Document:

exv10w16

Exhibit 10.16

Execution Copy

THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND THE SHARES ISSUABLE HEREUNDER, HAVE NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION.
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SHARES ISSUABLE UNDER THIS WARRANT ARE SUBJECT
TO THE TERMS AND CONDITIONS OF THE SHAREHOLDERS’ AGREEMENT BY AND AMONG THE HOLDER HEREOF, THE
COMPANY AND CERTAIN OTHER PARTIES NAMED THEREIN. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

EASTERN WELL HOLDINGS LIMITED

WARRANT TO PURCHASE SERIES A PREFERRED SHARES

(Subject to Adjustment)

Date: June 24, 2009

     THIS CERTIFIES THAT, for value received, CHINA ENVIRONMENT FUND III, L.P. (the “Holder”)
is entitled, subject to the terms and conditions of this Warrant, at any time and from time to time
during the Exercise Period (as defined below), to purchase from EASTERN WELL HOLDINGS LIMITED
, a company duly incorporated and validly
existing under the Laws of Hong Kong (the
“Company”), up to 2,453,240 Series A convertible and redeemable preferred shares of the Company,
par value US$0.001 per share (the “Warrant Shares”), at the Exercise Price Per Share (as defined
below). The Exercise Price Per Share and number of Warrant Shares are subject to adjustment and
change as provided herein. This Warrant is issued pursuant to the Series A Preferred Share Purchase
Agreement dated June 18, 2009 (the “Purchase Agreement”), among the Company, the Holder and certain
other parties named therein.

     1. Certain Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed thereto in the Purchase Agreement. As used in this Warrant
the following terms shall have the following respective meanings:

     “Board” shall mean the board of directors of the Company.

     “Company” means EASTERN WELL HOLDINGS LIMITED , a company duly incorporated and
validly existing under the Laws of Hong Kong.

     “Encumbrances” shall have the meaning ascribed to it in Section 7.

     “Exercise Date” shall mean the date of effective exercise of this Warrant by the Holder
during the Exercise Period.

Series A Warrant

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     “Exercise Period” shall mean the twelve-month period commencing on the date of this
Warrant.

     “Exercise Price Per Share” means the per share exercise price of the Warrant Shares which
shall initially be US$4.076 (which is subject to the adjustment stated in Section 4 herein and the
adjustment of the purchase price of Series A Preferred Shares pursuant to the Purchase Agreement),
amounting to an aggregate exercise price of all the Warrant Shares of US$10,000,000.

     “Exercise Price” shall have the meaning ascribed to it in Section 2.1.

     “Notice of Exercise” shall have the meaning ascribed to it in Section 2.1.

     “Permitted Transferee” means an Affiliate of the Holder.

     “Person” means any individual, sole proprietorship, partnership, firm, joint venture, estate,
trust, unincorporated organization, association, corporation, institution, public benefit
corporation, entity or governmental authority or other entity of any kind or nature.

     “Securities Act” means the United States Securities Act of 1933, as amended, and the rules and
regulations of the United States Securities and Exchange Commission promulgated thereunder, all as
from time to time in effect.

     “Series A Director” means a director appointed by the Holder to the Company.

     “Series A Preferred Shares” means the Series A convertible and redeemable preferred shares,
par value US$0.001 per share, of the Company.

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

     “Purchase Agreement” means the Series A Preferred Share Purchase Agreement dated June 18, 2009
by and among the Company, the Holder and certain other parties named therein.

     “Shares” means the shares of the Company.

     “Shareholders Agreement” means that certain Shareholders Agreement dated June 24, 2009 by and
among the Company, the Holder and certain other parties named therein.

     “Warrant” as used herein, shall include this Warrant and any warrant delivered in substitution
or exchange therefor as provided herein.

     “Warrant Shares” shall have the meaning ascribed to it in the first paragraph of this Warrant
(which is subject to the adjustment stated in Section 4 herein and the adjustment set forth in the
Purchase Agreement).

     2. Exercise of Warrant

          2.1. Exercise and Payment. Subject to compliance with the terms and conditions of this
Warrant and applicable securities laws, this Warrant may be exercised, in whole or in part, at any
time during the Exercise Period by the delivery of notice of exercise

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substantially
in the form attached hereto as Exhibit A (the “Notice of Exercise”), duly
executed by the Holder, to the Company at the address provided for notice to the Company under the
Purchase Agreement, and within thirty (30) days thereafter, the Holder shall (a) surrender this
Warrant to the Company at such address, and (b) effect payment to the Company, (i) in cash (by
check) or by wire transfer, (ii) by cancellation of indebtedness of the Company owed to the Holder,
or (iii) by a combination of (i) and (ii), of an amount equal to the product obtained by
multiplying the number of Warrant Shares being purchased upon such exercise by the then effective
Exercise Price Per Share (the “Exercise Price”). The Warrant will expire if not exercised within
the Exercise Period.

          2.2. Share Certificates; Fractional Shares. Upon surrender of this Warrant and payment of the
Exercise Price by the Holder, the Company shall register the Holder as a member of the Company in
the Company’s share register in respect of the number of Warrant Shares issuable upon such
exercise, and issue and deliver to the Holder or person(s) entitled to receive the same a
certificate or certificates for such number of Warrant Shares issuable upon such exercise at the
Company’s expense, together with cash in lieu of any fraction of a Warrant Share equal to the
Exercise Price Per Share multiplied by such fraction. No fractional Warrant Share or scrip
representing a fractional Warrant Share shall be issued upon an exercise of this Warrant.

          2.3 Effective Date of Exercise. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for exercise and payment by
the Holder of the Exercise Price as provided in Clause 2.1 above. The person entitled to receive
the Warrant Shares issuable upon exercise of this Warrant shall be treated for all purposes as the
holder of record of such Warrant Shares from the close of business on the date the Holder is deemed
to have exercised this Warrant.

     3. Valid Issuance; Taxes. All Warrant Shares issued upon the exercise of this
Warrant shall be validly issued, fully paid and non-assessable, and the Company shall pay all taxes
and other governmental charges that may be imposed in respect of the issue or delivery thereof.

     4. Adjustment of Exercise Price Per Share and Number of Warrant Shares. The
Exercise Price Per Share and number of Warrant Shares issuable upon exercise of this Warrant is
subject to the adjustment upon occurrence of the following events before the Exercise Date:

          4.1. Subdivision, Combination or Reclassification of Series A Preferred Shares. If the Company
shall, at any time or from time to time, (i) subdivide the outstanding Series A Preferred Shares,
(ii) combine the outstanding Series A Preferred
Shares into a smaller number of shares, or (iii) issue any shares of its capital stock in a
reclassification of the Series A Preferred Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing corporation), then
in each such case, the Exercise Price Per Share in effect at the time of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares of capital stock
issuable on such date shall be proportionately adjusted so that the holder of any Warrant exercised
after such date shall be entitled to receive, upon payment of the same aggregate amount as would
have been payable before such date, the aggregate number and kind of shares of capital stock which,
if such Warrant had been exercised immediately prior to such date, such Holder would have owned
upon such exercise and been entitled to receive

Series A Warrant

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by virtue of such subdivision, combination or reclassification. Any such adjustment shall
become effective immediately after the effective date of such subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event listed above shall
occur.

          4.2. Other Changes, etc. If the Company at any time or from time to time, after the issuance
of this Warrant but prior to the exercise hereof, shall take any action affecting its Series A
Preferred Shares similar to or having an effect similar to any of the actions described in Section
4.1 or 4.4 (but not including any action described in such Sections) then, and in each such case,
the Exercise Price Per Share and number of Warrant Shares shall be adjusted in such manner and at
such time as the Board of Directors in good faith determines would be equitable under the
circumstances (such determination to be evidenced in a resolution, a certified copy of which shall
be mailed to the Holder).

          4.3. Adjustments to Other Shares. In the event that at any time, as a result of an adjustment
made pursuant to this Section 4, the Holder shall become entitled to receive, upon exercise of this
Warrant, any shares of capital stock of the Company other than Series A Preferred Shares, the
number of such other shares so receivable upon exercise of this Warrant and the Exercise Price Per
Share shall be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Series A Preferred Shares contained
in this Section 4 herein.

          4.4. Adjustment for Capital Reorganization, Merger or Consolidation. In case of any
reorganization of the capital shares of the Company (other than a combination, reclassification or
subdivision of shares otherwise provided for herein), or any merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all the assets of the Company
then, and in each such case, as a part of such reorganization, merger, consolidation, sale or
transfer, lawful provision shall be made so that the Holder of this Warrant shall thereafter be
entitled to receive, upon exercise of this Warrant, and upon payment of the Exercise Price then in
effect, the number of shares or other securities or property of the successor corporation resulting
from such reorganization, merger, consolidation, sale or transfer that a holder of the shares
deliverable upon exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or transfer, all subject to
further adjustment as provided in this Section 4. The foregoing provisions of this Section 4.4
shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers
and to the shares or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the Holder hereof for shares in
connection with any such transaction is in a form other than cash or marketable securities, then
the value of such consideration shall be determined in good faith by the Company’s Board of
Directors (including the affirmative vote of Series A Director). In all events, appropriate
adjustment (as determined in good faith by the Company’s Board of Directors, including the
affirmative
vote of Series A Director) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to the end that the
provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in
relation to any shares or other property deliverable after that event upon exercise of this
Warrant.

Series A Warrant

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     5. Certificate as to Adjustments. In each case of any adjustment in the Exercise
Price Per Share, or number or type of shares issuable upon exercise of this Warrant, the chief
financial officer (or any person of an equivalent position) of the Company shall compute such
adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth
such adjustment and showing in detail the facts upon which such adjustment is based, including a
statement of the adjusted Exercise Price Per Share. The Company shall promptly send (by facsimile
or electronic mail, and by either first class mail, postage prepaid or overnight delivery) a copy
of each such certificate to the Holder.

     6. Loss or Mutilation. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to it, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver in lieu thereof a new Warrant of
like tenor as the lost, stolen, destroyed or mutilated Warrant.

     7. Reservation of Shares. The Company hereby covenants and agrees that at all times there
shall be reserved in the Company’s authorized but unissued shares for issuance and delivery upon
exercise of this Warrant such number of Warrant Shares (or other securities of the Company as are
from time to time issuable upon exercise of this Warrant) and Ordinary Shares for issuance on
conversion of such Warrant Shares, including, amending its Memorandum and Articles of Association
or other constitutional documents from time to time to increase its authorized shares as necessary.
All such shares shall be duly authorized, and when issued by way of registration in the name of the
Holder in the Company’s register of members upon such exercise in accordance with the terms herein,
shall be validly issued, fully paid and non-assessable, free and clear of all liens, security
interests, charges and other encumbrances or restrictions on sale and free and clear of all
preemptive and similar rights
(“Encumbrances”), except such Encumbrances arising under Law or under the Shareholders Agreement.
The Holder acknowledges that “reserve,” “reservation” or similar words may have no technical
meaning under the Laws of Hong Kong. For purposes only of this Warrant, “reserve”, “reservation”
and similar words shall mean that the Board of Directors of the Company have approved and
authorized an intent by the Company to refrain from issuing a number of Warrant Shares sufficient
to satisfy the exercise rights of the Holder of this Warrant (including Ordinary Shares issuable
upon conversion of such Series A Preferred Shares issued upon exercise of this Warrant) such that
such Warrant Shares (and the Ordinary Shares issuable upon conversion thereof) will remain in the
authorized but unissued shares of the Company until, as applicable, this Warrant is exercised in
accordance with its terms or the Warrant Shares are converted into Ordinary Shares in accordance
with the terms thereof.

     8. Transfer and Exchange. Subject to the terms and conditions of this Warrant and the
Shareholders Agreement, and compliance with all applicable securities laws, this Warrant and all
rights hereunder may be transferred to any person, in whole or in part, on the books of the Company
maintained for such purpose at the address provided for notice to the Company under the Purchase
Agreement, by the Holder hereof in person, or by duly authorized attorney, upon surrender of this
Warrant properly endorsed and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company will issue and deliver to
the Holder a new Warrant or Warrants with respect to the Warrant Shares not so transferred. Each
taker and holder of this Warrant, by taking or holding the same, consents and agrees that when this
Warrant shall have been so endorsed, the person in possession of this Warrant may be treated by the
Company, and all other persons dealing with this Warrant, as the absolute owner hereof for

Series A Warrant

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any purpose and as the person entitled to exercise the rights represented hereby, any notice
to the contrary notwithstanding; provided, however, that until a transfer of this Warrant is duly
registered on the books of the Company, the Company may treat the Holder hereof as the owner for
all purposes.

     9. Representations and Warranties. The Company covenants that the representations and
warranties contained in Section 3 of the Purchase Agreement shall be true and correct in all
respects as of the date hereof and as of the Exercise Date, provided that if any of the
representation or warranty contained in Section 3 of the Purchase Agreement shall become untrue on
the date of exercise of this Warrant, due to reason of amendment of the applicable Laws by the
competent government authorities or due to the action of any third party, the Company shall notify
the Holder of such situation promptly after it has become aware of the same.

     10. Compliance with Securities Laws. By acceptance of this Warrant, the Holder hereby
represents, warrants and covenants that any Warrant Share purchased upon exercise of this Warrant
or any Ordinary Share acquired upon conversion thereof shall be acquired for investment only and
not with a view to, or for sale in connection with, any distribution thereof in the United States;
that the Holder has had such opportunity as such Holder has deemed adequate to obtain from
representatives of the Company such information as is necessary to permit the Holder to evaluate
the merits and risks of its investment in the company; that the Holder is able to bear the economic
risk of holding such Warrant Shares as may be acquired pursuant to the exercise of this Warrant for
an indefinite period; that the Holder understands that the Warrant Shares acquired pursuant to the
exercise of this Warrant or Ordinary Shares acquired upon conversion thereof will not be registered
under the Securities Act (unless otherwise required pursuant to exercise by the Holder of the
registration rights, if any, previously granted to the Holder) and will be “restricted securities”
within the meaning of Rule 144 under the Securities Act.

     11. No Rights or Liabilities as Shareholders. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder or member of the Company. In the absence of
affirmative action by such Holder to purchase Warrant Shares by exercise of this Warrant or
Ordinary Shares upon conversion thereof, no provisions of this Warrant, and no enumeration herein
of the rights or privileges of the Holder hereof shall cause such Holder hereof to be a shareholder
or member of the Company for any purpose.

     12. Registration Rights. All Warrant Shares issuable upon exercise of this Warrant and
Ordinary Shares issuable upon conversion of the Warrant Shares shall be “Registrable Securities”
within the meaning of the relevant provisions of the Shareholders Agreement, and are entitled,
subject to the terms and conditions of that agreement, to all registration rights granted to the
Holder thereunder.

     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.

     14. Notices. All notices and other communications from the Company to the Holder shall be
given in accordance with the Purchase Agreement.

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     15. Headings. The headings in this Warrant are for purposes of convenience in reference
only, and shall not be deemed to constitute a part hereof.

     16. Law Governing. This Warrant shall be governed in all respects by the Laws of Hong Kong
without regards to conflicts of law principles.

     17. Dispute Resolution.

          (a) Any dispute, controversy or claim arising out of or relating to this Warrant, or the
interpretation, breach, termination or validity hereof, shall first be subject to resolution
through consultation of the parties to such dispute, controversy or claim. Such consultation shall
begin within seven (7) days after one party hereto has delivered to the other party involved a
written request for such consultation. If within thirty (30) days following the commencement of
such consultation the dispute cannot be resolved, the dispute shall be submitted to arbitration
upon the request of any party with notice to the other party.

          (b) The arbitration shall be conducted in Hong Kong under the auspices of the Hong Kong
International Arbitration Centre (the “HKIAC”). There shall be three arbitrators. The complainant
and the respondent to such dispute shall each select one arbitrator within thirty (30) days after
giving or receiving the demand for arbitration. Such arbitrators shall be freely selected, and the
Parties shall not be limited in their selection to any prescribed list. The Chairman of the HKIAC
shall select the third arbitrator, who shall be qualified to practice Law in Hong Kong and fluent
in English and Mandarin. If either party to the arbitration does not appoint an arbitrator who has
consented to participate within thirty (30) days after selection of the first arbitrator, the
relevant appointment shall be made by the Chairman of the HKIAC.

          (c) The arbitration proceedings shall be conducted in English. The arbitration tribunal shall
apply the Arbitration Rules of the HKIAC in effect at the time of the arbitration. However, if
such rules are in conflict with the provisions of this
Section 17, including the provisions
concerning the appointment of arbitrators, the provisions of this
Section 17 shall prevail.

          (d) The arbitrators shall decide any dispute submitted by the parties to the arbitration
strictly in accordance with the Laws of Hong Kong and shall not apply any other substantive law.

          (e) Each party hereto shall cooperate with any party to the dispute in making full disclosure
of and providing complete access to all information and documents requested by such party in
connection with such arbitration proceedings, subject only to any confidentiality obligations
binding on the party receiving the request; all such requested information and documents can be
provided in English or Chinese with equal legal validity.

          (f) The award of the arbitration tribunal shall be final and binding upon the disputing
parties, and any party to the dispute may apply to a court of competent jurisdiction for
enforcement of such award.

          (g) Any party to the dispute shall be entitled to seek preliminary injunctive relief, if
possible, from any court of competent jurisdiction pending the constitution of the arbitral
tribunal.

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     18. No Impairment. The Company will not cooperate with or facilitate any amendment of
its Memorandum and Articles of Association or other constitutional documents, or any
reorganization, consolidation, merger, dissolution, issue or sale of shares, sale of assets or any
other voluntary action, so as to avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder of this Warrant against impairment. Without limiting the generality of the
foregoing, the Company (a) will use its best efforts to ensure that the par value of any shares
issuable upon the exercise of this Warrant will not be increased above the amount payable therefor
upon such exercise, and (b) will take or procure the taking of all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully paid and
non-assessable Warrant Shares upon exercise of this Warrant and fully paid and non-assessable
Ordinary Shares upon conversion of such Warrant Shares.

     19. Notices of Record Date. In the event:

          (a) the Company shall take a record of the holders of its Series A Preferred Shares or
Ordinary Shares (or other shares or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any right to subscribe for or purchase any
shares of any class or any other securities or to receive any other right; or

          (b) of any consolidation or merger of the Company with or into another corporation, any
capital reorganization of the Company, any reclassification of the shares of the Company, or any
conveyance of all or substantially all of the assets of the Company to another corporation in which
holders of the Company’s shares are to receive shares, securities or property of another
corporation; or

          (c) of any voluntary dissolution, liquidation or winding-up of the Company; or

          (d) of any redemption or conversion of all outstanding Ordinary Shares or Series A Preferred
Shares;

then, and in each such case, the Company will mail or cause to be mailed to the Holder of this
Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for
the purpose of such right, or (ii) the date on which a record is to be taken for a vote on such
reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion, and the time, if any is to be fixed, as of which the holders
of record of Series A Preferred Shares, Ordinary Shares or such shares or securities as at the time
are receivable upon the exercise of this Warrant, shall be entitled to exchange their Series A
Preferred Shares, Ordinary Shares or such other shares or securities, for securities or other
property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution,
liquidation or winding-up. Such notice shall be delivered at least twenty (20) days prior to the
date therein specified.

     20. Severability. If any term, provision, covenant or restriction of this Warrant is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Warrant shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.

Series A Warrant

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     21. Counterparts. For the convenience of the parties, any number of counterparts of this
Warrant may be executed by the parties hereto and each such executed counterpart shall be, and
shall be deemed to be, an original instrument, but all of which together shall constitute one and
the same instrument.

     22. Entire Agreement. This Warrant, the Purchase Agreement and the Shareholders Agreement
constitute the entire agreement between the Company and the Holder with respect to the Warrant and
supersedes all prior agreements and understanding with respects to the subject matter of this
Warrant.

     23. Binding Effect: Benefits. This Warrant shall inure to the benefit of and shall be binding
upon the Company and the Holder and their respective permitted successors and assigns. Nothing in
this Warrant, expressed or implied, is intended to or shall confer on any person other than the
Company and the Holder, or their respective permitted successors or assigns, any rights, remedies,
obligations or liabilities under or by reason of this Warrant.

     24. No Inconsistent Agreements. The Company will not on or after the date of this Warrant
enter into any agreement with respect to its Shares which is inconsistent with the rights granted
to the Holder or otherwise conflicts with the provisions hereof. The rights granted to Holder
hereunder do not in any way conflict with and are not inconsistent with the rights granted to
holders of the Company’s Shares under any other agreements, except rights that have been waived.

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Series A Warrant

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     IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the day and year
herein above first written

	 	 	 	 	 	 
	 	 	SEALED with the Common Seal of 

EASTERN WELL HOLDINGS LIMITED 

and SIGNED by
	 
	 	 	 	 
	 	 	            
	 	 	 
	 	 	in the presence of
	 
	 
	 	Address:
	 	No 485-487, Gu Yang Road,
 Changning District, Shanghai, 
China
	 	 	Fax: 86-21-6631-2459

	 	 	 
	Accepted and agreed,
	 	 
	CHINA ENVIRONMENT FUND III, L.P.
	 	 
	 
	 	 
	
	 	 
	 

Name:

	 	 
	Title: Authorized Signatory
	 	 
	Address: A2302, SP Tower, Tsinghua Science 

Park, Beijing 100084 China
	 	 
	Fax: 86-10-8215-1150
	 	 

[Signature page to Series A Warrant]

Series A Warrant

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EXHIBIT A

FORM OF NOTICE OF EXERCISE

NOTICE OF EXERCISE

To: EASTERN WELL HOLDINGS LIMITED (the “Company”)

     The undersigned hereby elects to purchase                      Series A Preferred Shares pursuant to the
terms of the attached Warrant (the “Warrant”). Payment of the Exercise Price (as defined in the
Warrant) required under the Warrant accompanies this notice or herewith tenders payment by wire
transfer to an account previously designated by the Company.

     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.

	 	 	 	 	 
	 	 	[                                  ]
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 

	 	Address:	 	 

Series A Warrant

11exv10w17

Exhibit 10.17

OPTION AGREEMENT NO. 1

     This OPTION AGREEMENT No. 1 (this “Agreement”), dated December 31, 2009, is entered
into by and between China Environment Fund III, L.P. (the “Holder”), Sun Kwok Ping
(), holder of Hong Kong document of identity No. DA9001901 (the “Founder”) and
Eastern Well Holdings Limited, a Hong Kong company (the “Company”).

RECITALS

	A.	 	The Company previously issued a Warrant No. 1 to Purchase Series A Preferred Shares, dated
June 24, 2009, to the Holder (the “Warrant”).
	 
	B.	 	The parties desire to terminate the Warrant and enter into this Agreement in replacement of
the Warrant.

WITNESSETH

     NOW, THEREFORE, in consideration of the premises set forth above, the mutual promises and
covenants set forth herein and other good and valuable consideration, the Parties agree as follows:

     1. Purchase During Exercise Period. Subject to the terms and conditions set forth in
this Agreement, the Holder shall be entitled, at any time during the Exercise Period, to purchase
(such right, the “Purchase Option”) from the Founder, at an aggregate price of US$1 (the
“Exercise Price”), a number of fully paid Ordinary Shares, par value US$0.001 per share, of
the Company (the “Ordinary Shares”) held by the Founder equal to the “Adjustment Number”
(as defined below). Subject to the terms and conditions set forth in this Agreement, the
Adjustment Number shall be the number of Ordinary Shares equal to the result of (i) 20,000,000
multiplied by the Percentage Interest, subtracted by (ii) 4,906,480. Promptly upon completion of
the purchase and sale of Ordinary Shares pursuant to the Purchase Option, if at such time the
Holder holds any Series A Preferred Shares of the Company (the “Series A Preferred
Shares”), the parties hereto shall cause the re-designation of such Ordinary Shares acquired by
the Holder into the number of Series A Preferred Shares then convertible into such Ordinary Shares.

     2. Termination. Subject to Section 4(c), the Exercise Period shall not commence, and
this Agreement and all rights and obligations hereunder shall terminate, if the Adjusted Post-Money
Valuation, as determined pursuant to this Agreement, equals or exceeds the Initial Post-Money
Valuation.

     3. Determination of Adjusted Post-Money Valuation. 

     (a) Adjusted Post-Money Valuation. Simultaneously with the delivery of the financial
statements for the 2009 Fiscal Year pursuant to Section 8.1 of the Shareholders Agreement, but in
any event within 60 days after the end of the 2009 Fiscal Year of the Company, the Company shall
deliver to the Holder and the Founder, together with such financial statements, (i) an audited
statement of profits and losses for the 2009 Fiscal

 

 

Year (divided into two periods, i.e. a period from January 1, 2009 to December 31, 2009, and
another period from January 1, 2010 to February 28, 2010), audited by the accounting firm agreed by
the Company and the Holder, prepared in accordance with IFRS, and (ii) a statement of revenue and
cost breakdown by project for the 2009 Fiscal Year issued by the Company and confirmed by the
accounting firm in writing, setting forth in reasonable detail the calculation of Adjusted
Post-Money Valuation; provided, that if the Company fails to deliver of such financial statements,
statement of profits and losses, or such statement within 60 days after the end of the 2009 Fiscal
Year, the Adjusted Post Money Valuation will be conclusively deemed lower than the Initial Post
Money Valuation, the Percentage Interest can be adjusted to 45% at the Holder’s sole discretion and
the Exercise Period will commence on the business day next following such 60th day. The Holder
shall have the right to object to the determination of Adjusted Post-Money Valuation in accordance
with Section 3(b) below.

     (b) Objection Procedure

     (i) Unless the Holder gives written notice to the Founder and the Company of its
objection (an “Objection”) to the Company’s calculation of the Adjusted Post-Money
Valuation within 30 days following its receipt of the financial statements and accompanying
chief financial officer’s certificate, the Company’s calculation shall be final and binding
upon the parties for purposes of this Agreement. If the Holder waives in writing its right
to deliver an Objection with respect to any such determination, the applicable
determination shall be final and binding upon the parties as of the date of delivery of
such waiver. Any Objection shall specify in reasonable detail the nature of any
disagreement so asserted. Upon request of the Holder, the Company shall promptly provide a
representative of the Holder such access to the books and records of the Company and its
Subsidiaries as are reasonably necessary to confirm the Company’s calculation of the
Adjusted Post-Money Valuation and the Holder agrees to maintain any such information in
strict confidence (except for such disclosure to advisors or otherwise as appropriate in
connection with the proceedings referred to below in clause (ii)). During the 15-day
period following the delivery of an Objection, the Founder and the Holder shall attempt in
good faith to resolve any differences which they may have with respect to any matter
specified in the Objection.

     (ii) If at the end of such 15-day period, the Founder and the Holder shall have failed
to reach written agreement with respect to all matters specified in any Objection, any
matter that remains in dispute shall promptly be submitted to an independent accounting
firm of internationally recognized standing (the “Accountant”) designated by the
Founder and the Holder within ten days after the expiration of such 15-day period, or, if
they cannot agree on an accounting firm, such dispute shall be promptly referred to the
HKIAC and an independent accounting firm of internationally recognized standing shall be
appointed thereby. The Accountant shall consider only the matters specified in the
Objection. The Accountant shall act promptly to resolve all matters specified in the
Objection, and shall give its decision within 30 days after the referral of the matter to
it.

2

 

Upon resolution by the Accountant of all matters specified in the Objection, the
Accountant shall determine the Adjusted Post-Money Valuation and/or whether the Adjusted
Post Money Valuation is lower than the Initial Post Money Valuation, as applicable, on the
basis of the matters it has resolved. The Accountant’s decisions and determinations with
respect to all matters specified in the Objection and its determination as to Adjusted Post
Money Valuation shall be final and binding upon the Founder and the Holder. The costs and
expenses of the Accountant shall be borne equally by the Founder, on the one hand, and the
Holder, on the other hand.

     4. Covenants.

     Without limiting any other covenant of the Company and the Founder under the Memorandum and
Articles of Association of the Company and the Shareholders Agreement, dated June 24, 2009 by and
among the Company, the Founder, the Holder and certain other parties thereto (the “Shareholders
Agreement”):

     (a) the Company shall not change any method of accounting or accounting practice or policy,
other than (i) pursuant to guidance provided by any applicable regulatory authority, with the
Holder’s consent, or (ii) as recommended by the Company’s independent auditors, with the Holder’s
consent;

     (b) the Company shall not (i) directly or indirectly change the allocation of items of
revenue, income and/or gain between, or the principles applied to allocate items of revenue, income
and/or gain in, EMC related profits on the one hand, and other items of income or gain on the other
hand, or (ii) otherwise artificially affect the Adjusted Post Money Valuation;

     (c) if there is any change to any Accounting Rules prior to an IPO of the Company, the Company
shall employ the adjusted Accounting Rules to re-calculate the Adjusted Post Money Valuation and
deliver the re-calculated Adjusted Post Money Valuation to the Holder and the Founder within 60
days after such change. The Adjusted Post Money Valuation can be re-calculated from time to time
prior to the IPO of the Company, due to change of the Accounting Rules. Determination of the
re-calculated Adjusted Post Money Valuation shall be in accordance with Section 3 of this
Agreement; and

     (d) if the Adjusted Post Money Valuation is adjusted prior to the IPO, and if, accordingly,
the Holder is not entitled to exercise the Purchase Option, any and all Ordinary Shares that have
been purchased by the Holder by exercising the Purchase Option (or Series A Preferred Shares
converted from such Ordinary Shares) shall be repurchased by the Founder at the Exercise Price.

     5. Definitions. As used herein, the following terms shall have the following
meanings:

     (a) “Adjusted Post Money Valuation” means a valuation of the Company, equaling to the
audited and consolidated Net Profit for 2009 Fiscal Year of the Company

3

 

multiplied by X, where X is determined in accordance with the following formula. For the
foregoing purpose, the exchange rate between United States Dollar and Renminbi is USD1 = RMB6.82.

X = (A / B) * 5.8 + (C / B) * 3.4

     A = EMC Gross Profit for the 2009 Fiscal Year;

     B = Normal Business Gross Profit for the 2009 Fiscal Year;

     C = other Gross Profit for the 2009 Fiscal Year, i.e. B minus A;

     (b) “Initial Post Money Valuation” means a valuation of the Company equal to
RMB100,000,000, multiplied by 5.56, with the exchange rate between United States Dollar and
Renminbi being USD1 = RMB6.82.

     (c) “Exercise Period” means the period beginning on the date (if any) that it is
determined in accordance with Section 3 hereof that the Adjusted Post Money Valuation is lower than
the Initial Post Money Valuation and ending at 5:00 p.m., Beijing time on the tenth anniversary of
June 24, 2009, or if such date is not a Business Day, then 5:00 p.m., Beijing time on the following
Business Day, or ending at the tenth anniversary of the date of publication of the final
re-calculated Adjusted Post Money Valuation in accordance with Section 4(c) hereof, whichever is
longer.

     (d) “2009 Fiscal Year” commences on January 1, 2009, ending on February 28, 2010.

     (e) “Percentage Interest” means a percentage obtained by dividing (i) US$20,000,000 by
(ii) the Adjusted Post Money Valuation, with the exchange rate between United States Dollar and
Renminbi being USD1 = RMB6.82; provided that the Percentage Interest shall in no event be higher
than 45%.

     (f) “Accounting Rules” means the accounting policies and critical accounting estimates
and assumptions (including without limitation, those descriptions under Note 3 from Page 10 to Page
23 and Note 5 from Page 24 to Page 25 in the report attached as Exhibit B hereto) employed by
PricewaterhouseCoopers in connection with preparation of the Company’s consolidated 2008 audit
report.

     (g) “IPO” means the first firmly underwritten registered public offering by the
Company of its Ordinary Shares pursuant to a registration statement that is filed with and declared
effective by a Governmental Authority in a jurisdiction.

     (h) “EMC” means energy management contracts projects, which are central heating and
cooling refurbishment and replacements for existing buildings and installation projects for new
buildings. In the EMC, the Company (including the PRC Companies) designs, manufactures and
installs ground-source heat pump (“GSHP”) systems under long-term (which shall be no less
than 10 years) service contracts, which have an annual energy management fee, to large scale
commercial businesses, such as

4

 

hotels and supermarkets. The Company (including the PRC Companies) will retain the title to
various GSHP related equipment and facilities until expiration of term under a service contract.
For avoidance of confusion, EMC shall include, but not limited to, the long term service contracts
described in the report attached as Exhibit B hereto. The Holder shall reserve the right to
determine whether a contract constitutes an EMC. However, such determination shall not be made in
conflict with the provisions hereof.

     (i) “EMC Gross Profit” means gross profit generated only from the EMC.

     (j) “EPC” means engineering-procurement construction projects. In the EPC, the
Company (including the PRC Companies) designs and installs central heating/cooling/hot water system
using its GSHP technology on a single project basis, charging an upfront fee to large scale
commercial customers, including large office buildings, industrial parks, and financial centres.
By the completion of the project, customers must settle the payment to and assume ownership of the
system from the Company.

     (k) “Normal Business” means heat pump related sales contracts, EPC, EMC and other heat
pump related businesses.

     (l) “Normal Business Gross Profit” means gross profit generated only from the Normal
Business.

     (m) “Net Profit” means Normal Business Gross Profit minus distribution costs minus
administrative expenses (excluding other gains) plus finance income minus tax. The accounting
terms used herein shall have the meaning ascribed to them in the report attached as Exhibit B
hereto.

     (n) Capitalized terms not otherwise defined herein shall have the meanings given to such terms
in the Shareholders Agreement. All accounting terms not otherwise defined herein have the meanings
assigned under IFRS.

     6. Methods of Exercise.

     During the Exercise Period, the Holder may exercise, in whole or in part, the Purchase Option
pursuant to this Agreement by either of the following methods:

     (a) Cash Exercise. The Holder may exercise by delivering a notice of exercise, in the
form attached as Exhibit A hereto (a “Notice of Exercise”) to the Founder and paying to the
Founder an amount (i) in cash (by check or wire transfer of immediately available funds), (ii) by
cancellation of indebtedness of the Founder owed to the Holder, if any, or (iii) by a combination
of (i) and (ii), equal to the aggregate Exercise Price for the number of Ordinary Shares being
purchased by such Holder.

     (b) Net Exercise. Alternatively, the Holder may exercise by:

     (i) delivering a Notice of Exercise to the Founder; and

5

 

     (ii) receiving such lesser number of Ordinary Shares calculated in accordance with the
formula below representing the satisfaction of the payment to the Founder of an amount
equal to the aggregate Exercise Price for the number of Ordinary Shares being purchased.

In the event the Holder chooses to exercise the Purchase Option pursuant to this Agreement in
accordance with this Section 6(b) (a “Net Exercise”), the Founder shall transfer to the
Holder a number of Ordinary Shares computed using the following formula:

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

where:

X = the number of Ordinary Shares to be transferred to the Holder

Y = the number of Ordinary Shares purchasable under this Agreement or, if only a
portion of the Purchase Option is being exercised, the number of Ordinary Shares
for which the Purchase Option is being exercised (at the date of such calculation)

A = the fair market value of one Ordinary Share (at the date of such calculation)

B = the Exercise Price (as adjusted to the date of such calculation).

For purposes of this Section 6(b), the fair market value of an Ordinary Share shall be the average
of the closing prices of the Ordinary Shares quoted (i) in the over-the-counter market in which the
Ordinary Shares are traded, or (ii) on any exchange or electronic securities market on which the
Ordinary Shares are listed for trading, as applicable, for the 30 trading days prior to the date of
determination of fair market value (or such shorter period of time during which such Ordinary
Shares were traded over-the-counter or on such exchange). If the Ordinary Shares are not traded on
the over-the-counter market, an exchange or an electronic securities market, the fair market value
of an Ordinary Share shall be determined by dividing:

     (i) the cash price at which a willing seller would sell and a willing buyer would buy
all of the issued and outstanding Ordinary Shares in a transaction negotiated at arm’s
length by unaffiliated third parties, each being apprised of and considering all relevant
facts, circumstances and factors, and neither acting under compulsion or time constraints,
by

     (ii) the number of then issued and outstanding Ordinary Shares.

In the case of any determination of the fair market value of the Ordinary Shares pursuant to this
Section 6(b), fair market value shall not include any discount (i) by reason of such Ordinary
Shares representing a minority interest, or (ii) to reflect the fact that such Ordinary Shares are
illiquid and subject to the restrictions on transfer set forth in this

6

 

Agreement, the Shareholders Agreement, the Right of First Refusal and Co-Sale Agreement, dated June
24, 2009, by and among the Company, the Founder, the Holder and other parties thereto (the
“ROFR Agreement”) and the Memorandum and Articles.

If the Founder and the Holder cannot agree on the fair market value of an Ordinary Share within 30
days after the date upon which the Holder delivers a Notice of Exercise to the Founder (the
“Negotiation Period”), the valuation shall be made by an appraiser of internationally
recognized standing designated jointly by the Founder and the Holder within ten days after the
expiration of the Negotiation Period or, if they cannot so agree on an appraiser, such dispute
shall be promptly referred to the HKIAC and an appraiser of nationally recognized standing shall be
appointed thereby. The valuation shall be made by such appraiser within 20 days of its designation
by the HKIAC. Any valuation made by an appraiser under this Section 6(b) shall be determinative of
such value and binding upon the Founder and the Holder. The cost of such valuation shall be borne
equally by the Founder and the Holder, but each party shall bear its own legal expenses, if any,
incurred in connection therewith.

     (c) Partial Exercise. The Purchase Option may be exercised for less than the full
number of Ordinary Shares subject to the Purchase Option, in which case the number of Ordinary
Shares receivable upon the exercise of the Purchase Option as a whole, and the sum payable upon the
exercise of the Purchase Option as a whole, shall be proportionately reduced.

     7. Certificates. Upon the exercise of the Purchase Option pursuant to this Agreement,
one or more certificates for the number of Ordinary Shares so purchased (or Series A Preferred
Shares converted from such Ordinary Shares) shall be issued and delivered by the Company to the
Holder as soon as practicable thereafter, and in any event within ten days of the delivery by the
Holder to the Founder of the Notice of Exercise. The date of delivery of such certificates is
referred to herein as the “Delivery Date.”

     8. Dividend, Subdivision, Combination, Reclassification, Reorganization, Consolidation,
Merger or Sale of Assets. The number of and kind of securities that may be transferred
pursuant to this Agreement and the Exercise Price shall be subject to adjustment from time to time
as follows:

     (a) In case of any reclassification, capital reorganization, or change in the shares of the
Company, or consolidation or merger of the Company with or into another corporation, or the sale of
all or substantially all of the assets of the Company to another corporation pursuant to which the
holders of Ordinary Shares shall be entitled to receive shares, securities, cash or other property
with respect to or in exchange for Ordinary Shares, then, as a condition to such reclassification,
reorganization, change, consolidation, merger or sale, the Founder shall make appropriate provision
so that the Holder (or its permitted transferees) shall have the right at any time prior to the
expiration of the Exercise Period to acquire, at a total per-share price equal to that payable
pursuant to this Agreement, the kind and amount of shares, securities, cash or other property
receivable in connection with such reclassification, reorganization, change, consolidation,

7

 

merger or sale by a holder of the same number of Ordinary Shares as were purchasable by the
Holder immediately prior to such reclassification, reorganization, change, consolidation, merger or
sale. 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, securities, cash or other property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per Ordinary Share payable hereunder, provided that
the aggregate purchase price shall remain the same.

     The Company shall not effect any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets in such sale shall assume, by
written instrument mailed or delivered to the Holder at the last address of the Holder appearing on
the books of the Company, the obligation to deliver to the Holder such shares, securities, cash or
other property as, in accordance with the foregoing provisions, the Holder may be entitled to
purchase. If a purchase, tender or exchange offer is made to and accepted by the holders of more
than 50% of the outstanding Ordinary Shares, the Company shall not effect any consolidation, merger
or sale with the Person having made such offer or with any Affiliate of such Person, unless prior
to the consummation of such consolidation, merger or sale the Holder shall have been given a
reasonable opportunity to then elect to receive pursuant to this Agreement either the stock,
securities, cash or other property then issuable with respect to the Ordinary Shares or the stock,
securities, cash or other property, or the equivalent, issued to holders of Ordinary Shares in
accordance with such offer.

     (b) If the Company shall, at any time or from time to time, (i) declare a dividend on the
Ordinary Shares payable in shares of its capital stock (including Ordinary Shares), (ii) subdivide
the outstanding Ordinary Shares, (iii) combine the outstanding Ordinary Shares into a smaller
number of shares, or (iv) issue any shares of its capital stock in a reclassification of the
Ordinary Shares (including any such reclassification in connection with a consolidation or merger
in which the Company is the continuing corporation), then in each such case, the Exercise Price in
effect at the time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares of capital stock
issuable on such date shall be proportionately adjusted so that the Holder, upon exercise of the
Purchase Option after such date, shall be entitled to receive, upon payment of the same aggregate
amount as would have been payable before such date, the aggregate number and kind of shares of
capital stock which, if the Purchase Option had been exercised immediately prior to such date, such
Holder would have owned upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. Any such adjustment shall become effective
immediately after the record date of such dividend or the effective date of such subdivision,
combination or reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur. If a dividend is declared and such dividend is not paid, the Exercise
Price shall again be adjusted to be the Exercise Price in effect immediately prior to such record
date.

8

 

     (c) Notice of Adjustment. When any adjustment is required to be made in the number or
kind of shares purchasable upon exercise of this Agreement, or in the Exercise Price, the Founder
shall provide the Holder with not less than 20 days’ prior written notice of the date on which the
event requiring such adjustment is to take place and information, reasonably detailed, regarding
the pertinent facts of such event, as well as the calculation of the adjusted Exercise Price and
the adjusted number of Ordinary Shares or securities, cash or other property thereafter purchasable
upon exercise of this Agreement.

     9. No Dilution or Impairment. The Founder and the Company will not, by amendment of
the Company’s Memorandum and Articles of Association, or through reorganization, consolidation,
merger, dissolution, sale of assets or any other voluntary action involving the Company, avoid or
seek to avoid the observance or performance of any of the terms of this Agreement, but will at all
times in good faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment. Without limiting the generality of the foregoing, the Company will
not increase the par value of any shares receivable upon exercise of the Purchase Option, and the
Founder at all times will take all such action as may be necessary or appropriate in order that the
Founder may validly and legally transfer fully paid shares pursuant to this Agreement.

     10. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of the Purchase Option, but in lieu of such
fractional shares the Founder shall make a cash payment therefor on the basis of the Exercise Price
then in effect.

     11. Representations, Warranties and Covenants of the Founder

     (a) Sale of Shares. The Founder covenants that the Ordinary Shares, when sold and
delivered pursuant to this Agreement, will be duly authorized, validly issued, fully paid and
non-assessable, and free from all taxes and liens with respect thereto.

     (b) Covenants as to Exercise of Purchase Option. The Founder covenants that the
Founder will at all times during the Exercise Period, hold a sufficient number of Ordinary Shares
to provide for the exercise of the Purchase Option pursuant to this Agreement.

     12. Restrictive Legend. The share certificates for the Ordinary Shares acquired
hereunder (or Series A Preferred Shares converted from such Ordinary Shares) shall be stamped or
imprinted with a legend in substantially the following form (unless registered under the Securities
Act or if the Holder delivers to the Founder an opinion of counsel (who may be an employee of the
Holder) reasonably satisfactory in form and substance to the Founder, that such shares do not
require registration under the Securities Act or any applicable state securities laws):

9

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED, OR THE LAWS OF ANY OTHER JURISDICTION. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR A COMPARABLE
DOCUMENT UNDER THE LAWS OF ANY OTHER JURISDICTION OR AN OPINION OF COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
THE OFFERING OF THESE SECURITIES HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE
SECURITIES ADMINISTRATOR.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SHAREHOLDERS
AGREEMENT, DATED AS OF JUNE 24, 2009, AMONG THE COMPANY AND CERTAIN OF ITS
SHAREHOLDERS, A COPY OF WHICH IS ON FILE WITH THE COMPANY. NO SALE, ASSIGNMENT,
TRANSFER, PLEDGE, ENCUMBRANCE OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED
HEREBY SHALL BE EFFECTIVE UNLESS AND UNTIL THE TERMS AND CONDITIONS OF SAID
SHAREHOLDERS AGREEMENT SHALL HAVE BEEN COMPLIED WITH IN FULL.

Any certificate issued at any time in exchange or substitution for any certificate bearing such
legend (except a new certificate issued upon completion of a public distribution pursuant to a
registration statement under the Securities Act) shall also bear such legend unless, in the opinion
of counsel selected by the Holder (who may be an employee of the Holder) and reasonably acceptable
to the Founder, the securities represented thereby need no longer be subject to restrictions on
resale under the Securities Act.

     13. Purchase Option and Shares Transferable

     (a) Subject to compliance with the terms and conditions of the Shareholders Agreement and this
Section 13, this Agreement and all rights hereunder are assignable, in whole or in part, by the
Holder. With respect to any assignment of this Agreement or any offer, sale or other disposition
of Ordinary Shares acquired pursuant to the exercise of the Purchase Option (or Series A Preferred
Shares converted from such Ordinary Shares) prior to registration of such shares, the Holder agrees
to give written notice to the Founder prior thereto, describing briefly the manner thereof,
together with a written opinion of such holder’s counsel, or other evidence, if reasonably
requested by the Founder, to the effect that such assignment or offer, sale or other disposition
may be effected without registration or qualification (under the Securities Act as then in effect
or any U.S. federal or state or other applicable securities law then in effect) of such shares and
indicating whether or not under the Securities Act certificates for such shares to be sold or
otherwise disposed of require any restrictive legend as to applicable restrictions on
transferability in order to ensure compliance with such law. Upon receiving such written notice
and reasonably satisfactory opinion or other evidence, if so requested, the

10

 

Founder, as promptly as practicable, shall notify such Holder that such Holder may assign this
Agreement or sell or otherwise dispose of such shares, all in accordance with the terms of the
notice delivered to the Founder. If a determination has been made pursuant to this Section 13 that
the opinion of counsel for the Holder or other evidence is not reasonably satisfactory to the
Founder, the Founder shall so notify the Holder promptly with details thereof after such
determination has been made. Each certificate representing the shares transferred in accordance
with this Section 13 shall bear a legend as to the applicable restrictions on transferability in
order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the
Holder, such legend is not required in order to ensure compliance with such laws. The Company may
issue stop transfer instructions to its transfer agent in connection with such restrictions.

     (b) Notwithstanding anything to the contrary contained herein, the Holder may, at any time and
from time to time, assign this Agreement or transfer any Ordinary Shares acquired pursuant to the
exercise of the Purchase Option (or Series A Preferred Shares converted from such Ordinary Shares)
and all rights hereunder and thereunder, in whole or in part, without charge to the Holder (except
for transfer taxes) to any of the Holder’s shareholders, partners or members by way of distribution
or dividend, or to one or more of the Holder’s Affiliates, so long as any such Affiliate is
controlled exclusively by the entity making such transfer. Any such transfer shall solely require
that the Holder give written notice thereof to the Founder; for greater certainty, none of the
terms and conditions set forth in Section 13(a) shall be applicable to any transfer governed by
this Section 13(b).

     14. Rights of Shareholders. The Holder shall not be entitled to vote or receive
dividends or be deemed the holder of the Ordinary Shares (or Series A Preferred Shares converted
from such Ordinary Shares) or any other securities of the Company which may at any time be
transferable on the exercise of the Purchase Option for any purpose, nor shall anything contained
herein be construed to confer upon the Holder, in respect of such shares, any of the rights of a
shareholder of the Company or any right to vote upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of Ordinary Shares or Series A Preferred
Shares, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice
of meetings, or to receive dividends or subscription rights or otherwise until the Purchase Option
shall have been exercised and the Ordinary Shares purchasable upon the exercise hereof (or Series A
Preferred Shares converted from such Ordinary Shares) shall have become deliverable, as provided
herein.

     15. Notices. Any notice required or permitted pursuant to this Agreement shall be
given in writing and shall be given either personally or by sending it by next-day or second-day
courier service, fax, electronic mail or similar means to the address as shown below the signature
of such party on the signature page of this Agreement (or at such other address as such party may
designate by fifteen (15) days’ advance written notice to the other parties given in accordance
with this Section 15). Where a notice is sent by next-day or second-day courier service, service
of the notice shall be deemed to be effected by properly addressing, pre-paying and sending by
next-day or second-day

11

 

service through an internationally-recognized courier a letter containing the notice, with a
confirmation of delivery, and by two (2) days having passed after the letter containing the same is
sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the notice shall
be deemed to be effected on the same day on which it is properly addressed and sent through a
transmitting organization with a reasonable confirmation of delivery.

     16. “Market Stand-Off” Agreement. The Holder hereby agrees that, during the period of
time specified by the Company and an underwriter of Ordinary Shares or other securities of the
Company, following the effective date of (i) a registration statement of the Company filed under
the Securities Act, or (ii) a comparable offering document filed under the applicable laws and
regulations of any foreign governmental authority, it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period, except Ordinary Shares included in such registration or
offering; provided, however, that:

     (a) all officers and directors of the Company, and each Person who holds one percent (1%) or
more of the Company’s outstanding shares, enter into similar agreements;

     (b) such market stand-off time period shall not exceed 90 days; and

     (c) the foregoing agreement shall not prohibit privately negotiated transfers of Ordinary
Shares (or Series A Preferred Shares converted from such Ordinary Shares) among the Holder and its
Affiliates.

The Holder agrees to provide to the underwriters of any public offering such further agreements as
such underwriters may reasonably request in connection with this market stand-off agreement,
provided that the terms of such agreements are substantially consistent with the provisions of this
Section 16. In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the securities of the Company held by the Holder (and the shares or
securities of every other Person subject to the foregoing restriction) until the end of such
period.

Notwithstanding the foregoing, the obligations described in this Section 16 shall not apply to (i)
a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms
which may be promulgated in the future, (ii) a registration relating solely to a transaction under
Rule 145 of the Securities Act, or (iii) any offering which would the equivalent of clause (i) or
(ii) under the applicable laws and regulations of any foreign governmental authority.

     17. Change, Waiver, Etc. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally except by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is sought.

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     18. Remedies. The Founder stipulates that the remedies at law of the Holder in the
event of any default by the Founder in the performance of or compliance with any of the terms of
this Agreement are not and will not be adequate, and that the same may be specifically enforced.

     19. Governing Law. This Agreement and all actions arising out of or in connection
with this Agreement shall be governed by and construed in accordance with the laws of the Hong
Kong, without regard to the conflicts of law provisions of the Hong Kong.

     20. Dispute Resolution.

     (a) The parties agree to negotiate in good faith to resolve any dispute between them regarding
this Agreement. If the negotiations do not resolve the dispute to the reasonable satisfaction of
both parties, then each party that is a company, shall nominate one (1) authorized officer as its
representative. The parties or their representatives, as the case may be, shall, within thirty
(30) days of a written request by either party to call such a meeting, meet in person and alone
(except for one (1) assistant for each party) and shall attempt in good faith to resolve the
dispute. If the disputes cannot be resolved by such senior managers in such meeting, the parties
agree that they shall, if requested in writing by either party, meet within thirty (30) days after
such written notification for one (1) day with an impartial mediator and consider dispute
resolution alternatives other than formal arbitration. If an alternative method of dispute
resolution is not agreed upon within thirty (30) days after the one (1) day mediation, either party
may begin formal arbitration proceedings to be conducted in accordance with subsection (b) below.
This procedure shall be a prerequisite before taking any additional action hereunder.

     (b) In the event the parties are unable to settle a dispute between them regarding this
Agreement in accordance with subsection (a) above, such dispute shall he referred to and finally
settled by arbitration at the HKIAC in accordance with the Hong Kong International Arbitration
Centre Administered Arbitration Rules in effect, which rules are deemed to be incorporated by
reference into this subsection (b), subject to the following: (i) the arbitration tribunal shall
consist of three (3) arbitrators to be appointed according to the Hong Kong International
Arbitration Centre Administered Arbitration Rules; and (ii) the language of the arbitration shall
be English. Notwithstanding anything in this Agreement or in the Hong Kong International
Arbitration Centre Administered Arbitration Rules or otherwise, the arbitration tribunal shall not
have the power to award injunctive relief or any other equitable remedy of any kind against any
Holder unless such award both (x) is expressly appealable to and subject to de novo review by the
courts of Hong Kong, and (y) would not, if upheld, have the effect of impairing, restricting, or
imposing any conditions on the right or ability of such Holder or its affiliates to conduct its
respective business operations or to make or dispose of any other investment. The prevailing party
shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.

13

 

     21. Rights and Obligations Survive Exercise of Purchase Option. Unless otherwise
provided herein, the rights and obligations of the Founder, the Company, the Holder and the holder
of the Ordinary Shares issued upon exercise of this Purchase Option (or Series A Preferred Shares
converted from such Ordinary Shares), shall survive any exercise of the Purchase Option.

     22. Terminate of Warrant. Upon the execution and delivery of this Agreement by the
parties hereto, the Warrant shall terminate and cease to have any effect.

[Signature page follows]

14

 

IN WITNESS WHEREOF this Agreement has been signed by the duly authorised representatives of the
parties on the date first written above.

	 	 	 	 
	 

	 	 
	 

	 	/s/ SUN KWOK PING
	 

	 	SUN KWOK PING
	 
	 	 
	 

	 	Address: Building No. 4, 150 Yong He Road,

Shanghai, China, 200072

Fax: 86-21-6631-2459

Signature Page to Option Agreement No. 1

 

 

IN WITNESS WHEREOF this Agreement has been signed by the duly authorised representatives of the
parties on the date first written above.

	 	 	 	 	 
	 	CHINA ENVIRONMENT FUND III, L.P.

 	 
	 	By:  	/s/ Donald Chang Ye	 
	 	 	Name:  	 	 
	 	 	Title:  	Authorized Signatory	 
	 
	 	Address: A2302, SP Tower, Tsinghua Science Park,

Beijing 100084 China

Fax: 86-10-8215-1150	 
	 

Signature Page to Option Agreement No. 1

 

 

IN WITNESS WHEREOF this Agreement has been signed by the duly authorised representatives of the
parties on the date first written above.

	 	 	 	 	 
	 	EASTERN WELL HOLDINGS LIMITED

 	 
	 	By:  	/s/
Sun Kwok Ping	 
	 	 	Name:  	Sun Kwok Ping 	 
	 	 	Title:  	Director	 
	 
	 	Address: Building No. 4, 150 Yong He Road,

Shanghai, China, 200072

Fax: 86-21-6631-2459 	 

Signature Page to Option Agreement No. 1

 

 

EXHIBIT A

NOTICE OF EXERCISE

	To: 	 	 SUN KWOK PING

Building No. 4, 150 Yong He Road, Shanghai, China, 200072

Fax: 86-21-6631-2459

     1. The undersigned hereby elects to purchase                      Ordinary Shares (“Ordinary
Shares”) pursuant to the terms of the Option Agreement No. 1 dated December 31, 2009 by and
between China Environment Fund III, L.P. and Sun Kwok Ping () (the “Agreement”).
Capitalized terms used and not otherwise defined herein have the meanings ascribed to them in
the Agreement.

     2. The undersigned shall exercise the Purchase Option (i) by means of a cash payment, and
tenders herewith, payment in full for the purchase price of the Ordinary Shares being
purchased, or (ii) by means of a Net Exercise in accordance with the terms of Section 6(b) of
the Agreement, together with all applicable taxes, if any.

     3. Please cause the Company to issue a certificate or certificates representing said
Ordinary Shares in the name of the undersigned or in such other name as is specified below:

_______________________

(Name)

_______________________

_______________________

(Address)

     4. The undersigned hereby represents and warrants that the aforesaid Ordinary Shares are
being acquired for the account of the undersigned for investment and not with a view to, or for
resale, in connection with the distribution thereof, and that the undersigned has no present
intention of distributing or reselling such shares.

	 	 	 	 
	 

	 	 
	 

	 	(Signature)
	 
	 	 
	 

	 	 
	 

	 	(Name)
	 
	 	 
	 
	 	 
	 	 	 
	(Date)

	 	(Title)

 

 

EXHIBIT B

CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT

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