Unassociated Document


    NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, 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 OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A, IF APPLICABLE, UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

    


    A-POWER
ENERGY GENERATION SYSTEMS, LTD.

    


    Warrant
To Purchase Common Shares

    


    Warrant
No.: ________

    Number of
Common Shares: _______

    Date of
Issuance: June 19, 2009 ("Issuance Date")

    


    A-Power
Energy Generation Systems, Ltd., a company organized under the laws of British
Virgin Islands (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, ___________, the registered holder hereof or its
permitted assigns (the "Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon surrender of this Warrant to
Purchase Common Shares (including any Warrants to Purchase Common Shares issued
in exchange, transfer or replacement hereof, the "Warrant"), at any time or
times on or after the Shareholder Approval Date (as defined in the Securities
Purchase Agreement) (the "Initial Exercisability Date"),
but not after 11:59 p.m., New York time, on the Expiration Date (as defined
below), _________ fully paid nonassessable Common Shares par value $0.0001 per
share (the "Warrant
Shares").  Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in Section
18.  This Warrant is one of the Warrants to purchase Common Shares
(the "SPA Warrants")
issued pursuant to Section 1 of that certain Securities Purchase Agreement,
dated as of June 18, 2009 (the "Subscription Date"), by and
among the Company and the investors (the "Buyers") referred to therein
(the "Securities Purchase
Agreement").


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    1.   EXERCISE OF WARRANT.

     

    
      (a)  Mechanics of
Exercise.  Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any time or times on or after the
Initial Exercisability Date, in whole or in part, by (i) delivery of a written
notice, in the form attached hereto as Exhibit A (the "Exercise Notice"), of the Holder's election to
exercise this Warrant and (ii) (A) payment to the Company of an amount equal to
the applicable Exercise Price multiplied by the number of Warrant Shares as to
which this Warrant is being exercised (the "Aggregate Exercise Price") in cash or by wire
transfer of immediately available funds or (B) by notifying the Company that
this Warrant is being exercised pursuant to a Cashless Exercise (as defined in
Section 1(d)).  The Holder shall not be required to deliver the
original Warrant in order to effect an exercise hereunder unless (A) this
Warrant is being exercised in full to purchase (or acquire by Cashless Exercise)
the total number of Warrant Shares issuable upon exercise of this Warrant or (B)
the Holder has provided the Company with prior written notice (which notice may
be included in an Exercise Notice) requesting the reissuance of this Warrant
upon physical surrender of this Warrant.  Execution and delivery of
the Exercise Notice with respect to less than all of the Warrant Shares shall
have the same effect as cancellation of the original Warrant and issuance of a
new Warrant evidencing the right to purchase the remaining number of Warrant
Shares.  On or before the first (1st) Trading Day following the date
on which the Company has received each of the Exercise Notice and the Aggregate
Exercise Price (or notice of a Cashless Exercise) (the "Exercise Delivery Documents"), the Company
shall transmit by facsimile an acknowledgment of confirmation of receipt of the
Exercise Delivery Documents to the Holder and the Company's transfer agent (the
"Transfer Agent").  On or
before the third (3rd) Trading Day following the date on which the Company has
received all of the Exercise Delivery Documents (the "Share Delivery Date"), the Company shall (X)
provided that the Transfer Agent is participating in The Depository Trust
Company ("DTC") Fast Automated Securities
Transfer Program, and such Common Shares do not require the placement of any
legends restricting transfer of such Common Shares, upon the request of the
Holder, credit such aggregate number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the Holder's or its designee's balance
account with DTC through its Deposit Withdrawal Agent Commission system, or (Y)
if (I) the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program or (II) such Common Shares require the placement of
legends restricting transfer of such Common Shares as required by Section 2(g)
of the Securities Purchase Agreement, issue and dispatch by overnight courier to
the address as specified in the Exercise Notice, a certificate, registered in
the Company's share register in the name of the Holder or its designee, for the
aggregate number of Common Shares to which the Holder is entitled pursuant to
such exercise, which certificate shall, in the case of clause (II), bear a
legend in accordance with Section 2(g) of the Securities Purchase
Agreement.  Upon delivery of the Exercise Delivery Documents, the
Holder shall be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are credited to the
Holder's DTC account or the date of delivery of the certificates evidencing such
Warrant Shares, as the case may be.  If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than three (3)
Trading Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 8(d)) representing the right to purchase the number of
Warrant Shares issuable immediately prior to such exercise under this Warrant,
less the number of Warrant Shares with respect to which this Warrant is
exercised.  No fractional Common Shares are to be issued upon the
exercise of this Warrant, but rather the number of Common Shares to be issued
shall be rounded up to the nearest whole number.  The Company shall
pay any and all transfer, stamp and similar taxes (other than income and similar
taxes) that are required to be paid with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant.

    

     


    
      
         


      

      
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    (b)  Exercise
Price.  For purposes of this Warrant, "Exercise Price"
means  $10.637, subject to adjustment as provided herein.

     

    (c)  Company's Failure to Timely
Deliver Securities.  If the Company shall fail to issue a
certificate to the Holder or to credit the Holder's balance account with DTC, as
applicable, for such number of Common Shares to which the Holder is entitled
upon the Holder's exercise of this Warrant within three (3) Trading Days of
receipt of the Exercise Delivery Documents (an "Exercise Failure"), and if on or after
such Exercise Failure the Holder purchases (in an open market transaction or
otherwise) Common Shares to deliver in satisfaction of a sale by the Holder of
Common Shares issuable upon such exercise that the Holder anticipated receiving
from the Company (a "Buy-In"), then the Company
shall, within three (3) Trading Days after the Holder's request and in the
Holder's discretion, either (i) pay cash to the Holder in an amount equal to the
Holder's total purchase price (including brokerage commissions and other
reasonable out-of-pocket brokerage expenses, if any) for the Common Shares so
purchased (the "Buy-In
Price"), at which point the Company's obligation to issue and deliver
such certificate to the Holder or credit the Holder's balance account with DTC
for such Common Shares shall terminate, or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing such Common
Shares or credit such Holder's balance account with DTC and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of Common Shares, times (B) the Closing Bid Price on
the date of exercise.

     

    (d)  Cashless Exercise.
 Notwithstanding
anything contained herein to the contrary, if, after the six month anniversary
of the Issuance Date, a Registration Statement (as defined in the Registration
Rights Agreement) covering the resale of the Warrant Shares that are the subject
of the Exercise Notice (the "Unavailable Warrant Shares")
is not available for the resale of such Unavailable Warrant Shares (other than
as a result of the occurrence of an Allowable Grace Period (as defined in the
Registration Rights Agreement) that occurs prior to the four year anniversary of
the date hereof), the Holder may, in its sole discretion, exercise this Warrant
in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such exercise the "Net
Number" of Common Shares determined according to the following formula (a "Cashless
Exercise"):


    
      
         


      

      
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                            Net
      Number =

                          	
                             (A x B) - (A x C)

                          	 
	 
      	
                             

                            B

                          	 


                  

                

              

            

          

        

      

    

     

    For purposes of the foregoing
formula:

     

    
      	
               
      

            	
              A=

            	
              the
      total number of shares with respect to which this Warrant is then being
      exercised.

            


    

     

    
      	
               
      

            	
              B=

            	
              the
      Weighted Average Price of the Common Shares (as reported by Bloomberg) for
      the five (5) consecutive Trading Days ending on the date immediately
      preceding the date of the Exercise
Notice.

            


    

     

    
      	
               
      

            	
              C=

            	
              the
      Exercise Price then in effect for the applicable Warrant Shares at the
      time of such exercise.

            


    

    


    (e)  Disputes.  In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed and resolve
such dispute in accordance with Section 13.

     

    (f)   Limitations on
Exercises.  The Company shall not effect any exercise of this
Warrant, and the Holder shall not have the right to exercise this Warrant, to
the extent that after giving effect to such exercise, such Holder (together with
the Holder's affiliates) would beneficially own in excess of 4.99% (the "Maximum Percentage") of the
number of Common Shares outstanding immediately after giving effect to such
exercise.  For purposes of the foregoing sentence, the aggregate
number of Common Shares beneficially owned by the Holder and its affiliates
shall include the number of Common Shares issuable upon exercise of this Warrant
with respect to which the determination of such sentence is being made, but
shall exclude the number of Common Shares which would be issuable upon (i)
exercise of the remaining, unexercised portion of this Warrant beneficially
owned by the Holder and any of its affiliates and (ii) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company
beneficially owned by such Person and its affiliates (including, without
limitation, any convertible notes or convertible preferred stock or warrants)
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
(the "1934
Act").  For purposes of this Warrant, in determining the number
of outstanding Common Shares, the Holder may rely on the number of outstanding
Common Shares as reflected in (1) the Company's most recent Form 20-F, Report of
Foreign Private Issuer on Form 6-K of the Company or other public filing with
the Securities and Exchange Commission (the "SEC"), as the case may be, (2)
a more recent public announcement by the Company or (3) any other notice by the
Company or the Transfer Agent setting forth the number of Common Shares
outstanding.  For any reason at any time, upon the written or oral
request of the Holder, the Company shall within two (2) Business Days confirm in
writing to the Holder the number of Common Shares then
outstanding.  In any case, the number of outstanding Common Shares
shall be determined after giving effect to the conversion or exercise of
securities of the Company, including the SPA Warrants, by the Holder and its
affiliates since the date as of which such number of outstanding Common Shares
was reported.  By written notice to the Company, the Holder may from
time to time increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that (i) any such
increase will not be effective until the sixty-first (61st) day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of SPA
Warrants.  The provisions of this paragraph shall be construed and
implemented in a manner other than in strict conformity with the terms of this
Section 1(f) 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.


    
      
         


      

      
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    (g)  Insufficient Authorized
Shares.  If at any time while this Warrant remains outstanding
the Company does not have a sufficient number of authorized and unreserved
Common Shares to satisfy its obligation to reserve for issuance upon exercise of
this Warrant at least a number of Common Shares equal to 130% (the "Required Reserve Amount") of
the number of Common Shares as shall from time to time be necessary to effect
the exercise of all of this Warrant then outstanding (an "Authorized Share Failure"),
then the Company shall as soon as practicable take all action necessary to
increase the Company's authorized Common Shares to an amount sufficient to allow
the Company to reserve the Required Reserve Amount for this Warrant then
outstanding.  Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence of an
Authorized Share Failure, but in no event later than ninety (90) days after the
occurrence of such Authorized Share Failure, the Company shall either (x) obtain
the vote or written consent of its shareholders for the approval of an increase
in the number of authorized Common Shares and provide each shareholder with an
information statement with respect thereto or (y) hold a meeting of its
shareholders for the approval of an increase in the number of authorized Common
Shares.  In connection with such meeting, the Company shall provide
each shareholder with a proxy statement and shall use its reasonable best
efforts to solicit its shareholders' approval of such increase in authorized
Common Shares and to cause its Board of Directors to recommend to the
shareholders that they approve such proposal.

     

    2.   ADJUSTMENT OF EXERCISE PRICE
AND NUMBER OF WARRANT SHARES.  The Exercise Price and the
number of Warrant Shares shall be adjusted from time to time as
follows:


    
      
         


      

      
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    (a)  Adjustment upon Issuance of
Common Shares.  If and whenever on or after the Subscription
Date through the second (2nd) year
anniversary of the Issuance Date, the Company issues or sells, or in accordance
with this Section 2 is deemed to have issued or sold, any Common Shares
(including the issuance or sale of Common Shares owned or held by or for the
account of the Company, but excluding Common Shares deemed to have been issued
by the Company in connection with any Excluded Securities (as defined in the SPA
Securities) for a consideration per share (the "New Issuance Price") less than
a price (the "Applicable
Price") equal to the Exercise Price in effect immediately prior to such
issue or sale or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance, the Exercise Price then in effect
shall be reduced to an amount equal to the New Issuance Price.  In the
event of any Dilutive Issuance after the second (2nd) year
anniversary of the Issuance Date, then immediately after such Dilutive Issuance,
the Exercise Price then in effect shall be reduced to an amount equal to the
product of (A) the Exercise Price in effect immediately prior to such Dilutive
Issuance and (B) the quotient determined by dividing (1) the sum of (I) the
product derived by multiplying the Exercise Price in effect immediately prior to
such Dilutive Issuance and the number of Common Shares Deemed Outstanding
immediately prior to such Dilutive Issuance plus (II) the consideration, if any,
received by the Company upon such Dilutive Issuance, by (2) the product derived
by multiplying (I) the Exercise Price in effect immediately prior to such
Dilutive Issuance by (II) the number of Common Shares Deemed Outstanding
immediately after such Dilutive Issuance. Upon each such adjustment of the
Exercise Price hereunder, the number of Warrant Shares shall be adjusted to the
number of Common Shares determined by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares acquirable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such
adjustment.  For purposes of determining the adjusted Exercise Price
under this Section 2(a), the following shall be applicable:

     

    (i)           Issuance of
Options.  If the Company in any manner grants any Options and
the lowest price per share for which one Common Share is issuable upon the
exercise of any such Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option is less than
the Applicable Price, then such Common Share shall be deemed to be outstanding
and to have been issued and sold by the Company at the time of the granting or
sale of such Option for such price per share.  For purposes of this
Section 2(a)(i), the "lowest price per share for which one Common Share is
issuable upon exercise of such Options or upon conversion, exercise or exchange
of such Convertible Securities issuable upon exercise of any such Option" shall
be equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one Common Share upon the granting
or sale of the Option, upon exercise of the Option and upon conversion, exercise
or exchange of any Convertible Security issuable upon exercise of such
Option.  No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such Common Shares or
of such Convertible Securities upon the exercise of such Options or upon the
actual issuance of such Common Shares upon conversion, exercise or exchange of
such Convertible Securities.


    
      
         


      

      
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    (ii)           Issuance of Convertible
Securities.  If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one Common Share
is issuable upon the conversion, exercise or exchange thereof is less than the
Applicable Price, then such Common Share shall be deemed to be outstanding and
to have been issued and sold by the Company at the time of the issuance or sale
of such Convertible Securities for such price per share.  For the
purposes of this Section 2(a)(ii), the "lowest price per share for which one
Common Share is issuable upon the conversion, exercise or exchange thereof"
shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to one Common Share upon the
issuance or sale of the Convertible Security and upon conversion, exercise or
exchange of such Convertible Security.  No further adjustment of the
Exercise Price or number of Warrant Shares shall be made upon the actual
issuance of such Common Shares upon conversion, exercise or exchange of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of this
Warrant has been or is to be made pursuant to other provisions of this Section
2(a), no further adjustment of the Exercise Price or number of Warrant Shares
shall be made by reason of such issue or sale.

     

    (iii)           Change in Option Price or
Rate of Conversion.  If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for Common Shares increases or decreases at any time, the Exercise
Price and the number of Warrant Shares in effect at the time of such increase or
decrease shall be adjusted to the Exercise Price and the number of Warrant
Shares which would have been in effect at such time had such Options or
Convertible Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate, as the case
may be, at the time initially granted, issued or sold.  For purposes
of this Section 2(a)(iii), if the terms of any Option or Convertible Security
that was outstanding as of the date of issuance of this Warrant are increased or
decreased in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the Common Shares deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such increase or decrease.  No adjustment pursuant to
this Section 2(a) shall be made if such adjustment would result in an increase
of the Exercise Price then in effect or a decrease in the number of Warrant
Shares.


    
      
         


      

      
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    (iv)           Calculation of Consideration
Received.  In case any Option is issued in connection with the
issue or sale of other securities of the Company, together comprising one
integrated transaction, (x) the Options will be deemed to have been issued for a
value determined by use of the Black Scholes Option Pricing Model (the "Option Value") and (y) the
other securities issued or sold in such integrated transaction shall be deemed
to have been issued for the difference of (I) the aggregate consideration
received by the Company, less (II) the Option Value.  If any Common
Shares, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the net amount received by the Company therefor.  If any Common
Shares, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of such consideration other than cash received by
the Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Closing Sale Price of such securities on the
date of receipt.  If any Common Shares, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Shares, Options or Convertible Securities, as the case may
be.  The fair value of any consideration other than cash or securities
will be determined jointly by the Company and the Required
Holders.  If such parties are unable to reach agreement within ten
(10) days after the occurrence of an event requiring valuation (the "Valuation Event"), the fair
value of such consideration will be determined within five (5) Trading Days
after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders.  The determination
of such appraiser shall be final and binding upon all parties absent manifest
error and the fees and expenses of such appraiser shall be borne by the
Company.

    


    (v)           Record
Date.  If the Company takes a record of the holders of Common
Shares for the purpose of entitling them (A) to receive a dividend or other
distribution payable in Common Shares, Options or in Convertible Securities or
(B) to subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Common Shares deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.

     

    (b)  Voluntary Adjustment By
Company.  The Company may at any time during the term of this
Warrant reduce the then current Exercise Price to any amount and for any period
of time deemed appropriate by the Board of Directors of the
Company.

     

    (c)  Adjustment upon Subdivision
or Combination of Common Shares.  If the Company at any time on
or after the Subscription Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding Common
Shares into a greater number of shares, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
Warrant Shares will be proportionately increased.  If the Company at
any time on or after the Subscription Date  combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding Common
Shares into a smaller number of shares, the Exercise Price in effect immediately
prior to such combination will be proportionately increased and the number of
Warrant Shares will be proportionately decreased.  Any adjustment
under this Section 2(c) shall become effective at the close of business on the
date the subdivision or combination becomes effective.


    
      
         


      

      
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    (d)  Other
Events.  If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
phantom share rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(d) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise determined pursuant
to this Section 2.

     

    (e)  De Minimis
Adjustments.  No adjustment in the Exercise Price or number of
issuable Warrant Shares shall be required unless such Exercise Price adjustment
would require an increase or decrease of at least $0.05 in such price; provided, however, that any
adjustment which by reason of this Section 2(e) is not required to be made shall
be carried forward and taken into account in any subsequent adjustments under
this Section 2.  All calculations under this Section 2 shall be made
by the Company in good faith and shall be made to the nearest cent or to the
nearest one hundredth of a share, as applicable.  No adjustment need
be made for a change in the par value or no par value of the Company's Common
Shares.

     

    3.   RIGHTS UPON DISTRIBUTION OF
ASSETS.  If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) (other than
Pill Rights) to holders of Common Shares, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction other than a dividend or distribution payable solely in
Common Shares for which an adjustment is made pursuant to Section 2(c)) (a
"Distribution"), at any
time after the issuance of this Warrant, then, in each such case:

     

    (a)  any
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of Common Shares entitled to
receive the Distribution shall be reduced, effective as of the close of business
on such record date, to a price determined by multiplying such Exercise Price by
a fraction of which (i) the numerator shall be the Closing Bid Price of the
Common Shares on the Trading Day immediately preceding such record date minus
the value of the Distribution (as determined in good faith by the Company's
Board of Directors) applicable to one share of Common Shares, and (ii) the
denominator shall be the Closing Bid Price of the Common Shares on the Trading
Day immediately preceding such record date; and

     


    
      
         


      

      
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    (b)  the
number of Warrant Shares shall be increased to a number of shares equal to the
number of Common Shares obtainable immediately prior to the close of business on
the record date fixed for the determination of holders of Common Shares entitled
to receive the Distribution multiplied by the reciprocal of the fraction set
forth in the immediately preceding paragraph (a); provided that in the event
that the Distribution is of Common Shares (or common shares or common stock)
("Other Common Shares")
of a company whose common shares are traded on a national securities exchange or
a national automated quotation system, then the Holder may elect to receive a
warrant to purchase Other Common Shares in lieu of an increase in the number of
Warrant Shares, the terms of which shall be identical to those of this Warrant,
except that such warrant shall be exercisable into the number of shares of Other
Common Shares that would have been payable to the Holder pursuant to the
Distribution had the Holder exercised this Warrant immediately prior to such
record date and with an aggregate exercise price equal to the product of the
amount by which the exercise price of this Warrant was decreased with respect to
the Distribution pursuant to the terms of the immediately preceding paragraph
(a) and the number of Warrant Shares calculated in accordance with the first
part of this paragraph (b).  The Holder shall notify the Company
within two (2) Business Days of its receipt of notice of the record date for
such Distribution as to its election under this Section 3(b) and, in the absence
of any such notice from the Holder, Holder shall be deemed to have elected to
accept an increase in the number of Warrant Shares.

     

    4.   PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS.

     

    (a)  Purchase
Rights.  In addition to any adjustments pursuant to Section 2
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase shares, warrants, securities or
other property pro rata to the record holders of any class of Common Shares
(other than Pill Rights) (the "Purchase Rights"), then the
Holder will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Holder could have acquired if
the Holder had held the number of Common Shares acquirable upon complete
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Shares are to be determined
for the grant, issue or sale of such Purchase Rights.


    
      
         


      

      
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    (b)  Fundamental
Transactions.  The Company shall not enter into or be party to
a Fundamental Transaction unless (i)  the Successor Entity, if a Person
other than the Company (with the Company being deemed to automatically so
assume), assumes in writing all of the obligations of the Company under this
Warrant and the other Transaction Documents in accordance with the provisions of
this Section (4)(b) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction (which approval shall not be
unreasonably withheld), including agreements to deliver to each holder of the
SPA Warrants in exchange for its Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and substance to
the SPA Warrants, including, without limitation, an adjusted exercise price
equal to the value for the Common Shares reflected by the terms of such
Fundamental Transaction, and exercisable for a corresponding number of shares of
capital stock equivalent to the Common Shares acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and satisfactory to the
Required Holders and (ii) the Successor Entity (or its Parent Entity if
such assumption is effected by the Parent Entity) is a publicly traded
corporation whose common stock is quoted on or listed for trading on an Eligible
Market.  Upon the occurrence of any Fundamental Transaction, the
Successor Entity, if a Person other than the Company (with the Company being
deemed to automatically so succeed), shall succeed to, and be substituted for
(so that from and after the date of such Fundamental Transaction, the provisions
of this Warrant referring to the "Company" shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Warrant with the same effect as
if such Successor Entity had been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity, if a Person
other than the Company (with the Company being deemed to automatically so be
required), shall deliver to the Holder confirmation that there shall be issued
upon exercise of this Warrant at any time after the consummation of the
Fundamental Transaction, in lieu of the Common Shares (or other securities,
cash, assets or other property) issuable upon the exercise of the Warrant prior
to such Fundamental Transaction such shares of the publicly traded common stock
or common shares (or its equivalent) of the Successor Entity (including its
Parent Entity) which the Holder would have been entitled to receive upon the
happening of such Fundamental Transaction had this Warrant been converted
immediately prior to such Fundamental Transaction, as adjusted in accordance
with the provisions of this Warrant.  In addition to and not in
substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of Common Shares are entitled
to receive securities or other assets with respect to or in exchange for Common
Shares (a "Corporate
Event"), the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon an exercise of this
Warrant at any time after the consummation of the Corporate Event but prior to
the Expiration Date, in lieu of Common Shares (or other securities, cash, assets
or other property) purchasable upon the exercise of this Warrant prior to such
Corporate Event, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Corporate Event had this Warrant been exercised immediately prior to
such Corporate Event.  Provision made pursuant to the preceding
sentence shall be in a form and substance reasonably satisfactory to the
Required Holders.  The provisions of this Section shall apply
similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied without regard to any limitations on the exercise of
this Warrant.

     

    (c)  Notwithstanding
the foregoing, in the event of a Fundamental Transaction, at the request of the
Holder delivered before the ninetieth (90th) day
after the consummation of such Fundamental Transaction, the Company (or the
Successor Entity) shall purchase this Warrant from the Holder by paying to the
Holder, within five (5) Business Days after such request (or, if later, on the
effective date of the Fundamental Transaction), cash in an amount equal to the
Black Scholes Value of the remaining unexercised portion of this Warrant on the
date of such Fundamental Transaction.


    
      
         


      

      
        - 11
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    5.    
 PARTICIPATION.  The
Holder, as the holder of this Warrant, shall be entitled to receive any Pill
Rights (or, at the option of the Holder, to the extent such Pill Rights become
exercisable or have been exercised into equity interests of the Company or any
other distribution is made of equity interests of the Company to holders of such
Pill Rights, such equity interests of the Company) made to the holders of Common
Shares concurrently with any issuance of Common Shares upon exercise of this
Warrant to the same extent as if the Holder had exercised this Warrant into such
Common Shares (without regard to any limitations on conversion herein or
elsewhere) and had held such Common Shares on the record date for such dividend
or distribution of Pill Rights.

     

    6.   NONCIRCUMVENTION.  The
Company hereby covenants and agrees that the Company will not, by amendment of
its Memorandum and Articles of Association or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, 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, and
will at all times in good faith carry out all the provisions of this Warrant and
take all action as may be required to protect the rights of the
Holder.  Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any Common Shares receivable upon
the exercise of this Warrant above the Exercise Price then in effect,
(ii) shall take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Common Shares upon the exercise of this Warrant, and (iii) shall,
so long as any of the SPA Warrants are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued Common Shares,
solely for the purpose of effecting the exercise of the SPA Warrants, 130% of
the number of Common Shares as shall from time to time be necessary to effect
the exercise of the SPA Warrants then outstanding (without regard to any
limitations on exercise).  For the avoidance of doubt, solicitation by
the Company in accordance with the requirements of the SPA Warrants and the
Securities Purchase Agreement of the consents of the Required Holders to any
amendment, modification or waiver of any provision of the SPA Warrants shall not
be or be deemed an avoidance of performance of the terms of this
Warrant.

     

    7.   WARRANT HOLDER NOT DEEMED A
SHAREHOLDER.  Except as otherwise specifically provided herein,
the Holder, solely in such Person's capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person's capacity
as the Holder of this Warrant, any of the rights of a shareholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant.  In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a shareholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company.  Notwithstanding this Section 7, to the
extent not available through the EDGAR filing system of the SEC, the Company
shall provide the Holder with copies of the same notices and other information
given to the shareholders of the Company generally, contemporaneously with the
giving thereof to the shareholders.


    
      
         


      

      
        - 12
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    8.   REISSUANCE OF
WARRANTS.

     

    (a)  Transfer of
Warrant.  If this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 8(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less than the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 8(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.

     

    (b)  Lost, Stolen or Mutilated
Warrant.  Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant (in accordance
with Section 8(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.

     

    (c)  Exchangeable for Multiple
Warrants.  This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a new Warrant
or Warrants (in accordance with Section 8(d)) representing in the aggregate the
right to purchase the number of Warrant Shares then underlying this Warrant, and
each such new Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such surrender;
provided, however, that no Warrants for fractional Common Shares shall be
given.

     

    (d)  Issuance of New
Warrants.  Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 8(a)
or Section 8(c), the Warrant Shares designated by the Holder which, when added
to the number of Common Shares underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of Warrant Shares then
underlying this Warrant), (iii) shall have an issuance date, as indicated on the
face of such new Warrant which is the same as the Issuance Date, and (iv) shall
have the same rights and conditions as this Warrant.


    
      
         


      

      
        - 13
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    9.   NOTICES.  Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of the
Securities  Purchase Agreement.  The Company shall provide
the Holder with prompt written notice of all actions taken pursuant to this
Warrant, including in reasonable detail a description of such action and the
reason therefor.  Without limiting the generality of the foregoing,
the Company will give written notice to the Holder (i) immediately upon any
adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least fifteen (15)
days or such shorter period as may be permitted by the Principal Market for the
public announcement of any such record date prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Shares, (B) with respect to any grants, issuances
or sales of any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of Common Shares or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to the Holder.

     

    10. AMENDMENT AND
WAIVER.  Except as otherwise provided herein, the provisions of
this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the affirmative vote at a meeting duly called
for such purpose or the written consent without a meeting of the Required
Holders; provided that no such action may increase the exercise price of any SPA
Warrant or decrease the number of shares or class of stock obtainable upon
exercise of any SPA Warrant without the written consent of the
Holder.  No such amendment shall be effective to the extent that it
applies to less than all of the holders of the SPA Warrants then
outstanding.

     

    11. GOVERNING
LAW.  This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

     

    12. CONSTRUCTION;
HEADINGS.  This Warrant shall be deemed to be jointly drafted
by the Company and all the Buyers and shall not be construed against any person
as the drafter hereof.  The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.

     

    13. DISPUTE
RESOLUTION.  In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within three (3) Business Days of receipt of the Exercise Notice
giving rise to such dispute, as the case may be, to the Holder.  If
the Holder and the Company are unable to agree upon such determination or
calculation of the Exercise Price or the Warrant Shares within three (3)
Business Days of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company shall, within two (2) Business Days
submit via facsimile (a) the disputed determination of the Exercise Price to an
independent, reputable investment bank selected by the Company and approved by
the Holder, such approval not to be unreasonably withheld, or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company's independent,
outside accountant.  The Company shall cause at its expense the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations.  Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.


    
      
         


      

      
        - 14
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    14. REMEDIES, OTHER OBLIGATIONS,
BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this
Warrant shall be cumulative and in addition to all other remedies available
under this Warrant and the other Transaction Documents, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the Holder to pursue damages for any
failure by the Company to comply with the terms of this Warrant.  The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate.  The Company therefore agrees that, in the event of
any such breach or threatened breach, the holder of this Warrant shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

     

    15. TRANSFER.    This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company, except as may otherwise be required by Section 2(f) of
the Securities Purchase Agreement.

     

    16. SEVERABILITY. 
If any provision of this Warrant is prohibited by law or otherwise determined to
be invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Warrant so long as this Warrant as
so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties.  The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).

     

    17. TAXES.

     

    (a)  Any
and all payments by the Company hereunder, including any amounts received on a
exercise or redemption of the Warrant and any amounts on account of interest or
deemed interest, shall be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, imposed under any law,
rule, code or regulation of the People's Republic of China, the British Virgin
Islands or any other non-U.S. governmental authority, including, without
limitation, any federal, state, local, provincial or other similar non-U.S.
governmental authority (collectively referred to as "International
Taxes").  If the Company shall be required to deduct any
International Taxes from or in respect of any sum payable hereunder to the
Holder, (i) the sum payable shall be increased by the amount by which the sum
payable would otherwise have to be increased (the "tax make-whole amount") to
ensure that after making all required deductions (including deductions
applicable to the tax make-whole amount) the Holder would receive an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Company shall make such deductions and (iii) the Company shall pay the full
amount withheld or deducted to the applicable governmental authority within the
time required.


    
      
         


      

      
        - 15
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    (b)  In
addition, the Company agrees to pay to the relevant governmental authority in
accordance with applicable law any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies that arise from
any payment made hereunder or in connection with the execution, delivery,
registration or performance of, or otherwise with respect to, this Warrant
("Other
Taxes").  The Company shall deliver to the Holder official
receipts, if any, in respect of any International Taxes and Other Taxes payable
hereunder promptly after payment of such International Taxes, Other Taxes or
other evidence of payment reasonably acceptable to the Holder.

     

    (c)  The
obligations of the Company under this Section 17(b) shall survive the
termination of this Warrant and the payment of the Warrant and all other amounts
payable hereunder.

     

    18.  CERTAIN
DEFINITIONS.  For purposes of this Warrant, the following terms
shall have the following meanings:

     

    (a)  "Approved Share Plan" means any
employee benefit plan which has been approved by the Board of Directors of the
Company prior or subsequent to the Subscription Date, pursuant to which the
Company's securities may be issued to any employee, officer or director for
services provided to the Company.

     

    (b)  "Black Scholes Value" means the
value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the "OV" function on Bloomberg determined as of the day of the
closing of the applicable Fundamental Transaction for pricing purposes and
reflecting (i) 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 such date of
request, (ii) an expected volatility equal to the greater of 100% and the 100
day volatility obtained from the HVT function on Bloomberg as of the day
immediately following the public announcement of the applicable Fundamental
Transaction, (iii) the underlying price per share used in such calculation shall
be the sum of the price per share being offered in cash, if any, plus the value
of any non cash consideration, if any, being offered in the Fundamental
Transaction and (iv) a 365 day annualization factor.

     

    (c)  "Bloomberg" means Bloomberg
Financial Markets.

     

    (d)  "Business Day" means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York or Hong Kong are authorized or required by law to remain
closed.


    
      
         


      

      
        - 16
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    (e)  "Closing Bid Price" and "Closing Sale Price" means, for
any security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or the last trade price,
respectively, 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 bid price or last
trade price, respectively, 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 bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, 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 Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases,
the Closing Bid Price or the Closing Sale Price, as the case may be, of such
security on such date shall be the fair market value as mutually determined by
the Company and the Holder.  If the Company and the Holder are unable
to agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 13.  All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period.

     

    (f)   "Common Shares" means
(i) the Company's Common Shares, par value $0.0001 per share, and
(ii) any share capital into which such Common Shares shall have been
changed or any share capital resulting from a reclassification of such Common
Shares.

     

    (g)  "Common Shares Deemed
Outstanding" means, at any given time, the number of Common Shares
actually outstanding at such time, plus the number of Common Shares deemed to be
outstanding pursuant to Sections 2(a)(i) and 2(a)(ii) hereof regardless of
whether the Options or Convertible Securities are actually exercisable at such
time, but excluding any Common Shares owned or held by or for the account of the
Company or issuable upon exercise of the SPA Warrants.

     

    (h)  "Convertible Securities" means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for Common Shares.

     

    (i)   "Eligible Market" means the
Principal Market, The NASDAQ Global Market, The NASDAQ Capital Market, The New
York Stock Exchange, Inc., or The NYSE Amex.

     

    (j)   "Expiration Date" means the
date sixty (60) months after the Initial Exercisability Date or, if such date
falls on a day other than a Business Day or on which trading does not take place
on the Principal Market (a "Holiday"), the next day that
is not a Holiday.


    
      
         


      

      
        - 17
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    (k)  "Fundamental Transaction" means
that (A) the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person or Persons, if the holders of the
Voting Stock of the Company (not including any shares of Voting Stock of the
Company held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such consolidation or merger)
immediately prior to such consolidation or merger shall hold or have the right
to direct the voting of less than 50% of the Voting Stock of the Company or such
voting securities of such other surviving Person immediately following such
transaction, (ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company to another Person,
(iii) allow another Person to make a purchase, tender or exchange offer that is
accepted by the holders of more than the 50% of the outstanding shares of Voting
Stock of the Company (not including any shares of Voting Stock of the Company
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
(iv) consummate a securities purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires
more than the 50% of the outstanding shares of Voting Stock of the Company (not
including any shares of Voting Stock of the Company held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such securities purchase agreement or other business
combination), or (v) reorganize, recapitalize or reclassify its Common Shares or
(B) any "person" or "group" (as these terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act) is or shall become the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
50% of the aggregate ordinary voting power represented by issued and outstanding
Common Shares.  Notwithstanding the foregoing, solely for the purpose
of the foregoing calculations, any director, officer or employee of the Company,
acting solely in its capacity as a director, officer or employee of the Company,
shall not be deemed to be making or party to, or associated or affiliated with
the Persons making or party to, such consolidation or merger.

     

    (l)   "Options" means any rights,
warrants or options to subscribe for or purchase Common Shares or Convertible
Securities.

     

    (m) "Parent Entity" of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common shares or common stock or equivalent equity security is quoted or
listed on an Eligible Market, or, if there is more than one such Person or
Parent Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.

     

    (n)  "Person" means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

     

    (o)  "Pill Rights" means any rights
issued by the Company pursuant to any so-called "poison pill" or similar Company
rights plan entitling all holders of equity interests of the Company to
subscribe for or purchase equity interests of the Company, which rights are not
exercisable until a determination by the Company's Board of Directors that one
or more Persons or "groups" (as defined in Rule 13d-5(b)(1) under the 1934 Act)
has acquired beneficial ownership of Common Shares in excess of the percentage
threshold specified in such plan.


    
      
         


      

      
        - 18
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    (p)  "Principal Market" means The
NASDAQ Global Select Market.

     

    (q)  "Registration Rights Agreement"
means that certain registration rights agreement by and among the Company and
the Buyers.

     

    (r)   "Required Holders" means the
holders of the SPA Warrants representing at least a majority of Common Shares
underlying the SPA Warrants then outstanding, but excluding any Notes
beneficially owned, directly or indirectly, by Mr. Lu (or any of his family
members, affiliates or agents), the Company or any of its
Subsidiaries..

     

    (s)  "SPA Securities" means the
Notes issued pursuant to the Securities Purchase Agreement.

     

    (t)   "Successor Entity" means the
Person, which may be the Company, formed by, resulting from or surviving any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded
entity whose common stock or equivalent equity security is quoted or listed for
trading on an Eligible Market, Successor Entity shall mean such Person's Parent
Entity.

     

    (u)  "Trading Day" means any day on
which the Common Shares are traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Shares, then on the
principal securities exchange or securities market on which the Common Shares
are then traded; provided that "Trading Day" shall not include any day on which
the Common Shares are scheduled to trade on such exchange or market for less
than 4.5 hours or any day that the Common Shares are suspended from trading
during the final hour of trading on such exchange or market (or if such exchange
or market does not designate in advance the closing time of trading on such
exchange or market, then during the hour ending at 4:00:00 p.m., New York
time).

     

    (v)  "Voting Stock" of a Person
means capital stock of such Person of the class or classes pursuant to which the
holders thereof have the general voting power to elect, or the general power to
appoint, at least a majority of the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).


    
      
         


      

      
        - 19
-

        
          

        

      

      
         


      

    


    (w) "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 City 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
City 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" function 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 City 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
City Time (or such other time as the Principal 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 as
mutually determined by the Company and the Holder.  If the Company and
the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 13 with the term "Weighted
Average Price" being substituted for the term "Exercise Price." All such
determinations shall be appropriately adjusted for any share dividend, share
split, share combination or other similar transaction during the applicable
calculation period.

     

    [Signature
Page Follows]


    
      
         


      

      
        - 20
-

        
          

        

      

      
         


      

    


    IN WITNESS WHEREOF, the
Company has caused this Warrant to Purchase Common Shares to be duly executed as
of the Issuance Date set out above.

    


    
      
        
          
            
              	 
      	
                      A-POWER
      ENERGY GENERATION SYSTEMS, LTD.

                    	 
	 
      	 
      	 
      	 
	 
      	
                      By:

                    	
                          

                    	 
	 
      	
                      Name:

                    	 
      	 
	 
      	
                      Title:

                    	 
      	 


            

          

        

      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
A

    


    EXERCISE
NOTICE

     

    TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
TO PURCHASE COMMON STOCK

    


    A-POWER
ENERGY GENERATION SYSTEMS, LTD.

     

    The undersigned holder hereby exercises
the right to purchase _________________ of the Common Shares ("Warrant Shares") of A-Power
Energy Generation Systems, Ltd., a company incorporated under the laws
of the British Virgin Islands (the "Company"), evidenced by the
attached Warrant to Purchase Common Shares (the "Warrant").  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

    


    1.  Form of Exercise
Price.  The Holder intends that payment of the Exercise Price shall be
made as:

    


    
      	
               
      

            	
              ____________
      a "Cash
      Exercise" with respect to _________________ Warrant Shares;
      and/or

            


    

    


    
      	
               
      

            	
              ____________
      a "Cashless
      Exercise" with respect to _______________ Warrant
      Shares.

            


    

    


    2.  Payment of Exercise
Price.  In the event that the holder has elected a Cash Exercise with
respect to some or all of the Warrant Shares to be issued pursuant hereto, the
holder shall pay the Aggregate Exercise Price in the sum of $___________________
to the Company in accordance with the terms of the Warrant.

    


    3.  Delivery of Warrant
Shares.  The Company shall deliver to the holder __________ Warrant
Shares in accordance with the terms of the Warrant.

    


    4.  Notwithstanding anything
to the contrary contained herein, this Exercise Notice shall constitute a
representation by the Holder of the Warrant submitting this Exercise Notice
that, after giving effect to the exercise provided for in this Exercise Notice,
such Holder (together with its affiliates) will not have beneficial ownership
(together with the beneficial ownership of such Person's affiliates) of a number
of Common Shares which exceeds the Maximum Percentage (as defined in the
Warrant) of the total outstanding Common Shares of the Company as determined
pursuant to the provisions of Section 1(f) of the Warrant.

    


    Date:
_______________ __, ______

    


    
      
        
          
            
              
                
                  
                    	____________________________	 
	
                            Name
      of Registered Holder

                          	 
	 
      	 
      	 
      	 
	
                            By:

                          	 
      	 
	 
      	
                            Name:

                          	__________________	 
	 
      	
                            Title:

                          	 
      	 


                  

                

              

            

          

        

      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    ACKNOWLEDGMENT

    


    The Company hereby acknowledges this
Exercise Notice and hereby directs Continental Stock Transfer & Trust
Company to issue
the above indicated number of Common Shares in accordance with the Transfer
Agent Instructions dated June 19, 2009 from the Company and acknowledged and
agreed to Continental Stock Transfer & Trust Company.

    


    
      
        	 	
                A-POWER
      ENERGY GENERATION SYSTEMS, LTD.

              
	 	 
      	 
      	 
      
	 	
                By:

              	
                   

              	 
      
	 	
                Name:

              	 
      	 
      
	 	
                Title: