f8k013110exix_covenant.htm


    Exhibit
10.9

    


    EXHIBIT
E

    TO

    EQUITY
CREDIT AGREEMENT

    


    


    


    FORM
OF WARRANT

    


    


    Original
Issue Date: ___________, 2010

    Original
Exercise Price (subject to adjustment herein): $2.00

    Warrant
Shares: 300,000

    


    COVENANT
GROUP OF CHINA, INC.

    


    COMMON
STOCK PURCHASE WARRANT

    SERIES
2010-1-__

    


    THIS COMMON STOCK PURCHASE WARRANT (the
“Warrant”)
certifies that, for value received, Southridge Partners II, LP (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the “Original Issue Date”)
and on or prior to the fifth anniversary of the Original Issue Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from COVENANT GROUP OF CHINA,
INC., a Nevada corporation (the “Company”), up to
Three Hundred Thousand (300,000) shares (the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section 2(b).

    


    This
Warrant was originally issued to the Holder or the Holder’s predecessor in
interest on the Original Issue Date identified in the caption of this
Warrant.

     

    Section
1.   Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in that certain Equity Credit Agreement, dated as of January 31, 2010
(the “Purchase
Agreement”), to which the Company and the Holder (or the Holder’s
predecessor in interest) were parties, as amended, modified or supplemented from
time to time in accordance with its terms.

    


    Section
2.     Exercise.

     

    (a)           Exercise of Warrant.
Exercise of the purchase rights represented by this Warrant may be made, in
whole or in part, at any time or times on or after the Original Issue Date and
on or before the Termination Date by (i) delivery to the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
registered Holder at the address of the Holder appearing on the books of the
Company) of a duly executed facsimile copy of the Notice of Exercise Form
annexed hereto; and (ii) delivery to the Company of the aggregate Exercise Price
of the shares thereby purchased by wire transfer or cashier’s check drawn on a
United States bank. 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 Notice of Exercise 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) Trading Days of receipt of such notice.
In the event of any dispute or discrepancy, the records of the Company shall be
controlling and determinative in the absence of manifest error. 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)  Exercise Price. The
exercise price per share of the Common Stock under this Warrant shall be the
Original Exercise Price identified in the caption to this Warrant, subject to
adjustment hereunder (the “Exercise
Price”).

     

    (c)  Cashless
Exercise.

    


    (i) This
Warrant may also be exercised at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a certificate for the number of
Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:

     

     (A)
=      the VWAP on the Trading Day immediately
preceding the date of such election;

    


     (B)
=      the Exercise Price of this Warrant, as
adjusted; and

    


    
      	
                         
           (X) =

            	
              the
      number of Warrant Shares issuable upon exercise of this Warrant in
      accordance with the terms of this Warrant by means of a cash exercise
      rather than a cashless exercise.

            


    

    


    “VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted for trading as reported by the Trading Market (based on a Trading Day
from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (b) 
if the OTC Bulletin Board is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on the
OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (d) in
all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Holder and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the
Company.

     

    (d) Exercise Limitations;
Holder’s Restrictions. Except (i) as specifically provided in this
Warrant as an exception to this provision, or (ii) while there is outstanding a
tender offer for any or all of the shares of the Company’s Common Stock, the
Company shall not effect any exercise of this Warrant, and a Holder shall not
have the right to exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, the Holder (together
with the Holder’s Affiliates, and any other person or entity acting as a group
together with the Holder or any of the Holder’s Affiliates), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined
below).  For purposes of the foregoing sentence, the 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 such determination is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon (A)
exercise of the remaining, nonexercised portion of this Warrant beneficially
owned by the Holder or any of its Affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Common Stock Equivalents) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its
affiliates.  Except as set forth in the preceding sentence, for
purposes of this Section 2(d), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder, it being acknowledged by the Holder that the Company is
not representing to the Holder 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    that such
calculation is in compliance with Section 13(d) of the Exchange Act and the
Holder is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained in this
Section 2(d) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with any
Affiliates) and of which portion of this Warrant is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is exercisable, in each
case subject to the Beneficial Ownership Limitation, and the Company shall have
no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 2(d), 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 (x) the
Company’s most recent Form 10-Q or Form 10-K (or similar form, if applicable),
as the case may be, (y) a more recent public announcement by the Company or (z)
any other notice by the Company or the Company’s transfer agent (the “Transfer Agent”)
setting forth the number of shares of Common Stock outstanding.  Upon
the written or oral request of a Holder, the Company shall within two Trading
Days confirm orally and in writing to the 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, by the Holder or
its Affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant.  Nothing herein shall
preclude the Holder from disposing of a sufficient number of other shares of
Common Stock beneficially owned by the Holder so as to thereafter permit the
continued exercise of this Warrant. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict conformity with
the terms of this Section 2(d) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The limitations contained
in this paragraph shall apply to a successor holder of this
Warrant.

     

    (e)    Mechanics of
Exercise.

     

    (i)           Delivery of Certificates
Upon Exercise. Certificates for shares purchased hereunder shall be
transmitted by the Transfer Agent to the Holder by crediting the account of the
Holder’s prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission (“DWAC”) system if the
Company is then a participant in such system and the shares are eligible for
resale without volume or manner-of-sale limitations pursuant to Rule 144, and
otherwise by physical delivery to the address specified by the Holder in the
Notice of Exercise within three (3) Trading Days from the delivery to the
Company of the Notice of Exercise Form, surrender of this Warrant (if required)
and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery
Date”). This Warrant shall be deemed to have been exercised on the date
the Exercise Price, if any, is received by the Company or on date the Notice of
Exercise is received, if it reflects a cashless exercise. The Warrant Shares
shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the Warrant has been exercised
by payment to the Company of the Exercise Price (or by cashless exercise, if
permitted) and all taxes required to be paid by the Holder, if any, pursuant to
Section 2(e)(vi) prior to the issuance of such shares, have been
paid.

    


    (ii)           Delivery of New Warrants
Upon Exercise. If this Warrant shall have been exercised in part, the
Company shall, at the request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.

     
 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (iii)           Rescission Rights. If
the Company fails to cause its Transfer Agent to transmit to the Holder a
certificate or certificates representing the Warrant Shares pursuant to this
Section 2(e)(i) by the Warrant Share Delivery Date, then the Holder will have
the right to rescind such exercise.

     
 (iv)           Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise. In addition to any
other rights available to the Holder, if the Company fails to cause its transfer
agent to transmit to the Holder a certificate or certificates representing the
Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery
Date, and if after such date the Holder is required by its broker to purchase
(in an open market transaction or otherwise) or the Holder’s brokerage firm
otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale
by the Holder of the Warrant Shares which the Holder anticipated receiving upon
such exercise (a “Buy-In”), then the
Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall limit a 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 and/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.

    


    (v)           No Fractional Shares or
Scrip. No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of a share which
Holder would otherwise be entitled to purchase upon such exercise, the Company
shall at its election, either pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Exercise Price or
round up to the next whole share.

     

    (vi)           Charges, Taxes and
Expenses. Issuance of certificates for Warrant Shares shall be made
without charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be issued in
the name of the Holder or in such name or names as may be directed by the
Holder; provided, however, that in the event certificates for Warrant Shares are
to be issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder; and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.

     

    (vii)           Closing of Books. The
Company will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.

    


    Section
3.    Certain
Adjustments.

     

    (a)           Stock Dividends and
Splits. If the Company, at any time while this Warrant is outstanding:
(A) subdivides outstanding shares of Common Stock into a larger number of
shares, (C) combines (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, or (D) issues by
reclassification of shares of the Common Stock any shares of capital stock of
the Company, then in each case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment
made pursuant to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.

     
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)           Subsequent Rights
Offerings. If the Company, at any time while the Warrant is outstanding,
shall issue rights, options or warrants to all holders of Common Stock (and not
to Holder) entitling them to subscribe for or purchase shares of Common Stock at
a price per share less than the VWAP at the record date mentioned below, then
the Exercise Price shall be multiplied by a fraction, of which the denominator
shall be the number of shares of the Common Stock outstanding on the date of
issuance of such rights or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase, and of which the numerator
shall be the number of shares of the Common Stock outstanding on the date of
issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered (assuming
receipt by the Company in full of all consideration payable upon exercise of
such rights, options or warrants) would purchase at such VWAP. Such adjustment
shall be made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.

     
 (c)           Fundamental
Transaction. If, at any time while this Warrant is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate
Consideration”) receivable as a result of such merger, consolidation or
disposition of assets by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event. For purposes
of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and evidencing the Holder’s right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 3(e) and insuring
that this Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.
Notwithstanding anything to the contrary, in the event of a Fundamental
Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction”
as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended,
or (3) a Fundamental Transaction involving a person or entity not traded on a
national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global
Market, or the Nasdaq Capital Market, the Company or any successor entity shall
pay at the Holder’s option, exercisable at any time concurrently with or within
thirty (30) days after the consummation of the Fundamental Transaction, an
amount of cash equal to the value of this Warrant as determined in accordance
with the Black Scholes Option Pricing Model obtained from the “OV” function on
Bloomberg L.P. using (i) a price per share of Common Stock equal to the VWAP of
the Common Stock for the Trading Day immediately preceding the date of
consummation of the applicable Fundamental Transaction, (ii) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the
remaining term of this Warrant as of the date of consummation of the applicable
Fundamental Transaction and (iii) an expected volatility equal to the 100 day
volatility obtained from the “HVT” function on Bloomberg L.P. determined as of
the Trading Day immediately following the public announcement of the applicable
Fundamental Transaction.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    (f)           Adjustment to Number of
Warrant Shares.  If the Exercise Price is reduced pursuant to
the preceding provisions of this Section 3, the number of shares issuable on
exercise of the Warrants shall be increased to a number of shares (the “Adjusted Warrant Shares
Number”) such that the aggregate Exercise Price (after taking into
account such reduction) for the Adjusted Warrant Shares Number shall be equal to
the aggregate Exercise Price (immediately before such reduction) for the Warrant
Shares issuable on exercise of the Warrants prior to the adjustment contemplated
by this clause (g) (for purposes of all such calculations, all Warrants shall be
assumed to be fully exercisable without regard to any limitations, restrictions
or conditions that may be provided herein or in any other provision of any of
the Transaction Agreements).

     

    (g)           Calculations. All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.

    


    (h)           Notice to
Holder.

     

    (i)           Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly mail to the Holder a notice
setting forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. If the Company enters into a
Variable Rate Transaction (as defined below), despite the prohibition thereon in
the Purchase Agreement, the Company shall be deemed to have issued Common Stock
or Common Stock Equivalents at the lowest possible conversion or exercise price
at which such securities may be converted or exercised. “Variable Rate
Transaction” means a transaction effected by the Company after the
Original Issue Date (other than and Exempt Issuance) in which the Company issues
securities, howsoever denominated,  which provide for a variable
conversion price or a variable exercise price.

    


    (ii)           Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any other
distribution in whatever form) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall appear upon the Warrant Register (as defined
below) of the Company, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to exercise this Warrant during the
period commencing on the date of such notice to the effective date of the event
triggering such notice.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    Section
4.    Transfer of
Warrant.

     

    (a)           Transferability.
Subject to compliance with any applicable securities laws, this Warrant and all
rights hereunder (including, without limitation, any registration rights) are
transferable, in whole or in part, upon surrender of this Warrant at the
principal office of the Company or its designated agent, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued.

     

    (b)           New Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. All Warrants issued on transfers or exchanges shall reflect
the Original Issue Date and shall be identical with this Warrant except as to
the number of Warrant Shares issuable pursuant thereto and any other adjustments
made pursuant to the provisions of this Warrant, including adjustments made
pursuant to Section 3 hereof.

     

    (c)           Warrant Register. The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time. 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.

    


    Section
5.     Reserved.

    


    Section
6.     Miscellaneous.

     

    (a)           No Rights as Shareholder
Until Exercise. This Warrant does not entitle the Holder to any voting
rights or other rights as a shareholder of the Company prior to the exercise
hereof as set forth in Section 2(e)(i) or other relevant provision of this
Warrant.

     

    (b)           Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

     

    (c)           Saturdays, Sundays,
Holidays, etc. If the last or appointed day for the taking of any action
or the expiration of any right required or granted herein shall not be a
Business Day, then such action may be taken or such right may be exercised on
the next succeeding Business Day.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    (d)           Authorized
Shares.

    


    (i)           Reservation. The
Company covenants that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock for the sole purpose of
issuance upon exercise of this Warrant, as herein provided, free from preemptive
rights or any other actual contingent purchase rights of Persons other than the
Holder (and the other holders of the Debentures and Warrants), not less than
such aggregate number of shares of the Common Stock (the “Reserved Amount”) as
shall (subject to the terms and conditions set forth in the Purchase Agreement)
be issuable (taking into account the adjustments of Section 3) upon the exercise
of the outstanding portion of this Warrant through and including the Termination
Date.  Such reserved shares are in addition to, and not in lieu of,
shares which may be reserved for the Holder and such other holders of the
Debentures and Warrants.

    


    (ii)           Determination of Reserved
Amount. The Reserved Amount shall be determined on the Original Issue
Date and on each date (each, an “Adjustment Date”), if
any, on which an adjustment to the Exercise Price is  made pursuant to
Section 3 hereof (each such determination date, a “Reserved Share Determination
Date”), and the number of shares to be reserved shall be based on all
outstanding Warrants as of such Reserved Share Determination Date. The Reserved
Amount determined on such date shall remain the Reserved Amount until the next
Adjustment Date, if any. The Company shall give written instructions to the
Transfer Agent to reserve for issuance to the Holder the number of shares equal
to the Reserved Amount.  The Company will, at the request of the
Holder, provide written confirmation, certified by an executive officer of the
Company, of the number of shares then reserved for the Holder and that the
instructions referred to in this Section 6(d)(ii) have been given to the
Transfer Agent.

    


    (iii)           Due Authorization.
The Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading Market upon
which the Common Stock may be listed. The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

     

    (e)           Certain
Covenants.

    


    (i)           Certain Actions.
Except and to the extent as waived or consented to by the Holder, the Company
shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this
Warrant.

     

    (ii)           Corporate
Authorizations. Before taking any action which would result in an
adjustment in the number of Warrant Shares for which this Warrant is exercisable
or in the Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    (f)           Governing Law; Jurisdiction;
Jury Trial. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Nevada, without regard to the principles of conflict of laws thereof. Each party
agrees that all legal proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of
the New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such New York Courts, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Warrant and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by applicable law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Warrant or the transactions contemplated hereby. If either
party shall commence an action or proceeding to enforce any provisions of this
Warrant, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorney’s fees and other costs and
expenses incurred in the investigation, preparation and prosecution of such
action or proceeding.

     

    (g)           Restrictions. The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.

     

    (h)           Nonwaiver and
Expenses. No course of dealing or any delay or failure to exercise any
right hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the
fact that all rights hereunder terminate on the Termination Date. If the Company
willfully and knowingly fails to comply with any provision of this Warrant,
which results in any material damages to the Holder, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.

     

    (i)           Notices. Any notice,
request or other document required or permitted to be given or delivered to the
Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.

     

    (j)           Limitation of
Liability. No provision hereof, in the absence of any affirmative action
by Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise to any
liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.

     

    (k)           Remedies. Holder, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law would be
adequate.

     

    (l)           Successors and
Assigns. Subject to applicable securities laws, this Warrant and the
rights and obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant and shall be
enforceable by the Holder or holder of Warrant Shares.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    


    (m)           Amendment. This
Warrant may be modified or amended or the provisions hereof waived only with the
written consent of the Company and the Holder.

     

    (n)           Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.

    


     

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    (o)           Headings. The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant and shall not
control or affect the meaning or construction of any of the provisions
hereof.

     
 

    IN WITNESS WHEREOF, the Company has
caused this instrument to be duly executed by an officer thereunto duly
authorized.

    


    Dated:
__________, 2010

    


    COVENANT GROUP OF CHINA,
INC.                                                                           

     
 

    By:_______________________________________

    


    __________________________________________

    (Print Name)

    _________________________________________

    (Title)

    


    


    Facsimile No. for delivery of
Notices:

    


    _________________________________

     
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
A

    


    COVENANT
GROUP OF CHINA, INC.

    


    NOTICE OF
EXERCISE

    (To be
Executed by the Registered Holder in Order to Convert theWarrant)

    


    TO:          COVENANT
GROUP OF CHINA, INC. VIA FAX:  (609) 953-0289

    Attn: CEO or President

    


    The
undersigned hereby irrevocably elects to exercise the right, represented by the
Common Stock Purchase Warrant dated as of January 31, 2010, (the “Warrant”) to purchase
_______________ shares (“Exercise Shares”) of
the Common Stock, $0.00001 par value (“Common Stock”), and
tenders herewith payment in accordance with Section 2 of said Common Stock
Purchase Warrant, as follows:

    


    o           CASH:  
 $                              =
(Exercise Price x Exercise Shares)

    


    Payment is being made by:

    enclosed
check

    wire
transfer

    other


     

    o           CASHLESS
EXERCISE:

    


    Net number of Warrant Shares to be
issued to Holder :     _________*

    


    * based
on:     (A-B) x
(X)

    A

    where:

    VWAP on the Trading Day immediately
preceding

    the date of such election
[A]                               
 =   $____________

    Exercise Price of this Warrant, as
adjusted
[B]                   =   $______________

    Exercise Shares1
[X]                                               
=    ________________

    


    It is the
intention of the Holder to comply with the provisions of Section 2(d) of the
Warrant regarding certain limits on the Holder's right to exercise
thereunder.  The Holder believes this exercise complies with the
provisions of said Section 2(d).  Nonetheless, to the extent that,
pursuant to the exercise effected hereby, the Holder would have more shares than
permitted under said Section, this notice should be amended and revised, ab
initio, to refer to the exercise which would result in the issuance of shares
consistent with such provision. Any exercise above such amount is hereby deemed
void and revoked.

    


    As contemplated by the Warrant, this
Notice of Exercise is being sent by facsimile to the telecopier number and
officer indicated above.

    


    The certificates representing the
Warrant Shares should be transmitted by the Company to the Holder

    


    o           via
express courier, or

    


    o           by
electronic transfer

     

     

                                     

    
      1The number of Exercise Shares is equal
to the number of Warrant Shares issuable upon exercise of this Warrant in
accordance with the terms of this Warrant by means of a cash exercise rather
than a cashless exercise.

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    after
receipt of this Notice of Exercise (by facsimile transmission or otherwise)
to:

    


    _____________________________________

    _____________________________________

    _____________________________________

    


    The undersigned Holder  is an
“accredited investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended

    


    


    


    Dated:
______________________

    


    


    ____________________________

    [Print
Name of Holder]

    


    By:
_________________________

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

     

     ASSIGNMENT
FORM

    


    (To
assign the foregoing warrant, execute this form and supply required
information.

    Do not
use this form to exercise the warrant.)

    


    FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

    


    _______________________________________________
whose address is

    


    _______________________________________________________________.

     
 

    _______________________________________________________________

    


    Dated:
______________, _______

    


    Holder’s
Signature:

     _________________________

     
 

    Holder’s
Address:

     _________________________

     
 

                  
  _________________________

    


    Signature
Guaranteed: ___________________________________________

    


    NOTE: The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing
Warrant.