Document:

Henry County Plywood Corporation: Exhibit 10.1 - Prepared by TNT
Filings Inc.

  

Exhibit
10.1

INDEMNIFICATION
AGREEMENT

          This
Indemnification Agreement (this “Agreement”), dated as of January 15,
2009, is executed by Michael Friess and Sanford Schwartz (collectively, the “Indemnitors”)
in favor of Henry County Plywood Corporation, a Nevada corporation (“HCP”),
Organic Region Group Limited, a British Virgin Islands company (“Organic
Region”); Fuji Sunrise International Enterprises
Limited, a British Virgin
Islands company (“Fuji Sunrise”), Southern International Develop Limited, a British Virgin Islands
company (“Southern International”), HK Organic Region Limited, a Hong Kong company (“HK
Organic”), Zhuhai Organic Region Modern Agriculture Ltd., a PRC company (“Zhuhai
Organic”) and Guangzhou Organic Region Agriculture Ltd., a PRC company (“Guangzhou
Organic,” and together with Organic Region, Fuji Sunrise, Southern
International, HK Organic and Zhuhai Organic, the “Organic Region
Companies”), and the Shareholders of Organic Region listed on Annex A
hereto (the “Shareholders”).

BACKGROUND

          Prior
to the date hereof, Indemnitors were the controlling stockholder of HCP.

          HCP,
the Organic Region Companies and the Shareholders are parties to a share
exchange agreement, dated as of the date hereof (the “Share Exchange Agreement”),
pursuant to which the Shareholders have agreed to exchange all of their capital
stock in New Resources for shares of HCP’s capital stock constituting, in the
aggregate, approximately 98% of the issued and outstanding capital stock of HCP
on a fully-diluted basis as of and immediately after the consummation of the
transactions contemplated by the Share Exchange Agreement.

AGREEMENT

          NOW,
THEREFORE, as partial consideration for the execution by HCP, the Organic
Region Companies and the Shareholders of the Share Exchange Agreement, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Indemnitors covenants and agrees as follows:

          1.        Indemnitors
shall defend, protect, indemnify and hold harmless the Shareholders, HCP and
the Organic Region Companies and all of their stockholders, partners, members,
officers, directors, employees and direct or indirect investors, and any of
their agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by the Share Exchange
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 (each, an “Indemnified Liability” and
collectively, 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 Indemnitors or HCP in the Share Exchange
Agreement or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the
Indemnitors or HCP contained in the Share Exchange Agreement 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 HCP) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Share Exchange Agreement or any other
certificate, instrument or document

 

contemplated hereby or thereby, or (ii) Indemnified
Liabilities based upon any matter relating to HCP that occurred on or prior to
the date hereof. 

          2.        Promptly
after receipt by an Indemnitee of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving an
Indemnified Liability, such Indemnitee shall, if a claim in respect thereof is
to be made against Indemnitors under this Agreement, deliver to the Indemnitors
a written notice of the commencement thereof, and the Indemnitors shall have
the right to participate in, and, to the extent the Indemnitors so desires,
jointly with any other Indemnitors similarly noticed, to assume control of the
defense thereof with counsel mutually reasonably satisfactory to the
Indemnitors and the Indemnitee; provided, however, that an Indemnitee shall
have the right to retain its own counsel with the fees and expenses of not more
than one counsel for such Indemnitee to be paid by the Indemnitors, if the
named parties to such proceeding include both the Indemnitors and the
Indemnitee and, in the reasonable opinion of the Indemnitee, the representation
by such counsel of the Indemnitee and the Indemnitors would be inappropriate
due to actual or potential differing interests between such Indemnitee and any
other party represented by such counsel in such proceeding. The Indemnitee
shall cooperate fully with the Indemnitors in connection with any negotiation
or defense of any such action or claim by the Indemnitors and shall furnish to
the Indemnitors all information reasonably available to the Indemnitee which
relates to such action or claim. The Indemnitors shall keep the Indemnitee
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No Indemnitors shall be liable for any
settlement of any action, claim or proceeding effected without its prior
written consent; provided, however, that the Indemnitors shall not unreasonably
withhold, delay or condition its consent. The Indemnitors shall not, without
the prior written consent of the Indemnitee, consent to entry of any judgment
or enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnitee of a release from all liability in respect to such claim or
litigation and such settlement shall not include any admission as to fault on
the part of the Indemnitee. Following indemnification as provided for
hereunder, the Indemnitors shall be subrogated to all rights of the Indemnitee
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the Indemnitors within a reasonable time of the commencement of any such
action shall not relieve such Indemnitors of any liability to the Indemnitee,
except to the extent that the Indemnitors is prejudiced in its ability to
defend such action.

          3.        The
indemnification required by this Agreement shall be made by periodic payments
of the amount thereof during the course of the defense against any of the
Indemnified Liabilities, reasonably promptly upon the receipt by such
Indemnitee of written bills (with such appropriate supporting information as is
reasonably requested by the Indemnitors that damages have been incurred and the
amount thereof (together with such appropriate supporting information as is
reasonably requested by the Indemnitors); provided that the Indemnitee, as
applicable, shall reimburse all such payments to the extent it is finally
judicially determined that such Indemnitee is not entitled to indemnification
hereunder.

          4.        As
security for the payment and discharge of Indemnitors’ obligations hereunder,
Indemnitors hereby pledge (the “Pledge”) to Organic Region, an aggregate
of 499,889 shares of common stock of HCP (the “HCP Shares”) owned and
controlled by them. In furtherance of the Pledge, Indemnitors shall deliver, or
cause to be delivered to Organic Region on the date hereof, the
certificates representing the HCP Shares, together with all bank signature
stamped stock powers executed in blank (or such other signed instrument of
transfer acceptable to HCP’s transfer agent) (together with the HCP
Shares, the “Escrow Documents”). Organic Region shall hold the Escrow
Documents in escrow until December 31, 2009 (the “Escrow Period”),
following which time, the Escrow Documents shall be returned to the
Indemnitors. Notwithstanding the foregoing, if, at any time during the Escrow
Period, the security becomes enforceable due to an outstanding Indemnified
Liability, Organic Region may, after providing five (5) days written notice to
the Indemnitors of such outstanding Indemnified Liability,

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assume ownership of the HCP Shares; provided, however,
that if the Indemnitors cure such outstanding Indemnified Liability prior to
the fifth (5th) day following delivery of such written notice,
Organic Region shall not be able to claim ownership of the shares. During the
Escrow Period, so long as Organic Region does not assume ownership of the HCP
Shares, Indemnitors shall be entitled to exercise all voting rights in respect
of the HCP Shares, however, any dividends or other distributions with regard to
the HCP Shares will be held in escrow and will be subject to the terms and
conditions hereof. Indemnitors hereby covenant that, during the Escrow Period,
they will not, without the prior written consent of Organic Region, permit any
sale, assignment, exchange or transfer of, or create or permit to arise or
subsist any pledge, lien, hypothecation or other encumbrance, priority or
security interest in all or any portion of the HCP Shares.

          5.        To
the extent that the undertaking by the Indemnitors hereunder may be
unenforceable for any reason, the Indemnitors shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. 

          6.        The
Indemnitors acknowledges that it has reviewed the representations and
warranties of HCP contained in Article IV of the Share Exchange Agreement and
hereby incorporates and makes such representations and warranties to the
Indemnitees as if set forth in full herein.

          7.        All
notices, requests, claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given upon receipt by the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):

	
 

	
 

	
 

	
 

	
If to the Indemnitors, to:

	
 

	
 

	
 

	
 

	
5353 Manhattan Circle 

	
 

	
 

	
Suite 101 

	
 

	
 

	
Boulder, Colorado 80303

	
 

	
 

	
Attention: Michael Friess

	
 

	
 

	
Facsimile: +1 303-499-6666

	
 

	
 

	
 

	
 

	
If to the Indemnitees, to

	
 

	
 

	
 

	
 

	
 

	
Organic Region Group Limited

	
 

	
 

	
6F No.947,Qiao Xing Road 

	
 

	
 

	
Shi Qiao Town, Pan Yu District

	
 

	
 

	
Guangzhou, China

	
 

	
 

	
Attention: Anson Ming

	
 

	
 

	
Facsimile: +86 20-84890227

	
 

	
 

	
 

	
 

	
with a copy to:

	
 

	
 

	
 

	
 

	
 

	
Pillsbury Winthrop Shaw Pittman LLP

	
 

	
 

	
50 Fremont Street

	
 

	
 

	
San Francisco, CA 94105-2228

	
 

	
 

	
Attention: Scott C. Kline, Esq.

	
 

	
 

	
Facsimile: +1 415.983.1200

          8.        Notwithstanding
any other provision contained in the Share Exchange Agreement, the indemnity
provided under this Agreement shall remain in full force and in effect for any
claims made within a period of twenty-four (24) months from the date hereof.
The indemnity contained herein shall be

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in addition to (a) any cause of action or similar
right of any Indemnitee against the Indemnitors or others, and (b) any
liabilities the Indemnitors may be subject to pursuant to applicable law.

          9.        This
Agreement shall be deemed to have been made under and be governed by, and
construed in accordance with, the laws of the State of New York, in all
respects, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof, except to the extent the laws of Nevada
are mandatorily applicable to any of the transactions.

          10.      This
Agreement may not be amended, modified, or supplemented except in writing
executed by the parties hereto. No provision contained herein shall be waived
unless the same shall be in writing and signed by each of the parties hereto
and shall be effective only in the specific instance and for the specific
purpose given.

          11.      This
Agreement may be executed, and accepted and agreed to in several counterparts,
each of which will be deemed to be an original, and such counterparts together
will constitute but one and the same instrument. Facsimile signatures shall be
deemed to have the same effect as originals.

[Remainder of
Page Intentionally Left Blank]

4

[Indemnitors
Signature Page]

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

	
 

	
 

	
 

	
 

	
/s/ Michael Friess

	
 

	
 

	 

	
 

	
 

	
Michael Friess

	
 

	
 

	
 

	
 

	
 

	
/s/ Sanford Schwartz

	
 

	
 

	 

	
 

	
 

	
Sanford Schwartz

	
 

 

[HCP
Signature Page]

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

	
 

	
 

	
 

	
 

	
 

	
HENRY COUNTY PLYWOOD
 CORPORATION

	
 

	
 

	
 

	
 

	
By:

	
/s/ Michael Friess

	
 

	
 

	
 

	 

	
 

	
 

	
Name: Michael Friess

	
 

	
 

	
Title: President

	
 

 

[Organic
Region Companies Signature Page]

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

	
 

	
 

	
 

	
 

	
 

	
ORGANIC REGION GROUP LIMITED 

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	
 

	
 

	
FUJI SUNRISE INTERNATIONAL ENTERPRISES LIMITED

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	
 

	
 

	
SOUTHERN INTERNATIONAL DEVELOP LIMITED

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	
 

	
 

	
HK ORGANIC REGION LIMITED
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	
 

	
 

	
ZHUHAI ORGANIC REGION MODERN AGRICULTURE LTD.

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	
 

	
 

	
GUANGZHOU ORGANIC REGION AGRICULTURE LTD.

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

 

[Shareholders’
Signature Page]

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

	
 

	
 

	
 

	
 

	
 

	
LOGO INTERNATIONAL HOLDINGS LIMITED

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	
 

	
 

	
GRAND WILL INVESTMENT GROUP LIMITED

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	
 

	
 

	
GOOD JOY INTERNATIONAL GROUP INVESTMENT LIMITED

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	
 

	
 

	
ALPHA FORTUNE GLOBAL DEVELOP LIMITED

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	
 

	
 

	
LONG RICH GLOBAL INVEST LIMITED

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	
 

	
 

	
MULTI BILLION INVESTMENT DEVELOPMENT LIMITED

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

	
 

	
 

	
 

	
 

	
 

	
WELLDONE INVESTMENT DEVELOPMENT LIMITED

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
 

	
 

	
 

	 

	
 

	
 

	
Name: 

	
 

	
 

	
Title: 

	
 

 

Annex
A

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
No.

	
 

	
Name
 and Address of 

 Shareholder

	
 

	
Tax ID 

 (if 
applicable)

	
 

	
Number of

 Shares of

 Organic

 Region Stock

 Being

 Exchanged

	
 

	

Percentage of
Total Organic

 Region Stock

 Represented By

 HCP Stock

 Being 
Exchanged

	
 

	
Number of

 Shares of

 HCP Stock to

 be Received

 by

 Shareholder

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	
1

	
 

	
Logo International Holdings Limited

 Pelm Grove House

 P.O. Box 438 

 Road Town, Tortola 

 British Virgin Islands

	
 

	
N/A

	
 

	
375

	
 

	
37.5%

	
 

	
30,618,207

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
2

	
 

	
Grand Will Investment Group Limited

 OMC Chambers

 P.O. Box 3152

 Road Town, Tortola

 British Virgin Islands

	
 

	
N/A

	
 

	
375

	
 

	
37.5%

	
 

	
30,618,207

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
3

	
 

	
Good Joy International Group Investment Limited

 Drake Chambers, 

 P.O. Box 3152

 Road Town, Tortola 

 British Virgin Islands

	
 

	
N/A

	
 

	
50

	
 

	
5%

	
 

	
4,082,428

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
4

	
 

	
Alpha Fortune Global Develop Limited

 Drake Chambers

 P.O. Box 3321

 Road Town, Tortola

 British Virgin Islands

	
 

	
N/A

	
 

	
50

	
 

	
5%

	
 

	
4,082,428

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
5

	
 

	
Long Rich Global Invest Limited

 Drake Chambers

 P.O. Box 3321

 Road Town, Tortola

 British Virgin Islands

	
 

	
N/A

	
 

	
50

	
 

	
5%

	
 

	
4,082,428

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
6

	
 

	
Multi Billion Investment Development Limited

 Drake Chambers

 P.O. Box 3321

 Road Town, Tortola

 British Virgin Islands

	
 

	
N/A

	
 

	
50

	
 

	
5%

	
 

	
4,082,428

 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
No.

	
 

	
Name
 and Address of 

 Shareholder

	
 

	
Tax ID 

 (if 
applicable)

	
 

	
Number of

 Shares of

 Organic

 Region Stock

 Being

 Exchanged

	
 

	
Percentage of
Total Organic

 Region Stock

 Represented By

 HCP Stock

 Being 
Exchanged

	
 

	
Number of

 Shares of

 HCP Stock to

 be Received

 by

 Shareholder

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	
7

	
 

	
Welldone Investment Development Limited

 Drake Chambers

 P.O. Box 3321

 Road Town, Tortola 

 British Virgin Islands

	
 

	
N/A

	
 

	
50

	
 

	
5%

	
 

	
4,082,428

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	
 

	
 

	
TOTAL

	
 

	
 

	
 

	
1,000

	
 

	
100%

	
 

	
81,648,554Henry County Plywood Corporation: Exhibit 10.2 - Prepared by TNT Filings
Inc.

  

 

Exhibit 10.2

 

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of April 23, 2008, among ORGANIC REGION GROUP LTD., a company organized under the laws of Hong Kong (together with its successors and assigns, the “Company”), and the investors identified on the signature pages hereto (each, an “Investor” and collectively, the “Investors”).

BACKGROUND

Subject to the terms and conditions set forth in this Agreement and pursuant to the Securities Act (as defined below), the Company desires to issue and sell to each Investor, and each Investor, severally and not jointly, desires to purchase from the Company certain securities of the Company, as more fully described in this Agreement.
 

AGREEMENT

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

ARTICLE 1

DEFINITIONS

1.1.

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

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person.

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

“Closing” means the closing of the purchase and sale of the Shares pursuant to Article 2.

 “Commission” means the Securities and Exchange Commission.

 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 “Exempt Issuance” means the issuance of (a) securities to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted by the Board of Directors of the Company or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder or to any placement agents in connection with the transactions contemplated hereby and/or convertible securities issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of any such securities, and (c) securities issued pursuant to acquisitions or strategic transactions, provided any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

 

“Going Public Transaction” means the consummation of (i) the acquisition of a controlling interest (more than 50% of the voting power) in the Company (through merger, sale of stock or other transaction or series of related transactions) by a U.S. entity whose equity securities are eligible for trading on NASDAQ's Over the Counter Bulletin Board (OTCBB), Nasdaq Market, Amex or New York stock exchange (the “Acquiror”), or (ii) the sale or transfer of all or substantially all of the Company's assets or b or any Canadian, European or Asian stock exchange usiness to an Acquiror.

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

“Promissory Note” means the convertible promissory note issued by the Company in the form attached hereto as Exhibit A.

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

“Securities Act” means the Securities Act of 1933, as amended.

“Warrant” means the warrant to purchase securities of the Company in the form attached hereto as Exhibit B.

ARTICLE 2

PURCHASE AND SALE

2.1.

Closing.  Subject to the terms and conditions set forth in this Agreement, upon the execution hereof the Company shall issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase from the Company, a Promissory Note in the principal amount set forth on the signature page hereof (the “Investment Amount”), together with a Warrant.  The Closing shall take place at the offices of Thelen Reid Brown Raysman & Steiner LLP in San Francisco, CA on the date hereof or at such other location or time as the parties may agree.  The Promissory Note, the Warrant and the equity securities issuable upon conversion or exercise thereof (and the securities issuable upon conversion of such equity securities) are collectively referred to herein as the "Securities."

2

 

2.2.

Closing Deliveries.

(a)

Upon the execution hereof, the Company shall deliver or cause to be delivered to each Investor a Promissory Note and Warrant duly (together with this Agreement, the “Transaction Documents”) executed by the Company.

(b)

Within one Business Day following the date of this Agreement, each Investor shall cause to be delivered to the Company its Investment Amount, less the expense reimbursement amount set forth in Section 4.4 below, in United States dollars and in immediately available funds, by wire transfer to an account designated in writing by the Company.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

3.1.

Representations and Warranties of the Company.  The Company hereby makes the following representations and warranties to each Investor:

(a)

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

(b)

Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated hereby and to carry out its obligations hereunder.  The execution and delivery hereof and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company in connection therewith.  This Agreement, the Promissory Note and Warrant has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.
 

3

 

(c)

Subsidiaries.  The Company owns, directly or indirectly, all of the capital stock or other equity interests of its subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

(d)

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

(e)

Filings, Consents and Approvals.  Except for required filings with the Securities and Exchange Commission (the “SEC”) and applicable “Blue Sky” or state securities commissions, no material consent, approval, license, permit, order or authorization (“Consent”) of, or registration, declaration or filing with, or permit from, any governmental entity is required to be obtained or made by or with respect to the Company or any subsidiary in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

(f)

Issuance of the Securities.  The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares.  

(g)

Capitalization.  The capitalization of the Company is as set forth on Schedule 3.1(g).  Except as set forth on Schedule 3.1(g), no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.  No further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Securities.

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(h)

Financial Statements.  The Company has provided the Investors with its unaudited balance sheet as of December 31, 2007, together with its statements of income, cash flows and shareholders equity for the year ended December 31, 2007 (the “Financial Statements”).  The Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the People's Republic of China applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such Financial Statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company, as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject to normal, immaterial, year-end audit adjustments.

(i)

Material Changes.  Since December 31, 2007, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's Financial Statements pursuant to GAAP, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans.

(j)

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

(k)

Compliance.  Neither the Company nor any subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any subsidiary under), nor has the Company or any subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

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(l)

Regulatory Permits.  The Company and the subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. The Company and its subsidiaries have paid all fees for permits and licenses required to be paid by them in the PRC in connection with the operation of their respective businesses.

(m)

Certain Fees.  Other than fees payable to Hickey Freihofner Capital, no brokerage or finder's fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents.  The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.  

(n)

Private Placement.  Assuming the accuracy of the Purchasers' representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby.

(o)

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

(p)

No Integrated Offering. Assuming the accuracy of the Purchasers' representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act which would require the registration of any such securities under the Securities Act.
 

(q)

No General Solicitation. Neither the Company nor any of its Affiliates, or any person acting on its or their behalf, directly or indirectly, (i) has conducted or will conduct any general solicitation (as that term is used in Rule 502(c) of Regulation D as promulgated by the Commission under the Securities Act) or general advertising with respect to the sale of the Common Stock or Warrants, or (ii) made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration of the Common Stock or Warrants, under the Securities Act, except as required herein.

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(r)

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

(s)

Sovereign Immunity.  Under the laws of their respective jurisdiction of incorporation and the PRC, neither the Company nor any subsidiary, is, nor are any of their respective properties, assets or revenues, entitled to any right of immunity on the grounds of sovereignty from any legal action, suit or proceeding, from set-off or counterclaim, from the jurisdiction of any court, from service of process, from attachment prior to or in aid of execution of judgment, or from other legal process or proceeding for the giving of any relief or for the enforcement of any judgment.

3.2.

Representations and Warranties of the Investors. Each Investor hereby, for itself and for no other Investor, represents and warrants to the Company as follows:

(a)

Organization; Authority.  If such Investor is a business entity, such Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated hereby and to carry out its obligations hereunder.  The execution, delivery and performance by such Investor of the transactions contemplated by this Agreement has been duly authorized by all necessary action on the part of such Investor.  This Agreement has been duly executed by such Investor, and when delivered by such Investor in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Investor, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.

(b)

Investment Intent.  Such Investor is acquiring the Securities for its own account for investment purposes only and not with a view towards, or resale in connection with, a public sale or distribution of such Securities or any part thereof, without prejudice, however, to such Investor's right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws.  Subject to the immediately preceding sentence and the terms of the Promissory Note and Warrant, nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time.  Such Investor is acquiring such securities hereunder in the ordinary course of its business.  Such Investor does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of such Securities.

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(c)

Investor Status.  The Investor is an “accredited investor” as defined in Rule 501(a) under the Securities Act.  Such Investor is not a registered broker dealer under Section 15 of the Exchange Act.

(d)

General Solicitation.  Such Investor is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio.

(e)

Access to Information.  Such Investor acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.  

(f)

Independent Investment Decision.  Such Investor has independently evaluated the merits of its decision to purchase Securities and such Investor confirms that it has not relied on the advice of any other Investor's business and/or legal counsel in making such decision.  Such Investor confirms that none of such Persons has made any representations or warranties to such Investor in connection with the transactions contemplated hereby.

The Company acknowledges and agrees that no Investor has made or makes any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2.

ARTICLE 4

OTHER AGREEMENTS OF THE PARTIES

4.1.

Compliance with Securities Laws.

(a)

The Securities may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of the Securities, other than pursuant to an effective registration statement, Regulation S, pursuant to Rule 144, or to the Company or an Affiliate of an Investor, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.  Notwithstanding the foregoing, the Company hereby consents to and agrees to register on the books of the Company and with its transfer agent, without any such legal opinion, any transfer of Securities by an Investor to an Affiliate of such Investor, provided that the transferee certifies to the Company that it is an “accredited investor” as defined in Rule 501(a) under the Securities Act and provided that such Affiliate does not request any removal of any existing legends on any certificate evidencing the Securities.

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(b)

Certificates evidencing the Securities will contain the following legend, until such time as they are not required under Section 4.1(c):

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

4.2.

Registration Obligation.

(a)

If the Company or any stockholder of the Company proposes to register any of its common stock or any securities convertible into common stock under the Securities Act (other than pursuant to an offering of securities on Form S-8 in connection with an employee benefit, share dividend, share ownership or dividend reinvestment plan or registration of securities on Form S-4 in connection with a business combination transaction), the Company shall give prompt written notice to the Investors of its intention to effect such a registration and shall, if commercially practicable, include in such registration statement all securities issued or issuable upon conversion or exercise of the Promissory Note and Warrant (the “Registrable Securities”) (subject to required cut-backs or limitations pursuant to the Commission's interpretations of Rule 415 promulgated under the Securities Act) with respect to which the Company has received written request from the Investors for inclusion therein within ten (10) business days after the date of sending of such written notices to the Investors to the Investors.  

(b)

All registrations made by the Investors will be made solely at the Company's expense, other than (i) if an underwritten offering is consented to by the Company, the underwriters', broker-dealers' and placement agents' selling discounts, commissions and fees relating to the sale of the Investors' securities, (ii) any costs and expenses of counsel, accountants or other advisors retained by the Investors and (iii) all transfer, franchise, capital stock and other taxes, if any, applicable to the Investors' securities which shall be paid by the Investors.

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(c)

In the event of any registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company shall indemnify and hold harmless each Investor holding such Registrable Securities, such Investor's directors and officers, and each other person (including each underwriter) who participated in the offering of such Registrable Securities and each other person, if any, who controls such Investor or such participating person within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Investor or any such director or officer or participating person or controlling person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or any alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, (ii) any omission or any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any other violation of any applicable securities laws, and in each of the foregoing circumstances shall reimburse such Investor or such director, officer or participating person or controlling person for any legal or any other expenses reasonably incurred by such Investor or such director, officer or participating person or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any actual or alleged untrue statement or actual or alleged omission made in such registration statement, preliminary prospectus, prospectus or amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Investor specifically for use therein.  

(d)

In the event of any registration of any Registrable Securities under the Securities Act pursuant to this Agreement, each Investor holding Registrable Securities agrees to indemnify and hold harmless the Company, its directors and officers and each other person, if any, who controls the Company within the meaning of the Securities Act and any other Investor against any losses, claims, damages or liabilities, joint or several, to which the Company or any such director or officer or any such person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or any alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any omission or any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in either case only to the extent that such untrue statement or omission is (A) made in reliance on and in conformity with any information furnished in writing by such Investor to the Company concerning such Investor specifically for inclusion in the offering documents relating to such offering, and (B) is not corrected by such Investor and distributed to the Investors within a reasonable period of time.  Notwithstanding the provisions of this Section 4.2(d), no Investor shall be required to indemnify any person pursuant to Section 4.2(d) or to contribute pursuant to Section 4.2(e) below in an amount in excess of the amount of the aggregate net proceeds received by such Investor in connection with any such registration under the Securities Act.

(e)

If the indemnification provided for above from the indemnifying
party is unavailable to an indemnified party hereunder in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. 

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 The relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.  The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.  The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 4.2(e) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above.  No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.

(f)

All rights of the Investors under this Section 4.2 are unique to and limited to the Investors and may not be transferred or inure to the benefit of the Investors' successors and assigns or any other transferee who obtains Registrable Securities.

4.3.

Publicity.  The Company may issue press releases disclosing the transactions contemplated hereby and may make all disclosures to the extent required by the Exchange Act.  

4.4.

Use of Proceeds; Expense Reimbursement.  The Company will use the net proceeds from the sale of the securities hereunder for working capital purposes, acquisitions and/or capital expenditures; provided, however, that the Company shall use a portion of the proceeds to retain U.S. auditors and U.S. legal counsel reasonably satisfactory to the Investors within fifteen (15) days of the date of this Agreement; provided further, that the Investors agree that Thelen Reid Brown Raysman & Steiner LLP shall be acceptable as U.S. legal counsel and Kabani & Co. shall be acceptable as U.S. Auditors.  The parties hereto agree that the Company shall  reimburse the Investors an aggregate of $22,000 from the proceeds of the sale of the Securities for the Investors' expenses related to pre-audit investigations (including by Thornhill Capital), due diligence and investment documentation (including legal expenses).

4.5.

Right of First Refusal.  

(a)

From the date hereof until the one year anniversary of the date hereof (the "Trigger Date"), the Company will not, directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its equity or equity equivalent securities, including without limitation any debt, preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable or exercisable for shares of common stock or common stock equivalents (any such offer, sale, grant, disposition or announcement being referred to as a "Subsequent Placement") unless the Company shall have first complied with this Section 4.5.

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(b)

The Company shall deliver to each Investor hereunder a written notice (the "Offer Notice") of any proposed or intended issuance or sale or exchange (the "Offer") of the securities being offered (the "Offered Securities") in a Subsequent Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify the persons or entities (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with such Investors all of the Offered Securities, allocated among such Investors (a) based on such Investor's pro rata portion of the total Investment Amount hereunder (the "Basic Amount"), and (b) with respect to each Investor that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Investors as such Investor shall indicate it will purchase or acquire should the other Investors subscribe for less than their Basic Amounts (the "Undersubscription Amount"), which process shall be repeated until the Investors shall have an opportunity to subscribe for any remaining Undersubscription Amount.

(c)

To accept an Offer, in whole or in part, such Investor must deliver a written notice to the Company prior to the end of the fifth (5th) Business Day after such Investor's receipt of the Offer Notice related to an unsolicited offer or the 10th Business Day after such Investor's receipt of the Offer Notice related to a Company negotiated offer (the "Offer Period"), setting forth the portion of such Investor's Basic Amount that such Investor elects to purchase and, if such Investor shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Investor elects to purchase (in either case, the "Notice of Acceptance").  If the Basic Amounts subscribed for by all Investors are less than the total of all of the Basic Amounts, then each Investor who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, that if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the "Available Undersubscription Amount"), each Investor who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Investor bears to the total Basic Amounts of all Investors that have subscribed for Undersubscription Amounts, subject to rounding by the Company to the extent its deems reasonably necessary.

(d)

The Company shall have forty-five (45) Business Days from the expiration of the Offer Period above to (i) offer, issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by the Investors (the "Refused Securities"), but only to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring person or persons or less favorable to the Company than those set forth in the Offer Notice and (ii) to publicly announce (a) the execution of such Subsequent Placement Agreement (as defined below), and (b) either (x) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (y) the termination of such Subsequent Placement Agreement.  

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(e)

In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in this Section 4.5), then each Investor may, at its sole option and in its sole discretion, reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that such Investor elected to purchase pursuant to Section 4.5(c) above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to Investors pursuant to Section 4.5(c) above prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities.  In the event that any Investor so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Investors in accordance with Section 4.5(b) above.

(f)

Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, the Investors shall acquire from the Company, and the Company shall issue to the Investors, the number or amount of Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section 4.5(e) above if the Investors have so elected, upon the terms and conditions specified in the Offer.  The purchase by the Investors of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and the Investors of a purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to the Investors and their respective counsel (such agreement, the “Subsequent Placement Agreement”).

(g)

Any Offered Securities not acquired by the Investors or other persons in accordance with Section 4.5(f) above may not be issued, sold or exchanged until they are again offered to the Investors under the procedures specified in this Agreement.

(h)

In exchange for the Company's willingness to agree to these procedures, each Investor hereby irrevocably agrees that it will hold in strict confidence any and all Offer Notices, the information contained therein, and the fact that the Company is contemplating a Subsequent Placement, until such time as the Company is obligated to make the disclosures required by Section 4.5(d), or unless it notifies the Company in writing that it no longer desires to receive Offer Notices.
 

(i)

Notwithstanding the foregoing, this Section 4.14 shall not apply in respect of an Exempt Issuance.

4.6.

Assignment In Going Public Transaction.  The Company shall cause the Acquiror in any Going Public Transaction to assume the obligations of the Company set forth in Section 4.2, 4.3 and 4.5 of this Agreement (and the Holders agree that the Company shall be released of such obligations upon such assumption).

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4.7.

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

4.8.

Reservation of Securities.  

(a)

The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents.

(b)

If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the required minimum on such date, then the Board of Directors of the Company shall use commercially reasonable efforts to amend the Company's certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock, as soon as possible and in any event not later than the 75th day after such date.

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ARTICLE 5

MISCELLANEOUS

5.1.

Fees and Expenses.  Except as set forth in Section 4.4 above, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance hereof.  

5.2.

Entire Agreement.  This Agreement, together with the Promissory Notes and Warrants, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents.

5.3.

Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile (provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile number specified in this Section prior to 5:30 p.m. (New York City time) on a Business Day, (b) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, (c) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as follows:

If to the Company:

Organic Region Group Ltd.

6F No. 947 Qiao Xing Road

Shi Qiao Town Pan Yu District

Guangzhou, China 511400

Attention:  C M Leung

Facsimile:  

With a copy to:

Thelen Reid Brown Raysman & Steiner LLP

101 Second Street, Suite 1800

San Francisco, CA  94105-3606

Attention:  Scott C. Kline, Esq.

Facsimile: 415.369.8774

 

If to an Investor:

To the address set forth under such Investor's name on the signature pages hereof;

With respect to Investor Ancora Greater China Fund, L.P., with a copy to (which shall not constitute notice):

15

 

 

Crone Rozynko LLP

101 Montgomery Street

Suite 1950

San Francisco, CA 94105

Fax: (415) 955-8910

 

or such other address as may be designated in writing hereafter, in the same manner, by such Person.

5.4.

Amendments; Waivers; No Additional Consideration.  No provision of this Agreement may be waived or amended except in a written instrument signed by the Company and the Investors holding at least a majority in interest of the outstanding aggregate principal amount of the Promissory Notes.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.  

5.5.

Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  

5.6.

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

5.7.

Governing Law.  This Agreement shall be governed by and be construed in accordance with the laws of the State of New York without regard to the conflicts of law rules of such state.  Each of the Company and the Investors hereby irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court for the Southern District of New York, and any appellate court from any thereof, in respect of actions brought against it as a defendant, in any action, suit or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action, suit or proceeding may be heard and determined in such courts.  Each of the parties hereto agrees that a final judgment in any such action, suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Company and the Investors hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement, or in any court referred to above.  Each of the parties hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action, suit proceeding in any such court and waives any other right to which it may be entitled on account of its place of residence or domicile.

16

 

5.8.

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

5.9.

Severability.  If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

5.10.

Independent Nature of Investors' Obligations and Rights.  The obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor hereunder.  The decision of each Investor to purchase Securities pursuant hereto has been made by such Investor independently of any other Investor.  

[Signature Page Follows]

17

 

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

 

ORGANIC REGION GROUP LTD.

 

 

By: ________________________________

Name:  C M Leung

Title: CEO

 

[Remainder of Page Intentionally Left Blank; Signature Page for Investors Follows]

 

 

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

NAME OF INVESTOR

	_____________________________________________________
	 
	
    By:__________________________________________________
	Name:
	Title:
	Investment Amount:
    $____________________________________
	 
	Tax ID
    No.:____________________________________________
	 
	ADDRESS FOR NOTICE
	
    c/o:__________________________________________________
	
    Street:________________________________________________
	
    City/State/Zip:__________________________________________
	
    Attention:_____________________________________________
	
    Tel:__________________________________________________
	
    Fax:__________________________________________________
	 
	DELIVERY INSTRUCTIONS
	(if different from above)
	
    c/o:__________________________________________________
	
    Street:________________________________________________
	
    City/State/Zip:__________________________________________
	
    Attention:_____________________________________________
	
    Tel:__________________________________________________

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