A-POWER ENERGY GENERATION SYSTEMS, LTD. Form of Lock-Up Agreement June __, 2009
Form
of Lock-Up Agreement
June __,
2009
No. 44
Jingxing Road
Tiexi
District
Shenyang,
Liaoning Province, China, 110021
Re: A-Power Energy Generation
Systems, Ltd.–
Lock-Up Agreement
Dear
Sirs:
This Lock-Up Agreement is being
delivered to you in connection with the Securities Purchase Agreement (the
"Purchase Agreement"),
dated as of June __, 2009 by and among A-Power Energy Generation Systems, Ltd.
(the "Company") and the
investors party thereto (the "Buyers"), with respect to the
issuance of (i) senior convertible notes of the Company (the "Notes"), which will, among
other things, be convertible into shares of the Company's common shares, $0.0001
par value per share (the "Common Shares", as converted,
the "Conversion Shares")
in accordance with the terms of the Notes and (ii) warrants which will be
exercisable to purchase Common Shares. Capitalized terms used herein
and not otherwise defined herein shall have the respective meanings set forth in
the Purchase Agreement.
In order to induce the Buyers to enter
into the Purchase Agreement, the undersigned agrees that, commencing on the date
hereof and ending on the earlier to occur of (A) the date upon which all of the
Notes are no longer outstanding and (B) the later to occur of (x) sixty (60 )
days after the Initial Effective Date (as defined in the Registration Rights
Agreement) and (y) two hundred and seventy (270) days after the date hereof (the
"Lock-Up Period"), the
undersigned will not, except as contemplated by the Transaction Documents (i)
sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any
option to purchase, make any short sale or otherwise dispose of or agree to
dispose of, directly or indirectly, any Common Shares, or establish or increase
a put equivalent position or liquidate or decrease a call equivalent position
within the meaning of Section 16 of the Securities and Exchange Act of 1934, as
amended and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder with respect to any Common Shares owned directly by the
undersigned (including holding as a custodian) or with respect to which the
undersigned has beneficial ownership within the rules and regulations of the
Securities and Exchange Commission, or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of any Common Shares, owned directly by the
undersigned (including holding as a custodian) or with respect to which the
undersigned has beneficial ownership within the rules and regulations of the
Securities and Exchange Commission, whether any such transaction is to be
settled by delivery of such securities, in cash or otherwise, (collectively, the
"Undersigned’s
Shares").
The foregoing restriction is expressly
agreed to preclude the undersigned or any affiliate of the undersigned from
engaging in any hedging or other transaction which is designed to or which
reasonably could be expected to lead to or result in a sale or disposition of
the Undersigned’s Shares even if the Undersigned’s Shares would be disposed of
by someone other than the undersigned. Such prohibited hedging or
other transactions would include, without limitation, any short sale or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to any of the Undersigned’s Shares or with respect to
any security that includes, relates to, or derives any significant part of its
value from the Undersigned’s Shares, except as contemplated by the Transaction
Documents.
Notwithstanding
the foregoing and subject to any limits in any other Transaction Documents, the
undersigned may transfer the Undersigned’s Shares (i) as a bona fide gift or gifts,
provided that the donee or donees thereof agree to be bound in writing by the
restrictions set forth herein or (ii) to any trust for the direct or indirect
benefit of the undersigned or the immediate family of the undersigned, provided
that the trustee of the trust agrees to be bound in writing by the restrictions
set forth herein, and provided further that any such transfer shall not involve
a disposition for value. For purposes of this Lock-Up Agreement,
“immediate family” shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin. Notwithstanding anything to the
contrary set forth herein, effective upon thirty (30) days after the Shareholder
Approval Date, this Lock-Up Agreement and the restrictions contained herein
shall not apply to shares acquired by the undersigned subsequent to the date
hereof upon the exercise of options granted pursuant to a Company's Approved
Share Plan (as defined in the Notes); provided, however, that such
number of shares shall not exceed [ ]. Except as set forth in
the Transaction Documents, the undersigned now has, and, except as contemplated
by clauses (i) and (ii) above, for the duration of this Lock-Up Agreement will
have, good and marketable title to the Undersigned’s Shares, free and clear of
all liens, encumbrances, and claims whatsoever. The undersigned also
agrees and consents to the entry of stop transfer instructions with the
Company’s transfer agent and registrar against the transfer of the Undersigned’s
Shares except in compliance with the foregoing restrictions.
Except as contemplated by the
Transaction Documents, during the Restricted Period, the undersigned shall not,
and no one acting on his behalf (including, without limitation, any employee,
attorney or agent) shall, directly or indirectly, (i) take any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company, (ii) sell, bid for, purchase, or pay any compensation
for soliciting any sale, bid for or purchase of any security of the Company,
including, without limitation, any Common Share, any of the Securities and any
short sales (as defined in Rule 200 of Regulation SHO under the 0000 Xxx)
related thereto (other than purchases of Excluded Securities (as defined in the
Notes)), (iii) issue or offer any security of the Company or any of its
subsidiaries to any Person, (iv) pay or agree to pay to any person any
compensation for soliciting another to purchase or sell any securities of the
Company, or (v) enter into any agreement or other writing or make any offer with
respect to the foregoing actions.
The undersigned understands and agrees
that this Lock-Up Agreement is irrevocable and shall be binding upon the
undersigned’s heirs, legal representatives, successors, and
assigns.
This Lock-Up Agreement may be executed
in two counterparts, each of which shall be deemed an original but both of which
shall be considered one and the same instrument.
This Lock-Up Agreement will be governed
by and construed in accordance with the laws of the State of New York, without
giving effect to any choice of law or conflicting provision or rule (whether of
the State of New York, or any other jurisdiction) that would cause the laws of
any jurisdiction other than the State of New York to be applied. In
furtherance of the foregoing, the internal laws of the State of New York will
control the interpretation and construction of this Lock-Up Agreement, even if
under such jurisdiction's choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily apply.
Each of the Company and the undersigned
hereby appoints C T Corporation System, with offices at 000 Xxxxxx Xxxxxx, Xxx
Xxxx, XX 00000, as its agent for service of process in New York.
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of page intentionally left blank]
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Very
truly yours,
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Exact
Name of Stockholder
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Authorized
Signature
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Title
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Agreed to
and Acknowledged:
A-POWER
ENERGY GENERATION SYSTEMS LTD.
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By:
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Name:
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Title:
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