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, 32 nd
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 $0.60per 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 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.
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(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 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):
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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.
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(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 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, 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.
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(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) .
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(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 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.
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(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 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 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.
10
(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
11
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.
12
(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 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
13
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 an
