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NEITHER
THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES
ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "
SECURITIES ACT "),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
CHINA ENERGY RECOVERY, INC.
WARRANT
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Warrant
No. [__]
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Dated:
April ___, 2008
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CHINA
ENERGY RECOVERY, INC., a Delaware corporation (the "
Company "),
hereby certifies that, for value received, [NAME OF HOLDER], or its
registered assigns (the "
Holder "),
is entitled to purchase from the Company up to a total of [___]
shares of common stock, $0.001 par value per share (the "
Common Stock "),
of the Company (each such share, a "
Warrant Share "
and all such shares, the "
Warrant Shares ")
at an exercise price equal to $1.29 per share (as adjusted from
time to time as provided in
Section 9 ,
the "
Exercise Price "),
at any time and from time to time from and after the six month
anniversary of the date hereof through and including the 60-month
anniversary of the date hereof (the "
Expiration Date "),
and subject to the terms and conditions set forth herein. This
Warrant (this "
Warrant ")
is one of a series of similar warrants issued pursuant to the
Securities Purchase Agreements dated as of the date hereof by and
between the Company and each of the Purchasers identified therein
(the "
Purchase Agreements ").
1.
Definitions .
In addition to the terms defined elsewhere in this Warrant,
capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Purchase
Agreement.
2.
Registration of the Warrant Shares .
The Company shall register the Warrant Shares pursuant to the terms
of the Registration Rights Agreement of even date herewith between
the Company and the Holder, among others. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, absent actual notice to
the contrary.
3.
Registration of Transfers .
The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and
signed, to the Company’s transfer agent or to the Company at
its address specified herein. Upon any such registration or
transfer, a new warrant to purchase Common Stock, in substantially
the form of this Warrant (any such new warrant, a "
New Warrant "),
evidencing the portion of this Warrant so transferred shall be
issued to the transferee and a New Warrant evidencing the remaining
portion of this Warrant not so transferred, if any, shall be issued
to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of the Holder of a
Warrant.
4.
Exercise and Duration of Warrants .
(a)
Exercise .
This Warrant shall be exercisable by the registered Holder at any
time and from time to time on or after the date the six month
anniversary of the date hereof to and including the Expiration
Date. At 5:00 P.M., Los Angeles, California time on the Expiration
Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value.
(b)
Procedures for Exercise .
A Holder may exercise this Warrant by delivering to the Company (i)
an exercise notice, in the form attached hereto (the "
Exercise Notice "),
appropriately completed and duly signed, and (ii) payment of the
Exercise Price in immediately available funds for the number of
Warrant Shares as to which this Warrant is being exercised, and the
date such items are delivered to the Company (as determined in
accordance with the notice provisions hereof) is an "
Exercise Date ."
The Holder shall not be required to deliver the original Warrant in
order to effect an exercise hereunder. Upon the execution and
delivery of the Exercise Notice, the Company shall issue a New
Warrant to the Holder evidencing the right to purchase the
remaining number of Warrant Shares.
5.
Delivery of Warrant Shares .
(a)
Upon
exercise of this Warrant, the Company shall promptly (but in
no event later than three Business Days after the Exercise
Date) issue or cause to be issued and cause to be delivered to
or upon the written order of the Holder and in such name or
names as the Holder may designate, a certificate for the
Warrant Shares issuable upon such exercise, free of
restrictive legends unless a registration statement covering
the resale of the Warrant Shares and naming the Holder as a
selling stockholder thereunder is not then effective and the
Warrant Shares are not freely transferable without volume
restrictions pursuant to Rule 144 under the Securities Act.
The Holder, or any Person so designated by the Holder to
receive Warrant Shares, shall be deemed to have become the
holder of record of such Warrant Shares as of the Exercise
Date. The Company shall, upon request of the Holder, use its
best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or
another established clearing corporation performing similar
functions.
(b)
This
Warrant is exercisable, either in its entirety or, from time
to time, for a portion of the number of Warrant Shares. Upon
surrender of this Warrant following one or more partial
exercises, the Company shall issue or cause to be issued, at
its expense, a New Warrant evidencing the right to purchase
the remaining number of Warrant Shares.
(c)
The
Company's obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of
any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in
connection with the issuance of Warrant Shares. Nothing herein
shall limit the Holder's right to pursue any other remedies
available to it hereunder, at law or in equity, including,
without limitation, a decree of specific performance or
injunctive relief with respect to the Company's failure to
timely deliver certificates representing shares of Common
Stock upon exercise of the Warrant as required pursuant to the
terms hereof.
6.
Charges, Taxes and Expenses .
Issuance and delivery of certificates for shares of Common Stock
upon exercise of this Warrant shall be made without charge to the
Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the
issuance of such certificates, all of which taxes and expenses
shall be paid by the Company; provided, however, that the Company
shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than
that of the Holder or an Affiliate thereof. The Holder shall be
responsible for all other tax liability that may arise as a result
of holding or transferring this Warrant or receiving Warrant Shares
upon exercise hereof.
7.
Replacement of Warrant .
If this Warrant is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and customary and reasonable bond or
indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable
third-party costs as the Company may prescribe.
8.
Reservation of Warrant Shares .
The Company covenants that it will at all times reserve and keep
available out of the aggregate of its authorized but unissued and
otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant
as herein provided, the number of Warrant Shares which are then
issuable and deliverable upon the exercise of this entire Warrant,
free from preemptive rights or any other contingent purchase rights
of persons other than the Holder (taking into account the
adjustments and restrictions of
Section 9 ).
The Company covenants that all Warrant Shares so issuable and
deliverable shall, upon issuance and the payment of the applicable
Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable. The
Company will take all such actions as may be necessary to assure
that such shares of Common Stock may be issued as provided herein
without violation of any applicable law or regulation, or of any
requirements of any securities exchange or automated quotation
system upon which the Common Stock may be listed.
9.
Certain Adjustments .
The Exercise Price and number of Warrant Shares issuable upon
exercise of this Warrant are subject to adjustment from time to
time as set forth in this
Section 9 .
(a)
Adjustments to the Exercise Price .
(i)
If,
at any time or from time to time after the date hereof, the
Company shall issue any Additional Stock (as defined in
Section 9(a)(vi) below)
without consideration or for consideration per share less than the
Exercise Price in effect immediately prior to the issuance of such
Additional Stock, such Exercise Price in effect immediately prior
to such issuance shall (except as otherwise provided in this
Section 9(a) )
be adjusted to a price determined by multiplying such Exercise
Price by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately prior to such issuance plus
the number of shares of Common Stock that the aggregate
consideration received by the Company for such issuance would
purchase at such Exercise Price, and the denominator of which is
the number of shares of Common Stock outstanding immediately prior
to such issuance plus the number of shares of such Additional
Stock.
(ii)
No
adjustment of the Exercise Price for any Warrant Share shall
be made in an amount less than one cent per share; provided
that any adjustments which are not required to be made by
reason of this sentence shall be carried forward and shall be
taken into account in any subsequent adjustment made prior to
three years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent
provided for in
Sections 9(a)(v)(C) ,
9(a)(v)(D) and
9(a)(viii) no
adjustment of such Exercise Price pursuant to this
Section 9(a) shall
have the effect of increasing the Exercise Price above the Exercise
Price in effect immediately prior to such adjustment.
(iii)
In
the case of the issuance of Additional Stock for cash, the
consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by the
Company for any underwriting or otherwise in connection with
the issuance and sale thereof.
(iv)
In
the case of the issuance of the Additional Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
value thereof as determined by the Board of Directors
of
the Company irrespective of any accounting treatment.
(v)
In
the case of the issuance of options to purchase or rights to
subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock or options
to purchase or rights to subscribe for such convertible or
exchangeable securities, the following provisions shall apply
for all purposes of this
Section 9(a) :
(A)
The
aggregate number of shares of Common Stock deliverable upon
exercise (assuming the satisfaction of any conditions to
exercisability, including but not limited to the passage of
time, but without taking into account potential antidilution
adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued
and outstanding at the time such options or rights were issued
and for a consideration equal to the consideration (determined
in the manner provided in
Sections 9(a)(iii) and
9(a)(iv) ),
if any, received by the Company upon the issuance of such options
or rights plus the minimum exercise price provided in such options
or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(B)
The
aggregate maximum number of shares of Common Stock deliverable
upon conversion of or in exchange (assuming the satisfaction
of any conditions to convertibility or exchangeability,
including but not limited to the passage of time, but without
taking into account potential antidilution adjustments) for
any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for
such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been
issued and outstanding at the time such securities were issued
or such options or rights were issued and for a consideration
equal to the consideration, if any, received by the Company
for any such securities and related options or rights
(excluding any cash received or account of accrued interest or
accrued dividends), plus the minimum additional consideration,
if any, to be received by the Company (without taking into
account potential antidilution adjustments) upon the
conversion or exchange of such securities or the exercise of
any related options or rights (the consideration in each case
to be determined in the manner provided in
Sections 9(a)(iii) and
9(a)(iv) ).
(C)
In
the event of any change in the number of shares of Common
Stock deliverable or in the consideration payable to the
Company upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or
exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof, the
Exercise Price, to the extent in any way affected by or
computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment
shall be made for the actu
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