requiring any investment to be maintained
for
an indefinite period of time, and I have no need to liquidate the
investment.
I
acknowledge that any delivery to me of any documentation relating to the shares
of Preferred Stock and Warrants prior to the determination by the Company of
my
suitability as an investor shall not constitute an offer of the shares of
Preferred Stock and Warrants until such determination of suitability shall
be
made, and I agree that I shall promptly return all such documentation to the
Company upon request.
Neither
I
nor any of my associates or affiliates: (i) are a member or a person associated
with a member firm of the NASD, (ii) own any stock or other securities of any
NASD member, or (iii) made subordinated loans to any NASD member.
My
answers to the foregoing questions are true and complete to the best of my
information and belief, and I will promptly notify the Company of any changes
in
the information I have provided.
I
also
understand and agree that, although the Company will use its best efforts to
keep the information provided in answers to this Questionnaire strictly
confidential, the Company may present this Questionnaire and the information
provided in answers to it to such parties as it may deem advisable if called
upon to establish the availability under any federal or state securities laws
of
an exemption from registration of the private placement or if the contents
thereof are relevant to any issue in any action, suit, or proceeding to which
the Company is a party or by which it or they are or may be bound.
I
realize
that this Questionnaire does not constitute an offer by the Company to sell
the
Securities but is merely a request for information.
_____________________________________
Printed
Name
_____________________________________
Signature
_____________________________________
Social
Security Number or
Employee
Identification Number
Date
and
Place Executed:
Date:
Place:
ANNEX
B
ELEMENT
21 GOLF COMPANY
STOCK
CERTIFICATE QUESTIONNAIRE
Please
provide the following information:
|
1.
The exact name that your Securities are to be registered in (this
is the
name that will appear on your stock certificate(s) for the Preferred
Stock
and on the Warrants). You may use a nominee name if appropriate:
|
___________________________________
|
|
2.
If
the purchaser of the Securities and the Registered Holder listed
above are
not the same, please disclose the relationship between the purchaser
of
the Securities and the Registered Holder listed in response to item
1
above
|
|
|
3.
The mailing address of the Registered Holder listed in response to
item 1
above:
|
___________________________________
___________________________________
___________________________________
|
|
4.
The Social Security Number or Tax Identification Number of the Registered
Holder listed in response to item 1 above
|
___________________________________
|
ANNEX
C
ELEMENT
21 GOLF COMPANY
REGISTRATION
STATEMENT QUESTIONNAIRE
In
connection with the preparation of the Registration Statement, please provide
the following information:
Pursuant
to the "Selling Stockholder" section of the Registration Statement, please
state
your or your organization's name exactly as it should appear in the Registration
Statement:
___________________________________________________________________
Please
provide the number of shares that you or your organization will own immediately
after Closing, including those Securities purchased by you or your organization
pursuant to this Subscription Agreement and those shares purchased by you or
your organization through other transactions:
___________________________________________________________________
Have
you
or your organization had any position, office or other material relationship
within the past three years with the Company or its affiliates?
________
Yes ________
No
If
yes,
please indicate the nature of any such relationships below:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Are
you
(i) an NASD Member (see definition), (ii) a Controlling (see definition)
shareholder of an NASD Member, (iii) a Person Associated with a Member of the
NASD (see definition), or (iv) an Underwriter or a Related Person (see
definition) with respect to the proposed offering; or (b) do you own any shares
or other securities of any NASD Member not purchased in the open market; or
(c)
have you made any outstanding subordinated loans to any NASD
Member?
________
Yes ________
No
If
"yes,"
please describe below:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
NASD
Member.
The term
"NASD member" means either any broker or dealer admitted to membership in the
National Association of Securities Dealers, Inc. ("NASD"). (NASD Manual, By-laws
Article I, Definitions)
Control.
The term
"control" (including the terms "controlling," "controlled by" and "under common
control with") means the possession, direct or indirect, of the power, either
individually or with others, to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting securities,
by
contract, or otherwise. (Rule 405 under the Securities Act of 1933, as
amended)
Person
Associated with a member of the NASD.
The term
"person associated with a member of the NASD" means every sole proprietor,
partner, officer, director, branch manager or executive representative of any
NASD Member, or any natural person occupying a similar status or performing
similar functions, or any natural person engaged in the investment banking
or
securities business who is directly or indirectly controlling or controlled
by a
NASD Member, whether or not such person is registered or exempt from
registration with the NASD pursuant to its bylaws. (NASD Manual, By-laws Article
I, Definitions)
Underwriter
or a Related Person.
The
term "underwriter or a related person" means, with respect to a proposed
offering, underwriters, underwriters' counsel, financial consultants and
advisors, finders, members of the selling or distribution group, and any and
all
other persons associated with or related to any of such persons. (NASD
Interpretation).
ANNEX
D
RISK
FACTORS
The
Securities to be issued by the Company are speculative and involve a high degree
of risk.
Each
investor is urged to carefully read the “Risk Factors” set forth below. As used
herein, the terms “we”, “the Company” and “our” refer to Element 21 Golf
Company.
We
Will Need To Raise Additional Funds. These Funds May Not Be Available When
We
Need Them or on Terms Favorable to Us.
We
will
need to raise additional funds to operate the business, support more rapid
expansion, develop new or enhanced products, respond to competitive pressures,
acquire complementary businesses or technologies, or respond to unanticipated
events. There can be no assurances that additional financing will be available
when needed on favorable terms, or at all. If these funds are not available
when
we need them, we may need to change our business strategy or reduce our
operations or investment activities. In addition, any issuance of additional
equity securities will dilute the ownership interest of our existing
stockholders and the issuance of additional debt securities may increase the
perceived risk of investing in us.
There
Are Risks Associated With Our Stock Trading On The NASD OTC Bulletin Board
Rather Than A National Exchange.
There
are
significant consequences associated with our stock trading on the NASD OTC
Bulletin Board rather than a national exchange. The effects of not being able
to
list our securities on a national exchange include:
-
Limited
release of the market prices of our securities;
-
Limited
news coverage of us;
-
Limited
interest by investors in our securities;
-
Volatility of our stock price due to low trading volume;
-
Increased difficulty in selling our securities in certain states due to “blue
sky” restrictions; and
-
Limited
ability to issue additional securities or to secure additional
financing.
“▇▇▇▇▇
Stock” Regulations May Impose Certain Restrictions On The Marketability of Our
Securities.
The
SEC
has adopted regulations which generally define “▇▇▇▇▇ stock” to be any equity
security that has a market price (as defined) less than $5.00 per share, subject
to certain exceptions. The Company's Common Stock is presently subject to these
regulations which impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make
a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a ▇▇▇▇▇ stock, unless
exempt, the rules require the delivery, prior to the transaction, of a risk
disclosure document mandated by the SEC relating to the ▇▇▇▇▇ stock market.
The
broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the ▇▇▇▇▇ stock held in the account and information on the
limited market in ▇▇▇▇▇ stocks. Consequently, the “▇▇▇▇▇ stock” rules may
restrict the ability of broker-dealers to sell the Company's securities and
may
negatively affect the ability of purchasers of the Company's shares of Common
Stock to sell such securities.
Limited
Trading Market; Restrictions on Transferability.
The
Company’s shares of Common Stock trade on the OTC Bulletin Board with limited
daily trading volume. However, the Securities have not been registered under
the
Act, and accordingly, are subject to restrictions on transferability and resale
and may not be transferred or sold except as permitted under the Act and
applicable state securities laws, pursuant to registration or exemption
therefrom. Investors should be aware that they will be required to bear the
financial risk of this investment for an indefinite period of time.
THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATES AND ARE BEING OFFERED
AND
SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT
AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY
AND
RESALE AND MAY NOT BE PLEDGED, TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER
SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY,
NOR
HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF
THIS
OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING DOCUMENTS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
IT
IS
INTENDED THAT THE SHARES OF PREFERRED STOCK OFFERED HEREBY AND THE WARRANTS
WILL
BE MADE AVAILABLE ONLY TO ACCREDITED INVESTORS, AS DEFINED IN SECTION
2(15) OF
THE
SECURITIES ACT AND RULE 501 THEREUNDER. THE SECURITIES OFFERED HEREBY ARE BEING
OFFERED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS FOR NON-PUBLIC OFFERINGS.
SUCH EXEMPTIONS LIMIT THE NUMBER AND TYPES OF INVESTORS TO WHICH THE OFFERING
WILL BE MADE AND RESTRICT SUBSEQUENT TRANSFER OF THE SECURITIES.
INVESTMENT
IN THE SECURITIES OFFERED HEREBY SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN
AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. INVESTORS WILL BE REQUIRED
TO REPRESENT THAT THEY ARE FAMILIAR WITH AND UNDERSTAND THE TERMS OF THIS
OFFERING, AND THAT HAVE SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS
MATTERS THAT THEY ARE CAPABLE OF EVALUATING THE MERITS AND RISKS OF THIS
INVESTMENT.
NO
SECURITIES MAY BE RESOLD OR OTHERWISE DISPOSED OF BY AN INVESTOR UNLESS, IN
THE
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, REGISTRATION UNDER THE
APPLICABLE FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE
IS
MADE WITH SUCH REGISTRATION REQUIREMENTS. THE OFFEREE, BY ACCEPTING DELIVERY
OF
THESE MATERIALS, AGREES TO RETURN THE OFFERING MATERIALS AND ALL ACCOMPANYING
OR
RELATED DOCUMENTS TO THE COMPANY UPON REQUEST IF THE OFFEREE DOES NOT AGREE
TO
PURCHASE ANY OF THE SECURITIES OFFERED HEREBY.
THESE
MATERIALS ARE SUBMITTED IN CONNECTION WITH THE PRIVATE OFFERING OF THE
SECURITIES AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED. ANY
REPRODUCTION OR DISTRIBUTION OF THE SUBSCRIPTION AGREEMENT IN WHOLE OR IN PART,
OR THE DIVULGENCE OF ANY OF ITS CONTENTS, WITHOUT THE PRIOR WRITTEN CONSENT
OF
THE COMPANY, IS PROHIBITED. ANY PERSON ACTING CONTRARY TO THE FOREGOING
RESTRICTIONS MAY PLACE HIMSELF AND THE COMPANY IN VIOLATION OF FEDERAL OR STATE
SECURITIES LAWS.
EACH
OFFEREE MAY, IF HE SO DESIRES, MAKE INQUIRIES OF MANAGEMENT OF THE COMPANY
WITH
RESPECT TO THE COMPANY'S BUSINESS OR ANY OTHER MATTERS SET FORTH HEREIN, AND
MAY
OBTAIN ANY ADDITIONAL INFORMATION WHICH SUCH PERSON DEEMS TO BE NECESSARY IN
ORDER TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED HEREIN AND TO MAKE
AN
INVESTMENT DECISION (TO THE EXTENT THAT THE COMPANY POSSESSES SUCH INFORMATION
OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE). IN CONNECTION WITH
SUCH INQUIRY, ANY DOCUMENTS WHICH ANY OFFEREE WISHES TO REVIEW WILL BE MADE
AVAILABLE FOR INSPECTION AND COPYING OR PROVIDED, UPON REQUEST, SUBJECT TO
THE
OFFEREES AGREEMENT TO MAINTAIN SUCH INFORMATION IN CONFIDENCE AND TO RETURN
THE
SAME TO THE COMPANY IF THE RECIPIENT DOES NOT PURCHASE THE SECURITIES OFFERED
HEREUNDER. ANY SUCH INQUIRIES OR REQUESTS FOR ADDITIONAL INFORMATION OR
DOCUMENTS SHOULD BE MADE IN WRITING TO THE COMPANY AT THE COMPANY’S
ADDRESS.
ANNEX
E
SEC
FILINGS
Annual
Report on Form 10-KSB for the fiscal year ended June 30, 2005.
Quarterly
Report on Form 10-QSB for the quarter ended September 30, 2005.
Quarterly
Report on Form 10-QSB for the quarter ended December 31, 2005.
Quarterly
Report on Form 10-QSB for the quarter ended March 31, 2006.