ELEMENT 21 GOLF COMPANY 10% CONVERTIBLE PROMISSORY NOTE
EXHIBIT
4.2
ELEMENT
21 GOLF COMPANY
10%
CONVERTIBLE PROMISSORY NOTE
| $_______ |
February
__,
2006
|
FOR
VALUE RECEIVED,
the
undersigned, ELEMENT
21 GOLF COMPANY,
a
Delaware corporation (the “Borrower”),
hereby
promises to pay to the order of _____________ (the “Lender”),
the
principal amount of __________________________ ($_________) on the earlier
to
occur of the consummation of the Equity Financing (as defined below) and
February 6, 2007 (the “Maturity Date”) plus accrued an unpaid
interest.
Section
1. Definitions. All
capitalized terms used herein and that are not otherwise defined herein shall
have the respective meanings ascribed to them in the Subscription Agreement,
dated February __, 2006, by and between the Borrower and the Lender (the
“Subscription Agreement”).
Section
2. Prepayment. This
Note
or any part of the principal amount hereof (in denominations of one thousand
dollars ($1,000) or multiples thereof) may be prepaid by the Borrower without
penalty, premium or prior notice.
Section
3. Interest. All
indebtedness outstanding under this Note shall bear interest (computed on the
basis of a 360-day year) at the rate of ten percent (10%) per annum commencing
from the date of this Note. Interest shall be payable on the Maturity
Date.
Section
4. Conversion.
(a) In
the
event that the Borrower consummates a financing transaction whereby the Borrower
issues equity securities in exchange for gross proceeds received by the Borrower
of at least $5,000,000 prior to February 6, 2007 (an “Equity Financing”), the
outstanding principal and accrued interest on this Note shall, at the option
of
the Lender, be converted upon the consummation of the Equity Financing into
the
same equity securities issued to participants in the Equity Financing on the
same terms and conditions applicable thereto at a conversion price equal to
price per share (or price per unit, as the case may be) paid by the investors
participating in the Equity Financing for the equity securities purchased
thereunder (the “Per Share Price”).
(b) If
the
Lender desires to exercise its conversion rights upon the consummation of an
Equity Financing, the Lender shall surrender this Note, duly endorsed, at the
principal office of the Company and shall give written notice to the Borrower
at
such office of its election to convert the outstanding principal and accrued
interest hereon into Equity Securities. The notice shall state the name(s)
of
the nominee(s) of the Lender in which any Equity Securities are to be issued.
The Company shall, as soon as practicable thereafter, issue and deliver at
such
office to the Lender or such nominee(s), a certificate or certificates for
the
number of Equity Shares to which the Lender or such nominee(s) is
entitled.
(c)
No
fractional shares or scrip shall be issued upon conversion of this Note. Instead
of issuing any fractional shares that would otherwise be issuable upon
conversion of this Note (or any portion hereof), the Borrower shall round up
to
the nearest whole number of shares and pay to the Lender cash in an amount
equal
to the amount of such fractional interest, multiplied by the Per Share
Price.
Section
5. Payment
in U.S. Funds. Unless
this Note is converted into Equity Securities in accordance with Section 4
hereof, payments of both principal and interest on this Note are to be made
in
lawful money of the United States payable by check payable to the Lender and
mailed to the address of the Lender as set forth in the first paragraph of
this
Note or such other place as the holder hereof shall designate to the Borrower
in
writing.
Section
6. Events
of Default. The
following events are Events of Default:
(i) the
Borrower fails to pay to the holder of this Note any monetary obligation due
under this Note after having received three (3) business days prior written
notice that such obligation has become due;
(ii) the
Borrower fails, for three (3) days after written notice, to comply with any
other material term, condition, covenant, or agreement in this
Note;
(iii) the
Borrower becomes insolvent, makes an assignment for the benefit of creditors,
calls a meeting of its creditors to obtain any general financial accommodation
or suspends business; or
(iv) a
case
under the Bankruptcy Code is commenced by or against the Borrower or a
liquidator, trustee, custodian or similar officer is appointed for all or a
material portion of the Borrower's assets, and such case is not dismissed or
such appointment is not rescinded within thirty (30) days
thereafter.
Section
7. Remedies
Upon Default. Upon
the
occurrence of any Event of Default, the principal amount of and accrued and
unpaid interest on this Note may be declared by the Lender (by giving written
notice to the Borrower) to be immediately due and payable by the Borrower.
Thereafter, the Lender shall be entitled to all rights and remedies provided
by
applicable law.
The
Borrower shall pay the costs and expenses of collection, including, without
limitation, reasonable attorneys' fees and disbursements if any action, suit
or
proceeding is brought by the holder hereof to collect this Note.
Section
8. Amendments
and Assignment. This
Note
may be amended by one or more written instruments signed by the Borrower and
by
the Lender. Without the Borrower’s prior written consent, this Note may not be
assigned or negotiated by the Lender.
2
Section
9. Non-Recourse. No
officer, director, shareholder, agent or employee of the Borrower shall be
personally liable for any of the indebtedness of the Borrower represented by
this Note or otherwise.
Section
10. Choice
of Laws and Jurisdiction. THIS
NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO ITS RULES PERTAINING TO
CONFLICTS OF LAWS.
| ELEMENT 21 GOLF COMPANY | ||
| |
|
|
| By: | /s/ | |
|
Name: |
||
| Title: | ||
3
