Exhibit 10.1







SECURITIES
PURCHASE AGREEMENT


This
Securities Purchase Agreement (this “Agreement”) is dated as of August 27, 2014, between Orient Paper, Inc.,
a Nevada corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and collectively the “Purchasers”).


WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to each Purchaser,
and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described
in this Agreement.


NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration
the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:


ARTICLE
I.

DEFINITIONS


1.1            Definitions.
In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:


“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.5.


“Action”
shall have the meaning ascribed to such term in Section 3.1(j).


“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.


“Board
of Directors” means the board of directors of the Company.


“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action
to close.


“Closing”
means the closing of the purchase and sale of the Shares and Warrants pursuant to Section 2.1.


“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii)
the Company’s obligations to deliver the Shares and the Warrants, in each case, have been satisfied or waived, but in no
event later than the third Trading Day following the date hereof.



    	 



    	 



    

 


“Commission”
means the United States Securities and Exchange Commission.


“Common
Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.


“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock.


“Disclosure
Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.


“EGS”
means Ellenoff Grossman & Schole LLP, with offices located at 1345 Avenue of the Americas, New York, New York 10105-0302.


“Escrow
Agent” means Signature Bank, a New York State chartered bank, with offices at 261 Madison Avenue, New York, New York
10016.


“Escrow
Agreement” means the escrow agreement entered into prior to the date hereof, by and among the Company, the Escrow Agent
and the Placement Agent pursuant to which the Purchasers shall deposit Subscription Amounts with the Escrow Agent to be applied
to the transactions contemplated hereunder.


“Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(r).


“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.


 


“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company
pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon
the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable
for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities
have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities, and (c) securities issued pursuant to acquisitions or strategic transactions
approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person
(or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset
in a business synergistic with the business of the Company and shall provide to the Company additional 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.



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“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.


“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).


“Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(z).


“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).


“Liens”
means a material lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.


“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).


“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(m).


“Per
Share Purchase Price” equals $1.60, subject to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.


“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.


“Placement
Agent” means H.C. Wainwright & Co., LLC.


“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.


“Prospectus”
means the final prospectus filed for the Registration Statement.


“Prospectus
Supplement” means the supplement to the Prospectus complying with Rule 424(b) of the Securities Act that is filed with
the Commission and delivered by the Company to each Purchaser at the Closing.


“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.8.


“Registration
Statement” means the effective registration statement with Commission file No. 333-196111 which registers the sale of
the Shares, the Warrants and the Warrant Shares to the Purchasers.


“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).



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“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.


“Rule
424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.


“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).


“Securities”
means the Shares, the Warrants and the Warrant Shares.


“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


“Shares”
means the shares of Common Stock issued to each Purchaser pursuant to this Agreement in the number as specified below such Purchaser’s
name on such Purchaser’s signature page of this Agreement and next to the heading “Shares”.


“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall
not be deemed to include the location and/or reservation of borrowable shares of Common Stock). 


“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares and Warrants purchased hereunder as
specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately available funds.


“Subsidiary”
means any subsidiary of the Company as set forth or incorporated by reference in the Prospectus and the Registration Statement,
and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.


“Trading
Day” means a day on which the principal Trading Market is open for trading.


“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board (or any successor to any of the foregoing).


“Transaction
Documents” means this Agreement, the Warrants and any other documents or agreements executed by the Company and/or the
Purchasers in connection with the transactions contemplated hereunder.






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“Transfer
Agent” means Empire Stock Transfer, the current transfer agent of the Company, with a mailing address of 1859 Whitney
Mesa Dr., Henderson, NV 89014 and a facsimile number of (702) 974-1444, and any successor transfer agent of the Company.


“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.12(b).


“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section
2.2(a) hereof, which Warrants shall be exercisable immediately and have a term of exercise equal to five (5) years from the date
of exercise, in the form of Exhibit A attached hereto.


“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the Warrants.


ARTICLE
II.

PURCHASE AND SALE


2.1           Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate of $2,500,000 of Shares and Warrants. Each Purchaser shall deliver to the Escrow Agent,
via wire transfer or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount as set
forth on the signature page hereto executed by such Purchaser and the Company shall deliver to each Purchaser its respective Shares
and a Warrant as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth
in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3,
the Closing shall occur at the offices of EGS or such other location as the parties shall mutually agree.


2.2           Deliveries.


(a)          On
or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:


(i)                this
Agreement duly executed by the Company;


(ii)              
a legal opinion of Brownstein Hyatt Farber Schreck, LLP, special Nevada counsel to the Company, substantially in the form
of Exhibit B-1 attached hereto and a legal opinion of DLA Piper LLP (US), special counsel to the Company, substantially
in the form of Exhibit B-2 attached hereto;


(iii)            
a copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver on an expedited
basis via The Depository Trust Company Deposit or Withdrawal at Custodian system (“DWAC”) Shares equal to such
Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;



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(iv)            
a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 50% of
such Purchaser’s Shares, with an exercise price equal to $1.70, subject to adjustment therein (the Warrant certificate evidencing
the Warrant may be delivered within three Trading Days of the Closing Date); and


(v)              the
Prospectus and Prospectus Supplement (which may be delivered in accordance with Rule 172 under the Securities Act).


(b)         On
or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company or the Escrow Agent, as applicable,
the following:


(i)                this
Agreement duly executed by such Purchaser; and


(ii)              to
the Escrow Agent, such Purchaser’s Subscription Amount by wire transfer to the account specified in the Escrow Agreement.


2.3           Closing
Conditions. 


(a)          The
obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:


(i)                the
accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein
(unless as of a specific date therein in which case they shall be accurate as of such date);


(ii)              all
obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been
performed; and


(iii)            
the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.


(b)          The
respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being
met:


(i)                the
accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein);


(ii)              all
obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been
performed;


(iii)            
the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;


(iv)            
there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and



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(v)              
from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or
the Company’s principal Trading Market, and, at any time prior to the Closing Date, trading in securities generally as reported
by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose
trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the
Securities at the Closing.


ARTICLE
III.

REPRESENTATIONS AND WARRANTIES


3.1          Representations
and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed
a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding
section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:


(a)           Subsidiaries.
All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly or indirectly,
all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities.


(b)           Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.



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(c)           Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders
in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction
Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by applicable law.


(d)           No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to
which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby
and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon
any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing
a Company or Subsidiary debt or otherwise) to which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in
a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or would not reasonably be expected to result in a Material Adverse Effect.



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(e)           Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i)
the filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus Supplement,
(iii) application(s) to each applicable Trading Market for the listing of the Shares and Warrant Shares for trading thereon in
the time and manner required thereby and (iv) such filings as are required to be made under applicable state securities laws (collectively,
the “Required Approvals”).


(f)            Issuance
of the Securities; Registration. The Securities are duly authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company. The Warrant Shares, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company. The Company has reserved from its duly authorized capital stock
the maximum number of shares of Common Stock issuable pursuant to this Agreement and the Warrants. The Company has prepared and
filed the Registration Statement in conformity with the requirements of the Securities Act, which became effective on June
26, 2014 (the “Effective Date”), including the Prospectus, and such amendments and supplements thereto as may
have been required to the date of this Agreement. The Registration Statement is effective under the Securities Act and no stop
order preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus
has been issued by the Commission and no proceedings for that purpose have been instituted or, to the knowledge of the Company,
are threatened by the Commission. The Company, if required by the rules and regulations of the Commission, shall file the Prospectus
with the Commission pursuant to Rule 424(b). At the time the Registration Statement and any amendments thereto became effective,
at the date of this Agreement and at the Closing Date, the Registration Statement and any amendments thereto conformed and will
conform in all material respects to the requirements of the Securities Act and did not and will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein
not misleading; and the Prospectus and any amendments or supplements thereto, at time the Prospectus or any amendment or supplement
thereto was issued and at the Closing Date, conformed and will conform in all material respects to the requirements of the Securities
Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they were made, not misleading.



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(g)           Capitalization.
The consolidated balance sheets of the Company as of June 30, 2014 and December 31, 2013 are set forth on Schedule 3.1(g).
The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than
pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common
Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise
of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person
has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Securities, there are no outstanding
options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary
is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and
will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under
any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding
shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further
approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.
Except as set forth in the SEC Reports, there are no stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among
any of the Company’s stockholders.


(h)           SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the one year preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with
the Prospectus and the Prospectus Supplement, being collectively referred to herein as the “SEC Reports”) on
a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.



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(i)            Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there
has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company
has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock
and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company
stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence
or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries
or their respective businesses, prospects, properties, operations, assets or financial condition that would be required to be
disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not
been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.


(j)            Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action
involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.



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(k)           Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company
or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company
or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are
in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure to be in compliance would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.


(l)            Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has
the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any
court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation
of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as
would not have or reasonably be expected to result in a Material Adverse Effect.


(m)          Regulatory
Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits would not reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation
or modification of any Material Permit.


(n)           Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them
and good and marketable title in all tangible personal property owned by them that is material to the business of the Company
and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the
Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made in
accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which
the Company and the Subsidiaries are in compliance in all material respects.



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(o)           Intellectual
Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights
and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports
and which the failure to so have would reasonably to be expected to have a Material Adverse Effect (collectively, the “Intellectual
Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise)
that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate
or be abandoned, within two (2) years from the date of this Agreement, except as would not reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements
included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights
violate or infringe upon the rights of any Person, except as would not have or reasonably be expected to not have a Material Adverse
Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement
by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do
so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.


(p)           Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage. Neither the Company nor any Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business without a significant increase in cost.


(q)           Transactions
With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company or
any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party
to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or
personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case
in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option
plan of the Company.



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(r)            Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are in compliance with any and all applicable requirements
of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of
the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since
the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the
Exchange Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect,
the internal control over financial reporting of the Company and its Subsidiaries.


(s)           Certain
Fees. Except as set forth in the Prospectus Supplement, no brokerage or finder’s fees or commissions are or will be
payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker,
bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.


(t)            Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.



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(u)           Registration
Rights. Other than as set forth on Schedule 3.1(u), no Person has any right to cause the Company or any Subsidiary
to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.


(v)           Listing
and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating
terminating such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently
eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company
is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection
with such electronic transfer.


(w)          Application
of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and
the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation
as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.


(x)           Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel
with any information that it believes constitutes or might constitute material, non-public information which is not otherwise
disclosed in the Prospectus Supplement. The Company understands and confirms that the Purchasers will rely on the foregoing representation
in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including
the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which
they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or
warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.



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(y)           No
Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2,
neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering
of the Securities to be integrated with prior offerings by the Company for purposes of any applicable shareholder approval provisions
of any Trading Market on which any of the securities of the Company are listed or designated.


(z)            Solvency.
Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds
the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to
carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular
capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability
thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate
all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).
The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(z)
sets forth as of the date hereof all of the outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or
for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred
in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness
of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to
be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.


(aa)         Tax
Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local
income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined
to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the
payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of
the Company or of any Subsidiary know of no basis for any such claim.






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(bb)         Foreign
Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent
or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns
from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person
acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any
provision of FCPA.


(cc)         Accountants.
The Company’s accounting firm is set forth on Schedule 3.1(cc) of the Disclosure Schedules. To the knowledge and
belief of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii)
shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the
fiscal year ending December 31, 2014.


(dd)         Acknowledgment
Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given
by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents
to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been
based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.



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(ee)         Acknowledgement
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except
for Sections 3.2(f) and 4.14 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been
asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities
of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for
any specified term; (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation,
Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions,
may negatively impact the market price of the Company’s publicly-traded securities; (iii) any Purchaser, and counter-parties
in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a
“short” position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any “derivative” transaction. The Company further understands
and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods that the value of the Warrant Shares deliverable
with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing
stockholders' equity interests in the Company at and after the time that the hedging activities are being conducted.  The
Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.


(ff)          Regulation
M Compliance.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s
placement agent in connection with the placement of the Securities.


(gg)        Office
of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer,
agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).


(hh)        U.S.
Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s
request.


(ii)           Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System
(the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly
or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or
more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither
the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve.


(jj)           Money
Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with
applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money
Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body
or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge
of the Company or any Subsidiary, threatened.






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3.2           Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as
of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):


(a)           Organization;
Authority. Such Purchaser is an entity duly incorporated or formed, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar
power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out
its obligations hereunder and thereunder. The execution and delivery of this Agreement and performance by such Purchaser of the
transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited liability
company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute
the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions
may be limited by applicable law.


(b)           Understandings
or Arrangements. Such Purchaser is acquiring the Securities as principal for its own account and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation
and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise
in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business.


(c)           Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on
which it exercises any Warrants, it will be either (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a)
under the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange
Act.


(d)           Experience
of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.



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(e)           Access
to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including
all exhibits and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity to ask such questions as it
has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the
offering of the Shares and the merits and risks of investing in the Shares; (ii) access to information about the Company and its
financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate
its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. 
Such Purchaser acknowledges and agrees that neither the Placement Agent nor any Affiliate of the Placement Agent has provided
such Purchaser with any information or advice with respect to the Securities nor is such information or advice necessary or desired. 
Neither the Placement Agent nor any Affiliate has made or makes any representation as to the Company or the quality of the Securities
and the Placement Agent and any Affiliate may have acquired non-public information with respect to the Company which such Purchaser
agrees need not be provided to it.  In connection with the issuance of the Securities to such Purchaser, neither the Placement
Agent nor any of its Affiliates has acted as a financial advisor or fiduciary to such Purchaser.


(f)            Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not,
nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any
purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that
such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting
forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall
only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Other than to other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty,
or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow
in order to effect Short Sales or similar transactions in the future.


The
Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s
right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties
contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this
Agreement or the consummation of the transaction contemplated hereby.



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ARTICLE
IV.

OTHER AGREEMENTS OF THE PARTIES


4.1            Warrant
Shares. If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover
the issuance or resale of the Warrant Shares or if the Warrant is exercised via cashless exercise, the Warrant Shares issued pursuant
to any such exercise shall be issued free of all legends. If at any time following the date hereof the Registration Statement
(or any subsequent registration statement registering the sale or resale of the Warrant Shares) is not effective or is not otherwise
available for the sale or resale of the Warrant Shares, the Company shall immediately notify the holders of the Warrants in writing
that such registration statement is not then effective and thereafter shall promptly notify such holders when the registration
statement is effective again and available for the sale or resale of the Warrant Shares (it being understood and agreed that the
foregoing shall not limit the ability of the Company to issue, or any Purchaser to sell, any of the Warrant Shares in compliance
with applicable federal and state securities laws). For as long as the Warrant and Warrant Shares remain outstanding, the Company
shall use commercially reasonable efforts to keep a registration statement (including the Registration Statement) registering
the issuance or resale of the Warrant Shares effective during the term of the Warrants.


4.2            Furnishing
of Information. Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the
Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12 (g) of the Exchange Act and timely
file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act.


4.3            Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such subsequent transaction.


4.4            Securities
Laws Disclosure; Publicity. The Company shall (a) by 9:00 a.m. (New York City time) on the Trading Day immediately following
the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current
Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the
Exchange Act. From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly
disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or
any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction
Documents. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make
any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without
the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law
in connection with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (b).



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4.5            Shareholder
Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that
any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the
Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.


4.6            Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction
Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.


4.7            Use
of Proceeds. Except as set forth on Schedule 4.7 attached hereto, the Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and shall not use such proceeds: (a) for the satisfaction of any portion
of the Company’s debt (other than payment of trade payables in the ordinary course of the Company’s business and prior
practices), (b) for the redemption of any Common Stock or Common Stock Equivalents, (c) for the settlement of any outstanding
litigation or (d) in violation of FCPA or OFAC regulations.



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4.8            Indemnification
of Purchasers. Subject to the provisions of this Section 4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of
a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against
the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is
not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless
such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may
be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall
have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time
to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will
not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s
prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that
a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties,
covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification
required by this Section 4.8 shall be made by periodic payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any
cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject
to pursuant to law.


4.9            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, a sufficient number of shares of Common Stock for the purpose of enabling the Company
to issue Shares pursuant to this Agreement and Warrant Shares pursuant to any exercise of the Warrants.



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4.10         Listing
of Common Stock. During the term of the Warrants, the Company hereby agrees to use commercially reasonable efforts to maintain
the listing or quotation of the Common Stock on the Trading Market on which it is currently listed, and concurrently with the
Closing, the Company shall apply to list or quote all of the Shares and Warrant Shares on such Trading Market and take all actions
reasonably necessary for securing the listing of all of the Shares and Warrant Shares on such Trading Market. The Company further
agrees, if the Company applies during the term of the Warrant to have the Common Stock traded on any other Trading Market, it
will then include in such application all of the Shares and Warrant Shares, and will take such other action as is necessary to
cause all of the Shares and Warrant Shares to be listed or quoted on such other Trading Market as promptly as possible. The Company
will then take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the
Trading Market. The Company agrees to maintain the eligibility of the Common Stock for electronic transfer through the Depository
Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository
Trust Company or such other established clearing corporation in connection with such electronic transfer.


4.11         Participation in Future Financing.


(a)           From
the date hereof until the date that is the 18 month anniversary of the Closing Date, upon any issuance by the Company or any of
its Subsidiaries of Common Shares or Common Share Equivalents for cash consideration, Indebtedness or a combination of units thereof
(a “Subsequent Financing”), each Purchaser shall have the right to participate in up to an amount of the Subsequent
Financing equal to 50% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions
and price provided for in the Subsequent Financing.


(b)           Approximately
(5) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Participation Right Purchaser
a written notice of its intention to effect a Subsequent Financing (a “Subsequent Financing Notice”). The Subsequent
Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and
shall include a term sheet or similar document relating thereto as an attachment.


(c)           Any
Participation Right Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company
by not later than 5:30 p.m. (New York City time) on the third (3rd) Trading Day after all of the Participation Right Purchasers
have received the Subsequent Financing Notice that the Participation Right Purchaser is willing to participate in the Subsequent
Financing, the amount of such Participation Right Purchaser’s participation, and representing and warranting that such Participation
Right Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing
Notice. If the Company receives no such notice from a Participation Right Purchaser as of such third (3rd) Trading Day, such Participation
Right Purchaser shall be deemed to have notified the Company that it does not elect to participate.


(d)           If
by 5:30 p.m. (New York City time) on the third (3rd) Trading Day after all of the Participation Right Purchasers have received
the Subsequent Financing Notice, notifications by the Participation Right Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to participate) is, in the aggregate, less than the total amount of the Subsequent
Financing, then the Company may effect the remaining portion of such Subsequent Financing on the terms and with the Persons set
forth in the Subsequent Financing Notice.






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(e)           If
by 5:30 p.m. (New York City time) on the third (3rd) Trading Day after all of the Participation Right Purchasers have received
the Subsequent Financing Notice, the Company receives responses to the Subsequent Financing Notice from Participation Right Purchasers
seeking to purchase more than the aggregate amount of the Participation Maximum, each such Participation Right Purchaser shall
have the right to purchase its Pro Rata Portion (as defined below) of the Participation Maximum. “Pro Rata Portion”
means the ratio of (x) the Subscription Amount of Securities purchased on the Closing Date by a Participation Right Purchaser
participating under this Section 4.11 and (y) the sum of the aggregate Subscription Amounts of Securities purchased on the Closing
Date by all Participation Right Purchasers participating under this Section 4.11.


(f)            The
Company must provide the Participation Right Purchasers with a second Subsequent Financing Notice, and the Participation Right
Purchasers will again have the right of participation set forth above in this Section 4.11, if the Subsequent Financing subject
to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing
Notice within 30 Trading Days after the date of the initial Subsequent Financing Notice.


(g)           The
Company and each Participation Right Purchaser agree that if any Participation Right Purchaser elects to participate in the Subsequent
Financing, the transaction documents related to the Subsequent Financing shall not include any term or provision whereby such
Participation Right Purchaser shall be required to agree to any restrictions on trading as to any of the Securities purchased
hereunder or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in
connection with, this Agreement, without the prior written consent of such Participation Right Purchaser.


(h)           Notwithstanding
anything to the contrary in this Section 4.11 and unless otherwise agreed to by such Participation Right Purchaser, the Company
shall either confirm in writing to such Participation Right Purchaser that the transaction with respect to the Subsequent Financing
has been abandoned or shall publicly disclose its intention to issue the securities in the Subsequent Financing, in either case
in such a manner such that such Participation Right Purchaser will not be in possession of any material, non-public information,
by the sixth (6th) Business Day following delivery
of the Subsequent Financing Notice. If by such sixth (6th)
Business Day, no public disclosure regarding a transaction with respect to the Subsequent Financing has been made, and no notice
regarding the abandonment of such transaction has been received by such Participation Right Purchaser, such transaction shall
be deemed to have been abandoned and such Participation Right Purchaser shall not be deemed to be in possession of any material,
non-public information with respect to the Company or any of its Subsidiaries.


(i)            Notwithstanding
the foregoing, this Section 4.11 shall not apply in respect of an Exempt Issuance.



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4.12        Subsequent
Equity Sales.


(a)           From
the date hereof until 90 days after the Closing Date, neither the Company nor any Subsidiary shall issue, enter into any agreement
to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents. In addition,
for a period of 12 months following the 90 calendar day period described in the preceding sentence, neither the Company nor any
Subsidiary shall issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common
Stock or Common Stock Equivalents for an effective per share purchase price of less than $2.00 (subject to adjustment for reverse
and forward stock splits and similar transactions).


(b)           From
the date hereof until such time as no Purchaser holds any of the Warrants, the Company shall be prohibited from effecting or entering
into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents
(or a combination of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means
a transaction in which the Company (i) issues or sells 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 price, exercise
price 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 or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company
may issue securities at a future determined price. Any Purchaser 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.


(c)           Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall
be an Exempt Issuance.


4.13        Equal
Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration
is also offered to all of the parties to this Agreement. For clarification purposes, this provision constitutes a separate right
granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat
the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect
to the purchase, disposition or voting of Securities or otherwise.



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4.14        Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including
Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and ending
at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release
as described in Section 4.4.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such
time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release
as described in Section 4.4, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and
the information included in the Disclosure Schedules.  Notwithstanding the foregoing and notwithstanding anything contained
in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation,
warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time
that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described
in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company
in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as described in Section 4.4 and (iii) no Purchaser shall have any
duty of confidentiality to the Company or its Subsidiaries after the issuance of the initial press release as described in Section
4.4.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge
of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant
set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment
decision to purchase the Securities covered by this Agreement.


4.15        Capital
Changes. Until the one year anniversary of the Closing Date, the Company shall not undertake a reverse or forward stock split
or reclassification of the Common Stock without the prior written consent of the Purchasers holding a majority in interest of
the Shares.


4.16        Exercise
Procedures. The form of Notice of Exercise included in the Warrants set forth the totality of the procedures required of the
Purchasers in order to exercise the Warrants. No additional legal opinion, other information or instructions shall be required
of the Purchasers to exercise their Warrants. Without limiting the preceding sentences, no ink-original Notice of Exercise shall
be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be
required in order to exercise the Warrants. The Company shall honor exercises of the Warrants and shall deliver Warrant Shares
in accordance with the terms, conditions and time periods set forth in the Transaction Documents.



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ARTICLE
V.

MISCELLANEOUS


5.1            Termination. 
This Agreement may be terminated by any Purchaser or by the Company with respect to any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers,
by written notice to the other parties, if the Closing has not been consummated on or before September 5, 2014; provided,
however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).


5.2            Fees
and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident
to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent
fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company
and any exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery
of any Securities to the Purchasers.


5.3            Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, the Prospectus and the Prospectus
Supplement, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.


5.4            Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered
via facsimile or e-mail attachment at the facsimile number or e-mail address set forth on the signature pages attached hereto
at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile or e-mail attachment at the facsimile number or e-mail address set forth on
the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day or (c) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications
shall be as set forth on the signature pages attached hereto.


5.5            Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and, if prior to the Closing, the Purchasers that have committed to purchase or, if
subsequent to the Closing, Holders holding, at least a majority in interest of the Shares based on the initial Subscription Amounts
hereunder or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver
of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver
in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall
any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.


5.6            Headings.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.


5.7            Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to
whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”



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5.8            No
Third-Party Beneficiaries. The Placement Agent shall be the third party beneficiary of the representations and warranties
of the Company in Section 3.1 and the representations and warranties of the Purchasers in Section 3.2. This Agreement is intended
for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.8 and this Section 5.8.


5.9            Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication
of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including
with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either
party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to
the obligations of the Company under Section 4.8, the prevailing party in such action, suit or proceeding shall be reimbursed
by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.


5.10         
Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the
Securities.


5.11         
Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered
to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and
effect as if such facsimile or “.pdf” signature page were an original thereof.



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5.12          Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.


5.13          Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of)
any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser
may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand
or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the
case of a rescission of an exercise of a Warrant, the applicable Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid
to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s
Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).


5.14          Replacement
of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation),
or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory
to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances
shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement
Securities.


5.15          Remedies.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.



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5.16          Payment
Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document
or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from,
disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.


5.17         
Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction
Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way
for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained
herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed
to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated
by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights including, without
limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary
for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented
by its own separate legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience
only, each Purchaser and its respective counsel have chosen to communicate with the Company through EGS. EGS does not represent
any of the Purchasers and only represents the Placement Agent. The Company has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any
of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction
Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between
and among the Purchasers.


5.18         
Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing
under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated
damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial
liquidated damages or other amounts are due and payable shall have been canceled.


5.19         
Saturdays, Sundays, Holidays, etc.If the last or appointed day for the taking of any action or the expiration
of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised
on the next succeeding Business Day.



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5.20         
Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity
to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to
be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments
thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be
subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement.


5.21         
WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST
ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY,
UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.  


(Signature Pages
Follow)






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IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.


	orient
    paper, inc.	 	Address for Notice:	 
	 	 	 		 
	By:      	/s/ Zhenyong Liu	 	Science Park, Juli Road	 
	Name:     	Zhenyong Liu	 	Xushui County, Baoding City
	Title:	 Chief Executive Officer 	 	Hebei Province, P.R. China 072550
	With a copy to (which shall not constitute notice):	Fax: +86-312-869-8212	 
	 	 	 
	DLA
                                         Piper LLP (US)


1251 Avenue of the Americas, 27th
Floor


New York, New York 10020-1104


Attention: Jack I. Kantrowitz


	 







[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR
PURCHASER FOLLOWS]







 









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[PURCHASER
SIGNATURE PAGES TO ONP SECURITIES PURCHASE AGREEMENT]


  


IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.


 


Name
of Purchaser: Sabby Healthcare Volatility Master Fund, Ltd.


 


Signature
of Authorized Signatory of Purchaser:         /s/    Robert Grundstein                                 


 


Name
of Authorized Signatory:      Robert Grundstein                                                               


 


Title
of Authorized Signatory:      COO of Purchaser’s Investment Manager                                


 


Email
Address of Authorized Signatory:      rgrundstein@sabbycapital.com                                   


 


Facsimile
Number of Authorized Signatory:       201 661 8654                                    


 


Address
for Notice to Purchaser: c/o Sabby Management, LLC, 10 Mountainview Road, Suite 205, Upper Saddle River, NJ 07458


  


Address
for Delivery of Securities to Purchaser (if not same as address for notice):


 


Bank America
Merrill Lynch, One Bryant Park – 6th Floor, New York, NY 10036, Attn: Miguelina Seda


  


Subscription
Amount: $    1,250,000                         


  


Shares:
    781,250 at $1.60                           


  


Warrant
Shares:      390,625 at $1.70 for 5 years                        


 


EIN Number:
     98-1012742                                       


  


[SIGNATURE
PAGES CONTINUE]


 




    	34



    	 



    


 


[PURCHASER
SIGNATURE PAGES TO ONP SECURITIES PURCHASE AGREEMENT]


 


IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.


 


Name
of Purchaser: Sabby Volatility Warrant Master Fund, Ltd.


 


Signature
of Authorized Signatory of Purchaser: ___/s/ Robert Grundstein________________________


 


Name
of Authorized Signatory: _Robert Grundstein______________________________


 


Title
of Authorized Signatory: _COO of Purchaser’s Investment Manager______________


 


Email
Address of Authorized Signatory:__rgrundstein@sabbycapital.com____________


 


Facsimile
Number of Authorized Signatory: __201 661 8654______________________


 


Address
for Notice to Purchaser: c/o Sabby Management, LLC, 10 Mountainview Road, Suite 205, Upper Saddle River, NJ 07458


  


Address
for Delivery of Securities to Purchaser (if not same as address for notice):


 


Bank America
Merrill Lynch, One Bryant Park – 6th Floor, New York, NY 10036, Attn: Miguelina Seda


  


Subscription
Amount: $__1,250,000_______________


 


Shares:
_781,250 at $1.60________________


  


Warrant
Shares: _390,625 at $1.70 for 5 years_______________


  


EIN Number:
_98-1017380______________________


  


[SIGNATURE
PAGES CONTINUE]


  






    	35



    	 



    




 


Disclosure Schedules


 


Schedule 3.1 (a)


 


The following diagram sets forth the
current corporate structure of Orient Paper:


 


 





 


100% ownership


 


Controlled by contractual
agreements


 






    	36



    	 



    

  


Schedule 3.1(g)


 


ORIENT PAPER,
INC.


CONDENSED CONSOLIDATED
BALANCE SHEETS


AS OF JUNE 30,
2014 AND DECEMBER 31, 2013


(Unaudited)


 


	 	 	June
    30,	 	 	December 31,	 
	 	 	2014	 	 	2013	 
	 	 	 	 	 	 	 
	ASSETS	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Current Assets	 	 	 	 	 	 
	Cash and cash
    equivalents	 	$	4,133,362	 	 	$	3,131,163	 
	Restricted cash	 	 	6,403,589	 	 	 	2,454,108	 
	Accounts
    receivable (net of allowance for doubtful accounts of $70,996 and $67,592 as of June 30, 2014 and December 31, 2013, respectively)	 	 	3,478,794	 	 	 	3,327,494	 
	Inventories	 	 	12,976,476	 	 	 	11,428,405	 
	Prepayments and other current
    assets	 	 	1,095,486	 	 	 	1,068,031	 
	Assets held for sale	 	 	4,103,335	 	 	 	4,130,590	 
	Deferred
    tax assets - current	 	 	24,784	 	 	 	413,537	 
	 	 	 	 	 	 	 	 	 
	Total current assets	 	 	32,215,826	 	 	 	25,953,328	 
	 	 	 	 	 	 	 	 	 
	Prepayment on property,
    plant and equipment	 	 	1,482,252	 	 	 	1,492,098	 
	Property, plant, and equipment,
    net	 	 	187,078,274	 	 	 	178,535,259	 
	Recoverable VAT	 	 	3,039,913	 	 	 	3,277,188	 
	Deferred
    tax asset – non-current	 	 	399,262	 	 	 	268,329	 
	 	 	 	 	 	 	 	 	 
	Total
    Assets	 	$	224,215,527	 	 	$	209,526,202	 
	 	 	 	 	 	 	 	 	 
	LIABILITIES AND STOCKHOLDERS'
    EQUITY	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Current Liabilities	 	 	 	 	 	 	 	 
	Short-term bank loans	 	$	8,126,381	 	 	$	6,544,288	 
	Current portion of long-term
    loans from credit union	 	 	113,769	 	 	 	1,660,613	 
	Current obligations under
    capital lease	 	 	8,190,597	 	 	 	8,264,795	 
	Accounts payable	 	 	6,396,818	 	 	 	926,571	 
	Notes payable	 	 	12,904,694	 	 	 	4,908,216	 
	Security deposit from a
    related party	 	 	1,625,276	 	 	 	1,636,072	 
	Due to a related party	 	 	145,384	 	 	 	64,546	 
	Accrued payroll and employee
    benefits	 	 	558,892	 	 	 	498,010	 
	Other payables and accrued
    liabilities	 	 	1,958,087	 	 	 	2,651,472	 
	Income
    taxes payable	 	 	929,666	 	 	 	1,218,140	 
	 	 	 	 	 	 	 	 	 
	Total current liabilities	 	 	40,949,564	 	 	 	28,372,723	 
	 	 	 	 	 	 	 	 	 
	Loans from credit union	 	 	5,761,604	 	 	 	4,253,788	 
	Loan from a related party	 	 	2,373,865	 	 	 	2,389,633	 
	Deferred gain on sale-leaseback	 	 	922,092	 	 	 	1,160,271	 
	Long-term
    obligations under capital lease	 	 	8,140,518	 	 	 	12,296,639	 
	 	 	 	 	 	 	 	 	 
	Total
    liabilities	 	 	58,147,643	 	 	 	48,473,054	 
	 	 	 	 	 	 	 	 	 
	Commitments and Contingencies	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Stockholders' Equity	 	 	 	 	 	 	 	 
	Common
    stock, 500,000,000 shares authorized, $0.001 par value per share, 18,753,900 and 18,753,900 shares issued and outstanding
    as of June 30, 2014 and December 31, 2013, respectively	 	 	18,754	 	 	 	18,754	 
	Additional paid-in capital	 	 	46,909,543	 	 	 	46,909,543	 
	Statutory earnings reserve	 	 	6,038,406	 	 	 	6,038,406	 
	Accumulated other comprehensive
    income	 	 	16,055,642	 	 	 	17,146,308	 
	Retained
    earnings	 	 	97,045,539	 	 	 	90,940,137	 
	 	 	 	 	 	 	 	 	 
	Total
    stockholders' equity	 	 	166,067,884	 	 	 	161,053,148	 
	 	 	 	 	 	 	 	 	 
	Total
    Liabilities and Stockholders' Equity	 	$	224,215,527	 	 	$	209,526,202	 



 


See accompanying
notes to condensed consolidated financial statements


 






    	37



    	 



    




 


Schedule 3.1(u)


 


Effective October
28, 2009, the Company entered into an appointment letter with Drew Bernstein. Pursuant to the agreement, Mr. Bernstein was appointed
our director and shall receive an annual salary of $20,000, payable on a monthly basis. Mr. Bernstein shall also receive 7,500
shares of common stock with piggyback registration rights subordinate to any investors in any past or present private placement
of securities.


 


Effective October
28, 2009, the Company entered into an appointment letter with Wenbing Christopher Wang. Pursuant to the agreement, Mr. Wang was
appointed our director and shall receive an annual salary of $20,000, payable on a monthly basis. Mr. Wang shall also receive
4,000 shares of common stock, which represents $20,000 divided by the closing price of the common stock on October 28, 2009, with
piggyback registration rights subordinate to any investors in any past or present private placement of securities.


 






    	38



    	 



    




 


Schedule 3.1(z)





 


Short-term bank loans


	 	 	 	 	 	June
    30, 
2014	 	 	December 31,
    
2013	 
	Industrial &
    Commercial Bank of China (“ICBC”) Loan 1	 	 	(a)	 	 	$	3,250,553	 	 	$	4,090,180	 
	ICBC Loan 2	 	 	(b)	 	 	 	812,638	 	 	 	818,036	 
	ICBC Loan 3	 	 	(c)	 	 	 	1,625,276	 	 	 	1,636,072	 
	ICBC
    Loan 4	 	 	(d)	 	 	 	2,437,914	 	 	 	-	 
	Total
    short-term bank loans	 	 	 	 	 	$	8,126,381	 	 	$	6,544,288	 



 


	(a)	On September
        2, 2013, the Company entered into a working capital loan agreement with the ICBC for $3,250,553 and $4,090,180 as of June
        30, 2014 and December 31, 2013, respectively, for which $813,921 was paid on June 5, 2014 and $3,250,553 is payable on
        August 15, 2014. The loan bears an interest rate of 115% over the primary lending rate of the People’s Bank of China
        and was at 6.9% per annum at the time of funding.

         

        Concurrent
        with the signing of the working capital loan agreement, the Company also entered into an agreement with the ICBC, which
        provides account management services to the Company during the terms of the underlying loan. The working capital loan
        is guaranteed by Hebei Fangsheng Real Estate Development Co. Ltd. (“Hebei Fangsheng”) with the land use right
        on our Headquarters Compound pledged by Hebei Fangsheng as collateral for the benefit of the bank. The land use right
        on our Headquarters Compound was acquired by Hebei Fangsheng from the Company on August 9, 2013. Hebei Fangsheng is controlled
        by the Company’s Chairman and CEO Mr. Zhenyong Liu.

	 	 
	(b)	On September
        6, 2013, the Company obtained a new accounts receivable factoring facility from the ICBC for $812,638 and $818,036 as
        of June 30, 2014 and December 31, 2013, respectively. Under the factoring agreement, the bank has recourse against the
        Company if the receivables, which remain in the Company’s books at all times, are not fully collected. The factoring
        facility will expire on August 4, 2014 and bears an interest rate of 110% of the primary lending rate of the People’s
        Bank of China and was at 6.6% per annum at the time of funding.

         

        Concurrent
        with the signing of the new factoring agreement, the Company also entered into a financial service agreement with ICBC,
        which provides accounts receivable management services to the Company during the terms of the underlying factoring facility.
        The factoring facility is personally guaranteed by the Company’s Chairman and CEO Mr. Zhenyong Liu.

	 	 
	(c)	On
    December 3, 2013, the Company obtained from the ICBC an accounts receivable factoring facility with a maximum credit limit
    of $1,625,276 and $1,636,072 as of June 30, 2014 and December 31, 2013, respectively. Under the factoring agreement, the bank
    has recourse against the Company if the receivables, which remain in the Company’s books at all times, are not fully
    collected. The term of the factoring facility expires on October 21, 2014 and carries an interest rate of 6.6% per annum,
    or 1.0% plus the prime rate for the loan set forth by the People’s Bank of China at the time of funding. The unpaid
    balance of the loan was in the amount of $1,625,276 as of June 30, 2014.


 


 


	(d)	On June
        26, 2014, the Company obtained a new accounts receivable factoring facility from the ICBC for $2,437,914 as of June 30,
        2014. Under the factoring agreement, the bank has recourse against the Company if the receivables, which remain in the
        Company’s books at all times, are not fully collected. The factoring facility will expire on June 25, 2015 and bears
        an interest rate of 110% of the primary lending rate of the People’s Bank of China and was at 6.6% per annum at
        the time of funding.

         

        Concurrent
        with the signing of the new factoring agreement, the Company also entered into a financial service agreement with ICBC,
        which provides accounts receivable management services to the Company during the terms of the underlying factoring facility.



 


As of June 30,
2014 and December 31, 2013, all short-term borrowings are secured bank loans. The factoring facility was secured by the Company’s
accounts receivable in the amount of $3,478,794 and $3,272,528 as of June 30, 2014 and December 31, 2013, respectively.


 






    	39



    	 



    




 


The average short-term
borrowing rates for the six months ended June 30, 2014 and 2013 were approximately 6.78% and 6.60%, respectively. The average
short-term borrowing rate for the three months ended June 30, 2014 and 2013 were approximately 6.78% and 6.60%, respectively.


 


Long-term loans from credit union


 


As of June 30,
2014 and December 31, 2013, loan payable to Rural Credit Union of Xushui County, amounted to $5,875,373 and $5,914,401, respectively.


 


On March 31, 2011,
the Company entered into a three-year term loan agreement with Rural Credit Union of Xushui County for an amount that is $1,611,531
as of December 31, 2013. The loan is guaranteed by an independent third party. Interest payment is due quarterly and bears the
rate of 0.72% per month, which was due on March 30, 2014. Because of the ongoing negotiation for renewing the loan, the Company
did not repay the loan upon expiry. On April 16, 2014, the Company repaid the entire amount without any penalty. On the same day,
the Company entered into another agreement with the Rural Credit Union of Xushui County for an amount that is $1,600,897 as of
June 30, 2014. The loan is guaranteed by an independent third party. Interest payment is due quarterly and bears the rate of 0.72%
per month. The loan balance would be repayable by various installments through June 21, 2014 to November 18, 2018. As of June
30, 2014, total outstanding loan balance was $1,600,897 with $48,758 becoming due within one year and presented as current portion
of long term loan from credit union in the condensed consolidated balance sheet.


 


On July 15, 2013,
the Company entered into a new agreement with the Rural Credit Union of Xushui County for a term of 5 years, which is due and
payable on various scheduled repayment dates between December 21, 2013 and July 26, 2018. The loan is secured by certain of the
Company’s manufacturing equipments in the amount of $18,501,809 and $21,901,456 as of June 30, 2014 and December 31, 2013,
respectively. Interest payment is due quarterly and bears a fixed rate of 0.72% per month. As of June 30, 2014, total outstanding
loan balance was $4,274,476 with $65,011 becoming due within one year and presented as current portion of long term loan from
credit union in the condensed consolidated balance sheet. As of December 31, 2013, total outstanding loan balance was $4,302,870,
with $49,082 becoming due within one year and presented as current portion of long term loan from credit union in the condensed
consolidated balance sheet.


 


Financing with
Sale-Leaseback


 


The Company entered
into a sale-leaseback arrangement (the “Lease Financing Agreement”) with China National Foreign Trade Financial &
Leasing Co., Ltd ("CNFTFL") on June 16, 2013, for a total financing proceeds in the amount of RMB150 million (approximately
US$24 million). Under the sale-leaseback arrangement, Orient Paper HB sold the Leased Equipment to CNFTFL for an amount of RMB
150 million (approximately US$24 million). Concurrent with the sale of equipment, Orient Paper HB leases back all of the equipment
sold to CNFTFL for a lease term of three years. At the end of the lease term, Orient Paper HB may pay a nominal purchase price
of RMB 15,000 (approximately $2,400) to CNFTFL and buy back all of the Leased Equipment. The sale-leaseback is treated by the
Company as a mere financing and capital lease transaction, rather than a sale of assets (under which gain or loss is immediately
recognized) under ASC 840-40-25-4. All of the Leased Equipment are included as part of the property, plant and equipment of the
Company for the periods presented; while the net present value of the minimum lease payment (including a lease service charge
equal to 5.55% of the amount financed, i.e. approximately US$1.35 million) was recorded as obligations under capital lease and
was calculated with CNFTFL’s implicit interest rate of 6.15% per annum and stated at $25,750,170 at the inception of the
lease on June 16, 2013. The balance of the long-term obligations under capital lease were $8,140,518 and $12,296,639 as of June
30, 2014 and December 31, 2013, which is net of its current portion in the amount of $8,190,597 and $8,264,795, respectively.


 


Total interest
expenses for the sale-leaseback arrangement for three months ended June 30, 2014 and 2013 were $247,795 and $60,454, respectively. Total
interest expenses for the sale-leaseback arrangement for six months ended June 30, 2014 and 2013 were $509,228 and $60,454, respectively.


 






    	40



    	 



    




 


As a result of
the sale, a deferred gain on sale of Leased Equipment in the amount of $1,379,282 was created at the closing of the transaction
and is presented as a non-current liability. The deferred gain would be amortized by the Company during the lease term and would
be used to offset the depreciation of the Leased Equipment.


 


As part of the
sale-leaseback transaction, Orient Paper HB entered into a Collateral Agreement with CNFTFL and pledged the land use right in
the amount of approximately $7,376,183 on some 58,566 square meters of land as collateral for the lease. In addition to Orient
Paper HB’s collateral, Orient Paper Shengde also entered into a Guarantee Contract with CNFTFL on June 16, 2013. Under the
Guarantee Contract, Orient Paper Shengde agrees to guarantee Orient Paper HB’s performance under the lease and to pledge
all of its production equipment as additional collateral. Net book value of Orient Paper Shengde’s asset guarantee was $34,511,101
and $36,134,038 as of June 30, 2014 and December 31, 2013, respectively.


 


The future minimum lease payments of
the capital lease as of June 30, 2014 were as follows:


 


	June 30,	 	Amount	 
	2015	 	$	9,013,478	 
	2016	 	 	8,507,458	 
	 	 	$	17,520,936	 






  


Related Party Transactions


 


Mr. Zhenyong Liu
is the director, principal stockholder and chief executive officer of the Company. He loaned money to Orient Paper HB for working
capital purposes over a period of time. On January 1, 2013, Orient Paper HB and Mr. Liu renewed the three-year term loan previously
entered on January 1, 2010, and extended the maturity date further to December 31, 2015. The unsecured loan carries an annual
interest rate based on the People’s Bank of China at the time of the renewal and was set at 6.15% per annum. As of June
30, 2014 and December 31, 2013, net amount due to Mr. Liu were $2,373,865 and $2,389,633, respectively.


 


The interest expenses
incurred for above related party loans are $36,404 and $36,205 for the three months ended June 30, 2014 and 2013, while the interest
expenses were $73,111 and $71,982 for the six months ended June 30, 2014 and 2013. On March 25, 2014, our Chairman and CEO Mr.
Zhenyong Liu agreed in writing to permit the Company to continue to postpone the repayment of the accrued interest on his loan
to Orient Paper HB until the earliest date on which the Company's quarterly or annual financial statements filed with the SEC
show a satisfactory working capital level. The accrued interest owned to Mr. Liu was approximately $635,602 and $566,343, which
was recorded in other payables and accrued liabilities (see Note (12) below) as part of the current liabilities as of June 30,
2014 and December 31, 2013, respectively.


 


During the six
months and the three months ended June 30, 2014, the Company borrowed $343,500 and $220,000, respectively, from a shareholder
to pay for various expenses incurred in the U.S. The amount was repayable on demand with interest free. The Company repaid the
entire balance by the end of the period.


 


Notes payable


 


As of June 30,
2014, the Company had eleven bank acceptance notes and one commercial acceptance note of $12,417,111 and $487,583, respectively,
from Bank of Hebei and SPD Bank, made payable to one of its major suppliers for settling purchase of raw materials. These acceptances
notes are used to essentially extend the payment of our accounts payable and are issued under the banking facilities obtained
from these two banks as well as the restricted bank deposit of $6,403,589 in these two banks as mentioned in Note (3). In particular,
the banking facility obtained from Bank of Hebei was secured by certain of the Company’s property, plant and equipment in
the amount of $33,161 and guaranteed by the Company’s Chairman and CEO Mr. Liu Zhenyong and Hebei Fangsheng and two independent
third parties. The banking facility obtained from SPD Bank was secured by land use right from a related party as mentioned in
Note (10). The bank acceptance notes from both Bank of Hebei and SPD Bank bear interest rate at nil% per annum and 0.05% of notes
amount as handling charge. They will become due and payable on various dates starting from July 7 through December 16 during the
year of 2014. Proceeds from the issuance and cash used for repayment for these notes payable are reported as cash generated or
used in operating activities in our cash flow statements pursuant to requirements under ASC 230-10-45-17.


 






    	41



    	 



    




 


As of December
31, 2013, the Company had three bank acceptance notes from Bank of Hebei to one of its major suppliers for a total amount of $4,908,216
for settling purchase of raw materials. An amount equal to $2,454,108 is under the banking facility obtained from Bank of Hebei
in November 13, 2013, while the remaining portion, amount of $2,454,108 are secured with a restricted bank deposit as mentioned
in Note (3). The banking facility obtained from Bank of Hebei was secured by certain of the Company’s property, plant and
equipment in the amount of $34,177, and guaranteed by the Company’s Chairman and CEO Mr. Liu Zhenyong and two independent
third parties. The bank acceptance notes bear interest rate at nil% per annum and 0.05% of notes amount as handling charge. They
were due and settled on various dates starting from May 15 through June 19 during the year of 2014.


 


Subsequent Events


 


Between July 17
and July 21, 2014 the Company entered into a series of financing agreements with the Commercial Bank of the City of Zhangjiakou,
based in the City of Zhangjiakou, Hebei, China for a total amount of approximately $11.4 million (the “CBCZ Financing”).
These agreements include (1) fourteen bank acceptance notes issued by the Commercial Bank of the City of Zhangjiakou in the total
amount of approximately $8.1 million to our suppliers for purchase of inventory, and (2) working capital loan agreement in the
amount of approximately $3.3 million. For the bank acceptance notes, the Company is required to retain 50% of the amount of the
notes in a designated account as restricted cash and will pay a service charge for 0.05% of the amount of the notes. The $3.3
million working capital loan bears a fixed interest rate of 9.9% per annum and is co-guaranteed by the Company’s Chairman
and CEO Mr. Zhenyong Liu and a third party financial guarantor company, which takes as collateral some 41 acres of land use rights
at the Wei County Industrial Park that are leased to the Company by Hebei Tengsheng Paper Co. Ltd. All notes and loans under the
CBCZ Financing are for terms less than or equal to 12 months.


 






    	42



    	 



    

 





Schedule 3.1(cc)


BDO China Shu Lun Pan Certified
Public Accountants LLP



    	43



    	 



    




Schedule 4.7 


None.


44