ex10-3.htm


    Exhibit
10.3

     

     

    NEITHER
THE SECURITIES REPRESENTED BY THIS WARRANT NOR THE UNDERLYING SHARES OF COMMON
STOCK HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“1933 ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE 1933 ACT, OR (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND THE COMPANY
SHALL HAVE RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AS TO SUCH
EXEMPTION.

    


    IN
ADDITION, A SECURITIES PURCHASE AGREEMENT DATED AS OF NOVEMBER 30, 2009,
A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE
OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT
TO THIS WARRANT.

    


    
      
        

      

    

    


    CHINA
POWER EQUIPMENT, INC.

    


    COMMON
STOCK PURCHASE WARRANT

    


    


    Number of
Shares:  ____________                                                                                                           Holder:
_______________

    


    Original
Issue Date: ___________, 2009

     

    Expiration
Date: ______________, 2012

     

    Exercise
Price per Share: $2.40

    


    


    THIS
COMMON STOCK PURCHASE WARRANT is issued by CHINA POWER EQUIPMENT, INC., a
Maryland corporation (the “Company”) pursuant to a Securities Purchase Agreement
dated November 30, 2009 (“Purchase
Agreement”).

    


    The
Company hereby certifies that, for value received, ________________, or
registered assigns (the “Warrant Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company up
to _______________ shares (as adjusted from time to time as provided in Section
7 of this Warrant, the “Warrant Shares”) of
common stock, $.001 par value (the “Common Stock”), of
the Company at a price of two dollars forty cents ($2.40) per Warrant Share (as
adjusted from time to time as provided in Section 7, the “Exercise Price”), at
any time and from time to time from and after the date thereof and through and
including 5:00 p.m. New York City time on ___________, 2012 (the “Expiration Date”),
and subject to the following terms and conditions:

     

    1.    Registration
of Warrant.  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 Warrant Holder hereof from time to time.  The Company may
deem and treat the registered Warrant Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Warrant Holder, and for all other purposes, and the Company shall not be
affected by notice to the contrary.

     

    2.     Investment
Representation.  The Warrant Holder by
accepting this Warrant represents that the Warrant Holder is acquiring this
Warrant for Holder’s own account or the account of an affiliate that is an
accredited investor, which has been identified to and approved by the Company
(such approval not to be unreasonably withheld or delayed), for investment
purposes and not with the view to any offering or distribution and that the
Warrant Holder will not sell or otherwise dispose of this Warrant or the
underlying Warrant Shares in violation of applicable securities
laws.  The Warrant Holder acknowledges that the certificates
representing any Warrant Shares will bear a legend indicating that they have not
been registered under the 1933 Act, and may not be sold by the Warrant Holder
except pursuant to an effective registration statement or pursuant to an
exemption from registration requirements of the 1933 Act and in accordance with
federal and state securities laws.  If this Warrant was acquired by
the Warrant Holder pursuant to the exemption from the registration requirements
of the 1933 Act afforded by Regulation S thereunder, the Warrant Holder
acknowledges and covenants that this Warrant may not be exercised by or on
behalf of a Person during the one year distribution compliance period (as
defined in Regulation S) following the date hereof.  “Person” means an individual, partnership,
firm, limited liability company, trust, joint venture, association, corporation,
or any other legal entity.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.     Validity
of Warrant and Issue of Shares.  The Company represents and
warrants that this Warrant has been duly authorized and validly issued and
warrants and agrees that all of Common Stock that may be issued upon the
exercise of the rights represented by this Warrant will, when issued upon such
exercise, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof other
than those incurred by the Holder.  The Company further warrants and
agrees that during the Exercise Period, the Company will at all times have
authorized and reserved a sufficient number of Common Stock to provide for the
exercise of the rights represented by this Warrant.

     

    4.     Registration
of Transfers and Exchange of Warrants.

     

    a.   Subject to compliance with the federal
and state securities laws, the Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant
with the Form of Assignment attached hereto duly completed and signed, to the
Company at the office specified in or pursuant to Section 13.  Upon
any such registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a “New
Warrant”), evidencing the
portion of this Warrant so transferred shall be issued to the transferee and a
New Warrant evidencing the remaining portion of this Warrant not so transferred,
if any, shall be issued to the transferring Warrant Holder.  The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a Warrant
Holder of a Warrant.

     

    b.   This Warrant is exchangeable, upon the
surrender hereof by the Warrant Holder to the office of the Company specified in
or pursuant to Section 9 for one or more New Warrants, evidencing in the
aggregate the right to purchase the number of Warrant Shares which may then be
purchased hereunder.  Any such New Warrant will be dated the date of
such exchange.

     

    5.     Exercise
of Warrants.

    


    a.   Upon surrender of this Warrant with the
Form of Election to Purchase attached hereto duly completed and signed to the
Company, at its address set forth in Section 13, and upon payment and delivery
of the Exercise Price per Warrant Share multiplied by the number of Warrant
Shares that the Warrant Holder intends to purchase hereunder, in lawful money of
the United States of America, by wire transfer or by certified or official bank
check or checks, to the Company, all as specified by the Warrant Holder in the
Form of Election to Purchase, the Company shall promptly (but in no event later
than 7 business days after the Date of Exercise (as defined herein)) issue or
cause to be issued  and cause to be delivered to or upon the written
order of the Warrant Holder and in such name or names as the Warrant Holder may
designate (subject to the restrictions on transfer described in the legend set
forth on the face of this Warrant), a certificate for the Warrant Shares
issuable upon such exercise, with such restrictive legend as required by the
1933 Act.  Any person so designated by the Warrant Holder to receive
Warrant Shares shall be deemed to have become holder of record of such Warrant
Shares as of the Date of Exercise of this Warrant.

     

    b.   A “Date of
Exercise” means the date
on which the Company shall have received (i) this Warrant (or any New Warrant,
as applicable), with the Form of Election to Purchase attached hereto (or
attached to such New Warrant) appropriately completed and duly signed, and (ii)
payment of the Exercise Price for the number of Warrant Shares so indicated by
the Warrant Holder to be purchased.

     

    c.   This Warrant shall be exercisable at
any time and from time to time during the Exercise Period for such number of
Warrant Shares as is indicated in the attached Form of Election to
Purchase.  If less than all of the Warrant Shares which may be
purchased under this Warrant are exercised at any time, the Company shall issue
or cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares for which no exercise has been
evidenced by this Warrant.

     

    d.   (i) Notwithstanding anything
contained herein to the contrary, but subject to Section 5(e) and Section 6, the
Holder may, at Holder’s election 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 Exercise Price, elect instead to
receive upon such exercise the “Net Number” of shares of
Common Stock determined according to the following formula (a “Cashless
Exercise”):

     

    Net
Number = (A x (B - C))/B

     

    (ii)           For
purposes of the foregoing formula:

     

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

     

    B= the
last reported sale price (as reported by Bloomberg) of the Common Stock on the
trading day immediately preceding the date of the Exercise Notice.

     

    C= the
Warrant Exercise Price then in effect at the time of such exercise.

     

    e.  The
holder of this Warrant may not make a Cashless Exercise (i) during the six (6)
months following the Original Issue Date (the “Cashless Start Date”)
or (ii) thereafter, if the resale of the Warrant Shares by the Holder of the
Warrant Shares is covered by an effective registration statement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    6.     Maximum
Exercise.  The Warrant Holder shall
not be entitled to exercise this Warrant on a Date of Exercise in
connection with that number of shares of Common Stock which would be in excess
of the sum of (i) the number of shares of Common Stock beneficially owned by the
Warrant Holder and its affiliates on the Date of Exercise, and (ii) the number
of shares of Common Stock issuable upon the exercise of this Warrant with
respect to which the determination of this limitation is being made on an Date
of Exercise, which would result in beneficial ownership by the Warrant Holder
and its affiliates of more than 4.9% of the outstanding shares of Common Stock
on such date.  This Section 6 may not be waived or amended. As used in
this Warrant, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”), and Regulation
13d-3 thereunder.

     

    7.     Adjustment
of Exercise Price and Number of Shares.  The character of the
shares of stock or other securities at the time issuable upon exercise of this
Warrant and the Exercise Price therefore, are subject to adjustment upon the
occurrence of any of the following events which shall have occurred or which
shall occur at any time on or after the Closing Date, as defined in the Purchase
Agreement and regardless of whether any Warrants were issued on the Closing
Date, and all such adjustments shall be cumulative:

     

    a.   Adjustment for Stock
Splits, Stock Dividends, Recapitalizations, Etc.  The Exercise Price of this
Warrant and the number of shares of Common Stock or other securities at the time
issuable upon exercise of this Warrant shall be appropriately adjusted to
reflect any stock dividend, stock split, stock distribution, combination of
shares, reverse split, reclassification, recapitalization or other similar event
affecting the number of outstanding shares of stock or
securities.

     

    b.   Adjustment for
Reorganization, Consolidation, Merger, Etc.  In case of any
consolidation or merger of the Company with or into any other corporation,
entity or person, or any other corporate reorganization, in which the Company
shall not be the continuing or surviving entity of such consolidation, merger or
reorganization (any such transaction being hereinafter referred to as a
“Reorganization”), then, in each case, the holder of
this Warrant, on exercise hereof at any time after the consummation or effective
date of such Reorganization (the “Effective
Date”), shall receive, in
lieu of the shares of stock or other securities at any time issuable upon the
exercise of the Warrant issuable on such exercise prior to the Effective Date,
the stock and other securities and property (including cash) to which such
holder would have been entitled upon the Effective Date if such holder had
exercised this Warrant immediately prior thereto (all subject to further
adjustment as provided in this Warrant).

     

    c.   Certificate as to
Adjustments.  In
case of any adjustment or readjustment in the price or kind of securities
issuable on the exercise of this Warrant, the Company will promptly give written
notice thereof to the holder of this Warrant in the form of a certificate,
certified and confirmed by the Board of Directors of the Company, setting forth
such adjustment or readjustment and showing in reasonable detail the facts upon
which such adjustment or readjustment is based.

     

    8.     Fractional
Shares.  The Company shall not be
required to issue or cause to be issued fractional Warrant Shares on the
exercise of this Warrant.  The number of full Warrant Shares that
shall be issuable upon the exercise of this Warrant shall be computed on the
basis of the aggregate number of Warrants Shares purchasable on exercise of this
Warrant so presented.  If any fraction of a Warrant Share would,
except for the provisions of this Section 8, be issuable on the exercise of this
Warrant, the Company shall, at its option, (i) pay an amount in cash equal to
the Exercise Price multiplied by such fraction or (ii) round the number of
Warrant Shares issuable, up to the next whole number.

     

    9.     Sale
or Merger of the Company.  Upon a Merger Transaction, the
restriction contained in Section 6 shall immediately be released and the Warrant
Holder will have the right to exercise this Warrant concurrently with such
Merger Transaction.  For purposes of this Warrant, the term “Merger
Transaction” shall mean a consolidation or merger of the Company into another
company or entity in which the Company is not the surviving entity or the sale
of all or substantially all of the assets of the Company to another company or
entity not controlled by the then existing stockholders of the
Company.

     

    10.   Notice
of Intent to Sell or Merge the Company.  The Company will give Warrant Holder
ten (10) business days notice before any Merger Transaction.

     

    11.   Issuance
of Substitute Warrant. In the event of a merger,
consolidation, recapitalization or reorganization of the Company or a
reclassification of Company shares of stock, which results in an adjustment to
the number of shares subject to this Warrant and/or the Exercise Price
hereunder, the Company agrees to issue to the Warrant Holder a substitute
Warrant reflecting the adjusted number of shares and/or Exercise Price upon the
surrender of this Warrant to the Company.  However, in the event that
the Company does not issue a substitute warrant, the number and class of Warrant
Shares or other securities and the Exercise Price shall be adjusted as provided
in this Warrant, and this Warrant shall relate the adjusted number of Warrant
Shares and Exercise Price.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    12.    Right
of Redemption/ Mandatory Exercise.

     

    
      	
                                       a.        

            	
              (i)
      At any time that (a) the Market Price of the Common Stock shall equal or
      exceed the Target Price on each trading day for twenty (20) consecutive
      trading days and (b) there is an effective registration statement covering
      the resale of the Warrant Shares by the Holder, the Company shall have the
      right, upon written notice of at least ten (10) trading days, to require
      that the Holder exercise the Warrant in full (an “Exercise
      Notice”).  In the event that the Holder does not exercise
      the Warrant in full by such date (the “Mandatory Exercise
      Date”),  the Company may redeem the then outstanding
      balance of the Warrant at the Redemption Price of one cent ($.01) per
      share of Common Stock issuable upon exercise of the
      Warrant.  The Exercise Notice shall be mailed by first class
      mail, postage prepaid, and sent by telecopier and e-mail, and shall be
      deemed given on the date of receipt of the notice by the
      Holder.  If the exercise by the Company of its right of
      redemption pursuant to this Section 12(a)(i) would result in a violation
      of the 4.9% Limitation, the Company shall not have the right to redeem the
      Holder’s Warrant to the extent that the exercise of the Warrant as to
      which the Exercise Notice is given would result in such a
      violation.  In such event, the Company may subsequently exercise
      its right to redeem the remaining balance of the Warrant held by the
      Holder on and subject to the provisions of this Section
      12(a)(i).

               

            
	 
      	
              (ii)
      At any time that the Market Price of the Common Stock shall equal or
      exceed the Target Price on each trading day for twenty (20) consecutive
      trading days after the Cashless Start Date, the Company shall have the
      right, upon written notice of at least ten (10) trading days, to require
      that the Holder exercise the Warrant in full pursuant to a Cashless
      Exercise (a “Cashless
      Exercise Notice”).  In the event that the Holder does not
      exercise the Warrant in full by such date (the “Mandatory Cashless Exercise
      Date”), the Company may redeem the then outstanding balance of the
      Warrant at the Redemption Price of one cent ($.01) per share of Common
      Stock issuable upon Cashless Exercise of the Warrant.  The
      Cashless Exercise Notice shall be mailed by first class mail, postage
      prepaid, and sent by telecopier and e-mail, and shall be deemed given on
      the date of receipt of the notice by the Holder.  If the
      exercise by the Company of its right of redemption pursuant to this
      Section 12(a)(ii) would result in a violation of the 4.9% Limitation, the
      Company shall not have the right to redeem the Holder’s Warrant to the
      extent that the exercise of the Warrant as to which the Exercise Notice is
      given would result in such a violation.  In such event, the
      Company may subsequently exercise its right to redeem the remaining
      balance of the Warrant held by the Holder on and subject to the provisions
      of this Section 12(a)(ii).

            


    

     

    
      	 
      	
              (iii)
      As used in this Section 12, the following terms shall have the meanings
      set forth below:

            


    

     

    
      	 
      	
              “Market
      Price” shall mean the closing bid price of the Common Stock (as reported
      by Bloomberg L.P. or, if the Common Stock is traded on the NASDAQ Stock
      Market or the NYSE Amex, as reported by such market or
      exchange).

            


    

     

    
      	 
      	
              “Target
      Price” shall mean three and 50/100 dollars
  ($3.50).

            


    

     

    
      	
               b.

            	
                          Notwithstanding
      any other provision of this Section
12:

            


    

     

    
      	
                

            	
              (i)
      The Redemption Date shall be postponed for two (2) trading days for each
      day after the Warrant is called for redemption that the Market Price of
      the Common Stock is less than the Target Price; provided, however, that if
      the Market Price shall be less than the Target Price for ten (10)
      consecutive trading days or fifteen (15) trading days during the period
      from the date the Warrant is called for redemption to the Redemption Date,
      the Company’s right to redeem any portion of the Warrant not theretofore
      exercised or converted shall terminate, subject to the right of the
      Company to call the remaining portion of the Warrant for redemption
      pursuant to this Section 12.

            


    

     

    
      	
                        
      c.

               

            	
              The
      Exercise Notice shall specify (i) the Redemption Price, (ii) the
      Redemption Date, (iii) the place where the Warrants shall be delivered and
      the Redemption Price shall be paid, (iv) the number of Warrants being
      called for redemption if less than all of the Warrants are being redeemed,
      and (v) that the right to exercise the Warrants shall terminate at 5:30
      p.m. (New York City time) on the trading day immediately preceding the
      Redemption Date.  No failure to mail such notice nor any defect
      therein or in the mailing thereof shall affect the validity of the
      proceedings for such redemption except as to a Holder (x) to whom notice
      was not mailed or (y) whose notice was defective.  An affidavit
      of the Chief Financial Officer of the Company that Exercise Notice has
      been mailed shall, in the absence of fraud, be prima facie evidence of the
      facts stated therein.

            


    

     

    
      	
                       
      d.

            	
              Any
      right to exercise or convert a Warrant to the extent that the Warrant was
      called for redemption shall terminate at 5:30 p.m. (New York City time) on
      the Redemption Date.  After such time, Holders of the Warrants
      shall have no further rights except to receive, upon surrender of the
      Warrant, the Redemption Price without interest, subject to the provisions
      of applicable laws relating to the treatment of abandoned
      property.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    13.   Notice.  All notices and
other communications hereunder shall be in writing and shall be deemed to have
been given (i) on the date they are delivered if delivered in person; (ii) on
the date initially received if delivered by facsimile transmission followed by
registered or certified mail confirmation; (iii) on the date delivered by an
overnight courier service; or (iv) on the date of delivery after it is mailed by
registered or certified mail, return receipt requested with postage and other
fees prepaid as follows:

    


     If to the
Company:

     

                                                    c/o China Power Equipment,
Inc.

    Attn:
Ms. Yarong
Feng

    6th Floor,
Fei Jing International, No. 15 Gaoxin 6 Road, Hi-tech Industrial Xi’an, Shaanxi,
China 710075

    Email:
fyr@xa-fj.com 

    Fax:

    


    with a copy to, which
copy shall not constitute a notice:

    


    Guzov Ofsink, LLC

    600 Madison

    New York, New York 10022

    Attention: Darren Ofsink

    E-mail:
dofsink@golawintl.com

    Fax: (212) 688-7273

     

    If to the Warrant
Holder:

    


    At the
address or facsimile number of such Holder appearing on the books of the
Company.

     

    14.    Miscellaneous.

    


    a.  This Warrant shall be binding on and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.  This Warrant may be amended only by a writing
signed by the Company and the Warrant Holder.

     

    b.  Nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and the
Warrant Holder any legal or equitable right, remedy or cause of action under
this Warrant; this Warrant shall be for the sole and exclusive benefit of the
Company and the Warrant Holder.

     

    c.  This Warrant shall be governed by,
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law
thereof.

     

    d.  The headings herein are for convenience
only, do not constitute a part of this Warrant and shall not be deemed to limit
or affect any of the provisions hereof.

     

    e.  In case any one or more of the
provisions of this Warrant shall be invalid or unenforceable in any respect, the
validity and enforceability of the remaining terms and provisions of this
Warrant shall not in any way be affected or impaired thereby and the parties
will attempt in good faith to agree upon a valid and enforceable provision which
shall be a commercially reasonably substitute therefore, and upon so agreeing,
shall incorporate such substitute provision in this Warrant.

     

    f.  The Warrant Holder shall not, by virtue
hereof, be entitled to any voting or other rights of a stockholder of the
Company, either at law or equity, and the rights of the Warrant Holder are
limited to those expressed in this Warrant.

     

    [Signature
Page Follows]

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by the
authorized officer as of the date first above stated.

    


    


    Date:
________________                          
CHINA POWER EQUIPMENT,
INC.

    


    


                                                                                By:______________________________                                      

                                                                                Name: Yongxing Song

                                                                               Title:  Chief Executive
Officer

     

     

    


    


    


    


    


    


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    


    


    


    FORM
OF ELECTION TO PURCHASE

    


    (To be
executed by the Warrant Holder to exercise the right to purchase shares
of

    Common
Stock under the foregoing Warrant)

    


    To:  CHINA
POWER EQUIPMENT, INC.:

    


    In
accordance with the COMMON STOCK WARRANT enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase ______________
shares of Common Stock (“Common Stock”), $.001 par value, of China Power
Equipment, Inc. and encloses the warrant and $____ for each Warrant Share being
purchased or an aggregate of $________________ in cash or certified or official
bank check or checks, which sum represents the aggregate Exercise Price (as
defined in the Warrant) together with any applicable taxes payable by the
undersigned pursuant to the Warrant.

    


    The
undersigned requests that certificates for the shares of Common Stock issuable
upon this exercise be issued in the name of:

     

    
      	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              (Please
      print name and address)

            	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              (Please
      insert Social Security or Tax Identification Number)

            	 
      


    

                                                             

     

    If the
number of shares of Common Stock issuable upon this exercise shall not be all of
the shares of Common Stock which the undersigned is entitled to purchase in
accordance with the enclosed Warrant, the undersigned requests that a New
Warrant (as defined in the Warrant) evidencing the right to purchase the shares
of Common Stock not issuable pursuant to the exercise evidenced hereby be issued
in the name of and delivered to:

                                                                               

     

    
      	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              (Please
      print name and address)

            	 
      


    

     

     

    
      	Dated:     	
                                      

            	 	
              Name
      of Warrant Holder:

            	 
      	 
      
	 	 
      	 	
              (Print)  

            	 
      	 
      
	 	 
      	 	
              (By:) 

            	 
      	 
      
	 	 
      	 	
              (Name:)  

            	 
      	 
      
	 	 
      	 	
              (Title:)  

            	 
      	 
      


    

     

    (Signature
must conform in all respects to name of Warrant Holder as specified on the face
of the Warrant)