EXHIBIT 4.6
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HARBIN ELECTRIC, INC.
Six-Year Warrants to Purchase 2,192,308
Shares of Common Stock
at an exercise price of $7.80 per share
Six-Year Warrants to Purchase 525,830
Shares of Common Stock
at an exercise price of $10.84 per share
Three-Year Warrants to Purchase 769,230
Shares of Common Stock
at an exercise price of $7.80 per share
WARRANT AGREEMENT
DATED AS OF AUGUST 30, 2006
THE BANK OF NEW YORK,
A NEW YORK BANKING CORPORATION
Warrant Agent
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WARRANT AGREEMENT, dated as of August 30, 2006, between Harbin
Electric, Inc., a Nevada corporation (the "Company"), and The Bank of New York,
a New York banking corporation, as warrant agent (the "Warrant Agent") (the
"Agreement").
RECITALS
WHEREAS, the Company proposes to issue to Citadel Equity Fund
Limited six-year warrants (the "2012 Warrants") to initially purchase up to an
aggregate of 2,718,138 shares of Common Stock, par value $.00001 per share (the
"Common Stock"), of the Company (the Common Stock issuable on exercise of the
2012 Warrants being referred to herein as the "2012 Warrant Shares"), in
connection with the offering by the Company of 38,000 Units, each consisting of
(i) $1,000 principal amount of the Guaranteed Senior Secured Floating Rate Notes
due 2012 of the Company (the "2012 Notes"), (ii) a proportionate share of the
2012 Warrants to purchase 2,192,308 Warrant Shares at an exercise price of $7.80
per share (the "First Tranche 2012 Warrants"), and (iii) a proportionate share
of the 2012 Warrants to purchase 525,830 Warrant Shares at an exercise price of
$10.84 per share (the "Second Tranche 2012 Warrants").
WHEREAS, the Company proposes to issue to Xxxxxxx Xxxxx
International three-year warrants (the "2009 Warrants" and together with the
2012 Warrants, the "Warrants") to initially purchase up to an aggregate of
769,230 shares of Common Stock at an exercise price of $7.80 per share (the
Common Stock issuable on exercise of the 2009 Warrants being referred to herein
as the "2009 Warrant Shares" and together with the 2012 Warrant Shares, the
"Warrant Shares"), in connection with the offering by the Company of 12,000
Units, each consisting of (i) $1,000 principal amount of the Guaranteed Senior
Secured Floating Rate Notes due 2010 of the Company (the "2010 Notes" and
together with the 2012 Notes, the "Notes") and (ii) a proportionate share of the
2009 Warrants.
WHEREAS, the Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing so to act in connection with the
issuance of Warrant Certificates (as defined) and other matters as provided
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
following respective meanings:
"2009 Warrants" has the meaning set forth in the Recitals.
"2009 Warrant Share" has the meaning set forth in the Recitals.
"2010 Notes" has the meaning set forth in the Recitals.
"2012 Notes" has the meaning set forth in the Recitals.
"2012 Warrants" has the meaning set forth in the Recitals.
"2012 Warrant Share" has the meaning set forth in the Recitals.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise. For purposes of this definition, the terms
"controlling," "controlled by" and "under common control with" have correlative
meanings; provided, that notwithstanding the foregoing, for purposes of Section
8(g), "Affiliate" shall have the meaning set forth therein.
"Board of Directors" means the board of directors of the corporation
or any committee thereof duly authorized to act on behalf of such Board of
Directors.
"Business Day" means a day other than a Saturday or Sunday and means
any day that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law or regulation (including any executive order)
to close in either The City of New York or London.
"Cashless Exercise Ratio" has the meaning set forth in Section 4(a).
"Clearstream" means Clearstream Banking, societe anonyme,
Luxembourg, and its successors.
"Closing Date" means the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Depositary" means, with respect to the Warrants issuable or
issued in whole or in part in global form, the Person specified in Section 3.3
hereof as the Common Depositary with respect to the Warrants, and any and all
successors thereto appointed as Common Depositary hereunder and having become
such pursuant to the applicable provision of this Warrant Agreement.
"Common Stock" has the meaning set forth in the Recitals.
"Company" has the meaning set forth in the Recitals.
"Definitive Warrants" has the meaning specified in Section 3.5.
"Disinterested Director" has the meaning set forth in Section 8(g).
"Distribution Compliance Period" means the period ending on the
first anniversary of the date hereof.
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"Equity Registration Rights Agreement" means the registration rights
agreement, dated as of August 30, 2006, by and between the Company and the
purchasers of the Warrants relating to the Warrant Shares.
"Euroclear" means Euroclear Bank S.A./N.V., as operator of the
Euroclear system, and its successors.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Period" has the meaning set forth in Section 4(a).
"Exercise Price" means the applicable amount set forth in the form
of Warrant Certificate attached hereto as Exhibit A-1 (in the case of the First
Tranche 2012 Warrant), Exhibit A-2 (in the case of the Second Tranche 2012
Warrant) or Exhibit A-3 (in the case of the 2009 Warrant), as adjusted as herein
provided.
"Expiration Date" has the meaning set forth in Section 4(a).
"Fair Value" has the meaning set forth in Section 8(g).
"First Tranche 2012 Warrants" has the meaning set forth in the
Recitals.
"Global Warrants" has the meaning specified in Section 3.5.
"Market Value" has the meaning set forth in Section 4(a).
"Non-Affiliate Sale" has the meaning set forth in Section 8(g).
"Notes" has the meaning set forth in the Recitals.
"Officer" means, with respect to any Person, the Chief Executive
Officer, the President, the Chief Financial Officer or any Executive Vice
President of such Person.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Warrant Agent in form and substance reasonably
acceptable to the Warrant Agent. The counsel may be an employee of or counsel to
the Company, any subsidiary of the Company or the Warrant Agent.
"Participant" means, with respect to Euroclear or Clearstream, a
Person who has an account with Euroclear or Clearstream.
"Permanent Global Warrant" has the meaning specified in Section 3.5.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
limited liability company or government or other entity.
"Second Tranche 2012 Warrants" has the meaning set forth in the
Recitals.
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"Transfer Agent" has the meaning set forth in Section 6(b).
"Warrant Agent" has the meaning set forth in the Recitals.
"Warrant Certificate" has the meaning set forth in Section 3.1.
"Warrant Countersignature Order" has the meaning set forth in
Section 3.2.
"Warrant Registrar" has the meaning set forth in Section 3.3.
"Warrant Shares" has the meaning set forth in the Recitals.
"Warrants" has the meaning set forth in the Recitals.
SECTION 2. APPOINTMENT OF WARRANT AGENT.
The Company hereby appoints the Warrant Agent to act as agent for
the Company in accordance with the instructions set forth hereinafter in this
Agreement and the Warrant Agent hereby accepts such appointment.
SECTION 3. ISSUANCE OF WARRANTS; WARRANT CERTIFICATES
3.1 FORM AND DATING.
(a) General.
The Warrants and the Warrant Shares may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Warrant shall
be dated the date of the countersignature.
The terms and provisions contained in the Warrants shall constitute,
and are hereby expressly made, a part of this Warrant Agreement. The Company and
the Warrant Agent, by their execution and delivery of this Warrant Agreement,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Warrant conflicts with the express provisions
of this Warrant Agreement, the provisions of this Warrant Agreement shall govern
and be controlling.
(b) Global Warrants.
The Warrants shall be issued from time to time initially in the form
of global warrants (each a "Global Warrant"). Global Warrants shall be
substantially in the form of Exhibit A-1 (in the case of the First Tranche 2012
Warrants), Exhibit A-2 (in the case of the Second Tranche 2012 Warrant), and
Exhibit A-3 (in the case of the 2009 Warrants) attached hereto (including the
Global Warrant Legend and the Regulation S Legend thereon and the "Schedule of
Exchanges of Interests in the Global Warrant" attached thereto, each a "Warrant
Certificate"). Definitive Warrants shall be substantially in the form of Exhibit
A-1 (in the case of the First Tranche 2012 Warrants), Exhibit A-2 (in the case
of the Second Tranche 2012 Warrants), and Exhibit A-3 (in the case of the 2009
Warrants) attached hereto, but without the Global Warrant Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Warrant" attached
thereto. Each Global Warrant shall represent such of the outstanding Warrants as
shall be specified therein and each shall provide that it shall represent the
number of outstanding Warrants from time to time endorsed thereon and that the
number of outstanding Warrants represented thereby may from time to time be
reduced or increased, as appropriate, to reflect exchanges and redemptions. Any
endorsement of a Global Warrant to reflect the amount of any increase or
decrease in the number of outstanding Warrants represented thereby shall be made
by the Warrant Agent in accordance with instructions given by the holder thereof
as required by Section 3.5 hereof. Each Global Warrant shall be deposited with
the Common Depositary, which shall hold such Global Warrant in safe custody for
the account of Euroclear and/or Clearstream and instruct Euroclear or
Clearstream or both of them, as the case may be, to credit the number of
Warrants represented by such Global Warrant to the holder's distribution account
with Euroclear or Clearstream.
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(c) Euroclear and Clearstream Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream shall
be applicable to transfers of beneficial interests in the Global Warrants that
are held by Participants through Euroclear or Clearstream.
3.2 EXECUTION
An Officer shall sign the Warrants on behalf of the Company by
manual or facsimile signature.
If the Officer whose signature is on a Warrant no longer holds that
office at the time a Warrant is countersigned, the Warrant shall nevertheless be
valid.
A Warrant shall not be valid until countersigned by the manual
signature of the Warrant Agent. The signature shall be conclusive evidence that
the Warrant has been properly issued under this Warrant Agreement.
The Warrant Agent shall, upon a written order of the Company signed
by an Officer (a "Warrant Countersignature Order"), countersign Warrants for
original issue up to the number stated in the preamble hereto.
The Warrant Agent may appoint an agent acceptable to the Company to
countersign Warrants. Such an agent may countersign Warrants whenever the
Warrant Agent may do so. Each reference in this Warrant Agreement to a
countersignature by the Warrant Agent includes a countersignature by such agent.
Such an agent has the same rights as the Warrant Agent to deal with the Company
or an Affiliate of the Company.
3.3 WARRANT REGISTRAR AND COMMON DEPOSITARY
The Company shall maintain an office or agency where Warrants may be
presented for registration of transfer or for exchange ("Warrant Registrar").
The Warrant Registrar shall keep a register of the Warrants and of their
registration of transfer and exchange (the "Warrant Register"). The Company may
appoint one or more co-Warrant Registrars. The term "Warrant Registrar" includes
any co-Warrant Registrar. The Company may change any Warrant Registrar without
notice to any holder. The Company shall notify the Warrant Agent in writing of
the name and address of any agent not a party to this Warrant Agreement. If the
Company fails to appoint or maintain another entity as Warrant Registrar, the
Warrant Agent shall act as such. The Company or any of its subsidiaries may act
as Warrant Registrar.
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The Company initially appoints the Warrant Agent to act as the
Warrant Registrar with respect to the Global Warrants.
The Company initially appoints the Warrant Agent to act as Common
Depositary with respect to the Global Warrants.
3.4 HOLDER LISTS
The Warrant Agent shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all holders of Warrants. If the Warrant Agent is not the Warrant
Registrar, the Company shall promptly furnish to the Warrant Agent at such times
as the Warrant Agent may request in writing, a list in such form and as of such
date as the Warrant Agent may reasonably require of the names and addresses of
the holders.
3.5 TRANSFER AND EXCHANGE
(a) In accordance with the terms of this Warrant Agreement, the
Warrant Agent shall deliver at the cost of the Company, upon not less than 45
days' notice to the Warrant Agent by Euroclear or Clearstream, the relevant
Warrants in definitive, bearer form ("Definitive Warrants") in exchange for
interests in such Global Warrant. For this purpose, the Warrant Agent is
authorized and it shall (A) authenticate each such Definitive Warrant and (B)
deliver each such Definitive Warrant to or to the order of Euroclear or
Clearstream, in exchange for interests in such Global Warrant. The Warrant Agent
shall promptly notify the Company upon receipt of a request for issue of
Definitive Warrants the aggregate number of Warrants represented by the relevant
Global Warrant to be exchanged in connection therewith. The Company undertakes
to deliver to, or to the order of, the Warrant Agent sufficient numbers of duly
executed Definitive Warrants to enable the Warrant Agent to comply with its
obligations under this Section 3.5(a). Transfer of a Global Warrant by the
Common Depositary to another shall be limited to transfer of such Global Warrant
in whole, but not in part, to nominees of Euroclear or Clearstream, to a
successor of Euroclear or Clearstream, such successor's nominee, or such
depositary other than the Common Depositary (or its nominee) as the Company may
designate. Notwithstanding the above, interests in a Global Warrant shall be
exchangeable in whole (but not in part) at the cost of the Company for
Definitive Warrants if either Euroclear or Clearstream or any other relevant
clearing system ceases to operate as a clearing system (other than by reason of
public holiday) or announces an intention to permanently cease business and it
shall not be practicable to transfer the relevant Warrants to another clearing
system within 90 days.
(b) Upon any exchange of an interest in a Global Warrant for
Definitive Warrants, the relevant Global Warrant shall be endorsed by the
Warrant Agent to reflect the reduction of the number of Warrants so exchanged.
Until exchanged in full, the holder of any interest in any Global Warrant shall
in all respects be entitled to the same benefits under this Warrant Agreement as
Definitive Warrants authenticated and delivered hereunder. Once exchanged in
full, a Global Warrant shall be canceled and disposed of by the Warrant Agent in
accordance with its customary procedures.
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(c) The Warrant Agent shall cause all Global Warrants and Definitive
Warrants delivered to it and held by it hereunder to be maintained in safe
custody in accordance with this Section 3.5, and shall ensure that such Warrants
are issued only in accordance with the provisions of this Warrant Agreement.
(d) The Warrant Agent shall be entitled to treat a telephone, telex
or facsimile communication from a person purporting to be (and who the Warrant
Agent believes in good faith to be) the authorized representative of the
Company, named in a list furnished to the Warrant Agent from time to time, as
sufficient instructions and authority of the Company for the Warrant Agent to
act in accordance with this Section 3.5.
(e) Title to the Warrants shall pass by delivery. However, title to
Warrants issued in the form of Global Warrants held through Euroclear and
Clearstream shall be transferable only in accordance with the rules and
procedures of Euroclear and Clearstream, as appropriate.
(f) General Provisions Relating to Transfers and Exchanges
(1) To permit registrations of transfers and exchanges, the
Company shall execute and the Warrant Agent shall countersign Global
Warrants and Definitive Warrants upon the Company's order or at the
Warrant Registrar's request.
(2) The Company hereby agrees and instructs the Warrant Agent
that the Warrant Registrar shall not register the proposed transfer of any
beneficial interest in, or proposed exercise of any right in, any Warrant,
unless the Warrant Registrar shall have first received certification in
the form of Exhibit B hereto that such transfer or exercise is made in
accordance with the provisions of Regulation S.
(3) The Warrant Register shall be in written form in the
English language and shall include a record of the certificate number of
each Warrant issued, and shall show the number of Warrants, the date of
issue, all subsequent transfer and changes of ownership in respect thereof
and the names, tax identifying numbers (if relevant to a specific holder)
and addresses of the holders.
(4) The Warrant Registrar shall at all reasonable times during
office hours make the Warrant Register available to the Company, the
Warrant Agent, the holders of Warrants or any person authorized by the
Company in writing for inspection and for the taking of copies thereof or
extracts therefrom, and at the expense of the Company, the Warrant
Registrar shall deliver to such persons all lists of holders of Warrants,
their addresses, number of holdings and other details as they may request.
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(5) The Warrant Registrar shall only register the transfer of
an interest in a Warrant if the requested transfer is (i) to the Company
(including its affiliates); (ii) being made by a person who has provided
the Warrant Registrar with a certification in the form of Exhibit B
hereto; (iii) pursuant to an effective registration statement under the
Securities Act with certification to that effect from such holder; or (iv)
being transferred in reliance on any other exemption from the registration
requirements of the Securities Act (including Rule 904 thereunder), with a
certification to that effect from such holder and an opinion of counsel
from such holder or the transferee reasonably acceptable to the Company
and to the Warrant Registrar to the effect that such transfer is in
compliance with the Securities Act.
(6) No service charge shall be made to a holder of a
beneficial interest in a Global Warrant or to a holder of a Definitive
Warrant for any registration of transfer or exchange, but the Company or
the Warrant Agent may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection
therewith and may require that a Person receiving Definitive Warrants must
bear the cost of insurance, postage, transportation and the like in the
event that such Person does not receive such Definitive Warrants in person
at the offices of an Warrant Agent.
(7) All Global Warrants and Definitive Warrants issued upon
any registration of transfer or exchange of Global Warrants or Definitive
Warrants shall be the duly authorized, executed and issued warrants for
Common Stock of the Company, not subject to any preemptive rights, and
entitled to the same benefits under this Warrant Agreement, as the Global
Warrants or Definitive Warrants surrendered upon such registration of
transfer or exchange.
(8) Prior to due presentment for the registration of a
transfer of any Warrant, the Warrant Agent, and the Company may deem and
treat the Person in whose name any Warrant is registered as the absolute
owner of such Warrant for all purposes and none of the Warrant Agent, or
the Company shall be affected by notice to the contrary.
(9) The Warrant Agent shall countersign Global Warrants and
Definitive Warrants in accordance with the provisions of Section 3.2
hereof.
(g) Facsimile Submissions to Warrant Agent
All certifications, certificates and Opinions of Counsel required to
be submitted to the Warrant Registrar pursuant to this Section 3.5 to effect a
registration of transfer or exchange may be submitted by facsimile.
Notwithstanding anything herein to the contrary, as to any
certificates and/or certifications delivered to the Warrant Registrar pursuant
to this Section 3.5, the Warrant Registrar's duties shall be limited to
confirming that any such certifications and certificates delivered to it are in
the form of Exhibits B attached hereto. The Warrant Registrar shall not be
responsible for confirming the truth or accuracy of representations made in any
such certifications or certificates. As to any Opinions of Counsel delivered
pursuant to this Section 3.5, the Warrant Registrar may rely upon, and be fully
protected in relying upon, such opinions.
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3.6 REPLACEMENT WARRANTS
If any mutilated Warrant is surrendered to the Warrant Agent or the
Company and the Warrant Agent receives evidence to its satisfaction of the
destruction, loss or theft of any Warrant, the Company shall issue and the
Warrant Agent, upon receipt of a Warrant Countersignature Order, shall
countersign a replacement Warrant if the Warrant Agent's requirements are met.
If required by the Warrant Agent or the Company, an indemnity bond must be
supplied by the holder that is sufficient in the judgment of the Warrant Agent
and the Company to protect the Company, the Warrant Agent, any Agent and any
agent for purposes of the countersignature from any loss that any of them may
suffer if a Warrant is replaced. The Company may charge any holder of Warrants
for the Company's expenses in replacing a Warrant.
Every replacement Warrant is an additional warrant of the Company
and shall be entitled to all of the benefits of this Warrant Agreement equally
and proportionately with all other Warrants duly issued hereunder.
3.7 TEMPORARY WARRANTS
Until certificates representing Warrants are ready for delivery, the
Company may prepare and the Warrant Agent, upon receipt of a Warrant
Countersignature Order, shall issue temporary Warrants. Temporary Warrants shall
be substantially in the form of certificated Warrants but may have variations
that the Company considers appropriate for temporary Warrants and as shall be
reasonably acceptable to the Warrant Agent. Without unreasonable delay, the
Company shall prepare and the Warrant Agent shall countersign definitive
Warrants in exchange for temporary Warrants.
Holders of temporary Warrants shall be entitled to all of the
benefits of this Warrant Agreement.
3.8 CANCELLATION
Subject to Section 3.5(g) hereof, the Company at any time may
deliver Warrants to the Warrant Agent for cancellation. The Warrant Registrar
and Warrant Agent shall forward to the Warrant Agent any Warrants surrendered to
them for registration of transfer, exchange or exercise. The Warrant Agent and
no one else shall cancel all Warrants surrendered for registration of transfer,
exchange, exercise, replacement or cancellation and shall destroy canceled
Warrants (subject to the record retention requirement of the Exchange Act). Upon
the Company's written request, certification of the destruction of all cancelled
Warrants shall be delivered to the Company. The Company may not issue new
Warrants to replace Warrants that have been exercised or that have been
delivered to the Warrant Agent for cancellation.
SECTION 4. SEPARATION OF WARRANTS; EXERCISE OF WARRANTS; TERMS OF WARRANTS
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(a) The Notes and Warrants will be separately transferable from the
date hereof. Subject to the terms of this Agreement, (i) each holder of 2012
Warrants shall have the right, which may be exercised during the period (the
"2012 Warrant Exercise Period") commencing at the opening of business on the
date hereof and until 5:00 p.m., New York City time on August 30, 2012 (the
"2012 Warrant Expiration Date"), and (ii) each holder of 2009 Warrants shall
have the right, which may be exercised during the period (the "2009 Warrant
Exercise Period", with the 2009 Warrant Exercise Period and the 2012 Warrant
Exercise Period also referred to herein as applicable "Exercise Period")
commencing at the opening of business on the date hereof and until 5:00 p.m.,
New York City time on August 30, 2009 (the "2009 Warrant Expiration Date", with
the 2009 Warrant Expiration Date and the 2012 Warrant Expiration Date also
referred to herein as the applicable "Expiration Date"), to receive from the
Company the number of fully paid and nonassessable Warrant Shares which the
holder may at the time be entitled to receive on exercise of such Warrants and
payment of the applicable Exercise Price (i) in cash, by wire transfer or by
certified or official bank check payable to the order of the Company, (ii) by
tendering Notes having a principal amount at the time of tender equal to the
applicable Exercise Price then in effect, (iii) by tendering Warrants as set
forth below or (iv) any combination of cash, Notes or Warrants. Each holder may
elect, upon exercise of its Warrants during the applicable Exercise Period, to
receive Warrant Shares on a net basis, such that, without the exchange of any
funds, the holder will receive such number of Warrant Shares as shall equal the
product of (A) the number of Warrant Shares for which such Warrant is
exercisable as of the date of exercise (if the Exercise Price were being paid in
cash) and (B) the Cashless Exercise Ratio. The "Cashless Exercise Ratio" shall
be calculated by the Company and shall equal a fraction the numerator of which
is the Market Value (as defined below) per share of Common Stock minus the
applicable Exercise Price per share as of the date of exercise and the
denominator of which is the Market Value per share on the date of exercise. Each
Warrant not exercised prior to 5:00 p.m., New York City time, on the applicable
Expiration Date shall become void and all rights thereunder and all rights in
respect thereof under this agreement shall cease as of such time. The Warrant
Agent shall have no obligation to calculate the Cashless Exercise Ratio. No
adjustments as to dividends will be made upon exercise of the Warrants.
The "Market Value" per share of Common Stock as of any date shall
equal (i) if Common Stock is primarily traded on a securities exchange, the last
sale price on such securities exchange on the trading day immediately prior to
the date of determination, or if no sale occurred on such day, the mean between
the closing "bid" and "asked" prices on such day, (ii) if the principal market
for Common Stock is in the over-the-counter market, the closing sale price on
the trading day immediately prior to the date of the determination, as published
by the National Association of Securities Dealers Automated Quotation System or
similar organization, or if such price is not so published on such day, the mean
between the closing "bid" and "asked" prices, if available, on such day, which
prices may be obtained from any reputable pricing service, broker or dealer, and
(iii) if neither clause (i) nor clause (ii) is applicable, the fair market value
on the date of determination of Common Stock as determined in good faith by the
Board of Directors of the Company based on a written opinion of an
internationally recognized investment banking, appraisal or valuation firm that
is not an Affiliate of the Company.
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(b) In order to exercise all or any of the Warrants represented by a
Warrant Certificate, (i) in the case of a Definitive Warrant, the holder thereof
must surrender upon exercise the Warrant Certificate to the Company at the
corporate trust office of the Warrant Agent set forth in Section 15 hereof, (ii)
in the case of a book-entry interest in a Global Warrant, the exercising
Participant whose name appears on a securities position listing of the Common
Depositary as the holder of such book-entry interest must comply with the Common
Depositary's procedures relating to the exercise of such book-entry interest in
such Global Warrant and (iii) in the case of interests in both Global Warrants
and Definitive Warrants, the holder thereof or the Participant, as applicable,
shall deliver to the Company at the corporate trust office of the Warrant Agent
the form of election to purchase on the reverse thereof duly completed and
signed, which signature shall be medallion guaranteed by an institution which is
a member of a Securities Transfer Association recognized signature guarantee
program, and upon payment to the Warrant Agent for the account of the Company of
the applicable Exercise Price, for the number of Warrant Shares in respect of
which such Warrants are then exercised. Payment of the aggregate Exercise Price
shall be made in accordance with Section 4(a) hereof.
(c) Subject to the provisions of Section 5 hereof, upon compliance
with clause (b) above, the Company shall deliver or cause to be delivered with
all reasonable dispatch, to or to the written order of the holder and in such
name or names as the holder may designate, a certificate or certificates for the
number of whole Warrant Shares issuable upon the exercise of such Warrants or
other securities or property to which such holder is entitled hereunder,
together with cash as provided in Section 9 hereof; provided that if any
consolidation, merger or lease or sale of assets is proposed to be effected by
the Company or its subsidiaries as described in Section 8(k) hereof, or a tender
offer or an exchange offer for shares of Common Stock shall be made, upon such
surrender of Warrants and payment of the applicable Exercise Price in accordance
with clause (b) above, the Company shall, as soon as possible, but in any event
not later than two business days thereafter, deliver or cause to be delivered
the full number of Warrant Shares issuable upon the exercise of such Warrants in
the manner described in this sentence or other securities or property to which
such holder is entitled hereunder, together with cash as provided in Section 9
hereof. Such certificate or certificates shall be deemed to have been issued and
any Person so designated to be named therein shall be deemed to have become a
holder of record of such Warrant Shares as of the date of the surrender of such
Warrants and payment of the applicable Exercise Price.
(d) The Warrants shall be exercisable, at the election of the
holders thereof, either in full or in part from time to time. If less than all
the Warrants represented by a Warrant Certificate are exercised, such Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the number of Warrants which were not exercised shall be executed by the
Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as may
be directed in writing by the holder, and shall deliver or cause to be delivered
the new Warrant Certificate to the Person or Persons entitled to receive the
same.
(e) All Warrant Certificates surrendered upon exercise of Warrants
shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates
shall then be disposed of by the Warrant Agent in a manner satisfactory to the
Company. The Warrant Agent shall report promptly to the Company with respect to
Warrants exercised and concurrently pay to the Company all monies received by
the Warrant Agent for the purchase of the Warrant Shares through the exercise of
such Warrants.
(f) The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder available for inspection by the holders
which shall be allowed upon prior written request with reasonable notice and
during normal business hours at its office. The Company shall supply the Warrant
Agent from time to time with such numbers of copies of this Agreement as the
Warrant Agent may request.
11
SECTION 5. PAYMENT OF TAXES
The Company shall pay all documentary stamp taxes attributable to
the initial issuance of Warrant Shares upon the exercise of Warrants; provided
that the Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in the issue of any Warrant
Certificates or any certificates for Warrant Shares in a name other than that of
the registered holder of a Warrant Certificate surrendered upon the exercise of
a Warrant, and the Company shall not be required to issue or deliver such
Warrant Certificates unless or until the Person or Persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
SECTION 6. RESERVATION OF WARRANT SHARES
(a) The Company shall at all times reserve and keep available, free
and clear of all liens, security interests, charges and other encumbrances or
restrictions on sale, free from preemptive rights, out of the aggregate of its
authorized but unissued Common Stock or the authorized and issued Common Stock
held in its treasury, for the purpose of enabling it to satisfy any obligation
to issue Warrant Shares upon exercise of Warrants, the maximum number of shares
of Common Stock which may then be deliverable upon the exercise of all
outstanding Warrants.
(b) The Company or, if appointed, the transfer agent for the Common
Stock (the "Transfer Agent") and every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of any of the rights
of purchase aforesaid will be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose. The Company shall keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition from time to time from such Transfer Agent the stock certificates
required to honor outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company shall supply such Transfer Agent with
duly executed certificates for such purposes and shall provide or otherwise make
available any cash which may be payable as provided in Section 9 hereof. The
Company shall furnish such Transfer Agent a copy of all notices of adjustments,
and certificates related thereto, transmitted to each holder pursuant to Section
10 hereof.
(c) Before taking any action which would cause an adjustment
pursuant to Section 8 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares at the Exercise Price as so adjusted.
(d) The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants shall, upon issue, be fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens, charges
and security interests with respect to the issuance thereof.
12
SECTION 7. OBTAINING STOCK EXCHANGE LISTINGS.
The Company shall from time to time take all action which may be
necessary so that the Warrant Shares, immediately upon their issuance upon the
exercise of Warrants, will be listed on a principal securities exchange,
automated quotation system or other market within the United States of America,
if any, on which other shares of Common Stock are then listed, if any.
SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES ISSUABLE
The applicable Exercise Price and the number of Warrant Shares
issuable upon the exercise of each Warrant shall be subject to adjustment from
time to time upon the occurrence of the events enumerated in this Section 8;
provided that in no event shall the applicable Exercise Price be less than $0.01
per share of Common Stock. For purposes of this Section 8, "Common Stock"
includes shares now or hereafter authorized of any class of common stock of the
Company and any other stock of the Company, however designated, that has the
right (subject to any prior rights of any class or series of preferred stock) to
participate in any distribution of the assets or earnings of the Company without
limit as to per share amount.
In addition to the adjustments required under this Section 8, the
Company may, at any time, reduce the applicable Exercise Price to any amount
greater than or equal to $0.01 per share for any period of time (but not less
than 20 Business Days) deemed appropriate by the Board of Directors of the
Company.
(a) Adjustment for Change in Capital Stock.
If the Company (i) pays a dividend or makes a distribution on its
Common Stock payable in shares of its Common Stock, (ii) subdivides its
outstanding shares of Common Stock into a greater number of shares, (iii)
combines its outstanding shares of Common Stock into a smaller number of shares,
(iv) makes a distribution on its Common Stock in shares of its capital stock
other than Common Stock or (v) issues by reclassification of its Common Stock
any shares of its capital stock, then the applicable Exercise Price in effect
immediately prior to such action shall, subject to the proviso to the first
sentence of the first paragraph of this Section 8, be proportionately adjusted
so that the holder of any Warrant thereafter exercised may receive the aggregate
number and kind of shares of capital stock of the Company which such holder
would have owned immediately following such action as if such Warrant had been
exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant upon exercise of it may receive
shares of two or more classes of capital stock of the Company, the Company shall
determine, in good faith, the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation, the exercise privilege and
the applicable Exercise Price of each class of capital stock shall thereafter be
subject to adjustment on terms comparable to those applicable to Common Stock in
this Section 8. Such adjustment shall be made successively whenever any event
listed above shall occur.
13
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them for a period expiring within 45 days
after the record date set forth below to subscribe for shares of Common Stock or
securities convertible into, or exchangeable or exercisable for, shares of
Common Stock, in either case, at a price per share less than the Fair Value (as
defined in subsection (g) of this Section 8) per share on that record date, the
applicable Exercise Price shall be adjusted in accordance with the formula:
O + N x P
----------
E' = E x M
-----------------------
O + N
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding on
the record date.
N = the number of additional shares of Common Stock
issued pursuant to such rights, options or warrants.
P = the aggregate price per share of the additional
shares of Common Stock.
M = the Fair Value per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the applicable Exercise Price shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares actually issued.
(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock any of
its assets (including cash), debt securities, preferred stock or any rights or
warrants to purchase assets (including cash), debt securities, preferred stock
or other securities of the Company, the applicable Exercise Price shall be
adjusted in accordance with the formula:
14
E' = E x M - F
-----------
M
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
M = the Fair Value per share of Common Stock
on the record date mentioned below.
F = the fair market value on the record date of
the debt securities, preferred stock, assets,
securities, rights or warrants to be distributed in
respect of one share of Common Stock as determined in
good faith by the Board of Directors of the Company
based on a written opinion of an internationally
recognized investment banking, appraisal or valuation
firm that is not an Affiliate of the Company.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This Section 8(c) shall not apply to cash dividends or other cash
distributions paid out of consolidated current or retained earnings as shown on
the books of the Company prepared in accordance with generally accepted
accounting principles. In addition, this Section 8(c) shall not apply to rights,
options or warrants referred to in Section 8(b) hereof.
(d) Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock for a consideration per
share less than the Fair Value per share on the date the Company fixes the
offering price of such additional shares, the applicable Exercise Price shall be
adjusted in accordance with the formula:
P
------
E' = E x O + M
-----------------
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional
shares.
15
P = the aggregate consideration received for the
issuance of such additional shares.
M = the Fair Value per share of Common Stock on the date of
issuance of such additional shares of Common Stock.
A = the number of shares outstanding of Common Stock
immediately after the issuance of such additional shares
of Common Stock.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This subsection (d) shall not apply to:
(1) any of the transactions described in subsections (a), (b)
or (c) of this Section 8, including, without limitation, the shares of
Common Stock issuable upon the exercise thereof,
(2) the exercise of Warrants, or the conversion, exchange or
exercise of other securities convertible into or exchangeable or
exercisable for Common Stock the issuance of which requires an adjustment
to be made under Section 8(e),
(3) the issuance of Common Stock to employees, officers or
directors of the Company or its subsidiaries under bona fide employee
benefit plans adopted by the Board of Directors and approved by the
holders of Common Stock when required by law, if such Common Stock would
otherwise be covered by this subsection (d) (but only to the extent that
the aggregate number of shares excluded hereby and issued after the date
of this Warrant Agreement shall not, together with options exercisable for
Common Stock issued under the employee benefit plans referred to Section
8(e)(2), exceed 450,000 shares of the Common Stock through December 31,
2006 (as adjusted proportionally for stock dividends, stock splits,
combinations, recapitalizations and the like) and shall not, together with
options exercisable for Common Stock issued under the employee benefit
plans referred to Section 8(e)(2), exceed 300,000 shares of Common Stock
per calendar year thereafter (as adjusted proportionally for stock
dividends, stock splits, combinations, recapitalizations and the like)),
(4) the issuance of not more than 750,000 shares of Common
Stock to shareholders of Harbin Taifu Auto Co. Ltd. (chinese characters)
("Taifu") upon its merger into the Company or share acquisition, share
exchange or any other business combination deemed desirable by the
Company, or with a subsidiary of the Company, in proportion to their stock
holdings of Taifu immediately prior to such merger, upon such merger,
provided that if Taifu is an Affiliate of the Company, the Board of
Directors shall have obtained a fairness opinion from a internationally
recognized investment banking, appraisal or valuation firm, which is not
an Affiliate of the Company, stating that the consideration received in
such merger is fair to the Company from a financial point of view,
16
(5) the issuance of Common Stock issuable upon the conversion,
exchange or exercise of other securities, warrants, options or similar
rights if the conversion, exchange or exercise price is not less than the
Fair Value per share of Common Stock at the time the security, warrant,
option or right so converted, exchanged or exercised was issued or
granted, or
(6) the issuance of shares of Common Stock pursuant to rights,
options or warrants which were originally issued in a Non-Affiliate Sale
(as defined below) together with one or more other securities as part of a
unit at a price per unit.
(e) Adjustment for Convertible Securities Issue.
If the Company issues any securities convertible into or
exchangeable or exercisable for Common Stock (other than securities issued in
transactions described in subsections (a), (b) or (c) of this Section 8) for a
consideration per share of Common Stock initially deliverable upon conversion,
exchange or exercise of such securities less than the Fair Value per share on
the date of issuance of such securities or on the date the Company fixes the
offering price of such securities, the applicable Exercise Price shall be
adjusted in accordance with the formula:
P
------
O + M
E' = E x ----------------
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities.
P = the aggregate consideration received for the issuance of
such securities.
M = the Fair Value per share of Common Stock on the
date of issuance of such securities.
D = the maximum number of shares of Common Stock deliverable
upon conversion or in exchange for such securities at
the initial conversion, exchange or exercise rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion, exchange or
exercise of such securities have not been issued when such securities are no
longer outstanding, then the applicable Exercise Price shall promptly be
readjusted to the applicable Exercise Price which would then be in effect had
the adjustment upon the issuance of such securities been made on the basis of
the actual number of shares of Common Stock issued upon conversion, exchange or
exercise of such securities.
17
This subsection (e) shall not apply to:
(1) convertible securities issued to shareholders of any
Person which merges into the Company, or with a subsidiary of the Company, in
proportion to their stock holdings of such person immediately prior to such
merger, upon such merger, provided that if such Person is an Affiliate of the
Company, the Board of Directors shall have obtained a fairness opinion from a
nationally recognized investment banking, appraisal or valuation firm, which is
not an Affiliate of the Company, stating that the consideration received in such
merger is fair to the Company from a financial point of view,
(2) the issuance of options exercisable for Common Stock to
employees, officers or directors of the Company or its subsidiaries under bona
fide employee benefit plans adopted by the Board of Directors and approved by
the holders of Common Stock when required by law, if such Common Stock would
otherwise be covered by this subsection (e) (but only to the extent that the
aggregate number of shares excluded hereby and issued after the date of this
Warrant Agreement shall not, together with Common Stock issued under the
employee benefit plans referred to Section 8(d)(3), exceed 450,000 shares of the
Common Stock through December 31, 2006 (as adjusted proportionally for stock
dividends, stock splits, combinations, recapitalizations and the like) and shall
not, together with Common Stock issued under the employee benefit plans referred
to Section 8(d)(3), exceed 300,000 shares of Common Stock per calendar year
thereafter (as adjusted proportionally for stock dividends, stock splits,
combinations, recapitalizations and the like)), or
(3) the exercise of currently outstanding options and warrants
that were issued in connection with the Securities Purchase Agreement between
the Company and certain investors as parties thereto dated August 31, 2005.
(f) Consideration Received.
For purposes of any computation respecting consideration received
pursuant to subsections (d) and (e) of this Section 8, the following shall
apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or
other expenses incurred by the Company for any underwriting of the issue
or otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors based on a written
opinion of an internationally recognized investment banking, appraisal or
valuation firm that is not an Affiliate of the Company (irrespective of
the accounting treatment thereof), whose determination shall be
conclusive, and described in a Board resolution which shall be filed with
the Warrant Agent;
18
(3) in the case of the issuance of securities convertible into
or exchangeable or exercisable for shares of Common Stock, the aggregate
consideration received therefor shall be deemed to be the consideration
received by the Company for the issuance of such securities plus the
additional minimum consideration, if any, to be received by the Company
upon the conversion, exchange or exercise thereof (the consideration in
each case to be determined in the same manner as provided in clauses (1)
and (2) of this subsection (f)); and
(4) in the case of the issuance of shares of Common Stock
pursuant to rights, options or warrants which rights, options or warrants
were originally issued together with one or more other securities as part
of a unit at a price per unit, the consideration shall be deemed to be the
fair value of such rights, options or warrants at the time of issuance
thereof as determined in good faith by the Board of Directors based on a
written opinion of an internationally recognized investment banking,
appraisal or valuation firm that is not an Affiliate of the Company and in
accordance with GAAP whose determination shall be conclusive and described
in a Board resolution, which shall be filed with the Warrant Agent, plus
the additional minimum consideration, if any, to be received by the
Company upon the exercise, conversion or exchange thereof (as determined
in the same manner as provided in clauses (1) and (2) of this subsection
(f)).
(g) Fair Value.
For purposes of Sections 8(b), (c), (d) and (e) hereof, the "Fair
Value" per share of Common Stock at any date of determination shall be (1) in
connection with a sale by the Company to a party that is not an Affiliate of the
Company in an arm's-length transaction (a "Non-Affiliate Sale"), the price per
security at which such security is sold and (2) in connection with any sale by
the Company to an Affiliate of the Company, (a) the last price per security at
which such security was sold in a Non-Affiliate Sale within the three-month
period preceding such date of determination and (b), if clause (a) is not
applicable, the fair market value of such security determined in good faith by
(i) a majority of the Board of Directors of the Company, including a majority of
the Disinterested Directors (as defined below), and approved in a Board
resolution delivered to the Warrant Agent, along with an Officer's Certificate
indicating that such Board Resolution was adopted by a majority of the
Disinterested Directors or (ii) an internationally recognized investment
banking, appraisal or valuation firm, which is not an Affiliate of the Company,
in each case, taking into account, among all other factors deemed relevant by
the Board of Directors or such investment banking, appraisal or valuation firm,
the trading price and volume of such security on any national securities
exchange or automated quotation system on which such security is traded.
For purposes of this Section 8(g), "Disinterested Director" means,
in connection with any issuance of securities that gives rise to a determination
of the Fair Value thereof, each member of the Board of Directors who is not an
officer, employee, director or other Affiliate of the party to whom the Company
is proposing to issue the securities giving rise to such determination.
For purposes of this Section 8(g), "Affiliate" of any specified
Person means (A) any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified
Person and (B) any director, officer or employee of such specified Person. For
purposes of this definition "control" (including, with correlative meanings, the
terms "controlling," "controlled by" and "under common control with") as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise.
19
(h) When De Minimis Adjustment May Be Deferred.
No adjustment in the applicable Exercise Price need be made unless
the adjustment would require an increase or decrease of at least 1% in the
applicable Exercise Price. Any adjustments that are not made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 8 shall be made by the Company to the nearest cent or to the
nearest 1/100th of a share, as the case may be, it being understood that no such
rounding shall be made under subsection (o).
(i) When No Adjustment Required.
With respect to Warrants of any holder, no adjustment need be made
for a transaction referred to Section 8(a), (b), (c), (d) or (e) hereof, if such
holder is to participate (without being required to exercise its Warrants) in
the transaction on a basis and with notice that the Board of Directors
determines to be fair and appropriate in light of the basis and notice on which
holders of Common Stock participate in the transaction. No adjustment need be
made for (i) rights to purchase Common Stock pursuant to a Company plan for
reinvestment of dividends or interest or (ii) a change in the par value or no
par value of the Common Stock. To the extent the Warrants become convertible
into cash, no adjustment need be made thereafter as to the cash. Interest will
not accrue on the cash.
(j) Notice of Adjustment.
Whenever the applicable Exercise Price is adjusted, the Company
shall provide the notices required by Section 10 hereof.
(k) Reorganization of Company.
(1) If the Company consolidates or merges with or into, or
transfers or leases all or substantially all its assets to, any Person,
upon consummation of such transaction the Warrants shall automatically
become exercisable for the kind and amount of securities, cash or other
assets which the holder of a Warrant would have owned immediately after
the consolidation, merger, transfer or lease if the holder had exercised
the Warrant immediately before the effective date of the transaction.
Concurrently with the consummation of such transaction, the corporation
formed by or surviving any such consolidation or merger if other than the
Company, or the Person to which such sale or conveyance shall have been
made, shall enter into (i) a supplemental Warrant Agreement so providing
and further providing for adjustments which shall be as nearly equivalent
as may be practical to the adjustments provided for in this Section 8 and
(ii) a supplement to the Equity Registration Rights Agreement providing
for the assumption of the Company's obligations thereunder. The successor
company shall mail to Warrant holders a notice describing the supplemental
Warrant Agreement and Equity Registration Rights Agreement. If the issuer
of securities deliverable upon exercise of Warrants under the supplemental
Warrant Agreement is an Affiliate of the formed, surviving, transferee or
lessee corporation, such issuer shall join in the supplemental Warrant
Agreement and Equity Registration Rights Agreement. If this Section 8(k)
shall be applicable, Sections 8(a), (b), (c), (d), (e) and (f) hereof
shall not be applicable.
20
(2) Notwithstanding subclause (1) above, if (A) the Company
consolidates or merges with or into, or sells, transfers or leases all or
substantially all its assets to, any Person and in connection therewith,
the consideration payable to holders of shares of the Common Stock in
exchange for their shares of Common Stock is payable solely in cash or (B)
proceedings commence for the voluntary or involuntary dissolution,
liquidation or winding up of the Company, then the Warrants shall
automatically be exercised into such number of Warrant Shares as is
determined pursuant to the provisions of Section 4(a), and the Warrant
certificate representing such Warrants shall be deemed cancelled. As a
result of such conversion, each holder of Warrant Shares shall be entitled
to receive distributions on an equal basis with the holders of the shares
of Common Stock. If this Section 8(k) applies to a transaction, Sections
8(a), (b), (c), (d) and (e) hereof do not apply.
(l) Company Determination Final.
Any determination that the Company or the Board of Directors must
make pursuant to Section 8(a), (b), (c), (d), (e), (f), (g), (h) or (i) hereof
is conclusive.
(m) Warrant Agent's Disclaimer.
The Warrant Agent shall have no duty to determine when an adjustment
under this Section 8 should be made, how it should be made or what it should be.
The Warrant Agent shall have no duty to determine whether a supplemental warrant
agreement under Section 8(k) need be entered into or whether any provisions of a
supplemental Warrant Agreement under Section 8(k) hereof are correct. The
Warrant Agent makes no representation as to the validity or value of any
securities or assets issued upon exercise of Warrants. The Warrant Agent shall
not be responsible for the Company's failure to comply with this Section 8. The
Warrant Agent shall not be required to make or be responsible for any
calculations under this Section 8.
(n) When Issuance or Payment May Be Deferred.
In any case in which this Section 8 shall require that an adjustment
in the applicable Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the holder of any Warrant exercised after such record date
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the applicable
Exercise Price and (ii) paying to such holder any amount in cash in lieu of a
fractional share pursuant to Section 9 hereof; provided that the Company shall
deliver to such holder a due xxxx or other appropriate instrument evidencing
such holder's right to receive such additional Warrant Shares, other capital
stock and cash upon the occurrence of the event requiring such adjustment.
21
(o) Adjustment in Number of Shares.
Upon each adjustment of the applicable Exercise Price pursuant to
this Section 8, each Warrant outstanding prior to the making of the adjustment
in the applicable Exercise Price shall thereafter evidence the right to receive
upon payment of the adjusted Exercise Price that number of shares of Common
Stock (calculated to the nearest hundredth) obtained from the following formula:
N' = N x E
----
E'
where:
N' = the adjusted number of Warrant Shares issuable upon
exercise of a Warrant by payment of the adjusted
Exercise Price.
N = the number or Warrant Shares previously issuable upon
exercise of a Warrant by payment of the Exercise Price
prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(p) Form of Warrants.
Irrespective of any adjustments in the applicable Exercise Price or
the number or kind of shares purchasable upon the exercise of the Warrants,
Warrants theretofore or thereafter issued may continue to express the same price
and number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 9. FRACTIONAL INTERESTS
The Company shall not be required to issue fractional Warrant Shares
on the exercise of Warrants. If more than one Warrant shall be presented for
exercise in full at the same time by the same holder, the number of full Warrant
Shares which shall be issuable upon the exercise thereof shall be computed on
the basis of the aggregate number of Warrant Shares purchasable on exercise of
the Warrants so presented. If any fraction of a Warrant Share would, except for
the provisions of this Section 9, be issuable on the exercise of any Warrants
(or specified portion thereof), the Company shall pay an amount in cash equal to
the Fair Value per Warrant Share, as determined on the day immediately preceding
the date the Warrant is presented for exercise, multiplied by such fraction,
computed to the nearest whole U.S. cent.
SECTION 10. NOTICES TO WARRANT HOLDERS
22
(a) Upon any adjustment of the applicable Exercise Price pursuant to
Section 8 hereof, the Company shall promptly thereafter (i) cause to be filed
with the Warrant Agent a certificate of a firm of independent public accountants
of recognized standing selected by the Board of Directors of the Company (who
may be the regular auditors of the Company) setting forth the applicable
Exercise Price after such adjustment and setting forth in reasonable detail the
method of calculation and the facts upon which such calculations are based and
setting forth the number of Warrant Shares (or portion thereof) issuable after
such adjustment in the applicable Exercise Price, upon exercise of a Warrant and
payment of the adjusted Exercise Price, which certificate shall be conclusive
evidence of the correctness of the matters set forth therein, and (ii) cause to
be given to each of the registered holders of Warrants at the address appearing
on the Warrant register for each such registered holder written notice of such
adjustments by first-class mail, postage prepaid. Where appropriate, such notice
may be given in advance and included as a part of the notice required to be
mailed under the other provisions of this Section 10.
(b) In the event:
(i) that the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants;
(ii) that the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or
assets (other than dividends or cash distributions paid out of
consolidated current or retained earnings as shown on the books of the
Company prepared in accordance with generally accepted accounting
principles or dividends payable in shares of Common Stock or distributions
referred to in Section 8(a) hereof);
(iii) of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change
in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or a tender
offer or exchange offer for shares of Common Stock;
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(v) that the Company proposes to take any action which would require
an adjustment of the applicable Exercise Price pursuant to Section 8
hereof;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of Warrants at his address
appearing on the Warrant register, at least 20 days (or 10 days in any case
specified in clauses (i) or (ii) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (x)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, (y) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (z) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 10 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
23
(c) Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders of Warrants the
right to vote or to consent or to receive notice as stockholders in respect of
the meetings of stockholders or the election of directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company.
SECTION 11. MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT
(a) Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of Section 13 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, and in case
at that time any of the Warrant Certificates shall have been countersigned but
not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and in case at that time any of
the Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
(b) In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent whose name has been changed
may adopt the countersignature under its prior name, and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name, and in all such cases such Warrant Certificates shall have the
full force and effect provided in the Warrant Certificates and in this
Agreement.
SECTION 12. WARRANT AGENT
The Warrant Agent undertakes the duties and obligations imposed by
this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Warrants, by their acceptance thereof, shall be
bound:
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken or to be taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
24
(b) The Warrant Agent shall not be responsible for any failure of
the Company to comply with any of the covenants contained in this Agreement or
in the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant Certificate in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement. The Company shall indemnify
the Warrant Agent against any and all losses, liabilities or expenses incurred
by it arising out of or in connection with the acceptance or administration of
its duties under this Warrant Agreement, including the costs and expenses of
enforcing this Agreement against the Company and defending itself against any
claim (whether asserted by the Company or any holder of the Warrants or any
other person) or liability in connection with the exercise or performance of any
of its powers or duties hereunder, except to the extent any such loss, liability
or expense may be attributable to its gross negligence or bad faith. The Warrant
Agent shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Warrant Agent to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company shall defend the
claim and the Warrant Agent shall cooperate in the defense. The Warrant Agent
may have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld,
conditioned or delayed.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more registered holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as it may consider proper,
whether with or without any such security or indemnity. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrant Certificates or the
production thereof at any trial or other proceeding relative thereto, and any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent and any recovery of judgment shall be for the
ratable benefit of the registered holders of the Warrants, as their respective
rights or interests may appear.
25
(g) The Warrant Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Warrants or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for anything which it may do or refrain from
doing in connection with this Agreement except for its own gross negligence or
bad faith.
(i) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of any Warrant Certificate to make or cause to be
made any adjustment of the applicable Exercise Price or number of the Warrant
Shares or other securities or property deliverable as provided in this
Agreement, or to determine whether any facts exist which may require any of such
adjustments, or with respect to the nature or extent of any such adjustments,
when made, or with respect to the method employed in making the same. The
Warrant Agent shall not be accountable with respect to the validity or value or
the kind or amount of any Warrant Shares or of any securities or property which
may at any time be issued or delivered upon the exercise of any Warrant or with
respect to whether any such Warrant Shares or other securities will when issued
be validly issued and fully paid and nonassessable, and makes no representation
with respect thereto.
(j) The Warrant Agent shall not be required to risk or expend its
own funds on the performance of it obligations and duties hereunder.
(k) in no event shall the Warrant Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the Warrant Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action.
SECTION 13. CHANGE OF WARRANT AGENT
If the Warrant Agent shall become incapable of acting as Warrant
Agent, the Company shall appoint a successor to such Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after it
has been notified in writing of such incapacity by the Warrant Agent or by the
registered holder of a Warrant Certificate, then the Warrant Agent or the
registered holder of any Warrant may, at the expense of the Company, apply to
any court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Pending appointment of a successor to such Warrant Agent, either
by the Company or by such a court, the duties of the Warrant Agent shall be
carried out by the Company. The holders (other than the Company and any
Affiliate thereof) of a majority of the unexercised Warrants shall be entitled
at any time to remove the Warrant Agent and appoint a successor to such Warrant
Agent. Such successor to the Warrant Agent need not be approved by the Company
or the former Warrant Agent. After appointment the successor to the Warrant
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Warrant Agent without further act or deed;
provided that the former Warrant Agent shall deliver and transfer to the
successor to the Warrant Agent any property at the time held by it hereunder and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Failure to give any notice provided for in this Section 13,
however, or any defect therein, shall not affect the legality or validity of the
appointment of a successor to the Warrant Agent.
26
SECTION 14. REPORTS
(a) The Company agrees with each holder, for so long as any Warrants
or Warrant Shares remain outstanding and during any period in which the Company
(i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any holder, to such holder or beneficial owner of
Warrants or Warrant Shares in connection with any sale thereof and any
prospective purchaser of such Warrants or Warrant Shares designated by such
holder or beneficial owner, the information required by Rule 144(A)(d)(4) under
the Securities Act in order to permit resales of such Warrants or Warrant Shares
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Warrants or Warrant Shares pursuant to Rule 144A.
(b) The Company shall provide the Warrant Agent with a sufficient
number of copies of all such reports that the Warrant Agent may be required to
deliver to the holders of the Warrants and the Warrant Shares under this Section
14.
SECTION 15. NOTICES TO COMPANY AND WARRANT AGENT
Any notice or demand authorized by this Agreement to be given or
made by the Warrant Agent or by the registered holder of any Warrant to or on
the Company shall be sufficiently given or made when received if deposited in
the mail, first class or registered, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent) or delivered
by facsimile as follows:
Harbin Electric, Inc.
Xx. 0 Xx Xxxx Xx Xx, Xx Ping Lu Xx Xxxxx Qu
Xxxxxx Xxx Fa Qu
Harbin 150060
P.R. China
Telecopier No.: x00 000 0000 0000
Attention: Yang Tianfu, CEO
With a copy to:
Xxxx Xxxxx LLP
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
U.S.A.
Telecopier No.: x0 000 000 0000
Attention: Xxxxxx Xxxxx, Esq.
27
In case the Company shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
corporate trust office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or
by the registered holder(s) of any Warrant to the Warrant Agent shall be
sufficiently given when and if deposited in the mail, first-class or registered,
postage prepaid, addressed (until another address is filed in writing by the
Warrant Agent with the Company), or delivered by facsimile, to and received by
the Warrant Agent at its corporate trust office as follows:
The Bank of New York
000 Xxxxxxx Xxxxxx - 21st Floor
West New York, NY 10286
U.S.A.
Telecopier No.: x0 000 000 0000 or x0 000 000 0000
Attention: Global Finance Unit
With a copy to:
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
000 Xxxx Xxx., 00xx Xxxxx
Xxx Xxxx, XX 00000
X.X.X.
Telecopier No.: x0 000 000 0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
SECTION 16. SUPPLEMENTS AND AMENDMENTS
The Company and the Warrant Agent may from time to time supplement
or amend this Agreement without the approval of any holders of Warrants in order
to cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Warrant Agent may deem necessary or desirable and
which shall not in any way materially adversely affect the interests of the
holders of Warrants.
Any amendment or supplement to this Agreement that has a materially
adverse effect on the interests of the holders of First Tranche 2012 Warrants
shall require the written consent of the holders of a majority of the then
outstanding First Tranche 2012 Warrants (excluding First Tranche 2012 Warrants
held by the Company or any of its Affiliates). Any amendment or supplement to
this Agreement that has a materially adverse effect on the interests of the
holders of Second Tranche 2012 Warrants shall require the written consent of the
holders of a majority of the then outstanding Second Tranche 2012 Warrants
(excluding Second Tranche 2012 Warrants held by the Company or any of its
Affiliates). Any amendment or supplement to this Agreement that has a materially
adverse effect on the interests of the holders of 2009 Warrants shall require
the written consent of the holders of a majority of the then outstanding 2009
Warrants (excluding 2009 Warrants held by the Company or any of its Affiliates).
28
The consent of each holder of Warrants affected shall be required
for any amendment pursuant to which the applicable Exercise Price would be
increased or the number of Warrant Shares purchasable upon exercise of Warrants
would be decreased (other than pursuant to adjustments provided in this
Agreement). In executing or accepting any supplement, modification or amendment
to this Agreement, the Warrant Agent shall be entitled to receive, and shall be
fully protected in relying upon, an opinion of counsel stating that the
execution of such supplement, modification or amendment is authorized or
permitted by this Agreement and all conditions precedent herein have been
complied with. The Warrant Agent may, but shall not be obligated to, enter into
any such supplement, modification or amendment which affects the Warrant Agent's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 17. SUCCESSORS
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
SECTION 18. TERMINATION
This Agreement shall terminate at 5:00 p.m., New York City time on
the final Expiration Date of the 2012 Warrants. Notwithstanding the foregoing,
this Agreement will terminate on any earlier date if all Warrants have been
exercised. The provisions of Section 12 shall survive such termination.
SECTION 19. GOVERNING LAW
This Agreement and each Warrant Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of New York and for
all purposes shall be construed in accordance with the internal laws of said
State.
SECTION 20. JURISDICTION
The Company agrees that any suit, action or proceeding against it
arising out of or based upon this Agreement or the transactions contemplated
hereby may be instituted in any State or U.S. federal court in The City of New
York and County of New York, and waives any objection which it may now or
hereafter have to the laying of venue of any such proceeding, and irrevocably
submits to the non-exclusive jurisdiction of such courts in any suit, action or
proceeding.
SECTION 21. BENEFITS OF THIS AGREEMENT
Nothing in this Agreement shall be construed to give to any person
or corporation other than the Company, the Warrant Agent and the registered
holders of Warrants any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Warrant Agent and the registered holders of Warrants.
29
SECTION 22. COUNTERPARTS
This Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
[Signature Page Follows]
30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
HARBIN ELECTRIC, INC.
By: /s/ Xxxxxx Xxxx
-----------------------------------------------
Name: Xxxxxx Xxxx
Title: Chief Executive Officer
THE BANK OF NEW YORK, A NEW YORK BANKING CORPORATION, as
Warrant Agent
By: /s/ Xxxx Xxx
-----------------------------------------------
Name: Xxxx Xxx
Title: Assistant Treasurer
[SIGNATURE PAGE TO WARRANT AGREEMENT]
EXHIBIT A-1
[Form of First Tranche 2012 Warrant Certificate]
[Face]
[GLOBAL WARRANT LEGEND]
THIS GLOBAL WARRANT IS HELD BY THE COMMON DEPOSITARY (AS DEFINED IN THE
WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR
THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY
MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.5 OF
THE WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE
BUT NOT IN PART PURSUANT TO SECTION 3.5 OF THE WARRANT AGREEMENT, (III)
THIS GLOBAL WARRANT MAY BE DELIVERED TO THE WARRANT AGENT FOR CANCELLATION
PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL
WARRANT MAY BE TRANSFERRED TO A SUCCESSOR COMMON DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY.
[REGULATION S LEGEND]
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") AND THE WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE
MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS BY OR
ON BEHALF OF ANY U.S. PERSON, UNLESS REGISTERED UNDER THE SECURITIES ACT
OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. IN ORDER TO TRANSFER
OR EXERCISE ANY INTEREST IN THIS WARRANT, THE BENEFICIAL HOLDER MUST
FURNISH TO THE COMPANY AND THE WARRANT REGISTRAR EITHER (A) A WRITTEN
CERTIFICATION THAT IT IS NOT A U.S. PERSON AND THE WARRANT IS NOT BEING
EXERCISED ON BEHALF OF A U.S. PERSON OR (B) A WRITTEN OPINION OF COUNSEL
TO THE EFFECT THAT THE SECURITIES DELIVERED UPON EXERCISE OF THE WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR THAT THE DELIVERY OF SUCH
SECURITIES IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. EACH BENEFICIAL HOLDER BY ACCEPTING AN INTEREST IN THIS WARRANT
AGREES THAT ANY HEDGING TRANSACTION INVOLVING THIS WARRANT OR THE
SECURITIES TO BE ISSUED UPON EXERCISE OF THIS WARRANT MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. TERMS IN THIS LEGEND HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
2,192,308 Warrant Shares
No. 1
ISIN No. USU245151134
Common Code: 026615127
Warrant Certificate
HARBIN ELECTRIC, INC.
This Warrant Certificate certifies that The Bank of New York
Depository (Nominees) Limited, or its registered assigns, as common depository
for Clearstream Banking, societe anonyme ("Clearstream") and/or Euroclear Bank
S.A./N.V. as operator of the Euroclear System, ("Euroclear"), is the registered
holder of the number set forth above of Warrants expiring August 30, 2012 (the
"Warrants") to purchase Common Stock, par value $.00001 (the "Common Stock"), of
Harbin Electric, Inc., a Nevada corporation (the "Company"). Each Warrant
entitles the registered holder upon exercise at any time from 9:00 a.m. on the
date hereof until 5:00 p.m. New York City Time on August 30, 2012 to receive
from the Company 2,192,308 fully paid and nonassessable shares of Common Stock
(the "Warrant Shares") at the initial exercise price (the "Exercise Price") of
$7.80 per share payable upon surrender of this Warrant Certificate and payment
of the Exercise Price at the office or agency of the Warrant Agent, but only
subject to the conditions set forth herein and in the Warrant Agreement referred
to on the reverse hereof. The Exercise Price and number of Warrant Shares
issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City Time on
August 30, 2012. To the extent not exercised by such time, any such Warrant
shall become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the internal laws of the State of New York.
A-2
IN WITNESS WHEREOF, Harbin Electric, Inc. has caused this Warrant
Certificate to be signed below.
Dated: August 30, 2006
HARBIN ELECTRIC, INC.
By:
-------------------------------------------
Name:
Title:
Countersigned:
THE BANK OF NEW YORK,
a New York banking corporation
as Warrant Agent
By:
-----------------------------------------
Authorized Signatory
[SIGNATURE PAGE TO FIRST TRANCHE 2012 WARRANT CERTIFICATE]
[Reverse of Warrant Certificate]
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring at 5:00 p.m. New York City time on
August 30, 2012 entitling the holder on exercise to receive shares of Common
Stock, and are issued or to be issued pursuant to a Warrant Agreement dated as
of August 30, 2006 (the "Warrant Agreement"), duly executed and delivered by the
Company to The Bank of New York, a New York banking corporation, as warrant
agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered holder)
of the Warrants. Capitalized terms used but not defined herein have the meaning
ascribed to such terms in the Warrant Agreement. A copy of the Warrant Agreement
may be obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time on or after the date hereof
and on or before 5:00 p.m. New York City time on August 30, 2012. In order to
exercise all or any of the Warrants represented by this Warrant Certificate, the
holder must deliver to the Warrant Agent at its corporate trust office set forth
in Section 15 of the Warrant Agreement this Warrant Certificate and the form of
election to purchase on the reverse hereof duly completed and signed, which
signature shall be medallion guaranteed by an institution which is a member of a
Securities Transfer Association recognized signature guarantee program, and upon
payment to the Warrant Agent for the account of the Company of the Exercise
Price, for the number of Warrant Shares in respect of which such Warrants are
then exercised. No adjustment shall be made for any dividends on any Common
Stock issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
The Company has agreed pursuant to an Equity Registration Rights
Agreement dated as of August 30, 2006 to, as promptly as practicable, file a
registration statement on an appropriate form under the Securities Act of 1933
(the "Securities Act") covering the resale of the Warrant Shares. The Company
will use its reasonable best efforts to cause any such registration statement to
be declared effective and to keep such registration statement continuously
effective under the Securities Act in order to permit the resale of the Warrant
Shares by the holders thereof until the Warrant Shares (i) have been sold
pursuant thereto or (ii) may be sold without volume limitations pursuant to Rule
144(k).
Warrant Certificates, when surrendered at the corporate trust office
of the Warrant Agent by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the corporate trust office of the Warrant Agent a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
This Agreement and each Warrant Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of New York and for
all purposes shall be construed in accordance with the internal laws of said
State.
The Company agrees that any suit, action or proceeding against it
arising out of or based upon this Agreement or the transactions contemplated
hereby may be instituted in any State or U.S. federal court in The City of New
York and County of New York, and waives any objection which it may now or
hereafter have to the laying of venue of any such proceeding, and irrevocably
submits to the non-exclusive jurisdiction of such courts in any suit, action or
proceeding.
A-2
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _____________ shares of
Common Stock and herewith tenders payment for such shares to the order of HARBIN
ELECTRIC, INC., in the amount of [Warrants equal in fair market value] [Notes
equal in principal amount] to $__________ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be registered in the
name of _______________, whose address is __________________ and that such
shares be delivered to ___________, whose address is
____________________________. If said number of shares is less than all of the
shares of Common Stock purchasable hereunder, the undersigned requests that a
new Warrant Certificate representing the remaining balance of such shares be
registered in the name of ______________________, whose address is
____________________, and that such Warrant Certificate be delivered to whose
address is ____________________.
The undersigned hereby certifies that (i) it is not a U.S. person
and the Warrant is not being exercised on behalf of a U.S. person, or (ii) the
undersigned is providing herewith an opinion of counsel to the effect that the
Warrant and the shares of Common Stock to be delivered upon exercise thereof
have been registered under the Securities Act of 1933 or are exempt from
registration thereunder.
----------------------------------------
Signature
Date:
----------------------------------------
Signature Guaranteed
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Warrant Agent, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Warrant Agent in
addition to, or in substitution for, STAMP.
A-3
SCHEDULE OF EXCHANGES OF INTERESTS OF GLOBAL WARRANTS
The following exchanges of a part of this Global Warrant have been made:
Number of Warrants
Amount of decrease Amount of increase in this Global
in Number of in Number of Warrant following Signature of
warrants in this Warrants in this such decrease or authorized officer
Date of Exchange Global Warrant Global Warrant increase of Warrant Agent
---------------- -------------- -------------- -------- ----------------
X-0
XXXXXXX X-0
[Form of Second Tranche 2012 Warrant Certificate]
[Face]
[GLOBAL WARRANT LEGEND]
THIS GLOBAL WARRANT IS HELD BY THE COMMON DEPOSITARY (AS DEFINED IN THE
WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR
THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY
MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.5 OF
THE WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE
BUT NOT IN PART PURSUANT TO SECTION 3.5 OF THE WARRANT AGREEMENT, (III)
THIS GLOBAL WARRANT MAY BE DELIVERED TO THE WARRANT AGENT FOR CANCELLATION
PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL
WARRANT MAY BE TRANSFERRED TO A SUCCESSOR COMMON DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY.
[REGULATION S LEGEND]
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") AND THE WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE
MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS BY OR
ON BEHALF OF ANY U.S. PERSON, UNLESS REGISTERED UNDER THE SECURITIES ACT
OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. IN ORDER TO TRANSFER
OR EXERCISE ANY INTEREST IN THIS WARRANT, THE BENEFICIAL HOLDER MUST
FURNISH TO THE COMPANY AND THE WARRANT REGISTRAR EITHER (A) A WRITTEN
CERTIFICATION THAT IT IS NOT A U.S. PERSON AND THE WARRANT IS NOT BEING
EXERCISED ON BEHALF OF A U.S. PERSON OR (B) A WRITTEN OPINION OF COUNSEL
TO THE EFFECT THAT THE SECURITIES DELIVERED UPON EXERCISE OF THE WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR THAT THE DELIVERY OF SUCH
SECURITIES IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. EACH BENEFICIAL HOLDER BY ACCEPTING AN INTEREST IN THIS WARRANT
AGREES THAT ANY HEDGING TRANSACTION INVOLVING THIS WARRANT OR THE
SECURITIES TO BE ISSUED UPON EXERCISE OF THIS WARRANT MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. TERMS IN THIS LEGEND HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
525,830 Warrants
No. 1
ISIN No. USU245151399
Common Code: 026615194
Warrant Certificate
HARBIN ELECTRIC, INC.
This Warrant Certificate certifies that The Bank of New York
Depository (Nominees) Limited, or its registered assigns, as common depository
for Clearstream Banking, societe anonyme ("Clearstream") and/or Euroclear Bank
S.A./N.V. as operator of the Euroclear System, ("Euroclear"), is the registered
holder of the number set forth above of Warrants expiring August 30, 2012 (the
"Warrants") to purchase Common Stock, par value $.00001 (the "Common Stock"), of
Harbin Electric, Inc., a Nevada corporation (the "Company"). Each Warrant
entitles the registered holder upon exercise at any time from 9:00 a.m. on the
date hereof until 5:00 p.m. New York City Time on August 30, 2012 to receive
from the Company 525,830 fully paid and nonassessable shares of Common Stock
(the "Warrant Shares") at the initial exercise price (the "Exercise Price") of
$10.84 per share payable upon surrender of this Warrant Certificate and payment
of the Exercise Price at the office or agency of the Warrant Agent, but only
subject to the conditions set forth herein and in the Warrant Agreement referred
to on the reverse hereof. The Exercise Price and number of Warrant Shares
issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City
Time on August 30, 2012. To the extent not exercised by such time, any such
Warrant shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the internal laws of the State of New York.
A-2
IN WITNESS WHEREOF, Harbin Electric, Inc. has caused this Warrant
Certificate to be signed below.
Dated: August 30, 2006
HARBIN ELECTRIC, INC.
By:
-------------------------------------------
Name:
Title:
Countersigned:
THE BANK OF NEW YORK,
a New York banking corporation
as Warrant Agent
By:_____________________________________
Authorized Signatory
[SIGNATURE PAGE TO SECOND TRANCHE 2012 WARRANT CERTIFICATE]
[Reverse of Warrant Certificate]
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring at 5:00 p.m. New York City time on
August 30, 2012 entitling the holder on exercise to receive shares of Common
Stock, and are issued or to be issued pursuant to a Warrant Agreement dated as
of August 30, 2006 (the "Warrant Agreement"), duly executed and delivered by the
Company to The Bank of New York, a New York banking corporation, as warrant
agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered holder)
of the Warrants. Capitalized terms used but not defined herein have the meaning
ascribed to such terms in the Warrant Agreement. A copy of the Warrant Agreement
may be obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time on or after the date hereof
and on or before 5:00 p.m. New York City time on August 30, 2012. In order to
exercise all or any of the Warrants represented by this Warrant Certificate, the
holder must deliver to the Warrant Agent at its corporate trust office set forth
in Section 15 of the Warrant Agreement this Warrant Certificate and the form of
election to purchase on the reverse hereof duly completed and signed, which
signature shall be medallion guaranteed by an institution which is a member of a
Securities Transfer Association recognized signature guarantee program, and upon
payment to the Warrant Agent for the account of the Company of the Exercise
Price, for the number of Warrant Shares in respect of which such Warrants are
then exercised. No adjustment shall be made for any dividends on any Common
Stock issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
The Company has agreed pursuant to an Equity Registration Rights
Agreement dated as of August 30, 2006 to, as promptly as practicable, file a
registration statement on an appropriate form under the Securities Act of 1933
(the "Securities Act") covering the resale of the Warrant Shares. The Company
will use its reasonable best efforts to cause any such registration statement to
be declared effective and to keep such registration statement continuously
effective under the Securities Act in order to permit the resale of the Warrant
Shares by the holders thereof until the Warrant Shares (i) have been sold
pursuant thereto or (ii) may be sold without volume limitations pursuant to Rule
144(k).
Warrant Certificates, when surrendered at the corporate trust office
of the Warrant Agent by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the corporate trust office of the Warrant Agent a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
This Agreement and each Warrant Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of New York and for
all purposes shall be construed in accordance with the internal laws of said
State.
The Company agrees that any suit, action or proceeding against it
arising out of or based upon this Agreement or the transactions contemplated
hereby may be instituted in any State or U.S. federal court in The City of New
York and County of New York, and waives any objection which it may now or
hereafter have to the laying of venue of any such proceeding, and irrevocably
submits to the non-exclusive jurisdiction of such courts in any suit, action or
proceeding.
A-2
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _____________ shares of
Common Stock and herewith tenders payment for such shares to the order of HARBIN
ELECTRIC, INC., in the amount of [Warrants equal in fair market value] [Notes
equal in principal amount] to $__________ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be registered in the
name of _______________, whose address is __________________ and that such
shares be delivered to ___________, whose address is
____________________________. If said number of shares is less than all of the
shares of Common Stock purchasable hereunder, the undersigned requests that a
new Warrant Certificate representing the remaining balance of such shares be
registered in the name of ______________________, whose address is
____________________, and that such Warrant Certificate be delivered to whose
address is ____________________ .
The undersigned hereby certifies that (i) it is not a U.S. person
and the Warrant is not being exercised on behalf of a U.S. person, or (ii) the
undersigned is providing herewith an opinion of counsel to the effect that the
Warrant and the shares of Common Stock to be delivered upon exercise thereof
have been registered under the Securities Act of 1933 or are exempt from
registration thereunder.
----------------------------------------
Signature
Date:
----------------------------------------
Signature Guaranteed
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Warrant Agent, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Warrant Agent in
addition to, or in substitution for, STAMP.
A-3
SCHEDULE OF EXCHANGES OF INTERESTS OF GLOBAL WARRANTS
The following exchanges of a part of this Global Warrant have been made:
Number of Warrants
Amount of decrease Amount of increase in this Global
in Number of in Number of Warrant following Signature of
warrants in this Warrants in this such decrease or authorized officer
Date of Exchange Global Warrant Global Warrant increase of Warrant Agent
---------------- -------------- -------------- -------- ----------------
X-0
XXXXXXX X-0
[Form of 2009 Warrant Certificate]
[Face]
[GLOBAL WARRANT LEGEND]
THIS GLOBAL WARRANT IS HELD BY THE COMMON DEPOSITARY (AS DEFINED IN THE
WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR
THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY
MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.5 OF
THE WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE
BUT NOT IN PART PURSUANT TO SECTION 3.5 OF THE WARRANT AGREEMENT, (III)
THIS GLOBAL WARRANT MAY BE DELIVERED TO THE WARRANT AGENT FOR CANCELLATION
PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL
WARRANT MAY BE TRANSFERRED TO A SUCCESSOR COMMON DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY.
[REGULATION S LEGEND]
THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") AND THE WARRANT AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE
MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS BY OR
ON BEHALF OF ANY U.S. PERSON, UNLESS REGISTERED UNDER THE SECURITIES ACT
OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. IN ORDER TO TRANSFER
OR EXERCISE ANY INTEREST IN THIS WARRANT, THE BENEFICIAL HOLDER MUST
FURNISH TO THE COMPANY AND THE WARRANT REGISTRAR EITHER (A) A WRITTEN
CERTIFICATION THAT IT IS NOT A U.S. PERSON AND THE WARRANT IS NOT BEING
EXERCISED ON BEHALF OF A U.S. PERSON OR (B) A WRITTEN OPINION OF COUNSEL
TO THE EFFECT THAT THE SECURITIES DELIVERED UPON EXERCISE OF THE WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OR THAT THE DELIVERY OF SUCH
SECURITIES IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. EACH BENEFICIAL HOLDER BY ACCEPTING AN INTEREST IN THIS WARRANT
AGREES THAT ANY HEDGING TRANSACTION INVOLVING THIS WARRANT OR THE
SECURITIES TO BE ISSUED UPON EXERCISE OF THIS WARRANT MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. TERMS IN THIS LEGEND HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
769,230 Warrants
No. 1
ISIN No. USU245151217
Common Code: 026615267
Warrant Certificate
HARBIN ELECTRIC, INC.
This Warrant Certificate certifies that The Bank of New York
Depository (Nominees) Limited, or its registered assigns, as common depository
for Clearstream Banking, societe anonyme ("Clearstream") and/or Euroclear Bank
S.A./N.V. as operator of the Euroclear System, ("Euroclear"), is the registered
holder of the number set forth above of Warrants expiring August 30, 2009 (the
"Warrants") to purchase Common Stock, par value $.00001 (the "Common Stock"), of
Harbin Electric, Inc., a Nevada corporation (the "Company"). Each Warrant
entitles the registered holder upon exercise at any time from 9:00 a.m. on the
date hereof until 5:00 p.m. New York City Time on August 30, 2009 to receive
from the Company 769,230 fully paid and nonassessable shares of Common Stock
(the "Warrant Shares") at the initial exercise price (the "Exercise Price") of
$7.80 per share payable upon surrender of this Warrant Certificate and payment
of the Exercise Price at the office or agency of the Warrant Agent, but only
subject to the conditions set forth herein and in the Warrant Agreement referred
to on the reverse hereof. The Exercise Price and number of Warrant Shares
issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City Time on
August 30, 2009. To the extent not exercised by such time, any such Warrant
shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the internal laws of the State of New York.
A-2
IN WITNESS WHEREOF, Harbin Electric, Inc. has caused this Warrant
Certificate to be signed below.
Dated: August 30, 2006
HARBIN ELECTRIC, INC.
By:
-------------------------------------------
Name:
Title:
Countersigned:
THE BANK OF NEW YORK,
a New York banking corporation
as Warrant Agent
By:_____________________________________
Authorized Signatory
[SIGNATURE PAGE TO 2009 WARRANT CERTIFICATE]
[Reverse of Warrant Certificate]
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring at 5:00 p.m. New York City time on
August 30, 2009 entitling the holder on exercise to receive shares of Common
Stock, and are issued or to be issued pursuant to a Warrant Agreement dated as
of August 30, 2006 (the "Warrant Agreement"), duly executed and delivered by the
Company to The Bank of New York, a New York banking corporation, as warrant
agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered holder)
of the Warrants. Capitalized terms used but not defined herein have the meaning
ascribed to such terms in the Warrant Agreement. A copy of the Warrant Agreement
may be obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time on or after the date hereof
and on or before 5:00 p.m. New York City time on August 30, 2009. In order to
exercise all or any of the Warrants represented by this Warrant Certificate, the
holder must deliver to the Warrant Agent at its corporate trust office set forth
in Section 15 of the Warrant Agreement this Warrant Certificate and the form of
election to purchase on the reverse hereof duly completed and signed, which
signature shall be medallion guaranteed by an institution which is a member of a
Securities Transfer Association recognized signature guarantee program, and upon
payment to the Warrant Agent for the account of the Company of the Exercise
Price, for the number of Warrant Shares in respect of which such Warrants are
then exercised. No adjustment shall be made for any dividends on any Common
Stock issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
The Company has agreed pursuant to an Equity Registration Rights
Agreement dated as of August 30, 2006 to, as promptly as practicable, file a
registration statement on an appropriate form under the Securities Act of 1933
(the "Securities Act") covering the resale of the Warrant Shares. The Company
will use its reasonable best efforts to cause any such registration statement to
be declared effective and to keep such registration statement continuously
effective under the Securities Act in order to permit the resale of the Warrant
Shares by the holders thereof until the Warrant Shares (i) have been sold
pursuant thereto or (ii) may be sold without volume limitations pursuant to Rule
144(k).
Warrant Certificates, when surrendered at the corporate trust office
of the Warrant Agent by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
A-2
Upon due presentation for registration of transfer of this Warrant
Certificate at the corporate trust office of the Warrant Agent a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
This Agreement and each Warrant Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of New York and for
all purposes shall be construed in accordance with the internal laws of said
State.
The Company agrees that any suit, action or proceeding against it
arising out of or based upon this Agreement or the transactions contemplated
hereby may be instituted in any State or U.S. federal court in The City of New
York and County of New York, and waives any objection which it may now or
hereafter have to the laying of venue of any such proceeding, and irrevocably
submits to the non-exclusive jurisdiction of such courts in any suit, action or
proceeding.
A-3
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _____________ shares of
Common Stock and herewith tenders payment for such shares to the order of HARBIN
ELECTRIC, INC., in the amount of [Warrants equal in fair market value] [Notes
equal in principal amount] to $__________ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be registered in the
name of _______________, whose address is __________________ and that such
shares be delivered to ___________, whose address is
____________________________. If said number of shares is less than all of the
shares of Common Stock purchasable hereunder, the undersigned requests that a
new Warrant Certificate representing the remaining balance of such shares be
registered in the name of ______________________, whose address is
____________________, and that such Warrant Certificate be delivered to whose
address is ____________________.
The undersigned hereby certifies that (i) it is not a U.S. person
and the Warrant is not being exercised on behalf of a U.S. person, or (ii) the
undersigned is providing herewith an opinion of counsel to the effect that the
Warrant and the shares of Common Stock to be delivered upon exercise thereof
have been registered under the Securities Act of 1933 or are exempt from
registration thereunder.
----------------------------------------
Signature
Date:
----------------------------------------
Signature Guaranteed
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Warrant Agent, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Warrant Agent in
addition to, or in substitution for, STAMP.
A-4
SCHEDULE OF EXCHANGES OF INTERESTS OF GLOBAL WARRANTS
The following exchanges of a part of this Global Warrant have been made:
Number of Warrants
Amount of decrease Amount of increase in this Global
in Number of in Number of Warrant following Signature of
warrants in this Warrants in this such decrease or authorized officer
Date of Exchange Global Warrant Global Warrant increase of Warrant Agent
---------------- -------------- -------------- -------- ----------------
A-5
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Harbin Electric, Inc.
Xx. 0 Xx Xxxx Xx Xx, Xx Ping Lu Xx Xxxxx Qu
Xxxxxx Xxx Xx Xx
Xxxxxx 150060
P.R. China
The Bank of New York
000 Xxxxxxx Xxxxxx - 21st Floor West
New York, NY 10286
U.S.A.
Attention: Global Finance Unit
Re: Warrants
Reference is hereby made to the Warrant Agreement, dated as of
August 30, 2006 (the "Warrant Agreement"), between Harbin Electric, Inc., as
issuer (the "Company"), and The Bank of New York, a New York banking
corporation, as warrant agent. Capitalized terms used but not defined herein
shall have the meanings given to them in the Warrant Agreement.
___________________, (the "Transferee") proposes to acquire
___________ number of Warrant[s] or interest in such Warrant[s] (the
"Transfer"). In connection with the Transfer, the Transferee hereby agrees (i)
that any hedging transactions involving the Warrants or the securities issuable
upon exercise thereof may not be conducted unless in compliance with the
Securities Act and (ii) such Transferee will only resell the Warrants or the
securities issuable upon exercise of the Warrants in accordance with the
provisions of Regulation S, pursuant to registration under the Securities Act or
pursuant to an available exemption from registration. The Transferee further
certifies that:
[CHECK ALL THAT APPLY]
1. |_| Check if Transferee will take delivery of a beneficial
interest in the Global Warrant or a Definitive Warrant pursuant to Regulation S.
The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the U.S. Securities Act of 1933 (the "Securities Act") and,
accordingly, the Transferee hereby further certifies that (i) the Transferee is
not a person in the United States and (x) at the time the buy order was
originated, the Transferee was outside the United States or (y) the transaction
was executed in, on or through the facilities of a designated offshore
securities market and the Transfer was not prearranged with a buyer in the
United States, (ii) no directed selling efforts have been made in contravention
of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the
Securities Act, (iii) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Distribution Compliance
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S. Person. Upon consummation of the proposed Transfer in
accordance with the terms of the Warrant Certificate, the transferred beneficial
interest or Definitive Warrant will be subject to the restrictions on transfer
printed on the Global Warrant and/or the Definitive Warrant and the Securities
Act.
2. |_| Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act and in compliance with the
transfer restrictions contained in the Warrant Certificate and any applicable
blue sky securities laws of any State of the United States.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
--------------------------------------------
[Insert Name of Transferee]
By:
--------------------------------------------
Name:
Title:
Dated: _________________
B-2
