FORM OF WARRANT]
[FORM
OF WARRANT]
CHINA
BAK BATTERY, INC.
Warrant
No.: [__________]
Number of
Shares of Common Stock:[__________]
Date of
Issuance: October
27, 2009, 2009 ("Issuance Date")
China BAK
Battery, Inc., a Nevada corporation (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, [___________], the registered holder hereof or its
permitted assigns (the "Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon surrender of this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the "Warrant"), at any time or
times on or after the date hereof (the "Initial Exercise Eligibility
Date"), but not after 11:59 p.m., New York time, on the Expiration Date
(as defined below), ______________
( )
fully paid, nonassessable shares of Common Stock (as defined below) (the "Warrant
Shares"). Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in Section
15. This Warrant is one of the Warrants to purchase Common Stock (the
"SA Warrant") issued
pursuant that certain Subscription Agreement, dated as of October 21, 2009 (the
"Subscription Date"), by
and among the Company and the investors (the "Buyers") (the "Subscription
Agreement").
1. EXERCISE OF
WARRANT.
(a) Mechanics of
Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any day on or after the Initial
Exercise Eligibility Date, in whole or in part, by delivery of a written notice,
in the form attached hereto as Exhibit A (the "Exercise Notice"), of the
Holder's election to exercise this Warrant. The Holder shall not be
required to deliver the original Warrant in order to effect an exercise
hereunder. Execution and delivery of the Exercise Notice with respect
to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares. On or
before the first (1st)
Business Day following the date on which the Company has received each of the
Exercise Notice, the Company shall transmit by facsimile an acknowledgment of
confirmation of receipt of the Exercise Notice to the Holder and the Company's
transfer agent (the "Transfer
Agent"). On or before the third (3rd)
Trading Day following the date on which the Company has received the Exercise
Notice, and upon receipt by the Company of (A) payment to the Company of an
amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the "Aggregate Exercise Price" and
together with the Exercise Notice, the "Exercise Delivery Documents")
in cash or by wire transfer of immediately available funds or (B) notification
from the Holder that this Warrant is being exercised pursuant to a Cashless
Exercise (as defined in Section 1(d)) (the date of receipt of the Exercise
Delivery Documents being referred to as (the "Share Delivery Date"), the
Company shall (X) provided that the Transfer Agent is participating in The
Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of Warrant Shares to which the Holder is entitled pursuant to
such exercise to the Holder's or its designee's balance account with DTC through
its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent is
not participating in the DTC Fast Automated Securities Transfer Program, issue
and dispatch by overnight courier to the address as specified in the Exercise
Notice, a certificate, registered in the Company's share register in the name of
the Holder or its designee, for the number of shares of Common Stock to which
the Holder is entitled pursuant to such exercise. When issued, the
Warrant Shares shall be issued free of restrictive legends unless the
Registration Statement (as defined in the Subscription Agreement) is not then
effective or the Warrant Shares are not freely transferable without volume
restrictions or current public information requirements pursuant to Rule 144
under the Securities Act of 1933, as amended. Upon delivery of the
Exercise Delivery Documents, the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares with respect
to which this Warrant has been exercised, irrespective of the date such Warrant
Shares are credited to the Holder's DTC account or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may be. If
this Warrant is submitted in connection with any exercise pursuant to this
Section 1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being
acquired upon an exercise, then the Company shall as soon as practicable and in
no event later than three Business Days after any exercise and at its own
expense, issue a new Warrant (in accordance with Section 7(d)) representing the
right to purchase the number of Warrant Shares purchasable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares with respect
to which this Warrant is exercised. No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but rather the number
of shares of Common Stock to be issued shall be rounded up to the nearest whole
number. The Company shall pay any and all taxes, and Transfer Agent
fees, which may be payable with respect to the issuance and delivery of Warrant
Shares upon exercise of this Warrant.
(b) Exercise
Price. For purposes of this Warrant, "Exercise Price" means $3.90,
subject to adjustment as provided herein.
(c) Company's Failure to Timely
Deliver Securities. If within three (3) Trading Days after the
Company's receipt of the facsimile copy of an Exercise Notice the Company shall
fail to issue and deliver a certificate to the Holder and register such shares
of Common Stock on the Company's share register or credit the Holder's balance
account with DTC for the number of shares of Common Stock to which the Holder is
entitled upon the Holder's exercise hereunder, 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 shares of
Common Stock issuable upon such exercise that the Holder anticipated receiving
from the Company (a "Buy-In"), then the Company
shall, within three (3) Business Days after the Holder's request and in the
Holder's discretion, either (i) 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 certificate (and to issue such
Warrant Shares) shall terminate, or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing such Warrant
Shares and pay cash to the Holder in an amount equal to the excess (if any) of
the Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the Closing Bid Price on the date of exercise.
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(d) Cashless Exercise.
Notwithstanding
anything contained herein to the contrary, if a Registration Statement (as
defined in the Subscription Agreement) covering the Warrant Shares that are the
subject of the Exercise Notice (the "Unavailable Warrant Shares")
is not available for the resale of such Unavailable Warrant Shares, the Holder
may, in its sole discretion, exercise this Warrant in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made to the Company
upon such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the "Net Number" of shares of Common Stock determined
according to the following formula (a "Cashless
Exercise"):
Net Number = (A x B) - (A x
C)
B
For purposes of the foregoing
formula:
|
A=
|
the
total number of shares with respect to which this Warrant is then being
exercised.
|
|
B=
|
the
Weighted Average Price of the shares of Common Stock (as reported by
Bloomberg) for the five (5) consecutive Trading Days ending on
the date immediately preceding the date of the Exercise
Notice.
|
|
C=
|
the
Exercise Price then in effect for the applicable Warrant Shares at the
time of such exercise.
|
(e) Disputes. In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed and resolve
such dispute in accordance with Section 12.
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(f) Beneficial Ownership
Limitation. The Company shall not effect the exercise of this
Warrant, and the Holder shall not have the right to exercise this Warrant, to
the extent that after giving effect to such exercise, such Person (together with
such Person's affiliates) would beneficially own in excess of 4.99% (the "Maximum Percentage") of the
shares of Common Stock outstanding immediately after giving effect to such
exercise. For purposes of the foregoing sentence, the aggregate
number of shares of Common Stock beneficially owned by such Person and its
affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (x) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (y) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding
sentence, for purposes of this paragraph, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. For purposes of this Warrant, in determining the
number of outstanding shares of Common Stock, the Holder may rely on the number
of outstanding shares of Common Stock as reflected in (1) the Company's most
recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing
with the Securities and Exchange Commission, as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice by the Company
or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral
request of the Holder, the Company shall within one Business Day confirm orally
and in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of
securities of the Company, including the SA Warrants, by the Holder and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. By written notice to the Company, the
Holder may from time to time increase or decrease the Maximum Percentage to any
other percentage not in excess of 9.99% specified in such notice; provided that
(x) any such increase will not be effective until the sixty-first (61st) day
after such notice is delivered to the Company, and (y) any such increase or
decrease will apply only to the Holder and not to any other holder of SA
Warrants.
(g) Insufficient Authorized
Shares. If at any time while any of the Warrants remain
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon exercise of the Warrants at least a number of shares of Common
Stock equal to (the "Required
Reserve Amount") the number of shares of Common Stock as shall from time
to time be necessary to effect the exercise of all of the Warrants then
outstanding (an "Authorized
Share Failure"), then the Company shall immediately take all action
necessary to increase the Company's authorized shares of Common Stock to an
amount sufficient to allow the Company to reserve the Required Reserve Amount
for the Warrants then outstanding. Without limiting the generality of
the foregoing sentence, as soon as practicable after the date of the occurrence
of an Authorized Share Failure, but in no event later than seventy five (75)
days after the occurrence of such Authorized Share Failure, the Company shall
hold a meeting of its stockholders for the approval of an increase in the number
of authorized shares of Common Stock. In connection with such
meeting, the Company shall provide each stockholder with a proxy statement and
shall use its best efforts to solicit its stockholders' approval of such
increase in authorized shares of Common Stock and to cause its board of
directors to recommend to the stockholders that they approve such
proposal.
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2. ADJUSTMENT OF EXERCISE PRICE
AND NUMBER OF WARRANT SHARES. The Exercise Price and the
number of Warrant Shares shall be adjusted from time to time as
follows:
(a) Adjustment upon Subdivision
or Combination of Common Stock. If the Company at any time on
or after the Subscription Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced and the
number of Warrant Shares will be proportionately increased. If the
Company at any time on or after the Subscription Date combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately
decreased. Any adjustment under this Section 2(b) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(b) Voluntary Adjustment By
Company. The Company may at any time during the term of
this Warrant reduce the then current Exercise Price to any amount and for any
period of time deemed appropriate by the Board of Directors of the
Company.
(c) Other
Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features to the holders of the
Company’s Common Stock), then the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of Warrant Shares so
as to protect the rights of the Holder; provided that no such adjustment
pursuant to this Section 2(c) will increase the Exercise Price or decrease the
number of Warrant Shares as otherwise determined pursuant to this Section
2.
3. RIGHTS UPON DISTRIBUTION OF
ASSETS. If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"), at any time
after the issuance of this Warrant, then, in each such case:
(a) any
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution shall be reduced, effective as of the close
of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid
Price of the shares of Common Stock on the Trading Day immediately preceding
such record date minus the value of the Distribution (as mutually determined in
good faith by the Company's Board of Directors and the Holder) applicable to one
share of Common Stock, and (ii) the denominator shall be the Closing Bid Price
of the shares of Common Stock on the Trading Day immediately preceding such
record date; and
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(b) the
number of Warrant Shares shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution is of shares of Common Stock (or common
stock) ("Other Shares of Common
Stock") of a company whose common shares are traded on a national
securities exchange or a national automated quotation system, then the Holder
may elect to receive a warrant to purchase Other Shares of Common Stock in lieu
of an increase in the number of Warrant Shares, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common Stock that would
have been payable to the Holder pursuant to the Distribution had the Holder
exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b).
4. PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS.
(a) Purchase
Rights. In addition to any adjustments pursuant to Section 2
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the "Purchase
Rights"), then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of shares of Common
Stock acquirable upon complete exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
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(b) Fundamental
Transactions. The Company shall not enter into or be party to
a Fundamental Transaction unless the Successor Entity assumes in writing all of
the obligations of the Company under this Warrant and the other Transaction
Documents in accordance with the provisions of this Section (4)(b) pursuant to
written agreements in form and substance satisfactory to the Holder and approved
by the Holder prior to such Fundamental Transaction, including agreements to
deliver to each holder of Warrants in exchange for such Warrants a security of
the Successor Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant, including, without limitation, an adjusted
exercise price equal to the value for the shares of Common Stock reflected by
the terms of such Fundamental Transaction, and exercisable for a corresponding
number of shares of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and satisfactory to the Holder. Upon the occurrence of
any Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the "Company" shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of the Fundamental Transaction, the
Successor Entity shall deliver to the Holder confirmation that there shall be
issued upon exercise of this Warrant at any time after the consummation of the
Fundamental Transaction, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property) issuable upon the exercise of the
Warrant prior to such Fundamental Transaction, such shares of the publicly
traded Common Stock (or its equivalent) of the Successor Entity (including its
Parent Entity) which the Holder would have been entitled to receive upon the
happening of such Fundamental Transaction had this Warrant been converted
immediately prior to such Fundamental Transaction, as adjusted in accordance
with the provisions of this Warrant. In addition to and not in
substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of shares of Common Stock are
entitled to receive securities or other assets with respect to or in exchange
for shares of Common Stock (a "Corporate Event"), the Company
shall make appropriate provision to insure that the Holder will thereafter have
the right to receive upon an exercise of this Warrant at any time after the
consummation of the Fundamental Transaction but prior to the Expiration Date, in
lieu of the shares of the Common Stock (or other securities, cash, assets or
other property) issuable upon the exercise of this Warrant prior to such
Fundamental Transaction, such shares of stock, securities, cash, assets or any
other property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Warrant been exercised immediately
prior to such Fundamental Transaction. Provision made pursuant to the
preceding sentence shall be in a form and substance reasonably satisfactory to
the Holder. The provisions of this Section shall apply similarly and
equally to successive Fundamental Transactions and Corporate Events and shall be
applied without regard to any limitations on the exercise of this
Warrant.
(c) Notwithstanding
the foregoing, in the event of a Fundamental Transaction, at the request of the
Holder delivered before the 90th day after such Fundamental Transaction, the
Company (or the Successor Entity) shall purchase this Warrant from the Holder by
paying to the Holder, within five Business Days after such request (or, if
later, on the effective date of the Fundamental Transaction), cash in an amount
equal to the Black Scholes Value of the remaining unexercised portion of this
Warrant on the date of such Fundamental Transaction.
5. NONCIRCUMVENTION. The
Company hereby covenants and agrees that the Company will not, by amendment of
its Certificate of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and will at all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the
Holder. Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SA Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
SA Warrants, 120% of the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the SA Warrants then outstanding
(without regard to any limitations on exercise).
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6. WARRANT
SHARES. If all or any portion of a Warrant is exercised at a
time when there is an effective registration statement to cover the issuance or
resale of the Warrant Shares or if the Warrant is exercised via cashless
exercise, the Warrant Shares issued pursuant to any such exercise shall be
issued free of all legends. If at any time following the date hereof the
Registration Statement (or any subsequent registration statement registering the
sale or resale of the Warrant Shares) is not effective or is not otherwise
available for the sale or resale of the Warrant Shares, the Company shall
immediately notify the Holder in writing that such registration statement is not
then effective and thereafter shall promptly notify such Holder when the
registration statement is effective again and available for the sale or resale
of the Warrant Shares (it being understood and agreed that the foregoing shall
not limit the ability of the Company to issue, or the Holder to sell, any of the
Warrant Shares in compliance with applicable federal and state securities laws).
The Company shall use commercially reasonable efforts to keep a registration
statement (including the Registration Statement) registering the issuance or
resale of the Warrant Shares effective during the term of the Warrants. Upon a
cashless exercise of a Warrant, the holding period for purposes of Rule 144
shall tack back to the original date of issuance of such Warrant.
7. WARRANT HOLDER NOT DEEMED A
STOCKHOLDER. Except as otherwise specifically provided herein,
the Holder, solely in such Person's capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person's capacity
as the Holder of this Warrant, any of the rights of a stockholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company. Notwithstanding this Section 7, the Company
shall provide the Holder with copies of the same notices and other information
given to the stockholders of the Company generally, contemporaneously with the
giving thereof to the stockholders.
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8. REISSUANCE OF
WARRANTS.
(a) Transfer of
Warrant. If this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 8(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less than the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 8(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.
(b) Lost, Stolen or Mutilated
Warrant. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant (in accordance
with Section 8(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.
(c) Exchangeable for Multiple
Warrants. This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a new Warrant
or Warrants (in accordance with Section 8(d)) representing in the aggregate the
right to purchase the number of Warrant Shares then underlying this Warrant, and
each such new Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such surrender;
provided, however, that no Warrants for fractional shares of Common Stock shall
be given.
(d) Issuance of New
Warrants. Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 8(a)
or Section 8(c), the Warrant Shares designated by the Holder which, when added
to the number of shares of Common Stock underlying the other new Warrants issued
in connection with such issuance, does not exceed the number of Warrant Shares
then underlying this Warrant), (iii) shall have an issuance date, as indicated
on the face of such new Warrant which is the same as the Issuance Date, and (iv)
shall have the same rights and conditions as this Warrant.
9. NOTICES. Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 4(e) of the
Subscription Agreement. The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Warrant, including
in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the
Company will give written notice to the Holder (i) immediately upon any
adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least fifteen (15)
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to holders of shares of Common Stock or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.
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10. AMENDMENT AND
WAIVER. Except as otherwise provided herein, the provisions of
this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Holder.
11. GOVERNING
LAW. This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
12. CONSTRUCTION;
HEADINGS. This Warrant shall be deemed to be jointly drafted
by the Company and all the Holders and shall not be construed against any person
as the drafter hereof. The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.
13. DISPUTE
RESOLUTION. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within two (2) Business Days of receipt of the Exercise Notice giving
rise to such dispute, as the case may be, to the Holder. If the
Holder and the Company are unable to agree upon such determination or
calculation of the Exercise Price or the Warrant Shares within three (3)
Business Days of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company and the Holder shall, within two (2)
Business Days submit via facsimile (a) the disputed determination of the
Exercise Price to an independent, reputable investment bank jointly selected by
the Company and the Holder or (b) the disputed arithmetic calculation
of the Warrant Shares to an independent, outside accountant jointly selected by
the Company and the Holder. The Company shall cause at its expense
the investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
14. REMEDIES, OTHER OBLIGATIONS,
BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this
Warrant shall be cumulative and in addition to all other remedies available
under this Warrant and the Subscription Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the Holder to pursue actual damages for
any failure by the Company to comply with the terms of this
Warrant. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holder of this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being
required.
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15. TRANSFER. This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company.
16. CERTAIN
DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
(a) "Black Scholes Value" means the
value of this Warrant based on the Black and
Scholes Option Pricing Model obtained from the “OV” function on Bloomberg using
i) a price per share of Common Stock equal to the Weighted Average Price of the
Common Stock for the Trading Day immediately preceding the date of consummation
of the applicable Fundamental Transaction, (ii) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term
of this Warrant as of the date of consummation of the applicable Fundamental
Transaction and (iii) an expected volatility equal to the greater of 80% and the
30-day volatility obtained from the HVT function on Bloomberg determined as of
the Trading Day immediately following the public announcement of the applicable
Fundamental Transaction.
(b) "Bloomberg" means Bloomberg
Financial Markets.
(c) "Business Day" means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.
(d) "Closing Bid Price" and "Closing Sale Price" means, for
any security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or the last trade price,
respectively, of such security prior to 4:00:00 p.m., New York time, as reported
by Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last closing bid price or last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by Pink OTC Markets Inc. (formerly Pink Sheets LLC). If the
Closing Bid Price or the Closing Sale Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the
Holder. If the Company and the Holder are unable to agree upon the
fair market value of such security, then such dispute shall be resolved pursuant
to Section 13. All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination or other similar
transaction during the applicable calculation period.
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(e) "Common Stock" means
(i) the Company's shares of Common Stock, par value $0.001 per share, and
(ii) any share capital into which such Common Stock shall have been changed
or any share capital resulting from a reclassification of such Common
Stock.
(f) "Convertible Securities" means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.
(g) "Eligible Market" means the
Principal Market, The New York Stock Exchange, Inc., The NASDAQ Capital Market,
or The NASDAQ Global Select Market.
(h) "Expiration Date" means two
years after the Initial Exercise Eligibility Date; provided, however, that the
Expiration Date shall be extended by one day for each day that there is an
Authorized Share Failure.
(i)
"Fundamental
Transaction" means that the Company shall, directly or indirectly, in one
or more related transactions, (i) consolidate or merge with or into (whether or
not the Company is the surviving corporation) another Person, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (iii) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination), (v) reorganize, recapitalize or
reclassify its Common Stock, or (vi) any "person" or "group" (as these terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall
become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.
(j) "Options" means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.
(k) "Parent Entity" of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.
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(l) "Person" means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.
(m) "Principal Market" means The
NASDAQ Global Market.
(n) "Successor Entity" means the
Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting
from or surviving any Fundamental Transaction or the Person (or, if so elected
by the Holder, the Parent Entity) with which such Fundamental Transaction shall
have been entered into.
(o) "Trading Day" means any day on
which the Common Stock are traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock are
then traded; provided that "Trading Day" shall not include any day on which the
Common Stock are scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock are suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York
time).
(p) "Weighted Average Price" means,
for any security as of any date, the dollar volume-weighted average price for
such security on the Principal Market during the period beginning at 9:30:01
a.m., New York City time, and ending at 4:00:00 p.m., New York City time, as
reported by Bloomberg through its "Volume at Price" function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York City time,
and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg, or, if
no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the "pink sheets" by Pink OTC Markets Inc. (formerly Pink Sheets
LLC). If the Weighted Average Price cannot be calculated for such
security on such date on any of the foregoing bases, the Weighted Average Price
of such security on such date shall be the fair market value as mutually
determined by the Company and the Holder. If the Company and the
Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 12 with the term "Weighted
Average Price" being substituted for the term "Exercise Price." All such
determinations shall be appropriately adjusted for any share dividend, share
split or other similar transaction during such period.
[Signature
Page Follows]
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IN WITNESS WHEREOF, the
Company has caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.
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CHINA
BAK BATTERY, INC.
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By:
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Name:
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Title:
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EXHIBIT
A
EXERCISE
NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
CHINA
BAK BATTERY, INC.
The undersigned holder hereby exercises
the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of China BAK Battery, Inc., a
Nevada corporation (the "Company"), evidenced by the
attached Warrant to Purchase Common Stock (the "Warrant"). Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.
1. Form of Exercise
Price. The Holder intends that payment of the Exercise Price shall be
made as:
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____________
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a
"Cash
Exercise" with respect to _________________ Warrant Shares;
and/or
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____________
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a
"Cashless
Exercise" with respect to _______________ Warrant
Shares.
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2. Payment of Exercise
Price. In the event that the holder has elected a Cash Exercise with
respect to some or all of the Warrant Shares to be issued pursuant hereto, the
holder shall pay the Aggregate Exercise Price in the sum of $___________________
to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant
Shares. The Company shall deliver to the holder __________ Warrant
Shares in accordance with the terms of the Warrant.
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Date:
_______________ __, ______
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Name
of Registered Holder
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By:
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Name:
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Title:
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ACKNOWLEDGMENT
The Company hereby acknowledges this
Exercise Notice and hereby directs Securities Transfer Corporation to issue the
above indicated number of shares of Common Stock in accordance with the Transfer
Agent Instructions dated [__], 2009 from the Company and acknowledged and agreed
to by Securities Transfer Corporation.
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CHINA
BAK BATTERY, INC.
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By:
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Name:
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Title:
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