RESTATED
CERTIFICATE OF INCORPORATION
OF
China
Display Technologies, Inc.
China
Display Technologies, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the “Corporation”), does
hereby certify:
1. The
name
of the Corporation is China Display Technologies, Inc. The Corporation was
organized under the name Lincoln International Corporation on September 29,
2004.
2. The
Certificate of Incorporation of the Corporation is hereby amended and restated
to read as follows:
FIRST:
The name of the Corporation is China Display Technologies, Inc. (the
“Corporation”).
SECOND:
The address of its registered office in the State of Delaware is 160 Greentree
Drive, Suite 101, Dover, County of Kent, Delaware 19904. The name of its
registered agent at such address is National Registered Agents,
Inc.
THIRD:
The purpose of the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
FOURTH:
The Corporation is to have perpetual existence.
FIFTH:
(a) The
total
number of shares of capital stock which the Corporation shall have authority
to
issue is one hundred twenty million (120,000,000), of which (i) 100,000,000
shares are designated as common stock with a par value of $.001 per share
(“Common Stock”) and (ii) 20,000,000 shares are designated as preferred stock
with a par value of $.001 per share (“Preferred Stock”).
(b) The
Preferred Stock of the Corporation shall be issued by the Board of Directors
of
the Corporation in one or more classes or one or more series within any class
and such classes or series shall have such voting powers, full or limited,
or no
voting powers, and such designations, preferences, limitations or restrictions
as the Board of Directors of the Corporation may determine, from time to time,
including but not limited to:
(i) the
designation of such class or series;
(ii) the
dividend rate of such class or series, the conditions and dates upon which
such
dividends shall be payable, the preference or relation which such dividends
shall bear to the dividends payable on any other class or classes or of any
other series of capital stock, whether such dividends shall be cumulative or
non-cumulative, and whether such dividends may be paid in shares of any class
or
series of capital stock or other securities of the Corporation;
(iii) whether
the shares of such class or series shall be subject to redemption by the
Corporation, and, if made subject to such redemption, the times, prices and
other terms and conditions of such redemption;
(iv) the
terms
and amount of any sinking fund provided for the purchase or redemption of the
shares of such class or series;
(v) whether
or not the shares of such class or series shall be convertible into or
exchangeable for shares of any other class or classes or series of capital
stock
or other securities of the Corporation, and, if provision be made for conversion
or exchange, the times, prices, rates, adjustment and other terms and conditions
of such conversion or exchange;
(vi) the
extent, if any, to which the holders of the shares of such class or series
shall
be entitled to vote, as a class or otherwise, with respect to the election
of
the directors or otherwise, and the number of votes to which the holder of
each
share of such class or series shall be entitled;
(vii) the
restrictions, if any, on the issue or reissue of any additional shares or any
class or series of Preferred Stock; and
(viii) the
rights of the holders of the shares of such class or series upon the dissolution
of, or upon the distribution of assets of, the Corporation.
(c) Holders
of shares of Common Stock shall be entitled to cast one vote for each share
held
at all stockholders’ meetings for all purposes, including the election of
directors. The Common Stock does not have cumulative voting rights.
(d) No
holder
of shares of stock of any class shall be entitled as a matter of right to
subscribe for or purchase or receive any part of any new or additional issue
of
shares of stock of any class, or of securities convertible into shares of stock
of any class, whether now hereafter authorized or whether issued for money,
for
consideration other than money, or by way of dividend.
SIXTH:
The Board of Directors shall have the power to adopt, amend or repeal the
by-laws of the Corporation.
SEVENTH:
No director shall be personally liable to the Corporation or its stockholders
for monetary damages for any breach of fiduciary duty by such director as a
director. Notwithstanding the foregoing sentence, a director shall be liable
to
the extent provided by applicable law, (i) for breach of the director’s duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not
in good faith or which involve intentional misconduct or a knowing violation
of
law, (iii) pursuant to Section 174 of the General Corporation Law or (iv) for
any transaction from which the director derived an improper personal benefit.
If
the General Corporation Law hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability
of a
director of the Corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
General Corporation Law. No amendment to or repeal of this Article SEVENTH
shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of
such
director occurring prior to such amendment.
EIGHTH:
The Corporation shall indemnify, to the fullest extent permitted by Section
145
of the General Corporation Law, as amended from time to time, each person that
such section grants the Corporation the power to indemnify.
NINTH:
The terms and conditions of any rights, options and warrants approved by the
Board of Directors may provide that any or all of such terms and conditions
may
not be waived or amended or may be waived or amended only with the consent
of
the holders of a designated percentage of a designated class or classes of
capital stock of the Corporation (or a designated group or groups of holders
within such class or classes, including but not limited to disinterested
holders), and the applicable terms and conditions of any such rights, options
or
warrants so conditioned may not be waived or amended or may not be waived or
amended absent such consent.
3. Upon
the
effective date of the filing of this Restated Certificate of Incorporation,
the
Corporation shall effect a one-for-7.5 reverse split whereby each share of
common stock, par value $.0001 per share shall, without any action on the part
of the holder, become and be converted into 0.13 1/3 shares of common stock,
par
value $.001 per share. In connection with reverse split, no fractional shares
shall be issued. In lieu of fractional shares, each holder who would otherwise
be entitled to receive fractional shares of new common stock, will, upon
surrender of the certificates representing shares of old common stock, receive
such additional fractional share as will result in the holder having a whole
number of shares.
4. Set
forth
as Exhibit A to this Restated Certificate of Incorporation is a Statement of
Designations setting forth the rights, preferences and privileges of a series
of
Preferred Stock consisting of twenty million (20,000,000) shares and designated
as the Series A Convertible Preferred Stock.
5. This
Restated Certificate of Incorporation has been duly adopted in accordance with
the provisions of Sections 242 and 245 of the General Corporation Law of
Delaware.
6. The
capital of the Corporation will not be reduced under or by reason of any
amendment herein certified.
7. This
Restated Certificate of Incorporation shall be effective as of November 8,
2007.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by
its
chief executive officer this 2nd
day of
November, 2007.
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/s/
Lawrence
Kwok-Yan
Chan
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Lawrence
Kwok-Yan
Chan
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Chief
Executive Officer
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CHINA
DISPLAY TECHNOLOGIES, INC.
Statement
of Designations
Section
1.
Definitions.
Capitalized terms used and not otherwise defined herein that are defined in
the
Purchase Agreement (as defined below) shall have the meanings given such terms
in the Purchase Agreement. For the purposes hereof, the following terms shall
have the following meanings:
“4.9%
Limitation”
shall
have the meaning set forth in the Purchase Agreement.
“Bankruptcy
Event”
means
any of the following events: (a) the Company or any Significant Subsidiary
(as
such term is defined in Rule 1.02(s) of Regulation S-X) thereof commences a
case
or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
or
similar law of any jurisdiction relating to the Company or any Significant
Subsidiary thereof; (b) there is commenced against the Company or any
Significant Subsidiary thereof any such case or proceeding that is not stayed
or
dismissed within 90 days after commencement; (c) the Company or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
or other order approving any such case or proceeding is entered; (d) the Company
or any Significant Subsidiary thereof suffers any appointment of any custodian
or the like for it or any substantial part of its property that is not
discharged or stayed within 90 days; (e) the Company or any Significant
Subsidiary thereof makes a general assignment for the benefit of creditors;
(f)
the Company or any Significant Subsidiary thereof calls a meeting of its
creditors with a view to arranging a composition, adjustment or restructuring
of
its debts; or (g) the Company or any Significant Subsidiary thereof, by any
act
or failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action
for
the purpose of effecting any of the foregoing.
“Closing
Date”
means
the Closing Date, as defined in the Purchase Agreement.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the Company’s common stock, par value $.001 per share, and stock of any other
class into which such shares may hereafter have been reclassified or
changed.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that is
at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
“Conversion
Date”
shall
have the meaning set forth in Section 6(a).
“Conversion
Ratio”
shall
mean the number of shares of Common Stock issuable upon conversion of one share
of Series A Preferred Stock. Each share of Series A Preferred Stock shall be
convertible into seven and one-half share of Common Stock (the “Conversion
Ratio”), subject to adjustment as provided in this Statement of Designations. As
a result of the Reverse Split, the Conversion Ratio became one share of Common
Stock for each share of Series A Preferred Stock converted, subject to
adjustment as provided in this Statement of Designation.
“Conversion
Price”
shall
mean $1.08 (after giving effect to the Reverse Split), subject to
adjustment.
“Conversion
Shares”
means,
collectively, the shares of Common Stock into which the shares of Series A
Preferred Stock are convertible in accordance with the terms
hereof.
“Conversion
Shares Registration Statement”
means
a
registration statement that meets the requirements of the Registration Rights
Agreement and registers the resale of the Conversion Shares by the Holder,
who
shall be named as a “selling stockholder” thereunder, all as provided in the
Registration Rights Agreement.
“Conversion
Value”
means
an amount determined by multiplying the number of Conversion Shares as to which
a value is to be determined by the average of the closing prices of the Common
Stock on the principal market or exchange on which the Common Stock is traded
for the five days prior to the date as of which a Conversion Value is being
determined.
“Dilutive
Issuance”
shall
have the meaning set forth in Section 7(b) hereof.
“Effective
Date”
means
the date that the Conversion Shares Registration Statement is declared effective
by the Commission.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Exempt
Issuance”
shall
have the meaning set forth in the Purchase Agreement.
“Fundamental
Transaction”
shall
have the meaning set forth in Section 7(f)(iv) hereof.
“Holder”
shall
have the meaning given such term in Section 2 hereof.
“Investors”
shall
mean the persons named in Schedule A to the Purchase Agreement.
“Original
Issue Date”
shall
mean the date of the first issuance of any shares of the Series A Preferred
Stock regardless of the number of transfers of any particular shares of Series
A
Preferred Stock and regardless of the number of certificates which may be issued
to evidence such Series A Preferred Stock.
“Person”
means
a
corporation, an association, a partnership, a limited liability company, a
business association, an individual, a trust, a government or political
subdivision thereof or a governmental agency.
“Purchase
Agreement”
means
the Securities Purchase Agreement dated as of September 12, 2007, relating
to
the sale of (i) 3,703,704 shares of the Company’s Series A Preferred Stock, (ii)
warrants to purchase 41,250,000 shares of the Company’s Common Stock at $0.17
1/3 per share, and (iii) warrants to purchase 45,000,000 shares of the Company’s
Common Stock at $0.20 per share, as amended, modified or supplemented from
time
to time, a copy of which is on file at the principal offices of the Company.
As
a result of the Reverse Split, the warrants became warrants to purchase
5,500,000 shares of Common Stock at an exercise price of $1.30 per share and
6,000,000 shares of Common Stock at an exercise price of $1.50 per
share.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated as of the Closing Date, to which the
Company and the original Holder are parties, as amended, modified or
supplemented from time to time.
“Reverse
Split”
means
the one-for-7.5 reverse split of the Common Stock which became effective upon
the filing of the Restated Certificate of Incorporation to which this Statement
of Designation is filed as an exhibit.
“Securities”
shall
have the meaning set forth in Section 1.3.33 of the Purchase
Agreement.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Series
A Preferred Stock”
shall
have the meaning set forth in Section 2.
“Subsidiary”
shall
mean a corporation, limited liability company, partnership, joint venture or
other business entity of which the Company owns beneficially or of record more
than a majority of the equity interest.
“Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq SmallCap Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or
the
OTC Bulletin Board.
“Transaction
Documents”
shall
have the meaning set forth in the Purchase Agreement.
“VWAP”
means,
for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the primary Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based
on
a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP
function; (b) if the Common Stock is not then listed or quoted on the
Trading Market and if prices for the Common Stock are then reported in the
“Pink
Sheets” published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (c) in
all other cases, the fair market value of a share of Common Stock as determined
by a nationally recognized-independent appraiser selected in good faith by
Purchasers holding a majority of the principal amount of Series A Preferred
Stock then outstanding.
Rank
of Series.
For
purposes of this Statement of Designations, any stock of any series or class
of
the Corporation shall be deemed to rank:
(a)
senior to the shares of Series A Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up, as the case may be, if the holders
of
such class or classes shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
shares of Series A Preferred Stock;
(b)
on a
parity with shares of Series A Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up, as the case may be, whether or not
the
dividend rates, dividend payment dates or redemption or liquidation prices
per
share or sinking fund provisions, if any, be different from those of Series
A
Preferred Stock, if the holders of such stock shall be entitled to the receipt
of dividends or of amounts distributable upon dissolution, liquidation or
winding up of the Corporation, as the case may be, in proportion to their
respective dividend rates or liquidation prices, without preference or priority,
one over the other, as between the holders of such stock and the holders of
shares of Series A Preferred Stock;
(c)
junior to shares of Series A Preferred Stock as to dividends or upon
liquidation, dissolution or winding up, as the case may be, if such class shall
be Common Stock or if the holders of shares of Series A Preferred Stock shall
be
entitled to receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in preference
or priority to the holders of shares of such class or classes.
Section
2.
Designation
and Amount.
The
series of preferred stock, par value $.001 per share (“Preferred Stock”)
consisting of twenty million (20,000,000) shares shall be designated as the
Company’s Series A Convertible Preferred Stock (the “Series
A Preferred Stock”)
and
the number of shares so designated shall be (which shall not be subject to
increase without the consent of all of the holders of 75% of the then
outstanding shares of Series A Preferred Stock (each a “Holder”
and
collectively, the “Holders”).
In
the event that the Company shall change the par value of the Preferred Stock,
the par value of the Series A Preferred Stock shall be likewise changed. In
the
event of the conversion of shares of Series A Preferred Stock into this
Company’s Common Stock, pursuant to Section 6 hereof, or in the event that the
Company shall otherwise acquire and cancel any shares of Series A Preferred
Stock, the shares of Series A Preferred Stock so converted or otherwise acquired
and canceled shall have the status of authorized but unissued shares of
preferred stock, without designation as to series until such stock is once
more
designated as part of a particular Series by the Company’s Board of Directors.
In addition, if the Company shall not issue the maximum number of shares of
Series A Preferred Stock, the Company may, from time to time, by resolution
of
the Board of Directors and the approval of the holders of a majority of the
outstanding shares of Series A Preferred Stock, reduce the number of shares
of
Series A Preferred Stock authorized, provided, that no such reduction shall
reduce the number of authorized shares to a number which is less than the number
of shares of Series A Preferred Stock then issued or reserved for issuance.
The
number of shares by which the Series A Preferred Stock is reduced shall have
the
status of authorized but unissued shares of Preferred Stock, without designation
as to series, until such stock is once more designated as part of a particular
Series by the Company’s Board of Directors. The Board of Directors shall cause
to be filed with the Secretary of State of the State of Delaware such
certificate as shall be necessary to reflect any reduction in the number of
shares constituting the Series A Preferred Stock.
Section
3.
Dividends
and Other Distributions.
No
dividends shall be payable with respect to the Series A Preferred Stock. No
dividends shall be declared or payable with respect to the Common Stock while
the Series A Preferred Stock is outstanding. The Company shall not redeem or
purchase any shares of Common Stock or any other class or series of capital
stock which is junior to or on a parity with the Series A Preferred Stock while
the Series A Preferred Stock is outstanding.
Section
4.
Voting
Rights.
The
Series A Preferred Stock shall have no voting rights except as required by
law.
However, so long as any shares of Series A Preferred Stock are outstanding,
the
Company shall not, without the affirmative approval of the Holders of 75% of
the
shares of the Series A Preferred Stock then outstanding, (a) alter or change
adversely the powers, preferences or rights given to the Series A Preferred
Stock or alter or amend this Statement of Designations, (b) authorize or create
any class of stock ranking as to dividends or distribution of assets upon a
Liquidation (as defined in Section 5) senior to or otherwise pari passu with
the
Series A Preferred Stock, or any of preferred stock possessing greater voting
rights or the right to convert at a more favorable price than the Series A
Preferred Stock, (c) amend its certificate of incorporation or other charter
documents in breach of any of the provisions hereof, (d) increase the authorized
number of shares of Series A Preferred Stock or the number of authorized shares
of Preferred Stock, or (e) enter into any agreement with respect to the
foregoing. Notwithstanding any other provision of the Statement of Designations;
the provisions of Section 6(c) of this Statement of Designations may not be
amended or waived.
Section
5.
Liquidation.
Upon
any liquidation, dissolution or winding-up of the Company, whether voluntary
or
involuntary (a “Liquidation”),
the
Holders shall be entitled to receive out of the assets of the Company, whether
such assets are capital or surplus, for each share of Series A Preferred Stock
an amount equal to one and 8/100 dollars ($1.08) per share of Series A Preferred
Stock, which amount is referred to as the “Liquidation
Preference,”
before
any distribution or payment shall be made to the holders of any securities
which
are junior to the Series A Preferred Stock upon voluntary or involuntary
liquidation, dissolution or winding up and after any distributions or payments
made to holders of any class or series of securities which are senior to the
Series A Preferred Stock upon voluntary or involuntary liquidation, dissolution
or winding up, and if the assets of the Company shall be insufficient to pay
in
full such amounts, then the entire assets to be distributed to the Holders
shall
be distributed among the Holders ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon
were
paid in full. In the event the assets of the Company available for distribution
to the holders of shares of Series A Preferred Stock upon dissolution,
liquidation or winding up of the Company, whether voluntary or involuntary,
shall be insufficient to pay in full all amounts to which such holders are
entitled pursuant to Section 5, no such distribution shall be made on account
of
any shares of any other class or series of capital stock of the Company ranking
on a parity with the shares of Series A Preferred Stock upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of Series A Preferred Stock, ratably, in
proportion to the full distributable amounts for which holders of all such
parity shares are respectively entitled upon such dissolution, liquidation
or
winding up. At the election of a Holder made by written notice delivered to
the
Company at least two (2) business days prior to the effective date of the
subject transaction, as to the shares of Series A Preferred Stock held by such
Holder, a Fundamental Transaction (excluding for purposes of this Section 5
any
Fundamental Transaction described in Section 7(f)(iv)(A) or 7(f)(iv)(B)) or
Change of Control shall be treated as a Liquidation as to such Holder.
Section
6. Conversion.
(a) Conversions
at Option of Holder.
Each
share of Series A Preferred Stock shall be initially convertible (subject to
the
limitations set forth in Section 6(c)), into such number of shares of Common
Stock based on the Conversion Ratio at the option of the Holders, at any time
and from time to time from and after the Original Issue Date. Holders shall
effect conversions by providing the Company with the form of conversion notice
attached hereto as Annex
A
(a
“Notice
of Conversion”)
as
fully and originally executed by the Holder, together with the delivery by
the
Holder to the Company of the stock certificate(s) representing the number of
shares of Series A Preferred Stock so converted, with such stock certificates
being duly endorsed in full for transfer to the Company or with an applicable
stock power duly executed by the Holder in the manner and form as deemed
reasonable by the transfer agent of the Common Stock. Each Notice of Conversion
shall specify the number of shares of Series A Preferred Stock to be converted,
the number of shares of Series A Preferred Stock owned prior to the conversion
at issue, the number of shares of Series A Preferred Stock owned subsequent
to
the conversion at issue, the stock certificate number and the shares of Series
A
Preferred Stock represented thereby which are accompanying the Notice of
Conversion, and the date on which such conversion is to be effected, which
date
may not be prior to the date the Holder delivers such Notice of Conversion
and
the applicable stock certificates to the Company by overnight delivery service
(the “Conversion
Date”).
If no
Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the Trading Day immediately following the date that such Notice of
Conversion and applicable stock certificates are received by the Company. The
calculations and entries set forth in the Notice of Conversion shall control
in
the absence of manifest or mathematical error. Shares of Series A Preferred
Stock converted into Common Stock in accordance with the terms hereof shall
be
canceled and may not be reissued. If the Conversion Price is adjusted pursuant
to Section 7 or as otherwise provided in this Statement of Designations, the
Conversion Ratio shall likewise be adjusted and the new Conversion Ratio shall
determined by multiplying the Conversion Ratio in effect by a fraction, the
numerator of which is the Conversion Price in effect before the adjustment
and
the denominator of which is the new Conversion Price. Thereafter, subject to
any
further adjustments in the Conversion Price, each share of Series A Preferred
Stock shall be initially convertible into Common Stock based on the new
Conversion Ratio.
(b) Automatic
Conversion Upon Change of Control.
Subject
to Section 5, all of the outstanding shares of Series A Preferred Stock shall
be
automatically converted into the Conversion Shares upon the close of business
on
the business day immediately preceding the date fixed for consummation of any
transaction resulting in a Change of Control of the Company (an “Automatic
Conversion Event”). A “Change in Control” means a consolidation or merger of the
Company with or into another company or entity in which the Company is not
the
surviving entity or the sale of all or substantially all of the assets of the
Company to another company or entity not controlled by the then existing
stockholders of the Company in a transaction or series of transactions. The
Company shall not be obligated to issue certificates evidencing the Conversion
Shares unless certificates evidencing the shares of Series A Preferred Stock
so
converted are either delivered to the Company or its transfer agent or the
holder notifies the Company or its transfer agent in writing that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred
by
it in connection therewith. Upon the conversion of the Series A Preferred Stock
pursuant to this Section 6(b), the Company shall promptly send written notice
thereof, by hand delivery or by overnight delivery, to the holders of record
of
all of the Series A Preferred Stock at their addresses then shown on the records
of the Company, which notice shall state that certificates evidencing shares
of
Series A Preferred Stock must be surrendered at the office of the Company (or
of
its transfer agent for the Common Stock, if applicable).
(c) Beneficial
Ownership Limitation.
Except
as provided in Section 6(b) of this Statement of Designations, which shall
apply
as stated therein if an Automatic Conversion Event shall occur, the right of
the
Holder to convert the Series A Preferred Stock shall be subject to the 4.9%
Limitation, with the result that Company shall not effect any conversion of
the
Series A Preferred Stock, and the Holder shall not have the right to convert
any
portion of the Series A Preferred Stock, to the extent that after giving effect
to such conversion, the Holder (together with the Holder’s affiliates), as set
forth on the applicable Notice of Conversion, would beneficially own in excess
of 4.9% of the number of shares of the Common Stock outstanding immediately
after giving effect to such conversion. For
the
purposes of this Agreement beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act, and Regulation 13d-3
thereunder. For
purposes of this Section 6(c), in determining the number of outstanding shares
of Common Stock, the Holder may rely on the number of outstanding shares of
Common Stock as reflected in the most recent of the following: (A) the Company’s
most recent quarterly reports (Form 10-Q or Form 10-QSB), Annual Reports (Form
10-K or Form 10-KSB), or definitive proxy statement or information statement
as
filed with the Commission under the Exchange Act, (B) a more recent public
announcement by the Company, or (C) any other written notice by the Company
or
the Company’s transfer agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder, the Company
shall within two (2) Trading Days confirm orally and in writing to the Holder
the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
the
Series A Preferred Stock, by the Holder or its affiliates since the date as
of
which such number of outstanding shares of Common Stock was publicly reported
by
the Company. The 4.9% Limitation may be not be waived or amended.
(d) Mechanics
of Conversion
(i) Delivery
of Certificate Upon Conversion.
Except
as otherwise set forth herein, not later than three Trading Days after each
Conversion Date (the “Share
Delivery Date”),
the
Company shall deliver to the Holder (A) a certificate or certificates which,
after the Effective Date, shall be free of restrictive legends and trading
restrictions (other than those required by the Purchase Agreement) representing
the number of shares of Common Stock being acquired upon the conversion of
shares of Series A Preferred Stock, and (B) a bank check in the amount of
accrued and unpaid dividends (if the Company has elected or is required to
pay
accrued dividends in cash). After the Effective Date, the Company shall, upon
request of the Holder, deliver any certificate or certificates required to
be
delivered by the Company under this Section electronically through the
Depository Trust Company or another established clearing Company performing
similar functions if the Company’s transfer agent has the ability to deliver
shares of Common Stock in such manner. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed
by the applicable Holder by the third Trading Day after the Conversion Date,
the
Holder shall be entitled to elect by written notice to the Company at any time
on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return
the
certificates representing the shares of Series A Preferred Stock tendered for
conversion.
(ii) Obligation
Absolute; Partial Liquidated Damages.
The
Company’s obligations to issue and deliver the Conversion Shares upon conversion
of Series A Preferred Stock in accordance with the terms hereof are absolute
and
unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision hereof, the
recovery of any judgment against any Person or any action to enforce the same,
or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation
to
the Company or any violation or alleged violation of law by the Holder or any
other person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of such Conversion Shares. In the event a Holder shall elect to convert
any or all of its Series A Preferred Stock, the Company may not refuse
conversion based on any claim that such Holder or any one associated or
affiliated with the Holder of has been engaged in any violation of law,
agreement or for any other reason (other than the inability of the Company
to
issue shares of Common Stock as a result of the limitation set forth in Section
6(c) hereof) unless an injunction from a court, on notice, restraining and
or
enjoining conversion of all or part of this Series A Preferred Stock shall
have
been sought and obtained and the Company posts a surety bond for the benefit
of
the Holder in the amount of 150% of the Conversion Value of Series A Preferred
Stock which is subject to the injunction, which bond shall remain in effect
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Holder to the extent it obtains judgment.
In
the absence of an injunction precluding the same, the Company shall issue
Conversion Shares or, if applicable, cash, upon a properly noticed conversion.
If the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 6(d)(i) within two Trading Days of the Share Delivery Date
applicable to such conversion, the Company shall pay to such Holder, in cash,
as
liquidated damages and not as a penalty, for each $5,000 of Conversion Value
of
Series A Preferred Stock being converted, $50 per Trading Day (increasing to
$100 per Trading Day after three (3) Trading Days and increasing to $200 per
Trading Day six (6) Trading Days after such damages begin to accrue) for each
Trading Day after the Share Delivery Date until such certificates are delivered.
Nothing herein shall limit a Holder’s right to pursue actual damages for the
Company’s failure to deliver certificates representing shares of Common Stock
upon conversion within the period specified herein and such Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.
(iii) Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion.
If the
Company fails to deliver to the Holder such certificate or certificates pursuant
to Section 6(d)(i) by a Share Delivery Date, and if after such Share Delivery
Date the Holder purchases (in an open market transaction or otherwise) Common
Stock to deliver in satisfaction of a sale by such Holder of the Conversion
Shares which the Holder was entitled to receive upon the conversion relating
to
such Share Delivery Date (a “Buy-In”),
then
the Company shall pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
of Common Stock that such Holder was entitled to receive from the conversion
at
issue multiplied by (2) the price at which the sell order giving rise to such
purchase obligation was executed. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect
to
an attempted conversion of shares of Series A Preferred Stock with respect
to
which the aggregate sale price giving rise to such purchase obligation is
$10,000, under clause (A) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect of the
Buy-In, together with applicable confirmations and other evidence reasonably
requested by the Company. Nothing herein shall limit a Holder’s right to pursue
any other remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to the Company’s failure to timely deliver certificates
representing shares of Common Stock upon conversion of the shares of Series
A
Preferred Stock as required pursuant to the terms hereof.
(iv) Reservation
of Shares Issuable Upon Conversion.
The
Company covenants that it will at all times reserve and keep available out
of
its authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of the Series A Preferred Stock, each as herein
provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders, not less than such number of shares
of
the Common Stock as shall (subject to any additional requirements of the Company
as to reservation of such shares set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions of Section 7)
upon the conversion of all outstanding shares of Series A Preferred Stock.
The
Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and, if the Conversion Shares Registration Statement is then
effective under the Securities Act, registered for public sale in accordance
with such Conversion Shares Registration Statement provided that the holder
or
its broker delivers confirmation to the Company or its transfer agent to the
effect that the Conversion Shares have been sold pursuant to such registration
statement.
(v) Fractional
Shares.
Upon a
conversion of the Series A Preferred Stock, the Company shall not be required
to
issue stock certificates representing fractional shares of Common Stock. All
fractional shares shall be carried forward and any fractional shares which
remain after a Holder converts all of his or her Series A Preferred Stock shall
be dropped and eliminated.
(vi) Transfer
Taxes.
The
issuance of certificates for shares of the Common Stock on conversion of the
Series A Preferred Stock shall be made without charge to the Holders thereof
for
any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company shall not
be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such shares of Series A Preferred Stock so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been
paid.
(vii) Absolute
Obligation.
Except
as expressly provided herein, no provision of this Statement of Designations
shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the liquidated damages (if any) on, the shares of Series
A
Preferred Stock at the time, place, and rate, and in the coin or currency,
herein prescribed.
Section
7.
Certain
Adjustments.
(a) Stock
Dividends and Stock Splits.
If the
Company, at any time subsequent to the Closing Date as long as the Series A
Preferred Stock is outstanding: (i) shall pay a stock dividend or otherwise
make
a distribution or distributions on shares of its Common Stock or any other
equity or equity equivalent securities payable in shares of Common Stock (which,
for avoidance of doubt, shall not include any shares of Common Stock issued
by
the Company pursuant to this Series A Preferred Stock), (ii) subdivide
outstanding shares of Common Stock into a larger number of shares, (iii) combine
(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (iv) issue by reclassification of shares
of
the Common Stock any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of shares
of
Common Stock outstanding after such event. Any adjustment made pursuant to
this
Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case
of a
subdivision, combination or re-classification.
(b) Price
Adjustment.
From
and after the Closing Date and until such time as the Investors hold no
Securities, except for (i) Exempt Issuances, (ii) issuances
covered by Sections 7(a) and 7(c) hereof or (iii) an issuance of Common Stock
upon exercise or upon conversion of warrants, options or other convertible
securities for which an adjustment has already been made pursuant to this
Section 7,
as to
all of which this Section 7(b) does not apply, if the Company closes on the
sale
or issuance of Common Stock at a price, or issues warrants, options, convertible
debt or equity securities with a exercise price per share or conversion price
which is less than the Conversion Price then in effect (such lower sales price,
conversion or exercise price, as the case may be, being referred to as the
“Lower Price”), the Conversion Price in effect from and after the date of such
transaction shall be reduced to the Lower Price. For purpose of determining
the
exercise price of warrants issued by the Company, the price, if any, paid per
share for the warrants shall be added to the exercise price of the
warrants.
(c) Pro
Rata Distributions.
If the
Company, at any time from and after the Closing Date and as long as the Series
A
Preferred Stock is outstanding, shall distribute to all holders of Common Stock
(and not to Holders) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security, then in each such case
the
Conversion Price shall be determined by multiplying such Conversion Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the
then
fair market value at such record date of the portion of such assets or evidence
of indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith. In either case
the
adjustments shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(d) Calculations.
All
calculations under this Section 7 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held
by or
for the account of the Company or any of its subsidiaries. For purposes of
this
Section 7, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares and shares owned by subsidiaries, if
any) actually issued and outstanding.
(e) Notice
to Holders.
(i) Adjustment
to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any of this Section 7,
the
Company shall promptly mail to each Holder a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues a variable rate security,
despite the prohibition thereon in the Purchase Agreement, the Company shall
be
deemed to have issued Common Stock or Common Stock Equivalents at the lowest
possible conversion or exercise price at which such securities may be converted
or exercised in the case of a Variable Rate Transaction (as defined in the
Purchase Agreement), or the lowest possible adjustment price in the case of
an
MFN Transaction (as defined in the Purchase Agreement).
(ii) Notices
of Other Events.
If (A)
the Company shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Company shall declare a redemption of the Common Stock; (C)
the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock
or
any Fundamental Transaction, (E) the
Company shall authorize the voluntary or involuntary dissolution, liquidation
or
winding up of the affairs of the Company; then in each case, the Company shall
cause to be filed at each office or agency maintained for the purpose of
conversion of the Series A Preferred Stock, and shall cause to be mailed
to
the Holders at their last addresses as they shall appear upon the stock
books of
the
Company, at least 30 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x)
the
date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled
to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification is expected to become
effective or close, and the date as of which it is expected that holders of
the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification or Fundamental Transaction; provided,
that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.
(f) Exempt
Issuance.
Notwithstanding the foregoing, no adjustment in the Conversion Price will be
made in respect of an Exempt Issuance.
(g) Fundamental
Transaction.
If, at
any time while this Series A Preferred Stock is outstanding, (i) the Company
effects any merger or consolidation of the Company with or into another Person,
(ii) the Company effects any sale of all or substantially all of its assets
in
one or a series of related transactions, (iii) any tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental
Transaction”),
then
upon any subsequent conversion of this Series A Preferred Stock, the Holder
shall have the right to receive, for each Conversion Share that would have
been
issuable upon such conversion absent such Fundamental Transaction, the same
kind
and amount of securities, cash or property as it would have been entitled to
receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of one share
of
Common Stock (the “Alternate
Consideration”).
For
purposes of any such conversion, the determination of the Conversion Price
shall
be appropriately adjusted to apply to such Alternate Consideration based on
the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration
it
receives upon any conversion of this Series A Preferred Stock following such
Fundamental Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall file a new Statement of Designations with the same terms
and
conditions and issue to the Holder new preferred stock consistent with the
foregoing provisions and evidencing the Holder’s right to convert such preferred
stock into Alternate Consideration. The terms of any agreement pursuant to
which
a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this paragraph
(f)(iv) and insuring that this Series A Preferred Stock (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction. Notwithstanding the foregoing or any other
provisions of this Statement of Designations, in the event that the agreement
relating to a Fundamental Transaction provides for the conversion or exchange
of
the Series A Preferred Stock into equity or debt securities, cash or other
consideration and the agreement is approved by the holders of a majority of
the.
then-outstanding shares of Series A Preferred Stock, then the holders of the
Series A Preferred Stock shall have only the rights set forth in such
agreement.
Section
8.
Miscellaneous.
(a) Notices.
Any and
all notices or other communications or deliveries to be provided by the Holders
hereunder, including, without limitation, any Notice of Conversion, shall be
in
writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service, addressed to the Company, at its principal address
as
reflected in its most recent filing with the Commission. Any and all notices
or
other communications or deliveries to be provided by the Company hereunder
shall
be in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication
or
deliveries hereunder shall be deemed given when received, and any notice by
telecopier shall be effective if confirmation of receipt is given by the party
to whom the notice is transmitted.
(b) Lost
or Mutilated Preferred Stock Certificate.
If a
Holder’s Series A Preferred Stock certificate shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated certificate, or in lieu
of
or in substitution for a lost, stolen or destroyed certificate, a new
certificate for the shares of Series A Preferred Stock so mutilated, lost,
stolen or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such certificate, and of the ownership thereof, and indemnity,
if
requested, all reasonably satisfactory to the Company.
(c) Next
Business Day.
Whenever any payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day.
(d) Headings.
The
headings contained herein are for convenience only, do not constitute a part
of
this Statement of Designations and shall not be deemed to limit or affect any
of
the provisions hereof.
(e) Amendment.
This
Statement of Designations may be amended with the approval of the Company’s
board of directors and the consent of the holders of seventy-five percent (75%)
of the outstanding shares of Series A Preferred Stock, except that the 4.9%
Limitation may not be waived.
ANNEX
A
NOTICE
OF
CONVERSION
(TO
BE
EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF SERIES A
PREFERRED STOCK)
The
undersigned hereby elects to convert the number of shares of Series A
Convertible Preferred Stock indicated below, into shares of common stock, par
value $0.001 per share (the “Common
Stock”),
of
China Display Technologies, Inc., a Delaware corporation (the “Company”),
according to the conditions hereof, as of the date written below. If shares
are
to be issued in the name of a person other than undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the Company
in accordance therewith. No fee will be charged to the Holder for any
conversion, except for such transfer taxes, if any.
Conversion
calculations:
|
Date
to Effect Conversion:
________________________________________
|
|
Number
of shares of Common Stock owned prior to Conversion:
_______________
|
|
Number
of shares of Series A Preferred Stock to be Converted:
________________
|
|
Value
of shares of Series A Preferred Stock to be Converted:
____________________
|
|
Number
of shares of Common Stock to be Issued:
___________________________
|
|
Certificate
Number of Series A Preferred Stock attached
hereto:_________________
|
|
Number
of Shares of Series A Preferred Stock represented by attached
certificate:_________
|
| |
| |
|
Number
of shares of Series A Preferred Stock subsequent to Conversion:
________________
|
| |
|
|
| |
[HOLDER]
|
|
|
|
|
|
By: |
|
| |
Name:
|
| |
Title:
|