Document:

EX-10.1

Exhibit 10.1

     THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SUCH ACT.

	 	 	 
	No. W-1

	 	Warrant to Purchase 750,000 Common
	 

	 	Shares (subject to adjustment)

WARRANT

TO PURCHASE COMMON SHARES

OF

CHINA HYDROELECTRIC CORPORATION

     This Warrant (the “Warrant”) is issued to China Hydro, LLC or his, her or its permitted
assigns (“Holder”) by CHINA HYDROELECTRIC CORPORATION., a Cayman Islands corporation (the
“Company”), on November 10, 2006 (the “Warrant Issue Date”) for agreed upon
consideration, receipt of which is hereby acknowledged.

     1. Purchase Shares. Subject to the terms and conditions hereinafter set forth, the Holder
is entitled, upon surrender of this Warrant at the principal office of the Company (or at such
other place as the Company shall notify the holder hereof in writing), to purchase from the Company
up to 750,000 shares of Shares, par value $0.001 per share (“Shares”), of the Company (the
“Warrant Share”) at the Exercise Price (defined below), subject to adjustment as provided
in Section 8 hereof.

     2. Exercise Price. The purchase price for the Warrant Share shall be $5.00 per Warrant
Share, as adjusted from time to time pursuant to Section 8 hereof (the “Exercise Price”).

     3. Exercise Period. This Warrant may be exercised at any time after the date hereof until
5:00 p.m., New York City time, on the earlier of (a) November 10, 2011 or (b) upon redemption of
this Warrant in accordance with the terms and conditions set forth in Section 4 hereof.

     4. Redemption. (a) All but not less than all of the outstanding Warrants may be redeemed at
the option of the Company at any time during the Exercise Period, at the office of the Company,
upon the notice referred to in Section 4(b), at the price of $0.01 per Warrant (“Redemption
Price”), provided that the last independent bid price of the Common Shares equals or exceeds $8.50
per share, on each of any twenty (20) trading days within a thirty (30) trading day period ending
three business days prior to the date on which notice of redemption is given.

A-1

 

 

Notwithstanding the foregoing, Warrants held by the officers and directors of the Company will not
be redeemable so long as such officers and directors hold such warrants.

          (b)Date Fixed for, and Notice of, Redemption. In the event the Company shall elect to
redeem all of the Warrants, the Company shall fix a date for the redemption. Notice of redemption
shall be mailed by first class mail, postage prepaid, by the Company not less than thirty (30) days
prior to the date fixed for redemption to the registered holders of the Warrants to be redeemed at
their last addresses as they shall appear on the registration books. Any notice mailed in the
manner herein provided shall be conclusively presumed to have been duly given whether or not the
registered holder received such notice.

          (c) Exercise After Notice of Redemption. The Warrants may be exercised with the terms
of this Agreement at any time after notice of redemption shall have been given by the Company
pursuant to Section 4(b). hereof and prior to the time and date fixed for redemption. On and after
the redemption date, the record holder of the Warrants shall have no further rights except to
receive, upon surrender of the Warrants, the Redemption Price.

     5. Method of Exercise. While this Warrant remains outstanding and exercisable in accordance
with Section 3 above, the Holder may exercise, in whole or in part, the purchase rights evidenced
hereby. Such exercise shall be effected by:

     (a) the surrender of the Warrant, together with a duly executed copy of the form of Notice of
Exercise attached hereto, to the Secretary of the Company at its principal offices set forth on the
signature page hereof; and

     (b) the payment in the form of a certified or bank cashier’s check payable to the order of the
Company in an amount equal to the Exercise Price multiplied by the number of Warrant Shares for
which this Warrant is being exercised.

     6. Certificates for Shares. Upon the exercise of the purchase rights evidenced by this
Warrant, one or more certificates for the number of Warrant Shares so purchased shall be issued as
soon as practicable thereafter (with appropriate restrictive legends, if applicable), and in any
event within ten (10) business days of the delivery of the Notice of Exercise.

     7. Issuance of Shares. The Company covenants that the Warrant Shares, when issued pursuant
to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens, and charges with respect to the issuance thereof.

     8. Adjustment of Exercise Price and Kind and Number of Shares. The number and kind of
securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to
adjustment from time to time as follows:

     (a) Subdivisions, Combinations and Other Issuances. If the Company shall at any time prior
to the expiration of this Warrant (i) subdivide its Shares, by split-up or otherwise, or combine
its Shares, or (ii) issue additional shares of its Shares or other equity securities as a dividend
with respect to any shares of its Shares; the number of

 

 

shares of Shares issuable on the exercise of this Warrant shall forthwith be
proportionately increased in the case of a subdivision (by stock split, stock dividend or
otherwise), or proportionately decreased in the case of a combination. Appropriate
adjustments shall also be made to the Exercise Price payable per share, but the aggregate
Exercise Price payable for the total number of Warrant Shares purchasable under this
Warrant (as adjusted) shall remain the same. Any adjustment under this Section 8(a) shall
become effective at the close of business on the date the subdivision or combination
becomes effective, or as of the record date of such dividend, or in the event that no
record date is fixed, upon the making of such dividend.

     (b) Reclassification, Reorganization and Consolidation. In case of any reclassification,
capital reorganization, or change in the Shares of the Company (other than as a result of a
subdivision, combination, or stock dividend provided for in Section 8(a) above), then, as a
condition of such reclassification, reorganization, or change, lawful provision shall be made, and
duly executed documents evidencing the same from the Company or its successor shall be delivered to
the Holder, so that the Holder shall have the right at any time prior to the expiration of this
Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant
(subject to adjustment of the Exercise Price as provided in Section 8), the kind and amount of
shares of stock and other securities and property receivable in connection with such
reclassification, reorganization, or change by a holder of the same number of shares of Shares as
were purchasable by the Holder immediately prior to such reclassification, reorganization, or
change. In any such case appropriate provisions shall be made with respect to the rights and
interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to
any shares of stock or other securities and property deliverable upon exercise hereof, and
appropriate adjustments shall be made to the purchase price per share payable hereunder, provided
the aggregate Exercise Price shall remain the same.

     (c) Notice of Adjustment. When any adjustment is required to be made in the number or kind
of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall
promptly notify the holder of such event and of the number of shares of Shares or other securities
or property thereafter purchasable upon exercise of this Warrant.

     (d) Issuance of New Warrant. Upon the occurrence of any of the events listed in this
Section 8 that results in an adjustment of the type, number or exercise price of the securities
underlying this Warrant, the Holder shall have the right to receive a new warrant reflecting such
adjustment upon the Holder tendering this Warrant in exchange. The new warrant shall otherwise have
terms identical to this Warrant.

     9. No Impairment. Pursuant to the terms and conditions of this Warrant, Company shall: (i)
reserve an appropriate number of shares of Company’s Shares to facilitate the issuance of shares to
Holder pursuant to this Warrant, (ii) not amend its Articles of Association or take any other
action that would materially impair Company’s ability to comply with the terms of the Warrant, and
(iii) provide Holder with at least ten (10) days prior written notice of the record date for any
proposed dividend or distribution by the Company.

 

 

     10. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the
Company shall make a cash payment therefor on the basis of the Exercise Price then in effect,
unless such cash payment is less than one dollar ($1.00).

     11. No Stockholder Rights. Prior to exercise of this Warrant, the Holder shall not be
entitled to any rights of a stockholder with respect to the shares of Shares issuable on the
exercise hereof, including (without limitation) the right to vote such shares of Shares, receive
dividends or other distributions thereon, exercise preemptive rights or be notified of stockholder
meetings, and such holder shall not be entitled to any notice or other communication concerning the
business or affairs of the Company. However, nothing in this Section 11 shall limit the right of
the Holder to be provided the notices required under this Warrant.

     12. Successors and Assigns. The terms and provisions of this Warrant shall inure to the
benefit of, and be binding upon, the Company and the Holder and their respective successors and
assigns.

     13. Amendments and Waivers. Any term of this Warrant may be amended and the observance of
any term of this Warrant may be waived (either generally or in a particular instance and either
retroactively or prospectively), with the written consent of the Company and the Holder. Any waiver
or amendment effected in accordance with this Section shall be binding upon each holder of any
shares of Shares purchased under this Warrant at the time outstanding (including securities into
which such shares have been converted), each future holder of all such Shares, and the Company.

     14. Notices. All notices required under this Warrant and shall be deemed to have been given
or made for all purposes (i) upon personal delivery, (ii) upon confirmation receipt that the
communication was successfully sent to the applicable number if sent by facsimile;
(iii) one day after being sent, when sent by professional overnight courier service, or (iv) five
days after posting when sent by registered or certified mail. Notices to the Company shall be sent
to the principal office of the Company (or at such other place as the Company shall notify the
Holder hereof in writing). Notices to the Holder shall be sent to the address of the Holder on the
books of the Company (or at such other place as the Holder shall notify the Company hereof in
writing).

     15. Attorneys’ Fees. If any action of law or equity is necessary to enforce or interpret
the terms of this Warrant, the prevailing party shall be entitled to its reasonable attorneys’
fees, costs and disbursements in addition to any other relief to which it may be entitled.

     16. Captions. The section and subsection headings of this Warrant are inserted for
convenience only and shall not constitute a part of this Warrant in construing or interpreting any
provision hereof.

     17. Governing Law. This Warrant shall be governed by the laws of the State of New York,
without regard to the provisions thereof relating to conflict of laws.

 

 

     IN WITNESS WHEREOF, CHINA HYDROELECTRIC CORPORATION caused this Warrant to be executed by an
officer thereunto duly authorized.

	 	 	 	 	 
	 	CHINA HYDROELECTRIC CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	James Li  	 
	 	 	Title:  	Chief Financial Officer 	 
	 

 

 

NOTICE OF EXERCISE 

	 	 	 
	To:

	 	CHINA HYDROELECTRIC CORPORATION
	Attn:

	 	Corporate Secretary

     The undersigned hereby elects to:

     Purchase                      shares of Shares of CHINA HYDROELECTRIC CORPORATION, pursuant to
the terms of the attached Warrant and payment of the Exercise Price per share required under such
Warrant accompanying this notice.

     The undersigned hereby represents and warrants that the undersigned is acquiring such shares for
its own account for investment purposes only, and not for resale or with a view to distribution of
such shares or any part thereof.

	 	 	 	 	 
	 

	 	 	 	 
	 

	 	HOLDER:	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Address:	 	 

Date:

Name in which shares should be registered:EX-10.2

Exhibit 10.2

CHINA HYDROELECTRIC CORPORATION

2008 SHARE INCENTIVE PLAN

1. Establishment, Purpose and Types of Awards

     CHINA
HYDROELECTRIC CORPORATION, a Cayman Islands exempted company (the
“Company”), hereby
establishes the CHINA HYDROELECTRIC CORPORATION 2008 SHARE INCENTIVE PLAN (the “Plan”). The purpose
of the Plan is to promote the long-term growth and profitability of the Company by (i) providing
key people with incentives to improve shareholder value and to contribute to the growth and
financial success of the Company through their future services, and (ii) enabling the Company to
attract, retain and reward the best-available persons.

     The Plan permits the granting of share options (including incentive share options qualifying
under Code section 422 and nonstatutory share options), share appreciation rights, restricted or
unrestricted share awards, phantom shares, performance awards, other share-based awards, or any
combination of the foregoing.

2. Definitions

     Under this Plan, except where the context otherwise indicates, the following definitions
apply:

     (a) “Administrator” means the Board or the committee(s) or officer(s) appointed by the
Board that have authority to administer the Plan as provided in Section 3 hereof.

     (b) “Affiliate” means any entity, whether now or hereafter existing, which controls, is
controlled by, or is under common control with, the Company (including, but not limited
to, joint ventures, limited liability companies, and partnerships). For this purpose,
“control” shall mean ownership of 50% or more of the total combined voting power or value of all classes of
shares or interests of the entity, or the power to direct the management and policies of the
entity, by contract or otherwise.

     (c) “Award” means any share option, share appreciation right, share award, phantom share
award, performance award, or other
share-based award.

     (d)
“Board” means the Board of Directors of the Company.

     (e) “Change in Control” means: (i) the acquisition (other than from the Company) by
any Person, as defined in this Section 2(e), of the beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of 50% or more of (A)
the then outstanding shares of the securities of the Company, or (B) the combined voting power of
the then outstanding securities of the Company entitled to vote generally in the election of
directors (the “Company Voting Shares”); (ii) the closing of a sale or other conveyance of all or
substantially all of the assets of the Company; or (iii) the effective time of any merger, share exchange,
consolidation, or other business combination involving the Company if immediately after such transaction persons
who hold a majority of the outstanding voting shares entitled to vote generally in the election of
directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons
who, immediately prior to such transaction, held the Company Voting Shares; provided, however,
that a Change in Control shall not include a public offering of capital share of the Company and
provided, further, that for purposes of any Award or subplan that constitutes a “nonqualified deferred compensation
plan,” within the meaning of Code section 409A, the Administrator, in its discretion, may specify a
different definition of Change in Control in order to comply with the provisions of Code section 409A. For
purposes of this Section 2(e), a “Person” means any individual, entity or group within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended, other than: employee
benefit plans sponsored or maintained by the Company and by entities controlled by the Company or an
underwriter of the Ordinary Shares in a registered public offering.

 

 

     (f) “Code” means the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder.

     (g) “Fair Market Value” means, with respect to the Company’s Ordinary Shares for any
purpose on a particular date, the value determined by the Administrator in good faith.
However, if the
Ordinary Shares are registered under Section 12(b) or 12(g) of the Securities Exchange
Act of 1934, as
amended, and listed for trading on a national exchange or market, “Fair Market Value”
means, as
applicable, (i) either the closing price or the average of the high and low sale price
on the relevant date,
as determined in the Administrator’s discretion, quoted on the New York Stock Exchange,
the American
Stock Exchange, the Nasdaq Global Select Market, or the Nasdaq Global Market; (ii) the
last sale price
on the relevant date quoted on the Nasdaq Capital Market; (iii) the average of the high
bid and low
asked prices on the relevant date quoted on the Nasdaq OTC Bulletin Board Service or by
the National
Quotation Bureau, Inc. or a comparable service as determined in the Administrator’s
discretion; or (iv) if
the Ordinary Shares are not quoted by any of the above, the average of the closing bid
and asked
prices on the relevant date furnished by a professional market maker for the Ordinary
Shares, or by
such other source, selected by the Administrator. If no public trading of the Ordinary
Shares occurs on
the relevant date but the shares are so listed, then Fair Market Value shall be
determined as of the next
preceding date on which trading of the Ordinary Shares does occur. For all purposes
under this Plan,
the term “relevant date” as used in this Section 2(h) means either the date as of which
Fair Market
Value is to be determined or the next preceding date on which public trading of the
Ordinary Shares
occurs, as determined in the Administrator’s discretion.

     (h) “Grant Agreement” means a written document memorializing the terms and conditions
of an Award granted pursuant to the Plan and which shall incorporate the terms of the Plan.

     (i) “Ordinary Shares” means ordinary shares of the Company, par value of $0.001 per
share.

3. Administration

     (a) Administration of the Plan. The Plan shall be administered by the Board or by
such
committee or committees as may be appointed by the Board from time to time. To the
extent allowed
by applicable state law, the Board by resolution may authorize an officer or officers
to grant Awards
(other than share Awards) to other officers and employees of the Company and its
Affiliates, and, to the
extent of such authorization, such officer or officers shall be the Administrator.

     (b) Powers of the Administrator. The Administrator shall have all the powers vested in
it by
the terms of the Plan, such powers to include authority, in its sole and absolute
discretion, to grant
Awards under the Plan, prescribe Grant Agreements evidencing such Awards and establish
programs
for granting Awards.

     The Administrator shall have full power and authority to take all other actions
necessary to carry out the purpose and intent of the Plan, including, but not limited to,
the authority to: (i) determine the eligible persons to whom, and the time or times at which
Awards shall be granted; (ii) determine the types of Awards to be granted; (iii) determine
the number of shares to be covered by or used for reference purposes for each Award; (iv)
impose such terms, limitations, restrictions and conditions upon any such Award as the
Administrator shall deem appropriate; (v) modify, amend, extend or renew outstanding Awards,
or accept the surrender of outstanding Awards and substitute new Awards (provided however,
that, except as provided in Section 6 or 7(d) of the Plan, any modification that would
materially adversely affect any outstanding Award shall not be made without the consent of
the holder); (vi) accelerate or otherwise change the time in which an Award may be exercised
or becomes payable and to waive or accelerate the lapse, in whole or in part, of any
restriction or condition with respect to such Award, including, but not limited to, any
restriction or condition with respect to the vesting or exercisability of an Award following
termination of any grantee’s employment or other relationship with the Company; (vii)
establish objectives and conditions, if any, for earning Awards and determining whether
Awards will be paid with respect to a performance period; and (viii) for any purpose,
including but not limited to, qualifying for preferred tax treatment under foreign tax laws
or otherwise complying

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with the regulatory requirements of local or foreign jurisdictions, to establish, amend,
modify, administer or terminate sub-plans, and prescribe, amend and rescind rules and
regulations relating to such sub-plans.

     The Administrator shall have full power and authority, in its sole and absolute
discretion, to administer, construe and interpret the Plan, Grant Agreements and all other
documents relevant to the Plan and Awards issued thereunder, to establish, amend, rescind
and interpret such rules, regulations, agreements, guidelines and instruments for the
administration of the Plan and for the conduct of its business as the Administrator deems
necessary or advisable, and to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any Award in the manner and to the extent the Administrator
shall deem it desirable to carry it into effect.

     (c) Non-Uniform Determinations. The Administrator’s determinations under the Plan
(including without limitation, determinations of the persons to receive Awards, the
form, amount and
timing of such Awards, the terms and provisions of such Awards and the Grant Agreements
evidencing
such Awards) need not be uniform and may be made by the Administrator selectively among
persons
who receive, or are eligible to receive, Awards under the Plan, whether or not such
persons are similarly situated.

     (d) Limited Liability. To the maximum extent permitted by law, no member of the
Administrator shall be liable for any action taken or decision made in good faith
relating to the Plan or any Award thereunder.

     (e) Indemnification. To the maximum extent permitted by law and by the Company’s
charter and by-laws, the members of the Administrator shall be indemnified by the
Company in respect
of all their activities under the Plan.

     (f) Effect of Administrator’s Decision. All actions taken and decisions and
determinations
made by the Administrator on all matters relating to the Plan pursuant to the powers
vested in it
hereunder shall be in the Administrator’s sole and absolute discretion and shall be
conclusive and
binding on all parties concerned, including the Company, its shareholders, any
participants in the Plan
and any other employee, consultant, or director of the Company, and their respective
successors in interest.

4. Shares Available for the Plan; Maximum Awards

     Subject to adjustments as provided in Section 7(d) of the Plan, the Ordinary Shares that may
be issued with respect to Awards granted under the Plan shall not exceed an aggregate of
12,000,000 Ordinary Shares. The Company shall reserve such number of shares for Awards under the
Plan, subject to adjustments as provided in Section 7(d) of the Plan. If any Award, or portion of
an Award, under the Plan expires or terminates unexercised, becomes unexercisable, is settled in
cash without delivery of Ordinary Shares, or is forfeited or otherwise terminated, surrendered or
canceled as to any shares, or if any Ordinary Shares are repurchased by the Company in connection
with any Award (whether or not such surrendered Ordinary Shares were acquired pursuant to any
Award), or if any Ordinary Shares are withheld by the Company, the number of Ordinary Shares
subject to such Award and the repurchased and withheld shares shall thereafter be available for
further Awards under the Plan; provided, however, that any such Ordinary Shares that are
repurchased or withheld by the Company in connection with any Award or that are otherwise
forfeited after issuance shall not be available for purchase pursuant to incentive share options
intended to qualify under Code section 422.

5. Participation

     Participation in the Plan shall be open to all employees, officers, and directors of, and
other individuals providing bona fide services to or for, the Company, or of any Affiliate of the
Company, as may be selected by the Administrator from time to time. The Administrator may also
grant Awards to individuals in connection with hiring, retention or otherwise, prior to the date
the individual first performs services for the Company or an

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Affiliate, provided that such Awards shall not become vested or exercisable, and no Ordinary
Shares shall be issued to such individual, prior to the date the individual first commences
performance of such services.

6. Awards

     The Administrator, in its sole discretion, establishes the terms of all Awards granted under
the Plan. Awards may be granted individually or in tandem with other types of Awards, concurrently
with or with respect to outstanding Awards. All Awards are subject to the terms and conditions
provided in the Grant Agreement. The Administrator may permit or require a recipient of an Award to
defer such individual’s receipt of the payment of cash or the delivery of Ordinary Shares that
would otherwise be due to such individual by virtue of the issuance of, exercise of, payment of, or
lapse or waiver of restrictions respecting, any Award. If any such payment deferral is required or
permitted, the Administrator shall, in its sole discretion, establish rules and procedures for such
payment deferrals.

     (a) Share Options. The Administrator may from time to time grant to eligible
participants
Awards of incentive shares options as that term is defined in Code section 422 or
nonstatutory shares
options; provided, however, that Awards of incentive share options shall be
limited to employees of the
Company or of any current or hereafter existing “parent corporation” or “subsidiary
corporation,” as
defined in Code sections 424(e) and (f), respectively, of the Company and any other
individuals who are
eligible to receive incentive share options under the provisions of Code section 422.
Options intended
to qualify as incentive shares options under Code section 422 must have an exercise
price at least
equal to Fair Market Value as of the date of grant, but nonstatutory share options may
be granted with
an exercise price less than Fair Market Value. No share option shall be an incentive
share option
unless so designated by the Administrator at the time of grant or in the Grant Agreement
evidencing such share option.

     (b) Shares Appreciation Rights. The Administrator may from time to time grant to
eligible
participants Awards of Share Appreciation Rights (“SAR”). An SAR entitles the grantee
to receive,
subject to the provisions of the Plan and the Grant Agreement, a payment having an
aggregate value
equal to the product of (i) the excess of (A) the Fair Market Value on the exercise date
of one Ordinary
Share over (B) the base price per share specified in the Grant Agreement, times (ii) the
number of
shares specified by the SAR, or portion thereof, which is exercised. The base price per
Ordinary Share
specified in the Grant Agreement shall not be less than the lower of the Fair Market
Value on the grant
date or the exercise price of any tandem shares option Award to which the SAR is
related. Payment by
the Company of the amount receivable upon any exercise of an SAR may be made by the
delivery of
Ordinary Share or cash, or any combination of Ordinary Share and cash, as determined in
the sole
discretion of the Administrator. If upon settlement of the exercise of an SAR a grantee
is to receive a
portion of such payment in Ordinary Shares, the number of shares shall be determined by
dividing such
portion by the Fair Market Value of an Ordinary Share on the exercise date. No
fractional shares shall
be used for such payment and the Administrator shall determine whether cash shall be
given in lieu of
such fractional shares or whether such fractional shares shall be eliminated.

     (c) Share Awards. The Administrator may from time to time grant restricted or
unrestricted
shares Awards to eligible participants in such amounts, on such terms and conditions,
and for such
consideration, including no consideration or such minimum consideration as may be
required by law, as
it shall determine. A shares Award may be paid in Ordinary Shares, in cash, or in a
combination of
Ordinary Shares and cash, as determined in the sole discretion of the Administrator.

     (d) Phantom Shares. The Administrator may from time to time grant Awards to eligible
participants denominated in share-equivalent units (“phantom shares”) in such amounts
and on such
terms and conditions as it shall determine. Phantom share units granted to a
participant shall be
credited to a bookkeeping reserve account solely for accounting purposes and shall not
require a
segregation of any of the Company’s assets. An Award of phantom share may be settled in
Ordinary
Shares, in cash, or in a combination of Ordinary Shares and cash, as determined in the
sole discretion
of the Administrator. Except as otherwise provided in the applicable Grant Agreement,
the grantee shall
not have the rights of a shareholder with respect to any shares of Ordinary Shares
represented by a
phantom share unit solely as a result of the grant of a phantom share unit to the
grantee.

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     (e) Performance Awards. The Administrator may, in its discretion, grant performance
awards which become payable on account of attainment of one or more performance goals
established
by the Administrator. Performance awards may be paid by the delivery of Ordinary
Shares or cash, or
any combination of Ordinary Shares and cash, as determined in the sole discretion of
the Administrator.
Performance goals established by the Administrator may be based on the Company’s or an
Affiliate’s
operating income or one or more other business criteria selected by the Administrator
that apply to an
individual or group of individuals, a business unit, or the Company or an Affiliate as
a whole, over such
performance period as the Administrator may designate.

     (f) Other Share-Based Awards. The Administrator may from time to time grant other
share-based awards to eligible participants in such amounts, on such terms and
conditions, and for
such consideration, including no consideration or such minimum consideration as may be
required by
law, as it shall determine. Other share-based awards may be denominated in cash, in
Ordinary Shares
or other securities, in share-equivalent units, in share appreciation units, in
securities or debentures
convertible into Ordinary Shares, or in any combination of the foregoing and may be
paid in Ordinary
Shares or other securities, in cash, or in a combination of Ordinary Shares or other
securities and cash,
all as determined in the sole discretion of the Administrator.

7. Miscellaneous

     (a) Withholding of Taxes. Grantees and holders of Awards shall pay to the Company or
its Affiliate, or make provision satisfactory to the Administrator for payment of, any
taxes required to be
withheld in respect of Awards under the Plan no later than the date of the event
creating the tax liability.
The Company or its Affiliate may, to the extent permitted by law, deduct any such tax
obligations from
any payment of any kind otherwise due to the grantee or holder of an Award. In the
event that payment
to the Company or its Affiliate of such tax obligations is made in Ordinary Shares,
such shares shall be
valued at Fair Market Value on the applicable date for such purposes and shall not
exceed in amount
the minimum statutory tax withholding obligation.

     (b) Loans. To the extent otherwise permitted by law, the Company or its Affiliate may
make or guarantee loans to grantees to assist grantees in exercising Awards and
satisfying any
withholding tax obligations.

     (c) Transferability. Except as otherwise determined by the Administrator, and in any
event
in the case of an incentive share option or a share appreciation right granted with
respect to an
incentive share option, no Award granted under the Plan shall be transferable by a
grantee otherwise
than by will or the laws of descent and distribution. Unless otherwise determined by
the Administrator in
accord with the provisions of the immediately preceding sentence, an Award may be
exercised during
the lifetime of the grantee, only by the grantee or, during the period the grantee is
under a legal
disability, by the grantee’s guardian or legal representative.

     (d) Adjustments for Corporate Transactions and Other Events.

	 	(i)	 	Share Dividend, Share Split and Reverse Share
Split. In the event of a share dividend of, or share split or reverse
share split affecting, the Ordinary Shares, (A) the maximum number of
shares of such Ordinary Shares as to which Awards may be granted under
this Plan and the maximum number of shares with respect to which Awards
may be granted during any one fiscal year of the Company to any
individual, as provided in Section 4 of the Plan, and (B) the number of
shares covered by and the exercise price and other terms of outstanding
Awards, shall, without further action of the Board, be adjusted to
reflect such event. The Administrator may make adjustments, in its
discretion, to address the treatment of fractional shares and fractional
cents that arise with respect to outstanding Awards as a result of the
share dividend, share split or reverse share split.

- 5 -

 

	 	(ii)	 	Non-Change in Control Transactions. Except with respect to the
transactions set forth in Section 7(d)(i), in the event of any change
affecting the Ordinary Shares, the Company or its capitalization, by reason
of a spin-off, split-up, dividend, recapitalization, merger, consolidation
or share exchange, other than any such change that is part of a transaction
resulting in a Change in Control of the Company, the Administrator, in its
discretion and without the consent of the holders of the Awards, may make
(A) appropriate adjustments to the maximum number and kind of shares
reserved for issuance or with respect to which Awards may be granted under
the Plan, in the aggregate and with respect to any individual during any one
fiscal year of the Company, as provided in Section 4 of the Plan; and (B)
any adjustments in outstanding Awards, including but not limited to
modifying the number, kind and price of securities subject to Awards.
	 
	 	(iii)	 	Change in Control Transactions. In the event of any
transaction resulting in a Change in Control of the Company, outstanding
share options and other Awards that are payable in or convertible into
Ordinary Shares under this Plan will terminate upon the effective time of
such Change in Control unless provision is made in connection with the
transaction for the continuation or assumption of such Awards by, or for the
substitution of the equivalent awards, as determined in the sole discretion
of the Administrator, of, the surviving or successor entity or a parent
thereof. In the event of such termination, the holders of share options and
other Awards under the Plan will be permitted, immediately before the Change
in Control, to exercise or convert all portions of such share options or
other Awards under the Plan that are then exercisable or convertible or which
become exercisable or convertible upon or prior to the effective time of the
Change in Control. If, immediately before the Change in Control, no share of
the Company is readily tradeable on an established securities market or
otherwise, and the vesting of an Award or Awards pursuant to this Section
7(d)(iii) would be treated as a “parachute payment” (as defined in section
280G of the Code), then such Award or Awards shall not vest unless the
requirements of the shareholder approval exemption of section 280G(b)(5) of
the Code have been satisfied with respect to such Award or Awards.
	 
	 	(iv)	 	Unusual or Nonrecurring Events. The Administrator is
authorized to make, in its discretion and without the consent of holders of
Awards, adjustments in the terms and conditions of, and the criteria included
in, Awards in recognition of unusual or nonrecurring events affecting the
Company, or the financial statements of the Company or any Affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever
the Administrator determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan.

     (e) Substitution of Awards in Mergers and Acquisitions. Awards may be granted under the
Plan from time to time in substitution for awards held by employees, officers, consultants or
directors of entities who become or are about to become employees, officers, consultants or directors of
the Company or an Affiliate as the result of a merger or consolidation of the employing entity
with the Company or an Affiliate, or the acquisition by the Company or an Affiliate of the assets or
share of the employing entity. The terms and conditions of any substitute Awards so granted may vary from
the terms and conditions set forth herein to the extent that the Administrator deems appropriate
at the time of grant to conform the substitute Awards to the provisions of the awards for which they are
substituted.

     (f) Other Agreements. As a condition precedent to the grant of any Award under the Plan,
the exercise pursuant to such an Award, or to the delivery of certificates for shares issued
pursuant to any Award, the Administrator may require the grantee or the grantee’s successor or permitted
transferee, as the case may be, to become a party to a share restriction agreement, shareholders’

- 6 -

 

agreement, voting trust agreement or other agreements regarding the Ordinary Shares of the Company
in such form(s) as the Administrator may determine from time to time.

     (g) Termination, Amendment and Modification of the Plan. The Board may terminate, amend or
modify the Plan or any portion thereof at any time. Except as otherwise determined by the Board,
termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted
to it hereunder with respect to Awards granted under the Plan prior to the date of such
termination.

     (h) Non-Guarantee of Employment or Service. Nothing in the Plan or in any Grant Agreement
thereunder shall confer any right on an individual to continue in the service of the Company or
shall interfere in any way with the right of the Company to terminate such service at any time
with or without cause or notice and whether or not such termination results in (i) the failure of
any Award to vest; (ii) the forfeiture of any unvested or vested portion of any Award; and/or
(iii) any other adverse effect on the individual’s interests under the Plan.

     (i) Compliance with Securities Laws; Listing and Registration. If at any time the
Administrator determines that the delivery of Ordinary Shares under the Plan is or may be unlawful
under the laws of any applicable jurisdiction, or Federal, state or foreign securities laws
(including registration and filing requirements), the right to exercise an Award or receive
Ordinary Shares pursuant to an Award shall be suspended until the Administrator determines that
such delivery is lawful. The Company shall have no obligation to effect any registration or
qualification of the Ordinary Shares under Federal, state or foreign laws.

     The Company may require that a grantee, as a condition to exercise of an Award, and as a
condition to the delivery of any share certificate, make such written representations (including
representations to the effect that such person will not dispose of the Ordinary Shares so acquired
in violation of Federal, state or foreign securities laws) and furnish such information as may, in
the opinion of counsel for the Company, be appropriate to permit the Company to issue the Ordinary
Shares in compliance with applicable Federal, state or foreign securities laws. The share
certificates for any Ordinary Shares issued pursuant to this Plan may bear a legend restricting
transferability of the Ordinary Shares unless such shares are registered or an exemption from
registration is available under the Securities Act of 1933, as amended, and applicable state or
foreign securities laws.

     (j)
No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to
create a trust or separate fund of any kind or a fiduciary relationship between the Company and a
grantee or any other person. To the extent that any grantee or other person acquires a right to
receive payments from the Company pursuant to an Award, such right shall be no greater than the
right of any unsecured general creditor of the Company.

     (k) Governing Law. The validity, construction and effect of the Plan, of Grant Agreements
entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made
by the Administrator relating to the Plan or such Grant Agreements, and the rights of any and all
persons having or claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of without regard to its
conflict of laws principles.

     (l) Effective Date; Termination Date. The Plan is effective as of the date on which the Plan
is adopted by the Board, subject to approval of the shareholders within twelve months before or
after such date. No Award shall be granted under the Plan after the close of business on the day
immediately preceding the tenth anniversary of the effective date of the Plan, or if earlier, the
tenth anniversary of the date this Plan is approved by the shareholders. Subject to other
applicable provisions of the Plan, all Awards made under the Plan prior to such termination of the
Plan shall remain in effect until such Awards have been satisfied or terminated in accordance with
the Plan and the terms of such Awards.

PLAN APPROVAL

- 7 -

 

Date
Approved by the Board:                                                             

Date
Approved by the Shareholders:                                                             

- 8 -

 

APPENDIX A

PROVISIONS FOR CALIFORNIA RESIDENTS

     With respect to Awards granted to California residents prior to a public offering of the
capital shares of the Company that is effected pursuant to a registration statement filed with, and
declared effective by, the Securities and Exchange Commission under the Securities Act of 1933, as
amended, and only to the extent required by applicable law, the following provisions shall apply
notwithstanding anything in the Plan or a Grant Agreement to the contrary:

1. With respect to any Award granted in the form of a share option pursuant to Section 6(a) of the
Plan:

(a) The exercise period shall be no more than 120 months from the date the option is
granted.

(b) The options shall be non-transferable other than by will, by the laws of descent and
distribution,
or, if and to the extent permitted under the Grant Agreement, to a revocable trust or as
permitted by
Rule 701 of the Securities Act of 1933, as amended (17 C.F.R. 230.701).

(c) Unless employment is terminated for “cause” as defined by applicable law, the terms of
the Plan
or Grant Agreement, or a contract of employment, the right to exercise the option in the
event of
termination of employment, to the extent that the Award recipient is entitled to exercise on
the date
employment terminates, will be as follows:

(1) At least 6 months from the date of termination if termination was caused by death
or disability.

(2) At least 30 days from the date of termination if termination was caused by other
than death or disability.

2. With respect to an Award, granted pursuant to Section 6(c) of the Plan, that provides the Award
recipient the right to purchase shares, the Award shall be non-transferable other than by will, by
the laws of
descent and distribution, or, if and to the extent permitted under the Grant Agreement, to a
revocable trust or as
permitted by Rule 701 of the Securities Act of 1933, as amended (17 C.F.R. 230.701).

3. The Plan shall have a termination date of not more than 10 years from the date the Plan is
adopted by
the Board or the date the Plan is approved by the security holders, whichever is earlier.

4. Security holders representing a majority of the Company’s outstanding securities entitled to
vote must
approve the Plan by the later of (a) 12 months after the date the Plan is adopted or (b) 12 months
after the
granting of any Award to a resident of California. Any option exercised or any securities
purchased before
security holder approval is obtained must be rescinded if security holder approval is not obtained
within the
period described in the preceding sentence. Such securities shall not be counted in determining
whether such
approval is obtained.

5. At the discretion of the Administrator, the Company may reserve to itself and/or its assignee(s)
in the
Grant Agreement or any applicable share restriction agreement a right to repurchase securities held
by an
Award recipient upon such Award recipient’s termination of employment at any time within six months
after such
Award recipient’s termination date (or in the case of securities issued upon exercise of an option
after the
termination date, within six months after the date of such exercise) for cash or cancellation of
purchase money
indebtedness, at:

(A) no less than the Fair Market Value of such securities as of the date of the Award
recipient’s
termination of employment, provided, that such right to repurchase securities
terminates when the
Company’s securities have become publicly traded; or

(B) the Award recipient’s original purchase price, provided, that such right to
repurchase securities at
the original purchase price lapses at the rate of at least 20% of the securities per year
over 5 years from

A - 1 

 

the date the option is granted (without respect to the date the option was exercised or
became exercisable).

     The securities held by an officer, director, manager or consultant of the Company or an
affiliate may be subject to additional or greater restrictions.

6. The Company will provide financial statements to each Award recipient annually during the period
such
individual has Awards outstanding, or as otherwise required under Section 260.140.46 of Title 10 of
the
California Code of Regulations. Notwithstanding the foregoing, the Company will not be required
to provide
such financial statements to Award recipients when the Plan complies with all conditions of Rule
701 of the
Securities Act of 1933, as amended (17 C.F.R. 230.701); provided that for purposes of determining
such
compliance, any registered domestic partner shall be considered a “family member” as that term is
defined in
Rule 701.

7. The Plan is intended to comply with Section 25102(o) of the California Corporations Code. Any
provision of this Plan which is inconsistent with Section 25102(o), including without limitation
any provision of
this Plan that is more restrictive than would be permitted by Section 25102(o) as amended from time
to time,
shall, without further act or amendment by the Board, be reformed to comply with the provisions
of
Section 25102(o). If at any time the Administrator determines that the delivery of Ordinary
Shares under the
Plan is or may be unlawful under the laws of any applicable jurisdiction, or federal or state
securities laws, the
right to exercise an Award or receive Ordinary Shares pursuant to an Award shall be suspended until
the
Administrator determines that such delivery is lawful. The Company shall have no obligation to
effect any
registration or qualification of the Ordinary Shares under federal or state laws.

A - 2 

 

CHINA HYDROELECTRIC CORPORATION

2008 SHARE INCENTIVE PLAN 

        Grant
No.:                     

Nonstatutory Share Option Notice

     This Notice evidences the award of nonstatutory share options (each, an “Option” or
collectively, the “Options”) that have been granted to you, [NAME], subject to and conditioned
upon your agreement to the terms of the attached Nonstatutory Share Option Agreement (the
“Agreement”). The Options entitle you to purchase Ordinary Shares, par value $0.001 per share
(“Ordinary Shares”), of China Hydroelectric Corporation, a Cayman Islands exempted company (the
“Company”), under the CHINA HYDROELECTRIC CORPORATION 2008 Share Incentive Plan (the “Plan”).
The number of Ordinary Shares you may purchase and the exercise price at which you may purchase
them are specified below. This Notice constitutes part of and is subject to the terms and
provisions of the Agreement and the Plan, which are incorporated by reference herein. You must
return an executed copy of this Notice to the Company within 30 days of the date hereof. If you
fail to do so, the Options will be null and void.

Grant
Date: [GRANT DATE]

Number of Shares: [NUMBER]

Exercise Price: [PRICE] per share

Expiration Date: The Options expire at 5:00 p.m. Eastern Time on the last business day
coincident with or prior to the 5th anniversary of the Grant Date (the
“Expiration Date”), unless fully exercised or terminated earlier.

Exercisability Schedule: Subject to the terms and conditions described in the
Agreement, the Options become exercisable in accordance with the schedule below:

The extent to which the Options are exercisable as of a particular date is rounded down to the
nearest whole share. However, exercisability is rounded up to 100% on the [           anniversary] of the
Grant Date.

	 	 	 	 	 	 	 
	 	 	CHINA HYDROELECTRIC CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 

I acknowledge that I have carefully read the attached Agreement and the Plan and agree to be
bound by all of the provisions set forth in these documents.

	 	 	 	 	 	 	 	 	 
	Enclosures:	 	Nonstatutory Share Option Agreement	 	 	 	 
	 

	 	China Hydroelectric Corporation 2008	 	OPTIONEE	 	 	 	 
	 

	 	 Share Incentive Plan	 	 	 	 	 	 
	 

	 	Share Restriction Agreement 	 	 	 	 	 	 
	 

	 	Exercise Form	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 
	 	 

 

 

Grant No.:                     

Nonstatutory Share Option Agreement

Under The

CHINA HYDROELECTRIC CORPORATION 2008 Share Incentive Plan

     1. Terminology. Capitalized terms used in this Agreement are defined in the
correlating Share Option Notice and/or the Glossary at the end of the Agreement.

     2. Exercise of Options.

          (a) Exercisability. The Options will become exercisable in accordance with the
Exercisability Schedule set forth in the Share Option Notice, so long as you are in the Service of
the Company from the Grant Date through the applicable exercisability dates. None of the Options
will become exercisable after your Service with the Company ceases, unless the Share Option Notice
provides otherwise with respect to exercisability that arises as a result of your cessation of
Service.

          (b) Right to Exercise. You may exercise the Options, to the extent
exercisable, at any time on or before 5:00 p.m. Eastern Time on the Expiration Date or the earlier
termination of the Options, unless otherwise provided under applicable law. Section 3 below
describes certain limitations on exercise of the Options that apply in the event of your death,
Total and Permanent Disability, or termination of Service. The Options may be exercised only in
multiples of whole Shares and may not be exercised at any one time as to fewer than one hundred
Shares (or such lesser number of Shares as to which the Options are then exercisable). No
fractional Shares will be issued under the Options.

          (c) Exercise Procedure. In order to exercise the Options, you must provide the
following items to the Secretary of the Company or his or her delegate before the expiration or
termination of the Options:

	 	(i)	 	notice, in such manner and form as the
Administrator may require from time to time, specifying the number
of Shares to be purchased under the Options; and
	 
	 	(ii)	 	full payment of the Exercise Price for the
Shares or properly executed, irrevocable instructions, in such
manner and form as the Administrator may require from time to time,
to effectuate a broker-assisted cashless exercise, each in
accordance with Section 2(d) of this Agreement; and
	 
	 	(iii)	 	an executed copy of any other agreements
requested by the Administrator pursuant to Section 2(e) of this
Agreement.

An exercise will not be effective until the Secretary of the Company or his or her delegate
receives all of the foregoing items, and such exercise otherwise is permitted under and complies
with all applicable federal, state and foreign securities laws.

          (d) Method of Payment. You may pay the Exercise Price by:

	 	(i)	 	delivery of cash, certified or cashier’s check, money order or
other cash equivalent acceptable to the Administrator in its
discretion;

- 1 -

 

	 	(ii)	 	a broker-assisted cashless exercise in accordance with
Regulation T of the Board of Governors of the Federal Reserve
System through a brokerage firm approved by the Administrator;
	 
	 	(iii)	 	subject to such limits as the
Administrator may impose from time to time, tender (via actual
delivery or attestation) to the Company of other Ordinary Shares of
the Company which have a Fair Market Value on the date of tender
equal to the Exercise Price, provided that tender of such
shares will not result in the Company having to record a charge to
earnings under United States generally accepted accounting principles
then applicable to the Company;
	 
	 	(iv)	 	any other method approved by the
Administrator; or
	 
	 	(v)	 	any combination of the foregoing.

          (e) Agreement to Execute Other Agreements. You agree to execute, as a condition
precedent to the exercise of the Options and at any time thereafter as may reasonably be requested
by the Administrator, a Share Restriction Agreement substantially in the form, and containing the
terms and provisions, of the Share Restriction Agreement attached hereto as Exhibit A, with
respect to any shares you acquire pursuant to this Agreement; provided, however, that
execution of the Share Restriction Agreement will not be required upon any exercise that occurs
after the closing of the first public offering of Ordinary Shares of the Company that is effected
pursuant to a registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933 or, if later, the expiration of any market
stand-off agreement that applies to other shareholders of the Company respecting such public
offering of Ordinary Shares.

          (f) Issuance of Shares upon Exercise. As soon as practicable after exercise of the
Options, the Company will deliver a share certificate to you, or deliver Shares electronically or
in certificate form to your designated broker on your behalf, for the Shares issued upon exercise.
Any share certificates delivered will, unless the Shares are registered or an exemption from
registration is available under applicable federal and state law, bear a legend restricting
transferability of such Shares and referencing any applicable Share Restriction Agreement.

     3. Termination of Service.

          (a) Termination of Unexercisable Options. If your Service with the Company ceases for
any reason, the Options that are then unexercisable will terminate immediately upon such cessation.

          (b) Exercise Period Following Termination of Service. If your Service with the
Company ceases for any reason other than discharge for Cause, the Options that are then exercisable
will terminate upon the earliest of:

        (i) the expiration of 30 days following such cessation, if your Service
ceases on account of (1) your termination by the Company other than a discharge
for Cause, or (2) your voluntary termination other than for Total and Permanent
Disability or death;

        (ii) the expiration of 12 months following such cessation, if your Service
ceases on account of your Total and Permanent Disability or death;

        (iii) the expiration of 12 months following your death, if your death occurs
during the periods described in clauses (i) or (ii) of this Section 3(b), as
applicable; or

- 2 -

 

        (iv) the Expiration Date.

In the event of your death, the exercisable Options may be exercised by your executor, personal
representative, or the person(s) to whom the Options are transferred by will or the laws of descent
and distribution.

          (c) Misconduct. The Options will terminate in their entirety, regardless of whether
the Options are then exercisable, immediately upon your discharge from Service for Cause, or upon
your commission of any of the following acts during the exercise period following your termination
of Service: (i) fraud on or misappropriation of any funds or property of the Company, or (ii)
your breach of any provision of any employment, non-disclosure, non-competition,
non-solicitation, assignment of inventions, or other similar agreement executed by you for the
benefit of the Company, as determined by the Administrator, which determination will be conclusive.

          (d) Change in Status. In the event that your Service is with a business, trade or
entity that, after the Grant Date, ceases for any reason to be part or an Affiliate of the Company,
your Service will be deemed to have terminated for purposes of this Section 3 upon such cessation
if your Service does not continue uninterrupted immediately thereafter with the Company or an
Affiliate of the Company.

     4. Market Stand-Off Agreement. You agree that following the effective date of a
registration statement of the Company filed under the Securities Act of 1933, you, for the duration
specified by and to the extent requested by the Company and an underwriter of Ordinary Shares or
other securities of the Company, shall not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, enter into a transaction which
would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in
whole or in part, any of the economic consequences of ownership of such securities, whether any
such aforementioned transaction is to be settled by delivery of such securities or other
securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale,
pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, in
each case during the seven days prior to and the 180 days after the effectiveness of any
underwritten offering of the Company’s equity securities (or such longer or shorter period as may
be requested in writing by the managing underwriter and agreed to in writing by the Company) (the
“Market Stand-Off Period”), except as part of such underwritten registration if otherwise
permitted. In addition, you agree to execute any further letters, agreements and/or other
documents requested by the Company or its underwriters that are consistent with the terms of this
Section 4. The Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Stand-Off Period.

     5. Nontransferability
of Options. These Options and, before exercise,
the underlying Shares are nontransferable otherwise than by will or the laws of descent and
distribution and, during your lifetime, the Options may be exercised only by you or, during the
period you are under a legal disability, by your guardian or legal representative. Except as
provided above, the Options and, before exercise, the underlying Shares may not be assigned,
transferred, pledged, hypothecated, subjected to any “put equivalent position,” “call equivalent
position” (as each preceding term is defined by Rule 16(a)-1 under the Securities Exchange Act of
1934), or short position, or disposed of in any way (whether by operation of law or otherwise) and
shall not be subject to execution, attachment or similar process.

     6. Nonqualified Nature of the Options. The Options are not intended to
qualify as incentive share options within the meaning of Code section 422, and this Agreement shall
be so construed. You hereby acknowledge that, upon exercise of the Options, you will recognize
compensation income in an amount equal to the excess of the then Fair Market Value of the

- 3 -

 

Shares over the Exercise Price and must comply with the provisions of Section 7 of this Agreement
with respect to any tax withholding obligations that arise as a result of such exercise.

     7. Withholding of Taxes. At the time the Options are exercised, in whole or in part,
or at any time thereafter as requested by the Company, you hereby authorize withholding from
payroll or any other payment of any kind due to you and otherwise agree to make adequate provision
for foreign, federal, state and local taxes required by law to be withheld, if any, which arise in
connection with the Options. The Company may require you to make a cash payment to cover any
withholding tax obligation as a condition of exercise of the Options or issuance of share
certificates representing Shares.

     The Administrator may, in its sole discretion, permit you to satisfy, in whole or in part, any
withholding tax obligation which may arise in connection with the Options either by electing to
have the Company withhold from the Shares to be issued upon exercise that number of Shares, or by
electing to deliver to the Company already-owned shares, in either case having a Fair Market Value
not in excess of the amount necessary to satisfy the statutory minimum withholding amount due.

     8. Adjustments. The Administrator may make various adjustments to your Options,
including adjustments to the number and type of securities subject to the Options and the Exercise
Price, in accordance with the terms of the Plan.

     9. Non-Guarantee of Employment or Service Relationship. Nothing in the Plan or this
Agreement will alter your at-will or other employment status or other service relationship with the
Company, nor be construed as a contract of employment or service relationship between you and the
Company, or as a contractual right for you to continue in the employ of, or in a service
relationship with, the Company for any period of time, or as a limitation of the right of the
Company to discharge you at any time with or without Cause or notice and whether or not such
discharge results in the failure of any of the Options to become exercisable or any other adverse
effect on your interests under the Plan.

     10. No Rights as a Shareholder. You shall not have any of the rights of a
shareholder with respect to the Shares until such Shares have been issued to you upon the due
exercise of the Options. No adjustment will be made for dividends or distributions or other rights
for which the record date is prior to the date such Shares are issued.

     11. The Company’s Rights. The existence of the Options shall not affect in any way
the right or power of the Company or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company’s capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds, debentures,
preferred or other shares with preference ahead of or convertible into, or otherwise affecting the
Ordinary Shares or the rights thereof, or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of the Company’s assets or business, or any other corporate act
or proceeding, whether of a similar character or otherwise.

     12. Entire Agreement. This Agreement, together with the correlating Share Option
Notice, the Share Restriction Agreement (if any), and the Plan, contain the entire agreement
between you and the Company with respect to the Options. Any oral or written agreements,
representations, warranties, written inducements, or other communications made prior to the
execution of this Agreement with respect to the Options shall be void and ineffective for all
purposes.

     13. Amendment. This Agreement may be amended from time to time by the Administrator
in its discretion; provided, however, that this Agreement may not be modified in a manner
that would have a materially adverse effect on the Options or Shares as determined in

- 4 -

 

the discretion of the Administrator, except as provided in the Plan or in a written document
signed by you and the Company.

     14. Conformity with Plan. This Agreement is intended to conform in all respects with,
and is subject to all applicable provisions of, the Plan. Any conflict between the terms of this
Agreement and the Plan shall be resolved in accordance with the terms of the Plan. In the event of
any ambiguity in this Agreement or any matters as to which this Agreement is silent, the Plan shall
govern. A copy of the Plan is provided to you with this Agreement.

     15. Risk and Financial Information Disclosure. For purposes of claiming an
exemption from registration under Rule 12h-1(f)(1) under the Securities Exchange Act of 1934, the
Company may decide to provide you with information described in Rules 701(e)(3), (4), and (5) under
the Securities Act of 1933 (risk and financial information relating to the Company), every six
months, with the financial statements being not more than 180 days old and with such information
provided either by physical or electronic delivery or by written notice of the availability of the
information on an Internet site that may be password-protected and of any password needed to access
the information[; so long as you agree to execute, as a condition precedent to the provision of the
information, an agreement to keep the information confidential in such manner and form as the
Administrator may require from time to time]. Notwithstanding the foregoing, the Company shall
have no initial or continuing obligation to provide you with the information described in this
Section 15, except as otherwise required by applicable law.]

{Glossary begins on next page}

- 5 -

 

GLOSSARY

          (a) “Affiliate” has the meaning set forth in the Plan.

          (b)
“Cause” has the meaning ascribed to such term or words of similar import in your written
employment or service contract with the Company as in effect at the time at issue and, in the
absence of such agreement or definition, means your (i) conviction of, or plea of nolo contendere
to, a felony or crime involving moral turpitude; (ii) fraud on or misappropriation of any funds or
property of the Company, any affiliate, customer or vendor; (iii) personal dishonesty,
incompetence, willful misconduct, willful violation of any law, rule or regulation (other than
minor traffic violations or similar offenses) or breach of fiduciary duty which involves personal
profit; (iv) willful misconduct in connection with your duties or willful failure to
perform your responsibilities in the best interests of the Company; (v) illegal use or
distribution of drugs; (vi) violation of any Company rule, regulation, procedure or policy; or
(vii) breach of any provision of any employment, non-disclosure, non-competition, non-solicitation
or other similar agreement executed by you for the benefit of the Company, all as determined by the
Administrator, which determination will be conclusive.

          (c)
“Change in Control” has the meaning set forth in the Plan.

          (d) “Company” includes China Hydroelectric Corporation and its Affiliates, except where the
context otherwise requires. For purposes of determining whether a Change in Control has occurred,
Company shall mean only China Hydroelectric Corporation.

          (e) “Fair Market Value” of a share has the meaning set forth in the Plan.

          (f) “Service” means your employment or other service relationship with the Company.

          (g) “Shares” mean the Ordinary Shares underlying the Options.

          (h) “Share Option Notice” means the written notice evidencing the award of the Options that
correlates with and makes up a part of this Agreement.

          (i) “Total and Permanent Disability” means the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a continuous period
of not less than twelve months. The Administrator may require such proof of Total and Permanent
Disability as the Administrator in its sole discretion deems appropriate and the Administrator’s
good faith determination as to whether you are totally and permanently disabled will be final and
binding on all parties concerned.

          (j)
“You”; “Your”. “You” or “your” means the recipient of the award of
Options as reflected on the Share Option Notice. Whenever the Agreement refers to “you” under
circumstances where the provision should logically be construed, as determined by the
Administrator, to apply to your estate, personal representative, or beneficiary to whom the
Options may be transferred by will or by the laws of descent and distribution, the word “you”
shall be deemed to include such person.

- 6 -

 

EXERCISE FORM

	 	 	 
	Administrator of China Hydroelectric Corporation 2008 Share Incentive Plan
	c/o Office of the Corporate Secretary
	 	 
	China Hydroelectric Corporation
	 	 
	 	 	 
	[ADDRESS OF THE COMPANY]
	 	 
	 	 	 
	 
	 	 
	 	 	 

Gentlemen:

     I hereby exercise the Options granted to me on                                         ,               
      , by China Hydroelectric
Corporation (the “Company”), subject to all the terms and provisions of the applicable
grant agreement and of the China Hydroelectric Corporation 2008 Share Incentive Plan (the
“Plan”), and notify you of my desire to purchase
                     shares of Ordinary Shares of the Company
at a price of $                     per share pursuant to the exercise of said Options.

     This will confirm my understanding with respect to the shares to be issued to me by reason of
this exercise of the Options (the shares to be issued pursuant hereto shall be collectively
referred to hereinafter as the “Shares”) as follows:

          (a) I am purchasing the Shares for my own account for investment only, and not with a view to,
or for sale in connection with, any distribution of the Shares in violation of the Securities Act
of 1933 (the “Securities Act”), or any rule or regulation under the Securities Act.

          (b) I understand that the Shares are being issued without registration under the Securities
Act, in reliance upon one or more exemptions contained in the Securities Act, and such reliance is
based in part on the above representation. I also understand that the Company is not obligated
to comply with the registration requirements of the Securities Act or with the requirements for an
exemption under Regulation A under the Securities Act for my benefit.

          (c) I have had such opportunity as I deemed adequate to obtain from
representatives of the Company such information as is necessary to permit me to evaluate the merits
and risks of my investment in the Company.

          (d) I have sufficient experience in business, financial and investment matters to be able to
evaluate the risks involved in the purchase of the Shares and to make an informed investment
decision with respect to such purchase.

          (e) I can afford a complete loss of the value of the Shares and am able to bear the economic
risk of holding such Shares for an indefinite period.

          (f) I understand that (i) the Shares have not been registered under the Securities Act and are
“restricted securities” within the meaning of Rule 144 under the Securities Act; (ii) the Shares
cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under
the Securities Act or an exemption from registration is then available and, therefore, they may
need to be held indefinitely; and (iii) there is now no registration statement on file with the
Securities and Exchange Commission with respect to any share of the Company and the Company has no
obligation or current intention to register the Shares under the Securities Act. As a condition to
any transfer of the Shares, I understand that the Company may require an opinion of counsel
satisfactory to the Company to the effect that such transfer does not require registration under
the Securities Act or any state securities law.

          (g) I understand that the certificates for the Shares to be issued to me will bear a legend
substantially as follows:

 

 

The Ordinary Shares represented by this certificate are subject to restrictions on
transfer, an option to purchase and a market stand-off agreement set forth in a
certain Share Restriction Agreement between the corporation and the registered owner
of this certificate (or his predecessor in interest), and no transfer of such shares
may be made without compliance with that Agreement. A copy of that Agreement is
available for inspection at the office of the corporation upon appropriate request and
without charge.

The securities represented by this share certificate have not been registered under
the Securities Act of 1933 (the “Act”) or applicable state securities laws (the
“State Acts”), and shall not be sold, pledged, hypothecated, donated, or otherwise
transferred (whether or not for consideration) by the holder except upon the issuance
to the corporation of a favorable opinion of its counsel and/or submission to the
corporation of such other evidence as may be satisfactory to counsel for the
corporation, to the effect that any such transfer shall not be in violation of the
Act and the State Acts.

The Company will issue appropriate stop transfer instructions to its transfer agent.

          (h) I am a party to a grant agreement and a share restriction agreement with the Company,
pursuant to which I have agreed to certain restrictions on the transferability of the Shares and
other matters relating thereto.

Total Amount Enclosed: $                    

	 	 	 	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(Optionee)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Received by CHINA HYDROELECTRIC
CORPORATION on	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	                                        ,                     	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:

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