Document:

Phoenix Companies Inc.

EXHIBIT 10.1

CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (this “Agreement”), effective as of January 1, 2010, is between The Phoenix Companies, Inc., a Delaware corporation (the “Company”), and «Name» (the “Executive”).

RECITALS

The Company or one of its Affiliates (as defined below) has employed the Executive in an officer position and has determined that the Executive holds a critical position with the Company and/or such Affiliate.

The Company believes that, in the event it is confronted with a situation that could result in a change in ownership or control of the Company, continuity of management will be essential to its ability to evaluate and respond to such situation in the best interests of its shareholders.

The Company understands that any such situation will present significant concerns for the Executive with respect to the Executive’s financial and job security. The Company desires to assure the Company and its Affiliates of the Executive’s services during the period in which it is confronting such a situation, and to provide the Executive certain financial assurances to enable the Executive to perform the responsibilities of the Executive’s position without undue distraction and to exercise the Executive’s judgment without bias due to the Executive’s personal circumstances. To achieve these objectives, the Company and the Executive desire to enter into an agreement providing the Company and its Affiliates and the Executive with certain rights and obligations upon the occurrence of a Change in Control (as defined below).

The Company and the Executive therefore agree as follows:

1.

Operation of Agreement. 

(a) 

Term. The initial term of this Agreement shall commence on the date of this Agreement and continue through December 31, 2011, unless terminated earlier as provided in Section 5. Upon the expiration of the initial or any renewal term, this Agreement shall automatically renew for successive one-year terms, subject to earlier termination as provided in Section 5, unless either party provides the other party with a written notice at least sixty (60) days prior to the end of the initial term or any renewal term that the Company or the Executive does not want the term to be so extended. Notwithstanding anything to the contrary in this Agreement, the term of this Agreement shall in all events expire (regardless of when the term would otherwise have expired) on the second anniversary of a Change in Control; provided that any payment obligations 

hereunder resulting from the Executive’s termination of employment prior to the expiration of the term shall continue in full force and effect following the expiration of the term. 

(b) 

Effective Date. If a Change in Control occurs during the term of this Agreement, this Agreement shall govern the terms and conditions of the Executive’s employment and the benefits and compensation to be provided to the Executive commencing on the date on which a Change in Control occurs (the “Effective Date”) and ending on the second anniversary of the Effective Date; provided that if the Executive is not employed by the Company or one of its Affiliates on the Effective Date, this Agreement shall be void and without effect, and shall not constitute a contract of employment or a guarantee of employment for any period of time. Notwithstanding the preceding sentence, in the event that prior to the Effective Date, the Executive’s employment with the Company or any of its Affiliates is terminated in connection with a Change in Control (which shall in all events be deemed the case if such termination is within 90 days prior to the Effective Date and deemed not to be the case if such termination is more than 180 days before the Effective Date) without Cause or for Good Reason (as such terms are defined in Sections 5(b) and 5(c) below, but without regard to the requirement under Section 5(c) that such termination occur after the Effective Date), the Executive shall be entitled to receive the benefits provided under Section 6(b), but only to the extent that such benefits are in excess of those previously received by the Executive as a result of the Executive’s prior termination.

2.

Definitions.

(a)

“Affiliate” means any corporation, partnership, limited liability company, trust or other entity which directly, or indirectly through one or more intermediaries, controls, is under common control with, or is controlled by, the Company.

(b)

“Change in Control” means the first occurrence of:

(i)

any Person acquires “beneficial ownership” (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), directly or indirectly, of securities of the Company representing 25% or more of the combined Voting Power of the Company’s securities;

(ii)

within any 24-month period, the persons who were directors of the Company at the beginning of such period (the “Incumbent Directors”) shall cease to constitute at least a majority of the Board of Directors (the “Board”) or the board of directors of any successor to the Company; provided that any director elected or nominated for election to the Board by a majority of the Incumbent Directors still in office shall be deemed to be an Incumbent Director for purposes of this subclause 2(b)(ii);

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(iii)

the effective date of the consummation of any merger, consolidation, share exchange, division, sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Event”), if immediately following the consummation of such Corporate Event those Persons who were stockholders of the Company immediately prior to such Corporate Event do not hold, directly or indirectly, a majority of the Voting Power, in substantially the same proportion as prior to such Corporate Event, of (x) in the case of a merger or consolidation, the surviving or resulting corporation or (y) in the case of a division or a sale or other disposition of assets, each surviving, resulting or acquiring corporation which, immediately following the relevant Corporate Event, holds more than 25% of the consolidated assets of the Company immediately prior to such Corporate Event; 

(iv)

the approval by stockholders of the Company of a plan of liquidation with respect to the Company; or

(v)

the occurrence of any other event occurs which the Board declares to be a Change in Control.

(c)

“Code” means the Internal Revenue Code of 1986, as amended.

(d)

“Delay Period” means that period of time between the Executive’s date of Separation from Service and the earlier of (i) six months from the Separation from Service date, and (ii) the Executive’s date of death.

(e)

“Employment Period” means the period during which the Executive remains employed with the Company or any Affiliate following the Effective Date through the expiration of the term of this Agreement.

(f)

“Person” shall have the same meaning as ascribed to such term in Section 3(a)(9) of the Exchange Act, as supplemented by Section 13(d)(3) of the Exchange Act, and shall include any group (within the meaning of Rule 13d-5(b) under the Exchange Act); provided that Person shall not include (i) the Company or any of its Affiliates, or (ii) any employee benefit plan (including an employee stock ownership plan) sponsored by the Company or any of its Affiliates.

(g)

“PIP” means the Company's Performance Incentive Plan (or any successor plan) or similar annual incentive plan applicable to the Executive.

(h)

“Separation from Service” shall have the meaning set forth and described in the final regulations promulgated under Code section 409A.

(i)

“Voting Power” means such number of Voting Securities as shall enable the holders thereof to cast all the votes which could be cast in an annual election of directors of a company. 

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(j)

“Voting Securities” shall mean all securities entitling the holders thereof to vote in an annual election of directors of a company.

3.

Business Time. During the Employment Period, the Executive shall devote substantially the Executive’s full business time and efforts to the performance of the Executive’s duties on behalf of the Company, and its Affiliates, except for periods of vacation and sick leave or other leave period required by law. So long as the following activities do not (individually or in the aggregate) materially interfere with the performance of the Executive’s duties with the Company and its Affiliates and are conducted in compliance with the Company’s Code of Conduct (as in effect from time to time), the Executive may: (a) participate in charitable, civic, educational, professional, community or industry affairs or serve on the boards of directors or advisory boards of not for profit companies; and (b) manage his/her and his/her family’s personal financial and legal affairs. The Executive may serve on the boards of directors or similar governing bodies of any for profit entity only with the prior written consent of the Company’s Chief Executive Officer or, if the Executive is the Company’s Chief Executive Officer, the Company’s Board of Directors and only as long as such service is not in violation of the Company’s Code of Conduct. It is expressly understood and agreed that the Executive’s continuing to serve to the same extent and in the same manner on any boards and committees on which the Executive is serving or with which the Executive is otherwise associated immediately preceding the Effective Date shall not be deemed to interfere with the performance of the Executive’s services to the Company and its Affiliates.

4.

Compensation. 

(a) 

Base Salary. During the Employment Period, the Executive shall receive a base salary at a monthly rate at least equal to the monthly salary paid to the Executive immediately prior to the Effective Date. The base salary may be increased (but not decreased) at any time and from time to time by action of the Board or any committee thereof, the board of directors of any Affiliate or any committee thereof in the event the Executive is employed by an Affiliate, and any individual having authority to take such action in accordance with the Company’s or any Affiliate’s regular practices. The Executive’s base salary, as it may be increased from time to time, shall hereafter be referred to as the “Base Salary.”

(b)

Total Incentive Compensation. During the Employment Period, the total incentive compensation opportunities made available to the Executive in each year in the form of short-term incentive compensation and long-term incentive compensation (“Total Incentive Compensation”), whether in equity or cash, shall not be less than the Total Incentive Compensation made available to the Executive immediately prior to the Effective Date. For purposes of this Section 4(b), the amount of Total Incentive Compensation made available to the Executive, whether prior to or after a Change in Control, shall be conclusively determined by an independent compensation consultant selected by the Company prior to the occurrence of a Change in Control (or, if that entity is no longer able to serve or declines to serve in such capacity, such other independent 

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compensation consultant that has no existing client relationship with the Company and its Affiliates as shall be selected by the designated consultant and reasonably acceptable to the Board (either such consultant hereinafter referred to as the “Compensation Consultant”)), using methods of valuation and comparison commonly used in competitive compensation practices, which shall be consistently applied. The Company shall provide the Compensation Consultant with any and all data that the consultant shall reasonably request in order to make its evaluations hereunder.

5.

Termination. 

(a) 

Death, Disability, or Voluntary Resignation. This Agreement shall terminate automatically upon the Executive’s termination due to death, termination due to “Disability” (as defined below), voluntary retirement (other than for Good Reason, as defined below) under any of the retirement plans of the Company or its Affiliates applicable to the Executive as in effect from time to time, or Executive’s voluntary resignation for any reason (other than for Good Reason). For purposes of this Agreement, “Disability” shall mean the Executive’s inability to perform his or her material duties for six consecutive months due to a physical or mental incapacity.

(b)

Cause. The Company and each of its Affiliates that employ the Executive may terminate the Executive’s employment for Cause. For purposes of this Agreement, “Cause” means: (i) the Executive’s conviction of or plea of nolo contendere to, a felony (other than with respect to a traffic violation or an incident of vicarious liability); (ii) an act of willful misconduct on Executive’s part with regard to the Company or its Affiliates having a material adverse impact on the Company or its Affiliates (including, without limitation, a willful violation of the Company’s Code of Conduct), or (iii) the Executive’s failure in good faith to attempt or refusal to perform legal directives of the Board or executive officers of the Company, as applicable, which directives are consistent with the scope and nature of the Executive’s employment duties and responsibilities and which failure or refusal is not remedied by the Executive within thirty (30) days after notice of such non-performance is given to the Executive. The Executive shall be provided an opportunity, together with his or her counsel, to be heard before the Board prior to termination and after such notice. If the majority of the members of the Board do not confirm, through a duly-adopted resolution following such opportunity, that the Company had grounds for a “Cause” termination, the Executive shall have the option to treat his or her employment as not having terminated or as having been terminated pursuant to a termination without Cause. No event shall constitute grounds for a “Cause” termination in the event that the Company fails to take action within 90 days after the Company’s Chairman or the Chairman of the Company’s Audit Committee obtains actual knowledge of the occurrence of such event. Additionally, for purposes of clause (ii) of this definition, no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith 

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and without reasonable belief that the Executive’s act, or failure to act, was in the best interest of the Company and its subsidiaries.

(c)

Good Reason. After the Effective Date, the Executive may resign from employment at any time for Good Reason. For purposes of this Agreement, “Good Reason” means the occurrence after the Effective Date of any of the following, without the express written consent of the Executive and which occurrence is not remedied by the Company within thirty (30) days after written notice of such occurrence is given to the Company):

(i)

the material reduction in the Executive’s title, position, duties or responsibilities from the title, position, duties or responsibilities held or exercised by the Executive prior to the Effective Date;

(ii)

any requirement by the Company that the geographic location where the Executive regularly provides services to the Company is materially changed to a location that is more than 35 miles from where the Executive provides service to the Company immediately prior to the Effective Date;

(iii)

a material diminution/reduction by the Company of the Executive’s Base Salary or Total Incentive Compensation opportunity or a reduction in the employee benefits provided to the Executive under the Company’s employee benefit plans (unless the Executive is provided with substantially equivalent replacement benefits); or

(iv)

any failure to obtain the assumption and agreement to perform this Agreement by a successor as contemplated by Section 12(b).

(d)

Notice of Termination. Any termination of the Executive’s employment after the Effective Date by the Company and/or its Affiliates for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto in accordance with Section 14(d). For purposes of this Agreement, a “Notice of Termination” means a written notice given: (i) in the case of a termination for Cause, within 10 business days of the Company or any Affiliate that employs the Executive having actual knowledge of the events giving rise to such termination; or (ii) in the case of a termination for Good Reason, within 10 business days of the Executive’s having actual knowledge of the events giving rise to such termination, but in no event later than 90 calendar days after the actual event. Any such Notice of Termination shall (x) indicate the specific termination provision in this Agreement relied upon, (y) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (z) if the termination date is other than the date of receipt of such notice, specify the termination date of this Agreement (which date shall be not more than 15 days after the giving of such notice).

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(e)

Date of Termination. For the purpose of this Agreement, the term “Date of Termination” means: (i) in the case of a termination for which a Notice of Termination is required, the date of receipt of such Notice of Termination or, if later, the date specified therein, as the case may be, and (ii) in all other cases, the actual date on which the Executive’s Separation from Service occurs during the Employment Period.

6.

Obligations of the Company or an Affiliate upon Termination. 

(a) 

Death, Disability, Retirement, Voluntary Resignation and Termination for Cause. If the Executive’s employment is terminated during the Employment Period by reason of the Executive’s death, Disability, termination for Cause, or voluntary termination due to his or her retirement or other resignation (other than on account of Good Reason), this Agreement shall terminate without further obligations to the Executive or the Executive’s legal representatives under this Agreement other than those obligations accrued hereunder at the Date of Termination, and the Company or the Affiliate that employs the Executive shall pay to the Executive (or the Executive’s beneficiary or estate), at the times determined below: (i) the Executive’s full Base Salary through the Date of Termination (the “Earned Salary”), (ii) any vested amounts or benefits owing to the Executive under and in accordance with the terms and conditions of any otherwise applicable employee benefit plans, agreements and programs and any accrued vacation pay not yet paid (the “Accrued Obligations”), and (iii) any other benefits payable in such situation under the plans, agreements, policies or programs of the Company and its Affiliates and in accordance with the terms of such plans, policies and programs (the “Additional Benefits”). Any Earned Salary shall be paid in cash in a single lump sum as soon as practicable, but in no event more than 30 days (or at such earlier or later date required by law), following the Date of Termination. Accrued Obligations and Additional Benefits shall be paid in accordance with the terms of the applicable plan, program or arrangement.

(b)

Termination Without Cause or for Good Reason. If, during the Employment Period, the Company or the Affiliate that employs the Executive terminates the Executive’s employment other than for Cause or the Executive terminates his or her employment for Good Reason:

(i)

Pension Service Credit and Payment. The Executive’s accrued benefits under any qualified or nonqualified defined benefit type pension plan or arrangement of the Company, including, without limitation, the Employee Pension Plan or any successor plan and the Supplemental Executive Retirement Plan or the Supplemental Executive Retirement Plan B (“SERP”) or any successor plan (all such plans, the “Pension Plans”) shall, to the extent not previously vested, be deemed vested as of the Date of Termination. In addition, the Company shall increase:

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(A) if the Executive is a grandfathered participant under the new retirement program as implemented effective July 1, 2007, the Executive’s benefits under the Pension Plans by adding [2.0 or 1.0] years of additional service and age credit for pension calculation purposes (with the Base Salary rate as of the Effective Date used for that [2.0 or 1.0] years of the salary component of final average earnings for purposes of this calculation, without any adjustment to the incentive portion of final average earnings, and with age credits applied only for the purpose of determining any early retirement reduction factor); or

(B) if the Executive is a non-grandfathered participant under the new retirement program as implemented effective July 1, 2007, only the Executive’s Pension Equity Benefit, as defined in the Pension Plans, by adding [2.0 or 1.0] years of additional service credits for Pension Equity Benefit calculation purposes. The final average earnings will not be adjusted. 

These additional benefits shall be paid at the same time and in the same form as the regular SERP benefit, including any Code section 409A restrictions on the SERP benefit payments, and shall be paid on a nonqualified basis.

(ii)

Additional Lump Sum Payments. In lieu of (and not in addition to) any severance benefits payable to the Executive under any other plan, policy or program of the Company or any Affiliate (each, a “Severance Policy”) or under any written agreement between the Executive and the Company (each, a “Prior Agreement”), the Company shall pay to the Executive (or cause the Executive to be paid), at the times determined below, the following amounts:

(A)

the Executive’s Earned Salary;

(B)

a cash amount (the “Severance Amount”) equal to [2.0 or 1.0] times the sum of (x) the Executive’s annual rate of Base Salary as then in effect and (y) the target applicable to the Executive under the PIP for the year in which the Executive’s employment terminates; and

(C)

the Accrued Obligations and Additional Benefits.

The Earned Salary shall be paid in cash in a single lump sum as soon as practicable, but in no event more than 30 days (or at such earlier or later date required by law), following the Date of Termination. The Severance Amount shall be paid in a single lump sum as soon as practicable, but no later than 60 days, following the Date of Termination. The Accrued Obligations and 

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Additional Benefits shall be paid in accordance with the terms of the applicable plan, program or arrangement. Notwithstanding the foregoing, but subject to Section 13(b), the Executive may elect in writing to receive the benefits payable under any Severance Policy that would otherwise be available to him or her, or the termination benefits under any Prior Agreement to which he or she is a party, in each case in lieu of receiving the benefits payable hereunder; provided, however, that such benefits shall be paid in a lump sum at the same times as in the preceding sentences of this paragraph. 

[(iii)

Payment in Consideration of the Restrictive Covenants in Section 7. In addition to the Severance Amount specified in and payable under Section 6(b)(ii) and as the consideration for the covenants made by Executive pursuant to Section 7 hereof, the Company shall pay to the Executive (or cause the Executive to be paid) a single lump sum amount equal to the product of 1.5 times the sum of (x) the Executive’s annual rate of Base Salary as then in effect and (y) the target applicable to the Executive under the PIP for the year in which the Executive’s employment terminates (the “Non-competition Payment”). Such Non-Competition Payment shall be paid as soon as practicable, but no later than 60 days, following the Date of Termination.]

(iv)

Continuation of Benefits. The Executive (and, to the extent applicable, the Executive’s dependents) shall be entitled, after the Date of Termination until the end of the second calendar year following the calendar year of the Date of Termination (the “End Date”), to continue participation in all of the employee and executive plans providing medical, dental and long-term disability benefits that the Executive participated in prior to the Date of Termination (collectively, the “Continuing Benefit Plans”); provided that coverage with regard to medical, dental and long-term disability benefits for the period after the end of the eighteen (18)-month period following the Date of Termination shall be deemed to be monthly, in-kind payments of the premiums and will be taxable income to the Executive; and provided further that the participation by the Executive (and, to the extent applicable, the Executive’s dependents) in any Continuing Benefit Plan shall cease on the date, if any, prior to the End Date on which the Executive becomes eligible for comparable benefits under a similar plan, policy or program of a subsequent employer (“Prior Date”). The Executive agrees to notify the Company promptly if and when Executive begins employment with another employer and if and when Executive becomes eligible to participate in any benefit or other welfare plans, programs or arrangements of another employer. The Executive’s participation in the Continuing Benefit Plans will be on the same terms and conditions that would have applied had the Executive continued to be employed by the Company or the Affiliate that employs the Executive through the End Date or the Prior Date. To the extent any such benefits cannot be provided under the terms 

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of the applicable plan, policy or program, the Company shall provide (or shall cause to be provided) comparable benefits under another plan or from its general assets. To the extent any medical or dental plan is a “self-insured medical reimbursement plan” under Code section 105(h) and such coverage would be discriminatory thereunder, the premiums (both during and after the eighteen (18)-month period) shall be taxable income to the Executive and the Company or its Affiliates shall pay the Executive promptly after the provision of such benefits additional cash payments to the extent necessary for the Executive to receive the same net after-tax benefits that the Executive would have received under such plans if the Executive had continued to receive such plan benefits while employed with the Company; provided that any such additional cash payment that would be paid within the Delay Period (as defined in Section 2(d) hereof) shall not be paid during such Delay Period, but shall be paid immediately thereafter.

(v)

Deemed Vesting for Certain Benefits. The Executive shall be deemed to have met all service and other requirements for full vesting of benefits under all stock option or other stock or equity compensation plans of the Company in which the Executive participates and the stock options held by the Executive shall remain exercisable for the lesser of two years or the duration of their normal terms. 

(vi)

Pro-rata Payment of PIP and Long-Term Incentive Award. The Company shall pay to the Executive a cash amount equal to a pro rata portion of (A) the Executive’s target annual incentive award under the PIP for the fiscal year in which the Executive’s Date of Termination occurs and (B) subject to the terms and conditions of the individual award agreements underlying each award when granted, any awards made to the Executive under the Company’s long-term incentive plan (or any successor plan) determined as if the targets applicable to such awards were achieved. The PIP amount and the long-term incentive awards amount shall not be paid prior to six (6) months following the Executive’s Date of Termination. The pro-rata portion of each award shall be determined by multiplying the value of the award times a fraction, the numerator of which is the number of days during the performance period applicable to each such award prior to the Date of Termination and the denominator of which is the number of days in the performance period applicable to each such award. Notwithstanding the foregoing, any amount payable under this subparagraph in respect of the annual incentive award or in respect of any long-term incentive plan shall be the only amounts payable to the Executive under the PIP and long-term incentive plans for the year in which the Date of Termination occurs.

(vii)

Outplacement. The Company shall provide the Executive with reasonable outplacement services at a level commensurate with the 

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Executive’s position for up to twelve (12) consecutive months after the Executive’s Date of Termination. 

(c)

Discharge of the Company’s and its Affiliates’ Obligations. Except as expressly provided in the last sentence of this Section 6(c), the amounts payable to the Executive pursuant to this Section 6 following termination of the Executive’s employment shall be in full and complete satisfaction of the Executive’s rights under this Agreement and any other claims the Executive may have in respect of the Executive’s employment by the Company and its Affiliates. Such amounts shall constitute liquidated damages with respect to any and all such rights and claims and, upon the Executive’s receipt of such amounts, the Company and its Affiliates shall be released and discharged from any and all liability to the Executive in connection with this Agreement or otherwise in connection with the Executive’s employment by the Company and its Affiliates. Notwithstanding the foregoing: (i) the Executive shall retain all rights with respect to the Company’s continuing obligations to indemnify the Executive as a former officer and/or director of the Company or its Affiliates, and to provide directors and officers liability insurance, to the fullest extent permitted under the Company’s certificate of incorporation and by-laws or any other arrangement and (ii) to the extent the Executive is entitled to greater rights with respect to any category of severance payments or benefits in any similar situation under any other arrangement with the Company, the Executive shall be entitled to such greater rights. 

(d)

Section 280G Limitation on Payments by the Company and its Affiliates.

(i)

Application of Section 6(d). In the event that any amount or benefit to be paid or distributed to, or on behalf of, the Executive pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to, or on behalf of, the Executive by the Company, its Affiliates and their successors, including any acquiror of the Company or its Affiliates (or any person or entity required to be aggregated with the Company or its Affiliates for purposes of Code section 280G) under any other plan, agreement, or arrangement (collectively, the “Covered Payments”), would be an “excess parachute payment” as defined in Code section 280G, and would thereby subject the Executive to the tax (the “Excise Tax”) imposed under Code section 4999 (or any similar tax that may hereafter be imposed), the Company shall reduce the aggregate value of all Covered Payments to an amount equal to 2.99 times the Executive’s average annual compensation calculated in accordance with Code section 280G (such reduced payments to be referred to as the “Payment Cap”). In the event that as a consequence of the foregoing, Executive receives reduced payments and benefits hereunder, Executive shall have the right to designate which of the payments and benefits otherwise provided for in this Agreement that the Executive will 

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receive in connection with the application of the Payment Cap, but may not change the time of payment thereof.

[(ii)

Calculation of Benefits. Immediately following delivery of any notice of involuntary termination not for Cause by the Company or of any Notice of Termination by the Executive for Good Reason, the Company shall notify the Executive of the aggregate present value of all “parachute payments” (within the meaning of Code section 280G) to which the Executive would be entitled under this Agreement and any other plan, program or arrangement as of the projected Date of Termination, together with the projected maximum payments, determined as of such projected Date of Termination, that could be paid without the Executive exceeding the Payment Cap.

(iii)

Application of Code Section 280G. For purposes of determining whether any of the Covered Payments will be subject to the Excise Tax and the amount of such Excise Tax, 

(1)

such Covered Payments will be treated as “parachute payments” within the meaning of Code section 280G, and all “parachute payments” in excess of the “base amount” (as defined under Code section 280G(b)(3)) shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the good faith judgment of an independent certified public accountant other than the Company’s normal independent certified public accountants or tax counsel selected by such accountants (the “Accountants”), relying on the best authority available at the time of such determination (including, but not limited to, any proposed Treasury regulations upon which taxpayers may rely), that the Company or any otherwise applicable Subsidiary has a reasonable basis to conclude that such Covered Payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for personal services actually rendered (within the meaning of Code section 280G(b)(4)(B)) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Excise Tax, and

(2)

the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Code section 280G.

(iv)

Adjustments in Respect of the Payment Cap.

(1)

If the Executive receives reduced payments and benefits under this Section 6(d) (or this Section 6(d) is determined not to be applicable to the Executive because the Accountants 

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conclude that the Executive is not subject to any Excise Tax) and it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding (a “Final Determination”) that, notwithstanding the good faith of the parties in applying the terms of this Section 6(d), the aggregate “parachute payments” within the meaning of Code section 280G paid to the Executive or for his benefit are in an amount that would result in the Executive being subject an Excise Tax and, taking into account the amount of such aggregate parachute payments specified in such Final Determination, the Payment Cap should have been applied under the provisions of this Section 6(d), then the amount equal to the excess parachute payments made to the Executive shall be deemed for all purposes to be a loan to the Executive made on the date of receipt of such excess payments, which the Executive shall have an obligation to repay to the entity making such payment on demand, together with interest on such amount at the applicable Federal rate (as defined in Code section 1274(d)) from the date of the payment hereunder to the date of repayment by the Executive.

(2)

If the Executive receives reduced payments and benefits under this Section 6(d) and it is established pursuant to a Final Determination that, notwithstanding the good faith of the parties in applying the terms of this Section 6(d), the aggregate “parachute payments” within the meaning of Code section 280G paid to the Executive or for his benefit are in an amount that would result in the Executive being subject to an Excise Tax and, taking into account the amount of such aggregate parachute payments, the Payment Cap should not have been applied under Section 6(d), then the Company shall pay the Executive 30 days following such Final Determination an amount equal to the excess of (i) the amount of Aggregate Parachute Payments that would have been payable to the Executive without regard to Section 6(d) over (ii) the reduced amount actually paid to the Executive in accordance with Section 6(d), together with interest on such excess amount at the applicable Federal rate (as defined in Code section 1274(d)) from the date payment would have been made to the Executive of such excess amount (or any portion thereof) but for the application of Section 6(d) to the date of actual payments.

(3)

If the Executive receives reduced payments and benefits by reason of Section 6(d)(i) and it is established pursuant to a Final Determination that the Executive could have received a greater amount without exceeding the Payment Cap, then the Company or the appropriate Subsidiary shall promptly thereafter pay the Executive within 30 days of the date of the Final Determination the aggregate additional amount which could have been paid without exceeding the Payment Cap, together with 

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interest on such amount at the applicable Federal rate (as defined in Code section 1274(d)) from the original payment due date to the date of actual payment.]

(v)

Survival. The provisions of this Section 6(d) of the Agreement shall survive the termination of the Executive’s employment hereunder and the termination of this Agreement with regard to any event that occurred prior thereto.

7.

Restrictive Covenant(s). 

(a) Non-Solicitation. During the Employment Period, and for a period of 1.5 years after the Employment Period, the Executive agrees not to induce, encourage, or solicit, either directly or indirectly, any customer, client, employee, officer, director, agent, broker, registered representative or independent contractor to either: (i) terminate their respective relationship or contracts with the Company or its Affiliates; or (ii) not place business with the Company or its Affiliates. The Executive agrees the restrictions in this paragraph apply whether the Executive voluntarily terminates his or her employment or is involuntarily terminated with or without Cause or for Good Reason during the Employment Period.

[(b) Non-Competition. For a period of 1.5 years after his Date of Termination, Executive shall not, directly or indirectly, either for Executive’s own benefit or purposes or for the benefit or purposes of any other person or entity, engage in, invest in, own, manage, operate, control or participate in the ownership, management, operation or control of, or be employed by or render services to, any business which is engaged in a Competitive Activity. For purposes of this Agreement, the term “Competitive Activity” shall mean any activity that is directly competitive with the Company’s business of manufacturing and distributing life insurance and associated products, including any activities that are directly ancillary thereto. Notwithstanding the foregoing, Executive shall not be deemed to be in breach of the covenant contained in this Section 7(b) unless the activity in which Executive engages, or the services which Executive provides, in respect of such Competitive Activity relate in a substantial way to the services provided to, and responsibilities undertaken by the Executive for, the Company during the 18 month period immediately prior to Executive’s Date of Termination. For purposes of this Section 7(b), it is agreed that Executive’s ownership of not more than one percent (1%) of the outstanding voting stock of a publicly traded corporation or not more than five percent (5%) of the equity of a private entity shall not in itself constitute a violation of this Agreement, provided that in the case of equity of a private entity such ownership interest is treated by Executive as a passive investment and Executive discloses such ownership interest in writing to the Company.]

8.

Non-Exclusivity of Rights. Except as expressly provided herein, nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation 

14

in any benefit, bonus, incentive or other plan or program provided by the Company or any of its Affiliates and for which the Executive may qualify, nor shall anything herein limit or otherwise prejudice such rights as the Executive may have under any other agreements with the Company or any of its Affiliates, including employment agreements, stock option agreements, and other stock or equity compensation agreements. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any Affiliate at or subsequent to the Date of Termination shall be payable in accordance with such plan or program.

9.

No Offset. Except as expressly provided in this Agreement, the obligation of the Company to make the payments provided for in this Agreement or any of its Affiliates to make the payments provided for in this Agreement and otherwise to perform the obligations hereunder shall not be diminished or otherwise affected by any circumstances, including, but not limited to, any set-off, counterclaim, recoupment, defense or other right which the Company or any of its Affiliates may have against the Executive or others, whether by reason of the subsequent employment of the Executive or otherwise.

10.

Legal Fees and Expenses. If the Executive asserts any claim in any contest (whether initiated by the Executive or by the Company or any of its Affiliates) as to the validity, enforceability or interpretation of any provision of this Agreement or to enforce and/or collect any payment or benefit payable hereunder, the Company shall pay the Executive’s legal expenses (or cause such expenses to be paid) including, but not limited to, the Executive’s reasonable attorneys’ fees, on a quarterly basis, promptly upon presentation of proof of such expenses in a form acceptable to the Company, which submission shall be made within forty-five (45) days after the end of such quarter; provided that the Executive shall reimburse the Company for such amounts (to the extent permitted under applicable law), plus simple interest thereon at the 90-day United States Treasury Bill rate as in effect from time to time, compounded annually, if the arbitrator determines that the Executive’s claims were substantially frivolous or brought in bad faith.

11.

Surviving Agreements. This Agreement provides for certain payments and benefits to the Executive to be determined by the employee benefit plans and programs, incentive plans, stock option, and other stock or equity compensation plans of the Company and its Affiliates. To the extent so provided, such programs and plans constitute part of the agreement and understanding between the Executive and the Company and are incorporated herein and made a part hereof. The Executive and the Company hereby reaffirm their respective commitments under such programs and plans, and again agree to be bound by each of the covenants contained therein for the benefit of the Company in consideration of the benefits made available to the Executive hereby.

12.

Successors. 

(a) This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement 

15

shall inure to the benefit of and be enforceable by the Executive’s legal representatives and his or her estate.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and shall be assignable, in writing, by the Company only to the acquiror of all or substantially all, of the assets of the Company. The Company shall require any successor to all or substantially all of the business and/or assets of the Company, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place. 

13. 

Section 409A. 

(a) The intent is that payments and benefits under this Agreement comply with Code section 409A and accordingly this Agreement shall be interpreted to be in compliance therewith. The Company may from time to time amend this Agreement, without obtaining the consent of the Executive, as the Company deems necessary or desirable to comply with the requirements of Code section 409A and the regulations and guidance provided thereunder, regardless of whether any such amendment would cause a reduction or cessation of a benefit accrued prior to the adoption of such amendment. To the extent that this Agreement is modified to comply with Code section 409A, such modification shall, to the extent reasonably possible, maintain the original intent of the applicable provision of this Agreement without violating the provisions of Code section 409A.

(b) It is intended that the payments under this Agreement, to the extent applicable, comply with the short-term deferral rule under Code section 409A. 

14.

Miscellaneous. 

(a) 

Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut, applied without reference to principles of conflict of laws.

(b)

Amendments. Except as provided in Section 13(a), this Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. 

(c)

Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters referred to herein, and completely supersedes and replaces any prior agreement between the Executive and the Company or any of its Affiliates concerning the subject matter herein. No subsequent agreement concerning the subject matter herein, oral or otherwise, shall be binding between the parties unless it is in writing and signed 

16

by the party against whom enforcement is sought. Except as expressly provided herein, nothing in this Agreement shall be construed or interpreted to enhance, increase, reduce or diminish any rights, duties or obligations of the Executive under any agreement between the Executive and the Company or any of its Affiliates, or under any employee benefit plan program (as further set forth in Section 11) or procedure established by the Company or any of its affiliates with respect to any subject matter herein. There are no promises, representations, inducements or statements between the parties other than those that are expressly contained herein. The Executive acknowledges that the Executive is entering into this Agreement of the Executive’s own free will and accord, and with no duress, that the Executive has read this Agreement and that the Executive understands it and its legal consequences. 

(d)

Notices. All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party, overnight mail, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

Home address of the Executive noted on the records of the Company

If to the Company:

The Phoenix Companies, Inc.

One American Row

PO Box 5056

Hartford, CT 06102-5056

Attn.: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(e)

Tax Withholding. The Company shall withhold (or cause such withholding) from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(f)

Severability; Reformation. In the event that one or more of the provisions of this Agreement shall become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

(g)

Waiver. Waiver by any party hereto of any breach or default by the other party of any of the terms of this Agreement shall not operate as a waiver of any other breach or default, whether similar to or different from the breach or default waived. No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or from any failure by 

17

either party hereto to assert its or the Executive’s rights hereunder on any occasion or series of occasions.

(h)

Confidentiality. In further consideration for entering into this Agreement, the Executive, after termination of the Executive’s employment, shall retain in confidence any confidential or proprietary information known to the Executive concerning the Company and its Affiliates and their business so long as such information is not publicly disclosed and shall not use such information in any way injurious to the Company or its Affiliates except for any disclosure to which an authorized officer of the Company or such Affiliate has consented or any disclosure or use required by any order of any governmental body or court (including legal process). If requested, the Executive shall return to the Company and its Affiliates any memoranda, documents or other materials possessed by the Executive and containing confidential or proprietary information of the Company and its Affiliates. Notwithstanding the preceding sentence, the Executive shall not be required to return to the Company or its Affiliates, any memoranda, documents or other materials containing confidential or proprietary information of the Company or its Affiliates, if such materials were provided to the Executive in his or her capacity as a director of the Company or its Affiliates.

(i)

Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

(j)

Captions. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and the Company has caused this Agreement to be executed in its name on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary, all as of the day and year first above written.

			
	 
	THE PHOENIX COMPANIES, INC.

	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	By:____________________________

	 

	 
	      Name: Bonnie J. Malley

	 

	 
	      Title:   Executive Vice President 

	 

	 
	 
	 

	 
	 
	 

	 
	WITNESS:

	 

	 
	 
	 

	 
	_______________________________ 

	 

18

			
	 
	EXECUTIVE:

	DATE:

	 
	 
	 

	 
	_______________________________

	____________

	 
	«Name»

	 

	 
	 
	 

	 
	 
	 

	 
	WITNESS:

	 

	 
	 
	 

	 
	_______________________________ 

	 

19ex10one.htm

 

 

 

 

SECURITIES PURCHASE AGREEMENT

Dated as of ______________________, 2009

among

TIANYIN PHARMACEUTICAL CO., INC.

and

THE PURCHASERS LISTED ON EXHIBIT A

 

 

 

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”) is dated as of _________________, 2009 by and among Tianyin Pharmaceutical Co., Inc a Delaware corporation, (the “Company”) and the
Purchaser who has executed this Agreement on the signature page hereof (the “Purchaser”).

RECITALS

 

WHEREAS, the Company and the Purchaser are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act and/or Rule 506 of Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”) and/or Regulation S (“Regulation S”) as promulgated under the Securities Act;

 

 

WHEREAS, the Company is offering units of its securities (the “Units”) to the Purchaser and to the other persons, firms or corporations listed on Appendix A hereto (together with the Purchaser, the
“Purchasers”); and

 

WHEREAS, each Unit to consist of (i) one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and (ii) a Series C Warrant (the “Series C Warrant”),
with each Series C Warrant exercisable to purchase that number of shares of Common Stock as shall be equal to twenty percent (20%) of the number of Units purchased by each Purchaser;

 

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 the Purchaser hereby agree as follows:

ARTICLE I

Purchase and Sale of the Units

Section 1.1            Purchase and Sale of Units. Upon the following terms and conditions, the Company is offering Units to each Purchaser consisting of (i) one (1) share of the Common Stock of the Company, and
(ii) a Series C Warrant (the “Series C Warrant”) (as defined below).

Section 1.2             Series C Warrants. As part of the Units, each Purchaser shall be issued a Series C Warrant which shall:

(a)           entitle the Purchaser or any subsequent holder of such Series C Warrant, to purchase that number of shares of Common Stock as shall be equal to twenty percent (20%) of the number of Units purchased by the Purchaser;

(b)           expire three (3) years following the Closing Date;

 

 

 

 

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(c)           have an initial exercise price of $4.50 per share of Common Stock, subject to certain adjustments, as provided therein; and

(d)           be substantially in the form of Series C Warrant attached hereto as Exhibit A and made a part hereof.

 Section 1.3           Warrant Shares. The Company has authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of stockholders, a number of
shares of Common Stock equal to one hundred ten percent (110%) of the number of shares of Common Stock as shall from time to time be sufficient to effect the exercise of the Series C Warrants then outstanding. Any shares of Common Stock issuable upon exercise of the Series C Warrants (and such shares when issued) are herein referred to as the “Warrant Shares”, respectively. The Common Stock included in the Units and the Warrant Shares
are sometimes collectively referred to herein as the “Shares”.

Section 1.4             Purchase Price and Closing.

(a)           Subject to the terms and conditions hereof, the Company agrees to issue and sell to the Purchaser and, in consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of
this Agreement, the Purchaser agrees to purchase, for $3.25 per Unit, that number of Units as are set forth on the signature page of this Agreement (the “Purchase Price”).  The Purchaser and all of the other Purchasers listed on Appendix A hereto shall purchase (i) a minimum of 1,076,923.1 Units an for an aggregate purchase price as to all such Units of not less
than $3,500,000 (“Minimum Offering Amount”), and (ii) a maximum of 1,384,615.38 Units for an aggregate purchase price as to all such Units of not more than $4,500,000 (the “Maximum Offering Amount”), provided, however that the Company, in its sole discretion, shall have the right to increase the Maximum Offering Amount to 1,538,461.5 Units or $5,000,000.

(b)           Provided that the Offering shall have been subscribed for, funds representing the sale thereof shall have cleared, and all conditions to closing have been satisfied or waived, the closing of the purchase and sale of the
Units shall take place at the offices of Leser Hunter Taubman & Taubman, 17 State Street, New York, NY 10004, (the “Closing”) no later than November 15th, 2009, which date may be extended for an additional 60 days at the sole discretion of the Company if the Offering Amount is not achieved (the “Closing
Date”).

(c)           Pending receipt of good funds representing not less than the Minimum Offering Amount, all funds received shall be deposited and held in escrow in a special escrow account by Signature Bank, 261 Madison Avenue, New York,
New York 10016 (the “Escrow Agent”).  In the event that the Minimum Offering Amount shall not have been subscribed to and good funds received by the Closing Date, all funds shall be returned to subscribers without interest or deduction, all as provided in the Closing Escrow Agreement between the Company, the Purchaser and the Escrow Agent in the form of Exhibit C annexed
hereto and made a part hereof (the “Closing Escrow Agreement”).

 

 

 

 

 

3

 

 

(c)           Subject to the terms and conditions of this Agreement, at the Closing the Company shall deliver or cause to be delivered to each Purchaser (i) such number of shares of Common Stock and (y) the Series C Warrants to purchase
such number of shares of Common Stock, each as is set forth opposite the name of the Purchaser and the other Purchasers on Appendix A hereto, along with (ii) any other documents required to be delivered pursuant to the Agreement.  At the time of the Closing, the Purchaser shall have delivered its Purchase Price by wire transfer to the escrow account of the Escrow Agent pursuant to the Closing Escrow Agreement.  The Company may
also, in its sole discretion, terminate the Offering if the Minimum Offering Amount is not achieved and return the funds deposited in escrow, in accordance with the Closing Escrow Agreement.

ARTICLE II

Representations and Warranties

Section 2.1             Representations and Warranties of the Company, its Subsidiaries. The Company hereby represents and warrants to the Purchaser on behalf of itself, its Subsidiaries (as hereinafter defined),
as of the date hereof (except as set forth on the Schedule of Exceptions attached hereto with each numbered Schedule corresponding to the section number herein), as follows:

(a)           Organization, Good Standing and Power. The Company, each of its Subsidiaries is a corporation or other entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization (as applicable) and respectively, has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.  Except as set forth on Schedule 2.1(a), the Company each of its Subsidiaries is duly qualified to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect. (hereinafter defined)  As used in this Agreement and in all Transaction Documents (hereinafter defined) the term “Material Adverse Effect” shall mean (i) any material adverse effect upon the assets, properties, financial condition, business
or prospects of the Company and its Subsidiaries, when taken as a consolidated whole, and/or (ii) any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to perform any of its material covenants, agreements and obligations under this Agreement or any other Transaction Document.

 (b)         Corporate Power; Authority and Enforcement. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Series C Warrant in the form attached hereto
as Exhibit A, the Registration Rights Agreement in the form attached hereto as Exhibit B (the “Registration Rights Agreement”), and the Closing Escrow Agreement in the form of Exhibit C attached hereto (the “Closing
Escrow Agreement” and collectively, with this Agreement, the Series C Warrant and the Registration Rights Agreement the “Transaction Documents”) and to issue and sell the Units in accordance with the terms hereof. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required.  Each of the Transaction Documents constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

 

 

 

 

4

 

 

(c)          Capitalization. The authorized capital stock of the Company and the shares thereof issued and outstanding as of June 30, 2009 is set forth in the Company’s Form 10-K Annual Report for the fiscal year ended June
30, 2009 (the “Form 10-K”) and, except as set forth in the on Schedule 2.1(c) hereto, is the authorized and issued and outstanding capital stock of the Company as at the date hereof.  All of the issued outstanding shares of the Common Stock have been duly and validly authorized. Except as contemplated by the Transaction Documents or as set forth in the Form 10-K
or on Schedule 2.1(c) hereto:

(i) no shares of Common Stock are entitled to preemptive, conversion or other rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital
stock of the Company;

(ii)  there are no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of  capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company;

(iii) the Company is not a party to any agreement granting registration or anti-dilution rights to any person with respect to any of its equity or debt securities;

(iv) the Company is not a party to, and it has no knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company.

The offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued prior to the Closing complied with all applicable Federal and state securities laws, except where non-compliance would not have a Material Adverse Effect.  The Company has furnished or made available to the Purchaser
true and correct copies of the Company’s Articles of Incorporation, as amended and in effect on the date hereof (the “Articles”), and the Company’s Bylaws, as amended and in effect on the date hereof (the “Bylaws”).  Except as restricted under applicable federal, state, local or foreign laws and regulations, the Articles, or the Transaction
Documents, or as set forth on Schedule 2.1 (c), no written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement of the Company shall limit the payment of dividends on the Company’s Common Stock.

(d)          Issuance of Shares. The shares of Common Stock to be issued at the Closing have been duly authorized by all necessary corporate action and, when paid for or issued in accordance with the terms hereof, shall be validly
issued and outstanding, fully paid and non-assessable. When the Warrant Shares are issued, in accordance with the terms of the Series C Warrants, such shares will be duly authorized by all necessary corporate action and validly issued and outstanding, fully paid and non-assessable, and the holders shall be entitled to all rights accorded to a holder of Common Stock.

 

 

 

 

 

 

5

 

 

(e)          Subsidiaries. Schedule 2.1(e) hereto sets forth each Subsidiary of the Company, showing the jurisdiction of its incorporation or organization and showing
the percentage of ownership of each Subsidiary. There are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding upon any Subsidiary for the purchase or acquisition of any shares of capital stock of any Subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such capital stock. Except as disclosed in the Form 10-K, neither the Company nor any Subsidiary is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any shares of the capital stock of any Subsidiary or any convertible securities, rights, warrants or options of the type described in the preceding sentence. Neither the Company nor any Subsidiary is party to, nor has any knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of any Subsidiary.  For the purposes of this Agreement, “Subsidiary”
shall mean any corporation or other entity of which at least a majority of the securities or other ownership interests having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other Subsidiaries. All of the outstanding shares of capital stock of each Subsidiary has been duly authorized and validly issued, and are fully paid and non-assessable.

(f)           Commission Documents, Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including the Form 10-K and other material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including filings incorporated by reference therein being referred to herein as the “Commission Documents”).  The Company has not provided to the Purchaser
any material non-public information or other information which, according to applicable law, rule or regulation, was required to have been disclosed publicly by the Company but which has not been so disclosed, other than (i) with respect to the transactions contemplated by this Agreement, or (ii) pursuant to a non-disclosure or confidentiality agreement signed by the Purchaser.  At the time of the respective filings, the Form 10-K’s and the Form 10-Q’s complied in all material respects with
the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents.  As of their respective filing dates, none of the Form 10-K’s or Form 10-Q’s contained any untrue statement of a material fact; and none omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included in the Commission Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”)
applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the consolidated financial position of the Company as of 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 year-end audit adjustments).

 

 

 

 

 

 

6

 

 

(g)            No Material Adverse Effect.  As at June 30, 2009 and as at the date of this Agreement, the Company and its Subsidiaries have not experienced or suffered any Material Adverse Effect.

(h)           No Undisclosed Liabilities.  Other than as disclosed in the Form 10-K or on Schedule 2.1(h) to the knowledge of the Company, neither
the Company, nor the Subsidiaries has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those incurred in the ordinary course of the Company’s and the Subsidiaries’ respective businesses and which, individually or in the aggregate, do not or would not have a Material Adverse Effect

(i)            No Undisclosed Events or Circumstances. To the Company’s knowledge, no event or circumstance has occurred or exists with respect to the Company, the Subsidiaries or their respective businesses, properties,
operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

(j)            Indebtedness. The Financial Statements set forth, as at the respective dates thereof, all outstanding secured and unsecured Indebtedness of the Company on a consolidated basis, or for which the Company,
or the Subsidiaries have commitments as of the date of Financial Statements or any subsequent period that would require disclosure. For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $250,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness
of others, whether or not the same 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 (c) the present value of any lease payments in excess of $100,000 due under leases required to be capitalized in accordance with GAAP.  Neither the Company nor the Subsidiaries is in default with respect to any Indebtedness.

(k)          Title to Assets. Except where non-compliance would not have a Material Adverse Effect, each of the Company and the Subsidiaries has good and marketable title to (i) all properties and assets purportedly owned or used
by them as reflected in the Financial Statements, (ii) all properties and assets necessary for the conduct of their business as currently conducted, and (iii) all of the real and personal property reflected in the Financial Statements free and clear of any Lien. All leases are valid and subsisting and in full force and effect.

 

 

 

 

 

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(l)           Actions Pending. There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or any other proceeding pending or, to the knowledge of the Company, threatened against or
involving the Company or any Subsidiary which questions the validity of this Agreement or any of the other Transaction Documents or the transactions contemplated hereby or thereby or any action taken or to be taken pursuant hereto or thereto.  Except where the same would not have a Material Adverse Effect, there is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or any other proceeding pending or, to the knowledge of the Company, threatened against or involving
the Company or any Subsidiary involving any of their respective properties or assets.  To the knowledge of the Company, there are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company, the Subsidiaries or any of their respective executive officers or directors in their capacities as such.

(m)         Compliance with Law.  The Company and the Subsidiaries have all material franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct
of their respective business as now being conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

(n)           No Violation.  The business of the Company and the Subsidiaries is not being conducted in violation of any Federal, state, local or foreign governmental laws, or rules, regulations and ordinances
of any of any governmental entity, except for possible violations which singularly or in the aggregate could not reasonably be expected to have a Material Adverse Effect. The Company is not required under Federal, state, local or foreign law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under the Transaction Documents, or issue and sell the  Common
Stock, the Series C Warrants and the Warrant Shares in accordance with the terms hereof or thereof (other than (x) any consent, authorization or order that has been obtained as of the date hereof, (y) any filing or registration that has been made as of the date hereof or (z) any filings which may be required to be made by the Company with the Commission or state securities administrators subsequent to the Closing.)  .

(o)          No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated herein and therein do not and will not (i) violate
any provision of the Company’s Certificate or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party or by which it or its properties or assets are bound, (iii) create or impose a lien, mortgage,
security interest, pledge, charge or encumbrance (collectively, “Lien”) of any nature on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including Federal and state
securities laws and regulations) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries are bound or affected, provided, however, that, excluded from the foregoing in all cases are such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in
the aggregate, have a Material Adverse Effect.

 

 

 

 

 

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(p)        Taxes. Each of the Company and the Subsidiaries, to the extent its applicable, has accurately prepared and filed all federal, state and other tax returns required by law to be filed by it, has paid or made provisions for the payment
of all taxes shown to be due and all additional assessments, and adequate provisions have been and are reflected in the consolidated financial statements of the Company for all current taxes and other charges to which the Company or the Subsidiaries, if any, is subject and which are not currently due and payable. None of the federal income tax returns of the Company have been audited by the Internal Revenue Service. The Company has no knowledge of any additional assessments, adjustments or contingent tax liability
(whether federal, state or foreign) of any nature whatsoever, whether pending or threatened against the Company or any subsidiary for any period, nor of any basis for any such assessment, adjustment or contingency.

(q)        Certain Fees. Except as set forth on Schedule 2.1(q) hereto, no brokers fees, finders fees or financial advisory fees or commissions will be payable by the Company
with respect to the transactions contemplated by this Agreement and the other Transaction Documents.

(r)         Disclosure. Except as set forth in Schedule 2.1(q), neither this Agreement nor the Schedules hereto nor any other documents, certificates or instruments furnished
to the Purchaser by or on behalf of the Company or the Subsidiaries in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, taken as a whole and in the light of the circumstances under which they were made herein or therein, not false or misleading.

(s)         Intellectual Property. Each of the Company and the Subsidiaries owns or has the lawful right to use all patents, trademarks, domain names (whether or not registered) and any patentable improvements or copyrightable derivative
works thereof, websites and intellectual property rights relating thereto, service marks, trade names, copyrights, licenses and authorizations, and all rights with respect to the foregoing, which are necessary for the conduct of their respective business as now conducted without any conflict with the rights of others, except where the failure to so own or possess would not have a Material Adverse Effect.

(t)         Books and Record Internal Accounting Controls. Except as may have otherwise been disclosed in the Form 10-K’s or the Form 10-Qs, the books and records of the Company and the Subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and the Subsidiaries, the location and collection of their assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company, or the Subsidiaries.  Except as disclosed on Schedule 2.1(t), the Company and the Subsidiaries  maintain a system of internal accounting controls sufficient, in the judgment of the Company, 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 actions are taken with respect to any differences.

 

 

 

 

 

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(u)        Material Agreements. Any and all written or oral contracts, instruments, agreements, commitments, obligations, plans or arrangements, the Company and the Subsidiaries is a party to, that a copy of which would be required
to be filed with the Commission as an exhibit to a registration statement on Form S-1 (collectively, the “Material Agreements”) if the Company or any subsidiary were registering securities under the Securities Act has previously been publicly filed with the Commission in the Commission Documents.  Each of the Company and the Subsidiaries has in all material respects performed all the obligations required to be performed by
them to date under the foregoing agreements, have received no notice of default and are not in default under any Material Agreement now in effect the result of which would cause a Material Adverse Effect.

(v)       Transactions with Affiliates. Except as set forth in the Financial Statements or in the Commission Documents, there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing
transactions between (a) the Company or any Subsidiary on the one hand, and (b) on the other hand, any officer, employee, consultant or director of the Company, or any of Subsidiaries, or any person owning any capital stock of the Company or any Subsidiary or any member of the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer,
employee, consultant, director or stockholder.

(w)       Securities Act of 1933. Assuming the accuracy of the representations of the Purchaser set forth in Section 2.2 (d)-(h) hereof, the Company has complied and will comply with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Units hereunder. Neither the Company nor anyone acting on its behalf, directly or indirectly, has or will sell, offer to sell or solicit offers to buy any of the Units, the Common Stock, the Series C Warrants or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any person, or has taken or will take any action so as to bring the issuance and sale of any of the Units, the
Common Stock and the Series C Warrants in violation of the registration provisions of the Securities Act and applicable state securities laws, and neither the Company nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Units, the Common Stock and the Series C Warrants.

 

 

 

 

 

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(x)        Governmental Approvals. Except for the filing of any notice prior or subsequent to the Closing Date that may be required under applicable state and/or Federal securities laws (which if required, shall be filed on a timely basis),
including the filing of a Form D and a registration statement or statements pursuant to the Registration Rights Agreement, and the filing of the Series C Certificate of Designation with the Secretary of State for the State of Nevada, no authorization, consent, approval, license, exemption of, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery of
the Units, the Common Stock and the Series C Warrants, or for the performance by the Company of its obligations under the Transaction Documents.

(y)        Employees. Except as disclosed on Schedule 2.1(y), neither the Company nor any subsidiary has any collective bargaining arrangements covering any of its employees.  Schedule
2.1(y) sets forth a list of the employment contracts, agreements regarding proprietary information, non-competition agreements, non-solicitation agreements, confidentiality agreement, or any other similar contract or restrictive covenant, relating to the right of any officer, employee or consultant to be employed or engaged by the Company. No officer, consultant or key employee of the Company or any subsidiary whose termination, either individually or in the aggregate, would have a Material Adverse Effect,
has terminated or, to the knowledge of the Company, has any present intention of terminating his or her employment or engagement with the Company or any subsidiary.

(z)         Absence of Certain Developments. Except as disclosed on Schedule 2.1(z), neither the Company nor the Subsidiaries have:

(i) issued any stock, bonds or other corporate securities or any rights, options or warrants with respect thereto;

(ii) borrowed any amount or incurred or become subject to any liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal
year, as adjusted to reflect the current nature and volume of the Company’s or such subsidiary’s business;

(iii) discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business;

(iv) declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock;

(v) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business;

 

 

 

 

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                                (vi) sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual
property rights, or disclosed any proprietary confidential information to any person except to customers in the ordinary course of business or to the Purchaser or their representatives;

(vii) suffered any substantial losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business;

(viii) made any changes in employee compensation except in the ordinary course of business and consistent with past practices;

(ix) made capital expenditures or commitments therefor that aggregate in excess of $50,000;

(x) entered into any other transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business;

(xi) made charitable contributions or pledges in excess of $10,000;

(xii) suffered any material damage, destruction or casualty loss, whether or not covered by insurance;

(xiii) experienced any material problems with labor or management in connection with the terms and conditions of their employment;

(xiv) effected any two or more events of the foregoing kind which in the aggregate would be material to the Company or its subsidiaries; or

(xv) entered into an agreement, written or otherwise, to take any of the foregoing actions.

(aa)        Public Utility Holding Company Act; Investment Company Act and U.S. Real Property Holding Corporation Status. The Company is not a “holding company” or a “public utility company” as such terms are defined
in the Public Utility Holding Company Act of 1935, as amended. The Company is not, and as a result of and immediately upon the Closing will not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.  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.

(bb)       ERISA. No liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any Plan (as defined below) by the Company or any of its Subsidiaries which is or would have a Material Adverse Effect. The execution
and delivery of this Agreement and the other Transaction Documents and the issuance and sale of the Units, the Common Stock and the Series C Warrants will not involve any transaction which is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended, provided, that, if any of the Purchaser, or any person or entity that owns a beneficial interest in any of the Purchaser, is an “employee
pension benefit plan” (within the meaning of Section 3(2) of ERISA) with respect to which the Company is a “party in interest” (within the meaning of Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this Section 2.1(bb), the term “Plan” shall mean an “employee pension benefit plan” (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by the Company or any subsidiary or by any trade or business, whether or not incorporated, which, together with the Company or any subsidiary, is under common control, as described in Section 414(b) or (c) of the Code.

 

 

 

 

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(cc)           No Integrated Offering. 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 the offering of the Shares pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the Securities Act which would prevent the Company from selling the Shares pursuant to Rule 506 under the Securities Act, nor will the Company or any of its affiliates take any action or steps that would cause the offering of the Shares to be integrated with other offerings. The Company does not have any registration statement pending
before the Commission or currently under the Commission’s review and since June 26, 2009, other than as contemplated under the Transaction Documents, the Company has not offered or sold any of its equity securities or debt securities convertible into shares of Common Stock.

(dd)           Sarbanes-Oxley Act. The Company is in compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”),
and the rules and regulations promulgated thereunder, that are effective and for which compliance by the Company is required as of the date hereof.

(ee)           No Additional Agreements.  Neither the Company nor any of its affiliates has any agreement or understanding with any Purchaser with respect to the
transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.

(ff)            Foreign Corrupt Practices Act.  Neither the Company, the Subsidiaries, nor to the knowledge of the Company, the Subsidiaries any agent or other
person acting on behalf of the Company or the Subsidiaries, has, directly or indirectly, (i) used any funds, or will use any proceeds from the sale of the Units, 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 of the Company (or made by any Person acting on their behalf of which the Company is aware) or any members of their respective management which is in violation of any applicable law, or (iv) has violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder which was applicable to the Company or any of its subsidiaries.

 

 

 

 

 

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(gg)           PFIC.  None of the Company or any of its Subsidiaries is or intends to become a
“passive foreign investment company” within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

(hh)           OFAC. None of the Company or any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee, Affiliate or Person acting
on behalf of any of the Company or any of its Subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the sale of the Units, or lend, contribute or otherwise make available such proceeds to any subsidiary of the Company, joint venture partner or other Person or entity, towards
any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.

(ii)             Money Laundering Laws. The operations of each of the Company and the Subsidiaries have been conducted at all times in compliance with the money laundering
requirements of all applicable governmental authorities and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental authority (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental authority or any arbitrator involving any of the Company or the Subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

Section 2.2              Representations and Warranties of the Purchaser. Each Purchaser hereby makes the following representations and warranties to the Company as of the date hereof, with respect solely
to itself and not with respect to any other Purchaser:

(a)            Organization and Good Standing of the Purchaser. If the Purchaser is an entity, such Purchaser is a corporation, partnership or limited liability company duly incorporated or organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or organization.

(b)            Authorization and Power. Each Purchaser has the requisite power and authority to enter into and perform this Agreement and each of the other Transaction Documents to which such Purchaser is a party and
to purchase the Units, consisting of the Series C Warrants, being sold to it hereunder. The execution, delivery and performance of this Agreement and each of the other Transaction Documents to which such Purchaser is a party by such Purchaser and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate, partnership or limited liability company action, and no further consent or authorization of such Purchaser or its Board of Directors, stockholders,
partners, members, or managers, as the case may be, is required. This Agreement and each of the other Transaction Documents to which such Purchaser is a party has been duly authorized, executed and delivered by such Purchaser and constitutes, or shall constitute when executed and delivered, a valid and binding obligation of such Purchaser enforceable against such Purchaser in accordance with the terms hereof.

 

 

 

 

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(c)            No Conflicts. The execution, delivery and performance of this Agreement and each of the other Transaction Documents to which such Purchaser is a party and the consummation by such Purchaser of the transactions
contemplated hereby and thereby or relating hereto do not and will not (i) result in a violation of such Purchaser’s charter documents, bylaws, operating agreement, partnership agreement or other organizational documents or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or instrument or obligation to which such
Purchaser is a party or by which its properties or assets are bound, or result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to such Purchaser or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on such Purchaser). Such Purchaser is not required to obtain any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or any other Transaction Document to which such Purchaser is a party or to purchase the Units, or acquire the Series C Warrants in accordance with the terms hereof, provided, that for purposes of the representation made in this sentence, such Purchaser is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein.

(d)           Status of Purchaser. Each Purchaser is an “accredited investor” as defined in Regulation D, a “qualified institutional buyer” as defined in Rule 144A, or a “non-US person”
as defined in Regulation S. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act and such Purchaser is not a broker-dealer, nor an affiliate of a broker-dealer.

(e)          Acquisition for Investment. Each Purchaser is acquiring the Units, the Common Stock, the Series C Warrants and the Warrant Shares (collectively, the “Securities”)
solely for its own account for the purpose of investment and not with a view to or for sale in connection with a distribution. The Purchaser does not have a present intention to sell the Securities, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of the Securities to or through any person or entity; provided, however, that by making
the representations herein (except as provided below), such Purchaser does not agree to hold the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with Federal and state securities laws applicable to such disposition. Each Purchaser acknowledges that it is able to bear the financial risks associated with an investment in Securities and that it has been given full access to such records of the Company and the Subsidiaries and to the
officers of the Company and the Subsidiaries and received such information as it has deemed necessary or appropriate to conduct its due diligence investigation and has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company’s stage of development so as to be able to evaluate the risks and merits of its investment in the Company. Each Purchaser further acknowledges that such Purchaser understands the risks of investing in companies domiciled and/or which
operate primarily in the Peoples Republic of China and that the purchase of the Securities involves substantial risks.

 

 

 

 

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(f)           Reliance on Exemptions.  The Purchaser understands that the Securities are being offered and sold to it in reliance upon specific exemptions from
the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Securities.

 

(g)           Information.  The Purchaser and its advisors, if any, have had the opportunity to ask questions of management of the Company and its Subsidiaries
and have been furnished with all information relating to the business, finances and operations of the Company and information relating to the offer and sale of the Units which have been requested by the Purchaser or its advisors.  Neither such inquiries nor any other due diligence investigation conducted by the Purchaser or any of its advisors or representatives shall modify, amend or affect the Purchaser’s right to rely on the representations and warranties of the Company contained herein.  The
Purchaser understands that its investment in the Securities involves a significant degree of risk.  The Purchaser further represents to the Company that the Purchaser’s decision to enter into this Agreement has been based solely on the independent evaluation of the Purchaser and its representatives.

 

(h)           Governmental Review.  The Purchaser understands that no United States federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.

 

(i)           Transfer or Re-sale.  The Purchaser understands that except as provided in the Registration Rights Agreement, the sale or re-sale of the Securities
has not been and is not being registered under the Securities Act or any applicable state securities laws, and the Securities may not be transferred unless (i) the Securities are sold pursuant to an effective registration statement under the Securities Act, (ii) the Purchaser shall have delivered to the Company an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration, which opinion shall be reasonably acceptable to the Company, (iii) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the Securities Act (or a successor rule) (“Rule 144”)) of the Purchaser who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2.2(f) and who is an
Accredited Purchaser, (iv) the Securities are sold pursuant to Rule 144, or (v) the Securities are sold pursuant to Regulation S under the Securities Act (or a successor rule) (“Regulation S”).  Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account
or other lending arrangement.

 

(j)           Legends.  The Purchaser understands that the Common Stock, the Series C Warrants and the Warrant Shares shall bear a restrictive legend in the form
as set forth below.  The Purchaser understands that, until such time as the resale of the Common Stock or the Warrant Shares have been registered under the Securities Act as contemplated by the Registration Rights Agreement or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order
may be placed against transfer of the certificates evidencing such Securities):

 

 

 

 

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“Neither the offer nor sale of the securities represented by this certificate has been registered under the Securities Act of 1933, as amended, (the “Act”).  The securities may not be sold, transferred or assigned in the absence of an effective registration statement for the securities under the Act, or an
opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, that registration is not required under the Act or unless sold pursuant to Rule 144 or Regulation S under the Act.”

 

(k)           Residency.  The Purchaser is a resident of the jurisdiction set forth immediately below such Purchaser’s name on the signature pages hereto.

 

(l)           Short Sales.   The Purchaser may engage in short sales of Common Stock, to the extent permissible by applicable law and regulation.

(m)         Additional Representations and Warranties of Accredited Purchasers.  Each Purchaser indicating that such Purchaser is an Accredited Purchaser on its signature page to this Agreement further makes the representations
and warranties to the Company set forth on Appendix B-1.

 

(n)          Additional Representations and Warranties of Non-U.S. Persons.  Each Purchaser indicating that it is not a U.S. person on its signature page to this Agreement, severally and not jointly, further makes
the representations and warranties to the Company set forth on Appendix B-2.

(o)          No General Solicitation. Each Purchaser acknowledges that the Units were not offered to such Purchaser by means of any form of general or public solicitation or general advertising,
or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communications.

(p)         Rule 144. Such Purchaser understands that the Shares must be held indefinitely unless such Shares are registered under the Securities Act or an exemption from registration is available. Such Purchaser acknowledges that such
Purchaser is familiar with Rule 144 and Rule 144A, of the rules and regulations of the Commission, as amended, promulgated pursuant to the Securities Act (“Rule 144”), and that such person has been advised that Rule 144 and Rule 144A, as applicable, permits resales only under certain circumstances. Such Purchaser understands that to the extent that Rule 144 or Rule 144A is not available, such Purchaser will be unable to sell any Shares
without either registration under the Securities Act or the existence of another exemption from such registration requirement.

 

 

 

 

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(q)        Independent Investment. Except as may be disclosed in any filings with the Commission by the Purchaser under Section 13 and/or Section 16 of the Exchange Act, no Purchaser has agreed to act with any other Purchaser for the purpose
of acquiring, holding, voting or disposing of the Shares purchased hereunder for purposes of Section 13(d) under the Exchange Act, and each Purchaser is acting independently with respect to its investment in the Shares.

(r)         Brokers. Other than Tripoint Global Equities and selected dealers by Tripoint Global Equities, no Purchaser has any knowledge of any brokerage or finder’s fees or commissions that are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other person or entity with respect to the transactions contemplated by this Agreement.

ARTICLE III

Covenants

The Company covenants with each of the Purchaser as follows, which covenants are for the benefit of the Purchaser and their permitted assignees (as defined herein).

Section 3.1         Securities Compliance. The Company shall notify the Commission in accordance with its rules and regulations, of the transactions contemplated by any of the Transaction Documents, including filing a Form D with respect
to the Units, the Series C Warrants, and Warrant Shares as required under Regulation D and applicable “blue sky” laws, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Units, the Series C Warrants, and the Warrant Shares to the Purchaser or subsequent holders.

Section 3.2        Registration and Listing. The Company shall (a) comply in all material respects with its reporting and filing obligations under the Exchange Act, (b) comply with all requirements related to any registration statement filed
pursuant to the Registration Rights Agreement, and (c) not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act, except as permitted under the Transaction Documents. Subject to the terms of the Transaction Documents, the Company further covenants that it will take such further action as the Purchaser
may reasonably request, all to the extent required from time to time to enable the Purchaser to sell the Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, as amended.

Section 3.3      Confidential Information.  Each Purchaser agrees that such Purchaser and its employees, agents and representatives will keep confidential and will not disclose, divulge or use (other than for purposes of monitoring its investment
in the Company) any confidential information which such Purchaser may obtain from the Company pursuant to financial statements, reports and other materials submitted by the Company to such Purchaser pursuant to this Agreement, unless such information is known to the public through no fault of such Purchaser or his or its employees or representatives; provided, however, that a Purchaser may disclose such information (i) to its attorneys, accountants and other professionals in connection with their representation
of such Purchaser in connection with such Purchaser’s investment in the Company, (ii) to any prospective permitted transferee of the Shares, so long as the prospective transferee agrees to be bound by the provisions of this Section 3.3, or (iii) to any general partner or affiliate of such Purchaser.

 

 

 

 

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Section 3.4       Compliance with Laws. The Company shall comply, and cause each subsidiary to comply in all material respects, with all applicable laws, rules, regulations and orders, except where non-compliance could not reasonably be
expected to have a Material Adverse Effect.

Section 3.5        Keeping of Records and Books of Account. The Company shall keep and cause each Subsidiary and each PRC Operating Entity to keep adequate records and books of account, in which complete entries will be made in accordance
with GAAP consistently applied, reflecting all financial transactions of the Company and the Subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.

Section 3.6        Reporting Requirements. If the Commission ceases making periodic reports filed under the Exchange Act available via the EDGAR system, then at a Purchaser’s request the Company shall furnish the following to
such Purchaser so long as such Purchaser shall beneficially own any Shares:

(a)       Quarterly Reports filed with the Commission on Form 10-Q as soon as practicable after the document is filed with the Commission, and in any event within five (5) business days after the document is filed with the Commission;

(b)      Annual Reports filed with the Commission on Form 10-K as soon as practicable after the document is filed with the Commission, and in any event within five (5) business days after the document is filed with the Commission; and

(c)      Copies of all notices and information, including without limitation notices and proxy statements in connection with any meetings, that are provided to holders of shares of Common Stock, contemporaneously with the delivery of such notices or information to such holders of Common Stock.

Section 3.7        Other Agreements. The Company shall not enter into any agreement the terms of which would restrict or impair the ability of the Company to perform its obligations under any Transaction Document.

 

 

 

 

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Section 3.8        Reservation of Shares. So long as any of the Series C Warrants remain outstanding, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than
one hundred ten percent (110%) of the aggregate number of shares of Common Stock needed to provide for the issuance of the Warrant Shares.

Section 3.9        Transfer Agent.  The Company has engaged the transfer agent and registrar listed in its Form 10-K or Form S-3 registration statement  (the “Transfer
Agent”) with respect to its Common Stock, who is DTC and DWAC eligible and who will recognize, execute and honor the Irrevocable Transfer Agent Instructions (as defined below).  As a condition to Closing, the Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates, registered in the name of each Purchaser or its respective nominee(s), for the Warrant Shares in such amounts as specified from time to time by each Purchaser
to the Company upon exercise of the Series C Warrants in the form of Exhibit D attached hereto (the “Irrevocable Transfer Agent Instructions”). Prior to registration of the Warrant Shares under the Securities Act, all such certificates shall bear the restrictive legend specified in Section 5.1 of this Agreement. The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 3.9 will be given by the Company to its transfer agent and that the Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement. If a Purchaser provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Shares may be made without registration under the Securities
Act or the Purchaser provides the Company with reasonable assurances that such Shares can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold, the Company shall permit the transfer, and, in the case of the Warrant Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by such Purchaser and without any restrictive legend. The Company acknowledges
that a breach by it of its obligations under this Section 3.9 will cause irreparable harm to the Purchaser by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 3.9 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 3.9, that the Purchaser shall be entitled, in addition to all other available remedies, to
an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.

Section 3.10       Reporting Status. So long as a Purchaser beneficially owns any of the Shares, the Company shall timely file all reports required to be filed with the Commission pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination.

Section 3.11       Disclosure of Transaction. The Company shall issue a press release describing the material terms of the transactions contemplated hereby (the “Press Release”)
as soon as practicable after the Closing but in no event later than 9:00 A.M. Eastern Time on the first Business Day following the Closing. The Company shall also file with the Commission, the Form 8-K describing the material terms of the transactions contemplated hereby (and attaching as exhibits thereto this Agreement, the Registration Rights Agreement, , the Escrow Agreements, the form of Warrant and the Press Release) within three (3) Business Days following the Closing Date.  The Press Release
and Form 8-K shall be subject to prior review and comment by counsel for the Purchaser. “Business Day” means any day during which the NYSE AMEX (“AMEX”) (or other principal exchange) shall be open for trading.

 

 

 

 

 

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Section 3.12       Disclosure of Material Information. The Company and the Subsidiaries covenant and agree that neither it nor any other person acting on its or their behalf has provided or, from and after the filing of the Press Release,
will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information (other than with respect to the transactions contemplated by this Agreement), unless prior thereto such Purchaser shall have executed a specific written agreement regarding the confidentiality and use of such information.  The Company understands and confirms that each Purchaser shall be relying on the foregoing covenants in effecting transactions in securities
of the Company.  At the time of the filing of the Press Release, no Purchaser shall be in possession of any material, nonpublic information received from the Company, any of its subsidiaries or any of its respective officers, directors, employees or agents, that is not disclosed in the Press Release.  The Company shall not disclose the identity of any Purchaser in any filing with the SEC except as required by the rules and regulations of the SEC thereunder.  In the event of a breach
of the foregoing covenant by the Company, any of its subsidiaries, or any of its or their respective officers, directors, employees and agents, in addition to any other remedy provided herein or in the Transaction Documents, a Purchaser may notify the Company, and the Company shall make public disclosure of such material nonpublic information within two (2) trading days of such notification.

Section 3.13        Pledge of Securities. The Company acknowledges and agrees that the Shares may be pledged by a Purchaser in connection with a bonafide margin
agreement or other loan or financing arrangement that is secured by the Common Stock. The pledge of Common Stock shall not be deemed to be a transfer, sale or assignment of the Common Stock hereunder, and no Purchaser effecting a pledge of Common Stock shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document; provided, that a Purchaser
and its pledgee shall be required to comply with the provisions of Article V hereof in order to effect a sale, transfer or assignment of Common Stock to such pledgee. At a Purchaser’s expense, the Company hereby agrees to execute and deliver such documentation as a pledgee of the Common Stock may reasonably request in connection with a pledge of the Common Stock to such pledgee by a Purchaser, in accordance with applicable laws relating to the transfer of the securities.

Section 3.14        DTC. Not later than the Effective Date of the Registration Statement (as defined in the Registration Rights Agreement), the Company shall cause its Common Stock to be eligible for transfer with its transfer agent
pursuant to the Depository Trust Company Automated Securities Transfer Program.

 

 

 

 

 

 

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Section 3.15        Sarbanes-Oxley Act. The Company shall be in compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated thereunder, as required under such Act.

Section 3.16       No Integrated Offerings. The Company shall not make any offers or sales of any security (other than the securities being offered or sold hereunder) under circumstances that would require registration of the securities being
offered or sold hereunder under the Securities Act.

Section 3.16        No Manipulation of Price.  The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization
or manipulation of the price of any securities of the Company.

ARTICLE IV

CONDITIONS

Section 4.1         Conditions Precedent to the Obligation of the Company to Sell the Units. The obligation hereunder of the Company to issue and sell the Units, and the underlying Series C Warrants to the Purchaser is subject to the
satisfaction or waiver, at or before the Closing, of each of the conditions set forth below. These conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion.

(a)        Accuracy of Each Purchaser’s Representations and Warranties. The representations and warranties of each Purchaser in this Agreement and each of the other Transaction Documents to which such Purchaser is a party shall be
true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date.

(b)       Performance by the Purchaser. Each Purchaser shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Purchaser
at or prior to the Closing.

(c)       No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.

(d)       Delivery of Purchase Price. The Purchase Price for the Units shall have been delivered to the escrow agent pursuant to the Closing Escrow Agreement.  The Minimum Offering Price shall have been delivered to the escrow agent.

 

 

 

 

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(e)        Delivery of Transaction Documents. The Transaction Documents to which the Purchaser are parties shall have been duly executed and delivered by the Purchaser to the Company.

Section 4.2         Conditions Precedent to the Obligation of the Purchaser to Purchase the Units. The obligation hereunder of each Purchaser to acquire and pay for the Units is subject to the satisfaction or waiver, at or before
the Closing, of each of the conditions set forth below. These conditions are for each Purchaser’s sole benefit and may be waived by such Purchaser at any time in its sole discretion.

(a)         Accuracy of the Company’s Representations and Warranties. Each of the representations and warranties of the Company in this Agreement and the other Transaction Documents shall be true and correct in all respects
as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all respects as of such date.

(b)         Performance by the Company. The Company shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with
by the Company at or prior to the Closing.

(c)         No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this Agreement.

(d)         No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or affiliates of the Company or any subsidiary seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions.

(e)         Opinions of Counsel, Etc. At the Closing, the Purchaser shall have received an opinion of (i) U.S. counsel to the Company, dated the date of the Closing, in substantially the form of Exhibit
E hereto, and such other certificates and documents as the Purchaser or its counsel shall reasonably require incident to the Closing,

(f)         Registration Rights Agreement. On the Closing Date, the Company shall have executed and delivered the Registration Rights Agreement to each Purchaser.

(g)       Certificates. The Company shall have executed and delivered to the Purchaser the certificates (in such denominations as such Purchaser shall request) for the Common Stock and the Series C Warrants being acquired by such Purchaser at the
Closing (in such denominations as such Purchaser shall request) to such address set forth next to the Purchaser with respect to the Closing.

 

 

 

 

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(i)        Resolutions. The Board of Directors of the Company shall have adopted resolution consistent with Section 2.1(b) hereof in a form reasonably acceptable to such Purchaser (the “Resolution”).

(j)       Reservation of Shares. As of the Closing Date, the Company shall have reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting the exercise of the Series C Warrants, a number of shares of Common
Stock equal to one hundred ten percent (110%) of the aggregate number of Warrant Shares issuable upon exercise of the number of Warrants issued or to be issued pursuant to this Agreement.

(k)      Secretary’s Certificate. The Company shall have delivered to such Purchaser a secretary’s certificate, dated as of the Closing Date, as to (i) the resolutions adopted by the Board of Directors of the Company consistent with Section
2.1(b), (ii) the Articles, (iii) the Bylaws, each as in effect at the Closing, and (v) the authority and incumbency of the officers of the Company executing the Transaction Documents and any other documents required to be executed or delivered in connection therewith.

(l)      Officer’s Certificate. The Company shall have delivered to the Purchaser a certificate of an executive officer of the Company, dated as of the Closing Date, confirming the accuracy of the Company’s representations, warranties
and covenants as of the Closing Date and confirming the compliance by the Company with the conditions precedent set forth in this Section 4.2 as of the Closing Date.

(m)      Closing Escrow Agreement. On the Closing Date, the Company and the escrow agent shall have executed and delivered the Closing Escrow Agreement to each Purchaser.

(n)      Material Adverse Effect. No Material Adverse Effect shall have occurred at or before the Closing Date.

ARTICLE V

Stock Certificate Legend

Section 5.1        Legend. Each certificate representing the Common Stock, and Warrant Shares (collectively, the “Shares”), shall be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to any legend required by applicable state securities or “blue sky” laws):

THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

 

 

 

 

 

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The Company agrees to reissue certificates representing any of the Shares, without the legend set forth above if at such time, prior to making any transfer of any such securities, such holder thereof shall give written notice to the Company describing the manner and terms of such sale and removal as the Company may reasonably request.  Such
proposed transfer and removal will not be effected until: (a) either (i) the Company has received an opinion of counsel reasonably satisfactory to the Company, to the effect that the registration of the Shares under the Securities Act is not required in connection with such proposed transfer, (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Company with the Commission and has become effective under the Securities Act, (iii) the Company has received
other evidence reasonably satisfactory to the Company that such registration and qualification under the Securities Act and state securities laws are not required, or (iv) the holder provides the Company with reasonable assurances that such security can be sold pursuant to Rule 144(i)  under the Securities Act; and (b) either (i) the Company has received an opinion of counsel reasonably satisfactory to the Company, to the effect that registration or qualification under the securities or “blue
sky” laws of any state is not required in connection with such proposed disposition, or (ii) compliance with applicable state securities or “blue sky” laws has been effected or a valid exemption exists with respect thereto. The Company will respond to any such notice from a holder within five (5) business days. In the case of any proposed transfer under this Section 5.1, the Company will use reasonable efforts to comply with any such applicable state securities or “blue sky” laws,
but shall in no event be required, (x) to qualify to do business in any state where it is not then qualified, (y) to take any action that would subject it to tax or to the general service of process in any state where it is not then subject, or (z) to comply with state securities or “blue sky” laws of any state for which registration by coordination is unavailable to the Company. The restrictions on transfer contained in this Section 5.1 shall be in addition to, and not by way of limitation of, any
other restrictions on transfer contained in any other section of this Agreement. Whenever a certificate representing the Shares is required to be issued to a Purchaser without a legend, in lieu of delivering physical certificates representing the Shares (provided that a registration statement under the Securities Act providing for the resale of the Shares is then in effect), the Company may cause its transfer agent to electronically transmit the Shares to a Purchaser by crediting the account of such Purchaser
or such Purchaser’s prime broker with the DTC through its DWAC system (to the extent not inconsistent with any provisions of this Agreement).

ARTICLE VI

Indemnification

 

 

 

 

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Section 6.1            General Indemnity. The Company agrees to indemnify and hold harmless the Purchaser (and their respective directors, officers, managers, partners, members, shareholders, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Purchaser as a result of any inaccuracy in or breach of the representations, warranties or covenants made by the Company herein. Each Purchaser severally but not jointly agrees to indemnify and hold harmless the Company and its directors, officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Company as a result of any inaccuracy in or breach of the representations, warranties or covenants made by such Purchaser herein. The maximum aggregate liability of each Purchaser pursuant to its indemnification obligations under this Article VI shall not exceed the portion of the Purchase Price paid by such Purchaser
hereunder. In no event shall any “Indemnified Party” (as defined below) be entitled to recover consequential or punitive damages resulting from a breach or violation of this Agreement.

Section 6.2           Indemnification Procedure. Any party entitled to indemnification under this Article VI (an “Indemnified Party”) will give
written notice to the indemnifying party of any matters giving rise to a claim for indemnification; provided, that the failure of any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Article VI except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any action, proceeding or claim is brought
against an Indemnified Party in respect of which indemnification is sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the reasonable judgment of the Indemnified Party a conflict of interest between it and the indemnifying party may exist with respect of such action, proceeding or claim, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party. In the event that the indemnifying party advises an Indemnified Party that it will contest
such a claim for indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification notice to notify, in writing, such person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the Indemnified Party may, at its option, defend, settle or otherwise compromise or pay such action or claim. In any event, unless and until the indemnifying party elects
in writing to assume and does so assume the defense of any such claim, proceeding or action, the Indemnified Party’s costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification hereunder. The Indemnified Party shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party which relates to such action or claim. The indemnifying party shall keep the Indemnified Party fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. If the indemnifying party elects to defend any such action or claim, then the Indemnified Party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall be liable for any settlement if the indemnifying party is advised of the settlement but fails to respond to the settlement within thirty (30) days of receipt of such notification. Notwithstanding anything in this Article VI to the contrary, the indemnifying
party shall not, without the Indemnified Party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof which imposes any future obligation on the Indemnified Party or which does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnified Party of a release from all liability in respect of such claim. The indemnification required by this Article VI shall be made by periodic payments of the amount thereof
during the course of investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred, so long as the Indemnified Party irrevocably agrees to refund such moneys if it is ultimately determined by a court of competent jurisdiction that such party was not entitled to indemnification. The indemnity agreements contained herein shall be in addition to (a) any cause of action or similar rights of the Indemnified Party against the indemnifying party or others, and (b) any liabilities
the indemnifying party may be subject to pursuant to the law.

 

 

 

 

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ARTICLE VII

Miscellaneous

Section 7.1         Fees and Expenses. Except as otherwise set forth in this Agreement and the other Transaction Documents, each party shall pay the fees and expenses of its advisors, 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, provided that the Company shall pay all actual and reasonable attorneys’ fees and expenses (including disbursements and out-of-pocket expenses) up to a maximum of [$40,000] incurred by the Purchaser in connection with the preparation, negotiation, execution and delivery of this Agreement and the
other Transaction Documents.  The Company shall also pay all reasonable fees and expenses incurred by the Purchaser in connection with the enforcement of this Agreement or any of the other Transaction Documents, including, without limitation, all reasonable attorneys’ fees and expenses but only if the Purchaser is successful in any litigation or arbitration relating to such enforcement.  Any such fees and expenses that remain outstanding shall be paid out of the escrow account pursuant
to the Closing Escrow Agreement, prior to the release of the Purchase Price to the Company.

Section 7.2        Specific Enforcement, Consent to Jurisdiction.

(a)      The Company and the Purchaser acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement or the other Transaction Documents were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or the other Transaction Documents and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

 

 

 

 

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(b)      Each of the Company and the Purchaser (i) hereby irrevocably submits to the jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in New York county for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement or any of the other Transaction Documents or the transactions contemplated hereby or thereby and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Purchaser 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 in this Section 7.2 shall affect or limit any right to serve process in any other manner permitted by law.  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 to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.

Section 7.3        Entire Agreement; Amendment. This Agreement and the other Transaction Documents contains the entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the Transaction Documents, neither the Company nor any of the Purchaser makes any representations, warranty, covenant or undertaking with respect to such matters and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement nor any of the Transaction Documents may be waived or amended other than by a written instrument signed by the Company and the purchasers herein holding at least fifty percent
(50%) of the Common Stock then outstanding (the “Majority Holders”), and no provision hereof may be waived other than by a written instrument signed by the party against whom enforcement of any such waiver is sought. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Common Stock then outstanding. No consideration shall be offered or paid to any person to amend or consent to a waiver
or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents or holders of Common Stock, as the case may be.

Section 7.4       Notices. All notices, demands, consents, requests, instructions and other communications to be given or delivered or permitted under or by reason of the provisions of this Agreement or in connection with the transactions
contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered, on the business day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or registered mail return receipt requested, two (2) business days after being mailed, (iii) if delivered by overnight courier (with all charges having been prepaid), on the business day of such delivery (as evidenced by the receipt
of the overnight courier service of recognized standing), or (iv) if delivered by facsimile transmission, on the business day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding business day (as evidenced by the printed confirmation of delivery generated by the sending party’s telecopier machine). If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed address of which no
notice was given (in accordance with this Section 7.4), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is sent (as evidenced by a sworn affidavit of the sender). All such notices, demands, consents, requests, instructions and other communications will be sent to the following addresses or facsimile numbers as applicable:

 

 

 

 

 

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If to the Company:

Tianyin Pharmaceutical Co., Inc.

23rd Floor, Unionsun Yangkuo Plaza  No.2, Block 3,

Renmin Road South, Chengdu,

610041 P. R. China

0086-028-86154737

Attn:   Guoqing Jiang

Title:   Chief Executive Officer

with copies (which shall not constitute notice) to:

Leser Hunter Taubman & Taubman                                                                                     Hodgson
Russ LLP

17 State Street, Suite 2000                                                                                                     
1540 Broadway, 24th floor

New York, New York 10004                                                                                   
                New York, New York 10022

Tel. No.: (212) 732-7184                                                                                                      
   Tel. No.: (212) 751-4300

Fax No.: (212) 202-6380                                                                                                   
       Fax. No.: (212) 751-0928

Attn:    Louis Taubman, Esq.                                                                                      
         Attn:      Stephen A. Weiss, Esq.

If to any Purchaser:  

To the addresses set forth

on the Purchaser signature page(s)

to this Agreement

Any party hereto may from time to time change its address for notices by giving at least ten (10) days written notice of such changed address to the other party hereto.

Section 7.5          Waivers. No waiver by any party 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 other
provisions, 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 accruing to it thereafter.

Section 7.6          Headings. The section headings contained in this Agreement (including, without limitation, section headings and headings in the exhibits and schedules) are inserted for reference purposes only and shall
not affect in any way the meaning, construction or interpretation of this Agreement. Any reference to the masculine, feminine, or neuter gender shall be a reference to such other gender as is appropriate. References to the singular shall include the plural and vice versa.

 

 

 

 

 

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Section 7.7          Successors and Assigns.  This Agreement may not be assigned by a party hereto without the prior written consent of the Company or the Purchaser, as applicable, provided, however,
that, subject to federal and state securities laws and as otherwise provided in the Transaction Documents, a Purchaser may assign its rights and delegate its duties hereunder in whole or in part to an affiliate or to a third party acquiring all or substantially all of its Shares or Warrants in a private transaction without the prior written consent of the Company or the other Purchaser, after notice duly given by such Purchaser to the Company provided,
that no such assignment or obligation shall affect the obligations of such Purchaser hereunder and that such assignee agrees in writing to be bound, with respect to the transferred securities, by the provisions hereof that apply to the Purchaser.  The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

Section 7.8          No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof
be enforced by, any other person.

Section 7.9          Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would
result in the application of the substantive law of another jurisdiction. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.

Section 7.10         Survival. The representations and warranties of the Company and the Purchaser shall survive the execution and delivery hereof and the Closing hereunder for a period of three (3) years following the Closing
Date.

Section 7.11          Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the
same Agreement and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.

Section 7.12          Publicity. The Company agrees that it will not disclose, and will not include in any public announcement, the name of the Purchaser without the consent of the Purchaser unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such requirement.

 

 

 

 

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Section 7.13            Severability. The provisions of this Agreement and the Transaction Documents are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of
the provisions or part of the provisions contained in this Agreement or the Transaction Documents shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement or the Transaction Documents and such provision shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent possible.

Section 7.14             Further Assurances. From and after the date of this Agreement, upon the request of any Purchaser or the Company, each of the Company and the Purchaser shall execute and deliver such
instrument, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement, Common Stock, the Series C Warrants, the Warrant Shares, the Registration Rights Agreement and the other Transaction Documents.

Section 7.15              Currency.  Unless otherwise indicated, all dollar amounts referred to in this Agreement are in United States Dollars.  All amounts owing under this Agreement
or any Transaction Document shall be paid in US dollars.  All amounts denominated in other currencies shall be converted in the US dollar equivalent amount in accordance with the Exchange Rate on the date of calculation.  “Exchange Rate” means, in relation to any amount of currency to be converted into US dollars pursuant to this Agreement, the US dollar exchange rate as published in The Wall Street Journal on the relevant date of calculation.

Section 7.16              Termination.  This Agreement may be terminated prior to Closing:

(a)           by mutual written agreement of the Purchaser and the Company, a copy of which shall be provided to the escrow agent appointed under the Closing Escrow Agreement (the “Escrow
Agent”); and

(b)           by the Company or a Purchaser (as to itself but no other Purchaser) upon written notice to the other, with a copy to the Escrow Agent, if the Closing shall not have taken place by 5:00 p.m. Eastern time on November 15, 2009,
unless extended for a period of no more than thirty (60) calendar days by the Company, in which case the Closing shall not have taken place by 5:00 p.m. Eastern time on January 15, 2010; provided, that the right to terminate this Agreement under this Section 7.16(b) shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such time.

(c)           In the event of a termination pursuant to Section 7.16(a) or 7.16(b), each Purchaser shall have the right to a return of up to its entire Purchase Price deposited with the Escrow Agent pursuant to this Agreement, without
interest or deduction.  The Company covenants and agrees to cooperate with such Purchaser in obtaining the return of its Purchase Price, and shall not communicate any instructions to the contrary to the Escrow Agent.

 

 

 

 

31

 

 

(d)           In the event of a termination pursuant to this Section, the Company shall promptly notify all non-terminating Purchaser. Upon a termination in accordance with this Section 7.16, the Company and the terminating Purchaser(s) shall not have any further obligation or liability
(including as arising from such termination) to the other and no Purchaser will have any liability to any other Purchaser under the Transaction Documents as a result therefrom.

 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

32

  

Company Signature Page 34  of 47

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

	  	  	  	 
	  	  	 
	
The Company:

 
	  	
TIANYIN PHARMACEUTICAL CO., INC

 
	 
	  	
By:
	_____________________________________  	 
	  	
 
	 
	  	
Name:  Guoqing Jiang

Title:   Chief Executive Officer
	 

 

  

33

  

Purchaser Signature Page35  of 47

IN WITNESS WHEREOF, the Purchaser has caused this Agreement to be duly executed individually or by its authorized officer or member as of the date first above written.

 

	 The Purchaser:	 	 [Entity or Individual Name]	 
	 	 By:	 ____________________________________________	 
	 	 	 Name:_______________________________________	 
	 	 	 Title:  _______________________________________	 

 

 

 

Number of Units Purchased: __________

Total Purchase Price: ($3.25 x No. of Units) $_______________

 

Address and Contacts of Purchaser:

__________________________________

___________________________________

___________________________________

telephone:

fax:

email:

  

34

  

Appendix A

 

List of All Purchasers

 

	
Name
	
Address
	
Number of Units Purchased
	
Purchase Price

	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  

 

 

 

 

 

 

 

 

 

 

 

 

  

35

  

 

 

 

 Appendix B-1

SECURITIES PURCHASE AGREEMENT

[Missing Graphic Reference]

 

 

Definition of “Accredited Investor”

 

The term “accredited investor” means:

 

	
  
	
1)
	
A bank as defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered
under the Investment Company Act of 1940 (the “Investment Company Act”) or a business development company as defined in Section 2(a)(48) of the Investment Company Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees,
if such plan has total assets in excess of US $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (“ERISA”), if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of US $5,000,000 or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors.

 

	
  
	
2)
	
A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.

 

	
  
	
3)
	
An organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of US $5,000,000.

 

	
  
	
4)
	
A director or executive officer of the Company.

 

	
  
	
5)
	
A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his or her purchase exceeds US $1,000,000.

 

	
  
	
6)
	
A natural person who had an individual income in excess of US $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of US $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

 

 

 

 

36

 

 

	
  
	
7)
	
A trust, with total assets in excess of US $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) (i.e., a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment).

 

	
  
	
8)
	
An entity in which all of the equity owners are accredited investors.  (The Shareholder must identify each equity owner and provide statements signed by each demonstrating how each is qualified as an accredited investor).

 

Accredited Investor Representations

 

Each Purchaser indicating that it is an Accredited Purchaser, severally and not jointly, further represents and warrants to the Company as follows:

 

	
  
	
1.
	
Such person or entity qualifies as an Accredited Purchaser on the basis set forth on its signature page to this Agreement.

 

	
  
	
2.
	
Such person or entity has sufficient knowledge and experience in finance, securities, investments and other business matters to be able to protect such Shareholder’s interests in connection with the transactions contemplated by this Agreement.

 

	
  
	
3.
	
Such person or entity has consulted, to the extent that it has deemed necessary, with its tax, legal, accounting and financial advisors concerning its investment in the Units.

 

	
  
	
4.
	
Such person or entity understands the various risks of an investment in the Units and can afford to bear such risks for an indefinite period of time, including, without limitation, the risk of losing its entire investment in the Units.

 

	
  
	
5.
	
Such person or entity has had access to the Company’s publicly filed reports with the SEC and has been furnished during the course of the transactions contemplated by this Agreement with all other public information regarding the Company that such person or entity has requested and all such public information is sufficient for such person or entity to evaluate the risks of investing in the Units.

 

	
  
	
6.
	
Such person or entity has been afforded the opportunity to ask questions of and receive answers concerning the Company and the terms and conditions of the issuance of the Units.

 

	
  
	
7.
	
Such person or entity is not relying on any representations and warranties concerning the Company made by the Company or any officer, employee or agent of the Company, other than those contained in this Agreement.

 

	
  
	
8.
	
Such person or entity is acquiring the Units for such person’s or entity’s, as the case may be, own account, for investment and not for distribution or resale to others.

 

 

 

 

37

 

 

	
  
	
9.
	
Such person or entity will not sell or otherwise transfer the Units, unless either (a) the transfer of such securities is registered under the Securities Act or (b) an exemption from registration of such securities is available.

 

	
  
	
10.
	
Such person or entity consents to the placement of a legend on any certificate or other document evidencing the Units substantially in the form set forth in Section 5.1.

 

	
  
	
11.
	
Such person or entity understands and acknowledges that the Units have not been recommended by any federal or state securities commission or regulatory authority, that the foregoing authorities have not confirmed the accuracy or determined the adequacy of any information concerning the Company that has been supplied to such person or entity and that any representation to the contrary is a criminal offense.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

38

  

Appendix B-2

SECURITIES PURCHASE AGREEMENT

 

[Missing Graphic Reference]

 

NON U.S. PERSON REPRESENTATIONS

 

Each Purchaser indicating that it is not a U.S. person, severally and not jointly, further represents and warrants to the Company as follows:

 

	
  
	
1.
	
At the time of (a) the offer by the Company and (b) the acceptance of the offer by such person or entity, of the Units, such person or entity was outside the United States.

 

	
  
	
2.
	
Such person or entity is acquiring the Units for such Shareholder’s own account, for investment and not for distribution or resale to others and is not purchasing the Units for the account or benefit of any U.S. person, or with a view towards distribution to any U.S. person, in violation of the registration requirements of the Securities Act.

 

	
  
	
3.
	
Such person or entity will make all subsequent offers and sales of the Units either (x) outside of the United States in compliance with Regulation S; (y) pursuant to a registration under the Securities Act; or (z) pursuant to an available exemption from registration under the Securities Act.  Specifically, such person or entity will not resell the Units to any U.S. person or within the United States prior
to the expiration of a period commencing on the Closing Date and ending on the date that is one year thereafter (the “Distribution Compliance Period”), except pursuant to registration under the Securities Act or an exemption from registration under the Securities Act.

 

	
  
	
4.
	
Such person or entity has no present plan or intention to sell the Units in the United States or to a U.S. person at any predetermined time, has made no predetermined arrangements to sell the Units and is not acting as a Distributor of such securities.

 

	
  
	
5.
	
Neither such person or entity, its Affiliates nor any Person acting on behalf of such person or entity, has entered into, has the intention of entering into, or will enter into any put option, short position or other similar instrument or position in the U.S. with respect to the Units at any time after the Closing Date through the Distribution Compliance Period except in compliance with the Securities Act.

 

	
  
	
6.
	
Such person or entity consents to the placement of a legend on any certificate or other document evidencing the Units substantially in the form set forth in Section 5.1.

 

	
  
	
7.
	
Such person or entity is not acquiring the Units in a transaction (or an element of a series of transactions) that is part of any plan or scheme to evade the registration provisions of the Securities Act.

 

	
  
	
8.
	
Such person or entity has sufficient knowledge and experience in finance, securities, investments and other business matters to be able to protect such person’s or entity’s interests in connection with the transactions contemplated by this Agreement.

 

 

 

 

 

39

 

 

 

	
  
	
9.
	
Such person or entity has consulted, to the extent that it has deemed necessary, with its tax, legal, accounting and financial advisors concerning its investment in the Units.

 

	
  
	
10.
	
Such person or entity understands the various risks of an investment in the Units and can afford to bear such risks for an indefinite period of time, including, without limitation, the risk of losing its entire investment in the Units.

 

	
  
	
11.
	
Such person or entity has had access to the Company’s publicly filed reports with the SEC and has been furnished during the course of the transactions contemplated by this Agreement with all other public information regarding the Company that such person or entity has requested and all such public information is sufficient for such person or entity to evaluate the risks of investing in the Units.

 

	
  
	
12.
	
Such person or entity has been afforded the opportunity to ask questions of and receive answers concerning the Company and the terms and conditions of the issuance of the Units.

 

	
  
	
13.
	
Such person or entity is not relying on any representations and warranties concerning the Company made by the Company or any officer, employee or agent of the Company, other than those contained in this Agreement.

 

	
  
	
14.
	
Such person or entity will not sell or otherwise transfer the Shares unless either (A) the transfer of such securities is registered under the Securities Act or (B) an exemption from registration of such securities is available.

 

	
  
	
15.
	
Such person or entity represents that the address furnished on its signature page to this Agreement is the principal residence if he is an individual or its principal business address if it is a corporation or other entity.

 

	
  
	
16.
	
Such person or entity understands and acknowledges that the Units have not been recommended by any federal or state securities commission or regulatory authority, that the foregoing authorities have not confirmed the accuracy or determined the adequacy of any information concerning the Company that has been supplied to such person or entity and that any representation to the contrary is a criminal offense.

 

 

 

 

 

 

 

 

 

 

 

  

40

  

 

EXHIBIT A TO THE

SECURITIES PURCHASE AGREEMENT

FORM OF SERIES C WARRANT

 

 

 

 

 

 

 

 

 

 

 

 

  

41

  

 

EXHIBIT B TO THE

SECURITIES PURCHASE AGREEMENT

 

 

FORM OF REGISTRATION RIGHTS AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

  

42

  

EXHIBIT C TO THE

SECURITIES PURCHASE AGREEMENT

 

 

FORM OF CLOSING ESCROW AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

  

43

  

EXHIBIT D TO THE

SECURITIES PURCHASE AGREEMENT

 

IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

as of ____________, 2009

 

[Name and address of Transfer Agent]

Attn: _____________

 

Ladies and Gentlemen:

 

Reference is made to that certain Securities Purchase Agreement (the “Purchase Agreement”), dated as of __________, 2009, by and among Tianyin Pharmaceutical, Co., Inc., a Delaware corporation (the “Company”),
and each of the Purchaser of Units whose name is set forth on the signature page to the Purchase Agreement hereto (the “Purchaser”), pursuant to which the Company is issuing to the Purchaser units (the “Units”), consisting of (i) Series C warrants (the “Warrants”) to purchase shares of the Company’s Common Stock, par value $0.0001 per share
(the “Common Stock”). This letter shall serve as our irrevocable authorization and direction to you provided that you are the transfer agent of the Company at such time) to issue shares of Common and exercise of the Series C Warrants (the “Warrant Shares”) to or upon the order of a Purchaser from time to time upon (i) surrender to you of a properly completed
and duly executed Exercise Notice, as the case may be, (ii)  in the case of Warrants being exercised, a copy of the Series C Warrants (with the original Warrants delivered to the Company) being exercised (or, in each case, an indemnification undertaking with respect to such share certificates or the warrants in the case of their loss, theft or destruction), and (iii) delivery of a treasury order or other appropriate order duly executed by a duly authorized officer of the Company. So long as you have
previously received (x) written confirmation from counsel to the Company that a registration statement covering resales of the Warrant Shares, as applicable, has been declared effective by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), and no subsequent notice by the Company or its counsel of
the suspension or termination of its effectiveness and (y) a copy of such registration statement, and if the Purchaser represents in writing that the Warrant Shares, as the case may be, were sold pursuant to the Registration Statement, then certificates representing the Warrant Shares, as the case may be, shall not bear any legend restricting transfer of the the Warrant Shares, as the case may be, thereby and should not be subject to any stop-transfer restriction. Provided, however, that if you have not previously
received those items and representations listed above, then the certificates for the Warrant Shares shall bear the following legend:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS, OR THE COMPANY
SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.”

 

 

 

 

44

 

 

Please be advised that the Purchaser are relying upon this letter as an inducement to enter into the Purchase Agreement and, accordingly, each Purchaser is a third party beneficiary to these instructions.

 

Please execute this letter in the space indicated to acknowledge your agreement to act in accordance with these instructions. Should you have any questions concerning this matter, please contact me at ___________.

	  	
Very truly yours,

	  	  
	  	
[________________________________________]

	  	  
	  	
By:
	  
	  	  	  
	  	
Name:
	  
	  	  	  
	  	
Title:
	  

 

ACKNOWLEDGED AND AGREED:

 

[TRANSFER AGENT]

	
By:
	  	  
	  	  	  
	
Name:
	  	  
	  	  	  
	
Title:
	  	  
	  	  	  
	
Date:
	  	  

 

 

 

 

 

  

45

  

EXHIBIT E TO THE

SECURITIES PURCHASE AGREEMENT

 

 

FORM OF OPINION OF COUNSEL

1.         The Company is validly existing and in good standing as a corporation under the laws of the State of Delaware and has the corporate power to own, lease and operate its properties and assets, and to carry on its business as presently conducted.

2.         The Company has the corporate power and authority to enter into and perform its obligations under the Transaction Documents and to issue the Units, the Common Stock included in the Units, the Series C Warrant included in the Unit and the Warrant Shares (collectively, the “Securities”).
The execution, delivery and performance of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action. Each of the Transaction Documents has been duly executed and delivered and each of the Transaction Documents constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

 3.         The Common Stock, the Series C Warrants and the Warrant Shares are not subject to any preemptive rights under the Articles or the Bylaws.

4.          The Common Stock have been duly authorized and, when delivered against payment in full as provided in the Purchase Agreement, will be validly issued, fully paid and non-assessable.

5.          The execution, delivery and performance of and compliance with the terms of the Transaction Documents and the issuance of Securities do not (i) violate any provision of the Articles or Bylaws of the Company.

6.          No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required under Federal, state or local law, rule or regulation in connection with the valid execution and delivery of the Transaction Documents,
or the offer, sale or issuance of the Securities, other than the Registration Statement and applicable “Blue Sky” or state securities filings.

 

 

 

 

46

 

 

7.        To our knowledge, there is no action, suit, claim, investigation or proceeding pending or threatened against the Company which questions the validity of this Agreement or the transactions contemplated hereby or any action taken or to be taken pursuant hereto or thereto. To our knowledge, there
is no action, suit, claim, investigation or proceeding pending, or to our knowledge, threatened, against or involving the Company or any of its properties or assets and which, if adversely determined, is reasonably likely to result in a Material Adverse Effect.

8.        Based upon the representations of the Company and the Purchasers set forth in the Securities Purchase Agreement, and the Placement Agent in their certificate delivered to us today, the offer, issuance and sale of the Units, the Common Stock and the Series C Warrants and the offer, issuance
and sale of the Warrant Shares pursuant to the Purchase Agreement, as applicable, are exempt from the registration requirements of the Securities Act.

 

 

 

  

47

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