Exhibit A to Common Stock and Warrant Purchase Agreement FORM OF WARRANT
Exhibit
A
to
FORM
OF WARRANT
NEITHER
THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “SECURITIES
ACT”).
THIS
WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE
OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER
THE
SECURITIES ACT OR UNLESS SUCH OFFER, SALE OR TRANSFER IS EXEMPT FROM SUCH
REGISTRATION.
COMMON
STOCK WARRANT
| No. __________ |
______,
2007
|
CHINA
POWER EQUIPMENT, INC.,
a
Maryland corporation (the “Company”),
hereby certifies that ______________________________________, its permissible
transferees, designees, successors and assigns (collectively, the “Holder”), for
value received, is entitled to purchase from the Company at any time and
terminating on the third anniversary of the date hereof (the “Termination Date”)
up to such number of shares (each, a “Share” and collectively the “Shares”) of
the Company’s common stock, $.001 par value per Share (the “Common Stock”) as
shall be equal to
the
number of shares of Common Stock that the Holder has converted the
Company's Series A Convertible Preferred Stock, $.001 par value per share (the
"Preferred Stock")
into
Common Stock r,
at an
exercise price of $1.00 per share. In the aggregate, the number of Shares of
Common Stock for which the warrant can be exercisable should be no more that
5
million shares.
1. Exercise
of Warrant.
(a) The
purchase right represented by this Common Stock Warrant (this "Warrant") is
exercisable, in whole or in part, at any time and from time to time from and
after the Effective Date through and including the Termination
Date.
(b) Upon
presentation and surrender of this Warrant, accompanied by a completed Election
to Purchase in the form attached hereto as Exhibit
A
(the
“Election
to Purchase”)
duly
executed, at the principal office of the Company currently located at
_________________________________, (or such other office or agency of the
Company within the United States as the Company may designate to the Holder)
together with a check payable to, or wire transfer to, the Company in the amount
of the Exercise Price multiplied by the number of Shares being purchased, the
Company or the Company’s transfer agent, as the case may be, shall within three
(3) business days deliver to the Holder hereof certificates of fully paid and
non-assessable Common Stock which in the aggregate represent the number of
Shares being purchased. The certificates so delivered shall be in such
denominations as may be requested by the Holder and shall be registered in
the
name of the Holder or such other name as shall be designated by the Holder.
All
or less than all of the purchase rights represented by this Warrant may be
exercised and, in case of the exercise of less than all, the Company, upon
surrender hereof, will at the Company’s expense deliver to the Holder a new
warrant entitling said holder to purchase the number of Shares represented
by
this Warrant which have not been exercised. This Warrant may only be exercised
to the extent the Company has a sufficient number of Shares of Common Stock
available for issuance at the time of any exercise.
2. Warrant.
(a) Exchange,
Transfer and Replacement.
At any
time prior to the exercise hereof, this Warrant may be exchanged upon
presentation and surrender to the Company, alone or with other warrants of
like
tenor of different denominations registered in the name of the same Holder,
for
another warrant or warrants of like tenor in the name of such Holder exercisable
for the aggregate number of Shares as the warrant or warrants
surrendered.
(b) Replacement
of Warrant.
Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of this Warrant and, in the case of any such loss,
theft, or destruction, upon delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Warrant, the Company, at
its
expense, will execute and deliver in lieu thereof, a new Warrant of like
tenor.
(c) Cancellation;
Payment of Expenses.
Upon
the surrender of this Warrant in connection with any transfer, exchange or
replacement as provided in this Section 2, this Warrant shall be promptly
canceled by the Company. The Holder shall pay all taxes and all other expenses
(including legal expenses, if any, incurred by the Holder or transferees) and
charges payable in connection with the preparation, execution and delivery
of
Warrants pursuant to this Section 2.
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(d) Warrant
Register.
The
Company shall maintain, at its principal executive offices (or at the offices
of
the transfer agent for the Warrant or such other office or agency of the Company
as it may designate by notice to the holder hereof), a register for this Warrant
(the “Warrant Register”), in which the Company shall record the name and address
of the person in whose name this Warrant has been issued, as well as the name
and address of each transferee and each prior owner of this
Warrant.
3. Rights
and Obligations of Holders of this Warrant.
The
Holder of this Warrant shall not, by virtue hereof, be entitled to any rights
of
a stockholder in the Company, either at law or in equity; provided,
however,
that in
the event any certificate representing shares of Common Stock or other
securities is issued to the holder hereof upon exercise of this Warrant, such
holder shall, for all purposes, be deemed to have become the holder of record
of
such Common Stock on the date on which this Warrant, together with a duly
executed Election to Purchase, was surrendered and payment of the aggregate
Exercise Price was made, irrespective of the date of delivery of such Common
Stock certificate.
4. Registration
Rights.
(a)
The
Company, for a period of two years after the Conversion Date (as defined in
Section 3(d)), will give written notice to each Holder of this Warrant or shares
of Common Stock issued upon exercise of this Warrant (“Warrant Shares”) not less
than 20 days in advance of the initial filing of any registration statement
under the Securities Act of 1933, as amended (other than a registration
statement pertaining to securities issuable pursuant to employee stock option,
stock purchase, or similar plans or a registration statement pertaining to
securities issuable in connection with the acquisition of a business, whether
through a merger, consolidation, acquisition of assets, or exchange of
securities), covering any Common Stock or other securities of the Company,
and
will afford the Holder the opportunity to have included in such registration
statement all or such part of the Warrant Shares issued or issuable upon
exercise of this Warrant, as may be designated by written notice to the Company
not later than ten days following receipt of such notice from the Company.
The
Company shall be entitled to exclude the Warrant Shares held by or issuable
to
the Holder from any one, but not more than one, such registration if either
the
Company or the underwriter in connection with offering to be made pursuant
to
such registration statement in its sole discretion decides that the inclusion
of
such shares will materially interfere with the orderly sale and distribution
of
the securities being offered under such registration statement by the Company.
Notwithstanding the foregoing, the Company shall not be entitled to exclude
the
Warrant Shares held by or issuable to the Holder if shares of other shareholders
are being included in any such registration statement and, in such
circumstances, the Holder shall be entitled to include the Warrant Shares held
by or issuable to the Holder on a pro-rata basis in the proportion that the
number of Warrant Shares of Common Stock held by or issuable to the Holder
bears
to the shares of Common Stock held by all other shareholders, including shares
in such registration statement. The Holder shall not be entitled to include
shares in more than two registration statements pursuant to the provisions
of
this Section (3)(e), and all rights of any holder under this Section (3)(e)
shall terminate after the holder has included shares of Common Stock in two
registration statements pursuant to this Section (3)(e).
3
(b)
The
Company will pay all out-of-pocket costs and expenses of any registration
effected pursuant to the provisions of Section 5(a), including registration
fees, legal fees, accounting fees, printing expenses (including such number
of
any preliminary and the final prospectus as may be reasonably requested), blue
sky qualification fees and expenses, and all other expenses, except for
underwriting commissions or discounts applicable to the shares of Common Stock
being sold by the holder and the fees of counsel for the Holder, all of which
shall be paid by the Holder.
5. Fractional
Shares.
In lieu
of issuance of a fractional share upon any exercise hereunder, the Company
will
pay the cash value of that fractional share, calculated on the basis of the
Exercise Price.
6. Legends.
Prior
to issuance of the shares of Common Stock underlying this Warrant, all such
certificates representing such shares shall bear a restrictive legend to the
effect that the Shares represented by such certificate have not been registered
under the 1933 Act, and that the Shares may not be sold or transferred in the
absence of such registration or an exemption therefrom, such legend to be
substantially in the form of the bold-face language appearing at the top of
Page
1 of this Warrant.
7. Disposition
of Warrants or Shares; Lockup.
(a)
The
Holder of this Warrant, each transferee hereof and any holder and transferee
of
any Shares, by his or its acceptance thereof, agrees that no public distribution
of Warrants or Shares will be made in violation of the provisions of the
Securities Act of 1933, as amended. Furthermore, it shall be a condition to
the
transfer of this Warrant that any transferee thereof deliver to the Company
his
or its written agreement to accept and be bound by all of the terms and
conditions contained in this Warrant.
(b)
The
Holder may not, without obtaining the prior written consent of the Company,
directly or indirectly sell, offer to sell, grant an option for the sale of,
transfer, assign, hypothecate, pledge, distribute or otherwise dispose of or
encumber any Warrant Shares or any beneficial interest therein until at least
150 days following the exercise of Warrant; provided, however, immediately
upon
the exercise of Warrant a Holder may sell up to 10% of the Warrant Shares issued
to such Holder upon exercise of this Warrant, after the expiration of 90 days
after the exercise of Warrant a Holder may sell up to 30% of the Warrant Shares
issued to such Holder upon exercise of this Warrant, and after the expiration
of
120 days following the Effective Date a holder may sell up to an additional
30%
of the Warrant Shares issued to such Holder.
4
8. Merger
or Consolidation.
The
Company will not merge or consolidate with or into any other corporation, or
sell or otherwise transfer its property, assets and business substantially
as an
entirety to another corporation, unless the corporation resulting from such
merger or consolidation (if not the Company), or such transferee corporation,
as
the case may be, shall expressly assume, by supplemental agreement reasonably
satisfactory in form and substance to the Holder, the due and punctual
performance and observance of each and every covenant and condition of this
Warrant to be performed and observed by the Company.
9. Notices.
Except
as otherwise specified herein to the contrary, all notices, requests, demands
and other communications required or desired to be given hereunder shall only
be
effective if given in writing by certified or registered U.S. mail with return
receipt requested and postage prepaid; by private overnight delivery service
(e.g. Federal Express); by facsimile transmission (if no original documents
or
instruments must accompany the notice); or by personal delivery. Any such notice
shall be deemed to have been given (a) on the business day immediately following
the mailing thereof, if mailed by certified or registered U.S. mail as specified
above; (b) on the business day immediately following deposit with a private
overnight delivery service if sent by said service; (c) upon receipt of
confirmation of transmission if sent by facsimile transmission; or (d) upon
personal delivery of the notice. All such notices shall be sent to the following
addresses (or to such other address or addresses as a party may have advised
the
other in the manner provided in this Section 10):
if
to the Company:
[Address]
Attention:
Facsimile:
If
to the Holder:
____________________
____________________
____________________
____________________
Notwithstanding
the time of effectiveness of notices set forth in this Section, an Election
to
Purchase shall not be deemed effectively given until it has been duly completed
and submitted to the Company together with this original Warrant and payment
of
the Exercise Price in a manner set forth in this Section.
10. Governing
Law.
This
Warrant shall be governed by and construed in accordance with the laws of the
State of Maryland applicable to contracts made and to be performed in the State
of Maryland.
5
11. Successors
and Assigns.
This
Warrant shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
12. Headings.
The
headings of various sections of this Warrant have been inserted for reference
only and shall not affect the meaning or construction of any of the provisions
hereof.
13. Severability.
If any
provision of this Warrant is held to be unenforceable under applicable law,
such
provision shall be excluded from this Warrant, and the balance hereof shall
be
interpreted as if such provision were so excluded.
14. Modification
and Waiver.
This
Warrant and any provision hereof may be amended, waived, discharged or
terminated only by an instrument in writing signed by the Company and the
Holder.
15. Specific
Enforcement.
The
Company and the Holder acknowledge and agree that irreparable damage would
occur
in the event that any of the provisions of this Warrant were not performed
in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Warrant and
to
enforce specifically the terms and provisions hereof, this being in addition
to
any other remedy to which either of them may be entitled by law or
equity.
16. Assignment.
Subject
to prior written approval by the Company, this Warrant may be transferred or
assigned, in whole or in part, at any time and from time to time by the then
Holder by submitting this Warrant to the Company together with a duly executed
Assignment in substantially the form and substance of the Form of Assignment
which accompanies this Warrant, as Exhibit B hereto, and, upon the
Company’s receipt hereof, and in any event, within three (3) business days
thereafter, the Company shall issue a warrant to the Holder to evidence that
portion of this Warrant, if any as shall not have been so transferred or
assigned.
(signature
page immediately follows)
6
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed,
manually or by facsimile, by one of its officers thereunto duly
authorized.
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Date:
__________, 2007
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By: | |
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Name: |
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Title: President
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7
EXHIBIT
A
TO
WARRANT
CERTIFICATE
ELECTION
TO PURCHASE
To
Be
Executed by the Holder
in
Order
to Exercise the Warrant
The
undersigned Holder hereby elects to purchase _______ Shares pursuant to the
attached Warrant, and requests that certificates for securities be issued in
the
name of:
__________________________________________________________
(Please
type or print name and address)
__________________________________________________________
__________________________________________________________
__________________________________________________________
(Social
Security or Tax Identification Number)
and
delivered
to:________________________________________________________________________________________________
__________________________________________________________________________________________________.
(Please
type or print name and address if different from above)
If
such
number of Shares being purchased hereby shall not be all the Shares that may
be
purchased pursuant to the attached Warrant, a new Warrant for the balance of
such Shares shall be registered in the name of, and delivered to, the Holder
at
the address set forth below.
In
full
payment of the purchase price with respect to the Shares purchased and transfer
taxes, if any, the undersigned hereby tenders payment of $__________ by check,
money order or wire transfer payable in United States currency to the order
of
CHINA POWER EQUIPMENT, INC.
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HOLDER:
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| By: | ||
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Name: |
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| Title: | ||
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Address:
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Dated:_______________________
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8
EXHIBIT
B
TO
WARRANT
FORM
OF
ASSIGNMENT
(To
be
signed only on transfer of Warrant)
For
value
received, the undersigned hereby sells, assigns, and transfers unto
_____________ the right represented by the within Warrant to purchase ______
shares of Common Stock of China Power Equipment, Inc., a Maryland corporation,
to which the within Warrant relates, and appoints ____________________ Attorney
to transfer such right on the books of China Power Equipment, Inc., a Maryland
corporation, with full power of substitution of premises.
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Dated:
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By: | |
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Name: |
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| Title: | ||
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of
holder as specified on the fact
of
the Warrant)
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Address:
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Signed
in
the presence of:
Dated:
