EXHIBIT A
TO
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
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.
CHINA POWER EQUIPMENT, INC.
COMMON STOCK WARRANT
NO. __________ ______, 2007
CHINA POWER EQUIPMENT, INC., a Maryland corporation (the "Company"),
hereby certifies that ______________________________________, its permissible
transferees, designees, successors and assigns (collectively, the "Holder"), for
value received, is entitled to purchase from the Company at any time and
terminating on the third anniversary of the date hereof (the "Termination Date")
up to such number of shares (each, a "Share" and collectively the "Shares") of
the Company's common stock, $.001 par value per Share (the "Common Stock") as
shall be equal to the number of shares of Common Stock that the Holder has
converted the Company's Series A Convertible Preferred Stock, $.001 par value
per share (the "Preferred Stock") into Common Stock r, at an exercise price of
$1.00 per share. In the aggregate, the number of Shares of Common Stock for
which the warrant can be exercisable should be no more that 5 million shares.
1. Exercise of Warrant.
(a) The purchase right represented by this Common Stock Warrant
(this "Warrant") is exercisable, in whole or in part, at any time and from
time to time from and after the Effective Date through and including the
Termination Date.
(b) Upon presentation and surrender of this Warrant, accompanied by
a completed Election to Purchase in the form attached hereto as EXHIBIT A
(the "Election to Purchase") duly executed, at the principal office of the
Company currently located at _________________________________, (or such
other office or agency of the Company within the United States as the
Company may designate to the Holder) together with a check payable to, or
wire transfer to, the Company in the amount of the Exercise Price
multiplied by the number of Shares being purchased, the Company or the
Company's transfer agent, as the case may be, shall within three (3)
business days deliver to the Holder hereof certificates of fully paid and
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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.
(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
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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).
(b) The Company will pay all out-of-pocket costs and expenses of any
registration effected pursuant to the provisions of Section 5(a), including
registration fees, legal fees, accounting fees, printing expenses (including
such number of any preliminary and the final prospectus as may be reasonably
requested), blue sky qualification fees and expenses, and all other expenses,
except for underwriting commissions or discounts applicable to the shares of
Common Stock being sold by the holder and the fees of counsel for the Holder,
all of which shall be paid by the Holder.
5. Fractional Shares. In lieu of issuance of a fractional share upon any
exercise hereunder, the Company will pay the cash value of that fractional
share, calculated on the basis of the Exercise Price.
6. Legends. Prior to issuance of the shares of Common Stock underlying this
Warrant, all such certificates representing such shares shall bear a restrictive
legend to the effect that the Shares represented by such certificate have not
been registered under the 1933 Act, and that the Shares may not be sold or
transferred in the absence of such registration or an exemption therefrom, such
legend to be substantially in the form of the bold-face language appearing at
the top of Page 1 of this Warrant.
7. Disposition of Warrants or Shares; Lockup.
(a) The Holder of this Warrant, each transferee hereof and any holder and
transferee of any Shares, by his or its acceptance thereof, agrees that no
public distribution of Warrants or Shares will be made in violation of the
provisions of the Securities Act of 1933, as amended. Furthermore, it shall be a
condition to the transfer of this Warrant that any transferee thereof deliver to
the Company his or its written agreement to accept and be bound by all of the
terms and conditions contained in this Warrant.
(b) The Holder may not, without obtaining the prior written consent of the
Company, directly or indirectly sell, offer to sell, grant an option for the
sale of, transfer, assign, hypothecate, pledge, distribute or otherwise dispose
of or encumber any Warrant Shares or any beneficial interest therein until at
least 150 days following the exercise of Warrant; provided, however, immediately
upon the exercise of Warrant a Holder may sell up to 10% of the Warrant Shares
issued to such Holder upon exercise of this Warrant, after the expiration of 90
days after the exercise of Warrant a Holder may sell up to 30% of the Warrant
Shares issued to such Holder upon exercise of this Warrant, and after the
expiration of 120 days following the Effective Date a holder may sell up to an
additional 30% of the Warrant Shares issued to such Holder.
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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:
China Power Equipment, Inc.
[Address]
Attention:
Facsimile:
IF TO THE HOLDER:
_______________________
_______________________
_______________________
_______________________
Notwithstanding the time of effectiveness of notices set forth in this
Section, an Election to Purchase shall not be deemed effectively given until it
has been duly completed and submitted to the Company together with this original
Warrant and payment of the Exercise Price in a manner set forth in this Section.
10. Governing Law. This Warrant shall be governed by and construed in accordance
with the laws of the State of Maryland applicable to contracts made and to be
performed in the State of Maryland.
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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)
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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
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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:_______________________
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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:
