Document:

f8k082708ex4ii_ea3chinavalve.htm

    

    Exhibit
4.2

    

    LOCK-UP
AGREEMENT

    

    THIS LOCK-UP AGREEMENT (the "Agreement") is made and
entered into on August 26, 2008 between the stockholders set forth on the
signature page to this Agreement (each, a "Holder") and China Valves
Technology, Inc. (f/k/a Intercontinental Resources, Inc.), a Nevada corporation
(the "Company").

    

    RECITALS

    

            A.           The
Company has determined that it is advisable and in its best interest to enter
into that certain Securities Purchase Agreement, dated August 26, 2008 (the
"Purchase Agreement") with the Investors named therein (the "Investors") and
certain other parties named therein, pursuant to which the Company will issue
and sell in a private offering securities of the Company (the
"Offering").  Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement will have the meanings given such
terms in the Purchase Agreement.

    

    B.           In
connection with the Offering, the Company has agreed to provide the Investors
certain registration rights, and in furtherance thereof has agreed to file a
registration statement to enable the Investors to resell certain of the
securities subject of the Offering.

    

    C.           It
is a condition to the Investors' respective obligations to close under the
Purchase Agreement and provide the financing contemplating by the Offering that
the Holder execute and deliver to the Company this Agreement.

    

    D.           In
contemplation of, and as a material inducement for the Investors to enter into,
the Purchase Agreement, the Holder and the Company have each agreed to execute
and deliver this Agreement.

    

            NOW, THEREFORE, for
and in consideration of the mutual covenants and agreements set forth herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties, intending to be legally bound, agree as
follows:

    

    1.           Effectiveness of
Agreement.  This Agreement shall become null and void if the
Purchase Agreement is terminated prior to its Closing as to all
Investors.

    

    2.           Representations and
Warranties.  Each of the parties hereto, by their respective
execution and delivery of this Agreement, hereby represents and warrants to the
others and to all third party beneficiaries of this Agreement that (a) such
party has the full right, capacity and authority to enter into, deliver and
perform its respective obligations under this Agreement, (b) this Agreement has
been duly executed and delivered by such party and is the binding and
enforceable obligation of such party, enforceable against such party in
accordance with the terms of this Agreement and (c) the execution, delivery and
performance of such party’s obligations under this Agreement will not conflict
with or breach the terms of any other agreement, contract, commitment or
understanding to which such party is a party or to which the assets or
securities of such party are bound.

     

     

    
      
         

      

      
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    Each
Holder has independently evaluated the merits of its decision to enter into and
deliver this Agreement, and such Holder confirms that it has not relied on the
advice of the Company or any other person.

    

    3.           Beneficial
Ownership.  Holder hereby represents and warrants that it does
not beneficially own (as determined in accordance with Section 13(d) of the
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder) any shares of Common Stock, or any economic interest therein or
derivative therefrom, other than those shares of Common Stock specified on its
signature page to this Agreement.  For purposes of this Agreement the
shares of Common Stock beneficially owned by such Holder as specified on its
signature page to this Agreement are collectively referred to as the “Holder’s
Shares.”

    

            4.           Lockup.  From
and after the date of this Agreement and through and including the one year
anniversary of the effective date of a registration statement resulting in all
Shares being registered for resale by the Investors (plus one additional day for
each Trading Day following the Effective Date of any Registration Statement
during which either (1) the Registration Statement is not effective or
(2) the prospectus forming a portion of the Registration Statement is not
available for the resale of all Registrable Securities (as defined in the
Registration Rights Agreement) required to be covered thereby) (the "Lockup
Period"), the Holder irrevocably agrees that, except as set forth below, it will
not offer, pledge, encumber, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or indirectly,
or announce the offering of, any of its Holder’s Shares (including any
securities convertible into, or exchangeable for, or representing the rights to
receive, Holder’s Shares) or engage in any Short Sales with respect to any
security of the Company.  In furtherance thereof, the Company will (x)
place a stop order with the Transfer Agent on all Holder’s Shares, including
those which are covered by a registration statement, (y) notify its transfer
agent in writing of the stop order and the restrictions on such Holder’s Shares
under this Agreement and direct the transfer agent not to process any attempts
by the Holder to resell or transfer any Holder’s Shares except in compliance
with this Agreement.  Notwithstanding the foregoing, each Holder may
transfer any Holder's Shares by (a) bona fide gift or (b) will or intestate
succession to his or her immediate family or to a trust the sole beneficiaries
of which are one or more of the undersigned and his or her immediate family (the
term "immediate family" meaning for these purposes the spouse, domestic partner,
lineal descendant, father, mother or sibling of the undersigned), provided that
each resulting transferee of such Holder's Shares executes and delivers to the
Company an agreement satisfactory to the Company certifying that such transferee
is bound by the terms of this Agreement and has been in compliance with the
terms hereof since the date first above written as if it had been an original
party hereto.  Further, Holder shall be permitted to pledge, encumber,
or create a security interest in any or all of its Holder's Shares to secure the
payment or performance of indebtedness and other obligations of the Company
and/or its Subsidiaries to bona fide commercial lending institutions in the
People's Republic of China.  For purposes hereof, “Short Sales”
include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act and all types of direct
and indirect stock pledges, forward sale contracts, options, puts, calls, swaps
and similar arrangements (including on a total return basis), and sales and
other transactions through non-US broker dealers or foreign regulated
brokers.

     

     

    
      
         

      

      
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    5.           Third-Party
Beneficiaries.  The Holder and the Company acknowledge and
agree that this Agreement is entered into for the benefit of and is enforceable
by the Investors and their successors and assigns. The Holder and the Company
understand and agree that this Agreement is a material inducement to the
willingness of the Investors to enter into the Purchase agreement and the
transactions contemplated thereunder, that each of the Company and the Holder
receive benefits as a result of the investment into the Company by the
Investors.

    

    6.           No Additional
Fees/Payment.  Other than the consideration specifically
referenced herein, the parties hereto agree that no fee, payment or additional
consideration in any form has been or will be paid to the Holder in connection
with this Agreement.

    

    7.           Enumeration and
Headings.  The enumeration and headings contained in this
Agreement are for convenience of reference only and shall not control or affect
the meaning or construction of any of the provisions of this
Agreement.

    

            8.           Counterparts.  This
Agreement may be executed in facsimile and in any number of counterparts, each
of which when so executed and delivered shall be deemed an original, but all of
which shall together constitute one and the same agreement.

    

            9.           Successors
and Assigns.  This Agreement and the terms, covenants, provisions and
conditions hereof shall be binding upon, and shall inure to the benefit of, the
respective heirs, successors and assigns of the parties hereto.

    

            10.           Severability.  If
any provision of this Agreement is held to be invalid or unenforceable for any
reason, such provision will be conformed to prevailing law rather than voided,
if possible, in order to achieve the intent of the parties and, in any event,
the remaining provisions of this Agreement shall remain in full force and effect
and shall be binding upon the parties hereto.

    

            11.           Amendment.  This
Agreement may not be amended or modified in any manner except by a written
agreement executed by each of the parties hereto if and only if such
modification or amendment is consented to in writing by the Investors holding a
majority in interest of the Common Stock issued or issuable under the Purchase
Agreement.

    

            12.           Further
Assurances.  The Company and the Holder shall each do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as any Investor or the Transfer Agent or, in the case of the Holder,
the Company may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

     

     

    
      
         

      

      
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            13.           No
Strict Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.

    

            14.           Remedies.  The
Company and the Investors shall have the right to specifically enforce all of
the obligations of the Holder under this Agreement (without posting a bond or
other security), in addition to recovering damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by
law.  Furthermore, each Holder recognizes that if it fails to perform,
observe, or discharge any of its obligations under this Agreement, any remedy at
law may prove to be inadequate relief to the Company or the
Investors.  Therefore, the Holder agrees that each of the Company and
the Investors shall be entitled to seek temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages and
without posting a bond or other security.

    

    15.           Arbitration.           Any
dispute, controversy or claim arising out of or relating to this Agreement, or
the breach, termination or invalidity thereof, shall be settled definitively and
exclusively by arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association by a single arbitrator appointed in
accordance with said Rules.  The arbitration shall take place in New
York, New York, United States of America.  The language to be used in
the arbitral proceedings shall be English.  The arbitrator shall apply
the law of the State of New York, United States of America, without regard for
its principles of conflict of laws.  Decisions by the Investors
participating in the arbitration shall be by majority vote based on the
percentage of the Company owned by the individual Investors participating in the
arbitration.  Judgment upon the award may be entered in any court
having jurisdiction thereof.  If either party shall commence a
Proceeding to enforce any provisions of a Transaction Document, then the
prevailing party in such Proceeding shall be reimbursed by the other party for
its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.

     

    [Remainder
of Page Intentionally Left Blank]

     

     

    
      
         

      

      
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    IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement as of the
day and year first above written.

    

    
      	
                                                                                                      
      

              Name:

               

              Number
      of shares of Common
      Stock beneficially owned:

               

              ______________________________________

            
	
               

              CHINA
      VALVES TECHNOLOGY, INC.

               

              By:                                                                                  
      

              Name:

              Title:

            

    

    

    

    5f8k082708ex4iii_ea3chinavlve.htm

    

    NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE
OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
SECURED BY SUCH SECURITIES.

     

    CHINA
VALVES TECHNOLOGY, INC.

     

    WARRANT

     

    
      	Warrant No.
      [   ] 	
               Original Issue
      Date: August ­­__, 2008

            

    

     

    China
Valves Technology, Inc., a Nevada corporation (the “Company”), hereby certifies
that, as partial compensation for placement agent services, [ ] or its
registered assigns (the “Holder”), is entitled to
purchase from the Company up to a total of [   ] shares of Common
Stock (each such share, a “Warrant Share” and all such
shares, the “Warrant
Shares”), at any time and from time to time from and after the Original
Issue Date and through and including August __, 2011 (the “Expiration Date”), and
subject to the following terms and conditions:

     

    1. Definitions.  As
used in this Warrant, the following terms shall have the respective definitions
set forth in this Section 1.

     

    “Affiliate” means any Person
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144.

     

    “Business Day” means any day
except Saturday, Sunday and any day which is a federal legal holiday or a day on
which banking institutions in the State of New York are authorized or required
by law or other governmental action to close.

     

     

    
      
        
        

      

      
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    “Common Stock” means the
common stock of the Company, $0.001 par value per share, and any securities into
which such common stock may hereafter be reclassified or for which it may be
exchanged as a class.

     

    “Exchange Act” means the
Securities Exchange Act of 1934, as amended.

     

    “Exercise Price” means
$2.1456, subject to adjustment in accordance with Section 9.

     

    “Fundamental Transaction”
means any of the following: (1) the Company effects any merger or consolidation
of the Company with or into another Person, (2) the Company effects any sale of
all or substantially all of its assets in one or a series of related
transactions, (3) any tender offer or exchange offer (whether by the Company or
another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, or (4) the Company effects any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property.

     

    “New York Courts” means the
state and federal courts sitting in the City of New York, Borough of
Manhattan.

     

    “Original Issue Date” means
the Original Issue Date first set forth on the first page of this
Warrant.

     

    “Person” means an individual
or corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.

     

    “Rule 144” means Rule 144
promulgated by the Securities and Exchange Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission having
substantially the same effect as such Rule.

     

    “Securities Act” means the
Securities Act of 1933, as amended.

     

    “Subsidiary” means any
“significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X
promulgated by the Securities and Exchange Commission under the Exchange
Act.

     

    “Trading Day” means (i) a day
on which the Common Stock is traded on a Trading Market, or (ii) if the Common
Stock is not quoted on any Trading Market, a day on which the Common Stock is
quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any
similar organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i) or (ii) hereof, then Trading Day shall mean a Business
Day.

     

    “Trading Market” means
whichever of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.

     

     

    
      
        
        

      

      
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    “Warrant Shares” means the
shares of Common Stock issuable upon exercise of this Warrant.

     

    2. 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 Holder hereof from time to time.  The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.

     

    3. Registration of
Transfers.  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 its address specified herein.  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 Holder. The acceptance of the New
Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a
Warrant.

     

    4. Exercise and Duration of
Warrants.  This Warrant shall be exercisable by the registered
Holder at any time and from time to time on or after the Original Issue Date
through and including the Expiration Date.  At 6:30 p.m., New York
City time on the Expiration Date, the portion of this Warrant not exercised
prior thereto shall be and become void and of no value.  The Company
may not call or redeem any portion of this Warrant without the prior written
consent of the affected Holder.

     

    5. Delivery of Warrant
Shares.

     

    (a) To effect
exercises hereunder, the Holder shall not be required to physically surrender
this Warrant unless the aggregate Warrant Shares represented by this Warrant are
being exercised.  Upon delivery of the duly executed Exercise Notice
(in the form attached hereto) to the Company (with the attached Warrant Shares
Exercise Log) at its address for notice set forth herein and upon payment of the
Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, the Company shall promptly (but in no event later
than five Trading Days after the Date of Exercise (as defined herein)) issue and
deliver to the Holder, a certificate for the Warrant Shares issuable upon such
exercise.  The Company shall, upon request of the Holder and
subsequent to the date on which a registration statement covering the resale of
the Warrant Shares has been declared effective by the Securities and Exchange
Commission, use its reasonable best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions, if available, provided, that, the
Company may, but will not be required to change its transfer agent if its
current transfer agent cannot deliver Warrant Shares electronically through the
Depository Trust Corporation.  A “Date of Exercise” means the
date on which the Holder shall have delivered to the Company: (i) the Exercise
Notice (with the Warrant Exercise Log attached to it), appropriately completed
and duly signed and (ii) if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, payment of the Exercise Price for the
number of Warrant Shares so indicated by the Holder to be
purchased.

     

     

    
      
        
        

      

      
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    (b) If by the
fifth Trading Day after a Date of Exercise the Company fails to deliver the
required number of Warrant Shares in the manner required pursuant to Section
5(a), then the Holder will have the right to rescind such exercise.

     

    (c) If by the
fifth Trading Day after a Date of Exercise the Company fails to deliver the
required number of Warrant Shares in the manner required pursuant to Section
5(a), and if after such fifth Trading Day and prior to the receipt of such
Warrant Shares, the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”),
then the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder's total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue by (B) the
closing bid price of the Common Stock on the Date of Exercise and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations
hereunder.  The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In.

     

    (d) The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of Warrant Shares.  Nothing
herein shall limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing Warrant Shares upon exercise
of the Warrant as required pursuant to the terms hereof.

     

    6. Charges, Taxes and
Expenses.  Issuance and delivery of Warrant Shares upon
exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
or Warrants in a name other than that of the Holder.  The Holder shall
be responsible for all other tax liability that may arise as a result of holding
or transferring this Warrant or receiving Warrant Shares upon exercise
hereof.

     

     

    
      
        
        

      

      
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    7. Replacement of
Warrant.  If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity (which shall not include a surety bond), if
requested.  Applicants for a New Warrant under such circumstances
shall also comply with such other reasonable regulations and procedures and pay
such other reasonable third-party costs as the Company may
prescribe.  If a New Warrant is requested as a result of a mutilation
of this Warrant, then the Holder shall deliver such mutilated Warrant to the
Company as a condition precedent to the Company’s obligation to issue the New
Warrant.

     

    8. Reservation of Warrant
Shares.  The Company covenants that during the term that this
Warrant is exercisable, it will at all times reserve and keep available out of
the aggregate of its authorized but unissued and otherwise unreserved Common
Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, the number of Warrant Shares which
are then issuable and deliverable upon the exercise of this entire Warrant, free
from preemptive rights or any other contingent purchase rights of Persons other
than the Holder (taking into account the adjustments and restrictions of Section
9). The Company covenants that all Warrant Shares so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable.

     

    9. Certain
Adjustments.  The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section
9.

     

    (a) Stock Dividends and
Splits.  If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event.  Any adjustment made pursuant to clause (i) of this paragraph
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.

     

     

    
      
        
        

      

      
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    (b) Fundamental
Transactions.  If, at any time while this Warrant is
outstanding there is a Fundamental Transaction, then the Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant
Shares then issuable upon exercise in full of this Warrant (the “Alternate
Consideration”).  For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders
of Common Stock are given any choice as to the securities, cash or property to
be received in a Fundamental Transaction, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon any exercise of
this Warrant following such Fundamental Transaction.  At the Holder's
option and request, any successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new warrant substantially in
the form of this Warrant and consistent with the foregoing provisions and
evidencing the Holder's right to purchase the Alternate Consideration for the
aggregate Exercise Price upon exercise thereof.  The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with the
provisions of this paragraph (b) and insuring that the Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.

     

    (c) Number of Warrant
Shares.  Simultaneously with any adjustment to the Exercise
Price pursuant to this Section 9, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such
adjustment.

     

    (d) Calculations.  All
calculations under this Section 9 shall be made to the nearest cent or the
nearest 1/100th of a
share, as applicable.  The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.

     

    (e) Notice of
Adjustments.  Upon the occurrence of each adjustment pursuant
to this Section 9, the Company at its expense will promptly compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment, including a statement of the adjusted
Exercise Price and adjusted number or type of Warrant Shares or other securities
issuable upon exercise of this Warrant (as applicable), describing the
transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based.  Upon written request, the
Company will promptly deliver a copy of each such certificate to the Holder and
to the Company's Transfer Agent.

     

    (f) Notice of Corporate
Events.  If the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common
Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
except for grants of options to management (ii) authorizes or approves, enters
into any agreement contemplating or solicits stockholder approval for any
Fundamental Transaction or (iii) authorizes the voluntary dissolution,
liquidation or winding up of the affairs of the Company, then the Company shall
deliver to the Holder a notice describing the material terms and conditions of
such transaction (but only to the extent such disclosure would not result in the
dissemination of material, non-public information to the Holder) at least 10
calendar days prior to the applicable record or effective date on which a Person
would need to hold Common Stock in order to participate in or vote with respect
to such transaction, and the Company will take all steps reasonably necessary in
order to insure that the Holder is given the practical opportunity to exercise
this Warrant prior to such time so as to participate in or vote with respect to
such transaction; provided, however, that the failure to deliver such notice or
any defect therein shall not affect the validity of the corporate action
required to be described in such notice.

     

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

     

    10. Payment
of Exercise Price. The Holder may
pay the Exercise Price in one of the following manners:

     

    (a) Cash
Exercise.  The Holder may deliver immediately available funds;
or

     

    (b) Cashless
Exercise.  If an Exercise Notice is delivered at a time when a
registration statement permitting the Holder to resell the Warrant Shares is not
then effective or the prospectus forming a part thereof is not then available to
the Holder for the resale of the Warrant Shares, then the Holder may notify the
Company in an Exercise Notice of its election to utilize cashless exercise, in
which event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:

     

    X = Y
[(A-B)/A]

     

    where:

     

    X = the
number of Warrant Shares to be issued to the Holder.

     

    Y = the
number of Warrant Shares with respect to which this Warrant is being
exercised.

     

    A = the
average of the closing prices for the five Trading Days immediately prior to
(but not including) the Date of Exercise.

     

    B = the
Exercise Price.

     

    For
purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued.

     

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

     

    11. Limitations on
Exercise.  Notwithstanding anything to the contrary contained
herein, the number of Warrant Shares that may be acquired by the Holder upon any
exercise of this Warrant (or otherwise in respect hereof) shall be limited to
the extent necessary to insure that, following such exercise (or other
issuance), the total number of shares of Common Stock then beneficially owned by
such Holder and its Affiliates and any other Persons whose beneficial ownership
of Common Stock would be aggregated with the Holder's for purposes of Section
13(d) of the Exchange Act, does not exceed 9.99% of the total number of issued
and outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise).  For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated
thereunder.  This provision shall not restrict the number of shares of
Common Stock which a Holder may receive or beneficially own in order to
determine the amount of securities or other consideration that such Holder may
receive in the event of a Fundamental Transaction as contemplated in Section 9
of this Warrant.  This restriction may not be
waived.  Notwithstanding anything to the contrary contained in this
Warrant, (a) no term of this Section may be waived by any party, nor amended
such that the threshold percentage of ownership would be directly or indirectly
increased, (b) this restriction runs with the Warrant and may not be modified or
waived by any subsequent holder hereof and (c) any attempted waiver,
modification or amendment of this Section will be void ab initio.

     

    12. No Fractional
Shares.  No fractional shares of Warrant Shares will be issued
in connection with any exercise of this Warrant.  In lieu of any
fractional shares which would, otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the closing price of one
Warrant Share as reported by the applicable Trading Market on the date of
exercise.

     

    13. Notices.  Any
and all notices or other communications or deliveries hereunder (including,
without limitation, any Exercise Notice) shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (ii) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (iii) the Trading Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be
given.  The addresses for such communications shall be:  (i)
if to the Company, to China Valves Technology, Inc., No. 93 West Xinsong Road,
Kaifeng, Henan Province 475002, China, Attn: President, (or such other address
as the Company shall indicate in writing in accordance with this Section), with
a copy to Fang Liu, Esq., Thelen Reid Brown Raysman & Steiner LLP, 701
Eighth Street, N.W., Washington, DC 20001, facsimile no.: (202) 654-1895, or
(ii) if to the Holder, to the address or facsimile number appearing on the
Warrant Register or such other address or facsimile number as the Holder may
provide to the Company in accordance with this Section.

     

    14. Warrant
Agent.  The Company shall serve as warrant agent under this
Warrant.  Upon 10 days’ notice to the Holder, the Company may appoint
a new warrant agent.  Any corporation into which the Company or any
new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or
any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further
act.  Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.

     

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

     

    15. Miscellaneous.

     

    (a) This
Warrant shall be binding on and inure to the benefit of the parties hereto and
their respective successors and assigns.  Subject to the preceding
sentence, nothing in this Warrant shall be construed to give to any Person other
than the Company and the Holder any legal or equitable right, remedy or cause of
action under this Warrant.  This Warrant may be amended only in
writing signed by the Company and the Holder and their successors and
assigns.  The foregoing sentence shall be subject to the restrictions
on waivers and amendments set forth in Section 11 of this Warrant.

     

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

     

    (c) 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.

     

    (d) 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 reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

     

    (e) Prior to
exercise of this Warrant, the Holder hereof shall not, by reason of being a
Holder, be entitled to any rights of a stockholder with respect to the Warrant
Shares.

     

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

     

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

     

     

    
      	
               
      

            	
              CHINA
      VALVES TECHNOLOGY, INC.

            

    

     

    
      	
               

            	
              By:                                                                   
      

            

    

    
      	
               
      

            	
                  Name:

            

    

    
      	
               
      

            	
                  Title:

            

    

     

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

     

    EXERCISE
NOTICE

    CHINA
VALVES TECHNOLOGY, INC.

    WARRANT
DATED AUGUST __,
2008

     

    The
undersigned Holder hereby irrevocably elects to
purchase  _____________ shares of Common Stock pursuant to the above
referenced Warrant.  Capitalized terms used herein and not otherwise
defined have the respective meanings set forth in the Warrant.

     

    
      	
              (1)

            	
              The
      undersigned Holder hereby exercises its right to purchase
      _________________ Warrant Shares pursuant to the
  Warrant.

            

    

     

    
      	
              (2)

            	
              The
      Holder intends that payment of the Exercise Price shall be made as (check
      one):

            

    

     

    ____                 “Cash
Exercise” under Section 10

     

    ____                 “Cashless
Exercise” under Section 10

     

    
      	
              (3)

            	
              If
      the holder has elected a Cash Exercise, the holder shall pay the sum of
      $____________ to the Company in accordance with the terms of the
      Warrant.

            

    

     

    
      	
              (4)

            	
              Pursuant
      to this Exercise Notice, the Company shall deliver to the holder
      _______________ Warrant Shares in accordance with the terms of the
      Warrant.

            

    

     

    
      	
              (5)

            	
              By
      its delivery of this Exercise Notice, the undersigned represents and
      warrants to the Company that in giving effect to the exercise evidenced
      hereby the Holder will not beneficially own in excess of the number of
      shares of Common Stock (determined in accordance with Section 13(d) of the
      Securities Exchange Act of 1934) permitted to be owned under Section 11 of
      this Warrant to which this notice
relates.

            

    

    

    
      	 
      	 
      	 
      
	 
      	 
      	 
      
	
              Dated:                                      ,            
      

            	 
      	
              Name
      of Holder:

            
	 
      	 
      	 
      
	 
      	 
      	
              (Print)                                                             

            
	 
      	 
      	 
      
	 
      	 
      	
              By:                                                                  
      

            
	 
      	 
      	
              Name:                                                             

            
	 
      	 
      	
              Title:                                                               
      

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

            

    

    

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

     

    Warrant Shares Exercise
Log

     

    
      	
              Date

            	
              Number
      of Warrant Shares Available to be Exercised

            	
              Number
      of Warrant Shares Exercised

            	
              Number
      of Warrant Shares Remaining to be Exercised

            
	 
      	 
      	 
      	 
      

    

    

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

     

    CHINA
VALVES TECHNOLOGY, INC.

    WARRANT
DATED AUGUST __,
2008

    WARRANT
NO. __

     

    FORM OF
ASSIGNMENT

     

    [To be
completed and signed only upon transfer of Warrant]

     

    FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the above-captioned
Warrant to purchase  ____________ shares of Common Stock to which such
Warrant relates and appoints ________________ attorney to transfer said right on
the books of the Company with full power of substitution in the
premises.

     

    Dated:                      _______________,
____

     

    _______________________________________

     

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

     

    _______________________________________

     

     

    Address
of Transferee

     

    _______________________________________

     

    _______________________________________

     

    In the
presence of:

     

    __________________________

     

    
 

    -13-

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