Document:

SECURITIES PURCHASE AGREEMENT

SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of October 7, 2009, by and among Orient Paper, Inc., a Nevada corporation, with headquarters located at Nansan Gongli, Nanhuan Road, Xushui County, Baoding City, Hebei Province, The People’s Republic of China 072550 (the “Company”), and the investors listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).  The Company and the Buyers shall collectively be referred to as the “Parties” and individually, a “Party”.

BACKGROUND

A.        The Company and each Buyer is executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.

B.        Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) that aggregate number of shares of the Common Stock, par value $0.001 per share, of the Company (the “Common Stock”), set forth opposite such Buyer's name in column (3) on the Schedule of Buyers (which aggregate amount for all Buyers together shall be 8,333,332 shares of Common Stock and shall collectively be referred to herein as the “Common Shares”).  

C.        Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement, substantially in the form attached hereto as Exhibit A (the “Registration Rights Agreement”) pursuant to which the Company has agreed to provide certain registration rights with respect to the Common Shares under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

D.        Contemporaneously with the execution and delivery of this Agreement, the parties hereto, together with Sichenzia Ross Friedman Ference LLP (“Escrow Agent”), are executing and delivering a Closing Escrow Agreement, substantially in the form attached hereto as Exhibit B (the “Closing Escrow Agreement”) pursuant to which the Buyers shall deposit their Purchase Price (as defined below) with the Escrow Agent to be applied to the transactions contemplated hereunder.

E.        Contemporaneously with the execution and delivery of this Agreement, the Company, the Buyers and the Company’s CEO, Mr. Zhenyong Liu, and Sichenzia Ross Friedman Ference LLP  (“Make Good Escrow Agent”), are executing and delivering a Make Good Escrow 

 

Agreement, substantially in the form attached hereto as Exhibit C (the “Make Good Escrow Agreement”); and the Company and its CEO, Mr. Zhenyong Liu, are executing and delivering a Lock-Up Agreement, substantially in the form attached hereto as Exhibit D. 

NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

	
             
  	
            1.
 	
            PURCHASE AND SALE OF COMMON SHARES.
 

(a)       Purchase of Common Shares.  Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees to purchase from the Company on the Closing Date (as defined below), the number of Common Shares as is set forth opposite such Buyer's name in column (3) on the Schedule of Buyers (the “Closing”).  The Closing shall occur on the Closing Date at the offices of Sichenzia Ross Friedman Ference LLP, located at 61 Broadway, 32nd Floor, New York, NY 10006 or such other venue as the Parties may so designate.

(b)       Purchase Price.  The purchase price for the Common Shares to be purchased by each Buyer at the Closing shall be the amount set forth opposite such Buyer’s name in column (4) of the Schedule of Buyers (the “Purchase Price”) which shall be equal to the amount of $0.60 per Common Share times the number of Common Shares purchased.  

(c)       Closing Date.  The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m., New York City Time, on October 7, 2009 (or such other date and time as is mutually agreed to by the Company and each Buyer).

(d)       Form of Payment.  On the Closing Date, (i) each Buyer shall pay its respective Purchase Price to the Company for the Common Shares to be issued and sold to such Buyer at the Closing, either (A) by wire transfer of immediately available funds in accordance with the Company's written wire instructions, or (B) by bank certified checks made payable to the Company and (ii) the Company shall deliver to each Buyer one or more stock certificates, evidencing the number of Common Shares such Buyer is purchasing as is set forth opposite such Buyer’s name in column (3) of the Schedule of Buyers, duly executed on behalf of the Company and registered in the name of such Buyer.  

	
             
  	
            2.
 	
            BUYER'S REPRESENTATIONS AND WARRANTIES.
 

Each Buyer represents and warrants with respect to only itself that: 

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

 

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(b)       Authorization and Power. Each Buyer has the requisite power and authority to enter into and perform the Transaction Documents (as defined below) to which such Buyer is a party and to purchase the Common Stock being sold to it hereunder. The execution, delivery and performance of the Transaction Documents to which such Buyer is a party by such Buyer and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate or partnership action, and no further consent or authorization of such Buyer or its Board of Directors, stockholders, or partners, as the case may be, is required. The Transaction Documents to which such Buyer is a party have been duly authorized, executed and delivered by such Buyer and constitutes, or shall constitute when
executed and delivered, a valid and binding obligation of such Buyer enforceable against such Buyer in accordance with the terms thereof.

(c)       No Public Sale or Distribution.  Such Buyer is (i) acquiring the Common Shares in the ordinary course of business for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the 1933 Act and such Buyer does not have a present arrangement to effect any distribution of the Common Shares to or through any Person or entity; provided, however, that by making the representations herein, such Buyer does not agree to hold any of the Common Shares for any minimum or other specific term and reserves the right to dispose of the Common Shares at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.  

(d)       Accredited Investor Status.  Such Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D. Such Buyer is not required to be registered as a broker-dealer under Section 15 of the Exchange Act and such Buyer is not a broker-dealer, nor an affiliate of a broker-dealer.

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

 (f)        Information.  Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Common Shares which have been requested by such Buyer as it has deemed necessary or appropriate to conduct its due diligence investigation and has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company’s stage of development so as to be able to evaluate the risks and merits of its investment in the Company.  Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company.  Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or
its representatives shall modify, amend or affect such Buyer's right to rely on the Company's representations and warranties contained herein.  Each Buyer further acknowledges that such Buyer understands the high risks of investing in companies 

 

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domiciled and/or which operate primarily in the People’s Republic of China and that the purchase of the Common Shares involves substantial risks and is able to afford a complete loss of such investment.  Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Common Shares.

 (g)       No Governmental Review.  Such Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Common Shares or the fairness or suitability of the investment in the Common Shares nor have such authorities passed upon or endorsed the merits of the offering of the Common Shares.

 (h)       Transfer or Resale.  Such Buyer understands that except as provided in the Registration Rights Agreement: (i) the Common Shares have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such Common Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Buyer provides the Company with reasonable assurance that such Common Shares can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended, (or a
successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Common Shares made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Common Shares under circumstances in which the seller (or the Person (as defined in Section 3(r)) through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Common Shares under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.  Notwithstanding the foregoing, the Common Shares may be pledged in connection with a bona fide margin account or other loan secured by the Common Shares
and such pledge of Common Shares shall not be deemed to be a transfer, sale or assignment of the Common Shares hereunder, and no Buyer effecting a pledge of Common Shares shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document (as defined below), including, without limitation, this Section 2(h); provided, that in order to make any sale, transfer or assignment of Common Shares, such Buyer and its pledgee makes such disposition in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.  

 (i)        Legends.  Such Buyer understands that the certificates or other instruments representing the Common Shares and, until such time as the resale of the Common Shares have been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the stock certificates representing the Common Shares, except as set forth below, shall bear any 

 

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legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Common Shares upon which it is stamped or issue to such holder by electronic delivery at the applicable balance account at The Depository Trust Company (“DTC”), if, unless otherwise required by state securities laws, (i) such Common Shares are registered for resale under the 1933 Act, (ii) in connection with a sale, assignment or other transfer, such holder provides the Company with an opinion of counsel reasonably satisfactory to the Company, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Common Shares may be made without registration under the applicable requirements of the 1933 Act and that such legend is no longer required, or (iii) such holder provides the Company with
reasonable assurance that the Common Shares can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A.  The Company shall be responsible for the fees of its transfer agent and all DTC fees associated with such issuance.  If the Company shall fail for any reason or for no reason to issue to the holder of the Common Shares within three (3) Trading Days after the occurrence of any of (i) through (iii) above, a certificate without such legend or to issue such Common Shares to such holder by electronic delivery at the applicable balance account at DTC, and if on or after such Trading Day the holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the holder of such Common Shares that the holder anticipated receiving without legend from the Company (a “Buy-In”), then the Company shall, within three (3) Business Days after the holder's request, pay cash
to the holder in an amount equal to the holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company's obligation to deliver such unlegended Common Shares shall terminate. “Trading Day” is defined as a day on which securities are generally traded in real-time (and not under any delayed or pre-market or post-market trading) in any of the following markets: the Nasdaq Capital Market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.

 (j)        Validity; Enforcement.  This Agreement and other Transaction Documents as they apply to each Buyer have been duly and validly authorized, executed and delivered on 

 

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behalf of such Buyer and shall constitute the legal, valid and binding obligations of such Buyer enforceable against such Buyer in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies. 

 (k)       No Conflicts.  The execution, delivery and performance by such Buyer of this Agreement and the Transaction Documents as they apply to each Buyer and the consummation by such Buyer of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of such Buyer or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Buyer is a party or by which its properties or assets are bound, or (iii) result in a violation of any law, rule, regulation, order, judgment  or decree (including federal and state securities laws) applicable to
such Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of such Buyer to perform its obligations hereunder.  Such Buyer is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or the other Transaction Documents to which such Buyer is a party or to purchase the Common Shares.

 (l)        Residency.  Such Buyer is a resident of that jurisdiction specified below its address on the Schedule of Buyers.

 (m)      Prohibited Transactions.  Since the Buyer was approached by the Company with respect to the transactions contemplated hereby, neither such Buyer nor any Person acting on behalf of or pursuant to any understanding with such Buyer has, directly or indirectly, effected or agreed to effect any transaction in the Common Stock, including any short sale, whether or not against the box, established any “put equivalent position” (as defined in Rule 16a-1(h) under the Exchange Act) with respect to the Common Stock, granted any other right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security that includes, relates to or derived any significant part of its value from the Common Stock or otherwise sought to hedge its position in the
Common Shares (but not including any actions to secure available shares to borrow in order to effect short sales or similar transactions in the future) (each, a “Prohibited Transaction”).  Prior to the earliest to occur of (i) the termination of this Agreement or (ii) the date of the 8-K Filing as described in Section 4(h), such Buyer shall not, and shall cause any Person acting on behalf of or pursuant to any understanding with such Buyer not to, engage, directly or indirectly, in a Prohibited Transaction.

 (n)       No General Solicitation. Each Buyer acknowledges that the Common were not offered to such Buyer by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, 

 

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website, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such Buyer was invited by any of the foregoing means of communications.

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

 (p)       Brokers.  Save for Chinamerica Holdings, LLC, each Buyer has no knowledge of any brokerage or finder’s fees or commissions that are or will be payable by the Company or any of its Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person or entity with respect to the transactions contemplated by this Agreement

 (q)       Listing of Common Shares.  Immediately upon the effectiveness of a registration statement with the SEC covering the Common Shares, the Buyers shall use reasonable efforts to assist the Company in making an immediate application to a United States stock exchange, such as the Nasdaq Capital Market or the NYSE American Stock Exchange, for the listing of the Common Shares.

	
             
  	
            3.
 	
            REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
 

The Company represents and warrants to each of the Buyers that:

(a)       Organization and Qualification.  Each of the Company and its “Subsidiaries” (which for purposes of this Agreement means any entity in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest) are corporations duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated, and have the requisite corporate power and authorization to own their properties and to carry on their business as now being conducted.  Each of the Company and its Subsidiaries is duly qualified to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect.  As used in this Agreement, “Material Adverse Effect” means any material adverse effect on the business, properties, assets, operations, results of operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole, or on the transactions contemplated hereby and the other Transaction Documents or by the agreements and instruments to be entered into in connection herewith or therewith, or on the authority or ability of the Company to perform its obligations under the Transaction Documents (as defined below).  The Company has no Subsidiaries except as set forth on Schedule 3(a).  

(b)       Authorization; Enforcement; Validity.  The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 

 

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5), the Closing Escrow Agreement, the Make Good Escrow Agreement, the Lock-Up Agreement and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Transaction Documents”) and to issue the Common Shares in accordance with the terms hereof and thereof.  The execution and delivery of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Common Shares have been duly authorized by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders.  This Agreement and the other Transaction Documents have been duly executed and delivered by the Company, and
constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies.

(c)       Issuance of Common Shares.  The Common Shares are duly authorized and, upon issuance in accordance with the terms hereof, shall be validly issued and free from all taxes, liens and charges with respect to the issue thereof and the Common Shares shall be fully paid and nonassessable with the holders being entitled to all rights accorded to a holder of Common Stock.  The offer and issuance by the Company of the Common Shares is exempt from registration under the 1933 Act.

(d)       No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Common Shares) will not (i) result in a violation of the Articles of Incorporation (as defined below) or Bylaws (as defined below) of the Company or any of its Subsidiaries or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any U.S. law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations and the rules and regulations of the Over-The-Counter Bulletin Board (“OTCBB”)), or by which any property or asset of the Company or a Subsidiary is bound or affected, except in the case of clause (ii) such as could not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect.

(e)       Consents.  The Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents, in each case 

 

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in accordance with the terms hereof or thereof (other than (x) any consent, authorization or order that has been obtained as of the date hereof, (y) any filing or registration that has been made as of the date hereof or (z) any filings which may be required to be made by the Company with the Commission or state securities administrators subsequent to the Closing; provided, that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of the Buyers herein).  All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the Closing Date.  The Company and its Subsidiaries are unaware of any facts or circumstances that might prevent the
Company from obtaining or effecting any of the registration, application or filings pursuant to the preceding sentence.  The Company is not in violation of any requirements of the OTCBB and has no knowledge of any facts that would reasonably lead to the cessation of quotations for the Common Stock on the OTCBB in the foreseeable future

(f)        Acknowledgment Regarding Buyer's Purchase of Common Shares.  The Company acknowledges and agrees that each Buyer is acting solely in the capacity of arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that no Buyer is (i) an officer or director of the Company, (ii) an “affiliate” of the Company (as defined in Rule 144) or (iii) to the knowledge of the Company, a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”)).  The Company further acknowledges that no Buyer is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by a Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Buyer's purchase of the Common Shares.  The Company further represents to each Buyer that the Company's decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.

(g)       No General Solicitation; Placement Agent's Fees.  Neither the Company, nor any of its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Common Shares.  The Company shall be responsible for the payment of any placement agent's fees, financial advisory fees, or brokers' commissions (other than for persons engaged by any Buyer or its investment advisor) relating to or arising out of the transactions contemplated hereby.  The Company shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, attorney's fees and out-of-pocket expenses) arising in connection with any such claim.  For the
purposes of this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby, the Parties agree and acknowledge, jointly and severally, that no agent’s fees, financial advisory fees or brokers’ commission whatsoever is/are due to any third party by the Company, except to Chinamerica Holdings LLC.

 

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(h)       No Integrated Offering.  None of the Company, its Subsidiaries, any of their affiliates, and any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Common Shares under the 1933 Act or cause this offering of the Common Shares to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated.  None of the Company, its Subsidiaries, their affiliates and any Person acting on their behalf will take any
action or steps referred to in the preceding sentence that would require registration of any of the Common Shares under the 1933 Act or cause the offering of the Common Shares to be integrated with other offerings.

(i)        Application of Takeover Protections; Rights Agreement.  The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Articles of Incorporation or the laws of the State of Nevada which is or could become applicable to any Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Common Shares and any Buyer's ownership of the Common Shares.  The Company has not adopted a stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company.

(j)        SEC Documents; Financial Statements.  During the two (2) years prior to the date hereof, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof or prior to the date of the Closing, along with the Current Report of the Company being filed in connection with the transactions contemplated hereby, and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”).  The Company has delivered to the Buyers or their respective representatives true,
correct and complete copies of the SEC Documents not available on the EDGAR system.  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  No 

 

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other information provided by or on behalf of the Company to the Buyers which is not included in the SEC Documents, including, without limitation, information referred to in this Section 2(j) of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading.

(k)       Absence of Certain Changes.  Except as disclosed in Schedule 3(k), since December 31, 2008, there has been no material adverse change and no material adverse development in the business, properties, operations, condition (financial or otherwise), results of operations or prospects of the Company or its Subsidiaries.  Except as disclosed in Schedule 3(k), since December 31, 2008, the Company has not (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, in excess of $25,000 outside of the ordinary course of business or (iii) had capital expenditures, individually or in the aggregate, in excess of $25,000.  The Company has not taken any steps to seek protection pursuant
to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.  The Company is not as of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the Closing, will not be Insolvent (as defined below).  For purposes of this Section 3(k), “Insolvent” means, with respect to any Person  (i) the present fair saleable value of such Person's assets is less than the amount required to pay such Person's total Indebtedness (as defined in Section 3(r)), (ii) such Person is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (iii) such Person intends to incur or believes that it will incur debts that would be beyond its ability to pay as such
debts mature or (iv) such Person has unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted.

(l)        No Undisclosed Events, Liabilities, Developments or Circumstances.  No event, liability, development or circumstance has occurred or exists, or is contemplated to occur, with respect to the Company or its Subsidiaries or their respective business, properties, prospects, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced.

(m)      Conduct of Business; Regulatory Permits.  Neither the Company nor its Subsidiaries is in material violation of any term of or in default under the Articles of Incorporation or Bylaws or their organizational charter or articles of incorporation or bylaws, respectively.  Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except for possible violations which would not, individually or in the aggregate, have a Material Adverse Effect.  Without limiting the generality of the foregoing, the Company is not in violation of any of the rules, regulations or
requirements of the OTCBB and has no knowledge of 

 

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any facts or circumstances that would reasonably lead to delisting or suspension of the Common Stock by the OTCBB in the foreseeable future except for possible violations which would not, individually or in the aggregate, have a Material Adverse Effect and would not, individually or in the aggregate, reasonably lead to delisting or suspension from trading of the Common Stock by the OTCBB, FINRA or the SEC.  During the two (2) years prior to the date hereof, (i) the Common Stock has been quoted on the OTCBB, (ii) trading in the Common Stock has not been suspended by the SEC or FINRA and (iii) the Company has received no communication, written or oral, from the SEC or the OTCBB regarding the suspension or cessation of quotation of the Common Stock on the OTCBB.  The Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit

(n)       Foreign Corrupt Practices.  Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other Person acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

(o)       Sarbanes-Oxley Act.  The Company is in, and will be in continued compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof , except for possible violations which would not, individually or in the aggregate, have a Material Adverse Effect.

(p)       Transactions With Affiliates. Except as otherwise provided in the SEC Documents, none of the officers, directors or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for ordinary course services as employees, officers or directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director or employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any such officer, director, or employee has a substantial interest or is an officer, director, trustee or partner.

(q)       Equity Capitalization.  As of the date hereof, the authorized capital stock of the Company consists of 500,000,000 shares of Common Stock, of which as of the date hereof, 49,984,349 shares are issued and outstanding, no shares are reserved for issuance pursuant to 

 

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options and warrants outstanding and no shares are reserved for issuance pursuant to securities exercisable or exchangeable for, or convertible into, shares of Common Stock.  All of such outstanding shares have been, or upon issuance will be, validly issued and are fully paid and nonassessable.  Except as set forth on Schedule 3(q) and in the SEC Documents: (i) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company or any of its Subsidiaries,
or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company or any of its Subsidiaries; (iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness (as defined in Section 3(r)) of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there are no financing statements securing obligations in any material amounts, either singly or in the aggregate, filed in connection with the Company or any of its Subsidiaries; (v) there are no agreements
or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement); (vi) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Common Shares; (viii) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (ix) the Company and its Subsidiaries have no liabilities or obligations required to be disclosed in the SEC Documents but not so disclosed in the
SEC Documents, other than those incurred in the ordinary course of the Company's or any Subsidiary's respective businesses and which, individually or in the aggregate, do not or would not have a Material Adverse Effect.  The Company has furnished or made available to the Buyer upon such Buyer's request, true, correct and complete copies of the Company's Articles of Incorporation, as amended and as in effect on the date hereof (the “Articles of Incorporation”), and the Company's Bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof in respect thereto.  

(r)        Indebtedness and Other Contracts.  Except as disclosed in Schedule 3(r) and the SEC Documents, neither the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness (as defined below), (ii) is a party to any contract, agreement or instrument, the material violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument, in the judgment of the Company’s officers, would result in a Material Adverse Effect, (iii) is in material violation of any term of or in default under any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result,  in the judgment of the Company’s officers,  individually or in the aggregate, in a 

 

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Material Adverse Effect, or (iv) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company's officers, has or is expected to have a Material Adverse Effect.  For purposes of this Agreement:  (x) “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets
or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even
though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of other kinds referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; and (z) “Person” means
an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

(s)       Absence of Litigation.  Except as set forth on Schedule 3(s) and the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before the SEC, FINRA, any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company, the Common Stock or any of its Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors, whether of a civil or criminal nature or otherwise.  

(t)        Insurance.  The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged.  Except as set forth on Schedule 3(t), neither the Company nor any Subsidiary has been refused any insurance coverage sought or applied for. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew 

 

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its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

(u)       Employee Relations.  (i) Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member of a union.  The Company and its Subsidiaries believe that their relations with their employees are good.  No executive officer of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has notified the Company or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer's employment with the Company or any such Subsidiary.  No executive officer of the Company, to the knowledge of the Company or any of its Subsidiaries, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.

(ii)       The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

(v)       Title.  The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries.  Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.

(w)      Intellectual Property Rights.  The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights (“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted.  None of the Company's Intellectual Property Rights have expired or terminated, or are expected to expire or terminate within three years from the date of this Agreement.  The Company does not have any knowledge of any infringement by the Company or its Subsidiaries of Intellectual Property Rights of
others.  There is no claim, action or proceeding being made or brought, or to the knowledge of the Company, being threatened, against the Company or any of its Subsidiaries regarding its Intellectual Property Rights.  The Company is unaware of any facts or circumstances which might 

 

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give rise to any of the foregoing infringements or claims, actions or proceedings.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights.

(x)       Environmental Laws.  The Company and its Subsidiaries (i) are in compliance with any and all Environmental Laws (as hereinafter defined), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses (iii) are in compliance with all terms and conditions of any such permit, license or approval and (iv) do not have any unresolved environmental complaints or issues in any of the jurisdictions in which they operate where, in each of the foregoing clauses (i), (ii), (iii) and (iv), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.  Further, to the knowledge of the Company, it and its Subsidiaries are not in violation of any applicable
anti-dumping laws in the jurisdiction(s) in which it carries out business, where the failure to so comply would reasonably have in the aggregate a Material Adverse Effect. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as
all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.  The Company further undertakes that it shall notify the Buyers promptly if it or any of its Subsidiaries were to receive an environmental complaint.

(y)       Subsidiary Rights.  The Company, or one of its Subsidiaries, has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries as owned by the Company or such Subsidiary.

(z) Tax Status.  The Company and each of its Subsidiaries (i) has made or filed all federal, foreign and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

(aa)     Internal Accounting and Disclosure Controls.  The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in its reasonable belief, 

 

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to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference.  The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 under the 1934 Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or
submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed in to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure.  During the twelve months prior to the date hereof neither the Company nor any of its Subsidiaries have received any notice or correspondence from any accountant relating to any potential material weakness in any part of the system of internal accounting controls of the Company or any of its Subsidiaries.

(bb)     Off Balance Sheet Arrangements.  Save as otherwise provided  in the SEC Documents,  there is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its Exchange Act filings and is not so disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect.

(cc)     Manipulation of Price.  The Company has not, and to its knowledge no one acting on its behalf has taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Common Shares.   

(dd)     Transfer Taxes.  On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the sale and transfer of the Common Shares to be sold to each Buyer hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.

(ee)     Investment Company Status.  The Company is not, and upon consummation of the sale of the Common Shares will not be, an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of  1940, as amended.

 

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(ff)      Acknowledgement Regarding Buyers' Trading Activity.  Except as is set forth in Section 2(m), it is understood and acknowledged by the Company (i) that neither the Company nor any of its Subsidiaries has asked any Buyer nor has any Buyer agreed with the Company or its Subsidiaries, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Common Shares for any specified term; (ii) to the Company's knowledge, that any Buyer, and counterparties in “derivative” transactions to which any such Buyer is a party, directly or indirectly, presently do not have a “short” position in the Common Stock, and (iii) that each Buyer
shall not be deemed to have any affiliation with or control over any arm's length counterparty in any “derivative” transaction.  The Company further understands and acknowledges that (a) one or more Buyers may engage in hedging and/or trading activities at various times during the period that the Common Shares are outstanding and (b) such hedging and/or trading activities, if any, can reduce the value of the existing stockholders' equity interest in the Company both at and after the time the hedging and/or trading activities are being conducted.  The Company acknowledges that such aforementioned hedging and/or trading activities do not constitute a breach of this Agreement or any of the documents executed in connection herewith.  The Company is not aware of any of the aforementioned hedging and/or trading activities of any of the Buyers.  The Company may not be informed of, and will not monitor, any such aforementioned hedging and/or trading activities by one or more Buyers
in the future. 

(gg)     U.S. Real Property Holding Corporation.  The Company is not, has never been, and so long as any Common Shares remain outstanding, shall not become, a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Buyer's request.

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

(ii)       No Additional Agreements.   The Company does not have any agreement or understanding with any Buyer with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.

(jj) Disclosure.  The Company understands and confirms that each of the Buyers will rely on the foregoing representations in effecting transactions in securities of the Company.  All disclosure provided to the Buyers regarding the Company, its business and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company are materially true and correct and do not contain any untrue statement of a material fact 

 

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or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading except any non-disclosure would not, individually or in the aggregate, have a Material Adverse Effect .  Each press release issued by the Company during the twelve (12) months preceding the date of this Agreement did not at the time of release contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.  No event or circumstance has occurred or information exists with respect to the Company or any Subsidiary or either of its or their respective business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company's reports filed under the Exchange Act of 1934, as amended, are being incorporated into an effective registration statement filed by the Company under the 1933 Act) except any non-disclosure would not, individually or in the aggregate, have a Material Adverse Effect.  The Company acknowledges and agrees that no Buyer makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 2.

(kk)      Related Party Transactions. Except as set out in Schedule 3(kk), neither the Company or its Subsidiaries is involved in any related party transactions.  The Company undertakes that all future related party transactions shall be negotiated and entered into at arm’s length and shall be pre-approved by the Board of Directors of the Company.

(ll) Non-Competition. Save for the Company’s Chief Financial Officer, Winston Yen, the Company shall procure that all key members of its management shall devote substantially all their time and effort in the Company’s business and that they shall not be involved, directly or indirectly, in any business that is similar or in competition with the Company’s business.

	
             
  	
            4.
 	
            COVENANTS.
 

(a)       Best Efforts.  Each Party shall use its commercially reasonable efforts timely to satisfy each of the covenants and the conditions to be satisfied by it as provided in Sections 5, 6 and 7 of this Agreement.

(b)       Form D and Blue Sky.  The Company agrees to file a Form D with respect to the Common Shares as required under Regulation D and to provide a copy thereof to each Buyer promptly after such filing.  The Company, on or before the Closing Date, shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Common Shares for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date.  The Company shall make all filings and reports relating to the offer and sale of the Common Shares required
under applicable securities or “Blue Sky” laws of the states of the United States following the Closing Date.

 

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(c)       Reporting Status.  Until the date on which the Investors (as defined in the Registration Rights Agreement) shall have sold all the Common Shares (the “Reporting Period”), the Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would otherwise permit such termination.

(d)       Use of Proceeds.  The Company will use the proceeds from the sale of the Common Shares for general corporate purposes, including general and administrative expenses, and in connection with acquisitions and not for (i) the repayment of any outstanding Indebtedness of the Company or any of its Subsidiaries, or (ii) the redemption or repurchase of any of its or its Subsidiaries' equity securities.  The Company agrees that it will deposit $300,000  of the proceeds in escrow under the Escrow Agreement to pay the fees and expenses in connection with a public relations and investor relations campaign of a design and type satisfactory to a representative of the Buyers designated in the Escrow Agreement.  Such amount shall be released only upon the dual signatures of the CEO of the Company and such
representative of the Buyers designated in the Escrow Agreement.  The Company agrees that the public relations and investor relations campaign shall include a "retail component" involving the use of direct mail to assist in the repositioning of the Company in the minds of the general public.    Additionally, the Company agrees that it will deposit $2,000,000 of the proceeds in escrow under the Escrow Agreement on account of the Company appointing a Board of Director comprising a majority of independent Board of Directors acceptable to the Buyers. Such amount shall also be released only upon the dual signatures of the CEO of the Company and such representative of the Buyers designated in the Escrow Agreement.  

(e)       Financial Information.  The Company agrees to send the following to each Investor during the Reporting Period (i) unless the following are filed with the SEC through EDGAR and are available to the public through the EDGAR system, within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any registration statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile copies or email copies of all press releases issued by the Company or any of its Subsidiaries, and (iii) copies of any notices and other information made available or given to the stockholders of the Company generally, contemporaneously with
the making available or giving thereof to the stockholders.  As used herein, “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

(f)        Listing.  Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the national securities exchange, automated quotation system or OTCBB upon which the Common Stock is then listed or quoted. 

(g)       Pledge of Common Shares.  The Company acknowledges and agrees that the Common Shares may be pledged by an Investor (as defined in the Registration Rights 

 

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Agreement) in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Common Shares.  The pledge of Common Shares shall not be deemed to be a transfer, sale or assignment of the Common Shares hereunder, and no Investor effecting a pledge of Common Shares shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document, including, without limitation, Section 2(h) of this Agreement; provided that an Investor and its pledgee shall be required to comply with the provisions of Section 2(h) of this Agreement in order to effect a sale, transfer or assignment of Common Shares to such pledgee.  The Company hereby agrees to execute and deliver such documentation as a pledgee of the Common Shares may reasonably request in connection with a pledge of the Common
Shares to such pledgee by an Investor provided that any and all costs to effect the pledge of the Common Shares are borne by pledgor and/or pledgee and not Company.

(h)       Disclosure of Transactions and Other Material Information.  The Company shall, on or before 8:30 a.m., New York City time, within the fourth Business Day after the date of this Agreement, (A) issue a press release (the “Press Release”) reasonably acceptable to the Buyers disclosing all material terms of the transactions contemplated hereby and (B) file a Current Report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents in the form required by the 1934 Act, and attaching the material Transaction Documents (including, without limitation, this Agreement (and all schedules to this Agreement), and the Registration Rights Agreement) as exhibits to such filing (including all attachments, the
“8-K Filing”).  From and after the issuance of the Press Release, no Buyer shall be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of its respective officers, directors, employees or agents, that is not disclosed in the Press Release.  The Company shall not, and shall cause each of its Subsidiaries and each of their respective officers, directors, employees and agents, not to, provide any Buyer with any material, nonpublic information regarding the Company or any of its Subsidiaries from and after the filing of the Press Release without the express written consent of such Buyer.  If a Buyer has, or believes it has, received any such material, nonpublic information regarding the Company or any of its Subsidiaries from the Company, any of its Subsidiaries or any of the respective officers, directors, or agents, other than as required in writing by such Buyer, it may
provide the Company with written notice thereof.  The Company shall, within five (5) Trading Days of receipt of such notice, make public disclosure of such material, nonpublic information.  In the event of a breach of the foregoing covenant by the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees and agents, in addition to any other remedy provided herein or in the Transaction Documents, a Buyer shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such material, nonpublic information without the prior approval by the Company, its Subsidiaries, or any of its or their respective officers, directors, employees or agents.  No Buyer shall have any liability to the Company, its Subsidiaries, or any of its or their respective officers, directors, employees, stockholders or agents for any such disclosure.  Subject to the foregoing, neither the Company, its Subsidiaries nor any
Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of any Buyer, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K filing and contemporaneously therewith and (ii) as is required by applicable law and regulations, including the applicable rules and regulations 

 

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of the OTCBB (provided that in the case of clause (i) each Buyer shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release).  Without the prior written consent of any applicable Buyer, neither the Company nor any of its Subsidiaries or affiliates shall disclose the name of such Buyer in any filing, announcement, release or otherwise, unless such disclosure is required by law or regulation.

(i)        Registration Statements.  The Company shall file a registration statement with the SEC to register the Common Shares (“Registrable Securities”) pursuant to the terms set forth in the Registration Rights Agreement within ninety (90) days after the Closing Date. No other securities shall be included in the registration statement.  The Company shall use its commercially reasonable efforts to cause the registration statement to become effective within one hundred and eighty (180) days after filing.  In the event that the number of Common Shares to be registered on the initial registration statement as permitted by the Commission is less than the full amount of the Registrable as a result of Rule 415 of the Securities Act or its interpretation, the Company shall file one or more
subsequent registration statements to register the rest of the Registrable Securities until all Registrable Securities are registered, pursuant to the provisions of the Registration Rights Agreement;  provided that the Company's obligation to file subsequent registration statements shall cease on the first anniversary of the Closing Date.  Each Buyer’s shares shall be registered in the subsequent registrations on a pro rata basis.    Until the date that is forty-five days after the effective date of the initial registration statement, the Company will not file a registration statement (other than on Form S-8 or solely to register shares of Common Stock issued pursuant to an acquisition with non-affiliated third parties on an arm's length basis, the primary purpose of which is not to raise additional capital (the “Acquisition Shares”)) under the 1933 Act relating to securities that are
not the Common Shares.  Until the effective date of the initial registration statement, the Company will not file a registration statement under the 1933 Act relating to Acquisition Shares.

(j)        Corporate  Existence.  So long as any Buyer beneficially owns any Common Shares, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company's assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company's assets, where the surviving or successor entity in such transaction (i) assumes the Company's obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose common stock is quoted on or listed for trading on the OTCBB, The NASDAQ Capital Market, The NASDAQ Global Market, The NASDAQ Global Select Market, the American Stock Exchange or The New York Stock Exchange, Inc (each referred to herein as a
“Trading Market”).

(k)       Conduct of Business.  The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate, in a Material Adverse Effect.

 

22

 

 

(l)        Closing Documents.  On or prior to fourteen (14) calendar days after the Closing Date, the Company agrees to deliver, or cause to be delivered, to each Buyer a complete closing set of the Transaction Documents, Common Share certificates and any other document required to be delivered to any party pursuant to Section 7 hereof or otherwise.

(m)      No Change in Control. For a period of twelve (12) months from the Closing Date, the Company will not enter into a transaction that would result in a Change in Control of the Company without the unanimous approval of the Company’s independent directors and the written approval of the Buyers, such approval not to be unreasonably withheld.  For the purposes of this Section 4(m), “Change in Control” shall be deemed to have occurred (a) on the date that any one Person, or more than one Person acting in concert, acquires beneficial ownership of voting securities the Company that, together with the voting securities previously held or beneficially owned by such Person or Persons acting in concert, constitutes more than fifty percent (50%) of the voting
rights of any class of securities issued by the Company; or (b) on the date that any one Person or Persons acting in concert acquires (or has acquired during the twelve month period ending on the date of the most recent acquisition of such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; for this purpose, the term “gross fair market value” means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.  The determination of whether persons are acting in concert, and of beneficial ownership, shall be made in accordance with Regulation 13D under the Exchange Act.  

(n)       Sale and Further Encumbrance. For a period of twelve (12) months from the Closing Date, the Company shall not sell more than 10% of its Net Equity or encumber itself with a debt amounting to more than 50% of its Net Equity.  For the purposes of Section 4(n), “Net Equity” means that amount reflected as Stockholder's Equity of the Company on the most recent financial statements filed with the SEC.

(o)       Expenses.  The Company shall bear all of its own legal, accounting and other expenses, including those relating to the preparation of this Agreement and the other Transaction Documents, and the preparation and filing of any current report, quarterly or annual report or document.  In addition, the Company agrees that it will reimburse Access America Investments, Inc.  $100,000 in transactional expenses from the proceeds of the sale of Common Shares herein on or within a reasonable period of time after Closing. 

(p)       Employee Stock Option Plan.  On or prior to the expiration of sixty (60) days after the Closing Date,   the Company shall enact  an employee stock option plan for its directors and employees certain key members of management covering options to purchase a total of 1,500,000 shares of Common Stock of the Company at an exercise price of $.60 per share.  The options to purchase such shares shall vest in three equal installments on each of the first, second and third anniversary of the grant.

 

23

 

 

	
             
  	
            5.
 	
            REGISTER; TRANSFER AGENT INSTRUCTIONS.
 

(a)       Register.  The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to each holder of Common Shares), a register for the Common Shares, in which the Company shall record the name and address of the Person in whose name the Common Shares have been issued (including the name and address of each transferee), and the number of Common Shares held by such Person.  The Company shall keep the register open and available at all times during business hours for inspection of any Buyer or its legal representatives.

(b)       Transfer Agent Instructions.  The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates or credit shares to the applicable balance accounts at DTC, registered in the name of each Buyer or its respective nominee(s), for the Common Shares, issued at the Closing in the form of Exhibit E attached hereto (the “Irrevocable Transfer Agent Instructions”).  The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5(b), and stop transfer instructions to give effect to Section 2(h) hereof, will be given by the Company to its transfer agent, and that the Common Shares
shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the other Transaction Documents.  If a Buyer effects a sale, assignment or transfer of the Common Shares in accordance with Section 2(h), the Company shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by such Buyer to effect such sale, transfer or assignment.  In the event that such sale, assignment or transfer involves Common Shares sold, assigned or transferred pursuant to an effective registration statement or pursuant to Rule 144, the transfer agent shall issue such Common Shares to the Buyer, assignee or transferee, as the case may be, without any restrictive legend.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a Buyer.
Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5(b), that a Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.

	
             
  	
            6.
 	
            CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
 

The obligation of the Company hereunder to issue and sell the Common Shares to each Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion by providing each Buyer with prior written notice thereof:

(i)        Such Buyer shall have executed each of the Transaction Documents to which it is a party and delivered the same to the Company.

 

24

 

 

(ii)       Such Buyer shall have delivered to the Escrow Agent, in accordance with the terms of the Escrow Agreement, the Purchase Price for the Common Shares being purchased by such Buyer and each other Buyer at the Closing by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company or by means of a check made payable to the Escrow Agent which has been cleared and made freely available prior to the Closing.

(iii)      The representations and warranties of such Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date which shall be true and correct as of such specified date), and such Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Buyer at or prior to the Closing Date.

(iv)      No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

(v)       Each Buyer has completed an Accredited Investor Questionnaire to the satisfaction of the Company and has delivered the same to the Company. 

	
             
  	
            7.
 	
            CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
 

The obligation of each Buyer hereunder to purchase the Common Shares at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer's sole benefit and may be waived by such Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:

(i)        The Company shall have executed and delivered to such Buyer (i) each of the Transaction Documents and (ii) the Common Shares (in such amounts as such Buyer shall request) being purchased by such Buyer at the Closing pursuant to this Agreement.

(ii)       The Company shall have executed the Make Good Escrow Agreement together with the Buyers and Mr. Zhenyong Liu, the Company’s CEO.

(iii)      The Company shall have executed the Lock-Up Agreement with Mr. Zhenyong Liu. 

(iv)      Such Buyer shall have received the opinion of Sichenzia Ross Friedman Ference LLP, the Company's outside counsel (“Company Counsel”), dated as of the Closing Date, in substantially the form of Exhibit F attached hereto.

(v)       The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form of Exhibit E attached hereto, which 

 

25

 

 

instructions shall have been delivered to and acknowledged in writing by the Company's transfer agent.

(vi)      The Company shall have delivered to such Buyer a certificate evidencing the incorporation and good standing of the Company and each of its operating Subsidiaries in such corporation's state of incorporation issued by the Secretary of State of such state of incorporation as of a date within 10 days of the Closing Date.

(vii)     The Company shall have delivered to such Buyer a certificate evidencing the Company's qualification as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which the Company conducts business and is required to so qualify, as of a date within 10 days of the Closing Date.

(viii)    The Common Stock (I) shall be quoted on the OTCBB and (II) shall not have been suspended, as of the Closing Date, by the SEC or FINRA from trading on the OTCBB nor shall suspension by the SEC or FINRA have been threatened.

(ix)      The Company shall have delivered to such Buyer a certified copy of the Articles of Incorporation as certified by the Secretary of State of the State of Nevada within 10 days of the Closing Date.

(x)       The Company shall have delivered to such Buyer a certificate, executed by the Secretary of the Company and dated as of the Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the Company's Board of Directors in a form reasonably acceptable to such Buyer, (ii) the Articles of Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the form attached hereto as Exhibit G.

(xi)      The representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date which shall be true and correct as of such specified date) and the Company shall have performed, satisfied and complied in all respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Closing Date.  Such Buyer shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer in the form attached hereto as Exhibit H.

(xii)     The Company shall have delivered to such Buyer a letter from the Company's transfer agent certifying the number of shares of Common Stock outstanding as of a date within five days of the Closing Date.

(xiii)    The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Common Shares.

(xiv)    The Company shall have delivered to such Buyer such other documents relating to the transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.

 

26

 

 

(xv)     No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

8.         TERMINATION.  In the event that the Closing shall not have occurred with respect to a Buyer on or before ten (10) Business Days from the date hereof due to the Company's or such Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above (and the nonbreaching party's failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability of any party to any other party.

	
             
  	
            9.
 	
            MISCELLANEOUS.
 

(a) Governing Law; Jurisdiction; Jury Trial.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  The Company hereby appoints Sichenzia Ross Friedman Ference LLP with offices at 61 Broadway, 32nd Floor, New York, NY 10006 as its agent for service of process in New York.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 

(b) Counterparts.  This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature.

 

27

 

 

(c) Headings.  The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

(d) Severability.  If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

(e) Entire Agreement; Amendments.  This Agreement supersedes all other prior oral or written agreements between the Buyers, the Company, their affiliates and Persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters.  No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the holders of Common Shares representing at least a majority of the amount of the Common Shares, or, if prior to the Closing Date, the Buyers listed on the
Schedule of Buyers as being obligated to purchase at least a majority of the amount of the Common Shares.  No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought.  No such amendment shall be effective to the extent that it applies to less than all of the holders of the Common Shares then outstanding.  No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration also is offered to all of the parties to the Transaction Documents or holders of Common Shares, as the case may be.  The Company has not, directly or indirectly, made any agreements with any Buyers relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents.  Without limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company or otherwise. 

(f)  Notices.  Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) five Business Day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be:

If to the Company:

Orient Paper, Inc.

	
             
 	
            Attention:
 	
            Mr. Zhenyong Liu
 

	
             
 	
            Address:  
 	
            Nansan Gongli, Nanhuan Road, Xushui County, Baoding City,
 

 

28

 

 

	
             
 	
            City & State:
 	
            Hebei Province, The People’s Republic of China 072550
 

	
             
 	
            Telephone:
 	
            011 - (86) 312-8605508
 

	
             
 	
            Fax:
 	
            011 – (86) 312-8605530
 

	
             
 	
            Email:
 	
            liu@orientalpapercorporation.com/ wyen@accellencellp.com
 

 

With a copy (which will not constitute notice) to:

 

Sichenzia Ross Friedman Ference LLP

	
             
 	
            Attention:
 	
            Gregory Sichenzia, Esq.
 

	
             
 	
            Telephone:
 	
            (212) 930 9700
 

	
             
 	
            Fax:
 	
            (212) 930 9725
 

	
             
 	
            Email:
 	
            gsichenzia@srff.com
 

If to the Transfer Agent:

Empire Stock Transfer, Inc.

Address: 1859 Whitney Mesa Drive, Henderson, NV 89014

	
             
 	
            Telephone: 702-818-5898
 

	
             
 	
            Facsimile: 702-974-1444
 

	
             
 	
            Attention: Patrick Mokros
 

Email: patrick@empirestock.com

 

If to a Buyer, to its address, facsimile number and email address set forth on the Schedule of Buyers, or to such other address, facsimile number and/or email address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change.  Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.

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

(h) Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of the Common Shares.  The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the holders of Common Shares representing at least a majority of the number of the Common Shares, including by merger or consolidation.  A Buyer 

 

29

 

 

may assign some or all of its rights hereunder without the consent of the Company, in which event such assignee shall be deemed to be a Buyer hereunder with respect to such assigned rights.

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

(j)  Survival.  Unless this Agreement is terminated under Section 8, the representations and warranties of the Company and the Buyers contained in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closing and the delivery of Common Shares, as applicable.  Each Buyer shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

(k) Further Assurances.  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

(l)  Indemnification.  In consideration of each Buyer's execution and delivery of the Transaction Documents and acquiring the Common Shares thereunder and in addition to all of the Company's other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless each Buyer and each other holder of the Common Shares and all of their stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons' agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising
out of or resulting from (i) the execution, delivery, performance or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Common Shares, or (iii) the status of such Buyer or holder of the Common Shares as an investor in the Company.  To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities 

 

30

 

 

which is permissible under applicable law.  Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under this Section 9(l) shall be the same as those set forth in Section 6 of the Registration Rights Agreement.

(m)      No Strict Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

(n)       Remedies.  Each Buyer and each holder of the Common Shares shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law.  Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law.  Furthermore, the Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents, any remedy at law may prove to be
inadequate relief to the Buyers.  The Company therefore agrees that the Buyers shall be entitled to seek temporary and permanent injunctive relief in any such case without the necessity of proving actual damages and without posting a bond or other security.

(o)       Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Buyer exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights

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

(q)       Independent Nature of Buyers' Obligations and Rights.  The obligations of each Buyer under any Transaction Document are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations 

 

31

 

 

of any other Buyer under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Buyers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents and the Company acknowledges that the Buyers are not acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Buyer confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors.  Each Buyer shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding for such purpose.

	
             
  	
            (r)
 	
            Judgment Currency.
 

If for the purpose of obtaining or enforcing judgment against the Company in any court in any jurisdiction it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section 9(r) referred to as the “Judgment Currency”) an amount due in US dollars under this Agreement, the conversion shall be made at the Exchange Rate prevailing on the Business Day immediately preceding:

(1) the date of actual payment of the amount due, in the case of any proceeding in the courts of New York or in the courts of any other jurisdiction that will give effect to such conversion being made on such date: or 

(2) the date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section being hereinafter referred to as the “Judgment Conversion Date”).

If in the case of any proceeding in the court of any jurisdiction referred to in Section 9(r)(1) and (2) above, there is a change in the Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing on the date of payment, will produce the amount of US dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion Date.

Any amount due from the Company under this provision shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Agreement.

[Signature Pages Follow]

 

32

 

 

IN WITNESS WHEREOF, each Buyer and the Company have caused its respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

 

	
            COMPANY:

 
 
	
            ORIENT PAPER, INC.

By:               /s/ Zhenyong Liu                                       
 Name: Zhenyong Liu

Title:  Chief Executive Officer
 
	
             
 

 

 

 

IN WITNESS
WHEREOF, each Buyer and the Company have caused their respective signature page to
this Securities Purchase Agreement to be duly executed as of the date first written above.

 

	
             
 
	
             
 
	
             
 
	
             
 

 

	
             
 	
            BUYER:
 

 

 

	
             
 	
            ACCESS AMERICA FUND, LP
 

 

 

	
             
 	
            By:
 	
            _/s/ Christopher Efird______________
 

	
             
 	
            Name: Christopher Efird
 

	
             
 	
            Title: President
 

 

 

BUYER:

 

RENAISSANCE US GROWTH INVESTMENT TRUST PLC

 

	
             
 	
            By:
 	
            _/s/ Russell Cleveland_______________
 

	
             
 	
            Name: Russell Cleveland
 

	
             
 	
            Title: Director
 

 

 

BUYER:

 

RENN GLOBAL ENTREPRENEURS FUND, INC.

 

 

	
             
 	
            By:
 	
            _/s/ Russell Cleveland_______________
 

	
             
 	
            Name: Russell Cleveland
 

	
             
 	
            Title: President
 

 

34

 

 

 

 

BUYER:

 

PREMIER RENN ENTREPRENEURIAL FUND LIMITED

 

	
             
 	
            By:
 	
            _/s/ Russell Cleveland_______________
 

	
             
 	
            Name: Russell Cleveland
 

	
             
 	
            Title: Investment Manager
 

 

 

BUYER:

 

POPE INVESTMENTS II, LLC

 

	
             
 	
            By:
 	
            __/s/ William P. Weller______________
 

	
             
 	
            Name: William P. Weller
 

	
             
 	
            Title: Managing Member
 

 

 

 

BUYER:

 

	
             
 	
            Steve Mazur
 

 

	
             
 	
            By:
 	
            _/s/ Steve Mazur___________________
 

	
             
 	
            Name: Steve Mazur
 

	
             
 	
            Title: 
 

 

35

 

 

 

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 

SCHEDULE OF BUYERS

 

	
             

Buyer
 	
             

Address and Facsimile Number
 	
             

Number of Common Shares
 	
             

Purchase Price
 	
            Legal Representative’s Address and Facsimile Number
 
	
             

Access America Fund, LP

 

 
 	
             

11,200 Westheimer

Suite 508

Houston, Texas 77069

Fax: 713-599-1304

 
 	
             

2,500,000
 	
             

$1,500,000
 	
             

Access America Fund, LP

11,200 Westheimer

Suite 508

Houston, Texas 77069

Fax: 713-599-1304

 
 
	
             

Renaissance US Growth Investment Trust Plc

 
 	
             

8080 N. Central Expressway, Suite 210, LB-59

Dallas, TX 75206

Fax: 214-891-8291

 
 	
             

1,333,333
 	
             

$800,000
 	
             

Access America Fund, LP

11,200 Westheimer

Suite 508

Houston, Texas 77069

Fax: 713-599-1304

 
 
	
             

RENN Global Entrepreneurs Fund, Inc.

 
 	
             

8080 N. Central Expressway, Suite 210, LB-59

Dallas, TX 75206

Fax: 214-891-8291

 
 	
             

500,000
 	
             

$300,000
 	
             

Access America Fund, LP

11,200 Westheimer

Suite 508

Houston, Texas 77069

Fax: 713-599-1304

 
 
	
             

Premier RENN Entrepreneurial Fund Limited

 
 	
             

8080 N. Central Expressway, Suite 210, LB-59

Dallas, TX 75206

Fax: 214-891-8291

 
 	
             

 

500,000
 	
             

 

$300,000
 	
             

Access America Fund, LP

11,200 Westheimer

Suite 508

Houston, Texas 77069

Fax: 713-599-1304

 
 
	
             

Pope Investments II, LLC

 
 	
             

5100 Poplar Avenue Suite 805, Memphis, TN 38137

Fax: 901-763-4229
 	
             

3,333,333
 	
             

$2,000,000
 	
             

Access America Fund, LP

11,200 Westheimer

Suite 508

Houston, Texas 77069

Fax: 713-599-1304

 
 

 

 

 

	
            Steve Mazur
 	
            66 Glenbrook Road  - 2121

Stamford, Connecticut  06902

Fax: 631-598-4723
 	
            166,666
 	
            $100,000
 	
            Access America Fund, LP

11,200 Westheimer

Suite 508

Houston, Texas 77069

Fax: 713-599-1304

 
 
	
             

TOTAL

 
 	
             
 	
             

8,333,332
 	
             

$5,000,000
 	
             
 

 

 

37

 

 

EXHIBITS

 

	
            Exhibit A
 	
            Form of Registration Rights Agreement – Please refer to Exhibit 10.4 of this 8-K
 

	
            Exhibit B
 	
            Form of Closing Escrow Agreement – Please refer to Exhibit 10.3 of this 8-K
 

	
            Exhibit C
 	
            Form of Make Good Escrow Agreement – Please refer to Exhibit 10.2 of this 8-K
 

	
            Exhibit D
 	
            Form of Lock-Up Agreement – Please refer to Exhibit 10.5 of this 8-K
 

	
            Exhibit E
 	
            Form of Irrevocable Transfer Agent Instructions
 

	
            Exhibit F
 	
            Form of Company Counsel Opinion
 

	
            Exhibit G
 	
            Form of Secretary's Certificate
 

	
            Exhibit H
 	
            Form of Officer's Certificate
 

 

EXHIBIT E

Form of Irrevocable Transfer Agent Instructions

as of October 7, 2009

EMPIRE STOCK TRANSFER INC.

1859 Whitney Mesa Dr.

Henderson, NV 89014

	
            Attn:  
 	
            Patrick Mokros
 

 

Dear Mr. Mokros:

Reference is made to that certain Securities Purchase Agreement (the “Purchase Agreement”), dated as of October 7, 2009, by and among by and among Orient Paper, Inc., a Nevada corporation (the “Company”), and each of the Buyers whose names are set forth on the Schedule of Buyers thereto (individually, a “Buyer” and collectively, the “Buyers”), pursuant to which the Company is issuing to the Buyers shares of the Company’s common stock, par value $.001 per share (the “Common Stock”). 

This letter shall serve as our irrevocable authorization and direction to you provided that you are the transfer agent of the Company at such time) to issue shares of Common Stock upon delivery of a treasury order or other appropriate order duly executed by a duly authorized officer of the Company. So long as you have previously received (x) written confirmation from counsel to the Company that a registration statement covering resales of the Common Stock has been declared effective by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), and no subsequent notice by the Company or its counsel of the suspension or termination of its effectiveness and (y) a copy of such registration statement, and if the Buyer
represents in writing that the Common Stock was sold pursuant to the Registration Statement, then certificates representing the Common Stock shall not bear any legend restricting transfer of the Common Stock thereby and should not be subject to any stop-transfer restriction. Provided, however, that if you have not previously received those items and representations listed above, then the certificates for the Common Stock shall bear the following legend:

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

and, provided, further, that the Company may from time to time notify you to place stop-transfer restrictions on the certificates for the Common Stock in the event a registration statement covering the Common Stock is subject to amendment for events then current.

 

39

 

 

A form of written confirmation from counsel to the Company that a registration statement covering resales of the Common Stock has been declared effective by the SEC under the 1933 Act is attached hereto as Exhibit I.

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

Please execute this letter in the space indicated to acknowledge your agreement to act in accordance with these instructions. Should you have any questions concerning this matter, please contact me at (86) 312-860-5508.

 

Very truly yours,

 

ORIENT PAPER, INC.

	
             
 	
            By: ___________________________________________
 

Name: _________________________________________

Title: __________________________________________

 

ACKNOWLEDGED AND AGREED:

 

EMPIRE STOCK TRANSFER INC.

	
            By: __________________________________
 

	
            Name: ________________________________
 

	
            Title: _________________________________
 

	
            Date: _________________________________
 

 

40

 

 

EXHIBIT I

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

[Name and address of Transfer Agent]

Attn: _________

Re: [__________________________________]

Ladies and Gentlemen:

We are counsel to Orient Paper, Inc., a Nevada corporation (the “Company”), and have represented the Company in connection with that certain Securities Purchase Agreement (the “Purchase Agreement”), dated as of October __, 2009, by and among the Company and the investors named therein (collectively, the “Buyers”) pursuant to which the Company issued to the Buyers shares of the Company’s common stock, par value $.001 per share (the “Common Stock”). Pursuant to the Purchase Agreement, the Company has also entered into a Registration Rights Agreement with the Buyers (the “Registration Rights Agreement”),
dated as of October __, 2009, pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement) under the Securities Act of 1933, as amended (the “1933 Act”). In connection with the Company’s obligations under the Registration Rights Agreement, on o, 2009, the Company filed a Registration Statement on Form S-1 (File No. 333-________) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the resale of the Registrable Securities which names each of the present Buyers as a selling stockholder thereunder.

In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and accordingly, the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement.

Very truly yours,

Sichenzia Ross Friedman Ference LLP

	
             
 	
            By: _________________________________________ 
 

cc: [LIST NAMES OF BUYERS]

 

 

41

 

 

EXHIBIT F

Form of Company Counsel Opinion

 

Based on the foregoing, and subject to the qualifications and limitations stated in this letter, we are of the opinion that:

 

	
            1.
 	
            The authorized capital stock of the Company consists of 500,000,000 shares of Common Stock, par value $0.001 per share.  The Company has advised us that, as of the date hereof, and excluding any shares of Common Stock to be issued pursuant to the terms of the Transaction Documents and any shares of Common Stock to be issued upon the conversion or exercise of outstanding securities convertible or exercisable into shares of Common Stock, there are 49,984,349 shares of Common Stock issued and outstanding.  
 

	
            2.
 	
            The Company has the requisite corporate power and authority to enter into and perform its obligations under the Transaction Documents and to issue the Common Shares. The execution, delivery and performance of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required. Each of the Transaction Documents have been duly executed and delivered, and the Common Shares have been duly executed, issued and delivered by the Company and each of the Transaction Documents, subject to the limitations set forth below, constitutes a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its respective terms.
 

	
            3.
 	
            The Common Shares have been duly authorized and, when delivered against payment in full as provided in the Securities Purchase Agreement, will be validly issued, fully paid and nonassessable.
 

	
            4.
 	
            The execution, delivery and performance of and compliance with the terms of the Transaction Documents and the issuance of the Common Shares do not (i) violate any provision of the Articles or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party, (iii) create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound, or (iv)
result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment, injunction or decree (including Federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected, except, in all cases other than violations pursuant to clauses (i) and (iv) above, for such conflicts, default, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect.
 

Our opinion concerning the validity, binding effect and enforceability of the Transaction Documents means, that: (a)
each of the Transaction Documents constitutes an enforceable contract under New York law; (b) the Transaction Documents are not invalid in their entirety because of a specific statutory prohibition and is not
subject in its entirety to a contractual defense; and (b) subject to the 

 

42

 

 

last sentence of this paragraph, some remedy is available if the Company is in material default under the Transaction Documents.  This opinion does not mean that: (a) any particular remedy is available upon a material default; or (b) every provision of the Transaction Documents will be upheld or enforced in any or each circumstance by a court.  Furthermore, the validity, binding effect and enforceability of the Transaction Documents may be limited or otherwise affected by: (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar statutes, rules, regulations or other laws affecting the enforcement of creditors’ rights and remedies generally; and (b) the unavailability of, or limitation on the availability of, a particular right or remedy (whether in a proceeding in equity or at law) because of an equitable principle or requirement
as to commercial reasonableness, conscionability or good faith.

 

	
            5.
 	
            No consent, approval, authorization, order or action of, filing with or notice or payment to any   regulatory agency or authority of the State of New York or the United States Federal Government is required to be obtained or made by the Company to perform its obligations under the Transaction Documents and consummate the transactions contemplated thereby, except for such as have been obtained or made.
 

	
            6.
 	
            Based in part on the representations of the Buyers set forth in the Securities Purchase Agreement, the offer, issuance and sale of the Common Shares are exempt from the registration requirements of the Securities Act of 1933, as amended.
 

	
            7.
 	
             To the best of our knowledge, there are no current or pending claims, actions, suits, investigations  or proceedings against the Company before any court, arbitrator or governmental authority which if determined adversely to the Company, as the case may be, would have a Material Adverse Effect on the ability of the Company to perform its obligations under any of the Transaction Documents. There is no action, suit, claim, investigation or proceeding pending, or to our knowledge threatened, against or involving the Company or any of its properties or assets and which, if adversely determined, is reasonably likely to result in a Material Adverse Effect.  
 

	
            8.
 	
            To our knowledge, there are no outstanding orders, judgments, injunctions, awards or decrees of  any court, arbitrator or governmental or regulatory body against the Company or any officers or directors of the Corporation in their capacities as such.
 

	
            9.
 	
            The Company is not, and as a result of and immediately upon Closing will not be, an “investment  company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.
 

 

43

 

 

EXHIBIT G

Form of Secretary's Certificate 

 

The undersigned, ___________, hereby certifies that he/she is the Secretary of Orient Paper, Inc., a Nevada corporation, (the “Company”), and that she makes this certificate on behalf of the Company in connection with and pursuant to the Securities Purchase Agreement dated as of October 7, 2009 (the “Purchase Agreement”) between the Company and certain Buyers (as defined in the Purchase Agreement), and further certifies as follows:

 

	
             
 	
            1.
 	
            Attached hereto as Exhibit A is a true, complete and correct copy of the Articles of Incorporation of the Company and all amendments thereto (as so amended, the “Articles of Incorporation”), which is in full force and effect on and as of the date hereof and which has not been amended, modified or repealed, and no proceedings for the amendment, modification or rescission thereof are pending or contemplated, and no amendment or other document relating to or affecting the Articles of Incorporation has been filed in the office of the Secretary of State of Nevada since such date and no action has been taken by the Company, its shareholders, directors or officers in contemplation of the filing of any such amendment or other document or in contemplation of the liquidation or dissolution of the Company.
 

 

	
             
 	
            2.
 	
            Attached hereto as Exhibit B is a true, complete and correct copy of the Bylaws of the Company as in full force and effect on and as of the date hereof, which have not been amended, modified or repealed, and no proceedings for the amendment, modification or rescission thereof are pending or contemplated.
 

 

	
             
 	
            3.
 	
            Attached hereto as Exhibit C are true, complete and correct copies of all resolutions adopted by the Board of Directors of the Company by written unanimous consent relating to, among other things, the authorization, execution, delivery and performance of the Purchase Agreement and other Transaction Documents (as defined in the Purchase Agreement) and all other agreements and documents to be executed in connection therewith (collectively, with the Purchase Agreement and the Transaction Documents, the “Documents”) and the consummation of the transactions contemplated thereby and therein.  Such resolutions were duly and validly adopted by written consents of the Board of Directors of the Company.  All such resolutions are in full force and effect on the date hereof in the form in which adopted without
amendment, modification or revocation, and no other resolutions or action by the Board of Directors of the Company or any committee thereof have been adopted relating to the authorization, execution, delivery and performance of the Documents and the consummation of the transactions contemplated thereby and therein.
 

 

	
             
 	
            4.
 	
            The following officers currently hold the office set forth below their respective names and their genuine signatures are set forth below: 
 

 

Zhenyong Liu

 

44

 

 

	
             
 	
            Chief Executive Officer
 	
            ______________________________
 

 

Winston C. Yen

	
             
 	
            Chief Financial Officer
 	
            ______________________________
 

 

 

IN WITNESS WHEREOF, the undersigned has caused this certificate to be executed as of this 7th day of  October 2009.

 

 

_______________________________________

Name:  

Title: Secretary

 

45

 

 

EXHIBIT H

Form of Officer's Certificate 

 

I, _____________, in my capacity as ____________ of ORIENT PAPER, INC., a Nevada Corporation (the “Company”) and not personally, in connection with that certain Securities Purchase Agreement (the “Agreement”) dated October 7, 2009 by and between the Company and certain investors named therein, do hereby certify as follows (capitalized terms not otherwise defined having the meanings ascribed thereto in the Agreement):

 

The representations and warranties made by the Company in the Agreement were true when made and are true as of the date thereof with the same force and effect as if such representations and warranties were made at and as of the date hereof, the Company has performed and complied with all covenants and conditions required by Section 7 of the Agreement to be performed or complied with by the Company prior to or at the Closing, and there has been no Material Adverse Effect with respect to the Company from the date of the Agreement to the date hereof.  

 

IN WITNESS WHEREOF, I have signed this Officer’s Certificate as of October 7, 2009. 

 

 

____________________________________

 

SCHEDULES

 

	
            Schedule 3(a)
 	
            - List of Subsidiaries
 

Schedule 3(k) - Absence of Certain Changes

Schedule 3(q) - Equity Capitalization

Schedule 3(r) - Indebtedness and Other Contracts

Schedule 3(s) - Absence of Litigation

Schedule 3(t) – Insurance

Schedule 3(kk) – Related Party Transactions

 

Schedule 3(a) - List of Subsidiaries

 

Dongfang Zhiye Holding Limited (a BVI company, not serving any purpose after the 6/26/09 PRC legal restructuring with the following “Shengde” entities)

 

Shengde Holdings Inc. (a Nevada corporation)

 

Baoding Shengde Paper Co., Ltd. (a PRC company)

 

 

 

Schedule 3(k) - Absence of Certain Changes

 

Since December 31, 2008, there has been no material adverse change and no material adverse development in the business, properties, operations, condition (financial or otherwise), results of operations or prospects of the Company or its Subsidiaries except for the followings:

 

On August 26, 2009 the Company entered into a Short-Term Loan Deferred Payment Agreement with the United Commercial Bank (China) Ltd. under which the Company agreed to repay the outstanding loan balance in the amount of $2,816,476.39, due originally due January 23, 2009 and extended to June 30, 2009, in the following installments:

 

8/31/09: $400,000

9/15/09: all accrued interest up to 8/31/09

9/30/09: $400,000

10/31/09: $200,000

11/30/09: $300,000

12/31/09: $300,000

1/31/10: $200,000

2/28/10: $200,000

3/31/10: $200,000

4/30/10: $200,000

5/31/10: $200,000

6/30/10: $216,476.39

 

 

Schedule 3(q) - Equity Capitalization

 

	
             
 	
            1.
 	
            The Company agreed to issue warrants to CCG Investor Relations Partners LLC to purchase up to 100,000 shares the Company’s common stock at a price of $1.0 per share.  The warrants have a term of two (2) years and are with cashless exercise option and piggyback registration rights.
 

 

	
             
 	
            2.
 	
            The Chinamerica consultant warrants (to be determined)
 

 

	
             
 	
            3.
 	
            Employee Incentive Stock Option Plan (to be determined)
 

 

 

Schedule 3(r) - Indebtedness and Other Contracts

Schedule 3(kk) – Related Party Transactions

The Company had the following bank loans payable as of June 30, 2009:

 

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Description
 	
             
 	
            June 30,
 2009
 	
             
 	
             
 	
             
 	
             

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             

	
            Working capital loan provided by Industrial & Commercial Bank of China, secured by certain manufacturing equipments of the Company. Interest is payable monthly at the fixed rate of 6.372% per annum. The entire principal is due and payable at maturity on January 20, 2010. The note is renewable upon maturity.
 	
             
 	
            $
 	
            1,899,252
 	
             
 	
             
 	
             
 	
             
 	
             

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             

	
            Working capital loan provided by the Industrial & Commercial Bank of China. Interest is payable monthly at 8.217% per annum. The entire principal was due and payable at maturity on June 4, 2009. The Company was granted a grace period of one month by the bank. The loan was renewed on July 1, 2009. 
 	
             
 	
             
 	
            876,578
 	
             
 	
             
 	
             
 	
             
 	
             

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             

																
	
            Short-term credit facility provide by the United Commercial Bank (China) Limited, including
a revolving credit facility of $2,000,000 and a non-revolving import loan facility of $816,976. The credit facility is secured by the Company’s building, land use rights and is personally guaranteed by the
Chief Executive Officer and Director Mr. Zhenyong Liu. Interest is paid monthly with a floating rate indexed to 5% plus the three-month LIBOR, adjusted every three months, and was 5.6207% per annum on June 30, 2009.
The note is renewable upon maturity, which was extended to June 30, 2009, according to a Short-Term Credit Facility Extension Agreement entered into by the Company and the Bank on January 23, 2009.  On August 26, 2009
the Company entered into a Short-Term Loan Deferred Payment Agreement with the United Commercial Bank (China) Ltd. under which the Company agreed to repay the outstanding loan balance in the amount of $2,816,477 in
eleven (11) uneven monthly installments, starting from August 31, 2009 to June 30, 2010.

 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 

            

 

 

 

	
            See Schedule 3(k) for details of the installment payment schedule.

 
 	
             
 	
             
 	
            2,816,977
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Loan payable to Rural Credit Cooperative of Xushui, guaranteed by an unrelated third party company. The entire principal is due and payable at maturity on September 16, 2011. Interest is paid monthly at the rate of 0.774% per month.
 	
             
 	
             
 	
            1,940,159
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Total bank loans payable
 	
             
 	
             
 	
            7,532,966
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 

 

 

Mr. Zhenyong Liu, Chief Executive Officer of Orient Paper, loaned money (over a period of time) to the Company for working capital purposes, amounting to $6,131,761 and $2,131,761 as of June 30, 2009 and August 31, 2009. On July 24, 2008, Mr. Liu agreed to change the term of the loan from payable on demand to a period of three years, maturing on July 23, 2011, and with no stated interest.

On August 1, 2008, Mr. Shuangxi Zhao, a member of the Board of Directors of HBOP, loaned money to the Company for working capital purposes which amounted to $876,578 as of June 30, 2009. The amount owed bears interest at 7.56 percent per annum and is due on July 31, 2011.

On August 5, 2008, Mr. Xiaodong Liu, a member of the Board of Directors of Orient Paper loaned money to the Company for working capital purposes which amounted to $1,095,722 as of June 30, 2009. The amount owed bears interest at 7.56 percent per annum and is due on August 4, 2011.

 

Schedule 3(s) - Absence of Litigation

 

To the knowledge of the Company’s management, there is NO legal action, suit, proceeding, inquiry or investigation before the SEC, FINRA, any court, public board, government agency, self-regulatory organization or body pending or threatened against or affecting the Company, the Common Stock or any of its Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors, whether of a civil or criminal nature or otherwise.   

 

Schedule 3(t) - Insurance

 

The Company hereby acknowledges that it has never been rejected any insurance coverage sought or applied for.  The Company’s current insurance policies include the following: 

 

Du-Bang Property & Casualty Insurance Co., Ltd.

Insurance policy number is 20101213000009000011 for basic property insurance.

Insurance period is from July 9th, 2009 to July 9th, 2010.Exhibit 10.1

                               LITHIUM CORPORATION

                                 2009 STOCK PLAN

1. Purpose.

     The purpose of this plan (the "Plan") is to secure for Lithium  Corporation
(the "Corporation") and its stockholders the benefits arising from capital stock
ownership by employees,  officers and directors of, and  consultants or advisors
to,  the  Corporation  and  its  subsidiary  corporations  who are  expected  to
contribute  to the  Corporation's  future  growth and success.  The Plan permits
grants of  options  to  purchase  shares of Common  Stock,  $0.001 par value per
share, of the Corporation  ("Common Stock") and awards of shares of Common Stock
that are  restricted  as provided  in Section 12  ("Restricted  Shares").  Those
provisions  of the Plan  which make  express  reference  to  Section  422 of the
Internal  Revenue  Code of 1986,  as amended or replaced  from time to time (the
"Code"), shall apply only to Incentive Stock Options (as that term is defined in
the Plan).

2. Type of Options and Administration.

     (a)  Types of  Options.  Options  granted  pursuant  to the  Plan  shall be
authorized  by  action  of the  Board  of  Directors  of the  Corporation  (or a
Committee  designated  by the Board of  Directors)  and may be either  incentive
stock options  ("Incentive  Stock Options")  meeting the requirements of Section
422 of the Code or  non-statutory  options  which are not  intended  to meet the
requirements of Section 422 of the Code.

     (b) Administration. The Plan will be administered by the Board of Directors
of the  Corporation,  whose  construction  and  interpretation  of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
in its sole discretion grant Restricted Shares and options to purchase shares of
Common Stock and issue  shares upon  exercise of such options as provided in the
Plan. The Board shall have authority,  subject to the express  provisions of the
Plan, to construe the respective  option and Restricted Share agreements and the
Plan, to  prescribe,  amend and rescind  rules and  regulations  relating to the
Plan,  to  determine  the terms and  provisions  of the  respective  option  and
Restricted Share agreements,  which need not be identical, and to make all other
determinations in the judgment of the Board of Directors  necessary or desirable
for the  administration  of the Plan.  The Board of  Directors  may  correct any
defect or supply any omission or reconcile any  inconsistency  in the Plan or in
any  option or  Restricted  Share  agreement  in the manner and to the extent it
shall deem  expedient to carry the Plan into effect and it shall be the sole and
final  judge of such  expediency.  No  director  or person  acting  pursuant  to
authority  delegated by the Board of Directors shall be liable for any action or
determination  under the Plan made in good faith. The Board of Directors may, to
the full extent  permitted by or consistent  with applicable laws or regulations
(including, without limitation,  applicable state law and Rule 16b-3 promulgated
under the Securities Exchange Act of 1934 (the "Exchange Act"), or any successor
rule  ("Rule  16b-3")),  delegate  any or all of its powers  under the Plan to a
committee  (the  "Committee")  appointed by the Board of  Directors,  and if the
<PAGE>
Committee is so appointed  all  references to the Board of Directors in the Plan
shall mean and relate to such Committee with respect to the powers so delegated.
Any director to whom an option or stock grant is awarded  shall be ineligible to
vote upon his or her option or stock  grant,  but such option or stock grant may
be awarded any such director by a vote of the remainder of the directors, except
as limited below.

     (c)  Applicability  of Rule 16b-3.  Those provisions of the Plan which make
express reference to Rule 16b-3 shall apply to the Corporation only at such time
as the Corporation's Common Stock is registered under the Exchange Act, and then
only to such persons as are required to file reports  under Section 16(a) of the
Exchange Act (a "Reporting Person").

     (d) Compliance with Section 162(m) of the Code. Section 162(m) of the Code,
added by the Omnibus Budget Reconciliation Act of 1993, generally limits the tax
deductibility to publicly held companies of compensation in excess of $1,000,000
paid  to  certain  "covered  employees"   ("Covered   Employees").   It  is  the
Corporation's  intention to preserve the  deductibility of such  compensation to
the extent it is reasonably  practicable and to the extent it is consistent with
the Corporation's  compensation  objectives.  For purposes of this Plan, Covered
Employees  of the  Corporation  shall  be  those  employees  of the  Corporation
described in Section 162(m)(3) of the Code.

     (e) Special Provisions  Applicable to Options Granted to Covered Employees.
In order for the full  value of  options  granted  to  Covered  Employees  to be
deductible by the Corporation  for federal income tax purposes,  the Corporation
may intend  for such  options to be  treated  as  "qualified  performance  based
compensation"  as  described in Treas.  Reg.  ss.1.162-27(e)  (or any  successor
regulation). In such case, options granted to Covered Employees shall be subject
to the following additional requirements:

          (i) such  options  and  rights  shall be granted  only by a  committee
comprised  solely of two or more  "outside  directors",  within  the  meaning of
Treas. Reg. ss. 1.162.27(e)(3); and

          (ii) the exercise price of such options shall in no event be less than
the Fair Market  Value (as defined  below) of the Common Stock as of the date of
grant of such options.

     (f) Section 409A of the Code.  The Board of Directors  may only grant those
awards that either comply with the  applicable  requirements  of Section 409A of
the Code, or do not result in the deferral of compensation within the meaning of
Section 409A of the Code.

3. Eligibility.

     (a) General.  Options and  Restricted  Shares may be granted to persons who
are, at the time of grant,  in a Business  Relationship  (as defined below) with
the Corporation;  provided,  that Incentive Stock Options may only be granted to
individuals who are employees of the Corporation  (within the meaning of Section
3401(c) of the  Code).  A person  who has been  granted an option or  Restricted
Shares may, if he or she is otherwise eligible, be granted additional options or

                                       2
<PAGE>
Restricted Shares if the Board of Directors shall so determine.  For purposes of
the  Plan,   "Business   Relationship"  means  that  a  person  is  serving  the
Corporation,  its  parent,  if  applicable,  or  any  of  its  subsidiaries,  if
applicable,  in the  capacity  of an  employee,  officer,  director,  advisor or
consultant.

     (b) Grant of Options to Reporting Persons.  From and after the registration
of the Common Stock of the Corporation  under the Exchange Act, the selection of
a director or an officer who is a Reporting  Person (as the terms "director" and
"officer" are defined for purposes of Rule 16b-3) as a recipient of an option or
Restricted  Shares,  the timing of the option or  Restricted  Share  grant,  the
exercise  price of the  option  and the  number of  Restricted  Shares or shares
subject to the option shall be determined  either (i) by the Board of Directors,
or (ii) by a committee consisting of two or more "Non-Employee Directors" having
full  authority  to act in the matter.  For the purposes of the Plan, a director
shall be deemed to be a "Non-Employee Director" only if such person qualifies as
a  "Non-Employee  Director"  within the meaning of Rule  16b-3,  as such term is
interpreted from time to time.

4. Stock Subject to Plan.

     The stock subject to options granted under the Plan or grants of Restricted
Shares shall be shares of authorized  but unissued or  reacquired  Common Stock.
Subject to  adjustment  as provided in Section 16 below,  the maximum  number of
shares of Common  Stock of the  Corporation  ("Shares")  which may be issued and
sold under the Plan is six million and fifty-five  thousand  (6,055,000) Shares.
If any Restricted Shares shall be reacquired by the Corporation, forfeited or an
option  granted  under the Plan shall  expire,  terminate or is canceled for any
reason without having been exercised in full, the forfeited Restricted Shares or
unpurchased  Shares  subject  to  such  option  shall  again  be  available  for
subsequent  option  or  Restricted  Share  grants  under the  Plan.  Subject  to
adjustment in accordance with Section 16:

          (a) No more than an aggregate of 3,027,500  Shares may be issued under
     Incentive Stock Options or  non-statutory  stock options during the term of
     the Plan;

          (b) No more than an aggregate of 3,027,500 Shares may be issued in the
     form of Restricted Shares during the term of the Plan; and

          (c) The maximum  number of Shares with respect to which options may be
     granted to any one person during any fiscal year of the Corporation may not
     exceed 5% of the Corporation's issued and outstanding shares at the time of
     grant.

     These  limits  shall be applied and  construed  consistently  with  Section
162(m) of the Code.

                                       3
<PAGE>
5. Forms of Option and Restricted Share Agreements.

     As a condition  to the grant of  Restricted  Shares or an option  under the
Plan,  each recipient of Restricted  Shares or an option shall execute an option
or Restricted Share or Stock Option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Such Option or Restricted
Share agreements may differ among recipients.

6. Purchase Price.

     (a) General.  The purchase price per Share deliverable upon the exercise of
an option shall be  determined by the Board of Directors at the time of grant of
such option;  provided,  however, that the exercise price of an option shall not
be less than 100% of the Fair Market Value (as hereinafter  defined) of a Share,
at the time of grant of such  option,  or not less than 110% of such Fair Market
Value in the case of an Incentive Stock Option described in Section 11(b). "Fair
Market  Value" of a Share as of a  specified  date for the  purposes of the Plan
shall mean the closing price of a Share on the principal  securities exchange on
which such  Shares are traded on the day  immediately  preceding  the date as of
which Fair Market Value is being  determined,  or on the next  preceding date on
which  such  Shares  are  traded if no shares  were  traded on such  immediately
preceding  day, or if the Shares are not traded on a securities  exchange,  Fair
Market  Value  shall be deemed to be the  average  of the high bid and low asked
prices of the  Shares  in the  over-the-counter  market  on the day  immediately
preceding  the date as of which Fair Market Value is being  determined or on the
next  preceding  date on which such high bid and low asked prices were recorded.
In no case shall Fair Market  Value be  determined  with regard to  restrictions
other than  restrictions  which, by their terms,  will never lapse. The Board of
Directors may also permit  optionees,  either on a selective or aggregate basis,
to  simultaneously  exercise  options  and sell  the  Shares  thereby  acquired,
pursuant to a brokerage or similar arrangement, approved in advance by the Board
of Directors,  and to use the proceeds from such sale as payment of the purchase
price of such shares.

     (b) Payment of Purchase  Price.  Options granted under the Plan may provide
for the  payment of the  exercise  price by  delivery  of cash or a check to the
order  of the  Corporation  in an  amount  equal to the  exercise  price of such
options,  or, to the extent provided in the applicable option agreement,  (i) by
delivery to the  Corporation of Shares having a Fair Market Value on the date of
exercise equal in amount to the exercise  price of the options being  exercised,
(ii)  through any cashless  exercise  feature that may be included in the option
agreement covering a particular option grant, (iii) by any other means which the
Board of Directors  determines are  consistent  with the purpose of the Plan and
with  applicable  laws  and  regulations  (including,  without  limitation,  the
provisions  of Rule 16b-3 and  Regulation T promulgated  by the Federal  Reserve
Board) or (iv) by any combination of such methods of payment.

                                       4
<PAGE>
7. Option Period.

     Subject to earlier termination as provided in the Plan, each option and all
rights  thereunder  shall  expire  on such  date as  determined  by the Board of
Directors and set forth in the applicable option agreement,  provided, that such
date shall not be later  than (10) ten years  after the date on which the option
is granted.

8. Exercise of Options.

     Each option granted under the Plan shall be  exercisable  either in full or
in  installments  at such time or times and during  such  period as shall be set
forth in the option agreement evidencing such option,  subject to the provisions
of the Plan.  No option  granted  to a  Reporting  Person  for  purposes  of the
Exchange Act,  however,  shall be exercisable  during the first six months after
the date of grant.  Subject to the  requirements  in the  immediately  preceding
sentence, if an option is not at the time of grant immediately exercisable,  the
Board of Directors may (i) in the agreement evidencing such option,  provide for
the  acceleration  of the exercise date or dates of the subject  option upon the
occurrence  of specified  events,  and/or (ii) at any time prior to the complete
termination of an option,  accelerate the exercise date or dates of such option,
unless it would cause an option that otherwise  qualified as an Incentive  Stock
Option to lose  Incentive  Stock  Option  treatment  by  application  of Section
422(d)(1) of the Code and Section 11(c) of the Plan.

9. Non-transferability of Options.

     No  option  granted  under  this  Plan  shall be  assignable  or  otherwise
transferable  by the  optionee  except  by will or by the  laws of  descent  and
distribution or pursuant to a qualified  domestic  relations order as defined in
the Code or Title I of the Employee  Retirement  Income Security Act of 1974, as
amended  ("ERISA"),  or the rules thereunder.  An option may be exercised during
the lifetime of the optionee only by the optionee. In the event an optionee dies
during his employment by the Corporation or any of its  subsidiaries,  or during
the three-month period following the date of termination of such employment, his
option shall thereafter be exercisable,  during the period specified to the full
extent to which such option was  exercisable  by the optionee at the time of his
death  during the  periods  set forth in Section  10 or 11(d).  If any  optionee
should  attempt to  dispose of or  encumber  his or her  options,  other than in
accordance  with the  applicable  terms of this  Plan or the  applicable  option
agreement, his or her interest in such options shall terminate.

10. Effect of Termination of Employment or Other Relationship.

     Except as  provided  in Section  11(d)  with  respect  to  Incentive  Stock
Options,  and subject to the  provisions of the Plan and the  applicable  option
agreement,  an  optionee  may  exercise  an option  (but only to the extent such
option was  exercisable at the time of termination of the optionee's  employment
or other  relationship with the Corporation) at any time within three (3) months

                                       5
<PAGE>
following the  termination  of the optionee's  employment or other  relationship
with the  Corporation or within one (1) year if such  termination was due to the
death or disability of the optionee,  but,  except in the case of the optionee's
death,  in no  event  later  than  the  expiration  date of the  Option.  If the
termination  of  the  optionee's   employment  is  for  cause  or  is  otherwise
attributable to a breach by the optionee of an employment or  confidentiality or
non-disclosure   agreement,  the  option  shall  expire  immediately  upon  such
termination.  The Board of  Directors  shall  have the power to  determine  what
constitutes  a   termination   for  cause  or  a  breach  of  an  employment  or
confidentiality  or  non-disclosure  agreement,  whether  an  optionee  has been
terminated for cause or has breached such an agreement,  and the date upon which
such termination for cause or breach occurs.  Any such  determinations  shall be
final and conclusive and binding upon the optionee.

11. Incentive Stock Options.

     Options  granted  under the Plan which are intended to be  Incentive  Stock
Options shall be subject to the following additional terms and conditions:

     (a) Express Designation. All Incentive Stock Options granted under the Plan
shall, at the time of grant,  be  specifically  designated as such in the option
agreement covering such Incentive Stock Options.

     (b) 10%  Stockholder.  If any employee to whom an Incentive Stock Option is
to be granted  under the Plan is, at the time of the grant of such  option,  the
owner of stock  possessing  more than 10% of the total combined  voting power of
all  classes  of  stock  of the  Corporation  (after  taking  into  account  the
attribution of stock  ownership  rules of Section 424(d) of the Code),  then the
following  special  provisions shall be applicable to the Incentive Stock Option
granted to such individual:

          (i) The purchase  price per share of the Common Stock  subject to such
     Incentive Stock Option shall not be less than 110% of the Fair Market Value
     of one share of Common Stock at the time of grant; and

          (ii) the option  exercise  period shall not exceed five years from the
     date of grant.

     (c) Dollar  Limitation.  For so long as the Code shall so provide,  options
granted to any  employee  under the Plan (and any other  incentive  stock option
plans of the  Corporation)  which are  intended to  constitute  Incentive  Stock
Options  shall not  constitute  Incentive  Stock Options to the extent that such
options,  in the  aggregate,  become  exercisable  for the first time in any one
calendar year for shares of Common Stock with an aggregate Fair Market Value, as
of the respective  date or dates of grant,  of more than $100,000 (or such other
limitations as the Code may provide).

     (d)  Termination of Employment,  Death or  Disability.  No Incentive  Stock
Option may be exercised unless,  at the time of such exercise,  the optionee is,

                                       6
<PAGE>
and has been continuously since the date of grant of his or her option, employed
by the Corporation,  except that,  unless otherwise  specified in the applicable
option agreement:

          (i) an Incentive  Stock  Option may be exercised  within the period of
     three months  after the date the  optionee  ceases to be an employee of the
     Corporation  (or  within  such  lesser  period as may be  specified  in the
     applicable option agreement),  provided, that the agreement with respect to
     such option may  designate a longer  exercise  period and that the exercise
     after  such  three-month  period  shall be  treated  as the  exercise  of a
     non-statutory option under the Plan;

          (ii) if the optionee dies while in the employ of the  Corporation,  or
     within three months after the optionee  ceases to be such an employee,  the
     Incentive  Stock  Option  may be  exercised  by the  person  to  whom it is
     transferred  by will or the laws of  descent  and  distribution  within the
     period of one year after the date of death (or within such lesser period as
     may be specified in the applicable option agreement); and

          (iii) if the optionee  becomes disabled (within the meaning of Section
     22(e)(3)  of the Code or any  successor  provisions  thereto)  while in the
     employ of the  Corporation,  the  Incentive  Stock  Option may be exercised
     within the period of one year after the date the optionee ceases to be such
     an employee because of such disability (or within such lesser period as may
     be specified in the applicable option agreement).

For all  purposes  of the Plan and any option  granted  hereunder,  "employment"
shall be defined in accordance with the provisions of Section  1.421-1(h) of the
Income Tax  Regulations  (or any  successor  regulations).  Notwithstanding  the
foregoing  provisions  no  Incentive  Stock  Option may be  exercised  after its
expiration date.

12. Restricted Shares.

     (a) Awards.  The Board of Directors may from time to time in its discretion
award  Restricted  Shares to  persons  having a Business  Relationship  with the
Corporation  and may determine the number of Restricted  Shares  awarded and the
terms and conditions  of, and the amount of payment,  if any, to be made by such
persons.  Each  award  of  Restricted  Shares  will be  evidenced  by a  written
agreement  executed  on  behalf  of the  Corporation  and  containing  terms and
conditions  not  inconsistent  with the Plan as the  Board  of  Directors  shall
determine to be appropriate in its sole discretion.

     (b)  Restricted  Period;  Lapse  of  Restrictions.  At the time an award of
Restricted  Shares is made, the Board of Directors  shall  establish a period of
time (the "Restricted  Period") applicable to such award which shall not be more
than ten years. Each award of Restricted Shares may have a different  Restricted
Period. In lieu of establishing a Restricted  Period, the Board of Directors may
establish  restrictions  based only on the achievement of specified  performance
measures or a time release schedule.  At the time an award is made, the Board of

                                       7
<PAGE>
Directors may, in its discretion, prescribe conditions for the incremental lapse
of restrictions during the Restricted Period and for the lapse or termination of
restrictions  upon the  occurrence  of other  conditions in addition to or other
than the expiration of the Restricted  Period with respect to all or any portion
of the Restricted Shares. Such conditions may include,  without limitation,  the
death or disability of the  participant to whom  Restricted  Shares are awarded,
retirement of the participant  pursuant to normal or early  retirement under any
retirement  plan of the  Corporation or  termination  by the  Corporation of the
participant's  employment other than for cause, or the occurrence of a change in
control  of the  Corporation.  Such  conditions  may  also  include  performance
measures,  which,  in the  case of any  such  award of  Restricted  Shares  to a
participant who is a "covered  employee" within the meaning of Section 162(m) of
the Code, shall be based on one or more of the following criteria:  earnings per
share, market value per share,  return on invested capital,  return on operating
assets and return on equity. The Board of Directors may also, in its discretion,
shorten or terminate the Restricted Period or waive any conditions for the lapse
or  termination  of  restrictions  with  respect  to all or any  portion  of the
Restricted Shares at any time after the date the award is made.

     (c)  Rights of Holder;  Limitations  Thereon.  Upon an award of  Restricted
Shares, a stock certificate representing the number of Restricted Shares awarded
to the  participant  shall be registered in the  participant's  name and, at the
discretion  of  the  Board  of  Directors,  will  be  either  delivered  to  the
participant with an appropriate  legend or held in custody by the Corporation or
a bank for the participant's  account.  The participant shall generally have the
rights and privileges of a stockholder as to such Restricted  Shares,  including
the right to vote such Restricted Shares, except that the following restrictions
shall apply: (i) with respect to each Restricted  Share,  the participant  shall
not be entitled to delivery of an unlegended  certificate  until the  expiration
nor  termination of the Restricted  Period,  and the  satisfaction  of any other
conditions  prescribed  by the Board of Directors,  relating to such  Restricted
Share;  (ii) with respect to each Restricted  Share, such share may not be sold,
transferred, assigned, pledged, or otherwise encumbered or disposed of until the
expiration  of  the  Restricted  Period,  and  the  satisfaction  of  any  other
conditions  prescribed  by the Board of Directors,  relating to such  Restricted
Share (except,  subject to the provisions of the participant's stock restriction
agreement,  by will or the laws of descent  and  distribution  or  pursuant to a
qualified domestic relations order as defined by the Code or Title I of ERISA or
the rules  promulgated  thereunder) and (iii) all of the Restricted Shares as to
which restrictions have not at the time lapsed shall be forfeited and all rights
of the  participant to such Restricted  Shares shall  terminate  without further
obligation on the part of the Corporation unless the participant has remained in
a Business  Relationship  with the Corporation or any of its subsidiaries  until
the expiration or termination of the Restricted  Period and the  satisfaction of
any other  conditions  prescribed  by the Board of Directors  applicable to such
Restricted Shares.  Upon the forfeiture of any Restricted Shares, such forfeited
shares shall be transferred  to the  Corporation  without  further action by the
participant.  At the  discretion  of the  Board of  Directors,  cash  and  stock
dividends with respect to the Restricted  Shares may be either currently paid or
withheld by the Corporation for the participant's  account,  and interest may be
paid on the  amount of cash  dividends  withheld  at a rate and  subject to such
terms as determined by the Board of Directors.  The  participant  shall have the
same  rights  and  privileges,  and be subject  to the same  restrictions,  with
respect to any shares received pursuant to Section 16 hereof.

                                       8
<PAGE>
     (d) Delivery of Unrestricted  Shares. Upon the expiration or termination of
the Restricted Period and the satisfaction of any other conditions prescribed by
the Board of Directors,  the  restrictions  applicable to the Restricted  Shares
shall lapse and a stock  certificate  for the number of  Restricted  Shares with
respect to which the  restrictions  have lapsed shall be delivered,  free of all
such  restrictions,  except  any that may be imposed  by law  including  without
limitation securities laws, to the participant or the participant's  beneficiary
or estate,  as the case may be. The Corporation shall not be required to deliver
any  fractional  share of Common Stock but will pay, in lieu  thereof,  the fair
market  value  (determined  as of the  date  the  restrictions  lapse)  of  such
fractional share to the participant or the participant's  beneficiary or estate,
as the case may be.

13. Additional Provisions.

     (a)  Additional  Provisions.  The  Board  of  Directors  may,  in its  sole
discretion,   include  additional  provisions  in  option  or  Restricted  Stock
agreements  covering  options  or  Restricted  Stock  granted  under  the  Plan,
including  without  limitation,  restrictions  on transfer,  repurchase  rights,
rights of first refusal,  commitments to pay cash bonuses,  to make, arrange for
or guaranty  loans or to transfer  other  property to optionees upon exercise of
options,  or such  other  provisions  as shall  be  determined  by the  Board of
Directors;  provided,  that such additional provisions shall not be inconsistent
with any other  term or  condition  of the Plan and such  additional  provisions
shall not cause any  Incentive  Stock Option  granted  under the Plan to fail to
qualify as an Incentive  Stock  Option  within the meaning of Section 422 of the
Code or result in the  imposition of an additional tax under Section 409A of the
Code.

     (b) Acceleration,  Extension,  Etc. The Board of Directors may, in its sole
discretion,  (i)  accelerate  the date or dates on which  all or any  particular
option or options  granted  under the Plan may be  exercised  or (ii) extend the
dates during which all, or any  particular,  option or options granted under the
Plan may be exercised if it would not cause any Incentive  Stock Option  granted
under the Plan to fail to  qualify  as an  Incentive  Stock  Option  within  the
meaning of Section 422 of the Code or result in the  imposition of an additional
tax under Section 409A of the Code.

14. General Restrictions.

     (a) Investment  Representations.  The Corporation may require any person to
whom Restricted Shares or an option is granted, as a condition of receiving such
Restricted  Shares or  exercising  such option,  to give written  assurances  in
substance  and form  satisfactory  to the  Corporation  to the effect  that such
person is acquiring the Restricted  Shares or Common Stock subject to the option
for his or her own account for investment and not with any present  intention of
selling or otherwise  distributing  the same,  and to such other  effects as the
Corporation  deems  necessary or appropriate in order to comply with federal and
applicable state securities laws, or with covenants or  representations  made by
the Corporation in connection with any public offering of its Common Stock.

                                       9
<PAGE>
     (b)  Compliance  with  Securities  Law. Each option and grant of Restricted
Shares shall be subject to the requirement that if, at any time,  counsel to the
Corporation  shall determine that the listing,  registration or qualification of
the  Restricted  Shares or shares  subject to such  option  upon any  securities
exchange  or under any state or federal  law,  or the consent or approval of any
governmental   or  regulatory   body,  or  that  the  disclosure  of  non-public
information  or the  satisfaction  of any  other  condition  is  necessary  as a
condition  of,  or in  connection  with  the  issuance  or  purchase  of  shares
thereunder,  such Restricted Shares shall not be granted and such option may not
be  exercised,  in  whole  or  in  part,  unless  such  listing,   registration,
qualification, consent or approval, or satisfaction of such condition shall have
been  effected or obtained on  conditions  acceptable to the Board of Directors.
Nothing  herein  shall be deemed to require the  Corporation  to apply for or to
obtain  such  listing,  registration  or  qualification,   or  to  satisfy  such
condition.

15. Rights as a Stockholder.

     The holder of an option shall have no rights as a stockholder  with respect
to any shares covered by the option (including,  without limitation,  any rights
to receive  dividends  or non-cash  distributions  with  respect to such shares)
until the date of issue of a stock certificate to him or her for such shares. No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.

16.  Adjustment  Provisions for  Recapitalization,  Reorganizations  and Related
     Transactions.

     (a) Recapitalization and Related  Transactions.  If, through or as a result
of any recapitalization,  reclassification, stock dividend, stock split, reverse
stock split or other similar  transaction,  (i) the outstanding shares of Common
Stock are  increased,  decreased or exchanged for a different  number or kind of
shares or other securities of the Corporation,  or (ii) additional shares or new
or different  shares or other non-cash  assets are  distributed  with respect to
such  shares  of  Common  Stock  or  other   securities,   an  appropriate   and
proportionate  adjustment  shall be made in (x) the  maximum  number and kind of
shares  reserved  for  issuance  under  the  Plan,  (y) the  number  and kind of
Restricted  Shares  granted and shares or other  securities  subject to any then
outstanding  options under the Plan,  and (z) the exercise  price for each share
subject to any then  outstanding  options under the Plan,  without  changing the
aggregate   purchase  price  as  to  which  such  options  remain   exercisable.
Notwithstanding  the  foregoing,  no  adjustment  shall be made pursuant to this
Section 16 if such  adjustment  (i) would  cause the Plan to fail to comply with
Section  422 of the Code or with Rule 16b-3 or (ii) would be  considered  as the
adoption of a new plan requiring stockholder approval.

     (b)  Reorganization,  Merger and Related  Transactions.  If the Corporation
shall  be  the  surviving   corporation   in  any   reorganization,   merger  or
consolidation of the Corporation with one or more other  corporations,  any then
outstanding  Restricted  Shares or option  granted  pursuant  to the Plan  shall
pertain to and apply to the securities to which a holder of the number of shares
of Common Stock  subject to such  Restricted  Shares or options  would have been
entitled immediately  following such  reorganization,  merger, or consolidation,

                                       10
<PAGE>
with a corresponding  proportionate adjustment of the purchase price as to which
such options may be exercised so that the aggregate  purchase  price as to which
such options may be exercised shall be the same as the aggregate  purchase price
as to which such options may be exercised  for the shares  remaining  subject to
the options immediately prior to such reorganization, merger, or consolidation.

     (c) Board Authority to Make  Adjustments.  Any adjustments  made under this
Section 16 will be made by the Board of  Directors,  whose  determination  as to
what  adjustments,  if any,  will be made and the extent  thereof will be final,
binding and  conclusive.  No fractional  shares will be issued under the Plan on
account of any such adjustments.

17. Merger, Consolidation, Asset Sale, Liquidation, Etc.

     (a)  General.  In the  event of a  consolidation  or  merger  in which  the
Corporation is not the surviving  corporation,  or sale of all or  substantially
all of the assets of the Corporation in which outstanding shares of Common Stock
are exchanged for securities, cash or other property of any other corporation or
business   entity  or  in  the  event  of  a  liquidation  of  the   Corporation
(collectively,  a  "Corporate  Transaction"),  the  Board  of  Directors  of the
Corporation,  or  the  board  of  directors  of  any  corporation  assuming  the
obligations of the Corporation,  may, in its discretion, take any one or more of
the  following  actions,  as to  outstanding  options:  (i)  provide  that  such
Restricted Shares or options shall be assumed,  or equivalent  Restricted Shares
or options shall be substituted,  by the acquiring or succeeding corporation (or
an affiliate thereof),  provided that any such options substituted for Incentive
Stock Options shall meet the  requirements  of Section 424(a) of the Code,  (ii)
upon written notice,  provide that all unexercised options and Restricted Shares
will terminate  immediately prior to the consummation of such transaction unless
such options are exercised by the optionee within a specified  period  following
the date of such notice, (iii) in the event of a Corporate Transaction under the
terms of which holders of the Common Stock of the Corporation  will receive upon
consummation  thereof a cash payment for each share surrendered in the Corporate
Transaction (the "Transaction Price"), make or provide for a cash payment to the
optionees equal to the difference  between (A) the  Transaction  Price times the
number of shares of Common  Stock  subject to such  outstanding  options (to the
extent then  exercisable at prices not in excess of the  Transaction  Price) and
(B) the aggregate exercise price of all such outstanding options in exchange for
the  termination  of such  options,  and (iv) provide that all  restrictions  on
Restricted  Shares  shall  lapse in full or in part  and all or any  outstanding
options shall become  exercisable in full or in part  immediately  prior to such
event.

     (b) Substitute  Restricted  Shares or Options.  The  Corporation  may grant
Restricted  Shares or  options  under the Plan in  substitution  for  Restricted
Shares or  options  held by  persons in a  Business  Relationship  with  another
corporation who enter into a Business  Relationship  with the Corporation,  or a
subsidiary of the Corporation, as the result of a merger or consolidation of the
employing  corporation  with the Corporation or a subsidiary of the Corporation,
or  as  a  result  of  the  acquisition  by  the  Corporation,  or  one  of  its
subsidiaries, of property or stock of the other corporation. The Corporation may
direct that substitute Restricted Shares or options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.

                                       11
<PAGE>
18. No Special Employment Rights.

     Nothing  contained  in  the  Plan  or in any  Restricted  Share  or  option
agreement  shall  confer upon any holder of  Restricted  Shares or optionee  any
right with respect to the  continuation  of his or her  employment  by, or other
Business  Relationship  with,  the  Corporation or interfere in any way with the
right of the  Corporation at any time to terminate  such  employment or Business
Relationship or to increase or decrease the compensation of the optionee.

19. Other Employee Benefits.

     Except  as  to  plans  which  by  their  terms   include  such  amounts  as
compensation,  the  amount  of any  compensation  deemed  to be  received  by an
employee as a result of the grant of Restricted  Shares or lapse of restrictions
thereon,  the  exercise  of an option or the sale of shares  received  upon such
exercise  will not  constitute  compensation  with  respect  to which  any other
employee   benefits  of  such  employee  are  determined,   including,   without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary  continuation  plan, except as otherwise  specifically  determined by the
Board of Directors.

20. Amendment of the Plan.

     (a) The Board of Directors may at any time,  and from time to time,  modify
or amend the Plan in any respect, except that if at any time the approval of the
stockholders of the Corporation is required under Section 422 of the Code or any
successor  provision  with  respect to  Incentive  Stock  Options,  or the legal
requirements  relating to the  administration of equity  compensation  plans, if
any, under applicable  provisions of federal  securities laws,  applicable state
corporate and  securities  laws,  the Code,  the rules of any  applicable  stock
exchange or national market system or quotation system on which the Common Stock
is listed or quoted, and the applicable laws and rules of any foreign country or
jurisdiction where awards are, or will be, granted under the Plan.

     (b) The termination or any modification or amendment of the Plan shall not,
without the consent of an optionee or holder of Restricted Shares, affect his or
her rights under an option or grant of Restricted Shares  previously  granted to
him or her.  With the  consent of the  optionee or holder of  Restricted  Shares
affected,  the Board of Directors  may amend  outstanding  option or  Restricted
Share  agreements  in a manner  not  inconsistent  with the  Plan.  The Board of
Directors  shall have the right to amend or modify the terms and  provisions  of
the Plan and of any  outstanding  Incentive Stock Options granted under the Plan
to the extent  necessary to qualify any or all such  options for such  favorable
federal income tax treatment  (including  deferral of taxation upon exercise) as
may be afforded incentive stock options under Section 422 of the Code.

                                       12
<PAGE>
21. Withholding.

     (a) The  Corporation  shall have the right to deduct  from  payments of any
kind  otherwise due to the optionee or holder of Restricted  Shares any federal,
state or local taxes of any kind  required by law to be withheld with respect to
any  shares  issued  upon  exercise  of  options  or  lapse of  restrictions  on
Restricted  Shares  under  the  Plan.  Subject  to  the  prior  approval  of the
Corporation,  which may be withheld by the  Corporation in its sole  discretion,
the  optionee  or  holder  of  Restricted  Shares  may  elect  to  satisfy  such
obligations,  in whole or in part,  (i) by causing the  Corporation  to withhold
shares of Common Stock otherwise  issuable pursuant to the exercise of an option
or lapse of  restrictions  on  Restricted  Shares or (ii) by  delivering  to the
Corporation  shares of Common Stock  already  owned by the optionee or holder of
Restricted  Shares. The shares so delivered or withheld shall have a Fair Market
Value equal to such withholding obligation as of the date that the amount of tax
to be  withheld  is to be  determined.  An  optionee  who has  made an  election
pursuant to this  Section  21(a) may satisfy his or her  withholding  obligation
only with  shares of Common  Stock  which  are not  subject  to any  repurchase,
forfeiture, unfulfilled vesting or other similar requirements.

     (b) The  acceptance of shares of Common Stock upon exercise of an Incentive
Stock  Option  shall  constitute  an agreement by the optionee (i) to notify the
Corporation if any or all of such shares are disposed of by the optionee  within
two years from the date the option was  granted or within one year from the date
the shares were  transferred  to the  optionee  pursuant to the  exercise of the
option, and (ii) if required by law, to remit to the Corporation, at the time of
and in the case of any such  disposition,  an amount  sufficient  to satisfy the
Corporation's  federal, state and local withholding tax obligations with respect
to such disposition, whether or not, as to both (i) and (ii), the optionee is in
the employ of the Corporation at the time of such disposition.

     (c) Notwithstanding the foregoing,  in the case of a Reporting Person whose
options  have been granted in  accordance  with the  provisions  of Section 3(b)
herein,  no election to use shares for the payment of withholding taxes shall be
effective  unless made in compliance  with any applicable  requirements  of Rule
16b-3.

22. Section 162(m) of the Code. The Board of Directors,  in its sole discretion,
may require that one or more agreements  contain  provisions which provide that,
in the event Section 162(m) of the Code, or any successor  provision relating to
excessive  employee  remuneration,  would operate to disallow a deduction by the
Corporation  for all or part of any  payment  of an  award  under  the  Plan,  a
grantee's receipt of the portion that would not be deductible by the Corporation
shall be  deferred  to either the  earliest  date at which the Board  reasonably
anticipates that the grantee's remuneration either does not exceed the limit set
forth in Section 162(m) of the Code or is not subject to Section 162(m) of Code,
or the calendar year in which the grantee  separates from service.  This Section
22 shall be applied and construed consistently with Section 409A of the Code and
the regulations (and guidance) thereunder.

                                       13
<PAGE>
23. Effective Date and Duration of the Plan.

     (a) Effective  Date.  The Plan shall become  effective  when adopted by the
Board of Directors,  but no Incentive  Stock Option granted under the Plan shall
become  exercisable  unless and until the Plan shall have been  approved  by the
Corporation's stockholders.  If such stockholder approval is not obtained within
twelve  (12)  months  after the date of the  Board's  adoption  of the Plan,  no
options  previously granted under the Plan shall be deemed to be Incentive Stock
Options and no Incentive Stock Options shall be granted  thereafter.  Amendments
to the Plan not  requiring  stockholder  approval  shall become  effective  when
adopted by the Board of Directors; amendments requiring stockholder approval (as
provided  in Section 20) shall  become  effective  when  adopted by the Board of
Directors,  but no  Incentive  Stock  Option  granted  after  the  date  of such
amendment  shall become  exercisable  (to the extent that such  amendment to the
Plan was required to enable the Corporation to grant such Incentive Stock Option
to a  particular  optionee)  unless  and until  such  amendment  shall have been
approved by the Corporation's stockholders.  If such stockholder approval is not
obtained  within twelve (12) months of the Board's  adoption of such  amendment,
any Incentive Stock Options granted on or after the date of such amendment shall
terminate  to the extent that such  amendment to the Plan was required to enable
the Corporation to grant such option to a particular  optionee.  Subject to this
limitation,  options  may be  granted  under  the  Plan at any  time  after  the
effective date and before the date fixed for termination of the Plan.

     (b)  Termination.  Unless sooner  terminated in accordance with Section 17,
the Plan shall  terminate  upon the  earlier of (i) the close of business on the
day next  preceding  the tenth  anniversary  of the date of its  adoption by the
Board of Directors,  or (ii) the date on which all shares available for issuance
under the Plan shall have been issued  pursuant to the exercise or  cancellation
of  Restricted  Shares  or  options  granted  under  the  Plan.  If the  date of
termination is determined  under (i) above,  then  Restricted  Shares or options
outstanding  on such date shall  continue to have force and effect in accordance
with the provisions of the  instruments  evidencing  such  Restricted  Shares or
options.

24. Governing Law.

     The  provisions  of this Plan shall be governed and construed in accordance
with the  laws of the  State of  Nevada  without  regard  to the  principles  of
conflicts of laws.

                         Adopted by the Board of Directors on ____________, 2009

                                       14

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