ESCROW WARRANT
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
WARRANT NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR (B) AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT (II) UNLESS SOLD OR
TRANSFERRED TO A “QUALIFIED INSTITUTIONAL BUYER” WITHIN
THE MEANING OF RULE 144A UNDER THE SECURITIES ACT OR TO AN
“ACCREDITED INVESTOR” AS THAT TERM IS DEFINED IN RULE
501(A) OF REGULATION D
OR (III) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THIS WARRANT. ANY TRANSFEREE OF
THIS WARRANT SHOULD CAREFULLY REVIEW THE TERMS OF THIS
WARRANT.
CHINA AUTOMOTIVE SYSTEMS, INC.
Warrant To Purchase Common Stock
| Warrant No.:
YA-2008-B-2 |
Number of Shares:
94,133
|
Date
of Issuance: February 15, 2008
CHINA AUTOMOTIVE SYSTEMS, INC. ,
a Delaware corporation (the “
Company ”),
hereby certifies that, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
YA Global Investments, L.P. (the
“
Holder ”),
the registered Holder hereof or its permitted assigns, is entitled,
subject to the terms set forth below, to purchase from the Company
upon surrender of this Warrant, on or after the date hereof, but
not after 11:59 P.M. Eastern Time on the Expiration Date (as
defined herein) Ninety Four Thousand One Hundred Thirty Three
(94,133) fully paid and nonassessable shares of Common Stock (as
defined herein) of the Company (the “
Warrant Shares ”)
at the exercise price per share provided in
Section 1(b) below
or as subsequently adjusted;
provided ,
however ,
that in no event shall the Holder be entitled to exercise this
Warrant for a number of Warrant Shares in excess of that number of
Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially
owned by the Holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such exercise,
except within sixty (60) days of the Expiration Date (however, such
restriction may be waived by Holder (but only as to itself and not
to any other Holder) upon not less than sixty five (65) days prior
notice to the Company). For purposes of the foregoing proviso, the
aggregate number of shares of Common Stock beneficially owned by
the Holder and its affiliates shall include the number of shares of
Common Stock issuable upon exercise of this Warrant with respect to
which the determination of such proviso is being made, but shall
exclude shares of Common Stock which would be issuable upon (i)
exercise of the remaining, unexercised Warrants beneficially owned
by the Holder and its affiliates and (ii) exercise or conversion of
the unexercised or unconverted portion of any other securities of
the Company beneficially owned by the Holder and its affiliates
(including, without limitation, any convertible notes or preferred
stock) subject to a limitation on conversion or exercise analogous
to the limitation contained herein. Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended. For purposes of
this Warrant, in determining the number of outstanding shares of
Common Stock a Holder may rely on the number of outstanding shares
of Common Stock as reflected in (1) the Company’s most recent
Form 10-Q or Form 10-K, as the case may be, (2) a more recent
public announcement by the Company or (3) any other notice by the
Company or its transfer agent setting forth the number of shares of
Common Stock outstanding. Upon the written request of any Holder,
the Company shall promptly, but in no event later than one (1)
Business Day following the receipt of such notice, confirm in
writing to any such Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Warrant (as defined below) by such Holder and its affiliates since
the date as of which such number of outstanding shares of Common
Stock was reported.
Section
1.
(a)
General .
This Warrant is a common stock purchase warrant (the “
Warrant ”)
issued pursuant to the Securities Purchase Agreement
(“
Securities Purchase Agreement ”)
dated as of February 1, 2008 among the Company and the Holder and
the other parties to the Securities Purchase
Agreement.
(b)
Definitions. The
following words and terms as used in this Warrant shall have the
following meanings:
(i)
“
Approved Stock Plan ”
means any employee benefit plan which has been or is hereafter
approved by the Board of Directors of the Company, pursuant to
which the Company’s securities may be issued to any employee,
consultant, officer or director for services provided to the
Company.
(ii)
“
Business Day ”
means any day other than Saturday, Sunday or other day on which
commercial banks in the City of New York are authorized or required
by law to remain closed.
(iii)
“
Closing Trade Price ”
means, for any security as of any date, the last closing trade
price for such security on the Principal Market, as reported by
Bloomberg Financial Markets (“
Bloomberg ”),
or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing trade price then the last
trade price of such security prior to 4:00:00 p.m., New York Time,
as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security,
the last closing trade price of such security on the principal
securities exchange or trading market where such security is listed
or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing trade price of such security in the
over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no last closing trade
price is reported for such security by Bloomberg, the average of
the ask prices of any market makers for such security as reported
in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Trade Price cannot
be calculated for a security on a particular date on any of the
foregoing bases, the Closing Trade Price of such security on such
date shall be the fair market value as mutually determined by the
Company and the Holder. All such determinations to be appropriately
adjusted for any stock dividend, stock split, stock combination,
reclassification or similar transaction during the applicable
calculation period.
(iv)
“
Common Stock ”
means (i) the Company’s common stock, par value $0.0001 per
share, and (ii) any capital stock into which such Common Stock
shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.
(v)
“
Common Stock Deemed Outstanding ”
means, at any given time, the number of shares of Common Stock
outstanding at such time, plus the number of shares of Common Stock
deemed to be outstanding pursuant to
Sections 8(a)(i) and
8(a)(ii) hereof
regardless of whether the Options or Convertible Securities are
actually exercisable or convertible at such time, but excluding any
Common Stock owned or held by or for the account of the Company or
issuable upon conversion of the Notes and exercise of the
Warrants.
(vi)
“
Convertible Securities ”
means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for
Common Stock.
(vii)
“
Escrow Amount ”
means that portion of the purchase price for the Note and the
Warrants deposited in Escrow on the date hereof pursuant to
Section 1(c)(ii) of
the Securities Purchase Agreement.
(viii)
“
Escrow Release Date ”
means the date, if ever, the Escrow Amount is released to the
Company.
(ix)
“
Event of Default ”
means an event of default under the Notes, the Securities Purchase
Agreement or the Registration Rights Agreement dated the date
hereof.
(x)
“
Excluded Securities ”
means,
Common Stock issued or issuable: (i) as a stock dividend to holders
of Common Stock or upon any subdivision or combination of shares of
Common Stock; (ii) in connection with any Approved Stock Plan;
(iii) any securities issued to the seller as consideration for the
acquisition of another entity by the Company by merger or share
exchange (whereby the Company owns no less than 51% of the voting
power of the surviving entity) or purchase of substantially all of
such entity’s stock or assets that otherwise is permitted
under the Notes if still outstanding; (iv) any securities issued in
connection with a license, strategic partnership, joint venture or
other similar agreement,
provided that
the purpose of such arrangement is not primarily the raising of
capital; (v) upon exercise of warrants issued as a part of the
issuance of straight debt securities (with no equity or
equity-linked feature) issued to a financial institution or lender
in connection with a bank loan, credit, lease, or other debt
transaction with such financial institution or lender (where
warrant coverage is not greater than 5% of the loan amount); or
(vi) upon conversion of any Options or Convertible Securities which
are outstanding on the day immediately preceding the Closing
Date,
provided that
the terms of such Options or Convertible Securities are not
amended, modified or changed on or after the Closing
Date.
(xi)
“
Expiration Date ”
means the earlier of (x) the redemption of the Escrow Note (as
defined in the Securities Purchase Agreement and (Y) the date one
(1) year from the Issuance Date of this Warrant or, if such date
falls on a Saturday, Sunday or other day on which banks are
required or authorized to be closed in the City of New York or the
State of New York or on which trading does not take place on the
Principal Market or automated quotation system on which the Common
Stock is traded (a “
Holiday ”),
the next date that is not a Holiday.
(xii)
“
Issuance Date ”
means the date hereof.
(xiii)
“
Notes ”
means the Senior Convertible Notes of the Company issued on the
date hereof.
(xiv)
“
Options ”
means any rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.
(xv)
“
Other Securities ”
means (i) those Convertible Securities, Options and warrants of the
Company issued prior to, and outstanding on, the Issuance Date of
this Warrant, (ii) the shares of Common Stock issuable on exercise
of such convertible securities, options and warrants, provided such
convertible securities, options and warrants are not amended after
the Issuance Date of this Warrant, and (iii) the shares of Common
Stock issuable upon exercise of this Warrant or exercise or
conversion of the other securities issued pursuant to the
Securities Purchase Agreement.
(xvi)
“
Person ”
means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency
thereof.
(xvii)
“
Principal Market ”
means the NASDAQ Capital Market.
(xviii)
“
Registration Rights Agreement ”
shall mean that certain Registration Rights Agreement by and among
the Company and the parties thereto, dated the date hereof, and
relating to the holders of the Warrant Shares.
(xix)
“
Registration Statement ”
means a resale registration statement or registration statements of
the Company filed under the 1933 Act covering the Warrant
Shares.
(xx)
“
Required Holders ”
means (i) the Lead Buyer as identified in the Securities Purchase
Agreement or such other Person as it may designate (the
“
Lead Holder ”)
and (ii) other Holders of Warrants representing in the aggregate
with the Lead Holder’s Warrant at least a majority of the
Warrant Shares underlying such Warrants.
(xxi)
“
Securities Act ”
means the Securities Act of 1933, as amended.
(xxii)
“
Trading Day ”
means a day on which the Common Stock is trading on a Trading
Market.
(xxiii)
“
Trading Market ”
means the following markets or exchanges on which the Common Stock
is listed or quoted for trading on the date in question: the Nasdaq
Capital Market, the American Stock Exchange, the New York Stock
Exchange, the Nasdaq Global Market or the OTC Bulletin
Board.
(xxiv)
“
Warrant ”
means this Warrant and all Warrants issued in exchange, transfer or
replacement thereof.
(xxv)
“
Warrant Exercise Price ”
shall be $8.8527 per Warrant Share or as subsequently adjusted as
provided in
Section 8 hereof.
(xxvi)
“
Warrant Shares ”
means the shares of Common Stock issuable at any time upon exercise
of this Warrant.
(xxvii)
“
Weighted Average Price ”
means, for any security as of any date, the dollar volume-weighted
average price for such security on the Principal Market during the
period beginning at 9:30:01 a.m., New York Time (or such other time
as the Principal Market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other
time as the Principal Market publicly announces is the official
close of trading) as reported by Bloomberg through its
“Volume at Price” functions, or, if the foregoing does
not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin
board for such security during the period beginning at 9:30:01
a.m., New York Time (or such other time as such market publicly
announces is the official open of trading), and ending at 4:00:00
p.m., New York Time (or such other time as such market publicly
announces is the official close of trading) as reported by
Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average
of the highest closing bid price and the lowest closing ask price
of any of the market makers for such security as reported in the
“pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Weighted Average Price cannot be
calculated for a security on a particular date on any of the
foregoing bases, the Weighted Average Price of such security on
such date shall be the Fair Market Value. All such determinations
to be appropriately adjusted for any stock dividend, stock split,
stock combination, reclassification or similar transaction during
the applicable calculation period..
(c)
Other Definitional Provisions .
(i)
Except
as otherwise specified herein, all references herein (A) to
the Company shall be deemed to include the Company’s
successors and (B) to any applicable law defined or referred
to herein shall be deemed references to such applicable law as
the same may have been or may be amended or supplemented from
time to time.
(ii)
When
used in this Warrant, the words “
herein ”,
“
hereof ”,
and “
hereunder ”
and words of similar import, shall refer to this Warrant as a whole
and not to any provision of this Warrant, and the words
“
Section ”,
“
Schedule ”,
and “
Exhibit ”
shall refer to Sections of, and Schedules and Exhibits to, this
Warrant unless otherwise specified.
(iii)
Whenever
the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the
plural, and vice versa.
Section
2.
Exercise of Warrant; Warrant Shares; Limitations on
Exercise .
(a)
This
Warrant may be exercised, in whole or in any part, at anytime
between the Escrow Release Date and the Expiration Date (both
dates inclusive) (the “
Exercise Period ”)
by (i) delivery to the Company of a notice of election to exercise
this Warrant (or part thereof) in the form of
Exhibit A attached
hereto (“
Exercise Notice ”)
(or at such other agency or office of the Company in the United
States of America as it may designate by notice in writing to the
Holder at the address of the Holder), and (ii) payment to the
Company of the aggregate Warrant Exercise Price within three (3)
Trading Days of the date said Exercise Notice is delivered to the
Company (A) by cash, wire transfer funds or check or (B) if
applicable, in accordance with the procedures set forth in
Section 2(b) below.
On or before the first (1
st )
Trading Day following the Exercise Date (as defined below), the
Company shall transmit by facsimile a confirmation of receipt of
such Exercise Notice to the Holder and the Company’s transfer
agent (the “
Transfer Agent ”).
On or before the third (3rd) Trading Day following the Exercise
Date (the “
Share Delivery Date ”),
the Company shall (x)
provided that
there is an effective Registration Statement and that the Transfer
Agent is participating in the Depository Trust Company’s
(“
DTC ”)
Fast Automated Securities Transfer Program, credit such aggregate
number of Warrant Shares to which the Holder shall be entitled to
the Holder’s or its designee’s balance account with DTC
through its Deposit Withdrawal Agent Commission system or (y) if
there is no effective Registration Statement or if the Transfer
Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to the address as specified in
the Exercise Notice, a certificate, registered in the name of the
Holder or its designee, for the number of Warrant Shares to which
the Holder shall be entitled. Notwithstanding anything herein to
the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has
purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within three
(3) Trading Days of the date the final Exercise Notice is delivered
to the Company. Partial exercises of this Warrant resulting in
purchases of a portion of the total number of Warrant Shares
available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares
purchased. The Holder and the Company shall maintain records
showing the number of Warrant Shares purchased and the date of such
purchases. The Company shall deliver any objection to any
notice of exercise form within two (2) Business Days of receipt of
such notice. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares
available for purchase hereunder at any given time may be less than
the amount stated on the face hereof.
(b)
In
the event there is no effective Registration Statement or the
effectiveness of the Registration Statement has been suspended
for ten (10) consecutive Trading Days on the exercise date and
suspension is ongoing on the exercise date, the Holder may, in
lieu of exercising this Warrant for cash, wire transfer funds
or check, elect to receive, without payment by the Holder of
any additional consideration, a number of shares of Common
Stock equal to “X”, computed using the formula set
forth below, by surrender of this Warrant in accordance
with
Section 2(a) hereof
together with notice of such election, in which event the Company
shall issue to the Holder such number of shares of Common
Stock:
X
=
Y(A-B)
A
| Where: |
X |
= |
The
number of shares of Common Stock to be issued to the Holder
pursuant to such election;
|
| |
Y
|
=
|
The
number of Warrant Shares in respect of which such election is
made;
|
| |
A
|
=
|
The
Fair Market Value (the “
Fair Market Value ”)
of one share of Common Stock; and
|
| |
B
|
=
|
The
Warrant Exercise Price (as adjusted to the date of the
issuance).
|
For
purposes of this
Section 2(b) ,
the Fair Market Value as of a particular date shall be determined
as follows: (i) if shares of Common Stock are traded on a
securities exchange (including the New York Stock Exchange,
American Stock Exchange and the NASDAQ Stock Exchange) or through
the NASDAQ Global Market or Capital Market or other
over-the-counter market, the Fair Market Value shall be deemed to
be the average of the closing sales prices of such shares on such
exchange over the thirty (30) day period ending three (3) days
prior to the exercise of this election; or (ii) if no public market
exists for the shares of Common Stock, the Fair Market Value shall
(subject to the Holder’s right to dispute such valuation as
described below) be determined in good faith by the Board of
Directors of the Company. If the Holder disagrees with the Board of
Directors’ determination of the Fair Market Value pursuant to
clause (ii) above, the Holder may submit a notice of disagreement
to the Company. During the three (3) Business Days immediately
following the Company’s receipt of such notice, the Holder
and the Company shall negotiate in good faith to determine a
mutually agreeable Fair Market Value. If the parties remain unable
to reach agreement after such period, they shall engage one of the
“Big 4” accounting firms reasonably acceptable to each
such party to resolve such dispute (the “
Valuation Firm ”).
Each of the Holder and the Company shall provide (at each
party’s own expense) the Valuation Firm with copies of any
documents, analyses or other information within its possession or
control that the Valuation Firm reasonably requests in order to
resolve such dispute. The Valuation Firm shall determine the Fair
Market Value as soon as practicable after its engagement to resolve
the dispute using customary valuation techniques for other
companies or businesses in the same or similar industries as the
Company (and shall not apply any discount due to the fact that the
Common Stock may constitute “restricted securities”,
may be illiquid or represent a minority interest in the Company).
The Valuation’s Firm’s determination of the Fair Market
Value shall be binding on the Holder and the Company, and not
subject to challenge or collateral attack for any reason. The
Company shall pay all fees, costs and expenses of the Valuation
Firm in connection with its engagement to resolve such dispute (the
“
Valuation Cost ”);
provided ,
however ,
that if the Valuation’s Firm’s determination of the
Fair Market Value is in excess of 50%
lower
than the Holder’s proposed Fair Market Value, then the fees
and expenses of the Valuation Firm shall be shared in the same
proportion that the Company’s position, on the one hand, and
the Holder’s position, on the other hand, initially presented
to the Valuation Firm (based on the aggregate of all differences
taken as a whole) bear to the final resolution as determined by the
Valuation Firm. If this Warrant is exercised as provided in
this
Section 2(b) ,
the parties hereto shall treat such exercise as a recapitalization
pursuant to Section 368(a)(1)(E) of the Internal Revenue Code of
1986, as amended, for all tax purposes.
(c)
Upon
the exercise of this Warrant, the Company (unless otherwise
requested by the Holder) will issue fractional shares of its
Common Stock, and shall not distribute cash in lieu of such
fractional shares. If requested by the Holder, in lieu of any
fractional shares of Common Stock which would otherwise be
issuable upon the exercise of this Warrant, the Company shall
pay a cash adjustment in respect of such fractional interest
in an amount equal to the then Fair Market Value of a share of
Common Stock multiplied by such fractional
interest.
(d)
Notwithstanding
the terms of this
Section 2 ,
if (i) the Holder has not elected to exercise this Warrant prior to
the end of the Exercise Period pursuant to the terms hereof (the
“
Termination ”),
(ii) the Exercise Price for one Warrant Share is less than the Fair
Market Value of one share of Common Stock upon such Termination and
(iii) the other conditions (including no effective Registration
Statement) set forth in
Section 2(b) exist,
then (unless notice to the contrary is provided by the Holder),
this Warrant shall be deemed automatically exercised pursuant
to
Section 2(b) as
to the maximum number of Warrant Shares for which this Warrant is
then exercisable, immediately prior to such Termination, without
any action by the Holder with such exercise to be effected pursuant
to
Section 2(b) .
In the event that no public market exists for the shares of Common
Stock, the Company shall notify the Holder of the Board of
Directors’ determination of the Fair Market Value on third
day prior to the Termination, such notification to be given on or
before the Expiration Date and without prejudice to the
Holder’s rights to dispute the valuation in accordance
with
Section 2(b) which
shall survive the termination of this Agreement.
(e)
Each
date on which this Warrant is exercised and on which payment
of the Warrant Exercise Price (i.e., the later of those two
dates) is made is referred to herein as an “
Exercise Date ”.
As soon as reasonably possible but in no event later than two (2)
Business Days after the Exercise Date, the Company shall issue and
deliver a certificate or certificates for the Warrant Shares being
purchased pursuant to such exercise, registered in the name of the
Holder or the Holder’s designee, to such Holder or designee,
as the case may be. If such exercise shall not have been for the
full number of the Warrant Shares, then the Company shall if the
Holder has surrendered this Warrant for the purpose of such
exercise issue promptly and deliver to the Holder a new Warrant,
registered in the name of the Holder, of like tenor to this
Warrant, for the balance of the Warrant Shares that remain after
exercise of the Warrant.
(f)
The
person or entity in whose name any certificate for shares of
Common Stock is issued upon any exercise shall for all
purposes be deemed to have become the holder of record of such
shares as of the Exercise Date, except that if the Exercise
Date is a date on which the stock transfer books of the
Company are closed, such person or entity shall be deemed to
have become the holder of r
|
