PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement")
is
entered into as of _______,
2007,
by and
among CHINA POWER EQUIPMENT,
INC.,
a
Maryland corporation (the "Company"), with headquarters located at 00 Xxxxxxxxx
Xxxx, Xxxxxxxxxxxx, Xxxxxx of Xxxxxxxxx, XX 00000, and the purchasers
(collectively, the "Purchasers" and each a "Purchaser") set forth on
Schedule 1
hereof,
with regard to the following:
RECITALS
A. The
Company and the Purchasers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D ("Regulation D") and/or Regulation S, as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities
Act").
B. The
Purchasers desire to (a) purchase, upon the terms and conditions stated in
this Agreement, shares of the Company's Series A Convertible Preferred Stock,
$.001 par value per share (the "Preferred Stock") and (b) purchase, upon the
terms and conditions stated in this Agreement, the Common Stock Purchase
Warrants (the "Warrants") to purchase shares of the Company’s Common Stock,
$.001 par value per share (“Common Stock”), in the form attached hereto as
Exhibit A.
The
shares of Common Stock issuable upon exercise of or otherwise pursuant to the
Warrants are referred to herein as "Warrant Shares." The Preferred Stock, the
Warrants and the Warrant Shares are collectively referred to herein as the
"Securities".
The
Warrants and any other documents or agreements executed in connection with
the
transactions contemplated hereunder, are hereinafter referred to as the
"Transaction Documents.”
AGREEMENTS
NOW,
THEREFORE, in consideration of their respective promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and the Purchasers hereby agree as
follows:
ARTICLE
I
PURCHASE
AND SALE OF PREFERRED STOCK AND WARRANTS
1.1 Purchase
of Preferred Stock and Warrants.
Subject
to the terms and conditions of this Agreement, the issuance, sale and purchase
of the Preferred Stock and Warrants shall be consummated in a "Closing." The
purchase price (the "Purchase Price") shall be TEN
DOLLARS ($10.00)
per Unit, for a Unit consisting of one share of Preferred Stock and one Warrant
to purchase such number of shares of Common Stock as shall be equal to the
number of shares of Common Stock that one share of Preferred Stock shall have
been converted into pursuant to a mandatory conversion of Preferred Stock into
Common Stock made at the option of the Company pursuant to Section 3(d) of
Article SIXTH of the Certificate of Incorporation of the Company, as amended
and
in effect as of the date of the Closing. _______Units
shall be sold pursuant to this Agreement. On
the date of the Closing, subject to the satisfaction or waiver of the conditions
set forth in ARTICLES VI
and VII
hereof, the Company shall issue and sell to each Purchaser, and each Purchaser
severally agrees to purchase from the Company, the number of Units set forth
on
Schedule
1
hereto. Each Purchaser's obligation to purchase Units hereunder is distinct
and
separate from each other Purchaser's obligation to purchase, and no Purchaser
shall be required to purchase hereunder more than the number of Units set forth
on Schedule
1
hereto. The obligations of the Company with respect to each Purchaser shall
be
separate from the obligations of each other Purchaser and shall not be
conditioned as to any Purchaser upon the performance of obligations of any
other
Purchaser. .
1.2 Closing
Date.
Subject to the satisfaction (or waiver) of the conditions set forth in
ARTICLES VI
and VII
below, the date and time of the issuance, sale and purchase of the Preferred
Stock and Warrants pursuant to this Agreement shall be at 10:00 a.m. New
York time, on __________, 2007.
ARTICLE
II
PURCHASER'S
REPRESENTATIONS AND
WARRANTIES
Each
Purchaser represents and warrants to the Company, as of the date hereof and
as
of the Closing, severally and not jointly with respect to itself and its
purchase hereunder and not with respect to any other Purchaser or the purchase
hereunder by any other Purchaser that the following statements are true and
correct:
2.1 Investment
Purpose.
Purchaser is purchasing the Preferred Stock and the Warrants for Purchaser's
own
account for investment only and not with a view toward or in connection with
the
public sale or distribution thereof. Purchaser will not, directly or indirectly,
offer, sell, pledge or otherwise transfer its Preferred Stock, Warrants or
any
interest therein except pursuant to transactions that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act. Purchaser understands that Purchaser must bear the economic
risk of this investment indefinitely, unless the Securities are registered
pursuant to the Securities Act and any applicable state securities laws or
an
exemption from such registration is available, and that the Company has no
present intention of registering any such Securities other than as contemplated
by the terms of the Company’s Articles of Incorporation setting forth the
designation, rights and preferences of the Preferred Stock (the “Charter”) and
the terms of the Warrants set forth in the certificate evidencing the Warrants
(the “Warrant Certificate”).
2.2 Accredited
Investor/"Non-U.S."
Person Status.
Purchaser is an "accredited investor" as that term is defined in
Rule 501(a) of Regulation D as provided in Exhibit B hereto or Purchaser is
a “non-U.S.” Person as defined under Rule 902 of Regulation S.
2.3 Reliance
on Exemptions.
Purchaser understands that the Preferred Stock and Warrants are being offered
and sold to Purchaser in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and Purchaser's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire
the
Common Shares and Warrants.
2
2.4 Information.
Purchaser has been afforded the opportunity to ask questions of the Company,
was
permitted to meet with the Company's officers and has received what the
Purchaser believes to be complete and satisfactory answers
to any such inquiries. Except for the answers received by Purchaser as a result
of inquiries made by Purchaser to Company officers, and except as otherwise
provided in this Agreement, the Purchaser is not relying upon any information,
representations or warranties of any other party. Neither
such inquiries nor any other due diligence investigation conducted by Purchaser
or any of its representations shall modify, amend or affect Purchaser's right
to
rely on the Company's representations and warranties contained in ARTICLE III.
Purchaser understands that Purchaser's investment in the Securities involves
a
high degree of risk.
2.5 Governmental
Review.
Purchaser understands that no United States federal or state agency or any
other
government or governmental agency has passed upon or made any recommendation
or
endorsement of the Securities.
2.6 Transfer
or Resale.
Purchaser understands that (i) except as provided in the Charter and the
Warrant Certificate, the Securities have not been and are not being registered
under the Securities Act or any state securities laws, and may not be offered,
sold, pledged or otherwise transferred unless subsequently registered thereunder
or an exemption from such registration is available (which exemption the Company
expressly agrees may be established as contemplated in clauses (b) and (c)
of
Section 5.1
hereof);
(ii) any sale of such Securities made in reliance on Rule 144 under the
Securities Act (or a successor rule) ("Rule 144")
may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of such Securities without
registration under the Securities Act under circumstances in which the seller
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities
Act
or the rules and regulations of the SEC thereunder in order for such resale
to
be allowed, and (iii) the Company is under no obligation to register such
Securities under the Securities Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder (in each case, other
than pursuant to the Charter and the Warrant Certificate).
2.7 No
Directed Selling Efforts.
Neither
Purchaser, nor any of his affiliates, nor any person acting on its behalf or
any
behalf of any such affiliate, has engaged or will engage in any activity
undertaken for the purpose of, or that reasonably could be expected to have
the
effect of, conditioning the markets in the United States for the Units or Common
Stock, including but not limited to effecting any sale or short sale of the
Company’s securities through Purchaser or any of his affiliates prior to the
expiration of any restricted period contained in Regulation S (any such activity
being defined herein as a “Directed Selling Effort”). To the best knowledge of
the undersigned, this Agreement and the transactions contemplated herein are
not
part of a plan or scheme to evade the registration provisions of the 1933 Act,
and the Units are being purchased for investment purposes by Purchaser.
Purchaser agrees that all offers and sales of the Common Stock from the date
hereof and through the expiration of the any restricted period set forth in
Rule
903 of Regulation S (as the same may be amended from time to time hereafter)
shall not be made to U.S. Persons or for the account or benefit of U.S. Persons
and shall otherwise be made in compliance with the provisions of Regulation
S
and any other applicable provisions of the Securities Act. Purchaser and its
representatives have not conducted any Directed Selling Effort as that term
is
used and defined in Rule 902 of Regulation S and will not engage in any such
Directed Selling Effort within the United States through the expiration of
any
restricted period set forth in Rule 903 of Regulation S.
3
2.8 Legends.
Purchaser understands that, subject to ARTICLE V
hereof, the certificate for the Preferred Stock and the Warrant Certificate
and,
until such time as the Warrant Shares and shares of Common Stock issuable upon
conversion of the Preferred Stock (the “Conversion Shares”) have been registered
under the Securities Act or otherwise may be sold by Purchaser pursuant to
Rule
144 (subject to and in accordance with the procedures specified in ARTICLE V
hereof), the certificates for the Conversion Shares and the Warrant Shares
will
bear a restrictive legend (the "Legend"),
which will include language in substantially the following form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE
UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR
THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
2.9 Authorization;
Enforcement.
This Agreement has been duly and validly authorized, executed and delivered
on
behalf of Purchaser and is a valid and binding agreement of Purchaser
enforceable in accordance with its terms, except to the extent that such
validity or enforceability may be subject to or affected by any bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to,
or affecting generally the enforcement of, creditors' rights or remedies of
creditors, or by other equitable principles of general application.
2.10 Residency.
Purchaser is a resident of the jurisdiction set forth under Purchaser's name
on
the signature page hereto executed by Purchaser.
2.11 Hedging
Transactions.
Purchaser does not have an existing short position with respect to the Company’s
Common Stock.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to each Purchaser as of the date hereof and
as
of the Closing that the following statements are true and correct, except as
set
forth on the disclosure schedules, if any, attached hereto as Schedule
2
(the
"Company Disclosure Schedules").
4
Organization
and Qualification.
Each of
the Company and its subsidiaries is a corporation duly organized and existing
in
good standing under the laws of the jurisdiction in which it is incorporated,
and has the requisite corporate power to own its properties and to carry on
its
business as now being conducted. The Company and each of its subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction where the failure so to qualify or be in good standing
could reasonably be expected to have a Material Adverse Effect. "Material
Adverse Effect" means any effect which, individually or in the aggregate with
all other effects, reasonably would be expected to be materially adverse to
the
business, operations, properties, financial condition, operating results or
prospects of the Company and its subsidiaries, taken as a whole on a
consolidated basis or on the transactions contemplated hereby.
3.1 Authorization;
Enforcement.
(a) The Company has the requisite corporate power and authority to enter
into and perform under the Transaction Documents, and to issue, sell and perform
its obligations with respect to the Securities in accordance with the terms
hereof and thereof and in accordance with the terms and conditions of the
Securities; (b) the execution, delivery and performance of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including, without limitation, the issuance
of
the Preferred Stock, Conversion Shares and the Warrants and Warrant Shares,
and
the reservation for issuance of the Warrant Shares) have been duly authorized
by
all necessary corporate action and no further consent or authorization of the
Company, its board of directors, or its stockholders or any other Person is
required with respect to any of the transactions contemplated hereby or thereby;
(c) this Agreement, the Preferred Stock, and the Warrants have been duly
executed and delivered by the Company; and (d) this Agreement, the
Preferred Stock, and the Warrants constitute legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except (i) to the extent that such validity or
enforceability may be subject to or affected by any bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights or remedies of
creditors generally, or by other equitable principles of general application,
and (ii) as rights to indemnity and contribution may be limited by federal
or state securities laws. "Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
association, corporation, entity or government (whether federal, state, county,
city or otherwise, including, without limitation, any instrumentality, division,
agency or department thereof).
3.2 Capitalization.
There are currently 110,000,000 shares of authorized capital stock with
100,000,000 shares of Common Stock authorized and 10 million shares of preferred
stock authorized. There are currently ________ shares of Common Stock
outstanding and ________ shares of preferred stock outstanding. All of such
outstanding shares of capital stock have been, or upon issuance will be, validly
issued, fully paid and nonassessable. No shares of capital stock of the Company
(including the Preferred Stock, the Conversion Shares and the Warrant Shares)
are subject to preemptive rights or any other similar rights of the stockholders
of the Company or any liens or encumbrances. Except as disclosed in Schedule 3
hereof, as of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe for, calls or commitments of
any
character whatsoever relating to, or securities or rights convertible into
or
exercisable or exchangeable for, any shares of capital stock of the Company
or
any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of
its
subsidiaries, (ii) issuance of the Securities will not trigger
anti-dilution rights for any other outstanding or authorized securities of
the
Company, (iii) up until the date of effectiveness of a registration statement
registering the re-sale of the Securities, there will be no more than 20 million
shares of common stock outstanding on a fully diluted basis, and (iv) there
are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of its or their securities
under the Securities Act (except for the provisions sets forth in the Charter
and the Warrant Certificate). The Company has made available to Purchaser true
and correct copies of the Company's Articles of Incorporation as in effect
on
the date hereof ("Articles of Incorporation"), and the Company's By-laws as
in
effect on the date hereof (the "By-laws"). The Company has set forth on
Schedule 3
hereof all instruments and agreements (other than the Articles of Incorporation
and By-laws) governing securities convertible into or exercisable or
exchangeable for Common Stock of the Company (and the Company shall provide
to
Purchaser copies thereof upon the request of Purchaser).
5
3.3 No
Conflicts.
The execution, delivery and performance of the Transaction Documents by the
Company, and the consummation by the Company of transactions contemplated hereby
and thereby (including, without limitation, the issuance and reservation for
issuance, as applicable, of the Securities) do not and will not (a) result
in a violation of the Articles of Incorporation or By-laws or (b) conflict
with, or constitute a default (or an event which, with notice or lapse of time
or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is
a
party, or result in a violation of any law, rule, regulation, order, judgment
or
decree (including U.S. federal and state securities laws) applicable to the
Company or any of its subsidiaries, or by which any property or asset of the
Company or any of its subsidiaries, is bound or affected (except for such
possible conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect). Neither the Company nor any of its subsidiaries
is in violation of its Articles of Incorporation or other organizational
documents. Neither the Company nor any of its subsidiaries, is in default (and
no event has occurred which has not been waived which, with notice or lapse
of
time or both, could reasonably be expected to put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which
the Company or any of its subsidiaries is a party, except for possible
violations, defaults or rights as would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as
a
Purchaser owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either individually or in the aggregate would not have
a
Material Adverse Effect. Except as (A) such as may be required under the
Securities Act in connection with the performance of the Company's obligations
under the Charter and Warrant Certificate, (B) filing of a Form D with
the SEC, and (C) compliance with the state securities or Blue Sky laws of
applicable jurisdictions, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or
governmental agency or any regulatory or self-regulatory agency in order for
it
to execute, deliver or perform any of its obligations under this Agreement
or to
perform its obligations in accordance with the terms hereof or
thereof.
6
3.4 Consents.
The execution, delivery and performance by the Company of the Transaction
Documents and the offer, issuance and sale of the Securities require no consent
of, action by or in respect of, or filing with, any Person, governmental body,
agency, or official other than (i) filings that have been made pursuant to
applicable state securities laws, (ii) post-sale filings pursuant to applicable
state and federal securities laws, and (iii) any consent, action or filing
that
either individually or in the aggregate would not have a Material Adverse
Effect. Subject to the accuracy of the representations and warranties of each
Purchaser set forth in ARTICLE
II
hereof, the Company has taken all action necessary to exempt (i) the issuance
and sale of the Preferred Stock, (ii) the issuance of the Conversion Shares,
(iii) the issuance of the Warrants, and (iv) the issuance of the Warrant Shares,
from the provisions of any stockholder rights plan or other “poison pill”
arrangement, any anti-takeover, business combination or control share law or
statute binding on the Company or to which the Company or any of its assets
and
properties may be subject and any provision of the Company’s Articles of
Incorporation or By-laws that is or could reasonably be expected to become
applicable to the Purchasers as a result of the transactions contemplated
hereby, including without limitation, the issuance of the Securities and the
ownership, disposition or voting of the Securities by the Purchasers or the
exercise of any right granted to the Purchaser pursuant to this Agreement or
the
other Transaction Documents.
3.5 Absence
of Litigation.
There is no action, suit, proceeding, inquiry or investigation before or by
any
court, public board, government agency, or self-regulatory organization or
body
pending or, to the Company's knowledge or any of its subsidiaries, threatened
against or affecting the Company, any of its subsidiaries, or any of their
respective directors or officers in their capacities as such. There are no
facts
known to the Company which, if known by a potential claimant or governmental
authority, could reasonably be expected to give rise to a claim or proceeding
which, if asserted or conducted with results unfavorable to the Company or
any
of its subsidiaries, could reasonably be expected to have a Material Adverse
Effect.
3.6 Disclosure.
No information relating to or concerning the Company set forth in this Agreement
contains an untrue statement of a material fact. The Company has not omitted
to
state a material fact necessary in order to make the statements made herein
or
therein, in light of the circumstances under which they were made, not
misleading. Except for the execution and performance of this Agreement, no
material fact (within the meaning of the federal securities laws of the United
States and of applicable state securities laws) exists with respect to the
Company which has not been publicly disclosed.
3.7 No
General Solicitation.
Neither the Company nor any distributor participating on the Company's behalf
in
the transactions contemplated hereby (if any) nor any person acting for the
Company, or any such distributor, has conducted any "general solicitation,"
as
described in Rule 502(c) under Regulation D, with respect to any of
the Securities being offered hereby.
7
3.8 No
Integrated Offering.
Neither the Company, nor any of its affiliates, nor any person acting on its
or
their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under circumstances that
would prevent the parties hereto from consummating the transactions contemplated
hereby pursuant to an exemption from the registration under the Securities
Act
pursuant to the provisions of Regulation D. The transactions contemplated
hereby are exempt from the registration requirements of the Securities Act,
assuming the accuracy of the representations and warranties herein contained
of
each Purchaser.
3.9 No
Brokers.
The Company has taken no action which would give rise to any claim by any person
for brokerage commissions, finder's fees or similar payments by Purchaser
relating to this Agreement or the transactions contemplated hereby.
ARTICLE
IV
COVENANTS
4.1 Reasonable
Efforts.
The parties shall use their commercially reasonable efforts to timely satisfy
each of the conditions described in ARTICLES
VI
and VII
of this Agreement and to seek its Board of Directors' approval of this
Agreement.
4.2 Securities
Laws; Disclosure; Press Release.
The Company agrees to file a Form D with respect to the Securities with the
SEC as required under Regulation D. The Company shall, on or prior to the date
of Closing, take such action as is necessary to sell the Securities to each
Purchaser under applicable securities laws of the states of the United States.
4.3 Reservation
of Common Stock.
The
Company shall continue to reserve and keep available at all times, free of
preemptive rights, a sufficient number of shares of Common Stock for the purpose
of enabling the Company to issue the Conversion Shares and the Warrant
Shares.
4.4 Corporate
Existence.
So long as any Purchaser beneficially owns any Securities, the Company shall
maintain its corporate existence, except in the event of a merger, consolidation
or sale of all or substantially all of the Company's assets, as long as the
surviving or successor entity in such transaction assumes the Company's
obligations hereunder and under the agreements and instruments entered into
in
connection herewith.
4.5 Hedging
Transactions.
No Purchaser has an existing short position with respect to the Company’s Common
Stock. Each Purchaser agrees not to, directly or indirectly, enter into any
short sales with respect to the Common Stock prior to the date on which such
Purchaser is entitled to sell, transfer the number of shares of Common Stock
as
to which such Purchaser proposes to establish a short position.
4.6 Conversion.
(i)
Each
share of Series A Stock shall automatically be converted into shares of Common
Stock at the Conversion Price (as such term hereinafter defined) for such
share,
determined as hereafter provided, immediately upon the closing of the
corporation's sale of its Common Stock in an offering pursuant to a registration
statement under the Securities Act of 1933, as amended (a "Qualified IPO").
The
date of such closing is hereinafter referred to as the “Automatic Conversion
Date”. In connection with a Qualified IPO, prior to the initial filing of a
registration statement related to the Qualified IPO, the corporation shall
obtain from a person, firm or entity engaged in the business of providing
evaluations or appraisals of the value of securities of companies which is
selected in good faith by the Board of Directors of the corporation and is
independent of the corporation (the “Valuation Firm”) a valuation of the Common
Stock on a per share basis (the “Valuation Price”) For purposes hereof, the term
“Conversion Price” shall mean the price equal to the product obtained by
multiplying (x) 1/3, times (y) 80% of the Valuation Price. The number of
shares
of Common Stock issuable upon conversion of one share of Series A Preferred
shall be the quotient obtained by dividing (A) $10 by (B) the Conversion
Price.
No fractional shares of Common Stock may be issued upon the conversion of
any
share or shares of the Series A Preferred Stock into Common Stock, and the
number of shares of Common Stock to be issued shall be rounded up to the
nearest
whole share. The Conversion Price shall be appropriately adjusted in the
event
of a reorganization, recapitalization, stock split, stock dividend, combination
of shares, or similar change in the corporation's Common Stock. Except as
set
forth herein, neither the corporation nor any holder of Series A Preferred
shall
have the right to convert, or require the conversion of, Series A Preferred
into
Common Stock or any other security or property of the corporation or any
other
person.
8
ARTICLE
V
LEGEND
REMOVAL, TRANSFER, CERTAIN SALES, ADDITIONAL SHARES
5.1 Removal
of Legend.
The Legend shall be removed and the Company shall issue a certificate without
such Legend to the holder of any Security upon which it is stamped, and a
certificate for a security shall be originally issued without the Legend, if,
(a) the sale of such Security is registered under the Securities Act,
(b) such holder provides the Company with an opinion of counsel, in form,
substance and scope customary for opinions of counsel in comparable transactions
and reasonably satisfactory to the Company and its counsel (the reasonable
cost
of which shall be borne by the Company if, after one (1) year, neither an
effective registration statement under the Securities Act or Rule 144 is
available in connection with such sale) to the effect that a public sale or
transfer of such Security may be made without registration under the Securities
Act pursuant to an exemption from such registration requirements or
(c) such Security can be sold pursuant to Rule 144 and the holder
provides the Company with reasonable assurances that the Security can be so
sold
without restriction or (d) such Security can be sold pursuant to
Rule 144(k). The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section. Each Purchaser agrees to sell all
Securities, including those represented by a certificate(s) from which the
Legend has been removed, or which were originally issued without the Legend,
pursuant to an effective registration statement, in accordance with the manner
of distribution described in such registration statement and to deliver a
prospectus in connection with such sale, or in compliance with an exemption
from
the registration requirements of the Securities Act. In the event the Legend
is
removed from any Security or any Security is issued without the Legend and
the
Security is to be disposed of other than pursuant to the registration statement
or pursuant to Rule 144, then prior to, and as a condition to, such
disposition such Security shall be relegended as provided herein in connection
with any disposition if the subsequent transfer thereof would be restricted
under the Securities Act. Also, in the event the Legend is removed from any
Security or any Security is issued without the Legend and thereafter the
effectiveness of a registration statement covering the resale of such Security
is suspended or the Company determines that a supplement or amendment thereto
is
required by applicable securities laws, then upon reasonable advance notice
to
Purchaser holding such Security, the Company may require that the Legend be
placed on any such Security that cannot then be sold pursuant to an effective
registration statement or Rule 144 or with respect to which the opinion referred
to in clause (b) next above has not been rendered, which Legend shall be
removed when such Security may be sold pursuant to an effective registration
statement or Rule 144 or such holder provides the opinion with respect
thereto described in clause (b) next above.
9
5.2 Transfer
Agent Instructions.
The Company agrees that following the effective date of the registration
statement or at such time as such legend is no longer required under Section
5.1, it will, no later than ten (10) days following the delivery by a Purchaser
to the Company or the Company's transfer agent of a certificate representing
Warrant Shares issued with a restrictive legend (such date, the "Legend Removal
Date"), deliver or cause to be delivered to such Purchaser a certificate
representing such Securities that is free from all restrictive and other
legends, registered in the name of each Purchaser or its nominee for the Warrant
Shares in such amounts determined in accordance with the terms of the Warrants.
The Company covenants that no instruction other than such instructions referred
to in this ARTICLE V,
and stop transfer instructions to give effect to Section 2.6 hereof in the
case of the Warrant Shares prior to registration of the Warrant Shares under
the
Securities Act, will be given by the Company to its transfer agent and that
the
Securities shall otherwise be freely transferable on the books and records
of
the Company. Nothing in this Section shall affect in any way each Purchaser's
obligations and agreement set forth in Section 5.1 hereof to resell the
Securities pursuant to an effective registration statement and to deliver a
prospectus in connection with such sale or in compliance with an exemption
from
the registration requirements of applicable securities laws. If (a) a
Purchaser provides the Company with an opinion of counsel, which opinion of
counsel shall be in form, substance and scope customary for opinions of counsel
in comparable transactions and reasonably satisfactory to the Company and its
counsel (the reasonable cost of which shall be borne by the Company if, after
one (1) year, neither an effective registration statement under the
Securities Act or Rule 144 is available in connection with such sale), to
the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from registration or (b) a Purchaser
transfers Securities to an affiliate which is an accredited investor (within
the
meaning of Regulation D under the Securities Act) and which delivers to the
Company in written form the same representations, warranties and covenants
made
by Purchaser hereunder or pursuant to Rule 144, the Company shall permit
the transfer, and, in the case of the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denomination as specified by such Purchaser. The Company acknowledges that
a
breach by it of its obligations hereunder will cause irreparable harm to a
Purchaser by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this ARTICLE V
will be inadequate and agrees, in the event of a breach or threatened breach
by
the Company of the provisions of this ARTICLE V,
that a Purchaser shall be entitled, in addition to all other available remedies
to an injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond
or
other security being required.
10
ARTICLE
VI
CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL
6.1 Conditions
to the Company's Obligation to Sell.
The obligation of the Company hereunder to issue and sell the Preferred Stock
and Warrants to a Purchaser at the Closing is subject to the satisfaction,
as of
the date of the Closing and with respect to such Purchaser, of each of the
following conditions thereto, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its
sole
discretion:
(i) Such
Purchaser shall have executed and delivered the signature page to this
Agreement;
(ii) Such
Purchaser shall have wired its aggregate Purchase Price set forth on Schedule
1
hereto to the Company;
(iii) The
representations and warranties of such Purchaser shall be true and correct
as of
the date when made and as of the Closing with the same force and effect as
though such representations and warranties had been made on and as of the date
of Closing (except for representations and warranties that speak as of a
specific date), and such Purchaser shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by the applicable
Purchaser at or prior to the Closing;
(iv) No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which restricts or prohibits
the
consummation of any of the transactions contemplated by this Agreement;
and
(v) The
Company shall have obtained all waivers, authorizations, approvals and consents
needed to consummate the transaction contemplated by this Agreement which the
Company agrees to diligently procure.
11
ARTICLE
VII
CONDITIONS
TO EACH PURCHASER'S OBLIGATION TO PURCHASE
7.1 The
obligation of each Purchaser hereunder to purchase the Preferred Stock and
Warrants to be purchased by it on the date of the Closing is subject to the
satisfaction of each of the following conditions, provided that these conditions
are for each Purchaser's sole benefit and may be waived by such Purchaser at
any
time in such Purchaser's sole discretion:
(i) The
Company shall have executed and delivered the signature page to this
Agreement;
(ii) The
Company shall have delivered to the Purchaser duly issued certificates for
the
Preferred Stock and Warrants being so purchased by Purchaser at the
Closing;
(iii) The
representations and warranties of the Company shall be true and correct in
all
material respects as of the date when made and as of the Closing with the same
force and effect as though such representations and warranties had been made
on
and as of the date of Closing, and the Company shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing; and
(iv) No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the consummation
of any of the transactions contemplated by this Agreement.
ARTICLE
VIII
GOVERNING
LAW; MISCELLANEOUS
8.1 Governing
Law: Jurisdiction.
This Agreement shall be governed by and construed in accordance with the
Maryland General Corporation Law (in respect of matters of corporation law)
and
the laws of the State of New York (in respect of all other matters) applicable
to contracts made and to be performed in the State of New York. The parties
hereto irrevocably consent to the jurisdiction of the United States federal
courts and state courts located in the County of New York in the State of New
York in any suit or proceeding based on or arising under this Agreement or
the
transactions contemplated hereby and irrevocably agree that all claims in
respect of such suit or proceeding may be determined in such courts. The Company
and each Purchaser irrevocably waives the defense of an inconvenient forum
to
the maintenance of such suit or proceeding in such forum. The Company and each
Purchaser further agrees that service of process upon the Company or such
Purchaser, as applicable, mailed by the first class mail in accordance with
Section 8.6 shall be deemed in every respect effective service of process
upon the Company or such Purchaser in any suit or proceeding arising hereunder.
Nothing herein shall affect Purchaser's right to serve process in any other
manner permitted by law. The parties hereto agree that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
The parties hereto irrevocably waive any right to a trial by jury under
applicable law.
12
8.2 Counterparts.
This Agreement may be executed in two or more counterparts, including, without
limitation, by facsimile transmission, all of which counterparts shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
In
the event any signature page is delivered by facsimile transmission, the party
using such means of delivery shall cause additional original executed signature
pages to be delivered to the other parties as soon as practicable
thereafter.
8.3 Headings.
The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.
8.4 Severability.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
8.5 Entire
Agreement; Amendments.
This Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the maters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Purchaser makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may
be
waived other than by an instrument in writing signed by the party to be charged
with enforcement and no provision of this Agreement may be amended other than
by
an instrument in writing signed by the Company and each Purchaser.
8.6 Notice.
Any notice herein required or permitted to be given shall be in writing and
may
be personally served or delivered by nationally-recognized overnight courier
or
by facsimile machine confirmed telecopy, and shall be deemed delivered at the
time and date of receipt (which shall include telephone line facsimile
transmission). The addresses for such communications shall be:
if
to the Company:
[Address]
Attention:
Facsimile:
If
to the Purchasers:
[to
be supplied]
Each
party shall provide notice to the other parties of any change in
address.
13
8.7 Successors
and Assigns.
This Agreement shall be binding upon and inure to the benefit of the parties
and
their successors and assigns. Neither the Company nor any Purchaser shall assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the other.
8.8 Third
Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns and is not for the benefit of,
nor
may any provision hereof be enforced by, any other Person.
8.9 Survival;
Indemnification.
The representations and warranties of the Company and the agreements and
covenants shall survive the Closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of Purchaser. The Company agrees to
indemnify and hold harmless each Purchaser and each of each Purchaser's
officers, directors, employees, partners, agents and affiliates from and against
any and all losses, claims, damages, liabilities and expenses (including without
limitation reasonable attorneys' fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action,
claim or proceeding, pending or threatened and the costs of enforcement thereof)
(collectively, "Losses") arising as a result of or related to any breach or
alleged breach by the Company of any of its representations or covenants set
forth herein, including advancement of expenses as they are incurred. The
representations and warranties of the Purchasers shall survive the Closing
hereunder and each Purchaser shall indemnify and hold harmless the Company
and
each of its officers, directors, employees, partners, agents and affiliates
from
and against any and all Losses arising as a result of the breach of such
Purchaser's representations and warranties.
8.10 Further
Assurances.
Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated
hereby.
8.11 Remedies.
No provision of this Agreement providing for any remedy to a Purchaser shall
limit any remedy which would otherwise be available to such Purchaser at law
or
in equity. Nothing in this Agreement shall limit any rights a Purchaser may
have
with any applicable federal or state securities laws with respect to the
investment contemplated hereby. The Company acknowledges that a breach by it
of
its obligations hereunder will cause irreparable harm to a Purchaser.
Accordingly, the Company acknowledges that the remedy at law for a material
breach of its obligations under this Agreement will be inadequate and agrees,
in
the event of a breach or threatened breach by the Company of the provisions
of
this Agreement, that a Purchaser shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate compliance, without the necessity of showing economic loss and without
any bond or other security being required.
8.12 Final
Agreement.
This Agreement, when executed by the parties hereto, shall constitute the final
agreement between the parties and upon such execution Purchasers and the Company
accept the terms hereof and have no cause of action against each other for
prior
negotiations preceding the execution of this Agreement.
14
IN
WITNESS WHEREOF, the undersigned Purchasers and the Company have caused this
Agreement to be duly executed as of the date first above written.
COMPANY:
| By: | ||||
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Name |
||||
| Title | ||||
PURCHASERS:
|
$
|
||
|
Signature |
Number
of Units: ____________
|
|
|
|
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Name Typed or Printed |
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| Address: | ||||
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Telephone:
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15
LIST
OF EXHIBITS
EXHIBIT
A - FORM
OF WARRANT
EXHIBIT
B - ACCREDITED
INVESTOR QUESTIONNAIRE
16
Exhibit
A
To
FORM
OF WARRANT
NEITHER
THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “SECURITIES
ACT”).
THIS
WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE
OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER
THE
SECURITIES ACT OR UNLESS SUCH OFFER, SALE OR TRANSFER IS EXEMPT FROM SUCH
REGISTRATION.
COMMON
STOCK WARRANT
|
No.
__________
|
______,
2007
|
CHINA
POWER EQUIPMENT, INC.,
a
Maryland corporation (the “Company”),
hereby certifies that ______________________________________, its permissible
transferees, designees, successors and assigns (collectively, the “Holder”), for
value received, is entitled to purchase from the Company at any time commencing
on the date on which a Conversion Price (as defined in Section
3(d) of Article SIXTH of the Certificate of Incorporation of the Company, as
amended and in effect as of the date hereof (“Section 3(d)”)) is first
determinable under such Section 3(d) (such
time is hereinafter referred to as the “Effective Date”) and terminating on the
third anniversary of the date hereof (the “Termination Date”) up to such number
of shares (each, a “Share” and collectively the “Shares”) of the Company’s
common stock, $.001 par value per Share (the “Common Stock”) as shall be equal
to
the product obtained by multiplying (x) _________, times (y) the number of
shares of Common Stock that one share of the
Company's Series A Convertible Preferred Stock, $.001 par value per share (the
"Preferred Stock")
shall have been converted into pursuant to a mandatory conversion of Preferred
Stock into Common Stock made at the option of the Company pursuant to Section
3(d).,
at an
exercise price per Share equal to 150% of the Conversion Price (as such
Conversion Price may be adjusted pursuant to the terms of Section 3(d)) in
effect at the time of exercise.(The purchase price per share of Common Stock
calculated pursuant to the immediately preceding sentence is hereinafter
referred to as the “Exercise Price.”)
17
1. Exercise
of Warrant.
(a) The
purchase right represented by this Common Stock Warrant (this "Warrant") is
exercisable, in whole or in part, at any time and from time to time from and
after the Effective Date through and including the Termination
Date.
(b) Upon
presentation and surrender of this Warrant, accompanied by a completed Election
to Purchase in the form attached hereto as Exhibit
A
(the
“Election
to Purchase”)
duly
executed, at the principal office of the Company currently located at
_________________________________, (or such other office or agency of the
Company within the United States as the Company may designate to the Holder)
together with a check payable to, or wire transfer to, the Company in the amount
of the Exercise Price multiplied by the number of Shares being purchased, the
Company or the Company’s transfer agent, as the case may be, shall within three
(3) business days deliver to the Holder hereof certificates of fully paid and
non-assessable Common Stock which in the aggregate represent the number of
Shares being purchased. The certificates so delivered shall be in such
denominations as may be requested by the Holder and shall be registered in
the
name of the Holder or such other name as shall be designated by the Holder.
All
or less than all of the purchase rights represented by this Warrant may be
exercised and, in case of the exercise of less than all, the Company, upon
surrender hereof, will at the Company’s expense deliver to the Holder a new
warrant entitling said holder to purchase the number of Shares represented
by
this Warrant which have not been exercised. This Warrant may only be exercised
to the extent the Company has a sufficient number of Shares of Common Stock
available for issuance at the time of any exercise.
2. Warrant.
(a) Exchange,
Transfer and Replacement.
At any
time prior to the exercise hereof, this Warrant may be exchanged upon
presentation and surrender to the Company, alone or with other warrants of
like
tenor of different denominations registered in the name of the same Holder,
for
another warrant or warrants of like tenor in the name of such Holder exercisable
for the aggregate number of Shares as the warrant or warrants
surrendered.
(b) Replacement
of Warrant.
Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of this Warrant and, in the case of any such loss,
theft, or destruction, upon delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Warrant, the Company,
at its
expense, will execute and deliver in lieu thereof, a new Warrant of like
tenor.
(c) Cancellation;
Payment of Expenses.
Upon
the surrender of this Warrant in connection with any transfer, exchange or
replacement as provided in this Section 2, this Warrant shall be promptly
canceled by the Company. The Holder shall pay all taxes and all other expenses
(including legal expenses, if any, incurred by the Holder or transferees)
and
charges payable in connection with the preparation, execution and delivery
of
Warrants pursuant to this Section 2.
18
(d) Warrant
Register.
The
Company shall maintain, at its principal executive offices (or at the offices
of
the transfer agent for the Warrant or such other office or agency of the
Company
as it may designate by notice to the holder hereof), a register for this
Warrant
(the “Warrant Register”), in which the Company shall record the name and address
of the person in whose name this Warrant has been issued, as well as the
name
and address of each transferee and each prior owner of this
Warrant.
3. Rights
and Obligations of Holders of this Warrant.
The
Holder of this Warrant shall not, by virtue hereof, be entitled to any rights
of
a stockholder in the Company, either at law or in equity; provided,
however,
that in
the event any certificate representing shares of Common Stock or other
securities is issued to the holder hereof upon exercise of this Warrant, such
holder shall, for all purposes, be deemed to have become the holder of record
of
such Common Stock on the date on which this Warrant, together with a duly
executed Election to Purchase, was surrendered and payment of the aggregate
Exercise Price was made, irrespective of the date of delivery of such Common
Stock certificate.
4. Registration
Rights.
(a)
The
Company, for a period of two years after the Conversion Date (as defined in
Section 3(d)), will give written notice to each Holder of this Warrant or shares
of Common Stock issued upon exercise of this Warrant (“Warrant Shares”) not less
than 20 days in advance of the initial filing of any registration statement
under the Securities Act of 1933, as amended (other than a registration
statement pertaining to securities issuable pursuant to employee stock option,
stock purchase, or similar plans or a registration statement pertaining to
securities issuable in connection with the acquisition of a business, whether
through a merger, consolidation, acquisition of assets, or exchange of
securities), covering any Common Stock or other securities of the Company,
and
will afford the Holder the opportunity to have included in such registration
statement all or such part of the Warrant Shares issued or issuable upon
exercise of this Warrant, as may be designated by written notice to the Company
not later than ten days following receipt of such notice from the Company.
The
Company shall be entitled to exclude the Warrant Shares held by or issuable
to
the Holder from any one, but not more than one, such registration if either
the
Company or the underwriter in connection with offering to be made pursuant
to
such registration statement in its sole discretion decides that the inclusion
of
such shares will materially interfere with the orderly sale and distribution
of
the securities being offered under such registration statement by the Company.
Notwithstanding the foregoing, the Company shall not be entitled to exclude
the
Warrant Shares held by or issuable to the Holder if shares of other shareholders
are being included in any such registration statement and, in such
circumstances, the Holder shall be entitled to include the Warrant Shares held
by or issuable to the Holder on a pro-rata basis in the proportion that the
number of Warrant Shares of Common Stock held by or issuable to the Holder
bears
to the shares of Common Stock held by all other shareholders, including shares
in such registration statement. The Holder shall not be entitled to include
shares in more than two registration statements pursuant to the provisions
of
this Section (3)(e), and all rights of any holder under this Section (3)(e)
shall terminate after the holder has included shares of Common Stock in two
registration statements pursuant to this Section (3)(e).
19
(b)
The
Company will pay all out-of-pocket costs and expenses of any registration
effected pursuant to the provisions of Section 5(a), including registration
fees, legal fees, accounting fees, printing expenses (including such number
of
any preliminary and the final prospectus as may be reasonably requested),
blue
sky qualification fees and expenses, and all other expenses, except for
underwriting commissions or discounts applicable to the shares of Common
Stock
being sold by the holder and the fees of counsel for the Holder, all of which
shall be paid by the Holder.
5. Fractional
Shares.
In lieu
of issuance of a fractional share upon any exercise hereunder, the Company
will
pay the cash value of that fractional share, calculated on the basis of the
Exercise Price.
6. Legends.
Prior
to issuance of the shares of Common Stock underlying this Warrant, all such
certificates representing such shares shall bear a restrictive legend to the
effect that the Shares represented by such certificate have not been registered
under the 1933 Act, and that the Shares may not be sold or transferred in the
absence of such registration or an exemption therefrom, such legend to be
substantially in the form of the bold-face language appearing at the top of
Page
1 of this Warrant.
7. Disposition
of Warrants or Shares; Lockup.
(a)
The
Holder of this Warrant, each transferee hereof and any holder and transferee
of
any Shares, by his or its acceptance thereof, agrees that no public distribution
of Warrants or Shares will be made in violation of the provisions of the
Securities Act of 1933, as amended. Furthermore, it shall be a condition to
the
transfer of this Warrant that any transferee thereof deliver to the Company
his
or its written agreement to accept and be bound by all of the terms and
conditions contained in this Warrant.
(b)
The
Holder may not, without obtaining the prior written consent of the Company,
directly or indirectly sell, offer to sell, grant an option for the sale of,
transfer, assign, hypothecate, pledge, distribute or otherwise dispose of or
encumber any Warrant Shares or any beneficial interest therein until at least
150 days following the Effective Date; provided, however, after the expiration
of 90 days after the Effective Date a Holder may sell for a price per share
equal to or greater than 135% of the price per share of the shares of Common
Stock sold pursuant to the Registration Statement up to one-third of the Warrant
Shares issued to such Holder upon exercise of this Warrant, and after the
expiration of 120 days following the Effective Date a holder may sell for a
price per share equal to or greater than 135% of the price per share of the
shares of Common Stock sold in the Qualified IPO up to an additional one-third
of the Warrant Shares issued to such Holder.
20
8. Merger
or Consolidation.
The
Company will not merge or consolidate with or into any other corporation, or
sell or otherwise transfer its property, assets and business substantially
as an
entirety to another corporation, unless the corporation resulting from such
merger or consolidation (if not the Company), or such transferee corporation,
as
the case may be, shall expressly assume, by supplemental agreement reasonably
satisfactory in form and substance to the Holder, the due and punctual
performance and observance of each and every covenant and condition of this
Warrant to be performed and observed by the Company.
9. Notices.
Except
as otherwise specified herein to the contrary, all notices, requests, demands
and other communications required or desired to be given hereunder shall only
be
effective if given in writing by certified or registered U.S. mail with return
receipt requested and postage prepaid; by private overnight delivery service
(e.g. Federal Express); by facsimile transmission (if no original documents
or
instruments must accompany the notice); or by personal delivery. Any such notice
shall be deemed to have been given (a) on the business day immediately following
the mailing thereof, if mailed by certified or registered U.S. mail as specified
above; (b) on the business day immediately following deposit with a private
overnight delivery service if sent by said service; (c) upon receipt of
confirmation of transmission if sent by facsimile transmission; or (d) upon
personal delivery of the notice. All such notices shall be sent to the following
addresses (or to such other address or addresses as a party may have advised
the
other in the manner provided in this Section 10):
if
to the Company:
[Address]
Attention:
Facsimile:
If
to the Holder:
____________________
____________________
____________________
____________________
Notwithstanding
the time of effectiveness of notices set forth in this Section, an Election
to
Purchase shall not be deemed effectively given until it has been duly completed
and submitted to the Company together with this original Warrant and payment
of
the Exercise Price in a manner set forth in this Section.
21
10. Governing
Law.
This
Warrant shall be governed by and construed in accordance with the laws of the
State of Maryland applicable to contracts made and to be performed in the State
of Maryland.
11. Successors
and Assigns.
This
Warrant shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
12. Headings.
The
headings of various sections of this Warrant have been inserted for reference
only and shall not affect the meaning or construction of any of the provisions
hereof.
13. Severability.
If any
provision of this Warrant is held to be unenforceable under applicable law,
such
provision shall be excluded from this Warrant, and the balance hereof shall
be
interpreted as if such provision were so excluded.
14. Modification
and Waiver.
This
Warrant and any provision hereof may be amended, waived, discharged or
terminated only by an instrument in writing signed by the Company and the
Holder.
15. Specific
Enforcement.
The
Company and the Holder acknowledge and agree that irreparable damage would
occur
in the event that any of the provisions of this Warrant were not performed
in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Warrant and
to
enforce specifically the terms and provisions hereof, this being in addition
to
any other remedy to which either of them may be entitled by law or
equity.
16. Assignment.
Subject
to prior written approval by the Company, this Warrant may be transferred or
assigned, in whole or in part, at any time and from time to time by the then
Holder by submitting this Warrant to the Company together with a duly executed
Assignment in substantially the form and substance of the Form of Assignment
which accompanies this Warrant, as Exhibit B hereto, and, upon the
Company’s receipt hereof, and in any event, within three (3) business days
thereafter, the Company shall issue a warrant to the Holder to evidence that
portion of this Warrant, if any as shall not have been so transferred or
assigned.
(signature
page immediately follows)
22
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed,
manually or by facsimile, by one of its officers thereunto duly
authorized.
| CHINA POWER EQUIPMENT, INC. | ||
| |
|
|
|
Date:
__________, 2007
|
By: | |
|
Name: |
||
|
Title: President
|
||
23
EXHIBIT
A
TO
WARRANT
CERTIFICATE
ELECTION
TO PURCHASE
To
Be
Executed by the Holder
in
Order
to Exercise the Warrant
The
undersigned Holder hereby elects to purchase _______ Shares pursuant to the
attached Warrant, and requests that certificates for securities be issued in
the
name of:
|
|
||
|
(Please
type or print name and address)
|
||
|
|
||
|
|
||
|
|
||
|
(Social
Security or Tax Identification Number)
|
|
and
delivered
|
|
to:
|
|
|
|
(Please
type or print name and address if different from
above)
|
If
such
number of Shares being purchased hereby shall not be all the Shares that may
be
purchased pursuant to the attached Warrant, a new Warrant for the balance of
such Shares shall be registered in the name of, and delivered to, the Holder
at
the address set forth below.
In
full
payment of the purchase price with respect to the Shares purchased and transfer
taxes, if any, the undersigned hereby tenders payment of $__________ by check,
money order or wire transfer payable in United States currency to the order
of
CHINA POWER EQUIPMENT, INC.
|
HOLDER:
|
||
| |
|
|
| By: | ||
|
Name:
|
||
| Title: | ||
|
Address:
|
||
Dated:_______________________
24
EXHIBIT
B
TO
WARRANT
FORM
OF
ASSIGNMENT
(To
be
signed only on transfer of Warrant)
For
value
received, the undersigned hereby sells, assigns, and transfers unto
_____________ the right represented by the within Warrant to purchase ______
shares of Common Stock of China Power Equipment, Inc., a Maryland corporation,
to which the within Warrant relates, and appoints ____________________ Attorney
to transfer such right on the books of China Power Equipment, Inc., a Maryland
corporation, with full power of substitution of premises.
| Dated: | By: | |
|
Name: |
||
| Title | ||
|
(signature
must conform to name
of
holder as specified on the fact of
the Warrant)
|
||
|
Address:
|
||
Signed
in
the presence of:
Dated:
25
Exhibit
B
To
FORM
OF ACCREDITED INVESTOR QUESTIONNAIRE
ACCREDITED
INVESTOR QUESTIONNAIRE
|
ITEM
1.
|
All
Accredited Investors must initial the following
line:
|
________(a) I
understand that the representations contained in this Questionnaire are made
for
the purpose of qualifying me as an accredited investor as that term is defined
pursuant to Regulation D under the Securities Act of 1933 for the purpose
of
inducing a sale of securities to me. I hereby represent that the statement
or
statements initialed below are true and correct in all respects. I understand
that a false representation may constitute a violation of law, and that any
person who suffers damage as a result of a false representation may have
a claim
against me for damages.
|
ITEM
2.
|
Accredited
individual investors must initial one or more of the following
three
statements:
|
________(a) I
certify
that I am an accredited investor because I had individual income (exclusive
of
any income attributable to my spouse) of more than $200,000 in each of the
most
recent two years and I reasonably expect to have an individual income in
excess
of $200,000 for the current year.
________(b) I
certify
that I am an accredited investor because I had individual income (inclusive
of
any income attributable to my spouse) of more than $300,000 in each of the
most
recent two years and I reasonably expect to have an individual income (inclusive
of any income attributable to my spouse) in excess of $300,000 for the current
year.
________(c) I
certify
that I am an accredited investor because I have an individual net worth,
or my
spouse and I have a combined individual net worth, in excess of $1,000,000.
For
purposes of this questionnaire, "individual net worth" means the excess of
total
assets at fair market value, including home and personal property, over total
liabilities.
|
ITEM
3
|
Accredited
partnerships, corporations, or other entities which are not trusts
must
initial at least one of the following
statements:
|
26
________(a) The
Subscriber hereby certifies that all of the equity owners of the Subscriber
are
accredited individual investors as defined in either Item 2(a), 2(b) or 2(c)
above. Item 5 must be completed by all equity owners.
________(b) The
Subscriber hereby certifies that it is a "bank," "savings and loan association,"
or "insurance company" as defined in the Act.
________(c) The
Subscriber hereby certifies that it is an "employee benefit plan" as defined
in
the Employee Retirement Income Security Act of 1974 (a "Plan") that has total
assets in excess of $5,000,000.
________(d) The
Subscriber hereby certifies that it is a Plan whose investment decisions,
including the decision to subscribe for the Shares, are made solely by (i)
a
"plan fiduciary" as defined in the Employee Retirement Income Security Act
of
1974, which includes a bank, a savings and loan association, an insurance
company or a registered investment adviser, or (ii) an "accredited investor"
as
defined under Rule 501(a) under the Act, for a self-directed plan.
________(e) The
Subscriber hereby certifies that it is a broker/dealer registered pursuant
to
Section 15 of the Securities Exchange Act of 1934, as amended.
________(f) The
Subscriber hereby certifies that it is an investment company registered under,
or a "business development company" as defined in, the Investment Company
Act of
1940.
________(g) The
Subscriber hereby certifies that it is a Small Business Investment Company
licensed by the U.S. Small Business Administration under the Small Business
Investment Act of 1958.
________(h) The
Subscriber hereby certifies that it is a plan established and maintained
by a
state, its political subdivisions, or any agency or instrumentality of a
state
or its political subdivisions, for the benefit of its employees and having
total
assets in excess of $5,000,000.
________(i) The
Subscriber hereby certifies that it is a private business development company
as
defined in Section 202(a)(22) of the Investment Advisers Act of
1940.
________(j) The
Subscriber hereby certifies that it is an organization described in Section
501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar
business trust or partnership, not formed for the specific purpose of acquiring
the Shares, with total assets in excess of $5,000,000.
27
|
ITEM
4.
|
Accredited
trusts must initial one of the following two
statements:
|
________(a) The
trustee of the trust Subscriber hereby certifies that the trust has total
assets
in excess of $5,000,000, the trust was not formed for the specific purpose
of
acquiring the Shares whose purchase is directed by a "sophisticated person"
as
described in Rule 506(b)(2)(ii) under the Act.
________(b) The
trustee of the trust Subscriber hereby certifies that all settlors and
beneficiaries of the trust are accredited individual investors as defined
in
either Item 2(a), 2(b) or 2(c) above. Item 5 must be completed by all equity
owners.
|
ITEM
.5
|
Accredited
corporations, partnerships, trusts or other entities choosing Item.3(a)
OR
Item.4(b) above must provide the following
information:
|
The
Subscriber hereby certifies that set forth below is a complete list of all
own-ers of equity in ________________________________ [name of entity], a
_____________________________ [type of entity] formed pursuant to the laws
of
the State of ________________________. The Subscriber also certifies that
each
such owner has initialed the space opposite his/her name and that each such
owner understands that by initialing that space he/she is representing that
he/she is an accredited individual in-vestor satisfying the test for accredited
individual investors indi-cated under Item 2 above.
|
Name
of Equity Owner
|
Type
of Accredited Investor
|
Initials
|
|
1.
|
||
|
2.
|
||
|
3.
|
||
|
4.
|
||
|
5.
|
||
|
6.
|
||
|
7.
|
||
|
8.
|
||
|
9.
|
||
|
10.
|
28
List
of Schedules
to
Common
Stock and Warrant Purchase Agreement
Schedule 1 - List
of Investors
Schedule
2 - Company
Disclosure Schedules
Schedule 3 - Capitalization
SCHEDULE
1
LIST
OF INVESTORS
|
Investor
Name
and Address and Telephone Number
|
Shares
of Preferred Stock
|
Warrant
Shares
|
Aggregate
Purchase Price
|
|
Totals:
|
SCHEDULE
2
TO
COMPANY
DISCLOSURE SCHEDULES
None.
SCHEDULE
3
TO
CAPITALIZATION
AS
OF , 2007
|
|
Number
of
Shares
|
|||
|
Authorized
Stock as:
|
||||
|
Common
Stock:
|
100,000,000
|
|||
|
Series
A Preferred
|
5,000,000
|
|||
|
Blank
Check Preferred Stock
|
5,000,000
|
|||
|
Outstanding
Stock:
|
||||
|
Common
Stock:
|
0
|
|||
|
Series
A Preferred
|
0
|
|||
|
Blank
Check Preferred Stock
|
0
|
|||
|
Stock
Options:
|
0
|
