SECURITIES PURCHASE AGREEMENT BETWEEN LINCOLN INTERNATIONAL CORPORATION AND BARRON PARTNERS LP AND THE OTHER INVESTORS NAMED HEREIN DATED September 12, 2007
Exhibit
99.1
BETWEEN
LINCOLN
INTERNATIONAL CORPORATION
AND
▇▇▇▇▇▇
PARTNERS LP
AND
THE
OTHER INVESTORS NAMED HEREIN
DATED
September
12, 2007
This SECURITIES PURCHASE AGREEMENT (the “Agreement”)
is
made and entered into as of the 12th
day of
September, 2007 between Lincoln
International Corporation,
a
Delaware corporation (the “Company”), and ▇▇▇▇▇▇
Partners LP, a
Delaware limited partnership (“▇▇▇▇▇▇”),
and
any other investors named on the signature page of this Agreement (together
with
▇▇▇▇▇▇, the “Investors”
and
each an “Investor”).
RECITALS:
WHEREAS,
the
Investors wish to purchase from the Company, upon the terms and subject to
the
conditions of this Agreement, for the Purchase Price, as hereinafter defined,
(a) an aggregate of 3,703,704 shares of the Company’s Series A Convertible
Preferred Stock, par value $.0001 per share (“Series
A Preferred Stock”),
with
each share of Series A Preferred Stock being initially convertible into 7.5
shares of the Company’s common stock, par value $.0001 per share (“Common
Stock”),
subject to adjustment, (b) common stock purchase warrants (the “Warrants”)
to
purchase 41,250,000 shares of Common Stock at $.17 1/3 per share, (c) Warrants
to purchase 45,000,000 shares of Common Stock at $.20 per share; and
WHEREAS,
each
Investor is purchasing Series A Preferred Stock and Warrants in the principal
amount set forth in Schedule A of this Agreement; and
WHEREAS,
contemporaneously with the Closing, the Company is acquiring all of the issued
and outstanding capital stock of Keep On Holding Limited, a British Virgin
Islands corporation (“Keep On”), which is the sole stockholder of Suny
Electronics (Shenzhen) Company Limited, a corporation organized under the laws
of the Peoples’ Republic of China (“Suny”); and
WHEREAS,
the
parties intend to memorialize the terms on which the Company will sell to the
Investors and the Investors will purchase the Securities;
NOW,
THEREFORE,
in
consideration of the mutual covenants and premises contained herein, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby conclusively acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
Article
1
INCORPORATION
BY REFERENCE AND DEFINITIONS
1.1
Incorporation
by Reference.
The
foregoing recitals and the Exhibits and Schedules attached hereto and referred
to herein, are hereby acknowledged to be true and accurate, and are incorporated
herein by this reference.
1.2
Supersedes
Other Agreements.
This
Agreement, to the extent that it is inconsistent with any other instrument
or
understanding among the parties, shall supersede such instrument or
understanding to the fullest extent permitted by law. A copy of this Agreement
shall be filed at the Company’s principal office.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
PAGE
1
1.3
Certain
Definitions.
For
purposes of this Agreement, the following capitalized terms shall have the
following meanings (all capitalized terms used in this Agreement that are not
defined in this Article 1 shall have the meanings set forth elsewhere in this
Agreement):
1.3.1 “4.9%
Limitation”
has
the
meaning set forth in Section 2.1.3 of this Agreement.
1.3.2 “1933
Act”
means
the Securities Act of 1933, as amended.
1.3.3 “1934
Act”
means
the Securities Exchange Act of 1934, as amended.
1.3.4 “Affiliate”
means
a
Person or Persons directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with the Person(s) in
question. The term “control,” as used in the immediately preceding sentence,
means, with respect to a Person that is a corporation, the right to the
exercise, directly or indirectly, of more than 50% of the voting rights
attributable to the shares of such controlled corporation and, with respect
to a
Person that is not a corporation, the possession, directly or indirectly, of
the
power to direct or cause the direction of the management or policies of such
controlled Person.
1.3.5 “Articles”
means
the certificate of incorporation of the Company, as the same may be amended
from
time to time.
1.3.6 “Authorized
Stock Proviso”
has
the
meaning set forth in Section 4.4.3 of this Agreement.
1.3.7 “Bylaws”
means
the bylaws of the Company, as the same may be amended from time to
time.
1.3.8 “Certificate
of Designation”
means
the certificate of the rights, preferences and privileges, subject to the
limitations, with respect to the Series A Preferred Stock. The Certificate
of
Designation shall be in substantially the form of Exhibit
A
to this
Agreement; provided, however, that upon the filing of the Restated Certificate
of Incorporation, the Certificate of Designation shall be amended to reflect
the
occurrence of the Reverse Split.
1.3.9 “Closing” means
the
consummation of the transactions contemplated by this Agreement, all of which
transactions shall be consummated contemporaneously with the
Closing.
1.3.10 “Closing
Date”
means
the date on which the Closing occurs.
1.3.11 “Closing
Escrow Agreement”
shall
mean the agreement between the Company, the Investors and the Escrow Agent
pursuant to which securities are deposited into escrow to be held as provided
in
Section 6 of this Agreement. The Closing Escrow Agreement shall be in
substantially the form of Exhibit
B
to this
Agreement.
1.3.12 “Common
Stock”
means
the Company’s common stock, which is presently designated as the common stock,
par value $.001 per share.
1.3.13 “Company’s
Governing Documents”
means
the Articles and Bylaws.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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2
1.3.14 “EBITDA”
means
consolidated earnings before interest, taxes, depreciation and amortization,
determined in accordance with GAAP.
1.3.15 “Escrow
Agreement”
means
the Escrow Agreement dated July , 2007, among the Company, the Investor and
Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, as Escrow Agent.
1.3.16 “Exempt
Issuance”
means
the issuance of (a) shares of Common Stock or options to employees, officers,
directors of and consultants (other than consultants whose services relate
to
the raising of funds) of the Company pursuant to any stock or option plan that
was or may be adopted by a majority of independent members of the Board of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose, (b) securities upon the
exercise of or conversion of any securities issued hereunder and pursuant to
the
Registration Rights Agreement, the Warrants and the Certificate of Designation
and any other options, warrants or convertible securities which are outstanding
on after completion of the Closing, and (c) securities issued pursuant to
acquisitions, licensing agreements, or other strategic transactions, provided
any such issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in a business which the Company’s board of
directors believes is beneficial to the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities.
1.3.17 “GAAP”
means
United States generally accepted accounting principles consistently
applied.
1.3.18 “Independent
Director”
means
a
director who meets the requirements of an independent director under the rule
of
the Nasdaq Stock Market; provided, however, that if the Company’s Common Stock
is listed on the New York or American Stock Exchange, the rules of such exchange
shall apply.
1.3.19 “Material
Adverse Effect”
means
any adverse effect on the business, operations, properties or financial
condition of the Company or any of its Subsidiaries that is material and adverse
to the Company and its Subsidiaries taken as a whole and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company or any Subsidiary to perform any of its material
obligations under this Agreement, the Registration Rights Agreement or the
Warrants or to perform its obligations under any other material agreement.
1.3.20 “Delaware
Law”
shall
mean the Delaware General Corporation Law.
1.3.21 “Net
Income”
means
net income
determined in accordance with GAAP plus (a) any charges relating to the
transaction contemplated by this Agreement and the Registration Rights
Agreement, minus (b) the amount, if any, by which all non-recurring losses
or
expenses exceed all non-recurring items or income or gain.
Net
Income shall not be adjusted if all non-recurring items of income or gain exceed
all non-recurring losses or expenses. Items shall be deemed to be non-recurring
only if they qualify as non-recurring pursuant to GAAP.
1.3.22 “Person”
means
an individual, partnership, firm, limited liability company, trust, joint
venture, association, corporation, or any other legal entity.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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1.3.23 “Preferred
Stock”
means
the preferred stock, par value $.001 per share.
1.3.24 “Purchase
Price”
means
the four million dollars ($4,000,000) to be paid by the Investors to the Company
for the Securities.
1.3.25 “Registration
Rights Agreement”
means
the registration rights agreement between the Investor and the Company in
substantially the form of Exhibit
C
to this
Agreement.
1.3.26 “Registration
Statement”
means
the registration statement under the 1933 Act to be filed with the SEC for
the
registration of the Shares pursuant to the Registration Rights
Agreement.
1.3.27 “Restated
Certificate”
means
the restated certificate of incorporation which is in substantially the form
of
Exhibit
D
to this
Agreement.
1.3.28 “Restricted
Stockholders”
shall
have the meaning set forth in Section 6.16 of this Agreement.
1.3.29 “Restriction
Termination Date”
shall
mean the date on which the Investors shall have (a) converted all shares of
Series A Preferred Stock and exercised all Warrants (other than Warrants that
shall have expired unexercised) and (b) sold the underlying Shares in the public
market or otherwise pursuant to a registration statement.
1.3.30 “Restriction
Termination Date at 90%”
shall
mean the date on which the Investors shall have (a) converted shares of Series
A
Preferred Stock and exercised Warrants (other than Warrants that shall have
expired unexercised) and (b) sold 90% of the Total Shares.
1.3.31 “Reverse
Split”
shall
mean the one-for-7.5 reverse split of the Common Stock which was approved by
the
Company’s board of directors and will be reflected in the Restated
Certificate.
1.3.32 “Rule
144”
means
Rule 144 of the SEC pursuant to the 1933 Act, as the same may be amended from
time to time.
1.3.33 “Securities”
means
the shares of Series A Preferred Stock, the Warrants and the
Shares.
1.3.34 “SEC”
means
the Securities and Exchange Commission.
1.3.35 “SEC
Documents”
means,
at any given time, the Company’s latest Form 10-K or Form 10-KSB and all Forms
10-Q or 10-QSB and 8-K and all proxy statements or information statements filed
between the date the most recent Form 10-K or Form 10-KSB was filed and the
date
as to which a determination is being made.
1.3.36 “Series
A Preferred Stock”
means
the shares of Series A Preferred Stock having the rights, preferences and
privileges and subject to the limitations set forth in the Certificate of
Designation.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
PAGE
4
1.3.37 “Shares”
means,
collectively, the shares of Common Stock issued or issuable (i) upon conversion
of the Series A Preferred Stock and (ii) upon exercise of the
Warrants.
1.3.38 “Subsequent
Financing”
means
any offer and sale of shares of Preferred Stock or debt that is initially
convertible into shares of Common Stock or otherwise senior or superior to
the
Series A Preferred Stock.
1.3.39 “Subsidiary”
means
an entity in which the Company and/or one or more other Subsidiaries directly
or
indirectly own either 50% of the voting rights or 50% of the equity
interests.
1.3.40 “Target
Number”
has
the
meaning set forth in Section 6.15.2 of this Agreement.
1.3.41 “Total
Shares”
means
the number of shares of Common Stock as are issuable upon conversion of the
Series A Preferred Stock, such number to be determined as if the Series A
Preferred Stock is never converted into shares of Common Stock. Based on the
initial conversion price, as defined in the Certificate of Designation, which
is
$0.144 per share (and will become $1.08 per share after giving effect to the
Reverse Split), and the number of Warrants included in the Securities, the
Total
Shares shall be 114,027,780 shares of Common Stock prior to the Reverse Split
and 15,203,704 shares of Common Stock after giving effect to the Reverse Split.
The number of Total Shares shall be adjusted to reflect any change in the
conversion price of the Series A Preferred Stock, the expiration of any
Warrants, and the issuance of any additional shares pursuant to Section 6.15
of
this Agreement.
1.3.42 “Transaction
Documents”
means
this Agreement, all Schedules and Exhibits attached hereto, the Certificate
of
Designation, the Warrants, the Registration Rights Agreement, the Closing Escrow
Agreement and all other documents and instruments to be executed and delivered
by the parties in order to consummate the transactions contemplated
hereby.
1.3.43 “Warrants”
means
the common stock purchase warrants in substantially the forms of Exhibits
E-1 and E-2
to this
Agreement.
1.4 Effect
of Reverse Split.
All
references to numbers of shares of Common Stock reflect the Reverse Split,
regardless of whether the Reverse Split has occurred at the date as to which
such reference relates unless otherwise expressly provided in this
Agreement.
1.5 References.
All
references in this Agreement to “herein” or words of like effect, when referring
to preamble, recitals, article and section numbers, schedules and exhibits
shall
refer to this Agreement unless otherwise stated.
1.6 Value
of Series A Preferred Stock.
Whereever this Agreement provides for the delivery of shares of Series A
Preferred Stock is satisfaction of an obligation under this Agreement, a share
of Series A Preferred Stock shall have a value equal to its liquidation
preference as set forth in the Certificate of Designation.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
PAGE
5
Article
2
SALE
AND PURCHASE OF NOTES; PURCHASE PRICE
2.1 Sale
of Securities.
2.1.1 Upon
the
terms and subject to the conditions set forth herein, and in accordance with
applicable law, the Company agrees to sell to the Investors, and each Investor
severally agrees to purchase from the Company, on the Closing Date, the Shares
of Series A Preferred Stock and Warrants set forth after the Investor’s name on
Schedule A to this Agreement for that portion of the Purchase Price as is set
forth on said Schedule A. At or prior to the Closing each Investor shall wire
the Investor’s portion of the Purchase Price to the Escrow Agent, who shall
release the Purchase Price to the Company upon receipt of instructions from
the
Investor and the Company as provided in the Escrow Agreement. The Company shall
cause the shares of Series A Preferred Stock and Warrants to be issued to the
Investors upon the release of the Purchase Price to the Company by the Escrow
Agent pursuant to the terms of the Closing Escrow Agreement.
2.1.2 The
Series A Preferred Stock shall be convertible into Common Stock in the manner
set forth in the first introductory paragraph of this Agreement, all as set
forth in the Certificate of Designation.
2.1.3 Except
as
expressly provided in the Certificate of Designation and the Warrants, an
Investor shall not be entitled to convert the Series A Preferred
Stock
into
shares of Common Stock or to exercise the Warrants to the extent that such
conversion or exercise would result in beneficial ownership by the Investor
and
its Affiliates of more than 4.9% of the then outstanding number of shares of
Common Stock on such date after giving effect to such conversion or exercise.
For the purposes of this Agreement beneficial ownership shall be determined
in
accordance with Section 13(d) of the 1934 Act, and Regulation 13d-3 thereunder.
The limitation set forth in this Section 2.1.3 is referred to as the
“4.9%
Limitation.”
Article
3
CLOSING
DATE AND DELIVERIES AT CLOSING
3.1 Closing
Date.
The
Closing of the transactions contemplated by this Agreement, unless expressly
determined herein, shall be held at the offices of the Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 2:00 P.M. local time,
on
the Closing Date or on such other date and at such other place as may be
mutually agreed by the parties, including closing by facsimile with originals
to
follow.
3.2 Deliveries
by the Company.
In
addition to and without limiting any other provision of this Agreement, the
Company agrees to deliver, or cause to be delivered, to the escrow agent under
the Escrow Agreement, the following:
(a) At
or
prior to Closing, an executed Agreement with all exhibits and schedules attached
hereto;
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
PAGE
6
(b) At
the
Closing, certificates for the Series A Preferred Stock in the names of the
Investors for the number of shares set forth in Schedule A to this
Agreement;
(c) At
the
Closing, Warrant in the names of the Investors to purchase the number of shares
of Common Stock set forth in Schedule A to this Agreement;
(d) The
executed Registration Rights Agreement;
(e) The
executed Closing Escrow Agreement;
(f) Copies
of
all SEC correspondence since last Form 10-KSB and any correspondence which
was
issued prior to the last Form 10-KSB which has not been resolved to the
satisfaction of the SEC, other than SEC correspondence which is available on
▇▇▇▇▇.
(g) Schedule
of all amounts owed (cash and stock) to officers, consultants and key employees
(salary, bonuses, etc.).
(h) Certifications
in form and substance acceptable to the Company and the Investors from any
and
all brokers or agents involved in the transactions contemplated hereby as to
the
amount of commission or compensation payable to such broker or agent as a result
of the consummation of the transactions contemplated hereby and from the Company
or Investor, as appropriate, to the effect that reasonable reserves for any
other commissions or compensation that may be claimed by any broker or agent
have been set aside;
(i) Management
letter from the Company’s registered independent accounting firm or confirmation
from such firm that no such letter were issued in connection with the Company’s
most recent audit;
(j) Evidence
of approval of the Transaction Documents and the transactions contemplated
hereby and thereby by the Company’s Board of Directors;
(k) Evidence
of approval of the Restated Certificate by the Company’s Board of Directors and
the holders of a majority of the outstanding shares of Common
Stock;
(l) Evidence
of the filing of the Certificate of Designation with the Secretary of State
of
the State of Delaware;
(m) Evidence
that the Company has acquired all of the capital stock of Keep On, and that
Keep
On is the sole stockholder of Suny.
(n) Agreements
from the Restricted Stockholders pursuant to Section 6.16 of this
Agreement;
(o) Good
standing certificate from the Secretary of State of the State of
Delaware;
(p) Copy
of
the Company’s Articles, as currently in effect, certified by the Secretary of
State of the State of Delaware.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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(q) An
opinion from the Company’s counsel, concerning the Transaction Documents and the
transactions contemplated hereby in form and substance reasonably acceptable
to
Investors;
(r) The
executed disbursement instructions pursuant to the Escrow Agreement, which
shall
provide that the Escrow Agent continue to hold $150,000 to pay the Company’s
anticipated obligations to its investor relations company;
(s) Copies
of
all executive employment agreements, all past and present financing
documentation or other documentation where stock could potentially be issued
or
issued as payment, all past and present litigation documents;
(t) Copies
of
the non-competition agreements provided in Section 4.17 of this Agreement;
and
(u) Such
other documents or certificates as shall be reasonably requested by Investors
or
their counsel.
3.3 Deliveries
by Investors.
In
addition to and without limiting any other provision of this Agreement, the
Investors agree to deliver, or cause to be delivered, to the Escrow Agent under
the Escrow Agreement, the following:
(a) A
deposit
from each Investor as to the Investor’s portion of the Purchase
Price;
(b) The
executed Agreement with all Exhibits and Schedules attached hereto;
(c) The
executed Registration Rights Agreement;
(d) The
executed Closing Escrow Agreement;
(e) The
executed disbursement instructions pursuant to the Escrow Agreement;
and
(f) Such
other documents or certificates as shall be reasonably requested by the Company
or its counsel.
3.4 Delivery
of Original Documents.
In the
event any document provided to the other party in Paragraphs 3.2 and 3.3 herein
are provided by facsimile, the party shall forward an original document to
the
other party within seven (7) business days.
3.5 Further
Assurances.
The
Company and each Investor shall, upon request, on or after the Closing Date,
cooperate with each other (specifically, the Company shall cooperate with the
Investors, and each Investor shall cooperate with the Company) by furnishing
any
additional information, executing and delivering any additional documents and/or
other instruments and doing any and all such things as may be reasonably
required by the parties or their counsel to consummate or otherwise implement
the transactions contemplated by this Agreement.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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3.6 Waiver.
An
Investor may waive any of the requirements of Section 3.2 of this Agreement,
and
the Company may waive any of the provisions of Section 3.3 of this Agreement.
The Investors may also waive any of the requirements of the Company under the
Escrow Agreement.
Article
4
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to the Investors as of the date hereof and
as of
Closing Date (which warranties and representations shall survive the Closing
regardless of any examinations, inspections, audits and other investigations
the
Investors have heretofore made or may hereinafter make with respect to such
warranties and representations) as follows:
4.1 Organization
and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has the requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted and is duly qualified to do business
in
any other jurisdiction by virtue of the nature of the businesses conducted
by it
or the ownership or leasing of its properties, except where the failure to
be so
qualified will not, when taken together with all other such failures, have
a
Material Adverse Effect on the business, operations, properties, assets,
financial condition or results of operation of the Company and its subsidiaries
taken as a whole.
4.2 Company’s
Governing Documents.
The
complete and correct copies of the Company’s Governing Documents (a) have been
provided to the Investor and (b) have been filed with the SEC in accordance
with
the regulations of the SEC and (c) will be in full force and effect on the
Closing Date.
4.3 Capitalization.
4.3.1 The
authorized and outstanding capital stock of the Company as of the date of this
Agreement and as adjusted to reflect the issuance and sale of the Securities
pursuant to this Agreement is set forth in Schedule 4.3.l to this Agreement.
Schedule 4.3.1 lists all shares and potentially dilutive events, including
shares issuable pursuant to employment, consulting and other services
agreements, acquisition agreements, options and equity-based incentive plans,
debt securities, convertible securities, financing or business relationships
as
well as each agreement, plan, arrangement or understanding pursuant to which
any
shares of any class of capital stock may be issued, a copy of each of which
has
been provided to the Investors.
4.3.2 All
shares of capital stock described above to be issued have been duly authorized
and when issued, will be validly issued, fully paid and non-assessable and
free
of preemptive rights.
4.3.3 Except
pursuant to this Agreement and as set forth in Schedule 4.3.1, there are not
now
outstanding options, warrants, rights to subscribe for, calls or commitments
of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of any class of capital stock of the Company, or
agreements, understandings or arrangements to which the Company is a party,
or
by which the Company is or may be bound, to issue additional shares of its
capital stock or options, warrants, scrip or rights to subscribe for, calls
or
commitment of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of any class of its capital
stock. The Company agrees to inform the Investors in writing of any additional
warrants granted prior to the Closing Date.
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PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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4.4 Authority.
4.4.1 The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, the Series A Preferred Stock and Warrants issuable pursuant
to
this Agreement, the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock and upon exercise of the Warrants, the Registration
Rights Agreement, the Closing Escrow Agreement and any other Transaction
Documents to which the Company is a party, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, the Securities issuable
pursuant to this Agreement and upon conversion of the Series A Preferred Stock
and exercise of the Warrant, the Registration Rights Agreement, the Closing
Escrow Agreement and any other Transaction Documents to which the Company is
a
party have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company is necessary to authorize
this
Agreement or to consummate the transactions contemplated hereby and thereby
except as disclosed in this Agreement. This Agreement has been duly executed
and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency and other
laws
of general application affecting the enforcement of creditors’ rights and except
that any the granting of equitable relief is in the discretion of the
court.
4.4.2 Series
A
Preferred Stock will, when issued pursuant to this Agreement, be duly and
validly authorized and issued, fully paid and non-assessable and the Warrants
will be the valid and binding obligations of the Company, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency and other laws of general application affecting the
enforcement of creditors’ rights and except that any the granting of equitable
relief is in the discretion of the court. The Common Stock issuable upon
conversion of the Series A Preferred Stock and exercise of the Warrants issuable
pursuant to this Agreement will, when so issued, be duly and validly authorized
and issued, fully paid and non-assessable. All such Securities, when so issued,
will be free and clear of all liens, charges, claims, options, pledges,
restrictions, preemptive rights, rights of first refusal and encumbrances
whatsoever (other than those incurred by the Investor).
4.4.3 Notwithstanding
any contrary representations and warranties, no
representation is made with respect to the ability of any Investor to convert
the Series A Preferred Stock or exercise any Warrant if and to the extent that
the conversion price of the Series A Preferred Stock, as defined in the
Certificate of Designation, or the number of Shares issuable upon exercise
of
the Warrants would result in the issuance of a number of shares of Common Stock
which is greater than the amount by which the authorized Common Stock exceeds
the sum of the outstanding Common Stock and the shares of Common Stock reserved
for issuance pursuant to outstanding agreements and outstanding options,
warrants, rights, convertible securities and other securities upon the exercise
or conversion of which or pursuant to the terms of which additional shares
of
Common Stock may be issuable (the foregoing proviso being referred to as the
“Authorized
Stock Proviso”).
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4.5 No
Conflict; Required Filings and Consents.
Neither
the execution and delivery of this Agreement by the Company nor the issuance
of
the Securities as contemplated by this Agreement, nor any other Transaction
Documents, nor the performance by the Company of its obligations hereunder
and
thereunder will: (i) conflict with or violate the Company’s or any Subsidiary’s
Governing Instruments; (ii) conflict with, breach or violate any federal, state,
foreign (including the Peoples’ Republic of China) or local law, statute,
ordinance, rule, regulation, order, judgment or decree (collectively,
“Laws”)
in
effect as of the date of this Agreement and applicable to the Company or any
Subsidiary; or (iii) result in any breach of, constitute a default (or an event
that with notice or lapse of time or both would become a default) under, give
to
any other entity any right of termination, amendment, acceleration or
cancellation of, require payment under, or result in the creation of a lien
or
encumbrance on any of the properties or assets of the Company or any Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any of their respective properties or assets is bound, other than such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens that would not, in the aggregate, have a Material Adverse
Effect
except
to the extent that stockholder approval may be required as a result of the
Authorized Stock Proviso, in which event, the Company will seek stockholder
approval to an increase in the authorized Common Stock sufficient to enable
the
Company to be in compliance with this Section 4.5..
4.6 Report
and Financial Statements.
4.6.1 The
consolidated financial statements of Keep On, Suny and Suny’s Subsidiaries for
the years ended December 31, 2006 and 2005, including consolidated balance
sheets, statements of operations, stockholders’ equity and cash flows, together
with the notes thereon, certified by ▇▇▇▇▇▇▇▇ & Company Certified Public
Accountants, P.C. (“▇▇▇▇▇▇▇▇”),
the
Company’s independent registered accounting firm, together with the unaudited
consolidated financial statements for the six months ended June 30, 2007 and
2007, consisting of a balance sheet at June 30, 2007, statement of stockholders’
equity for the six months ended June 30, 2007, and statements of operations
and
cash flows for the six months ended June 30, 2007 and 2006, which have been
reviewed by ▇▇▇▇▇▇▇▇ have been delivered to the Investors. Each of the
consolidated balance sheets fairly presents the financial position of the Keep
On, Suny and Suny’s Subsidiaries, as of its date, and each of the consolidated
statements of income, stockholders’ equity and cash flows (including any related
notes and schedules thereto) fairly presents the results of operations, cash
flows and changes in stockholders’ equity, as the case may be, of Keep On, Suny
and Suny’s Subsidiaries for the periods to which they relate, in each case in
accordance with GAAP consistently applied during the periods involved. The
▇▇▇▇▇▇▇▇ is independent as to the Company, Keep On, Suny and Suny’s Subsidiaries
in accordance with the rules and regulations of the SEC. The books and records
of the Keep On, Suny and Suny’s Subsidiaries have been, and are being,
maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only actual
transaction. Neither Keep On nor Suny has received any advice from the ▇▇▇▇▇▇▇▇
to the effect that there is any significant deficiency or material weakness
in
the Keep On’s or Suny’s controls or recommending any corrective action on the
part of Keep On, Suny or any Subsidiary. Neither Keep On, Suny nor Suny’s
Subsidiaries has any contingent liability which is not reflected in the
financial statements.
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4.6.2 The
Company’s Form 10-KSB for the year ended July 31, 2006, contains the audited
financial statements of the Company, certified by Sherb & Co., LLP,
(“Sherb”),
the
Company’s independent registered accounting firm, and the Company’s Form 10-QSB
for the quarter ended April 30, 2007 contains the unaudited financial statements
of the Company which have been reviewed by Sherb. The balance sheets fairly
present the financial position of the Company, as of their respective dates,
and
each of the consolidated statements of income, stockholders’ equity and cash
flows (including any related notes and schedules thereto) fairly presents the
results of operations, cash flows and changes in stockholders’ equity, as the
case may be, of the Company for the periods to which they relate, in each case
in accordance with GAAP consistently applied during the periods involved. Sherb
is independent as to the Company in accordance with the rules and regulations
of
the SEC. The books and records of the Company have been, and are being,
maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only actual
transaction. The Company has not received any letters of comments from the
SEC
relating to any filing made by the Company with the SEC which has not been
addressed by an amended filing, and each amended filing fully responds to the
questions raised by the staff of the SEC. The Company maintains disclosure
controls and procedures that are effective to ensure that information required
to be disclosed by the Company in its annual and quarterly reports filed with
the SEC is accumulated and communicated to the Company’s management, including
its principal executive and financial officers as appropriate, to allow timely
decisions regarding required disclosure. There were no significant changes
in
the Company’s internal controls or other factors that could significantly affect
such controls subsequent to December 31, 2006. The Company has not received
any
advice from Sherb to the effect that there is any significant deficiency or
material weakness in the Company’s controls or recommending any corrective
action on the part of the Company or any Subsidiary. The Company does not have
any contingent liabilities.
4.7 Compliance
with Applicable Laws.
Neither
the Company nor any Subsidiary is in violation of, or, to the knowledge of
the
Company is under investigation with respect to or has been given notice or
has
been charged with the violation of, any Law of a governmental agency, except
for
violations which individually or in the aggregate do not have a Material Adverse
Effect.
4.8 Brokers.
No
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the transactions contemplated by
this
Agreement based upon arrangements made by or on behalf of the
Company.
4.9 SEC
Documents.
The
Investors acknowledge that the Company is a publicly held company and has made
available to the Investors upon request true and complete copies of any
requested SEC Documents. The Company’s Common Stock is registered pursuant to
Section 12(d) of the 1934 Act. The Common Stock is quoted and traded on the
OTC
Bulletin Board of the National Association of Securities Dealers, Inc. The
Company has received no notice, either oral or written, with respect to the
continued quotation or trading of the Common Stock on the OTC Bulletin Board.
The Company has not provided to any Investor any information that, according
to
applicable law, rule or regulation, should have been disclosed publicly prior
to
the date hereof by the Company, but which has not been so disclosed. As of
their
respective dates, the SEC Documents complied in all material respects with
the
requirements of the 1934 Act, and rules and regulations of the SEC promulgated
thereunder and the SEC Documents did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
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4.10 Litigation.
To the
knowledge of the Company, no litigation, claim, or other proceeding before
any
court or governmental agency is pending or to the knowledge of the Company,
threatened against the Company, the prosecution or outcome of which may have
a
Material Adverse Effect.
4.11 Employment
Agreements.
The
Company has listed on Schedule 4.11 each employment agreement between Keep
On,
Suny or any Subsidiary and any officer or director and has provided the
Investors with a true and correct English translation of each employment
agreement listed in said Schedule 4.11. The Company does not have any agreement
or understanding with any officer or director on Schedule 4.11.
4.12 Exemption
from Registration.
Subject
to the accuracy of the Investors’ representations in Article V of this
Agreement, except as required pursuant to the Registration Rights Agreement,
the
sale of the Series a Preferred Stock and Warrants by the Company to the
Investors will not require registration under the 1933 Act. When issued upon
conversion of the Series A Preferred Stock or upon exercise of the Warrants
in
accordance with their terms, the Shares underlying the Preferred Stock and
the
Warrants will be duly and validly authorized and issued, fully paid, and
non-assessable. The Company is issuing the Series A Preferred Stock and the
Warrants in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D as promulgated
by the SEC under the 1933 Act, and/or Section 4(2) of the 1933 Act; provided,
that filings may be required pursuant to state securities or “blue sky”
laws.
4.13 No
General Solicitation or Advertising in Regard to this
Transaction.
Neither
the Company nor any of its Affiliates nor, to the knowledge of the Company,
any
Person acting on its or their behalf (i) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation D as
promulgated by the SEC under the ▇▇▇▇ ▇▇▇) or general advertising with respect
to the sale of the Preferred Stock or Warrants, or (ii) made any offers or
sales
of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Series A Preferred Stock,
Common Stock or Warrants, under the 1933 Act, except as required
herein.
4.14 No
Material Adverse Effect.
Since
June 30, 2007, no event or circumstance resulting in a Material Adverse Effect
has occurred or exists with respect to the Company, Keep On or Suny or their
Subsidiaries. No material supplier or customer has given notice, oral or
written, that it intends to cease or reduce the volume of its business with
Keep
On or Suny or their Subsidiaries from historical levels. Since June 30, 2007,
no
event or circumstance has occurred or exists with respect to Keep On or Suny
or
their Subsidiaries or their respective businesses, properties, prospects,
operations or financial condition, that, under any applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed in
writing to the Investor.
4.15 Material
Non-Public Information.
The
Company has not disclosed to the Investors any material non-public information
that (i) if disclosed, would reasonably be expected to have a material effect
on
the price of the Common Stock or (ii) according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the
date
hereof but which has not been so disclosed.
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4.16 Internal
Controls And Procedures.
The
Company, Keep On, Suny and their Subsidiaries maintain books and records and
internal accounting controls which provide reasonable assurance that (i) all
transactions to which the Company, Keep On or Suny or their Subsidiaries is
a
party or by which their respective its properties are bound are executed with
management’s authorization; (ii) the recorded accounting of the Company’s, Keep
On or Suny or their Subsidiaries consolidated assets is compared with existing
assets at regular intervals; (iii) access to the Company’s, Keep On’s or Suny’s
or their Subsidiaries consolidated assets is permitted only in accordance with
management’s authorization; and (iv) all transactions to which the Company, Keep
On or Suny or any Subsidiary is a party or by which any of their respective
properties are bound are recorded as necessary to permit preparation of the
financial statements of the Company, Keep On and Suny in accordance with
GAAP.
4.17 Non-Competition
Agreement.
Each of
the Company’s executive officers shall have entered into an agreement with the
Company pursuant to which they agree that, to the maximum extent permitted
by
law, the Company’s executive officers shall not be involved in any business
venture, whether as an officer, director, partner, manager, lender, guarantor,
consultant or any other capacity in any business which competes with or is
similar in nature to the Company in China. To the extent that the provisions
of
this Section 4.17 are not enforceable under applicable law, the non-competition
agreement shall provide that it shall be deemed to restrict the executive
officers only to the maximum extent permitted by law. A copy of a true and
correct English translation of each of these agreements has been provided to
the
Investors.
4.18 Full
Disclosure.
No
representation or warranty made by the
Company in
this
Agreement and no certificate or document furnished or to be furnished to the
Investor pursuant to this Agreement contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not
misleading.
Article
5
REPRESENTATIONS
AND WARRANTIES OF THE INVESTORS
Each
Investor severally and not jointly represents and warrants to the Company
that:
5.1 Organization
of the Investors.
The
state in which any offer to purchase shares hereunder was made or accepted
by
such Investor is the state shown as such Investor’s address. The Investor was
not formed for the purpose of investing solely in the Securities. Any Investor
that is a limited partnership, limited liability company, corporation, trust
or
other entity is duly organized, validly existing and in good standing under
the
laws of the state or other jurisdiction of its organization.
5.2 Authorization
and Power.
The
Investor has the requisite power and authority to enter into and perform this
Agreement and to purchase the securities being sold to it hereunder. The
execution, delivery and performance of this Agreement by the Investor and the
consummation by the Investor of the transactions contemplated hereby have been
duly authorized by all necessary partnership action where appropriate. This
Agreement, the Registration Rights Agreement and the Closing Escrow Agreement
have been duly executed and delivered by such Investor and at the Closing shall
constitute valid and binding obligations of such Investor enforceable against
the Investor in accordance with their terms, except as such enforceability
may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.
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5.3 No
Conflicts.
The
execution, delivery and performance of this Agreement and the consummation
by
such Investor of the transactions contemplated hereby or relating hereto do
not
and will not (i) result in a violation of such Investor’s charter documents or
bylaws where appropriate or (ii) conflict with, or constitute a default (or
an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which such Investor
is
a party, or result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to such
Investor or its properties (except for such conflicts, defaults and violations
as would not, individually or in the aggregate, have a Material Adverse Effect
on such Investor). The Investor is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or
governmental agency in order for it to execute, deliver or perform any of such
Investor’s obligations under this Agreement or to purchase the securities from
the Company in accordance with the terms hereof, provided that for purposes
of
the representation made in this sentence, the Investor is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
5.4 Financial
Risks.
Such
Investor acknowledges that such Investor is able to bear the financial risks
associated with an investment in the securities being purchased by such Investor
from the Company and that it has been given full access to such records of
the
Company and its Subsidiaries and to the officers of the Company and its
Subsidiaries as it has deemed necessary or appropriate to conduct its due
diligence investigation. Such Investor is capable of evaluating the risks and
merits of an investment in the securities being purchased by the Investor from
the Company by virtue of its experience as an investor and its knowledge,
experience, and sophistication in financial and business matters and the
Investor is capable of bearing the entire loss of its investment in the
securities being purchased by the Investor from the Company.
5.5 Accredited
Investor.
The
Investor is (i) an “accredited investor” as that term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act by reason of Rule 501(a)(3) and
(6),
(ii) experienced in making investments of the kind described in this Agreement
and the related documents, (iii) able, by reason of the business and financial
experience of its officers (if an entity) and professional advisors (who are
not
affiliated with or compensated in any way by the Company or any of its
affiliates or selling agents), to protect its own interests in connection with
the transactions described in this Agreement, and the related documents, and
(iv) able to afford the entire loss of its investment in the securities being
purchased by the Investor from the Company.
5.6 Brokers.
No
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or Commission in connection with the transactions contemplated by
this
Agreement based upon arrangements made by or on behalf of such Investor. Such
Investor understands that any obligations under agreements or arrangements
with
brokers disclosed in Schedule 4.8 are obligations of the Company.
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5.7 Knowledge
of Company.
Such
Investor and such Investor’s advisors, if any, have been, upon request,
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the securities
being purchased by such Investor from the Company. Such Investor and such
Investor’s advisors, if any, have been afforded the opportunity to ask questions
of the Company and have received complete and satisfactory answers to any such
inquiries.
5.8 Risk
Factors.
Each
Investor understands that such Investor’s investment in the securities being
purchased by such Investor from the Company involves a high degree of risk.
Such
Investor understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the securities being purchased by the Investor from the Company.
Such Investor warrants that such Investor is able to bear the complete loss
of
such Investor’s investment in the securities being purchased by the Investor
from the Company.
5.9 Full
Disclosure.
No
representation or warranty made by such Investor in this Agreement and no
certificate or document furnished or to be furnished to the Company pursuant
to
this Agreement contains or will contain any untrue statement of a material
fact,
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading. Except as set forth or referred
to
in this Agreement, Investor does not have any agreement or understanding with
any person relating to acquiring, holding, voting or disposing of any equity
securities of the Company.
Article
6
COVENANTS
OF THE COMPANY
6.1 Registration
Rights.
The
Company shall cause the Registration Rights Agreement to remain in full force
and effect according to the provisions of the Registration Rights Agreement,
and
the Company shall comply in all material respects with the terms thereof. Except
as set forth on Schedule 6.1 to this Agreement, (a) the Company does not have
any agreement or obligation which would enable any Person to include securities
in any registration statement required to be filed on behalf of the Investors
pursuant to the Registration Rights Agreement and will not take any action
which
will give any Person any right to include securities in any such registration
statement, (b) no Person has any demand or piggyback registration right with
respect to any securities of the Company, and (c) the Company will not file
any
registration statement covering any shares of Common Stock issuable to any
officers, directors, Affiliates of or consultants to the Company until the
earlier of (a) thirty (30) months from the Closing Date or (b) the Restriction
Termination Date at 90%; provided, however, that the Company may file a
registration statement on Form S-8 for shares issued or issuable pursuant to
employee stock option or long-term incentive plans for employees who are not
officers, directors or Affiliates of the Company.
6.2 Reservation
of Common Stock.
As of
the date hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights, number
of
shares of Common Stock issuable from time to time upon conversion of the Series
A Preferred Stock and exercise of the Warrants.
6.3 Compliance
with Laws.
The
Company hereby agrees to comply in all respects with the Company’s reporting,
filing and other obligations under the Laws.
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6.4 Exchange
Act Registration.
The
Company will continue its obligation to report to the SEC under Section 15(d)
of
the 1934 Act and will, within ninety (90) days after the Closing, register
the
Common Stock under Section 12 of the 1934 Act and will use its best efforts
to
comply in all respects with its reporting and filing obligations under the
1934
Act, and will not take any action or file any document (whether or not permitted
by the 1934 Act or the rules thereunder) to terminate or suspend any such
registration or to terminate or suspend its reporting and filing obligations
under the 1934 until the Investors have disposed of all of their
Shares.
6.5 Corporate
Existence; No Conflicting Agreements.
The
Company will take all steps necessary to preserve and continue the corporate
existence of the Company. The Company shall not enter into any agreement, the
terms of which agreement would restrict or impair the right or ability of the
Company to perform any of its obligations under this Agreement or any of the
Transaction Documents.
6.6 Listing,
Securities Exchange Act of 1934 and Rule 144
Requirements.
6.6.1 The
Company shall not take any action which would cause its Common Stock not to
be
traded on the OTC Bulletin Board, except that the Company may list the Common
Stock on the Nasdaq Stock Market or the American or New York Stock Exchange
if
it meets the applicable listing requirements. The Company shall continue to
maintain its status as a company registered under the ▇▇▇▇ ▇▇▇.
6.6.2 If,
for
any time after the Closing, the Company is no longer in compliance with this
Section 6.6, then the Company shall pay to the Investors as liquidated damages
and not as a penalty, an amount equal to fifteen percent (15%) per annum, based
on the lesser of (a) the Purchase Price or (b) that percentage of the Purchase
Price which the Unsold Shares bears to the number of shares of Common Stock
initially issuable upon conversion of the Series A Preferred Stock sold pursuant
to this Agreement. The Unsold Shares shall mean shares of Series A Preferred
Stock with respect to which both (i) the Series A Preferred Stock has not been
converted and (ii) the underlying shares of Common Stock have not been sold
or
otherwise transferred pursuant to a registration statement or Rule 144. The
liquidated damages shall be payable in cash or in shares of Series A Preferred
Stock, as the Company shall determine. Such
damages shall be payable quarterly on the tenth (10th)
day of
the following calendar quarter, and shall cease at the time the Company begins
complying with the provisions of this Section 6.6.
6.7 No
Convertible Debt or Preferred Stock.
On
or
prior to the Closing Date, the Company will cause to be cancelled or paid all
convertible debt in the Company. Until the earlier of (a) five years from the
Closing Date or (b) the Restriction Termination Date, the Company will not
issue
any convertible debt or any shares of any class or series of Preferred Stock
except as contemplated by this Agreement.
6.8 Debt
Limitation.
The
Company agrees until the earlier of (a) three years after Closing Date or (b)
the Restriction Termination Date at 90%, it will not have outstanding any debt
in an amount greater than twice as the sum of the EBITDA from continuing
operations for the past four quarters.
6.9 Reset
Equity Deals.
On
or
prior to the Closing Date, the Company will cause to be cancelled any and all
reset features related to any shares outstanding that could result in additional
shares being issued. Until the earlier of (a) five years from the Closing Date
or (b) the Restriction Termination Date, the Company will not enter into any
transactions that have any reset features that could result in additional shares
being issued.
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6.10 Independent
Directors.
6.10.1 The
Company shall have caused the appointment of the majority of the board of
directors to be Independent Directors not
later
than the ninety (90) days after the Closing Date.
6.10.2 If,
at
any time subsequent to ninety (90) days after the Closing Date until the earlier
of (a) three years from the Closing or (b) the Restriction Termination Date
at
90%, the board of directors shall not be composed of a majority of Independent
Directors:
6.10.2.1 for
a
reason other than for an Excused Reason, the Company shall have 60 days to
take
such steps as are necessary so that a majority of the Company’s directors are
Independent Directors, and
6.10.2.2 for
an
Excused Reason, the Company shall have 75 days from the date that the Company
becomes aware of the event (or the last event if there are more than one such
event) giving rise to the Excused Reason, to take such steps as are necessary
so
that a majority of the Company’s directors are Independent
Directors.
6.10.3 The
term
“Excused Reason” shall mean the death or resignation of an Independent Director
or the occurrence of an event whereby an Independent Director ceases to be
independent.
6.10.4 From
and
after the Closing Date, the Company shall have a chief financial officer who
speaks and understands both English and Chinese and is familiar with GAAP (a
“qualified CFO”), who may serve on a part time basis until three months after
the Closing Date, by which time the Company shall have a full-time qualified
CFO. In the event that at any time subsequent to the Closing Date the Company
fails to have a qualified CFO, the Company shall, within 60 days from the date
that the Company ceases to have a qualified CFO, hire a qualified CFO. If the
Company shall not be able to hire a qualified CFO promptly upon the resignation
or termination of employment of the former chief financial officer, the Company
may engage an accountant or accounting firm to perform the duties of the chief
financial officer until a qualified CFO can be hired. In no event shall the
Company either (i) fail to file an annual, quarter or other report in a timely
manner because of the absence of a qualified CFO, or (ii) not have a person
who
can make the statements and sign the certifications required to be filed in
an
annual or quarterly report under the ▇▇▇▇ ▇▇▇.
6.10.5 If,
during the period referred to in Section 6.10.2 of this Agreement, the Company
shall have failed to have a board of directors composed of a majority of
Independent Directors after the date by which such situation was to have been
cured pursuant to Section 6.10.2.1 or Section 6.10.2.2 of this Agreement,
whichever shall apply, or if the Company shall have filed to file an annual
or
quarterly report in a timely manner because of the absence or lack of a
qualified CFO, the Company shall pay to the Investors, as liquidated damages
and
not as a penalty, an amount equal to twelve percent (12%) per annum of the
Purchase Price of the then outstanding shares of Series A Preferred Stock,
payable monthly on the tenth (10th)
day of
the following month, in cash or in Series A Preferred Stock at the option of
the
Investors, based on the number of days that such condition exists beyond the
applicable grace period. The parties agree that the only damages payable for
a
violation of such provisions shall be such liquidated damages. The parties
hereto agree that the liquidated damages provided for in this Section 6.10.5
constitute a reasonable estimate of the damages that may be incurred by the
Investors by reason of the failure of the Company to have a majority of
directors as independent directors.
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PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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18
6.10.6 In
no
event shall the total payments made pursuant to this Section 6.10 and Section
6.11, whether in cash or Series A Preferred Stock exceed in the aggregate
fifteen percent (15%) of the Purchase Price of the shares of Series A Preferred
Stock that are outstanding as of the date on which a computation is being
made.
6.11 Independent
Directors on Audit and Compensation Committees. No
later
than ninety (90) days after the Closing Date, the Company will have an audit
committee comprised solely of not less than three Independent Directors and
a
compensation committee comprised of not less than three directors, a majority
of
whom are Independent Directors. If at any time subsequent to the Closing Date
during the period when the Company is required to have a majority of Independent
Directors pursuant to Section 6.10 of this Agreement, Independent Directors
do
not comprise all of the members of the audit committee and a majority of the
members of the compensation committee within the grace periods provided in
Section 6.10, the Company shall pay to the Investors, as liquidated damages
and
not as a penalty, an amount equal to twelve percent (12%) per annum of the
Purchase Price of the then outstanding Series A Preferred Stock payable in
the
manner and at the time provided in Section 6.10, such payment shall be based
on
the number of days that such condition exists. The parties agree that the only
damages payable for a violation of the terms of this Agreement with respect
to
which liquidated damages are expressly provided shall be such liquidated
damages. Notwithstanding the foregoing, no liquidated damages shall be payable
pursuant to this Section 6.11 during any period for which liquidated damages
are
payable pursuant to Section 6.10.
6.12 Use
of Proceeds.
The
Company will use the net proceeds from the sale of the Securities, after payment
of legal fees and other closing costs, the purchase of 2,160,000 shares (before
the Reverse Split) of Common Stock from the Company’s principal stockholder for
not more than $625,000, for working capital and to make acquisitions. The
Company represents that as of the date of this Agreement it does not have,
and
as of the Closing Date, it will not have any agreements or understandings,
whether formal or informal, with respect to any acquisition, joint ventures
or
other business combinations or any material agreement not previously disclosed
to the Investors.
6.13 Right
of First Refusal.
6.13.1 Until
the
earlier of (i) five years from the date of this Agreement or (ii) such time
as
the Investors, as a group, cease to own at least five percent (5%) of the total
number of shares of Common Stock that were issued or are issuable upon
conversion of Series A Preferred Stock that were initially issued to the
Investors, in the event that the Company seeks to raise additional funds through
a
private
placement of its securities (a “Proposed
Financing”),
other
than Exempt Issuances, each Investor shall have the right to participate in
any
subsequent funding by the Company of the offering price on a pro rata basis,
based on the percentage that (a) the number of such Investor’s Percentage
Shares, without regard to the 4.9% Limitation but excluding shares of Common
Stock issuable upon exercise of Warrants, bears to (b) the total number of
shares of Common Stock outstanding plus the number of Shares issuable upon
conversion of the Series A Preferred Stock and any other series of convertible
preferred stock or debt securities, without regard to the 4.9% Limitations
any
other limitations on exercise such other convertible preferred stock or debt
securities. This Section 6.13 shall apply to each such offering based on the
total purchase price of the securities being offered by the Company. This right
is personal to each Investor and is not transferable, whether in connection
with
the sale of stock or otherwise.
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PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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6.13.2 The
terms
on which the Investors shall purchase securities pursuant to Proposed Financing
shall be the same as such securities are purchased by other investors. The
Company shall give the Investors the opportunity to participate in the offering
by giving the Investors not less than ten (10) days notice setting forth the
terms of the Proposed Financing. In the event that the terms of the Proposed
Financing are changed in a manner which is more favorable to the potential
investor, the Company shall provide the Investors, at the same time as the
notice is provided to the other potential investors, with a new ten (10) day
notice setting forth the revised terms that are provided to the other potential
investors.
6.13.3 In
the
event that the Investors does not exercise its right to participate in the
Proposed Financing within the time limits set forth in Section 6.13.2 of this
Agreement, the Company may sell the securities in the Proposed Financing at
a
price and on terms which are no more favorable to the investors than the terms
provided to the Investors. If the Company subsequently changes the price or
terms so that the price is more favorable to the investors or so the terms
are
more favorable to the investors, the Company shall provide the Investors with
the opportunity to purchase the securities on the revised terms in the manner
set forth in Section 6.13.2
of this
Agreement.
6.14 Price
Adjustment.
From
the
Closing Date until the Restriction Termination Date, except
for Exempt Issuances, as to which this Section
6.14
does not
apply, if the Company closes on the sale or issuance of Common Stock at a price,
or warrants, options, convertible
debt or
equity securities with a exercise price per share or conversion price per share
which is less than the Conversion Price, as defined in the Certificate of
Designation, 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. A similar
provision shall be included in the Warrants, except that the adjustment in
the
exercise price of the $.17 1/3 Warrant ($1.30 Warrant after the Reverse Split)
shall have a formula adjustment.
6.15 Deliveries
from Escrow Based on Net Income Per Share.
6.15.1 At
the
Closing, pursuant to the Closing Escrow Agreement, the Company shall deliver
to
the Escrow Agent 3,700,000 shares of Series A Preferred Stock.
6.15.2 In
the
event the Company’s consolidated Net Income for the year ended December 31, 2007
or 2008 is less than the amount per share hereinafter provided (the
“Target
Number”),
on a
fully-diluted basis, the percentage shortfall shall be determined by dividing
the amount of the shortfall by the applicable Target Number. The Target Number
for 2007 shall be RMB¥0.9894 per share, and the Target Number for 2008 shall be
RMB¥1.569 per share, except that, if all of the Warrants shall not have been
exercised by March 31, 2008, the Target Number for 2008 shall by RMB¥1.368 per
share.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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6.15.3 If
the
percentage shortfall for 2007 is equal to or greater than fifty percent (50%),
then the Escrow Agent shall deliver the 3,700,000 shares of Series A Preferred
Stock to the Investors in the ratio of their initial purchase of
Securities.
6.15.4 If
the
percentage shortfall for 2007 is less than fifty percent (50%), then the
adjustment percentage shall be determined. The adjustment percentage shall
mean
the percentage that the percentage shortfall bears to fifty percent (50%).
The
Escrow Agent shall deliver to the Investors in the ratio of their initial
purchase of Securities such number of shares of Series A Preferred Stock as
is
determined by multiplying the adjustment percentage by 3,700,000 shares and
retain the balance. For example, if the percentage shortfall is 20%, the
adjustment percentage would be 40%, and 40% of the 3,700,000 shares of Series
A
Preferred Stock, or 1,480,000 shares would be delivered to the Investors, with
the balance being retain by the Escrow Agent.
6.15.5 If
the
percentage shortfall for 2008 is equal to or greater than fifty percent (50%),
then the Escrow Agent shall deliver all of the shares of Series A Preferred
Stock then held by the Escrow Agent to the Investors in the ratio of their
initial purchase of Securities.
6.15.6 If
the
percentage shortfall for 2008 is less than fifty percent (50%), then the
adjustment percentage for 2008 shall be determined. The adjustment percentage
shall mean the percentage that the percentage shortfall bears to fifty percent
(50%). The maximum number of shares to be delivered shall be determined by
multiplying the adjustment percentage by 3,700,000 shares. The number of shares
to be delivered to the Investors shall be the lesser of the number of shares
of
Series A Preferred Stock then held by the Escrow Agent or the number of shares
determined by the preceding sentence. The Escrow Agent shall deliver to the
Investors the number of shares of Series A Preferred Stock as is determined
pursuant to this Section 6.15.6 in the ratio of their initial purchase of
Securities.
6.15.7 For
purpose of determining Net Income Per Share on a fully-diluted basis, all shares
of Common Stock issuable upon conversion of convertible securities and upon
exercise of warrants and options (whether or not vested) shall be deemed to
be
outstanding, regardless of whether (i) such shares are treated as outstanding
for determining diluted earnings per share under GAAP, (ii) such securities
are
“in the money,” or (iii) such shares may be issued as a result of the 4.9%
Limitation; provided, however, that none of the shares of Series A Preferred
Stock held in escrow pursuant to this Section 6.15 nor the shares of Common
Stock issuable upon conversion of such Series A Preferred Stock shall be deemed
outstanding for purpose of this Section 6.15.
6.15.8 The
distribution of shares of Series A Preferred Stock pursuant to this Section
6.15
shall be made within five (5) business days after the Company files its Form
10-KSB with the SEC for the applicable year. In the event that the Company
does
not file its Form 10-KSB for the year ended December 31, 2007 or 2008 with
the
SEC within thirty (30) days after the date that filing was required, after
giving effect to any extension pursuant to Rule 12b-25 of the Exchange Act,
all
of the 3,700,000 shares of Series A Preferred Stock shall be delivered to the
Investors.
6.15.9 The
parties understand that, pursuant to the Closing Escrow Agreement, the Escrow
Agent will not make any deliveries of shares without the signed written
instructions from the Company and the Investors.
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PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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6.16 Insider
Selling.
No
Restricted
Stockholders may sell any shares of Common Stock in the public market prior
to
the earlier of 27 months from the Closing Date or the Restriction Termination
Date. Restricted Stockholders shall mean any Person who is an officer, director
or Affiliate of the Company or who becomes an officer or director of the Company
subsequent to the Closing Date. Without
limiting the generality of the foregoing, the Restricted Stockholders shall
not
to directly or indirectly offer to sell, grant an option for the purchase or
sale of, transfer, pledge assign, hypothecate, distribute or otherwise encumber
or dispose of any securities in the Company in a transaction which is not in
the
public market unless the transferee agrees to be bound by the provisions of
this
Section 6.16. The
Company shall require any newly elected officer or director to agree to the
restriction set forth in this Section 6.16. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ and the
Investors shall not be considered Restricted Stockholders. The restrictions
in
this Section 6.16 shall also apply to shares which would be otherwise saleable
pursuant to an S-8 registration statement.
6.17 Employment
and Consulting Contracts.
For
three
years after the Closing, the Company shall have a unanimous approval from the
Compensation Committee that any awards other than salary are usual, appropriate
and reasonable for any officer, director or consultants whose compensation
is
more than $100,000 per annum. This Section 6.17 does not apply to attorneys,
accountants and other persons who provide professional services to the
Company.
6.18 Subsequent
Equity Sales.
From
the
date hereof until the Restriction Termination Date, the Company shall be not
effect or enter into an agreement to effect any Subsequent Financing involving
a
“Variable
Rate Transaction”
or
an
“MFN
Transaction”
(each
as defined below). The term “Variable
Rate Transaction”
shall
mean a transaction in which the Company issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at
a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities, or
(B)
with a conversion, exercise or exchange price that is subject to being reset
at
some future date after the initial issuance of such debt or equity security
or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock.
The
term “MFN
Transaction”
shall
mean a transaction in which the Company issues or sells any securities in a
capital raising transaction or series of related transactions which grants
to an
investor the right to receive additional shares based upon future transactions
of the Company on terms more favorable than those granted to such investor
in
such offering. Any Investor shall be entitled to obtain injunctive relief
against the Company to preclude any such issuance, which remedy shall be in
addition to any right to collect damages. Notwithstanding the foregoing, this
Section 6.18 shall not apply in respect of an Exempt Issuance, except that
no
Variable Rate Transaction or MFN Transaction shall be an Exempt
Issuance.
6.19 Restated
Certificate. The
Company’s board of directors and the holders of a majority of the outstanding
Common Stock have approved the Restated Certificate. The Company shall promptly,
but not later than 15 days after the Closing Date, file an information statement
with the SEC, and shall mail the information statement to stockholders within
five business days after the SEC has completed its review of the information
statement, of, if the SEC does not review the information statement, within
20
business days after the proxy statement or information statement is filed with
the SEC.
The
Company shall file the Restated Certificate with the Secretary of State of
the
State of Delaware promptly, but not later than 30 days the information statement
is mailed to stockholders.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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6.20 Stock
Splits.
All
forward and reverse stock splits and all stock dividends or distributions shall
effect all equity and derivative holders proportionately. The Company shall
not
approve or implement any forward stock split, dividends or distribution prior
to
the filing of the Restated Certificate.
6.21 Retention
of Investor Relations Firm.
The
Company shall instruct the Escrow Agent to retain two hundred fifty thousand
($250,000) of the proceeds of the sale of the Securities to be utilized for
payment to investor relations firms. The Company shall retain an investor
relations firm within 30 days after the Closing Date.
6.22 Payment
of Due Diligence Expenses.
At
Closing the Escrow Agent shall disperse to ▇▇▇▇▇▇ the sum of fifty thousand
dollars ($50,000.00) for its due diligence expenses.
6.23 No
Outside Interests.
Until
the Restriction Termination Date the Company’s chairman, chief executive officer
and chief financial officer will devote their full time and attention to the
business of the Company and shall not have any business interests or activities
other than as chairman, chief executive officer or chief financial officer,
as the case may be, except that he or she may devote time, which shall not
be material and which shall not interfere with his or her duties as the
Company’s chairman, chief executive officer or chief financial officer, as the
case may be, to personal passive investments and charitable and community
activities; provided, however, that during the three month period following
the
closing, the Company may have a part-time chief financial officer who may engage
in other business activities that are not competitive with the Company’s
business.
6.24 No
Waiver of Non-Competition Obligations.
Until
the Restriction Termination Date, the Company shall not waive the obligations
of
its executive officers pursuant to the non-competition agreements described
in
Section 4.17 of this Agreement.
Article
7
COVENANTS
OF THE INVESTOR
Each
Investor, severally and not jointly, covenants and agrees with the Company
as
follows:
7.1 Compliance
with Law.
Each
Investor’s trading activities with respect to shares of the Company’s Common
Stock will be in compliance with all applicable state and federal securities
laws, rules and regulations and rules and regulations of any public market
on
which the Company’s Common Stock is listed.
7.2 Transfer
Restrictions. The
Investors acknowledge that (a) the Preferred Stock, Warrants and Shares
underlying the Preferred Stock and Warrants have not been registered under
the
provisions of the 1933 Act, and may not be transferred unless (i) subsequently
registered thereunder or (ii) the Investor shall have delivered to the Company
an opinion of counsel, reasonably satisfactory in form, scope and substance
to
the Company, to the effect that the Preferred Stock, Warrants and Shares
underlying the Notes and Warrants to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; and (b) any sale
of
the Shares underlying the Preferred Stock and Warrants made in reliance on
Rule
144 promulgated under the 1933 Act may be made only in accordance with the
terms
of said Rule and further, if said Rule is not applicable, any resale of such
securities under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used
in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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7.3 Restrictive
Legend. Each
Investor acknowledges and agrees that the Securities and the Shares shall bear
a
restrictive legend and a stop-transfer order may be placed against transfer
of
any such Securities except that the requirement for a restrictive legend shall
not apply to Shares sold pursuant to a current and effective registration
statement or a sale pursuant Rule 144 or any successor rule.
Article
8
CONDITIONS
PRECEDENT TO THE COMPANY’S OBLIGATIONS
The
obligation of the Company to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date, of the
following conditions in addition to the deliveries required by Section 3.3
of
this Agreement:
8.1 No
Termination.
This
Agreement shall not have been terminated pursuant to Article 10
hereof.
8.2 Representations
True and Correct.
The
representations and warranties of the Investors contained in this Agreement
shall be true and correct in all material respects on and as of the Closing
Date
with the same force and effect as if made on as of the Closing
Date.
8.3 Compliance
with Covenants.
The
Investors shall have performed and complied in all material respects with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied by it prior to or at the Closing Date.
8.4 No
Adverse Proceedings.
On the
Closing Date, no action or proceeding shall be pending by any public authority
or individual or entity before any court or administrative body to restrain,
enjoin, or otherwise prevent the consummation of this Agreement or the
transactions contemplated hereby or to recover any damages or obtain other
relief as a result of the transactions proposed hereby.
Article
9
CONDITIONS
PRECEDENT TO INVESTORS’ OBLIGATIONS
The
obligation of the Investors to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date unless
specified otherwise, of the following conditions in addition to the deliveries
required by Section 3.2 of this Agreement:
9.1 No
Termination.
This
Agreement shall not have been terminated pursuant to Article 10
hereof.
9.2 Representations
True and Correct.
The
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date
with
the same force and effect as if made on as of the Closing Date.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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9.3 Compliance
with Covenants .
The
Company shall have performed and complied in all material respects with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied by it prior to or at the Closing Date.
9.4 No
Adverse Proceedings.
On the
Closing Date, no action or proceeding shall be pending by any public authority
or individual or entity before any court or administrative body to restrain,
enjoin, or otherwise prevent the consummation of this Agreement or the
transactions contemplated hereby or to recover any damages or obtain other
relief as a result of the transactions proposed hereby.
Article
10
TERMINATION,
AMENDMENT AND WAIVER
10.1 Termination.
This
Agreement may be terminated at any time prior to the Closing Date
10.1.1 by
mutual
written consent of the Investor and the Company;
10.1.2 by
the
Company upon a material breach of any representation, warranty, covenant or
agreement on the part of any Investor set forth in this Agreement, or any
Investor upon a material breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company or the Investor, respectively, shall
have become untrue, in either case such that any of the conditions set forth
in
Article 8 or Article 9 hereof would not be satisfied (a “Terminating
Breach”),
and
such breach shall, if capable of cure, not have been cured within five (5)
business days after receipt by the party in breach of a notice from the
non-breaching party setting forth in detail the nature of such
breach.
10.2 Effect
of Termination.
Except
as otherwise provided herein, in the event of the termination of this Agreement
pursuant to Section 10.1 hereof, there shall be no liability on the part of
the
Company or any Investor or any of their respective officers, directors, agents
or other representatives and all rights and obligations of any party hereto
shall cease; provided, that, in the event of a Terminating Breach, the breaching
party shall be liable to the non-breaching party for all costs and expenses
incurred by the non-breaching party, up to a maximum of $50,000.
10.3 Amendment.
This
Agreement may be amended by the parties hereto any time prior to the Closing
Date by an instrument in writing signed by the parties hereto; provided, however
that the 4.9% Limitation may not be amended or waived; provided, further, that
any amendment subsequent to the Closing Date shall require the signature of
the
Company and Investors that purchased a majority of the shares of Series A
Preferred Stock issued pursuant to this Agreement. With respect to this Section
10.3 and Section 10.4 of this Agreement, if Investors that purchased a majority
of the shares of Series A Preferred Stock issued pursuant to this Agreement
do
not, at the time of the amendment or waiver, own any Securities, then such
amendment or waiver shall require the approval of Investors who hold of a
majority of the shares of Common Stock issued or issuable upon conversion of
the
Series A Preferred Stock and exercise of the Warrants.
10.4 Waiver.
At any
time on or prior to the Closing Date, the Company or the Investors, as
appropriate, may: (a) extend the time for the performance of any of the
obligations or other acts of other party or; (b) waive any inaccuracies in
the
representations and warranties contained herein or in any document delivered
pursuant hereto which have been made to it or them; or (c) waive compliance
with
any of the agreements or conditions contained herein for its or their benefit
other than the 4.9% Limitation which may not be waived. At any time after the
Closing Date, any waiver of any covenant or other provision of this Agreement
(other than a waiver of the 4.9% Limitation) shall require the approval of
Investors that purchased a majority of the share of Series A Preferred Stock
issued pursuant to this Agreement and such waiver shall be deemed to be a waiver
by the Investors. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party or parties to be bound thereby
or, in the case of a waiver subsequent to the Closing Date, by Investors that
purchased a majority of the shares of Series A Preferred Stock issued pursuant
to this Agreement.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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Article
11
GENERAL
PROVISIONS
11.1 Transaction
Costs
Except
as otherwise provided herein, each of the parties shall pay all of his or its
costs and expenses (including attorney fees and other legal costs and expenses
and accountants’ fees and other accounting costs and expenses) incurred by that
party in connection with this Agreement; provided, the Company shall pay
Investor such due diligence expenses as described in Section 6.22.
11.2 Indemnification.
The
Investor agrees to indemnify, defend and hold the Company (following the Closing
Date) and its officers and directors harmless against and in respect of any
and
all claims, demands, losses, costs, expenses, obligations, liabilities or
damages, including interest, penalties and reasonable attorney’s fees, that it
shall incur or suffer, which arise out of or result from any breach of this
Agreement by the Investors or failure by the Investors to perform with respect
to the representations, warranties or covenants contained in this Agreement
or
in any exhibit or other instrument furnished or to be furnished under this
Agreement. The Company agrees to indemnify, defend and hold the Investors
(following the Closing Date) harmless against and in respect of any and all
claims, demands, losses, costs, expenses, obligations, liabilities or damages,
including interest, penalties and reasonable attorney’s fees, that it shall
incur or suffer, which arise out of, result from or relate to any breach of
this
Agreement or failure by the Company to perform with respect to the
representations, warranties or covenants contained in this Agreement or in
any
exhibit or other instrument furnished or to be furnished under this Agreement.
In no event shall the Company or the Investors be entitled to recover
consequential or punitive damages resulting from a breach or violation of this
Agreement nor shall any party have any liability hereunder in the event of
gross
negligence or willful misconduct of the indemnified party. In the event of
the
failure of the Company to issue the Series A Preferred Stock and Warrants in
violation of the provisions of this Agreement, the Investors, as their sole
remedy, shall be entitled to pursue a remedy of specific performance upon tender
into the Court an amount equal to the Purchase Price hereunder. The
indemnification by the Investors shall be limited to $50,000.00. This Section
11.2 shall not relate to indemnification under the Registration Rights
Agreement.
11.3 Headings.
The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement.
11.4 Entire
Agreement.
This
Agreement (together with the Schedule, Exhibits, Warrants and documents referred
to herein) constitute the entire agreement of the parties and supersede all
prior agreements and undertakings, both written and oral, between the parties,
or any of them, with respect to the subject matter hereof.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
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11.5 Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed to have been given (i) on the date they are delivered if delivered in
person; (ii) on the date initially received if delivered by facsimile
transmission followed by registered or certified mail confirmation; (iii) on
the
date delivered by an overnight courier service; or (iv) on the third business
day after it is mailed by registered or certified mail, return receipt requested
with postage and other fees prepaid as follows:
If
to
the Company:
▇▇.
▇▇▇▇▇▇▇▇
▇▇▇▇-▇▇▇ ▇▇▇▇,
CEO
Lincoln
International Corporation
c/o
Suny
Electronics (Shenzhen) Company, Limited
▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇. ▇
▇▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇
E-mail:
▇▇▇▇▇▇▇@▇▇▇.▇▇▇
and
▇▇▇▇▇▇▇▇▇▇▇.▇▇@▇▇▇▇▇.▇▇▇
Fax:
▇▇
▇▇▇▇-▇▇▇▇▇▇▇▇
With
a
copy to:
Sichenzia
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇
▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ PC
E-mail:
▇▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
If
to
▇▇▇▇▇▇:
▇▇▇▇▇▇
Partners L.P.
c/▇
▇▇▇▇▇▇ Capital Advisors, LLC
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
E-mail:
▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
and
▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Fax:
(▇▇▇)
▇▇▇-▇▇▇▇
If
to the
other Investors, at their addresses set forth on Appendix A.
11.6 Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any such term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
PAGE
27
11.7 Binding
Effect.
All the
terms and provisions of this Agreement whether so expressed or not, shall be
binding upon, inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, legal representatives, heirs,
successors and assignees.
11.8 Preparation
of Agreement.
This
Agreement shall not be construed more strongly against any party regardless
of
who is responsible for its preparation. The parties acknowledge each contributed
and is equally responsible for its preparation. In
resolving any dispute regarding, or construing any provision in, this Agreement,
there shall be no presumption made or inference drawn because of the drafting
history of the Agreement, or because of the inclusion of a provision not
contained in a prior draft or the deletion or modification of a provision
contained in a prior draft.
11.9 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of New York, without giving effect to applicable principles of
conflicts of law.
11.10
Jurisdiction;
Waiver of Jury Trial.
If
any action is brought among the parties with respect to this Agreement or
otherwise, by way of a claim or counterclaim, the parties agree that in any
such
action, and on all issues, the parties irrevocably waive their right to a trial
by jury.
Exclusive jurisdiction and venue for any such action shall be the federal and
state courts situated in the City, County and State of New York. In the event
suit or action is brought by any party under this Agreement to enforce any
of
its terms, or in any appeal therefrom, it is agreed that the prevailing party
shall be entitled to reasonable attorneys fees to be fixed by the arbitrator,
trial court, and/or appellate court if such party prevails on substantially
all
issues in dispute.
11.11
Preparation
and Filing of Securities and Exchange Commission
filings.
The
Investors shall reasonably assist and cooperate with the Company in the
preparation of all filings with the SEC after the Closing Date due after the
Closing Date.
11.12
Further
Assurances, Cooperation.
Each
party shall, upon reasonable request by the other party, execute and deliver
any
additional documents necessary or desirable to complete the transactions herein
pursuant to and in the manner contemplated by this Agreement. The parties hereto
agree to cooperate and use their respective best efforts to consummate the
transactions contemplated by this Agreement.
11.13
Survival.
The
representations, warranties, covenants and agreements made herein shall survive
the Closing of the transaction contemplated hereby.
11.14
Third
Parties.
Except
as disclosed in this Agreement, nothing in this Agreement, whether express
or
implied, is intended to confer any rights or remedies under or by reason of
this
Agreement on any persons other than the parties hereto and their respective
administrators, executors, legal representatives, heirs, successors and
assignees. Nothing in this Agreement is intended to relieve or discharge the
obligation or liability of any third persons to any party to this Agreement,
nor
shall any provision give any third persons any right of subrogation or action
over or against any party to this Agreement.
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
PAGE
28
11.15
Failure
or Indulgence Not Waiver; Remedies Cumulative.
No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall nay single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights
and
remedies existing under this Agreement are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
11.16
Counterparts.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original, but all of which taken together shall constitute
one
and the same agreement. A facsimile transmission of this signed Agreement shall
be legal and binding on all parties hereto.
[Signatures
on following page]
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS
LP
PAGE
29
IN
WITNESS WHEREOF,
the
Investors and the Company have as of the date first written above executed
this
Agreement.
THE
COMPANY:
LINCOLN
INTERNATIONAL CORPORATION
| By: | /s/
▇▇▇▇▇▇▇▇
▇▇▇▇-▇▇▇ ▇▇▇▇ |
|
| Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇-▇▇▇ ▇▇▇▇, CEO | ||
INVESTORS:
▇▇▇▇▇▇
PARTNERS LP
By:
▇▇▇▇▇▇ Capital Advisors, LLC, its General Partner
| /s/
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ |
|
| ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, President |
EOS
HOLDINGS
|
By:
|
/s/
▇▇▇ ▇. ▇▇▇▇▇▇ |
|
| ▇▇▇ ▇.▇▇▇▇▇▇, President |
The
undersigned hereby agrees to be bound by the provisions of Sections 6.16 and
6.23 of this Agreement.
| /s/ ▇▇▇▇▇▇▇▇
▇▇▇▇-▇▇▇ ▇▇▇▇ |
|
| ▇▇▇▇▇▇▇▇ ▇▇▇▇-▇▇▇ ▇▇▇▇ |
| /s/
Chi-▇▇▇ ▇▇▇ |
|
| Chi-▇▇▇ ▇▇▇ |
SECURITIES
PURCHASE AGREEMENT BETWEEN
LINCOLN
INTERNATIONAL CORPORATION AND ▇▇▇▇▇▇ PARTNERS LP
SIGNATURE
PAGE
Schedule
A
|
Name
and
Address
|
Amount
of Investment
|
Shares
of
Series A Preferred Stock |
Shares
Issuable on Conversion of Preferred |
Number
of
Shares Underlying
$1.30* ($.17 1/3) Warrants
|
Number
of
Shares Underlying
$1.50* ($.20) Warrants
|
|||||||||||
|
▇▇▇▇▇▇
Partners LP
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
|
$
|
3,900,000
|
3,611,111
|
27,083,333
|
40,218,750
|
43,875,000
|
||||||||||
|
▇▇▇▇▇▇
- post Reverse Split
|
3,611,111
|
5,362,500
|
5,850,000
|
|||||||||||||
|
Eos
Holdings
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇ ▇. ▇▇▇▇▇▇, President
|
$
|
100,000
|
92,593
|
694,448
|
1,031,250
|
1,125,000
|
||||||||||
|
Eos
- post Reverse Split
|
92,593
|
137,500
|
150,000
|
|||||||||||||
|
Total
pre Reverse Split
|
$
|
4,000,000
|
3,703,704
|
27,777,780
|
41,250,000
|
45,000,000
|
||||||||||
|
Total
post Reverse Split
|
3,703,704
|
5,500,000
|
6,000,000
|
|||||||||||||
* The
exercise prices of the warrants are stated after giving effect to the
one-for-7.5 reverse split. The exercise prices in parentheses are the exercise
prices before the reverse split.
Schedule
4.3.1
Lincoln
International Corporation
Cap
Table
with LCNIA
|
at
closing
|
after
reverse
|
||||||
|
Present
issued and outstanding
|
2,610,000
|
||||||
|
Shares
being purchased for $625,000 and cancelled
|
2,175,000
|
||||||
|
Shares
in float
|
435,000
|
58,000
|
|||||
|
Total
shares to be outstanding
|
87,000,000
|
11,600,000
|
|||||
|
New
shares to be issued to Belmont
|
870,000
|
116,000
|
|||||
|
Outstanding
shares less (B9 + B11)
|
85,695,000
|
11,426,000
|
|||||
|
Shares
to be issued to ▇▇▇▇▇▇▇▇ and designees
|
85,320,000
|
11,376,000
|
|||||
|
Shares
to be issued to ▇▇▇▇▇▇▇▇
|
375,000
|
50,000
|
|||||
|
Authorized
common stock
|
500,000,000
|
||||||
|
Reverse
split ratio
|
7.5
|
||||||
|
Investor
Preferred Conversion Shares
|
27,777,780
|
3,703,704
|
|||||
|
Investor
A Warrant Shares
|
41,250,000
|
5,500,000
|
|||||
|
Investor
B Warrant Shares
|
45,000,000
|
6,000,000
|
|||||
|
Total
w/ Investor Preferred Conversion
|
114,777,780
|
15,303,704
|
|||||
|
Total
w/ Investor Preferred and Warrants
|
201,027,780
|
26,803,704
|
|||||
|
Conversion
price for preferred stock
|
$
|
0.144
|
$
|
1.08
|
|||
|
Total
Investor Shares
|
114,027,780
|
15203704
|
|||||
|
$
|
1.30
|
$
|
1.50
|
|||||||||||||
| $ |
(.17 1/3
|
) |
$
|
(0.20
|
)
|
|||||||||||
|
▇▇▇▇▇▇
Investors
|
Investment
|
Preferred
|
Conversion
|
Warrants
|
Warrants
|
|||||||||||
|
▇▇▇▇▇▇
Partners pre reverse
|
$
|
3,900,000
|
3,611,111
|
27,083,333
|
40,218,750
|
43,875,000
|
||||||||||
|
▇▇▇▇▇▇
Partners post reverse
|
3,611,111
|
5,362,500
|
5,850,000
|
|||||||||||||
|
Eos
pre reverse
|
$
|
100,000
|
92,593
|
694,448
|
1,031,250
|
1,125,000
|
||||||||||
|
Eos
post reverse
|
92,593
|
137,500
|
150,000
|
|||||||||||||
|
Total
pre reverse
|
$
|
4,000,000
|
3,703,704
|
27,777,780
|
41,250,000
|
45,000,000
|
||||||||||
|
Total
post reverse
|
3,703,704
|
5,500,000
|
6,000,000
|
Schedule
4.11
List
of Employment Contracts
None
Exhibit
A
Form
of Certificate of Designation of Preferences, Rights and
Limitations
Filed
as
Exhibit 99.2
A-1
Exhibit
B
Closing
Escrow Agreement
Filed
as
Exhibit 99.6
B-1
Exhibit
C
Registration
Rights Agreement
Filed
as
Exhibit 99.5
C-1
Exhibit
D
Restated
Certificate of Incorporation
RESTATED
CERTIFICATE OF INCORPORATION
OF
SUNY
Display Technologies, Inc.
SUNY
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 SUNY Display Technologies, Inc. The Corporation was
organized under the name Lincoln International Corporation on September 10,
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 SUNY Display Technologies, Inc. (the
“Corporation”).
SECOND:
The address of its registered office in the State of Delaware is ▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇ of ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. 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;
D-1
(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.
D-2
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
filing of this Restated Certificate of Incorporation, the Corporation shall
affect 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 their
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.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by
its
president this th day of October, 2007.
| /s/ | ▇▇▇▇▇▇▇▇
▇▇▇▇-▇▇▇ ▇▇▇▇ |
|
|
|
▇▇▇▇▇▇▇▇
▇▇▇▇-▇▇▇
▇▇▇▇
|
|
| Chief Executive Officer |
D-3
Exhibits
E-1 and E-2
Warrants
See
Exhibits 99.3 and 99.4
E-1