Document:

Exhibit
4.1

    

     

    NEOPROBE
CORPORATION

    

    FIRST
AMENDED AND RESTATED CERTIFICATE OF DESIGNATIONS,

    VOTING
POWERS, PREFERENCES, LIMITATIONS,

    RESTRICTIONS,
AND RELATIVE RIGHTS OF SERIES A 8%

    CUMULATIVE
CONVERTIBLE PREFERRED STOCK

    

    

    It is
hereby certified that:

    

    I.       
    The name of the corporation is Neoprobe Corporation (the
“Corporation”),
a Delaware corporation.

    

    II.           On
December 26, 2007, the Corporation filed a certificate of designations, voting
powers, preferences, limitations, restrictions, and relative rights of shares of
Series A 8% Cumulative Convertible Preferred Stock of the Corporation (the
“Series A Preferred
Stock”) with the Secretary of State of the State of
Delaware.

    

    III.         Pursuant
to Section 242 of the General Corporation Law of the State of Delaware, set
forth hereinafter are the amended and restated designations, voting powers,
preferences, limitations, restrictions, and relative rights of shares of Series
A 8% Cumulative Convertible Preferred Stock of the Corporation (the “Amended and Restated
Designations”), hereinafter designated as contained in a resolution of
the Board of Directors of the Corporation pursuant to a provision of the
Certificate of Incorporation of the Corporation permitting the issuance of said
Series A Preferred Stock by resolution of the Board of Directors.

    

    IV.         The
Amended and Restated Designations set forth herein were duly adopted in
accordance with Section 242 of the General Corporation Law of the State of
Delaware by: (1) unanimous written action of the Board of Directors of the
Corporation on April 30, 2009; and (2) unanimous written action of the holders
of the Series A Preferred Stock on April 30, 2009.

    

    1.           Designation and
Rank.

     

    (a)       
     Designation.  The
designation of such series of the Corporation’s Preferred Stock shall be the
Series A 8% Cumulative Convertible Preferred Stock, par value $.001 per
share.  The maximum number of shares of Series A Preferred Stock shall
be Three Thousand (3,000) Shares.

     

    (b)      
      Rank.  The
Series A Preferred Stock shall rank prior to the common stock, par value $.001
per share (the “Common
Stock”), and to all other classes and series of equity securities of the
Company which by their terms do not rank on a parity with or senior to the
Series A Preferred Stock (“Junior
Stock”).  The Series A Preferred Stock shall be subordinate to
and rank junior to all indebtedness of the Company now or hereafter
outstanding.

     

    2.           Dividends.

     

    (a)     
       Quarterly
Dividends.  The holders of shares of the Series A Preferred
Stock shall be entitled to receive, out of funds legally available therefor,
dividends at an annual rate equal to 8% of the Liquidation Preference Amount,
whether or not declared.  Accrued and unpaid dividends shall compound
on a quarterly basis, and shall be, except as set forth in Section 2(b) below,
payable in cash.  The Board of Directors may fix a record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive payment of such dividends, which record date shall not be more than
sixty (60) days prior to the applicable dividend payment date.  The
first such dividend payment shall be due and payable on March 31, 2008, with
subsequent payments due and payable on June 30, September 30, December 31 and
March 31 of each year, provided that the
physical delivery of a certificate representing shares of Common Stock issued in
payment of dividends at any time up to two business days after the relevant
dividend payment date shall be deemed timely delivered.  All accrued
and unpaid dividends, if any, shall be mandatorily paid immediately prior to the
earlier to occur of (i) a liquidation, dissolution or winding up (or deemed
liquidation, dissolution or winding up under Section 4(b) hereof) of the Company
(a “Liquidation”) or (ii)
a Voluntary Conversion pursuant to Section 5 hereof (the “Mandatory Dividend Payment
Date”).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)      
      Payment of
Dividends.  At the option of the Company in compliance with
this Section 2(b), the Company may pay dividends on the Series A Preferred Stock
in registered shares of Common Stock, with each share of Common Stock being
valued for this purpose at 90% of the average VWAP for the five (5) trading days
immediately preceding the date on which such dividend is due and
payable.  Notwithstanding the above, no dividend shall be paid in
Common Stock (i) in connection with a Liquidation, (ii) if such payment would
cause the 4.99% or 9.99% limitations on beneficial ownership set forth in
Section 7 hereof to be exceeded, (iii) unless the shares of Common Stock
received upon such payment shall be freely salable by the recipient pursuant to
a then effective Registration Statement meeting the requirements of the
Registration Rights Agreement, dated on or about December 26, 2007, by and
between the Company and the investors named therein or (vi) if a default or an
Event of Default has occurred and is continuing under the Purchase Agreement (as
defined below) or under the Notes issued pursuant to the Purchase Agreement, or
the Company has failed to comply with any provision of this Certificate of
Designations in any material respect.  “VWAP” means, for any
date, (i) the daily volume weighted average price of the Common Stock for such
date on the OTC Bulletin Board (or national securities exchange, if applicable)
as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m.
Eastern Time to 4:02 p.m. Eastern Time); (ii) if the Common Stock is not then
listed or quoted on the OTC Bulletin Board (or national securities exchange, if
applicable) and if prices for the Common Stock are then reported in the “Pink
Sheets” published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (iii) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the holder and reasonably acceptable to the
Company.

     

    (c)       
     Junior Stock
Dividends.  The Company shall not declare or pay any cash
dividends on, or make any other distributions with respect to or redeem,
purchase or otherwise acquire for consideration, any shares of Junior Stock
unless and until all accrued and unpaid dividends on the Series A Preferred
Stock have been paid in full.  In all events, Junior Stock dividends
shall be subject to the restrictions set forth in Section 3(a)
below.

     

    3.           Voting
Rights.

     

    (a)          
  Class
Voting Rights.  The Series A Preferred Stock shall have the
following class voting rights (in addition to the voting rights set forth in
Section 3(b) and Section 10 hereof).  So long as at least 25% of the
shares of the Series A Preferred Stock issued pursuant to the Purchase Agreement
remain outstanding, the Company shall not, and shall not permit any subsidiary
to, without the affirmative vote or consent of the holders of at least a
majority of the shares of the Series A Preferred Stock outstanding at the time,
given in person or by proxy, either in writing or at a meeting, in which the
holders of the Series A Preferred Stock vote separately as a class: (i)
authorize, create, issue or increase the authorized or issued amount of any
class or series of stock, including but not limited to the issuance of any more
shares of previously authorized Preferred Stock, ranking on a parity with or
prior to the Series A Preferred Stock, with respect to the distribution of
assets on liquidation, dissolution or winding up; (ii) amend, alter or repeal
the terms of the Series A Preferred Stock, whether by merger, consolidation or
otherwise, so as to adversely affect any right, preference, privilege or voting
power of the Series A Preferred Stock; (iii) repurchase, redeem or pay dividends
on (whether in cash, in kind, or otherwise), shares of the Company's Junior
Stock; (iv) amend the Certificate of Incorporation or By-Laws of the Company so
as to affect materially and adversely any right, preference, privilege or voting
power of the Series A Preferred Stock; (v) effect any distribution with respect
to Junior Stock or parity stock; or (vi) reclassify the Company's outstanding
securities.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)      
      General Voting
Rights.  Except as otherwise set forth herein and except as
otherwise required by Delaware law, the Series A Preferred Stock shall have no
voting rights.  The Common Stock into which the Series A Preferred
Stock is convertible shall, upon issuance, have all of the same voting rights as
other issued and outstanding Common Stock of the Company.

     

    4.           Liquidation
Preference.

     

    (a)    
        In the event of the liquidation,
dissolution or winding up of the affairs of the Company, whether voluntary or
involuntary, the holders of shares of the Series A Preferred Stock then
outstanding shall be entitled to receive, out of the assets of the Company,
whether such assets are capital or surplus of any nature, an amount equal to One
Thousand Dollars ($1,000.00) per share (the “Liquidation Preference
Amount”) of the Series A Preferred Stock, before any payment shall be
made or any assets distributed to the holders of the Common Stock or any other
Junior Stock.    The liquidation payment with respect to
each outstanding fractional share of Series A Preferred Stock shall be equal to
a ratably proportionate amount of the liquidation payment with respect to each
outstanding share of Series A Preferred Stock.  All payments for which
this Section 4(a) provides shall be in cash, property (valued at its fair market
value as determined by an independent appraiser reasonably acceptable to the
holders of a majority of the Series A Preferred Stock) or a combination
thereof;  provided, however, that no cash shall be paid to holders of
Junior Stock unless each holder of the outstanding shares of Series A Preferred
Stock has been paid in cash the full Liquidation Preference Amount to which such
holder is entitled as provided herein.  After payment of the full
Liquidation Preference Amount to which each holder is entitled, such holders of
shares of Series A Preferred Stock will not be entitled to any further
participation as such in any distribution of the assets of the
Company.

     

    (b)       
     A consolidation or merger of the Company with or
into any other corporation or corporations, or a sale of all or substantially
all of the assets of the Company, or the effectuation by the Company of a
transaction or series of transactions in which more than 50% of the voting
shares of the Company is disposed of or conveyed, shall be, at the election of
the holders of a majority of the Series A Preferred Stock, deemed to be a
liquidation, dissolution, or winding up within the meaning of this Section
4.  In the event of the merger or consolidation of the Company with or
into another corporation that is not treated as a liquidation pursuant to this
Section 4(b), the Series A Preferred Stock shall maintain its relative powers,
designations and preferences provided for herein and no merger shall result
inconsistent therewith.

     

    (c)        
    Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, stating a
payment date and the place where the distributable amounts shall be payable,
shall be given by mail, postage prepaid, no less than forty-five (45) days prior
to the payment date stated therein, to the holders of record of the Series A
Preferred Stock at their respective addresses as the same shall appear on the
books of the Company.

     

    5.           Conversion.  The
holder of Series A Preferred Stock shall have the following conversion rights
(the “Conversion Rights”):

     

    (a)       
     Right to
Convert.  At any time on or after the date of issuance of the
Series A Preferred Stock (the “Issuance Date”), the
holder of any such shares of Series A Preferred Stock may, at such holder’s
option, subject to the limitations set forth in Section 7 herein, elect to
convert (a “Voluntary
Conversion”) all or any portion of the shares of Series A Preferred Stock
held by such person into a number of fully paid and nonassessable shares of
Common Stock equal to the quotient of (i) the Liquidation Preference Amount of
the shares of Series A Preferred Stock being converted thereon divided by (ii)
the Conversion Price (as defined in Section 5(d) below) then in effect as of the
date of the delivery by such holder of its notice of election to
convert.  The Company shall keep written records of the conversion of
the shares of Series A Preferred Stock converted by each holder.  A
holder shall be required to deliver the original certificates representing the
shares of Series A Preferred Stock upon complete conversion of the Series A
Preferred Stock.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)         
   Mechanics of Voluntary
Conversion.  The Voluntary Conversion of Series A Preferred
Stock shall be conducted in the following manner:

     

    (i)              Holder's Delivery
Requirements.  To convert Series A Preferred Stock into full
shares of Common Stock on any date (the “Voluntary Conversion
Date”), the holder thereof shall (A) transmit by facsimile (or otherwise
deliver), for receipt on or prior to 5:00 p.m., Eastern Time on such date, a
copy of a fully executed notice of conversion in the form attached hereto as
Exhibit I  (the “Conversion Notice”),
to the Company, and (B) with respect to the final conversion of shares of Series
A Preferred Stock held by any holder, such holder shall surrender to a common
carrier for delivery to the Company as soon as practicable following such
Conversion Date but in no event later than six (6) business days after such date
the original certificates representing the shares of Series A Preferred Stock
being converted (or an indemnification undertaking with respect to such shares
in the case of their loss, theft or destruction) (the “Preferred Stock
Certificates”).

     

    (ii)             Company's
Response.  Not later than three (3) trading days after any
Voluntary Conversion Date, the Company or its designated transfer agent, as
applicable, shall issue and deliver to the Depository Trust Company (“DTC”)
account on the holder’s behalf via the Deposit Withdrawal Agent Commission
System (“DWAC”) as specified in the Conversion Notice, the number of shares of
Common Stock to which the holder shall be entitled upon such conversion,
registered in the name of the holder or its designee.  In the
alternative, not later than three (3) trading days after any Voluntary
Conversion Date, the Company shall deliver to the applicable holder by express
courier a certificate or certificates which shall be free of restrictive legends
and trading restrictions (other than those required pursuant to the Purchase
Agreement) representing the number of shares of Common Stock being acquired upon
the conversion of this Note (the “Delivery Date”).
Notwithstanding the foregoing to the contrary, the Company or its designated
transfer agent (the “Transfer Agent”),
shall only be obligated to issue and deliver the shares to the DTC on the
holder’s behalf via DWAC (or certificates free of restrictive legends) if such
conversion is in connection with a sale by the holder and the holder has
complied with the applicable prospectus delivery requirements or an exemption
from such registration requirements (each as evidenced by documentation
furnished to and reasonably satisfactory to the Company).  If in the
case of any Conversion Notice such certificate or certificates are not delivered
to or as directed by the applicable holder by the Delivery Date, the holder
shall be entitled by written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to rescind such
conversion, in which event the Company shall immediately return any Preferred
Stock Certificates tendered for conversion, whereupon the Company and the holder
shall each be restored to their respective positions immediately prior to the
delivery of such Conversion Notice, except that any amounts described in
Sections 5(b)(v) shall be payable through the date notice of rescission is given
to the Company.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iii)           
Dispute
Resolution.  In the case of a dispute as to the arithmetic
calculation of the number of shares of Common Stock to be issued upon
conversion, the Company shall promptly issue to the holder the number of shares
of Common Stock that is not disputed and shall submit the arithmetic
calculations to the holder via facsimile as soon as possible, but in no event
later than two (2) business days after receipt of such holder's Conversion
Notice.  If such holder and the Company are unable to agree upon the
arithmetic calculation of the number of shares of Common Stock to be issued upon
such conversion within one (1) business day of such disputed arithmetic
calculation being submitted to the holder, then the Company shall within one (1)
business day submit via facsimile the disputed arithmetic calculation of the
number of shares of Common Stock to be issued upon such conversion to the
Company’s independent, outside accountant.  The Company shall cause
the accountant to perform the calculations and notify the Company and the holder
of the results no later than seventy-two (72) hours from the time it receives
the disputed calculations.  Such accountant's calculation shall be
binding upon all parties absent manifest error.  The reasonable
expenses of such accountant in making such determination shall be paid by the
Company, in the event the holder's calculation was correct, or by the holder, in
the event the Company’s calculation was correct, or equally by the Company and
the holder in the event that neither the Company's or the holder's calculation
was correct.  The period of time in which the Company is required to
effect conversions or redemptions under this Certificate of Designation shall be
tolled with respect to the subject conversion or redemption pending resolution
of any dispute by the Company made in good faith and in accordance with this
Section 5(b)(iii).

     

    (iv)           
Record
Holder.  The person or persons entitled to receive the shares
of Common Stock issuable upon a conversion of the Series A Preferred Stock shall
be treated for all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.

     

    (v)             Company's Failure to Timely
Convert.  If within five (5) business days of the Company's
receipt of the Conversion Notice (the “Share Delivery
Period”) the Company shall fail to issue and deliver to a holder the
number of shares of Common Stock to which such holder is entitled upon such
holder's conversion of the Series A Preferred Stock, or failure to deliver
unlegended certificates representing such shares or shares via DWAC if required
pursuant to Section 5(b)(ii) hereof (a “Conversion Failure”),
in addition to all other available remedies which such holder may pursue
hereunder and under the Securities Purchase Agreement among the Company and the
purchasers listed therein (the “Purchase Agreement”)
between the Company and the initial holders of the Series A Preferred Stock, the
Company shall pay additional damages to such holder on each business day after
such third (3rd) business day that such conversion is not timely effected in an
amount equal 0.5% of the product of (A) the sum of the number of shares of
Common Stock not so issued to the holder on a timely basis pursuant to Section
5(b)(ii) and to which such holder is entitled and (B) the Closing Price (as
defined in Section 5(d)(ii) hereof) of the Common Stock on the last possible
date which the Company could have issued such Common Stock to such holder
without violating Section 5(b)(ii).  If the Company fails to pay the
additional damages set forth in this Section 5(b)(v) within five (5) business
days of the date incurred, then such payment shall bear interest at the rate of
2% per month (pro rated for partial months) until such payments are
made.

     

    (c)      
      [Reserved]

     

    (d)       
     Conversion
Price.

     

    (i)              The
term “Conversion
Price” shall mean the Closing Price on the Issuance Date (but in no event
greater than $0.50 per share), subject to adjustment under Section 5(e)
hereof.  Notwithstanding any adjustment hereunder, at no time shall
the Conversion Price be greater than the Conversion Price on the Issuance Date
other than pursuant to the second sentence of Section 5(e)(i) in connection with
a reverse stock split effected by the Company.

     

    (ii)            
The term “Closing
Price” shall mean (i) the last trading price per share of the Common
Stock on such date on the OTC Bulletin Board or a registered national stock
exchange on which the Common Stock is then listed, or if there is no such price
on such date, then the last trading price on such exchange or quotation system
on the date nearest preceding such date, or (ii) if the price of the Common
Stock is not then reported by the OTC Bulletin Board or a registered national
securities exchange, then the average of the “Pink Sheet” quotes for the
relevant date, as reported by the National Quotation Bureau, Inc., or (iii) if
the Common Stock is not then publicly traded the fair market value of a share of
Common Stock as mutually determined by the Company and the holders of a majority
of the outstanding shares of Series A Preferred Stock.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (e)        
    Adjustments of Conversion
Price.

     

    (i)              Adjustments for Stock Splits and
Combinations.  If the Company shall at any time or from time to
time after the Issuance Date, effect a stock split of the outstanding Common
Stock, the Conversion Price shall be proportionately decreased.  If
the Company shall at any time or from time to time after the Issuance Date,
combine the outstanding shares of Common Stock, the Conversion Price shall be
proportionately increased.  Any adjustments under this Section 5(e)(i)
shall be effective at the close of business on the date the stock split or
combination occurs.

     

    (ii)            
Adjustments for Certain
Dividends and Distributions.  If the Company shall at any time
or from time to time after the Issuance Date, make or issue or set a record date
for the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in shares of Common Stock, then, and in each
event, the Conversion Price shall be decreased as of the time of such issuance
or, in the event such record date shall have been fixed, as of the close of
business on such record date, by multiplying, as applicable, the Conversion
Price then in effect by a fraction:

     

    (A)          the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date; and

     

    (B)           the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution.

     

    (iii)           
Adjustment for Other Dividends
and Distributions.  If the Company shall at any time or from
time to time after the Issuance Date, make or issue or set a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Company other than shares of Common
Stock, then, and in each event, an appropriate revision to the applicable
Conversion Price shall be made and provision shall be made (by adjustments of
the Conversion Price or otherwise) so that the holders of Series A Preferred
Stock shall receive upon conversions thereof, in addition to the number of
shares of Common Stock receivable thereon, the number of securities of the
Company which they would have received had their Series A Preferred Stock been
converted into Common Stock immediately prior to such event (or the record date
for such event, if applicable) (without giving effect to the limitations set
forth in Section 7 hereof) and had thereafter, during the period from the date
of such event to and including the Conversion Date, retained such securities
(together with any distributions payable thereon during such period), giving
application to all adjustments called for during such period under this Section
5(e)(iii) with respect to the rights of the holders of the Series A Preferred
Stock; provided,
however, that if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price shall be adjusted pursuant to this paragraph as
of the time of actual payment of such dividends or distributions.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iv)           
Adjustments for
Reclassification, Exchange or Substitution.  If the Common
Stock issuable upon conversion of the Series A Preferred Stock at any time or
from time to time after the Issuance Date shall be changed to the same or
different number of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than by way of a
stock split or combination of shares or stock dividends provided for in Sections
5(e)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale of
assets provided for in Section 5(e)(v)), then, and in each event, an appropriate
revision to the Conversion Price shall be made and provisions shall be made (by
adjustments of the Conversion Price or otherwise) so that the holder of each
share of Series A Preferred Stock shall have the right thereafter to convert
such share of Series A Preferred Stock into the kind and amount of shares of
stock and other securities receivable upon reclassification, exchange,
substitution or other change, by holders of the number of shares of Common Stock
into which such share of Series A Preferred Stock might have been converted
immediately prior to such reclassification, exchange, substitution or other
change (without giving effect to the limitations set forth in Section 7 hereof),
all subject to further adjustment as provided herein.

     

    (v)             Adjustments for Reorganization,
Merger, Consolidation or Sales of Assets.  If at any time or
from time to time after the Issuance Date there shall be a capital
reorganization of the Company (other than by way of a stock split or combination
of shares or stock dividends or distributions provided for in Section 5(e)(i),
(ii) and (iii), or a reclassification, exchange or substitution of shares
provided for in Section 5(e)(iv)), or a merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all of the
Company's properties or assets to any other person that is not deemed a
liquidation pursuant to Section 4(b) (an “Organic Change”),
then as a part of such Organic Change an appropriate revision to the Conversion
Price shall be made and provision shall be made (by adjustments of the
Conversion Price or otherwise) so that the holder of each share of Series A
Preferred Stock shall have the right thereafter to convert such share of Series
A Preferred Stock into the kind and amount of shares of stock and other
securities or property of the Company or any successor corporation resulting
from the Organic Change as the holder would have received as a result of the
Organic Change and if the holder had converted its Series A Preferred Stock into
the Company’s Common Stock prior to the Organic Change (without giving effect to
the limitations set forth in Section 7 hereof).  In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 5(e)(v) with respect to the rights of the holders of the Series A
Preferred Stock after the Organic Change to the end that the provisions of this
Section 5(e)(v) (including any adjustment in the Conversion Price then in effect
and the number of shares of stock or other securities deliverable upon
conversion of the Series A Preferred Stock) shall be applied after that event in
as nearly an equivalent manner as may be practicable.

     

    (vi)          
Adjustments for Issuance of
Additional Shares of Common Stock. In the event the Company, shall, at
any time, from time to time, issue or sell any additional shares of Common Stock
(otherwise than as provided in the foregoing subsections (i) through (v) of this
Section 5(e) or upon exercise or conversion of Common Stock Equivalents
(hereafter defined) granted or issued prior to the Issuance Date at the
conversion price applicable to such Common Stock Equivalents in effect on the
Issuance Date) (the “Additional Shares of Common
Stock”), at a price per share less than the Conversion Price, or without
consideration, then the Conversion Price upon each such issuance shall be
reduced to a price determined by multiplying the Conversion Price then in effect
by a fraction (A) the numerator of which is the total number of shares of Common
Stock then outstanding plus the number of shares of Common Stock which the
aggregate consideration received or to be received by the Company for the shares
so issued (or deemed issued) would purchase at such Conversion Price, and (B)
the denominator of which is the total number of shares of Common Stock then
outstanding plus the number of shares of Common Stock so issued (or deemed
issued).  Notwithstanding the foregoing, there shall be no adjustment
to the Conversion Price upon any issuance or deemed issuance of Common Stock if
the holders of a majority of the outstanding Series A Preferred Stock waive in
writing such adjustment.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (vii)           Issuance of Common Stock
Equivalents.  If the Company, at any time after the Issuance
Date, shall issue any securities convertible into or exchangeable for, directly
or indirectly, Common Stock (“Convertible
Securities”), other than the Series A Preferred Stock or Notes issuable
pursuant to the Purchase Agreement, or any rights or warrants or options to
purchase any such Common Stock or Convertible Securities, other than the
Warrants issuable pursuant to the Purchase Agreement, shall be issued or sold
(collectively, the “Common Stock
Equivalents”) and the aggregate of the price per share for which
Additional Shares of Common Stock may be issuable thereafter pursuant to such
Common Stock Equivalent, plus the consideration received by the Company for
issuance of such Common Stock Equivalent, divided by the number of shares of
Common Stock issuable pursuant to such Common Stock Equivalent (the “Aggregate Per Common Share
Price”), shall be less than the Conversion Price, or if, after any such
issuance of Common Stock Equivalents, the price per share for which Additional
Shares of Common Stock may be issuable thereafter is amended or adjusted, and
such price as so amended or adjusted shall make the Aggregate Per Common Share
Price be less than Conversion Price in effect at the time of such amendment or
such adjustment, then the applicable Conversion Price upon each such issuance or
amendment or adjustment shall be adjusted as provided Section 5(e)(vi), with the
maximum number of shares of Common Stock issuable upon conversion or exercise of
such Common Stock Equivalents being deemed to have be issued or sold by the
Company at the time of issuance or sale of such Common Stock Equivalents. For
purposes of this Section 5(e)(vii), the “price per share for which Additional
Shares of Common Stock is issuable” shall be determined by dividing (X) the
total amount received or receivable by the Company as consideration for the
issue or sale of such Common Stock Equivalents, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
conversion or exercise thereof, by (B) the total maximum number of shares of
Common Stock issuable upon the conversion or exercise of all such Common Stock
Equivalents. No adjustment of the number of shares of Common Stock shall be made
under Section 5(e)(vi) upon the issuance of any Additional Shares of Common
Stock which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any Common Stock Equivalents, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights or
upon the issuance of such Common Stock Equivalents (or upon the issuance of any
warrant or other rights therefor) pursuant to this Section
5(e)(vii).

     

    (viii)          Consideration for
Stock.  In case any shares of Common Stock or Convertible
Securities other than the Series A Preferred Stock, or any rights or warrants or
options to purchase any such Common Stock or Convertible Securities, shall be
issued or sold in connection with any merger or consolidation in which the
Company is the surviving corporation (other than any consolidation or merger in
which the previously outstanding shares of Common Stock of the Company shall be
changed to or exchanged for the stock or other securities of another
corporation), the amount of consideration therefor shall be deemed to be the
fair value, as determined reasonably and in good faith by the Board of Directors
of the Company, of such portion of the assets and business of the nonsurviving
corporation as such Board may determine to be attributable to such shares of
Common Stock, Convertible Securities, rights or warrants or options, as the case
may be.

     

    (ix)          
Record
Date.  In case the Company shall take record of the holders of
its Common Stock or any other Preferred Stock for the purpose of entitling them
to subscribe for or purchase Common Stock or Convertible Securities, then the
date of the issue or sale of the shares of Common Stock shall be deemed to be
such record date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (x)            
Certain Issues
Excepted.  Anything herein to the contrary notwithstanding, the
Company shall not be required to make any adjustment of the Conversion Price of
shares of Common Stock issuable upon conversion of the Series A Preferred Stock
in connection with any of the following:  (a) issuances, pursuant to
option plans in effect on December 26, 2007, of options to employees, officers,
directors or consultants of the Company approved by a majority of the
non-employee members of the Board of Directors of the Company or a majority of
the members of a committee of non-employee directors established for such
purpose, to the extent such issuances (i) are at an exercise price of not less
than the Closing Price on the date of grant and (ii) are at a per share exercise
price greater than the initial conversion price of the Series A Note issued
pursuant to the Purchase Agreement (as adjusted for splits, combinations, and
the like occurring after the date of the Purchase Agreement), (b) issuance of
the Notes, Preferred Stock or Warrants to the Purchasers pursuant to the terms
of the Purchase Agreement; (c) issuances of securities upon the exercise or
exchange of or conversion of any securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the Issuance
Date, provided that such securities have not been amended since such date to
increase the number of such securities or to decrease the exercise, exchange or
conversion price of any such securities (including the Notes, Preferred Stock
and Warrants issued to the Purchasers pursuant to the Purchase Agreement); (d)
securities issued pursuant to acquisitions or strategic transactions approved by
a majority of the disinterested directors, but not including a transaction with
an entity whose primary business is investing in securities or a transaction,
the primary purpose of which is to raise capital; or (e) the issuance of shares
of Common Stock in payment of interest on the Notes, or as a dividend or
distribution on the Series A Preferred Stock.

     

    (f)        
    No
Impairment.  The Company shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith, assist in the carrying out of all the provisions of this
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment.

     

    (g)      
      Certificates as to
Adjustments.  Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock pursuant to this
Section 5, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
such Series A Preferred Stock a certificate setting forth such adjustment and
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based.  The Company shall, upon written request of the
holder of such affected Series A Preferred Stock, at any time, furnish or cause
to be furnished to such holder a like certificate setting forth such adjustments
and readjustments, the Conversion Price in effect at the time, and the number of
shares of Common Stock and the amount, if any, of other securities or property
which at the time would be received upon the conversion of a share of such
Series A Preferred Stock.  Notwithstanding the foregoing, the Company
shall not be obligated to deliver a certificate unless such certificate would
reflect an increase or decrease of at least one percent (1%) of such adjusted
amount.

     

    (h)          
  Issue
Taxes.  The Company shall pay any and all issue and other
taxes, excluding federal, state or local income taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
shares of Series A Preferred Stock pursuant
thereto;  provided,  however, that the Company shall not be
obligated to pay any transfer taxes resulting from any transfer requested by any
holder in connection with any such conversion.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (i)    
         Notices.  Any
notice, demand, request, waiver or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (i) upon hand
delivery, telecopy or facsimile at the address or number designated in the
Purchase Agreement (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (ii) on the second business day
following the date of mailing by express overnight courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The Company will give written notice each holder of
Series A Preferred Stock at least ten (10) days prior to the date on which the
Company takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock or (C) for determining rights to vote with respect to any Organic
Change, dissolution, liquidation or winding-up and in no event shall such notice
be provided to such holder prior to such information being made known to the
public. The Company will also give written notice to each holder of Series A
Preferred Stock at least ten (10) days prior to the date on which any Organic
Change or Liquidation will take place and in no event shall such notice be
provided to such holder  prior to such information being made known to
the public

     

    (j)        
     Fractional
Shares.  No fractional shares of Common Stock shall be issued
upon conversion of the Series A Preferred Stock.  In lieu of any
fractional shares to which the holder would otherwise be entitled, the Company
shall at its option either (i) pay cash equal to the product of such fraction
multiplied by the average of the Closing Prices of the Common Stock for the five
(5) consecutive trading days immediately preceding the Voluntary Conversion Date
or Mandatory Conversion Date, as applicable, or (ii) in lieu of issuing such
fractional shares issue one additional whole share to the holder.

     

    (k)             Reservation of Common
Stock.  The Company shall, so long as any shares of Series A
Preferred Stock are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Series A Preferred Stock, such number of shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
of the Series A Preferred Stock then outstanding (without regard to the
limitations on conversion set forth in Section 7 hereof).  The initial
number of shares of Common Stock reserved for conversions of the Series A
Preferred Stock and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Series A Preferred Stock based on
the number of shares of Series A Preferred Stock held by each holder at the time
of issuance of the Series A Preferred Stock or increase in the number of
reserved shares, as the case may be.  In the event a holder shall sell
or otherwise transfer any of such holder's shares of Series A Preferred Stock,
each transferee shall be allocated a pro rata portion of the number of reserved
shares of Common Stock reserved for such transferor.  Any shares of
Common Stock reserved and which remain allocated to any person or entity which
does not hold any shares of Series A Preferred Stock shall be allocated to the
remaining holders of Series A Preferred Stock, pro rata based on the number of
shares of Series A Preferred Stock then held by such holder.

     

    (l)              Retirement of Series A
Preferred Stock.  Conversion of Series A Preferred Stock shall
be deemed to have been effected on the applicable Voluntary Conversion
Date.  The Company shall keep written records of the conversion of the
shares of Series A Preferred Stock converted by each holder.  A holder
shall be required to deliver the original certificates representing the shares
of Series A Preferred Stock upon complete conversion of the Series A Preferred
Stock.

     

    (m)            Regulatory
Compliance.  If any shares of Common Stock to be reserved for
the purpose of conversion of Series A Preferred Stock require registration or
listing with or approval of any governmental authority, stock exchange or other
regulatory body under any federal or state law or regulation or otherwise before
such shares may be validly issued or delivered upon conversion, the Company
shall, at its sole cost and expense, in good faith and as expeditiously as
possible, endeavor to secure such registration, listing or approval, as the case
may be.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    6.           No Preemptive
Rights.  Except as provided in Section 5 hereof, no holder of
the Series A Preferred Stock shall be entitled to rights to subscribe for,
purchase or receive any part of any new or additional shares of any class,
whether now or hereinafter authorized, or of bonds or debentures, or other
evidences of indebtedness convertible into or exchangeable for shares of any
class, but all such new or additional shares of any class, or any bond,
debentures or other evidences of indebtedness convertible into or exchangeable
for shares, may be issued and disposed of by the Board of Directors on such
terms and for such consideration (to the extent permitted by law), and to such
person or persons as the Board of Directors in their absolute discretion may
deem advisable.

     

    7.           Conversion
Restriction.

     

    (a)          
  Notwithstanding anything to the contrary set forth in Section 5 of this
Certificate of Designation, at no time may a holder of shares of Series A
Preferred Stock convert shares of the Series A Preferred Stock if the number of
shares of Common Stock to be issued pursuant to such conversion would exceed,
when aggregated with all other shares of Common Stock owned by such holder at
such time, the number of shares of Common Stock which would result in such
holder owning more than 4.99% of all of the Common Stock outstanding at such
time;  provided,  however,
that upon a holder of Series A Preferred Stock  providing the Company
with sixty-one (61) days notice (pursuant to Section 5(i) hereof) (the “Waiver Notice”) that
such holder would like to waive Section 7(a) of this Certificate of Designation
with regard to any or all shares of Common Stock issuable upon conversion of
Series A Preferred Stock, this Section 7(a) shall be of no force or effect with
regard to those shares of Series A Preferred Stock referenced in the Waiver
Notice.

     

    (b)      
      Notwithstanding anything to the contrary set
forth in Section 5 of this Certificate of Designation, at no time may a holder
of shares of Series A Preferred Stock convert shares of the Series A Preferred
Stock if the number of shares of Common Stock to be issued pursuant to such
conversion would exceed, when aggregated with all other shares of Common Stock
owned by such holder at such time, the number of shares of Common Stock which
would result in such holder beneficially owning (as determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the
rules thereunder) in excess of 9.99% of all of the Common Stock outstanding at
such time;  provided, however, that upon
a holder of Series A Preferred Stock  providing the Company with
sixty-one (61) days notice (pursuant to Section 5(i) hereof) (the “Waiver Notice”) that
such holder would like to waive Section 7 of this Certificate of Designation
with regard to any or all shares of Common Stock issuable upon conversion of
Series A Preferred Stock, this Section 7 shall be of no force or effect with
regard to those shares of Series A Preferred Stock referenced in the Waiver
Notice.

     

    8.           Inability to Fully
Convert.

     

    (a)          
  Holder's
Option if Company Cannot Fully Convert.  If, upon the Company's
receipt of a Conversion Notice, the Company cannot issue shares of Common Stock
registered for resale (to the extent the Company was obligated to register such
shares under the Registration Rights Agreement) for any reason, including,
without limitation, because the Company (i) does not have a sufficient number of
shares of Common Stock authorized and available, (ii) is otherwise prohibited by
applicable law or by the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Company or its securities from issuing all of the Common Stock which is to
be issued to a holder of Series A Preferred Stock pursuant to a Conversion
Notice or (iii) fails to have a sufficient number of shares of Common Stock
registered for resale required under the Registration Statement (subject to the
limitations set forth in the Registration Rights Agreement relating to Rule 415
under the Securities Act), then the Company shall issue as many shares of Common
Stock as it is able to issue in accordance with such holder's Conversion Notice
and pursuant to Section 5(b)(ii) above and, with respect to the unconverted
Series A Preferred Stock, the holder, solely at such holder's option, can elect
to:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (i) In
the case of 8(a)(i) above, require the Company to redeem from such holder those
Series A Preferred Stock for which the Company is unable to issue Common Stock
in accordance with such holder's Conversion Notice (“Mandatory
Redemption”) at a price per share equal to 120% of the Liquidation
Preference Amount as of such Conversion Date (the “Mandatory Redemption
Price”);

     

    (ii) if
the Company's inability to fully convert Series A Preferred Stock is pursuant to
Section 8(a)(iii) above, require the Company to issue restricted shares of
Common Stock in accordance with such holder's Conversion Notice and pursuant to
Section 5(b)(ii) above;

     

    (iii)
void its Conversion Notice and retain or have returned, as the case may be, the
shares of Series A Preferred Stock that were to be converted pursuant to such
holder's Conversion Notice (provided that a holder's voiding its Conversion
Notice shall not effect the Company's obligations to make any payments which
have accrued prior to the date of such notice).

     

    (b)          
  Mechanics
of Fulfilling Holder's Election.  The Company shall immediately
send via facsimile to a holder of Series A Preferred Stock, upon receipt of a
facsimile copy of a Conversion Notice from such holder which cannot be fully
satisfied as described in Section 8(a) above, a notice of the Company's
inability to fully satisfy such holder's Conversion Notice (the “Inability to Fully Convert
Notice”).  Such Inability to Fully Convert Notice shall
indicate (i) the reason why the Company is unable to fully satisfy such holder's
Conversion Notice, (ii) the number of Series A Preferred Stock which cannot be
converted and (iii) the applicable Mandatory Redemption Price.  Such
holder shall notify the Company of its election pursuant to Section 8(a) above
by delivering written notice via facsimile to the Company (“Notice in Response to
Inability to Convert”).

     

    (c)        
    Payment of Redemption
Price.  If such holder shall elect to have its shares redeemed
pursuant to Section 8(a)(i) above, the Company shall pay the Mandatory
Redemption Price to such holder within thirty (30) days of the Company's receipt
of the holder's Notice in Response to Inability to Convert,
provided  that prior to the Company's receipt of the holder's Notice
in Response to Inability to Convert the Company has not delivered a notice to
such holder stating, to the satisfaction of the holder, that the event or
condition resulting in the Mandatory Redemption has been cured and all
Conversion Shares issuable to such holder can and will be delivered to the
holder in accordance with the terms of Section 2(g).  If the Company
shall fail to pay the applicable Mandatory Redemption Price to such holder on a
timely basis as described in this Section 8(c) (other than pursuant to a dispute
as to the determination of the arithmetic calculation of the Redemption Price),
in addition to any remedy such holder of Series A Preferred Stock may have under
this Certificate of Designation and the Purchase Agreement, such unpaid amount
shall bear interest at the rate of 1.5% per month (prorated for partial months)
until paid in full.  Until the full Mandatory Redemption Price is paid
in full to such holder, such holder may (i) void the Mandatory Redemption with
respect to those Series A Preferred Stock for which the full Mandatory
Redemption Price has not been paid, (ii) receive back such Series A Preferred
Stock, and (iii) require that the Conversion Price of such returned Series A
Preferred Stock be adjusted to the lesser of (A) the Conversion Price and (B)
the lowest Closing Price during the period beginning on the Conversion Date and
ending on the date the holder voided the Mandatory Redemption.

     

    9.           Pro-rata Conversion and
Redemption.  In the event the Company receives a Conversion
Notice from more than one holder of Series A Preferred Stock on the same day and
the Company can convert and redeem some, but not all, of the Series A Preferred
Stock pursuant to Section 8, the Company shall convert and redeem from each
holder of Series A Preferred Stock electing to have Series A Preferred Stock
converted and redeemed at such time an amount equal to such holder's pro-rata
amount (based on the number shares of Series A Preferred Stock held by such
holder relative to the number shares of Series A Preferred Stock outstanding) of
all shares of Series A Preferred Stock being converted and redeemed at such
time.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    10.         Vote to Change the Terms of
or Issue Preferred Stock.  The affirmative vote at a meeting
duly called for such purpose or the written consent without a meeting, of the
holders of not less than a majority of the then outstanding shares of Series A
Preferred Stock, shall be required (a) for any change to this Certificate of
Designation or the Company’s Certificate of Incorporation that would amend,
alter, change or repeal any of the powers, designations, preferences and rights
of the Series A Preferred Stock or (b) for the issuance of shares of Series A
Preferred Stock other than pursuant to the Purchase Agreement.  The
provisions hereof may be waived on behalf of all the Holders if in writing and
signed by the Holders of not less than a majority of the then outstanding shares
of Series A Preferred Stock.

     

    11.         Lost or Stolen
Certificates.  Upon receipt by the Company of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Preferred Stock Certificates representing the shares of Series A Preferred
Stock, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the holder to the Company and, in the case of mutilation, upon
surrender and cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new preferred stock certificate(s) of like tenor and
date.

     

    12.         Remedies, Characterizations,
Other Obligations, Breaches and Injunctive Relief.  The
remedies provided in this Certificate of Designation shall be cumulative and in
addition to all other remedies available under this Certificate of Designation,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a holder's right to pursue actual damages for any failure by the
Company to comply with the terms of this Certificate of
Designation.  Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof).  The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the holders of the
Series A Preferred Stock and that the remedy at law for any such breach may be
inadequate.  The Company therefore agrees that, in the event of any
such breach or threatened breach, the holders of the Series A Preferred Stock
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

     

    13.           Failure or Indulgence Not
Waiver.  No failure or delay on the part of a holder of Series
A Preferred Stock in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege.

     

    IN WITNESS WHEREOF, the undersigned has
executed and subscribed this First Amended and Restated Certificate and does
affirm the foregoing as true this 30th day of April, 2009.

    

    
      
        
          
            
              
                
                  
                    
                      	 
      	 
      	 	 
      	 
	 
      	
                              NEOPROBE
      CORPORATION

                            	 
	
                               

                                

                            	
                               

                                

                            	 	
                               

                                

                            	 
	 
      	
                              By:  

                            	/s/ Brent L. Larson	 
	 
      	Name:	
                              Brent L. Larson

                            	 
	 
      	Title: 	
                              Vice President, Finance and Chief Financial
      Officer

                            	 

                    

                  

                

              

            

          

        

      

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
I

    NEOPROBE
CORPORATION

    CONVERSION
NOTICE

    

    Reference is made to the First Amended
and Restated Certificate of Designation of the Relative Rights and Preferences
of the Series A Preferred Stock of Neoprobe Corporation (the “Certificate of
Designation”).  In accordance with and pursuant to the
Certificate of Designation, the undersigned hereby elects to convert the number
of shares of Series A Preferred Stock, par value $.001 per share (the “Preferred Shares”),
of Neoprobe Corporation, a Delaware corporation (the “Company”), indicated
below into shares of Common Stock, par value $.001 per share (the “Common Stock”), of
the Company, by tendering the stock certificate(s) representing the share(s) of
Preferred Shares specified below as of the date specified below.

    

    Date of
Conversion:                                                                                    

    

    Number of
Preferred Shares to be converted:                                                                                             

    

    Stock
certificate no(s). of Preferred Shares to be converted:                                                                                     

    

    The
Common Stock have been sold pursuant to the Registration Statement (as defined
in the Registration Rights Agreement): YES ____NO____

    

    Please
confirm the following information:

    

    Conversion
Price:                            

    

    Number of
shares of Common Stock

    to be
issued:                                                                           

    

    Number of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the Date of Conversion determined in accordance with Section 16 of the
Securities Exchange Act of 1934, as amended:                                                                           

    

    Please
issue the Common Stock into which the Preferred Shares are being converted and,
if applicable, any check drawn on an account of the Company in the following
name and to the following address:

    

                Issue
to:                                                                                                 

                Facsimile
Number:                                                                                

    
 

    Authorization:                                           

                          By:                                                                                                 

                          Title:                                                                                              

    

    Dated:LOANOUT AGREEMENT

 

This LOANOUT AGREEMENT (this “Agreement”), dated as of May 1 , 2009, by and between Winston C. Yen, CPA, A Professional Accountancy Corporation, a California corporation, having its principal location at 345 S. Figueroa Street, Suite 100, Los Angeles, California 90071 (“Lender”), and Orient Paper, Inc., a Nevada corporation having its principal office at Science Park, Xushui Town, Baoding City, Hebei Province, People’s Republic of China (the “Company”), for the  services  of Lender’s  employee, Winston C. Yen (the "Executive").

 

	
             
 	
            1.
 	
            Engagement of Services, Duties and Acceptance.
 

1.1       Effective as of the date of this Agreement, the Company engages Lender and Lender agrees to supply and make available to the Company, the services of the Executive to serve as the Company’s Chief Financial Officer (“CFO”) during the term of this Agreement, on the terms and conditions contained in this Agreement. During the term of this Agreement, Executive shall make himself available to the Company and to any of its subsidiaries or affiliates as directed to pursue the business of the Company subject to the supervision and direction of the Board of Directors of the Company (the “Board”).

1.2       The Board may assign Executive such general management and supervisory responsibilities and executive duties for the Company as are appropriate and commensurate with Executive’s position as CFO with the understanding that the Executive will be based where Lender’s principal offices are located. 

1.3       Lender and Executive agree that Executive shall devote up to eighty hours per month of Executive’s business time, energies and attention to the performance of his duties hereunder and as an executive officer of the Company.  Nothing herein shall be construed as precluding Executive from owning, purchasing, selling, or otherwise dealing in any manner with any property or engaging in any business whatsoever, including without limitation, providing consulting services, acting as a CFO or a director of another company, or starting a new business, without notice to the Company, without participation of the Company, and without liability to the Company; provided, however, that these activities do not materially interfere with the performance of his duties hereunder or violate the provisions of Section 4.4 hereof.

 

	
             
 	
            2.
 	
            Compensation.
 

2.1       As compensation for all services to be rendered by Executive pursuant to this Agreement, the Company shall pay to Lender for the term thereof a fee (i) at an annual base rate of $36,000 in cash and (ii) additional compensation of $2,000 per month during any calendar month when “special road show services” are performed.  During Executive’s employment, compensation will be paid not less frequently than one month in arrear.  Payment will be made to Lender via wire transfer. Company shall be responsible for any applicable wire transfer fees for the compensation and/or expense reimbursement.  The Board or its compensation committee has 

 

Loanout Agreement - Orient Paper

 

1 

 

 

the power to interpret whether special road show services are performed during any calendar month for purposes of this Section 2.1. 

2.2       Upon execution of this Agreement, Executive will have the right to receive 20,000 shares of the Company’s Common Stock, $0.001 par value, which shall vest during the term of this Agreement, in the form of a restricted stock grant (the “Restricted Stock”).  The shares of the Restricted Stock shall vest in four (4) equal installments of 5,000 shares every three calendar months, with the first installment to vest on May 10, 2009 (the “Vesting Schedule”). The Restricted Stock shall be “restricted” and cannot be resold without their prior registration or compliance with the terms of Rule 144 promulgated by the Act or an exemption from the Act.  In addition, the Restricted Stock shall further be subject to the terms and conditions of a certain
Lock-Up Agreement, a copy of which is attached hereto as Exhibit A. 

The number of shares of Restricted Stock referenced in this section is subject to adjustment in the case of any stock split, reverse stock split, combination or similar events. 

Upon the filing of an election pursuant to Section 83(b) of the Internal Revenue Code (the “Code”) with respect to such grant of Restricted Stock, the Company will not reimburse the Executive any federal and state taxes due as a result of such election. 

During the term of this Agreement, Executive shall not, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any of the shares of the Restricted Stock or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the shares of Restricted Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of shares of the Restricted Stock, in cash or otherwise.

In connection with the issuance of the Shares, Executive hereby represents and warrants to the Company, as of the date hereof, that:   

 

A. The Shares will be acquired for investment for Executive’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), and the Executive has no present intention of selling, granting any participation in or otherwise distributing the same. 

 

B.  Executive understands that the acquisition of the Shares involves substantial risk. Executive has experience as an investor in securities of companies and acknowledges that it is able to fend for itself, can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of its investment and protecting its own interests in connection with this investment.

 

C.  Executive is an "accredited investor" within the meaning of Regulation D of the Securities Act. 

 

Loanout Agreement - Orient Paper

 

2 

 

 

 

D. Executive understands that (i) the Shares are characterized as "restricted securities" under the Securities Act, inasmuch as it are being acquired from the Company in a transaction not involving a public offering, and (ii) under the Securities Act and applicable rules and regulations thereunder, such securities may be resold without registration under the Securities Act only in certain limited circumstances. Executive is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

 

2.3       During the term of this Agreement, the Company shall include Executive as insured under a directors and officers insurance policy (the “D&O Insurance”) with initial coverage of $1,000,000 from an insurance carrier that has a minimum rating of XII A as defined by the A.M. Best Company. If any member of the Board enters into an indemnification agreement with the Company as part of the D&O Insurance, Executive shall be entitled to enter into an agreement of like tenor with the Company. Additionally, if the Board decides to increase the coverage of the D&O Insurance, Executive shall be covered by such policy. 

2.4       The Company shall reimburse Executive for all reasonable business expenses incurred by Executive during Executive’s employment hereunder to the extent in compliance with the Company’s business expense reimbursement policies in effect from time to time and upon presentation by Executive of such documentation and records as the Company shall from time to time require, provided that any expense in excess of $500.00 shall require the prior written approval of the Company.  When Executive is required to travel on behalf of the Company’s business outside of the continental United States, the cost of a business class airline ticket shall be included hereunder as a reimbursable business expense.

	
             
 	
            3.
 	
            Term and Termination.
 

3.1       The term of this Agreement commences as of the consummation of the Agreement and shall continue for one (1) years unless sooner terminated as herein provided. 

3.2       If Executive dies during the term of this Agreement, this Agreement shall thereupon terminate, except that the Company shall pay to Lender any accrued and unpaid fee due Lender pursuant to Section 2.1 hereof as well as a pro rata allocation of the shares of the Restricted Stock under Section 2.3 based on the days of service prior to the death in conjunction with the Vesting Schedule, and all previously accrued but unpaid expense reimbursements at the time of termination, including for.

3.3       The Company reserves the right to terminate this Agreement upon ten (10) days written notice if, for a continuous or accumulated period of forty-five (45) days during the one year term of this Agreement, Executive is prevented from discharging his duties under this Agreement due to any physical or mental disability.  With the exception of the covenants included in Section 4 below, upon such termination, the obligations of Executive and Company under this Agreement shall immediately cease.  In the event of a termination pursuant to this section, Executive shall be entitled to receive any accrued and unpaid amounts earned pursuant to Section 2.1 hereof as well as a pro rata allocation of the shares of the Restricted Stock under Section 2.3 based on the days of service prior to the cessation of Executive’s services in 

 

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conjunction with the Vesting Schedule, and all previously accrued but unpaid expense reimbursements.

3.4       The Company reserves the right to declare Executive in default of this Agreement if Executive willfully breaches or habitually neglects the duties which he is required to perform under the terms of this Agreement, or if Executive commits such acts of dishonesty, fraud, misrepresentation, gross negligence or willful misconduct as would prevent the effective performance of his duties or which results in material harm to the Company or its business.  The Company may terminate this Agreement for cause by giving written notice of termination to Executive.  With the exception of the covenants included in Section 4 below, upon the date of delivery of the written notice of such termination, the obligations of Executive and the Company under this Agreement shall immediately cease.  Such termination shall be without prejudice to any other remedy to which
the Company may be entitled either at law, in equity, or under this Agreement.  In the event of a termination pursuant to this section, Executive shall be entitled to receive any accrued and unpaid amounts earned pursuant to Section 2.1 hereof.  The Company shall also pay to Executive all previously accrued but unpaid expense reimbursements at the time of termination.    

3.5       Executive’s employment may be terminated at any time by Executive upon not less than ninety (90) days written notice by Executive to the Board.  With the exception of the covenants included in section 4 below, upon such termination the obligations of Executive and the Company under this Agreement shall immediately cease.  In the event of a termination pursuant to this section, Executive shall be entitled to receive any accrued and unpaid amounts earned pursuant to Section 2.1 hereof.  The Company shall also pay to Executive all previously accrued but unpaid expense reimbursements at the time of termination.   

3.6       Company may terminate Executive’s employment upon not less than thirty (30) days written notice by Company to Executive.  With the exception of the covenants included in section 4 below, upon such termination the obligations of Executive and the Company under this Agreement shall immediately cease.  In the event of a termination pursuant to this section, Executive shall be entitled to receive any accrued and unpaid amounts earned pursuant to Section 2.1 hereof as well as a pro rata allocation of the shares of Restricted Stock under Section 2.3 based on the days of service prior to the termination in conjunction with the Vesting Schedule, and all previously accrued but unpaid expense reimbursements at the time of termination.  

4.         Protection of Confidential Information; Non-Competition, Corporate Opportunities.

	
             
 	
            4.1
 	
            Lender and Executive acknowledge that:
 

 (a)       As a result of his association with the Company pursuant to this Agreement, Executive will obtain secret and confidential information concerning the business of the Company and its subsidiaries and affiliates (referred to collectively in this Article 4 as the “Group”), including, without limitation, trade secrets and any information concerning products, processes, formulas, designs, inventions (whether or not patentable or registrable under copyright or similar laws, and whether or not reduced to practice), discoveries, concepts, ideas, improvements, techniques, methods, research, development and test results, specifications, data, 

 

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know-how, software, formats, marketing plans, and analyses, business plans and analyses, strategies, forecasts, customer and supplier identities, characteristics and agreement (“Confidential Information”).  In addition, Executive may become aware of business opportunities that may be beneficial to the Group including, but not limited, opportunities to acquire or purchase, or, except for Permitted Competitive Investments, otherwise make equity or debt investments in, companies primarily involved in a Competitive Business (“Corporate Opportunities”), during the term of this Agreement, whether in the course of his employment or otherwise, and that such Corporate Opportunities shall considered to be business opportunities of the Group.

(b)       The Group will suffer substantial damage which will be difficult to compute if, during the term of this Agreement or thereafter, Lender and/or Executive should enter a business competitive with the Group or divulge Confidential Information.

(c)       The provisions of this Agreement are reasonable and necessary for the protection of the business of the Group.

4.2       Executive agrees that he will not at any time, either during the term of this Agreement or thereafter, divulge to any person or entity any Confidential Information obtained or learned by him as a result of his employment with the Group, except (i) in the course of performing his duties hereunder, (ii) to the extent that any such information is in the public domain other than as a result of Executive’s breach of any of his obligations hereunder, (iii) where required to be disclosed by court order, subpoena or other government process, or (iv) if such disclosure is made without Executive’s knowing intent to cause material harm to the Group.  If Executive shall be required to make disclosure pursuant to the provisions of clause (iii) of the preceding sentence, Executive promptly, but in no event more than 24 hours
after learning of such subpoena, court order, or other government process, shall notify, by personal delivery or by electronic means, confirmed by mail, the Company and, at the Company’s expense, Executive shall: (a) take reasonably necessary and lawful steps required by the Group to defend against the enforcement of such subpoena, court order or other government process, and (b) permit the Group to intervene and participate with counsel of its choice in any proceeding relating to the enforcement thereof.

4.3       Upon termination of this Agreement, Executive will promptly deliver to the Group all memoranda, correspondence, notes, records, reports, manuals, drawings, blue-prints and other documents (and all copies thereof) relating to the business of the Group and all property associated therewith, which he may then possess or have under his control whether prepared by Executive or others.

4.4       During the term of this Agreement and terminating three years after termination of employment, Executive, without the prior written permission of the Company, shall not for any reason whatsoever, (i) enter into the employ of or render any services to any person, firm or corporation engaged in any business which is in competition with the Group’s principal existing business at the time of termination (“Competitive Business”); (ii) engage in any Competitive Business as an individual, partner, shareholder, creditor, director, officer, principal, agent, employee, trustee consultant, advisor or in any other relationship or capacity; (iii) employ, or have or cause any other person or entity to employ, any person who was 

 

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employed by the Group at the time of termination of Executive’s employment by the Company; or (iv) solicit, interfere with, or endeavor to entice away from the Group, for the benefit of a Competitive Business, any of its customers.  Notwithstanding the foregoing, (i) Executive shall not be precluded from investing and managing the investment of, his or his family’s assets in the securities of any corporation or other business entity which is engaged in a Competitive Business if such securities are traded on a national stock exchange or in the over-the-counter market and if such investment does not result in his beneficially owning, at any time, more than 2% of any class of the publicly-traded equity securities of such Competitive Business (“Permitted Competitive Investment”); and
(ii) during the term of this Agreement and terminating one year after termination of Executive’s employment (except for investments in a class of securities trading on public markets), Executive: (a) shall be prohibited from taking for himself personally any Corporate Opportunities, and (b) shall refer to the Company for consideration (before any other party) any and all Corporate Opportunities that arise during the term of this Agreement or for a period of one year thereafter.  If the Company determines not to exploit any Corporate Opportunity, the Company shall determine what, if anything, should be done with such opportunity.  Executive shall not be entitled to any compensation, as a finder or otherwise, if either the Company or Executive introduces such opportunity to other persons, it being understood that any such compensation shall be paid to the Company.

4.5       If Executive commits a breach of any of the provisions of Sections 4.2 or 4.4, the Company shall have the right:

(a)       to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed by Executive that the services being rendered hereunder to the Company are of a special, unique and extraordinary character and that any breach or threatened breach will cause irreparable injury to the Group and that money damages will not provide an adequate remedy to the Group; and

(b)       to require Executive to account for and pay over to the Company all monetary damages determined by a non-appealable decision by a court of law to have been suffered by the Group as the result of any actions constituting a breach of any of the provisions of Section 4.2 or 4.4, and Executive hereby agrees to account for and pay over such damages to the Company.  

(c)       to not perform any obligation owed to Executive under this Agreement, to the fullest extent permitted by law.  Company shall also have the right, to the fullest extent permitted by law, to adjust any amount due and owing or to be due and owing to Executive, whether under this Agreement or any other agreement between Company and Executive in order to satisfy any losses to the Group as a result of Executive’s breach.              

4.6       If Executive shall violate any covenant contained in Section 4.4, the duration of such covenant so violated shall be automatically extended for a period of time equal to the period of such violation.

5.         Lender Representations.  Lender represents that it is a validly existing corporation and has the sole and exclusive right and authority to provide the services of Executive to the Company as contemplated by this Agreement, and that the entering into and performance of this 

 

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Agreement by Lender and the provision of services hereunder by Executive and the acceptance thereof by the Company will not violate any law, rule, regulation, order, contract or agreement to which either Lender or Executive is a party or is bound or affected.

 

	
             
 	
            6.
 	
            Miscellaneous Provisions.
 

6.1       The parties acknowledge and agree that the relationship between the Company and the Lender is that of independent contractors and not that of employer and employee. Nothing in this Agreement is intended to create or will be deemed to create or constitute a joint venture or partnership between the Company and Lender.

6.2       Lender will be responsible for the payment of all withholding, payroll and other taxes payable in respect of the payments received by Lender under this Agreement and hereby agrees to indemnify and hold the Company harmless from any obligation or penalty arising from the failure to pay such taxes.

6.3       All notices provided for in this Agreement shall be in writing, and shall be deemed to have been duly given when delivered personally to the party to receive the same, when delivered via overnight courier providing for next day delivery service (“Overnight Courier”), when transmitted by facsimile (electronic receipt confirmed), or when mailed first class postage prepaid, by certified mail, return receipt requested, addressed to the party to receive the same at his or its address set forth below, or such other address as the party to receive the same shall have specified by written notice given in the manner provided for in this Section 5.1.  All notices shall be deemed to have been given: (a) as of the date of personal delivery, (b) the first business day after delivery via Overnight Courier, (c) on the electronically confirmed date of receipt during business hours of the facsimile transmittal (or the following
business day if the facsimile is received after 5:30 p.m. PDT), or (d) three calendar days after the date of deposit (postage pre-paid) with the U.S. Postal Service if delivered via first class or certified mail.

	
             
 	
            If to Lender:
 	
            Winston C. Yen, CPA,
 

A Professional Accountancy Corporation

345 S. Figueroa Street, Suite 100

Los Angeles, California 90071

	
             
 	
            Fax: 1-213-613-1579  
 

 

	
             
 	
            If to Executive:
 	
            Winston C. Yen
 

345 S. Figueroa Street, Suite 100

Los Angeles, California 90071

Fax: 1-213-613-1579

 

	
             
 	
            If to the Company:
 	
            Orient Paper, Inc.
 

Science Park, Xushui Town

Baoding City, Hebei Province

People’s Republic of China

Attn: Mr. Zhenyong Liu

Fax: 

 

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6.4       In the event of any claims, litigation or other proceedings arising under this Agreement, Executive shall be reimbursed by the Company within sixty (60) days after delivery to the Company of statements for the costs incurred by Executive in connection with the analysis, defense and prosecution thereof, including reasonable attorneys’ fees and expenses; provided, however, that Executive shall reimburse the Company for all such costs if it is determined by a non-appealable final decision of a court of law that Executive shall have acted in bad faith with the intent to cause material damage to the Company in connection with any such claim, litigation or proceeding.

6.5       The Company, shall to the fullest extent permitted by law, indemnify Executive for any liability, damages, losses, costs and expenses arising out of alleged or actual claims made against Executive for any actions or omissions as an officer of the Company or its subsidiaries pursuant to the terms and conditions of a certain Indemnification Agreement, a copy of which is attached hereto as Exhibit B.  To the extent that the Company obtains directors and officers insurance coverage for any period in which Executive was an officer, director or consultant to the Company, Executive shall be a named insured and shall be entitled to coverage thereunder. 

6.6       The provisions of Article 4, Sections 5.2 and 5.3 and any provisions relating to payments owed to Executive after termination of employment shall survive termination of this Agreement for any reason.

6.7       This Agreement sets forth the entire agreement of the parties relating to the employment of Executive and is intended to supersede all prior negotiations, understandings and agreements.  No provisions of this Agreement may be waived or changed except by writing by the party against whom such waiver or change is sought to be enforced.  The failure of any party to require performance of any provision hereof or thereof shall in no manner affect the right at a later time to enforce such provision.  

6.8       All questions with respect to the construction of this Agreement, and the rights and obligations of the parties hereunder, shall be determined in accordance with the law of the State of Nevada applicable to agreements made and to be performed entirely in the State of Nevada.  Any disputes, claims or causes of action by one party against the other arising out of, in related to or concerning this Agreement shall be commenced and maintained in any state or federal court located in Clark County of the State of Nevada, and Executive hereby submits to the jurisdiction and venue of any such court.

6.9       This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company.  This Agreement shall not be assignable by Executive, but shall inure to the benefit of and be binding upon Executive’s heirs and legal representatives.

6.10     It is the desire and intent of the parties that the terms, provisions, covenants and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law.  If any such term, provision, covenant or remedy of this Agreement or the application thereof to any person or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant or remedy shall be construed in a manner so as to permit its enforceability under the applicable law, to the fullest 

 

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extent permitted by law.  In any case, the remaining provisions of the Agreement and the application thereof to any person or circumstance other than those to which they have been held invalid or unenforceable, shall remain valid and in full force and effect.

 [Remainder of Page Intentionally Blank]

 

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IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first above written.

 

	
            “COMPANY”
 	
            “LENDER”
 
	
            ORIENT PAPER, INC.

 
 	
            WINSTON C. YEN, CPA, A PROFESSIONAL ACCOUNTANCY CORPORATION 
 
	
            By: /s/ Zhenyong Liu                                                                                                                                                                    
 	
            By: /s/ Winston C. Yen                                                                                                                                                    
 
	
            Title Chairman & CEO                                                                                           
 	
            Title President                                                                                                                                                                                                          
 

 

 

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EXHIBIT A

 (Form of Lock-Up Agreement)

 

LOCKUP AGREEMENT

 

THIS LOCKUP AGREEMENT (the “Agreement”) by and between Orient Paper, Inc. (the “Company”), and Winston C. Yen (the “Holder”), is entered into as of May 1, 2009 (the “Effective Date”).  The Company and the Holder are collectively referred to herein as the “Parties”.

 

RECITALS

 

A.  This Agreement is being entered into in connection with a certain Loanout Agreement dated as of the Effective Date by and between the Company and Winston C. Yen, CPA, A Professional Accountancy Corporation, pursuant to which the Company is engaging the services of the Holder as the Chief Financial Officer of the Company. 

 

B.  Pursuant to the terms of the Loanout Agreement, the Company shall issue to the Holder 20,000 shares of the Company’s common stock, $0.001 par value, during the term of the Loanout Agreement (the “Shares”).

 

AGREEMENT

 

	
             
 	
            1.
 	
            Lockup.
 

 

 (a)       The Holder hereby agrees that commencing on the Issuance Date and within 18 months period (the “Lock-Up Period”) he will not: (i) offer to sell, sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase, make any short sale or otherwise dispose or agree to dispose of, directly or indirectly any Shares, owned directly or indirectly by the Holder (including holding as a custodian) or with respect to which the Holder has beneficial ownership within the rules and regulations of the Securities and Exchange Commission, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Shares, owned directly by the Holder (including holding as a custodian) or with respect to which the
Holder has beneficial ownership within the rules and regulations of the Securities and Exchange Commission, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise. The foregoing restriction is expressly agreed to preclude the Holder from engaging in any hedging or other transaction which is designed to, or reasonably expected to lead to, or result in, a sale or disposition of the Shares even if such Shares would be disposed of by someone other than the Holder.  Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Shares or with respect to any security that includes, relates to, or derives any significant part of its value from the Shares.

 

 (b)       The restriction in Section 1(a)  shall not apply to (i) bona fide gifts, provided the recipient thereof agrees in writing with the Company to be bound by the terms of 

 

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this agreement, (ii) dispositions to any trust for the direct or indirect benefit of the Holder and/or the immediate family of the Holder, provided that such trust agrees in writing with the Company to be bound by the terms of this Agreement, (iii) transfers by will or under the laws of descent, or (iv) any shares of common stock acquired on the open market or otherwise after the closing of the Exchange.

 

 (c)       The Company may impose stop-transfer instructions to enforce the terms of this Agreement.

 

 (d)       The Holder understands and agrees that this Agreement is irrevocable and shall be binding upon the Holder’s heirs, legal representatives, successors and assigns.

 

2.         Severability.  The provisions of this Agreement are severable. If any provision is determined to be invalid, illegal, or unenforceable, in whole or in part, the remaining provisions and any partially enforceable provisions shall remain in full force and effect.

 

3.         Waiver.  Either Party’s failure to enforce any provision of this Agreement shall not act as a waiver of that or any other provision.  Either Party’s waiver of any breach of this Agreement shall not act as a waiver of any other breach.

 

4.         Entire Agreement.  This Agreement constitutes the entire agreement between the Parties concerning the subject matter of this Agreement. This Agreement supersedes any prior communications, agreements or understandings, whether oral or written, between the Parties relating to the subject matter of this Agreement. This Agreement may be signed and delivered by facsimile and such facsimile signed and delivered shall be enforceable.

 

5.         Amendments.  This Agreement may not be amended or modified except in writing signed by both Parties.

 

6.         Governing Law.  The laws of the State of Nevada shall govern this Agreement (with the exception of its conflict of laws provisions).

 

7.         Notice.  Whenever any notice is required, it shall be given in writing addressed as follows:

 

	
             
 	
            To the Company:
 	
            Orient Paper, Inc.
 

Science Park, Xushui Town

Baoding City, Hebei Province

People’s Republic of China

Attn: Mr. Zhenyong Liu

 

	
             
 	
            To the Holder:
 	
            At the last residential address known by the Company.
 

 

                                    

 

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Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received.  Either Party may change the address to which notices shall be delivered or mailed by notifying the other Party of such change in accordance with this Section.

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first above written.

 

	
             
 	
            COMPANY:
 

 

ORIENT PAPER, INC.

 

	
             
 	
            By:_/s/ Zhenyong Liu_______________________
 

	
             
 	
            Zhenyong Liu
 

	
             
 	
            Chief Executive Officer  
 

 

 

	
             
 	
            HOLDER:
 

 

	
             
 	
            _/s/ Winston C. Yen________________________
 

 

	
             
 	
            Printed Name: Winston C. Yen
 

 

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EXHIBIT B

(Form of Indemnification Agreement)

 

INDEMNIFICATION AGREEMENT

 

THIS AGREEMENT is entered into, effective as of May 1, 2009, by and between Orient Paper, Inc., a Nevada corporation (the “Company”), and Winston C. Yen (“Indemnitee”).

 

WHEREAS, it is essential to the Company to retain and attract as directors and officers the most capable persons available; 

 

WHEREAS, pursuant to a certain Loanout Agreement dated as of the date hereof by and between the Company and Winston C. Yen, CPA, A Professional Accountancy Corporation, Indemnitee shall be engaged as the Chief Financial Officer of Company; and

 

WHEREAS, in recognition of Indemnitee’s need for substantial protection against personal liability in order to enhance Indemnitee’s continued and effective service to the Company, and in order to induce Indemnitee to provide services to the Company as the Chief Financial Officer, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by the laws of the Company’s state of incorporation and as set forth in this Agreement, and, to the extent insurance is maintained, for the coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies.

 

NOW, THEREFORE, in consideration of the above premises and of Indemnitee’s continuing to serve the Company directly or, at its request, with another enterprise, and intending to be legally bound hereby, the parties agree as follows:

 

	
            1.
 	
            Certain Definitions.
 

 

	
             
 	
            (a)
 	
            “Board” means the Board of Directors of the Company.
 

 

(b)       “Change in Control” shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Act”)), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company (collectively “excluded persons”), is or becomes the “Beneficial Owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 30% or more of the total voting power represented by the Company’s then outstanding Voting Securities, or (ii) during any
period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to 

 

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constitute a majority of the Board, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 50% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company’s assets.

 

(c)       “Expenses” means any expense, liability, or loss, including attorneys’ fees, judgments, fines, amounts paid or to be paid in settlement, any interest, assessments, or other charges imposed thereon, and any federal, state, local, or foreign taxes imposes as a result of the actual or deemed receipt of any payments under this Agreement, paid or incurred in connection with investigating, defending, being a witness in, or participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding relating to any Indemnifiable Event.

 

(d)       “Indemnifiable Event” means any event or occurrence that takes place either prior to or after the effective date of this Agreement, related to the fact that Indemnitee is or was a director or an officer (if the Indemnitee should be appointed as an officer) of the Company, or while a director or officer is or was serving at the request of the Company as a director, officer, employee, trustee, agent, or fiduciary of another foreign or domestic corporation, partnership, joint venture, employee benefit plan, trust, or other enterprise, or was a director, officer, employee, or agent of a foreign or domestic corporation that was a predecessor corporation of the Company or of another enterprise at the request of such predecessor corporation, or related to anything done or not done by Indemnitee in
any such capacity.

 

(e)       “Independent Counsel” means the person or body appointed in connection with Section 3.

 

(f)        “Potential Change in Control” shall be deemed to have occurred if (i) the Company enters into an agreement or arrangement, the consummation of which would result in the occurrence of a Change in Control, (ii) any person (including the Company) publicly announces an intention to take or to consider taking actions that, if consummated, would constitute a Change in Control, (iii) any person (other than an excluded Person) who is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company’s then outstanding Voting Securities, increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such person on the date hereof, or (iv) the Board adopts a resolution
to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

 

(g)       “Proceeding” means (i) any threatened, pending, or complete action, suit, or proceeding, whether civil, criminal, administrative, investigative, or other, or (ii) any inquiry, hearing, or investigation, whether conducted by the Company or any other party, that Indemnitee in good faith believes might lead to the institution of any such action, or proceeding.

 

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(h)       “Reviewing Party” means the person or body appointed in accordance with Section 3 of this Agreement.

 

(i)        “Voting Securities” any securities of the Company that vote generally in the election of directors.

 

	
            2.
 	
            Agreement to Indemnify.
 

 

(a)       General Agreement. In the event Indemnitee was, is, or become a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee from and against any and all Expenses to the fullest extent permitted by law, as the same exists or may hereafter be amended or interpreted (but in the case of any such amendment or interpretation, only to the extent that such amendment or interpretation permits the Company to provide broader indemnification rights than were permitted prior thereto). The parties hereto intend that this Agreement shall provide for indemnification in excess of that expressly permitted by statute, including, without limitation,
any indemnification provided by the Company’s Articles of Incorporation as amended, its bylaws as amended, vote of its stockholders or disinterested directors, or applicable law.

 

(b)       Initiation of Proceeding. Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Proceeding initiated by Indemnitee against the Company or any director or officer of the Company unless (i) the Company has joined in or the Board has consented to the initiation of such Proceeding, (ii) the Proceeding is one to enforce indemnification rights under Section 5, or (iii) the Proceeding is instituted after a Change in Control and Independent Counsel has approved its initiation.

 

(c)       Expense Advances. If so requested by Indemnitee, the Company shall advance (within ten business days of such request) any and all Expenses to Indemnitee (an “Expense Advance”); provided that such request shall be accompanied by reasonable evidence of the expenses incurred by Indemnitee and that, if and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid. If Indemnitee has commenced legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, as provided in Section 4, any determination made by
the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or have lapsed). 

 

(d)       Mandatory Indemnification. Notwithstanding any other provision of this Agreement (other than Section 2(f) below), to the extent that Indemnitee has been successful on the merits in defense of any Proceeding relating in whole or in part to an Indemnifiable Event or 

 

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in defense of any issue or matter therein, Indemnitee shall be indemnified against all Expenses incurred in connection therewith. 

 

(e)       Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

 

(f)        Prohibited Indemnification. No indemnification pursuant to this Agreement shall be paid by the Company on account of any Proceeding in which judgment is rendered against Indemnitee for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Act or similar provisions of any federal, state or local laws.

 

3.         Reviewing Party. Prior to any Change in Control, the Reviewing Party shall be any appropriate person or body consisting of a member or members of the Board or any other person or body appointed by the Board who is not a party to the particular Proceeding with respect to which Indemnitee is seeking indemnification; after a Change in Control, the Reviewing Party shall be the Independent Counsel referred to below. With respect to all matters arising after a Change in Control (other than a Change in Control approved by a majority of the directors on the Board who were directors immediately prior to such Change in Control) concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or under applicable law or the Company’s Articles of Incorporation
as amended or bylaws now or hereafter in effect relating to indemnification for Indemnifiable Events, the Company shall seek legal advice only from Independent Counsel selected by Indemnitee and approved by the Company and who has not otherwise performed services for the Company or the Indemnitee (other than in connection with indemnification matters) within the last five years. The Independent Counsel shall not include any person who, under the applicable standards of professional conduct then prevailing would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee should be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Independent Counsel and to indemnify fully such counsel against any and
all expenses (including attorney’s fees), claims, liabilities, loss, and damages arising out of or relating to this Agreement or the engagement of Independent Counsel pursuant hereto.

 

	
            4.
 	
            Indemnification Process and Appeal.
 

 

(a)       Suit To Enforce Rights. Regardless of any action by the Reviewing Party, if Indemnitee has not received full indemnification within 60 days after making a request in accordance with Section 2(c), Indemnitee shall have the right to enforce its indemnification rights under this Agreement by commencing litigation, in any appropriate court having subject matter jurisdiction thereof and in which venue is proper, seeking an initial determination by the court or challenging any determination by the Reviewing Party or any aspect thereof, provided, however, that such 60-day period shall be extended for reasonable time, not to exceed another 60 

 

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days, if the reviewing party in good faith requires additional time for the obtaining or evaluating of documentation and information relating thereto. The Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party not challenged by the Indemnitee shall be binding on the Company and Indemnitee. The remedy provided for in this Section 4 shall be in addition to any other remedies available to Indemnitee in law or equity.

 

(b)       Defense to Indemnification, Burden of Proof, and Presumptions. It shall be a defense to any action brought by Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Expenses incurred in defending a Proceeding in advance of its final disposition where the required undertaking has been tendered to the Company) that is not permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed. In connection with any such action or any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the burden of proving such a defense or determination shall be on the Company. Neither the failure of the Reviewing Party or the Company (including its Board, independent legal
counsel, or its stockholders) to have made a determination prior to the commencement of such action by Indemnitee that indemnification of the claimant is proper under the circumstances because Indemnitee has met the standard of conduct set forth in applicable law, nor an actual determination by the Reviewing Party or Company (including its Board, independent legal counsel, or its stockholders) that the Indemnitee had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. For purposes of this Agreement, the termination of any claim, action, suit, or proceeding, by judgment, order, settlement (whether with or without court approval), conviction, or upon a plea of nolo contendere, or its equivalent shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is
not permitted by applicable law. 

 

5.         Indemnification For Expenses Incurred In Enforcing Rights. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten business days of such request), advance such Expenses to Indemnitee, that are incurred by Indemnitee in connection with any claim asserted against or covered action brought by Indemnitee for (i) indemnification of Expenses or Expense Advances by the Company under this Agreement or any other agreement or under applicable law or the Company’s Articles of Incorporation as amended, or bylaws now or hereafter in effect relating to indemnification for Indemnifiable Events, and or (ii) recovery under directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification, Expense Advances, or insurance recovery, as the case may be.

 

	
            6.
 	
            Notification and Defense of Proceeding.
 

 

(a)       Notice. Promptly after receipt by Indemnitee of notice of the commencement of any Proceeding, Indemnitee shall, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof, but the 

 

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omission so to notify the Company will not relieve the Company from any liability that it may have to Indemnitee, except as provided in Section 6(c).

 

(b)       Defense. With respect to any Proceeding as to which Indemnitee notifies the Company of the commencement thereof, the Company shall be entitled to participate in the Proceeding at its own expense and except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election to assume the defense of any Proceeding, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently incurred by Indemnitee in connection with the defense of such Proceeding other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ his or her own legal counsel in such Proceeding, but
all Expenses related thereto incurred after notice from the Company of its assumption of the defense shall be at Indemnitee’s expense unless: (i) the employment of legal counsel by Indemnitee has been authorized by the Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the Company in the defense of the Proceeding, (iii) after a Change in Control, the employment of counsel by Indemnitee has been approved by the Independent Counsel, or (iv) the Company shall not in fact have employed counsel to assume the defense of such Proceeding, in each of which case all Expenses of the Proceeding shall be borne by the Company. The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company or as to which Indemnitee shall have made the determination provided for in (ii) above.

 

(c)       Settlement of Claims. The Company shall not be liable to indemnify Indemnitee under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the Company’s written consent, provided, however, that if a Change in Control has occurred, the Company shall be liable for indemnification of Indemnitee for amounts paid in settlement if the Independent Counsel has approved the settlement. The Company shall not settle any Proceeding in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee’s written consent. The Company shall not be liable to indemnify the Indemnitee under this Agreement with regard to any judicial award if the Company was not given a reasonable and timely opportunity, at its expense, to participate in the defense
of such action; the Company’s liability hereunder shall not be excused if participation in the Proceeding by the Company was barred by this Agreement.

 

7.         Non-Exclusivity. The rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company’s Articles of Incorporation as amended, bylaws, applicable law, or otherwise. To the extent that a change in applicable law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company’s Articles of Incorporation as amended, bylaws, applicable law, or this Agreement, it is the intent of the parties that Indemnitee enjoy by this Agreement the greater benefits so afforded by such change. 

 

8.         Liability Insurance. To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by such policy 

 

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or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director or officer.

 

9.         Amendment of this Agreement. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.

 

10.       Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

 

11.       No Duplication Of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee has otherwise received payment (under any insurance policy, bylaw, or otherwise) of the amounts otherwise indemnifiable hereunder.

 

12.       Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs, and personal and legal representatives. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity pertaining to an Indemnifiable Event even though he or she may have ceased to serve in such capacity at the time of any Proceeding.

 

13.       Severability. If any provision (or portion thereof) of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of this Agreement containing any provision held to be invalid, void, or otherwise unenforceable, that is not itself invalid, void, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, void, or unenforceable.

 

14.       Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the state of incorporation of the Company applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.

 

15.       Notices. All notices, demands, and other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered by 

 

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hand, against receipt, or mailed, postage prepaid, certified or registered mail, return receipt requested, and addressed to the Company at:

 

Orient Paper, Inc.

Science Park, Xushui Town

Baoding City, Hebei Province

People’s Republic of China

Attn: Mr. Zhenyong Liu

 

Notice of change of address shall be effective only when given in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of delivery or on the third business day after mailing.

 

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

 

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Indemnification Agreement as of the day specified above.

 

COMPANY:

 

ORIENT PAPER, INC.

 

	
             
 	
            By:_/s/ Zhenyong Liu_______________________
 

	
             
 	
            Zhenyong Liu
 

	
             
 	
            Chief Executive Officer
 

 

 

	
             
 	
            INDEMNITEE:
 

 

 

	
             
 	
            _/s/ Winston C. Yen________________________
 

 

Printed Name: Winston C. Yen                                        

 

 

 

Loanout Agreement - Orient Paper

 

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